<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
__________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[_] 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 1-11314
LTC PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
Maryland 71-0720518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
(Address of principal executive offices)
(805) 981-8655
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports 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 Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
--- ---
Shares of Registrant's common stock, $.01 par value, outstanding at July
31, 1996 - 18,639,694
================================================================================
<PAGE>
LTC PROPERTIES, INC.
FORM 10-Q
JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
PART I -- FINANCIAL INFORMATION ----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets.................................... 3
Condensed Consolidated Statements of Income.............................. 4
Condensed Consolidated Statements of Cash Flows.......................... 5
Notes to Condensed Consolidated Financial Statements..................... 6
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations....... 10
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................ 13
</TABLE>
2
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
Real Estate Investments:
Buildings and improvements, net of
accumulated depreciation and amortization: 1996 - $8,191; 1995 - $5,487 $194,213 $104,546
Land 10,486 7,236
Mortgage loans receivable, net of allowance for doubtful accounts:
1996 - $1,000; 1995 - $997 136,652 161,059
Mortgage-backed securities 92,731 67,384
-------- --------
Real estate investments, net 434,082 340,225
Other Assets:
Cash and cash equivalents 4,328 1,434
Restricted cash - 8,300
Debt issue costs, net 3,884 3,331
Interest receivable 2,426 2,093
Prepaid expenses and other assets 2,074 1,779
-------- --------
12,712 16,937
-------- --------
Total assets $446,794 $357,162
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Convertible subordinated debentures due 1999 - 2004 $119,931 $ 94,641
Bank borrowings 58,000 48,470
Mortgage loans payable 57,742 16,707
Bonds payable and capital lease obligations 14,183 14,265
Accrued interest 5,242 3,196
Accrued expenses and other liabilities 2,796 2,415
Distributions payable 6,355 5,764
-------- --------
Total liabilities 264,249 185,458
Minority interest 10,203 1,098
Commitments
Stockholders' equity:
Preferred stock $0.01 par value: 10,000,000 shares authorized; none
issued and outstanding - -
Common stock $0.01 par value; 40,000,000 shares authorized;
shares issued and outstanding: 1996 - 18,535,361; 1995 - 18,297,254 185 183
Capital in excess of par value 181,387 178,453
Cumulative net income 54,060 42,988
Cumulative distributions (63,290) (51,018)
-------- --------
Total stockholders' equity 172,342 170,606
-------- --------
Total liabilities and stockholders' equity $446,794 $357,162
======== ========
</TABLE>
See Accompanying Notes
3
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 4,927 $ 2,124 $ 9,061 $ 4,199
Interest income from mortgage loans 3,668 3,120 8,832 5,298
Interest income from mortgage-backed
securities 3,989 2,582 6,787 5,700
Interest and other income 336 734 603 868
------- ------- ------- -------
Total revenues 12,920 8,560 25,283 16,065
Expenses:
Interest expense 4,835 1,909 9,489 3,417
Depreciation and amortization 1,479 682 2,746 1,351
Amortization of Founders' stock 38 63 76 136
Minority interest 117 - 272 -
Operating and other expenses 834 707 1,628 1,244
------- ------- ------- -------
Total expenses 7,303 3,361 14,211 6,148
------- ------- ------- -------
Net income $ 5,617 $ 5,199 $11,072 $ 9,917
======= ======= ======= =======
Net income per share $ 0.30 $ 0.29 $ 0.59 $ 0.55
======= ======= ======= =======
Weighted average shares outstanding 18,959 18,138 18,900 18,076
======= ======= ======= =======
</TABLE>
See accompanying notes
4
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 11,072 $ 9,917
Depreciation on real estate 2,725 1,331
-------- --------
Funds from operations as defined by
NAREIT 13,797 11,248
Depreciation, amortization and
non-cash charges 814 821
Amortization of Founders' stock 76 136
-------- --------
Cash flow from operating activities
available for distribution or
reinvestment 14,687 12,205
Net change in other assets and
liabilities 2,250 692
-------- --------
Net cash provided by operating
activities 16,937 12,897
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible
debentures, net 28,953 -
Borrowings, net 9,530 44,200
Distributions paid (11,680) (10,312)
Repurchase of common stock (1,831) (6,924)
Other (54) (239)
-------- --------
Net cash provided by financing
activities 24,918 26,725
CASH FLOWS USED IN INVESTING ACTIVITIES:
Investment in real estate mortgages (58,010) (57,741)
Acquisitions of real estate
properties, net (77,048) (8,346)
Proceeds from sale of mortgage-backed
securities, net 86,874 19,216
Principal payments on mortgage loans
payable and capital lease obligations (212) -
Restricted cash 8,300 -
Principal payments on real estate
mortgages 1,452 294
Deferred facility fee, net (42) 286
Other (275) (296)
-------- --------
Net cash used in investing
activities (38,961) (46,587)
-------- --------
Increase (decrease) in cash and cash
equivalents 2,894 (6,965)
Cash and cash equivalents, beginning of
period 1,434 14,266
-------- --------
Cash and cash equivalents, end of period $ 4,328 $ 7,301
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 6,960 $ 2,459
======== ========
Non-cash investing and financing transactions:
Conversion of debentures into common
stock $ 4,710 $ 5,830
Assumption of mortgage loans payable
relating to acquisitions of real
estate properties 9,641 13,406
Exchange of mortgage loans for
mortgage-backed securities 80,962 -
Issuance of mortgage loans payable
for mortgage-backed securities 31,525 -
Minority interest related to
acquisitions of real estate
properties 8,932 1,041
</TABLE>
See accompanying notes
5
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(i) The condensed consolidated financial statements included herein
have been prepared by LTC Properties, Inc. (the "Company"), without audit, and
include all adjustments which are, in the opinion of management, necessary for a
fair presentation of the results of operations for the three-month and six-month
periods ended June 30, 1996 and 1995 pursuant to the rules and regulations of
the Securities and Exchange Commission. The accompanying consolidated financial
statements include the accounts of the Company, its wholly-owned subsidiaries
and controlled partnerships. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures in the accompanying financial statements are adequate to
make the information presented not misleading. The results of operations for the
three-month and six-month periods ended June 30, 1996 and 1995 are not
necessarily indicative of the results for a full year.
(ii) No provision has been made for federal income taxes. The
Company qualifies as a real estate investment trust ("REIT") under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended. As such, the
Company is not taxed on its income provided that at least 95 percent of its
taxable income is distributed to its stockholders.
(iii) During the six-month period ended June 30, 1996, the Company
invested in mortgage loans totaling $57,010,000 secured by, among other things,
23 skilled nursing facilities located in 11 states with a total of 2,884 beds
and certain guarantees. The mortgage loans, which individually range from
$1,200,000 to $11,250,000 in principal amount, have stated maturities of 7 to 15
years, generally have 25-year amortization schedules, have an initial weighted
average interest rate of 10.55%, generally provide for increases in the interest
rate and contain certain facility fees. In addition, the Company provided a
$1,000,000 additional advance on a previously existing loan.
In March 1996, the Company provided non-recourse mortgage loans
secured by long-term care facilities to three of its wholly owned subsidiaries
and to certain partnerships in which the Company was a general partner totaling
$31,525,000. Concurrent with the closing of the loans, the Company completed a
real estate mortgage investment conduit ("REMIC") transaction in which loans
totaling $112,487,000, including the $31,525,000 originated in 1996, were
exchanged for mortgage pass-through certificates for an equal amount. See note
(iv).
In addition to the mortgage loans, the Company acquired for
approximately $27,430,000 14 assisted living residences ("ALFs") in Alabama,
Texas and Washington with a total of 509 units. Thirteen of these ALFs were
purchased for a total of $26,180,000 and have been leased to Assisted Living
Concepts, Inc. ("ALC") for a total annual rent of approximately $2,485,000
(subject to increases) pursuant to long-term non-cancelable agreements. Included
in the leases to ALC were five ALFs in Washington which were purchased for
$11,280,000 and had been financed by the Company through the issuance of
6
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
$8,300,000 of multi-family tax-exempt revenue bonds in December 1995 that have a
total cost of funds of approximately 5.9%. As of June 30, 1996, the Company had
acquired all five of the Washington ALFs and had leased them to ALC generating
an initial annual rent of approximately $948,000. The Company also acquired for
$14,450,000 four skilled nursing facilities in Alabama, Georgia and Tennessee
with a total of 472 beds.
During the six months ended June 30, 1996, six newly formed limited
partnerships, of which the Company is the general partner, acquired 16 skilled
nursing facilities in Alabama, Arizona, Iowa and Texas for a total of
approximately $53,741,000. These facilities were purchased subject to mortgage
loans of approximately $9,641,000. Under the partnership agreements, the Company
has guaranteed payment of a 10% preferred return to the holders of the
$8,932,000 in limited partnership interests. Under certain circumstances, the
limited partnership interests can be exchanged, at the option of the holder,
into 628,511 shares of the Company's common stock commencing in January and July
1997. The mortgage loans of $9,641,000 assumed by the Company have an initial
average interest rate of 11.64%, are due in 2002-2005 and are currently owned by
REMICs formed by the Company in 1993 and 1994. In conjunction with these REMICs,
the Company sold senior certificates to third parties in 1993 and 1994 at a
blended interest rate of approximately 7.1% and 8.9%, respectively, and retained
the remaining certificates.
(iv) On March 29, 1996, the Company securitized approximately $112,487,000
of loans by creating a REMIC which, in turn, issued mortgage pass-through
certificates for the same amount in the form of various classes of certificates
(the "Certificates"). As part of the securitization, the Company sold
approximately $90,552,000 of Certificates to third parties at an effective
interest rate of 7.19%. The Company retained the remaining $21,935,000 face
amount of such Certificates which are effectively subordinated in right of
payment to the Certificates sold to third parties. The net proceeds from the
REMIC transaction were used to repay borrowings outstanding under the Company's
lines of credit. The mortgage loans represented by the Certificates consists of
34 mortgage loans, including the loans provided to the Company's wholly owned
subsidiaries and to the limited partnerships totaling $31,525,000, and are
secured by 55 skilled nursing facilities in 17 states. The mortgage loans in the
REMIC pool have an initial weighted average mortgage interest rate of 10.69% and
a weighted average remaining term to stated maturity of approximately 107
months. Concurrently with the closing of the REMIC transaction, the Company's
interest rate swap agreement entered into in May 1995 was terminated at a cost
of approximately $1,500,000. Because the purpose of the agreement was to hedge
the interest rate spread on the mortgages underlying a portion of the
Certificates sold to third parties, the costs of terminating the swap, along
with other costs of the transaction are reflected in the carrying value of the
retained Certificates. The Certificates retained by the Company have a weighted
average effective yield of approximately 18.0%.
7
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The mortgage-backed securities owned by the Company, which at June
30, 1996 had a carrying value of $92,731,000, are subordinated to approximately
$222,600,000 of senior Certificates which carry a weighted average interest rate
of 7.81%. The Company's mortgage-backed securities have a weighted average
effective yield of approximately 16.65%.
(v) On February 5, 1996, the Company sold, through a public offering,
$30,000,000 aggregate principal amount of 7.75% Convertible Subordinated
Debentures due January 1, 2002. The debentures are convertible at any time prior
to maturity into shares of the Company's common stock at a conversion price of
$16.50 per share, subject to adjustments under certain circumstances. Interest
on the debentures is payable semi-annually on January 1 and July 1 each year,
commencing on July 1, 1996. The net proceeds were used to repay borrowings
outstanding under the Company's lines of credit.
(vi) During the six-month period ended June 30, 1996, holders of
$1,258,000 in principal amount of 9.75% Convertible Subordinated Debentures due
2004 elected to convert the debentures into 125,800 shares of common stock at
$10.00 per share. During the six months ended June 30, 1996, holders of
$3,069,000 in principal amount of 8.5% Convertible Subordinated Debentures due
2000 elected to convert into 204,598 shares of common stock at $15.00 per share.
In addition, holders of $383,000 in principal amount of 8.5% Convertible
Subordinated Debentures due 2001 elected to convert the debentures into 24,709
shares of common stock at $15.50 per share. The conversions during the six
months ended June 30, 1996 resulted in an additional equity of approximately
$4,570,000, net of unamortized issuance costs of approximately $140,000. There
was approximately $83,000 of non-cash interest expense that was accrued but was
not required to be paid as a result of the conversions of the debentures.
(vii) On March 15, 1996, the Company filed a shelf-registration statement
with the Securities and Exchange Commission covering up to $125,000,000 of debt
and equity securities to be sold from time to time in the future. The
registration statement was declared effective on April 4, 1996.
(viii) In 1996, the Company's Board of Directors approved the issuance of
160,000 shares of restricted stock to certain employees and non-employee
directors pursuant to the Company's Amended and Restated Option Plan. The
restricted shares will vest over seven years, beginning January 1998. Dividends
are payable on the restricted shares to the extent and on the same date as
dividends are paid on all of the Company's common stock.
(ix) During the six months ended June 30, 1996, the Company repurchased
and retired 120,000 shares of common stock for an aggregate purchase price of
approximately $1,830,800.
8
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Subsequent to June 30, 1996, the Company invested in additional
mortgage loans totaling $3,000,000. These mortgage loans are secured by, among
other things, two skilled nursing facilities with a total of 173 beds. The loans
have an average initial interest rate of 11.58%, have maturities of 10 and 20
years and provide for increases in the interest rate.
Subsequent to June 30, 1996, an additional $1,010,000 in principal
amount of 9.75% Convertible Subordinated Debentures converted into 101,000
shares of the Company's common stock. In addition, approximately $50,000 in
principal amount of 8.5% Convertible Subordinated Debentures converted into
3,333 shares of the Company's common stock.
As of August 1, 1996, the Company had outstanding commitments to
provide mortgage loans totaling approximately $27,912,000 and to acquire 20
long-term care facilities for an aggregate purchase price of approximately
$50,634,000.
(x) A quarterly dividend of $0.34 per share aggregating approximately
$6,355,000 was declared by the Board of Directors payable on July 15, 1996 to
stockholders of record on June 30, 1996. The dividend has been reflected as
distributions payable in the accompanying financial statements as of June 30,
1996.
(xi) In 1996, the Company's Board of Directors authorized an increase in
the Company's investment in assisted living facilities ("ALFs") from 10% to 20%
of its adjusted gross real estate investment portfolio (adjusted to include the
mortgage loans to third parties underlying the $92,731,000 investment in
mortgage-backed securities). In addition, the Board of Directors also authorized
an increase in the Company's investment in properties operated by Assisted
Living Concepts, Inc. ("ALC"), an owner, operator and developer of ALFs whose
securities are listed on the American Stock Exchange, from 5% to 10% of its
adjusted gross real estate investment portfolio (which was approximately
$605,356,000 as of June 30, 1996). Currently, two of the Company's executive
officers serve as members of the Board of Directors of ALC. As of August 1,
1996, three executive officers of the Company own approximately 6.5% of ALC's
common stock. As of June 30, 1996, the Company had investments in ALFs and
properties operated by ALC of approximately 7.4% and 4.9%, respectively of the
Company's total adjusted gross real estate investment portfolio.
9
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Six months 1996 Compared to Six months 1995
During the six-months ended June 30, 1996, cash flow from operating
activities available for distribution or reinvestment was $14,687,000 versus
$12,205,000 for the comparable period in 1995. Revenues for the six months
ended June 30, 1996 were $25,283,000 versus $16,065,000 for the same period in
1995. Revenues increased $9,218,000 primarily as a result of increased rental
income of $4,862,000 and increased interest income on mortgage loans of
$3,534,000 attributable to investments of approximately $218,670,000 in long-
term care facilities the Company completed since June 30, 1995. Revenues also
increased $1,087,000 as a result of interest income from mortgage-backed
securities. These increases were offset by a decrease in other income of
$265,000.
Total expenses for the six months ended June 30, 1996 were $14,211,000
versus $6,148,000 for the same period in 1995. The increase of $8,063,000 is
due in large part to an increase of $6,072,000 in interest expense. Interest
expense increased by $3,842,000 due to the issuance of convertible subordinated
debentures in September 1995 and in February 1996. Interest expense also
increased by $2,150,000 as a result of the bond financing and assumption of
capital leases and mortgage loans by the Company. The remaining increase of
$836,000 was due to interest on borrowings under the Company's lines of credit
which was offset by a decrease of $756,000 as a result of conversions of the
9.75% Convertible Subordinated Debentures since June 30, 1995. Depreciation and
amortization expense increased by $1,335,000 primarily due to the acquisition of
43 additional skilled nursing and assisted living facilities in the past year.
Operating and other expenses increased by $384,000 principally due to higher
administrative costs. The remaining increase in total expenses of $272,000
related to the payments made to the holders of the limited partnership
interests.
Second Quarter 1996 Compared to Second Quarter 1995
During the three-months ended June 30, 1996, cash flow from operating
activities available for distribution or reinvestment was $7,567,000 versus
$6,345,000 for the comparable period in 1995. Revenues for the three months
ended June 30, 1996 were $12,920,000 versus $8,560,000 for the same period in
1995. Revenues increased $4,360,000 primarily as a result of increased rental
income of $2,803,000, increased interest income on mortgage-backed securities of
$1,407,000 and increased interest income on mortgage loans of $548,000. These
increases were offset by a decrease in other income of $398,000.
Total expenses for the three months ended June 30, 1996 were $7,303,000
versus $3,361,000 for the same period in 1995. The increase of $3,942,000 is due
in large part to an increase of $2,926,000 in interest expense. Interest expense
increased primarily due to the issuance of convertible subordinated debentures
in September 1995 and in February 1996 and
10
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
debt assumed by the Company as previously described. Depreciation and
amortization expense increased by $772,000 primarily due to the acquisition of
additional skilled nursing and assisted living facilities in the past year,
including $95,621,000 invested in owned facilities during 1996. Operating and
other expenses increased by $127,000 principally due to higher administrative
costs. The remaining increase in total expenses of $117,000 related to the
payments made to the holders of the limited partnership interests.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company's real estate investment portfolio
consisted of approximately $212,890,000 invested in skilled nursing and assisted
living facilities, approximately $137,652,000 invested in mortgage loans and
approximately $92,731,000 invested in mortgage-backed securities. The Company's
portfolio consists of 252 skilled nursing facilities and 23 assisted living
facilities in 30 states.
During the six-month period ended June 30, 1996, the Company completed
investments totaling approximately $153,631,000 which consisted of purchases of
34 long-term care facilities for approximately $95,621,000 and mortgage loans
for approximately $58,010,000. The Company financed its investments through the
sale of $30,000,000 aggregate principal amount of 7.75% Convertible Subordinated
Debentures in February 1996, the sale of mortgage-backed securities in March
1996, the assumption of non-recourse mortgage loans totaling $9,641,000, the
issuance of $8,932,000 in minority interests, short-term borrowings and cash on
hand.
The Company has the option to redeem, without penalty, its currently
outstanding $873,000 aggregate principal amount of 9.75% Convertible
Subordinated Debentures at any time. Since such debentures are convertible into
common stock of the Company at a conversion price of $10.00 per share, the
Company anticipates that substantially all of such debentures will be converted
if it elects to redeem the debentures.
Subsequent to June 30, 1996, the Company invested in additional mortgage
loans totaling $3,000,000. These mortgage loans are secured by two skilled
nursing facilities with a total of 173 beds. The loans have an average initial
interest rate of 11.58%, have maturities of 10 and 20 years and provide for
increases in the interest rate.
As of August 1, 1996, the Company had outstanding commitments to provide
mortgage loans totaling approximately $27,912,000 and to acquire 20 long-term
care facilities for an aggregate purchase price of approximately $50,634,000.
The Company expects to fund at least $29,587,000 of these commitments by the end
of 1996.
11
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
In May 1996, the terms of the Company's unsecured line of credit were
amended, including certain financial covenants, to increase the amount of the
line from $35,000,000 to $45,000,000 and to extend the expiration date from
December 31, 1996 to May 31, 1998. As of August 1, 1996, the Company had
$56,700,000 borrowings outstanding under its secured and unsecured lines of
credit bearing a weighted average interest rate of approximately 7.18%.
At August 1, 1996, the Company had approximately $125,000,000 available
under its shelf registration statement for future issuance of capital from time
to time in accordance with then existing market conditions. In addition, based
on the current level of collateral, there was approximately $40,140,000
available under its lines of credit which will be increased to $72,300,000 when
additional collateral is accepted.
The Company also anticipates completing a securitization transaction
within the next year, the proceeds of which will be used to repay borrowings
outstanding under its repurchase agreement and its unsecured line of credit. In
connection with such securitization, the Company, in September 1995, entered
into a seven-year forward interest rate swap agreement (the "September 1995
Agreement"), which effectively locked-in the net interest margin on $60,000,000
principal amount of senior certificates that will be sold. The September 1995
Agreement will be terminated at the earlier of (i) the completion of the
securitization or (ii) February 28, 1997 and has been accounted for as a hedging
transaction. As of June 28, 1996, the Company had an unrealized gain of
approximately $1,080,000 on the September 1995 Agreement.
In June 1996, the Financial Accounting Standards Board issued Statement
No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" which will require the Company to classify its
investments in mortgage-backed securities, that contractually can be prepaid, to
be measured like investments in debt securities classified as available-for-sale
under Statement 115. Adoption of Statement No. 125 is not required until
January 1, 1997 and the effect of adoption cannot be assessed at this time.
The Company believes that its current cash from operations available for
distribution or reinvestment and its borrowing capacity are sufficient to
provide for payment of its operating costs, provide funds for distribution to
its stockholders and to fund additional investments.
12
<PAGE>
PART II
LTC PROPERTIES, INC.
OTHER INFORMATION
June 30, 1996
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Amended and Restated By-Laws of the Company
10.1 Second Amended and Restated Revolving Credit Agreement between
LTC Properties, Inc. and Sanwa Bank California, as agent, dated
as of May 21, 1996
10.2 Guarantee Agreement between Kansas-LTC Corporation, L-Tex GP,
Inc., L-Tex LP, Inc., Rusk-Tex, LP, Inc., Texas-LTC Limited
Partnership, as guarantors, and Sanwa Bank California, as the
agent, dated as of May 21, 1996
11.1 Computation of earnings per share
27 Financial Data
In accordance with Item 601(b)(4)(iii) of Regulation S-K,
certain instruments pertaining to Registrants long-term debt
have not been filed; copies thereof will be furnished to the
Securities and Exchange Commission upon request.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the
three months ended June 30, 1996.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LTC PROPERTIES, INC.
Registrant
Dated: August 14, 1996 By: /s/ JAMES J. PIECZYNSKI
-----------------------------
James J. Pieczynski
Senior Vice President and
Chief Financial Officer
14
<PAGE>
Exhibit 3.1
The Company amended its Bylaws on October 17, 1995. Since this
amendment is the first amendment to the Company's Bylaws, which it is filing
electronically, the Company is required to restate the entire bylaws in
accordance with Rule 102(c) of Regulations S-T under the Securities Exchange Act
of 1934, as amended.
BYLAWS
OF
LTC PROPERTIES, INC.
TABLE OF CONTENTS
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ARTICLE I MEETINGS OF STOCKHOLDERS............................. 1
1.01 Place 1
1.02 Annual Meeting 1
1.03 Special Meetings......................................... 1
1.04 Notice................................................... 1
1.05 Scope of Notice.......................................... 1
1.06 Quorum................................................... 2
1.07 Voting................................................... 2
1.08 Proxies.................................................. 2
1.09 Conduct of Meetings...................................... 2
1.10 Tabulation of Votes...................................... 3
1.11 Informal Action by Stockholders.......................... 3
1.12 Voting by Ballot......................................... 3
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ARTICLE II DIRECTORS........................................... 3
2.01 General Powers........................................... 3
2.02 Outside Activities....................................... 4
2.03 Outside Management....................................... 4
2.04 Number, Tenure, Qualification, Nomination and Election... 4
2.05 Annual and Regular Meetings.............................. 7
2.06 Special Meetings......................................... 7
2.07 Notice................................................... 7
2.08 Quorum................................................... 7
2.09 Voting................................................... 8
2.10 Conduct of Meetings...................................... 8
2.11 Resignations............................................. 8
2.12 Vacancies................................................ 8
2.13 Informal Action by Directors............................. 8
2.14 Compensation............................................. 9
ARTICLE III COMMITTEES......................................... 9
3.01 Number, Tenure and Qualification......................... 9
3.02 Delegation of Power...................................... 9
3.03 Quorum................................................... 9
3.04 Conduct of Meetings...................................... 9
3.05 Informal Action by Committees............................ 10
ARTICLE IV OFFICERS............................................ 10
4.01 Enumueration............................................. 10
4.02 Powers and Duties........................................ 10
4.03 Removal.................................................. 10
4.04 Outside Activities....................................... 10
4.05 Vacancies................................................ 11
4.06 Chairman of the Board.................................... 11
4.07 President................................................ 11
4.08 Vice Presidents.......................................... 12
4.09 Secretary................................................ 12
4.10 Treasurer................................................ 12
4.11 Assistant Secretaries and Assistant Treasurers........... 13
4.12 Salaries................................................. 13
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ARTICLE V SHARES OF STOCK...................................... 13
5.01 Certificates of Stock.................................... 13
5.02 Stock Ledger............................................. 13
5.03 Recording Transfers of Stock............................. 14
5.04 Lost Certificate......................................... 14
5.05 Closing of Transfer Books or Fixing of Record Date....... 15
ARTICLE VI DIVIDENDS.AND DISTRIBUTIONS......................... 16
6.01 Declaration.............................................. 16
6.02 Contingencies............................................ 16
ARTICLE VII INDEMNIFICATION.................................... 16
7.01 Indemnification of officers.............................. 16
7.02 Insurance................................................ 16
ARTICLE VIII NOTICES........................................... 17
8.01 Notices.................................................. 17
8.02 Secretary to Give Notice................................. 17
8.03 Waiver of Notice......................................... 17
ARTICLE IX MISCELLANEOUS....................................... 18
9.01 Books and Records......................................... 18
9.02 Inspection of Bylaws and Corporate Records................ 18
9.03 Contracts................................................. 18
9.04 Checks, Drafts, Etc....................................... 18
9.05 Deposits.................................................. 18
9.06 Loans..................................................... 19
9.07 Fiscal Year............................................... 19
9.08 Reports and Other Information............................. 19
9.09 Bylaws Severable.......................................... 20
ARTICLE X AMENDMENT OF BYLAWS.................................. 20
10.01 By Directors............................................. 20
10.02 By Stockholders.......................................... 20
10.03 Exception for Indemnification............................ 21
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ARTICLE I
MEETINGS OF STOCKHOLDERS
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1.01. PLACE. All meetings of the holders of the issued and outstanding
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capital stock of the Corporation (the "Stockholders") shall be held at the
principal office of the Corporation in Ft. Smith, Arkansas or at such other
place within the United States as shall be stated in the notice of the meeting.
1.02. ANNUAL MEETING. An annual meeting of the Stockholders for the
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election of Directors and the transaction of any business within the powers of
the Corporation shall be held on the last Thursday of April, or at such other
date and time as may be fixed by the Board of Directors. If the day fixed for
the annual meeting shall be a legal holiday, such meeting shall be held at the
same time on the next succeeding business day.
1.03. SPECIAL MEETINGS. The Chairman of the Board (if any), the President
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or a majority of the Board of Directors may call special meetings of the
Stockholders. Special meetings of Stockholders shall also be called by the
Secretary upon the written request of the holders of shares entitled to cast not
less than 25% of all the votes entitled to be cast at such meeting. Such
request shall state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat. The date, time, place and record date for any
such Special Meeting, including a meeting called at the request of Stockholders,
shall be established by the Board of Directors or Officer calling the same.
1.04. NOTICE. Not less than ten (10) nor more than ninety (90) days
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before the date of every meeting of Stockholders, written or printed notice of
such meeting shall be given, in accordance with Section 8.01, to each
Stockholder entitled to vote or entitled to notice by statute, stating the time
and place of the meeting and, in the case of a special meeting or as otherwise
may be required by statute, the purpose or purposes for which the meeting is
called.
1.05. SCOPE OF NOTICE. No business shall be transacted at a special
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meeting of Stockholders except that specifically designated in the notice. Any
business of the Corporation may be transacted at the annual meeting without
being specifically designated in the notice, except such business as is required
by statute to be stated in such notice.
1.06. QUORUM. At any meeting of Stockholders, the presence in person or
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by proxy of Stockholders entitled to cast a majority of the votes shall
constitute a quorum; but this Section shall not affect any requirement under any
statute or the Charter of the Corporation (the "Charter") for the vote necessary
for the adoption of any measure. If, however, a quorum is not present at any
meeting of the Stockholders, the Stockholders present in person or by proxy
shall have the power to adjourn the meeting from time to time without notice
other than announcement at the meeting until a quorum is present and the meeting
so adjourned may be reconvened without further notice. At any adjourned
meeting at which a quorum is present,
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any business may be transacted that might have been transacted at the meeting as
originally notified. The Stockholders present at a meeting which has been duly
called and convened and at which a quorum is present at the time counted may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough Stockholders to leave less than a quorum.
1.07. VOTING. A majority of the votes cast at a meeting of Stockholders
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duly called and at which a quorum is present shall be sufficient to take or
authorize action upon any matter which may properly come before the meeting,
unless more than a majority of the votes cast is specifically required by
statute, by the Charter or by these Bylaws. Unless otherwise provided in the
Charter, each outstanding share (a "Share") of capital stock of the Corporation
(the "Stock"), regardless of class, shall be entitled to one vote upon each
matter submitted to a vote at a meeting of Stockholders. Shares of its own
Stock directly or indirectly owned by this Corporation shall not be voted in any
meeting and shall not be counted in determining the total number of outstanding
Shares entitled to vote at any given time, but Shares of its own Stock held by
it in a fiduciary capacity may be voted and shall be counted in determining the
total number of outstanding Shares at any given time.
1.08. PROXIES. A Stockholder may vote the Shares owned of record by him
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or her, either in person or by proxy executed in writing by the Stockholder or
by his or her duly authorized attorney in fact. Such proxy shall be filed with
the Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
1.09. CONDUCT OF MEETINGS. The Chairman of the Board (if any) or, in the
-------------------
absence of the Chairman, the President, or, in the absence of the Chairman,
President and Vice Presidents, a presiding officer elected at the meeting, shall
preside over meetings of the Stockholders (the "Presiding Officer"). The
Secretary of the Corporation, or, in the absence of the Secretary and Assistant
Secretaries, the person appointed by the presiding Officer of the meeting shall
act as secretary of such meeting.
1.10. TABULATION OF VOTES. At any annual or special meeting of
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Stockholders, the presiding Officer shall be authorized to appoint a Teller for
such meeting. The Teller may, but need not, be an officer, employee or agent of
the Corporation. The Teller shall be responsible for tabulating or causing to
be tabulated shares voted at the meeting and reviewing or causing to be reviewed
all proxies. In tabulating votes, the Teller shall be entitled to rely in whole
or in part on tabulations and analyses made by personnel of the Corporation, its
counsel, its transfer agent, its registrar or such other organizations that are
customarily employed to provide such services. The Teller shall be authorized
to determine the legality and sufficiency of all votes cast and proxies
delivered under both the Charter and these Bylaws and applicable law. The
presiding Officer may review all determinations made by the Teller hereunder,
and in doing so the presiding Officer shall be entitled to exercise his or her
sole
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judgment and discretion and he or she shall not be bound by any determinations
made by the Teller.
1.11. INFORMAL ACTION BY STOCKHOLDERS. An action required or permitted to
-------------------------------
be taken at a meeting of Stockholders may be taken without a meeting if a
consent in writing, setting forth such action, is signed by all the Stockholders
entitled to vote on the subject matter thereof and any other Stockholders
entitled to notice of a meeting of Stockholders (but not to vote there at) have
waived in writing any rights which they may have to dissent from such action,
and such consents and waivers are filed with the minutes of proceedings of the
Stockholders. Such consents and waivers may be signed by different Stockholders
on separate counterparts.
1.12. VOTING BY BALLOT. Voting on any question or in any election may be
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viva voce unless the presiding Officer shall order or any Stockholder shall
- ---- ----
demand that voting be by ballot.
ARTICLE II
DIRECTORS
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2.01. GENERAL POWERS. The business and affairs of the Corporation shall
--------------
be managed by its Board of Directors.
2.02. OUTSIDE ACTIVITIES. The Board of Directors and its members are
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required to spend only such time managing the business and affairs of the
Corporation as is necessary to carry out their duties in accordance with Section
2-405.1 of the Maryland General Corporation Law. The Board of Directors, each
Director, and the agents, Officers and employees of the Corporation or of the
Board of Directors or of any Director may engage with or for others in business
activities of the types conducted by the Corporation; none of them has an
obligation to notify or present to the Corporation or each other any investment
opportunity that may come to such person's attention even though such investment
might be within the scope of the Corporation's purposes or various investment
objectives. Any interest (including any interest as defined in Section 2-419(a)
of the Maryland General Corporation Law) that a Director has in any investment
opportunity presented to the Corporation must be disclosed by such Director to
the Board of Directors (and, if voting thereon, to the Stockholders or to any
committee of the Board of Directors) within ten (10) days after the later of the
date upon which such Director becomes aware of such interest or that the
Corporation is considering such investment opportunity. If such interest comes
to the interested Director's attention after a vote to take such investment
opportunity, the voting body shall reconsider such investment opportunity if not
already consummated or implemented.
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2.03. OUTSIDE MANAGEMENT. The Board of Directors may delegate some or all
------------------
of the duties of management of the assets and the administration of the
Corporation's day-to-day business operations to one or more advisors pursuant to
a written contract or contracts approved by the Board of Directors.
2.04. NUMBER, TENURE, QUALIFICATION, NOMINATION AND ELECTION.
------------------------------------------------------
2.04.1 The number of Directors of the Corporation shall be six (6),
unless a majority of the Board of Directors establishes some other number not
less than three (3) and not more than nine (9).
2.04.2 The Stockholders shall elect the number of Directors so
established, if and to the extent there are nominees duly nominated in
accordance with these Bylaws. Ballots bearing the names of all the persons who
have been duly nominated for election as directors at an annual meeting of
Stockholders in accordance with the procedures set forth in this Section 2.04
shall be provided for use at the annual meeting.
2.04.3 Nominations of candidates for election as Directors of the
Corporation at any annual meeting of Stockholders may be made (i) by, or at the
direction of, a majority of the Board of Directors or a duly authorized
committee thereof (which committee in the case of any nomination of a director
who is to be an Independent Director shall have a majority of Independent
Directors) or (ii) by any holder of record (both as of the time notice of such
nomination is given by the Stockholder as set forth below and as of the record
date for the annual meeting in question) of any shares of the Corporation's
capital stock entitled to vote at such annual meeting who complies with the
notice procedures of this Section 2.04. Any Stockholder who seeks to make such
a nomination, or his representative, must be present in person at the annual
meeting. Only persons nominated in accordance with the procedures set forth in
this Section 2.04 shall be eligible for election as Directors at an annual
meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors or a duly authorized committee thereto, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation as set forth in
this Section 2.04. To be timely, a Stockholder's notice shall be delivered to,
or mailed and received at, the principal executive offices of the Corporation
not less than 60 days nor more than 150 days prior to the anniversary of the
last annual meeting of Stockholders. Each such Stockholder notice shall set
forth (i) as to each person whom the Stockholder proposes to nominate for
election or reelection as a Director and as to the Stockholder giving the notice
(a) the name, age, business address and residence address of such person, (b)
the principal occupation or employment of such person, (c) the class and number
of shares of the Corporation's capital stock which are beneficially owned by
such person on the date of such Stockholder notice, (d) such nominee's consent
to serve as a Director if elected and (e) any other information relating to such
person that is required to be disclosed in solicitations of proxies with respect
to nominees for election as may be deemed necessary or desirable by the
Corporation's counsel, in the exercise of his
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or her discretion; and (ii) as to the Stockholder giving the notice (a) the name
and address, as they appear on the Corporation's books, of such Stockholder and
any other Stockholders known by such Stockholder to be supporting such nominees
and (b) the class and number of shares of the Corporation's capital stock which
are beneficially owned by such Stockholder on the date of such Stockholder
notice and by any other Stockholders known by such Stockholder to be supporting
such nominees on the date of such Stockholder notice. At the request of the
Board of Directors or a committee appointed by it, any persons nominated by, or
at the direction of, the Board or such committee for election as a Director at
an annual meeting shall furnish to the Secretary of the Corporation that
information required to be set forth in a Stockholder's notice of nomination
which pertains to the nominee.
2.04.4 If the Board of Directors, or a designated committee thereof,
determines that any Stockholder nomination was not timely made in accordance
with the terms of this Section 2.04, or the information provided in a
Stockholder's notice does not satisfy the informational requirements of this
Section 2.04 in any material respect, then the Board of Directors or such
committee, as the case may be, shall reject such Stockholder nomination and such
nomination shall not be considered at the annual meeting in question; provided,
--------
however, if such Stockholder's notice was duly received at least 15 days in
- -------
advance of the last date on which such notice could have been timely made, then
the Secretary of the corporation shall, within 10 days after the Secretary's
receipt of such notice, notify such Stockholder of the deficiency in the notice.
Such Stockholder receiving such notice from the Secretary shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within such period of time, not to exceed five days from the date such
deficiency notice is given to the Stockholder, as the Board of Directors or such
committee shall reasonably determine. If the deficiency is not cured within such
period, or if the Board of Directors or such committee reasonably determines
that the additional information provided by the Stockholder, together with
information previously provided, does not satisfy the requirements of this
Section 2.04 in any material respect, then the Board of Directors shall reject
such Stockholder's nomination and such nomination shall not be considered at the
annual meeting in question.
2.04.5 If neither the Board of Directors nor such committee makes a
determination as to the validity of any nominations by a Stockholder as set
forth above, the Presiding Officer of the annual meeting shall determine and
declare at the annual meeting whether a nomination was made in accordance with
the terms of this Section 2.04. If the Presiding Officer determines that a
nomination was made in accordance with the terms of this Section 2.04, he shall
so declare at the annual meeting and ballots shall be provided for use at the
meeting with respect to such nominee. If the Presiding Officer determines that
a nomination was not made in accordance with the terms of this Section 2.04, he
shall so declare at the annual meeting and such nomination shall be disregarded.
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2.05. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
---------------------------
Directors may be held immediately after and at the same place as the annual
meeting of Stockholders, or such other time and place, either within or without
the State of Maryland, as is selected by resolution of the Board of Directors,
and no notice other than these Bylaws or such resolution shall be necessary.
The Board of Directors may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of regular meetings of
the Board of Directors without other notice than such resolutions.
2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
----------------
called by or at the request of the Chairman of the Board (if any), the President
or a majority of the Directors then in office. The person or persons authorized
to call special meetings of the Board of Directors may fix any place, either
within or without the State of Maryland, as the place for holding any special
meeting of the Board of Directors called by them.
2.07. NOTICE. Notice of any special meeting to be provided herein shall
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be given, in accordance with Section 8.01, by written notice delivered
personally, telegraphed or telecopied to each Director at his or her business or
residence at least twenty-four (24) hours, or by mail at least five (5) days,
prior to the meeting. Neither the business to be transacted at, nor the purpose
of, any annual, regular or special meeting of the Board of Directors need be
specified in the notice, unless specifically required by statute or these
Bylaws.
2.08. QUORUM. A majority of the Directors then in office shall constitute
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a quorum for transaction of business at any meeting of the Board of Directors;
provided, however that a quorum for transaction of business with respect to any
matter in which any Director (or affiliate of such Director) who is not an
Independent Director has any interest shall consist of a majority of the
Directors, including a majority of the Independent Directors, then in office.
2.09. VOTING. Except as otherwise required by law or by the Charter, the
------
act of a majority of Directors present at a meeting at which a quorum is present
shall constitute the act of the Board of Directors, except that no act relating
to any matter in which any Director (or affiliate of such Director) who is not
an Independent Director has any interest shall be the act of the Board unless a
majority of the Independent Directors on the Board vote for such act.
2.10. CONDUCT OF MEETINGS. All meetings of the Board of Directors shall
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be called to order and presided over by the Chairman of the Board (if any), or
in the absence of the Chairman of the Board by the President (if a member of the
Board of Directors), or, in the absence of the Chairman of the Board or the
President, by a member of the Board of Directors selected by the members
present. The Secretary of the Corporation shall act as secretary at all
meetings of the Board of Directors, and in the absence of the Secretary and
Assistant Secretaries, the presiding Officer of the meeting shall designate any
person to act as secretary of the meeting. Members of the Board of Directors
may participate in meetings of the Board of Directors by conference telephone or
similar communications equipment by means of which all Directors participating
in the meeting can hear each other at the same time, and
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participation in a meeting in accordance herewith shall constitute presence in
person at such meeting for all purposes.
2.11. RESIGNATIONS. Any Director may resign from the Board of Directors
------------
or any committee thereof at any time. Such resignation shall be made in writing
and shall take effect at the time specified herein, or if no time be specified,
at the time of the receipt of notice of such resignation by the President or the
Secretary.
2.12. VACANCIES. A vacancy which arises through the death, resignation or
---------
removal of a Director or as a result of an increase by the Board of Directors in
the number of Directors may be filled by a vote of the entire Board of
Directors, and a Director so elected by the Board of Directors to fill a vacancy
shall serve until the next annual meeting of Stockholders and until his
successor shall be duly elected and qualified. At the annual meeting of
Stockholders, a Director shall be elected to fill the vacancy for the remainder
of the present term of office of the class to which the Director is elected.
2.13. INFORMAL ACTION BY DIRECTORS. Any action required or permitted to
----------------------------
be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to such action is signed by all of the
Directors and such written consent is filed with the minutes of the Board of
Directors. Consents may be signed by different Directors on separate
counterparts.
2.14. COMPENSATION. An annual fee for services and payment for expenses
------------
of attendance at each meeting of the Board of Directors, or of any committee
thereof, may be allowed to any Director by resolution of the Board of Directors.
ARTICLE III
COMMITTEES
----------
3.01. NUMBER, TENURE AND QUALIFICATION. The Board of Directors may
--------------------------------
appoint from among its members an Executive Committee and other committees,
composed of two or more Directors, to serve at the pleasure of the Board of
Directors. If any committee may take or authorize any act as to any matter in
which any Director (or affiliate of such Director) who is not an Independent
Director has or may have any interest, a majority of the members of such
committee shall be Independent Directors, except that any such committee
consisting of only two Directors may have one Independent Director and one
Director who is not an Independent Director.
3.02. DELEGATION OF POWER. The Board of Directors may delegate to these
-------------------
committees in the intervals between meetings of the Board of Directors any of
the powers of the Board of Directors to manage the business and affairs of the
Corporation, except those
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powers which the Board of Directors is specifically prohibited from delegating
pursuant to Section 2-411 of the Maryland General Corporation Law.
3.03. QUORUM AND VOTING. A majority of the members of any committee shall
-----------------
constitute a quorum for the transaction of business by such committee, and the
act of a majority of the quorum shall constitute the act of the committee,
except that no act relating to any matter in which any Director (or affiliate of
such Director) who is not an Independent Director has any interest shall be the
act of any committee unless a majority of the Independent Directors on the
committee vote for such act.
3.04. CONDUCT OF MEETINGS. Each committee shall designate a presiding
-------------------
Officer of such committee, and if not present at a particular meeting, the
committee shall select a presiding officer for such meeting. Members of any
committee may participate in meetings of such committee by conference telephone
or similar communications equipment by means of which all Directors
participating in the meeting can hear each other at the same time, and
participation in a meeting in accordance herewith shall constitute presence in
person at such meeting for all purposes. Each committee shall keep minutes of
its meetings, and report the results of any proceedings at the next succeeding
annual or regular meeting of the Board of Directors.
3.05. INFORMAL ACTION BY COMMITTEES. Any action required or permitted to
-----------------------------
be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of
proceedings of such committee. Consents may be signed by different members on
separate counterparts.
ARTICLE IV
OFFICERS
--------
4.01. ENUMUERATION. The Officers of the Corporation shall consist of a
------------
President, a Treasurer and a Secretary, and may also consist of a Chairman of
the Board, one or more Vice Presidents, Assistant Treasurers, Assistant
Secretaries and other Officers as the Board of Directors may from time to time
elect or appoint.
4.02. POWERS AND DUTIES. The President, Treasurer and Secretary of the
-----------------
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
Stockholders. If the election of such Officers shall not be held at such
meeting, such election shall be held as soon thereafter as may be convenient.
The Board of Directors may elect or appoint such other Officers as they
determine at any time. Each Officer shall hold office until his successor is
duly elected and qualifies or until his death, resignation or removal in the
manner hereinafter provided, or until
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the office to which he is elected (if other than that of President, Treasurer or
Secretary) is terminated by the Board of Directors. Any two or more offices
except President and Vice President may be held by the same person. Election or
appointment of an Officer or agent shall not of itself create contract rights
between the Corporation and such Officer or agent.
4.03. REMOVAL. Any Officer or agent elected or appointed by the Board of
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Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. The fact that a person is elected or appointed to an office, whether
or not for a specified term, shall not by itself constitute any undertaking or
evidence of any employment obligation of the Corporation to that person.
4.04. OUTSIDE ACTIVITIES. Any interest (including any interest as defined
------------------
in Section 2-419(a) of the Maryland General Corporation Law as if the Officer or
agent were a Director of the Corporation) that an Officer or an agent has in any
investment opportunity presented to the Corporation must be disclosed by such
Officer or agent to the Board of Directors (and, if voting thereon, to the
Stockholders or to any committee of the Board of Directors) within ten (10) days
after the later of the date upon which such Officer or agent becomes aware of
such interest or that the Corporation is considering such investment
opportunity. If such interest comes to the attention of the interested Officer
or agent after a vote to take such investment opportunity, the voting body shall
reconsider such investment opportunity if not already consummated or
implemented.
4.05. VACANCIES. A vacancy in any office may be filled by the Board of
---------
Directors for the unexpired portion of the term.
4.06. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is
---------------------
elected, shall preside at all meetings of the Stockholders and of the Board of
Directors. The Chairman of the Board may sign and execute all authorized deeds,
mortgages, bonds, contracts or other instruments in the name of the Corporation
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other Officer or agent of the
Corporation or shall be required by law to be otherwise signed or executed.
4.07. PRESIDENT. Unless the Board of Directors shall otherwise determine
---------
in favor of the Chairman of the Board or any other Officer of the Corporation,
the President shall be the Chief Executive Officer and general manager of the
Corporation and shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of the Chairman of the Board (if
any), the President shall preside at all meetings of the Stockholders and of the
Board of Directors (if a member of the Board of Directors). The President may
sign any deed, mortgage, bond, contract or other instruments on behalf of the
Corporation except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other Officer or
agent of the Corporation or shall be
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required by law to be otherwise signed or executed. In general, the President
shall perform all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time to time.
4.08. VICE PRESIDENTS. In the absence of the President or in the event of
---------------
a vacancy in such office, the Vice President (or in the event there be more than
one Vice President, the Vice Presidents in the order designated at the time of
their election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. Every Vice President shall perform such other duties as from time to
time may be assigned to him or her by the President or the Board of Directors.
4.09. SECRETARY. The Secretary shall (i) keep the minutes of the
---------
proceedings of the Stockholders and Board of Directors in one or more books
provided for that purpose; (ii) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (iii) be
custodian of the corporate records of the Corporation; (iv) unless a transfer
agent is appointed, keep a register of the post office address of each
Stockholder that shall be furnished to the Secretary by such Stockholder and
have general charge of the Stock Ledger of the Corporation; (v) when authorized
by the Board of Directors or the President, attest to or witness all documents
requiring the same; (vi) perform all duties as from time to time may be assigned
to him or her by the President or by the Board of Directors; and (vii) perform
all the duties generally incident to the office of secretary of a corporation.
4.10. TREASURER. The Treasurer shall have the custody of the corporate
---------
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositaries as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at the regular meetings of the Board
of Directors or whenever they may require it, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
The Board of Directors may engage a Custodian to perform some or all of the
duties of the Treasurer, and if a Custodian is so engaged then the Treasurer
shall be relieved of the responsibilities set forth herein to the extent
delegated to such Custodian and, unless the Board of Directors otherwise
determines, shall have general supervision over the activities of such
Custodian. The Custodian shall not be an Officer of the Corporation.
4.11. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
----------------------------------------------
Secretaries and Assistant Treasurers (if any) (i) shall have the power to
perform and shall perform all the duties of the Secretary and the Treasurer,
respectively, in such respective Officer's absence and (ii) shall perform such
duties as shall be assigned to him or her by the Secretary or Treasurer,
respectively, or by the President or the Board of Directors.
10
<PAGE>
4.12. SALARIES. The salaries, if any, of the Officers shall be fixed from
--------
time to time by the Board of Directors. No Officer shall be prevented from
receiving such salary, if any, by reason of the fact that he or she is also a
Director of the Corporation.
ARTICLE V
SHARES OF STOCK
---------------
5.01. CERTIFICATES OF STOCK. Each Stockholder shall be entitled to a
---------------------
certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman, President, or any Vice President and countersigned by
the Treasurer, Secretary, or any Assistant Treasurer or Assistant Secretary.
The Corporation seal and the signatures by Corporation officers may be facsimile
if the certificate is manually countersigned by an authorized person on behalf
of a transfer agent or registrar other than the Corporation or its employee. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the time of its issue. Every certificate for
shares of stock which are subject to any restriction on transfer and every
certificate issued when the Corporation is authorized to issue more than one
class or series of stock shall contain such legend with respect thereto as is
required by law.
5.02. STOCK LEDGER. The Corporation shall maintain at its principal
------------
office in Ft. Smith, Arkansas (or any subsequent address selected by the Board
of Directors) or at the office of its counsel, accountants or transfer agent, an
original or duplicate Stock Ledger containing the names and addresses of all the
Stockholders and the number of shares of each class held by each Stockholder.
The Stock Ledger shall be maintained pursuant to a system that the Corporation
shall adopt allowing for the issuance, recordation and transfer of its Stock by
electronic or other means that can be readily converted into written form for
visual inspection. Such system shall include provisions for notice to acquirers
of Stock (whether upon issuance or transfer of Stock) in accordance with
Sections 2-210 and 2-211 of the Maryland General Corporation Law, and Section 8-
408 of the Commercial Law Article of the State of Maryland. The Corporation
shall be entitled to treat the holder of record of any Share or Shares as the
holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Maryland. Until a transfer is
duly effected on the Stock Ledger, the Corporation shall not be affected by any
notice of such transfer, either actual or constructive. Nothing herein shall
impose upon the Corporation, the Board of Directors or Officers or their agents
and representatives a duty or limit their rights to inquire as to the actual
ownership of Shares.
11
<PAGE>
5.03. RECORDING TRANSFERS OF STOCK. If transferred in accordance with any
----------------------------
restrictions on transfer contained in the Charter, these Bylaws or otherwise,
Shares shall be recorded as transferred in the Stock Ledger upon provision to
the Corporation or the transfer agent of the Corporation of an executed stock
power duly guaranteed and any other documents reasonably requested by the
Corporation, and the surrender of the certificate or certificates, if any,
representing such Shares. Upon receipt of such documents, the Corporation shall
issue the statements required by Sections 2-210 and 2-211 of the Maryland
General Corporation Law and Section 8-408 of the Commercial Law Article of the
State of Maryland, issue as needed a new certificate or certificates (if the
transferred Shares were certificated) to the persons entitled thereto, cancel
any old certificates and record the transaction upon its books.
5.04. LOST CERTIFICATE. The Board of Directors may direct a new
----------------
certificate to be issued in the place of any certificate theretofore issued by
the Corporation alleged to have been stolen, lost or destroyed upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be stolen, lost or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such stolen, lost or destroyed
certificate or his legal representative to advertise the same in such manner as
it shall require and/or to give bond, with sufficient surety, to the Corporation
to indemnify it against any loss or claim which may arise by reason of the
issuance of a new certificate.
5.05. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
--------------------------------------------------
5.5.1. The Board of Directors may fix, in advance, a date as the
record date for the purpose of determining Stockholders entitled to notice of,
or to vote at, any meeting of Stockholders, or Stockholders entitled to receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Stockholders for any other proper purpose. Such date, in any
case, shall be not more than sixty (60) days, and in case of a meeting of
Stockholders not less than ten (10) days, prior to the date on which the meeting
or particular action requiring such determination of Stockholders is to be held
or taken.
5.5.2. If, in lieu of fixing a record date, the stock transfer books
are closed by the Board of Directors in accordance with Section 2-511 of the
Maryland General Corporation Law for the purpose of determining Stockholders
entitled to notice of or to vote at a meeting of Stockholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting.
5.5.3. If no record date is fixed and the stock transfer books are
not closed for the determination of Stockholders, (a) the record date for the
determination of Stockholders entitled to notice of, or to vote at, a meeting of
Stockholders shall be at the close of business on the day on which the notice of
meeting is mailed or the 30th day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
Stockholders entitled to receive payment of a dividend or an allotment of and
rights shall be at
12
<PAGE>
the close of business on the day on which the resolution of the Board of
Directors, declaring the dividend or allotment of rights, is adopted.
5.5.4. When a determination of Stockholders entitled to vote at any
meeting of Stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
---------------------------
6.01. DECLARATION. Dividends and other distributions upon the Stock may
-----------
be declared by the Board of Directors as set forth in the applicable provisions
of the Charter and any applicable law, limited only to the extent of Section 2-
311 of the Maryland General Corporation Law. Dividends and other distributions
upon the Stock may be paid in cash, property or Stock of the Corporation,
subject to the provisions of law and of the Charter.
6.02. CONTINGENCIES. Before payment of any dividends or other
-------------
distributions upon the Stock, there may be set aside (but there is no duty to
set aside) out of any funds of the Corporation available for dividends or other
distributions such sum or sums as the Board of Directors may from time to time,
in its absolute discretion, think proper as a reserve fund to meet
contingencies, for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors shall determine to be in the
best interest of the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE VII
INDEMNIFICATION
---------------
7.01 INDEMNIFICATION OF OFFICERS. Unless the Directors otherwise
---------------------------
determine prospectively in the case of any one or more specified officers, all
persons elected or appointed by the Directors as an officer of the Corporation
shall be entitled to indemnification by the Corporation on account of matters
resulting in their capacity as an officer to the same extent provided with
respect to Directors by the Charter.
7.02. INSURANCE. The Corporation shall have power to purchase and
---------
maintain insurance on behalf of any person entitled to indemnification or whom
the Corporation may indemnify under ARTICLE TWELFTH of the Charter or under
Maryland law against any liability, whether or not the Corporation would have
the power to indemnify him or her
13
<PAGE>
against such liability. The rights to indemnification set forth in the Charter
or in the Bylaws are in addition to all rights which any Indemnified Person may
be entitled as a matter of law, and shall inure to the benefit of the heirs and
personal representatives of each Indemnified Person.
ARTICLE VIII
NOTICES
-------
8.01. NOTICES. Whenever notice is required to be given pursuant to these
-------
Bylaws, it shall be construed to mean either written notice personally served
against written receipt, or notice in writing transmitted by mail, by depositing
the same in a post office or letter box, in a post-paid sealed wrapper,
addressed, if to the Corporation, at the principal office of the Corporation,
3820 Free Ferry Road, Ft. Smith, Arkansas 72903 (or any subsequent address
selected by the Board of Directors notice of which is given to the
Stockholders), attention President, or if to a Stockholder, Director or Officer,
at the address of such person as it appears on the books of the Corporation or
in default of any other address at the general post office situated in the city
or county of his or her residence. Unless otherwise specified, notice sent by
mail shall be deemed to be given at the time the same shall be thus mailed.
8.02. SECRETARY TO GIVE NOTICE. All notices required by law or these
------------------------
Bylaws to be given by the Corporation shall be given by the Secretary of the
Corporation. If the Secretary and Assistant Secretary are absent or refuse or
neglect to act, the notice may be given by any person directed to do so by the
President or, with respect to any meeting called pursuant to these Bylaws upon
the request of any Stockholders or Directors, by any person directed to do so by
the Stockholders or Directors upon whose request the meeting is called.
8.03. WAIVER OF NOTICE. Whenever any notice is required to be given
----------------
pursuant to the Charter or Bylaws of the Corporation or pursuant to applicable
law, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Such waiver shall be filed with the
records of the meeting. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any meeting
shall constitute a waiver of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
14
<PAGE>
ARTICLE IX
MISCELLANEOUS
-------------
9.01. BOOKS AND RECORDS. The Corporation shall keep correct and complete
-----------------
books and records of its accounts and transactions and minutes of the
proceedings of its Stockholders and Board of Directors and of executive or other
committee when exercising any of the powers or authority of the Board of
Directors. The books and records of the Corporation may be in written form or
in any other form that be converted within a reasonable time into written form
for visual inspection. Minutes shall be recorded in written form, but may be
maintained in the form of a reproduction.
9.02. INSPECTION OF BYLAWS AND CORPORATE RECORDS. These Bylaws, the
------------------------------------------
accounting books and records, including the stock register, of the Corporation,
the minutes of proceedings of the Stockholders, the Board of Directors and
committees thereof, annual statements of affairs and any Shareholders' or voting
trust agreements on record shall be open to inspection upon the written demand
on the Corporation by any Stockholder or holder of a voting trust certificate at
any reasonable time during usual business hours, for a purpose reasonably
related to such holder's interests as a Stockholder or as the holder of such
voting trust certificate, in each case to the extent permitted by the Maryland
General Corporation Law.
9.03. CONTRACTS. In addition to the provisions of these Bylaws relating
---------
to the authority of any specified Officer, the Board of Directors may authorize
any Officer or Officers, agent or agents, to enter into any contract or to
execute and deliver any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
9.04. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
-------------------
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such Officers or agents of the Corporation
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
9.05. DEPOSITS. All funds of the Corporation not otherwise employed shall
--------
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as the Board of Directors may select.
9.06. LOANS.
-----
9.6.1. Such Officers or agents of the Corporation as from time to
time have been designated by the Board of Directors shall have authority (i) to
effect loans, advances, or other forms of credit at any time or times for the
Corporation, from such banks, trust companies, institutions, corporations,
firms, or persons, in such amounts and subject to such
15
<PAGE>
terms and conditions, as the Board of Directors from time to time has
designated; and (ii) as security for the repayment of any loans, advances, or
other forms of credit so authorized, to assign, transfer, endorse, and deliver,
either originally or in addition or substitution, any or all personal property,
real property, stocks, bonds, deposits, accounts, documents, bills, accounts
receivable, and other commercial paper and evidences of debt or other
securities, or any rights or interests at any time held by the Corporation; and
(iii) in connection with any loans, advances, or other forms of credit so
authorized, to make, execute, and deliver one or more notes, mortgages, deeds of
trust, financing statements, security agreements, acceptances, or written
obligations of the Corporation, on such terms and with such provisions as to the
security or sale or disposition of them as those Officers or agents deem proper;
and (iv) to sell to, or discount or rediscount with, the banks, trust companies,
institutions, corporations, firms or persons making those loans, advances, or
other forms of credit, any and all commercial paper, bills, accounts receivable,
acceptances, and other instruments and evidences of debt at any time held by the
Corporation, and, to that end, to endorse, transfer, and deliver the same.
9.6.2. From time to time the Corporation shall certify to each bank,
trust company, institution, corporation, firm, or person so designated, the
signatures of the Officers or agents so authorized. Each bank, trust company,
institution, corporation, firm, or person so designated is authorized to rely
upon such certification until it has received written notice that the Board of
Directors has revoked the authority of those Officers or agents.
9.07. FISCAL YEAR. The Board of Directors shall have the power, from time
-----------
to time, to fix the fiscal year of the Corporation by a duly adopted resolution,
and, in the absence of such resolution, the fiscal year shall be the period
ending December 31.
9.08. REPORTS AND OTHER INFORMATION.
-----------------------------
9.8.1. Not later than 120 days after the close of each fiscal year,
the Board of Directors of the Corporation shall cause to be sent to the
Stockholders an Annual Report in such form as may be deemed appropriate by the
Board of Directors. The Annual Report shall include audited financial
statements and shall be accompanied by the report thereon of an independent
certified public accountant. The Board of Directors of the Corporation shall
also cause to be sent to the Stockholders such other information as may be
necessary to enable the Stockholders to prepare their respective state and
federal income tax returns.
9.8.2. The Corporation may send interim reports to the Stockholders
having such form and content as the Board of Directors deem proper or as the
Officers of the Corporation in good faith deem is required by law or by good
corporate practices.
9.8.3. Any distributions to Stockholders of income, capital gains or
a return of capital assets shall be accompanied by a written statement
disclosing the source of the funds distributed unless at the time of
distribution they are accompanied by a written explanation of the relevant
circumstances. The statement as to such source shall be sent to the Stockholders
16
<PAGE>
not later than sixty (60) days after the close of the fiscal year in which the
distributions were made.
9.09. BYLAWS SEVERABLE. The provisions of these Bylaws are severable, and
----------------
if any provision shall be held invalid or unenforceable, that invalidity or
unenforceability shall attach only to that provision and shall not in any manner
affect or render invalid or unenforceable any other provision of these Bylaws,
and these Bylaws shall be carried out as if the invalid or unenforceable
provision were not contained herein.
ARTICLE X
AMENDMENT OF BYLAWS
--------------------
10.1. BY DIRECTORS. To the fullest extent permitted by the Maryland
------------
General Corporation Law the Board of Directors shall have the power, at any
annual or regular meeting, or at any special meeting if notice thereof be
included in the notice of such special meeting, to alter or repeal any Bylaws of
the Corporation and to make new Bylaws.
10.2. BY STOCKHOLDERS. The Stockholders shall have the power, at any
---------------
annual meeting, or at any special meeting if notice thereof be included in the
notice of such special meeting, with the approval of Stockholders holding in
excess of 66 2/3% of all outstanding Shares of Stock to alter or repeal any
Bylaws of the Corporation and to make new Bylaws.
10.3. EXCEPTION FOR INDEMNIFICATION. No amendment or repeal of any
-----------------------------
Charter provision, Bylaw provision or provision of any resolution of the Board
of Directors or other contractual obligation of the Corporation affording
indemnification by the Corporation to any person shall be effective so as to
deprive such person from the right to indemnification on account of all matters
occurring or arising prior to such amendment or repeal without the consent of
such indemnified person.
17
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
************************************************************
LTC PROPERTIES, INC.
_____________________________
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT
Dated as of May 21, 1996
SANWA BANK CALIFORNIA
as Agent
************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience of reference only.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions and Accounting Matters............................. 2
1.1 Certain Defined Terms.......................................... 2
1.2 Accounting Terms and Determinations............................ 24
1.3 Types of Loans................................................. 25
1.4 Interpretation................................................. 25
Section 2. Commitments, Loans, Notes and Prepayments...................... 25
2.1 Loans.......................................................... 25
2.2 Limit on Eurodollar Loans...................................... 26
2.3 Borrowings of Loans............................................ 26
2.4 Changes of Commitments......................................... 26
2.5 Commitment Fee................................................. 27
2.6 Facility Fee................................................... 27
2.7 Lending Offices................................................ 27
2.8 Several Obligations; Remedies Independent...................... 27
2.9 Notes.......................................................... 27
2.10 Optional Prepayments and Conversions or Continuations of Loans. 28
2.11 Annual Clean................................................... 28
2.12 Mandatory Prepayments.......................................... 28
Section 3. Payments of Principal and Interest............................. 29
3.1 Repayment of Loans............................................. 29
3.2 Interest....................................................... 29
Section 4. Payments; Pro Rata Treatment; ComputatioNS; Etc................ 30
4.1 Payments....................................................... 30
4.2 Pro Rata Treatment............................................. 31
4.3 Computations................................................... 31
4.4 Minimum Amounts................................................ 32
4.5 Certain Notices................................................ 32
4.6 NonReceipt of Funds by the Agent............................... 33
4.7 Sharing of Payments, Etc....................................... 34
Section 5. Yield Protection, Etc.......................................... 35
5.1 Additional Costs............................................... 35
5.2 Limitation on Types of Loans................................... 37
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C>
5.3 Illegality..................................................... 38
5.4 Treatment of Affected Loans.................................... 38
5.5 Compensation................................................... 39
5.6 Taxes.......................................................... 40
Section 6. Conditions Precedent........................................... 41
6.1 Initial Extension of Credit.................................... 41
6.2 Initial and Subsequent Extensions of Credit.................... 45
Section 7. Representations and Warranties................................. 46
7.1 Corporate Existence............................................ 46
7.2 Financial Condition............................................ 47
7.3 Litigation..................................................... 47
7.4 No Breach...................................................... 48
7.5 Action......................................................... 48
7.6 Approvals...................................................... 48
7.7 Margin Stock................................................... 48
7.8 ERISA.......................................................... 49
7.9 Taxes.......................................................... 49
7.10 Certain Regulations............................................ 49
7.11 Material Agreements and Liens.................................. 49
7.12 Envirnomental Matters.......................................... 50
7.13 Capitalization................................................. 52
7.14 Subsidiaries, Etc.............................................. 53
7.15 Title to Assets................................................ 53
7.16 True and Complete Disclosure................................... 54
7.17 REIT AND REMIC Status.......................................... 54
7.18 Eligible Mortgage Loans........................................ 54
Section 8. Covenants of the Company....................................... 62
8.1 Financial Statements Etc....................................... 62
8.2 Litigation..................................................... 66
8.3 Existence, Etc................................................. 66
8.4 Insurance...................................................... 67
8.5 Prohibition of Fundamental Changes............................. 67
8.6 Limitation on Liens............................................ 68
8.7 Indebtedness................................................... 70
8.8 Investments.................................................... 70
8.9 Operator Concentration......................................... 71
8.10 Leverage Ratio................................................. 71
8.11 Tangible Net Worth............................................. 71
8.12 Senior Funded Debt to Tangible Net Worth....................... 72
8.13 Interest Coverage.............................................. 72
8.14 Capital Expenditures........................................... 72
8.15 Mortgage Receivables........................................... 72
8.16 Goldman Facility............................................... 72
8.17 Subordinated Indebtedness...................................... 72
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.18 Lines of Business.............................................. 73
8.19 Transactions with Affiliates................................... 73
8.20 Use of Proceeds................................................ 74
8.21 Certain Obligations Respecting Subsidiaries.................... 74
8.22 REIT Status.................................................... 74
8.23 Deposits....................................................... 74
8.24 Underwriting Standards......................................... 74
8.25 Maximum Limits on Mortgage Loans and Facility Acquisitions..... 74
8.26 Dividend Payments.............................................. 75
Section 9. Events of Default.............................................. 75
Section 10. The Agent..................................................... 78
10.1 Appointment, Powers and Immunities............................. 78
10.2 Reliance by Agent.............................................. 79
10.3 Defaults....................................................... 79
10.4 Rights as a Bank............................................... 80
10.5 Indemnification................................................ 80
10.6 Nonreliance on Agent and Other Banks........................... 81
10.7 Failure to Act................................................. 81
10.8 Resignation or Removal of Agent................................ 81
10.9 Agency Fee..................................................... 82
Section 11. Miscellaneous................................................. 82
11.1 Waiver......................................................... 82
11.2 Notices........................................................ 82
11.3 Expenses, Etc.................................................. 83
11.4 Amendments, Etc................................................ 84
11.5 Successors and Assigns......................................... 85
11.6 Assignments and Participations................................. 85
11.7 Survival....................................................... 87
11.8 Agreements Superseded.......................................... 87
11.9 Severability................................................... 87
11.10 Captions....................................................... 87
11.11 Counterparts................................................... 87
11.12 GOVERNING LAW; SUBMISSION TO JURISDICTION...................... 87
11.13 WAIVER OF JURY TRIAL........................................... 88
</TABLE>
- iii -
<PAGE>
ANNEX 1 - Addresses for Notices and Commitments of the Banks
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Environmental Matters
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Litigation
SCHEDULE V - Appraisals
SCHEDULE VI - Surveys
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Opinion of Counsel to the Company
EXHIBIT B-2 - Form of Opinion of Maryland Counsel to the Company
EXHIBIT C - Form of Borrowing Base Certificate
EXHIBIT D - Form of Reliance Letter
EXHIBIT E - Form of Subsidiary Guarantee
- iv -
<PAGE>
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
------------------------------------------------------
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this
"Agreement") dated as of May 21, 1996, is made among: LTC Properties, Inc., a
- ----------
Maryland corporation (the "Company"); each of the lenders that is a signatory to
-------
this Agreement identified under the caption "BANKS" on the signature pages of
this Agreement or which, pursuant to Section 11.6(b), shall become a "Bank"
---------------
under this Agreement (individually, a "Bank" and, collectively, the "Banks");
---- -----
and Sanwa Bank California, as agent for the Banks (in such capacity, together
with its successors in such capacity, the "Agent").
-----
This Agreement amends and restates the Revolving Credit Agreement
dated January 18, 1995 (the "Original Credit Agreement"), as amended and
-------------------------
restated pursuant to the Amended and Restated Credit Agreement dated as of
October 17, 1995 (the "Amended and Restated Credit Agreement"), among the
-------------------------------------
Company, the Banks, as defined therein, and the Agent, pursuant to which
Original Credit Agreement the Company requested the Banks to extend credit to
the Company in an aggregate principal amount not exceeding Twenty-Five Million
Dollars ($25,000,000) to finance the acquisition by the Company of Facilities
and Mortgage Loans, to enable the Company to make Mortgage Loans with respect to
Facilities and for general corporate purposes.
Pursuant to the terms and conditions set forth in the Amended and
Restated Credit Agreement, the aggregate Commitments were increased to Thirty-
Five Million Dollars ($35,000,000).
The Company has requested that the Banks increase the Commitment by an
additional Ten Million Dollars ($10,000,000) and extend credit to the Company in
an aggregate principal amount not exceeding Forty-Five Million Dollars
($45,000,000). The Banks have agreed to such an increase pursuant to the terms
and conditions set forth in this Agreement.
To induce the Banks to extend such credit, the Company, the Banks and
the Agent propose to enter into this Agreement, pursuant to which the Banks
agree to make loans to the Company.
- 1 -
<PAGE>
Accordingly, the parties to this Agreement agree as follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.1 Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings:
"Additional Cost" shall have the meaning assigned to that term in
---------------
Section 5.1.
- -----------
"Affiliate" shall mean any Person that directly or indirectly
---------
controls, or is under common control with, or is controlled by, the Company. As
used in this definition, "control" (including, with its correlative meanings,
-------
"controlled by" and "under common control with") shall mean the possession,
- -------------- -------------------------
directly or indirectly, of power to direct or cause the direction of the
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise); provided that, in any
--------
event, any Person that owns directly or indirectly securities having 10% or more
of the voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, the definition of "Affiliate" shall not encompass (a) any individual
solely by reason of his or her being a director, officer or employee of the
Company or any of its Subsidiaries, (b) any of the Subsidiaries of the Company
and (c) the Agent or any Bank.
"Agent" shall have the meaning assigned to that term in the
-----
introductory paragraphs to this Agreement.
"Applicable Lending Office" shall mean, for each Bank and for each
-------------------------
Type of Loan, the "Lending Office" of such Bank (or of an Affiliate of such
Bank) designated for such Type of Loan on Annex 1 or such other office of such
-------
Bank (or of an Affiliate of such Bank) as such Bank may from time to time
specify to the Agent and the Company as the office for its Loans of such Type.
"Applicable Value" shall mean (i) with respect to any Facility, the
----------------
value of such Facility determined at the lower of cost, as determined in
accordance with GAAP, and Appraised Value of such Facility, and (ii) with
respect to any Mortgaged Property, the unpaid principal balance of such related
Mortgage Note.
- 2 -
<PAGE>
"Appraisal" shall mean a Master Appraisal Institute appraisal (or
---------
other appraisal satisfactory to the Agent and the Majority Banks), acceptable in
form and substance to the Agent and the Majority Banks, the age of which shall
not be in excess of one year when initially delivered to the Agent, except as
set forth on Schedule V.
----------
"Appraised Value" shall mean the value of a Facility or Property as
---------------
set forth in an Appraisal of such Facility or such Property underlying a
Mortgage Loan.
"Assignment of Rents" shall mean, with respect to any Mortgage Loan,
-------------------
any assignment to the Mortgagee of the Borrower's rights to receive rental
payments, profits, issues or other income derived from the ownership, operation
or leasing of all or a part of the Mortgaged Property or the related Tenant
pursuant to the related Net Lease, which assignment may be contained in the
related Mortgage or in one or more separate documents duly executed by the
Borrower in connection with the Mortgage Loan. In the case of any Mortgaged Loan
secured by more than one Mortgaged Property, the term "Assignment of Leases and
Rents" shall refer to each Assignment of Leases and Rents relating to each such
Mortgaged Property and such Mortgage Loan.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978.
---------------
"Banks" shall have the meaning assigned to that term in the
-----
introductory paragraphs of this Agreement. The term "Banks" shall include the
Agent.
"Base Rate" shall mean, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Reference Rate for such day. Each interest rate that this Agreement provides is
to be based upon the Base Rate shall change upon any change in the Base Rate,
effective as of the opening of business on the day of such change in the Base
Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
---------------
upon the Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the
---------------
Subsidiary Guarantee, the Notes and the Fee Letter.
"Borrower" shall mean, with respect to any Mortgage Loan, the obligor
--------
on the related Mortgage Note.
- 3 -
<PAGE>
"Borrowing Base" shall mean, as at any date, (i) 50% of the aggregate
--------------
Applicable Value of the Eligible Facilities and (ii) 60% of the Eligible
Mortgage Loans; provided that the aggregate value of Eligible Mortgage Loans
--------
included in the Borrowing Base shall be limited to a maximum of 50% of the
aggregate amount of the Borrowing Base.
"Borrowing Base Certificate" shall mean a certificate of the Chief
--------------------------
Financial Officer of the Company, in substantially the form of Exhibit C and
---------
appropriately completed.
"Business Day" shall mean (a) any day on which commercial banks are
------------
not authorized or required to close in New York City, New York, Chicago,
Illinois or Los Angeles, California and (b) if such day relates to a borrowing
of, a payment or prepayment of principal of or interest on, a Conversion of or
into, or an Interest Period for, a Eurodollar Loan or a notice by the Company
with respect to any such borrowing, payment, prepayment, Conversion or Interest
Period, any day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Expenditures" shall mean, for any period, expenditures
--------------------
(including the aggregate amount of Capital Lease Obligations incurred during
such period) made by the Company or any of its Consolidated Subsidiaries to
acquire or to construct fixed assets, plant and equipment (including renewals,
improvements and replacements, but excluding repairs in the ordinary course)
during such period computed in accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount of such obligation, determined in accordance with GAAP
(including such Statement No. 13).
"Cash Flow" shall mean, for any period, for the Company and its
---------
Consolidated Subsidiaries (determined on a consolidated basis in a presentation
of consolidated cash flow without duplication in accordance with GAAP), cash
flow from operating activities available for distribution or reinvestment plus
Interest Expense for such period.
- 4 -
<PAGE>
"Casualty Event" shall mean, with respect to any Property of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of, or
defect in or exception to the title of, such Property for which such Person or
any of its Subsidiaries receives insurance proceeds, including title insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Closing Date" shall mean the date upon which the initial extension of
------------
credit under this Agreement is made.
"Code" shall mean the Internal Revenue Code of 1986.
----
"Commitment" shall mean, for each Bank, the obligation of such Bank to
----------
make Loans in an aggregate amount at any one time outstanding up to but not
exceeding the amount set opposite the name of such Bank on Annex 1 (as the same
-------
may be reduced from time to time pursuant to Section 2.4). The original
-----------
aggregate principal amount of the Commitments is $45,000,000.
"Company" shall have the meaning assigned to that term in the
-------
introductory paragraphs of this Agreement.
"Consolidated Subsidiary" shall mean, for any Person, each Subsidiary
-----------------------
of such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"Continue," "Continuation" and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 2.10 of a Eurodollar Loan of one Type as a
------------
Eurodollar Loan of the same Type from one Interest Period to the next Interest
Period.
"Convert," "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 2.10 of one Type of Loans into another Type of Loans, which
------------
may be accompanied by the transfer by a Bank (at its sole discretion) of a Loan
from one Applicable Lending Office to another.
"Default" shall mean an Event of Default or an event that with notice
-------
or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
-----------
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any Person excluding any sale, assignment,
transfer or other disposition of any Property (other than Facilities owned by
the
- 5 -
<PAGE>
Company) sold or disposed of in the ordinary course of business and on ordinary
business terms.
"Disqualifying Condition" shall mean a condition existing as a result
-----------------------
of, or arising from, the presence of any substances, materials, pollutants,
contaminants or wastes regulated or identified by any Environmental Laws, or
otherwise subject to removal and remediation under any Environmental Laws, such
that the Mortgage Loan secured by the affected Mortgaged Property (as if such
Mortgaged Property were multifamily residential property) would be ineligible,
solely by reason of such condition, for purchase by the Federal National
Mortgage Association under the terms of Part II, Section 501.04 of the FNMA
Multifamily Guide, in effect, with respect to the related Mortgage Loan,
including, without limitation, a condition that would constitute, solely by
reason of such condition, a material violation of applicable federal, state or
local law in effect.
"Dividend Payment" shall mean dividends (in cash, Property or
----------------
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or any of the Company's Subsidiaries or of any
warrants, options or other rights to acquire the same (or to make any payments
to any Person, such as "phantom stock" payments, where the amount is calculated
with reference to the fair market or equity value of the Company or any of its
Subsidiaries), but excluding dividends payable solely in shares of common stock
of the Company or any of the Company's Subsidiaries.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"Due Date" shall mean, with respect to any Monthly Payment, the date
--------
on which such Monthly Payment is required to be paid pursuant to the related
Mortgage Note, without giving effect to any grace period permitted by such
Mortgage Note or the related Mortgage.
"Eligible Facilities" shall mean, as at any date, Facilities included
-------------------
in the Borrowing Base, which are Facilities owned by the Company, other than the
following:
(a) any Facility for which the Lease payment is 30 days or more past
due;
(b) any Facility for which the term of the Lease does not extend past
the Termination Date or for which the Operator has failed to exercise a
renewal option and no new
- 6 -
<PAGE>
Lease has been executed by the lessee within 60 days prior to the
expiration of such Lease;
(c) any Facility for which no Lease is in effect, or with respect to
which an event of default has occurred under the Lease for such Facility;
(d) any Facility where the Operator has filed bankruptcy or is
otherwise insolvent;
(e) any Facility for which the Operator is not acceptable to the
Agent and the Majority Banks, which acceptance shall not be unreasonably
withheld;
(f) Facilities for which the Operator does not have all Governmental
Approvals required for the operation thereof as a Facility;
(g) any Facility which has been in operation as a licensed skilled
nursing home or long term care facility for less than one year;
(h) any Facility with respect to which there has not been issued an
ALTA owner's policy naming the Company as the insured and in an amount not
less than the Applicable Value of such Facility, insuring that fee simple
title to such Facility is vested in the Company as of a date not more than
one year prior to the date such Facility was initially included in the
Borrowing Base, free of all monetary liens other than non-delinquent
property taxes and subject to no exceptions or defects to fee title
unacceptable to the Agent and the Majority Banks;
(i) any Facility subject to any Lien;
(j) any Facility for which no Appraisal has been delivered to the
Banks;
(k) any Facility for which there does not exist a Phase I
environmental report (or Phase II if recommended by the related Phase I)
acceptable in form and substance to the Agent and the Majority Banks or any
Facility with respect to which any Environmental Claim has been made, which
Environmental Claim could give rise to a Material Adverse Effect; and
(l) any Facility reasonably determined by the Agent and the Majority
Banks to be ineligible for any reason, including the failure by the Company
to provide for such
- 7 -
<PAGE>
Facility all of the materials described in Sections 6.1(f) through 6.1(j)
--------------- ------
and 6.1(l).
------
"Eligible Mortgage Loan" shall mean, with respect to any date, any
----------------------
unencumbered Mortgage Loan as to which (i) the Company has delivered the
original Mortgage Note to the Agent pursuant to Section 6.2(e) of this Agreement
(provided, however, that the Company may thereafter request the return of such
Mortgage Note for a period of up to 30 days in connection with the performance
of due diligence by Goldman or a similar lender for the purpose of placing such
Mortgage Note in a REMIC without such Mortgage Loan being excluded from the
Borrowing Base during such 30-day period), (ii) the Agent has received a Phase I
environmental assessment in accordance with Section 6.1(f) of this Agreement in
form and substance satisfactory to it, and has not requested that any more
detailed environmental assessment be performed and (iii) in the reasonable
determination of the Agent, there has not been a breach of any of the
representations and warranties contained in Section 7.18 of this Agreement;
provided, however, that none of the following shall constitute Eligible Mortgage
- --------
Loans: (a) any Mortgage Loan which, in the Agent's determination, has been
"warehoused" for a period in excess of 365 days from the date of initial
origination of the Mortgage Note; (b) any Mortgage Loan for which the Company
has failed to deliver any document required by Section 6.2(e)(i) and (ii) of
this Agreement; (c) any Mortgage Loan which has been listed on the custodial
report delivered to the Agent in accordance with Section 8.1(d)(v) of this
Agreement; and (d) any Mortgage Loan with respect to which any representation or
warranty contained in Section 7.18 is or shall prove to have been false or
------------
misleading in any material respect as of the time made or furnished or deemed
made or furnished.
"Environmental Claim" shall mean, with respect to any Person, (a) any
-------------------
written or oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include any claim by any Governmental Person for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising
- 8 -
<PAGE>
from alleged injury or threat of injury to human or animal health or safety or
to the environment.
"Environmental Laws" shall mean any and all present and future
------------------
Governmental Rules relating to the regulation or protection of human health or
safety or of the environment or to Releases or threatened Releases of Hazardous
Materials into the indoor or outdoor environment, including ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata, or otherwise
relating to the treatment, storage, disposal or transport of Hazardous
Materials. The term "Environmental Law" shall include the terms and conditions
of any Governmental Approval issued to the Company or any of its Subsidiaries
under any Environmental Law or with respect to any Hazardous Material.
"Equity or Debt Issuance" shall mean (a) any issuance or sale by the
-----------------------
Company or by any of its Subsidiaries after the Signing Date of (i) any capital
stock, (ii) any warrants or options exercisable in respect of capital stock
(other than any warrants or options issued to directors, officers or employees
of the Company or of any of its Subsidiaries and any capital stock of the
Company issued upon the exercise of such warrants), (iii) any other security or
instrument representing an equity interest (or the right to obtain any equity
interest) in the issuing or selling Person or (iv) without limiting the
Obligations of the Company under Section 8.7, any Subordinated Indebtedness or
-----------
(b) the receipt by the Company or by any of its Subsidiaries after the Signing
Date of any capital contribution received (whether or not evidenced by any
equity security issued by the recipient of such contribution); provided that the
--------
term "Equity or Debt Issuance" shall not include (x) any such issuance or sale
by any Subsidiary of the Company to the Company or to any Wholly Owned
Subsidiary of the Company, (y) any capital contribution by the Company or by any
Wholly Owned Subsidiary of the Company to any Subsidiary of the Company or (z)
any borrowings under the Goldman Facility.
"Equity Rights" shall mean, with respect to any Person, any
-------------
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or outstanding securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974.
- 9 -
<PAGE>
"ERISA Affiliate" shall mean any corporation or trade or business that
---------------
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan
--------------------
for any Interest Period for such Loan, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/16 of 1%), as determined by the Agent of the
respective rates per annum quoted by Telerate, Inc. at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) on the date two Business Days
prior to the first day of such Interest Period for the offering by lenders to
leading banks in the London interbank market of Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the Eurodollar Loan to be made by the Banks for such Interest Period.
"Eurodollar Loans" shall mean Loans that bear interest at rates based
----------------
on the Eurodollar Rate.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest
---------------
Period for such Loan, a rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the Agent to be equal to the sum of (a) the
Eurodollar Base Rate for such Loan for such Interest Period divided by 1 minus
the Reserve Requirement for such Loan for such Interest Period, plus 1.50%;
provided that such margin shall be reduced to 1.25% at such times as the
- --------
Company's senior unsecured Indebtedness is rated by at least two of Standard &
Poor's Ratings Group ("S&P"), Moody's Investors Services, Inc. ("Moody's"), Duff
& Phelps Credit Rating Company or Fitch Investors Service, Inc. (one of which
must be S&P or Moody's) not less than the ratings set forth below for such
agency:
<TABLE>
<CAPTION>
Agency Rating
------ ------
<S> <C>
S&P BBB-
Moody's Baa3
Duff & Phelps BBB-
Fitch BBB-
</TABLE>
"Event of Default" shall have the meaning assigned to that term in
----------------
Section 9.
- ---------
- 10 -
<PAGE>
"Facilities" shall mean skilled nursing homes, long-term care
----------
facilities, or assisted living facilities.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Sanwa on such Business Day on such
transactions as determined by the Agent.
"Fee Letter" shall mean each of (i) the letter agreement dated January
----------
18, 1995 between the Company and the Agent, (ii) the letter agreement dated
October 17, 1995 between the Company and the Agent and (iii) the letter
agreement dated May 21, 1996 between the Company and the Agent.
"GAAP" shall mean generally accepted accounting principles applied on
----
a basis consistent with those which, in accordance with the last sentence of
Section 1.2(a), are to be used in making the calculations for purposes of
- --------------
determining compliance with this Agreement.
"Goldman" shall mean Goldman Sachs Mortgage Company.
-------
"Goldman Facility" shall mean the mortgage repurchase facility
----------------
provided to the Company by Goldman pursuant to the Master Repurchase Agreement
dated as of December 15, 1993, as heretofore amended, supplemented or otherwise
modified and any substantially similar facility hereafter provided by Goldman to
the Company.
"Governmental Approvals" shall mean any authorization, consent,
----------------------
approval, license, lease, ruling, permit, waiver, exemption, filing,
registration or notice by or with any Governmental Person.
"Governmental Person" shall mean any national (Federal or foreign),
-------------------
state or local government, any political subdivision or any governmental, quasi-
governmental, judicial, public or statutory instrumentality, authority, agency,
body or entity, including the PBGC, Federal Deposit Insurance Corporation, the
- 11 -
<PAGE>
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, any central bank or any comparable authority.
"Governmental Rules" shall mean any law, rule, regulation, ordinance,
------------------
order, code, judgment, decree, directive, guideline, policy, or any similar form
of decision of, or any interpretation or administration of any of the foregoing
by, any Governmental Person.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or to become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss,
including causing a bank or other financial institution to issue a letter of
credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as verbs shall have
--------- ----------
correlative meanings.
"Guarantor" shall mean, collectively, all of the Subsidiaries of the
---------
Company (other than LTC REMIC Corporation and any other Subsidiary of the
Company formed directly in connection with a securitization of the Company's
Mortgage Loans), which Subsidiaries, as of the Signing Date, are set forth on
Part B of Schedule III.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
------------------
petroleum products, flammable explosives, radioactive materials, friable
asbestos in any form, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls (PCBs), (b) any chemicals or other materials or substances which are
now or hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants," "infectious wastes," "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which or use of which is now or hereafter prohibited,
limited or regulated under any Environmental Law.
- 12 -
<PAGE>
"Indebtedness" shall mean, for any Person (without duplication): (a)
------------
obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered; (c)
Indebtedness of others secured by a Lien on the Property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person;
(d) obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such Person; (e) Capital Lease Obligations of such Person; and (f)
Indebtedness of others Guaranteed by such Person.
"Indentures" shall mean (i) the Indenture dated as of August 25, 1992
----------
pursuant to which the Company issued 9 3/4% Subordinated Convertible Debentures
in the amount of $75,000,000, (ii) the Indenture dated as of September 23, 1994
pursuant to which the Company issued 8 1/2% Subordinated Convertible Debentures
in the amount of $30,000,000, (iii) the Indenture dated as of September 21, 1995
pursuant to which the Company issued 8 1/2% Subordinated Convertible Debentures
in the amount of $51,500,000, (iv) the Indenture dated as of September 26, 1995
pursuant to which the Company issued 8 1/4% Subordinated Convertible Debentures
in the amount of $10,000,000 and (v) the Indenture dated as of February 5, 1996
pursuant to which the Company issued 7 3/4% Subordinated Convertible Debentures
in the amount of $30,000,000.
"Interest Coverage Ratio" shall mean, at any Quarterly Date, the ratio
-----------------------
of Cash Flow (excluding any revenues or interest directly related to properties
or assets financed on a non-recourse basis) to Interest Expense (excluding any
interest expenses directly related to properties or assets financed on a non-
recourse basis) of the Company for the fiscal quarter ending on such Quarterly
Date.
"Interest Expense" shall mean, for any period, the sum, for the
----------------
Company and its Consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following: (a) all interest
in respect of Indebtedness accrued or capitalized during such period (whether or
not actually paid during such period) plus (b) the net amounts
----
- 13 -
<PAGE>
payable (or minus the net amounts receivable) under Interest Rate Protection
-----
Agreements accrued during such period (whether or not actually paid or received
during such period).
"Interest Period" shall mean, with respect to any Eurodollar Loan,
---------------
each period commencing on the date such Eurodollar Loan is made or Converted
from a Loan of another Type or the last day of the next preceding Interest
Period for such Loan and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the Company may
select as provided in Section 4.5 (or such longer period as may be requested by
-----------
the Company and agreed to by the Agent and all of the Banks), except that each
Interest Period that commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month. Notwithstanding the foregoing: (i) no
Interest Period may end after the Termination Date; (ii) each Interest Period
that would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (or, in the case of an Interest Period for a
Eurodollar Loan, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); and (iii)
notwithstanding clauses (i) and (ii) above, no Interest Period for any Loan
shall have a duration of less than one month and, if the Interest Period for any
Eurodollar Loan would otherwise be a shorter period, such Loan shall not be
available under this Agreement for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
----------------------------------
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
For purposes of this Agreement, the "credit exposure" at any time of any Person
under an Interest Rate Protection Agreement to which such Person is a party
shall be determined at such time in accordance with the standard methods of
calculating credit exposure under similar arrangements as prescribed from time
to time by the Agent, taking into account potential interest rate movements and
the respective termination provisions and notional principal amount and term of
such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including any "short sale" or any sale of any securities at a
- 14 -
<PAGE>
time when such securities are not owned by the Person entering into such short
sale) but shall not include any such acquisitions made pursuant to the Goldman
Facility; (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (other than any Mortgage Loans made by
the Company to third parties in the ordinary course of the Company's business or
in connection with any payment otherwise permitted under this Agreement,
including a payment of Subordinated Indebtedness under Section 8.17) (including
------------
the purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person, but
excluding any such advance, loan or extension of credit having a term not
exceeding 90 days representing the purchase price of inventory or supplies sold
by such Person in the ordinary course of business); (c) the entering into of any
Guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person other than commitments
of the Company to make Mortgage Loans in the ordinary course of the Company's
business; or (d) the entering into of any Interest Rate Protection Agreement.
"Lease" shall mean a lease acceptable in form and substance to the
-----
Agent and the Majority Banks, which lease shall include an obligation on the
part of the Lessee to pay all taxes, insurance, maintenance, refurbishment and
similar such costs in connection with the leased Facility.
"Leverage Ratio" shall mean, at any time, the ratio of Total
--------------
Liabilities to Tangible Net Worth of the Company at such time.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property or any agreement to give, or notice of, any of the foregoing. For
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any Property that it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement (other than an operating lease) relating to such Property.
"Loan-to-Value Ratio" shall mean, with respect to any Mortgage Loan,
-------------------
the fraction, expressed as a percentage, the numerator of which is the principal
balance of such Mortgage Loan on the date of origination of such Mortgage Loan
(determined on the assumption that all amounts required at any time to be
disbursed to the related Borrower have been so disbursed) and the
- 15 -
<PAGE>
denominator of which is the Appraised Value of the related Mortgaged Property.
"Loans" shall mean the loans provided for by Section 2.1, which may be
----- -----------
Base Rate Loans, Eurodollar Loans or both.
"LTC REMICS" shall mean any REMIC formed by the Company or any of its
----------
Subsidiaries.
"Majority Banks" shall mean Banks having at least 60% of the aggregate
--------------
amount of the Commitments or, if the Commitments shall have terminated, Banks
holding at least 60% of the aggregate unpaid principal amount of the Loans, but
in no event less than two Banks.
"Margin Stock" shall mean "margin stock" within the meaning of
------------
Regulations U and X.
"Material Adverse Effect" shall mean, in the determination of the
-----------------------
Agent and the Majority Banks, a material adverse effect on (a) the Properties,
business, operations, financial condition, liabilities or capitalization of the
Company and its Subsidiaries taken as a whole, (b) the ability of the Company to
perform its obligations under any of the Basic Documents, (c) the validity or
enforceability of any of the Basic Documents, (d) the rights, remedies, powers
and privileges of the Banks and the Agent under any of the Basic Documents or
(e) the timely payment of the Obligations.
"Monthly Payment" shall mean, with respect to any Mortgage Loan and
---------------
any month, the payment of principal, if any, and interest due in such month
pursuant to the related Mortgage Note, determined after giving effect to any
prepayment of principal with respect to such Mortgage Loan made prior to such
month.
"Mortgage" shall mean, with respect to any Mortgage Loan, the
--------
mortgage, deed of trust or other instrument creating a first mortgage lien on
the related Mortgaged Property. In the case of Mortgage Loan secured by more
than one Mortgage, the term "Mortgage" shall refer to each such Mortgage.
"Mortgage Loan" shall mean (i) each mortgage loan identified on the
-------------
Mortgage Loan Schedules and each other mortgage loan delivered to the Agent
pursuant to the terms of this Agreement, in each case evidenced by a Mortgage
Note secured by a Mortgage and by the other Loan Documents, all rights to
payment in respect thereof under the Mortgage Note and any and all related
agreements, any security interest thereunder, any
- 16 -
<PAGE>
guaranty relating to the Mortgaged Property and (ii) and mortgage loans made by
any Person to finance Facilities.
"Mortgage Loan Documents" shall mean, with respect to each Eligible
-----------------------
Mortgage Loan, each of the following, if applicable: (i) original Mortgage Note,
(ii) certified copy of Mortgage including its accompanying Mortgage Loan
Schedule, (iii) certified copy of Assignment of Rents, (iv) certified copy of
lender's title insurance policy, (v) certified copy of associated insurance
policies, (vi) certified copy of appraisal report, (vii) certified copy of Phase
I environmental report, (viii) certified copy of related leases, and (ix) such
other documents as the Agent may reasonably request.
"Mortgage Loan Schedule" shall mean, with respect to any Eligible
----------------------
Mortgage Loan, each schedule of such Eligible Mortgage Loans underlying a
Mortgage Note deposited with the Agent pursuant to the terms of this Agreement,
specifying with respect to each Eligible Mortgage Loan: (i) its loan number,
(ii) name of Borrower, (iii) the address of the related Mortgaged Property or
Properties, (iv) the first Due Date under the related Mortgage Note, (v) its
original principal balance, (vi) its principal balance as of the date of deposit
of such Mortgage Note with the Agent, (vii) the interest rate on such loan,
separately identifying the amount and effective date of any scheduled increase
therein, (viii) the amount of each Monthly Payment and, if applicable, any
balloon payment, (ix) its maturity date, (x) its Loan-to-Value Ratio, (xi) its
prepayment provisions, separately identifying the maximum prepayment, if any,
permitted without penalty in any year, the lock-out date, the prepayment
premium, expressed as a percentage of the principal portion of such prepayment,
due in connection with any prepayment made in the first year following such
lock-out date, and the annual decline is such percentage for each subsequent
year, and the minimum prepayment premium, and (xii) the name of each Tenant or
other operator of the related Mortgaged Property or Properties.
"Mortgage Note" shall mean, with respect to any Mortgage Loan, the
-------------
note (or notes) or other instrument(s) evidencing the indebtedness under such
Mortgage Loan.
"Mortgage Receivables" shall mean amounts owed to the Company pursuant
--------------------
to any mortgages entered into by the Company as mortgagee, which mortgages have
not been transferred to one of the LTC REMICS.
"Mortgaged Property" shall mean, with respect to any Mortgage Loan,
------------------
any fee interest of the obligor on the related Mortgage Note in land and the
improvements thereon subject to the lien of the related Mortgage. In the case of
any Mortgage Loan
- 17 -
<PAGE>
secured by more than one Mortgaged Property, the term "Mortgaged Property" shall
refer to each such Mortgaged Property.
"Mortgagee" shall mean, with respect to any Mortgage Loan, the holder
---------
of the related Mortgage Note.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate within the preceding six years and which is covered by
Title IV of ERISA.
"Net Available Proceeds" shall mean:
----------------------
(i) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(ii) in the case of any Casualty Event with respect to an Eligible
Facility or any Property underlying an Eligible Mortgage Loan, the aggregate
amount of proceeds of insurance, including, title insurance, condemnation awards
and other compensation received by the Company and its Subsidiaries in respect
of such Casualty Event net of (A) reasonable expenses incurred by the Company
and its Subsidiaries in connection with such Casualty Event and (B)
contractually required repayments of Indebtedness to the extent secured by a
Lien on such Property (provided that such Lien was not incurred in violation of
--------
this Agreement) and any income and transfer taxes payable by the Company or any
of its Subsidiaries in respect of such Casualty Event;
(iii) in the case of any Equity or Debt Issuance, the aggregate
amount of all cash received by the Company and its Subsidiaries in respect of
such Equity or Debt Issuance net of reasonable expenses incurred by the Company
and its Subsidiaries in connection with such Equity and Debt Issuance; and
(iv) in the case of any issuance and sale of REMIC Certificates, the
amount of Net Cash Payments received by the Company or the relevant LTC REMIC.
"Net Cash Payments" shall mean, with respect to any Disposition, the
-----------------
aggregate amount of all cash payments, and the fair market value of any noncash
consideration, received by the Company and its Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
--------
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by the Company and its
Subsidiaries in connection with such Disposition and (ii) any Federal, state and
local income or other taxes estimated to be payable by the Company and its
Subsidiaries as a
- 18 -
<PAGE>
result of such Disposition (but only to the extent that such estimated taxes are
in fact paid to the relevant Governmental Person within three months of the date
of such Disposition) and (b) Net Cash Payments shall be net of any repayments by
the Company or any of its Subsidiaries of Indebtedness, including the Goldman
Facility, to the extent that (i) such Indebtedness is secured by a Lien on the
Property that is the subject of such Disposition (provided that such Lien was
--------
not incurred in violation of this Agreement) and (ii) the transferee of (or
holder of a Lien on) such Property requires that such Indebtedness be repaid as
a condition to the sale of such Property.
"Net Lease" shall mean, with respect to any Mortgage Loan, a lease
---------
covering substantially all of the related Mortgaged Property pursuant to which
the related Tenant is obligated to pay (i) a minimum fixed rental substantially
sufficient, as of the date of origination of such Mortgage Loan, to satisfy the
scheduled amortization of such Mortgage Loan (other than any balloon payment)
and (ii) all other charges commonly associated with the operation and
maintenance of such Mortgaged Property (other than exterior maintenance of
buildings and adjacent land and improvements located thereon), including,
without limitation, real estate taxes and assessments, insurance and structural
and non-structural repairs and maintenance. In the case of any Mortgage Loan
secured by more than one Mortgaged Property, the term "Net Lease" shall refer to
each Net Lease relating to such Mortgaged Property.
"Notes" shall mean the promissory notes provided for by Section 2.9.
----- -----------
"Obligations" shall mean the principal of any Loan, interest, fees and
-----------
any other amount payable by the Company under any Basic Document.
"Operator" shall mean, the lessee or operator of any of the Facilities
--------
owned by the Company or Property underlying a Mortgage Loan.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Permitted Investments" shall mean: (a) direct obligations of the
---------------------
United States of America, or of any of its agencies, or obligations guaranteed
as to principal and interest by the United States of America, or of any of its
agencies, in either case maturing not more than 90 days from the date of
acquisition of such obligation; (b) certificates of deposit issued by any bank
or trust company organized under the laws of
- 19 -
<PAGE>
the United States of America or any state and having capital, surplus and
undivided profits of at least $500,000,000, maturing not more than 90 days from
the date of acquisition; (c) commercial paper rated A-1 or better or P-1 by S&P
or Moody's, respectively, maturing not more than 90 days from the date of
acquisition; and (d) any repurchase agreement with any financial institution the
short-term obligations of which are rated "P-1" or better by Moody's or "A-1" or
better by S&P, which agreement is secured by any one or more securities of the
type described in clause (a) above; provided that such repurchase obligations
--------
shall be transferred to and segregated from other obligations owned by any such
bank.
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, joint venture, trust, unincorporated organization or
Governmental Person.
"Plan" shall mean an employee benefit or other plan established or
----
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum during the period from
-----------------
the occurrence of an Event of Default through the date such Event of Default is
cured or waived in accordance with the terms of this Agreement, equal to 2.0%
plus the Base Rate as in effect from time to time with respect to Base Rate
- ----
Loans and (without limiting the rights of the Agent and the Banks contained in
the last sentence of Section 2.10) 2.0% plus the Eurodollar Rate as in effect
------------
from time to time with respect to Eurodollar Loans.
"Principal Office" shall mean the principal office of Sanwa located on
----------------
the Signing Date at 601 South Figueroa Street, Los Angeles, California.
"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the last Business Day of March, June,
---------------
September and December in each year, the first of which shall be June 30, 1996.
"Reference Rate" shall mean the rate of interest from time to time
--------------
announced by Sanwa at the Principal Office as its reference rate. Such announced
rate is not necessarily the lowest rate offered by Sanwa and any other extension
of credit by Sanwa may be at rates above, below or at such announced rate.
- 20 -
<PAGE>
"Regulations A, D, U and X" shall mean, respectively, Regulations A,
-------------------------
D, U and X of the Board of Governors of the Federal Reserve System.
"Regulatory Change" shall mean, with respect to any Bank (or its
-----------------
Applicable Lending Office), the occurrence after the Signing Date of any of the
following events: (a) the adoption of any applicable Governmental Rule, (b) any
change in any applicable Governmental Rule (including Regulation D) or in the
interpretation or administration of any Governmental Rule (including Regulation
D) by any Governmental Person charged with its interpretation or administration
or (c) the adoption or making of any interpretation, directive, guideline,
policy or request applying to a class of banks including such Bank of or under
any Governmental Rule or in the interpretation or administration of any
Governmental Rule (including Regulation D) (whether or not having the force of
law and whether or not failure to comply would be unlawful) by any Governmental
Person charged with its interpretation or administration.
"REIT" shall mean a Real Estate Investment Trust (as defined in the
----
Code) formed and operated in compliance with the Code.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including the movement of Hazardous Materials
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.
"Reliance Letter" shall mean a letter to the Agent and the Banks from
---------------
the Company's accountants, substantially in the form of Exhibit D.
---------
"Relevant Parties" shall have the meaning assigned to such term in
----------------
Section 9(b).
- ------------
"REMIC" shall mean a Real Estate Mortgage Investment Conduit (as
-----
defined in the Code) formed and operated in compliance with the Code.
"REMIC Certificates" shall mean any certificates issued by or on
------------------
behalf of any of the LTC REMICS representing an interest in a mortgage portfolio
held by or on behalf of such LTC REMIC.
"Reserve Requirement" shall mean, for any Interest Period for any
-------------------
Eurodollar Loan, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest
- 21 -
<PAGE>
Period under Regulation D by member banks of the Federal Reserve System in New
York City with deposits exceeding one billion Dollars against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall include any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change with respect to (i) any category of liabilities that includes deposits by
reference to which the Eurodollar Base Rate for Eurodollar Loans is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.1 or (ii) any category of extensions of credit or other assets that
- -----------
includes Eurodollar Loans.
"Retained REMIC Certificates" shall mean any REMIC Certificates
---------------------------
retained by the Company or any of its Subsidiaries subsequent to the
securitization of the mortgages giving rise to such REMIC Certificates.
"Sanwa" shall mean Sanwa Bank California.
-----
"Senior Funded Debt" shall mean all Indebtedness of the Company under
------------------
the Goldman Facility and this Agreement.
"Signing Date" shall mean the date on which the Company, the Agent and
------------
the Banks holding the full original amount of the Commitments have executed and
delivered this Agreement.
"Subordinated Indebtedness" shall mean, collectively, Indebtedness (a)
-------------------------
for which the Company is directly and primarily liable, (b) in respect of which
none of its Subsidiaries is contingently or otherwise obligated and (c) which is
subordinated to the obligations of the Company under this Agreement on terms,
and pursuant to documentation containing other terms (including interest,
amortization, covenants and events of default), in term, form and substance
satisfactory to the Agent and the Majority Banks, which shall include
Indebtedness pursuant to the Indentures.
"Subsidiary" shall mean, for any Person, any corporation, partnership
----------
or other entity of which at least a majority of the securities or other
ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other class or
classes of such corporation, partnership or other entity shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or
- 22 -
<PAGE>
more Subsidiaries of such Person. "Wholly Owned Subsidiary" shall mean any such
-----------------------
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are so owned or controlled.
"Subsidiary Guarantee" shall mean the Guarantee Agreement dated as of
--------------------
May 21, 1996 between the Guarantors and the Agent, substantially in the form of
Exhibit E to this Agreement.
- ---------
"Tangible Net Worth" shall mean, as at any date for any Person, the
------------------
sum for such Person and its Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following:
(a) the amount of capital stock plus any additional paid in capital,
plus
- ----
(b) Subordinated Indebtedness, plus
----
(c) the amount of surplus and retained earnings (or, in the case of a
surplus or retained earnings deficit, minus the amount of such deficit),
-----
minus
-----
(d) the sum of the following: the cost of treasury shares and the
book value of all assets which should be classified as intangibles (without
duplication of deductions in respect of items already deducted in arriving
at surplus and retained earnings) but in any event including goodwill,
minority interests, research and development costs, trademarks, trade
names, copyrights, patents and franchises, unamortized debt discount and
expense, all reserves and any write-up in the book value of assets
resulting from a revaluation of such assets subsequent to December 31,
1993, minus
-----
(e) any Mortgage Receivables that have not been paid within thirty
days of the originally scheduled due date of each such receivable, minus
-----
(f) twenty-five percent of the book value of any outstanding Retained
REMIC Certificates reflected on the Company's balance sheet.
"Tenant" shall mean, with respect to any Mortgage Loan, the tenant
------
under the related Net Lease.
"Termination Date" shall mean May 31, 1998.
----------------
- 23 -
<PAGE>
"Total Liabilities" shall mean, as at any date, the sum, for the
-----------------
Company and its Consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following: (a) all
Indebtedness (other than Subordinated Indebtedness) and (b) all other
liabilities which should be classified as liabilities on a balance sheet,
including all reserves (other than general contingency reserves) and all
deferred taxes and other deferred items.
"Type" shall have the meaning assigned to such term in Section 1.3.
---- -----------
1.2 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided in this Agreement, all
accounting terms used in this Agreement shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Agent and the Banks under this Agreement shall (unless
otherwise disclosed to the Agent and the Banks in writing at the time of
delivery in the manner described in subsection (b) below) be prepared, in
accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest financial statements
furnished to the Agent and the Banks under this Agreement (which, prior to the
delivery of the first financial statements under Section 8.1, shall mean the
-----------
audited financial statements as at December 31, 1995 referred to in Section
-------
7.2). All calculations made for the purposes of determining compliance with
- ---
this Agreement shall (except as otherwise expressly provided in this Agreement)
be made by application of generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the latest annual or
quarterly financial statements furnished to the Agent and the Banks pursuant to
Section 8.1 (or, prior to the delivery of the first financial statements under
- -----------
Section 8.1, used in the preparation of the audited financial statements as at
- -----------
December 31, 1995 referred to in Section 7.2) unless (i) the Company shall have
-----------
objected to determining such compliance on such basis at the time of delivery of
such financial statements (and the Agent and the Majority Banks shall have
agreed to such objection) or (ii) the Agent and the Majority Banks shall so
object in writing within 30 days after delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.1, shall
-----------
mean the financial statements referred to in Section 7.2).
-----------
- 24 -
<PAGE>
(b) The Company shall deliver to the Agent and the Banks at the same
time as the delivery of any annual or quarterly financial statement under
Section 8.1 (i) a description in reasonable detail of any material variation
- -----------
between the application of accounting principles employed in the preparation of
such statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence of any such difference.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8, the Company will not change the last
---------
day of its fiscal year from December 31 of each year, or the last days of the
first three fiscal quarters in each of its fiscal years from March 31, June 30
and September 30 of each year, respectively.
1.3 Types of Loans. Loans are distinguished by "Type." The "Type"
--------------
of a Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan,
each of which constitutes a Type.
1.4 Interpretation. In this Agreement, unless otherwise indicated,
--------------
the singular includes the plural and plural the singular; words importing any
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions and other
modifications by the terms of this Agreement); and references to Persons include
their respective permitted successors and assigns and, in the case of
Governmental Persons, Persons succeeding to their respective functions and
capacities.
Section 2. Commitments, Loans, Notes and Prepayments.
-----------------------------------------
2.1 Loans. Any Loans, including any interest, outstanding as of the
-----
Closing Date shall be repaid on the Closing Date and readvanced under this
Agreement in accordance with its
- 25 -
<PAGE>
terms and conditions. Each Bank severally agrees, on the terms and conditions of
this Agreement, to make Loans to the Company in Dollars during the period from
and including the Closing Date to but not including the Termination Date in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount of the Commitment of such Bank as in effect from time to time;
provided that in no event shall the aggregate principal amount of all Loans
- --------
exceed the lesser of (i) the aggregate amount of the Commitments as in effect
from time to time and (ii) the Borrowing Base. Subject to the terms and
conditions of this Agreement, during such period the Company may borrow, repay
and reborrow the amount of the Commitments by means of Base Rate Loans and
Eurodollar Loans and may Convert Loans of one Type into Loans of another Type
(as provided in Section 2.10) or Continue Loans of one Type as Loans of the same
------------
Type (as provided in Section 2.10).
------------
2.2 Limit on Eurodollar Loans. No more than five separate Interest
-------------------------
Periods in respect of Eurodollar Loans from each Bank may be outstanding at any
one time.
2.3 Borrowings of Loans. The Company shall give the Agent (which
-------------------
shall promptly notify the Banks) notice of each borrowing of Loans as provided
in Section 4.5. Not later than 12:00 noon Los Angeles time on the date
-----------
specified for each borrowing of Loans, each Bank shall make available the amount
of the Loan or Loans to be made by it on such date to the Agent, at account
number 2302-25217 maintained by the Agent with Sanwa at the Principal Office, in
immediately available funds, for the account of the Company. The amount so
received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with Sanwa
designated by the Company.
2.4 Changes of Commitments.
----------------------
(a) The aggregate amount of the Commitments shall be automatically
reduced to zero on the Termination Date.
(b) The Company shall have the right at any time or from time to time
(i) so long as no Loans are outstanding, to terminate the Commitments and (ii)
to reduce the aggregate unused amount of the Commitments; provided that (x) the
--------
Company shall give notice of each such termination or reduction as provided in
Section 4.5 and (y) each partial reduction shall be in an aggregate amount at
- -----------
least equal to $5,000,000 or in any larger multiple of $1,000,000.
- 26 -
<PAGE>
2.5 Commitment Fee. The Company shall pay to the Agent for the
--------------
account of each Bank a commitment fee on the daily average unused amount of such
Bank's Commitment for the period from and including the Closing Date, to but not
including the earlier of the date such Commitment is terminated and the
Termination Date, at a rate per annum equal to .25%. Accrued commitment fees
shall be payable in arrears on the day ten days after each Quarterly Date and on
the earlier of the date the relevant Commitments are terminated and the
Termination Date.
2.6 Facility Fee. On the Closing Date, the Company shall pay to the
------------
Agent a facility fee as provided in the Fee Letter.
2.7 Lending Offices. The Loans of each Type made by each Bank shall
---------------
be made and maintained at such Bank's Applicable Lending Office for Loans of
such Type.
2.8 Several Obligations; Remedies Independent. The failure of any
-----------------------------------------
Bank to make any Loan to be made by it on the date specified for such Loan shall
not relieve any other Bank of its obligation to make its Loan on such date, but
neither any Bank nor the Agent shall be responsible for the failure of any other
Bank to make a Loan to be made by such other Bank, and no Bank shall have any
obligation to the Agent or any other Bank for the failure by such Bank to make
any Loan required to be made by such Bank.
2.9 Notes.
-----
(a) The Loans made by each Bank shall be evidenced by a single
promissory note of the Company in substantially the form of Exhibit A, dated the
---------
Closing Date, payable to such Bank in a principal amount equal to the amount of
its Commitment as originally in effect and otherwise duly completed.
(b) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan made by each Bank to the Company, and each
payment made on account of the principal of each Loan, shall be recorded by such
Bank on its books and, prior to any transfer of the Note evidencing the Loans
held by it, endorsed by such Bank on the schedule attached to such Note or any
continuation of such Note; provided that the failure of such Bank to make any
--------
such recordation or endorsement shall not affect the obligations of the Company
to make a payment when due of any amount owing under this Agreement or under
such Note in respect of the Loans to be evidenced by such Note.
(c) No Bank shall be entitled to have its Note subdivided, by
exchange for promissory notes of lesser
- 27 -
<PAGE>
denominations or otherwise, except in connection with a permitted assignment of
all or any portion of such Bank's relevant Commitment, Loans and Note pursuant
to Section 11.6(b).
---------------
2.10 Optional Prepayments and Conversions or Continuations of Loans.
--------------------------------------------------------------
Subject to Section 4.4, the Company shall have the right to prepay Loans, or to
-----------
Convert Loans of one Type into Loans of another Type or Continue Loans of one
Type as Loans of the same Type, at any time or from time to time, provided that:
--------
(a) the Company shall give the Agent notice of each such prepayment, Conversion
or Continuation as provided in Section 4.5 (and, upon the date specified in any
-----------
such notice of prepayment, the amount to be prepaid shall become due and payable
under this Agreement); (b) Eurodollar Loans may be Continued or Converted only
on the last day of an Interest Period for such Loans; and (c) Eurodollar Loans
may only be prepaid on the last day of an Interest Period for such Loans unless
all costs to be paid pursuant to Section 5 as a result of such prepayment are
---------
paid simultaneously with such prepayment. Notwithstanding the foregoing, and
without limiting the rights and remedies of the Agent and the Banks under
Section 9, in the event that any Event of Default shall have occurred and be
- ---------
continuing, the Agent may (and at the request of the Majority Banks shall)
suspend the right of the Company to Convert any Loan into a Eurodollar Loan, or
to Continue any Loan as a Eurodollar Loan, in which event all Loans shall be
Converted into (on the last day(s) of their respective Interest Periods) or
Continued as, as the case may be, Base Rate Loans.
2.11 Annual Clean. The Company will from time to time cause the
------------
aggregate outstanding principal amount of the Loans to be zero for a period of
at least thirty consecutive days during each fiscal year. The Company shall be
deemed to have satisfied this requirement for the 1996 fiscal year.
2.12 Mandatory Prepayments.
---------------------
(a) Borrowing Base. The Company shall promptly prepay the Loans in
--------------
such amounts as shall be necessary so that at all times the aggregate
outstanding principal of and interest on the Loans shall not exceed the
Borrowing Base.
(b) Casualty Events. Upon the date ten days following the receipt by
---------------
the Company or any of its Subsidiaries of the proceeds of insurance, including
title insurance, condemnation award or other compensation in respect of any
Casualty Event affecting any of the Eligible Facilities or any Property
underlying an Eligible Mortgage Loan (or upon such earlier date as the Company
or such Subsidiary, as the case may be, shall have determined not to repair or
replace the Facility affected by such
- 28 -
<PAGE>
Casualty Event), the Company shall prepay the Loans in an aggregate amount equal
to 100% of the Net Available Proceeds of such Casualty Event not previously
applied to the repair or replacement of such Property.
(c) Equity or Debt Issuance. Upon any Equity or Debt Issuance
-----------------------
occurring after the Signing Date, the Company shall prepay the Loans in an
aggregate amount equal to 100% of the Net Available Proceeds of such Equity or
Debt Issuance.
(d) Sale of Facilities. Without limiting the obligation of the
------------------
Company to obtain the consent of the Agent and the Majority Banks pursuant to
Section 8.5 to any Disposition not otherwise permitted under the Basic
- -----------
Documents, no later than five Business Days prior to the occurrence of any
Disposition of any Facility, the Company will deliver to the Agent and the Banks
a statement, certified by the chief financial officer of the Company, in form
and detail satisfactory to the Agent, of the amount of the Net Available
Proceeds of such Disposition and the Company will prepay the Loans in an
aggregate amount equal to 100% of the Net Available Proceeds of such
Disposition.
(e) Sale of REMIC Assets, REMIC Certificates, Retained REMIC
--------------------------------------------------------
Certificates or Mortgage Receivables. Upon the issuance and sale of any REMIC
- ------------------------------------
Certificates or Retained REMIC Certificates by or on behalf of any of the LTC
REMICS or the sale, liquidation or transfer of any assets of the Company,
including any of the LTC REMICS, REMIC Certificates, Retained REMIC Certificates
or Mortgage Receivables, the Company shall prepay the Loans in an aggregate
amount equal to 100% of the Net Available Proceeds of any such sale, liquidation
or transfer; provided that any sales to Goldman under the Goldman Facility shall
--------
not be considered a sale for purposes of this paragraph.
Section 3. Payments of Principal and Interest.
----------------------------------
3.1 Repayment of Loans. The Company hereby promises to pay to the
------------------
Agent for the account of each Bank the entire outstanding principal amount of
such Bank's Loans, and each Loan shall mature, on the Termination Date.
3.2 Interest. The Company hereby promises to pay to the Agent for
--------
the account of each Bank interest on the unpaid principal amount of each Loan
made by such Bank for the period from and including the date of such Loan to but
excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time); and
- 29 -
<PAGE>
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period, the Eurodollar Rate for such Loan for such Interest Period.
Notwithstanding the foregoing, the Company hereby promises to pay to the Agent
for the account of each Bank interest at the applicable Post-Default Rate on all
Obligations held by such Bank to or for the account of such Bank, at any time an
Event of Default has occurred and is continuing. Accrued interest on each Loan
shall be payable (i) in the case of a Base Rate Loan, monthly on the last day of
each month, (ii) in the case of a Eurodollar Loan, on the last day of each
Interest Period for such Loan and, if such Interest Period is longer than three
months, at three-month intervals, following the first day of such Interest
Period, and (iii) in the case of any Loan, upon the payment or prepayment of
such Loan or the Conversion or Continuance of such Loan to a Loan of another
Type (but only on the principal amount so paid, prepaid, Converted or
Continued), except that interest payable at the Post-Default Rate shall be
payable from time to time on demand. Promptly after the determination of any
interest rate provided for in this Agreement or any change in any such interest
rate, the Agent shall give notice of the same to the Banks to which such
interest is payable and to the Company.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
------------------------------------------------
4.1 Payments.
--------
(a) Except to the extent otherwise provided in this Agreement, all
payments of any Obligations shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Agent at account
number 2302-25217 maintained by the Agent with Sanwa at the Principal Office (or
such other account as the Agent shall have designated in writing to the
Company), not later than 11:00 a.m. Los Angeles time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment under this
Agreement of any Obligation for the account of any Bank, specify to the Agent
(which shall so notify each intended recipient) to which Obligation such payment
is to be applied (and in the event that the Company fails to so specify, or if
an Event of Default has occurred and is continuing, the Agent may distribute
such payment to the Banks for application in such manner as it or the Majority
Banks, subject to Section 4.2, may determine to be appropriate).
-----------
- 30 -
<PAGE>
(c) Each payment received by the Agent under this Agreement of any
Obligation for the account of any Bank shall be paid by the Agent promptly to
such Bank, in immediately available funds, for the account of such Bank's
Applicable Lending Office for the Loan or other Obligation in respect of which
such payment is made.
(d) If the due date of any payment of any Obligation would otherwise
fall on a day that is not a Business Day, such date shall be extended to the
next succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
4.2 Pro Rata Treatment. Except to the extent otherwise provided in
------------------
this Agreement:
(a) the making, Conversion and Continuation of Loans of a particular
Type (other than Conversions provided for by Section 5.4) shall be made pro rata
-----------
among the relevant Banks according to the amounts of their respective
Commitments (in the case of making of Loans) or their respective Loans (in the
case of Conversions and Continuations of Loans) and the then current Interest
Period for each Loan of such Type shall be coterminous; and
(b) each payment on account of any Obligations to or for the account
of one or more of the Banks in respect of any Obligations due on a particular
day (or, if such day is not a Business Day, the next succeeding Business Day)
shall be entitled to priority over payments in respect of Obligations not then
due and shall be allocated among the Banks entitled to such payments pro rata in
--- ----
accordance with the respective amounts due and payable to such Banks on such day
(or Business Day) and shall be distributed accordingly. Nothing in this Section
-------
4.2 shall be deemed to prevent, except in the case of shortfall, the
- ---
differential indemnity and other amounts owing to or for the account of a
particular Bank or Banks pursuant to any provisions of any Basic Document which,
by their terms, require differential payments.
4.3 Computations. Interest on Eurodollar Loans and commitment fees
------------
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed (including the first day but excluding the last day) occurring in
the period for which payable) and interest payable at the Base Rate shall be
computed on the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed (including the first day but excluding the last
day) occurring in the period for which payable. Notwithstanding the foregoing,
for each day that the Base Rate is calculated by reference to the Federal Funds
Rate,
- 31 -
<PAGE>
interest payable at the Base Rate shall be computed on the basis of a year of
360 days and the actual number of days elapsed.
4.4 Minimum Amounts. Except for mandatory prepayments made pursuant
---------------
to Section 2.12 and Conversions or prepayments made pursuant to Section 2.10,
------------ ------------
each borrowing, Conversion and partial prepayment of principal of Loans shall be
in an aggregate amount at least equal to $500,000 (borrowings, Conversions or
prepayments of or into Loans of different Types or, in the case of Eurodollar
Loans, having different Interest Periods at the same time to be deemed separate
borrowings, Conversions and prepayments for purposes of the foregoing, one for
each Type or Interest Period). Notwithstanding any other provision of this
Agreement, the aggregate principal amount of Eurodollar Loans of each Type
having the same Interest Period shall be in an amount at least equal to
$1,000,000 and, if any Eurodollar Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Base Rate Loans during such period.
4.5 Certain Notices. Notices by the Company to the Agent of
---------------
terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans, of Types of Loans and of the
duration of Interest Periods shall be irrevocable and shall be effective only if
received by the Agent not later than 12:00 noon Los Angeles time on the number
of Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 0
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the Loans to be
borrowed, Converted,
- 32 -
<PAGE>
Continued or prepaid and the amount (subject to Section 4.4) and Type of each
-----------
Loan to be borrowed, Converted, Continued or prepaid (and, in the case of a
Conversion, the Type of Loan to result from such Conversion) and the date of
borrowing, Conversion, Continuation or optional prepayment (which shall be a
Business Day). Each such notice of the duration of an Interest Period shall
specify the Loans to which such Interest Period is to relate. The Agent shall
promptly notify the Banks of the contents of each such notice. In the event that
the Company fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 4.5, such Loan (if outstanding as a Eurodollar Loan) will be
-----------
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.6 Non-Receipt of Funds by the Agent. Unless the Agent shall have
---------------------------------
been notified by a Bank or the Company (the "Payor") prior to the date on which
-----
the Payor is to make payment to the Agent of (in the case of a Bank) the
proceeds of a Loan to be made by such Bank under this Agreement or (in the case
of the Company) a payment to the Agent for the account of one or more of the
Banks (the "Required Payment"), which notice shall be effective upon receipt,
----------------
that the Payor does not intend to make the Required Payment to the Agent, the
Agent may assume that the Required Payment has been made and may, in reliance
upon such assumption (but shall not be required to), make the amount of such
payment available to the intended recipient on such date; and, if the Payor has
not in fact made the Required Payment to the Agent, the recipient or recipients
of such payment shall, on demand, repay to the Agent the amount so made
available together with interest on such amount in respect of each day during
the period commencing on the date (the "Advance Date") such amount was so made
------------
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the Federal Funds Rate for such day and, if such recipient or
recipients shall fail promptly to make such payment, the Agent shall be entitled
to recover such amount, on demand, from the Payor, together with interest as set
forth above; provided that if neither the recipient or recipients nor the Payor
--------
shall return the Required Payment to the Agent within three Business Days of the
Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient or recipients shall each be obligated to pay interest on the Required
Payment as follows:
(a) if the Required Payment shall represent a payment to be made by
the Company to the Banks, the Company and the recipient or recipients shall each
be obligated retroactively to
- 33 -
<PAGE>
the Advance Date to pay interest in respect of the Required Payment at the Post-
Default Rate (and, in case the recipient or recipients shall return the Required
Payment to the Agent, without limiting the obligation of the Company under
Section 3.2 to pay interest to such recipient or recipients at the Post-Default
- -----------
Rate in respect of the Required Payment) and
(b) if the Required Payment shall represent proceeds of a Loan to be
made by the Banks to the Company, the Payor shall be obligated retroactively to
the Advance Date to pay interest in respect of the Required Payment at the rate
of interest provided for such Required Payment pursuant to Section 3.2.
-----------
4.7 Sharing of Payments, Etc.
-------------------------
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's Lien or counterclaim a Bank may otherwise
have, each Bank shall be entitled, at its option but only with the prior written
consent of the Majority Banks or the Agent, to offset balances held by it for
the account of the Company at any of its offices, in Dollars or in any other
currency, against any Obligations of the Company to such Bank that are not paid
when due (regardless of whether such balances are then due to the Company). Any
Bank so entitled shall promptly notify the Company and the Agent of any offset
effected by it; provided that such Bank's failure to give such notice shall not
--------
affect the validity of such offset.
(b) If any Bank shall obtain from the Company payment of any
Obligation through the exercise of any right of set-off, banker's Lien or
counterclaim or similar right or otherwise (other than from the Agent as
provided in this Agreement), and, as a result of such payment, such Bank shall
have received a greater amount of the Obligations than the amount allocable to
such Bank under Section 4.2, it shall promptly purchase from such other Banks
-----------
participations in (or, if and to the extent specified by such Bank, direct
interests in) such Obligations owing to such other Banks in such amounts, and
make such other adjustments from time to time as shall be equitable, to the end
that all the Banks shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Bank in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid Obligations owing to each
of the Banks. To such end all the Banks shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Bank so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
Lien, counterclaim or similar rights with
- 34 -
<PAGE>
respect to such participation as fully as if such Bank were a direct holder of
Loans or other amounts (as the case may be) owing to such Bank in the amount of
such participation.
(d) Nothing contained in this Section 4.7 shall require any Bank to
-----------
exercise any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company. If, under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured claim in lieu of a
set-off to which this Section 4.7 applies, such Bank shall, to the extent
-----------
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section 4.7 to share
-----------
in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
----------------------
5.1 Additional Costs.
----------------
(a) The Company shall pay directly to each Bank from time to time on
demand such amounts as such Bank may determine to be necessary to compensate
such Bank for any costs that such Bank determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans, or any reduction in any amount receivable by such Bank in respect of any
of such Loans or such obligation (collectively, "Additional Costs"), resulting
----------------
from any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to such
Bank under this Agreement or its Notes in respect of any of such Loans
(other than changes in the rate of taxation imposed on or measured by the
overall net income of such Bank or of its Applicable Lending Office for any
of such Loans by the jurisdiction in which such Bank has its principal
office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Bank (including any of such Loans or any deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.1), or
-----------
any commitment of such Bank (including the Commitments of such Bank); or
- 35 -
<PAGE>
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Bank requests compensation from the Company under this Section 5.1(a),
--------------
the Company may, by notice to such Bank (with a copy to the Agent), suspend the
obligation of such Bank thereafter to make or to Continue Loans of the Type with
respect to which such compensation is requested, or to Convert Loans of any
other Type into Loans of such Type, until the Regulatory Change giving rise to
such request ceases to be in effect (in which case the provisions of Section 5.4
-----------
shall be applicable); provided that such suspension shall not affect the right
--------
of such Bank to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.1, in the event that, by reason of any Regulatory Change, any Bank
- -----------
either (i) incurs (or would incur) Additional Costs as a result of its exceeding
a specified level of a category of deposits or other liabilities of such Bank
that includes deposits by reference to which the interest rate on Eurodollar
Loans is determined as provided in this Agreement or of a category of extensions
of credit or other assets of such Bank that includes Eurodollar Loans or (ii)
becomes subject to restrictions on the amount of such a category of liabilities
or assets that it may hold, then, if such Bank so elects by notice to the
Company (with a copy to the Agent), the obligation of such Bank to make or
Continue, or to Convert Loans of any other Type into, Loans of such Type shall
be suspended until such Regulatory Change ceases to be in effect (in which case
the provisions of Section 5.4 shall be applicable).
-----------
(c) Without limiting the effect of the foregoing provisions of this
Section 5.1 (but without duplication), the Company shall pay directly to each
- -----------
Bank from time to time on demand such amounts as such Bank may determine to be
necessary to compensate such Bank (or, without duplication, the bank holding
company of which such Bank is a subsidiary) for any costs that it determines are
attributable to the maintenance by such Bank (or any Applicable Lending Office
or such bank holding company), pursuant to any Governmental Rule following any
Regulatory Change of capital in respect of its Commitments or Loans (such
compensation to include an amount equal to any reduction of the rate of return
on assets or equity of such Bank (or any Applicable Lending Office or such bank
holding company) to a level below that which such Bank (or any Applicable
Lending Office or such bank holding company) could have achieved but for such
Governmental Rule.
- 36 -
<PAGE>
(d) Each Bank shall notify the Company of any event occurring after
the date of this Agreement entitling such Bank to compensation under paragraph
(a) or (c) of this Section 5.1 as promptly as practicable, but in any event
-----------
within 45 days, after such Bank obtains actual knowledge of such event; provided
--------
that (i) if any Bank fails to give such notice within 45 days after it obtains
actual knowledge of such event, such Bank shall, with respect to compensation
payable pursuant to this Section 5.1 in respect of any costs resulting from such
-----------
event, only be entitled to payment under this Section 5.1 for costs incurred
-----------
from and after the date 45 days prior to the date that such Bank does give such
notice and (ii) each Bank will designate a different Applicable Lending Office
for the Loans of such Bank affected by such event if such designation will avoid
the need for, or reduce the amount of, such compensation by an amount determined
by such Bank to be material and will not, in the sole opinion of such Bank, be
disadvantageous to such Bank, except that such Bank shall have no obligation to
designate an Applicable Lending Office located in the United States of America.
Each Bank will furnish to the Company a certificate setting forth the basis and
amount of each request by such Bank for compensation under paragraph (a) or (c)
of this Section 5.1. Determinations and allocations by any Bank for purposes of
-----------
this Section 5.1 of the effect of any Regulatory Change pursuant to paragraph
-----------
(a) or (b) of this Section 5.1, or of the effect of capital maintained pursuant
-----------
to paragraph (c) of this Section 5.1, on its costs or rate of return of
-----------
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Bank
under this Section 5.1, shall be conclusive; provided that such determinations
----------- --------
and allocations are made on a reasonable basis.
5.2 Limitation on Types of Loans. Notwithstanding any other
----------------------------
provision of this Agreement, if, on or prior to the determination of any
Eurodollar Base Rate for any Interest Period:
(a) the Agent determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in the
definition of "Eurodollar Base Rate" in Section 1.1 are not being provided in
-----------
the relevant amounts or for the relevant maturities for purposes of determining
rates of interest for any Type of Eurodollar Loans as provided in this
Agreement; or
(b) if the Majority Banks determine, which determination shall be
conclusive, and notify the Agent that the relevant rates of interest referred to
in the definition of "Eurodollar Base Rate" in Section 1.1 upon the basis of
-----------
which the rate of interest for Eurodollar Loans for such Interest Period is
- 37 -
<PAGE>
to be determined are not likely to cover adequately the cost to such Banks of
making or maintaining such Type of Loans for such Interest Period;
then the Agent shall give the Company and each Bank prompt notice of such
determination and, so long as such condition remains in effect, the Banks shall
be under no obligation to make additional Loans of such Type, to Continue Loans
of such Type or to Convert Loans of any other Type into Loans of such Type, and
the Company shall, on the last day or days of the then current Interest Period
or Periods for the outstanding Loans of such Type, either prepay such Loans or
Convert such Loans into another Type of Loan in accordance with Section 2.10.
------------
5.3 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful or, by reason of a Regulatory
Change, impossible for any Bank or its Applicable Lending Office to honor its
obligation to make or maintain Eurodollar Loans, then such Bank shall promptly
notify the Company of such event (with a copy to the Agent) and such Bank's
obligation to make or to Continue, or to Convert Loans of any other Type into,
Eurodollar Loans shall be suspended until such time as such Bank may again make
and maintain Eurodollar Loans (in which case the provisions of Section 5.4 shall
-----------
be applicable).
5.4 Treatment of Affected Loans. If the obligation of any Bank to
---------------------------
make a particular Type of Eurodollar Loans or to Continue, or to Convert Loans
of any other Type into, Loans of a particular Type shall be suspended pursuant
to Sections 5.1 or 5.3 (Loans of such Type being called "Affected Loans" and
------------------- --------------
such Type being called the "Affected Type"), such Bank's Affected Loans shall be
-------------
automatically Converted into Base Rate Loans on the last day or days of the then
current Interest Period or Periods for Affected Loans (or, in the case of a
Conversion required by Sections 5.1(b) or 5.3, on such earlier date as such Bank
----------------------
may specify to the Company with a copy to the Agent) and, unless and until such
Bank gives notice as provided below that the circumstances specified in Sections
--------
5.1 or 5.3 that gave rise to such Conversion no longer exist:
- ----------
(a) to the extent that such Bank's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Bank's Affected Loans shall be applied instead to its Base Rate
Loans;
(b) all Loans that would otherwise be made or Continued by such Bank
as Loans of the Affected Type shall be made or Continued instead as Base Rate
Loans, and all Loans of such Bank that would otherwise be Converted into Loans
of the
- 38 -
<PAGE>
Affected Type shall be Converted instead into (or shall remain as) Base Rate
Loans; and
(c) if Loans of other Banks of the Affected Type are subsequently
Converted into Loans of another Type (other than Base Rate Loans), such Bank's
Base Rate Loans shall be automatically Converted on the Conversion date for such
Loans of the other Banks into Loans of such other Type to the extent necessary
so that, after giving effect thereto, all Loans held by such Bank and the Banks
whose Loans are so Converted are held pro rata (as to principal amounts, Types
and Interest Periods) in accordance with their respective Commitments.
If such Bank gives notice to the Company with a copy to the Agent that the
circumstances specified in Sections 5.1 or 5.3 that gave rise to the Conversion
-------------------
of such Bank's Affected Loans pursuant to this Section 5.4 no longer exist
-----------
(which such Bank agrees to do promptly upon such circumstances ceasing to exist)
at a time when Loans of the Affected Type made by other Banks are outstanding,
such Bank's Base Rate Loans shall be automatically Converted, on the first day
or days of the next succeeding Interest Period or Periods for such outstanding
Loans of the Affected Type, to the extent necessary so that, after giving effect
to such Conversions, all Loans held by the Banks holding Loans of the Affected
Type and by such Bank are held pro rata (as to principal amounts, Types and
Interest Periods) in accordance with their respective Commitments.
5.5 Compensation. The Company shall pay to the Agent for the
------------
account of each Bank, upon the request of such Bank through the Agent, such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Bank) to compensate it for any loss, cost or expense that such Bank determines
is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Bank for any reason (including the acceleration of
the Loans pursuant to Section 9) on a date other than the last day of the
---------
Interest Period for such Loan; or
(b) any failure by the Company for any reason (including the failure
of any of the conditions precedent specified in Section 6 to be satisfied) to
---------
borrow a Eurodollar Loan from such Bank on the date for such borrowing specified
in the relevant notice of borrowing given pursuant to Section 2.3.
-----------
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued
- 39 -
<PAGE>
on the principal amount so paid, prepaid or Converted or not borrowed for the
period from the date of such payment, prepayment, Conversion or failure to
borrow to the last day of the then current Interest Period for such Loan (or, in
the case of a failure to borrow, the Interest Period for such Loan that would
have commenced on the date specified for such borrowing) at the applicable rate
of interest for such Loan provided for in this Agreement over (ii) the amount of
interest that otherwise would have accrued on such principal amount at a rate
per annum equal to the interest component of the amount such Bank would have bid
in the London interbank market (if such Loan is a Eurodollar Loan) for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Bank).
5.6 Taxes.
-----
(a) The Company agrees to pay to each Bank such additional amounts as
are necessary in order that the net payment of any Obligation due to such Bank
after deduction for or withholding in respect of any Tax imposed with respect to
such payment (or for payment of such Tax by such Bank), will not be less than
the amount of the Obligation then due and payable; provided that the foregoing
--------
obligation to pay such additional amounts shall not apply:
(i) to any payment to a Bank that is not a U.S. Person unless
such Bank is, on the Signing Date (or on the date it becomes a Bank as
provided in Section 11.6(b)) and on the date of any change in the
---------------
Applicable Lending Office of such Bank, either entitled to submit a Form
1001 (relating to such Bank and entitling it to a complete exemption from
withholding on all interest to be received by it under this Agreement and
the Notes in respect of the Loans) or Form 4224 (relating to all interest
to be received by such Bank under this Agreement in respect of the Loans)
(and in that regard each such non-U.S. Person shall on such date deliver to
the Agent and the Company duplicate such Forms 1001 or 4224, as
appropriate), it being understood that each Bank shall submit an updated
Form 1001 or 4224 prior to any such Form becoming outdated, or
(ii) to any Tax imposed solely by reason of the failure by such
non-U.S. Person to comply with clause (i) above and, without duplication,
any applicable certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or connections
with the United States of America of such non-U.S. Person if such
compliance is required by statute or
- 40 -
<PAGE>
regulation of the United States of America as a precondition to relief or
exemption from such Tax.
For the purposes of this Section 5.6(a), (w) "Form 1001" shall mean Form 1001
-------------- ---------
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
---------
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
of the kind to which such Form relates), (y) "U.S. Person" shall mean a citizen,
-----------
national or resident of the United States of America, a corporation, partnership
or other entity created or organized in or under any laws of the United States
of America, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income and (z) "Taxes" shall mean any present or
-----
future tax, assessment or other charge or levy imposed by or on behalf of any
Governmental Person (other than taxes imposed on or measured by the overall net
income of any Bank or of its Applicable Lending Office by the jurisdiction in
which such Bank has its principal office or any Applicable Lending Office).
(b) Within 30 days after paying any amount to the Agent or any Bank
from which it is required by law to make any deduction or withholding, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Company shall deliver
to the Agent for delivery to such non-U.S. Person evidence satisfactory to such
Person of such deduction, withholding or payment (as the case may be).
Section 6. Conditions Precedent.
--------------------
6.1 Initial Extension of Credit. The obligation of any Bank to make
---------------------------
its initial extension of credit under this Agreement is subject to the receipt
by the Agent and the Banks, of the following documents, each of which shall be
satisfactory to the Agent (and to the extent specified below, to each Bank) in
form and substance:
(a) Basic Documents.
---------------
(i) This Agreement, executed by the Company, the Agent and each
of the Banks;
(ii) The Notes, duly completed and executed;
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<PAGE>
(iii) The Subsidiary Guarantee, executed by each Guarantor and
the Agent;
(iv) The Fee Letter.
(b) Corporate Documents. The following documents, each certified as
-------------------
indicated below:
(i) a copy of the charter, as amended and in effect, of the
Company and each of its Subsidiaries certified as of a recent date by the
Secretary of State of its jurisdiction of incorporation, and such evidence
from such Governmental Persons as to the good standing of and information
regarding such charter filed by the Company and each of its Subsidiaries as
the Agent may reasonably request;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company and each of its Subsidiaries, dated the Closing Date and
certifying (A) that attached to such certificate is a true and complete
copy of the by-laws of the Company and each of its Subsidiaries as amended
and in effect at all times from the date on which the unanimous written
consent referred to in clause (B) was issued, to and including the date of
such certificate, (B) that attached to such certificate is a true and
complete copy of the unanimous written consent duly issued by the board of
directors of the Company and each of its Subsidiaries authorizing the
execution, delivery and performance of the Basic Documents and, the
extensions of credit under this Agreement, and that such unanimous written
consent has not been modified, rescinded or amended and is in full force
and effect, (C) that the charters of the Company and its Subsidiaries have
not been amended since the date of the certification furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen signature of
each officer of the Company executing the Basic Documents and each other
document to be delivered by the Company from time to time in connection
with any Basic Document (and the Agent and each Bank may conclusively rely
on such certificate until the Agent receives notice in writing from the
Company); and
(iii) a certificate of another officer of the Company as to the
incumbency and specimen signature of the Secretary or Assistant Secretary,
as the case may be, of the Company and each of its Subsidiaries.
(c) Officer's Certificate. A certificate of a senior officer of the
---------------------
Company, dated the Closing Date, to the effect set
- 42 -
<PAGE>
forth in subclauses (a) and (b) of the first sentence of Section 6.2.
-----------
(d) Opinions of Counsel to the Company.
----------------------------------
(i) An opinion, dated the Signing Date, of Weil, Gotshal &
Manges, counsel to the Company and its Subsidiaries, in substantially the
form of
Exhibit B-1 and covering such other matters as the Agent or any Bank may
-----------
reasonably request (and the Company hereby instructs such counsel to
deliver such opinion to the Banks and the Agent).
(ii) An opinion, dated the Signing Date, of Ballard Spahr Andrews
& Ingersoll, special Maryland counsel to the Company, in substantially the
form of Exhibit B-2 and covering such other matters as the Agent or any
-----------
Bank may reasonably request (and the Company hereby instructs such counsel
to deliver such opinion to the Banks and the Agent).
(e) Borrowing Base Certificate. A Borrowing Base Certificate as of a
--------------------------
date not more than five days prior to the Closing Date.
(f) Environmental Surveys. With respect to each Eligible Facility
---------------------
and each Property underlying an Eligible Mortgage Loan, an environmental survey
and assessment and Phase I report prepared by a firm of licensed engineers
(familiar with the identification of Hazardous Materials) in form and substance
reasonably satisfactory to the Agent and the Majority Banks, such environmental
survey and assessment to be based upon physical on-site inspections by such firm
of each of the Eligible Facilities and each Property underlying an Eligible
Mortgage Loan as well as a historical review of the uses of such Eligible
Facilities and such Property underlying an Eligible Mortgage Loan and of the
business and operations of the Company and its Subsidiaries (including any
former Subsidiaries or divisions of the Company or any of its Subsidiaries which
have been disposed of prior to the date of such survey and assessment and with
respect to which the Company or any of its Subsidiaries may have retained
liability for environmental matters).
(g) Title Insurance. With respect to each Eligible Facility (except
---------------
Eligible Facilities agreed to in writing by the Agent and the Majority Banks),
policies of title insurance on forms of and issued by one or more title
companies satisfactory to the Agent and the Majority Banks (the "Title
-----
Companies"), showing fee simple title vested in the Company and insuring such
- ---------
title in an amount for each Eligible Facility equal to not less than the
Applicable Value for such Eligible Facility subject only to such defects, Liens,
encumbrances, assessments, security
- 43 -
<PAGE>
interests, restrictions, easements and other title exceptions as are
satisfactory to the Agent and the Majority Banks, together with, as may be
reasonably required by the Agent and the Majority Banks, such reinsurance
schedules and agreements in respect of all then existing title insurance
policies for the Eligible Facilities in amounts and otherwise in form and
substance satisfactory to the Agent and the Majority Banks and executed by the
Title Companies. Such policies shall also contain such endorsements and
affirmative insurance provisions as the Agent and the Majority Banks may
reasonably require. In addition, the Company shall have paid to the Title
Companies all expenses and premiums of the Title Companies in connection with
the issuance of such policies.
(h) Survey. With respect to each Eligible Facility (except Eligible
------
Facilities agreed to in writing by the Agent and the Majority Banks), a survey,
the age of which shall not be in excess of two years when initially delivered to
the Agent, except as set forth on Schedule VI, of each Eligible Facility,
prepared by a licensed or registered land surveyor satisfactory to the Agent and
the Majority Banks, in compliance with the minimum standard detail requirements
for land title surveys adopted by the American Land Title Association and
American Congress on Surveying and Mapping, and certified to the Agent and the
Banks, the Company, the Title Companies and any other parties requested by the
Agent and the Banks as of a certification date approved by the Agent and the
Majority Banks.
(i) Zoning Compliance, Etc. An Officer's Certificate to the effect
-----------------------
that all improvements have been constructed and are being used and operated in
full compliance with (i) all applicable zoning, subdivision and other laws,
orders, rules, regulations and requirements of all governmental or quasi-
governmental authorities having jurisdiction with respect to the Eligible
Facilities, and (ii) all building permits issued in respect of the Eligible
Facilities and (if available) a copy of the certificate of occupancy certified
by the Company for each Eligible Facility.
(j) Leases. Certified executed copies of all leases, ground leases
------
and subleases of any material portion of any Eligible Facility and any Property
underlying an Eligible Mortgage Loan together with all amendments and
modifications thereto, together with a certificate of the Company stating for
each Eligible Facility and each Property underlying an Eligible Mortgage Loan,
the name of each Operator, the rental to be paid in respect of each lease,
ground lease and sublease, the security deposit paid in respect of each lease,
ground lease and sublease, the expiration date of each lease, ground lease and
sublease, all concessions granted in respect of each lease, ground lease and
- 44 -
<PAGE>
sublease (if any) and such other information as shall be requested by the Agent
and the Majority Banks and confirming that each such lease, ground lease and
sublease is unmodified (except as disclosed to the Agent and the Banks in
writing) and in full force and effect and is the only lease, ground lease and
sublease in respect of such Eligible Facility and such Property underlying an
Eligible Mortgage Loan and a description of any defaults known to the Company to
exist under such lease, ground lease and sublease and stating that such default
(if any) if uncured would not have a Material Adverse Effect on the value,
utility, operation or legality of such Eligible Facility and such Property
underlying an Eligible Mortgage Loan.
(k) Material Contracts. Certified copies of the Goldman Facility,
------------------
the Indentures, and the pooling and servicing agreement, transfer and repurchase
agreement and subservicing agreement executed in connection with the issuance of
each of the LTC Commercial Mortgage Pass-Through Certificates, Series 1993-1,
the LTC Commercial Mortgage Pass-Through Certificates, Series 1994-1 and the LTC
Commercial Mortgage Pass-Through Certificates, Series 1996-1.
(l) Appraisals. Appraisals of each of the Eligible Facilities and
----------
each Mortgaged Property underlying an Eligible Mortgage Loan.
(m) Reliance Letter. A Reliance Letter from Ernst & Young with
---------------
respect to Ernst & Young's audits of the Company's 1994 and 1995 fiscal years.
(n) Other Documents. Such other documents as the Agent or any Bank
---------------
or counsel to Agent and the Bank may reasonably request.
The obligation of any Bank to make its initial extension of credit under this
Agreement is also subject to the payment or delivery by the Company of such fees
and other consideration as the Company shall have agreed to pay or deliver to
any Bank or an affiliate of such Bank or the Agent in connection with this
Agreement, including the reasonable fees and expenses of Milbank, Tweed, Hadley
& McCloy, counsel to the Agent and the Banks, in connection with the
negotiation, preparation, execution and delivery of this Agreement and the Notes
(to the extent that statements for such fees and expenses have been delivered to
the Company).
6.2 Initial and Subsequent Extensions of Credit. The obligation of
-------------------------------------------
any Bank to make any Loan (including such Bank's initial Loan) or otherwise
extend any credit to the Company upon the occasion of each borrowing or other
extension of credit under
- 45 -
<PAGE>
this Agreement is subject to the further conditions precedent that, both
immediately prior to the making of such Loan or other extension of credit and
also after giving effect to, and to the intended use of, such Loan or other
extension:
(a) no Default shall have occurred and be continuing;
(b) the representations and warranties made by the Company in Section
-------
7 shall be true and complete on and as of the Signing Date or the date of the
- -
making of such Loan or other extension of credit, as applicable, with the same
force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date);
(c) the aggregate principal amount of the Loans shall not exceed the
Borrowing Base reflected on the most recent Borrowing Base Certificate delivered
pursuant to Section 6.1(d) or Section 8.1(d);
-------------- --------------
(d) the requirements set forth in Section 6.1(f) through Section
6.1(l), and Section 6.1(n), with respect to any Eligible Facility to be acquired
with the proceeds of such Loan, shall have been satisfied; and
(e) (i) the Company shall have delivered to the Agent each of the
underlying original executed Mortgage Notes corresponding to each of Eligible
Mortgage Loans included in the Borrowing Base and (ii) the Company shall have
delivered to the Agent, at least one Business Day prior to the date of the
funding of such additional Loan, each of the underlying Mortgage Loan Documents,
which shall constitute the Mortgage Loan file to be maintained by the Agent,
corresponding to each of the Eligible Mortgage Loans composing part of the
Borrowing Base.
Each notice of borrowing by the Company shall constitute a certification by the
Company to the effect set forth in the preceding sentence (both as of the date
of such notice or request and, unless the Company otherwise notifies the Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Section 7. Representations and Warranties. The Company represents
------------------------------
and warrants to the Agent and the Banks that:
7.1 Corporate Existence. Each of the Company and its Subsidiaries:
-------------------
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material
- 46 -
<PAGE>
Governmental Approvals necessary, to own its assets and to carry on its business
as now being or as proposed to be conducted; and (c) is qualified to do business
and is in good standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify could have a Material Adverse Effect.
7.2 Financial Condition.
-------------------
(a) The Company has previously furnished to each of the Banks
consolidated and consolidating balance sheets of the Company and its
Consolidated Subsidiaries as at December 31, 1995 and the related consolidated
and consolidating statements of income, retained earnings and Cash Flow of the
Company and its Consolidated Subsidiaries for the fiscal year ended on that
date, with the opinion (in the case of those consolidated balance sheet and
statements) of Ernst & Young, and the unaudited consolidated and consolidating
balance sheets of the Company and its Consolidated Subsidiaries as at March 31,
1996 and the related consolidated and consolidating statements of income,
retained earnings and Cash Flow of the Company and its Consolidated Subsidiaries
for the three-month period ended on such date.
(b) All such financial statements present are complete and correct and
fairly present in all material respects the consolidated financial condition of
the Company and its Consolidated Subsidiaries, and (in the case of the
consolidating financial statements) the respective unconsolidated financial
condition of the Company and of each of its Consolidated Subsidiaries, as at
those dates and the consolidated and unconsolidated results of their operations
for the fiscal year and three-month period ended on those dates (subject, in the
case of such financial statements as at March 31, 1996, to normal year-end audit
adjustments), all in accordance with GAAP and practices applied on a consistent
basis. Neither the Company nor any of its Subsidiaries has on the Signing Date
any material contingent liabilities, liabilities or reserves for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the most recent balance sheet referred to above. Since March 31, 1996, there
has been no material adverse change in the consolidated financial condition,
operations or business taken as a whole of the Company and its Consolidated
Subsidiaries from that set forth in the financial statements as at September 30,
1994 for the period ending on that date.
7.3 Litigation. Except as disclosed to the Banks in Schedule IV,
---------- -----------
there are no legal or arbitral proceedings, or any proceedings by or before any
Governmental Person now pending or
- 47 -
<PAGE>
(to the knowledge of the Company) threatened against the Company or any of its
Subsidiaries which, if adversely determined, could have a Material Adverse
Effect.
7.4 No Breach. None of the execution and delivery of the Basic
---------
Documents, the consummation of the transactions contemplated in the Basic
Documents or compliance with the terms and provisions of the Basic Documents
will conflict with or result in a breach of, or require any consent under, the
charter or by-laws of the Company, or any applicable Governmental Rule or any
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their Property is bound or to which any
of them is subject, or constitute a default under, or result in the acceleration
or mandatory prepayment of, any indebtedness evidenced by or termination of any
such agreement or instrument, or result in the creation or imposition of any
Lien upon any Property of the Company or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
7.5 Action. The Company has all necessary corporate power and
------
authority to execute, deliver and perform its obligations under each of the
Basic Documents, the execution, delivery and performance by the Company of each
of the Basic Documents have been duly authorized by all necessary corporate
action on its part (including any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by the Company and
constitutes, and each of the Notes when executed and delivered by it for value
will constitute, its legal, valid and binding obligation, enforceable against
the Company in accordance with its terms, (a) except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) except as such
enforceability may be limited by the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
7.6 Approvals. No Governmental Approvals are necessary for the
---------
execution, delivery or performance by the Company of the Basic Documents or for
the legality, validity or enforceability of any Basic Document.
7.7 Margin Stock. Neither the Company nor any of its Subsidiaries
------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of any extension
of credit under this Agreement will be used to buy or carry any Margin Stock.
- 48 -
<PAGE>
7.8 ERISA. Each Plan, and, to the knowledge of the Company, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Governmental Rule, and no event or
condition has occurred and is continuing as to which the Company would be under
an obligation to furnish a report to the Banks under Section 8.1(g), which could
--------------
reasonably be expected to give rise to a Material Adverse Effect.
7.9 Taxes. There is no tax sharing, tax allocation or similar
-----
agreement currently in effect providing for the manner in which tax payments
owing by the Company or any of its Subsidiaries (whether in respect of Federal
or state income or other taxes) are allocated among such Persons. The Company
and its Subsidiaries have filed all Federal income tax returns and all other
material tax returns that are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by the
Company or any of its Subsidiaries and all other related penalties and charges.
The Company and its Subsidiaries do not have any charges, accruals or reserves
for taxes and the charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of other governmental charges are, in the opinion of
the Company, adequate. The Company has not given or been requested to give a
waiver of the statute of limitations relating to the payment of Federal or other
taxes.
7.10 Certain Regulations. Neither the Company nor any of its
-------------------
Subsidiaries is (a) an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940;
(b) a "holding company," or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935; or (c) subject to any other Governmental
Rule restricting its ability to incur debt.
7.11 Material Agreements and Liens.
-----------------------------
(a) Part A of Schedule I is a complete and correct list, as of the
----------
Signing Date of each credit agreement, loan agreement, indenture, purchase
agreement, Guarantee, letter of credit or other arrangement providing for or
otherwise relating to any Indebtedness or any extension of credit (or commitment
for any extension of credit) to, or Guarantee by, the Company or any of its
Subsidiaries the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $250,000, and the aggregate principal or face amount
outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of Schedule I.
----------
- 49 -
<PAGE>
(b) Part B of Schedule I is a complete and correct list, as of the
----------
Signing Date, of each Lien securing Indebtedness of any Person the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$250,000 and covering any Property of the Company or any of its Subsidiaries,
and the aggregate Indebtedness secured (or which may be secured) by each such
Lien and the Property covered by each such Lien is correctly described in Part B
of Schedule I. In addition, none of the Liens described in Part B of Schedule I
---------- ----------
are reasonably likely to have a Material Adverse Effect.
7.12 Environmental Matters. Except as set forth in Schedule II, to
--------------------- -----------
the best of the Company's knowledge, after due inquiry:
(a) Each of the Company and its Subsidiaries has obtained all
Governmental Approvals required under all Environmental Laws to carry on its
business as now being conducted, except to the extent failure to have any such
Governmental Approvals would not have a Material Adverse Effect. Each of such
Governmental Approvals is in full force and effect and each of the Company and
its Subsidiaries is in compliance with the terms and conditions of such
Governmental Approvals, and is also in compliance with all other provisions of
any applicable Environmental Law or in any Governmental Rule issued, entered,
promulgated or approved under any Environmental Law, except to the extent
failure to comply with such provisions would not have a Material Adverse Effect.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any Governmental Person with respect to any alleged failure by the
Company or any of its Subsidiaries to have any Governmental Approval required
under any Environmental Law in connection with the conduct of the business of
the Company or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation or Release of any Hazardous
Materials generated by the Company or any of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries owns, operates or
leases a treatment, storage or disposal facility requiring a permit under the
Resource Conservation and Recovery Act of 1976 or under any comparable state or
local statute; and
(i) no polychlorinated biphenyls (PCBs) are or have been present
at any site, facility or vessel owned,
- 50 -
<PAGE>
operated or leased by the Company or any of its Subsidiaries;
(ii) no friable asbestos or asbestos-containing materials are or
have been present at any site, facility or vessel owned, operated or leased
by the Company or any of its Subsidiaries;
(iii) there are no underground storage tanks or surface
impoundments for Hazardous Materials, active or abandoned, at any site or
facility owned, operated or leased by the Company or any of its
Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or under
any site or facility owned, operated or leased by the Company or any of its
Subsidiaries in a quantity established as reportable under any
Environmental Law; and
(v) no Hazardous Materials have been otherwise Released at, on or
under any site, facility or vessel owned, operated or leased by the Company
or any of its Subsidiaries that could reasonably give rise to a Material
Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries has transported
or arranged for the transportation of any Hazardous Material to any location
that is listed on the National Priorities List ("NPL") under the Comprehensive
---
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"),
------
listed for possible inclusion on the NPL by the Environmental Protection Agency
in the Comprehensive Environmental Response and Liability Information System, as
provided for by 40 C.F.R. ' 300.5 ("CERCLIS"), or on any similar state or local
-------
list or that is the subject of Federal, state or local enforcement actions or
other investigations that may lead to Environmental Claims against the Company
or any of its Subsidiaries, which Environmental Claims could reasonably give
rise to a Material Adverse Effect.
(e) No site, facility or vessel owned, operated or leased by the
Company or any of its Subsidiaries is listed or formally proposed for listing on
the NPL, CERCLIS or any similar state list of sites requiring investigation or
clean-up.
(f) No Liens have arisen under or pursuant to any Environmental Laws
on any site, facility or vessel owned, operated or leased by the Company or any
of its Subsidiaries, and no action has been taken by any Governmental Person
that could subject any such site, facility or vessel to such Liens and neither
the Company nor any of its Subsidiaries would be required
- 51 -
<PAGE>
to place any notice or restriction relating to the presence of Hazardous
Materials at any site, facility or vessel owned by it or in any instrument of
transfer affecting such site, facility or vessel.
(g) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or that are in the possession of
the Company or any of its Subsidiaries in relation to any site, facility or
vessel owned, operated or leased by the Company or any of its Subsidiaries which
disclose Environmental Claims against the Company that could reasonably give
rise to a Material Adverse Effect and that have not been made available to the
Banks.
In addition, none of the items listed in Schedule II are reasonably likely to
-----------
give rise to a Material Adverse Effect.
7.13 Capitalization. The authorized capital stock of the Company
--------------
consists, on the Signing Date, of an aggregate of 50,000,000 shares consisting
of (i) 40,000,000 shares of common stock, par value $0.01 per share, of which
18,500,949 shares will be duly and validly issued and outstanding, each of which
shares is fully paid and nonassessable and (ii) 10,000,000 shares of preferred
stock, of which 0 shares will be duly and validly issued and outstanding, each
of which shares is fully paid and nonassessable. As of the Signing Date, (x)
there are no outstanding Equity Rights with respect to the Company (other than
(i) the Company's 9 3/4% Convertible Subordinated Debentures due 2004 which are
convertible into the Company's common stock, (ii) the Company's 8 1/2%
Convertible Subordinated Debentures due 2000 which are convertible into the
Company's common stock, (iii) the Company's 8 1/2% Convertible Subordinated
Debentures due 2001 which are convertible into the Company's common stock, (iv)
the Company's 8 1/4% Convertible Subordinated Debentures due 1999 which are
convertible into the Company's common stock, (v) the Company's 7 3/4%
Convertible Subordinated Debentures due 2002 which are convertible into the
Company's common stock and (vi) 1,388,500 stock options pursuant to the
Company's 1992 Stock Option Plan, as amended) and (y) there are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem, or
otherwise acquire any shares of capital stock of the Company nor are there any
outstanding obligations of the Company or any of its Subsidiaries to make
payments to any Person, such as "phantom stock" payments, where the amount of
the payment is calculated with reference to the fair market value or equity
value of the Company or any of its Subsidiaries.
- 52 -
<PAGE>
7.14 Subsidiaries, Etc.
------------------
(a) Set forth in Part A of Schedule III is a complete and correct
------------
list, as of the Signing Date, of all of the Subsidiaries of the Company,
together with, for each such Subsidiary, (i) the jurisdiction of organization of
such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary
and (iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Part A of Schedule III, (x) each of the
------------
Company and its Subsidiaries owns, free and clear of Liens, and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule III, (y) all of the issued and
------------
outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part C of Schedule III is a complete and correct
------------
list, as of the Signing Date, of all Investments (other than Investments
disclosed in Part A of Schedule III) held by the Company or any of its
------------
Subsidiaries in any Person and, for each such Investment, (x) the identity of
the Person or Persons holding such Investment and (y) the nature of such
Investment. Except as disclosed in Part C of Schedule III each of the Company
------------
and its Subsidiaries owns, free and clear of all Liens, all such Investments.
(c) None of the Subsidiaries of the Company is, on the Signing Date,
subject to any indenture, agreement, instrument or other arrangement of the type
described in the last sentence of Section 8.21.
------------
7.15 Title to Assets. The Company owns and has on the Signing Date,
---------------
and will own and have on the Closing Date, good and marketable title (subject
only to Liens permitted by Section 8.6) to the Properties, including the
-----------
Eligible Facilities, shown to be owned in the most recent financial statements
referred to in Section 7.2 (other than Properties disposed of in the ordinary
-----------
course of business (other than Facilities owned by the Company) or otherwise
permitted to be disposed of pursuant to Section 8.5). The Company owns and has
-----------
on the Signing Date and will own and have on the Closing Date, good and
marketable title to, and enjoys on the Signing Date and will enjoy on the
Closing Date, peaceful and undisturbed possession of, all Properties, including
the Eligible Facilities, (subject only to Liens permitted by Section 8.6) that
-----------
are necessary for the operation and conduct of its businesses.
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<PAGE>
7.16 True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to any Bank in connection with the negotiation,
preparation or delivery of the Basic Documents or included in or delivered
pursuant to any Basic Document, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements in any Basic Document, in light of the circumstances under which
they were made, not misleading. All written information furnished after the
Signing Date by the Company and its Subsidiaries to the Agent and the Banks in
connection with the Basic Documents and the transactions contemplated by the
Basic Documents will be true, complete and accurate in every material respect,
or (in the case of projections) based on reasonable estimates, on the date as of
which such information is stated or certified. There is no fact known to the
Company that could have a Material Adverse Effect that has not been disclosed in
the Basic Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Agent or the Banks for use
in connection with the transactions contemplated by the Basic Documents.
7.17 REIT and REMIC Status. The Company is a REIT and each of the
---------------------
LTC REMICS is a REMIC.
7.18 Eligible Mortgage Loans. With respect to each Eligible
-----------------------
Mortgage Loan, (i) the information set forth in the related Mortgage Loan
Schedule is complete and correct in all material respects as of the date or
dates respecting which the information is furnished and (ii) as to each Eligible
Mortgage Loan, as of date of such Eligible Mortgage Loan becoming part of the
Borrowing Base:
(a) the Company is sole owner and holder of such Eligible Mortgage
Loan;
(b) the Company has full right and authority to sell, assign and
transfer such Eligible Mortgage Loan and the related Mortgage and Mortgage
Note and other related documents pledged, assigned or deposited pursuant to
this Agreement;
(c) the related Mortgage Note is not, and has not been since the date
of origination of the Eligible Mortgage Loan, secured by any collateral
except the lien of the related Mortgage, any related Assignment of Leases
and Rents and any related security agreement; and such Mortgaged Property
and the other collateral for such Eligible Mortgage Loan do not
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<PAGE>
secure any mortgage loan or related Mortgage Note that is not on deposit
with the Agent on the date hereof;
(d) such Eligible Mortgage Loan is a whole loan and not a
participation interest in a mortgage loan and, except as set forth in the
Mortgage Loan Schedule, the Eligible Mortgage Loan contains no equity
participation;
(e) such Eligible Mortgage Loan complied, as of the date of
origination, with, or was exempt from, any applicable federal, state or
local law, regulation and other requirement pertaining to usury, and the
receipt of any amounts payable as interest or otherwise from revenues
derived from the operation of the related Mortgaged Property or in respect
of any equity participation provision of such Eligible Mortgage Loan will
not violate any applicable federal, state or local law, regulation or other
requirement pertaining to usury; any and all other requirements of any
federal, state or local laws, including, without limitation, truth-in-
lending, real estate settlement procedures, equal credit opportunity or
disclosure laws, applicable to such Eligible Mortgage Loan have been
complied with as of the date of origination of such Eligible Mortgage Loan;
(f) the origination, servicing and collection practices used by the
Company or any prior holder of such Eligible Mortgage Loan have been in all
respects legal, proper and prudent and have met customary standards
utilized by mortgage lenders in their commercial mortgage origination and
servicing business;
(g) such Eligible Mortgage Loan was originated either by the Company
or an agent thereof, or by an originator approved by the Company, and
complies with all the terms, conditions and requirements of the
underwriting policies of such originator in effect at the time of
origination;
(h) the Company is delivering the Mortgage Note underlying such
Eligible Mortgage Loan free and clear of any and all liens, pledges,
charges, security interests or restrictions on transfer of any nature
encumbering or affecting such Eligible Mortgage Loan and Mortgage Note;
(i) the proceeds of the Eligible Mortgage Loan have been fully
disbursed and there is no requirement for future advances thereunder, and
any and all requirements imposed by the mortgagee as to completion of any
onsite or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with;
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<PAGE>
(j) each of the related Mortgage Notes, related Mortgages and other
agreements providing security, credit support or other assurances in
connection therewith is a legal, valid and binding obligation of the maker
thereof (subject to any nonrecourse provisions therein), enforceable in
accordance with its terms, except as such enforcement may be limited by (A)
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, (B) general principles of
equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law), and (C) in the case of certain personal
guarantees executed in connection with certain Eligible Mortgage Loans, the
community property laws of the states in which the persons executing such
guarantees are domiciled, and there is no offset, defense, counterclaim or
right to rescission with respect to such Mortgage Note, Mortgage or other
agreements;
(k) the related Mortgage (including any related security agreement
included in the definition of such term) is a valid and enforceable first
lien on the related Mortgaged Property, which Mortgaged Property is free
and clear of all encumbrances and liens having priority over, or equal to,
the lien of the Mortgage, except for (i) liens for real estate taxes and
special assessments not yet due and payable, (ii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record
as of the date of recording of such Mortgage, such exceptions appearing of
record being acceptable to mortgage lending institutions generally or
specifically reflected in the appraisal made in connection with the
origination of the related Eligible Mortgage Loan, none of which materially
interferes with the benefits of the security intended to be provided by
such Mortgage, (iii) exceptions and exclusions specifically referred to in
the lender's title insurance policy described in clause (w) below, none of
which materially interferes with the security intended to be provided by
such Mortgage, and (iv) other matters to which like properties are commonly
subject which do not, individually or in the aggregate, materially
interfere with the benefits of the security intended to be provided by such
Mortgage;
(l) the related Mortgage has not been waived, modified, altered,
satisfied, canceled or subordinated in any respect or rescinded, and the
related Mortgaged Property has not been released from the lien or other
encumbrance of, nor has the Borrower been released from its obligations
under, the Mortgage, in whole or in any part, in a manner which materially
interfered with the benefits of the
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<PAGE>
security intended to be provided by the Mortgage or the use, enjoyment,
value or marketability of the Mortgaged Property for the purposes specified
in the Mortgage, nor has any guarantor been released, in whole or in part,
under the related guaranty (if any), nor has any instrument been executed
that would effect any such cancellation, subordination, rescission or
release;
(m) all taxes, governmental assessments and water, sewer and
municipal charges that prior to the date of deliverance of each Mortgage
Note underlying each Eligible Mortgage became due and owing in respect of,
and affect, the related Mortgaged Property have been paid prior to becoming
delinquent, or an escrow of funds in an amount sufficient to cover such
payments has been established;
(n) all escrow deposits and payments relating to the Eligible
Mortgage Loan are in the possession, or under the control, of the Company
or its agents, and all amounts required to be deposited by the related
Borrower have been deposited and there are no deficiencies with regard
thereto;
(o) neither the Company nor any of its agents or Affiliates has,
directly or indirectly, advanced funds, or received any advance of funds by
a party other than the Borrower, for the payment of any amount required by
the related Mortgage Note or the related Mortgage, except for interest
accruing from the date of the Mortgage Note or date of disbursement of the
Eligible Mortgage Loan proceeds, whichever is later, to the date which
preceded by 30 days the first Due Date under the related Mortgage Note;
(p) each Eligible Mortgage Loan is secured by an interest in real
property having a fair market value at least equal to 125% of the principal
balance of the Eligible Mortgage Loan at the time the Eligible Mortgage
Loan was originated, provided that, for purposes of this clause (p), the
fair market value of the real property interest must first be reduced by
(i) the amount of any lien on the real property interest that is senior to
the Eligible Mortgage Loan and (ii) a proportionate amount of any lien that
is in parity with the Eligible Mortgage Loan;
(q) there is no proceeding pending for the total or partial
condemnation of the related Mortgaged Property, and the Mortgaged Property
is in good repair and free and clear of any damage that would affect
materially and adversely the value of the Mortgaged Property as security
for the Eligible Mortgage Loan or the use for which the premises were
intended;
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<PAGE>
(r) the related Mortgaged Property is free and clear of any
mechanics' and materialmen's liens or liens in the nature thereof, and no
rights are outstanding that under law could give rise to any such liens,
any of which liens are or may be prior to, or equal with, the lien of the
mortgage, except those which are insured against by the lender's title
insurance policy referred to in clause (w) below;
(s) none of the improvements which were included for the purpose of
determining the Appraised Value of the related Mortgaged Property in
connection with the origination of the Eligible Mortgage Loan lies outside
the boundaries and building restriction lines of such property, no
improvements on adjoining properties materially encroach upon such
Mortgaged Property, and all improvements located on or forming a part of
this related Mortgaged Property comply with applicable zoning laws or
ordinances;
(t) the related Borrower is in possession of all certificates of
occupancy or other similar licenses, permits and other authorizations
necessary and required by applicable law for the use of the related
Mortgaged Property; all such certificates of occupancy or other similar
licenses, permits and authorizations are valid and in full force and
effect;
(u) if applicable, the related Borrower is the owner and holder of
the landlord's interest under any lease for use and occupancy of all or any
portion of the related Mortgaged Property; the related Mortgage provides
for the appointment of a receiver for rents in the event of default or
allows the Mortgagee to enter into possession to collect the rents; no
assignments have been made of the landlord's interest in any such lease or
any portion of the rents, additional rents, charges, issues or profits due
and payable or to become due and payable under any such lease, which
assignments are presently outstanding and have priority over the related
Mortgage or any related Assignment of Leases and Rents given in connection
with the origination of the related Mortgage, other than as may be
disclosed in the related lender's title insurance policy referred to in
clause (w) below;
(v) to the extent required under applicable law, each holder of the
Eligible Mortgage Loan was authorized to transact and do business in the
jurisdiction in which the related Mortgaged Property is located at all
times when it held the Eligible Mortgage Loan;
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<PAGE>
(w) the related Mortgaged Property is covered by a lender's title
insurance policy, issued by a title insurance company acceptable to the
Agent, insuring that the related Mortgage is a valid first lien on such
Mortgaged Property; such title insurance policy is in full force and effect
and is freely assignable; such policy is subject only to exceptions which
are acceptable to mortgage lending institutions generally and which are
specifically referenced in such title insurance policy, none of which
materially interferes with the benefits of the security provided by the
related Mortgage or the use, enjoyment, value or marketability of the
related Mortgaged Property; and neither the Company nor any prior Mortgagee
has done, by act or omission, anything which would materially impair the
coverage of any such title insurance policy;
(x) the related Mortgaged Property is insured by a fire and extended
perils insurance policy issued by a qualified insurance company acceptable
to the Agent, providing coverage against loss or damage sustained by reason
of fire, lightning, windstorm, hail, explosion, riot, riot attending a
strike, civil commotion, aircraft, vehicles and smoke, and, to the extent
required as of the date of origination by the Company consistent with its
normal commercial mortgage lending practices, against other risks insured
against by Persons operating like properties in the locality of the
Mortgaged Property, in an amount which is at least equal to this lesser of
the current principal balance of such Eligible Mortgage Loan and the
replacement cost of the improvements which are a part of the related
Mortgage Property and which is not less than the amount necessary to avoid
the operation of any coinsurance provisions with respect to the Mortgaged
Property in the event of any loss less than the amount of the insurance
coverage, and consistent with the amount that would have been required as
of the date of origination by the Company in its normal commercial mortgage
lending activities with respect to similar properties in the same locality;
all premiums on such insurance policy have been paid; such insurance policy
requires prior notice to the insured of termination or cancellation, and no
such notice has been received; the related Mortgage obligates the related
borrower to maintain all such insurance and, upon such Borrower's failure
to do so, authorizes the mortgagee to maintain such insurance at the
Borrower's cost and expense and to seek reimbursement therefor from such
Borrower;
(y) there is no default, breach, violation or event of acceleration
existing under the related Mortgage or the related Mortgage Note and no
event (other than payments due
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<PAGE>
but not yet delinquent) which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration; there has been no waiver of any
material default, breach, violation or event of acceleration of any of the
foregoing, and, pursuant to the terms of the Eligible Mortgage Loan, the
related Mortgage or the related Mortgage Note, no Person other than the
holder of such Mortgage Note may declare an event of default or accelerate
the related indebtedness under any such Eligible Mortgage Loan, Mortgage or
Mortgage Note;
(z) no Eligible Mortgage Loan is 30 days or more delinquent in
payment beyond any grace period permitted by the related Mortgage or
Mortgage Note and no Eligible Mortgage Loan has been more than 30 days
delinquent in payment more than once during any twelve month period,
without giving effect to any grace period permitted by the related Mortgage
or Mortgage Note;
(aa) all of the terms of the related Mortgage pertaining to interest
rate adjustment, payment adjustments and adjustments of the principal
balance are enforceable, such adjustments will not affect the priority of
the liens of the Mortgage, and all such adjustments and all calculations of
interest which have made, were made correctly and in full compliance with
the terms of the related Mortgage Note and Mortgage;
(bb) the related Mortgage Note or the related Mortgage contains
customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization against the
Mortgaged Property of the benefits of the security, including realization
by judicial or, if applicable, nonjudicial foreclosure, and there is no
exemption available to the Borrower which would interfere with such right
to foreclosure;
(cc) each related Mortgaged Property has been inspected by the
Company or one of its agents within the past eight months;
(dd) the facility located on the related Mortgaged Property and the
operator with respect to such facility have all certificates, licenses and
permits required by applicable law for the operation of such facility and,
to the extent such facility participates in Medicaid, Medicare or other
similar programs, such facility and operator hold a valid certification for
such participation, appropriate for the level of care provided at such
facility;
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<PAGE>
(ee) no Mortgaged Property is affected by a Disqualifying Condition;
(ff) no Eligible Mortgage Loan is secured in whole or in part by the
interest of a Borrower as a lessee under a ground lease of a Mortgaged
Property;
(gg) the Appraised Value of the Mortgaged Property reflected at the
relevant date of origination an amount not less than the Company's best
estimate of the market value of such Mortgaged Property, based on an
appraisal conducted by an independent appraiser;
(hh) to the best of the Company's knowledge, there is no existing
circumstance or condition with respect to the Mortgage, Mortgaged Property,
Borrower, Tenant or operator of the Mortgaged Property relating to the
Eligible Mortgage Loan (giving effect to any non-recourse provisions
therein) that in the Company's reasonable determination would cause such
Eligible Mortgage Loan to be subject to imminent default, that could
reasonably be expected to cause prudent institutional investors to regard
such Eligible Mortgage Loan as an unacceptable investment or that could
adversely affect the marketability of such Eligible Mortgage Loan;
(ii) each related Mortgaged Property is on a separate tax parcel,
assessed for real estate tax purposes separate and apart from any other
property owned by the related Borrower or any other Person;
(jj) the related Borrower owns the Mortgaged Property in fee simple;
(kk) if the related Mortgage is a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the deed of trust or has
been substituted in accordance with applicable law, and no fees or expenses
are or will become payable to the trustee under the deed of trust, except
in connection with a trustee's sale after default by the Borrower or in
connection with the release of the Mortgaged Property or related security
for the Eligible Mortgage Loan following the payment of the Eligible
Mortgage Loan in full;
(ll) any related Assignment of Leases and Rents creates a valid first
priority assignment of, or security interest in, the right to receive all
payments due under the related Net Lease, if any, which right may be
exercised by
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<PAGE>
the Mortgagee upon the occurrence of an event of default by the Borrower
under the terms of the Mortgage;
(mm) the Related Mortgage Note does not provide for any grace period
that exceeds five Business Days during which remittance by the Borrower of
any scheduled Monthly Payment may be deferred without the payment of any
default interest or late charge therefor, and there is no differences for
any period between the amount of interest accrued on such Eligible Mortgage
Loan and the amount of interest payable thereon;
(nn) in the event of a foreclosure under the Mortgage, the related
Net Lease, if any, will either (i) be extinguished by reason of being
subordinate to the Mortgage, without any non-disturbance or attornment
obligations; or (ii) continue in full force and effect, either because such
Net Lease is superior in time or because non-disturbance and attornment
obligations have been given, and such continuing Net Lease currently
provides for monthly lease payments in excess of the Monthly Payment on the
Eligible Mortgage Loan; and
(oo) such Eligible Mortgage Loan would be eligible to be a "qualified
mortgage" within the meaning of ' 860G(a)(3) of the Internal Revenue Code
if transferred to a Real Estate Mortgage Investment Conduit in the manner
and within the timeframe required under that section.
Section 8. Covenants of the Company. The Company covenants and
------------------------
agrees with the Agent and the Banks that, so long as any Commitment or Loan is
outstanding and until payment in full of all Obligations:
8.1 Financial Statements Etc. The Company shall deliver to each of
-------------------------
the Agent and the Banks:
(a) as soon as available and in any event within 50 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated and consolidating statements of income, retained earnings and cash
flow of the Company and its Consolidated Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding period in the preceding fiscal year,
accompanied by a certificate of a senior financial officer of
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<PAGE>
the Company, which certificate shall state that those consolidated financial
statements fairly present in all material respects the consolidated financial
condition and results of operations of the Company and its Consolidated
Subsidiaries, and those consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Consolidated Subsidiaries, in each
case in accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such period (subject to normal year-end
audit adjustments);
(b) as soon as available and in any event within 95 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of income, retained earnings and Cash Flow of the Company and its
Consolidated Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Consolidated Subsidiaries as
at the end of such fiscal year, setting forth in each case in comparative form
the corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of those consolidated statements
and balance sheet of the Company, by an unqualified opinion of independent
certified public accountants of recognized national standing, which opinion
shall state that those consolidated financial statements fairly present in all
material respects the consolidated financial condition and results of operations
of the Company and its Consolidated Subsidiaries as at the end of, and for, such
fiscal year in accordance with generally accepted accounting principles,
consistently applied, and (1) a certificate of such accountants stating that, in
making the examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default or the necessity of any reserve
for taxes by the Company and (2) a Reliance Letter from such accountants, and
(ii) in the case of those consolidating statements and balance sheets, by a
certificate of a senior financial officer of the Company, which certificate
shall state that those consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Consolidated Subsidiaries, in each
case in accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year;
(c) as soon as available and in any event within 95 days after the
end of each fiscal year of the Company, the Company's consolidated financial
projections for the next two fiscal years of the Company and its Subsidiaries;
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<PAGE>
(d) as soon as available and in any event within 20 days after the
end of each fiscal month (reflecting the status of each of the following as of
the end of such fiscal month) (i) a Borrowing Base Certificate, (ii) a report
setting forth the amounts outstanding under the Goldman Facility and a schedule
of the collateral securing the Goldman Facility, (iii) a report setting forth
the aging of the Mortgage Receivables and the mortgages securing the REMIC
Certificates, (iv) a report listing each Operator operating or leasing Eligible
Facilities having combined revenues to the Company in excess of fifteen percent
of the Company's total revenues arising from all Eligible Facilities and the
percentage that such Operator operates or leases and (v) a custodial report of
the specific mortgage loans pledged pursuant to the Goldman Facility;
(e) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the Company
shall have filed with the Securities and Exchange Commission or any national
securities exchange;
(f) promptly upon their being mailed or provided to the shareholders
of the Company generally, copies of all financial statements, reports and proxy
statements so mailed or provided;
(g) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred or
exists, a statement signed by a senior financial officer of the Company setting
forth details respecting such event or condition and the action, if any, that
the Company or its ERISA Affiliate proposes to take with respect such event or
condition (and a copy of any report or notice required to be filed with or given
to PBGC by the Company or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued under that Section, with respect to a Plan, as
to which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence of
such event (provided that a failure to meet the minimum funding standard of
--------
Section 412 of the Code or Section 302 of ERISA, including the failure to
make on or before its due date a required installment under Section 412(m)
of the Code or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with Section 412(d)
of the Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
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<PAGE>
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by the Company or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by
the Company or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA which, in either case, requires annual payments exceeding the
amount contributed to such Plan for the Plan year ending prior to such
event;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if the
Company or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of those Sections;
(h) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company, as the case may be, has
taken or proposes to take with respect to such Default; and
(i) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including with respect to any Plan or, to the extent available,
Multiemployer Plan and any
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<PAGE>
reports or other information required to be filed under ERISA) as any Bank or
the Agent may reasonably request.
The Company will furnish to the Agent and the Banks, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the Company (i) to the effect that
no Default has occurred and is continuing (or, if any Default has occurred and
is continuing, describing the same in reasonable detail and describing the
action that the Company has taken or proposes to take with respect to such
Default) and (ii) setting forth in reasonable detail the computations necessary
to determine whether the Company is in compliance with Sections 8.9, 8.10, 8.11,
-------------------------
8.12, 8.13, 8.14, 8.15 and 8.16 as of the end of the respective quarterly fiscal
- -------------------------------
period or fiscal year.
8.2 Litigation. The Company will promptly give to the Agent notice
----------
of all legal, arbitral or investigatory proceedings, and of all proceedings by
or before any Governmental Person, and any material development in respect of
any such proceedings, affecting the Company or any of its Subsidiaries, except
proceedings which, if adversely determined, would not have a Material Adverse
Effect. Without limiting the generality of the foregoing, the Company will give
to the Agent notice of the assertion of any Environmental Claim by any Person
against, or with respect to the activities of, the Company or any of its
Subsidiaries and notice of any alleged violation of or noncompliance with any
Environmental Laws or any Governmental Approvals under Environmental Laws other
than any Environmental Claim or alleged violation which, if adversely
determined, would not have a Material Adverse Effect.
8.3 Existence, Etc. The Company will, and will cause each of its
---------------
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in this
--------
Section 8.3 shall prohibit any transaction expressly permitted under Section
- ----------- -------
8.5);
- ---
(b) comply with the requirements of all applicable Governmental
Rules, if failure to comply with such requirements could have a Material Adverse
Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its Properties
prior to the date on which penalties attach except for any such tax, assessment,
charge or levy the payment of which is being contested in good faith and by
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<PAGE>
proper proceedings and against which adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles, consistently applied; and
(f) permit representatives of any Bank and the Agent, during normal
business hours, to examine, copy and make extracts from its books and records,
to inspect any of its Properties and to discuss its business and affairs with
its officers, all to the extent reasonably requested by such Bank and the Agent.
8.4 Insurance. The Company will, and will cause each of its
---------
Subsidiaries and each of the Operators to, keep insured by financially sound and
reputable insurers all Property of a character usually insured by corporations
engaged in the same or similar business similarly situated against loss or
damage of the kinds and in the amounts customarily insured against by such
corporations and carry such other insurance as is usually carried by such
corporations.
8.5 Prohibition of Fundamental Changes. The Company will not, nor
----------------------------------
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution). The Company will not, nor will it
permit any of its Subsidiaries to, acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person except for
purchases of Facilities, including any Facilities title to which is acquired
through foreclosure or following a default on a Mortgage Receivable, other
Property to be sold or used in the ordinary course of business, Investments
permitted under Section 8.8 and Capital Expenditures permitted under Section
----------- -------
8.14; provided that the Company may acquire (a) with the prior written consent
- ---- --------
of the Agent and the Majority Banks, its own capital stock and (b) the stock of
any Person; provided that (i) the aggregate consideration for such stock does
--------
not exceed $3,500,000 in any fiscal year (provided that the Company's allowance
--------
for the 1996 fiscal year shall deemed to be exhausted), (ii) the Company does
not incur any Indebtedness in connection with such acquisition and (iii) such
Person is in the same line or lines of business as the Company. The Company
will not, nor will it permit any of its Subsidiaries to, convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, any
- 67 -
<PAGE>
material part of its business or Property, whether now owned or hereafter
acquired (including receivables and leasehold interests, but excluding (i)
obsolete or worn-out Property, tools or equipment no longer used or useful in
its business so long as the amount so sold in any single fiscal year by the
Company and its Subsidiaries shall not have a fair market value in excess of
$500,000, (ii) any inventory or other Property sold or disposed of in the
ordinary course of business and on ordinary business terms and (iii) any
transfer of the Company's Mortgage Loans to a Subsidiary of the Company in
connection with a securitization of such Mortgage Loans, any sale of REMIC
Certificates or Retained REMIC Certificates and any transfers of Mortgage Loans
to Goldman pursuant to the Goldman Facility). Notwithstanding the foregoing
provisions of this Section 8.5:
-----------
(a) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or surviving
corporation or (ii) any other such Subsidiary; provided that (x) if any such
--------
transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the
Wholly Owned Subsidiary shall be the continuing or surviving corporation and (y)
that if any such transaction shall be between a Guarantor and a Subsidiary not a
Guarantor, and such Guarantor is not the continuing or surviving corporation,
then the continuing or surviving corporation shall have assumed all of the
obligations of such Guarantor under the Basic Documents; and
(b) any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation or
otherwise) to the Company or a Wholly Owned Subsidiary of the Company; provided
--------
that if any such sale is by a Guarantor to a Subsidiary of the Company not a
Guarantor, then such Subsidiary shall have assumed all of the obligations of
such Guarantor under the Basic Documents.
8.6 Limitation on Liens. The Company will not, nor will it permit
-------------------
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens in existence on the Signing Date and listed in Part B of
Schedule I (excluding, however, following the making of the initial Loans, Liens
- ----------
securing Indebtedness to be repaid with the proceeds of such Loans, as indicated
in Schedule I);
----------
(b) Liens imposed by any Governmental Person for taxes, assessments
or charges not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect to such Lien are
maintained on the books of the Company or the affected Subsidiaries, as the case
may be, in accordance with GAAP;
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<PAGE>
(c) carriers', mechanics', warehousemen's, artisans', service,
suppliers', depositaries', or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days or which are
being contested in good faith and by appropriate proceedings and Liens securing
judgments but only to the extent, for an amount and for a period not resulting
in an Event of Default under Section 9(h);
------------
(d) pledges or deposits in respect of workers' compensation,
unemployment insurance and other social security legislation;
(e) Liens on Mortgage Loans granted pursuant to the Goldman Facility
and Liens on Mortgage Loans granted in connection with any securitization of the
Company's Mortgage Loans;
(f) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Property or minor imperfections in title which, in the aggregate, are not
material in amount, and which do not in any case detract from the value of the
Property subject to such Lien or interfere with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
(h) Liens on Facilities securing Indebtedness incurred with respect to
any such Facility; provided that (i) such Lien attaches solely to such Facility,
--------
(ii) the principal amount of the Indebtedness secured by such Facility does not
exceed 80% of the fair market value of such Facility as reflected in an
Appraisal; and (iii) the Indebtedness secured by such Lien is non-recourse to
the Company and its Subsidiaries; provided that this subclause (iii) shall not
--------
apply to Indebtedness up to $5,000,000 in the aggregate; and
(i) any extension, renewal or replacement of the foregoing; provided,
--------
however, that (i) the Liens permitted under this clause (i) shall not be spread
to cover any additional Indebtedness or Property (other than a substitution of
like Property) and (ii) the terms and conditions of the documentation evidencing
such Liens and underlying Indebtedness must be no less favorable to the Company
and its Subsidiaries, as applicable, (as
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<PAGE>
determined by the Agent and the Majority Banks) as were in effect on the Signing
Date.
8.7 Indebtedness. The Company will not, nor will it permit any of
------------
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Banks under the Basic Documents;
(b) Indebtedness outstanding on the Signing Date and listed in Part A
of Schedule I (excluding, however, following the making of the initial Loans,
----------
the Indebtedness to be repaid with the proceeds of such Loans, as indicated in
Schedule I);
- ----------
(c) Indebtedness of Subsidiaries of the Company to the Company or to
other Subsidiaries of the Company;
(d) Subordinated Indebtedness;
(e) Indebtedness under the Goldman Facility;
(f) Indebtedness secured by Liens permitted by Section 8.6; and
-----------
(g) additional Indebtedness up to but not exceeding $1,000,000 in the
aggregate.
8.8 Investments. The Company will not, nor will it permit any of
-----------
its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the Signing Date and identified in
Schedule III, Part C;
- ------------
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Company and its Subsidiaries in capital stock
of Subsidiaries of the Company to the extent outstanding on the March 31, 1996
financial statements of the Company and its Consolidated Subsidiaries referred
to in Section 7.2 and advances by the Company and its Subsidiaries to
-----------
Subsidiaries of the Company in the ordinary course of business so long as the
net amount of such advances by the Company to any one of its Subsidiaries shall
not exceed $1,000,000 in the aggregate at any one time and the aggregate net
amount of such advances by the Company to its Subsidiaries as a whole shall not
exceed $1,000,000 in the aggregate at any one time;
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<PAGE>
(e) Investments arising from the transfer of mortgages to an LTC
REMIC; provided such transfer is in compliance with Section 8.19;
-------- ------------
(f) Investments arising from the transfer of mortgage portfolios by
the Company to an LTC REMIC, conditioned upon (i) REMIC Certificates being
issued with respect to such mortgage portfolio and the dollar majority of such
REMIC Certificates being sold by such LTC REMIC within seven months of such
transfer and (ii) the Company immediately receiving the Net Available Proceeds
of such sale (which proceeds shall be paid to the Banks in accordance with
Section 2.12(e));
- ---------------
(g) the purchase of Facilities;
(h) additional Investments up to but not exceeding $1,000,000 in the
aggregate; and
(i) Investments arising from the Company entering into Interest Rate
Protection Agreements with respect to Mortgage Receivables; provided that (x)
such Mortgage Receivables represent no more than 100% of the current balance of
all Mortgage Receivables, (y) such Mortgage Receivables are transferred to an
LTC REMIC on a non-recourse basis and subject to Section 8.8(f) within eighteen
--------------
months from the Company entering into such Interest Rate Protection Agreement
and (z) such Interest Rate Protection Agreements are terminated on the earlier
of (1) the date of such sale of the Mortgage Receivables and (2) eighteen months
from the Company's entering into such Interest Rate Protection Agreement.
8.9 Operator Concentration. No one Operator shall operate or lease
----------------------
Eligible Facilities having combined revenues in excess of sixty percent of the
Company's total revenues arising from all Eligible Facilities and no one
Operator shall operate or lease Properties underlying Eligible Mortgage Loans
having combined revenues in excess of sixty percent of the Company's total
revenues arising from all Properties underlying Eligible Mortgage Loans;
provided, however, that if a merger between Operators causes a breach of this
- --------
Section 8.9, the Company shall have 180 days to cure such breach.
- -----------
8.10 Leverage Ratio. The Company will not permit the Leverage Ratio
--------------
to exceed .75 to 1.
8.11 Tangible Net Worth. The Company will not permit its Tangible
------------------
Net Worth to be less than the sum of $160,000,000, plus fifty percent of the Net
----
Available Proceeds of any Equity or Debt Issuance occurring subsequent to June
30, 1994.
- 71 -
<PAGE>
8.12 Senior Funded Debt to Tangible Net Worth. The Company will not
----------------------------------------
permit the ratio of Senior Funded Debt to Tangible Net Worth at any Quarterly
Date to exceed 0.85 to 1.
8.13 Interest Coverage. The Company will not permit the Interest
-----------------
Coverage Ratio to be less than 2.5 to 1 for any fiscal quarter.
8.14 Capital Expenditures. The Company will not permit the
--------------------
aggregate amount of Capital Expenditures by the Company and its Consolidated
Subsidiaries to exceed $2,500,000 in any fiscal year, other than Capital
Expenditures to acquire or improve Facilities owned by the Company; provided,
--------
however, that if the Company does not utilize the full amount of such Capital
Expenditures in any fiscal year, any such unused amounts may be utilized by the
Company in the next fiscal year.
8.15 Mortgage Receivables. No more than ten percent of the Mortgage
--------------------
Receivables and mortgages securing the REMIC Certificates shall be outstanding
in excess of sixty days from the date such receivables were due and owing.
8.16 Goldman Facility.
----------------
(a) The commitment under the Goldman Facility shall not exceed
$84,000,000.
(b) The advance rate under the Goldman Facility shall not be less
than sixty percent.
(c) The Company shall not transfer any collateral to Goldman to
secure the Goldman Facility other than Mortgage Loans with respect to which
Goldman is obligated to make advances under the Goldman Facility.
(d) Without the prior written consent of the Agent and the Majority
Banks, the Company shall not amend, supplement or otherwise modify the Goldman
Facility if such amendment, supplement or modification, in the determination of
the Agent and the Majority Banks, would cause any of the foregoing conditions to
be breached.
8.17 Subordinated Indebtedness. Neither the Company nor any of its
-------------------------
Subsidiaries shall purchase, redeem, retire or otherwise acquire for value, or
set apart any money for a sinking, defeasance or other analogous fund for, the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any Subordinated Indebtedness, except for regularly
scheduled payments of
- 72 -
<PAGE>
principal and interest in respect of such Subordinated Indebtedness required
pursuant to the instruments evidencing such Subordinated Indebtedness; provided
--------
that prior to the occurrence and continuance of an Event of Default, the Company
may redeem Subordinated Indebtedness to the extent specifically required by the
Code to retain its status as a REIT (unless the potential loss of REIT status
arises as a result of action taken by the Company, its Subsidiaries or any of
their Affiliates), conditioned upon the Company delivering to the Agent and the
Majority Banks an opinion of counsel to the Company, in form and substance
reasonably satisfactory to the Agent and the Majority Banks, providing that if
the Company fails to redeem such Subordinated Indebtedness it should cause the
Company to lose its status as a REIT.
8.18 Lines of Business. Neither the Company nor any of its
-----------------
Subsidiaries shall engage to any substantial extent in any line or lines of
business activity other than the business of acquiring and managing Facilities,
making loans to and investments in, and providing management services to,
corporations in the assisted living care industry or making or servicing
Mortgage Loans to owners of Facilities and related activities.
8.19 Transactions with Affiliates. Except as expressly permitted by
----------------------------
this Agreement, the Company will not, directly or indirectly, nor will it permit
any of its Subsidiaries, directly or indirectly, to: (a) make any Investment in
an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including
Guarantees and assumptions of obligations of an Affiliate); provided that (x)
--------
any Affiliate who is an individual may serve as a director, officer or employee
of the Company or any of its Subsidiaries and receive reasonable compensation
for his or her services in such capacity, (y) the Company and its Subsidiaries
may enter into transactions (other than extensions of credit by the Company or
any of its Subsidiaries to an Affiliate) providing for the leasing of Property,
the rendering or receipt of services or the purchase or sale of inventory and
other Property in the ordinary course of business if the monetary or business
consideration arising from such activity would be substantially as advantageous
to the Company and its Subsidiaries as the monetary or business consideration
which would obtain in a comparable transaction with a Person not an Affiliate
and (z) this Section 8.19 shall not apply to any agreements between the Company
------------
and any Subsidiary of the Company executed directly
- 73 -
<PAGE>
in connection with any securitization of the Company's Mortgage Loans.
8.20 Use of Proceeds. The Company will use the proceeds of the
---------------
Loans solely to acquire Facilities or Mortgage Loans, make Mortgage Loans to
purchasers or owners of Facilities and for general corporate purposes (in
compliance with all applicable Governmental Rules); provided that neither the
--------
Agent nor any Bank shall have any responsibility as to the use of any of such
proceeds.
8.21 Certain Obligations Respecting Subsidiaries. The Company will,
-------------------------------------------
and will cause each of its Subsidiaries to, take such action from time to time
as shall be necessary to ensure that each of its Subsidiaries is a Wholly Owned
Subsidiary. The Company will not permit any of its Subsidiaries to enter into,
after the Signing Date, any indenture, agreement, instrument or other
arrangement (other than pursuant to any Basic Document) that, directly or
indirectly, prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the incurrence or
payment of Indebtedness, the granting of Liens, the declaration or payment of
dividends, the making of loans, advances or Investments or the sale, assignment,
transfer or other disposition of Property, other than indentures, agreements or
instruments entered into by a Subsidiary of the Company in connection with any
securitization of the Company's Mortgage Loans. In addition, the Company will
cause each of the Guarantors (including Guarantors created or acquired by the
Company after the Signing Date) to execute the Subsidiary Guarantee, except to
the extent such Guarantor would be precluded by any Governmental Rules from
entering into the Subsidiary Guarantee.
8.22 REIT Status. The Company shall at all times maintain its
-----------
status as a REIT.
8.23 Deposits. The Company and its Subsidiaries shall maintain all
--------
of their savings and operating accounts at Sanwa; provided, however, that the
--------
Company shall be permitted to maintain a bank account at Harris Trust & Savings
Bank in Chicago, Illinois.
8.24 Underwriting Standards. The Company shall not reduce its
----------------------
underwriting standards for the making of Mortgage Loans or the acquisition of
Facilities from those in effect on the Signing Date.
8.25 Maximum Limits on Mortgage Loans and Facility Acquisitions.
----------------------------------------------------------
Subsequent to the date of this Agreement, the Company shall not make any
Mortgage Loan with a principal amount
- 74 -
<PAGE>
in excess of $15,000,000 and shall not purchase any Facility for an amount in
excess of $10,000,000.
8.26 Dividend Payments. Dividend Payments shall not exceed 100% of
-----------------
the sum of the Company's net income, depreciation expense, amortization expense
and non-cash charges; provided that prior to the occurrence and continuance of
--------
an Event of Default under Section 9(a) or Section 9(l), the Company may make any
------------ ------------
Dividend Payment necessary to maintain its status as a REIT. Subsequent to the
occurrence and continuance of an Event of Default under Section 9(a) or Section
------------ -------
9(l), the Company shall not declare or make any Dividend Payment.
- ----
Section 9. Events of Default. If one or more of the following
-----------------
events ("Events of Default") shall occur and be continuing:
-----------------
(a) The Company shall: (i) default in the payment of any principal
of any Loan (including prepayments pursuant to Section 2.12) when due (whether
at stated maturity or at mandatory or optional prepayment); or (ii) default in
the payment of any interest on any Loan or any other Obligation when due and
such default shall have continued unremedied for five or more days; or
(b) The Company or any of its Subsidiaries (the Company and such
Subsidiaries, collectively, the "Relevant Parties") shall default in the payment
----------------
when due of any principal of or interest on any of its other Indebtedness
aggregating $250,000 or more, or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if the effect of such event is to cause such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or, in the case of an
Interest Rate Protection Agreement, to permit the payments owing under such
Interest Rate Protection Agreement to be liquidated; or
(c) Any representation, warranty or certification made or deemed made
in any Basic Document by the Company, or any certificate furnished to any Bank
or the Agent pursuant to the provisions of any Basic Document, shall prove to
have been false or misleading as of the time made or furnished or deemed made or
furnished in any material respect; provided, however, that with respect to
--------
representations contained in Section 7.18, (i) if such representation was not
------------
known by the Company to have been false or misleading at the time it was made
and (ii) such representation or warranty relates to an immaterial Mortgage Loan,
the Company shall have five days to substitute a Mortgage Loan of equal value
- 75 -
<PAGE>
or repay the Loans in the amount required pursuant to Section 2.12(a) as a
---------------
result of such Mortgage Loan no longer constituting an Eligible Mortgage Loan;
or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.1(h), 8.4, 8.5, 8.6, 8.9 through 8.26; or
------------------------------------------------
the Company shall default in the performance of any of its other obligations in
this Agreement or any other Basic Document and such default shall continue
unremedied for a period of 30 days after notice of such default to the Company
by the Agent or any Bank (through the Agent); or
(e) Any Relevant Party shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its
Property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Bankruptcy Code, (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of such Relevant Party or of all or any substantial part of its Property,
or (iii) similar relief in respect of such Relevant Party under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more days; or
an order for relief against any Relevant Party shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $250,000 in the aggregate (exclusive of
- 76 -
<PAGE>
judgment amounts fully covered by insurance where the insurer has admitted
liability in respect of such judgment) or in excess of $500,000 in the aggregate
(regardless of insurance coverage) shall be rendered by a one or more
Governmental Persons having jurisdiction against any Relevant Party and the same
shall not be discharged (or provision shall not be made for such discharge), or
a stay of execution of the relevant judgment shall not be procured, within 30
days from the date of entry of such judgment and such Relevant Party shall not,
within that thirty-day period, or such longer period during which execution of
the same shall have been stayed, appeal from and cause the execution of such
judgment to be stayed during such appeal; or
(i) An event or condition specified in Section 8.1(g) shall occur or
--------------
exist with respect to any Plan or Multiemployer Plan and, as a result of such
event or condition, together with all other such events or conditions, the
Company or any ERISA Affiliate shall incur or shall be reasonably likely to
incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which would constitute a Material Adverse Effect; or
(j) There shall have been asserted against the Company or any of its
Subsidiaries, Environmental Claims based on or arising from the Release of
Hazardous Materials by the Company or any of its Subsidiaries or Affiliates, or
any predecessor in interest of the Company or any of its Subsidiaries or
Affiliates, or relating to any site, facility or vessel owned, operated or
leased by the Company or any of its Subsidiaries or Affiliates, which
Environmental Claims (insofar as they are payable by the Company or any of its
Subsidiaries but after deducting any portion which is reasonably expected to be
paid by any insurance carrier or any other credit worthy Persons jointly and
severally liable for such portion), in the reasonable judgment of the Agent and
the Majority Banks are reasonably likely to be determined adversely to the
Company or any of its Subsidiaries, and the amount of such Environmental Claims
is, singly or in the aggregate, reasonably likely to have a Material Adverse
Effect; or
(k) At any time Andre C. Dimitriadis shall cease to be the Chairman
and Chief Executive Officer of the Company; provided that the Company shall have
--------
120 days to replace Andre C. Dimitriadis with a Chairman and Chief Executive
Officer reasonably acceptable to the Agent and the Majority Banks;
(l) The Company shall fail to maintain its status as a REIT;
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<PAGE>
(m) Any event of default shall occur and be continuing under any of
the Goldman Facility, the Indentures or the documents relating to any of the LTC
REMICs; or
(n) Except for expiration in accordance with its terms, the
Subsidiary Guarantee shall be terminated or shall cease to be in full force and
effect, for whatever reason or any Guarantor shall revoke or seek or purport to
revoke its obligations under the Subsidiary Guarantee.
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to any Relevant Party, (A) the
---------
Agent may and, upon the request of the Majority Banks shall, by notice to the
Company, terminate the Commitments and they shall thereupon terminate, and (B)
the Agent may and, upon the request of the Majority Banks shall, by notice to
the Company, declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other Obligations (including any amounts payable
under Section 5.5) to be forthwith due and payable, whereupon such amounts shall
-----------
be immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company; and (2) in the case of the occurrence of an Event of Default referred
to in clause (f) or (g) of this Section 9 with respect to any Relevant Party,
---------
the Commitments shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other Obligations
(including any amounts payable under Section 5.5 or 5.6) shall automatically
------------------
become immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company.
Section 10. The Agent.
---------
10.1 Appointment, Powers and Immunities. Each Bank hereby
----------------------------------
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Basic Documents with such powers as are specifically
delegated to the Agent by the terms of the Basic Documents, together with such
other powers as are reasonably incidental to such powers. The Agent (which term
as used in this sentence and in Section 11.4 and the first sentence of Section
------------ -------
11.5 shall include reference to its affiliates and its own and its affiliates'
- ----
officers, directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in the Basic Documents, and
shall not by reason of any Basic Document be a trustee for any Bank; (b) shall
not be responsible to the Banks for any recitals, statements, representations or
warranties
- 78 -
<PAGE>
contained in any Basic Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, any Basic
Document, or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of any Basic Document or any other document referred to or
provided for in any Basic Document or for any failure by the Company or any
other Person to perform any of its obligations under any Basic Document; (c)
shall not be required to initiate or conduct any litigation or collection
proceedings under any Basic Document; and (d) shall not be responsible for any
action taken or omitted to be taken by it under any Basic Document or under any
other document or instrument referred to or provided for in any Basic Document
or in connection with any Basic Document, except for its own gross negligence or
willful misconduct. The Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Agent may deem and treat the
payee of any Note as the holder of such Note for all purposes of the Basic
Documents unless and until a notice of the assignment or transfer of such Note
shall have been filed with the Agent, together with the consent of the Company
to such assignment or transfer (to the extent provided in Section 11.6(b)).
---------------
10.2 Reliance by Agent. The Agent shall be entitled to rely upon any
-----------------
certification, notice or other communication (including any made by telephone,
telecopy, telex, telegram or cable) believed by it to be genuine and correct and
to have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Agent. As to any matters not expressly provided for by
any Basic Document, the Agent shall in all cases be fully protected in acting,
or in refraining from acting, under any Basic Document in accordance with
instructions given by the Majority Banks or all of the Banks as is required in
such circumstance, and such instructions of such Banks and any action taken or
failure to act pursuant to such instructions shall be binding on all of the
Banks.
10.3 Defaults. The Agent shall not be deemed to have knowledge or
--------
notice of the occurrence of a Default (other than the nonpayment of principal of
or interest on Loans or of commitment fees) unless the Agent has received notice
from a Bank or the Company specifying such Default and stating that such notice
is a "Notice of Default." In the event that the Agent receives such a notice of
the occurrence of a Default, the Agent shall give prompt notice of such receipt
to the Banks (and shall give each Bank prompt notice of each such nonpayment).
The Agent shall (subject to Section 10.7) take such action with respect to such
------------
Default as shall be directed by the Majority Banks; provided that, unless and
--------
until the Agent shall have received such
- 79 -
<PAGE>
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem
advisable in the best interest of the Majority Banks except to the extent that
this Agreement expressly requires that such action be taken, or not be taken,
only with the consent or upon the authorization of the Majority Banks or all of
the Banks.
10.4 Rights as a Bank. With respect to its Commitments and the
----------------
Loans made by it, Sanwa Bank California (and any successor acting as Agent) in
its capacity as a Bank under the Basic Documents shall have the same rights,
privileges and powers under the Basic Documents as any other Bank and may
exercise the same as though it were not acting as the Agent, and the term "Bank"
or "Banks" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. Sanwa Bank California (and any successor acting as
Agent) and its affiliates may (without having to account for the same to any
Bank) accept deposits from, lend money to, make investments in and generally
engage in any kind of banking, trust or other business with the Company (and any
of its Subsidiaries or Affiliates) as if it were not acting as the Agent, and
Sanwa Bank California and its affiliates may accept fees and other consideration
from the Company for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
10.5 Indemnification. The Banks agree to (i) indemnify the Agent
---------------
(to the extent not reimbursed under Section 11.3, but without limiting the
------------
obligations of the Company under Section 11.3) ratably in accordance with their
------------
respective Commitments, for any and all losses, liabilities, damages or expenses
incurred by the Agent in connection with or by reason of any actual or
threatened investigation, litigation or other proceedings (including any such
investigation, litigation or other proceedings between the Agent and any Bank)
relating to the extensions of credit under, and the transactions contemplated
by, the Basic Documents or any actual or proposed use by the Company or any of
its Subsidiaries of the proceeds of any such extensions of credit, including the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceedings (but excluding any such
losses, liabilities, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) and (ii) not
to assert any claim against the Agent, any Bank or any of their respective
affiliates, directors, officers, employees, attorneys and agents, on any theory
of liability, for special, indirect, consequential or punitive damages arising
out of or otherwise relating to any of the transactions contemplated in any
Basic Document (including the costs and expenses that the
- 80 -
<PAGE>
Company is obligated to pay under Section 11.3, but excluding, unless a Default
------------
has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties under the Basic Documents) or
the enforcement of any of the terms of the Basic Documents or of any such other
documents; provided that no Bank shall be liable for any of the foregoing to the
--------
extent they arise from the gross negligence or willful misconduct of the party
to be indemnified.
10.6 Nonreliance on Agent and Other Banks. Each Bank agrees that
------------------------------------
it has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Company and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Company of any Basic Document or any other document referred to or provided
for in any Basic Document or to inspect the Properties or books of the Company
or any of its Subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent under
this Agreement, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the affairs, financial
condition or business of the Company or any of its Subsidiaries (or any of their
Affiliates) that may come into the possession of the Agent or any of its
affiliates.
10.7 Failure to Act. Except for action expressly required of the
--------------
Agent under the Basic Documents, the Agent shall in all cases be fully justified
in failing or refusing to act under any Basic Document unless it shall receive
further assurances to its satisfaction from the Banks of their indemnification
obligations under Section 10.5 against any and all liability and expense that
------------
may be incurred by it by reason of taking or continuing to take any such action.
10.8 Resignation or Removal of Agent. Subject to the appointment
-------------------------------
and acceptance of a successor Agent as provided below, the Agent may resign at
any time by notice to the Banks and the Company and the Agent may be removed at
any time with or without cause by the Majority Banks. Upon any such resignation
or removal, the Majority Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Majority Banks
and shall have accepted such appointment within 30 days after the retiring
Agent's giving of
- 81 -
<PAGE>
notice of resignation or the Majority Banks' removal of the retiring Agent, then
the retiring Agent may, on behalf of the Banks, appoint a successor Agent, that
shall be a bank which has an office in Los Angeles, California. Upon the
acceptance of any appointment as Agent by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights,
remedies, powers, privileges, duties and obligations of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations, under
the Basic Documents. After any retiring Agent's resignation or removal as Agent,
the provisions of this Section 10 shall continue in effect for its benefit in
----------
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent.
10.9 Agency Fee. So long as the Commitments are in effect and
----------
until payment in full of the principal of and interest on the Loans and all
other Obligations, the Company will pay to the Agent an agency fee pursuant to
the terms of the Fee Letter. Such fee, once paid, shall be nonrefundable.
Section 11. Miscellaneous.
-------------
11.1 Waiver. No failure on the part of the Agent or any Bank to
------
exercise and no delay in exercising, and no course of dealing with respect to,
any right, remedy, power or privilege under this Agreement or any Note shall
operate as a waiver of such right, remedy, power or privilege, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
or any Note preclude any other or further exercise of any such right, remedy,
power or privilege or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided in this
Agreement and the Notes are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.2 Notices. All notices, requests and other communications
-------
provided for in this Agreement and under the Notes (including any modifications
of, or waivers or consents under, this Agreement) shall be given or made in
writing, delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages to this Agreement or Annex I, as
-------
applicable, or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in any
Basic Document, all such communications shall be deemed to have been duly given
when transmitted by telex or telecopier or personally delivered or, in the case
of a mailed notice, upon receipt, in each case given or addressed as set forth
above.
- 82 -
<PAGE>
11.3 Expenses, Etc. The Company agrees to pay or reimburse each of
--------------
the Banks and the Agent for paying: (a) all reasonable out-of-pocket costs and
expenses of the Agent (including the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, counsel to the Agent and the Banks), in connection with
(i) the negotiation, preparation, execution and delivery of the Basic Documents
and the extension of credit under this Agreement, (ii) administration of the
Loans, including ongoing due diligence; provided that prior to the occurrence
--------
and continuance of an Event of Default, such costs shall not exceed $15,000 in
any year and (iii) any modification, supplement or waiver of any of the terms of
any Basic Document; (b) all reasonable costs and expenses of the Banks and the
Agent (including reasonable counsels' fees) in connection with (i) any Default
and any enforcement or collection proceedings (including any bankruptcy,
reorganization, workout or other similar proceeding) resulting from such Default
or in connection with the negotiation of any restructuring or "work-out"
(whether or not consummated) of the obligations of the Company under the Basic
Documents and (ii) the enforcement of this Section 11.3; and (c) all transfer,
------------
stamp, documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of any Basic Document or any other
document referred to in any Basic Document.
The Company hereby agrees (i) to indemnify the Agent and each Bank and
their respective affiliates, directors, officers, employees, attorneys and
agents from, and hold each of them harmless against, any and all losses,
liabilities, damages or expenses incurred by any of them in connection with or
by reason of any actual or threatened investigation, litigation or other
proceedings (including any such investigation, litigation or other proceedings
between the Agent and any Bank) relating to the extensions of credit under, and
the transactions contemplated by, the Basic Documents or any actual or proposed
use by the Company or any of its Subsidiaries of the proceeds of any such
extensions of credit, including the reasonable fees and disbursements of counsel
to the Agent and the Banks incurred in connection with any such investigation,
litigation or other proceedings (but excluding any such losses, liabilities,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified) and (ii) not to assert any claim
against the Agent, any Bank or any of their respective affiliates, directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to any of the transactions contemplated in any Basic Document. It shall
not be a condition to any such indemnification that the Agent or any Bank be a
party to any such investigation, litigation or other proceeding. Without
limiting
- 83 -
<PAGE>
the generality of the foregoing, the Company will indemnify the Agent and each
Bank and their respective affiliates, directors, officers, employees, attorneys
and agents from, and hold each of them harmless against, any losses,
liabilities, damages or expenses described in the preceding provisions (but
excluding, as provided in the preceding provisions, any loss, liability, damage
or expense incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified) arising under any Environmental Law as a result of
the past, present or future operations of the Company or any of its Subsidiaries
(or any predecessor in interest to the Company or any of its Subsidiaries), or
the past, present or future condition of any site, facility or vessel owned,
operated or leased by the Company or any of its Subsidiaries (or any such
predecessor in interest), or any Release or threatened Release of any Hazardous
Materials from any such site or facility, including any such Release or
threatened Release which shall occur during any period when the Agent or any
Bank shall be in possession of any such site, facility or vessel following the
exercise by the Agent or any Bank of any of its rights and remedies under any
Basic Document.
11.4 Amendments, Etc. Except as otherwise expressly provided in
----------------
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Agent and the
Majority Banks, or by the Company and the Agent acting with the consent of the
Majority Banks, and any provision of this Agreement may be waived by the
Majority Banks or by the Agent acting with the consent of the Majority Banks;
provided that: (a) no modification, supplement or waiver shall, unless by an
- --------
instrument signed by all of the Banks or by the Agent acting with the consent of
all of the Banks: (i) increase, or extend the term of any of the Commitments,
or extend the time or waive any requirement for the reduction or termination of
any of the Commitments, (ii) extend the date fixed for the payment of any
Obligation under this Agreement or the Notes, (iii) reduce the amount of any
such payment of principal, (iv) reduce the rate at which interest or any fee is
payable under this Agreement or alter the basis for calculating any other
Obligation, (v) alter the rights or obligations of the Company to prepay Loans,
(vi) alter the terms of this Section 11.4, (vii) modify the definition of the
------------
term "Majority Banks" or modify in any other manner the number or percentage of
the Banks required to make any determinations or to waive any rights under, or
to modify any provision of, this Agreement, or (viii) waive any of the
conditions precedent set forth in Section 6; and (b) any modification or
---------
supplement of Section 10 shall require the consent of the Agent. Any
----------
modification, supplement or waiver shall be for such period and subject to such
conditions as shall be specified in the instrument effecting the same and shall
be binding upon the
- 84 -
<PAGE>
Agent, the Banks and the Company, and any such waiver shall be effective only in
the specific instance and for the purpose for which given.
11.5 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of its parties and their respective successors and
permitted assigns.
11.6 Assignments and Participations.
------------------------------
(a) The Company may not assign any of its rights or obligations under
this Agreement or under the Notes without the prior consent of all of the Banks
and the Agent.
(b) Each Bank may assign all or any part of its Loans, its Notes and
its Commitments (but only with the consent of the Agent, which consent shall not
unreasonably be withheld), together with, in any such case, its related rights,
remedies, powers and privileges under the Basic Documents; provided that (i) any
--------
such partial assignment shall be in an amount at least equal to $5,000,000; and
(ii) each such assignment by a Bank of its Loans, Note or Commitment shall be
made in such manner so that the same portion of its Loans, Note and Commitment
is assigned to the respective assignee. Upon execution and delivery by the
assignee to the Company and the Agent of an instrument in writing pursuant to
which such assignee agrees to become a "Bank" under this Agreement (if not
already a Bank) having the Commitment or Commitments and Loans specified in such
instrument, and upon the consent of the Agent, which consent shall not
unreasonably be withheld, to the extent required above, the assignee shall have,
to the extent of such assignment (unless otherwise provided in such assignment
with the consent of the Agent, which consent shall not unreasonably be
withheld), the obligations, rights and benefits of a Bank under the Basic
Documents holding the Commitment or Commitments and Loans assigned to it (in
addition to the Commitment or Commitments and Loans, if any, theretofore held by
such assignee) and the assigning Bank shall, to the extent of such assignment,
be released from the Commitment or Commitments so assigned. Upon each such
assignment the assigning Bank shall pay the Agent an assignment fee of $2,000.
(c) A Bank may sell or agree to sell to one or more other Persons a
participation in all or any part of its Loans, its Notes, its Commitments and
its related rights, remedies, powers and privileges under the Basic Documents
(but only with the consent of the Agent, which consent shall not unreasonably be
withheld), in which event each purchaser of a participation (a "Participant")
-----------
shall be entitled to the rights and benefits of the provisions of Section 8.1(i)
--------------
with respect to such
- 85 -
<PAGE>
participation as if (and the Company shall be directly obligated to such
Participant under such provisions as if) such Participant were a "Bank" for
purposes of Section 8.1(i), but, except as otherwise provided in Section 4.7(c),
-------------- --------------
shall not have any other rights, remedies, powers or privileges under any Basic
Document (the Participant's rights against such Bank in respect of such
participation to be those set forth in the agreements executed by such Bank in
favor of the Participant). All amounts payable by the Company to any Bank under
Section 5 in respect of such Bank's Loans, Notes and Commitments shall be
- ---------
determined as if such Bank had not sold or agreed to sell any participations in
such Loans, Notes and Commitments, and as if such Bank were funding each of such
Loans, Note and Commitments in the same way that it is funding the portion of
such Loans, Note and Commitments in which no participations have been sold. In
no event shall a Bank that sells a participation agree with the Participant to
take or to refrain from taking any action under any Basic Document except that
such Bank may agree with the Participant that it will not, without the consent
of the Participant, agree to (i) increase or to extend the term, or to extend
the time or to waive any requirement for the reduction or termination, of such
Bank's related Commitment, (ii) extend the date fixed for the payment of
principal of or interest on the related Loan or Loans or any portion of any fee
under this Agreement payable to the Participant, (iii) reduce the amount of any
such payment of principal, (iv) reduce the rate at which interest or any fee
under this Agreement in which such Bank has sold an interest is payable to the
Participant, to a level below the rate at which the Participant is entitled to
receive such interest or fee under its agreements with such Bank, (v) alter the
rights or obligations of the Company to prepay the related Loans or (vi) consent
to any modification, supplement or waiver of any Basic Document to the extent
that the same, under Section 11.4, requires the consent of each Bank.
------------
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.6, any Bank may assign and pledge
------------
all or any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall release the assigning
Bank from its obligations under the Basic Documents.
(e) A Bank may furnish any information concerning the Company or any
of its respective Subsidiaries in the possession of such Bank from time to time
to assignees and participants (including prospective assignees and
participants).
Notwithstanding anything in this Section 11.6 to the contrary, no Bank may
------------
assign or participate any interest in any Obligation or
- 86 -
<PAGE>
Commitment (or any related rights, remedies, powers or privileges) to the
Company or any of its Affiliates or Subsidiaries without the prior written
consent of each Bank.
11.7 Survival. The obligations of the Company under Sections 5.1,
-------- -------------
5.5, 5.6 and 11.3 and the obligations of the Banks under Section 10.5 shall
- ----------------- ------------
survive the repayment of the Obligations and the termination of the Commitments.
In addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit, in or pursuant to any Basic Document shall
survive the making or deemed making of such representation and warranty, and no
Bank shall be deemed to have waived, by reason of making any extension of
credit, any Default which may arise by reason of such representation or warranty
proving to have been false or misleading, notwithstanding that such Bank or the
Agent may have had notice or knowledge or reason to believe that such
representation or warranty was false or misleading at the time such extension of
credit was made.
11.8 Agreements Superseded. This Agreement supersedes all prior
---------------------
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
11.9 Severability. Any provision of this Agreement or the Notes
------------
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or the Notes, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
11.10 Captions. The table of contents and captions and section
--------
headings appearing in this Agreement are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
11.11 Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
11.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
-----------------------------------------
AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF CALIFORNIA. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF
CALIFORNIA AND OF ANY CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA
FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
- 87 -
<PAGE>
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
11.13 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE
--------------------
BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
- 88 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
COMPANY
-------
LTC PROPERTIES, INC.
/s/ James J. Pieczynski
By: ------------------------
Name: James J. Pieczynski
Title: Senior Vice
President
Address for Notices:
LTC Properties, Inc.
300 Esplanade Drive
Suite 1860
Oxnard, California 93030
Attn: Mr. James J. Pieczynski
Telecopier: (805) 981-8663
Telephone: (805) 981-8655
<PAGE>
AGENT
-----
SANWA BANK CALIFORNIA,
as Agent
By: /s/ John C. Hyche
------------------------
Name: John C. Hyche
Title: Vice President
Address for Notices:
Sanwa Bank California, as Agent
601 S. Figueroa Street
8th Floor
Los Angeles, California, 90017
Attn: Mr. John C. Hyche
Telecopier: (213) 896-7282
Telephone: (213) 896-7543
<PAGE>
BANKS
-----
SANWA BANK CALIFORNIA
/s/ John C. Hyche
By: ------------------------
Name: John C. Hyche
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
BANK HAPOALIM, B.M.,
LOS ANGELES BRANCH
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
<PAGE>
BANKS
-----
SANWA BANK CALIFORNIA
By: _______________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
/s/ Yvonne K. Tso
By: -----------------------
Name: YVONNE K. TSO
Title: Vice President
/S/ David M. Lawrence
By: ------------------------
Name: DAVID M. LAWRENCE
Title: Vice President & Manager
BANK HAPOALIM, B.M.,
LOS ANGELES BRANCH
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
<PAGE>
BANKS
-----
SANWA BANK CALIFORNIA
By: _______________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
BANK HAPOALIM, B.M.,
LOS ANGELES BRANCH
/s/ Kalman Schiff
By: -------------------------
Name: KALMAN SCHIFF
Title: FIRST VICE PRESIDENT
/s/ Lori Lake
By: -------------------------
Name: Lori Lake
Title: A V P
<PAGE>
Annex 1
Addresses for Notices and Commitments of the Banks
<TABLE>
<CAPTION>
Bank Commitment
- ---- -----------
<S> <C>
SANWA BANK CALIFORNIA $20,000,000
Address for Notices & Applicable
Lending Office:
Sanwa Bank California
601 S. Figueroa Street
Los Angeles, California 90017
Attn: Mr. John C. Hyche
Telecopier: (213) 896-7282
Telephone: (213) 896-7543
THE SUMITOMO BANK, LIMITED $15,000,000
Address for Notices:
The Sumitomo Bank, Limited
U.S. Commercial Banking Division
800 W. 6th Street, Suite 950
Los Angeles, California 90017
Attn: Ms. Yvonne K. Tso
Telecopier: (213) 623-4629
Telephone: (213) 623-4531
Applicable Lending Office:
The Sumitomo Bank, Limited
233 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
</TABLE>
<PAGE>
BANK HAPOALIM $10,000,000
Address for Notices:
Bank Hapoalim, Los Angeles Branch
6222 Wilshire Boulevard, Suite 200
Los Angeles, CA 90048
Attn: Lori Lake
Telecopier:(213) 937-1439
Telephone:(213) 937-2322
Applicable Lending Office:
Bank Hapoalim, Los Angeles Branch
6222 Wilshire Boulevard, Suite 200
Los Angeles, CA 90048
- 2 -
<PAGE>
SCHEDULE I
Material Agreements and Liens
-----------------------------
[SEE SECTIONS 7.11 AND 8.7(B)]
Part A - Material Agreements
-------------------
1. Whole Mortgage Loans Repurchase Agreement, dated as of May 14, 1993 between
Goldman Sachs Mortgage Company and LTC Properties, Inc.
2. Transfer and Repurchase Agreement, dated as of November 1, 1994, between
LTC Properties, Inc. and LTC REMIC Corporation.
3. Pooling and Servicing Agreement, dated as of November 1, 1994, among LTC
REMIC Corporation, as depositor, Bankers Trust Company, as master servicer,
LTC Properties, Inc., as special servicer and originator and Marine Midland
Bank, as trustee.
4. Transfer and Repurchase Agreement, dated as of July 20, 1993, between LTC
Properties, Inc. and LTC REMIC Corporation.
5. Pooling and Servicing Agreement, dated as of July 20, 1993, among LTC REMIC
Corporation, as depositor, Bankers Trust Company, as master servicer, LTC
Properties, Inc., as special servicer and originator, and Union Bank, as
trustee.
6. Transfer and Repurchase Agreement dated 3/1/96.
7. Pooling and Servicing Agreement dated 3/1/96.
Part B - Liens
-----
The contents of the Title Reports provided to the Agent pursuant to
Section 6.1(g), as listed below, are hereby incorporated by reference./*/
Prairie Manor
- -------------
Owner's Policy, Policy #1401 007521371 D2, Date of Policy: September 23,
1994, Chicago Title Insurance Company
Silvercrest Manor
- -----------------
Commitment to Insure Title, Commitment #C-1953240, Effective Date: May 23,
1994, Attorney's Title Insurance Fund, Inc.
______________________
* The listing of any Lien on this Schedule shall not affect the
Eligibility or lack thereof of any Facility.
<PAGE>
Surrey Place - Bradenton
- ------------------------
Owner's Policy, Policy #85-01-401253, Date of Policy: September 16, 1993,
Lawyers Title Insurance Corporation
Surrey Place - Lecanto
- ----------------------
Owner's Policy, Policy #85-01-401253, Date of Policy: September 16, 1993,
Lawyers Title Insurance Corporation
West Whittier/Berryman
- ----------------------
Policy of Title Insurance, Policy #0-9993-78036, Effective Date: September
15, 1994, Stewart Title Guaranty Company
Windsor Manor
- -------------
Commitment to Insure Title, Commitment #C-1953239, Effective Date: March
2, 1994, Attorney's Title Insurance Fund, Inc.
Lorel Way Care
- --------------
Owner's Policy of Title Insurance, Policy #16351, Date of Policy: January
29, 1993, Commonwealth Land Title Insurance Company
Bay Breeze Nursing
- ------------------
Commitment to Insure Title, Commitment #C-1953242, Effective Date: March
10, 1994, Attorney's Title Insurance Fund, Inc.
The Bluffs Nursing
- ------------------
Commitment to Insure Title, Commitment #C-1953244, Effective Date: March
15, 1994, First American Title Insurance Company of Texas
BMW/Risk
- --------
Owner's Policy of Title Insurance, Serial #426105 0, Date of Policy: March
1, 1994, First American Title Insurance Company of Texas
Casa Arena Blanca
- -----------------
Owner's Policy of Title Insurance, Policy #167-034554, Date of Policy:
March 12, 1993, Commonwealth Land Title Insurance Company
<PAGE>
Casa Maria
- ----------
Owner's Policy, Policy #113-00-766292, Date of Policy: October 30, 1992,
Lawyer's Title Insurance Corporation
Country Place
- -------------
Owner's Policy, Policy #113-00-492287, Date of Policy, September 3, 1993,
Lawyer's Title Insurance Corporation
East Whittier/Berryman
- ----------------------
Policy of Title Insurance, Policy #0-9993-78035, Effective Date: September
15, 1994, Stewart Title Guaranty Company
Mayfair Manor
- -------------
Fund Owner's Policy, Policy #OPM-907241, Effective Date: July 1, 1994,
Attorney's Title Insurance Fund, Inc.
Village of San Destin
- ---------------------
Fund Owner's Policy, Policy #10 1013 106 00000498
Effective Date: February 7, 1995, Chicago Title Insurance Company
<PAGE>
SCHEDULE II
Environmental Matters
---------------------
[SEE SECTION 7.12]
The contents of the Environmental Surveys and Questionnaires provided
to the Agent pursuant to Section 6.1(f), as listed below, are hereby
--------------
incorporated by reference.
1. Casa Maria Health Care/Roswell, New Mexico
2. Casa Arena Blanca/Alamogordo, New Mexico
3 Country Place of Clearwater/Clearwater, Florida
4. Surrey Place-Bradenton/Bradenton, Florida
5. Surrey Place-Lecanto/Lecanto, Florida
6. Oak Park Care Center/Rusk, Texas
7. Bay Breeze Nursing & Retirement/Gulf Breeze, Florida
8. The Bluffs Nursing Home/Pensacola, Florida
9. Mayfair Manor/Pensacola, Florida
10. Silvercrest Manor/Crestview, Florida
11. Windsor Manor/Starke, Florida
12. East Whittier/Whittier, California
13. West Whittier/Whittier, California
14. San Destin/Destin, Florida
15. Prairie Manor/Chicago Heights, Illinois
16. Yuba City Care Center/Yuba City, California
<PAGE>
SCHEDULE III
Subsidiaries and Investments
----------------------------
[SEE SECTIONS 7.13 AND 8.8(D)]
Part A - Subsidiaries
------------
Coronado Corporation
Kansas-LTC Corporation
L-TEX GP, Inc.
L-Tex LP, Inc.
LTC GP I, Inc.
LTC Partners I, L.P.
LTC Partners II, L.P.
LTC Partners III, L.P.
LTC Partners IV, L.P.
Missouri River Corporation
Park Villa Corporation
Rusk-TEX LP, Inc.
Texas-LTC Limited Partnership
Part B - Guarantors
----------
Kansas-LTC Corporation
L-TEX GP, Inc.
L-TEX LP, Inc.
Rusk-TEX LP, INC.
Texas-LTC Limited Partnership
Part C - Investments
-----------
1. LTC Properties, Inc. owns warrants to purchase ten percent (10%) of the
issued and outstanding shares of Consulting Management and Education, Inc.
for a purchase price of $1.00.
2. LTC Properties, Inc. has committed to extend, and is in the process of
documenting, a working capital line of credit to Consulting Management and
Education, Inc. Total maximum amount of the line of credit will be
$300,000, and such line of credit will be secured by accounts receivable.
3. LTC Properties, Inc. has guaranteed to Horizon Healthcare Corporation
repayment of a $200,000 note from Senior Care Properties, Inc. to Horizon.
LTC Properties, Inc.'s guarantee is backed by an indemnification agreement
from Senior Care Properties, Inc. and its principal, Harold Stewart.
<PAGE>
SCHEDULE IV
Litigation
----------
None
Schedule IV to Credit Agreement
-------------------------------
<PAGE>
SCHEDULE V
Appraisals
----------
LOCATION APPRAISAL DATE
Roswell, New Mexico March 1993
New Alamagordo, New Mexico May 1993
Tucson, Arizona April 1993
Clearwater, Florida May 1993
<PAGE>
SCHEDULE VI
Surveys
-------
Set forth below are certain Eligible Facilities, the age of whose surveys
was in excess of two years when initially delivered to the Agent.
1. Roswell, New Mexico
2. New Alamagordo, New Mexico
<PAGE>
EXHIBIT A
[FORM OF NOTE]
PROMISSORY NOTE
$ [_______________] ________, 1996
Los Angeles, California
FOR VALUE RECEIVED, LTC PROPERTIES, INC., a Maryland corporation (the
"Company"), hereby promises to pay to [__________________] (the "Bank"), for
------- ----
the account of its respective Applicable Lending Offices provided for by the
Credit Agreement referred to below, at its principal office located at
[________________________________________________________________
__________________], or to order, the principal sum of [_______________]
Dollars (or such lesser amount as shall equal the aggregate unpaid principal
amount of the Loans made by the Bank to the Company under the Credit Agreement),
in lawful money of the United States of America and in immediately available
funds, on the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of each such Loan,
at such office, in like money and funds, for the period commencing on the date
of such Loan until such Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Loan made by the Bank to the Company, and each payment
made on account of the principal of such Loan, shall be recorded by the Bank on
its books; provided that the failure of the Bank to make any such recordation
--------
shall not affect the obligations of the Company to make a payment when due of
any amount owing under the Credit Agreement or under this Note in respect of the
Loans made by the Bank.
This Note is one of the Notes referred to in the Second Amended and
Restated Revolving Credit Agreement dated as of May 21, 1996 (as modified and
supplemented and in effect from time to time, the "Credit Agreement") between
----------------
the Company, the Banks (including this Bank) and Sanwa Bank California, as
Agent, and evidences Loans made by the Bank under the Credit Agreement.
Capitalized terms used but not defined in this Note have the respective meanings
assigned to them in the Credit Agreement.
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified in the Credit Agreement.
Except as permitted by Section 11.6(b) of the Credit Agreement, this
Note may not be assigned by the Bank to any other Person.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF CALIFORNIA.
LTC PROPERTIES, INC.
By: _______________________
Title:
NOTE
----
- 2 -
<PAGE>
EXHIBIT B-1
FORM OF OPINION OF COUNSEL TO THE COMPANY
<PAGE>
EXHIBIT B-2
FORM OF OPINION OF MARYLAND COUNSEL TO THE COMPANY
<PAGE>
EXHIBIT C
[FORM OF BORROWING BASE CERTIFICATE]
BORROWING BASE CERTIFICATE
[MONTHLY ACCOUNTING PERIOD ENDED __________ _____, 199__]
[______________ ___, 199__]
Reference is made to the Second Amended and Restated Revolving Credit
Agreement dated as of May 21, 1996 (as modified and supplemented and in effect
from time to time, the "Credit Agreement"), between LTC Properties, Inc. (the
----------------
"Company"), the Banks and Sanwa Bank California, as agent for the Banks.
-------
Capitalized terms used in this certificate have the respective meanings assigned
to them in the Credit Agreement.
Pursuant to Section 8.1(d) of the Credit Agreement, the undersigned,
the [PRESIDENT][CHIEF FINANCIAL OFFICER] of the Company, hereby certifies that,
to the best of [HIS][HER] knowledge, attached as Annex 1 is a true and accurate
calculation of the Borrowing Base as at [THE END OF THE MONTHLY ACCOUNTING
PERIOD ENDED] __________ _____, ___ determined in accordance with the
requirements of the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed as of the __________ day of ____________, 199__.
____________________________
Title: [PRESIDENT][CHIEF
FINANCIAL OFFICER]
<PAGE>
Annex 1
LTC PROPERTIES, INC.
BORROWING BASE CERTIFICATE
ELIGIBLE FACILITIES
-------------------
Valued at the Lower of Cost,
Determined in Accordance with GAAP,
and Appraised Value
<TABLE>
<CAPTION>
A B Applicable
- - Value
Appraised Cost (lesser of
LOCATION Value Value A and B)
--------
<S> <C> <C> <C> <C>
1. __________________________ _______ _______ _______
2. __________________________ _______ _______ _______
3. __________________________ _______ _______ _______
4. __________________________ _______ _______ _______
5. __________________________ _______ _______ _______
6. __________________________ _______ _______ _______
7. __________________________ _______ _______ _______
8. __________________________ _______ _______ _______
9. __________________________ _______ _______ _______
10. __________________________ _______ _______ _______
11. __________________________ _______ _______ _______
12. __________________________ _______ _______ _______
13. __________________________ _______ _______ _______
14. __________________________ _______ _______ _______
15. __________________________ _______ _______ _______
</TABLE>
Total Applicable Value of Eligible Facilities _______
Annex 1 to Borrowing Base Certificate
-------------------------------------
<PAGE>
ELIGIBLE MORTGAGE LOANS
-----------------------
<TABLE>
<CAPTION>
Current Face Current
Annual Amount Amount of
Debt of Mortgage
LOCATION OF PROPERTY Service Mortgage Loans
--------------------
Loans
<S> <C> <C> <C> <C>
1. __________________________ _______ _______ _______
2. __________________________ _______ _______ _______
3. __________________________ _______ _______ _______
4. __________________________ _______ _______ _______
5. __________________________ _______ _______ _______
6. __________________________ _______ _______ _______
7. __________________________ _______ _______ _______
8. __________________________ _______ _______ _______
9. __________________________ _______ _______ _______
10. __________________________ _______ _______ _______
11. __________________________ _______ _______ _______
12. __________________________ _______ _______ _______
13. __________________________ _______ _______ _______
14. __________________________ _______ _______ _______
15. __________________________ _______ _______ _______
</TABLE>
Total Applicable Value of Eligible Mortgage Loans _______
Borrowing Base:
50% of Total Applicable Value of Eligible Facilities _______
60% of Total Applicable Value of Eligible Mortgage Loans _______
[LESS LOAN BALANCE PERIOD ENDING _______ __, 199__ _______]
[LESS LOAN BALANCE AS OF ______ __, 199__ _______]
Current Availability
=======
Annex 1 to Borrowing Base Certificate
-------------------------------------
- 2 -
<PAGE>
EXHIBIT D
Form of Reliance Letter
[SANWA BANK LETTERHEAD]
________ __, 1996
ERNST & YOUNG LLP
515 South Flower Street, Suite 1800
Los Angeles, California 90071
Attention: Mr. Alex Chavez
Manager/Audit Healthcare, 17th Floor
Re: LTC PROPERTIES, INC.
--------------------
Dear Sirs:
This Letter ("Letter of Understanding") is being sent to ERNST & YOUNG
LLP ("CPA") with respect to a credit accommodation that SANWA BANK CALIFORNIA
("Bank") on its own behalf and as agent for certain other financial institutions
(collectively, the "Lenders") has granted to LTC PROPERTIES, INC. ("Client
Corp.").
We wish to confirm that the Bank and the Lenders may use CPA's Audit
Report dated January 15, 1996, except Notes 8 and 9, as to which the date is
February 15, 1996, on the financial statements of Client Corp., as of December
31, 1994 and December 31, 1995 ("Current Audit Report") in connection with the
Bank's and the Lenders' decision to extend a Thirty-Five Million Dollar
($35,000,000) unsecured revolving credit facility (the "Credit") to Client Corp.
The Bank and the Lenders may also use CPA's subsequent Audit Reports
on future financial statements of Client Corp. ("Subsequent Audit Reports") in
connection with the Bank's and the Lenders' provision of credit to Client Corp.
so long as there has been no substantial change to the terms of the Credit as
outlined above. Upon the occurrence of a substantial change, CPA may
communicate in writing to the Bank that the Bank and the Lenders should no
longer use the Current and Subsequent Audit Reports with respect to subsequent
credit decisions relating to Client Corp., in which case Bank and the Lenders
shall no longer have the benefit of this Letter of Understanding with respect to
subsequent credit decisions relating to Client Corp.
<PAGE>
The Bank's and the Lenders' consideration of the Current or Subsequent
Audit Reports may or may not have an impact on the Bank's and the Lenders'
decision whether or not to extend the Credit; nor is the Current Audit Report or
any Subsequent Audit Report a representation of creditworthiness. The Bank's
and the Lenders' credit decisions will not be based solely on such audited
financial statements, but will also be based on the exercise of reasonable due
diligence with respect to other potentially relevant factors bearing on Client
Corp.'s creditworthiness as the Bank and each individual Lender believes
appropriate.
Consideration by the Bank and the Lenders of the Current or Subsequent
Audit Reports shall not (a) change CPA's duties to Client Corp. with respect to
the conduct of the audit, (b) change the limitations of the audits as set forth
in the Current or Subsequent Audit Reports, (c) affect the timeliness of the
information contained in the Current or Subsequent Audit Reports and financial
statements, or (d) alter the responsibility of management of Client Corp. for
the financial statements accompanying the Current or Subsequent Audit Reports.
Events may occur after the period covered by any Current or Subsequent
Audit Report which may have an effect on the financial condition of Client Corp.
and the CPA is not responsible under this Letter of Understanding for knowledge
or disclosure of such events.
Other than with respect to the right to use Current or Subsequent
Audit Reports as provided in this Letter of Understanding, it should be
understood that through this Letter of Understanding CPA has not undertaken any
contractual obligations to Bank and the Lenders. For example, CPA has
undertaken no obligation to Bank and the Lenders to issue a report on Client
Corp.'s financial statements now or at any future time or to advise Bank and the
Lenders of any further information CPA learns after issuing a Current or
Subsequent Audit Report. Nor has CPA undertaken to perform an audit for Bank's
and the Lenders' purposes, nor undertaken for Bank and the Lenders any
procedures for the purposes of verifying such items in Client Corp.'s financial
statements as might be material to Bank and the Lenders' transaction with Client
Corp.
In addition, because there are inherent limitations involved in any
audit that is intended to express an opinion on the fairness of the presentation
of the financial statements being reported on, an auditors' report is never
intended to be a warranty or guaranty of any sort, but rather is an opinion,
arrived at in accordance with recognized professional standards, whether the
financial statements as a whole present fairly, in all material respects, in
conformity with generally accepted accounting
RELIANCE LETTER
---------------
- 2 -
<PAGE>
principles, Client Corp.'s financial position as of the balance sheet date and
the results of its operations and its cash flows for the year then ended. Credit
decisions are by their nature complex and multifaceted. CPA's audit should not
be taken to supplant the inquiries and procedures that Bank and the Lenders
should undertake for the purpose of satisfying themselves of Client Corp.'s
credit worthiness or ability to comply or compliance with the provisions of the
Credit. Prudent lenders will perform such due diligence investigations as they
believe are appropriate in the circumstances. Bank and the Lenders' needs may
change in the future and CPA is unable to assess how the Current or any
Subsequent Audit Reports that CPA may issue on behalf of Client Corp. will
compare with such needs. Bank and the Lenders should rely on their own prudence
and diligence in connection with the Credit and any transactions thereunder.
This Letter of Understanding does not authorize the Bank or the
Lenders to use the Current or any Subsequent Audit Report in connection with any
transaction other than the granting of the Credit and transactions thereunder.
The Bank and the Lenders agree to treat the Current and Subsequent Audit Reports
as they do other confidential information and, except as required by law or
regulation, not to disclose any such Audit Report to any other party not
involved in the Credit unless the Audit Report becomes generally available to
the public.
RELIANCE LETTER
---------------
- 3 -
<PAGE>
Kindly confirm your acknowledgement and agreement to this Letter of
Understanding by signing the enclosed copy of this Letter of Understanding and
returning it promptly to the Bank.
SANWA BANK CALIFORNIA on its own behalf and as
agent for certain other institutions
By:
Its:
ACKNOWLEDGED AND AGREED:
LTC PROPERTIES
By:
Its:
ACKNOWLEDGED AND AGREED:
ERNST & YOUNG LLP
By:
Its:
RELIANCE LETTER
---------------
- 4 -
<PAGE>
EXHIBIT E
Form of Subsidiary Guarantee
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of ________ __,
---------
199, is made between [GURANTOR] and [GUARANTOR] (the "Guarantors") and Sanwa
----------
Bank California, as the agent (in such capacity, the "Agent") for the Banks
-----
identified in the Credit Agreement referred to below.
The Second Amended and Restated Credit Agreement, dated as of May 21,
1996 (as amended, supplemented or modified, the "Credit Agreement") between LTC
----------------
Properties, Inc. (the "Company"), the lenders identified in the Credit Agreement
-------
(the "Banks") and the Agent provides, subject to its terms and conditions, for
-----
certain extensions of credit to the Company. It is a condition to the
obligations of the Agent and the Banks under the Credit Agreement that each
Guarantor shall have executed and delivered this Guarantee.
To induce the Banks to enter into, and to extend credit under, the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantors have agreed jointly
and severally to guarantee the Guaranteed Obligations upon the terms and
conditions of this Guarantee. Accordingly, the Guarantors agree with the Agent
as follows:
Section 1. Definitions.
-----------
1.01 Definitions. Unless otherwise defined, all capitalized terms
-----------
used in this Guarantee that are defined in the Credit Agreement (including those
terms incorporated by reference) shall have the respective meanings assigned to
them in the Credit Agreement. In addition, the following terms shall have the
following meanings under this Guarantee:
"Basic Documents" shall have the meaning assigned to the term "Basic
---------------
Documents" in the Credit Agreement and shall also mean any other agreement (oral
or written), instrument, document or book entry evidencing, creating, securing
or otherwise relating to all or any part of the Guaranteed Obligations referred
to in clause (b) of the definition of that term that are intended by the Company
and the Agent and Banks or any such Person individually (as the case may be) to
be guaranteed by this Guarantee.
"Guaranteed Obligations" shall mean (a) any and all Obligations and
----------------------
any and all obligations of the Company for the performance by it of its
agreements, covenants and undertakings
<PAGE>
under or in respect of the Basic Documents referred to in the Credit Agreement,
it being acknowledged by each Guarantor that extensions of credit under the
Credit Agreement are available on a revolving basis, and (b) any and all other
obligations of the Company for the payment of all amounts, liabilities and
indebtedness (whether for principal, interest, reimbursement, fees, charge,
indemnification or otherwise) now or in the future owed to the Agent, the Banks
or any such Person individually, and for the performance by the Company of its
agreements, covenants and undertakings, under or in respect of any and all the
Basic Documents, it being acknowledged by each Guarantor that such other
obligations may arise or be created, incurred or assumed at any time and from
time to time and in such manner and such circumstances and with such terms and
provisions as the Company and the Agent and the Banks or any such Person
individually may agree without notice or demand of any kind or nature whatsoever
to any Guarantor.
1.02 Interpretation. In this Guarantee, unless otherwise indicated,
--------------
the singular includes the plural and plural the singular; words importing any
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Guarantee; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions or modifications by
the terms of this Agreement); and references to Persons include their respective
successors and permitted assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
Section 2. The Guarantee
-------------
2.01 Guarantee. Subject to the limitation set forth in Section
---------
2.08, the Guarantors hereby jointly and severally guarantee to each Bank and the
Agent the timely payment in full when due (whether at stated maturity, by
acceleration or otherwise) and performance of the Guaranteed Obligations in each
case strictly in accordance with their terms. The Guarantors hereby further
jointly and severally agree that if the Company shall fail to pay in full when
due (whether at stated maturity, by acceleration or otherwise) all or any part
of the Guaranteed Obligations, the Guarantors will immediately pay the same,
without any demand or notice whatsoever,
FORM OF SUBSIDIARY GUARANTEE
----------------------------
- 2 -
<PAGE>
and that in the case of any extension of time of payment or renewal of all or
any part of the Guaranteed Obligations, the same will be timely paid in full
when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal. This Guarantee is
irrevocable and unconditional in nature and is made with respect to any
Guaranteed Obligations now existing or in the future arising. The Guarantors'
liability under this Guarantee shall continue until full satisfaction of all
Guaranteed Obligations. This Guarantee is a guarantee of due and punctual
payment and performance and is not merely a guarantee of collection.
2.02 Acknowledgements, Waivers and Consents. Each Guarantor
--------------------------------------
acknowledges that the obligations undertaken by it under this Guarantee involve
the guarantee of obligations of Persons other than such Guarantor and that such
obligations of such Guarantor are absolute, irrevocable and unconditional under
any and all circumstances. In full recognition and in furtherance of the
foregoing, each Guarantor agrees that:
(a) Without affecting the enforceability or effectiveness of this
Guarantee in accordance with its terms and without affecting, limiting,
reducing, discharging or terminating the liability of such Guarantor, or the
rights, remedies, powers and privileges of the Agent and the Banks under this
Guarantee, the Agent and the Banks may, at any time and from time to time and
without notice or demand of any kind or nature whatsoever:
(i) amend, supplement, modify, extend, renew, waive,
accelerate or otherwise change the time for payment or performance of, or the
terms of, all or any part of the Guaranteed Obligations (including any increase
or decrease in the rate or rates of interest on all or any part of the
Guaranteed Obligations);
(ii) amend, supplement, modify, extend, renew, waive or
otherwise change, or enter into or give, any Basic Document or any agreement,
security document, guarantee, approval, consent or other instrument with respect
to all or any part of the Guaranteed Obligations, any Basic Document or any such
other instrument or any term or provision of the foregoing;
(iii) accept or enter into new or additional agreements,
security documents, guarantees (including letters of credit) or other
instruments in addition to, in exchange for or relative to any Basic Document,
all or any part of the Guaranteed Obligations or any collateral now or in the
future serving as security for the Guaranteed Obligations;
FORM OF SUBSIDIARY GUARANTEE
----------------------------
- 3 -
<PAGE>
(iv) accept or receive (including from any other
Guarantor) partial payments or performance on the Guaranteed Obligations
(whether as a result of the exercise of any right, remedy, power or privilege or
otherwise);
(v) accept, receive and hold any additional collateral
for all or any part of the Guaranteed Obligations (including from any other
Guarantor);
(vi) release, reconvey, terminate, waive, abandon, allow
to lapse or expire, fail to perfect, subordinate, exchange, substitute,
transfer, foreclose upon or enforce any collateral, security documents or
guarantees (including letters of credit or the obligations of any other
Guarantor) for or relative to all or any part of the Guaranteed Obligations;
(vii) apply any collateral or the proceeds of any
collateral or guarantee (including any letter of credit or the obligations of
any other Guarantor) to all or any part of the Guaranteed Obligations in such
manner and extent as the Agent or any Bank may in its discretion determine;
(viii) release any Person (including any other Guarantor)
from any personal liability with respect to all or any part of the Guaranteed
Obligations;
(ix) settle, compromise, release, liquidate or enforce
upon such terms and in such manner as the Agent or the Banks may determine or as
applicable law may dictate all or any part of the Guaranteed Obligations or any
collateral on or guarantee of (including any letter of credit issued with
respect to) all or any part of the Guaranteed Obligations (including with any
other Guarantor);
(x) consent to the merger or consolidation of, the sale
of substantial assets by, or other restructuring or termination of the corporate
existence of the Company or any other Person (including any other Guarantor);
(xi) proceed against the Company, such or any other
Guarantor or any other guarantor of (including any issuer of any letter of
credit issued with respect to) all or any part of the Guaranteed Obligations or
any collateral provided by any Person and exercise the rights, remedies, powers
and privileges of the Agent and the Banks under the Basic Documents or otherwise
in such order and such manner as the Agent or any Bank may, in its discretion,
determine, without any necessity to proceed upon or against or exhaust any
collateral, right, remedy, power or privilege before proceeding to call upon or
otherwise enforce this Guarantee as to any Guarantor;
FORM OF SUBSIDIARY GUARANTEE
----------------------------
- 4 -
<PAGE>
(xii) foreclose upon any deed of trust, mortgage or other
instrument creating or granting liens on any interest in real property by
judicial or nonjudicial sale or by deed in lieu of foreclosure, bid any amount
or make no bid in any foreclosure sale or make any other election of remedies
with respect to such liens or exercise any right of set-off;
(xiii) obtain the appointment of a receiver with respect to
any collateral for all or any part of the Guaranteed Obligations and apply the
proceeds of such receivership as the Agent or any Bank may in its discretion
determine (it being agreed that nothing in this clause (xiii) shall be deemed to
make the Agent or any Bank a party in possession in contemplation of law, except
at its option);
(xiv) enter into such other transactions or business
dealings with any other Guarantor, the Company, any Subsidiary or Affiliate of
the Company or any other guarantor of all or any part of the Guaranteed
Obligations as the Agent or any Bank may desire; and
(xv) do all or any combination of the actions set forth in
this Section 2.02(a).
(b) The enforceability and effectiveness of this Guarantee and
the liability of the Guarantors, and the rights, remedies, powers and privileges
of the Agent and the Banks, under this Guarantee shall not be affected, limited,
reduced, discharged or terminated, and each Guarantor hereby expressly waives to
the fullest extent permitted by law any defense now or in the future arising, by
reason of:
(i) the illegality, invalidity or unenforceability of all or
any part of the Guaranteed Obligations, any Basic Document or any agreement,
security document, guarantee or other instrument relative to all or any part of
the Guaranteed Obligations;
(ii) any disability or other defense with respect to all
of any part of the Guaranteed Obligations of the Company, any other Guarantor or
any other guarantor of all or any part of the Guaranteed Obligations (including
any issuer of any letters of credit), including the effect of any statute of
limitations that may bar the enforcement of all or any part of the Guaranteed
Obligations or the obligations of any such other guarantor;
(iii) the illegality, invalidity or unenforceability of any
security or guarantee (including any letter of credit) for all or any part of
the Guaranteed Obligations or the
FORM OF SUBSIDIARY GUARANTEE
----------------------------
- 5 -
<PAGE>
lack of perfection or continuing perfection or failure of the priority of any
lien on any collateral for all or any part of the Guaranteed Obligations;
(iv) the cessation, for any cause whatsoever, of the
liability of the Company, any other Guarantor or any other guarantor of all or
any part of the Guaranteed Obligations (other than, subject to Section 2.05, by
reason of the full payment and performance of all Guaranteed Obligations);
(v) any failure of the Agent or any Bank to marshal assets in
favor of the Company or any other Person (including any other Guarantor), to
exhaust any collateral for all or any part of the Guaranteed Obligations, to
pursue or exhaust any right, remedy, power or privilege it may have against any
other Guarantor, the Company, any other guarantor of all or any part of the
Guaranteed Obligations (including any issuer of any letter of credit) or any
other Person or to take any action whatsoever to mitigate or reduce such or any
other Guarantor's liability under this Guarantee, neither the Agent nor any Bank
being under any obligation to take any such action notwithstanding the fact that
all or any part of the Guaranteed Obligations may be due and payable and that
the Company may be in default of its obligations under any Basic Document;
(vi) any failure of the Agent or any Bank to give notice
of sale or other disposition of any collateral (including any notice of any
judicial or nonjudicial foreclosure or sale of any interest in real property
serving as collateral for all or any part of the Guaranteed Obligations) for all
or any part of the Guaranteed Obligations to the Company, any Guarantor or any
other Person or any defect in, or any failure by any Guarantor or any other
Person to receive, any notice that may be given in connection with any sale or
disposition of any collateral;
(vii) any failure of the Agent or any Bank to comply with
applicable laws in connection with the sale or other disposition of any
collateral for all or any part of the Guaranteed Obligations;
(viii) any judicial or nonjudicial foreclosure or sale of,
or other election of remedies with respect to, any interest in real property or
other collateral serving as security for all or any part of the Guaranteed
Obligations, even though such foreclosure, sale or election of remedies may
impair the subrogation rights of any Guarantor or may preclude any Guarantor
from obtaining reimbursement, contribution, indemnification or other recovery
from any other Guarantor, the Company, any other guarantor or any other Person
and even though the Company may not,
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as a result of such foreclosure, sale or election of remedies, be liable for any
deficiency;
(ix) any benefits the Company, any Guarantor or any other
guarantor may otherwise derive from Section 580a, 580b, 580d or 726 of the
California Code of Civil Procedure or any comparable provisions of the laws of
any other jurisdiction;
(x) any act or omission of the Agent, any Bank or any other
Person that directly or indirectly results in or aids the discharge or release
of the Company or any other Guarantor of all or any part of the Guaranteed
Obligations or any security or guarantee (including any letter of credit) for
all or any part of the Guaranteed Obligations by operation of law or otherwise;
(xi) any law which provides that the obligation of a
surety or guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety's or guarantor's
obligation in proportion to the principal obligation;
(xii) the possibility that the obligations of the Company
to the Agent and the Banks may at any time and from time to time exceed the
aggregate liability of the Guarantors under this Guarantee;
(xiii) any counterclaim, set-off or other claim which the
Company or any other Guarantor has or alleges to have with respect to all or any
part of the Guaranteed Obligations;
(xiv) any failure of the Agent or any Bank to file or
enforce a claim in any bankruptcy or other proceeding with respect to any
Person;
(xv) the election by the Agent or any Bank, in any
bankruptcy proceeding of any Person, of the application or nonapplication of
Section 1111(b)(2) of the Bankruptcy Code;
(xvi) any extension of credit or the grant of any Lien
under Section 364 of the Bankruptcy Code;
(xvii) any use of cash collateral under Section 363 of the
Bankruptcy Code;
(xviii) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person;
(xix) the avoidance of any Lien in favor of the Agent or
any Bank for any reason;
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(xx) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against any Person, including any discharge of, or bar or stay
against collecting, all or any part of the Guaranteed Obligations (or any
interest on all or any part of the Guaranteed Obligations) in or as a result of
any such proceeding;
(xxi) any action taken by the Agent or any Bank that is
authorized by this Section 2.02 or otherwise in this Guarantee or by any other
provision of any Basic Document or any omission to take any such action; or
(xxii) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, including by reason of Sections 2809, 2810, 2819, 2839, 2845, 2850,
2899, 3275 and 3433 of the California Civil Code, and any future judicial
decisions or legislation or of any comparable provisions of the laws of any
other jurisdiction.
(c) Each Guarantor expressly waives, for the benefit of the Agent
and the Banks, all set-offs and counterclaims and all presentments, demands for
payment or performance, notices of nonpayment or nonperformance, protests,
notices of protest, notices of dishonor and all other notices or demands of any
kind or nature whatsoever with respect to the Guaranteed Obligations, and all
notices of acceptance of this Guarantee or of the existence, creation, incurring
or assumption of new or additional Guaranteed Obligations. Each Guarantor
further expressly waives the benefit of any and all statutes of limitation and
any and all laws providing for the exemption of property from execution or for
valuation and appraisal upon foreclosure, to the maximum extent permitted by
applicable law.
(d) Each Guarantor represents and warrants to the Agent and the
Banks that it has established adequate means of obtaining financial and other
information pertaining to the business, operations and condition (financial and
otherwise) of the Company and its properties on a continuing basis and that such
Guarantor is now and will in the future remain fully familiar with the business,
operations and condition (financial and otherwise) of the Company and its
properties. Each Guarantor further represents and warrants that it has reviewed
and approved each of the Basic Documents and is fully familiar with the
transaction contemplated by the Basic Documents and that it will in the future
remain fully familiar with such transaction and with any new Basic Documents and
the transactions contemplated by such Basic Documents. Each Guarantor hereby
expressly waives and relinquishes any duty on the part of the Agent or the Banks
(should any such duty exist) to
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disclose to such or any other Guarantor any matter of fact or other information
related to the business, operations or condition (financial or otherwise) of the
Company or its properties or to any Basic Document or the transactions
undertaken pursuant to, or contemplated by, any such Basic Document, whether now
or in the future known by the Agent or any Bank.
(e) Each Guarantor intends that its rights and obligations shall
be those expressly set forth in this Guarantee and that its obligations shall
not be affected, limited, reduced, discharged or terminated by reason of any
principles or provisions of law which conflict with the terms of this Guarantee.
2.03 Understanding With Respect to Waivers and Consents. Each
--------------------------------------------------
Guarantor warrants and agrees that each of the waivers and consents set forth in
this Guarantee is made voluntarily and unconditionally after consultation with
outside legal counsel and with full knowledge of its significance and
consequences, with the understanding that events giving rise to any defense or
right waived may diminish, destroy or otherwise adversely affect rights which
such or any other Guarantor otherwise may have against the Company, the Agent,
any Bank or any other Person or against any collateral. If, notwithstanding the
intent of the parties that the terms of this Guarantee shall control in any and
all circumstances, any such waivers or consents are determined to be
unenforceable under applicable law, such waivers and consents shall be effective
to the maximum extent permitted by law.
2.04 Subrogation. Each Guarantor hereby waives, until the payment
-----------
and satisfaction in full of all of the Guaranteed Obligations and the expiration
and termination of the Commitments of the Banks, under the Credit Agreement, any
right, remedy, power or privilege, such as any right of subrogation,
contribution or indemnity or related remedy, power or privilege, arising
(whether by contract or operation of law, including under the Bankruptcy Code)
against the Company, any other Guarantor or any other guarantor of all or any
part of the Guaranteed Obligations or any collateral for all or any part of the
Guaranteed Obligations by reason of any payment or other performance pursuant to
the provisions of this Guarantee and, if any amount shall be paid to such
Guarantor on account of such rights, remedies, powers or privileges, it shall
hold such amount in trust for the benefit of, and pay the same over to, the
Agent (for the benefit of the Banks) on account of the Guaranteed Obligations.
Each Guarantor understands that the exercise by the Agent or any Bank of any
right, remedy, power or privilege that it may have under the Basic Documents,
any agreement, security document, guarantee or other instrument relative to all
or any part of the Guaranteed Obligations or otherwise may affect or eliminate
such or any other Guarantor's right of subrogation or similar recovery against
the
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Company, any other Guarantor, any other guarantors or any collateral and that
such and the other Guarantors may therefore incur partially or totally
nonreimbursable liability under this Guarantee. Nevertheless, each Guarantor
hereby authorizes and empowers the Agent and the Banks to exercise, in its or
their sole discretion, any combination of such rights, remedies, powers and
privileges.
2.04 Reinstatement. The obligations of each Guarantor under this
-------------
Guarantee shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company, any other Guarantor or any
other Person or any other application of funds (including the proceeds of any
collateral for all or any part of the Guaranteed Obligations) in respect of all
or any part of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of such Guaranteed Obligations, whether as a result of
any proceedings in bankruptcy, reorganization or otherwise and Guarantors
jointly and severally agree that it will indemnify the Agent and each Bank on
demand for all reasonable costs and expenses (including fees and expenses of
counsel) incurred by the Agent or such Bank in connection with such rescission
or restoration.
2.05 Remedies. The Guarantors hereby jointly and severally agree
--------
that, between each of them and the Banks, the obligations of the Company under
the Credit Agreement and the other Basic Documents may be declared to be
forthwith (or may become automatically) due and payable as provided in Section 9
of the Credit Agreement for purposes of Section 2.01 notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
becoming due and payable as against the Company) and that, in the event of such
declaration (or such obligation being deemed due and payable), such obligations
(whether or not due and payable by the Company) shall forthwith become due and
payable for purposes of Section 2.01.
2.06 Separate Action. The Agent may bring and prosecute a separate
---------------
action or actions against any Guarantor whether or not any other Guarantor, the
Company, any other guarantor or any other Person is joined in any such action or
a separate action or actions are brought against any other Guarantor, the
Company, any other guarantor, any other Person, or any collateral for all or any
part of the Guaranteed Obligations. The obligations of each Guarantor under, and
the effectiveness of, this Guarantee are not conditioned upon the existence or
continuation of any other guarantee (including any letter of credit) of all or
any part of the Guaranteed Obligations.
2.07 Subordination of Indebtedness of the Company; Security Interest.
---------------------------------------------------------------
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(a) Each Guarantor agrees that any indebtedness of the Company now
or in the future owed to such Guarantor is hereby subordinated to the Guaranteed
Obligations. If the Agent so requests, any such indebtedness shall be
collected, enforced and received by such Guarantor as trustee for the Agent and
shall be paid over to the Agent (for the benefit of the Banks) in kind on
account of the Guaranteed Obligations. If, after the Agent's request, such
Guarantor fails to collect or enforce any such indebtedness or to pay the
proceeds of such indebtedness to the Agent, the Agent as such Guarantor's
attorney-in-fact may do such acts and sign such documents in such Guarantor's
name and on such Guarantor's behalf as the Agent considers necessary or
desirable to effect such collection, enforcement or payment, the Agent being
hereby appointed such Guarantor's attorney-in-fact for such purpose.
(b) Each Guarantor hereby grants to the Agent (for the benefit of
the Banks) a security interest in any indebtedness and in any personal property
of the Company in which such Guarantor now has or in the future acquires any
right, title or interest. Each Guarantor agrees that such security interest
shall be additional security for the Guaranteed Obligations and shall be
superior to any right of such Guarantor in such property until the Guaranteed
Obligations have been fully satisfied and performed.
2.08 Limitation on Guarantee. In any proceeding involving any state
-----------------------
corporate law or any state or federal bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the obligations of the
Guarantors under Section 2.01 would otherwise, taking into account the
provisions of Section 2.09, be held or determined to be void, invalid or
unenforceable or if the claims of the Banks in respect of such obligations would
be subordinated to the claims of any other creditors on account of the
Guarantors' liability under Section 2.01, then, notwithstanding any other
provision of this Guarantee to the contrary, the amount of such liability shall,
without any further action by the Guarantors, any Bank, the Agent or any other
Person, be automatically limited and reduced to the highest amount which is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
2.09 Rights of Contribution. The Guarantors hereby agree, as
----------------------
between themselves, that if any Guarantor (an "Excess Funding Guarantor") shall
------------------------
pay a portion of the Guaranteed Obligations in excess of the Excess Funding
Guarantor's Pro Rata Share (as defined below) of the Guaranteed Obligations, the
other Guarantors shall, on demand (but subject to the next sentence), pay to the
Excess Funding Guarantor an amount equal to their respective
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Pro Rata Shares of such Excess Funding Guarantor's payment. The payment
obligations of any Guarantor under this Section 2.09 shall be subordinate and
subject in right of payment to the prior payment in full and in cash of the
obligations of such Guarantor under the other provision of this Section 2, and
such Excess Funding Guarantor shall not exercise any right, remedy, power or
privilege with respect to such excess until payment and satisfaction in full of
all such obligations. For the purposes of this Section 2.09, "Pro Rata Shares"
---------------
shall mean, for any Guarantor, a percentage equal to the percentage that such
Guarantor's Tangible Net Worth as at March 31, 1996 (as reflected on the balance
sheet as at that date referred to in Section 3.02) is of the aggregate Tangible
Net Worth of all of the Guarantors as so reflected as at such date.
2.10 Revocation. To the fullest extent permitted by law, each
----------
Guarantor hereby waives all right of revocation with respect to the Guaranteed
Obligations.
2.11 Right to Offset Balances. Each Guarantor agrees that, in
------------------------
addition to (and without any limitation of) any right of set-off, banker's lien
or counterclaim a Bank may otherwise have, each Bank shall be entitled, at its
option but only with the prior written consent of the Majority Banks or the
Agent, to offset balances held by it for the account of any Guarantor at any of
its offices, in Dollars or in any other currency, against any Obligations of the
Company to such Bank that are not paid when due (regardless of whether such
balances are then due to such Guarantor). Any Bank so entitled shall promptly
notify such Guarantor and the Agent of any offset effected by it, provided that
--------
such Bank's failure to give such notice shall not affect the validity of such
offset.
Section 3. Representations of the Guarantors. As of the Signing Date
---------------------------------
and as of the date of each extension of credit by the Banks, each Guarantor
represents to the Agent and the Banks that:
3.01 Corporate Existence. Each of such Guarantor and its
-------------------
Subsidiaries: (i) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has all requisite corporate or other power, and has all
material Governmental Approvals, necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (iii) is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where the failure so to qualify
would have a Material Adverse Effect.
3.02 Financial Condition. The consolidated and consolidating balance
-------------------
sheets of the Company and the Guarantors as
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of March 31, 1996 are complete and correct and fairly present the financial
condition of such entities as at such date.
3.03 Litigation. Except as disclosed to the Banks in writing prior
----------
to the Signing Date, there are no legal or arbitral proceedings by or before any
Governmental Person, now pending or (to the knowledge of such Guarantor)
threatened against such Guarantor or its Property or any of its Subsidiaries or
any of their Property that, if adversely determined, could have a Material
Adverse Effect.
3.04 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions contemplated by this Guarantee
or compliance with the terms and provisions of this Guarantee will conflict with
or result in a breach of, or require any consent under, the corporate charter or
by-laws of such Guarantor, or any applicable Governmental Rule, or any agreement
or instrument to which such Guarantor or any of its Subsidiaries is a party or
by which any of them is bound or to which any of them is subject, or constitute
a default under, or result in the acceleration or mandatory prepayment of, any
Indebtedness evidenced by, or termination of, any such agreement or instrument,
or result in the creation or imposition of any Lien upon any Property of such
Guarantor or any of its Subsidiaries pursuant to the terms of any such agreement
or instrument.
3.05 Corporate Action. Such Guarantor has all necessary corporate
----------------
power and authority to execute, deliver and perform its obligations under this
Guarantee; the execution, delivery and performance by such Guarantor of this
Guarantee have been duly authorized by all necessary corporate action on its
part (including any required shareholder approvals); and this Guarantee has been
duly and validly executed and delivered by such Guarantor and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
3.06 Approvals. No Governmental Approvals are necessary for the
---------
execution, delivery or performance by such Guarantor of this Guarantee or for
the legality, validity or enforceability of this Guarantee.
3.07 ERISA. Such Guarantor and its ERISA Affiliates have fulfilled
-----
their respective obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and are in compliance with all material
respects with the presently applicable provisions of ERISA and the Code, and
have not incurred any liability to the PBGC or any Plan or Multiemployer Plan
(other than to make contributions in the ordinary course of business).
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3.08 Taxes. Such Guarantor and its Subsidiaries have filed all
-----
United States Federal income tax returns and all other material tax returns that
are required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by such Guarantor or any of its
Subsidiaries and all other related penalties and charges. The charges, accruals
and reserves on the books of such Guarantor and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of such Guarantor,
adequate. Such Guarantor has not given or been requested to give a waiver of
the statute of limitations relating to the payment of any Federal or other
taxes.
3.09 Certain Regulations. Such Guarantor is not (a) an "investment
-------------------
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, (b) a "holding company," or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935
or (c) subject to any other Governmental Rule restricting its ability to incur
Indebtedness or to issue guarantees.
Section 4. Covenants of the Guarantors. So long as this Guarantee is
---------------------------
in effect and until all of the Guaranteed Obligations have been paid in full and
the expiration and termination of the Commitments of the Bank under the Credit
Agreement, each Guarantor agrees as follows:
4.01 Financial Statements. Such Guarantor shall deliver to each of
--------------------
the Banks:
(a) consolidated and consolidating statements of income, retained
earnings and changes in financial position (or of cash flow, as the case may be)
of such Guarantor and its Consolidated Subsidiaries and copies of all
registration statements and regular periodic reports, if any, that such
Guarantor shall have filed with the Securities and Exchange Commission, any
comparable Governmental Person of any State or any national securities exchange
each in accordance with the Credit Agreement;
(b) as soon as possible, and in any event within 10 days after
such Guarantor knows or has reason to know that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan have occurred or
exist, a statement signed by a senior financial officer of such Guarantor
setting forth details respecting such event or condition and the action, if any,
that such Guarantor or its ERISA Affiliate proposes to take with respect to such
event or condition (and a copy of any report or notice required to be filed with
or given to PBGC by such Guarantor or an ERISA Affiliate with respect to such
event or condition):
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(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued under ERISA, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section 412 of
the Code or Section 302 of ERISA shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by such Guarantor or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC with
respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by such Guarantor
or an ERISA Affiliate under Section 4201 or 4204 of ERISA from a Multiemployer
Plan, or the receipt by such Guarantor or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA; and
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against such Guarantor or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
(c) promptly after such Guarantor knows or has reason to know
that any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that such Guarantor has taken and proposes
to take with respect to such Default; and
(d) from time to time such other information regarding the
business, affairs or financial condition of such Guarantor or any of its
Subsidiaries (including any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA) as any Bank or the Agent may
reasonably request.
4.02 Litigation. Such Guarantor will promptly give to each Bank
----------
notice of all legal or arbitral proceedings by or before
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any Governmental Person affecting such Guarantor or any of its Subsidiaries,
except proceedings that, if adversely determined, would not have a Material
Adverse Effect.
4.03 Corporate Existence, Etc. Such Guarantor will, and will cause
-------------------------
each of its Subsidiaries to: preserve and maintain its corporate existence and
all of its material rights, privileges and franchises; comply with the
requirements of all applicable Governmental Rules if the failure to comply with
such requirements has a Material Adverse Effect; pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income or
profits or on any of its other Property prior to the date on which penalties
would attach, except for any such tax, assessment, charge or levy, the payment
of which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained; maintain all of its Properties
used or useful in its business in good working order and condition, ordinary
wear and tear excepted; permit representatives of any Bank or the Agent, during
normal business hours, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and affairs with
its officers, all to the extent reasonably requested by any Bank or the Agent
(as the case may be); keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP; and keep insured by
financially sound and reputable insurers all property of a character usually
insured by corporations engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts customarily
insured against by such corporations and carry such other insurance as is
usually carried by such corporations.
Section 5. Miscellaneous Provisions.
------------------------
5.01 Waiver. No failure or delay by the Agent or any Bank in
------
exercising any remedy, right, power or privilege under this Guarantee or any
other Basic Document shall operate as a waiver of such remedy, right, power or
privilege, nor shall any single or partial exercise of such remedy, right, power
or privilege preclude any other or further exercise of such remedy, right, power
or privilege or the exercise of any other remedy, right, power or privilege.
The remedies, rights, powers and privileges provided by this Guarantee are
cumulative and not exclusive of any remedies, rights, powers or privileges
provided by the other Basic Documents or by law.
5.02 Notices. All notices and communications to be given under this
-------
Guarantee shall be given or made in writing to the intended recipient at the
address specified below or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in
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this Guarantee, all such communications shall be deemed to have been duly given
when transmitted by telex or telecopier, delivered to the telegraph or cable
office or personally delivered or, in the case of a mailed notice, upon receipt,
in each case, given or addressed as provided in this Section 5.03:
To the Guarantors: LTC Properties, Inc.
300 Esplanade Drive
Suite 1860
Oxnard, California 93030
Attention: James J. Pieczynski
To the Agent: Sanwa Bank California
601 S. Figueroa Street
8th Floor
Los Angeles, California 90017
Attention: John C. Hyche
5.03 Expenses, Etc. The Guarantors jointly and severally agree
--------------
to pay or to reimburse the Banks and the Agent for all costs and expenses
(including reasonable attorneys' fees and expenses) that may be incurred by the
Agent or the Banks in any effort to enforce any of the obligations of any
Guarantor under this Guarantee, whether or not any lawsuit is filed, including
all such costs and expenses (and reasonable attorneys' fees and expenses)
incurred by the Agent or the Banks in any bankruptcy, reorganization, workout or
similar proceeding. All amounts due under this Guarantee (including under
Section 2.01) not paid when due shall bear interest until paid at the rate per
annum equal to the Post-Default Rate.
5.04 Amendments, Etc. Any provision of this Guarantee may be
----------------
modified, supplemented or waived only by an instrument in writing signed by the
Guarantors and the Agent (with the consent of the Banks as specified in Section
11.4 of the Credit Agreement). Any modification, supplement or waiver shall be
for such period and subject to such conditions as shall be specified in the
written instrument effecting the same and shall be binding upon the Agent, each
Bank, each holder of Guaranteed Obligations and each Guarantor, and any such
waiver shall be effective only in the specific instance and for the purpose for
which given.
5.05 Successors and Assigns. This Guarantee shall be binding upon
----------------------
and inure to the benefit of its parties and their respective successors and
assigns. No Guarantor may assign or transfer its rights or obligations under
this Guarantee without the
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prior written consent of the Agent (with the further consent of the Banks as
specified in Section 11.4 of the Credit Agreement).
5.06 Survival. All representations and warranties made in this
--------
Guarantee or in any certificate or other document delivered pursuant to or in
connection with this Guarantee shall survive the execution and delivery of this
Guarantee or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
5.07 Agreements Superseded. This Guarantee supersedes all prior
---------------------
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Guarantee.
5.08 Severability. Any provision of this Guarantee that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Guarantee, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
5.10 Captions. The table of contents, captions and section headings
--------
appearing in this Guarantee are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Guarantee.
5.11 Counterparts. This Guarantee may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to the Guarantee may execute this Guarantee by
signing any such counterpart.
5.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS GUARANTEE
-----------------------------------------
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA. EACH GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA AND OF
ANY CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA FOR THE PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE
TRANSACTIONS CONTEMPLATED BY THIS GUARANTEE. EACH GUARANTOR IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT
IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
5.13 WAIVER OF JURY TRIAL. EACH OF THE GUARANTORS AND THE AGENT (ON
--------------------
BEHALF OF ITSELF AND THE BANKS) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT
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<PAGE>
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTEE OR THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTEE.
FORM OF SUBSIDIARY GUARANTEE
----------------------------
- 19 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Guarantee as of
the date first above written.
GUARANTORS
----------
[GUARANTOR],
By:_______________________________
Title:
[GUARANTOR],
By:_______________________________
Title:
AGENT
-----
SANWA BANK CALIFORNIA,
By:_______________________________
Title:
<PAGE>
EXHIBIT 10.2
EXECUTION COPY
*****************************************************************
GUARANTEE AGREEMENT
Dated as of May 21, 1996
between
KANSAS-LTC CORPORATION,
L-TEX GP, INC.,
L-TEX LP, INC.,
RUSK-TEX LP, INC.,
TEXAS-LTC LIMITED PARTNERSHIP
as Guarantors
and
SANWA BANK CALIFORNIA,
as the Agent
*****************************************************************
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions............................ 1
1.01 Definitions.................................. 1
1.02 Interpretation............................... 2
Section 2. The Guarantee.......................... 2
2.01 Guarantee.................................... 2
2.02 Acknowledgements, Waivers and Consents....... 3
2.03 Understanding With Respect to Waivers and
Consents..................................... 9
2.04 Reinstatement................................ 10
2.05 Remedies..................................... 10
2.06 Separate Action.............................. 10
2.07 Subordination of Indebtedness of the Company;
Security Interest............................ 11
2.09 Rights of Contribution....................... 12
2.10 Revocation................................... 12
2.11 Right to Offset Balances..................... 12
Section 3. Representations of the Guarantors...... 13
3.01 Corporate Existence.......................... 13
3.02 Financial Condition.......................... 13
3.03 Litigation................................... 13
3.04 No Breach.................................... 13
3.05 Corporate Action............................. 13
3.06 Approvals.................................... 14
3.07 ERISA........................................ 14
3.08 Taxes........................................ 14
3.09 Certain Regulations.......................... 14
Section 4. Covenants of the Guarantors............ 14
4.01 Financial Statements......................... 15
4.02 Litigation................................... 16
4.03 Corporate Existence, Etc..................... 16
Section 5. Miscellaneous Provisions............... 17
5.01 Waiver....................................... 17
5.02 Notices...................................... 17
5.03 Expenses, Etc................................ 18
5.04 Amendments, Etc.............................. 18
5.05 Successors and Assigns....................... 18
5.06 Survival..................................... 18
5.07 Agreements Superseded........................ 18
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.08 Severability................................ 18
5.10 Captions.................................... 19
5.11 Counterparts................................ 19
5.12 Governing Law; Submission to Jurisdiction... 19
5.13 Waiver of Jury Trial........................ 19
</TABLE>
<PAGE>
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of May 21,
---------
1996, is made between Kansas-LTC Corporation, L-TEX GP, Inc., L-TEX LP, Inc.,
Rusk-TEX LP, INC. and Texas-LTC Limited Partnership (the "Guarantors") and Sanwa
----------
Bank California, as the agent (in such capacity, the "Agent") for the Banks
-----
identified in the Credit Agreement referred to below.
The Second Amended and Restated Credit Agreement, dated as of May 21,
1996 (as amended, supplemented or modified, the "Credit Agreement") between LTC
----------------
Properties, Inc. (the "Company"), the lenders identified in the Credit Agreement
-------
(the "Banks") and the Agent provides, subject to its terms and conditions, for
-----
certain extensions of credit to the Company. It is a condition to the
obligations of the Agent and the Banks under the Credit Agreement that each
Guarantor shall have executed and delivered this Guarantee.
To induce the Banks to enter into, and to extend credit under, the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantors have agreed jointly
and severally to guarantee the Guaranteed Obligations upon the terms and
conditions of this Guarantee. Accordingly, the Guarantors agree with the Agent
as follows:
Section 1. Definitions.
-----------
1.01 Definitions. Unless otherwise defined, all capitalized terms
-----------
used in this Guarantee that are defined in the Credit Agreement (including those
terms incorporated by reference) shall have the respective meanings assigned to
them in the Credit Agreement. In addition, the following terms shall have the
following meanings under this Guarantee:
"Basic Documents" shall have the meaning assigned to the term "Basic
---------------
Documents" in the Credit Agreement and shall also mean any other agreement (oral
or written), instrument, document or book entry evidencing, creating, securing
or otherwise relating to all or any part of the Guaranteed Obligations referred
to in clause (b) of the definition of that term that are intended by the Company
and the Agent and Banks or any such Person individually (as the case may be) to
be guaranteed by this Guarantee.
"Guaranteed Obligations" shall mean (a) any and all Obligations and
----------------------
any and all obligations of the Company for the performance by it of its
agreements, covenants and undertakings
-1-
<PAGE>
under or in respect of the Basic Documents referred to in the Credit Agreement,
it being acknowledged by each Guarantor that extensions of credit under the
Credit Agreement are available on a revolving basis, and (b) any and all other
obligations of the Company for the payment of all amounts, liabilities and
indebtedness (whether for principal, interest, reimbursement, fees, charge,
indemnification or otherwise) now or in the future owed to the Agent, the Banks
or any such Person individually, and for the performance by the Company of its
agreements, covenants and undertakings, under or in respect of any and all the
Basic Documents, it being acknowledged by each Guarantor that such other
obligations may arise or be created, incurred or assumed at any time and from
time to time and in such manner and such circumstances and with such terms and
provisions as the Company and the Agent and the Banks or any such Person
individually may agree without notice or demand of any kind or nature whatsoever
to any Guarantor.
1.02 Interpretation. In this Guarantee, unless otherwise indicated,
--------------
the singular includes the plural and plural the singular; words importing any
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Guarantee; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions or modifications by
the terms of this Agreement); and references to Persons include their respective
successors and permitted assigns and, in the case of Governmental Persons,
Persons succeeding to their respective functions and capacities.
Section 2. The Guarantee
-------------
2.01 Guarantee. Subject to the limitation set forth in Section 2.08,
---------
the Guarantors hereby jointly and severally guarantee to each Bank and the Agent
the timely payment in full when due (whether at stated maturity, by acceleration
or otherwise) and performance of the Guaranteed Obligations in each case
strictly in accordance with their terms. The Guarantors hereby further jointly
and severally agree that if the Company shall fail to pay in full when due
(whether at stated maturity, by acceleration or otherwise) all or any part of
the Guaranteed
-2-
<PAGE>
Obligations, the Guarantors will immediately pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of all or any part of the Guaranteed Obligations, the same will be
timely paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal. This
Guarantee is irrevocable and unconditional in nature and is made with respect to
any Guaranteed Obligations now existing or in the future arising. The
Guarantors' liability under this Guarantee shall continue until full
satisfaction of all Guaranteed Obligations. This Guarantee is a guarantee of
due and punctual payment and performance and is not merely a guarantee of
collection.
2.02 Acknowledgements, Waivers and Consents. Each Guarantor
--------------------------------------
acknowledges that the obligations undertaken by it under this Guarantee involve
the guarantee of obligations of Persons other than such Guarantor and that such
obligations of such Guarantor are absolute, irrevocable and unconditional under
any and all circumstances. In full recognition and in furtherance of the
foregoing, each Guarantor agrees that:
(a) Without affecting the enforceability or effectiveness of
this Guarantee in accordance with its terms and without affecting, limiting,
reducing, discharging or terminating the liability of such Guarantor, or the
rights, remedies, powers and privileges of the Agent and the Banks under this
Guarantee, the Agent and the Banks may, at any time and from time to time and
without notice or demand of any kind or nature whatsoever:
(i) amend, supplement, modify, extend, renew, waive,
accelerate or otherwise change the time for payment or performance of, or the
terms of, all or any part of the Guaranteed Obligations (including any increase
or decrease in the rate or rates of interest on all or any part of the
Guaranteed Obligations);
(ii) amend, supplement, modify, extend, renew, waive or
otherwise change, or enter into or give, any Basic Document or any agreement,
security document, guarantee, approval, consent or other instrument with respect
to all or any part of the Guaranteed Obligations, any Basic Document or any such
other instrument or any term or provision of the foregoing;
(iii) accept or enter into new or additional agreements,
security documents, guarantees (including letters of credit) or other
instruments in addition to, in exchange for or relative to any Basic Document,
all or any part of the Guaranteed Obligations or any collateral now or in the
future serving as security for the Guaranteed Obligations;
-3-
<PAGE>
(iv) accept or receive (including from any other Guarantor)
partial payments or performance on the Guaranteed Obligations (whether as a
result of the exercise of any right, remedy, power or privilege or otherwise);
(v) accept, receive and hold any additional collateral for
all or any part of the Guaranteed Obligations (including from any other
Guarantor);
(vi) release, reconvey, terminate, waive, abandon, allow to
lapse or expire, fail to perfect, subordinate, exchange, substitute, transfer,
foreclose upon or enforce any collateral, security documents or guarantees
(including letters of credit or the obligations of any other Guarantor) for or
relative to all or any part of the Guaranteed Obligations;
(vii) apply any collateral or the proceeds of any collateral
or guarantee (including any letter of credit or the obligations of any other
Guarantor) to all or any part of the Guaranteed Obligations in such manner and
extent as the Agent or any Bank may in its discretion determine;
(viii) release any Person (including any other Guarantor)
from any personal liability with respect to all or any part of the Guaranteed
Obligations;
(ix) settle, compromise, release, liquidate or enforce upon
such terms and in such manner as the Agent or the Banks may determine or as
applicable law may dictate all or any part of the Guaranteed Obligations or any
collateral on or guarantee of (including any letter of credit issued with
respect to) all or any part of the Guaranteed Obligations (including with any
other Guarantor);
(x) consent to the merger or consolidation of, the sale of
substantial assets by, or other restructuring or termination of the corporate
existence of the Company or any other Person (including any other Guarantor);
(xi) proceed against the Company, such or any other
Guarantor or any other guarantor of (including any issuer of any letter of
credit issued with respect to) all or any part of the Guaranteed Obligations or
any collateral provided by any Person and exercise the rights, remedies, powers
and privileges of the Agent and the Banks under the Basic Documents or otherwise
in such order and such manner as the Agent or any Bank may, in its discretion,
determine, without any necessity to proceed upon or against or exhaust any
collateral, right, remedy, power or privilege before proceeding to call upon or
otherwise enforce this Guarantee as to any Guarantor;
-4-
<PAGE>
(xii) foreclose upon any deed of trust, mortgage or other
instrument creating or granting liens on any interest in real property by
judicial or nonjudicial sale or by deed in lieu of foreclosure, bid any amount
or make no bid in any foreclosure sale or make any other election of remedies
with respect to such liens or exercise any right of set-off;
(xiii) obtain the appointment of a receiver with respect to
any collateral for all or any part of the Guaranteed Obligations and apply the
proceeds of such receivership as the Agent or any Bank may in its discretion
determine (it being agreed that nothing in this clause (xiii) shall be deemed to
make the Agent or any Bank a party in possession in contemplation of law, except
at its option);
(xiv) enter into such other transactions or business
dealings with any other Guarantor, the Company, any Subsidiary or Affiliate of
the Company or any other guarantor of all or any part of the Guaranteed
Obligations as the Agent or any Bank may desire; and
(xv) do all or any combination of the actions set forth in
this Section 2.02(a).
(b) The enforceability and effectiveness of this Guarantee and
the liability of the Guarantors, and the rights, remedies, powers and privileges
of the Agent and the Banks, under this Guarantee shall not be affected, limited,
reduced, discharged or terminated, and each Guarantor hereby expressly waives to
the fullest extent permitted by law any defense now or in the future arising, by
reason of:
(i) the illegality, invalidity or unenforceability of all or
any part of the Guaranteed Obligations, any Basic Document or any agreement,
security document, guarantee or other instrument relative to all or any part of
the Guaranteed Obligations;
(ii) any disability or other defense with respect to all of
any part of the Guaranteed Obligations of the Company, any other Guarantor or
any other guarantor of all or any part of the Guaranteed Obligations (including
any issuer of any letters of credit), including the effect of any statute of
limitations that may bar the enforcement of all or any part of the Guaranteed
Obligations or the obligations of any such other guarantor;
(iii) the illegality, invalidity or unenforceability of any
security or guarantee (including any letter of credit) for all or any part of
the Guaranteed Obligations or the
-5-
<PAGE>
lack of perfection or continuing perfection or failure of the priority of any
lien on any collateral for all or any part of the Guaranteed Obligations;
(iv) the cessation, for any cause whatsoever, of the
liability of the Company, any other Guarantor or any other guarantor of all or
any part of the Guaranteed Obligations (other than, subject to Section 2.05, by
reason of the full payment and performance of all Guaranteed Obligations);
(v) any failure of the Agent or any Bank to marshal assets
in favor of the Company or any other Person (including any other Guarantor), to
exhaust any collateral for all or any part of the Guaranteed Obligations, to
pursue or exhaust any right, remedy, power or privilege it may have against any
other Guarantor, the Company, any other guarantor of all or any part of the
Guaranteed Obligations (including any issuer of any letter of credit) or any
other Person or to take any action whatsoever to mitigate or reduce such or any
other Guarantor's liability under this Guarantee, neither the Agent nor any Bank
being under any obligation to take any such action notwithstanding the fact that
all or any part of the Guaranteed Obligations may be due and payable and that
the Company may be in default of its obligations under any Basic Document;
(vi) any failure of the Agent or any Bank to give notice of
sale or other disposition of any collateral (including any notice of any
judicial or nonjudicial foreclosure or sale of any interest in real property
serving as collateral for all or any part of the Guaranteed Obligations) for all
or any part of the Guaranteed Obligations to the Company, any Guarantor or any
other Person or any defect in, or any failure by any Guarantor or any other
Person to receive, any notice that may be given in connection with any sale or
disposition of any collateral;
(vii) any failure of the Agent or any Bank to comply with
applicable laws in connection with the sale or other disposition of any
collateral for all or any part of the Guaranteed Obligations;
(viii) any judicial or nonjudicial foreclosure or sale of,
or other election of remedies with respect to, any interest in real property or
other collateral serving as security for all or any part of the Guaranteed
Obligations, even though such foreclosure, sale or election of remedies may
impair the subrogation rights of any Guarantor or may preclude any Guarantor
from obtaining reimbursement, contribution, indemnification or other recovery
from any other Guarantor, the Company, any other guarantor or any other Person
and even though the Company may
-6-
<PAGE>
not, as a result of such foreclosure, sale or election of remedies, be liable
for any deficiency;
(ix) any benefits the Company, any Guarantor or any other
guarantor may otherwise derive from Section 580a, 580b, 580d or 726 of the
California Code of Civil Procedure or any comparable provisions of the laws of
any other jurisdiction;
(x) any act or omission of the Agent, any Bank or any other
Person that directly or indirectly results in or aids the discharge or release
of the Company or any other Guarantor of all or any part of the Guaranteed
Obligations or any security or guarantee (including any letter of credit) for
all or any part of the Guaranteed Obligations by operation of law or otherwise;
(xi) any law which provides that the obligation of a surety
or guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety's or guarantor's
obligation in proportion to the principal obligation;
(xii) the possibility that the obligations of the Company to
the Agent and the Banks may at any time and from time to time exceed the
aggregate liability of the Guarantors under this Guarantee;
(xiii) any counterclaim, set-off or other claim which the
Company or any other Guarantor has or alleges to have with respect to all or any
part of the Guaranteed Obligations;
(xiv) any failure of the Agent or any Bank to file or
enforce a claim in any bankruptcy or other proceeding with respect to any
Person;
(xv) the election by the Agent or any Bank, in any
bankruptcy proceeding of any Person, of the application or nonapplication of
Section 1111(b)(2) of the Bankruptcy Code;
(xvi) any extension of credit or the grant of any Lien under
Section 364 of the Bankruptcy Code;
(xvii) any use of cash collateral under Section 363 of the
Bankruptcy Code;
(xviii) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person;
-7-
<PAGE>
(xix) the avoidance of any Lien in favor of the Agent or any
Bank for any reason;
(xx) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against any Person, including any discharge of, or bar or stay
against collecting, all or any part of the Guaranteed Obligations (or any
interest on all or any part of the Guaranteed Obligations) in or as a result of
any such proceeding;
(xxi) any action taken by the Agent or any Bank that is
authorized by this Section 2.02 or otherwise in this Guarantee or by any other
provision of any Basic Document or any omission to take any such action; or
(xxii) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, including by reason of Sections 2809, 2810, 2819, 2839, 2845, 2850,
2899, 3275 and 3433 of the California Civil Code, and any future judicial
decisions or legislation or of any comparable provisions of the laws of any
other jurisdiction.
(c) Each Guarantor expressly waives, for the benefit of the
Agent and the Banks, all set-offs and counterclaims and all presentments,
demands for payment or performance, notices of nonpayment or nonperformance,
protests, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever with respect to the Guaranteed
Obligations, and all notices of acceptance of this Guarantee or of the
existence, creation, incurring or assumption of new or additional Guaranteed
Obligations. Each Guarantor further expressly waives the benefit of any and all
statutes of limitation and any and all laws providing for the exemption of
property from execution or for valuation and appraisal upon foreclosure, to the
maximum extent permitted by applicable law.
(d) Each Guarantor represents and warrants to the Agent and the
Banks that it has established adequate means of obtaining financial and other
information pertaining to the business, operations and condition (financial and
otherwise) of the Company and its properties on a continuing basis and that such
Guarantor is now and will in the future remain fully familiar with the business,
operations and condition (financial and otherwise) of the Company and its
properties. Each Guarantor further represents and warrants that it has reviewed
and approved each of the Basic Documents and is fully familiar with the
transaction contemplated by the Basic Documents and that it will in the future
remain fully familiar with such transaction and
-8-
<PAGE>
with any new Basic Documents and the transactions contemplated by such Basic
Documents. Each Guarantor hereby expressly waives and relinquishes any duty on
the part of the Agent or the Banks (should any such duty exist) to disclose to
such or any other Guarantor any matter of fact or other information related to
the business, operations or condition (financial or otherwise) of the Company or
its properties or to any Basic Document or the transactions undertaken pursuant
to, or contemplated by, any such Basic Document, whether now or in the future
known by the Agent or any Bank.
(e) Each Guarantor intends that its rights and obligations shall
be those expressly set forth in this Guarantee and that its obligations shall
not be affected, limited, reduced, discharged or terminated by reason of any
principles or provisions of law which conflict with the terms of this Guarantee.
2.03 Understanding With Respect to Waivers and Consents. Each
--------------------------------------------------
Guarantor warrants and agrees that each of the waivers and consents set forth in
this Guarantee is made voluntarily and unconditionally after consultation with
outside legal counsel and with full knowledge of its significance and
consequences, with the understanding that events giving rise to any defense or
right waived may diminish, destroy or otherwise adversely affect rights which
such or any other Guarantor otherwise may have against the Company, the Agent,
any Bank or any other Person or against any collateral. If, notwithstanding the
intent of the parties that the terms of this Guarantee shall control in any and
all circumstances, any such waivers or consents are determined to be
unenforceable under applicable law, such waivers and consents shall be effective
to the maximum extent permitted by law.
2.04 Subrogation. Each Guarantor hereby waives, until the payment
-----------
and satisfaction in full of all of the Guaranteed Obligations and the expiration
and termination of the Commitments of the Banks, under the Credit Agreement, any
right, remedy, power or privilege, such as any right of subrogation,
contribution or indemnity or related remedy, power or privilege, arising
(whether by contract or operation of law, including under the Bankruptcy Code)
against the Company, any other Guarantor or any other guarantor of all or any
part of the Guaranteed Obligations or any collateral for all or any part of the
Guaranteed Obligations by reason of any payment or other performance pursuant to
the provisions of this Guarantee and, if any amount shall be paid to such
Guarantor on account of such rights, remedies, powers or privileges, it shall
hold such amount in trust for the benefit of, and pay the same over to, the
Agent (for the benefit of the Banks) on account of the Guaranteed
-9-
<PAGE>
Obligations. Each Guarantor understands that the exercise by the Agent or any
Bank of any right, remedy, power or privilege that it may have under the Basic
Documents, any agreement, security document, guarantee or other instrument
relative to all or any part of the Guaranteed Obligations or otherwise may
affect or eliminate such or any other Guarantor's right of subrogation or
similar recovery against the Company, any other Guarantor, any other guarantors
or any collateral and that such and the other Guarantors may therefore incur
partially or totally nonreimbursable liability under this Guarantee.
Nevertheless, each Guarantor hereby authorizes and empowers the Agent and the
Banks to exercise, in its or their sole discretion, any combination of such
rights, remedies, powers and privileges.
2.04 Reinstatement. The obligations of each Guarantor under this
-------------
Guarantee shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company, any other Guarantor or any
other Person or any other application of funds (including the proceeds of any
collateral for all or any part of the Guaranteed Obligations) in respect of all
or any part of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of such Guaranteed Obligations, whether as a result of
any proceedings in bankruptcy, reorganization or otherwise and Guarantors
jointly and severally agree that it will indemnify the Agent and each Bank on
demand for all reasonable costs and expenses (including fees and expenses of
counsel) incurred by the Agent or such Bank in connection with such rescission
or restoration.
2.05 Remedies. The Guarantors hereby jointly and severally agree
--------
that, between each of them and the Banks, the obligations of the Company under
the Credit Agreement and the other Basic Documents may be declared to be
forthwith (or may become automatically) due and payable as provided in Section 9
of the Credit Agreement for purposes of Section 2.01 notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
becoming due and payable as against the Company) and that, in the event of such
declaration (or such obligation being deemed due and payable), such obligations
(whether or not due and payable by the Company) shall forthwith become due and
payable for purposes of Section 2.01.
2.06 Separate Action. The Agent may bring and prosecute a separate
---------------
action or actions against any Guarantor whether or not any other Guarantor, the
Company, any other guarantor or any other Person is joined in any such action or
a separate action or actions are brought against any other Guarantor, the
Company, any other guarantor, any other Person, or any collateral for all or any
part of the Guaranteed Obligations. The obligations of each Guarantor under,
and the effectiveness
-10-
<PAGE>
of, this Guarantee are not conditioned upon the existence or continuation of any
other guarantee (including any letter of credit) of all or any part of the
Guaranteed Obligations.
2.07 Subordination of Indebtedness of the Company; Security Interest.
---------------------------------------------------------------
(a) Each Guarantor agrees that any indebtedness of the Company
now or in the future owed to such Guarantor is hereby subordinated to the
Guaranteed Obligations. If the Agent so requests, any such indebtedness shall be
collected, enforced and received by such Guarantor as trustee for the Agent and
shall be paid over to the Agent (for the benefit of the Banks) in kind on
account of the Guaranteed Obligations. If, after the Agent's request, such
Guarantor fails to collect or enforce any such indebtedness or to pay the
proceeds of such indebtedness to the Agent, the Agent as such Guarantor's
attorney-in-fact may do such acts and sign such documents in such Guarantor's
name and on such Guarantor's behalf as the Agent considers necessary or
desirable to effect such collection, enforcement or payment, the Agent being
hereby appointed such Guarantor's attorney-in-fact for such purpose.
(b) Each Guarantor hereby grants to the Agent (for the benefit
of the Banks) a security interest in any indebtedness and in any personal
property of the Company in which such Guarantor now has or in the future
acquires any right, title or interest. Each Guarantor agrees that such security
interest shall be additional security for the Guaranteed Obligations and shall
be superior to any right of such Guarantor in such property until the Guaranteed
Obligations have been fully satisfied and performed.
2.08 Limitation on Guarantee. In any proceeding involving any state
-----------------------
corporate law or any state or federal bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the obligations of the
Guarantors under Section 2.01 would otherwise, taking into account the
provisions of Section 2.09, be held or determined to be void, invalid or
unenforceable or if the claims of the Banks in respect of such obligations would
be subordinated to the claims of any other creditors on account of the
Guarantors' liability under Section 2.01, then, notwithstanding any other
provision of this Guarantee to the contrary, the amount of such liability shall,
without any further action by the Guarantors, any Bank, the Agent or any other
Person, be automatically limited and reduced to the highest amount which is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
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<PAGE>
2.09 Rights of Contribution. The Guarantors hereby agree, as between
----------------------
themselves, that if any Guarantor (an "Excess Funding Guarantor") shall pay a
------------------------
portion of the Guaranteed Obligations in excess of the Excess Funding
Guarantor's Pro Rata Share (as defined below) of the Guaranteed Obligations, the
other Guarantors shall, on demand (but subject to the next sentence), pay to the
Excess Funding Guarantor an amount equal to their respective Pro Rata Shares of
such Excess Funding Guarantor's payment. The payment obligations of any
Guarantor under this Section 2.09 shall be subordinate and subject in right of
payment to the prior payment in full and in cash of the obligations of such
Guarantor under the other provision of this Section 2, and such Excess Funding
Guarantor shall not exercise any right, remedy, power or privilege with respect
to such excess until payment and satisfaction in full of all such obligations.
For the purposes of this Section 2.09, "Pro Rata Shares" shall mean, for any
---------------
Guarantor, a percentage equal to the percentage that such Guarantor's Tangible
Net Worth as at March 31, 1996 (as reflected on the balance sheet as at that
date referred to in Section 3.02) is of the aggregate Tangible Net Worth of all
of the Guarantors as so reflected as at such date.
2.10 Revocation. To the fullest extent permitted by law, each
----------
Guarantor hereby waives all right of revocation with respect to the Guaranteed
Obligations.
2.11 Right to Offset Balances. Each Guarantor agrees that, in
------------------------
addition to (and without any limitation of) any right of set-off, banker's lien
or counterclaim a Bank may otherwise have, each Bank shall be entitled, at its
option but only with the prior written consent of the Majority Banks or the
Agent, to offset balances held by it for the account of any Guarantor at any of
its offices, in Dollars or in any other currency, against any Obligations of the
Company to such Bank that are not paid when due (regardless of whether such
balances are then due to such Guarantor). Any Bank so entitled shall promptly
notify such Guarantor and the Agent of any offset effected by it, provided that
--------
such Bank's failure to give such notice shall not affect the validity of such
offset.
Section 3. Representations of the Guarantors. As of the Signing Date
---------------------------------
and as of the date of each extension of credit by the Banks, each Guarantor
represents to the Agent and the Banks that:
3.01 Corporate Existence. Each of such Guarantor and its
-------------------
Subsidiaries: (i) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has all requisite corporate or other power, and has all
material
-12-
<PAGE>
Governmental Approvals, necessary to own its assets and carry on its business as
now being or as proposed to be conducted; and (iii) is qualified to do business
in all jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where the failure so to qualify would have a
Material Adverse Effect.
3.02 Financial Condition. The consolidated and consolidating balance
-------------------
sheets of the Company and the Guarantors as of March 31, 1996 are complete and
correct and fairly present the financial condition of such entities as at such
date.
3.03 Litigation. Except as disclosed to the Banks in writing prior
----------
to the Signing Date, there are no legal or arbitral proceedings by or before any
Governmental Person, now pending or (to the knowledge of such Guarantor)
threatened against such Guarantor or its Property or any of its Subsidiaries or
any of their Property that, if adversely determined, could have a Material
Adverse Effect.
3.04 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions contemplated by this Guarantee
or compliance with the terms and provisions of this Guarantee will conflict with
or result in a breach of, or require any consent under, the corporate charter or
by-laws of such Guarantor, or any applicable Governmental Rule, or any agreement
or instrument to which such Guarantor or any of its Subsidiaries is a party or
by which any of them is bound or to which any of them is subject, or constitute
a default under, or result in the acceleration or mandatory prepayment of, any
Indebtedness evidenced by, or termination of, any such agreement or instrument,
or result in the creation or imposition of any Lien upon any Property of such
Guarantor or any of its Subsidiaries pursuant to the terms of any such agreement
or instrument.
3.05 Corporate Action. Such Guarantor has all necessary corporate
----------------
power and authority to execute, deliver and perform its obligations under this
Guarantee; the execution, delivery and performance by such Guarantor of this
Guarantee have been duly authorized by all necessary corporate action on its
part (including any required shareholder approvals); and this Guarantee has been
duly and validly executed and delivered by such Guarantor and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
3.06 Approvals. No Governmental Approvals are necessary for the
---------
execution, delivery or performance by such Guarantor of this Guarantee or for
the legality, validity or enforceability of this Guarantee.
-13-
<PAGE>
3.07 ERISA. Such Guarantor and its ERISA Affiliates have fulfilled
-----
their respective obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and are in compliance with all material
respects with the presently applicable provisions of ERISA and the Code, and
have not incurred any liability to the PBGC or any Plan or Multiemployer Plan
(other than to make contributions in the ordinary course of business).
3.08 Taxes. Such Guarantor and its Subsidiaries have filed all
-----
United States Federal income tax returns and all other material tax returns that
are required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by such Guarantor or any of its
Subsidiaries and all other related penalties and charges. The charges, accruals
and reserves on the books of such Guarantor and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of such Guarantor,
adequate. Such Guarantor has not given or been requested to give a waiver of
the statute of limitations relating to the payment of any Federal or other
taxes.
3.09 Certain Regulations. Such Guarantor is not (a) an "investment
-------------------
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, (b) a "holding company," or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935
or (c) subject to any other Governmental Rule restricting its ability to incur
Indebtedness or to issue guarantees.
Section 4. Covenants of the Guarantors. So long as this Guarantee is
---------------------------
in effect and until all of the Guaranteed Obligations have been paid in full and
the expiration and termination of the Commitments of the Bank under the Credit
Agreement, each Guarantor agrees as follows:
4.01 Financial Statements. Such Guarantor shall deliver to each of
--------------------
the Banks:
(a) consolidated and consolidating statements of income,
retained earnings and changes in financial position (or of cash flow, as the
case may be) of such Guarantor and its Consolidated Subsidiaries and copies of
all registration statements and regular periodic reports, if any, that such
Guarantor shall have filed with the Securities and Exchange Commission, any
comparable Governmental Person of any State or any national securities exchange
each in accordance with the Credit Agreement;
-14-
<PAGE>
(b) as soon as possible, and in any event within 10 days after
such Guarantor knows or has reason to know that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan have occurred or
exist, a statement signed by a senior financial officer of such Guarantor
setting forth details respecting such event or condition and the action, if any,
that such Guarantor or its ERISA Affiliate proposes to take with respect to such
event or condition (and a copy of any report or notice required to be filed with
or given to PBGC by such Guarantor or an ERISA Affiliate with respect to such
event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued under ERISA, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section 412 of
the Code or Section 302 of ERISA shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by such Guarantor or any ERISA Affiliate of
a notice from a Multiemployer Plan that such action has been taken by PBGC with
respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by such Guarantor or
an ERISA Affiliate under Section 4201 or 4204 of ERISA from a Multiemployer
Plan, or the receipt by such Guarantor or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA; and
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against such Guarantor or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
(c) promptly after such Guarantor knows or has reason to know
that any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description
-15-
<PAGE>
of the action that such Guarantor has taken and proposes to take with respect to
such Default; and
(d) from time to time such other information regarding the
business, affairs or financial condition of such Guarantor or any of its
Subsidiaries (including any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA) as any Bank or the Agent may
reasonably request.
4.02 Litigation. Such Guarantor will promptly give to each Bank
----------
notice of all legal or arbitral proceedings by or before any Governmental Person
affecting such Guarantor or any of its Subsidiaries, except proceedings that, if
adversely determined, would not have a Material Adverse Effect.
4.03 Corporate Existence, Etc. Such Guarantor will, and will cause
-------------------------
each of its Subsidiaries to: preserve and maintain its corporate existence and
all of its material rights, privileges and franchises; comply with the
requirements of all applicable Governmental Rules if the failure to comply with
such requirements has a Material Adverse Effect; pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income or
profits or on any of its other Property prior to the date on which penalties
would attach, except for any such tax, assessment, charge or levy, the payment
of which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained; maintain all of its Properties
used or useful in its business in good working order and condition, ordinary
wear and tear excepted; permit representatives of any Bank or the Agent, during
normal business hours, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and affairs with
its officers, all to the extent reasonably requested by any Bank or the Agent
(as the case may be); keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP; and keep insured by
financially sound and reputable insurers all property of a character usually
insured by corporations engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts customarily
insured against by such corporations and carry such other insurance as is
usually carried by such corporations.
Section 5. Miscellaneous Provisions.
------------------------
5.01 Waiver. No failure or delay by the Agent or any Bank in
------
exercising any remedy, right, power or privilege under this Guarantee or any
other Basic Document shall operate as a waiver of such remedy, right, power or
privilege, nor shall any
-16-
<PAGE>
single or partial exercise of such remedy, right, power or privilege preclude
any other or further exercise of such remedy, right, power or privilege or the
exercise of any other remedy, right, power or privilege. The remedies, rights,
powers and privileges provided by this Guarantee are cumulative and not
exclusive of any remedies, rights, powers or privileges provided by the other
Basic Documents or by law.
5.02 Notices. All notices and communications to be given under this
-------
Guarantee shall be given or made in writing to the intended recipient at the
address specified below or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Guarantee, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, upon
receipt, in each case, given or addressed as provided in this Section 5.03:
To the Guarantors: LTC Properties, Inc.
300 Esplanade Drive
Suite 1860
Oxnard, California 93030
Attention: James J. Pieczynski
To the Agent: Sanwa Bank California
601 S. Figueroa Street
8th Floor
Los Angeles, California 90017
Attention: John C. Hyche
5.03 Expenses, Etc. The Guarantors jointly and severally agree to
--------------
pay or to reimburse the Banks and the Agent for all costs and expenses
(including reasonable attorneys' fees and expenses) that may be incurred by the
Agent or the Banks in any effort to enforce any of the obligations of any
Guarantor under this Guarantee, whether or not any lawsuit is filed, including
all such costs and expenses (and reasonable attorneys' fees and expenses)
incurred by the Agent or the Banks in any bankruptcy, reorganization, workout or
similar proceeding. All amounts due under this Guarantee (including under
Section 2.01) not paid when due shall bear interest until paid at the rate per
annum equal to the Post-Default Rate.
-17-
<PAGE>
5.04 Amendments, Etc. Any provision of this Guarantee may be
----------------
modified, supplemented or waived only by an instrument in writing signed by the
Guarantors and the Agent (with the consent of the Banks as specified in Section
11.4 of the Credit Agreement). Any modification, supplement or waiver shall be
for such period and subject to such conditions as shall be specified in the
written instrument effecting the same and shall be binding upon the Agent, each
Bank, each holder of Guaranteed Obligations and each Guarantor, and any such
waiver shall be effective only in the specific instance and for the purpose for
which given.
5.05 Successors and Assigns. This Guarantee shall be binding upon
----------------------
and inure to the benefit of its parties and their respective successors and
assigns. No Guarantor may assign or transfer its rights or obligations under
this Guarantee without the prior written consent of the Agent (with the further
consent of the Banks as specified in Section 11.4 of the Credit Agreement).
5.06 Survival. All representations and warranties made in this
--------
Guarantee or in any certificate or other document delivered pursuant to or in
connection with this Guarantee shall survive the execution and delivery of this
Guarantee or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
5.07 Agreements Superseded. This Guarantee supersedes all prior
---------------------
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Guarantee.
5.08 Severability. Any provision of this Guarantee that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Guarantee, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
5.10 Captions. The table of contents, captions and section headings
--------
appearing in this Guarantee are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Guarantee.
5.11 Counterparts. This Guarantee may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to the Guarantee may execute this Guarantee by
signing any such counterpart.
-18-
<PAGE>
5.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS GUARANTEE SHALL
-----------------------------------------
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA. EACH GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA AND OF
ANY CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA FOR THE PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE
TRANSACTIONS CONTEMPLATED BY THIS GUARANTEE. EACH GUARANTOR IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT
IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
5.13 WAIVER OF JURY TRIAL. EACH OF THE GUARANTORS AND THE AGENT (ON
--------------------
BEHALF OF ITSELF AND THE BANKS) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED BY
THIS GUARANTEE.
-19-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Guarantee as of
the date first above written.
GUARANTORS
----------
KANSAS-LTC CORPORATION,
By: /s/ CHRISTOPHER T. ISHIKAWA
------------------------------------
Title: Secretary
L-TEX GP, INC.,
By: /s/ CHRISTOPHER T. ISHIKAWA
------------------------------------
Title: Secretary
L-TEX LP, INC.
By: /s/ CHRISTOPHER T. ISHIKAWA
------------------------------------
Title: Secretary
RUSK-TEX LP, INC.
By: /s/ CHRISTOPHER T. ISHIKAWA
------------------------------------
Title: Secretary
TEXAS-LTC LIMITED PARTNERSHIP
By: /s/ CHRISTOPHER T. ISHIKAWA
------------------------------------
Title: G.P.
AGENT
-----
SANWA BANK CALIFORNIA,
By: /s/ JOHN C. HYCHE
------------------------------------
Title: Vice President
<PAGE>
EXHIBIT 11.1
LTC PROPERTIES, INC.
COMPUTATION OF NET INCOME PER SHARE (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
Three months ended June 30,
1996 1995
---- ----
<S> <C> <C>
PRIMARY:
Net income applicable to common shares $ 5,617 $ 5,199
======= =======
Applicable common shares:
Weighted average outstanding shares during the period 18,548 17,898
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options using
the treasury stock method) 411 240
------- -------
Total 18,959 18,138
======= =======
Net income per share of common stock $ 0.30 $ 0.29
======= =======
FULLY DILUTED:
Net income $ 5,617 $ 5,199
Add back minority interest - (a) - (a)
Reduction of interest and amortization expenses resulting
from assumed conversion of 9.75% convertible
subordinated debentures 47 417
Reduction of interest and amortization expenses resulting from
assumed conversion of 8.5% convertible subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 8.25% convertible subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting from assumed
conversion of 7.75% convertible subordinated debentures - (a) N/A
Less applicable income taxes - -
------- -------
Adjusted net income applicable to common shares $ 5,664 $ 5,616
======= =======
Applicable common shares:
Weighted average outstanding shares during the period 18,548 17,898
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options using the
treasury stock method) 435 240
Assumed conversion of partnership units - (a) - (a)
Assumed conversion of 9.75% convertible subordinated debentures 191 1,678
Assumed conversion of 8.5% convertible subordinated debentures - (a) - (a)
Assumed conversion of 8.25% convertible subordinated debentures - (a) - (a)
Assumed conversion of 7.75% convertible subordinated debentures - (a) N/A
Less contingent shares - -
------- -------
Total 19,174 19,816
======= =======
Net income per share of common stock $ 0.30 $ 0.28
======= =======
</TABLE>
a) Conversion would be anti-dilutive and is therefore not assumed in the
computation of fully diluted net income per share of common stock.
15
<PAGE>
LTC PROPERTIES, INC.
COMPUTATION OF NET INCOME PER SHARE (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
Six months ended June 30,
1996 1995
---- ----
<S> <C> <C>
PRIMARY:
Net income applicable to common shares $11,072 $ 9,917
======= =======
Applicable common shares:
Weighted average outstanding shares during the period 18,482 17,872
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options using
the treasury stock method) 418 204
------- -------
Total 18,900 18,076
======= =======
Net income per share of common stock $ 0.59 $ 0.55
======= =======
FULLY DILUTED:
Net income $11,072 $ 9,917
Add back minority interest - (a) - (a)
Reduction of interest and amortization expenses resulting
from assumed conversion of 9.75% convertible
subordinated debentures 99 843
Reduction of interest and amortization expenses resulting
from assumed conversion of 8.5% convertible
subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting
from assumed conversion of 8.25% convertible
subordinated debentures - (a) - (a)
Reduction of interest and amortization expenses resulting
from assumed conversion of 7.75% convertible
subordinated debentures - (a) N/A
Less applicable income taxes - -
------- -------
Adjusted net income applicable to common shares $11,171 $10,760
======= =======
Applicable common shares:
Weighted average outstanding shares during the period 18,482 17,872
Weighted average shares issuable upon exercise of common
stock equivalents outstanding (principally stock
options using the treasury stock method) 435 220
Assumed conversion of partnership units - (a) - (a)
Assumed conversion of 9.75% convertible subordinated debentures 199 1,728
Assumed conversion of 8.5% convertible subordinated debentures - (a) - (a)
Assumed conversion of 8.25% convertible subordinated debentures - (a) - (a)
Assumed conversion of 7.75% convertible subordinated debentures - (a) N/A
Less contingent shares - -
------- -------
Total 19,116 19,820
======= =======
Net income per share of common stock $ 0.58 $ 0.54
======= =======
</TABLE>
a) Conversion would be anti-dilutive and is therefore not assumed in the
computation of fully diluted net income per share of common stock.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 0 4,328
<SECURITIES> 0 92,731
<RECEIVABLES> 0 137,652
<ALLOWANCES> 0 1,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 212,890
<DEPRECIATION> 0 8,191
<TOTAL-ASSETS> 0 446,794
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 8,300
0 0
0 0
<COMMON> 0 185
<OTHER-SE> 0 172,157
<TOTAL-LIABILITY-AND-EQUITY> 0 446,794
<SALES> 0 0
<TOTAL-REVENUES> 12,920 25,283
<CGS> 0 0
<TOTAL-COSTS> 7,303 14,211
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,835 9,489
<INCOME-PRETAX> 5,617 11,072
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 5,617 11,072
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,617 11,072
<EPS-PRIMARY> .296 .586
<EPS-DILUTED> .295 .584
</TABLE>
