<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
For the quarterly period ended September 30, 1997
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 1-12566
---------------
G & L REALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 95-4449388
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
439 N. BEDFORD DRIVE
BEVERLY HILLS, CALIFORNIA 90210
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 273-9930
---------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No ___.
---
The number of shares outstanding of the Registrant's Common Stock as of
October 31, 1997 was 4,001,300 shares.
================================================================================
<PAGE>
G&L REALTY CORP.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1997 (unaudited) and
December 31, 1996 3
Condensed Consolidated Statements of
Operations for the three and nine months ended
September 30, 1997 and 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997
and 1996 (unaudited) 5
Condensed Consolidated Statements of Cash Flows:
Supplemental Schedule of Noncash Investing and
Financing Activities for the nine months ended
September 30, 1997 and 1996 (unaudited) 6
Notes to Condensed Consolidated Financial
Statements (unaudited) 7 - 18
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 19 - 23
Part II Other Information
Item 1 Legal Proceedings 24
Item 2 Changes in Securities 24
Item 3 Defaults Upon Senior Securities 24
Item 4 Submission of Matters to a Vote of Security Holders 24
Item 5 Other Information 24
Item 6 Exhibits and Reports on Form 8-K 24
Signature 25
Exhibit
Index 26
</TABLE>
Page 2
<PAGE>
REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------------------------
(Unaudited)
ASSETS
- ------
<S> <C> <C>
Rental properties:
Land $ 23,521,000 $ 17,096,000
Buildings and improvements, net 95,117,000 76,135,000
------------ ------------
Total rental properties 118,638,000 93,231,000
Cash 570,000 265,000
Restricted cash 2,566,000 1,967,000
Other receivables, net 1,013,000 682,000
Tenant rent and reimbursements receivable, net 1,581,000 1,048,000
Unbilled rent receivable, net 1,722,000 1,477,000
Investments in unconsolidated affiliates 5,391,000 ---
Mortgage loans and bonds receivable, net 30,224,000 14,358,000
Assets available for sale 287,000 20,523,000
Deferred charges and other assets, net 2,354,000 2,445,000
------------ ------------
TOTAL ASSETS $164,346,000 $135,996,000
============ ============
LIABILITIES AND STOCKHOLDERS'EQUITY
- -----------------------------------
Liabilities:
Notes payable $103,939,000 $109,025,000
Accounts payable and other liabilities 1,617,000 1,462,000
Distributions payable 1,601,000 1,642,000
Tenant security deposits 1,044,000 1,034,000
------------ ------------
Total liabilities 108,201,000 113,163,000
Commitments and contingencies --- ---
Minority interest in consolidated partnership (2,645,000) (2,718,000)
Minority interest in Operating Partnership 2,966,000 3,103,000
Stockholders' equity:
Preferred shares - $.01 par value, 10,000,000 shares authorized:
Series A Cumulative Preferred - 1,495,000 and zero shares
issued and outstanding as of 9/30/97 and 12/31/96
respectively 15,000 ---
Common shares - $.01 par value, 50,000,000 shares authorized,
4,005,700 and 4,062,500 shares issued and outstanding as of
9/30/97 and 12/31/96 respectively 40,000 41,000
Additional paid-in capital 58,186,000 23,710,000
Distributions in excess of net income (2,417,000) (1,303,000)
------------ ------------
Total stockholders' equity 55,824,000 22,448,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $164,346,000 $135,996,000
============ ============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 3
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Nine Month
Periods Ended September 30, Periods Ended September 30,
1997 1996 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rental $5,201,000 $3,723,000 $14,614,000 $11,396,000
Tenant reimbursements 189,000 124,000 584,000 381,000
Parking 330,000 289,000 1,048,000 922,000
Interest, loan fees and related income 1,059,000 2,071,000 3,444,000 5,342,000
Other 84,000 92,000 221,000 317,000
---------- ---------- ----------- -----------
Total revenues 6,863,000 6,299,000 19,911,000 18,358,000
---------- ---------- ----------- -----------
EXPENSES:
Property operations 1,490,000 1,369,000 4,657,000 3,833,000
Depreciation and amortization 931,000 777,000 2,947,000 2,434,000
Interest 2,074,000 2,276,000 6,749,000 6,573,000
General and administrative 502,000 499,000 1,509,000 1,422,000
Loss on disposition of rental property 4,874,000
---------- ---------- ----------- -----------
Total expenses 4,997,000 4,921,000 15,862,000 19,136,000
---------- ---------- ----------- -----------
Income (loss) from operations 1,866,000 1,378,000 4,049,000 (778,000)
Equity in earnings of unconsolidated affiliate 294,000 866,000
Minority interest in consolidated affiliates (40,000) (32,000) (135,000) (104,000)
Minority interest in Operating Partnership (129,000) (151,000) (400,000) 77,000
---------- ---------- ----------- -----------
Income (loss) before extraordinary gain 1,991,000 1,195,000 4,380,000 (805,000)
Extraordinary gain on retirement of debt 9,311,000
---------- ---------- ----------- -----------
Net income $1,991,000 $1,195,000 $ 4,380,000 $ 8,506,000
========== ========== =========== ===========
Per share data:
Income (loss) before extraordinary gain $0.25 $0.29 $0.78 $(0.20)
Extraordinary gain 2.29
---------- ---------- ----------- -----------
Net income $0.25 $0.29 $0.78 $2.09
========== ========== =========== ===========
Weighted average number of outstanding shares 4,128,000 4,063,000 4,135,000 4,063,000
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 4
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,380,000 $ 8,506,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary gain on retirement of debt --- (9,311,000)
Loss on disposition of rental property --- 4,874,000
Depreciation and amortization 2,947,000 2,434,000
Minority interests 535,000 27,000
Undistributed equity in income from affiliates (700,000) ---
Gain on sale of assets held for sale (556,000) ---
Unbilled rent receivable (307,000) 122,000
Allowance for doubtful notes and receivables (134,000) 410,000
(Increase) decrease in:
Accounts receivable (206,000) (101,000)
Tenant rent and reimbursements receivable (362,000) (152,000)
Prepaid expense and other assets (146,000) 466,000
Accrued interest receivable and loan fees (939,000) (1,183,000)
Increase (decrease) in:
Accounts payable and other liabilities (32,000) (774,000)
Tenant security deposits 10,000 11,000
------------ ------------
Net cash provided by operating activities 4,490,000 5,318,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental properties (724,000) (1,500,000)
Purchase of rental properties (22,452,000) (19,428,000)
Proceeds from sale (acquisition) of assets available for sale 4,475,000 (3,273,000)
Pre-acquisition costs (46,000) (50,000)
Return of pre-acquisition deposits --- 1,115,000
Leasing commissions (114,000) (99,000)
Investment in notes and bonds receivable (19,656,000) (1,464,000)
Net investment in affiliate (2,038,000) ---
------------ ------------
Net cash used in investing activities (40,555,000) (24,699,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 42,878,000 47,000,000
Deferred financing costs (301,000) (1,114,000)
Repayments of notes payable (33,964,000) (21,020,000)
Sale of preferred stock and preferred partnership units 35,415,000 ---
Sale (purchase) of common stock and partnership units (925,000) 5,000
Increase in restricted cash (599,000) (1,863,000)
Distributions (6,134,000) (4,308,000)
------------ ------------
Net cash provided by financing activities 36,370,000 18,700,000
------------ ------------
NET INCREASE (DECREASE) IN CASH 305,000 (681,000)
BEGINNING CASH 265,000 932,000
------------ ------------
ENDING CASH $ 570,000 $ 251,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 6,647,000 $ 6,636,000
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 5
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
For the Nine Month Periods Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------------------
<S> <C> <C>
NONCASH INVESTING ACTIVITIES:
Property acquired in exchange for partnership units $ 549,000
===========
Property acquired in satisfaction of note receivable $ 4,650,000
===========
During the period, the Company sold Series A and B
Bonds for the following noncash consideration:
Assignment of note payable $14,000,000
Investment in affiliate 3,165,000
-----------
$17,165,000
===========
NONCASH FINANCING ACTIVITIES:
Net cost of assets transferred to lien holder:
Land $ 2,047,000
Buildings and improvements 21,601,000
Tenant improvements 477,000
Accumulated depreciation (3,557,000)
-----------
Total rental property 20,568,000
Unbilled rent receivable, net 1,109,000
Tenant and other accounts receivable 340,000
Leasing commissions, net 181,000
Deferred charges and other assets 87,000
Accounts payable and other liabilities 589,000
-----------
Net cost of assets transferred to lien holder 22,874,000
Nonrecourse debt extinguished 28,500,000
-----------
Excess of nonrecourse debt over net cost of assets surrendered $ 5,626,000
===========
Noncash gain from transfer of property to lien holder:
Extraordinary gain on retirement of debt $ 9,311,000
Minority interest share of extraordinary gain 1,055,000
-----------
Extraordinary gain on retirement of debt 10,366,000
Extraordinary loss related to other refinancing transactions 134,000
-----------
Extraordinary gain on transfer of property to lien holder 10,500,000
Loss on disposition of rental property (4,874,000)
-----------
Noncash gain from transfer of property to lien holder $ 5,626,000
===========
Distributions declared not yet paid $ 1,601,000 $ 1,642,000
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 6
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
G & L Realty Corp. (the "Company") was formed as a Maryland
corporation on September 15, 1993 to continue the ownership, management,
acquisition and development activities previously conducted by G&L Development,
a California general partnership, the Company's predecessor. All of the
Company's assets are held by, and all of its operations are conducted through,
the following entities:
G&L Realty Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership")
G&L Realty Financing Partnership II, L.P., a Delaware limited
partnership (the "Realty Financing Partnership")*
G&L Medical Partnership, L.P., a Delaware limited partnership
(the "Medical Partnership")*
G&L Gardens, LLC, an Arizona limited liability company
("Maryland Gardens")
435 North Roxbury Drive, Ltd., a California limited partnership
(the "Roxbury Partnership")
GL/PHP, LLC, a Delaware limited liability company ("GL/PHP")*
*The Realty Financing Partnership, the Medical Partnership, Maryland
Gardens and GL/PHP are herein defined collectively as the "Financing Entities"
and individually as a "Financing Entity".
The Company, as the sole general partner and as owner of an
approximately 89% ownership interest, controls the Operating Partnership. The
Company controls the Financing Entities through wholly owned subsidiaries
incorporated in the State of Delaware ( collectively, the "Subsidiaries" and
individually, a "Subsidiary"). Each Subsidiary owns, as sole general partner or
sole managing member, a 1% ownership interest in its related Financing Entity.
The remaining 99% ownership interest in each Financing Entity is owned by the
Operating Partnership, acting as sole limited partner or member.
References in these consolidated financial statements to the Company
include its operations, assets and liabilities include the operations, assets
and liabilities of the Operating Partnership, the Subsidiaries, the Financing
Entities and the Roxbury Partnership (in which the Operating Partnership owns a
61.75% partnership interest and is the sole general partner).
Page 7
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
The Company also owns interests in various unconsolidated affiliates.
Although the Company's investment represents a significant portion of the
capital of such affiliates and the Company exercises significant influence over
the activities of these entities, the Company does not have the requisite level
of voting control to include the assets, liabilities and operating activities of
these affiliates in the consolidated financial statements of the Company. The
Company has unconsolidated financial interests in the following entities:
GLN Capital Co., LLC ("GLN Capital"), a Delaware limited liability company
formed in 1996. GLN Capital, an unconsolidated affiliate, is owned 49.9%
by the Operating Partnership and 50.1% by an affiliate of Nomura Asset
Capital Corp. ("Nomura"). The purpose of GLN Capital is to fund loans to
the senior care industry.
Valley Convalescent, LLC ("Valley Convalescent") is a California limited
liability company formed by the Company, through the Operating Partnership,
and Continuum Health Incorporated, a Delaware corporation ("Continuum"),
who each hold a 50% ownership interest. Continuum is the managing member
of Valley Convalescent which was formed for the purpose of acquiring Valley
Convalescent Center located in El Centro, California.
AV Medical Associates, LLC ("AV Medical") is a California limited liability
company formed by the Company through the Operating Partnership, and M&Z
Aliso Associates, LLC, a California limited liability company, who each
hold a 50% ownership interest. The M&Z Aliso Associates, LLC is the
managing member of AV Medical which was formed for the purpose of acquiring
a vacant parcel of land in Aliso Viejo, California upon which AV Medical
intends to build a 33,000 square foot, three story medical office building
which has been preleased to an investment grade hospital owner/operator.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business- The Company is a self-administered and self-managed real
estate investment trust ("REIT") that finances, acquires, develops, manages and
leases health care properties. The Company's business currently consists
primarily of investments, either directly or through joint ventures, in health
care properties (primarily through its Medical Office Building Division) and in
debt obligations secured by health care properties (primarily through its Senior
Care Division).
Basis of Presentation - The accompanying condensed consolidated
financial statements include the accounts of the Company. The interests in 435
North Roxbury Drive, Ltd. not owned by the Company have been reflected in
minority interests. All significant intercompany accounts and transactions have
been eliminated in consolidation. Prior period amounts have been reclassified
to conform to the current period's financial statement presentation.
The information presented as of and for the three and nine month
periods ended September 30, 1997 and 1996 has not been audited by independent
accountants, but includes all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results for such periods. The results of operations for the
three and nine months ended September 30, 1997 are not necessarily indicative of
results that might be expected for the full fiscal year.
Page 8
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
Certain information and footnote disclosures normally included in
annual financial statements have been omitted. The Company believes that the
disclosures included in these financial statements are adequate for a fair
presentation and conform to reporting requirements established by the Securities
and Exchange Commission ("SEC"). The condensed consolidated financial
statements as presented herein should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K as filed with the SEC.
The Condensed Consolidated Balance Sheets reflect the combined assets
and liabilities of the Company. The Condensed Consolidated Statements of
Operations include the operating results of the Company for the three and nine
months ended September 30, 1997 and 1996. The Condensed Consolidated Statements
of Cash Flows have been prepared to reflect the operations of the Company for
the nine months ended September 30, 1997 and 1996.
Cash and Restricted Cash - As of September 30, 1997, the Company had
$2,566,000 in a segregated interest bearing account to be used for debt service
due in October 1997, current property taxes, insurance and property
improvements.
Assets Available for Sale - The Company is currently involved in
negotiations to sell certain assets. The associated cost of these assets is
included in the Company's balance sheet as assets available for sale. No
adjustment has been made to the cost basis of these assets as Management
believes that the net realizable value of the assets available for sale
approximate their original cost.
Per Share Data - Earnings per share are computed based upon the
weighted average number of common shares outstanding during the period. The
treasury stock method is used to determine the number of incremental common
equivalent shares resulting from options granted under the Company's 1993 Stock
Incentive Plan. As of September 30, 1997, there were approximately 341,500
stock options outstanding with a weighted average exercise price of $11.85.
Using the closing market price of $18.50 on September 30, 1997, the number of
shares which may be issued pursuant to the Plan is 122,755.
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------------------------
(Unaudited)
<S> <C> <C>
Buildings and improvements $102,674,000 $ 81,677,000
Tenant improvements 5,123,000 4,708,000
Furniture, fixtures and equipment 372,000 359,000
------------ ------------
108,169,000 86,744,000
Less accumulated depreciation and amortization (13,052,000) (10,609,000)
------------ ------------
Total $ 95,117,000 $ 76,135,000
============ ============
</TABLE>
Page 9
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------------------------
<S> <C> <C>
(Unaudited)
Deferred financing costs $1,760,000 $2,061,000
Pre-acquisition costs 63,000 17,000
Leasing commissions 576,000 462,000
Prepaid expense and other assets 397,000 272,000
---------- ----------
2,796,000 2,812,000
Less accumulated amortization (442,000) (367,000)
---------- ----------
Total $2,354,000 $2,445,000
========== ==========
</TABLE>
5. STOCKHOLDERS' EQUITY AND DEBT OUTSTANDING
As described in Note 2, the Company has elected to be treated, for
federal income tax purposes, as a REIT. As such, the Company is required to
distribute annually, in the form of distributions to its stockholders, at least
95% of its taxable income. In reporting periods in which distributions exceed
net income, stockholders' equity will be reduced by the distributions in excess
of net income in such period and will be increased by the excess of net income
over distributions in reporting periods in which net income exceeds
distributions. For tax reporting purposes, a portion of the dividends declared
represents a return of capital. The following table reconciles net income and
distributions in excess of net income for the nine month period ended September
30, 1997 and for the year ended December 31, 1996:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------------------------------
(Unaudited)
<S> <C> <C>
Distributions in excess of net income
at beginning of period $(1,303,000) $(5,479,000)
Net income during period 4,380,000 9,701,000
Less: Distributions declared (5,494,000) (5,525,000)
----------- -----------
Distributions in excess of net income $(2,417,000) $(1,303,000)
=========== ===========
</TABLE>
Page 10
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
The Company issued 1,495,000 shares which included an over allotment of
195,000 shares of 10.25% Series A Cumulative Preferred Stock, par value $.01
(the "Series A Preferred Stock") in May 1997. Dividends on the Series A
Preferred Stock are cumulative from the date of issue and are payable monthly to
shareholders of record on the first day of each month. The dividends, which
commenced on June 15, 1997, are payable at the rate of $2.5625 per share,
yielding 10.25% per annum based upon the $25 per share liquidation preference.
The Company may redeem the Series A Preferred Stock at the redemption price of
$25 per share plus any accumulated, unpaid dividends at any time after June 1,
2001.
Upon consummation of the offering, the Company received net proceeds of
$35.4 million. The Company contributed the net proceeds of the Series A
Preferred Stock offering to the Operating Partnership in exchange for a new
series of preferred partnership units having terms substantially similar to
those of the Series A Preferred Stock. Approximately $28.7 million of the
proceeds were used by the Operating Partnership to repay, without prepayment
charges or penalties, the following notes payable:
<TABLE>
<S> <C>
Credit line due August 17, 1998, collateralized by deeds of
trust, $20 million available, interest payable monthly at
30 day LIBOR plus 1.75% per annum (7.5% at pay-off)......... $16,900,000
Unsecured credit line due December 11, 1997. $3.0 million
available, interest payable monthly at the prime rate plus
2.0% (10.5% at pay-off)..................................... 1,000,000
Note due June 17, 1997, collateralized by note receivable
and deed of trust, interest payable monthly at the Citibank
Prime rate of interest (8.5% at pay-off).................... 4,125,000
Note due May 31, 1997, collateralized by note receivable
and deed of trust, interest payable monthly at the Citibank
Prime rate of interest (8.5% at pay-off).................... 3,000,000
Note due August 28, 1997, collateralized by equity
investment in affiliate, interest payable at 12% per annum.. 3,700,000
</TABLE>
The excess proceeds (approximately $6.7 million) were invested in interest-
bearing accounts.
At various times during the three months ended June 30, 1997, the Company
repurchased a total of 56,800 shares of the Company's Common Stock at an average
price of approximately $16.30 per share.
6. INVESTMENT IN UNCONSOLIDATED AFFILIATE
On November 25, 1996, the Company expanded its activities in the Senior
Care Division by entering into an unconsolidated operating venture, GLN Capital,
which commenced operations in January 1997. Subsequent to the formation of GLN
Capital, GMAC Commercial Mortgage ("GMAC-CM"), which has previously funded four
loans to the Company, committed to provide to GLN Capital a $50.0 million credit
line that will be secured by loans originated by GLN Capital.
In March 1997, the Company sold Series A and B Industrial Revenue Bonds
(the "Bonds") issued by the Massachusetts Industrial Finance Agency to GLN
Capital for total consideration of $21.7 million. The Bonds, which had a book
value of $20.6 million at the time of sale, were purchased in October 1995 for
$19.9 million. At the time of sale, the Series A and B Bonds had a combined
Page 11
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
outstanding balance of $27.7 million, including principal (at face value) and
accrued interest. Total consideration included $4.5 million in cash, a $3.2
million capital contribution to GLN Capital, and an assumption of the $14
million note due and payable to GMAC-CM (the "GMAC Loan").
On June 1, 1997 the Operating Partnership provided a loan in the amount of
$14 million (the "Loan") to GLN Capital, the proceeds of which were used to
retire the GMAC Loan. Pursuant to the terms of the Security Agreement, the Loan
will mature on June 1, 1998 and will bear interest at the prime lending rate
plus 1.5% adjusted monthly. Subject to the Security Agreement, GLN Capital
assigned a security interest in the Bonds to the Operating Partnership as
collateral for the Loan.
The following table provides a summary of the Company's investment in GLN
Capital, as of September 30, 1997.
<TABLE>
<CAPTION>
<S> <C>
Cash contributions $ 2,038,000
Non-Cash contributions 3,165,000
Equity in earnings 866,000
Unrecognized gain (512,000)
Cash distributions (166,000)
------------
BALANCE September 30, 1997 $ 5,391,000
============
</TABLE>
Following is a summary of the condensed financial information, as of
September 30, 1997, for GLN Capital.
<TABLE>
<CAPTION>
Financial Position:
-------------------
<S> <C>
Notes and bonds receivable, net $ 31,748,000
Other Assets 258,000
Notes payable (21,134,000)
Other liabilities (993,000)
------------
Net Assets: $ 9,879,000
============
<CAPTION>
Partner's equity:
-----------------
<S> <C>
G&L Realty Partnership, L.P. $5,203,000
Others 3,522,000
Current earnings 1,629,000
Cash distributions (475,000)
----------
$9,879,000
==========
<CAPTION>
Operations:
-----------
<S> <C>
Revenues $2,960,000
Expenses 1,331,000
----------
Net Income $1,629,000
==========
<CAPTION>
Allocation of net income:
-------------------------
<S> <C>
G & L Realty Partnership, L.P. $ 866,000
Others 763,000
----------
$1,629,000
==========
</TABLE>
Page 12
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
7. INVESTMENT IN RENTAL PROPERTIES AND SECURED NOTES RECEIVABLE
On February 26, 1997 the Company, through the Operating Partnership,
entered into a joint venture by forming GL/PHP, LLC, a Delaware limited
liability company ("GL/PHP") with PHP Healthcare Corporation, an NYSE listed
company ("PHP"). At the time of its formation, the Operating Partnership and PHP
contributed $4.4 million of equity in proportion to their 80.5% and 19.5%
respective interests in GL/PHP. Subject to restrictions in the operating
agreement, the Operating Partnership was the sole manager of GL/PHP. On February
28, 1997, GL/PHP acquired six primary care facilities in New Jersey, totaling
80,415 square feet, at a cost of approximately $22.4 million. GL/PHP used the
$4.4 million equity contribution together with the proceeds of two new loans
obtained from PHP to fund the acquisition. The PHP loans were secured by first
and second deeds of trust with the greater of the two loans, at $15,735,000, due
on August 28, 1997 and giving PHP a right, upon default, to purchase the
Company's 80.5% interest in GL/PHP. The properties, which were acquired from
Blue Cross/Blue Shield of New Jersey, were initially leased to PHP pursuant to
the terms of a 25-year net lease which provided for fixed rent escalations
during the term of the lease. Mr. Charles P. Reilly, a director of the Company
and chairman of the Compensation Committee of the Company's Board of Directors,
is Chairman of the Board of Directors of PHP. Mr. Reilly was not present and did
not participate in the Board's consideration of this proposal and did not vote
with respect thereto. See "Business and Properties--Description of the
Properties and Tenants" and "Certain Transactions."
On August 15, 1997, the Company acquired PHP's interest in GL/PHP for a
total consideration of $919,000. Concurrent with the transfer of ownership, the
following transactions were completed:
. GL/PHP redeemed PHP's 18.5% ownership interest in GL/PHP.
. PHP's remaining 1% ownership interest in GL/PHP was assigned to G&L
Management Delaware Corp., a newly formed Delaware corporation and
wholly owned subsidiary of the Company.
. G&L Management Delaware Corp. assumed responsibilities as the managing
member of GL/PHP from the Operating Partnership.
. GL/PHP obtained a new 10-year, $16.0 million fixed rate loan from
Nomura that bears interest at 8.98% per annum and requires monthly
principal and interest payments of approximately $155,000 per month.
. The Operating Partnership borrowed $2.0 million from PHP and
contributed the loan proceeds to GL/PHP. GL/PHP used the funds to
retire the $2.0 million second trust deed payable to PHP. The
Operating Partnership's new $2.0 million loan from PHP is unsecured
and requires quarterly interest only payments at 8.5% per annum with
all unpaid interest and principal due July 31, 2007.
. The original 25-year lease between GL/PHP and PHP was renegotiated,
effective as of August 15, 1997. Under the terms of the new 17-year
net operating lease, PHP is required to make monthly payments of
approximately $221,500. The lease provides for rent increases equal
to the annual increase in the Consumer Price Index subject to a
maximum annual increase of 5%.
Page 13
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
The following table sets forth certain information regarding each of the
New Jersey properties and the respective leases at August 15, 1997.
<TABLE>
<CAPTION>
YEAR
CONSTRUCTED RENTABLE TOTAL AVERAGE
OR SQUARE ANNUALIZED RENT PER
PROPERTY REHABILITATED FEET (1) RENT (2) SQ. FT. (3)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2103 Mt. Holly Rd.
Burlington, NJ 1994 12,560 $ 434,950 $34.63
150 Century Parkway
Mt. Laurel, NJ 1995 12,560 391,310 31.16
274 Highway 35, South
Eatontown, NJ 1995 12,560 481,030 38.30
80 Eisenhower Drive
Paramus, NJ 1994 12,675 421,800 33.28
16 Commerce Drive
Cranford, NJ 1963 17,500 491,670 28.10
4622 Black Horse Pike
Mays Landing, NJ 1994 12,560 437,490 34.83
------ ----------
Total 80,415 $2,658,250 $33.06
====== ==========
</TABLE>
(1) Rentable square feet includes space used for management purposes but does
not include storage space.
(2) Rent is based on third-party leased space billed in February 1997; no rent
is assumed from management space.
(3) Average rent per square foot is calculated based upon third-party leased
space.
Prior to the Company's acquisition of PHP's 19.5% interest on August 15,
1997, the Company did not have the requisite level of voting control required by
Financial Accounting Standard 94 to account for its interests on a consolidated
basis. As a result of the terms of the August 15, 1997 acquisition, the
Company gained voting control of GL/PHP and is therefore required to include the
assets, liabilities and operating activities of GL/PHP in the Company's
consolidated financial statements.
The Company views each interim period as being an integral part of the
annual period, and, as a result of the August 15, 1997 transaction, the Company
will be required to report the activities of GL/PHP on a consolidated basis for
the year ending December 31, 1997. [Therefore, these interim financial
statements for the nine months ended September 30, 1997, include the assets,
liabilities and operating activities of GL/PHP, on a consolidated basis.]
In August of 1997, the Company took title to the Maryland Gardens Facility
through a deed in lieu of foreclosure on a loan secured by a first trust deed
the Company had previously funded on this property. At the time the Company
took title to this facility the outstanding balance on this loan was
approximately $4.7 million, which was also the appraised value on this facility
at that time. The Maryland Gardens Facility is currently leased to Capital
Senior Management I, Inc. ("Capital Senior Management"), a nationally recognized
senior care facility operator which has been operating this facility since 1996.
Management believes that Capital Senior Management is continuing to operate this
facility profitably and effectively under its operating lease, which provides
for triple net rental payments in the amount of $30,000 in September 1997. The
monthly rental payment will be increased to $35,000 per month from October 1997
through April 1998 and June through July 1998. No rental payments were due in
August 1997 or will be due in May 1998.
Page 14
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
In the normal course of its business, the Company has funded three loans
secured by deeds of trust totaling an aggregate of approximately $2.9 million.
The first of these loans is secured by a 92-bed senior care facility ( the "Coos
Bay Facility") located in Coos Bay, Oregon. The second and third of these are
secured by a 63-bed senior care facility and a 68-bed senior care facility (the
"Idaho Facilities") located in Idaho Falls and Burley, Idaho, respectively.
In October 1997, the Company assigned to Iatros Health Network, Inc.
(Iatros) its participation interest in promissory notes secured by third and
fifth trust deeds on the Crystal Park Facility in exchange for an unsecured 7-
year 10% note for $800,000 from Iatros. As part of the assignment agreement
with Iatros, the Company retained title to the accounts receivable of the former
owner of the facility, which had served as additional collateral for the
promissory notes, and which the Company believes have a net realizable value of
approximately $400,000. The outstanding balance on these promissory notes was
approximately $1.3 million at September 30, 1997.
8. SUBSEQUENT EVENTS
On October 15, 1997, the Company and the Operating Partnership created two
new entities for the purpose of acquiring three nursing homes in Massachusetts
(the "Hampden Properties."). The Hampden Properties previously secured the
Bonds held by GLN Capital (see note 6). The Company has formed G&L Hampden,
Inc., a Delaware corporation and wholly owned subsidiary of the Company. The
Operating Partnership and G&L Hampden, Inc. have entered into an operating
agreement and have formed G&L Hampden, LLC ("G&L Hampden"), a Delaware limited
liability company which is 99% owned by the Operating Partnership and 1% owned
by G&L Hampden, Inc. its sole managing member. On October 28, 1997, G&L Hampden
acquired the Hampden Properties from Hampden Nursing Homes, Inc. ("Hampden
Nursing"), for a total aggregate consideration of approximately $20.4 million.
Of this amount, G&L Hampden will borrow $6.0 million from Nomura at an interest
rate of 8.62% per annum. The Hampden Properties will secure repayment of this
loan. Under this loan, the Company may, at any time during the next two years,
make up to two additional draws of not less than $2.0 million each, up to an
aggregate loan amount of 14.0 million (including the initial draw under the
loan). In the event the Company makes an additional loan draw, the interest
rate on such draw will be 2.5%; per annum above the prevailing market rate on
U.S. Treasury Securities of equivalent maturity. The loan agreement with Nomura
provides for a term of 12 years and requires monthly interest and principal
payments based upon a 27-year amortization schedule. At the end of 12 years,
all unpaid principal and interest will be due in full. The Company has the
option to prepay this loan at any time upon the payment of a premium that, when
added to the remaining principal amount of the note, will be sufficient to
purchase non-callable obligations of the U.S. Government sufficient to provide
for the schedule payments remaining under the note. As a condition of the loan,
Nomura has required G&L Hampden to place $400,000 into a reserve account which
may be used to fund unspecified maintenance capital reserves.
In conjunction with the acquisition of the Hampden Properties, the Company
entered into a 15-year net operating lease with Iatros. Although Iatros is the
current operator of the Hampden Properties, the licenses necessary to operate
the Hampden Properties are currently held by Hampden Nursing. Iatros has
applied for state authorization to operate the Hampden Properties without the
participation of Hampden Nursing. Although this transfer will be handled in the
normal course of business, the parties
Page 15
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
anticipate that it will take approximately 90 days to transfer the licenses.
Until the licenses are transferred, the Company has leased the facilities to
Hampden Nursing which has engaged Iatros to manage the facilities until the
licenses are transferred. The lease between the Company and Hampden Nursing
requires monthly lease payments of $225,000 and expires upon transfer of the
operating licenses from Hampden Nursing to Iatros. The Company's lease with
Iatros for the Hampden Properties provides for the monthly lease payments of
$225,000 and fixed annual increases of 2.0% per year at the end of each of the
first seven years. Thereafter, the annual increase is based upon the greater of
2.0% of the previous year's rent or 2.5% of the increase in gross receipts
derived from the operation of the Hampden Properties in excess of $17,750,000.
Although management believes that Iatros will receive approval for the transfer
of the operating license from Hampden Nursing in a timely manner, there can be
no assurance that the license will be transferred or, if it is, that the
transfer will occur within the expected 90-day time period.
The Hampden Properties are Riverdale Gardens Nursing Home, located in West
Springfield, Massachusetts, Chestnut Hill Nursing Home, located in East
Longmeadow, Massachusetts and Mary Lyon Nursing Home, located in Hampden,
Massachusetts.
Riverdale Gardens Nursing Home is a 168-bed nursing facility currently
licensed for 84 skilled care and 84 intermediate care beds with 16 private and
76 double occupancy rooms. Constructed in various stages between 1957 and 1975,
the property consists of a single story 54,451 square foot building on
approximately 3.85 acres as well as a 3,366 square foot family residence on an
adjacent 30,000 square foot lot.
Chestnut Hill Nursing Home is a 123-bed nursing home consisting of 82
skilled nursing and 41 intermediate care beds with 15 private and 54 double
occupancy rooms. The facility is a 49,198 square foot single story building
constructed in 1984 on approximately 11.9 acres of land.
Mary Lyon Nursing Home occupies a 28,940 square foot building situated on
3.7 acres and was originally constructed in 1959 and renovated in 1986. The
facility is licensed for 100 beds of which 40 are skilled nursing and 60 are
intermediate care beds with ten private rooms, 39 double occupancy and three
quadruple occupancy rooms.
The following table sets forth certain information regarding the Hampden
Properties as of October 28, 1997.
<TABLE>
<CAPTION>
Year Constructed Total Average
or Number of Purchase Annualized Annual Rent
Property Rehabilitated Beds Price Rent Per Bed
- --------------------------- ----------------- --------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Riverdale Gardens Nursing Home......... 1957-1975 168 $ 5,760,000 $ 762,420 $ 4,538
Chestnut Hill Nursing Home............. 1984 123 10,825,000 1,432,800 11,649
Mary Lyon Nursing Home................. 1986 100 3,815,000 504,780 5,048
</TABLE>
The total annualized rent expected to be derived from the Hampden
Properties is approximately $2.7 million, or approximately 11.5% of the
Company's total annualized rental income, based on current rental rates. This
rental income will be derived from Hampden Nursing until the transfer of the
licenses to Iatros, at which time Iatros will be responsible for the rent on the
Hampden Properties. Iatros has recently experienced problems in operating
certain senior care facilities and had reported financial
Page 16
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
difficulties which could materially and adversely affect the Company's results
of operations and its ability to make expected distributions to stockholders.
In light of such difficulties, Iatros has recently hired a new management team
to improve its senior care facility operating capabilities. Although the
Company believes that this new management team will be able to operate senior
care facilities profitably, there can be no assurance that Iatros' facility
operations will improve under this new management team.
On October 24, 1997, the Company, through AV Medical, has acquired a vacant
parcel of land located in Aliso Viejo, California for approximately $2.2
million. AV Medical Associates, LLC ("AV Medical") intends to build a 33,000
square foot, three-story MOB on this property. Management believes that, upon
completion of construction, the total investment in land and building will be
approximately $6.5 million. Concurrent with the acquisition of the vacant land,
AV Medical pre-leased the entire MOB to an investment grade hospital operator.
Under the terms of this 10-year net operating lease with this hospital tenant,
rent payments will commence upon issuance of a Certificate of Occupancy at the
rate of $750,000 per annum. The tenant has an option to acquire the MOB from AV
Medical for approximately $9.5 million after four years of tenancy. There can be
no assurance, however, that the Company will be able to develop the Aliso Viejo
MOB property or, if developed, that the lease will prove favorable to the
Company.
In conjunction with the October 24, 1997 acquisition of land, the Company
directly acquired a second parcel of land in Aliso Viejo, California for
$814,000. Prior to closing escrow on this second parcel, the Company signed a
lease with a nationally recognized retailer who has agreed to occupy and lease
the 9,100 square foot building to be constructed on this parcel. The Company
has an agreement with this future tenant for construction of the building for a
cost not to exceed $720,000. The lease, which is anticipated to commence on
August 1, 1998, is a ten-year triple net lease with annual net lease payments of
$182,000 for the first five years and $200,000 per annum thereafter. While
management believes that this land will be successfully developed and leased,
there can be no assurance that this transaction will prove favorable to the
Company.
The Company has a 50% membership interest in Valley Convalescent, LLC
("Valley Convalescent"), a limited liability company formed by the Company and
Continuum Health Incorporated ("Continuum"), which was formed in anticipation of
the purchase of Valley Convalescent Hospital, Valley Living Center and Mountain
View Care Center located in El Centro, California (the " El Centro Properties")
for an aggregate acquisition price of approximately $3.6 million, $400,000 of
which would be used for facility renovations. The Company and Continuum
contributed approximately $300,000 and $344,000, respectively, to Valley
Convalescent and the Company funded a loan secured by a first deed of trust on
the El Centro Properties for approximately $2.8 million. This loan bears
interest at a rate of 12.0% per annum, matures on September 1, 2002, and
provides for monthly payments of interest only. At maturity, assuming no
prepayments, $2.8 million will be due on this loan. This loan permits
prepayments on any monthly payment date of all or any portion of the outstanding
principal amount of the loan, without penalty, upon not less than five day's
prior written notice to the Company of the borrower's intent to repay. Although
no assurances can be given, the Company anticipates that the sale of these
properties will close during the fourth quarter upon the receipt of certain
regulatory licenses by the proposed operator of the properties.
Page 17
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
9. DEPENDENCE ON CERTAIN TENANTS
The Company leases the six MOB properties located in New Jersey to PHP
under a 17-year lease pursuant to which PHP will pay approximately $2.7
million annually. The Company also leases the Hampden Properties to Hampden
Nursing pursuant to a short-term lease which provides for monthly aggregate rent
payments of $225,000. Hampden Nursing has engaged Iatros to manage the
facilities until such time as the operating licenses for these facilities are
transferred to Iatros. Upon transfer of the operating licenses, the Company's
15-year lease with Iatros will commence, under which the Company will receive
rent of approximately $2.7 million per annum. The rent revenues to be received
pursuant to these leases, individually and collectively, is significant to the
Company's operations.
10. COMMITMENTS AND CONTINGENCIES
Neither the Company, any of its consolidated or unconsolidated affiliates
nor any of the assets within their portfolios of medical office buildings,
senior care facilities, parking facilities, and retail space is currently a
party to any material litigation.
Page 18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Unaudited Condensed Consolidated Financial Statements and Notes thereto included
elsewhere in this Form 10-Q.
Except for the historical information contained herein, the matters
discussed in this Form 10-Q are forward-looking statements which involve risk
and uncertainties. The risk and uncertainties include, but are not limited to,
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, and other factors
discussed in the Company's filings with the SEC.
Results of Operations
- ---------------------
Comparison of the Three Month Period Ended September 30, 1997 versus the Three
Month Period Ended September 30, 1996.
Revenues increased by $564,000 from $6,299,000 in the third quarter of 1996
to $6,863,000 for the same period in 1997. Rents, tenant reimbursements and
parking revenues increased an aggregate $1,584,000 or 38% from a combined total
of $4,136,000 during the third quarter of 1996 to $5,720,000 for the same period
in 1997. Increases in rents, tenant reimbursements and parking revenues were
related to the acquisition of the six New Jersey properties, the Tustin Hospital
lease, the rental income from Maryland Gardens and the August 30, 1996
reacquisition of the property located at 436 North Bedford Drive. In 1997, the
Company began making loans through GLN Capital, its newly formed venture with
Nomura. Interest, loan fees and related revenues derived from loans secured by
senior care facilities were down $1,012,000 from the third quarter of 1996,
reflecting the shift toward investments in GLN Capital, in which the Company
reports its pro-rata share of net income but does not report its pro-rata share
of revenues and expenses. The Company's pro-rata share of net income from its
investments in GLN Capital is reported after income from operations and totaled
$294,000 for the three months ended September 30, 1997.
Expenses increased by $76,000, or less than 2%, from $4,921,000 in the
third quarter of 1996 to $4,997,000 for the same period in 1997. Property
operations increased 9% or $121,000 from $1,369,000 in the third quarter of
1996 to $1,490,000 for 1997. The primary component of this increase was the
August 30, 1996 reacquisition of the property located at 436 North Bedford
Drive. Depreciation and amortization expense also increased 20% or $154,000
from $777,000 to $931,000 in the third quarter of 1996 and 1997, respectively.
This increase in depreciation and amortization expense resulted from
depreciation expense related to the six New Jersey properties, Maryland Gardens
and 436 North Bedford Drive. Interest expense declined $202,000 from $2,276,000
in 1996 to $2,074,000 for the three months ended September 30, 1997. The
decline in interest expense was related to the Series A Preferred Stock offering
completed in the second quarter of 1997, the proceeds of which were used to
retire debt. This decrease in interest expense was partially offset by added
interest expense from the additional $18.0 million of debt used to acquire the
six New Jersey properties.
Page 19
<PAGE>
Comparison of the Nine Month Period Ended September 30, 1997 versus the Nine
Month Period Ended September 30, 1996.
Net income declined $4,126,000 from $8,506,000 for the nine months ended
September 30, 1996 to $4,380,000 during the same period in 1997 primarily due
to non-recurring gains and losses resulting from the disposition of one of the
Company's properties. The primary components affecting this decline were the
$4,874,000 loss on disposition of rental property and the associated
$9,311,000 extraordinary gain on retirement of the debt secured the related
rental property.
Revenues increased approximately 8% or $1,553,000 from $18,358,000 for the
nine months ended September 30, 1996 to $19,911,000 during the same period in
1997. This increase in revenues was the result of a $3,547,000 or 28% increase
in rents, tenant reimbursements and parking revenues which was partially
offset by a $1,898,000 or 36% decline in interest, loan fees and related
revenues. The $3,547,000 increase resulted from several events, including the
addition, on February 28, 1997, of the six New Jersey properties, the
commencement on May 1, 1997, of the Tustin Hospital lease, the leasing, in
August 1997, of the Maryland Gardens facility to a nursing home operator and
the reacquisition, in August 30, 1996, of the property located at 436 North
Bedford Drive.
During the first nine months of 1997, the Company made new investments in
short-term secured loans through GLN Capital, an unconsolidated affiliate.
Interest, loan fees and related revenues declined $1,898,000 from $5,342,000
during the nine months ended September 30, 1996 to $3,444,000 during the same
period in 1997, reflecting management's decision to make investments in
secured trust deeds through GLN Capital for which the Company reports its pro-
rata share of net income from GLN Capital but no revenues. The Company
accounts for its investments in unconsolidated affiliates, such as GLN
Capital, using the equity method; therefore, the Company's pro-rata share of
net income from investment in such unconsolidated affiliates is reported after
income from operations. The Company's pro-rata share of net income from GLN
Capital totaled $866,000 for the nine months ended September 30, 1997.
Excluding the 1996 loss on disposition of rental property of $4,874,000,
operating expense increased $1,600,000 or 11% from $14,262,000 during the nine
months ended September 30, 1996 to $15,862,000 in 1997. Property operations
increased $824,000 or 21% from $3,833,000 in 1996 to $4,657,000 for the same
period of 1997. This increase is the result of the acquisition of the Tustin
Hospital and adjacent medical office buildings and the reacquisition of the
436 North Bedford Drive property in August 1996. The Company has also
increased earthquake coverage on its properties located in Southern California
which has partially contributed to the rise in property operations expense.
Depreciation and amortization expense increased 21% or $513,000 from
$2,434,000 to $2,947,000 during the nine months ended September 30, 1996 and
1997, respectively. This increase in depreciation and amortization expense is
the result of depreciation expense related to the six New Jersey properties,
the Tustin Hospital and adjacent medical office buildings, the Maryland
Gardens facility and 436 North Bedford Drive. Interest expense increased
$176,000 from $6,573,000 in 1996 to $6,749,000 for the nine months ended
September 30, 1997. The increase in interest expense is related to the added
interest expense from the additional debt used to acquire the six New Jersey
properties. This increase in interest expense was offset, in part, by lower
interest costs which resulted from the Company's reduction of its debt with
the proceeds from the sale of Series A Preferred Stock in the second quarter
of 1997.
Page 20
<PAGE>
Liquidity and Capital Resources
- -------------------------------
As of September 30, 1997, the Company's investment in real estate assets
totaled approximately $118.6 million, which included $111.1 million related to
13 medical office buildings and an adjacent parking structure in California and
six medical office buildings in New Jersey and $7.3 million related to two
senior care facilities in California and Arizona. The Company also had $30.5
million invested in five secured notes (before allowance for doubtful accounts
of $350,000) secured by senior care facilities located in Oregon, California,
Idaho and Maryland.
During the first nine months of 1997, the Company completed the $22.4
million acquisition of the New Jersey properties which are 100% leased to PHP
subject to a 17-year net operating lease which includes annual rent adjustments
equal to increases in the Consumer Price Index up to a maximum of 5.0%.
Effective May 1, 1997, the Company leased the previously closed Tustin Hospital,
which was vacant when acquired in June 1996. In September 1997, the Company
directly loaned an aggregate of $5.7 million in secured first trust deeds to
facilitate the acquisition of four senior care facilities located in California,
Oregon and Idaho.
As of December 31, 1996, the Company had a reserve for doubtful notes
receivable of $375,000. Due to the uncertainties surrounding various notes, the
Company increased its reserves for doubtful notes receivable to $630,000 as of
June 30, 1997. During the third quarter, management reduced the reserves from
$630,000 to $350,000. Based upon the receipt of the $800,000 Note from Iatros,
the assignment of $400,000 accounts receivable from the Crystal Park facility
and appraisals on the Maryland Gardens and Carroll Manor facilities, management
believes that $350,000 is appropriate.
In May 1997, the Company issued 1,495,000 shares of the Series A Preferred
Stock, from which it received net proceeds of $35.4 million. Of these proceeds,
approximately $28.7 million was used to repay indebtedness which carried
interest at rates ranging from 7.5% to 12%. The Company has a $20.0 million
secured and $3.0 million unsecured line of credit. As of September 30, 1997,
the Company had $4.5 million available under its secured credit line and $3.0
million available under its unsecured credit line. At various times during the
second quarter, which ended on June 30, 1997, the Company repurchased a total of
56,800 shares of the Company's Common Stock at an average price of approximately
$16.30 per share.
The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of medical office
buildings and senior care lending activities and primarily consist of Funds from
Operations ("FFO") less dividends (see discussion below of FFO). In addition to
the recently completed preferred stock offering, the Company's external sources
of capital consist of various secured loans and lines of credit. The Company's
ability to expand its medical office and senior care lending operations requires
continued access to capital to fund new investments.
The Company declared a quarterly distribution payable to holders of the
Company's Common Stock for the third quarter of 1997 in the amount of $0.36 per
share which was paid on October 15, 1997 to stockholders of record on September
30, 1997. The Company also paid a monthly dividend to holders of the Company's
Series A Preferred Stock on the fifteenth day of each of July, August, September
and October to stockholders of record on the first day of each month.
Undistributed FFO was used internally to fund maintenance and capital
expenditures necessary to maintain the Company's existing properties.
In general, the Company expects to continue meeting its short-term
liquidity requirements through its working capital, cash flow provided by
operations and, if necessary, from its lines of credit. The Company considers
its ability to generate cash to be good and expects to continue meeting all
operating requirements as well as providing sufficient funds to maintain
stockholder distributions in accordance with REIT requirements. Long-term
liquidity requirements such as refinancing mortgages, financing acquisitions and
financing capital improvements will be accomplished through long-term
borrowings, the issuance of debt securities and the offering of additional
equity securities. Although no assurances can be given, Management anticipates
that it will complete an offering of 1,200,000 shares of Series B Preferred
Stock during the fourth quarter, the net proceeds of which are expected to be
approximately $28.3 million. The proceeds will be used in part to pay
indebtedness under the Company's credit lines with the balance to fund new
property acquisitions and short-term loans.
Page 21
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA
(Unaudited)
Funds from Operations
- ---------------------
Industry analysts generally consider FFO to be an appropriate measure of
the performance of a REIT. The Company presents FFO based upon the new
guidelines established by the Board of Governors of the National Association of
Real Estate Investment Trusts ("NAREIT"). FFO is calculated to include the
minority interest's share of income since the Operating Partnership's net income
is allocated proportionately among all owners of Operating Partnership units.
The number of Operating Partnership units held by the Company is identical to
the number of outstanding shares of the Company's common stock, and owners of
Operating Partnership units may, at their discretion and subject to certain
restrictions, exchange their units into shares of common stock on a one-for-one
basis.
Management believes that in order to facilitate a clear understanding of
the operating results of the Company, FFO should be examined in conjunction with
the Company's net income as presented in the Condensed Consolidated Financial
Statements and Notes thereto included elsewhere in this Form 10-Q, the
additional data presented below, and the Company's Consolidated Financial
Statements and related Notes included in the Company's annual report on Form 10-
K. Management believes FFO is only one of a range of indicators which should be
considered in determining a company's operating performance. The methods of
calculating FFO among different companies are subject to variation, and FFO
therefore may be an invalid measure of comparing companies. Also, the
elimination of depreciation and gains and losses on sales of property may not be
a true indication of an entity's ability to recover its investment in
properties. The tables below present an analysis of FFO and certain additional
data for the three-month and nine-month periods ended September 30, 1997 and
1996.
<TABLE>
<CAPTION>
For the Three Month For the Nine Month
Periods Ended September 30, Periods Ended September 30,
1997 1996 1997 1996
---------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS1
- ----------------------
Net income $1,991 $1,195 $4,380 $ 8,506
Extraordinary gain (9,311)
Minority interest in Operating Partnership 129 151 400 (77)
------ ------ ------ -------
Income (loss) for Operating Partnership 2,120 1,346 4,780 (882)
before extraordinary gain
Loss on disposition of real property 4,874
Depreciation of real estate assets 851 610 2,400 1,919
Amortization of deferred lease costs 22 17 61 87
Adjustment for minority interest in
consolidated affiliates (19) (7) (61) (21)
Dividends on preferred stock (958) (1150)
------ ------ ------ -------
FUNDS FROM OPERATIONS2 $2,016 $1,966 $6,030 $ 5,977
====== ====== ====== =======
Weighted average shares outstanding 2 4,504 4,561 4,523 4,535
</TABLE>
Table continues on the following page.
Page 22
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Nine Month
Periods Ended September 30, Periods Ended September 30,
1997 1996 1997 1996
---------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
ADDITIONAL DATA
- ---------------
Cash Flows:
- -----------
Operating Activities 1,526 1,602 4,490 5,318
Investing Activities (5,807) (9,335) (40,555) (24,699)
Financing Activities 4,564 5,586 36,370 18,700
Capital Expenditures
- --------------------
Building improvements 62 168 331 366
Tenant improvements 49 372 386 1,091
Furniture, fixtures & equipment --- 15 7 41
Leasing commissions 72 31 114 99
Depreciation and Amortization
- -----------------------------
Depreciation of real estate assets 853 610 2,400 1,919
Depreciation of non-real estate assets 16 11 44 33
Amortization of deferred lease costs 21 17 61 87
Amortization of capitalized financing costs 41 139 442 395
</TABLE>
_____________
(1) FFO represents net income (computed in accordance with generally accepted
accounting principles, consistently applied ("GAAP")), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation of
real property, less preferred stock dividends and after adjustments for
consolidated and unconsolidated entities in which the Company holds a
partial interest. FFO is computed in accordance with the definition
adopted by NAREIT. FFO should not be considered as an alternative to net
income or any other indicator developed in compliance with GAAP, including
measures of liquidity such as cash flows from operating, investing and
financing activities. FFO is helpful in evaluating the performance of a
real estate portfolio considering the fact that historical cost accounting
assumes that the value of real estate diminishes predictably over time.
Management believes FFO is only one of a range of indicators which should
be considered in determining a company's operating performance. The
methods of calculating FFO among different companies are subject to
variation; therefore, FFO may be an invalid measure for purposes of
comparing companies. Also, the elimination of depreciation and gains and
losses on sales of property may not be a true indication of an entity's
ability to recover its investment in properties. The Company implemented
the new method of calculating FFO effective as of the NAREIT-suggested
adoption date of January 1, 1996.
(2) Assumes that all outstanding Operating Partnership units have been
converted to common stock.
Page 23
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company or any of its consolidated or unconsolidated
affiliates nor any of the assets within their portfolios of medical
office buildings, senior care facilities, parking facilities, and
retail space is currently a party to any material litigation.
Item 2 Changes in Securities.
None.
Item 3 Defaults Upon Senior Securities.
None.
Item 4 Submission of Matters to a Vote of Security Holders.
None.
Item 5 Other Information.
None.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
10.53(1) Purchase and Sale Agreement, dated October 1, 1997, by and
between Hampden Nursing Homes, Inc. and G&L Senior Care, LLC.
10.54(1) Lease and Agreement, dated October 1, 1997, by and between
G&L Hampden, LLC and Hampden Holding Group, Inc.
10.55(1) Loan Commitment, dated October 23, 1997, by and between G&L
Realty Partnership, L.P. and Iatros Health Network, Inc.
10.56(1) Lease and Agreement, dated October 1, 1997, by and between
G&L Hampden, LLC and Hampden Nursing Homes, Inc.
10.57(1) Guaranty of Lease, dated October 1, 1997, by Iatros Health
Network, Inc.
10.58(1) Limited Liability Company Agreement of G&L Hampden, LLC.
10.59(1) Loan Agreement by and between Nomura Asset Capital
Corporation and G&L Hampden, LLC.
10.60(1) Promissory Note in the amount of $6,000,000.00 given by G&L
Hampden, LLC in favor of Nomura Asset Capital Corporation.
10.61(1) Form of Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing for each of the 3 Hampden Properties.
10.62 Operating Agreement of AV Medical Associates, LLC, dated as
of September 25, 1997.
10.63 Real Estate Lease by and between AV Medical Associates, LLC
and Hoag Memorial Hospital Presbyterian.
10.64 Assignment of Purchase Agreement and Development Management
Agreement by and between G&L Realty Partnership, L.P.,
Centrium Associates LLC and M&Z Aliso Associates, LLC.
10.65 Amended and Restated Promissory Note in the Amount of
$1,934,325.00 given by Hearthside Skilled Nursing Facility,
LLC in favor of G&L Realty Partnership, L.P.
10.66 Amended and Restated Deed of Trust, Security Agreement,
Fixture Filing with Assignment of Rents and Agreements, dated
as of September 29, 1997, by and between Hearthside Skilled
Nursing Facility, LLC and G&L Realty Partnership, L.P.
10.67 Amended and Restated Assignment of Leases and Rents, dated as
of September 29, 1997, by and between Hearthside Skilled
Nursing Facility, LLC and G&L Realty Partnership, L.P.
10.68 Promissory Note in the Amount of $2,799,490.00 given by
Valley Convalescent, LLC in favor of G&L Realty Partnership,
L.P.
10.69 Deed of Trust, Security Agreement, Fixture Filing with
Assignment of Rents and Agreements, dated as of August 29,
1997, by and between Valley Convalescent, LLC and G&L Realty
Partnership, L.P.
10.70 Assignment of Leases and Rents, dated as of August 29, 1997,
by and between Valley Convalescent, LLC and G&L Realty
Partnership, L.P.
10.71 Promissory Note in the amount of $870,000.00 given by Burley
Skilled Nursing Facility, LLC in favor of G&L Realty
Partnership, L.P.
10.72 Deed of Trust, Security Agreement, Fixture Filing with
Assignment of Rents and Agreements, dated as of September 29,
1997, by and between Burley Skilled Nursing Facility, LLC and
G&L Realty Partnership, L.P.
10.73 Assignment of Leases and Rents, dated as of September 29,
1997, by and between Burley Skilled Nursing Facility, LLC and
G&L Realty Partnership, L.P.
10.74 Promissory Note in the amount of $115,272.00 given by Valley
Living Center, LLC in favor of G&L Realty Partnership, L.P.
10.75 Deed of Trust, Security Agreement, Fixture Filing with
Assignment of Rents and Agreements, dated as of
September 29, 1997, by and between Valley Living Center, LLC
and G&L Realty Partnership, L.P.
10.76 Assignment of Leases and Rents, dated as of September 29,
1997, by and between Valley Living Center, LLC and G&L Realty
Partnership, L.P.
27 Financial Data Schedule.
- ---------------
(1) Filed as an exhibit to the Company's Current Report on Form 8-K (filed as
of October 28, 1997) and incorporated herein by reference.
(b) Reports on Form 8-K.
(i) The Company filed a report on Form 8-K/A on October 6, 1997
concerning the August 15, 1997 acquisition of a certain
rental property located in New Jersey.
(ii) The Company filed a report on Form 8-K on November 5, 1997
concerning the October 28, 1997 acquisition of the Hampden
Properties.
Page 24
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
G&L REALTY CORP.
Date: November 4, 1997 By: /s/ Quentin Thompson
-------------------------------
Quentin Thompson
Secretary, Treasurer
and Chief Accounting Officer
Page 25
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -------------------------------------------------------------
10.53(1) Purchase and Sale Agreement, dated October 1, 1997, by and
between Hampden Nursing Homes, Inc. and G&L Senior Care, LLC.
10.54(1) Lease and Agreement, dated October 1, 1997, by and between
G&L Hampden, LLC and Hampden Holding Group, Inc.
10.55(1) Loan Commitment, dated October 23, 1997, by and between G&L
Realty Partnership, L.P. and Iatros Health Network, Inc.
10.56(1) Lease and Agreement, dated October 1, 1997, by and between
G&L Hampden, LLC and Hampden Nursing Homes, Inc.
10.57(1) Guaranty of Lease, dated October 1, 1997, by Iatros Health
Network, Inc.
10.58(1) Limited Liability Company Agreement of G&L Hampden, LLC.
10.59(1) Loan Agreement by and between Nomura Asset Capital
Corporation and G&L Hampden, LLC.
10.60(1) Promissory Note in the amount of $6,000,000.00 given by G&L
Hampden, LLC in favor of Nomura Asset Capital Corporation.
10.61(1) Form of Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing for each of the 3 Hampden Properties.
10.62 Operating Agreement of AV Medical Associates, LLC, dated as
of September 25, 1997.
10.63 Real Estate Lease by and between AV Medical Associates, LLC
and Hoag Memorial Hospital Presbyterian.
10.64 Assignment of Purchase Agreement and Development Management
Agreement by and between G&L Realty Partnership, L.P.,
Centrium Associates LLC and M&Z Aliso Associates, LLC.
10.65 Amended and Restated Promissory Note in the Amount of
$1,934,325.00 given by Hearthside Skilled Nursing Facility,
LLC in favor of G&L Realty Partnership, L.P.
10.66 Amended and Restated Deed of Trust, Security Agreement,
Fixture Filing with Assignment of Rents and Agreements, dated
as of September 29, 1997, by and between Hearthside Skilled
Nursing Facility, LLC and G&L Realty Partnership, L.P.
10.67 Amended and Restated Assignment of Leases and Rents, dated as
of September 29, 1997, by and between Hearthside Skilled
Nursing Facility, LLC and G&L Realty Partnership, L.P.
10.68 Promissory Note in the Amount of $2,799,490.00 given by
Valley Convalescent, LLC in favor of G&L Realty Partnership,
L.P.
10.69 Deed of Trust, Security Agreement, Fixture Filing with
Assignment of Rents and Agreements, dated as of August 29,
1997, by and between Valley Convalescent, LLC and G&L Realty
Partnership, L.P.
10.70 Assignment of Leases and Rents, dated as of August 29, 1997,
by and between Valley Convalescent, LLC and G&L Realty
Partnership, L.P.
10.71 Promissory Note in the amount of $870,000.00 given by Burley
Skilled Nursing Facility, LLC in favor of G&L Realty
Partnership, L.P.
10.72 Deed of Trust, Security Agreement, Fixture Filing with
Assignment of Rents and Agreements, dated as of September 29,
1997, by and between Burley Skilled Nursing Facility, LLC and
G&L Realty Partnership, L.P.
10.73 Assignment of Leases and Rents, dated as of September 29,
1997, by and between Burley Skilled Nursing Facility, LLC and
G&L Realty Partnership, L.P.
10.74 Promissory Note in the amount of $115,272.00 given by Valley
Living Center, LLC in favor of G&L Realty Partnership, L.P.
10.75 Deed of Trust, Security Agreement, Fixture Filing with
Assignment of Rents and Agreements, dated as of
September 29, 1997, by and between Valley Living Center, LLC
and G&L Realty Partnership, L.P.
10.76 Assignment of Leases and Rents, dated as of September 29,
1997, by and between Valley Living Center, LLC and G&L Realty
Partnership, L.P.
27 Financial Data Schedule.
- ---------------
(1) Filed as an exhibit to the Company's Current Report on Form 8-K (filed as
of October 28, 1997) and incorporated herein by reference.
Page 26
<PAGE>
EXHIBIT 10.62
OPERATING AGREEMENT OF
AV Medical Associates, LLC,
a California Limited Liability Company
This Operating Agreement is made and entered into as of September 25,
1997, by and between M&Z Aliso Associates, LLC, a California limited liability
company ("M&Z") and G&L Realty Partnership, L.P., a Delaware limited partnership
("GLR") (each, a "Member" and, collectively, the "Members"). Certain capitalized
words used herein have the meanings set forth in Section 2 hereof.
1. ORGANIZATION
1.1 A CALIFORNIA LIMITED LIABILITY COMPANY. The Members have formed a
California limited liability company (the "Company") by executing and delivering
the Articles of Organization to the Secretary of State of California in
accordance with the Act, and the rights and liabilities of the Members shall be
as provided in such Act except as may be modified in this Agreement. In the
event of a conflict between the provisions of the Act and the provisions of this
Agreement, the provisions of this Agreement shall prevail unless the Act
specifically provides that the Operating Agreement may not change the provision
in question.
1.2 BUSINESS PURPOSE. The business of the Company is to acquire, own,
operate, construct, improve, manage, lease, sell, exchange or otherwise use real
property and any personal property associated therewith, and to engage in any
and all activities related or incidental thereto, and specifically to acquire
certain real property described as Parcel 2 of lot line adjustment LLA 97-017
recorded July 7, 1997 as Instrument No. 19970320479 in Official Records of
Orange County, California (the "Real Property"), to construct a medical office
building thereon (the "Office Building"), and to hold such improved real
property for lease and investment. The Real Property, the Office Building and
all other improvements to the Real Property are hereinafter collectively
referred to as the "Property." Notwithstanding the foregoing, and subject to
approval of all of the Members, the Company may engage in any lawful business
activity in which a California limited liability company may engage, except that
the Company shall not engage in the trust company business or in the businesses
of banking or insurance.
1.3 NAME AND ADDRESS OF COMPANY. The business of the Company shall be
conducted under the name "AV Medical Associates, LLC," at the following address:
439 North Bedford Drive, Beverly Hills, California 90210.
1.4 TERM. The term of this Agreement shall be coterminous with the
period of duration of the Company as provided in the Articles, which is from the
date of the filing of the Articles until December 31, 2047, unless extended or
sooner terminated as provided in this Agreement.
1.5 REQUIRED FILINGS. The Members shall cause to be executed, filed,
recorded and/or published, such certificates and documents as may be required by
this Agreement or by law in connection with the formation and operation of the
Company.
1.6 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial
registered office and initial registered agent shall be as provided in the
Articles. The registered office and register
<PAGE>
agent may be changed from time to time by the Members by causing the filing of
the new address and/or the name of the new registered agent in accordance with
the Act.
2. DEFINITIONS
For purposes of this Agreement the terms defined hereinbelow shall
have the following meaning unless the context clearly requires a different
interpretation:
2.1 "ACT" shall mean the Beverly-Killea Limited Liability Company Act,
codified in the California Corporation's Code, Section 17100 et seq., as may be
------
amended from time to time.
2.2 "ADJUSTED CAPITAL CONTRIBUTIONS" shall mean the excess of (i) each
Member's money or property contributed to the Company as capital, including
contributions when the Company is formed, and later contributions, less any
liabilities assumed by the Company pursuant to such contribution over (ii) the
sum of cumulative Distributions to such Member under Section 4.4(a)(iv) and
Section 4.4(b)(ii), in the case of GLR, and Section 4.4(a)(iv) and Section
4.4(b)(iv), in the case of M&Z, attributable to such Member's Adjusted Capital
Contributions as referred to therein (such Distributions to be valued in
accordance with the principles of Treasury Regulation Section 1.714-1
(b)(2)(iv)(e)).
2.3 "AGREEMENT" shall mean this Operating Agreement of the Company.
2.4 "AFFILIATE" shall mean with respect to any person or entity: (a)
any person or entity directly or indirectly controlling, controlled by, or under
common control with such person or entity; (b) any person or entity owning or
controlling 10% or more of the outstanding voting securities or beneficial
interests of such person or entity; (c) any officer, director, general partner,
trustee, or anyone acting in a substantially similar capacity as to such person
or entity; (d) any person or entity who is an officer, director, general
partner, trustee, or holder of 10% or more of the voting securities or
beneficial interests of any of the foregoing; and (e) any person or entity
related to such person or entity within the meaning of Code Section 267(b).
2.5 "ARTICLES" shall mean the Articles of Organization of the Company
as filed with the Secretary of State as the same may be amended from time to
time.
2.6 "ASSIGNEE" shall mean a person who has acquired an economic
interest in the Company from a third party but who is not a Substituted Member.
2.7 "CAPITAL ACCOUNT" of a Member shall mean the capital account of
that Member determined from the inception of the Company strictly in accordance
with the rules set forth in Section l.704-l(b)(2)(iv) of the Treasury
Regulations. In accordance with that Section of the Treasury Regulations, a
Member's Capital Account shall be equal to the amount of money contributed by
the Member and the fair market value of any property contributed by the Member
(net of liabilities secured by the property or to which the property is subject)
increased by allocations of Net Income to the Member and decreased by (a) the
amount of money distributed to the Member, (b) the fair market value of any
property distributed to the Member by the Company (net of liabilities secured by
the property or to which the property is subject), (c) the Member's share of
expenditures of the Company described in Section 705(a)(2)(B) of the Code
(including, for this purpose, losses which are nondeductible under Section
267(a)(1) or Section 707(b) of the Code) and (d) the Net Losses allocated
-2-
<PAGE>
to the Member. The Capital Account of a Member shall be further adjusted as
required by Section l.704-l(b)(2)(iv) of the Treasury Regulations. To the extent
that anything contained herein shall be inconsistent with Section l.704-
l(b)(2)(iv) of the Treasury Regulations, the Treasury Regulations shall control.
The Capital Account of an Assignee shall be the same as the Capital Account of
the Member from whom the Assignee acquired its Interest, as further adjusted
pursuant to this Section 2.6 as if such Assignee were a Member.
2.8 "CAPITAL CONTRIBUTIONS" shall mean the total cash investment and
contribution to the capital of the Company by the Members, as provided in
Section 3.1.
2.9 "CAPITAL EVENT" shall mean the sale or other disposition of the
Company's assets of a capital type (including all or any portion of the
Property) regardless of whether such property is treated as capital gain
property or ordinary income property for federal income tax purposes), the
refinancing of any such Company assets, the receipt of insurance and other
proceeds derived from the involuntary conversion of such Company assets, or from
similar events with respect to the assets of the Company.
2.10 "CASH FROM CAPITAL EVENTS" shall mean (i) the cash proceeds from
a Capital Event after retirement of debt of the Company and all expenses
relating to the transaction, and retention of reasonable reserves, and (ii) cash
proceeds representing excess condemnation proceeds or insurance proceeds.
Excess condemnation proceeds and insurance proceeds shall include the remaining
condemnation proceeds and insurance proceeds after (i) payments required to be
made to lenders, tenants or any other party pursuant to an agreement of the
Company, (ii) all expenses for repairs and restorations made by the Company at
the reasonable discretion of the Members, subject to Section 5, to repair or
restore the damage caused by the condemnation or by the event for which the
insurance is provided, (iii) all expenses relating to the condemnation or
insurance payment, and (iv) the retention of reasonable reserves.
2.11 "CODE" shall mean the Internal Revenue Code of 1986, as amended
to date, or corresponding provisions of subsequent superseding revenue laws.
2.12 "COMPANY" shall refer to the limited liability company created
pursuant to the Articles as governed by this Agreement.
2.13 "COMPANY MINIMUM GAIN" with respect to any taxable year of the
Company shall mean the "partnership minimum gain" of the Company computed
strictly in accordance with the principles of Section l.704-2(b)(2) of the
Treasury Regulations.
2.14 "CONSTRUCTION PERIOD" shall mean the period of time commencing at
the inception of the Company up to the date the notice of completion for the
Office Building is recorded in the Official Records of Orange County,
California.
2.15 "DISTRIBUTABLE CASH FROM OPERATIONS" shall mean the excess of
cash received by the Company from operations over (a) operational cash
disbursements, and (b) a reasonable allowance for reserves, contingencies and
anticipated obligations.
2.16 "DISTRIBUTIONS" shall mean any cash (or property to the extent
applicable) distributed to the Members or Assignees arising from their
Interests in the Company.
-3-
<PAGE>
2.17 "ECONOMIC RISK OF LOSS" shall mean the economic risk of loss
within the meaning of Section l.752-2 of the Treasury Regulations.
2.18 "INTEREST" shall mean the ownership interest as a Member in the
Company or the economic interest as an Assignee.
2.19 "MAJORITY-IN-INTEREST" shall mean any group of Members who
own a majority of the interests in both the Net Income and Capital Accounts of
---
the Company. For this purpose, Net Income is determined and allocated based on
any reasonable estimate of Net Income from the date of the event giving rise to
the vote of the Members to the projected termination of the Company, taking into
account present and future allocations of Net Income under this Agreement as in
effect on the date of the event. For this purpose, Capital Accounts are
determined as of the date of the event.
2.20 "MEMBER" shall mean any person or entity admitted to the Company
as a Member or Substituted Member and who has not ceased to be a Member.
2.21 "MEMBER NONRECOURSE DEBT" shall mean liabilities of the Company
treated as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the
Treasury Regulations.
2.22 "MEMBER NONRECOURSE DEDUCTIONS" shall mean in any Company fiscal
year, the Company deductions that are characterized as "partnership nonrecourse
deductions" under Section l.704-2(i)(2) of the Treasury Regulations.
2.23 "NET INCOME FROM OPERATIONS" and "NET LOSSES" shall mean the net
income and net losses, respectively, of the Company as determined for federal
income tax purposes; provided however, that the "book" value of an asset shall
be substituted for its adjusted tax basis if the two differ, and provided that
the following items shall be excluded from the computation of Net Income and Net
Losses:
(a) Any gain or income specifically allocated under Section
4.5(d)(iii), (iv) or (v).
(b) Any Nonrecourse Deductions.
(c) Any Member Nonrecourse Deductions.
(d) Net Income from Capital Events.
2.24 "NET INCOME FROM CAPITAL EVENTS" shall mean the net income of the
Company recognized from a Capital Event as determined for federal income tax
purposes; provided, however, that the "book" value of an asset shall be
substituted for its adjusted tax basis if the two differ.
2.25 "NONRECOURSE DEDUCTIONS" in any fiscal year means the amount of
Company deductions that are characterized as "nonrecourse deductions" under
Section 1.704-2(b)(l) of the Treasury Regulations.
-4-
<PAGE>
2.26 "NONRECOURSE LIABILITIES" shall mean the liabilities of the
Company treated as "nonrecourse liabilities" under Section l.752-1(a)(2) of the
Treasury Regulations.
2.27 "PERCENTAGE INTEREST" shall mean the percentage interest
indicated on SCHEDULE A, as adjusted pursuant to Section 3.l of this Agreement.
----------
2.28 "PREFERRED RETURN" shall mean a cumulative, non-compounded annual
return of ten percent (10.00%) (pro rated for periods less than a whole year) on
the periodic balances of a Member's Adjusted Capital Contributions.
2.29 "SUBSTITUTED MEMBER" shall mean an Assignee who shall become a
Member in the place of an assignor Member pursuant to Section 7.3.
2.30 "TREASURY REGULATIONS" shall mean the regulations of the United
States Treasury Department pertaining to the Code, as amended, and any
successor provision(s).
3. CAPITAL
3.1 CAPITAL CONTRIBUTIONS AND LOANS.
(a) INITIAL CONTRIBUTIONS AND LOANS.
(i) INITIAL CONTRIBUTIONS. Each Member shall make an initial
contribution to the capital of the Company in the amount set forth on SCHEDULE
--------
A, which amount shall be contributed upon execution of this Agreement. Further,
- -
M&Z shall concurrently herewith assign to the Company all right, title and
interest to acquire the Property pursuant to that certain Purchase and Sale
Agreement with Escrow Instructions between Mission Viejo Company as Seller and
M&Z Associates, LLC dated as of May l, l997, as amended, together with those
contracts and other agreements related to the Office Building set forth on
SCHEDULE B attached hereto.
- ----------
(ii) Initial Loans. GLR shall concurrently herewith loan to
the Company $2,000,000, which loan shall be evidenced by a promissory note (the
"Note"), with monthly interest only payments, at the rate of ten percent (10%)
per annum, with all principal and accrued but unpaid interest due and payable
one year from the date hereof. The Note shall be in the form of and on such
additional terms as EXHIBIT A attached hereto and shall be secured by a deed of
---------
trust in the form and on the terms of EXHIBIT B attached hereto, which deed of
---------
trust shall encumber the Real Property and the Office Building (the "Trust
Deed").
(b) ADDITIONAL CAPITAL REQUIREMENTS.
(i) ADDITIONAL CAPITAL CONTRIBUTIONS. In the event any
Member reasonably determines, from time to time, that additional capital is
required for the operations of the business of the Company ("Shortfall Amount")
and funds are not available from commercial lenders on terms reasonably
acceptable to all of the Members, the determining Member shall send a notice of
such Shortfall Amount to the other Members ("Shortfall Notice"). All of the
Members may (but shall not be obligated to) thereupon, within thirty (30) days
of the date of such Shortfall Notice (the "Contribution Date") contribute
("Shortfall Contribution(s)"), pro rata based on their respective initial
Percentage Interest at the time of execution of this Agreement, without
adjustment
-5-
<PAGE>
pursuant to Section 3.l(b)(ii) or otherwise ("Initial Percentage Interest"), the
Shortfall Amount to the Company. Each Member may contribute in cash an amount
(the "Member's Share") equal to such Member's Initial Percentage Interest
multiplied by the total Shortfall Amount identified in the Shortfall Notice. M&Z
may elect, by delivery of written notice to GLR and the Company, to have all or
a part of the amount to be distributed to M&Z pursuant to Section 4.4(b)(v)
herein applied to its Member's Share and the Company shall accept such credit of
any amount yet to be distributed to M&Z pursuant to Section 4.4(b)(v) to M&Z's
Member's Share then due and owing. If any Member shall fail to contribute as
referenced above, then (i) such non-contributing Member(s) shall be referred to
herein as a "Non-Contributing Member," and (ii) each of the remaining Members
who have voluntarily contributed their respective Member's Share (a
"Contributing Member") shall have the right to either (A) contribute its
Member's Share plus the amount the Non-Contributing Members failed to contribute
(allocated among all Contributing Members who desire to make such contributions
in accordance with their respective Initial Percentage Interests), in which case
such contributions shall be treated like all other Shortfall Contributions, or
(B) loan ("Shortfall Loan") its Member's Share plus the amount the Non-
Contributing Members failed to contribute (allocated among all Contributing
Members who desire to make such loan in accordance with their respective Initial
Percentage Interests). Shortfall Loan(s) shall (i) bear interest at a rate equal
to the lesser of (A) 3% over Wells Fargo Bank's then quoted prime rate, as
adjusted from time to time, or (B) the maximum rate then permitted by law, (ii)
be repaid by the Company to the lending Members pro rata prior to the
Distributions made to all of the Members pursuant to Section 4, (iii) be
evidenced by a promissory note, and (iv) be on such other terms and conditions
as reasonably determined by the Contributing Members.
(ii) DILUTION FOR NON-CONTRIBUTING MEMBERS. If any
Contributing Member(s) makes a Shortfall Contribution for Non-Contributing
Member(s), then (i) the Percentage Interest(s) of the Contributing Member(s)
shall be increased, pro rata, by a percentage equal to 200% times a fraction,
the numerator of which is the amount of the Non-Contributing Member's(s') Share
and the denominator of which is the sum of the total capital contributed to the
Company to date, including the then current Shortfall Contribution, and (ii) the
Percentage Interest(s) of the Non-Contributing Member(s) shall be decreased, pro
rata, by the same percentage calculated in subpart (i) of this subsection.
(iii) PRIORITY OF ADDITIONAL CONTRIBUTIONS AND LOANS.
Notwithstanding any provision to the contrary in Section 4 or any other Section
of this Agreement, in the event any Shortfall Contributions or Shortfall Loans
have been made pursuant to this Section, (i) prior to any Distributions being
made, all Shortfall Loans shall be repaid in full, and (ii) all subsequent
Distributions shall be made to the Members pro rata in proportion to their
unrecovered Shortfall Contributions made pursuant to this Section until they
have fully recovered such Shortfall Contributions.
3.2. INTEREST. No Member shall receive interest on its
contribution to the capital of the Company.
3.3. WITHDRAWAL AND RETURN OF CAPITAL. Except as may be provided
herein, no Member may withdraw any portion of the capital of the Company and no
Member shall be entitled to the return of its contribution to the capital of the
Company except on dissolution of the Company.
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3.4 CAPITAL ACCOUNTS.
(a) MEMBER CAPITAL ACCOUNTS. An individual Capital Account shall
be maintained for each Member.
(b) CAPITAL ACCOUNT OF ASSIGNEE. On any sale or transfer of any
Interest, the Capital Account of the transferor Member shall become the Capital
Account of the Assignee Member, as it existed at the effective date of the
transfer of the Member's Interest.
(c) DEFICIT CAPITAL ACCOUNT. No Member shall have any liability
to the Company, to any other Member, or to the creditors of the Company on
account of any deficit Capital Account balance.
4. FINANCIAL
4.1 ACCOUNTING METHOD. The Company books shall be kept on a basis to
be jointly determined by the Members.
4.2 FISCAL YEAR. The fiscal year of the Company shall end on December
31, unless the Members determine that some other fiscal year would be more
appropriate and obtain the consent of the Internal Revenue Service to use that
other fiscal year.
4.3 EXPENSES OF THE COMPANY. The Company shall pay or reimburse to
the Members the expenses of the Company including, but not limited to, the
organizational expenses (including legal and filing fees), the operational
expenses and any expenses incurred in connection with purchasing, operating and
disposing of any Company property; provided, however, that the Members shall not
incur expenses on behalf of the Company or be reimbursed for any expenses that
are not related to the business of the Company and shall only be reimbursed for
expenses approved by the Members in accordance with Section 5 hereof.
4.4 DISTRIBUTIONS. Other than Distributions in liquidation as
provided in Section 9.3, Distributions shall be distributed at such times as
determined by the Members and when distributed shall be distributed to the
Members in accordance with the following order of priority:
(a) DISTRIBUTABLE CASH FROM OPERATIONS. Distributable Cash from
Operations shall be distributed as follows:
(i) First, to GLR until it has received cumulative
Distributions pursuant to this Section 4.4(a)(i) and Section 4.4(b)(i) equal to
its Preferred Return that has accrued during the Construction Period; and
thereafter
(ii) To M&Z until it has received cumulative Distributions
pursuant to this Section 4.4(a)(ii) and Section 4.4(b)(iii) equal to its
Preferred Return that has accrued during the Construction Period; and thereafter
(iii) To the Members until they have received cumulative
Distributions pursuant to this Section 4.4(a)(iii) and Section 4.4(b)(i) (in the
case of GLR) and this Section 4.4(a)(iii) and Section 4.4(b)(iii) (in the case
of M&Z) equal to their Preferred Returns accrued
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for periods commencing on the first date after the Construction Period,
allocated among them in proportion to their relative accrued Preferred Returns;
and thereafter
(iv) To the Members to the extent of their Adjusted Capital
Contributions, allocated among them in proportion to their relative Adjusted
Capital Contributions; and thereafter
(v) To the Members in accordance with their Percentage
Interests.
(b) DISTRIBUTIONS OF CASH FROM CAPITAL EVENTS. Distributions of
Cash from Capital Events shall be as follows:
(i) To GLR until it has received cumulative Distributions
pursuant to this Section 4.4(b)(i), Section 4.4(a)(i) and Section 4.4(a)(iii)
equal to its accrued but unpaid Preferred Return; and thereafter
(ii) To GLR to the extent of its Adjusted Capital
Contributions; and thereafter
(iii) To M&Z until it has received cumulative Distributions
pursuant to this Section 4.4(b)(iii), Section 4.4(a)(ii) and Section 4.4(a)(iii)
equal to its accrued but unpaid Preferred Return; and thereafter
(iv) To M&Z to the extent of its Adjusted Capital
Contributions; and thereafter
(v) To M&Z until it has received credits to its Member's
Share pursuant to Section 3.1(b)(i) and cumulative Distributions pursuant to
this Section 4.4(b)(v) equal in the aggregate to $75,000; and thereafter
(vi) To GLR until it has received cumulative Distributions
pursuant to this Section 4.4(b)(vi) equal to a cumulative, but noncompounded,
five percent (5%) return on its Adjusted Capital Contributions computed from
the inception of the Company; and thereafter
(vii) To M&Z until it has received cumulative Distributions
pursuant to this Section 4.4(b)(vii) equal to a cumulative, but noncompounded,
five percent (5%) return on its Adjusted Capital Contributions computed from the
inception of the Company; and thereafter
(viii) To the Members in accordance with their Percentage
Interests.
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4.5 ALLOCATIONS OF NET INCOME AND NET LOSSES. Subject to Section
4.5(d), below, Net Income from Operations, Net Income from Capital Events and
Net Losses shall be allocated to the Members based on the following order of
priority:
(a) NET INCOME FROM OPERATIONS. Net Income from Operations shall
be allocated to the Members in the following order of priority:
(i) First, to the Members with negative Capital Accounts,
between them in proportion to the ratio of their negative Capital Account
balances, until no Member has a negative Capital Account (after crediting each
Member's Capital Account for the amount each Member is deemed obligated to
restore pursuant to the penultimate sentences of Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), and after adjusting each Member Capital
Account as required in Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Treasury Regulations); and thereafter
(ii) To GLR to the extent, if any, that its Adjusted
Capital Contributions exceeds its Capital Account balance; and thereafter
(iii) To M&Z to the extent, if any, that its Adjusted
Capital Contributions exceeds its Capital Account balance; and thereafter
(iv) To GLR to the extent that the sum of its Adjusted
Capital Contributions and unpaid Preferred Return that has accrued during the
Construction Period exceeds its Capital Account balance; and thereafter
(v) To M&Z to the extent that the sum of its Adjusted
Capital Contributions plus unpaid Preferred Return that has accrued during the
Construction Period exceeds its Capital Account balance; and thereafter
(vi) To the Members whose Adjusted Capital Contributions
plus unpaid Preferred Returns exceed their Capital Accounts balances, among them
in proportion to such excesses; and thereafter
(vii) To the Members in accordance with their Percentage
Interests.
(b) NET INCOME FROM CAPITAL EVENTS. Net Income from Capital
Events shall be allocated in accordance with the following order of priority:
(i) First, to the Members with negative Capital Accounts,
between them in proportion to the ratio of their negative Capital Account
balances, until no Member has a negative Capital Account (after crediting each
Member's Capital Account for the amount each Member is deemed obligated to
restore pursuant to the penultimate sentences of Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), and after adjusting each Member Capital
Account as required in Section l.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Treasury Regulations); and thereafter
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<PAGE>
(ii) To GLR to the extent that the sum of its Adjusted
Capital Contributions and unpaid Preferred Return that has accrued exceeds its
Capital Account balance and thereafter
(iii) To M&Z to the extent that the sum of its Adjusted
Capital Contributions and unpaid Preferred Return that has accrued exceeds its
Capital Account balance; and thereafter
(iv) To M&Z to the extent that the cumulative allocations
pursuant to this Section 4.5(b)(iv) equals $75,000; and thereafter
(v) To GLR to the extent that the sum of (i) its Adjusted
Capital Contributions, (ii) its Preferred Return and (iii) an amount equal to a
cumulative five percent (5%) return on its Adjusted Capital Contributions
computed from the inception of the Company exceeds its Capital Account balance;
and thereafter
(vi) To M&Z to the extent that the sum of(i) its Adjusted
Capital Contributions, (ii) its Preferred Return and (iii) an amount equal to a
cumulative five percent (5%) return on its Adjusted Capital Contributions
computed from the inception of the Company exceeds its Capital Account balance;
and thereafter
(vii) To the Members in accordance with their Percentage
Interests.
(c) NET LOSSES AND NONRECOURSE DEDUCTIONS. Net Losses and
Nonrecourse Deductions shall be allocated in accordance with the following order
of priority:
(i) First, to the Members until the Members have received
cumulative allocations of Net Loss and Nonrecourse Deductions pursuant to this
Section 4.5(c)(i) equal to the difference between (A) the cumulative allocations
of Net Income pursuant to Section 4.5(a)(vii) and Section 4.5(1)(vii) over (B)
the cumulative Distributions to the Members pursuant to Section 4.4(a)(v) and
Section 4.4(b)(viii), among them in proportion to their relative proportion of
such amounts; and thereafter
(ii) To M&Z until it has received cumulative allocations of
Net Loss and Nonrecourse Deductions pursuant to this Section 4.5(c)(ii) equal to
the difference between (A) the cumulative allocations of Net Income pursuant to
Section 4.5(b)(vi) over (B) the cumulative Distributions to M&Z pursuant to
Section 4.4(b)(vii); and thereafter
(iii) To GLR until it has received cumulative allocations of
Net Loss and Nonrecourse Deductions pursuant to this Section 4.5(c)(iii) equal
to the difference between (A) the cumulative allocations of Net Income pursuant
to Section 4.5(b)(v) over (B) the cumulative Distributions to GLR pursuant to
Section 4.4(b)(vi); and thereafter
(iv) To M&Z to the extent that it has received cumulative
allocations of Net Loss and Nonrecourse Deductions pursuant to this Section
4.5(c)(iv) equal to the difference between (A) the cumulative allocations of Net
Income to M&Z pursuant to Section 4.5(b)(iv) over (B) the cumulative
Distributions to M&Z pursuant to Section 4.4(b)(v); and thereafter
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<PAGE>
(v) To M&Z until it has received cumulative allocations of
Net Loss and Nonrecourse Deductions pursuant to this Section 4.5(c)(v) equal to
the difference between (A) the cumulative allocations of Net income to M&Z
relating to its unpaid Preferred Return pursuant to Sections 4.5(a)(v) and (vi),
and Section 4.5(b)(iii) over (B) the cumulative Distributions to M&Z relating to
its unpaid Preferred Return pursuant to Sections 4.4(a)(ii) and (iii), and
Section 4.4(b)(iii); and thereafter
(vi) To M&Z until its Capital Account balance is reduced to
zero; and thereafter
(vii) To GLR until it has received cumulative allocations of
Net Loss and Nonrecourse Deductions pursuant to this Section 4.5(c)(vii) equal
to the difference between (A) the cumulative allocations of Net Income to GLR
relating to its unpaid Preferred Return pursuant to Sections 4.5(a)(iv) and
(vi), and Section 4.5(b)(ii) over (B) the cumulative Distributions to GLR
relating to its Preferred Return pursuant to Sections 4.4(a)(i) and (iii), and
Section 4.4(b)(i); and thereafter
(viii) To GLR until its Capital Account balance is reduced
to zero; and thereafter
(ix) To the Members in accordance with their Percentage
Interests
(d) TAX ALLOCATIONS.
(i) 704 ALLOCATIONS. To the extent permitted by Section
1.704-1(b)(4)(i) of the Treasury Regulations, all items of income, gain, loss,
and deduction for Federal and state income tax purposes shall be allocated in
accordance with the corresponding "book" items in accordance with the principles
of Section 704(c) of the Code and Section l.704-l(b)(4)(i) of the Treasury
Regulations.
(ii) RECAPTURE. In the event that the Company has taxable
income that is characterized as ordinary income under the recapture provisions
of the Code, each Member's distributive share of taxable gain or loss from the
sale of Company assets (to the extent possible) shall include a proportionate
share of this recapture income equal to that Member's prior share of prior
cumulative depreciation deductions with respect to the assets which gave rise to
the recapture income.
(iii) MINIMUM GAIN CHARGEBACK. Except as otherwise provided
in Section 1.704-2(f) of the Treasury Regulations, in the event that there is a
net decrease in the Company Minimum Gain during any taxable year, each Member
shall be allocated items of income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member's share of the net decrease
in such Company Minimum Gain during such year in accordance with Section 1.704-
2(g) of the Treasury Regulations. This Section 4.4(d)(iii) is intended to comply
with the minimum gain chargeback requirement of Section 1.704-2(f) of the
Treasury Regulations and shall be interpreted consistent therewith.
(iv) MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Section 1.704-2(i)(4) of the Treasury Regulations, in the event
there is a net decrease in the minimum gain attributable to a Member Nonrecourse
Debt during any taxable year, each Member with
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a share of such minimum gain shall be allocated income and gain for the year
(and, if necessary subsequent years) in accordance with Section 1.704-2(i) of
the Treasury Regulations. This Section 4.4(d)(iv) is intended to comply with the
chargeback requirement of Section 1.704-2(i)(4) of the Treasury Regulations and
shall be interpreted consistent therewith.
(v) QUALIFIED INCOME OFFSET. Any Member who unexpectedly
receives an adjustment, allocation, or distribution described in subparagraphs
(4), (5) or (6) of Section 1.704-1 (b)(2)(ii)(d) of the Treasury Regulations,
- - - -
which adjustment, allocation or distribution creates or increases a deficit
balance in that Member's Capital Account, shall be allocated items of "book"
income and gain in an amount and manner sufficient to eliminate or to reduce
the deficit balance in that Member's Capital Account so created or increased as
quickly as possible in accordance with Section 1.704-1 (b)(2)(ii)(d) of the
-
Treasury Regulations and its requirements for a "qualified income offset." The
Members intend that the provision set forth in this Section 4.4(d)(v) will
constitute a "qualified income offset" as described in Section 1.704-1
(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted consistent
-
therewith.
(e) VARYING INTERESTS. Where any Member's interest, or portion
thereof, is acquired or transferred during a taxable year, the Members may
choose to implement the provisions of Section 706(d) of the Code in allocating
among the varying interests.
(f) CONSENT OF MEMBER. The methods, hereinabove set forth, by
which Net Income, Net Losses and Distributions are allocated and distributed are
hereby expressly consented to by the Members as an express condition of becoming
a Member.
5. MANAGEMENT
5.1 MANAGEMENT OF THE COMPANY.
(a) GENERAL. The operations and affairs of the Company shall be
administered by its Members as set forth in this Section 5.
(b) MANAGING MEMBER CONTROL IN M&Z. M&Z shall be the managing
Member. Except as otherwise expressly stated in this Agreement, M&Z shall have
exclusive control and responsibility over the business of the Company, shall
oversee business operations and day-to-day management of the Company, shall
establish policy and operating procedures respecting the Company's business, and
shall have all rights, power, and authority generally conferred by law or
necessary, advisable, or consistent with accomplishing the purpose of the
Company.
(c) SPECIFIC MANAGEMENT RIGHTS AND OBLIGATIONS
(i) FINANCING AUTHORITY IN GLR. Notwithstanding Section
5.1(b) above, GLR shall have exclusive control and responsibility to arrange all
financings relating to the Company, including, but not limited to, both the
construction financing for the Property and any long term loans secured by the
Property. All such financings shall be on competitive terms and shall be subject
to the reasonable prior written approval of M&Z.
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(ii) DEVELOPMENT AND CONSTRUCTION SUPERVISION/
PREDEVELOPMENT BUDGET PREPARATION. M&Z shall perform all development and
construction supervision services required for the development of the Property
("Development Services"). In addition to all other required Development
Services, M&Z shall, concurrently with the execution of this Agreement, prepare
and submit to GLR for its review and approval a construction budget (the
"Predevelopment Budget") setting forth all costs ("hard" and "soft") to be
incurred in constructing the Office Building, as well as a time schedule for
completing each phase of construction and the final completion date. M&Z has
informed GLR that the aggregate total of all items in the Predevelopment Budget
is approximately $6,000,000. M&Z represents to GLR that M&Z established the
Predevelopment Budget acting diligently and in good faith, and in an effort to
make the cost estimates in the Predevelopment Budget as close as possible to
what the actual costs of such items will be. M&Z further represents to GLR that
M&Z does not anticipate the actual cost of the items specified in the
Predevelopment Budget will exceed $6,000,000. GLR shall either approve or
disapprove the Predevelopment Budget within ten (10) business days of receipt.
If GLR disapproves the Predevelopment Budget, it shall cite the specific reasons
for its disapproval and M&Z shall resubmit a revised budget taking into account
such requested revisions within ten (10) business days of receipt of such
comments. This process shall be repeated until all Members agree on the
Predevelopment Budget.
(iii) PROPERTY MANAGEMENT/OPERATING BUDGET PREPARATION. GLR
shall perform all required property management services for the Property
("Management Services"). In addition to all other required Management Services,
GLR shall, at least ninety (90) days prior to the beginning of each fiscal year
for the Company, prepare and submit to all other Members for their review and
approval an operating budget (the "Operating Budget") setting forth the
anticipated receipts and expenditures for the following Company fiscal year in
such detail as M&Z may reasonably require. Each Member shall either approve or
disapprove the Operating Budget within ten (10) business days of receipt. If a
Member disapproves the Operating Budget, it shall cite the specific reasons for
its disapproval and GLR shall resubmit a revised budget taking into account such
requested revisions within ten (10) business days of receipt of such comments.
This process shall be repeated until all Members agree on the Operating Budget.
(d) EXECUTION OF DOCUMENTS/RELIANCE ON ACTS OF MEMBERS. All of
the Members, on behalf of the Company, shall be required to sign any deed, deed
of trust, bill of sale, contract of sale or purchase, option, or other
instrument conveying or encumbering, or purporting to convey or encumber, all or
any portion of the fee interest in any real or personal property, at any time
owned by the Company, for such instrument to be binding and enforceable against
the Company; provided, however, that the Note and Trust Deed may be executed by
either GLR or M&Z alone. Only one Member, on behalf of the Company, shall be
required to sign any lease, license, easement, or other instrument purporting to
create a leasehold or other right to use any portion of the fee interest in any
real or personal property, at any time owned by the Company, for such instrument
to be binding and enforceable against the Company. All other agreements,
documents. and instruments executed on behalf of the Company shall be executed
by at least two Members. Except for the number of Members' signatures required
by this Section, no other signatures shall be required for any agreement,
document, or instrument to be binding and enforceable against the Company. No
purchaser, mortgagee, lessee, assignee, optionee, or other
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party dealing with the Company shall be required to ascertain whether the
provisions of this Agreement have been met or complied with, or to inquire as
to the authority or power of any Member or be obliged to inquire into the
validity of any agreement, document, or instrument executed by the Members, and
any such party shall be exonerated from any and all liability if such party
deals with the Company on the basis of agreements, documents, and instruments
executed on behalf of the Company by the Members as described in this Section.
(e) MAJOR DECISIONS. Notwithstanding any other Section of this
Agreement, no act shall be taken, sum expended, decision made, or obligation
incurred by either M&Z or GLR on behalf of the Company with respect to a matter
within the scope of any of the major decisions enumerated below (hereinafter
"Major Decisions"), unless such Major Decision has been reviewed and approved
in advance in writing by all of the Members. Major Decisions shall only
include:
(i) Election to dissolve the Company;
(ii) Sale of all or substantially all of the assets of the
Company in a single transaction or series of related transactions;
(iii) Amending this Agreement;
(iv) Admitting a new Member;
(v) Any contract for the acquisition of any land, including
but not limited to, option agreements, purchase agreements, ground leases, and
offers to enter into any of the foregoing where a nonrefundable deposit and/or
specific performance of the Company is required in connection with such offer;
(vi) Borrowing in excess of $25,000 or entering into any
loan documents;
(vii) Any participating financing of the Property, including
but not limited to, option and permanent participating financing of the
construction of improvements with respect thereto;
(viii) Any transaction with either an M&Z or GLR Affiliate
(unless otherwise specifically provided for in this Agreement), including
approval of the terms and conditions of such transaction;
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(ix) Entering into a partnership limited liability company,
or joint venture agreement with any third parry, including approval of the terms
and conditions of such partnership. limited liability company, or joint venture
agreement;
(x) Investing Distributable Cash from Operations or Cash
From Capital Events in any asset other than the Property, except temporarily to
establish working capital reserves as reasonably determined by M&Z or GLR, as
applicable (such temporary working capital reserves may be invested in (a)
obligations that are backed by the United States government or insured by FDIC
or FSLIC, or (b) short term corporate paper rated not less than A by Standard
and Poors);
(xi) Adjusting, settling or compromising any claim,
obligation, debt, demand, suit or judgment against the Company involving more
than $10,000;
(xii) Implementing, changing or modifying any site plan(s)
for the development of the Property;
(xiii) Entering into any lease in excess of 3,000 square
feet;
(xiv) Entering into a construction contract with a general
contractor for construction of the Office Building;
(xv) Making any material change in or deviation from the
approved Predevelopment Budget or Operating Budget, and;
(xvi) Establishing, implementing, changing or modifying any
budget for the Property or the Company business.
5.2 COMPENSATION TO THE MEMBERS.
(a) FINANCING FEE. Upon any and all financings and refinancing of
Company indebtedness, GLR shall receive a fee equal to one percent (1.0%) of the
total amount of the financed debt (the "Financing Fee"). The Financing Fee shall
be paid upon finding of the indebtedness. GLR shall also be promptly reimbursed
by the Company for all costs and expenses incurred by GLR relating to any such
financings or refinancings.
(b) DEVELOPMENT FEE. As the sole consideration for performing the
Development Services, M&Z shall receive a development fee equal to $105,000 (the
"Development Fee"). The Development Fee shall be paid monthly in the amount of
$7,500 commencing November 1, 1997 and continuing on the first day of each
calendar month thereafter until construction of the Office Building commences
(defined as pouring of foundations) at which time the monthly payment shall
increase to $10,000 and continue until the Development Fee is paid in full,
provided M&Z is not in default hereunder.
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(c) PROPERTY MANAGEMENT FEE. As the sole consideration for
performing the Management Services, GLR shall receive a monthly property
management fee equal to one percent (1%) of the gross revenues collected during
the calendar month for which such fee is payable (the "Management Fee"). The
Management Fee shall be paid on or before the thirtieth (30th) day after the end
of the calendar month for which it is payable. The term "gross revenues" shall
include all revenues received from the Real Property or the Office Building,
including but not limited to base rent, but excluding reimbursement for property
taxes, insurance and maintenance costs.
5.3 RESPONSIBILITIES OF THE MEMBERS. Each Member shall devote such
time to administering the business of the Company as it reasonably deems
necessary to perform its duties as set forth in this Agreement. Nothing in this
Agreement shall preclude the employment by the Company of any agent or third
party to provide services in respect of the business of the Company; provided,
however, that the Members shall continue to have ultimate responsibility under
this Agreement. The Members shall cause to be filed such certificates or filings
as may be required for the continuation and operation of the Company as a
limited liability company in the State of California or any other state in which
the Company elects to do business. The Members shall use their best efforts to
do all things (including the filing of certificates, the appointment of
registered agents of the Company and maintenance of registered offices of the
Company) requisite to the qualification or maintenance of the Company as a
limited liability company under the laws of the State of California or any other
state in which the Company may elect to do business.
5.4 DEVOTION OF TIME. The Members are not obligated to devote their
full time to the affairs of the Company. Any Member may become involved in other
businesses and occupations and other partnerships, some of which may be directly
competitive with the Company business. The Members shall devote such time as is
necessary to manage the Company business and perform the Members' duties
hereunder.
5.5 LIMITATIONS ON A MEMBER'S AUTHORITY. The Members shall not have
the authority to:
(a) ACT IN CONTRAVENTION OF AGREEMENT. Do any act in
contravention of this Agreement;
(b) USE COMPANY ASSETS. Employ, or permit to employ, the funds
or assets of the Company in any manner except for the exclusive benefit of the
Company;
(c) CREATE LIABILITY TO THE MEMBERS. Perform any action (other
than an act required by this Agreement or any act taken in good faith) which
would, at the time such act occurred, subject the Members to liability in any
jurisdiction;
(d) ALTER OR HINDER PURPOSE OF COMPANY. Alter the primary purpose
of the Company as set forth in Section 1.2 or do any act which would make it
impossible to carry on the ordinary business of the Company; or
(e) POSSESS COMPANY PROPERTY. Possess Company property, assign
the rights of the Company in any property for other than a Company purpose, or
commingle Company funds with those of any other person or entity.
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5.6 LIMITATION OF RIGHTS OF MEMBERS. Except as otherwise provided in
this Agreement, no Member shall have the right or power to: (i) withdraw or
reduce its Capital Contribution, except as a result of the dissolution of the
Company or as otherwise provided in this Agreement or by law; (ii) bring an
action for partition against the Company; or (iii) demand or receive property in
any distribution other than cash. Except as otherwise provided in this
Agreement, no Member shall have priority over any other Member either as to the
return of Capital Contributions or as to allocations of the Net income. Net
Losses or Contributions of the Company.
5.7 TAX MATTERS MEMBER. GLR shall be the "Tax Matters Member" of the
Company in accordance with Section 6231 (a)(7) of the Code and in connection
therewith and in addition to all the powers given thereunder, shall have all
other powers needed to fully perform hereunder including, without limitation,
the power to retain all attorneys and accountants of their choice. The
designation made in this Section is hereby expressly consented to by each Member
as an express condition to becoming a Member.
5.8 APPOINTMENT AND DUTIES OF OFFICERS
(a) APPOINTMENT OF OFFICERS. In connection with the management of
the operations and affairs of the Company, the Members shall have the option to
appoint officers of the Company. The officers of this Company may include a
president, a secretary and a chief financial officer. The Members, at their
discretion, may also appoint a Chairman, one or more vice presidents, one or
more assistant secretaries, one or more assistant financial officers and such
other officers as they deem appropriate. Each officer shall exercise such powers
and perform such duties as are prescribed herein or as determined by the
Members. Any number of offices may be held by the same person. An officer need
not be a member of the Company.
(b) TERM OF OFFICE. The Members may appoint officers to serve for
any period of time that they deem appropriate. Each officer shall hold his
office and perform such duties appurtenant thereto until he shall resign or
shall be removed or otherwise be disqualified to serve, or until a successor to
his office is appointed upon the expiration of his term if a term is specified.
(c) REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by the Members, at any regular or special meeting
thereof, or, by any officer upon whom such power of removal may be conferred by
the Members (subject, in each case, to the rights, if any, of an officer under
any contract of employment). Any officer may resign at any time by giving
written notice to the Members or to the president or secretary of the Company,
without prejudice, however, to the rights, if any, of the Company under any
contract to which such officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
(d) VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the operating agreement for regular appointments to such
office.
(e) CHAIRMAN. The Chairman, if there shall be such an officer,
shall, exercise and perform such other powers and duties as may be from time to
time assigned to him by the Members.
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(f) PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Members to the Chairman, if there be such an officer, the
president shall be the chief executive officer of the Company and shall, subject
to the control of the Members, have general supervision, direction and control
of the business and officers of the Company. The president shall be ex officio a
member of all the standing committees, including the executive committee, if
any, and shall have the general powers and duties of management usually vested
in the office of president of a corporation, and shall have such other powers
and duties as may be prescribed by the Members.
(g) VICE PRESIDENT. In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the Members
or, if not ranked, the vice president designated by the Members, shall perform
all the duties of the president, and when so acting shall have such other powers
and perform such other duties as from time to time may be prescribed for them
respectively by the Members.
(h) SECRETARY. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the registered office and such
other place as the Members may order, a book of minutes of actions taken at all
meetings of Members, with the time and place of holding, the notice thereof
given, the names and membership interests present or represented at Member
meetings, and the proceedings thereof. The secretary shall keep, or cause to be
kept, at the registered office (i) a current list of the full name and last
known business or residence address of each Member and of each holder of an
economic interest in the Company set forth in alphabetical order, together with
the contribution and the share in profits and losses of each Member and holder
of an economic interest, (ii) a copy of the articles of organization and all
amendments thereto, (iii) copies of the Company's federal, state and local
income tax or information returns and reports, if any, for the six most recent
taxable years, (iv) a copy of the Company's operating agreement, and any
amendments thereto, (v) copies of the financial statements of the Company, if
any, for the six most recent fiscal years, and (vi) the books and records of the
Company as they relate to the internal affairs of the Company for at least the
current and past four fiscal years. The secretary shall give, or cause to be
given, notice of all the meetings of the Members required by the operating
agreement or by law to be given, and shall have such other powers and perform
such other duties as may be prescribed by the Members.
(i) CHIEF FINANCIAL OFFICER. The Chief Financial Officer of the
Company shall keep and maintain, or cause to be kept and maintained, adequate
and correct accounts of the properties and business transactions of the Company,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and membership interests. The books of account shall at
all reasonable times be open to inspection by any Member. The Chief Financial
Officer shall deposit all monies and other valuables in the name and to the
credit of the Company with such depositories as may be designated by the
Members. The Chief Financial Officer shall disburse the funds of the Company as
may be ordered by the Members, shall render to the president and Members,
whenever they request it, an account of all of his or her transactions as Chief
Financial Officer and of the financial condition of the Company, and shall have
such other powers and perform such other duties as may be prescribed by the
Members.
5.9 MEETINGS OF MEMBERS. If and when the Members shall determine,
meetings of Members may be called and when called shall be governed by the
provisions in Section 17104 of the Act; provided, however, that this reference
to Section 17104 or any other provision of this Agreement
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shall not be interpreted to require that meetings of the Members be held, it
being the intent of the Members that meetings of the Members are not required.
6 LIABILITY, RESIGNATION AND WITHDRAWAL OF MEMBERS.
6.1 LIABILITY OF MEMBERS. Except as specifically provided in this
Agreement, no Member shall be liable for the debts, liabilities, contracts, or
any other obligations of the Company except with respect to their Capital
Contributions as indicated herein. Only the Company and no third party creditor
(either in its own right or as a successor-in-interest of the Company, and
including a trustee, receiver or other representative of the Company or Member),
shall be entitled to enforce the requirements to make Capital Contributions. The
Members intend and agree that the obligation of the Members to make Capital
Contributions constitutes an agreement to make financial accommodations to and
for the benefit of the other Member and the Company.
6.2 RETURN OF DISTRIBUTIONS. In accordance with the Act, a Member
may, under certain circumstances, be required to return to the Company, for the
benefit of the Company's creditors, amounts previously distributed to the
Member.
6.3 RESIGNATION OR WITHDRAWAL OF A MEMBER. Subject to Section 7, a
Member shall not resign or withdraw as a Member without the unanimous consent of
the other Members.
7. TRANSFERS OF INTERESTS.
7.1 ASSIGNMENT OF INTEREST.
(a) CONSENT. No Member shall have the right to assign the whole
or any part of its Interest in the Company without the unanimous written consent
of the other Member(s). A sale, assignment or other transfer of more than fifty
percent (50%) of the record or beneficial ownership of the stock, partnership or
other ownership interest of M&Z or any Member other than GLR shall constitute a
sale, assignment and transfer of M&Z's or such other Member's Interest under
this Agreement. A sale, assignment or other transfer of any stock, partnership
or other ownership interest in GLR shall in no event constitute a sale,
assignment or transfer of GLR's Interest under any section of this Agreement.
Any transfer approved by the unanimous written consent of the other Member(s)
shall be subject to the right of first refusal contained in Section 7.2 and any
permitted transferee of an Interest shall merely be an Assignee possessing only
an economic interest and shall not become a Substituted Member except upon
compliance with Section 7.3. A Member assigning an Interest in the Company to an
Assignee shall not assign to, nor obligate itself to act on behalf of or upon
the direction of that Assignee with regard to, the Member's right:
(i) To require any information from the Company or obtain
accountings of the Company's activities;
(ii) To inspect the Company's books and records; or
(iii) To vote on any matter upon which a Member is entitled
to vote pursuant to either this Agreement or any applicable law.
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(b) DISTRIBUTIONS. A permitted Assignee shall be entitled to
receive Distributions from the Company attributable to the Interest acquired by
reason of such assignment from and after the effective day of the assignment of
such Interest to him; however, anything herein to the contrary notwithstanding,
the Company shall be entitled to treat the assignor of such Interest as the
absolute owner thereof in all respects, and shall incur no liability for
allocations of Net Income or Net Losses. Distributions or transmittal of reports
and notices required to be given to Members hereunder which are made in good
faith to such assignor until such time as the written instrument of assignment
has been received by the Company and recorded on its books, and the effective
date of assignment has passed.
(c) TRANSFERS NULL AND VOID. Any transfer or attempted transfer
in violation of this Agreement shall be null and void and of no effect. Each
Member acknowledges the reasonableness of the restrictions on transfer imposed
by this Agreement in view of the purposes of the Company, its status as a
limited liability company and the relationship of its Members. The transfer
restrictions contained herein are expressly consented to by each Member as an
express condition of becoming a Member.
7.2 RIGHT OF FIRST REFUSAL. If a Member shall decide to sell or
transfer all or any part of his Interest ("Offered Interest") pursuant to a bona
fide offer, such Member shall give written notice, setting forth in full the
terms of such bona fide offer and the identity of the offeror(s), to the Company
and all other Members (the "Notice"). Pursuant to Section 7.1, if fewer than all
of the other Members consent to such transfer, such transfer shall not be
allowed. If all of the Members have so consented to the transfer, the Company
shall then have the right and option (with the transferring Member not entitled
to vote with regards to such right and option), for a period ending thirty (30)
calendar days following the receipt of such written notice, to elect to purchase
all or any part of the Offered Interest at the purchase price and upon the terms
specified in the bona fide offer, and the remaining Members shall then have the
right and option, for a period of twenty (20) calendar days thereafter, to elect
to purchase, in accordance with such Member's Percentage Interest, all or any
part of the Offered Interest not elected to be purchased by the Company at the
purchase price and upon the terms specified in the bona fide offer, or, if the
purchase price determined using the valuation method described in Section
7.4(c)(i) would be lower, then such price shall be used. If all remaining
Members do not elect to purchase the entire remaining part of the Offered
Interest, then the Members electing to purchase shall have the right, in
accordance with such Member's Percentage Interest, to elect to purchase the
remaining part of the Offered Interest available for purchase. Unless otherwise
provided in the original terms of the bona fide offer, purchase by the Company
and/or the remaining Members shall be completed within sixty (60) calendar days
following receipt of the Notice.
Notwithstanding the foregoing, however, if the Company and/or the
other Members do not elect to purchase all of the Offered Interest, pursuant to
---
the right of first refusal, the Member desiring to sell the Offered Interest
may sell or transfer all of the Offered Interest to the transferee upon the
terms set forth in the written notice provided to the Company, whereupon the
transferee shall take and hold the Interest subject to this Agreement and to all
of the obligations and restrictions upon the Member from whom such Interest was
acquired and shall observe and comply with this Agreement and all such
obligations and restrictions; provided, however, that such Assignee shall not
become a Substituted Member unless the consent requirements of Section 7.3 are
met. Any such transfer of the Offered Interest must be effected within seventy-
five (75) calendar days after the date of the termination of the Members' rights
as provided herein. If no such transfer is effected within the
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seventy-five (75) calendar day period, then any subsequent proposed transfer of
all or any part of such interest shall once again be subject to the provisions
of this Section 7.
For purposes hereof, in the event any consideration offered for the
Offered Interest in the bona fide offer consists of rights, interests or
properties other than money, the Members shall, in good faith, determine the
fair market value of such consideration in monetary terms as of the date the
bona fide offer was received by the Member desiring to sell the Offered Interest
pursuant thereto. The fair market value of such consideration in monetary terms,
as so determined, shall be included in the purchase price payable by the Company
and/or the remaining Members hereunder, but the Company and/or the remaining
Members need not transfer to the selling Member the actual rights, interests or
properties offered in the bona fide offer, nor afford the selling Member the
same tax treatment that would have been available to him under the bona fide
offer, in order to exercise the rights of first refusal granted pursuant to this
Section 7.
7.3 SUBSTITUTED MEMBERS.
(a) CONDITIONS OF SUBSTITUTION. An Assignee may have the right
to become a Substituted Member in place of his assignor only if all of the
following conditions are first satisfied:
(i) WRITTEN ASSIGNMENT. A duly executed and acknowledged
written instrument of assignment shall have been filed with the Company, which
instrument shall specify the percentage of the Interest in the Company being
assigned and which sets forth the intention of the assignor that the Assignee
succeed to the assignor's interest as a Substituted Member in its place;
(ii) INSTRUMENTS OF SUBSTITUTION. The Assignee shall have
executed and acknowledged such other instruments as may be necessary or
desirable to effect such substitution, including the written acceptance and
adoption by the Assignee of the provisions of this Agreement; and
(iii) CONSENT OF MEMBERS. The written consent of all of the
non-transferring Members to such substitution shall have been obtained, the
granting or denial of which shall be within the sole and absolute discretion of
each Member.
7.4 PURCHASE UPON CERTAIN EVENTS.
(a) OPTION TO PURCHASE. The Company shall have the right and
option to elect to purchase all or any part of a Member's Interest ("Option
Interest") upon the occurrence of one or more of the events described in Section
7.4(b) below ("Option Events") for a period of sixty (60) days following the
occurrence of an Option Event. If the Company elects to purchase 100% of the
Option Interest, it shall provide written notice to the Affected Member within
such sixty (60) day period. If the Company does not elect to purchase all of the
Option Interest of the Affected Member, then the non-affected Members shall have
the right and option, for a period of thirty (30) calendar days thereafter, to
elect to purchase, in accordance with such Member's Percentage Interest, all or
any part of the Option Interest not elected to be purchased by the Company. If
the non-affected Members do not elect to purchase the entire remaining part of
the Option Interest, then the Members electing to purchase (the "Purchasing
Members") shall have the right, in accordance with such Member's Percentage
Interest, to elect to purchase the remaining part of the Option Interest
available for
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purchase. If the Company and the Purchasing Members in the aggregate elect to
purchase 100% of the Option Interest, the Company shall provide written notice
to the Affected Member within such thirty (30) day period. If the Company and/or
the Purchasing Members, in the aggregate, do not elect to purchase all of the
Option Interest, none of the affected Member's Interest may be purchased
pursuant to this Section 7.4; provided that the Option Interest shall remain
subject to this Agreement and all such obligations and restrictions; provided
further that if the Option Event causes a transfer of the Option Interest and
the Option Interest is not purchased by the Company and/or the Purchasing
Members, the transferee shall become an Assignee only and shall not become a
substituted Member except upon compliance with Section 7.3. Any purchase of an
Option Interest shall be on the terms as set forth in Section 7.4(c) below.
(b) OPTION EVENTS. Each of the following shall constitute an
Option Event with respect to a Member (the "Affected Member"):
(i) The maintenance of any proceeding initiated by or
against a Member under any bankruptcy or debtors' relief laws of the United
States or of any other jurisdiction, which proceeding is not terminated within
ninety (90) days after its commencement;
(ii) A general assignment for the benefit of the creditors
of a Member;
(iii) A levy upon the Interest of a Member pursuant to a
writ of execution or subject to the authority of any governmental entity, which
levy is not removed within thirty (30) days; and
(iv) The death of a Member who is a natural person.
(c) TERMS OF PURCHASE.
(i) PURCHASE PRICE OF MEMBERSHIP INTEREST. The purchase
price to be paid by the Company and/or the purchasing Members, as the case may
be, upon the exercise of any option to purchase an interest under Section 7.4(a)
above shall be the Fair Market Value of the Option Interest as of the end of the
month preceding the date of the Option Event determined by the Affected Member
or, if dead, the legal representative of the Affected Member, as one party, and
the remaining Members holding a Majority-In-Interest as another party, shall
attempt to agree upon the Fair Market Value of the Option Interest. If such
parties are unable to agree upon the Fair Market Value within thirty (30) days
following the notice of the exercise of the option pursuant to Section 7.4(a)
above, the Fair Market Value of the Option Interest shall be determined by an
independent appraiser experienced in appraising closely held businesses selected
by the mutual agreement of such parties. If such parties are unable to agree
upon a mutually acceptable appraiser within forty-five (45) days following the
notice of exercise of the option pursuant to Section 7.4(a) above, the Fair
Market Value shall be determined by the Company's independent certified public
accountant. In performing such valuation, the appraiser or accountant, as the
case may be, shall consider such methods of valuation as are customary and
appropriate in the discretion of said appraiser or accountant.
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(ii) BINDING EFFECT. The value determined pursuant to
Section 7.4(c) shall be binding upon the parties to this Agreement, their legal
representatives, and their successors in interest.
(iii) PAYMENT OF PURCHASE PRICE. The Company and/or, if
applicable, the Purchasing Members, shall pay the purchase price of the portion
of the Option Interest to be purchased by it in cash no later than sixty (60)
days following the giving of the notice of the election of the Company and/or
the Purchasing Members to the Affected Member or its legal representative of its
election to purchase the Option Interest or, if later, the final determination
as to the value of the Option Interest. Upon the receipt of the payment the
Affected Member or legal representative shall execute all documents required or
appropriate to transfer the Option Interest to the purchasers. If the Affected
Member or the legal representative refuses to do so; the Company shall
nevertheless enter the transfer on its records and the remaining Members shall
be authorized to amend this Agreement to reflect such transfer.
7.5 BUY SELL OBLIGATION BETWEEN MEMBERS. In the event that a Member
desires to purchase the Interest of another Member, or in the event a Member
desires to sell all of its Interest to another Member and such Members are
unable to mutually agree on a price and terms for such purchase or sale within
thirty (30) days of receipt of written notice of a Member's desire to purchase
or sell, as the case may be, the disposition of the Interests of both such
Members shall be controlled by the provisions of Sections 7.5(a), 7.5(b), 7.5(c)
and 7.5(d) hereinbelow and the other applicable provisions of this Agreement.
Although the purchase price for such Interests shall be as hereinafter
determined in this Section 7.5, the manner and terms of payment of such purchase
price upon any such purchase or sale pursuant to this Section 7.5 shall be set
forth in Section 7.4(c)(iii) hereof. Notwithstanding the foregoing provisions of
Section 7.5, no Member shall be entitled to offer to purchase the Interest of
another Member pursuant to this Section 7.5 during the eighteen (18) month
period commencing as of the date hereof unless an event has occurred that
requires the consent of both M&Z and GLR and M&Z and GLR cannot agree on how to
proceed within fifteen (15) days of receipt by M&Z and GLR of written notice
sent by the Member requesting approval of the requested action stating that
failure to resolve such dispute within such fifteen (15) day period shall enable
a Member to exercise its rights to buy or sell pursuant to this Section.
(a) OFFER TO PURCHASE. Each Member agrees that within sixty (60)
days after receipt of an offer to purchase the entire Interest it holds by
another Member (the "Buying Member"), such Member shall either sell the entire
Interest sought by the Buying Member on the terms specified in this Section 7.5,
or shall purchase the entire Interest held by the Buying Member on the terms
specified in this Section 7.5. For the purposes of the foregoing, the Buying
Member's offer to purchase shall be deemed an irrevocable offer to sell its
Interest to the other Member on the terms specified in this Section 7.5.
(b) OFFER TO SELL. Each Member agrees that within sixty (60) days
after receipt of an offer from another Member (the "Selling Member") to sell the
entire Interest the Selling Member holds, such Member must either purchase the
entire Interest offered on the terms specified in this Section 7.5, or sell the
entire Interest it holds to the Selling Member on the terms specified in this
Section 7.5. For the purposes of the foregoing, the Selling Member's offer to
sell
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shall be deemed an irrevocable offer to purchase the other Member's Interest on
the terms specified in this Section 7.5.
(c) NOTICE OF BUY-SELL. The Buying or Selling Member shall give
written notice (the "Buying Notice") of such proposed transfer to the Company
and to each of the other Members in the manner and at the addresses set forth
herein. The Buying Notice must set forth the names of both Members involved, the
Interest owned by each Member, and the value of the Property as determined by
the Buying Member or the Selling Member, as applicable (the "Buy/Sell Value").
Immediately thereafter, the Company shall cause a meeting (the "Buying Meeting")
of the Members in order to allow the interested Members to complete the proposed
transfer in accordance with Sections 7.5(a) and (b) above. The Buying Meeting
shall be called for a date not later than fifteen (15) days from the date of
delivery to the Company of the Buying Notice. Written notice of the Buying
Meeting shall be given to all Members not later than ten (10) days prior to the
date set therefor.
(d) BUY/SELL PRICE. The purchase price to be paid by the
purchasing Member pursuant to this Section 7.5 for the selling Member's Interest
(the "Buy/Sell Price") shall be the amount, as determined by the Company's
accountant, that the selling Member would receive if (i) the Property were sold
for the Buy/Sell Value, less four percent (4%) of the Buy/Sell Value, which the
Members hereby agree is the reasonable estimate of the selling costs that would
be incurred if the Property were actually sold, (ii) the Company were
liquidated, and (iii) the Company's assets were distributed to its Members.
7.6 REFERENCE TO A MEMBER. Wherever the context requires, reference
in this Agreement to a Member shall include an Assignee who does not become a
Substituted Member wherever such reference relates solely to an economic
interest in the Company.
7.7 EXCHANGE. In the event of the acquisition of the Interest of a
Member pursuant to Sections 7.4 or 7.5, the acquiring Member agrees to cooperate
with the selling Member in effecting such transfer as a tax deferred exchange
provided the acquiring Member incurs no additional cost or liability nor does
such cooperation delay the closing of such transfer.
8. BOOKS AND RECORDS
8.1 RECORDS. The Company shall keep at 439 North Bedford Drive,
Beverly Hills, California 90210, or such other place as shall be designated by
the Members, the following documents:
(a) A current list of the full name and last known business or
residence address of each Member and Assignee set forth in alphabetical order,
together with the contribution and share in profits and losses of each Member or
Assignee;
(b) A copy of the Articles and all amendments thereto, and
executed copies of any powers of attorney pursuant to which the Articles or any
amendments thereto were executed;
(c) Copies of the Company's Federal, state and local income tax
or information returns and reports, if any, for the six most recent taxable
years;
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(d) Copies of the original Agreement and all amendments to the
Agreement, together with any powers of attorney pursuant to which this Agreement
or any amendment to the Agreement were executed;
(e) Financial statements of the Company for the six most recent
fiscal years; and
(f) The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past four fiscal
years.
8.2 INSPECTION.
(a) Upon the request of a Member or Assignee, the Company shall
promptly deliver to the requesting Member or Assignee, at the expense of the
Company, a copy of the information required to be maintained by Sections 8.1(a)
or 8.1(c), above.
(b) Each Member and Assignee has the right, upon reasonable
request, to:
(i) Inspect and copy during normal business hours any of the
Company records required to be maintained by Section 8.1.
(ii) Obtain from the Company, promptly after becoming
available, a copy of the Company's Federal, state and local income tax or
information returns for each year.
8.3 REPORTS.
(a) The Company shall cause an annual financial report to be sent
to each Member not later than 90 days after the close of each fiscal year and
that financial report shall contain: (1) a balance sheet as of the end of the
fiscal year; (2) an income statement; and (3) a statement of changes in
financial position for the fiscal year.
(b) The Company shall send to each Member within 75 days after
the end of each taxable year the information necessary for the Member to
complete its Federal and state income tax or information returns, and a copy of
the Company's Federal, state, and local income tax or information returns for
the year.
9. DISSOLUTION AND TERMINATION OF THE COMPANY
9.1 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and
its affairs shall be wound-up upon the earliest to occur of the following
events:
(a) The expiration of the term of the Company as stated in the
Articles;
(b) The unanimous vote of the Members to dissolve the Company;
(c) The withdrawal, adjudication of bankruptcy, resignation, or
dissolution of a Member unless after such event their exists at least two
Members and a Majority-In-Interest of
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such remaining Members vote within thirty (30) days of such event to continue
the Company's business, this Company shall continue in business; or
(d) Entry of a decree of judicial dissolution pursuant to Section
17351 of the Act.
9.2 CERTIFICATE OF DISSOLUTION. As soon as possible following the
occurrence of any of the events specified in Section 9.1, the Members shall
execute a Certificate of Dissolution in such form as shall be prescribed by the
California Secretary of State and file the Certificate as required by the Act.
9.3 DISTRIBUTION ON DISSOLUTION. Unless the business of the Company
is continued pursuant to Section 9.1(c), the Members shall take full account of
the Company's assets and liabilities, shall liquidate the assets as promptly as
is consistent with obtaining their fair value, or, if the assets cannot be sold,
they shall be valued and distributed in kind, and shall apply and distribute the
proceeds or assets in the following order:
(a) To the payment of creditors of the Company but excluding
secured creditors whose obligations will be assumed or otherwise transferred on
the liquidation of Company assets;
(b) To the creation of any reserves which the Members jointly
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Company;
(c) To the repayment of any outstanding loans made by any Member
to the Company; and
(d) To the Members with positive Capital Accounts in accordance
with the ratio of their Capital Accounts.
10. INDEMNIFICATION
10.1 GENERAL. The Company, its receiver or its trustee, shall
indemnify, defend, save harmless and pay all judgments and claims against each
of the Members or any of their respective Affiliates ("Indemnitees") from any
liability, loss or damage incurred by it or by the Company by reason of any act
performed or omitted to be performed by it in connection with the business of
the Company, including costs and attorneys' fees (which attorneys' fees may be
paid as incurred) and any amounts expended in the settlements of any claims of
liability, loss or damage provided that the indemnification shall be recoverable
only from the assets of the Company and not any assets of the Members. The
Company may, however, purchase and pay for that insurance, including extended
coverage liability and casualty and worker's compensation, as would be customary
for any person engaging in a similar business, and name the indemnitees as
additional or primary insured parties.
10.2 ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
incurred by an Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced in
Section 10.1 hereof. The Indemnitee person shall repay such amounts advanced
only if, and to the extent that, it shall ultimately be determined that such
person is not entitled to be indemnified by the Company as authorized hereby.
The advances to be
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made hereunder shall be paid by the Company to the indemnified person within ten
(10) days following delivery of a written request therefor by the indemnified
person to the Company.
11. REPRESENTATIONS AND WARRANTIES OF MEMBERS. Each Member hereby
represents, warrants and covenants to the Company that, as of the date hereof:
(a) INVESTMENT REPRESENTATION. The Member has acquired or is
acquiring its Interest in good faith for its own personal account, for
investment purposes only and not with a view to or for the distribution, resale,
subdivision, fractionalization or disposition thereof, and the Member has no
present interest of selling or otherwise distributing such Interest. The Member
is or will be the sole party in interest in its Interest and as such is or will
be vested with all legal and equitable rights in such Interest.
(b) SOPHISTICATION OF THE MEMBER. The Member either has a
preexisting personal or business relationship with the Company or, by reason of
its business or financial experience or the business or financial experience of
its professional advisors, who are unaffiliated with and not compensated by the
Company or an Affiliate of the Company, directly or indirectly, has the capacity
to protect its own interests in connection with this investment. The Member is
able to bear the economic risk of an investment in its interest and can afford
to sustain a total loss on such investment. The nature and amount of the
Member's investment in such Interest is consistent with its investment
objectives, abilities and resources.
(c) NO PUBLIC MARKET. The Member understands that there is no
public market for its interest and that it is extremely unlikely that there
will be such a market in the future. The Member has been advised that its
Interest has not been registered under the Securities Act of 1933, as amended,
and that said interest must be held indefinitely unless it is subsequently
registered under the Securities Act of 1933, as amended, or an exemption from
such registration is available, and understands that the Company is under no
obligation to register said Interest or to comply with any exemption from such
registration requirement. In addition, the Member understands that the
transferability of its Interest is and will be further restricted by this
Agreement which, among other things, requires that any sale or assignment of its
Interest will be subject to certain terms and conditions. Thus, the Member
realizes that it cannot expect to be able to liquidate its investment in the
Company readily, or at all, in the case of an emergency.
(d) SPECULATIVE INVESTMENT. The Member recognizes that an
investment in the Company is speculative in nature and involves a high degree
of risk, and it has carefully considered the risk factors involved. These
factors include, without limitation, the fact that the business of the Company
is in the formative stages and that the Company's initial capitalization may be
insufficient to satisfy the Company's working capital requirements.
12. MISCELLANEOUS
12.1 COUNTERPARTS. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
of the Members, notwithstanding that all of the Members are not signatory to the
original or the same counterpart.
12.2 BINDING ON SUCCESSORS. This Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the Members.
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<PAGE>
12.3 SEVERABILITY. If any sentence or paragraph of this Agreement is
declared by a court of competent jurisdiction to be void, the sentence or
paragraph shall be deemed severed from the remainder of this Agreement and the
balance of this Agreement shall remain in effect.
12.4 NOTICES. All notices under this Agreement shall be in writing
and shall be given to the person entitled thereto, by personal service, or by
mail, posted to the address maintained by the Company for that person or at any
other address that he specifies in writing. The names, addresses and Capital
Contributions of the Members shall be maintained at the principal place of
business of the Company.
12.5 CAPTIONS. Paragraph titles or captions contained in this
Agreement are inserted only as a matter of convenient reference. The titles and
captions in no way define, limit, extend, or describe the scope of this
Agreement nor the intent of any provision hereof.
12.6 GENDER. Whenever required by the context, the masculine gender
shall include the feminine and neuter genders, and vice versa; and the word
"person" shall include a corporation, partnership, firm, or other form of
association; the singular shall include the plural, and vice versa.
12.7 CHOICE OF LAW. This Agreement shall be construed under the laws
of the State of California. This Agreement was executed in and is to be
performed entirely within the State of California.
12.8 ENTIRE AGREEMENT. This Agreement contains the entire
understanding among the Members and supersedes any prior written or oral
agreements between them respecting the subject matter contained herein. There
are no representations, agreements, arrangements or understandings, oral or
written, between and among the Members relating to the subject matter of this
Agreement that are not fully expressed herein.
IN WITNESS WHEREOF, the parties have signed this Agreement on the date first
above-written.
MEMBERS
G&L Realty Partnership, L.P.,
A Delaware Limited Partnership
By: G&L Realty Corp.,
A Maryland corporation,
its general partner
By:
----------------------------
Its: Senior Vice President
---------------------
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<PAGE>
M&Z Aliso Associates, LLC,
a California limited liability company
By: Centrium Associates. LLC,
a California limited liability company,
Manager
By: /s/ John Zahoudanis
------------------------
John Zahoudanis, Manager
By: MCC Capital Incorporated,
a California corporation, Manager
By: /s/ Michael McCarthy
---------------------------
Michael McCarthy, President
-29-
<PAGE>
SCHEDULE A
Member Capital Contribution Percentage
------ -------------------- ----------
Interest
--------
G & L Realty Partnership $ 600,000 50%
M&Z Aliso Associates, LLC $ 200,000 50%
--------- ---
Total $ 800,000 100%
========= ====
<PAGE>
EXHIBIT 10.63
REAL ESTATE LEASE
AV MEDICAL ASSOCIATES, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
LANDLORD
HOAG MEMORIAL HOSPITAL PRESBYTERIAN,
A CALIFORNIA NON-PROFIT CORPORATION
TENANT
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
BASIC TERMS
<TABLE>
<S> <C> <C>
Section 1.1 Date of Lease...............................1
Section 1.2 Landlord....................................1
Section 1.3 Tenant......................................1
Section 1.4 Property....................................1
Section 1.5 Lease Term..................................1
Section 1.6 Permitted Uses..............................2
Section 1.7 Tenant's Guarantor..........................2
Section 1.8 Broker......................................2
Section 1.9 Security Deposit............................3
Section 1.10 Rent and Other Charges Payable by Tenant....3
ARTICLE III
LEASE TERM
Section 2.1. Lease of Property for Lease Term............3
Section 2.2. Holding Over................................4
ARTICLE IV
BASE RENT
Section 3.1 Time and Manner of Payment..................4
Section 3.2 Termination; Advance Payments...............4
Section 3.3 Partial Month...............................4
ARTICLE V
OTHER CHARGES PAYABLE BY TENANT
Section 4.1 Additional Rent.............................5
Section 4.2 Property Taxes..............................5
Section 4.3 Insurance...................................7
Section 4.4 Waiver of Subrogation.......................8
Section 4.5 Utilities...................................9
Section 4.6 Common Area Maintenance Costs...............9
Section 4.7 Late Charges................................9
Section 4.8 Interest on Past Due Obligations............9
ARTICLE V
USE OF PROPERTY
Section 5.1 Permitted Uses.............................10
Section 5.2 Manner of Use..............................10
Section 5.3 Signs and Auctions.........................10
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
<TABLE>
<S> <C> <C>
Section 5.4 Indemnity..................................10
Section 5.5 Landlord's Access..........................11
Section 5.6 Quiet Possession...........................11
ARTICLE VI
CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.1 Existing Condition.........................11
Section 6.2 Exemption of Landlord from Liability.......11
Section 6.3 Landlord's Obligations.....................12
Section 6.4 Tenant's Obligations.......................12
Section 6.5 Alterations, Additions, and Improvements...12
Section 6.6 Hazardous Materials/Geological Reports.....13
ARTICLE VII
DAMAGE OR DESTRUCTION
Section 7.1 Damage to Property.........................14
Section 7.2 Temporary Reduction of Rent................14
Section 7.3 Waiver.....................................15
ARTICLE VIII
CONDEMNATION
ARTICLE IX
ASSIGNMENT AND SUBLETTING
Section 9.1 Landlord's Consent Required................16
Section 9.2 Transfers to Affiliates; Permitted
Subleases..................................16
Section 9.3 No Release of Tenant.......................16
Section 9.4 Landlord's Consent.........................16
Section 9.5 No Merger..................................17
ARTICLE X
LEASEHOLD FINANCING
ARTICLE XI
DEFAULTS; REMEDIES
Section 11.1 Covenants and Conditions...................19
Section 11.2 Defaults...................................19
Section 11.3 Remedies...................................20
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
<TABLE>
<S> <C> <C>
Section 11.4 Termination................................21
Section 11.5 Cumulative Remedies........................22
ARTICLE XII
LANDLORD'S DEFAULT
Section 12.1 Tenant's Remedy............................22
Section 12.2 Limitation on Landlord's Liability.........22
ARTICLE XIII
PROTECTION OF LENDERS
Section 13.1 Subordination..............................22
Section 13.2 Attornment.................................23
Section 13.3 Signing of Documents.......................23
Section 13.4 Estoppel Certificates......................23
Section 13.5 Tenant's Financial Condition...............24
ARTICLE XIV
LEGAL COSTS
Section 14.1 Legal Proceedings..........................24
Section 14.2 Landlord's Consent.........................25
ARTICLE XV
OPTION TO PURCHASE
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Landlord...................................25
Section 16.2 Severability...............................26
Section 16.3 Interpretation.............................26
Section 16.4 Incorporation of Prior Agreements;
Modifications..............................26
Section 16.5 Notices....................................26
Section 16.6 Waivers....................................27
Section 16.7 No Recordation.............................27
Section 16.8 Binding Effect; Choice of Law..............27
Section 16.9 Corporate Authority; Partnership
Authority..................................28
Section 16.10 Force Majeure..............................28
Section 16.11 Execution of Lease.........................28
Section 16.12 Survival...................................28
Section 16.13 Arbitration................................28
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
ARTICLE XVII
DESIGN AND CONSTRUCTION OF IMPROVEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 17.1 Design.....................................29
Section 17.2 Construction...............................30
Section 17.3 Tenant Improvement Allowance...............32
Section 17.4 Construction Standards; Compliance with
Laws.......................................33
ARTICLE XVIII
COVENANTS, CONDITIONS AND RESTRICTIONS
ARTICLE XIX
RADIUS RESTRICTION
ARTICLE XX
RIGHT OF FIRST OFFER
ARTICLE XXI
MISCELLANEOUS ADDITIONAL PROVISIONS
Section 21.1 Waiver of Landlord's Lien.........35
Section 21.2 Approval..........................35
Section 21.3 Energy............................35
EXHIBIT A LEGAL DESCRIPTION.............................A-1
EXHIBIT B PROJECT TO BE CONSTRUCTED.....................B-1
EXHIBIT C IRREVOCABLE STANDBY LETTER OF CREDIT..........C-1
EXHIBIT D PURCHASE AGREEMENT............................D-1
EXHIBIT E MEMORANDUM OF LEASE...........................E-1
EXHIBIT F PRELIMINARY TITLE REPORT......................F-1
</TABLE>
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<PAGE>
REAL ESTATE LEASE
(SINGLE TENANT FACILITY)
ARTICLE I
---------
BASIC TERMS.
SECTION 1.1. DATE OF LEASE.
------------
October 22, 1997.
SECTION 1.2. LANDLORD.
------------
AV MEDICAL ASSOCIATES, LLC, a California limited liability company
Address of Landlord: 1332 Park View Avenue, Suite 101, Manhattan Beach,
CA 90266
Attn: John Zahoudanis
SECTION 1.3. TENANT.
------------
HOAG MEMORIAL HOSPITAL PRESBYTERIAN, a California non-profit corporation
Address of Tenant: 301 Newport Boulevard, P.O. Box 6100, Newport Beach,
CA 92658-6100, Attn: Peter M. Foulke, Executive Vice
President
SECTION 1.4. PROPERTY.
------------
That certain parcel of real property located in Aliso Viejo, County of
Orange, State of California as depicted on EXHIBIT "A" attached hereto and
-----------
incorporated herein by reference ("Land"). In accordance with the terms of this
Lease, Landlord shall construct upon the Land a three (3) story shell office
building containing approximately 33,000 square feet of floor area ("Building")
as depicted and described in those certain plans and specifications prepared by
Architects Orange described on EXHIBIT "B" (the "Plans"), together with
-----------
amenities including, but not limited to, utilities, grading, paving, access
rights, exterior lighting and landscaping (collectively, "Improvements"). The
exact configuration and dimensions of the Building shall be as set forth in the
final Plans as described in Article XVII. The Land and the Improvements
(including the Building) may be collectively referred to herein as the
"Property."
SECTION 1.5. LEASE TERM.
------------
The term ("Term") of this Lease shall be ten (10) years (subject to early
termination due to Tenant's exercise of its option to purchase the Property as
set forth in Article XV and as elsewhere expressly set forth in this Lease),
commencing on the date ("Commencement Date") that is four (4) months after the
date that Landlord delivers possession of the shell Building to be constructed
by Landlord pursuant to the terms of this Lease to Tenant Substantially
Completed (as hereinafter defined) in accordance with the Plans, subject to
extension for force majeure delays and any delays caused by
<PAGE>
Landlord's failure to respond to a request for approval of any tenant
improvement work within five (5) business days of submittal by Tenant of a
request for approval.
For purposes of this Lease, the shell Building shall be deemed
substantially completed in accordance with the Plans only upon the occurrence of
all of the following ("Substantial Completion"): (a) all of Landlord's Work (as
defined in Article XVII) has been fully completed by Landlord in accordance with
the terms of this Lease except for normal so-called "punchlist" or "pick-up
list" items which do not unreasonably interfere with the Tenant Improvement Work
(as defined in Article XVII); (b) Landlord has obtained and provided Tenant with
copies of such governmental authorizations, permits or approvals related to
Landlord's Work as may be required to permit Tenant's contractors, consultants
and permittees to commence and complete the Tenant Improvement Work and upon its
completion in accordance with the terms of this Lease to obtain a permanent
certificate of occupancy for the Property; (c) all primary sewer, water,
electrical and other utility services have been connected and are supplied to
the Building as required by the Plans; (d) the Building and all outside areas of
the Property are in a clean and safe condition for the use by Tenant's
contractors, consultants and permittees and Landlord has provided access and
tendered possession of the Property to Tenant; (e) Landlord's architect and
general contractor have delivered their certificate to Tenant certifying that
Landlord's Work has been completed in accordance with the Final Plans; (f)
Landlord has provided Tenant with all non-disturbance agreements in accordance
with the provisions of this Lease to the extent that the Lease is subordinate to
the interest of any lender, ground lessor or other encumbrancer; and (g)
Landlord provides Tenant with a complete set of "as-built" plans for the
Property not later than ninety (90) days following turnover of the Building to
Tenant. Landlord shall diligently complete as soon as reasonably possible, and
in no event more than sixty (60) days after the date of Substantial Completion
as described above, all remaining normal "punch-list" or "pick-up" items
relating to Landlord's Work. If Landlord fails or refuses to complete "punch -
list" or "pick-up" items relating to Landlord's Work within sixty (60) days
after Substantial COmpletion, Tenant shall have the right, without prejudice to
any other right or remedy and upon written notice to Landlord, to expend such
Reasonable sums as may be necessary to cure Landlord's failure to perform, and
to deduct such sums, together with an amount equal to 10% per annum thereon,
from the Rent due for the months next following the months in which the sums
were paid by Tenant. Whenever in the Lease reference is made to Landlord's
delivery of possession of the shell Building to Tenant, such reference shall
mean that all of the Substantial Completion conditions set forth above have
occurred.
SECTION 1.6. PERMITTED USES.
------------
Operation of a medical office building and related services.
SECTION 1.7. TENANT'S GUARANTOR.
------------
None.
SECTION 1.8. BROKER.
------------
Grubb & Ellis, which represents Landlord, and The Seeley Company, which
represents Tenant. Landlord shall be responsible for any and all brokerage
commissions due to these two brokers in connection with this transaction
pursuant to a separate agreement.
-2-
<PAGE>
SECTION 1.9. SECURITY DEPOSIT.
------------
Concurrently with the execution of this Lease, Tenant shall provide
Landlord with an irrevocable letter of credit in a form and issued by a bank
reasonably acceptable to Landlord in the amount of $250,000.00 ("Letter of
Credit") substantially in the form as shown in EXHIBIT "C" or cash to Landlord
-----------
in such amount, at Tenant's election, as security for the performance of
Tenant's obligations under this Lease. Landlord shall be entitled to draw on
the Letter of Credit following a default by Tenant in its obligations hereunder
and the delivery of notice and expiration of the applicable cure period, in the
amount necessary to cure such default. So long as Tenant is not then in
default, Landlord shall return the Letter of Credit or the cash deposit, as
applicable, to Tenant promptly following the first payment of rent under the
Lease by Tenant.
SECTION 1.10. RENT AND OTHER CHARGES PAYABLE BY TENANT.
-------------
(a) Base Rent.
--- ---------
Monthly Base Rent shall be payable in the amount of Sixty-Two Thousand
Seven Hundred Dollars ($62,700.00). In the event Tenant does not properly
exercise its option to purchase the Property as set forth in Article XV, the
monthly Base Rent shall increase to Eighty Thousand Dollars ($80,000.00) per
month in year five (5) of the Lease. Thereafter, the Base Rent shall increase
at the rate of five percent (5%) per Lease year on the anniversary date of the
Commencement Date on a cumulative and compounded basis. In the event (i) Tenant
properly exercises its option to purchase the Property, and the escrow for the
sale of the Property to Tenant does not close due to a breach by Seller in its
obligations under the Purchase Agreement attached hereto as EXHIBIT "D" or (ii)
-----------
Tenant is legally prevented from exercising or enforcing the option due to a
bankruptcy proceeding, assignment for benefit of creditors or similar debtor
relief action by or against Landlord, then, without limitation on any of
Tenant's other rights or remedies, the Base Rent shall not increase above the
initial monthly amount of $62,700.00 until thirty (30) days after such time as
Landlord cures its default; upon such cure, the escrow shall close promptly and
Tenant shall complete its purchase of the Property. In addition, upon the
occurrence of the events specified in subparagraphs (i) or (ii) above, the Lease
Term shall, at Tenant's option, exercisable on or before one hundred eighty
(180) days prior to the expiration of the Lease Term, be extended for a period
of five (5) years at such Base Rent of $62,700.00.
(b) Additional Rent: (i) Real Property Taxes (See Section 4.2);
--- ---------------
(ii) Insurance Premiums (See Section 4.3); (iii) Utilities (see Section 4.5);
(iv) Common Area Maintenance Costs (see Section 4.6) and (v) Maintenance,
Repairs and Alterations (See Article VI).
ARTICLE II
----------
LEASE TERM
SECTION 2.1. LEASE OF PROPERTY FOR LEASE TERM.
------------
Landlord leases the Property to Tenant and Tenant leases the Property from
Landlord for the Lease Term. The Lease Term is for the period stated in Section
1.5 above and shall begin and end on the dates specified in Section 1.5 above,
unless the beginning or end of the Lease Term is changed under any provision of
this Lease. The "Commencement Date" shall be the date specified in Section
-3-
<PAGE>
1.5 above for the beginning of the Lease Term, unless advanced or delayed under
any provision of this Lease.
SECTION 2.2. HOLDING OVER.
------------
Tenant shall vacate the Property upon the expiration or earlier termination
of this Lease in a neat and clean condition. Tenant shall reimburse Landlord
for, and indemnify Landlord against, all damages which Landlord incurs from
Tenant's delay in vacating the Property. If Tenant does not vacate the Property
upon the expiration or earlier termination of the Lease and Landlord thereafter
accepts rent from Tenant, Tenant's occupancy of the Property shall be a "month-
to-month" tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy.
ARTICLE III
-----------
BASE RENT
SECTION 3.1. TIME AND MANNER OF PAYMENT.
------------
Base Rent shall be due and payable on the first day of each month
commencing on the Commencement Date. Base Rent shall be paid in advance without
offset, deduction or prior demand except as expressly provided herein, and shall
be payable at Landlord's address or at such other place as Landlord may
designate in writing.
SECTION 3.2. TERMINATION; ADVANCE PAYMENTS..
------------
Upon termination of this Lease under Article VIII (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant's successor) any advance rent or other advance
payments made by Tenant to Landlord, and any amounts paid for real property
taxes and other reserves which apply to any time periods after termination of
the Lease.
SECTION 3.3. PARTIAL MONTH.
------------
Should the Commencement Date be a day of the month other than the first day
of such month, then the Base Rent for the first fractional month shall be
computed on a daily basis for the period from the Commencement Date to the end
of such calendar month and at an amount equal to one/three hundred and sixtieth
(1/360/th/) of the annual Base Rent for each such day. Base Rent for such
partial month shall be due and payable upon the Commencement Date. Base Rent
shall likewise be prorated for the fractional month at the end of the Lease
Term.
-4-
<PAGE>
ARTICLE IV
----------
OTHER CHARGES PAYABLE BY TENANT
SECTION 4.1. ADDITIONAL RENT.
------------
All charges payable by Tenant other than Base Rent are called "Additional
Rent." Unless this Lease provides otherwise, Tenant shall pay all Additional
Rent then due with the next monthly installment of Base Rent. The term "rent"
shall mean Base Rent and Additional Rent. Landlord shall be responsible for,
and shall pay, all Additional Rent attributable to periods prior to the
Commencement Date.
SECTION 4.2. PROPERTY TAXES.
------------
(a) Real Property Taxes. Tenant shall pay all real property
--- -------------------
taxes on the Property (including any fees, taxes or assessments against, or as a
result of, any tenant improvements installed on the Property by or for the
benefit of Tenant) during the Lease Term. Such payment shall be made prior to
the penalty imposition date of the taxes. Concurrently with the payment, Tenant
shall furnish Landlord with satisfactory evidence that the real property taxes
have been paid. Landlord shall reimburse Tenant upon demand for any real
property taxes paid by Tenant covering any period of time prior to or after the
Lease Term, or for which Tenant is not liable pursuant to Section 4.2(e) below,
or, at Tenant's election, Landlord shall pay such taxes directly to the taxing
authority concurrently with Tenant's payment covered by the same tax bill. If
Tenant fails to pay the real property taxes when due, Landlord may, after ten
(10) days notice to Tenant, pay the taxes, and Tenant shall reimburse Landlord
for the amount of such tax payment, including interest and penalties, as
Additional Rent plus interest at the annual rate of ten percent (10%).
Landlord and Tenant shall each promptly provide the other with a copy
of any real property tax bill received by such party. Tenant shall have the
right, at any time, to seek a reduction in the assessed valuation of all or any
part of the Property or to contest any real property tax or personal property
tax to be imposed upon Tenant, provided that Tenant first pays such taxes, under
protest if so desired by Tenant. Landlord shall not be required to join in any
proceeding or contest brought by Tenant unless the provisions of any law require
that the proceeding or contest be brought by or in the name of Landlord or any
owner of the Property. In that case, Landlord shall join in any proceeding or
contest or permit it to be brought in Landlord's name as long as Landlord is not
required to bear any cost or incur any liability. Tenant, on final
determination of the proceeding or contest, shall promptly pay or discharge any
unpaid real property taxes or personal property taxes determined by any decision
or judgment rendered, together with all costs, charges, interest and penalties
incidental to the decision or judgment. If any contest of taxes with respect to
the Property results in a reimbursement by one or more taxing authorities of
some or all of the tax payments previously made by Landlord or Tenant with
respect to the Property, Tenant shall be entitled to the full amount of such
reimbursement that is attributable to taxes arising on or after the Commencement
Date. Landlord hereby appoints Tenant as its agent for the purpose of obtaining
information and other data from the county or city assessor with respect to the
Property, and instituting and maintaining any proceeding or contest allowed
under this Section.
(b) Definition of "Real Property Tax". "Real property tax"
--- ---------------------------------
means: (i) any commercial rental tax (so long as it is not a tax on income),
levy, charge, assessment including without
-5-
<PAGE>
limitation, all Mello Roos/Community Facilities and other assessment district
assessments, penalty or tax imposed by any taxing authority against the
Property; (ii) any tax or fee (including a business license fee or rental sales
tax so long as it is not a tax on income) calculated on the Rent payable
hereunder or any portion thereof; (iii) any tax or charge for fire protection,
streets, sidewalks, road maintenance, refuse or other services provided to the
Property by any governmental agency; (iv) except as set forth in Section 4.2(e)
below, any tax imposed upon this transaction based upon a re-assessment of the
Property due to a change of ownership, as defined by applicable law, or other
transfer of all or part of Landlord's interest in the Property; and (v) any
charge or fee replacing any tax previously included within the definition of
real property tax. "Real property tax" does not, however, include Landlord's
federal or state income, franchise, inheritance or estate taxes, gift taxes,
capital stock taxes and other taxes applied or measured by Landlord's general or
net income, and any interest, penalties or fines due to Landlord's failure to
promptly pay real property taxes for which Tenant is not liable under this
Lease, all of which shall be the responsibility of Landlord. If any third party
under any recorded document affecting the Property attempts to create or
increase any taxes or assessments, payment for which Tenant is solely or
partially responsible under this Lease, Landlord covenants not to support (and
to protest and vote against, as directed by Tenant) any such new taxes or
assessment without Tenant's prior written consent.
(c) Joint Assessment. If the Property is not separately
--- ----------------
assessed, Landlord shall reasonably determine Tenant's share of the real
property tax payable by Tenant under Section 4.2(a) from the assessor's
worksheets or other reasonably available information. Tenant shall pay such
share to Landlord within fifteen (15) days after receipt of Landlord's written
statement. In the event of any dispute hereunder, such dispute shall be
submitted to arbitration in accordance with Section 16.13 below.
(d) Personal Property Taxes. Tenant shall pay all taxes charged,
-----------------------
levied or assessed against trade fixtures, furnishings, equipment or any other
personal property associated with the Property. Tenant shall try to have
personal property taxed separately from the Property.
(e) Change in Ownership. Following the acquisition of the Land
--- -------------------
by Landlord and the construction of the Improvements by Landlord,
notwithstanding anything to the contrary contained in this Lease, if thereafter
at any time (and from time to time) prior to the expiration of the forty-eighth
(48th) month of the Lease Term, any change in ownership (as defined under
applicable statutes) of the Property or any part thereof or any interest therein
is consummated and, as a result, all or part of the Property is reassessed
("Reassessment") for real property tax purposes by the appropriate governmental
authority under the terms of Proposition 13 or any successor legislation, then
Tenant shall not be liable for any increase in real property taxes attributable
to the Reassessment; and for purposes of computing Tenant's real property taxes
for the period commencing with the tax year in which the Reassessment is first
reflected in the taxing authorities' notice of assessment, and continuing for
all subsequent tax years prior to the expiration of the forty-eighth (48th)
month of the Lease Term, the increase in real property taxes attributable to the
Reassessment shall be paid by Landlord (or, if previously paid by Tenant, shall
be reimbursed by Landlord to Tenant) and Tenant shall not be responsible for the
payment thereof. Tenant's protection from real property tax increases resulting
from a Reassessment shall terminate upon commencement of the forty-ninth (49th)
month of the Lease Term.
-6-
<PAGE>
SECTION 4.3. INSURANCE.
------------
(a) From and after the date of delivery of the Property from
Landlord to Tenant, Tenant will carry and maintain, at its sole cost and
expense, the following types of insurance, as applicable, in the amounts
specified and in the form hereinafter required. Each policy shall be endorsed
to provide that such coverage shall be primary, and that any coverage maintained
by Landlord shall be excess insurance only, containing an endorsement deleting
any employee exclusion on personal injury coverage, including employees as
additional insureds, and providing for coverage of employer's automobile, non-
ownership liability.
(i) Public Liability and Property Damage. Commercial general
--- ------------------------------------
liability and property damage insurance (including protective
liability coverage on operations of independent contractors engaged in
construction on behalf of Tenant and blanket contractual liability
insurance) with limits of not less than Two Million Dollars
($2,000,000.00), insuring against any and all liability of the insured
with respect to the Property or arising out of the maintenance, use or
occupancy thereof. All such bodily injury liability insurance and
property damage liability insurance shall specifically insure the
performance by Tenant of the indemnity agreement as to liability for
injury to or death of persons and injury or damage to property as set
forth in Section 5.5. Tenant's liability insurance may be provided by
a combination of primary, excess, and umbrella policies so long as the
coverage required hereunder is not diminished.
(ii) Plate Glass. Tenant shall be responsible for the
---- -----------
maintenance of the plate glass on the Property, but shall have the
option to insure the risk or to self-insure.
(iii) Air Conditioning Equipment, Boiler and Machinery
----- ------------------------------------------------
Insurance. Insurance on all air conditioning equipment, boilers, and
---------
other pressure vessels and systems whether fired or unfired serving
the Property; and if such objects and the damage that may be caused by
them or result from them are not covered by Tenant's extended coverage
insurance, then such insurance shall be in an amount not less than One
Million Dollars ($1,000,000.00).
(iv) Building and Tenant Improvements. A policy or policies
---- --------------------------------
of All Risk property insurance covering the entire Property (but
Tenant shall not be required to carry earthquake, flood and subsidence
coverage) including, but not limited to, all improvements constructed
thereon by Landlord and Tenant or their predecessors (and, at Tenant's
option, Tenant's trade fixtures, merchandise and personal property),
with vandalism and malicious mischief endorsements to the extent of
one hundred percent (100%) of the full replacement cost thereof. The
policy or policies set forth herein shall include sprinkler leakage
and contingent liability from operation of building laws endorsements.
(v) Workers' Compensation. Workers' compensation as required
--- ---------------------
by law.
(vi) Course of Construction. During the period of any
---- ----------------------
construction of improvements to the Property by Tenant, Tenant shall
carry or cause its general contractor to carry a policy or policies of
Course of Construction or Builder's All Risk insurance.
-7-
<PAGE>
(vii) Rental Loss. Rental loss insurance in favor of Landlord
----- -----------
for a period of not less than twelve (12) months.
(viii) Earthquake/Flood Insurance. Tenant may elect whether
------ --------------------------
or not to carry earthquake or flood insurance, provided however, that
if Tenant elects not to carry earthquake or flood insurance, Tenant
shall be responsible for the full repair and/or reconstruction of the
Improvements due to earthquake or flooding.
(b) Policy Form. All policies of insurance provided for herein shall
--- -----------
be issued by insurance companies, with general policy holder ratings of not less
than A+ and a financial rating of X or better as rated in the most current
available "Best's Insurance Reports" and qualified to do business in the State
of California. Landlord shall be designated as an additional insured on all
such policies of insurance to be maintained hereunder except the worker's
compensation policy referred to above. Executed copies of such policies of
insurance (or, at Tenant's election, certificates evidencing same) shall be
delivered to Landlord within ten (10) days after delivery of possession of the
Property to Tenant, and thereafter prior to the expiration of the term of each
such policy. All public liability and property damage policies shall contain a
provision that Landlord and Tenant, although named as an additional insured,
shall nevertheless be entitled to recover under such policies for any loss
occasioned to either of them or their servants, agents and employees by reason
of the negligence of the other. As often as any such policy shall expire or
terminate, renewal or additional policies shall be procured and maintained by
Tenant in like manner and to like extent. All policies of insurance delivered
to Landlord must contain a provision that the company writing said policy will
give to Landlord thirty (30) days' notice in writing in advance of any
cancellation or lapse, or the effective date of any reduction in the amounts of
insurance.
(c) Notwithstanding anything to the contrary contained within
this Section 4.3, Tenant's obligations to carry the insurance provided for
herein may be satisfied through a so-called blanket policy or policies of
insurance carried and maintained by Tenant, provided, however, that (i) Landlord
shall be named as an additional insured thereunder as its interest may appear,
(ii) the coverage afforded Landlord will not be reduced or diminished by reason
of the use of such blanket policy of insurance, and (iii) the requirements set
forth herein are otherwise satisfied. Tenant agrees to permit Landlord at all
reasonable times to inspect the policies of insurance of Tenant covering risks
upon the Property for which policies or copies thereof are not required to be
delivered to Landlord.
SECTION 4.4. WAIVER OF SUBROGATION.
------------
Each party hereto ("Releasing Party") hereby releases the other ("Released
Party") from any liability which the Released Party would, but for this Section,
have had to the Releasing Party arising out of or in connection with any
accident or occurrence or casualty (1) which is or would be covered by a
standard fire and extended coverage policy (with vandalism and malicious
mischief endorsement attached) or by a sprinkler leakage or water damage policy
in the state in which the Property is located regardless of whether or not such
coverage is being carried by the Releasing Party, and (2) to the extent of
recovery under any other casualty or property damage insurance being carried by
the Releasing Party at the time of such accident or occurrence or casualty,
which accident or occurrence or casualty may have resulted in whole or in part
from any act or neglect of the Released Party, its officers, agents or
employees; provided however, the release hereinabove set forth shall become
inoperative, null and void if the Releasing Party contracts for the insurance
required to be carried under
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the terms of this Lease with an insurance company which (a) takes the position
that the existence of such release vitiates or would adversely affect any policy
so insuring the Releasing Party in a substantial manner and notice thereof is
given to the Release Party, or (b) requires the payment of a higher premium by
reason of the existence of such release, unless in the latter case the Released
Party, within ten (10) days after notice thereof from the Releasing Party, pays
such increase in premium. In the event the release of one party becomes null and
void due to such circumstances, the release of the other shall also become null
and void at the same time.
SECTION 4.5. UTILITIES.
------------
Tenant shall pay, directly to the appropriate supplier, the cost of all
natural gas, heat, light, power, sewer service, telephone, water, refuse
disposal and other utilities and services supplied to the Property.
SECTION 4.6. COMMON AREA MAINTENANCE COSTS.
------------
Tenant shall pay its proportionate share as required pursuant to that
certain Declaration of Covenants, Conditions and Restrictions and Reservation of
Easements for Park Plaza at Aliso Viejo Town Center, recorded December 14, 1995,
as Instrument No. 19956558554 in the Official Records of Orange County,
California, as amended (the "Declaration") of all common area maintenance costs
incurred in connection with the repair, maintenance and operation of the common
areas of the shopping center in which the Property is located ("Shopping
Center").
SECTION 4.7. LATE CHARGES.
------------
Tenant's failure to pay Rent promptly may cause Landlord to incur
unanticipated costs. The exact amount of such costs are impractical or
extremely difficult to ascertain. Such costs may include, but are not limited
to, processing and accounting charges and late charges which may be imposed on
Landlord by any ground lease, mortgage or trust deed encumbering the Property.
Therefore, if Landlord does not receive any rent payment within ten (10) days
after receipt of notice from Landlord that such rent payment has not been paid,
Tenant shall pay Landlord a late charge equal to three percent (3%) of the
overdue amount. The parties agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of such late
payment.
SECTION 4.8. INTEREST ON PAST DUE OBLIGATIONS.
------------
Any amount owed by Tenant to Landlord which is not paid within ten (10)
days after the date due shall bear interest at the rate of ten percent (10%) per
annum from the due date of such amount. However, interest shall not be payable
on late charges to be paid by Tenant under this Lease. The payment of interest
on such amounts shall not excuse or cure any default by Tenant under this Lease.
If the interest rate specified in this Lease is higher than the rate permitted
by law, the interest rate is hereby decreased to the maximum legal interest rate
permitted by law.
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ARTICLE V
---------
USE OF PROPERTY
SECTION 5.1. PERMITTED USES.
------------
Tenant may use the Property only for the Permitted Uses set forth in
Section 1.6 above.
SECTION 5.2. MANNER OF USE.
------------
Tenant shall not cause or permit the Property to be used in any way which
constitutes a violation of any law, ordinance, or governmental regulation or
order, or which constitutes a legal nuisance or waste. Tenant shall obtain and
pay for all permits required for Tenant's occupancy of the Property and shall
promptly take all actions necessary to comply with all applicable statutes,
ordinances, rules, regulations, orders and requirements regulating the use by
Tenant of the Property, including the Occupational Safety and Health Act.
Tenant shall have the right to contest by appropriate legal proceedings the
validity of any law, ordinance, order, rule, regulation or requirement of the
nature herein described and to postpone compliance with the same pending such
contest provided (i) Landlord is not subjected to liability, damages, fines,
penalties, expenses or other costs, and (ii) Tenant provides Landlord with
reasonable security pending the outcome of the contest.
SECTION 5.3. SIGNS AND AUCTIONS.
------------
Tenant shall not conduct or permit any auctions or sheriff's sales at the
Property. Tenant shall have the sole signage rights on the Building and, except
as provided in any CC&R's which shall be recorded against the Property as of the
date hereof or are described on EXHIBIT F hereto, the Property, and whatever
---------
monument signage rights are available to the owner of the Property, subject only
to applicable laws, ordinances and restrictions, the approved sign criteria for
the shopping center of which the Building is a part (the "Shopping Center"), and
Landlord's approval, which approval shall not be unreasonably withheld,
conditioned or delayed.
SECTION 5.4. INDEMNITY.
------------
(a) Tenant shall indemnify and defend Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in, on or about the Property; (c)
any breach or default in the performance of Tenant's obligations under this
Lease; or (d) other acts or omissions of Tenant. Tenant shall defend Landlord
against any such cost, claim or liability at Tenant's expense with counsel
reasonably acceptable to Landlord or, at Landlord's election, Tenant shall
reimburse Landlord for any reasonable legal fees or costs incurred by Landlord
in connection with any such claim. As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
(b) Notwithstanding anything contained herein to the contrary,
from and after the date of execution of this Lease, Landlord agrees to indemnify
and hold harmless Tenant from and against all claims or proceedings brought
thereon, and the defense thereof arising or caused in any way by any act,
omission or negligence of Landlord or Landlord's employees, contractors or
agents arising from the use of any portion of the Property, any breach or
default of Landlord's obligations under this
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<PAGE>
Lease, and any violation of applicable law by Landlord with respect to the
Property from and after the date that possession of the Property is delivered to
Tenant and until the end of the Term. Landlord shall defend Tenant against any
such cost, claim, or liability at Landlord's expense with counsel reasonably
acceptable to Tenant or, at Tenant's election, Landlord shall reimburse Tenant
for any reasonable legal fees or costs incurred by Tenant in connection with any
such claim.
SECTION 5.5. LANDLORD'S ACCESS.
------------
Subject to Tenant's reasonable security requirements, Landlord or its
agents may enter the Property at all reasonable times to show the Property to
potential buyers, investors or mortgagees; to inspect and conduct tests in order
to monitor Tenant's compliance with all applicable environmental laws and all
laws governing the presence and use of Hazardous Material; or for any other
purpose Landlord reasonably deems necessary. Landlord shall give Tenant at
least seventy-two (72) hours prior notice of such entry, except in the case of
an emergency.
Landlord shall exercise its rights reserved hereunder in such manner as
will attempt to minimize any interference to the Property or the business
conducted therein. Landlord's access to special security areas within the
Property shall only occur in the company of an authorized representative of
Tenant, except in the event of an emergency.
SECTION 5.6. QUIET POSSESSION.
------------
If Tenant pays the rent and complies with all other terms of this Lease and
all declarations and covenants, conditions and restrictions applicable to the
Property (collectively "Restrictions"), Tenant may occupy and enjoy the entire
Property to the exclusion of all others, except with respect to the common areas
located on the Property, for the full Lease Term, subject to the provisions of
this Lease and the Restrictions.
ARTICLE VI
----------
CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
SECTION 6.1. EXISTING CONDITION.
------------
Following delivery of the shell Building by Landlord to Tenant, Tenant
shall perform the Tenant Improvement Work on the terms set forth in Article
XVII. Provided Tenant does not interfere with Landlord's contractor, Tenant may
commence such work prior to Substantial Completion of Landlord's Work.
SECTION 6.2. EXEMPTION OF LANDLORD FROM LIABILITY.
------------
From and after Substantial Completion of Landlord's Work, Landlord shall
not be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other property of Tenant,
Tenant's employees, invitees, customers or any other person in or about the
Property, whether such damage or injury is caused by or results from: (a) fire,
steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or any other causes; or (c) conditions
arising in or about the Property or upon other portions of the Shopping Center,
or from other sources or places.
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<PAGE>
This exculpation clause shall not apply to claims against Landlord or its
agents, contractors or employees to the extent the injury, loss or damage was
proximately caused by such party's gross negligence or willful misconduct.
SECTION 6.3. LANDLORD'S OBLIGATIONS.
------------
From and after Substantial Completion of Landlord's Work, and subject to
the provisions of Article VII (Damage or Destruction) and Article VIII
(Condemnation), Landlord shall not have the responsibility to repair, maintain
or replace any portion of the Property at any time. Tenant waives the benefit
of any present or future law which might give Tenant the right to repair the
Property at Landlord's expense or to terminate the Lease due to the condition of
the Property, except as otherwise specifically provided in this Lease.
SECTION 6.4. TENANT'S OBLIGATIONS.
------------
From and after Substantial Completion of Landlord's Work, and except as
provided in Article VII (Damage or Destruction) and Article VIII (Condemnation),
Tenant shall keep all portions of the Property (including structural,
nonstructural, interior, exterior, roof, and landscaped areas, portions, systems
and equipment) in good order, condition and repair (including interior
repainting and refinishing, as needed, and repairs or replacement required by
fire, earthquake or other code requirements). It is the intention of Landlord
and Tenant that at all times Tenant shall maintain the portions of the Property
which Tenant is obligated to maintain in an attractive and neat condition.
SECTION 6.5. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
------------
(a) Tenant shall not make any material exterior or any structural
alterations, additions, or improvements to the Property without Landlord's prior
written consent, which consent shall not be unreasonably withheld or delayed.
Tenant shall have the right to make any other alterations, additions and
improvements without Landlord's consent, subject to the later provisions hereof.
Tenant shall promptly remove any alterations, additions, or improvements
constructed in violation of this Section 6.6(a) upon Landlord's written request.
All alterations, additions, and improvements shall be done in a good and
workmanlike manner, in conformity with all applicable laws and regulations, and
by a qualified, licensed contractor. Within ninety (90) days after completion of
any such work, Tenant shall provide Landlord with "as built" plans. Tenant shall
give Landlord at least fifteen (15) days notice prior to the commencement of any
substantial improvements or alterations to the Property.
(b) Tenant shall pay when due all claims for labor and material
furnished to the Property during the Term of this Lease, except that Landlord
shall pay when due all claims for labor and material furnished to the Property
in connection with any work done by Landlord with respect to the Property, and
Landlord shall keep the Property free and clear of all mechanics liens arising
out of any work performed at the request of Landlord. Tenant shall keep the
Property free and clear of all mechanics liens arising out of any work performed
at the request of Tenant. Landlord and Tenant shall each have the right to
contest any claim it disputes in good faith so long as it does so diligently and
either pays the disputed amount albeit under protest, or bonds around the lien
within sixty (60) days after the filing of the lien, so as to eliminate any risk
of foreclosure of the mechanics lien.
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<PAGE>
(c) If the nature of Tenant's alterations, additions or
improvements at the Property require the Property to be modified to comply with
seismic, ADA, or other similar requirements, Tenant shall be required to
undertake such compliance, including the payment of all costs associated
therewith.
SECTION 6.6. HAZARDOUS MATERIALS/GEOLOGICAL REPORTS.
------------
Landlord will provide Tenant for its review and approval, prior to October
22, 1997, which approval shall not be unreasonably withheld, all environmental
and geological reports in Landlord's possession or control applicable to the
Property. Landlord shall cause any and all Hazardous Material (as defined
below) placed on the Property by Landlord, its contractor, agents or employees,
or by any third parties other than Tenant, its contractors, agents, or employees
on or before the date of delivery of possession of the shell Building to Tenant
to be remediated to the extent required by law. Upon delivery of possession of
the shell Building, Tenant shall be responsible for any and all Hazardous
Material which may be released, used, stored or generated on the Property after
such date, unless released, spilled or generated by Landlord, its contractors,
agents or representatives.
Tenant shall not cause or permit any Hazardous Material to be brought upon,
kept or used in or about the Property by Tenant, its agents, employees,
contractors or invitees, except in compliance with all law, rules, statutes and
ordinances regulating any such Hazardous Material so brought upon or used or
kept in or about the Property. Tenant shall notify Landlord in writing in the
event any Hazardous Material is brought onto the Property for which a
governmental permit is required and Tenant shall furnish Landlord with a copy of
all such permits. Landlord acknowledges that Tenant intends to use certain
Hazardous Materials in connection with the operation of the medical office
building on the Property. Tenant shall, prior to the use of Hazardous Materials
for which a governmental permit is required, present to Landlord copies of
Tenant's disposal plan with respect to such Hazardous Materials. If Tenant
breaches the obligations stated in this Article, or if the presence of Hazardous
Material on or about the Property caused or permitted by Tenant results in
contamination of the Property, or if contamination of the Property or
surrounding area by Hazardous Material otherwise occurs for which Tenant is
legally liable to Landlord for damage resulting therefrom, then Tenant shall
indemnify, defend and hold Landlord harmless from any and all claims, judgments,
damages, penalties, fines, costs, liabilities or losses which arise during or
after the term of this Lease as a result of such contamination. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions, or any
cleanup, remediation, removal or restoration work, required by any federal,
state or local governmental agency or political subdivision because of Hazardous
Material present in the soil or ground water on, under or about the Property
that was present prior to Substantial Completion. Without limiting the
foregoing, if the presence of any Hazardous Material on or about the Property
caused or permitted by Tenant results in any contamination of the Property or
surrounding area, or causes the Property or surrounding area to be in violation
of any law, rules, statues or ordinances, Tenant shall promptly take all actions
at its sole expense as are necessary to return the Property and surrounding area
to the condition existing prior to the introduction of any such Hazardous
Material or otherwise to the satisfaction of the applicable governmental
authorities; provided that Landlord's approval of such actions shall first be
obtained, which approval shall not be unreasonably withheld so long as such
actions would not potentially have any material adverse long-term or short-term
effect on the Property or surrounding area.
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<PAGE>
Landlord shall cause any and all Hazardous Material placed on the Property
by Landlord, its contractors, agents or employees, or by any third parties other
than Tenant, its contractors, agents or employees, on or before the date of
delivery of the shell Building to Tenant, to be remediated to the extent
required by law. Landlord shall indemnify, defend and hold Tenant harmless from
any and all claims, judgments, damages, penalties, fines, costs, liabilities or
losses which arise as a result of a breach of this covenant. This
indemnification of Tenant by Landlord includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remediation, removal or restoration work required by any federal, state or local
governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water on, under or about the Property that was
present prior to Substantial Completion.
As used herein, the term "Hazardous Material" means any hazardous or toxic
substance, material or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States. The term
"Hazardous Material" includes, without limitation, any material or substance
which is (i) defined as a "hazardous waste," "extremely hazardous waste," or
"restricted hazardous waste" under Sections 25115, 25117, or 25122.7, or is
listed pursuant to Section 25140, of the California Health and Safety Code,
Division 20, Chapter 6.5 (Hazardous Waste Control law), (ii) defined as a
"hazardous material," "hazardous substance," or "hazardous waste" under Section
25501 of the California Health and Safety Code, Division 20, Chapter 6.95
(Hazardous Materials Release Response Plans and Inventory), (iv) defined as a
"hazardous substance" under Section 2528 of the California Health and Safety
Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances),
(v) petroleum, (vi) asbestos, (vii) listed under Article 9 or defined as
hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the
California Administrative Code, Division 4, Chapter 20, (viii) designated as a
"hazardous substance" pursuant to Section 311 of the Federal Water Pollution
Control Act (33 U.S.C. Sec. 1317), (ix) defined as a "hazardous waste" pursuant
to Section 1004 of the Federal Resource Conservation and Recovery Act, 42
U.S.C. Sec 6901 et seq. (42 U.S.C. Sec 6903), or (x) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sec. 9601 et seq. (42 U.S.C. Sec.
6901).
ARTICLE VII
-----------
DAMAGE OR DESTRUCTION
SECTION 7.1. DAMAGE TO PROPERTY.
------------
Following Substantial Completion, Tenant shall notify Landlord in
writing immediately upon the occurrence of any damage to the Property. This
Lease shall remain in effect and Tenant shall repair the damage as soon as
reasonably possible. Tenant shall pay the cost of such repairs and Landlord
shall deliver to Tenant on a periodic basis, consistent with normal construction
loan disbursement procedures, the insurance proceeds, if any, received by
Landlord for the damage to be repaired by Tenant.
SECTION 7.2. TEMPORARY REDUCTION OF RENT.
------------
If the Property is destroyed or damaged and Tenant repairs or restores the
Property pursuant to the provisions of this Article VII, any rent payable during
the period of such damage, repair and/or restoration shall be reduced according
to the degree, if any, to which Tenant's use of the Property is
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impaired. However, the rent reduction during the initial twelve (12) months
following the casualty shall not exceed the amount of insurance proceeds payable
to Landlord by the insurance maintained by Tenant to replace the loss of Base
Rent, insurance proceeds and real estate taxes. Except for such possible
reduction in rent, insurance premiums and real property taxes, Tenant shall not
be entitled to any compensation, reduction, or reimbursement from Landlord as a
result of any damage, destruction, repair, or restoration of or to the Property
unless caused by Landlord's gross negligence or willful misconduct.
Alternatively, Tenant may self insure for rental loss coverage, in which event,
Tenant shall not be entitled to any abatement of rent.
SECTION 7.3. WAIVER.
------------
Tenant waives the protection of any statute, code or judicial decision
which grants a tenant the right to terminate a lease in the event of the
substantial or total destruction of the leased property. Tenant agrees that the
provisions of Section 7.1 above shall govern the rights and obligations of
Landlord and Tenant in the event of any substantial or total destruction to the
Property.
ARTICLE VIII
------------
CONDEMNATION
If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the Building, or if more
than twenty percent (20%) of the parking spaces in the immediate vicinity of the
Property, is taken, Tenant may terminate this Lease as of the date the
condemning authority takes title or possession, by delivering written notice to
Landlord within ten (10) days after receipt of written notice of such taking, or
in the absence of such notice, within ten (10) days after the condemning
authority takes title or possession. If Tenant does not terminate this Lease,
this Lease shall remain in effect as to the portion of the Property not taken,
except that the Base Rent and Additional Rent shall be reduced in proportion to
the reduction in the floor area of the Building or diminution in use resulting
from the loss of parking. Any condemnation award or payment following a
termination shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
tenant's trade fixtures or removable personal property; (c) third, to Landlord
and Tenant prorata based upon their relative contributions to the unamortized
cost of the leasehold improvements; and (d) fourth, to Landlord, the remainder
of such award, whether as compensation for reduction in the value of the
leasehold, the taking of the fee, or otherwise. If this Lease is not
terminated, Tenant shall repair any damage to the Property caused by the
Condemnation and Tenant shall be entitled to the entire portion of the
condemnation award to repair such damage. The balance of the condemnation award
shall be apportioned between Landlord and Tenant as set forth above (but the
purchase price shall be reduced by the amount of any condemnation award received
by Landlord). Notwithstanding the foregoing, Tenant shall be entitled to the
entire Condemnation award in the event that Tenant duly exercises its option to
purchase the Property as set forth in Article XV below, and Tenant may exercise
its option early if necessary to effectuate such right to the entire award.
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ARTICLE IX
----------
ASSIGNMENT AND SUBLETTING
SECTION 9.1. LANDLORD'S CONSENT REQUIRED.
------------
No portion of the Property or of Tenant's interest in this Lease may be
acquired by another person or entity, whether by sale, assignment, mortgage,
sublease, transfer, operation of law, or act of Tenant, without Landlord's prior
written consent, which shall not be unreasonably withheld as provided in Section
9.4 below. Except as otherwise provided below, any attempted transfer without
Landlord's consent shall be void and shall constitute a breach of this Lease.
SECTION 9.2. TRANSFERS TO AFFILIATES; PERMITTED SUBLEASES.
------------
Notwithstanding anything contained herein to the contrary, Tenant may
assign its interest in this Lease or sublet the Property, or any portion
thereof, without Landlord's consent to (a) any entity which owns a controlling
share of the capital stock of Tenant or an entity in which a controlling share
of the capital stock is owned by Tenant, or (b) any entity resulting from the
merger or consolidation with Tenant, or (c) any person or entity which acquires
all or substantially all of the assets of Tenant. Tenant may also sublease the
Property without Landlord's consent to medical or dental practitioners who meet
Tenant's standard leasing requirements. Upon written notice to Landlord
specifying the name and address of the assignee of such interest (the
"Transferee"), Landlord shall henceforth give to such Transferee any notice
required to be given to Tenant under this Lease. Landlord shall accept payment
or performance by such Transferee of any obligation of Tenant as though paid or
performed by Tenant. At least ten (10) days prior to any of the transactions
set forth in this Section (except for subleases to medical or dental
practitioners who meet Tenant's standard leasing requirements), Tenant shall
give written notice to Landlord specifying the name and address of the
Transferee, and setting forth the nature of the transaction which will result in
the Transferee acting as the assignee under this Lease. In addition, Transferee
shall execute an assignment agreement on a form approved by Landlord pursuant to
which Transferee acknowledges and assumes all of the obligations of Tenant under
this Lease, and Tenant acknowledges that it shall not be relieved of its primary
liability for the performance of its obligations under this Lease.
SECTION 9.3. NO RELEASE OF TENANT.
------------
No transfer permitted by this Article IX, whether with or without
Landlord's consent, shall release Tenant or change Tenant's primary liability to
pay the rent and to perform all other obligations of Tenant under this Lease.
Landlord's acceptance of rent from any other person is not a waiver of any
provision of this Article IX. Consent to one transfer is not a consent to any
subsequent transfer. If Tenant's Transferee defaults under this Lease, Landlord
may proceed directly against Tenant without pursuing remedies against the
Transferee. Landlord may consent to subsequent assignments or modifications of
this Lease by Tenant's Transferee, without notifying Tenant or obtaining its
consent. Such action shall not relieve Tenant of its liability under this
Lease.
SECTION 9.4. LANDLORD'S CONSENT.
------------
Tenant's request for consent to any transfer described in Section 9.1 shall
set forth in writing the details of the proposed transfer, including the name,
business and financial condition of the
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prospective transferee, the proposed use and any other information Landlord
reasonably deems relevant. Landlord shall have the right to withhold consent, if
reasonable, or to grant consent, based on the following factors: (i) the
business of the proposed assignee or subtenant and the proposed use of the
Property to the extent it conflicts with the uses permitted hereunder; (ii) the
net worth and financial reputation of the proposed assignee or subtenant; (iii)
Tenant's compliance with all of its obligations under the Lease; and (iv) such
other factors as Landlord may reasonably deem relevant in light of the nature of
this transaction.
SECTION 9.5. NO MERGER.
------------
No merger shall result from Tenant's sublease of the Property under
this Article IX, Tenant's surrender of this Lease, or the termination of this
Lease in any other manner. In any such event, Landlord may terminate any or all
subtenancies or succeed to the interest of Tenant as sublandlord under any or
all subtenancies.
ARTICLE X
---------
LEASEHOLD FINANCING
(a) Tenant shall have the right to subject its leasehold estate
created by this Lease to (1) a mortgage or deed of trust as security for a loan
from a bank, savings and loan association, trust company, insurance company, or
other institutional lender, provided that all of the following conditions are
satisfied:
(i) The mortgage or deed of trust, and all rights thereunder,
shall be no greater than or extend beyond the rights of Tenant under
this Lease, and the mortgage or deed of trust shall be subject to each
and all of the covenants, conditions, restrictions and obligations
stated in this Lease, and to all and each of the rights of Landlord in
this Lease.
(ii) Tenant shall give Landlord at least ten (10) days prior
written notice of any such mortgage or deed of trust, and shall
accompany the notice with a true and correct copy of the proposed
note, deed of trust and mortgage.
(iii) The leasehold mortgage documents shall provide that any
proceeds from Tenant's property insurance shall be used first for
repair or rebuilding of the Property as provided herein and otherwise
to repay all or any part of the outstanding balance of the leasehold
mortgage.
(iv) On the recording of the leasehold mortgage, Tenant shall,
at Tenant's expense, cause to be recorded in the office of the County
Recorder of Orange County, California, a written request executed and
acknowledged by Landlord for a copy of all notices of default and all
notices of sale under the mortgage or deed of trust as provided by the
statutes of the State of California. Inclusion in the body of the
recorded mortgage or the deed of trust of a request for notice having
the effect described above shall constitute compliance with this
provision.
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(b) Landlord agrees that, so long as any such leasehold mortgage
or deed of trust shall remain unsatisfied of record or until written notice of
satisfaction is given by the holder to Landlord, the following provisions shall
apply:
(i) Landlord shall, upon serving upon Tenant any notice of
default, or any other notice under the provisions of or with respect
to this Lease, simultaneously serve a copy of such notice upon the
holder of the leasehold mortgage at the address specified by such
leasehold mortgagee, and no notice of such default or other notice
shall be deemed to have been duly given unless and until a copy
thereof has been so served upon any such leasehold mortgagee. The
leasehold mortgagee shall thereupon have the same period of time as
Tenant hereunder to remedy or cause to be remedied the defaults
complained of. The remedy of any such default within the time above
specified by the leasehold mortgagee shall have the same force and
effect as if such default has been remedied by Tenant.
(ii) Anything herein contained to the contrary
notwithstanding, while the leasehold mortgage remains unsatisfied of
record, or until written notice of satisfaction is given by the holder
to Landlord, (a) if a default by Tenant shall occur which, under any
provisions of this Lease shall entitle Landlord to terminate this
Lease, and if before the expiration of thirty (30) days from the date
of service of notice of termination upon the leasehold mortgagee, the
leasehold mortgagee shall have notified Landlord of its desire to
nullify such notice and shall have paid Landlord all Rent and other
payments herein provided for, and then in default, and shall have
complied or shall commence the work of complying with all of the other
requirements of this Lease, if any are then in default, and shall
prosecute the same to completion with reasonable diligence, then in
such event, Landlord shall not be entitled to terminate this Lease and
any notice of termination theretofore given shall be void and of no
effect, or (b) if this Lease shall be terminated at any time during
the Term hereof by reason of a default by Tenant which is not capable
of being cured by the leasehold mortgagee, the leasehold mortgagee
shall have the right upon written notice to Landlord, which notice
must be given, if at all, within ten (10) days after termination of
this Lease, to enter into a new lease with Landlord upon all the same
terms and conditions as contained in this Lease provided all monetary
defaults have been cured.
(iii) In the event the leasehold mortgagee shall acquire
Tenant's interest in this Lease as a result of a foreclosure under
such leasehold mortgagee or through any transfer or assignment in lieu
of foreclosure, the leasehold mortgagee shall have the right to assign
this Lease to an assignee for use as set forth in Section 1.6 of this
Lease with the prior written consent of Landlord, which consent shall
not be withheld provided that all of the following conditions are
satisfied: (a) such assignment shall be subject to all of the terms,
covenants and conditions of this Lease and such assignee shall
expressly assume for the benefit of Landlord the obligations of Tenant
under this Lease by a document reasonably satisfactory to Landlord;
(b) the proposed assignee has a tangible net worth as certified
without qualification by a national accounting firm of recognized
standing equal to or greater than the net worth of Tenant as of the
date of this Lease; (c) the proposed assignee shall have successful
experience in operating an establishment of the type operated by
Tenant pursuant to this Lease. Upon such
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assignment, the leasehold mortgagee shall be relieved of any further
liability under this Lease from and after the date the aforesaid
assignee has assumed Tenant's obligations under this Lease.
(iv) Landlord agrees, within twenty (20) days after the
request in writing by the leasehold mortgagee, to furnish the
leasehold mortgagee with a written statement duly acknowledged, of the
fact that there are no defaults hereunder by Tenant, if such is the
case. If any defaults then do exist, Landlord agrees that, in such
statement, it will specify the particular default or defaults which
Landlord claims to exist. Such statement shall confirm the date to
which rent and all other required charges have been paid.
ARTICLE XI
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DEFAULTS; REMEDIES
SECTION 11.1. COVENANTS AND CONDITIONS.
-------------
Each party's performance of each of its obligations under this Lease is a
condition as well as a covenant. Time is of the essence in the performance of
all covenants and conditions.
SECTION 11.2. DEFAULTS.
-------------
Tenant shall be in material default under this Lease:
(a) If Tenant fails to pay rent or any other charge, interest or
fee when due and such payments are not made by Tenant to Landlord within ten
(10) days after receipt of written notice thereof of the failure by Landlord
(provided, however, that the first two (2) times during the Lease Term that
Tenant fails to pay rent or any other charge within ten (10) days after written
notice thereof such that Tenant would otherwise be in default pursuant to the
foregoing provisions of this Section 11.2(a), Tenant shall not be in default
pursuant to this Section 11.2(a) unless Tenant fails to pay such rent or other
charge within five (5) days after a second written notice of such failure);
(b) If Tenant fails to perform any of Tenant's non-monetary
obligations under this Lease for a period of thirty (30) days after written
notice from Landlord; provided that if more than thirty (30) days are required
to complete such performance, Tenant shall not be in default if Tenant commences
such performance within the thirty (30) day period and thereafter diligently
pursues its completion (and provided, further, that the first two (2) times
during the Lease Term that Tenant fails to perform any of its non-monetary
obligations after written notice from Landlord such that Tenant would otherwise
be in default pursuant to the foregoing provisions of this Section 11.2(b),
Tenant shall not be in default pursuant to this Section 11.2(b) unless Tenant
fails to perform such non-monetary obligations within fifteen (15) days after a
second written notice from Landlord or, if more than fifteen (15) days are
required to complete such performance, if Tenant commences such performance
within the fifteen (15) day period and thereafter diligently pursues its
completion). However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Section is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
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(c) (i) If Tenant makes a general assignment or general
arrangement for the benefit of creditors; (ii) if a petition for adjudication of
bankruptcy or for reorganization or rearrangement is filed by or against Tenant
and is not dismissed or stayed within sixty (60) days; (iii) if a trustee or
receiver is appointed to take possession of substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease and possession is
not restored to Tenant within sixty (60) days. If a court of competent
jurisdiction determines that any of the acts described in this subparagraph (c)
is not a default under this Lease, and a trustee is appointed to take possession
(or if Tenant remains a debtor in possession) and such trustee or Tenant
transfers Tenant's interest hereunder, then Landlord shall receive, as
Additional Rent, the excess, if any, of the rent (or any other consideration)
paid in connection with such assignment or sublease over the rent payable by
Tenant under this Lease.
SECTION 11.3. REMEDIES.
-------------
(a) Landlord shall have the following remedies if Tenant commits
a default as set forth above. These remedies are not exclusive; they are
cumulative in addition to any other remedies now or later allowed by law. Such
remedies may be exercised without further notice or demand of any kind to Tenant
or any other persons and include:
(i) The right of Landlord to declare the term hereof ended and
to re-enter the Property and take possession thereof and remove all
persons therefrom, and Tenant shall have no further claim thereon
thereunder, or
(ii) The right of Landlord without declaring this Lease ended
to re-enter the Property and occupy the whole or any part thereof for
and on account of Tenant and to collect said rent and any other rent
that may thereafter become payable.
(iii) The right of Landlord, even though it may have re-
entered the Property, to thereafter elect to terminate this Lease and
all of the rights of Tenant in or to the Property.
(b) Should Landlord elect to terminate this Lease under the
provisions of Section 11.3(a) above, Landlord may recover from Tenant as
damages:
(i) The worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount of the
unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss Tenant proves
could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the award exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided; plus
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom including, but not limited to, any
costs or expenses incurred by Landlord in maintaining
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or preserving the Property after such default, repairing the Property
for re-letting to a new tenant, any repairs or alterations to the
Property for such re-letting, leasing commissions, or any other costs
necessary or appropriate to re-let the Property; plus
(v) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by
applicable California law.
(c) As used in Sections 11.3(b)(i) and 11.3(b)(ii) above, the
"worth at the time of award" is computed by allowing interest at the lesser of
the rate of ten percent (10%) per annum or the maximum legal rate. As used in
Section 11.3(b)(iii) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(d) For all purposes of this Section 11.3, the term "rent" shall
be deemed to be the rent and all other sums required to be paid by Tenant
pursuant to the terms of this Lease, including interest and late charges.
(e) Should Landlord have re-entered the Property under the
provisions of Subsection 11.3(a)(i) above, Landlord shall not be deemed to have
terminated this Lease, or the liability of Tenant to pay rent thereafter to
accrue, or its liability for damages under any of the provisions hereof, by any
such re-entry or by any action in unlawful detainer, or otherwise, to obtain
possession of the Property, unless Landlord shall have notified Tenant in
writing that is has so elected to terminate this Lease, and Tenant further
covenants that the service by Landlord of any notice pursuant to the unlawful
detainer statutes of the State of California and the surrender of possession
pursuant to such notice shall not (unless Landlord elects to the contrary at the
time of or at any time subsequent to the serving of such notices and such
election be evidenced by a written notice to Tenant) be deemed to be a
termination of this Lease. In the event of any entry or taking possession of
the Property as aforesaid, Landlord shall have the right, but not the
obligation, to remove therefrom all or any part of the personal property located
therein and place the same in storage at a public warehouse at the expense and
risk of the owner or owners hereof. The acceptance by Landlord of less than all
of the rent due under the terms of this Lease at any time shall not constitute a
waiver by Landlord of its right to receive the remainder of the Rent or of its
right to exercise any remedy specified in this Lease, including but not limited
to the termination of this Lease.
SECTION 11.4. TERMINATION.
-------------
In the event Landlord exercises its right to terminate this Lease as
provided in Section 11.3 hereof, Landlord's damages for default shall include
all costs and fees, including reasonable attorneys' fees that Landlord incurs in
connection with the filing, commencement, pursuing and/or defending of any
action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
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SECTION 11.5. CUMULATIVE REMEDIES.
-------------
Landlord's or Tenant's exercise of any right or remedy shall not prevent it
from exercising any other right or remedy.
ARTICLE XII
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LANDLORD'S DEFAULT
SECTION 12.1. TENANT'S REMEDY.
-------------
In the event Landlord shall neglect or fail to perform or observe any of
the covenants, provisions or conditions contained in this Lease on its part to
be performed or observed within (i) ten (10) days after written notice of
default regarding the disbursement of the Tenant Improvement Allowance (as
defined and set forth in Section 17.3 below) , or (ii) thirty (30) days after
written notice of default (or if more than thirty (30) days shall be required
because of the nature of the default, if Landlord shall fail to proceed
diligently to cure such default after notice or in the case of an emergency a
shorter notice need not be given) delivered to Landlord, then in that event,
Tenant shall have the right to cure any such default. If Tenant at any time, by
reason of Landlord's default, pays any sum or does any act that requires the
payment of any sum, the sum paid by Tenant shall be offset against Tenant's
future obligations to pay Rent, or against the purchase price for the Property,
as Tenant may elect, with interest at the lesser of the Bank of America prime
rate plus two percent (2%), or the maximum amount allowed by law, if, and only
if (in cases where Landlord contests the payment obligation) Tenant is the
prevailing party in an arbitration proceeding which determines that Landlord was
responsible for such items of default. Tenant shall have no right to terminate
this Lease except as expressly set forth in Article VII, Condemnation.. Any
notices that are to be given to Landlord hereunder shall also be given to
Landlord's lender if such lender has previously been identified to Tenant by
Landlord. Should Landlord fail to make any payment (including any damages
awarded by a court or arbitrator) or to reimburse Tenant as and when required by
this Lease, Tenant shall have the right without prejudice to any other right or
remedy, to offset such amounts, with interest at the above rate, against
Tenant's obligation to pay rent or the Purchase Price as Tenant may elect (with
the same arbitration condition as described above in cases where Landlord
contests the payment obligation).
SECTION 12.2. LIMITATION ON LANDLORD'S LIABILITY.
-------------
In no event shall Tenant have the right to terminate this Lease as a result
of Landlord's default. Tenant's sole remedy shall be limited to the offset
rights as expressly provided, the recovery of damages, and/or equitable
remedies.
ARTICLE XIII
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PROTECTION OF LENDERS
SECTION 13.1. SUBORDINATION.
-------------
Subject to the requirements of Section 13.2 herein, Landlord shall have the
right to subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof, and any
renewals, modifications, consolidations, replacements or
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extensions thereof, whenever made or recorded. Tenant shall cooperate with
Landlord and any lender which is acquiring a security interest in the Property
or the Lease. Tenant shall execute such further documents and assurances as such
lender may reasonably require, and which may include provisions to the effect
that this Lease will not be amended, surrendered or terminated without the
lender's consent (not to be unreasonably withheld), that rent will not be
prepaid more than one (1) month in advance, and that the lender will not be
subject to any offsets or claims for monies previously paid to Landlord by
Tenant or for any damages caused by Landlord except for offset rights and damage
remedies expressly described in this Lease. Tenant's right to quiet possession
of the Property during the Lease Term shall not be disturbed if Tenant pays the
rent and performs all of Tenant's obligations under this Lease and is not
otherwise in default. If any ground lessor, beneficiary or mortgagee elects to
have this Lease prior to the lien of its ground lease, deed of trust or mortgage
and gives written notice thereof to Tenant, this Lease shall be deemed prior to
such ground lease, deed of trust or mortgage whether this Lease is dated prior
or subsequent to the date of said ground lease, deed of trust or mortgage or the
date of recording thereof.
SECTION 13.2. ATTORNMENT.
-------------
If Landlord's interest in the Property is acquired by any ground lessor,
beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure sale
or by deed in lieu of foreclosure, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest. Tenant's attornment hereunder and Tenant's agreement
and Landlord's right to subordinate per Section 13.1 are expressly conditioned
on Tenant's receipt of a non-disturbance agreement from the party seeking
attornment or subordination in a form reasonably acceptable to Tenant. Any such
nondisturbance agreement shall recognize Tenant's express rights of offset set
forth in this Lease, Tenant's option to purchase specified in Article 14 and
shall not materially change any terms or provisions of the Lease.
SECTION 13.3. SIGNING OF DOCUMENTS.
-------------
Tenant shall sign and deliver any instruments or documents necessary or
appropriate to evidence any such attornment or subordination or agreement to do
so within twenty (20) days after written request.
SECTION 13.4. ESTOPPEL CERTIFICATES.
-------------
(a) Upon either party's written request, the other shall execute,
acknowledge and deliver to the requesting party a written statement certifying:
(i) that none of the terms or provisions of this Lease have been changed (or if
they have been changed, stating how they have been changed); (ii) that this
Lease has not been canceled or terminated; (iii) the last date of payment of the
Base Rent and other charges and the time period covered by such payment; (iv)
that the other party is not in default under this Lease (or, if the other party
is claimed to be in default, stating the nature of such claimed default); and
(v) such other representations or information with respect to the other party or
the Lease as the requesting party may reasonably request, or which any
prospective purchaser or encumbrancer of the Property may require. A party
shall deliver such statement to the requesting party within ten (10) calendar
days after the request.
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(b) If either party does not deliver such statement to the
requesting party within such ten (10) day calendar period, the requesting party,
and any prospective purchaser or encumbrancer, may, after an additional five (5)
day warning notice, conclusively presume and rely upon the following facts: (i)
that the terms and provisions of this Lease have not been changed except as
otherwise represented by the requesting party; (ii) that this Lease has not been
canceled or terminated except as otherwise represented by the requesting party;
(iii) that not more than one month's Base Rent or other charges have been paid
in advance; and (iv) that the requesting party is not in default under the
Lease. In such event, the other party shall be estopped from denying the truth
of such matters.
SECTION 13.5. TENANT'S FINANCIAL CONDITION.
-------------
Within ten (10) days after written request from Landlord in connection with
any proposed sale or refinance of the Property or any portion thereof, Tenant
shall deliver to Landlord such financial statements as Landlord reasonably
requests. For purposes of this Section, financial statements shall include,
without limitation, a current balance sheet, an income and expense statement
prepared in accordance with generally accepted account principles and certified
by a certified public accountant or the chief financial officer of Tenant. In
addition, Tenant shall deliver to any lender designated by Landlord any
financial statements reasonably required by such lender to facilitate the
financing or refinancing of the Property. Tenant represents and warrants to
Landlord that each such financial statement is true and accurate in all material
respects as of the date of such statement. All financial statements shall be
kept confidential and shall be used only for the purposes set forth in this
Lease.
ARTICLE XIV
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LEGAL COSTS
SECTION 14.1. LEGAL PROCEEDINGS.
-------------
If Tenant or Landlord shall be in breach or default under this Lease, such
party (the "Defaulting Party") shall reimburse the other party (the
"Nondefaulting Party") upon demand for any costs or expenses that the
Nondefaulting Party incurs in connection with any breach or default of the
Defaulting Party under this Lease, whether or not suit is commenced or judgment
entered. Such costs shall include legal fees and costs incurred for the
negotiation of a settlement, enforcement of rights or otherwise. Furthermore,
if any action for breach of or to enforce the provisions of this Lease is
commenced, the court in such action shall award to the party in whose favor a
judgment is entered, a reasonable sum as attorneys' fees and costs. The losing
party in such action shall pay such attorneys' fees and costs.
Each party shall also indemnify the other against and hold the other
harmless from all costs, expenses, demands and liability incurred by the
indemnified party if the indemnified party becomes or is made a party to any
claim or action (a) instituted by the other party against any third party, or by
any third party against the other party, or by or against any person holding any
interest under or using the Property by license of or agreement with Tenant; (b)
for foreclosure of any lien for labor or material furnished to or for the other
party or such other person; (c) otherwise arising out of or resulting from any
act or transaction of the other party or any party claiming under such other
party or that relate to the Property or such other person; or (d) necessary to
protect Landlord's or Tenant's interest under this Lease in a bankruptcy
proceeding, or other proceeding under Title 11 of the United States Code, as
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amended. Each party shall defend the other against any such claim or action at
the expense of the indemnifying party with counsel reasonably acceptable to the
indemnified party or, at the election of the indemnified party, the other party
shall reimburse the indemnified party for any legal fees or costs reasonably
incurred by the indemnified party in any such claim or action.
SECTION 14.2. LANDLORD'S CONSENT.
-------------
Tenant shall pay Landlord's reasonable attorneys' fees (not to exceed
$500.00) incurred in connection with Tenant's request for Landlord's consent
under Article IX (Assignment and Subletting), or in connection with any other
act which Tenant proposes to do after the Commencement Date and which requires
Landlord's consent.
ARTICLE XV
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OPTION TO PURCHASE
Tenant shall have the option to purchase the Property from Landlord on the
following terms and conditions. Provided that Tenant is not then in default in
any material obligation hereunder (after notice and the expiration of any
applicable cure period set forth in this Lease), Tenant shall be entitled to
notify Landlord in writing of Tenant's exercise of its option to purchase all of
the Property, but not a part thereof, at any time during the forty-fifth
(45/th/) through the forty-seventh (47/th/) month of the Lease. To prevent the
inadvertent failure of Tenant to exercise the purchase option by the date
required hereunder, the parties agree that the purchase option shall not expire
unless (i) Landlord shall have given Tenant notice (the "Expiration Notice") at
any time from and after the last day on which Tenant otherwise could exercise
the option that Landlord has not received notice of Tenant's exercise of the
option, and (ii) Tenant shall have not exercised the option within thirty (30)
days after receipt of the Expiration Notice from Landlord. If Tenant does not
exercise the option to Landlord by such thirtieth (30/th/) day after receipt of
the Expiration Notice, the option shall automatically terminate. Upon valid
exercise of the option by Tenant, Landlord shall be obligated to sell, and
Tenant shall be obligated to purchase, the Property after the expiration of the
forty-eighth (48/th/) month of the Lease Term, for the sum of Nine Million Five
Hundred Thousand Dollars ($9,500,000.00), subject only to current taxes and
assessments not yet due and payable, and non-monetary exceptions existing as of
the date of this Lease as approved or created by Tenant. The parties shall
execute a purchase agreement providing for such purchase and sale, which
agreement is attached as EXHIBIT "D" to the Lease.
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ARTICLE XVI
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MISCELLANEOUS PROVISIONS
SECTION 16.1. LANDLORD.
-------------
As used in this Lease, the term "Landlord" means only the current owner of
the fee title to the Property or the leasehold estate under a ground lease of
the Property at the time in question. Each Landlord is obligated to perform the
obligations of Landlord under this Lease only during and with respect to the
time such Landlord owns such interest or title. Any Landlord who transfers its
title or interest is relieved of all liability with respect to the obligations
of Landlord under this Lease to be performed (other than obligations relating to
such Landlord's period of ownership) on or after the date of transfer provided
the transferee assumes all of the obligations under this Lease in writing.
However,
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each Landlord shall deliver to its transferee all funds that Tenant previously
paid if such funds have not yet been applied under the terms of this Lease.
SECTION 16.2. SEVERABILITY.
-------------
A determination by a court of competent jurisdiction that any provision of
this Lease or any part thereof is illegal or unenforceable shall not cancel or
invalidate the remainder of this Lease, which shall remain in full force and
effect.
SECTION 16.3. INTERPRETATION.
-------------
The captions of the Articles or Sections of this Lease are to assist the
parties in reading this Lease and are not a part of the terms or provisions of
this Lease. Whenever required by the context of this Lease, the singular shall
include plural and the plural shall include singular. The masculine, feminine
and neuter genders shall each include the other.
SECTION 16.4. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS.
-------------
This Lease is the only agreement between the parties pertaining to the
lease of the Property and no other agreements are effective. All amendments to
this Lease shall be in writing and signed by all parties. Any other attempted
amendment shall be void.
SECTION 16.5. NOTICES.
-------------
All notices required or permitted under this Lease shall be in writing and
shall be personally delivered or sent by certified mail, return receipt
requested, postage prepaid. In lieu of mailing, either party may cause delivery
of such notices, demands and requests to be made by personal service or
overnight courier, provided that written proof of delivery is given to the
sender. All such notices shall be delivered as follows:
To Landlord: AV Medical Associates, LLC
1332 Park View Avenue, Suite 101
Manhattan Beach, CA 90266
Attn: John Zahoudanis
Facsimile: (310) 546-5487
with copies to: G&L Realty Partnership, L.P.
439 North Bedford Drive
Beverly Hills, CA 90210
Attn: Joseph Carroll
Facsimile: (310) 248-2222
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Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attention: Bruce C. Stuart, Esq.
Facsimile: (714) 725-4100
To Tenant: Hoag Memorial Hospital Presbyterian
P.O. Box 6100
301 Newport Boulevard
Newport Beach, CA 92658-6100
Attention: Peter M. Foulke, Executive Vice President
Facsimile: (714) 760-5746
with copies to: Hewitt & McGuire
19900 MacArthur Boulevard, Suite 1050
Irvine, CA 92612
Attn: Dean Dunn-Rankin, Esq.
Facsimile: (714) 798-0511
All notices shall be effective upon delivery or on the date delivery is
refused by the receiving party. Either party may change its notice address upon
written notice to the other party.
SECTION 16.6. WAIVERS.
-------------
All waivers must be in writing and signed by the waiving party. A party's
failure to enforce any provision of this Lease or its acceptance of rent shall
not be a waiver and shall not prevent such party from enforcing that provision
or any other provision of this Lease in the future. No statement on a payment
check from either party or in a letter accompanying a payment check shall be
binding on the other. Either party may, with or without notice to the other,
negotiate such check without being bound to the conditions of such statement.
SECTION 16.7. NO RECORDATION.
-------------
Neither party shall record this Lease. A "short form" memorandum of this
Lease executed by both parties, and including Tenant's option to purchase the
Property, shall be recorded. Tenant shall pay all recording fees. A copy of
such memorandum of Lease is attached hereto as EXHIBIT "E" and incorporated
-----------
herein by this reference. Upon Landlord's acquisition of title to the Land,
title to the Land shall be subject only to those exceptions set forth on EXHIBIT
-------
"F" hereto.
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SECTION 16.8. BINDING EFFECT; CHOICE OF LAW.
-------------
This Lease binds any party who legally acquires any right or interest in
this Lease from Landlord or Tenant. However, Landlord shall have no obligation
to Tenant's successor unless the rights or interests of Tenant's successor are
acquired in accordance with the terms of this Lease. The laws of the state in
which the Property is located shall govern this Lease.
-27-
<PAGE>
SECTION 16.9. AUTHORITY.
-------------
If a party signing this Lease is a legal entity (a corporation, non-profit
corporation, limited liability company or partnership) rather than an
individual, each person signing this Lease on behalf of such party represents
and warrants that he has full authority to do so and that this Lease binds the
entity. Within thirty (30) days after this Lease is signed, each party that
executes this Lease as a corporation shall deliver to the other a certified copy
of a resolution of its board of directors authorizing the execution of this
Lease or other evidence of such authority reasonably acceptable to the other.
SECTION 16.10. FORCE MAJEURE.
--------------
Excluding monetary obligations, for which there shall be no force majeure
relief once the Commencement Date has occurred, if a party cannot perform any of
its obligations due to events beyond its control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond a party's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions. Neither party shall claim the benefit of
a force majeure event for economic inability.
SECTION 16.11. EXECUTION OF LEASE.
--------------
The Lease may be executed in counterparts and, when all counterpart
documents are executed, the counterparts shall constitute a single binding
instrument. A party's delivery of this Lease to the other shall not be deemed
to be an offer to lease and shall not be binding upon either party until
executed and delivered by both parties.
SECTION 16.12. SURVIVAL.
--------------
All representations and warranties of Landlord and Tenant shall survive the
termination of this Lease.
SECTION 16.13. ARBITRATION.
--------------
(a) For disputes which are specifically subject to arbitration
under any provision of this Lease and which do not provide for an alternative
method of resolution, and that are not resolved by the parties within ten (10)
days after either party gives notice to the other of its desire to arbitrate the
dispute, the dispute shall then be immediately submitted to binding arbitration
by the American Arbitration Association in accord with its then-prevailing
rules. Judgment upon the arbitration award may be entered in any court having
jurisdiction. The arbitrators shall have no power to change the Lease
provisions. The arbitration panel shall consist of three arbitrators, one of
whom must be a real estate attorney actively engaged in the practice of law for
at least the last five (5) years. Both parties shall continue performing their
Lease obligations pending the award in the arbitration proceeding. The
arbitrators shall award the prevailing party reasonable expenses and costs
including reasonable attorneys' fees pursuant to Section 14.1.
(b) The losing party shall pay to the prevailing party the amount
of the final arbitration award. If payment is not made within ten (10) business
days after the date the arbitration award is no longer appealable, then in
addition to any other remedies under the law:
-28-
<PAGE>
(i) If Landlord is the prevailing party, it shall have the
same remedies for failure to pay the arbitration award as it has for
Tenant's failure to pay the Rent; and
(ii) If Tenant is the prevailing party, it may deduct any
remaining unpaid award from (1) its monthly payment of Rent,
Additional Rent, or other charges, or (2) the purchase price in the
event Tenant exercises its option to purchase the Property.
(c) The following disputes are subject to arbitration:
(i) Any disputes that the parties agree to submit to
arbitration;
(ii) The amount billed as Additional Rent or any component
part of the calculation of Additional Rent;
(iii) Whether Landlord's withholding of consent is
unreasonable or unduly delayed under Section 9.4;
(iv) Any disputes relating to the construction of the Building
or claims relating thereto; and
(v) Any failure by a party to pay to the other any sum claimed
by it to be due.
ARTICLE XVII
------------
DESIGN AND CONSTRUCTION OF IMPROVEMENTS
SECTION 17.1. DESIGN. For purposes of this Article XVII, Landlord
-------------
hereby designates John Zahoudanis as its construction representative, and Tenant
hereby designates Greg McClure as its construction representative. Each of
these individuals shall bind their respective companies with regard to all
matters under this Article XVII, and the other party shall be entitled to rely
on any statement or decision by such construction representative. Either party
may change its construction representative from time to time by notice to the
other in accordance with the notice provisions of this Lease.
Landlord has caused Architects Orange to prepare the Plans. Tenant hereby
approves the Plans (which include the second elevator that is to be included in
the Building at Landlord's cost), however, Landlord agrees that if Tenant
desires, Tenant may modify the Plans, provided Tenant pays any and all costs and
expenses, including, but not limited to, increased construction costs (after
deducting any savings attributable to Tenant's changes), any costs attributable
to the selection by Tenant of an alternative contractor other than the low
bidder, and any loss of rents due to a delay in the commencement of construction
due to such changes in the Plans, but excluding any financing costs. Such
increase in construction costs shall be determined based on the final
construction contract, and such sum shall be placed in an escrow account by
Tenant prior to the commencement of construction to be disbursed when and as
such costs are incurred during construction as determined in the reasonable
opinion of Landlord. Any changes in the Plans requested by Tenant shall be
consistent with and in conformance with all Mission Viejo Company and
governmental design guidelines and design criteria applicable to the Property
("Design Criteria"). No material, non-cosmetic changes shall be made to the
exterior of the Building from those shown on the Plans. Such delay shall be
based on the time taken by
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<PAGE>
Tenant to modify the Plans and to respond to Plan check comments beyond five (5)
business days as provided below and any delay in commencing construction caused
by having to rebid the Plans, as a result of Tenant's modifications. Landlord
agrees to respond to any Tenant modification within five (5) business days and
to any resubmittal within three (3) business days. Landlord's review beyond such
time periods, and the time taken by the County of Orange for plan review, shall
not be considered a delay caused by Tenant's changes in the Plans as long as
such changes requested by Tenant comply in all material respects with the Design
Criteria and applicable building codes. If Tenant's changes do not comply in all
material respects with the Design Criteria and applicable building codes, and if
due to such noncompliance the time period for review by the County of Orange is
increased, such increased time period shall be considered a delay caused by
Tenant's changes. The initial delay shall be measured from October 1, 1997 until
the revised Plans are submitted to the County of Orange for review.
The amount agreed upon as compensation for any loss of rents shall be equal
to $35,000.00 per month for each month (prorated for any partial month) ("Rent
Loss Amount") that the submission of Plans to the County of Orange is being
delayed past October 1, 1997, plus (i) delays by Tenant beyond five (5) business
days in responding to plan check comments attributable to changes in the Plans
requested by Tenant, and (ii) delays caused by Tenant's rebidding of
modifications to the Plans. The Rent Loss Amount shall be payable by Tenant to
Landlord monthly in arrears commencing on November 1, 1997 and shall be payable
until the entire Rent Loss Amount which accrues is paid in full. If by February
1, 1998 (a) Tenant has not received approval of its modifications to the Plans;
(b) the contractor to construct the Building in accordance with such modified
Plans has not been selected, and (c) Landlord is then not entitled to obtain a
building permit for such Plans as modified, Tenant shall be required to accept
the Plans as they exist as of the date hereof and construction of the Building
will commence on the basis of such Plans.
SECTION 17.2. CONSTRUCTION. Concurrently with submission of the Plans,
-------------
as the same may be modified, to the County, Landlord shall solicit a minimum of
three (3) bids, which shall be sealed, for the construction of the shell
Building and related Improvements as set forth in Section 1.4 of the Lease based
on the current Plans (as modified to include the second elevator) and on the
Plans as modified by Tenant, from contractors selected by Tenant and reasonably
approved by Landlord, one of which will include Gentosi Construction
("Gentosi"). Tenant hereby agrees that notwithstanding that the Plans were
revised to include the second elevator and Landlord is paying for the cost of
designing and constructing such second elevator, such changes to the Plans shall
be considered a change requested by Tenant and that therefore the time spent by
Landlord in revising the Plans to include the second elevator shall not be
deducted from the number of days of delay in submitting the Plans past October
1, 1997 in determining the Rent Loss Amount. The sealed bids shall be returned
within fifteen (15) days of delivery of bid packages and shall be opened in the
presence of both Landlord's and Tenant's construction representative, and shall
be reconciled. The lowest bidder shall be awarded the job; provided, however,
that if Tenant agrees to pay any increase in costs, Tenant can require that
another of the bidders be awarded the contract, so long as such bidder is
qualified and available to perform the work when and as required by Landlord.
The form of construction contract between Landlord and the selected contractor
shall be subject to Tenant's approval, not to be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, the bidding and award of
the contract shall be completed no later than February 1, 1998.
-30-
<PAGE>
If Gentosi is the lowest bidder and Tenant elects to select another bidder
as provided above, Tenant shall pay, upon receipt of invoice therefore, any
costs or expenses payable by Landlord to Gentosi or its trade subcontractors for
work prior to the date hereof (unless such subcontractors are used by the actual
contractor), which in no event shall be more than $20,000.00.
Landlord agrees that all costs required to complete the Landlord's Work
shall be borne by Landlord and shall not be the responsibility of Tenant except
as expressly set forth below. Notwithstanding Landlord's obligation to deliver
the shell Building to Tenant constructed substantially in accordance with the
Plans, Tenant shall be responsible for obtaining the Certificate of Occupancy
for the Building. Tenant shall be responsible for all Tenant Improvements
beyond the scope contained in the Plans. It is currently estimated that
Landlord's construction period will be eight (8) months from commencement of
construction.
During the construction of Landlord's work under this Article XVII
("Landlord's Work"), Landlord shall carry, or cause the general contractor to
carry, a policy or policies of Course of Construction or Builder's All Risk
insurance, and a policy of commercial general liability in the amount and form
required under Section 4.3(a)(i) of the Lease. During the construction of the
Tenant Improvement Work by Tenant's contractor, Tenant or its contractor shall
comply with the same requirements.
Tenant, through its agents and architect, shall have the right upon
reasonable notice and with a representative of Landlord to inspect Landlord's
Work during the progress thereof provided Tenant does not materially interfere
with or delay such work. If Tenant shall give notice of faulty construction,
non-compliance with applicable laws or any other material deviation from the
final Plans prior to Substantial Completion of the shell Building and Landlord
agrees with Tenant regarding such fault, non compliance or material deviation,
Landlord agrees to cause its contractors and subcontractors to make appropriate
corrections promptly. All work shall be done with new materials.
If Tenant desires to change the approved Plans during the course of
construction, Tenant shall deliver notice (the "Change Notice") of the same to
Landlord setting forth in reasonable detail the change (the "Tenant Change")
Tenant desires to make. Landlord shall, within three (3) business days of
receipt of the Change Notice either (i) approve the Tenant Change, which
approval shall not be unreasonably withheld, or (ii) disapprove the Tenant
Change and deliver a notice to Tenant specifying in reasonable detail the
reasons for Landlord's disapproval, which reasons shall be limited to adverse
affects on structural integrity, non-compliance with law, adverse affect on
building systems, adverse effect on exterior appearance, or delay in completion
of the Improvements beyond the deadline imposed by the Mission Viejo Company.
In the event of approval, Landlord shall provide Tenant with a good faith non-
binding estimate of the costs and the period of delay (if any) necessitated by
the Tenant Change. Thereafter, Tenant shall, within three (3) business days of
receipt of Landlord's approval, deliver notice to Landlord stating whether or
not Tenant elects to cause Landlord to make such Tenant Change. Any additional
costs which arise in connection with such Tenant Change, including without
limitation additional architectural and engineering costs, construction and
materials costs, and processing costs with governmental entities shall be the
sole and exclusive obligation of Tenant. Any delay in Substantial Completion
caused by a Tenant Change shall not delay the date of Substantial Completion
from that which would have occurred but for such Tenant Change. Unless Tenant
includes in its initial Change Notice a request that the work in process at the
time such request is made be halted pending approval and execution of the
applicable change order, Landlord shall not be
-31-
<PAGE>
obligated to stop construction, whether or not the Change Notice relates to the
work then in process or about to be started. Failure to timely respond by either
Landlord or Tenant according to the foregoing timetables shall be deemed to be a
delay on a day for day basis for each day of delay by the delinquent party.
Tenant may install temporary advertising signs prior to or during the
course of construction and shall remove them within a reasonable time after the
installation of Tenant's permanent signs. Tenant acknowledges that the right to
erect and maintain such temporary sign(s) and the location, size, design, color
and other physical aspects of such sign(s) shall be subject to the reasonable
written approval of Landlord, any covenants, conditions or restrictions
encumbering the Premises and any applicable municipal or other governmental
permits and approvals. The cost of the sign(s) including the installation,
maintenance and removal thereof shall be at Tenant's sole cost and expense.
SECTION 17.3. TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide a
-------------
tenant improvement allowance of $1,200,000 ("Tenant Improvement Allowance") to
be paid to Tenant monthly as such improvements are constructed in accordance
with the following construction disbursement procedures, provided that such
funds shall not be payable for furniture, movable fixtures, trade fixtures or
equipment. Tenant shall enter into a contract with a contractor, both subject
to reasonable approval by Landlord, for the construction of tenant improvements,
per Tenant's design, with Tenant paying any tenant improvement costs in excess
of the Tenant Improvement Allowance on a progress payment basis as provided
herein.
Provided that the conditions in subsection (i),(ii), (v) and (vii) below
have been satisfied, within thirty (30) days after Tenant's presentation of the
invoices and proofs of payment referenced in subsection (v) below, Landlord
shall reimburse Tenant for expenditures in connection with Tenant's work, not to
exceed the amount of the Tenant Improvement Allowance, less a ten percent (10%)
retention for each payment request made by Tenant. Landlord shall make final
payment of all Tenant Improvement Allowance sums due, including all withheld
retention monies, within thirty (30) days after request by Tenant, provided that
all of the requirements of the following section have been met:
(i) A building permit for the construction of Tenant's work,
if required, has been issued by the County of Orange and a copy of the
building permit has been delivered to Landlord;
(ii) Tenant has delivered to Landlord lien waivers and
releases, in statutory form, for all contractors, subcontractors, and
materialmen who performed work or supplied materials in excess of
$10,000.00 in connection with the completion of Tenant's work, as
follows. A conditional lien release shall be delivered for completed
work where the party performing the work or supplying the materials
has not yet been paid, and an unconditional lien release shall be
delivered where such party has been fully paid;
(iii) All required inspections of the applicable work by
governmental agencies have taken place and the completed Tenant's work
has passed such inspections;
(iv) Tenant has delivered to Landlord a certificate of
occupancy for Tenant's work if customarily issued following the
completion of such work;
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<PAGE>
(v) Tenant has submitted to Landlord invoices and proofs of
payment for Tenant's work which evidence expenditure by Tenant of all
sums desired to be reimbursed;
(vi) Tenant has submitted to Landlord as-built drawings for
all of Tenant's work; and
(vii) Tenant has paid to Landlord all amounts owing to
Landlord pursuant to this Lease as of the date reimbursement is to be
made, and Tenant is not otherwise in default of any other term or
condition of this Lease as of such date, and no event has occurred
which, with the passage of time or the giving of notice or both, could
be declared a default under this Lease.
SECTION 17.4. CONSTRUCTION STANDARDS; COMPLIANCE WITH LAWS. The
-------------
Building, related Improvements and Tenant Improvement Work shall be constructed
in compliance with all governmental rules, regulations, laws, and building codes
and private restrictions then in effect. The contractor shall provide a minimum
warranty of one year, including a standard ten (10) year roof warranty, both for
the benefit of Landlord and Tenant, for all material and workmanship provided by
such contractor. Due to Tenant's obligations to maintain the Property as set
forth in this Lease, Landlord shall assign all warranties to Tenant to assist
Tenant in the performance of its maintenance obligations under the Lease,
provided, however, that if Tenant does not duly exercise its option to purchase
the Property, Tenant shall reassign any such unexpired warranties promptly to
Landlord at the end of the Lease term. Landlord shall use commercially
reasonable efforts to supervise the general contractor (but not the
subcontractors) to see that the Improvements are constructed substantially in
accordance with the final Plans. Prior to or in connection with the preparation
of the punch list described in Section 1.5, Tenant shall be entitled to
designate any portion of Landlord's Work which does not then comply with
applicable laws, codes, restrictions, rules and regulations. Landlord shall be
obligated to cause such deficiencies to be corrected prior to Substantial
Completion as required hereinabove, or, to the extent the deficiency is a punch
list item, within the time periods set forth in Section 1.5. Once Landlord has
caused such deficiencies to be corrected, Tenant shall be responsible to ensure
that the Property complies with any laws, rules and regulations applicable to
the Property and accepts responsibility for any items not specified to be
corrected as part of such punch list.
Landlord hereby warrants to Tenant that as of the date of the execution and
delivery of this Lease by Landlord and Tenant, that Landlord has the right to
acquire the Property and that Landlord shall use commercially reasonable efforts
to acquire the Property not later than October 24, 1997. Landlord shall pull
the building permit for Landlord's Work and shall commence construction promptly
thereafter, and Landlord shall diligently prosecute Landlord's Work to
completion.
Notwithstanding anything to the contrary in this Lease, following
Substantial Completion and completion of all punch list items, Landlord shall
have no responsibility to Tenant or its subtenants for any defects in
construction, for any defect or failure attributable to any design professional,
or for failure of the Building to comply with any laws, rules and regulations
applicable to the Property. Further, upon Substantial Completion and completion
of all punch list items, Tenant shall bear all risk of defects in workmanship,
materials and otherwise to the Building and related amenities and Landlord shall
have no liability therefor, however, Landlord will assign all warranties given
in connection with the construction of the shell Building and related amenities
to Tenant. Landlord shall also cause
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<PAGE>
Architects Orange to name Tenant as an additional insured on Architects Orange's
errors and omissions/professional liability coverage for the Property with
customary "tail" coverage.
ARTICLE XVIII
-------------
COVENANTS, CONDITIONS AND RESTRICTIONS
Landlord agrees, provided Tenant indemnifies, defends and holds Landlord
harmless from any liability in connection therewith, that (i) the exercise of
any rights or privileges under any recorded declaration applicable to the
Property to which Landlord is entitled pursuant to its ownership of the
Property, (ii) any interaction with utility suppliers and/or governmental
authorities relating to conservation matters, and (iii) any interaction with
governmental authorities relating to new assessments and Hazardous Material,
shall be done in accordance with Tenant's direction.
ARTICLE XIX
-----------
RADIUS RESTRICTION
Neither M&Z Aliso Associates, LLC, its members, Michael D. McCarthy and
John Zahoudanis, nor any entity they control individually or together or in
which they have a significant financial interest (defined as more than 5%), or
Landlord, shall commence construction of a medical office building within one
(1) mile of the Property on or before February 1, 1999. The foregoing shall not
apply to G&L Realty Partnership, L.P. or its partners or affiliates, and their
respective members, shareholders, officers and directors.
ARTICLE XX
----------
RIGHT OF FIRST OFFER
Tenant shall have the right of first offer if Landlord elects to sell the
Property during the Lease Term. In the event Landlord makes such an election,
Landlord shall notify Tenant in writing of the terms which Landlord deems
acceptable, including the purchase price, closing date and related matters.
Tenant shall have a period not to exceed thirty (30) days within which to accept
or reject such offer. In the event that Tenant accepts such offer, the Property
shall be sold to Tenant in accordance with the terms and conditions set forth in
the offer.
In the event Tenant rejects Landlord's right of first offer, if Landlord
desires to enter into a sale transaction with a third party on materially
different terms, Landlord must again re-offer the Property for sale to Tenant on
such revised terms. Tenant shall have ten (10) business days within which to
determine whether to accept or reject the revised offer to sell the Property.
If Tenant does not accept the revised offer, Landlord shall be entitled to sell
the Property to a third party on the revised terms that were offered to Tenant.
Any such sale shall be made expressly subject to the terms of this Lease and to
Tenant's option to purchase the Property.
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<PAGE>
ARTICLE XXI
-----------
MISCELLANEOUS ADDITIONAL PROVISIONS
SECTION 21.1. WAIVER OF LANDLORD'S LIEN.
-------------
Landlord, within ten (10) days after demand from Tenant, shall execute and
deliver any document required by any supplier, lessor or lender in connection
with the installation on the Property of Tenant's personal property or Tenant's
trade fixtures in which Landlord shall waive any rights it may have or acquire
with respect to that property.
SECTION 21.2. APPROVAL.
-------------
Wherever a party's approval or consent is required hereunder, such approval
or consent shall not be unreasonably withheld or delayed.
SECTION 21.3. ENERGY.
-------------
If any governmental entity shall pass any law, regulation or recommendation
for the conservation of energy or energy sources that will in any way affect or
curtail the utilities or services available to Tenant under this Lease, upon
learning of same, Landlord shall immediately notify Tenant thereof, shall
allocate to Tenant the maximum amount of the affected or curtailed energy or
energy source permitted; and Landlord shall not curtail any utilities or
services in response to any non-mandatory statement or action of any
governmental or non-governmental entity, without Tenant's prior written consent
to such curtailment.
-35-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date set forth in Section 1.1.
<TABLE>
<CAPTION>
"TENANT" "LANDLORD"
<S> <C>
Hoag Memorial Hospital Presbyterian AV MEDICAL ASSOCIATES, LLC,
a California limited liability company
By: G & L Realty Partnership, L.P.,
By: /s/ Albert J. Auer a Delaware limited partnership, member
---------------------------------
Albert J. Auer, Chairman
By: G & L Realty Corp.,
a Maryland corporation,
AS TO ARTICLE XIX: general partner
M&Z Aliso Associates, LLC
By: /s/ Joseph D. Carroll
--------------------------------
By: /s/ John Zahoudanis Joseph D. Carroll
--------------------------------- Senior Vice President
John Zahoudanis
Member
By: /s/ Michael D. McCarthy
---------------------------------
Michael D. McCarthy
Member
</TABLE>
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<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
PARCEL 2 OF LOT LINE ADJUSTMENT LLA 97-017 RECORDED JULY 7, 1997 AS INSTRUMENT
NO. 19970320479 IN OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.
A-1
<PAGE>
EXHIBIT "B"
PROJECT TO BE CONSTRUCTED
B-1
<PAGE>
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO AND
MAIL TAX STATEMENTS TO:
Hoag Memorial Hospital Presbyterian
Post Office Box 6100
301 Newport Boulevard
Newport Beach, California 92658-6100
Attn: Peter M. Foulke, Executive Vice
President
- ----------------------------------------
[Space above for recorder.]
LEASE AND PURCHASE OPTION
(SHORT FORM - MEMORANDUM)
This Lease and Purchase Option (Short Form Memorandum) dated as of
____________, 1997 is by and between AV Medical Associates, LLC, a California
limited liability company, with its principal office located at 1332 Park View
Avenue, Suite 101, Manhattan Beach, California 90266, Attention: John
Zahoudanis ("Landlord"), and Hoag Memorial Hospital Presbyterian, a California
non-profit corporation, with its principal office located at 301 Newport
Boulevard, Newport Beach, California 92658-6100, Attention: Peter M. Foulke,
Executive Vice President ("Tenant").
W I T N E S S E T H
1. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord that certain real property ("Premises") located at
______________________________, in the County of Orange, State of California,
described on SCHEDULE 1 attached hereto and incorporated by reference herein
----------
("Premises") at the rental and upon all of the terms and conditions set forth in
that certain Real Estate Lease of even date herewith between the parties hereto,
which is incorporated herein by this reference ("Lease").
2. The Premises is leased for a term of ten (10) years, subject to
Tenant's option to purchase the Property as set forth in paragraph 3 below. The
Commencement Date under the Lease shall occur four (4) months after Substantial
Completion of the Improvements (as defined in the Lease).
3. Tenant has an option to purchase the Premises upon the expiration of
the forty-eighth (48/th/) month of the Lease term, on the terms and for the
price set forth in the Lease.
4. The Lease provides that Tenant shall have the right of first offer in
the event Landlord elects to sell the Property during the term of the Lease on
the terms and conditions specified in the Lease.
5. The Lease provides, among other things, that Tenant shall have the
rights of ingress and egress to and from the Premises and all other rights
appurtenant to the Premises.
E-1
<PAGE>
EXHIBIT B
DEED OF TRUST
<PAGE>
6. Should there be any inconsistency between the terms of this instrument
and the Lease, the terms of the Lease shall prevail.
IN WITNESS WHEREOF, each of the parties hereto has executed this instrument
as of the date first above written.
<TABLE>
<CAPTION>
"TENANT" "LANDLORD"
<S> <C>
Hoag Memorial Hospital Presbyterian,
a California limited liability company AV MEDICAL ASSOCIATES, LLC,
a California limited liability company
By: /s/ Albert J. Auer
-------------------------------- By: G & L Realty Partnership, L.P.,
Albert J. Auer, Chairman a Delaware limited partnership, member
By: G & L Realty Corp.,
a Maryland corporation,
general partner
By: /s/ Joseph D. Carroll
-----------------------------------
Joseph D. Carroll
Senior Vice President
</TABLE>
E-2
<PAGE>
SCHEDULE 1 TO MEMORANDUM OF LEASE
LEGAL DESCRIPTION
SCHEDULE 1
<PAGE>
ACKNOWLEDGEMENTS
STATE OF CALIFORNIA )
)
COUNTY OF________________)
On ___________________, before me, the undersigned notary public, personally
appeared ___________________________,
[ ] personally known to me
[ ] proved to me on the basis of satisfactory evidence
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
______________________________
Signature
<PAGE>
EXHIBIT "F"
Preliminary Title Report dated as of ___________, Order No. ______________,
prepared by First American Title Insurance Company.
[TO BE ATTACHED].
F-1
<PAGE>
EXHIBIT 10.64
ASSIGNMENT OF PURCHASE AGREEMENT
AND DEVELOPMENT MANAGEMENT AGREEMENT
This Assignment of Purchase Agreement and Development Management
Agreement ("Agreement") is made and entered into as of this ____ day of October,
1997 by and between G&L Realty Partnership, L.P., a Delaware limited partnership
("Assignee"), Centrium Associates, LLC, a California limited liability company
("Assignor") and M&Z Aliso Associates, LLC, a California limited liability
company ("M&Z").
RECITALS
A. Assignor and Mission Viejo Company, a California corporation
("Seller"), have entered into that certain Purchase and Sale Agreement with
Escrow Instructions made and effective as of May 1, 1997, which has been amended
by a First Amendment effective August 15, 1997, a Second Amendment effective
August 20, 1997, and a Third Amendment effective September ___, 1997
(collectively, the "Purchase Agreement") for the real property ("Property")
described therein. Assignor has entered into a lease ("Lease") with Pier 1
Imports (U.S.), Inc., a Delaware corporation ("Pier 1"), whereby Assignor will
construct on the Property and lease to Pier 1 a building ("Building") of
approximately 9100 sq. ft. for an initial term of ten years.
B. Unless otherwise defined herein, all capitalized terms used in
this Agreement shall have the same meanings as provided in the Purchase
Agreement.
C. Assignor desires to assign all of its rights under the Purchase
Agreement (including the Deposit), the Lease, the Contracts (hereinafter
defined), and all Property Documents (hereinafter defined) (collectively, the
"Transferred Rights") to Assignee and Assignee desires to accept such assignment
and assume all the obligations of Assignor under the aforesaid agreements
("Property Agreements"), all in accordance with the terms of this Agreement.
D. Assignee also desires that M&Z manage the development of the
Building, as Assignee's representative, following the assignment of Transferred
Rights and be compensated therefor as provided herein.
AGREEMENT
NOW, THEREFORE, for good and valuable "Transferred Rights", the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Assignment and Assumption. Assignor hereby assigns, sells,
-------------------------
transfers, sets over, and delivers unto Assignee the Transferred Rights and
Assignee hereby accepts such assignment and assumes all of the obligations of
Assignor under the Property Agreements. Assignor and Assignee shall execute
separate assignments of such Property Agreements if necessary.
<PAGE>
2. Subject to. This Agreement is contingent upon Assignor obtaining
----------
and delivering to Assignee a written instrument ("Consent") executed by Seller
(i) consenting to the assignment of the Purchase Agreement, (ii) confirming
there are no defaults under the Purchase Agreement, and (iii) confirming the
amount of the deposits pursuant to the Purchase Agreement.
3. Consideration. In consideration for the assignment of
-------------
Transferred Rights, Assignee agrees to engage M&Z, effective as of the date of
this Agreement, as Assignee's representative for the purpose of overseeing the
construction of the Building by Assignee's general contractor in accordance with
the requirements of the Purchase Agreement and the Lease (the "Project"), as
provided below.
4. Development Management. M&Z agrees to act as Assignee's
----------------------
representative for the purpose of overseeing the construction of the Building by
Assignee's general contractor in accordance with the requirements of the
Purchase Agreement and the Lease in consideration of the following:
(a) Monthly Payments. Effective November 1, 1997, Assignee
----------------
shall pay to M&Z, without deduction, the sum of $2,500.00 per month, regardless
of the number of hours actually expended by M&Z in rendering services for the
Project, and Assignee shall continue to make such monthly payments to M&Z until
M&Z has been paid a total of 5% of the hard costs of construction of the
Project. As used herein, "hard costs" shall include the costs and fees of the
general contractor and the costs of the building shell, tenant improvements,
site preparation, landscaping, and site electrical, telephone, and lighting
(excluding, however, any reimbursements to Mission Viejo Company under the
Purchase Agreement for sitework performed by Mission Viejo Company).
(b) Incentive Payment. In addition to the monthly payments
-----------------
described in Section 4(a) hereof, M&Z shall be entitled to receive an incentive
payment of $50,000.00 payable upon the opening for business of Pier 1 provided
that (i) the plans of the Building have been approved when and as required
pursuant to the Lease, (ii) construction of the Building has been commenced
within 150 days from the date of execution of the Lease, (iii) the Project has
been completed within 330 days of the date of the Pier 1 Lease (subject to force
majeure) and (iv) the total cost of construction of the Project, including
labor, materials, permits, architectural and engineering fees, does not exceed
$1,460,954 (excluding financing costs, legal fees, cost overruns which are a
direct result of abnormally inclement weather, earthquakes or acts of God which
create a substantial delay or a substantial increase in cost).
(c) Expense Reimbursement. In addition to the payment
---------------------
provided in Sections 4(a) and 4(b) hereof, M&Z shall be entitled to be
reimbursed for direct expenses incurred by M&Z in connection with the Project.
Such direct expenses shall be limited to actual direct expenses paid by M&Z for
the direct benefit of the Project and shall not include any amounts incurred by
M&Z as a part of general overhead expense. Notwithstanding the foregoing, M&Z
shall not be entitled to be reimbursed for any such direct expense which exceeds
$1,000 unless M&Z first obtains Assignee's approval for such expense.
(d) Termination. Assignee may terminate M&Z's engagement, in
-----------
writing effective upon the date such writing is sent, if at any time M&Z fails
to perform its obligations hereunder within ten (10) days of receipt of written
notice from Assignee. M&Z's engagement hereunder may not be terminated by
Assignee for any other reason without the written consent of M&Z.
2
<PAGE>
5. Contracts. Assignor has heretofore entered into certain
---------
contracts ("Contracts") in connection with the Building, as listed on Exhibit
"A", attached hereto and incorporated herein, which Contracts are assigned to
and assumed by Assignee pursuant to Section 1 hereof.
6. Representations of Assignor. Assignor hereby represents and
---------------------------
warrants to Assignee as follows, which representations and warranties shall
survive the execution of this Agreement:
(a) Authority. Assignor has the full power and authority to
---------
enter into this Agreement, to carry out and perform all the obligations of
Assignor under this Agreement, and the execution, performance, and delivery of
this Agreement by Assignor has been fully authorized by all requisite action on
the part of Assignor.
(b) Purchase Agreement. The Purchase Agreement sets forth all
------------------
of the understandings and agreements between Seller and Assignor with respect to
the Property and there are no amendments, modifications, or supplements, written
or oral, other than as set forth in the Purchase Agreement.
(c) No Default. There is no default by Seller or Assignor
----------
under the terms of the Purchase Agreement.
(d) Deposits. Assignor has made all deposits required under
--------
the Purchase Agreement.
(e) Closing Date. The date for Close of Escrow under the
------------
Purchase Agreement is to be no later than October 24, 1997.
(f) Purchase Price. The Purchase Price of the Property under
--------------
the Purchase Agreement is $564,200.00.
(g) Title. Title to the Property is subject only to the
-----
Permitted Exceptions.
(h) Property Documents. Assignor has delivered to Assignee
------------------
copies of all reports, inspections and other materials ("Property Documents") in
Assignor's possession which contain information material to an understanding of
the Property.
(i) Lease. Assignor has entered into the Lease with Pier 1
-----
for the Building. The Lease is a valid and binding obligation of Pier 1 and
Assignor, and is in full force and effect.
(j) Construction Costs. The total cost to construct the
------------------
planned improvements on the Property, including satisfying all of the
construction obligations of Landlord under the Lease and of the Buyer under the
Purchase Agreement, including, without limitation, the cost of labor and
materials, permits and fees (both governmental and professional fees) shall not
exceed the sum of $1,460,954 (excluding financing costs, legal fees, cost
overruns which are a direct result of abnormally inclement weather, earthquakes,
or acts of God which create a substantial delay or a substantial increase in
cost) (the "Maximum Construction Cost").
(k) General Representation. No representation, warranty, or
----------------------
statement of Assignor in this Agreement, or any document, certificate, or
schedule prepared by Assignor and furnished by
3
<PAGE>
Assignor as a part hereof contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the statements or facts
contained therein not misleading.
7. Representations of M&Z. M&Z hereby represents and warrants to
----------------------
Assignee as follows, which representations and warranties shall survive the
execution of this Agreement:
(a) Authority. M&Z has the full power and authority to enter
---------
into this Agreement, to carry out and perform all the obligations of M&Z under
this Agreement, and the execution, performance, and delivery of this Agreement
by M&Z has been fully authorized by all requisite action on the part of M&Z.
(b) Construction Costs. The total cost to construct the
------------------
planned improvements on the Property, including satisfying all of the
construction obligations of Landlord under the Lease and of the Buyer under the
Purchase Agreement, including, without limitation, the cost of labor and
materials, permits and fees (both governmental and professional fees) shall not
exceed the Maximum Construction Cost.
(c) General Representation. No representation, warranty, or
----------------------
statement of M&Z in this Agreement, or any document, certificate, or schedule
prepared by M&Z and furnished by M&Z as a part hereof contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained therein not misleading.
8. Indemnification. In the event the total cost to construct the
---------------
planned improvements on the Property exceed the Maximum Construction Costs,
Assignor and M&Z shall, jointly and severally indemnify, defend and hold
Assignee from and against any and all such excess and shall promptly pay the
amount of such excess when and as required to complete the construction of the
Building and related improvements pursuant to the Lease.
9. Representation of Assignee. Assignee hereby represents and
--------------------------
warrants to Assignor and M&Z that Assignee has the full power and authority to
enter into this Agreement, to carry out and perform the obligations of Assignee
under this Agreement, and the execution, performance, and delivery of this
Agreement by Assignee has been fully authorized by all requisite action on the
part of Assignee. This representation and warranty shall survive the execution
of this Agreement.
10. No Broker. Each party warrants to each other party that no
---------
broker can properly claim a right to a commission or finder's fee based upon
contracts between the claimant and the warranting party with respect to the
other party. Each party indemnifies, defends, and holds each other party from
and against any loss, cost, or expense, including, but not limited to,
attorneys' fees and court costs, resulting from any claim for a fee or
commission by any broker or finder with respect to this Agreement resulting from
the indemnifying party's actions.
11. Miscellaneous.
-------------
(a) Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be personally delivered
(including by means of professional messenger service) or sent by registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon the date of receipt thereof. (Notice of change of address shall
be given by written notice in the manner detailed in this Section.)
4
<PAGE>
To Assignee: G & L Realty Partnership
439 North Bedford Drive
Beverly Hills, California 90210
Attention: Joseph Carroll
To Assignor: Centrium Associates, LLC
1332 Park View Avenue, Suite 101
Manhattan Beach, CA 90266
To M&Z: M&Z Aliso Associates, LLC
c/o Centrium Associates, LLC
1332 Park View Avenue, Suite 101
Manhattan Beach, CA 90266
(b) Required Actions. Each party agrees to execute all such
----------------
instruments and documents and to take all actions pursuant to the provisions
hereof in order to consummate the transactions herein contemplated.
(c) Partial Invalidity. If any term or provision of this
------------------
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each such term and provision of this Agreement shall be valid and
be enforced to the fullest extent permitted by law.
(d) Waivers. No waiver of any breach of any covenant or
-------
provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof, or of any other covenant or provision herein
contained. No extension of time for performance of any obligation or act shall
be deemed an extension of the time for performance of any other obligation or
act.
(e) Successors and Assigns. Assignee is acquiring the
----------------------
Transferred Rights for its own account and does not intend to assign its rights
under this Agreement; provided, however, Assignee reserves the right to assign
its rights under this Agreement (i) to a partnership, limited liability company,
or other entity which is owned or controlled by Assignee, or (ii) subject to the
consent of Assignor and M&Z not to be unreasonably withheld, to any other
person. This Agreement shall be binding upon and shall inure to the benefit of
the permitted successors and assignees of the parties hereto.
(f) Confidentiality. The terms of this Agreement shall be
---------------
held in strict confidence by each party and shall not be disclosed to any third
party except (i) as may be required by law, (ii) to prospective investors,
lenders, attorneys, and other consultants of Assignee, and (iii) to the Seller
for the purpose of obtaining the Consent.
(g) Professional Fees. In the event of bringing of any action
-----------------
or suit by a party hereto against another party hereunder by reason of any
breach of any of the covenants, agreements, or provisions on the part of the
other party arising out of this Agreement, then in that event the prevailing
party shall be entitled to have and recover of and from the other party all
reasonable costs and expenses of the action or suit, including actual attorneys'
fees, accounting fees, and engineering fees, and any other professional fees
resulting therefrom.
5
<PAGE>
(h) Entire Agreement. This Agreement is the final expression
----------------
of and contains the entire agreement between, the parties with respect to the
subject matter hereof and supersedes all prior understandings with respect
thereto. This Agreement may not be modified, changed, supplemented, or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. The parties do not intend
to confer any benefit hereunder on any person, firm, or corporation other than
the parties hereto.
(i) Governing Law. The parties hereto acknowledge that this
-------------
Agreement has been negotiated and entered into in the State of California. The
parties hereto expressly agree that this Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with the laws of the
State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year hereinabove written.
<TABLE>
<CAPTION>
Assignee Assignor
<S> <C>
G & L Realty Partnership L.P., Centrium Associates, LLC,
a Delaware limited partnership a California limited liability company
By: G&L Realty Corp., By: /s/ John Zahoudanis
a Maryland corporation, __________________________
its general partner John Zahoudanis, Manager
By:______________________
Its:______________________
</TABLE>
M&Z
M&Z Aliso Associates, LLC,
a California limited liability company
By: Centrium Associates, LLC,
a California limited liability company,
Manager
By: /s/ John Zahoudanis
_________________________
John Zahoudanis, Manager
By: MCC Capital Incorporated,
a California corporation, Manager
By: /s/ Michael McCarthy
_________________________
Michael McCarthy, President
6
<PAGE>
EXHIBIT "A"
1. Lease commission agreement for Pier 1 dated September 15, 1997 between
Assignor and Grubb & Ellis.
2. Architectural services agreement for Pier 1 building dated September 2, 1997
between Assignor and Architects Orange.
3. Engineering Services Agreement for Pier 1 building dated as of October 10,
1997 between Assignor and Kleinfelder, Inc.
<PAGE>
EXHIBIT 10.65
AMENDED AND RESTATED PROMISSORY NOTE
Costa Mesa, California Original Date: August 29, 1997
Amended and Restated Date: September __, 1997
For value received, the undersigned, HEARTHSIDE SKILLED NURSING FACILITY,
LLC, a Delaware limited liability company ("BORROWER"), promises to pay to the
order of G&L REALTY PARTNERSHIP, L.P., a Delaware limited partnership
("LENDER"), at 439 North Bedford Drive, Beverly Hills, California 90210 or at
any other place that may be designated in writing by Lender, the principal sum
of One Million Nine Hundred Thirty-Four Thousand, Three Hundred Twenty-Five
Dollars and No/Cents ($1,934,325.00) ("LOAN AMOUNT"), with interest as set forth
herein (calculated on the basis of a 360-day year). All sums due are payable in
lawful money of the United States of America. The principal sum will bear
interest at the London Interbank Offered Rate fixed for 30-day maturities
("LIBOR") (as defined below) plus 650 basis points.
This Amended and Restated Promissory Note ("Note") amends and completely
restates that certain Promissory Note dated August 29, 1997, ("ORIGINAL NOTE")
in the original principal sum of $1,934,325.00 by Borrower (erroneously referred
to therein as Hearthside Skilled Nursing Center, LLC) in favor of Lender,
pursuant to the terms of an agreement dated August 29, 1997 between Lender and
Borrower concerning modification of loan documents. All interest accrued but
unpaid on the Original Note shall hereafter be deemed for all purposes to be due
and payable hereunder and with respect hereto. All principal disbursed under
the Original Note shall be deemed for all purposes to have been disbursed to the
undersigned hereunder.
LIBOR shall mean for 30-day maturities an interest rate per annum which is
the arithmetic mean (rounded upward to the nearest whole multiple of one-
sixteenth of one percent) of the respective London Interbank Offered Rates
offered to the principal office of Bank of America in London, England, by prime
banks in the London interbank market at 11:00 a.m. (London time), two business
days (defined as a day of the year on which dealings are carried on in the
London interbank market and banks are open for business in London and not
required or authorized to close in New York City) before the first day of such
30-day maturity period, for a period equal to such 30-day maturity period.
This Note is secured by, among other things, a certain Amended and Restated
Deed of Trust, Security Agreement, and Fixture Filing, with Assignment of Rents
and Agreements dated as of the same date as this Note, executed by Borrower, as
trustor, in favor of Lender, as beneficiary ("DEED OF TRUST"), and encumbering
the real property described in the Deed of Trust ("PROPERTY"). The holder of
this Note will be entitled to the benefits of the security provided by the Deed
of Trust and will have the right to enforce the covenants and agreements of
Borrower contained in the Deed of Trust.
-1-
<PAGE>
Borrower will pay to Lender the principal amount of this Note, and accrued
interest, as follows:
Borrower will make an initial payment of interest only at the LIBOR rate
plus 650 basis points as determined by Lender, in accordance with the LIBOR
definition herein, and communicated in writing to Borrower prior to the initial
interest payment date, on the first day of the first month after the date of
disbursement of the Loan Amount, covering interest accrued on this Note from the
date of disbursement of the Loan Amount to the end of the month in which the
disbursement of the Loan Amount will occur. After that, Borrower will make
monthly payments of interest only (at the LIBOR rate communicated in writing to
Borrower prior to the interest payment date, plus 650 basis points), on the
first day of the second month after the date of disbursement of the Loan Amount
and the first day of each succeeding month after that.
The entire unpaid principal balance of this Note, together with all accrued
and unpaid interest, will be due on February 1, 1998 ("MATURITY DATE"). The
Maturity Date may be extended to March 1, 1998, by the payment to Lender of the
sum of $9,671.63 on or before February 1, 1998. If the due date is so extended,
it may be further extended to April 1, 1998, by the payment to Lender of an
additional sum of $9,671.63 on or before March 1, 1998. If the due date is so
extended, it may be further extended to May 1, 1998, by the payment to Lender of
an additional sum of $9,671.63 on or before April 1, 1998. If the due date is
so extended, it may be further extended to June 1, 1998, by the payment to
Lender of an additional sum of $9,671.63 on or before May 1, 1998. If the due
date is so extended, it may be further extended to July 1, 1998, by the payment
to the Lender of an additional sum of $9,671.63 on or before June 1, 1998. If
the due date is so extended, it may be further extended to August 1, 1998, by
the payment to the Lender of an additional sum of $9,671.63 on or before July 1,
1998. The aforementioned extension payments shall not be applied to principal
and interest otherwise owing under the terms of this Note.
In the event Lender fails to notify Borrower of the applicable LIBOR rate
before a date when interest is payable, the LIBOR rate previously determined by
Lender and communicated in writing to Borrower shall apply, and, if necessary,
for the next following interest payment date an adjustment will be made in the
interest payment amount payable by Borrower hereunder based upon the difference,
if any, in the LIBOR rate actually in effect during such period in question and
the LIBOR rate paid.
If the LIBOR rate is unavailable for a date when interest on any portion of
the loan outstanding is to be determined and paid, the Lender and Borrower shall
negotiate in good faith with a view to adopting a substitute rate or rates of
interest for loan amounts outstanding.
If Borrower fails to make any required payment on or before five (5) days
following the date on which it becomes due, Borrower will pay, at Lender's
option, a late charge equal to five percent (5%) of the amount of the unpaid
payment.
-2-
<PAGE>
From and after the Maturity Date, or an earlier date on which all sums
owing under this Note become due by acceleration or otherwise, all sums owing
under this Note will bear interest until paid in full at a rate equal to five
percent (5%) per annum in excess of the rate of interest specified above
("DEFAULT RATE").
All payments on this Note will be applied first to the payment of any
costs, fees, late charges, or other charges incurred in connection with the
indebtedness evidenced by this Note; next, to the payment of accrued interest;
then to the reduction of the principal balance; or in any other order that
Lender requires.
If:
(a) Borrower fails to pay when due any sums payable under this Note;
provided that such failure continues for five (5) business days after
written notice of such default;
(b) an Event of Default (defined in the Deed of Trust) occurs; or
(c) any other event or condition occurs that, under the terms of the
Deed of Trust, gives rise to a right of acceleration of sums owing under
this Note,
then Lender, at its sole option, will have the right to declare all sums owing
under the Note immediately due. However, if any document related to this Note
provides for the automatic acceleration of payment of sums owing under this
Note, all sums owing will be automatically due in accordance with the terms of
that document.
Borrower will have the right to pay, without penalty or premium, on any
monthly payment date, all or any portion of the outstanding principal amount of
this Note prior to the Maturity Date on not less than five (5) days' prior
written notice to Lender. Lender will apply all prepayments first to the
payment of any costs, fees, late charges, or other charges incurred in
connection with the indebtedness evidenced by this Note; next, to the payment of
accrued interest; then to the outstanding principal amount of this Note in
inverse order of maturity, or, at the option of Lender, in the regular order of
maturity; or in any other order that Lender requires.
Borrower will pay to Lender all sums owing under this Note without
deduction, offset, or counterclaim of any kind. The relationship of Borrower and
Lender under this Note is solely that of borrower and lender, and the loan
evidenced by this Note and secured by the Deed of Trust will in no manner make
Lender the partner or joint venturer of Borrower.
If any attorney is engaged by Lender to enforce or construe any provision
of this Note, the Deed of Trust or the other Loan Documents (defined in the Deed
of Trust) or as a consequence of any Event of Default, with or without the
filing of any legal action or proceeding, then Borrower will immediately pay to
Lender on demand all attorney fees and other costs incurred by Lender, including
attorneys' fees and costs at trial, upon appeal or
-3-
<PAGE>
any petition for review, together with interest from the date of the demand
until paid at the Default Rate.
No previous waiver or failure or delay by Lender in acting with respect to
the terms of this Note, the Deed of Trust, or the other Loan Documents will
constitute a waiver of any breach, default, or failure of condition under this
Note, the Deed of Trust, or the other Loan Documents. A waiver of any term of
this Note, the Deed of Trust, or the other Loan Documents must be made in
writing and will be limited to the express written terms of the waiver. If there
are any inconsistencies between the terms of this Note and the terms of any of
the other Loan Documents, the terms of this Note will prevail.
All notices required or permitted in connection with this Note will be in
writing and will be given at the place and in the manner provided in the Deed of
Trust for the giving of notices.
If this Note is executed by more than one person or entity as Borrower, the
obligations of each person or entity will be joint and several. No person or
entity will be a mere accommodation maker, but each will be primarily and
directly liable. Borrower waives presentment; demand; notice of dishonor; notice
of default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs, expenses, or losses and interest; notice of
interest on interest and late charges; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of the
rights or interests to properties securing payment of this Note. Time is of the
essence with respect to every provision of this Note. This Note will be
construed and enforced in accordance with the laws of the state in which the
Property is located, except to the extent that federal laws pre-empt state law,
and all persons and entities in any manner obligated under this Note consent to
the jurisdiction of any federal or state court where the Property is located
having proper venue and also consent to service of process by any means
authorized by the state court where the Property is located or federal law.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note and the other Loan
Documents and that this Note and the other Loan Documents constitute valid and
binding obligations of Borrower.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS,
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS
HEREBY
-4-
<PAGE>
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY BORROWER.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of Lender, and then only to the extent therein specifically
set forth. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Borrower" and "Lender" shall include their
respective successions, assigns, heirs, executors and administrators.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDER
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDER TO
BE ENFORCEABLE.
BORROWER:
HEARTHSIDE SKILLED NURSING FACILITY, LLC,
a Delaware limited liability company
By: /s/ Johann Keil
----------------------------------------------
Name: JOHANN KEIL
--------------------------------------------
Title: Member
-------------------------------------------
-5-
<PAGE>
EXHIBIT 10.66
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
AMENDED AND RESTATED DEED OF TRUST,
SECURITY AGREEMENT, AND FIXTURE FILING
WITH ASSIGNMENT OF RENTS AND AGREEMENTS
This Amended and Restated Deed of Trust, Security Agreement, and Fixture
Filing with Assignment of Rents and Agreements (this "DEED OF TRUST") is made as
of September 29, 1997, by HEARTHSIDE SKILLED NURSING FACILITY, LLC, A Delaware
limited liability company ("TRUSTOR"), to KEY TITLE COMPANY, an Oregon
corporation ("TRUSTEE"), for the benefit of G&L REALTY PARTNERSHIP, L.P., a
Delaware limited partnership ("BENEFICIARY").
This Deed of Trust amends and completely restates that certain Deed of
Trust, Security Agreement, and Fixture Filing with Assignment of Rents and
Agreements dated August 28, 1997 by and among Trustor, Trustee and Beneficiary,
pursuant to the terms of an agreement dated August 29, 1997 between Trustor and
Beneficiary concerning modification of loan documents.
Witnesseth:
Trustor does irrevocably grant, transfer, and assign to Trustee, in trust,
with power of sale, all Trustor's right, title, and interest now owned or later
acquired in the real property ("LAND") located in Coos County, Oregon, and more
particularly described in attached Exhibit A, incorporated by reference (Trustor
---------
agrees that any greater title to the Land later acquired during the term of this
Deed of Trust will be subject to this Deed of Trust); together with the rents,
issues, and profits, subject however, to the right, power, and authority granted
and conferred on Trustor in this Deed of Trust to collect and apply the rents,
issues, and profits; and Trustor also irrevocably grants, transfers, and assigns
to Trustee, in trust, with power of sale, all of Trustor's right, title, and
interest now owned or later acquired to the following property (including the
rights or interests pertaining to the property) located at the Property:
(1) all buildings ("BUILDINGS") and improvements now or later on the Land,
and all appurtenances, easements, water and water rights, and pumps and pumping
plants, and all shares of stock evidencing these; all machinery, equipment,
appliances, and fixtures for generating or distributing air, water, heat,
electricity, light, fuel, or refrigeration or for
-1-
<PAGE>
ventilating or sanitary purposes or for the exclusion of vermin or insects or
for the removal of dust, refuse, or garbage; all wall safes, built-in furniture,
and installations, shelving, lockers, partitions, doorstops, vaults, elevators,
dumbwaiters, awnings, window shades, venetian blinds, light fixtures, fire hoses
and brackets and boxes for them, fire sprinklers, alarm systems, draperies,
drapery rods and brackets, screens, linoleum, carpets, furniture, furnishings,
fixtures, plumbing, laundry tubs and trays, iceboxes, refrigerators, heating
units, stoves, water heaters, incinerators, and communication systems and
installations for which any Building is specially designed; all of these items,
whether now or later installed, being declared to be for all purposes of this
Deed of Trust a part of the Land, the specific enumerations in this Deed of
Trust not excluding the general;
(2) the rents, issues, profits, and proceeds; and
(3) the Property to the extent not included in clauses (1) and (2) above.
For the purpose of securing, in the order of priority that Beneficiary
determines
(1) payment of the indebtedness evidenced by an Amended and Restated
Promissory Note of Trustor dated as of the same date as this Deed of Trust in
the principal amount of One Million Nine Hundred Thirty-Four Thousand, Three
Hundred Twenty-Five Dollars and No/Cents ($1,934,325.00)("NOTE"), payable to
Beneficiary or to order, and all extensions, modifications, or renewals of that
Note;
(2) payment of the interest on that indebtedness according to the terms of
the Note;
(3) payment of all other sums (with interest as provided in this Deed of
Trust) becoming due and payable to Beneficiary or Trustee pursuant to the terms
of this Deed of Trust;
(4) performance of every obligation contained in this Deed of Trust, the
Note, any instrument now or later evidencing or securing any indebtedness
secured by this Deed of Trust, and any agreements, supplemental agreements, or
other instruments of security executed by Trustor as of the same date of this
Deed of Trust or at any time subsequent to the date of this Deed of Trust for
the purpose of further securing any indebtedness secured by this Deed of Trust,
or any part of it, or for the purpose of supplementing or amending this Deed of
Trust or any instrument secured by this Deed of Trust; and
(5) payment of all other obligations owed by Trustor to Beneficiary that
by their terms recite that they are secured by this Deed of Trust, including
those incurred as primary obligor or as guarantor.
Regardless of anything stated above or any other term contained in this
Deed of Trust or in the Loan Documents (as defined in this Deed of Trust), none
of Trustor's obligations
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under or pursuant to the Certification Agreement (as defined in this Deed of
Trust) will be secured by the lien of this Deed of Trust.
1. DEFINITIONS.
-----------
1.1 CERTAIN DEFINED TERMS. As used in this Deed of Trust the following
---------------------
terms will have the following meanings:
"ASSIGNMENT OF LEASES": The Amended and Restated Assignment of Leases
and Rents dated as of the same date as this Deed of Trust executed by Trustor in
favor of Beneficiary.
"BUILDINGS": The Buildings as defined above in this Deed of Trust.
"CERTIFICATION AGREEMENT": The Amended and Restated Environmental
Certification Agreement and Indemnity of Borrower dated on the same date as this
Deed of Trust and executed by Trustor in favor of Beneficiary.
"COLLATERAL": The Collateral as defined in Section 9.1 of this Deed
-----------
of Trust.
"DEFAULT RATE": A rate of interest per annum equal to five percent
(5%) per annum above the Loan Rate.
"FIXTURES": All fixtures located on the Improvements (as defined in
this Deed of Trust) or now or later installed in, or used in connection with,
any of the Improvements, including, but not limited to, all partitions, screens,
awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators,
cleaning and sprinkler systems, fire-extinguishing apparatus and equipment,
water tanks, heating, ventilating, air-conditioning and air-cooling equipment,
built-in refrigerators, and gas and electric machinery, appurtenances, and
equipment, whether or not permanently affixed to the Land or the Improvements.
"HAZARDOUS SUBSTANCE":
(a) any oil, flammable substance, explosive, radioactive material,
hazardous waste or substance, toxic waste or substance, or any other waste,
material, or pollutant that:
(1) poses a hazard to the Property or to persons on the
Property, or
(2) causes the Property to be in violation of any Hazardous
Substance Law;
(b) asbestos in any form;
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(c) urea formaldehyde foam insulation;
(d) transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls;
(e) radon gas;
(f) any chemical, material, or substance defined as or included in
the definition of hazardous substance, hazardous substances, hazardous wastes,
hazardous materials, extremely hazardous waste, restricted hazardous waste, or
toxic substances or words of similar import under any applicable local, state,
or federal law or under the regulations adopted or publications promulgated
pursuant to those laws, including, but not limited to, any Hazardous Substance
Law, as amended from time to time;
(g) any other chemical, material, or substance, exposure to which is
prohibited, limited, or regulated by any governmental authority or which may
pose a hazard to the health and safety of the occupants of the Property or the
owners or occupants of property adjacent to or surrounding the Property, or any
other person coming on the Property or any adjacent property; and
(h) any other chemical, material, or substance that may pose a hazard
to the environment.
"HAZARDOUS SUBSTANCE CLAIM": Any enforcement, cleanup, removal,
remedial, or other governmental, regulatory, or private actions, agreements, or
orders threatened, instituted, or completed pursuant to any Hazardous Substance
Law, together with all claims made or threatened by any third party against
Trustor or the Property relating to damage, contribution, cost-recovery
compensation, loss, or injury resulting from the presence, release, or discharge
of any Hazardous Substance.
"HAZARDOUS SUBSTANCE LAW": Any federal, state, or local law,
ordinance, regulation, or policy relating to the environment, health, and
safety, any Hazardous Substance (including, without limitation, the use,
handling, transportation, production, disposal, discharge, or storage of the
substance), industrial hygiene, soil, groundwater, and indoor and ambient air
conditions or the environmental conditions on the Property, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended from time to time; the Hazardous Substances
Transportation Act, as amended from time to time; the Resource Conservation and
Recovery Act, as amended from time to time; the Federal Water Pollution Control
Act, as amended from time to time; the Hazardous Substance Account Act, as
amended from time to time; the Hazardous Waste Control Law, as amended from time
to time; the Medical Waste Management Act, as amended from time to time; the
Emergency Planning and Community Right-to-Know Act of 1986, as amended from time
to time; the Solid Waste Disposal Act, as amended from time to time; the Clean
Water Act, as amended from time to time; the Clean Air Act, as amended from time
to time; the Toxic Substances Control Act, as amended from time to time; the
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Safe Drinking Water Act, as amended from time to time; the Occupational Safety
and Health Act, as amended from time to time; and the Porter-Cologne Water
Quality Control Act, as amended from time to time, and all rules and regulations
adopted in respect of the foregoing laws whether presently in force or coming
into being and/or effectiveness hereafter.
"IMPOSITIONS" All real estate and personal property taxes and other
taxes and assessments, water and sewer rates and charges, and all other
governmental charges and any interest or costs or penalties with respect to
those charges, assessments, or taxes, ground rent and charges for any easement
or agreement maintained for the benefit of the Property, general and special,
ordinary and extraordinary, foreseen or unforeseen, of any kind that at any time
prior to or after the execution of the Loan Documents may be assessed, levied,
imposed, or become a lien on the Property or the rent or income received from
the Property, or any use or occupancy of the Property; and any charges,
expenses, payments, or assessments of any nature, if any, that are or may become
a lien on the Property or the rent or income received from the Property.
"IMPOSITION AND INSURANCE IMPOUND FUND": The fund that Trustor is
required to maintain pursuant to Section 4.4(c) of this Deed of Trust for the
--------------
payment of Impositions and Insurance Premiums.
"IMPROVEMENTS": All Buildings, improvements, and appurtenances on the
Land, and all improvements, additions, and replacements of those improvements
and other buildings and improvements, at any time later constructed or placed on
the Land.
"INDEBTEDNESS": The principal of and interest on, and all other
amounts, payments, and premiums due under, the Note and any extensions or
renewals (including, without limitation, extensions or renewals at a different
rate of interest, regardless of whether evidenced by a new or additional
promissory note or notes), and all other indebtedness of Trustor to Beneficiary
under or secured by the Security Documents (defined in this Deed of Trust),
together with all other sums owed by Trustor to Beneficiary, including those
incurred as primary obligor or as guarantor, that recite that they are secured
by the Security Documents.
"INSURANCE PREMIUMS": The amounts Trustor is required to pay as
provided in Section 4.4(d).
--------------
"LAND": The Land as defined in this Deed of Trust.
"LEASES": All leasehold interests, including subleases and tenancies
following attornment, affecting or covering any portion of the Property.
"LOAN": The loan secured by this Deed of Trust and evidenced by the
Note.
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"LOAN DOCUMENTS": The Note, the Security Documents, and all other
documents (including guaranties) evidencing, securing, or relating to the Loan,
except the Certification Agreement.
"LOAN PARTIES": Trustor and any guarantors of the loan or any
obligations under the loan, together with their respective affiliates and their
respective members and officers.
"LOAN RATE": The rate at which the principal accrues interest as set
forth in the Note.
"MATERIAL ADVERSE CHANGE": Any material and adverse change in:
(a) the business or properties or condition (financial or
otherwise) of Trustor, or
(b) the condition or operation of the Property.
"NOTE": The Note as defined in this Deed of Trust.
"OBLIGATIONS" All of the covenants, promises, and other obligations
(other than the Indebtedness):
(a) made or owing by Trustor to or due to Beneficiary under or as
set forth in the Loan Documents, and
(b) made or owing by Trustor to every other Person, a breach of
which would or may affect Trustor's ownership, development, or operation of the
Property, except any covenants, promises, and other obligations of Trustor to
Beneficiary under the Certification Agreement.
"PERSON": Any natural person, corporation, firm, association,
government, governmental agency, or any other entity, whether acting in an
individual, fiduciary, or other capacity.
"PERSONALTY": Trustor's interest in all accounts, contract rights,
and general intangibles (specifically including any insurance proceeds and
condemnation awards) arising out of the ownership, development, or operation of
the Property, and all furniture, furnishings, equipment, machinery, construction
materials and supplies, leasehold interests in personal property, and all other
personal property (other than Fixtures) now or later on the Property, together
with all present and future attachments, accessions, replacements,
substitutions, and additions, and the cash and noncash proceeds.
"PROPERTY": The Land, the Improvements, the Fixtures, and the
Personalty, together with:
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(a) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, and appurtenances of the Land or the Improvements now or later
belonging to the Property, and all right, title, and interest of Trustor in any
streets, ways, alleys, strips, or gores of land adjoining the Land; and
(b) all of Trustor's right, title, and interest in the Land, the
Improvements, the Fixtures, and the Personalty, including any award for any
change of grade of streets affecting the Land, the Improvements, the
Fixtures, or the Personalty.
"RECEIVER": Any trustee, receiver, custodian, fiscal agent,
liquidator, or similar officer.
"RELEASE": Any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment, including continuing migration, of Hazardous Substances that
goes into the soil, surface water, or groundwater of the Property, whether or
not caused by, contributed to, permitted by, acquiesced to, or known to Trustor.
"SECURITY DOCUMENTS": This Deed of Trust, the Assignment of Leases
and all other documents now or later securing any part of the payment of the
Indebtedness or the observance or performance of the Obligations.
"TITLE POLICY": The title insurance policy issued by Stewart Title
Guaranty Company to Beneficiary.
"USER": Any person, other than Trustor, who occupies, used, or comes
into or has occupied, used, or come into the Property or any part of it and any
agent or contractor of that person.
2. WARRANTY OF TITLE. Trustor warrants that:
-----------------
(a) Trustor is the lawful owner of the Property,
(b) Trustor will maintain and preserve the lien of this Deed of Trust
until the Indebtedness has been paid in full,
(c) Trustor has good, right, and lawful authority to grant the
Property as provided in this Deed of Trust, and
(d) Trustor will forever warrant and defend the grant made in this
Deed of Trust against all claims and demands, except as are specifically
set forth in this Deed of Trust.
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3. REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
------------------------------
Beneficiary that as of the date of this Deed of Trust:
3.1 ORGANIZATION OF THE LOAN PARTIES.
--------------------------------
(a) Trustor is a limited liability company organized, validly
existing, and in good standing under the laws of the State of Delaware and is
qualified to do business in Oregon.
(b) Trustor has the requisite power and authority to own and manage
its properties, to carry on its business as now being conducted, and to own,
develop, and operate the Property.
(c) Trustor is qualified to do business in every jurisdiction in which
the nature of its business or its properties makes qualification necessary.
(d) Trustor and its third party operator of the Property is in
compliance with all laws, regulations, ordinances, and orders of public
authorities applicable to it.
(e) Trustor's third party operator of the Property shall operate a
nursing care facility on the Property in compliance with all laws, regulations,
ordinances and orders of public authority.
3.2 VALIDITY OF LOAN DOCUMENTS.
--------------------------
(a) The execution, delivery, and performance by the Loan Parties of
the Loan Documents and the borrowings evidenced by the Note:
(1) are within the power of the Loan Parties,
(2) have been duly authorized by all requisite limited liability
company, corporate or partnership actions, as appropriate,
(3) have received all necessary governmental approval, and
(4) will not violate any provision of law, any order of any court
or agency of government, the charter documents of any Loan Party, or any
indenture, agreement, or any other instrument to which any Loan Party is a party
or by which any Loan Party or any of its property is bound, nor will they
conflict with, result in a breach of, or constitute (with due notice and lapse
of time) a default under any indenture, agreement, or other instrument, or
result in the creation or imposition of any lien, charge, or encumbrance of any
nature on any of the property or assets of any Loan Party, except as
contemplated by the provisions of the Loan Documents.
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(b) Each of the Loan Documents, when executed and delivered to
Beneficiary, will constitute a valid obligation, enforceable in accordance with
its terms.
(c) The Note, this Deed of Trust and the other Loan Documents are not
subject to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, nor would the operation of any of the terms of the Note,
this Deed of Trust or any of the other Loan Documents, or the exercise of any
right thereunder, render this Deed of Trust unenforceable, in whole or in part,
or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury.
3.3 FINANCIAL STATEMENTS.
--------------------
(a) All financial statements and data that have been given to
Beneficiary with respect to any Loan Party:
(1) are complete and correct in all material respects;
(2) accurately present the financial condition of that Loan Party
on each date as of which they have been furnished, and accurately present the
results of the operations of that Loan Party for the periods for which they have
been furnished; and
(3) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered.
(b) All balance sheets and the notes with respect to the Loan Parties
furnished to Beneficiary disclose all liabilities of the Loan Parties, fixed and
contingent, as of their respective dates, as well as all obligations of those
Loan Parties under any guaranties.
(c) There has been no Material Adverse Change in the financial
condition or operations of Trustor since:
(1) the date of the most recent financial statement given to
Beneficiary with respect to Trustor of the Property, or
(2) the date of the financial statements given to Beneficiary
immediately prior to the date of this Deed of Trust, other than changes in the
ordinary course of business, none of which constitute a Material Adverse Change,
either individually or in the aggregate.
3.4 USE OF PROCEEDS OF LOAN. Trustor will use the Loan to assist in the
-----------------------
acquisition of the Property.
3.5 OTHER ARRANGEMENTS. Trustor is not a party to any agreement or
------------------
instrument materially and adversely affecting Trustor's present or proposed
business, properties, assets, operation, or condition, financial or otherwise;
and Trustor is not in default in the
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performance, observance, or fulfillment of any of the material obligations,
covenants, or conditions in any agreement or instrument to which Trustor is a
party that materially affect Trustor's present or proposed business, properties,
assets, operation, or condition, financial or otherwise.
3.6 OTHER INFORMATION. All other reports, papers, data, and information
-----------------
given to Beneficiary with respect to Trustor and the Property are accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Beneficiary a true and accurate knowledge of the subject
matter.
3.7 LITIGATION. There is not now pending against or affecting any Loan
----------
Party, nor to the knowledge of any Loan Party is there threatened, any action,
suit, or proceeding at law or in equity or before any administrative agency
that, if adversely determined, would materially impair or affect:
(a) the financial condition or operations of Trustor, or
(b) the condition or operation of the Property.
3.8 OTHER WARRANTIES.
----------------
(a) The Property is not used for agricultural or grazing purposes,
and
(b) Trustor's third party operator of the Property is engaged in the
operation of a nursing care facility.
(c) This Deed of Trust is not, and will at all times continue not to
be, a residential Trust Deed (as that term is defined in ORS 86.705(c)).
3.9 TAXES. Trustor has filed all federal, state, county, and municipal
-----
income tax returns required to have been filed and has paid all taxes that have
become due pursuant to those returns or pursuant to any assessments received by
Trustor, and Trustor does not know of any basis for any additional assessment
against Trustor in respect of those taxes.
3.10 COMPLIANCE WITH LAWS. Except as otherwise provided in this Deed of
--------------------
Trust, the Property and the proposed and actual use of the Property comply with
all laws, ordinances, rules, and regulations of all local, regional, county,
state, and federal governmental authorities having jurisdiction (including, but
not limited to, the Americans With Disabilities Act), and there is no action or
proceeding pending or, to the knowledge of Trustor after due inquiry, threatened
before any court, quasi-judicial body, or administrative agency at the time of
any disbursement by Beneficiary relating to the validity of the Loan or the
proposed or actual use of the Property. All rights to appeal any decision
rendered will have expired prior to the date of this Deed of Trust.
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3.11 SINGLE ASSET ENTITY. Trustor does not own and will not own any other
-------------------
asset or property other than (i) the Property, and (ii) incidental personal
property necessary for the ownership and operation of the Property.
3.12 BROKERS, AGENTS, ADVISORS, CONSULTANTS AND FINDERS. No financial
--------------------------------------------------
advisors, brokers, underwriters, placement agents, agents or finders have been
dealt with by the Trustor in connection with the Loan.
3.13 TAXED AS PARTNERSHIP. Trustor is currently taxed as a partnership
--------------------
for income tax purposes.
4. AFFIRMATIVE COVENANTS. Until the entire Indebtedness has been paid in
---------------------
full, Trustor covenants to and agrees with Beneficiary as follows:
4.1 OBLIGATIONS OF TRUSTOR. Trustor will pay the Indebtedness and
----------------------
Trustor will continue to be liable for the payment of the Indebtedness until it
has been paid in full. Trustor:
(a) will timely perform all the covenants, agreements, terms, and
conditions to be performed by Trustor:
(1) under this Deed of Trust;
(2) as seller under each contract of sale of, and as lessor under
each lease of, for any portion of the Property for which a contract of sale or
lease has been approved in writing by Beneficiary;
(3) as required of Trustor under each document and agreement
constituting one of the Security Documents;
(4) under all other agreements between Trustor and Beneficiary in
accordance with the respective terms of the agreement; and
(5) as required of Trustor under all other agreements to which
Trustor is a party with respect to the Property;
(b) will not cancel, surrender, modify, amend, or permit the
cancellation, surrender, modification, or amendment of any of the previously
mentioned agreements or any of the covenants, agreements, terms, or conditions
contained in any of them without the prior written consent, in each case, of
Beneficiary; and
(c) will keep Beneficiary indemnified against all actions,
proceedings, costs (including, without limitation, Beneficiary's counsel fees
and disbursements), claims, and damages incurred or sustained by Beneficiary in
respect of the nonpayment of any
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charges or the nonobservance or nonperformance of any of the covenants,
agreements, terms, or conditions in any of the previously mentioned agreements.
4.2 INSURANCE.
---------
(a) Trustor, at its sole cost and expense, will keep the Property
insured for the mutual benefit of Trustor and Beneficiary against loss or damage
by earthquake and fire, and against loss or damage by other risks embraced by
coverage of the type now known as the broad form of extended coverage,
including, but not limited to, riot and civil commotion, vandalism, malicious
mischief, burglary, theft, and mysterious disappearance, and against any other
risks or hazards that Beneficiary may from time to time reasonably designate, in
an amount not less than one hundred percent (100%) of the then full replacement
cost of the Improvements, without deduction for physical depreciation. The
policies of insurance carried in accordance with this section shall contain the
Replacement Cost Endorsement with a waiver of depreciation, and shall have a
deductible no greater than $10,000.00 unless so agreed by Beneficiary.
Notwithstanding the above, with respect to earthquake insurance, (A) such
insurance shall be required only to the extent it is available at commercially
reasonable prices, and (B) such insurance shall be on commercially reasonable
terms and with commercially reasonable deductible amounts.
(b) Trustor, at its sole cost and expense, but for the mutual benefit
of Trustor and Beneficiary, will maintain during the term of this Deed of Trust
the following policies of insurance:
(i) Flood insurance if any part of the Property is located in an
area identified by the Federal Emergency Management Agency as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Program in an amount at least equal to the
outstanding principal amount of the Loan or the maximum limit of coverage
available with respect to the Property under said Program, whichever is less.
(ii) Commercial general liability insurance, including broad form
property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages and containing minimum limits per occurrence of
$1,000,000 and $2,000,000 in the aggregate for any policy year. In addition, at
least $5,000,000 excess and/or umbrella liability insurance shall be obtained
and maintained for any and all claims, including all legal liability imposed
upon Trustor and all court costs and attorneys' fees incurred in connection with
the ownership, operation and maintenance of the Property.
(iii) Rental loss and/or business interruption insurance in an
amount equal to the greater of (A) estimated gross revenues for eighteen (18)
months from the operations of the Property or (B) the projected operating
expenses (including debt service) for eighteen (18) months for the maintenance
and operation of the Property.
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(iv) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in the Improvements (without
exclusion for explosions), to the extent that such items now or hereafter exist
upon the Property, in an amount at least equal to the outstanding principal
amount of the Note.
(v) If the Property includes commercial property, workers'
compensation insurance with respect to any employees of Trustor, as required by
any governmental authority or legal requirement.
(vi) During any period of repair or restoration, builder's "all
risk" insurance in an amount equal to not less than the full insurable value of
the Property insuring against such risks (including, without limitation, fire
and extended coverage and collapse of the Improvements to agreed limits) as
Beneficiary may request, in form and substance acceptable to Beneficiary.
(vii) Ordinance or law coverage to compensate for the cost of
demolition and the increased cost of construction.
(viii) Such other insurance as may from time to time be reasonably
required by Beneficiary in order to protect its interests, including earthquake
insurance coverage.
(c) Effective on the occurrence of any Event of Default, all of
Trustor's right, title, and interest in all policies of property insurance and
any unearned premiums paid are assigned to Beneficiary, who may assign them to
any purchaser of the Property at any foreclosure sale.
(d) All policies of insurance (the "POLICIES") required pursuant to
this Section: (i) shall be issued by companies approved by Beneficiary and
licensed to do business in the state where the Property is located, with a
claims paying ability rating of "AA" or better by Standard & Poor's Rating
Services, a division of the McGraw Hill Companies, Inc. and/or a rating of "A:X"
or better in the current Best's Insurance Reports; (ii) shall name Beneficiary
and its successors and/or assigns as their interest may appear as the
beneficiary/ mortgagee; (iii) shall contain a non-contributory standard
mortgagee clause and a lender's loss payable endorsement or their equivalents,
naming Beneficiary as the person to which all payments made by such insurance
company shall be paid; (iv) shall contain a waiver of subrogation against
Beneficiary; (v) shall be maintained throughout the term of this Deed of Trust
without cost to Beneficiary; (vi) shall be assigned and the originals delivered
to Beneficiary; (vii) shall contain such provisions as Beneficiary deems
reasonably necessary or desirable to protect its interest including, without
limitation, endorsements providing that neither Trustor, Beneficiary nor any
other party shall be a co-insurer under said Policies and that Beneficiary shall
receive at least thirty (30) days prior written notice of any modification,
reduction or cancellation; and (viii) shall be satisfactory
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in form and substance to Beneficiary and shall be approved by Beneficiary as to
amounts, form, risk coverage, deductibles, loss payees and insureds. Trustor
shall pay the premiums for such Policies (the "INSURANCE PREMIUMS") as the same
become due and payable and shall furnish to Beneficiary evidence of the renewal
of each of the Policies with receipts for the payment of the Insurance Premiums
or other evidence of such payment reasonably satisfactory to Beneficiary
(provided, however, that Trustor is not required to furnish such evidence of
payment to Beneficiary in the event that such Insurance Premiums have been paid
by Beneficiary pursuant to Section 4.4 hereof). If Trustor does not furnish
-----------
such evidence and receipts at least thirty (30) days prior to the expiration of
any expiring Policy, then Beneficiary may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums promptly on demand.
Within thirty (30) days after request by Beneficiary, Trustor shall obtain such
increases in the amounts of coverage required hereunder as may be reasonably
requested by Beneficiary, taking into consideration changes in the value of
money over time, changes in liability laws, changes in prudent customs and
practices.
WARNING
UNLESS TRUSTOR PROVIDES BENEFICIARY WITH EVIDENCE OF THE
INSURANCE COVERAGE AS REQUIRED HEREUNDER, BENEFICIARY MAY PURCHASE
INSURANCE AT TRUSTOR'S EXPENSE TO PROTECT BENEFICIARY'S INTEREST.
THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT TRUSTOR'S INTEREST. IF
THE COLLATERAL BECOMES DAMAGED, THE COVERAGE BENEFICIARY PURCHASES
MAY NOT PAY ANY CLAIM TRUSTOR MAKES OR ANY CLAIM MADE AGAINST
TRUSTOR. TRUSTOR MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE
THAT TRUSTOR HAS OBTAINED REQUIRED COVERAGE ELSEWHERE.
TRUSTOR IS RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED
BY BENEFICIARY. THE COST OF THIS INSURANCE MAY BE ADDED TO THE
INDEBTEDNESS, AND SHALL BEAR INTEREST AT THE DEFAULT RATE. THE
EFFECTIVE DATE OF COVERAGE MAY BE THE DATE TRUSTOR'S COVERAGE LAPSED
OR THE DATE TRUSTOR FAILED TO PROVIDE PROOF OF COVERAGE.
THE COVERAGE BENEFICIARY PURCHASES MAY BE CONSIDERABLY MORE
EXPENSIVE THAN INSURANCE TRUSTOR CAN OBTAIN ON ITS OWN AND MAY NOT
SATISFY ANY NEED FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY
LIABILITY INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW.
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4.3 MAINTENANCE, WASTE, AND REPAIR. Trustor will maintain the
------------------------------
Improvements now or later existing in good and tenantable repair, and will not
structurally alter them without the prior written consent of Beneficiary, or
remove or demolish them in whole or in part, nor will Trustor suffer any waste
of the Property or make any change in the use of the Property that will in any
way increase any ordinary fire or other hazard insurance premiums or permit
anything that may in any way impair the security of this Deed of Trust. Trustor
will not abandon the Property or lease the Property unprotected, vacant, or
deserted.
4.4 IMPOSITION AND INSURANCE; IMPOUNDS.
----------------------------------
(a) Trustor will pay when due all Impositions that are or that may
become a lien on the Property or are assessed against the Property or its rents,
royalties, profits, and income.
(b) Trustor will file all federal, state, provincial, county, and
municipal income tax returns required to be filed and will pay all taxes that
become due pursuant to the returns or pursuant to any assessments received by
Trustor.
(c) Trustor shall pay to Beneficiary on the first day of each
calendar month (a) one-twelfth of the Impositions that Beneficiary estimates
will be payable during the next ensuing twelve (12) months in order to
accumulate with Beneficiary sufficient funds to pay all such Impositions at
least thirty (30) days prior to their respective due dates, and (b) one-twelfth
of the Insurance Premiums that Beneficiary estimates will be payable for the
renewal of the coverage afforded by the Policies upon the expiration thereof in
order to accumulate with Beneficiary sufficient funds to pay all such Insurance
Premiums at least thirty (30) days prior to the expiration of the Policies (said
amounts in (a) and (b) above hereinafter called the "IMPOSITION AND INSURANCE
IMPOUND FUND"). The Imposition and Insurance Impound Fund and the payments of
interest or principal or both, payable pursuant to the Note, shall be added
together and shall be paid as an aggregate sum by Trustor to Beneficiary.
Beneficiary will apply the Imposition and Insurance Impound Fund to payments of
Impositions and Insurance Premiums required to be made by Trustor pursuant to
Sections 4.2(f) and 4.4(a) hereof. In making any payment relating to the
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Imposition and Insurance Impound Fund, Beneficiary may do so according to any
bill, statement or estimate procured from the appropriate public office (with
respect to Impositions) or insurer or agent (with respect to Insurance
Premiums), without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax, assessment, sale, forfeiture, tax lien or title
or claim thereof. If the amount of the Imposition and Insurance Impound Fund
shall exceed the amounts due for Impositions and Insurance Premiums pursuant to
Sections 4.2(f) and 4.4(a) hereof, Beneficiary shall, in its sole discretion,
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return any excess to Trustor or credit such excess against future payments to be
made to the Imposition and Insurance Impound Fund. In allocating such excess,
Beneficiary may deal with the person shown on the records of Beneficiary to be
the owner of the Property. If at an time Beneficiary determines that the
Imposition and Insurance Impound Fund is not or will not be sufficient to pay
the items set forth in (a) and (b) above, Beneficiary shall notify Trustor of
such determination and Trustor shall increase its monthly payments to
Beneficiary by the amount that Beneficiary estimates is
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sufficient to make up the deficiency at least thirty (30) days prior to
delinquency of the Impositions and/or expiration of the Policies, as the case
may be. Until expended or applied as above provided, any amounts in the
Imposition and Insurance Impound Fund shall constitute additional security for
the Indebtedness. The Imposition and Insurance Impound Fund shall not
constitute a trust fund. No earnings or interest on the Imposition and
Insurance Impound Fund shall be payable to Trustor. If Beneficiary so elects at
any time, Trustor shall provide, at Trustor's expense, a tax service contract
for the Loan term issued by a tax reporting agency acceptable to Beneficiary.
If Beneficiary does not so elect, Trustor shall reimburse Beneficiary for the
cost of making annual tax searches throughout the Loan term.
(d) Trustor hereby pledges to Beneficiary and grants to Beneficiary a
security interest in any and all monies now or hereafter deposited in the
Imposition and Insurance Impound Fund as additional security for the payment of
the Indebtedness. Upon the occurrence of an Event of Default, Beneficiary may
apply any sums then present in the Imposition and Insurance Impound Fund to the
payment of the Indebtedness in any order in its sole discretion.
(e) By exercising any of its rights or remedies under this Section 4.4
-----------
(including, without limitation, taking possession of the Imposition and
Insurance Impound Fund), Beneficiary shall not be deemed to have exercised any
equitable right of setoff, foreclosed any statutory banker's lien, initiated or
prosecuted any "action" to enforce the rights and obligations secured by this
Deed of Trust, or the Loan Documents, as the term "action" is used under Oregon
law, or to have violated the "security first" principle, if any, under Oregon
law. Accordingly, the exercise of any or all of Beneficiary's rights and
remedies under this Section 4.4 shall not in any way prejudice or affect
-----------
Beneficiary's right to initiate and complete a judicial or nonjudicial
foreclosure under this Deed of Trust. This Deed of Trust evidences the
consensual granting of a personal property security interest in the Imposition
and Insurance Impound Fund as permitted by the Oregon Uniform Commercial Code;
the parties do not intend that the exercise by Beneficiary of any of its rights
or remedies hereunder shall have any different consequences under Oregon law
than the exercise of rights or remedies under any other security agreement under
which a secured party has been granted a security interest in other types of
personal property.
4.5 COMPLIANCE WITH LAW. Trustor will preserve and keep in full force
-------------------
its existence, rights, and powers. Trustor will promptly and faithfully comply
with all present and future laws, ordinances, rules, regulations, and
requirements of every governmental authority or agency and of every board of
fire underwriters (or similar body exercising similar functions) having
jurisdiction that may be applicable to it or to the Property or to the use or
manner of occupancy, possession, operation, maintenance, alteration, or repair
of the Property or any part of it, whether the law, ordinance, rule, order,
regulation, or requirement necessitates structural changes or improvements or
interferes with the use or enjoyment of the Property.
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<PAGE>
4.6 BOOKS AND RECORDS. Trustor will maintain complete books of account
-----------------
and other records reflecting the results of Trustor's operations in a form
satisfactory to Beneficiary, and furnish to Beneficiary any information about
the financial condition of Trustor, and the sales and operations of the Property
as Beneficiary reasonably requests, including, but not limited to, the following
information, which will be furnished without request:
(a) within twenty (20) days after the end of each month, a statement
of revenues and expenses relating to all of Trustor's business operations for
the month just ended, including without limitation, operations of the Property
for the month just ended;
(b) as soon as available and in any event within sixty (60) days after
the end of each fiscal year of Trustor, a copy of the annual audit report for
the fiscal year for Trustor, including a balance sheet of Trustor as of the end
of the fiscal year, and statements of income and retained earnings and of change
in financial position of Trustor for the fiscal year, in each case certified in
a manner acceptable to Beneficiary by independent public accountants acceptable
to Beneficiary;
(c) promptly upon their becoming available, copies of all financial
statements, reports, and notices (including tax returns) sent by Trustor to its
partners or any governmental authority succeeding to any of its functions; and
(d) promptly upon receipt, copies of any reports by independent public
accountants submitted to Trustor concerning its properties or operations.
Beneficiary will have the right, at all reasonable times and on reasonable
notice, to audit, at Trustor's sole cost and expense, Trustor's books of account
and records, all of which will be made available to Beneficiary and
Beneficiary's representatives for that purpose, from time to time, on
Beneficiary's request. Trustor's failure to comply with the requirements of
this Section 4.6 within fifteen (15) days after written notice from Beneficiary
-----------
shall be an Event of Default hereunder. Notwithstanding the above, if the above
records and information are within the control of any third party operator,
Trustor shall not be in default hereunder so long as Trustor exercises
commercially reasonable efforts to require such operator to provide such
information under its lease or other operative agreement with Trustor.
4.7 FURTHER ASSURANCES. Trustor, at Trustor's expense and at any time on
------------------
the reasonable request of Beneficiary, will execute, acknowledge, and deliver
any additional papers and instruments (including, without limitation, a
declaration of no setoff) and any further assurances of title and will do or
cause to be done all further acts and things that may be proper or reasonably
necessary to carry out the purpose of this Deed of Trust and of the Loan
Documents and to subject to the liens any property intended by the terms to be
covered and any renewals, additions, substitutions, replacements, or
betterments.
4.8 STATEMENT BY TRUSTOR. Trustor, on ten (10) days' written request,
--------------------
will furnish a statement of the amount due or outstanding on the Note and a
statement of any offsets, counterclaims, or defenses to the payment.
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4.9 INDEMNITY. In addition to any other indemnifications provided herein
---------
or in the other Loan Documents, Trustor shall protect, defend, indemnify and
save harmless Beneficiary and Trustee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation, reasonable attorneys'
fees and disbursements whether or not suit is filed), imposed upon or incurred
by or asserted against Beneficiary or Trustee by reason of (a) ownership of this
Deed of Trust, the Property or any interest therein or receipt of any Payments;
(b) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(c) any use, nonuse or condition in, on or about the Property or any part
thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (d) any failure on the part of Trustor or Trustee to
perform or comply with any of the terms of this Deed of Trust; (e) performance
of any labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (f) the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release, or threatened release
of any Hazardous Substance on, from or affecting the Property; (g) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or related to such Hazardous Substance; (h) any lawsuit brought or
threatened, settlement reached, or government order relating to such Hazardous
Substance; (i) any violation of the Hazardous Substance Laws, which are based
upon or in any way related to such Hazardous Substance including, without
limitation, the costs and expenses of any remedial work, attorney and consultant
fees and disbursements, investigation and laboratory fees, court costs, and
litigation expenses; (j) any failure of the Property to comply with any Access
Laws; (k) any representation or warranty made in the Note, this Deed of Trust or
any of the other Loan Documents being false or misleading in any material
respect as of the date such representation or warrant was made; (l) any claim by
brokers, finders or similar persons claiming to be entitled to a commission in
connection with the Loan or other transaction involving the Property or any part
thereof under any legal requirement or any liability asserted against
Beneficiary with respect thereto; and (m) the claims of any lessee of any
portion of the Property or any person acting through or under any lessee or
otherwise arising under or as a consequence of any Leases. Any amounts payable
to Beneficiary or Trustee by reason of the application of this paragraph shall
be secured by this Deed of Trust and shall become immediately due and payable
and shall bear interest at the Default Rate from the date loss or damage is
sustained by Beneficiary or Trustee until paid. The obligations and liabilities
of Trustor under this Section 4.9 shall survive the termination, satisfaction,
-----------
or assignment of this Deed of Trust and the exercise by Beneficiary of any of
its rights or remedies hereunder, including, but not limited to, the acquisition
of the Property by foreclosure or a conveyance in lieu of foreclosure.
4.10 REIMBURSEMENT. Beneficiary will have the right to declare
-------------
immediately due any amount paid by it for any Impositions, tax, stamp tax,
assessment, water rate, sewer rate, Insurance Premium, repair, rent charge,
debt, claim, inspection, or lien having priority over this Deed of Trust, or
over any other agreement given to secure the Indebtedness.
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<PAGE>
4.11 LITIGATION. Trustor will promptly give written notice to Beneficiary
----------
of any litigation commenced or threatened affecting Trustor or the Property
other than unlawful detainer proceedings brought by Trustor.
4.12 TAX RECEIPTS. Subject to the provisions of Section 4.4 of this Deed
------------ -----------
of Trust, Trustor will exhibit to Beneficiary, within seven (7) days after
demand, bills (that will be receipted from and after the date receipted bills
are obtainable) showing the payment to the extent then due of all taxes,
assessments (including those payable in periodic installments), water rates,
sewer rates, or any other Imposition that may have become a lien on the Property
or any Personalty prior to the lien of this Deed of Trust.
4.13 DUPLICATE PLANS. Trustor will submit to Beneficiary a duplicate set
---------------
of plans and specifications for approval before any material improvements,
repairs, or alterations are begun that affect the Property.
4.14 ADDITIONAL INFORMATION. Trustor will furnish to Beneficiary, within
----------------------
seven (7) days after written request, all information that Beneficiary may
request concerning the performance by Trustor of the covenants of the Loan
Documents, and Trustor will permit Beneficiary or its representatives at all
reasonable times to make investigation or examination concerning that
performance.
4.15 RIGHT OF ENTRY. Trustor grants to Beneficiary and its agents,
--------------
employees, consultants, and contractors the right to enter on the Property for
the purpose of making any inspections, reports, tests (including, without
limitation, soils borings, groundwater testing, wells, or soils analysis),
inquiries, and reviews that Beneficiary, in its sole and absolute discretion,
deems necessary to assess the then current condition of the Property.
Beneficiary will provide Trustor with one (1) business day's notice of the
entry. However, Trustor's consent will not be required for entry or for the
performance of tests. All costs, fees, and expenses (including, without
limitation, those of Beneficiary's outside counsel and consultants) incurred by
Beneficiary with respect to the inspections, reports, tests, inquiries, and
reviews, together with all related preparation, consultation, analyses, and
review, will be paid by Trustor to Beneficiary on demand, will accrue interest
at the Default Rate until paid, and will be secured by this Deed of Trust, prior
to any right, title, or interest in or claim on the Property attaching or
accruing subsequent to the lien of this Deed of Trust.
4.16 HANDICAPPED ACCESS.
------------------
(a) The Property shall at all times strictly comply to the extent
applicable with the requirements of the Americans with Disabilities Act of 1990,
the Fair Housing Amendments Act of 1988 (if applicable), all state and local
laws and ordinances related to handicapped access and all rules, regulations,
and order issued pursuant thereto including, without limitation, the Americans
with Disabilities Act Accessibility Guidelines for Buildings and Facilities
(collectively, "ACCESS LAWS").
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<PAGE>
(b) Trustor agrees to give prompt notice to Beneficiary of the receipt
by Trustor of any complaints related to violation of any Access Laws and of the
commencement of any proceedings or investigations which relate to compliance
with applicable Access Laws.
4.17 TAXED AS PARTNERSHIP. Trustor will continue to be taxed as a
--------------------
partnership for income tax purposes during the term of this Deed of Trust.
4.18 LIMITED LIABILITY COMPANY FILINGS. Trustor will make all filings as
---------------------------------
required under Oregon law concerning foreign limited liability companies, and
deliver same to Beneficiary within ten (10) days of filing.
4.19 THIRD PARTY OPERATOR. Trustor will preserve and keep in full force
--------------------
and effect that certain Skilled Nursing Facility Lease dated June 4, 1997
between Continuum Health Incorporated (with Trustor as its successor and
assign), as lessor, and Coos Bay Rehabilitation, Inc., as lessee, with respect
to the operation of the Property as a nursing care facility, or will enter into
and keep in full force and effect and maintain during the entire term of the
Loan a lease with such other third party operator which is acceptable to
Beneficiary (which acceptance shall have been obtained from Beneficiary in
writing prior to entering into such lease) concerning the operation of the
Property as a nursing care facility.
5. NEGATIVE COVENANTS. Until the entire Indebtedness has been paid in full,
------------------
Trustor covenants to and agrees with Beneficiary as follows:
5.1 RESTRICTIVE USES. Trustor covenants not to initiate, join in, or
----------------
consent to any change in any zoning ordinance, private restrictive covenant,
assessment proceedings, or other public or private restriction limiting or
restricting the uses that may be made of the Property or any part of it without
the prior written consent of Beneficiary.
5.2 OTHER FINANCING. Except for the liens securing the Indebtedness,
---------------
Trustor will not create or permit to continue in existence any mortgage, pledge,
encumbrance, lien, or charge of any kind (including purchase money and
conditional sale liens) on any of the Property except for:
(a) liens for taxes not yet delinquent, and
(b) any other liens or charges that are specifically approved in
writing by Beneficiary prior to the recordation.
Any transaction in violation of this section will cause all Indebtedness,
irrespective of the maturity dates, at the option of the holder and without
demand or notice, to immediately become due, together with any prepayment
premium in accordance with the terms of the Note.
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<PAGE>
5.3 TRANSFER OR ENCUMBRANCE OF THE PROPERTY.
---------------------------------------
(a) Trustor acknowledges that Beneficiary has examined and relied on
the creditworthiness and experience of Trustor in owning and operating the
Property in agreeing to make the Loan, and that Beneficiary will continue to
rely on Trustor's ownership of the Property as a means of maintaining the value
of the Property as security for repayment of the Indebtedness. Trustor
acknowledges that Beneficiary has a valid interest in maintaining the value of
the Property so as to ensure that, should Trustor default in the repayment of
the Indebtedness, Beneficiary can recover the Indebtedness by a sale of the
Property. Trustor shall not, without the prior written consent of Beneficiary,
sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer the
Property or any part thereof, or permit the Property or any part thereof to be
sold, conveyed, alienated, mortgaged, encumbered, pledged or otherwise
transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this Section 5.3 shall be deemed to include (i)
-----------
an installment sales agreement wherein Trustor agrees to sell the Property or
any part thereof for a price to be paid in installments; (ii) an agreement by
Trustor leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Trustor's right, title and interest
in and to any Leases or any Payments; (iii) if Trustor or any general partner or
managing member of Trustor is a corporation, the voluntary or involuntary sale,
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by operation of
law or otherwise) or the creation or issuance of new stock in one or a series of
transactions by which an aggregate of more than 50% of such corporation's stock
shall be vested in a party or parties who are not now stockholders or any change
in the control of such corporation; (iv) if Trustor or any general partner of
Trustor is a limited or general partnership, joint venture or limited liability
company, the change, removal, resignation or addition of a general partner,
managing partner, or joint venturer or the transfer of any ownership interest of
any general partner, managing partner or joint venturer or the transfer,
assignment or pledge of any ownership interest of any general partner, managing
partner or joint venturer; (v) if Trustor is a limited partnership, the
voluntary or involuntary sale, conveyance, transfer or pledge of any limited
partnership interests or the creation or issuance of new limited partnership
interests, by which an aggregate of more than 50% of such limited partnership
interests are held by parties who are not currently limited partners; or (vi) if
Trustor is a limited liability company, the voluntary or involuntary sale,
conveyance or transfer of more than 50% of the members' interests.
Notwithstanding anything herein to the contrary, the following transfers of
ownership interests in any Trustor entity shall be permitted transfers hereunder
without Beneficiary's consent and shall not constitute a default hereunder: (i)
any transfers into or out of a trust, family limited partnership, or other
similar entity or device for tax or estate planning purposes; and (ii) any
transfers resulting from the death of an individual, including without
limitation, pursuant to a will, trust or intestate proceeding.
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(c) Beneficiary shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Indebtedness immediately due and payable upon Trustor's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property without Beneficiary's consent. This provision shall apply to every
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property.
(d) Beneficiary's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be deemed to
be a waiver of Beneficiary's right to require such consent to any future
occurrence of same. Any sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Property made in contravention of this Section shall
be null and void and of no force and effect.
(e) Trustor agrees to bear and shall pay or reimburse Beneficiary on
demand for all reasonable expenses (including, without limitation, reasonable
attorneys' fees and disbursements, title search costs and title insurance
endorsement premiums) incurred by Beneficiary in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
(f) Beneficiary's consent to the sale or transfer of the Property will
not be unreasonably withheld after consideration of all relevant factors,
provided that:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of
Default shall have occurred and remain uncured;
(ii) the proposed transferee ("TRANSFEREE") shall be a reputable
entity or person of good character, creditworthy, with
sufficient financial worth considering the obligations
assumed and undertaken, as evidenced by financial
statements and other information reasonably requested by
Beneficiary;
(iii) the Transferee and its property manager (if any) shall
have sufficient experience in the ownership and management
of properties similar to the Property, and Beneficiary
shall be provided with reasonable evidence thereof;
(iv) the Transferee shall have executed and delivered to
Beneficiary an assumption agreement in form and substance
acceptable to Beneficiary, evidencing such Transferee's
agreement to abide and be bound by the terms of the Note,
this Deed of Trust and the other Loan Documents, together
with such legal opinions
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and title insurance endorsements as may be reasonably
requested by Beneficiary; and
(v) Beneficiary shall have received the payment of all costs
and expenses incurred by Beneficiary in connection with
such assumption (including reasonable attorneys' fees and
costs).
5.4 REPLACEMENT OF FIXTURES AND PERSONALTY. Trustor will not permit any
--------------------------------------
of the Fixtures or Personalty to be removed at any time from the Property
without the prior written consent of Beneficiary unless actually replaced by
articles of equal suitability and value owned by Trustor free and clear of any
lien or security interest except as may be approved in writing by Beneficiary.
5.5 LIMITED LIABILITY COMPANY CHANGES. Trustor will make no material
---------------------------------
changes nor materially amend or modify Trustor's articles of organization or
operating agreement without first obtaining Beneficiary's prior written consent
(which consent shall not be unreasonably withheld or delayed), nor compromise
any members' obligations to contribute capital or enter into any merger or
consolidation without first obtaining Beneficiary's prior written consent of
same. Trustor will in writing immediately notify Beneficiary of any planned or
anticipated dissolution of Trustor or of any event likely to result in
dissolution of Trustor.
6. ENVIRONMENTAL PROVISIONS.
------------------------
6.1 REPRESENTATIONS AND WARRANTIES. Except as disclosed in writing to,
------------------------------
and acknowledged in writing by, Beneficiary, Trustor represents and warrants
that:
(a) during the period of Trustor's ownership of the Property:
(1) there has been no use, generation, manufacture, storage,
treatment, disposal, discharge, Release, or threatened Release of any Hazardous
Substance by any person on or around the Property; and
(2) there have been no Hazardous Substances transported over or
through the Property;
(b) after diligent inquiry, Trustor has no knowledge of, or reason to
believe that, there has been:
(1) any use, generation, manufacture, storage, treatment,
disposal, Release, or threatened Release of any hazardous waste or substance by
any prior owners or prior occupants of the Property or by any third parties onto
the Property; or
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(2) any actual or threatened litigation or claims of any kind by
any person relating to these matters;
(c) no Hazardous Substances in excess of permitted levels or
reportable quantities under applicable Hazardous Substance Laws are present in
or about the Property or any nearby real property that could migrate to the
Property;
(d) no Release or threatened Release exists or has occurred;
(e) no underground storage tanks of any kind are or ever have been
located in or about the Property;
(f) the Property and all operations and activities at, and the use
and occupancy of, the Property, comply with all applicable Hazardous Substance
Laws;
(g) Trustor and every User has, and is now in strict compliance with,
every permit, license, and approval required by all applicable Hazardous
Substance Laws for all activities and operations at, and the use and occupancy
of, the Property;
(h) to the best of Trustor's knowledge, after diligent inquiry, there
are no Hazardous Substance Claims pending or threatened with regard to Property
or against Trustor or any Guarantor;
(i) the Property has not been nor is it within 2,000 feet of any
other property designated as hazardous waste property or border zone property
pursuant to Oregon law, and no proceedings for a determination of this
designation are pending or threatened;
(j) to the best of its knowledge after diligent inquiry, there exists
no occurrence or condition on any real property adjoining or within 2,000 feet
of the Property that would cause the Property or any part of it to be designated
as hazardous waste property or border zone property under Oregon law;
(k) that the current use of the Property is as a nursing care
facility;
(l) any written disclosure submitted by or on behalf of Trustor to
Beneficiary concerning any Release or threatened Release, past or present
compliance by Trustor, or any User or other person of any Hazardous Substance
Laws applicable to the Property, the past and present use and occupancy of the
Property, and any environmental concerns relating to the Property, was true and
complete when submitted and continues to be true and complete as of the date of
this Deed of Trust.
6.2 COVENANTS. Trustor agrees, except in the ordinary course of business
---------
and in strict compliance with all applicable Hazardous Substance Laws, as
follows:
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(a) not to cause or permit the Property to be used as a site for the
use, generation, manufacture, storage, treatment, Release, discharge, disposal,
transportation, or presence of any Hazardous Substance;
(b) not to cause, contribute to, permit, or acquiesce in any Release
or threatened Release;
(c) not to change or modify the use of the Property without the prior
written consent of Beneficiary;
(d) to comply with and to cause the Property and every User of the
Property to comply with all Hazardous Substance Laws;
(e) to immediately notify Beneficiary in writing and to provide
Beneficiary with a reasonably detailed description of:
(1) any noncompliance of the Property with any Hazardous
Substance Laws;
(2) any Hazardous Substance Claim;
(3) any Release or threatened Release;
(4) the discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Property that would cause the
Property or any part of it to be designated as hazardous waste property or
border zone property under Oregon law;
(f) in the event that Trustor discovers a Release or the presence of
any Hazardous Substance on or about the Property in violation of any Hazardous
Substance Law, to:
(1) notify Beneficiary of that discovery together with a
reasonably detailed description;
(2) promptly after a request by Beneficiary, engage a qualified
environmental engineer reasonably satisfactory to Beneficiary to investigate
these matters and prepare and submit to Beneficiary a written report containing
the findings and conclusions resulting from that investigation, all at the sole
expense of Trustor; and
(3) take, at Trustor's sole expense, all necessary actions to
remedy, repair, clean up, or detoxify any Release or Hazardous Substance,
including, but not limited to, any remedial action required by any Hazardous
Substance Laws or any judgment, consent, decree, settlement, or compromise in
respect of any Hazardous Substance Claims, these actions to be performed:
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(i) in accordance with Hazardous Substance Laws;
(ii) in a good and proper manner;
(iii) under the supervision of a qualified environmental
engineer approved in writing by Beneficiary;
(iv) in accordance with plans and specifications for these
actions approved in writing by Beneficiary; and
(v) using licensed and insured qualified contractors
approved in writing by Beneficiary;
(g) immediately furnish to Beneficiary copies of all written
communications received by Trustor from any governmental authority or other
person or given by Trustor to any person and any other information Beneficiary
may reasonably request concerning any Release, threatened Release, Hazardous
Substance Claim, or the discovery of any Hazardous Substance on or about the
Property in violation of any Hazardous Substance Law; and
(h) keep Beneficiary generally informed regarding any Release,
threatened Release, Hazardous Substance Claim, or the discovery of any Hazardous
Substance on or about the Property in violation of any Hazardous Substance Law.
6.3 ENVIRONMENTAL MONITORING. Trustor shall permit Beneficiary to join
------------------------
and participate in, as a party if it so elects, any legal proceedings or action
initiated with respect to the Property in connection with any Hazardous
Substance Law or Hazardous Substance, and Trustor shall pay all attorneys' fees
and disbursements incurred by Beneficiary in connection therewith. Upon
Beneficiary's request, at any time and from time to time while this Deed of
Trust is in effect, but not more frequently than once per calendar year, unless
Beneficiary has determined (in the exercise of its good faith judgment) that
reasonable cause exists for the performance of an environmental inspection or
audit of the Property, Trustor shall provide at Trustor's sole expense an
inspection or audit of the Property prepared by a licensed hydrogeologist or
licensed environmental engineer approved by Beneficiary indicating the presence
or absence of Hazardous Substances in, or near the Property. If Trustor fails
to provide such inspections or audits within thirty (30) days after such
request, Beneficiary may order same, and Trustor hereby grants to Beneficiary
and its employees and agents access to the Property and a license to undertake
those inspections or audits. The cost of such inspections or audits shall be
added to the principal balance of the sums due under the Note and the Deed of
Trust and shall bear interest thereafter until paid at the Default Rate (as
defined in the Note). In the event that any environmental site assessment
report prepared in connection with such inspection or audit recommends that an
operations and maintenance plan be implemented for any Hazardous Substance,
Trustor shall cause such operations and maintenance plan to be prepared and
implemented at Trustor's expense upon request of Beneficiary. Trustor shall
commence and thereafter diligently prosecute to completion any remedial work
within thirty (30) days after written demand by Beneficiary
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for performance thereof (or any such shorter period of time as may be required
under applicable law). All remedial work shall be performed by contractors
approved in advance by Beneficiary, and under the supervision of a consulting
engineer approved by Beneficiary. All costs and expenses of such remedial work
shall be paid by Trustor including, without limitation, Beneficiary's reasonable
attorneys' fees and costs incurred in connection with monitoring or review of
such remedial work. In the event Trustor shall fail to timely commence, or
cause to be commenced, or fail to diligently prosecute to completion, such
remedial work, Beneficiary may, but shall not be required to, cause such
remedial work to be performed, and all costs and expenses thereof, or incurred
in connection therewith, shall become part of the Indebtedness and shall bear
interest thereafter until paid at the Default Rate.
6.4 INSPECTION AND RECEIVERSHIP RIGHTS. Upon Beneficiary's reasonable
----------------------------------
belief of the existence of a past or present Release or threatened Release not
previously disclosed by Trustor in connection with the making of the Loan or the
execution of this Deed of Trust or upon Beneficiary's reasonable belief that
Trustor has failed to comply with any environmental provision of this Deed of
Trust or any other Loan Document and upon reasonable prior notice (except in the
case of an emergency) to Trustor, Beneficiary or its representatives, employees,
and agents, may from time to time and at all reasonable times (or at any time in
the case of an emergency) enter and inspect the Property and every part of it
(including all samples of building materials, soil, and groundwater, and all
books, records, and files of Trustor relating to the Property) and perform those
acts and things that Beneficiary deems necessary or desirable to inspect,
investigate, assess, and protect the security of this Deed of Trust, for the
purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release;
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law; and
(c) the compliance by Trustor of every environmental provision of
this Deed of Trust and every other Loan Document. In furtherance of the purposes
above, without limitation of any of its other rights, Beneficiary may:
(1) obtain a court order to enforce Beneficiary's right to enter
and inspect the Property under Oregon law, to which the decision of Beneficiary
as to whether there exists a Release, a threatened Release, any Hazardous
Substances on or about the Property in violation of any Hazardous Substance Law,
or a breach by Trustor of any environmental provision of this Deed of Trust or
any other Loan Document, will be deemed reasonable and conclusive as between the
parties; and
(2) have a receiver appointed to enforce Beneficiary's right to
enter and inspect the Property for the purpose set forth above.
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All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including without limitation court costs, consultant's fees, and
attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until those sums have been paid in full. Except as provided by law, any
inspections or tests made by Beneficiary or its representatives, employees, and
agents will be for Beneficiary's purposes only and will not be construed to
create any responsibility or liability on the part of Beneficiary to Trustor or
to any other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision contained in this Deed
of Trust or any Loan Document.
6.5 RELEASE AND INDEMNITY. Trustor:
---------------------
(a) releases and waives any future claims against Beneficiary for
indemnity or contribution in the event Trustor becomes liable for cleanup or
other costs under any Hazardous Substance Laws or under any Hazardous Substance
Claim;
(b) agrees to reimburse Beneficiary, on demand, for all costs and
expenses incurred by Beneficiary in connection with any review, approval,
consent, or inspection relating to the environmental provisions in this Deed of
Trust together with interest, after demand, at the Default Rate; and
(c) agrees to indemnify, defend, and hold Beneficiary and Trustee
harmless from all losses, costs, claims, damages, penalties, liabilities, causes
of action, judgments, court costs, attorney fees and other legal expenses, costs
of evidence of title, cost of evidence of value, and other expenses
(collectively, "Expenses"), including, but not limited to, any Expenses incurred
or accruing after the foreclosure of the lien of this Deed of Trust, which
either may suffer or incur and which directly or indirectly arises out of or is
in any way connected with the breach of any environmental provision either in
this Deed of Trust or in any Loan Document or as a consequence of any Release or
threatened Release on the presence, use, generation, manufacture, storage,
disposal, transportation, Release, or threatened Release of any Hazardous
Substance on or about the Property, including the soils and groundwaters, caused
or permitted by Trustor, any prior owner or operator of the Property, any
adjoining landowner or any other party, including, without limitation, the cost
of any required or necessary repair, cleanup, remedy, or detoxification of any
Hazardous Substance and the preparation of any closure, remedial action, or
other required plans, whether that action is required or necessary by reason of
acts or omissions occurring prior to or following the recordation of this Deed
of Trust. Trustor's obligations will survive the satisfaction, release, or
cancellation of the Indebtedness, the release and reconveyance or partial
release and reconveyance of this Deed of Trust, and the foreclosure of the lien
of this Deed of Trust or deed in lieu of the Deed of Trust.
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6.6 REQUEST FOR INFORMATION. Trustor and Beneficiary agree that:
-----------------------
(a) this Section 6.6 is intended as Beneficiary's written request for
-----------
information and Trustor's written response concerning the environmental
condition of the Property; and
(b) each representation, warranty, covenant, or indemnity made by
Trustor in this Section 6 or in any other provision of this Deed of Trust or any
---------
Loan Document that relates to the environmental condition of the Property is
intended by Trustor and Beneficiary to be an environmental provision for
purposes of Oregon law and will survive the payment of the Indebtedness and the
termination or expiration of this Deed of Trust and will not be affected by
Beneficiary's acquisition of any interest in the Property, whether by full
credit bid at foreclosure, deed in lieu of that, or otherwise. If there is any
transfer of any portion of Trustor's interest in the Property, any successor-in-
interest to Trustor agrees by its succession to that interest that the written
request made pursuant to this Article will be deemed remade to the successor-in-
interest without any further or additional action on the part of Beneficiary and
that by assuming the debt secured by this Deed of Trust or by accepting the
interest of Trustor subject to the lien of this Deed of Trust, the successor
remakes each of the representations and warranties in this Deed of Trust and
agrees to be bound by each covenant in this Deed of Trust, including, but not
limited to, any indemnity provision.
6.7 EFFECT OF SITE ASSESSMENT. Even though Trustor may have provided
-------------------------
Beneficiary with an environmental site assessment or other environmental report
together with other relevant information regarding the environmental condition
of the Property, Trustor acknowledges and agrees that Beneficiary is not
accepting the Property as security for the Loan based on that assessment,
report, or information. Rather Beneficiary has relied on the representations and
warranties of Trustor in this Deed of Trust, and Beneficiary is not waiving any
of its rights and remedies in the environmental provisions of this Deed of Trust
or any other Loan Document.
7. CASUALTIES AND CONDEMNATION.
---------------------------
7.1 CASUALTIES.
----------
(a) Trustor will promptly notify Beneficiary in writing after any
loss or damage caused by fire or other casualty to the Property, and prior to
the making of any repairs. Trustor will furnish to Beneficiary within sixty (60)
days after the loss or damage the following:
(1) evidence satisfactory to Beneficiary of the cost of repair
or reconstruction;
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(2) evidence satisfactory to Beneficiary that sufficient funds
are available or committed for the benefit of Beneficiary, including insurance
proceeds, payment and performance bonds, or otherwise, to complete the repair or
reconstruction; and
(3) evidence satisfactory to Beneficiary that the repair or
reconstruction may be completed in accordance with all applicable laws, rules,
regulations, and ordinances and that all necessary permits and approvals have
been or will be obtained.
If Trustor does not furnish this evidence to Beneficiary within the sixty-
day period, or if Beneficiary in its reasonable discretion determines that
repair or reconstruction is not economically feasible, then within sixty (60)
days after the expiration of the sixty-day period, Beneficiary will have the
option ("REPAYMENT OPTION") to have all insurance proceeds applied against the
Indebtedness. If Beneficiary elects the Repayment Option, Trustor will
immediately transfer to Beneficiary all insurance proceeds received by it, if
any, to the extent of the Indebtedness, and Beneficiary will apply the insurance
proceeds received by it, if any, against the Indebtedness. If the insurance
proceeds held by Trustor and Beneficiary exceed the Indebtedness, any excess
insurance proceeds will belong and be paid over to, or be retained, by Trustor.
(b) If Beneficiary does not elect the Repayment Option within the
specified time period, Trustor will, with all diligence, repair or otherwise
reconstruct the damage to the Property, all according to the original plans and
specifications for the Improvements or any modified plans and specifications
conforming to the then laws and regulations as will first have been approved in
writing by Beneficiary and any occupants of the Improvements having the right to
approve. Beneficiary will use all insurance proceeds, if any, received by it
relating to the damage or destruction to reimburse Trustor from time to time for
expenditures made for repair of the damage or for the erection of any building,
structure, or improvements in their place if permitted as follows:
(1) At the end of each month against Trustor's architect's
certificate, an amount that will be that proportion of the insurance proceeds
held in trust that ninety percent (90%) of the payments to be made to the
contractors or materialmen for work done, materials supplied, and services
rendered during that month bears to the total contract price.
(2) At the completion of the work, the balance of the proceeds
required for completing the payments for the work will be paid to or for the
account of Trustor, provided that at the time of the payment:
(i) there are no liens (as evidenced by an endorsement
satisfactory to Beneficiary issued by Trustee) against the Property by reason of
the work, or proof satisfactory to Beneficiary has been submitted that all costs
of the work have been paid; and
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(ii) Trustor's architect will certify that all required work
is completed and is proper and of a quality and class of the original work
required by the original plans and specifications and in accordance with the
approved plans and specifications.
If the insurance proceeds exceed the costs of completing the work, the
excess insurance proceeds will belong and be retained by or be paid over to
Beneficiary to be applied against the Indebtedness. If the costs of completing
the work exceed the insurance proceeds, Trustor will, no later than ninety (90)
days before commencement of the work, provide evidence satisfactory to
beneficiary that Trustor has the funds to complete the work and shall, before
commencement of the work, deposit with Beneficiary said funds which shall be
used to reimburse Trustor in the same manner as insurance proceeds.
7.2 CONDEMNATION. Trustor, immediately upon obtaining knowledge of the
------------
institution of any proceedings for the condemnation of the Property or any
portion of it, will notify Trustee and Beneficiary of the pendency of the
proceedings. Trustee and Beneficiary may participate in any proceedings and
Trustor from time to time will deliver to Beneficiary all instruments requested
by Beneficiary to permit participation. If there are condemnation proceedings,
the award or compensation payable is assigned to and will be paid to
Beneficiary. Beneficiary will be under no obligation to question the amount of
any award or compensation and may accept it in the amount in which it is paid.
In any condemnation proceedings, Beneficiary may be represented by counsel
selected by Beneficiary. The proceeds of any award or compensation received will
be paid over to Trustor for restoration of the Improvements in accordance with
the provisions of Section 7.1 of this Deed of Trust or, if the Improvements will
-----------
not be restored, will be applied, without premium, to the prepayment of the
Note.
8. EVENTS OF DEFAULT AND REMEDIES OF BENEFICIARY.
---------------------------------------------
8.1 EVENTS OF DEFAULT. The following events are each an Event of
-----------------
Default:
(a) Default in the payment of any sum of principal or interest when
due under the Note or any other sum due under the Loan Documents, provided that
such failure continues for five (5) business days after written notice of such
default.
(b) The failure (without cure during the applicable period, if any,
for cure) of any Loan Party to observe, perform, or discharge any obligation,
term, covenant, or condition of Loan Documents, any agreement relating to the
Property, or any agreement or instrument between any Loan Party and Beneficiary,
provided that such failure continues for thirty (30) days after written notice
of such default, or such longer period of time up to one-hundred twenty (120)
days to cure such default if Trustor commences a cure within such 30 day period
and thereafter diligently prosecutes such cure to completion.
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(c) The entry of an order for relief under federal bankruptcy laws as
to Trustor or the adjudication of Trustor as insolvent or bankrupt pursuant to
the provisions of any state insolvency or bankruptcy act; the commencement by
Trustor of any case, proceeding, or other action seeking any reorganization,
arrangement, composition, adjustment, liquidation, dissolution, or other relief
for debtors; Trustor's consent to, acquiescence in, or attempt to secure the
appointment of, any Receiver of all or any substantial part of its properties or
of the Property; Trustor's generally not paying its debts as they become due or
admitting in writing its inability to pay its debts or making a general
assignment for the benefit of creditors; or Trustor's taking of any action to
authorize any of the acts set forth above in this section.
(d) Any case, proceeding, or other action against Trustor is
commenced, seeking to have an order for relief entered against it as a debtor or
seeking any reorganization, arrangement, composition, adjustment, liquidation,
dissolution, or similar relief under any present or future statute, law, or
regulation relating to bankruptcy, insolvency, reorganization, or other relief
for debtors, or seeking appointment of any Receiver for Trustor or for all or
any substantial part of its property or for the Property, and that case,
proceeding, or other action:
(1) results in the entry of an order for relief against it that
is not fully stayed within sixty (60) days after the entry, or
(2) remains undismissed for an aggregate of sixty (60) days
(whether or not consecutive);
or the possibility that any portion of the Property would, by operation of law
or otherwise, devolve on or pass to any Person other than Trustor and that
situation continues and is not remedied by Trustor within sixty (60) days after
the happening of the event.
(e) The assignment by Trustor, as lessor or sublessor, as the case
may be, of the rents or the income of the Property or any part of it (other than
to Beneficiary) without first obtaining the written consent of Beneficiary.
(f) The following events:
(1) The filing of any claim or lien against the Property or any
part of it, whether or not the lien is prior to this Deed of Trust, and the
continued maintenance of the claim or lien for a period of sixty (60) days
without discharge, satisfaction, or adequate bonding in accordance with the
terms of this Deed of Trust;
(2) the existence of any interest in the Property other than
those of Trustor, Beneficiary, and any tenants of Trustor; or
(3) the sale, hypothecation, conveyance, or other disposition of
the Property except in accordance with Sections 5.2 or 5.3 of this Deed of
-------------------
Trust, any of which
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will be an Event of Default because Trustor's obligation to own and operate the
Property is one of the inducements to Beneficiary to make the Loan;
(g) Default under any agreement to which Trustor is a party, which
agreement relates to the borrowing of money by Trustor from any Person.
(h) Any representation or warranty made by any Loan Party or any other
Person under this Deed of Trust or in, under, or pursuant to the Loan Documents,
is false or misleading in any material respect as of the date on which the
representation or warranty was made.
(i) Any of the Loan Documents, at any time after their respective
execution and delivery and for any reason, cease to be in full force or are
declared null and void, or the validity or enforceability is contested by any
Loan Party or any stockholder or partner of any Loan Party, or any Loan Party
denies that it has any or further liability or obligation under any of the Loan
Documents to which it is a party.
(j) Any of the Security Documents, at any time after their respective
execution and delivery and for any reason, cease to constitute valid and
subsisting liens or valid and perfected security interests in and to the
property purported to be subject to any of the Security Documents;
(k) Any representation made by any Loan Party in the Certification
Agreement is false or misleading in any material respect as of the date made, or
any breach or default in any of Trustor's obligations under the Certification
Agreement.
(l) The occurrence of any Material Adverse Change.
If one or more Event of Default occurs and is continuing, then Beneficiary
may declare all the Indebtedness to be due and the Indebtedness will become due
without any further presentment, demand, protest, or notice of any kind, and
Beneficiary may:
(1) in person, by agent, or by a receiver, and without regard to
the adequacy of security, the solvency of Trustor, or the existence of waste,
enter on and take possession of the Property or any part of it in its own name
or in the name of Trustee, sue for or otherwise collect the rents, issues, and
profits, and apply them, less costs and expenses of operation and collection,
including reasonable attorney fees, upon the Indebtedness, all in any order that
Beneficiary may determine. The entering on and taking possession of the
Property, the collection of rents, issues, and profits, and the application of
them will not cure or waive any default or notice of default or invalidate any
act done pursuant to the notice;
(2) commence an action to foreclose this Deed of Trust in the
manner provided by law for the foreclosure of mortgages of real property and
following any
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sale under judicial foreclosure, bring actions, suits and proceedings against
Trustor and any other Loan Parties, for any amount by which the unpaid balance
of the Indedtedness secured by this Deed of Trust exceeds the net proceeds
payable to Beneficiary, and Beneficiary shall be entitled to a deficiency
judgment in such amount;
(3) foreclose this Deed of Trust by advertisement and sale by
exercise of the power of sale contained herein in accordance with ORS 86.705, et
--
seq.;
- ---
(4) with respect to any Personalty, proceed as to both the real
and personal property in accordance with Beneficiary's rights and remedies in
respect of the Land, or proceed to sell the Personalty separately and without
regard to the Land in accordance with Beneficiary's rights and remedies; or
(5) exercise any of these remedies in combination or any other
remedy at law or in equity.
8.2 POWER OF SALE.
-------------
(a) If Beneficiary elects to foreclose by exercise of the power of
sale in this Deed of Trust, Beneficiary will also deposit with Trustee this Deed
of Trust, the Note, and any receipts and evidence of expenditures made and
secured as Trustee may require. If notice of default has been given as then
required by law, and after lapse of the time that may then be required by law,
after recordation of the notice of default, Trustee, without demand on Trustor,
will, after notice of sale having been given as required by law, sell the
Property at the time and place of sale fixed by it in the notice of sale, either
as a whole or in separate parcels as Trustee determines, and in any order that
it may determine, at public auction to the highest bidder. Trustee may postpone
sale of all or any portion of the Property by public announcement at the time
and place of sale, and from time to time after that may postpone the sale by
public announcement at the time fixed by the preceding postponement, and without
further notice make the sale at the time fixed by the last postponement; or
Trustee may, in its discretion, give a new notice of sale. Beneficiary may
rescind any notice of default at any time before Trustee's sale by executing a
notice of rescission and recording it. The recordation of the notice will
constitute a cancellation of any prior declaration of default and demand for
sale and of any acceleration of maturity of Indebtedness affected by any prior
declaration or notice of default. The exercise by Beneficiary of the right of
rescission will not constitute a waiver of any default then existing or
subsequently occurring, or impair the right of Beneficiary to execute other
declarations of default and demand for sale, or notices of default and of
election to cause the Property to be sold, nor otherwise affect the Note or this
Deed of Trust, or any of the rights, obligations, or remedies of Beneficiary or
Trustee. After sale, Trustee will deliver to the purchaser its deed conveying
the property sold, but without any covenant or warranty, express or implied. The
recitals in the deed of any matters or facts will be conclusive proof of their
truthfulness. Any Person, including Trustor, Trustee, or Beneficiary, may
purchase at that sale. If allowed by law, Beneficiary, if it is the purchaser,
may turn in the Note at the amount owing on it toward payment of the purchase
price (or for endorsement of the purchase price as a payment on the Note if the
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amount owing exceeds the purchase price). Trustor expressly waives any right of
redemption after sale that Trustor may have at the time of sale or that may
apply to the sale.
(b) Trustee, upon the sale, will make (without any covenant or
warranty, express or implied), execute and, after due payment made, deliver to a
purchaser and its heirs or assigns a deed or other record of interest, as the
case may be, to the Property sold, which will convey to the purchaser all the
title and interest of Trustor in the Property and will apply the proceeds of the
sale in payment:
(1) first, of the expenses of the sale together with the expenses
of the trust, including, without limitation, attorney fees, that will become due
on any default made by Trustor, and also any sums that Trustee or Beneficiary
have paid for procuring a search of the title to the Property subsequent to the
execution of this Deed of Trust; and
(2) second, in payment of the Indebtedness then remaining unpaid,
and the amount of all other monies with interest in this Deed of Trust agreed or
provided to be paid by Trustor.
Trustee will pay the balance or surplus of the proceeds of sale to Trustor
and its successors or assigns as its interests may appear.
8.3 PROOF OF DEFAULT. If there is a sale of the Property, or any part of
----------------
it, and the execution of a deed for it, the recital of default and of recording
notice of breach and election of sale, and of the elapsing of the required time
between the recording and the following notice, and of the giving of notice of
sale, and of a demand by Beneficiary that the sale should be made, will be
conclusive proof of the default, recording, election, elapsing of time, and the
due giving of notice, and that the sale was regularly and validly made on proper
demand by Beneficiary. Any deed with these recitals will be effectual and
conclusive against Trustor, its successors, and assigns, and all other Persons.
The receipt for the purchase money recited or in any deed executed to the
purchaser will be sufficient discharge to the purchaser from all obligations to
see to the proper application of the purchase money.
8.4 PROTECTION OF SECURITY. If an Event of Default occurs and is
----------------------
continuing, Beneficiary or Trustee, without limitation to do so, without notice
to or demand upon Trustor, and without releasing Trustor from any obligations or
defaults may:
(a) enter on the Property in any manner and to any extent that either
deems necessary to protect the security of this Deed of Trust;
(b) appear in and defend any action or proceeding purporting to
affect, in any manner, the Obligations or the Indebtedness, the security of this
Deed of Trust, or the rights or powers of Beneficiary or Trustee;
(c) pay, purchase, or compromise any encumbrance, charge, or lien
that in the judgment of Beneficiary or Trustee is prior or superior to this Deed
of Trust; and
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(d) pay necessary expenses, employ counsel, and pay reasonable
attorney fees.
Trustor agrees to repay on demand all sums expended by Trustee or Beneficiary
pursuant to this section with interest at the Default Rate, and those sums, with
interest, will be secured by this Deed of Trust.
8.5 RECEIVER. If an Event of Default occurs and is continuing,
--------
Beneficiary, as a matter of strict right and without notice to Trustor or anyone
claiming under Trustor and without regard to the then value of the Property,
will have the right to apply ex parte or by noticed motion to any court having
jurisdiction to appoint a Receiver of the Property. Any Receiver will have all
the powers and duties of receivers in similar cases and all the powers and
duties of Beneficiary in case of entry as provided in this Deed of Trust, and
will continue as such and exercise all those powers until the date of
confirmation of sale, unless the receivership is terminated sooner.
8.6 CURING THE DEFAULTS. If Trustor at any time fails to perform or
-------------------
comply with any of the terms, covenants, and conditions required on Trustor's
part to be performed and complied with under this Deed of Trust, the Note, any
of the other Loan Documents, or any other agreement that, under the terms of
this Deed of Trust, Trustor is required to perform, then Beneficiary, after ten
(10) days' notice to Trustor (or without notice if Beneficiary determines that
an emergency exists), and without waiving or releasing Trustor from any of the
Obligations, may, subject to the provisions of any of the agreements:
(a) make from its own funds any payments payable by Trustor and take
out, pay for, and maintain any of the insurance policies provided for; and
(b) perform any other acts on the part of Trustor to be performed and
enter on the Property for that purpose. The making by Beneficiary of payments
out of Beneficiary's own funds will not, however, be deemed to cure the default
by Trustor, and they will not be cured unless and until Trustor reimburses
Beneficiary for the payments. All sums paid and all reasonable costs and
expenses incurred by Beneficiary in connection with the performance of any act,
together with interest on unpaid balances at the Default Rate from the
respective dates of Beneficiary's making of each payment, will be added to the
principal of the Indebtedness, will be secured by the Security Documents and by
the lien of this Deed of Trust, prior to any right, title, or interest in or
claim on the Property attaching or accruing subsequent to the lien of this Deed
of Trust, and will be payable by Trustor to Beneficiary on demand.
8.7 INSPECTION RIGHTS. On reasonable notice (except in the case of an
-----------------
emergency), and without releasing Trustor from any obligation to cure any
default of Trustor, Beneficiary or its agents, representatives, and employees
acting by themselves or through a court-appointed receiver, may, from time to
time and at all reasonable times (or at any time in the case of an emergency)
enter and inspect the Property and every part of it (including all samples of
building materials, soil, and groundwater, and all books, records,
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<PAGE>
and files of Trustor relating to the Property) and perform any acts and things
as Beneficiary deems necessary or desirable to inspect, investigate, assess, and
protect the security of this Deed of Trust, for the purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release,
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law, and
(c) the compliance by Trustor of every environmental provision of
this Deed of Trust and every other Loan Document.
In furtherance of these purposes, without limitation of any of its other
rights, Beneficiary may:
(a) obtain a court order to enforce Beneficiary's right to enter and
inspect the Property, to which the decision of Beneficiary as to whether there
exists a Release, threatened Release, any Hazardous Substances on or about the
Property in violation of any Hazardous Substance Law, or a breach by Trustor of
any environmental provision of this Deed of Trust or any other Loan Document,
will be deemed reasonable and conclusive as between Trustor, Trustee, and
Beneficiary; and
(b) have a receiver appointed to enforce Beneficiary's right to enter
and inspect the Property for Hazardous Substances.
All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including, without limitation, court costs, consultants fees, and
attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until they have been paid in full. Except as provided by law, any inspections or
tests made by Beneficiary or its representatives, employees, and agents, will be
for Beneficiary's purposes only and will not be construed to create any
responsibility or liability on the part of Beneficiary to Trustor or to any
other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision in this Deed of Trust or
any Loan Document.
8.8 JUDGMENT ON ENVIRONMENTAL PROVISION. Beneficiary or its agents,
-----------------------------------
representatives, and employees may seek a judgment that Trustor has breached its
covenants, representations, or warranties in Article 6 of this Deed of Trust or
---------
any other covenants, representations, or warranties that are deemed to be
environmental provisions under Oregon
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law (each an "ENVIRONMENTAL PROVISION"), by commencing and maintaining an action
or actions in any court of competent jurisdiction under to Oregon law, whether
commenced prior to or after foreclosure of the lien of this Deed of Trust.
Beneficiary or its agents, representatives, and employees may also seek an
injunction to cause Trustor to abate any action in violation of any
Environmental Provision and may seek the recovery of all costs, damages,
expenses, fees, penalties, fines, judgments, indemnification payments to third
parties, and other out-of-pocket costs or expenses actually incurred by
Beneficiary (collectively, "ENVIRONMENTAL COSTS") incurred or advanced by
Beneficiary relating to the cleanup, remedy, or other response action required
by any Hazardous Substances Law, or any Hazardous Substance Claim, or which
Beneficiary believes necessary to protect the Property. It will be conclusively
presumed between Beneficiary and Trustor that all Environmental Costs incurred
or advanced by Beneficiary relating to the cleanup, remedy, or other response
action of or to the Property were made by Beneficiary in good faith. All
Environmental Costs incurred by Beneficiary under this subsection (including,
without limitation, court costs, consultant fees, and attorney fees, whether
incurred in litigation and whether before or after judgment) will bear interest
at the Default Rate from the date of expenditure until those sums have been paid
in full. Beneficiary will be entitled to bid, at any trustee's or foreclosure
sale of the Property, the amount of the costs, expenses, and interest in
addition to the amount of other Indebtedness.
8.9 WAIVE LIEN. Beneficiary or its agents, representatives, and
----------
employees may waive its lien against the Property or any portion of it,
including the Improvements and the Personal Property, to the extent that the
Property is found to be environmentally impaired under Oregon law, and to
exercise all rights and remedies of an unsecured creditor against Trustor and
all of Trustor's assets and property for the recovery of any deficiency and
Environmental Costs, including, but not limited to, seeking an attachment order
under Oregon law. As between Beneficiary and Trustor, Trustor will have the
burden of proving that Trustor or any related party (or any affiliate or agent
of Trustor or any related party) was not in any way negligent in permitting the
Release or threatened Release of the Hazardous Substances.
8.10 REMEDIES CUMULATIVE. All remedies of Beneficiary provided for in
-------------------
this Deed of Trust are cumulative and will be in addition to all other rights
and remedies provided in the other Loan Documents or provided by law, including
any banker's lien and right of offset. The exercise of any right or remedy by
Beneficiary will not in any way constitute a cure or waiver of default, will not
invalidate any act done pursuant to any notice of default, nor will it prejudice
Beneficiary in the exercise of any of its rights unless, in the exercise of
those rights, Beneficiary collects the total amount of the Indebtedness.
9. SECURITY AGREEMENT.
------------------
9.1 GRANT OF SECURITY INTEREST. Trustor also grants to Beneficiary a
--------------------------
security interest in all of Trustor's right, title, and interest now owned or
later acquired to the following property (collectively, "COLLATERAL") now or
later affixed to or located on the Property, or used in connection with the
operation of the Property or the Improvements and
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all the rents, revenues, issues, profits and proceeds of that property: the
Personalty; the Fixtures; all machinery, equipment, engines, appliances, and
fixtures for generating or distributing air, water, heat, electricity, light,
fuel, or refrigeration, or for ventilating or sanitary purposes, or for the
exclusion of vermin or insects, or for the removal of dust, refuse, or garbage;
all wallbeds, wall safes, built-in furniture and installations, shelving,
lockers, partitions, doorstops, vaults, motors, elevators, dumbwaiters, awnings,
window shades, venetian blinds, light fixtures, fire hoses and brackets and
boxes for them, fire sprinklers, alarm systems, draperies, drapery rods and
brackets, mirrors, mantles, screens, linoleum, carpets and carpeting, plumbing,
bathtubs, sinks, basins, pipes, faucets, water closets, laundry equipment,
washers, dryers, iceboxes, refrigerators, heating units, stoves, ovens, ranges,
dishwashers, disposals, water heaters, incinerators, furniture, fixtures, and
furnishings; all communication systems; all specifically designed installations
and furnishings; all building materials, supplies, and equipment now or later
delivered to the Property; all office equipment, including, without limitation,
all computers, computer systems, hardware and software, access codes, access
keys, computer programs, file names, typewriters, duplicating machines, word
processing equipment, adding machines, calculators, dictating equipment,
printing presses, and related equipment; all inventories and supplies,
including, without limitation, office supplies, soap, light bulbs, toilet paper,
and linens; all clocks, television sets, radios, and other electronic or
audio/video equipment; all podiums, microphones, movie and slide projectors and
screens, and other property relating to conference and convention facilities;
all security and cleaning deposits collected from any tenants or lessees of any
part of the Property, all deposits collected from purchasers pursuant to
contracts for sale of the Property or any portion of the Property; and, subject
to the other provisions of this Deed of Trust, all proceeds of any fire and
builders' risk insurance policy, or of any policy insuring the Property (and the
contents of the Improvements) against any other perils, all awards made in
eminent domain proceedings, or purchased in lieu of that, made with respect to
the Property, and any compensation, award, payment, or relief given by any
governmental agency or other source because of damage to the Property resulting
from earthquake, flood, windstorm, or any emergency or any other event or
circumstance. The specific enumerations in this Deed of Trust do not exclude the
general.
The security interest also includes all additions to, substitutions for,
changes in, or replacements of the whole or any part of these articles of
property, together with all contract rights of Trustor in construction
contracts, bonds, agreements for purchase and sale of the Property, all policies
of insurance arising out of the improvement or ownership of the Property, and
all accounts, contract rights, chattel paper, instruments, general intangibles,
receivables and other obligations of any kind now or later existing, arising out
of, or in connection with the operation or development of the Property. The
security interest also includes all rights now or later existing in all security
agreements, leases, and other contracts securing or otherwise relating to any
accounts, contract rights, chattel paper, instruments, general intangibles, or
obligations; all causes of action and recoveries now or later existing for any
loss or diminution in value of the Property; all proceeds of any of the
Collateral; and, to the extent not otherwise included, all payments under
insurance (whether Beneficiary is the loss payee), or any indemnity, warranty,
or guaranty payable by reason of loss or damage to or otherwise with respect to
any of the Collateral.
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9.2 REMEDIES. This Deed of Trust constitutes a security agreement with
--------
respect to the Collateral in which Beneficiary is granted a security interest.
Beneficiary has all of the rights and remedies of a secured party under the
Oregon Uniform Commercial Code as well as all other rights and remedies
available at law or in equity. Trustor agrees to execute and deliver on demand,
and irrevocably constitutes and appoints Beneficiary the attorney-in-fact of
Trustor to execute, deliver, and file, any security agreements, financing
statements, continuation statements, or other instruments that Beneficiary may
request to impose, perfect, or continue the perfection of the lien or security
interest created by this Deed of Trust. On the occurrence of any Event of
Default (taking into account any applicable period of grace or cure),
Beneficiary will have the right to sell at any public or private sales as
permitted by applicable law any of the Collateral that is personal property.
Beneficiary will also have any other rights and remedies, whether at law, in
equity, or by statute that are available to secured creditors. Any disposition
may be conducted by an employee or agent of Beneficiary or Trustee. Any Person,
including both Trustor and Beneficiary, will be eligible to purchase any part or
all of the Collateral at any disposition.
9.3 EXPENSES.
--------
Expenses of retaking, holding, and preparing for sale, selling, or the like
will be borne by Trustor and will include Beneficiary's and Trustee's attorney
fees and legal expenses. Trustor, on demand of Beneficiary, will assemble the
Collateral and make it available to Beneficiary at the Property, a place deemed
to be reasonably convenient to Beneficiary and Trustor. Beneficiary will give
Trustor at least ten (10) days' prior written notice of the time and place of
any public sale or other disposition of the Collateral or of the time of or
after which any private sale or any other intended disposition is to be made. If
the notice is sent to Trustor in the manner provided for the mailing of notices
in this Deed of Trust, it is deemed reasonable notice to Trustor.
9.4 FIXTURE FILING.
--------------
(a) This Deed of Trust constitutes a financing statement filed as a
fixture filing in the Official Records of the County Recorder of the county in
which the Property is located with respect to all Fixtures included within the
term Property as used in this Deed of Trust and with respect to any goods,
Collateral, or other personal property that may now be or later become fixtures.
(b) It is understood and agreed that, to protect Beneficiary against
the effect of ORS (S) 79.313, if any fixture owned by Trustor on the Property,
or any part of any fixture, is replaced or added to, or any new fixture owned by
Trustor is installed by Trustor, and in each case the fixture has a cost or fair
market value in excess of One Thousand Dollars ($1,000.00) and the fixture is or
may be subject to a security interest held by a seller or any other party, the
following will apply:
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(1) Trustor or any owner of all or any part of the Property will,
before the replacement, addition, or installation of any fixture, obtain the
prior written approval of Beneficiary, and give Beneficiary written notice that
a security agreement with respect to the fixture has been or will be
consummated, and the notice will contain the following information:
(i) description of the fixtures to be replaced, added to,
installed, or substituted;
(ii) a recital of the location at which the fixtures will
be replaced, added to, installed, or substituted;
(iii) a statement of the name and address of the holder
and amount of the security interest; and
(iv) the date of the purchase of the fixtures.
Neither this subsection nor any consent by Beneficiary pursuant to this
subsection will constitute an agreement to subordinate any right of Beneficiary
in fixtures or other property covered by this Deed of Trust.
(2) Beneficiary may at any time pay the balance due under the
security agreement and the amount paid will be:
(i) secured by this Deed of Trust and will be a lien on the
Property, enjoying the same priorities as this Deed of Trust,
(ii) added to the amount of the Note or other obligation
secured by this Deed of Trust, and
(iii) on demand with interest at the Default Rate from the time of
the payment; and if Trustor is in default for ten (10) days after demand, the
entire principal sum secured with all unpaid interest will, at the Beneficiary's
option, become immediately due, regardless of any contrary provision in this
Deed of Trust or the Note; or Beneficiary will have the privilege of acquiring
by assignment from the holder of the security interest any contract rights,
accounts receivable, chattel paper, negotiable or nonnegotiable instruments, or
other evidence of Trustor's indebtedness for the fixtures, and, on acquiring
these interests by assignment, will have the right to enforce the security
interest as an assignee, in accordance with the Oregon Uniform Commercial Code
and other applicable law.
(3) Whether Beneficiary has paid or taken an assignment of the
security interest, if at any time Trustor is in default for a period of ten (10)
days under the security agreement covering the fixtures, that default will be
considered a material breach of Trustor's covenants under this Deed of Trust,
and will, at Beneficiary's option, constitute a
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default under this Deed of Trust, and the principal sum secured will, at
Beneficiary's option, become immediately due.
(4) The provisions of subsections (ii) and (iii) above will not apply
if the goods that may become fixtures are of at least equivalent value and
quality as any property being replaced and if the rights of the party holding
the security interest have been expressly subordinated, at no cost to
Beneficiary, to the lien of this Deed of Trust in a manner satisfactory to
Beneficiary, including, without limitation, at Beneficiary's option, providing
to Beneficiary a satisfactory opinion of counsel that this Deed of Trust
constitutes a valid and subsisting first lien on the fixtures that is not
subordinate to the lien of the security interest under any applicable law,
including, without limitation, the provisions of ORS (S) 79.313.
9.5 ASSIGNMENT OF AGREEMENTS.
------------------------
(a) As partial security for the Loan, Trustor sells, assigns,
transfers, sets over, and delivers to Beneficiary all of Trustor's right, title,
and interest in all agreements, permits, and contracts pertaining to the use or
operation of the Property, including, but not limited to, environmental impact
reports; negative declarations; map approvals; grading and construction permits;
conditional use permits; applications for all permits; management agreements;
all development rights in the Property that Trustor may now or later acquire
(including, without limitation, development rights arising in connection with
any action by a governmental entity, including, by way of illustration, but not
of limitation, inducement resolutions of county, municipal, or other
governmental entities); agreements with contractors, suppliers, and construction
managers; and agreements pertaining to the transfer of development rights or
permitted floor area under applicable laws or ordinances (collectively,
"AGREEMENTS"), as they may be amended or otherwise modified from time to time,
including, without limitation, the right of Trustor to terminate any of the
Agreements, to perform under them, and to compel performance and otherwise
exercise all remedies under them, together with the immediate and continuing
right to collect and receive all sums that may become due to Trustor, or which
Trustor may now or later become entitled to demand or claim, arising or issuing
out of the Agreements, including, without limitation, claims of Trustor for
damages arising out of breach of or default under any of the Agreements and all
rights of Trustor to receive proceeds of any insurance, indemnity, warranty, or
guaranty with respect to any of the Agreements. However, so long as no Event of
Default has occurred and is continuing, Trustor will have the right under a
license granted to collect and retain all sums that may become payable to
Trustor under the Agreements.
(b) Trustor covenants and agrees to punctually observe, perform, and
discharge the obligations, terms, covenants, conditions, and warranties to be
observed, performed, and discharged by it under the Agreements. Beneficiary,
upon an Event of Default, at its option and upon written notice to Trustor, will
have the right to declare the assignment in this Section 9.5 to be absolute,
-----------
and, in addition, Beneficiary will have the complete right then or later to
exercise and enforce all of the rights and remedies provided by law.
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(c) The acceptance by Beneficiary of the assignment in this Section
-------
9.5, with all the rights, powers, privileges, and authority granted will not,
- ---
prior to the exercise of Beneficiary's right to declare the assignment in this
Section 9.5 to be absolute, obligate Beneficiary to assume any obligations under
- -----------
the Agreements or to take any action under them, or to expend any money or incur
any expense or perform or discharge any obligation, duty, or liability under the
Agreements, or to assume any obligation or responsibility for the nonperformance
of the provisions by Trustor.
10. ASSIGNMENT OF LEASES AND RENTS.
------------------------------
10.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary:
----------
(a) all of Trustor's right, title, and interest in all leases;
licenses; agreements relating to the management, leasing, or operation of the
Property; and other agreements of any kind relating to the use or occupancy of
the Property, whether now existing or entered into after the date of this Deed
of Trust, including, without limitation, that certain lease referenced in
Section 4.19 hereof ("LEASES"), and
- ------------
(b) the rents, issues, and profits of the Property, including,
without limitation, all amounts payable and all rights and benefits accruing to
Trustor under the Leases ("PAYMENTS"), for the purposes and on the terms and
conditions below. The term Leases will also include all guarantees of and
security for the lessees' performance, and all amendments, extensions, renewals,
or modifications that are permitted. This is a present and absolute assignment,
not an assignment for security purposes only, and Beneficiary's right to the
Leases and Payments is not contingent on, and may be exercised without,
possession of the Property.
10.2 LICENSE. Beneficiary confers on Trustor a license ("LICENSE") to
-------
collect and retain the Payments as they become due until the occurrence of an
Event of Default. Upon an Event of Default, the License will be automatically
revoked and Beneficiary may collect and retain the Payments without notice and
without taking possession of the Property. Trustor irrevocably authorizes and
directs the lessees under the Leases to rely on and comply with any notice or
demand by Beneficiary for the payment to Beneficiary of any rental or other sums
that may at any time become due under the Leases, or for the performance of any
of the lessees' undertakings under the Leases. The lessees will have no right or
duty to inquire as to whether any Default has actually occurred or is then
existing. Trustor relieves the lessees from any liability to Trustor by reason
of relying on and complying with any notice or demand by Beneficiary.
10.3 EFFECT OF ASSIGNMENT. The assignment will not impose on Beneficiary
--------------------
any duty to produce rents, issues, or profits from the Property, or cause
Beneficiary to be:
(a) a mortgagee-in-possession for any purpose;
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(b) responsible for performing any of the obligations of the lessor
under any of the Leases; or
(c) responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any negligence
in the management, upkeep, repair, or control of the Property. Beneficiary will
not be liable to Trustor or any other party as a consequence of the exercise of
the rights granted to Beneficiary under this assignment or the failure of
Beneficiary to perform any obligation of Trustor arising under the Leases.
10.4 LEASING COVENANTS. Trustor covenants and agrees as follows:
-----------------
(a) At Trustor's sole cost to:
(1) perform all obligations of the lessor under the Leases and
enforce performance by the lessees of their obligations under the Leases;
(2) subject to the provisions of Section 10.4(b)(5) below,
----------
enforce all remedies available to Trustor in case of default by the lessees
under any of the Leases and prosecute and defend any action, arbitration, or
other controversy relating to any of the Leases or to Trustor's interest in any
of the Leases;
(3) give Beneficiary prompt notice of any default that occurs
under any of the Leases, whether by the lessees or Trustor;
(4) exercise diligent, good-faith efforts to keep all portions
of the Property leased at all times and at rentals not less than the fair market
rental value;
(5) promptly upon execution, deliver to Beneficiary fully
executed counterpart originals of the Leases; and
(b) except with Beneficiary's prior written consent, not to:
(1) enter into any Leases after the date of this Deed of Trust;
(2) enter into any leases except those which provide solely for
the payment of rent which qualifies as "rents from real property" as that phrase
is defined in Internal Revenue Code Section 856(d);
(3) execute any other assignment relating to any of the Leases
or the Payments;
(4) discount any rent or other sums due under the Leases or
collect them in advance, other than to collect rent one (1) month in advance of
the time when it becomes due;
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(5) terminate, modify, or amend any of the terms of the Leases
or release or discharge the lessees from any obligations;
(6) consent to any assignment or subletting by any lessee; or
(7) subordinate any of the Leases to any other deed of trust or
encumbrance.
Any attempted action in violation of the provisions of Section 10.4(b) will be
---------------
voidable at Beneficiary's election.
10.5 APPLICATION OF RENTS. Beneficiary, in its sole discretion, may
--------------------
apply, or require the application of, all amounts received pursuant to the
assignment to the payment of any one or more of the Obligations in any order
that Beneficiary may elect.
10.6 ESTOPPEL CERTIFICATES. Within twenty (20) days after request by
---------------------
Beneficiary, Trustor will deliver to Beneficiary and to any party designated by
Beneficiary estoppel certificates executed by Trustor and by each of the
lessees, in recordable form, certifying:
(a) that the assignment and the Leases are in full force;
(b) the date of each lessee's most recent payment of rent;
(c) that there are no defenses or offsets outstanding, or stating
those claimed by Trustor or lessees under the assignment or the Leases,; and
(d) any other information reasonably requested by Beneficiary.
10.7 REMEDIES. In addition to any other remedies in this Deed of Trust,
--------
Beneficiary will have the following rights and remedies upon the occurrence of
an Event of Default:
(a) To receive the Payments and any other amounts arising or accruing
under the Leases or from the Property;
(b) To collect, sue for, settle, compromise, and give releases for
the Payments and pursue any remedies for the enforcement of the Leases or
Trustor's rights under the Leases; and
(c) To take possession of the Property, and hold, manage, lease, and
operate it on any terms and for any period of time that Beneficiary may deem
proper and, either with or without taking possession of the Property, in its own
name, make from time to time all alterations, renovations, repairs, or
replacements that Beneficiary may deem proper.
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10.8 DEFINITIONS. The terms lessor and lessors as used in this Deed of
-----------
Trust will include all owners, landlords, licensors, and other parties in a
similar position with respect to the Leases. The terms lessee and lessees will
include any tenants and licensees and any other parties in a similar position
and will also include any guarantors of or other obligors under the Leases.
10.9 NONDISTURBANCE AGREEMENTS. At Trustor's request, Beneficiary shall
-------------------------
enter into a nondisturbance and attornment agreement with respect to Trustor's
lease of the Property to a third party operator, which shall provide that
Beneficiary shall recognize the lessee's rights under the lease following a
foreclosure if the lessee is not in default under the lease at the time of the
foreclosure.
11. MISCELLANEOUS.
-------------
11.1 SUCCESSOR TRUSTEE. Beneficiary may remove Trustee or any successor
-----------------
trustee at any time and appoint a successor trustee by recording a written
substitution in the county where the Property is located, or in any other manner
permitted by law. Upon that appointment, all of the powers, rights, and
authority of Trustee will immediately become vested in the successor.
11.2 CHANGE OF LAW. If any law is passed, after the date of this Deed of
-------------
Trust, that deducts from the value of the Property, for the purposes of
taxation, any lien on it, or changes in any way the laws now in force for the
taxation of mortgages, deeds of trust, or debts secured by mortgage or deed of
trust (other than laws imposing taxes on income) or the manner of the collection
of any taxes so as to affect adversely the rights of Beneficiary as holder of
the Note and Beneficiary under this Deed of Trust, the Indebtedness will become
due at Beneficiary's option, exercised by thirty (30) days' notice to Trustor
unless Trustor, within that thirty (30) day period, if permitted by law, assumes
the payment of any tax or other charge imposed on Beneficiary for the period
remaining until full payment by Trustor of the Indebtedness.
11.3 NO WAIVER. No waiver by Beneficiary of any default or breach by
---------
Trustor will be implied from any omission by Beneficiary to take action on
account of that default if the default persists or is repeated. Also, no express
waiver will affect any default other than the default in the waiver and the
waiver will be operative only for the time and to the extent stated. Waivers of
any covenant, term, or condition in this Deed of Trust will not be construed as
a waiver of any subsequent breach of the same covenant, term, or condition. The
consent or approval by Beneficiary for any act by Trustor requiring further
consent or approval will not be deemed to waive or render unnecessary the
consent or approval for any subsequent similar act.
11.4 ABANDONMENT. Subject to any chattel mortgages, security agreements,
-----------
or other liens on title that may exist with the consent of Beneficiary, or any
provided for in this Deed of Trust, all Personalty that upon foreclosure of the
Property is owned by Trustor and is used in connection with the operation of the
Property will be deemed at Beneficiary's
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option to have become on that date a part of the Property and abandoned to
Beneficiary in its then condition.
11.5 NOTICES. All notices, advices, demands, requests, consents,
-------
statements, satisfactions, waivers, designations, refusals, confirmations, or
denials that may be required or contemplated under this Deed of Trust for any
party to serve on or give to any other will be in writing, and, if not in
writing, will not be deemed to have been given. Also, they must be either
personally served or sent with return receipt requested by registered or
certified mail with postage (including registration or certification charges)
prepaid in a securely enclosed and sealed envelope as follows:
(a) If to Trustor, addressed to:
Continuum Health Incorporated
31105 Rancho Viejo Road, No. 5
San Juan Capistrano, CA 92675
Attention: Johann Keil
(b) If to Beneficiary, addressed to:
G&L Realty Partnership, L.P.
439 North Bedford Drive
Beverly Hills, CA 90210
Attn: Mark Hamermesh
With a copy to:
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
Attn: James R. Andrews, Esq.
11.6 SURVIVAL. The covenants and agreements in this Deed of Trust will
--------
bind and inure to the benefit of Beneficiary and Trustor and their successors
and assigns, provided that nothing herein shall waive the provisions of Section
-------
5.3. It is agreed that Beneficiary may assign to or grant a participation in
- ---
any one or more lenders, free from any right of counterclaim, recoupment, or
setoff by Trustor, Beneficiary's rights and obligations in whole or in part
under the Loan Documents. Nothing in this Section 11.6 is intended to limit
------------
other provisions in the Loan Documents that by their terms survive the repayment
of the Indebtedness or the termination of any Loan Document.
11.7 SEVERABILITY. If any term, provision, covenant, or condition of this
------------
Deed of Trust or any application of it is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, in whole or in part, all
terms, provisions, covenants, and conditions of this
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Deed of Trust and all applications of it not held invalid, void, or
unenforceable will continue in full force and will not be affected, impaired, or
invalidated.
11.8 REFERENCES TO FORECLOSURE. References in this Deed of Trust to
-------------------------
foreclosure and related phrases are references to the appropriate procedure in
connection with Trustee's private power of sale, any judicial foreclosure
proceeding, and any deed given in lieu of foreclosure.
11.9 JOINDER OF FORECLOSURE. If Beneficiary holds any other or additional
----------------------
security for the payment of any Indebtedness or performance of any Obligation,
its sale or foreclosure, on any default in the payment or performance, in
Beneficiary's sole discretion, may be prior to, subsequent to, or joined or
otherwise contemporaneous with any sale or foreclosure. In addition to the
rights in this Deed of Trust specifically conferred, Beneficiary, at any time
and from time to time, may exercise any right or remedy now or later given by
law to beneficiaries under deeds of trust generally, or to the holders of any
obligations of the kind secured.
11.10 RIGHTS OF BENEFICIARY AND TRUSTEE. At any time and from time to
---------------------------------
time, without liability and without notice, and without releasing or otherwise
affecting the liability of any person for payment of any Indebtedness,
(a) Beneficiary, at its sole discretion and only in writing, may
extend the time for or release any Person now or later liable for payment of any
Indebtedness, or accept or release additional security, or subordinate the lien
or charge of this Deed of Trust, or
(b) Trustee, on written request of Beneficiary and presentation of
the Note, any additional notes secured by this Deed of Trust, and this Deed of
Trust for endorsement, may reconvey any part of the Property, consent to the
making of any map or plat of it, join in granting any easement on it, or join in
any agreement of extension or subordination.
On Beneficiary's written request and surrender of the Note, any additional
notes secured by this Deed of Trust, and this Deed of Trust to Trustee for
cancellation, and on payment to Trustee of its fees and expenses, Trustee will
reconvey without warranty the then trust property. The recitals in any
reconveyance will be conclusive proof of the truthfulness of them, and the
grantee in any reconveyance may be described as the person legally entitled.
11.11 COPIES. Trustor will promptly give to Beneficiary copies of all:
------
(a) notices of violation that Trustor receives from any governmental
agency or authority, and
(b) notices of default that Trustor receives under any agreement
relating to the borrowing of money by Trustor from any Person.
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11.12 ERISA COMPLIANCE. Trustor will at all times comply with the
----------------
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to any retirement or other employment benefit plan to
which it is a party as employer. As soon as possible after Trustor knows, or has
reason to know, that any Reportable Event (defined in ERISA) with respect to any
plan of Trustor has occurred, it will furnish to Beneficiary a statement in
writing setting forth details about the Reportable Event and the action, if any,
that Trustor proposes to take, together with a copy of the notice of the
Reportable Event furnished to the Pension Benefit Guaranty Corporation. In
addition, if at any time the loan evidenced by the Note is deemed in whole or in
part to be a transaction prohibited by the provisions of ERISA, Trustor will
immediately reimburse Beneficiary on demand for all taxes levied against or
costs incurred by Beneficiary or Trustee by reason of the Reportable Event.
11.13 SUBORDINATION. At the option of Beneficiary, this Deed of Trust will
-------------
become subject and subordinate, in whole or in part (but not with respect to
priority of entitlement to any insurance proceeds, damages, awards, or
compensation resulting from damage to the Property or condemnation or exercise
of power of eminent domain), to any contracts of sale or any leases of the
Property on the execution by Beneficiary and recording of a unilateral
declaration to that effect in the official records of the county and state where
the Property is located. Beneficiary may require the issuance of any title
insurance endorsements to the Title Policy in connection with any subordination
that Beneficiary, in its judgment, determines are appropriate, and Trustor will
be obligated to pay any cost or expense incurred in connection with the
issuance.
11.14 NO MERGER. So long as any of the Indebtedness remains unpaid or
---------
Trustor has any further obligation under the Loan Documents, unless Beneficiary
otherwise consents in writing, the fee estate of Trustor in the Property or any
part of it will not merge, by operation of law or otherwise, with any leasehold
or other estate in the Property or any part of it, but will always be kept
separate and distinct, regardless of the union of the fee estate and the
leasehold or other estate in Trustor or any other Person.
11.15 INSPECTION OF PROPERTY. Beneficiary is authorized by itself or its
----------------------
agents, employees, or workers, to enter at any reasonable time on prior written
notice to Trustor on any part of the Property for the purpose of inspecting it,
and for the purpose of performing any of the acts it is authorized to perform
under the terms of this Deed of Trust. Trustor agrees to cooperate with
Beneficiary to facilitate any inspection.
11.16 PERFORMANCE BY TRUSTOR. Trustor will faithfully perform every
----------------------
covenant to be performed by Trustor under any lien or encumbrance, including,
without limiting the generality of this Deed of Trust, mortgages, deeds of
trust, leases, declarations or covenants, conditions and restrictions, and other
agreements that affect the Property, in law or in equity, that Beneficiary
reasonably believes may be prior and superior to or on a parity with the lien or
charge of this Deed of Trust. A breach of or a default under any lien or
encumbrance that exists after any applicable grace period in the pertinent
instrument has expired without that breach or default having been cured, will
constitute an Event of Default under this Deed of
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Trust. If Trustor fails to do so, Beneficiary, without demand or notice and in
its sole judgment, may do any things required by Trustor by any of the
provisions in this Deed of Trust and incur and pay expenses in connection with
that. Nothing in this section affects Trustor's obligations pursuant to Sections
--------
5.2 and 5.3 of this Deed of Trust or limits Beneficiary's rights.
- -----------
11.17 PERSONALTY SECURITY INSTRUMENTS. Trustor agrees that if Beneficiary
-------------------------------
at any time holds additional security for any obligations secured by this Deed
of Trust, it may enforce the terms of it or otherwise realize on it, at its
option, either before or concurrently or after a sale is made under this Deed of
Trust, and may apply the proceeds on the Indebtedness secured without affecting
the status or waiving any right to exhaust any other security, including the
security under this Deed of Trust, and without waiving any breach or default or
any right or power, whether exercised under this Deed of Trust or in any other
security.
11.18 SUITS TO PROTECT PROPERTY. Trustor agrees to appear in and defend
-------------------------
any action or proceeding purporting to affect the security of this Deed of Trust
or any additional or other security for the obligations secured, the interest of
Beneficiary or the rights, powers, or duties of Trustee, and to pay all costs
and expenses, including, without limitation, cost of evidence of title and
attorney fees, in any action or proceeding in which Beneficiary or Trustee may
appear or be made a party, including, but not limited to, foreclosure or other
proceeding commenced by those claiming a right to any part of the Property under
subordinate liens, in any action to partition or condemn all or part of the
Property, whether pursued to final judgment, and in any exercise of the power of
sale in this Deed of Trust, whether the sale is actually consummated.
11.19 JUNIOR LIENS. Trustor agrees:
------------
(a) that as of the date of this Deed of Trust there are no
encumbrances to secure debts junior to this Deed of Trust; and
(b) that there are to be none as of the date when this Deed of Trust
becomes of record.
11.20 FURTHER ADVANCES. On the request of Trustor or its permitted
----------------
successors in ownership of the Land, Beneficiary may, at its option, at any time
before full payment of the Indebtedness, make further advances to Trustor or the
successors in ownership, with interest and late charges to be secured by this
Deed of Trust. However, the amount of principal secured by this Deed of Trust
and remaining unpaid will not at the time of and including any advance exceed
the original principal sum secured. Also, if Beneficiary, at its option, makes a
further advance or advances, Trustor or the successors in ownership agree to
execute and deliver to Beneficiary a note, payable on or before the maturity of
the Indebtedness secured and bearing any other terms that Beneficiary will
require.
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11.21 WAIVER OF STATUTE OF LIMITATIONS. The pleading of any statute of
--------------------------------
limitations as a defense to any obligations secured by this Deed of Trust is
waived, to the fullest extent permissible by law.
11.22 CHARGES FOR STATEMENTS. Trustor agrees to pay Beneficiary's
----------------------
reasonable charge, to the maximum amount permitted by law, for any statement
regarding the obligations secured by this Deed of Trust requested by Trustor or
on its behalf.
11.23 ENTIRE AGREEMENT. This Deed of Trust and the other Loan Documents
----------------
set forth the entire understanding between Trustor and Beneficiary and they will
not be amended except by a written instrument duly executed by each of Trustor
and Beneficiary. Any previous representations, warranties, agreements, and
understandings among the parties regarding the subject matter of the Loan or the
Loan Documents, whether written or oral, are superseded by this Deed of Trust
and the other Loan Documents.
11.24 INCORPORATION. All terms of the Loan Documents are incorporated in
-------------
this Deed of Trust by this reference. All persons who may have or acquire an
interest in the Property will be deemed to have notice of the terms of the Loan
Documents and to have notice, if provided for, that the rate of interest on one
or more Obligations may vary from time to time.
11.25 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
---------------------------
claiming through or under Trustor, and for all parties who may acquire a lien on
or interest in the Property, waives all rights to have the Property or any other
property that is now or later may be security for any Obligation ("OTHER
PROPERTY") marshaled on any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Obligations. Beneficiary will
have the right to sell, and any court in which foreclosure proceedings may be
brought will have the right to order a sale of, the Property and any of the
Other Property as a whole or in separate parcels, in any order that Beneficiary
may designate.
11.26 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts
-------------------------------------------------
this trust when this Deed of Trust is recorded. From time to time on written
request of Beneficiary and presentation of this Deed of Trust for endorsement,
and without affecting the personal liability of any person for payment of any
indebtedness or the performance of any obligations, Trustee may, without
liability and without notice:
(a) reconvey all or any part of the Property;
(b) consent to the making of any map or plat; and
(c) join in any grant of easement, any declaration of covenants,
conditions, and restrictions, any extension agreement, or any agreement
subordinating the lien or charge of this Deed of Trust. Except as may be
required by applicable law, Trustee or Beneficiary may from time to time apply
to any court of competent jurisdiction for aid and direction in the execution of
the trust and the enforcement of the rights and remedies
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available, and may obtain orders or decrees directing, confirming, or approving
acts in the execution of the trust and the enforcement of the remedies. Trustee
has no obligation to notify any party of any pending sale or any action or
proceeding, including, without limitation, actions in which Trustor,
Beneficiary, or Trustee will be a party, unless held or commenced and maintained
by Trustee under this Deed of Trust. Trustee will not be obligated to perform
any act required of it under this Deed of Trust unless the performance of the
act is requested in writing and Trustee is reasonably indemnified and held
harmless against any loss, cost, liability, or expense.
11.27 RELEASES, EXTENSIONS, MODIFICATIONS, AND ADDITIONAL SECURITY.
------------------------------------------------------------
Without notice to or the consent, approval, or agreement of any persons or
entities having any interest at any time in the Property or in any manner
obligated under the Obligations ("INTERESTED PARTIES"), Beneficiary may, from
time to time, release any person or entity from liability for the payment or
performance of any Obligation; take any action or make any agreement extending
the maturity or otherwise altering the terms or increasing the amount of any
Obligation; or accept additional security or release the Property or other
security for any Obligation. None of these actions will release or reduce the
personal liability of any of the Interested Parties, or release or impair the
lien of this Deed of Trust, or the priority of it on the Property. However, no
action taken or agreement made by Beneficiary to extend the maturity or
otherwise alter the terms or increase the amount of any Obligation will be
binding on Trustor without Trustor's consent.
11.28 RECONVEYANCE. Upon the payment and performance of all Obligations,
------------
including, without limitation, Beneficiary's receipt of all sums owing and
outstanding under the Note, Beneficiary will deliver to Trustee a written
request for reconveyance, and will surrender to Trustee for cancellation this
Deed of Trust and any note or instrument evidencing the Obligations. However,
Beneficiary will have no obligation to deliver the written request and documents
until Beneficiary has been paid by Trustor, in immediately available funds, all
escrow, closing, and recording costs, the costs of preparing and issuing the
reconveyance, and any trustee's or reconveyance fees. On Trustee's receipt of
the written request by Beneficiary and the documents, Trustee will reconvey,
without warranty, the Property or that portion then held. To the extent
permitted by law, the reconveyance may describe the grantee as the person or
persons legally entitled and the recitals of any matters or facts in any
reconveyance will be conclusive proof of the truthfulness of them. Neither
Beneficiary nor Trustee will have any duty to determine the rights of persons
claiming to be rightful grantees of any reconveyance. When the Property has been
fully reconveyed, the last reconveyance will operate as a reassignment of all
future rents, issues, and profits of the Property to the person legally
entitled.
11.29 SUBROGATION. Beneficiary will be subrogated to the lien of all
-----------
encumbrances, whether released of record, paid in whole or in part by
Beneficiary pursuant to this Deed of Trust, or by the proceeds of any loan
secured by this Deed of Trust.
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11.30 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person
-----------------------------------------
has executed this Deed of Trust as Trustor, the obligations of all those persons
will be joint and several.
11.31 RECOURSE TO SEPARATE PROPERTY. Any married person who executes this
-----------------------------
Deed of Trust as a Trustor agrees that any money judgment that Beneficiary or
Trustee obtains pursuant to the terms of this Deed of Trust or any other
obligation of that married person secured by this Deed of Trust may be collected
by execution on that person's separate property, and any community property of
which that person is a manager.
11.32 RULES OF CONSTRUCTION. When the identity of the parties or other
---------------------
circumstances make it appropriate, the singular number includes the plural.
11.33 NO OFFSET. Trustor will pay to Beneficiary all amounts owing under
---------
the Note, this Deed of Trust, or any of the other Obligations without deduction,
offset, or counterclaim of any kind.
11.34 GOVERNING LAW. The parties expressly agree that this Deed of Trust
-------------
(including, without limitation, all questions regarding permissive rates of
interest) will be governed by or construed in accordance with the laws of the
state in which the Property is located and the applicable laws of the United
States of America.
11.35 WAIVER OF JURY TRIAL. TRUSTOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY TRUSTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. BENEFICIARY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY TRUSTOR.
11.36 NO DEFAULT AFFIDAVITS. After request by Beneficiary, Trustor shall
---------------------
within ten (10) days furnish Beneficiary with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest
of the Note, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Indebtedness, if any,
(vi) that the Note, this Deed of Trust and the other Loan Documents are valid,
legal and binding obligations and have not been modified or if modified, giving
particulars of such modification; and (vii) reaffirming all representations and
warranties of Trustor set forth herein and in the other Loan Documents as of the
date requested by
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Beneficiary or, to the extent of any changes to any such representations and
warranties, so stating such changes.
11.37 CONTROLLING AGREEMENT. It is expressly stipulated and agreed to be
---------------------
the intent of Trustor, and Beneficiary at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Beneficiary to contract for, charge, take, reserve, or receive a greater amount
of interest than under state law) and that this Section 11.37 (and the similar
-------------
paragraph contained in the Note) shall control every other covenant and
agreement in this Deed of Trust and the other Loan Documents. If the applicable
law (state or federal) is ever judicially interpreted so as to render usurious
any amount called for under the Note or under any of the other Loan Documents,
or contracted for, charged, taken, reserved, or received with respect to the
Indebtedness, or if Beneficiary's exercise of the option to accelerate the
maturity of the Note, or if any prepayment by Trustor results in Trustor having
paid any interest in excess of that permitted by applicable law, then it is
Trustor's and Beneficiary's express intent that all excess amounts theretofore
collected by Beneficiary shall be credited on the principal balance of the Note
and all other Indebtedness (or, if the Note and all other Indebtedness have been
or would thereby be paid in full, refunded to Trustor), and the provisions of
the Note and the other Loan Documents immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid or agreed to be paid to
Beneficiary for the use, forbearance, or detention of the Indebtedness shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Indebtedness until payment in full
so that the rate or amount of interest on account of the Indebtedness does not
exceed the maximum lawful rate from time to time in effect and applicable to the
Indebtedness for so long as the Indebtedness is outstanding. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Documents,
it is not the intention of Beneficiary to accelerate the maturity of any
interest that has not accrued at the time of such acceleration or to collect
unearned interest at the time of acceleration.
11.38 NO CREDITS ON ACCOUNT OF THE DEBT. Trustor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Indebtedness for any
part of the Impositions assessed against the Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof, for real estate tax purposes by reason of this
Deed of Trust or the Indebtedness. In the event such claim, credit and
deduction shall be required by law, Beneficiary shall have the option, by
written notice of not less than ninety (90) days, to declare the Indebtedness
immediately due and payable.
11.39 DOCUMENTARY STAMPS. If at any time the United States of America,
------------------
any State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Deed of Trust, or impose any
other tax or charge on the same, Trustor will pay for the same, with interest
and penalties thereon, if any.
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11.40 REASONABLENESS. Lender shall act reasonably and in good faith in
--------------
exercising any approval rights or other rights hereunder.
11.41 OREGON STATUTE OF FRAUDS. UNDER OREGON LAW, MOST AGREEMENTS,
------------------------
PROMISES AND COMMITMENTS MADE BY BENEFICIARY AFTER OCTOBER 3, 1989 CONCERNING
LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR
HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BENEFICIARY TO BE ENFORCEABLE.
11.42 ATTORNEYS' FEES AND COSTS. If the Indebtedness is not paid when due
-------------------------
after the expiration of any grace period, or if any Event of Default occurs,
Trustor promises to pay all costs of enforcement and collection, including, but
not limited to, court costs and reasonable attorneys' fees, whether or not such
enforcement and collection includes the filing of a lawsuit. All provisions in
this Deed of Trust for payment of attorneys' fees in any suit, action or other
proceeding shall be construed to include all such fees in any bankruptcy,
receivership or other proceedings, at any trial, on any appeal, and on any
petition for review, in addition to all other sums provided by law.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day
and year first above written.
HEARTHSIDE SKILLED NURSING FACILITY, LLC,
a Delaware limited liability company
By: /s/ Johann Keil
--------------------------
Name: JOHANN KEIL
---------------------
Title: Member
--------------------
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<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
) ss.
County of Los Angeles )
On Sept. 29, 1997 (date) before me, Helen Nelson (name and title "Notary
Public"), personally appeared Johann Keil (name of signer(s)), personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Helen Nelson
- --------------------------------------
(signature of Notary) (seal of Notary)
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EXHIBIT A
---------
[Legal Description]
PARCEL 1: Lot 1, Block 6, BOULEVARD PARK ADDITION, Coos County, Oregon, Except
the West 50 feet thereof.
PARCEL 2: Lot 2 and the West 50 feet of Lot 1, Block 6, BOULEVARD PARK
ADDITION, Coos County, Oregon
Real Property Tax Account No.: 36
Assessors Parcel No.: T25-R13-S22DB Tax Lot 2300 and 2301
Property Address disclosed by Coos County Tax Roll: 2625 Koosbay Blvd.
Coos Bay, OR 97420
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[Acknowledgements]
Acknowledgements - Page 1
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EXHIBIT 10.67
Recording Requested By And
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401-1000
AMENDED AND RESTATED ASSIGNMENT OF LEASES AND RENTS
---------------------------------------------------
THIS AMENDED AND RESTATED ASSIGNMENT OF LEASES AND RENTS ("ASSIGNMENT") is
made as of September 29, 1997, by HEARTHSIDE SKILLED NURSING FACILITY, LLC, a
Delaware limited liability company, having its principal place of business at
31105 Rancho Viejo Road, No. 5, San Juan Capistrano, California 92675
("ASSIGNOR"), to G&L REALTY PARTNERSHIP, L.P., a Delaware limited partnership,
having an office at 439 North Bedford Drive, Beverly Hills, California 90210
("ASSIGNEE").
This Assignment amends and completely restates that certain Assignment of
Leases and Rents dated August 28, 1997 executed by assignor in favor of
Assignee, pursuant to the terms of an agreement dated August 29, 1997 between
Assignor and Assignee concerning modification of loan documents.
WITNESSETH:
THAT Assignor for good and valuable consideration, receipt whereof is
hereby acknowledged, hereby grants, transfer and absolutely and unconditionally
assigns to Assignee the entire lessor's interest in and to all current and
future leases, and other agreements affecting the use, enjoyment, or occupancy
of all or any part of the land, more particularly described in Exhibit A annexed
---------
hereto and made a part hereof, together with the buildings, structures,
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter located thereon (hereinafter
collectively referred to as the "PROPERTY").
TOGETHER WITH all other leases and other agreements affecting the use,
enjoyment or occupancy of any part of the Property now or hereafter made
affecting the Property or any portion thereof, together with any extensions or
renewals of the same, this Assignment of other present and future leases and
present and future agreements being effective without further or supplemental
assignment;
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The leases and other agreements described above together with all other
present and future leases and present and future agreements and any extension or
renewal of the same are hereinafter collectively referred to as the "LEASES";
TOGETHER WITH all accounts, deposits, rents, income, issues, revenues,
receipts, insurance proceeds and profits arising from the Leases and renewals
thereof and together with all rents, income, issues and profits (including, but
not limited to, all oil and gas or other mineral royalties and bonuses) from the
use, enjoyment and occupancy of the Property, or the sale, lease, sublease,
license, concession or other grant of right to use or occupy any portion
thereof, vending machine proceeds, and any compensation received for the
rendering of services by Assignor (hereinafter collectively referred to as the
"RENTS").
THIS ASSIGNMENT is made in consideration of that certain loan made by
Assignee to Assignor evidenced by that certain amended and restated note made by
Assignor to Assignee, dated the date hereof, in the principal sum of One Million
Nine Hundred Thirty-Four Thousand Three Hundred Twenty-Five Dollars and No Cents
($1,934,325.00) (the "NOTE"), and secured by that certain amended and restated
deed of trust, security agreement, and fixture filing with assignment of rents
and agreements given by Assignor to Assignee, dated the date hereof covering the
Property and intended to be duly recorded (the "SECURITY INSTRUMENT").
The principal sum, interest and all other sums due and payable under the
Note and Security Instrument are hereinafter collectively referred to as the
"DEBT". This Assignment, the Note, the Security Instrument and any other
documents now or hereafter executed by Assignor and/or others and by or in favor
of Assignee which evidences, secures or guarantees all or any portion of the
payments due under the Note or otherwise is executed and/or delivered in
connection with the Note and the Security Instrument are hereinafter referred to
as the "LOAN DOCUMENTS".
ASSIGNOR WARRANTS that (A) Assignor is the sole owner of the entire
lessor's interest in the Leases; (B) the Leases are valid, enforceable and in
full force and effect and have not been altered, modified or amended in any
manner whatsoever; (C) none of the Rents have been assigned or otherwise pledged
or hypothecated; (D) none of the Rents have been collected for more than two (2)
months in advance; (E) Assignor has full power and authority to execute and
deliver this Assignment and the execution and delivery of this Assignment has
been duly authorized and does not conflict with or constitute a default under
any law, judicial order or other agreement affecting Assignor or the Property;
(F) the premises demised under the Leases have been completed and the tenants
under the Leases have accepted the same and have taken possession of the same on
a rent-paying basis; and (G) there exist on offsets or defenses to the payment
of any portion of the Rents.
ASSIGNOR COVENANTS with Assignee that Assignor (A) shall observe and
perform all the obligations imposed upon the lessor under the Leases and shall
not do or permit to be done anything to impair the value of the Leases as
security for the Debt; (B) shall promptly send copies to Assignee of all notices
of default which Assignor shall send or
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<PAGE>
receive thereunder; (C) shall enforce all of the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed
and performed, short of termination thereof; (D) shall not collect any of the
Rents more than one (1) month in advance; (E) shall not execute any other
assignment of the lessor's interest in the Leases or the Rents; (F) shall
deliver to Assignee, upon request, tenant estoppel certificates from each
commercial tenant at the Property in form and substance reasonably satisfactory
to Assignee, provided that Assignor shall not be required to deliver such
certificates more frequently than two (2) times in any calendar year; and (G)
shall execute and deliver at the request of Assignee all such further
assurances, confirmations and assignments in connection with the Property as
Assignee shall from time to time require.
ASSIGNOR FURTHER COVENANTS with Assignee that Assignor shall not, without
the prior consent of Assignee (i) enter into any Lease of all or any part of the
Property in excess of 5% of gross leasable area rentable square feet (a "MAJOR
LEASE"), (ii) cancel, terminate, abridge or otherwise modify the terms of any
Major Lease, or accept a surrender thereof, (iii) consent to any transfer,
assignment of or subletting under any Major Lease, (iv) cancel, terminate,
abridge or otherwise modify any guaranty of any Major Lease or the terms
thereof, (v) accept prepayments of installments of Rents for a period of more
than one (1) month in advance or (vi) further assign the whole or any part of
the Leases or the Rents. In addition to the foregoing, Assignor shall not, (i)
lease all or any part of the Property, (ii) cancel, terminate, abridge or
otherwise modify the terms of any Lease, or accept a surrender thereof, (iii)
consent to any transfer, assignment of or subletting under any Lease not in
accordance with its terms or (iv) cancel, terminate, abridge or otherwise modify
any guaranty of any Lease or the terms thereof unless such actions are exercised
for a commercially reasonable purpose in an arms-length transaction on market
rate terms.
ASSIGNOR FURTHER COVENANTS with Assignee that (A) all Leases shall provide
that the tenant agrees to attorn to Assignee; (B) none of the Leases shall
contain any option to purchase, any right of first refusal to lease or purchase,
or any right to terminate the lease term (except in the event of the destruction
of all or substantially all of the Property); (C) Leases executed after the date
hereof shall not contain any provisions which adversely affect the Property or
which might adversely affect the rights of the Assignee, and (D) each tenant
shall conduct business only in that portion of the Property covered by its
lease. Upon request, Assignor shall furnish Assignee with executed copies of
all Leases.
THIS ASSIGNMENT is made on the following terms, covenants and conditions:
1. PRESENT ASSIGNMENT. Assignor does hereby absolutely and
------------------
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, it being intended by Assignor that this
assignment constitutes a present, absolute and unconditional assignment and not
an assignment for additional security only. Such assignment to Assignee shall
not be construed to bind Assignee to the performance of any of the covenants,
conditions, or provisions contained in any such Lease or otherwise to impose any
obligation upon Assignee. Assignor agrees to execute and deliver to Assignee
such additional instruments, in form and substance satisfactory to Assignee, as
may hereinafter be
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<PAGE>
requested by Assignee to further evidence and confirm said assignment.
Nevertheless, subject to the terms of this paragraph, Assignee grants to
Assignor a revocable license to operate and manage the Property and to collect
the Rents. Assignor shall hold the Rents, or a portion thereof, sufficient to
discharge all current sums due on the Debt for use in the payment of such sums.
Upon an Event of Default (as defined in the Security Instrument), the license
granted to Assignor herein shall automatically be revoked by Assignee and
Assignee shall immediately be entitled to receive and apply all Rents, whether
or not Assignee enters upon and takes control of the Property. Assignee and
Trustee (as defined in the Security Instrument) are hereby granted and assigned
by Assignor the right, at its option, upon the revocation of the license granted
herein to enter upon the Property in person, by agent or by court-appointed
received to collect the Rents. Any Rents collected after the revocation of the
license herein granted may be applied toward payment of the Debt in such
priority and proportion as Assignee, in its discretion, shall deem proper.
2. REMEDIES OF ASSIGNEE. Upon or at any time after an Event of Default,
--------------------
Assignee may, at its option, without waiving such Event of Default, without
notice and without regard to the adequacy of the security for the Debt, either
in person or by agent, with or without bringing any action or proceeding, or by
a receiver appointed by a court, take possession of the Property and have, hold,
manage, lease and operate the Property on such terms and for such period of time
as Assignee may deem proper and either with or without taking possession of the
Property in its own name, demand, sue for or otherwise collect and receive all
Rents, including those past due and unpaid, with full power to make from time to
time all alterations, renovations, repairs or replacements thereto or thereof as
may seem proper to Assignee and may apply the Rents to the payment of the
following in such order and proportion as Assignee in its sole discretion may
determine, any law, custom or use to the contrary notwithstanding: (a) all
expenses of managing and securing the Property, including, without being limited
thereto, the salaries, fees and wages of a managing agent and such other
employees or agents a Assignee may deem necessary or desirable and all expenses
of operating and maintaining the Property, including, without being limited
thereto, all taxes, charges, claims, assessments, water charges, sewer rents and
any other liens, and premiums for all insurance which Assignee may deem
necessary or desirable, and the cost of all alterations, renovations, repairs or
replacements, and all expenses incident to taking and retaining possession of
the Property; and (b) the Debt, together with all costs and attorneys' fees. In
addition to the rights which Assignee may have herein, upon the occurrence of an
Event of Default, Assignee, at its option, may either require Assignor to pay
monthly in advance to Assignee, or any receiver appointed to collect the Rents,
the fair and reasonable rental value for the use and occupation of such part of
the Property as may be in possession of Assignor or require Assignor to vacate
and surrender possession of the Property to Assignee or to such receiver and, in
default thereof, Assignor may be evicted by summary proceedings or otherwise.
Additionally, Assignee shall have the right to establish a lock box for the
deposit of all Rents and other receivables of Assignor relating to the Property.
For purposes of paragraphs 1 and 2 hereof, Assignor grants to assignee its
irrevocable power of attorney, coupled with an interest, to take any and all of
the aforementioned actions and any or all other actions designated by Assignee
for the proper management and preservation of the Property. The exercise by
Assignee of the option
-4-
<PAGE>
granted it in this paragraph and the collection of the Rents and the application
thereof as herein provided shall not be considered a waiver of any default by
Assignor under the Note, the Security Instrument, the Leases, this Assignment or
the other Loan Documents.
3. NO LIABILITY OF ASSIGNOR. Assignee shall not be liable for any loss
------------------------
sustained by Assignor resulting from Assignee's failure to let the Property
after an Event of Default or from any other act or omission of Assignee in
managing the Property after an Event of Default. Assignee shall not be
obligated to perform or discharge any obligation, duty or liability under the
Leases or under or by reason of this Assignment and Assignor shall, and hereby
agrees, to indemnify Assignee for, and to hold Assignee harmless from, any and
all liability, loss or damage which may or might be incurred under the Leases or
under or by reason of this Assignment and from any and all claims and demands
whatsoever, including the defense of any such claims and demands whatsoever,
including the defense of any such claims or demands which may be asserted
against Assignee by reason of any alleged obligations and undertakings on its
part to perform or discharge any of the terms, covenants or agreements contained
in the Leases. Should Assignee incur any such liability, the amount thereof,
including costs, expenses and attorneys' fees, shall be secured hereby and by
the Security Instrument and the other Loan Documents and Assignor shall
reimburse Assignee therefor immediately upon demand and upon the failure of
Assignor so to do Assignee may, at its option, declare all sums secured hereby,
the Note, the Security Instrument and the other Loan Documents immediately due
and payable. This Assignment shall not operate to place any obligation or
liability for the control, care, management or repair of the Property upon
Assignee, for the carrying out of any of the terms and conditions of the Leases;
nor shall it operate to make Assignee responsible or liable for any waste
committed on the Property by the tenants or any other parties, or for any
dangerous or defective condition of the Property, including, without limitation,
the presence of any Hazardous Substances (as defined in the Security
Instrument), or for any negligence in the management, upkeep, repair or control
of the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger.
4. NOTICE TO LESSEES. Assignor hereby authorized and directs the
-----------------
tenants named in the Leases or any other or future tenants or occupants of the
Property upon receipt from Assignee of written notice to the effect that the
Assignee is then the holder of the Note and that a default exists hereunder or
under this Assignment, the Note, the Security Instrument or the other Loan
Documents to pay over to Assignee all rents and to continue to do so until
otherwise notified by Assignee.
5. OTHER SECURITY. Assignee may take or release other security for the
--------------
payment of the Debt, may release any party primarily or secondarily liable
therefor and may apply any other security held by it to the reduction or
satisfaction of the Debt without prejudice to any of its rights under this
Assignment.
6. OTHER REMEDIES. Nothing contained in this Assignment and no act done
--------------
or omitted by Assignee pursuant to the power and rights granted to Assignee
hereunder shall be deemed to be a waiver by Assignee of its rights and remedies
under the Note, the Security
-5-
<PAGE>
Instrument or the other Loan Documents and this Assignment is made and accepted
without prejudice to any of the rights and remedies possessed by Assignee under
the terms thereof. The right of Assignee to collect the Debt and to enforce any
other security therefor held by it may be exercised by Assignee either prior to,
simultaneously with, or subsequent to any action taken by it hereunder.
7. NO MORTGAGEE IN POSSESSION. Nothing herein contained shall be
--------------------------
construed as constituting Assignee a "mortgagee in possession" in the absence of
the taking of actual possession of the Property by Assignee. In the exercise of
the powers herein granted Assignee, no liability shall be asserted or enforced
against Assignee, all such liability being expressly waived and released by
Assignor.
8. CONFLICT OF TERMS. In case of any conflict between the terms of this
-----------------
Assignment and the terms of the Security Instrument, the terms of the Security
Instrument shall prevail.
9. NO ORAL CHANGE. This Assignment and any provisions hereof may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally,
or by any act or failure to act on the part of Assignor or Assignee, but only
by an agreement in writing signed by the party against whom the enforcement of
any modification, amendment, waiver, extension, change, discharge or termination
is sought.
10. CERTAIN DEFINITIONS. Unless the content clearly indicates a contrary
-------------------
intent or unless otherwise specifically provided herein, words used in this
Assignment may be used interchangeable in singular or plural form and the word
"ASSIGNOR" shall mean each Assignor and any subsequent owner or owners of the
Property or any part thereof or any interest therein, the word "ASSIGNEE" shall
mean Assignee and any subsequent holder of the Note, the word "NOTE" shall mean
the Note and any other evidence of indebtedness secured by the Security
Instrument, the word "PERSON" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the word "PROPERTY" shall include any portion
of the Property and any interest therein; whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms; and the singular form of nouns and pronouns shall include the
plural and vice versa.
11. NON-WAIVER. The failure of Assignee to insist upon strict
----------
performance of any term shall not be deemed to be a waiver of any term of this
Assignment. Assignor shall not be relieved of Assignor's obligations hereunder
by reason of (i) failure of Assignee to comply with any request of Assignor or
any other party to take any action to enforce any of the provisions hereof or of
the Security Instrument, the Note or the other Loan Documents, (ii) the release
regardless of consideration, of the whole or any part of the Property, or (iii)
any agreement or stipulation by Assignee extending the time of payment or
otherwise modifying or supplementing the terms of this Assignment, the Note, the
Security Instrument or the other Loan Documents. Assignee may resort for the
payment of the Debt to any other security held by Assignee in such order and
manner as Assignee, in its discretion, may elect.
-6-
<PAGE>
Assignee may take any action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Assignee
thereafter to enforce its rights under this Assignment. The rights of Assignee
under this Assignment shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. No act of Assignee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provisions.
12. INAPPLICABLE PROVISIONS. If any term, covenant or condition of this
-----------------------
Assignment is held to be invalid, illegal or unenforceable in any respect, this
Assignment shall be construed without such provision.
13. DUPLICATE ORIGINALS. This Assignment may be executed in any number
-------------------
of duplicate originals and each such duplicate original shall be deemed to be an
original.
14. GOVERNING LAW. This Assignment shall be governed and construed in
-------------
accordance with the laws of the state in which the real property encumbered by
the Security Instrument is located.
15. TERMINATION OF ASSIGNMENT. Upon payment in full of the Debt and the
-------------------------
delivery and recording of a satisfaction, release, reconveyance or discharge of
the Security Instrument duly executed by Assignee, this Assignment shall become
and be void and of no effect.
16. WAIVER OF JURY TRIAL. ASSIGNOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS ASSIGNMENT, THE SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
ASSIGNOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. ASSIGNEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY ASSIGNOR.
-7-
<PAGE>
THIS ASSIGNMENT shall inure to the benefit of Assignee and any subsequent
holder of the Note and shall be binding upon Assignor, and Assignor's heirs,
executors, administrators, successors and assigns and any subsequent owner of
the Property.
Assignor has executed this instrument the day and year first above written.
ASSIGNOR:
HEARTHSIDE SKILLED NURSING CENTER, LLC,
a Delaware limited liability company
By: /s/ Johann Keil
---------------------------------------
Name: JOHANN KEIL
----------------------------------
Title: Member
---------------------------------
-8-
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
) ss.
County of Los Angeles )
On Sept, 29, 1997 (date) before me, Helen Nelson (name and title "Notary
Public"), personally appeared Johann Keil (name of signer(s)), personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Helen Nelson
- ------------------------
(signature of Notary) (seal of Notary)
-9-
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
PARCEL 1: Lot 1, Block 6, BOULEVARD PARK ADDITION, Coos County, Oregon,
Except the West 50 feet thereof.
PARCEL 2: Lot 2 and the West 50 feet of Lot 1, Block 6, BOULEVARD PARK
ADDITION, Coos County, Oregon.
Real Property Tax Account No.: 64345.00 and 64345.02
Assessors Parcel No.: T25-R13-S22DB Tax Lot 2300 and 2301
Property Address disclosed by Coos County Tax Roll:
2625 Koosbay Blvd.
Coos Bay, OR 97420
A-1
<PAGE>
EXHIBIT 10.68
PROMISSORY NOTE
Costa Mesa, California August 29, 1997
For value received, the undersigned, VALLEY CONVALESCENT, LLC, a California
limited liability company ("BORROWER"), promises to pay to the order of G&L
REALTY PARTNERSHIP, L.P., a Delaware limited partnership ("LENDER"), at 439
North Bedford Drive, Beverly Hills, California 90210 or at any other place that
may be designated in writing by Lender, the principal sum of Two Million Seven
Hundred Ninety-Nine Thousand, Four Hundred and Ninety Dollars and No/Cents
($2,799,490.00)("LOAN AMOUNT"), with interest as set forth in this Note
(calculated on the basis of a 360-day year). All sums due are payable in lawful
money of the United States of America. The principal amount of this Note will
bear interest at the rate of twelve percent (12%) per annum.
This Note is secured by, among other things, a certain Deed of Trust,
Security Agreement, and Fixture Filing, with Assignment of Rents and Agreements
dated as of the same date as this Note, executed by Borrower, as trustor, in
favor of Lender, as beneficiary ("DEED OF TRUST"), and encumbering the real
property described in the Deed of Trust ("PROPERTY"). The holder of this Note
will be entitled to the benefits of the security provided by the Deed of Trust
and will have the right to enforce the covenants and agreements of Borrower
contained in the Deed of Trust.
Borrower will pay to Lender the principal amount of this Note, and accrued
interest, as follows:
Borrower will make an initial payment of interest only on the first day of
the first month after the date of disbursement of the Loan Amount, covering
interest accrued on this Note from the date of disbursement of the Loan Amount
to the end of the month in which the disbursement of the Loan Amount will occur.
After, that Borrower will make monthly payments of interest only, which will be
in the amount of $27,944.00 each, and will be due on the first day of the second
month after the date of disbursement of the Loan Amount and the first day of
each succeeding month after that. The entire unpaid principal balance of this
Note, together with all accrued and unpaid interest, will be due on September 1,
2002 ("MATURITY DATE").
If Borrower fails to make any required payment on or before five (5) days
following the date on which it becomes due, Borrower will pay, at Lender's
option, a late charge equal to five percent (5%) of the amount of the unpaid
payment.
From and after the Maturity Date, or an earlier date on which all sums
owing under this Note become due by acceleration or otherwise, all sums owing
under this Note will bear interest until paid in full at a rate equal to five
percent (5%) per annum in excess of the rate of interest specified above
("DEFAULT RATE").
-1-
<PAGE>
All payments on this Note will be applied first to the payment of any
costs, fees, late charges, or other charges incurred in connection with the
indebtedness evidenced by this Note; next, to the payment of accrued interest;
then to the reduction of the principal balance; or in any other order that
Lender requires.
If:
(a) Borrower fails to pay when due any sums payable under this Note;
provided that such failure continues for five (5) business days after
written notice of such default;
(b) an Event of Default (defined in the Deed of Trust) occurs; or
(c) any other event or condition occurs that, under the terms of the
Deed of Trust, gives rise to a right of acceleration of sums owing under
this Note,
then Lender, at its sole option, will have the right to declare all sums owing
under the Note immediately due. However, if any document related to this Note
provides for the automatic acceleration of payment of sums owing under this
Note, all sums owing will be automatically due in accordance with the terms of
that document.
Borrower will have the right to pay, without penalty or premium, on any
monthly payment date, all or any portion of the outstanding principal amount of
this Note prior to the Maturity Date on not less than five (5) days' prior
written notice to Lender. Lender will apply all prepayments first to the
payment of any costs, fees, late charges, or other charges incurred in
connection with the indebtedness evidenced by this Note; next, to the payment of
accrued interest; then to the outstanding principal amount of this Note in
inverse order of maturity, or, at the option of Lender, in the regular order of
maturity; or in any other order that Lender requires.
Borrower will pay to Lender all sums owing under this Note without
deduction, offset, or counterclaim of any kind. The relationship of Borrower and
Lender under this Note is solely that of borrower and lender, and the loan
evidenced by this Note and secured by the Deed of Trust will in no manner make
Lender the partner or joint venturer of Borrower.
If any attorney is engaged by Lender to enforce or construe any provision
of this Note, the Deed of Trust or the other Loan Documents (defined in the Deed
of Trust) or as a consequence of any Event of Default, with or without the
filing of any legal action or proceeding, then Borrower will immediately pay to
Lender on demand all attorney fees and other costs incurred by Lender, together
with interest from the date of the demand until paid at the Default Rate.
No previous waiver or failure or delay by Lender in acting with respect to
the terms of this Note, the Deed of Trust, or the other Loan Documents will
constitute a waiver of any breach, default, or failure of condition under this
Note, the Deed of Trust, or the other Loan
-2-
<PAGE>
Documents. A waiver of any term of this Note, the Deed of Trust, or the other
Loan Documents must be made in writing and will be limited to the express
written terms of the waiver. If there are any inconsistencies between the terms
of this Note and the terms of any of the other Loan Documents, the terms of this
Note will prevail.
All notices required or permitted in connection with this Note will be in
writing and will be given at the place and in the manner provided in the Deed of
Trust for the giving of notices.
If this Note is executed by more than one person or entity as Borrower, the
obligations of each person or entity will be joint and several. No person or
entity will be a mere accommodation maker, but each will be primarily and
directly liable. Borrower waives presentment; demand; notice of dishonor; notice
of default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs, expenses, or losses and interest; notice of
interest on interest and late charges; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of the
rights or interests to properties securing payment of this Note. Time is of the
essence with respect to every provision of this Note. This Note will be
construed and enforced in accordance with the laws of the state in which the
Property is located, except to the extent that federal laws pre-empt state law,
and all persons and entities in any manner obligated under this Note consent to
the jurisdiction of any federal or state court where the Property is located
having proper venue and also consent to service of process by any means
authorized by the state court where the Property is located or federal law.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note and the other Loan
Documents and that this Note and the other Loan Documents constitute valid and
binding obligations of Borrower.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS,
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
-3-
<PAGE>
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of Lender, and then only to the extent therein specifically
set forth. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Borrower" and "Lender" shall include their
respective successions, assigns, heirs, executors and administrators.
BORROWER:
VALLEY CONVALESCENT, LLC
a California limited liability company
BY: Continuum Health Incorporated,
a Delaware corporation,
Its Manager
By: /s/ Johann Keil
-------------------------------
Name: JOHANN KEIL
-----------------------------
Title: Member
----------------------------
-4-
<PAGE>
EXHIBIT 10.69
Recording Requested By And
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
DEED OF TRUST, SECURITY AGREEMENT, AND FIXTURE FILING
WITH ASSIGNMENT OF RENTS AND AGREEMENTS
This Deed of Trust, Security Agreement, and Fixture Filing with Assignment
of Rents and Agreements (this "DEED OF TRUST") is made as of August 29, 1997, by
VALLEY CONVALESCENT, LLC, a California limited liability company ("TRUSTOR"), to
FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation ("TRUSTEE"),
for the benefit of G&L REALTY PARTNERSHIP, L.P., a Delaware limited partnership
("BENEFICIARY").
Witnesseth:
Trustor does irrevocably grant, transfer, and assign to Trustee, in trust,
with power of sale, all Trustor's right, title, and interest now owned or later
acquired in the real property ("LAND") located in Imperial County, California,
and more particularly described in attached Exhibit A, incorporated by reference
---------
(Trustor agrees that any greater title to the Land later acquired during the
term of this Deed of Trust will be subject to this Deed of Trust); together with
the rents, issues, and profits, subject however, to the right, power, and
authority granted and conferred on Trustor in this Deed of Trust to collect and
apply the rents, issues, and profits; and Trustor also irrevocably grants,
transfers, and assigns to Trustee, in trust, with power of sale, all of
Trustor's right, title, and interest now owned or later acquired to the
following property (including the rights or interests pertaining to the
property) located at the Property:
(1) all buildings ("BUILDINGS") and improvements now or later on the Land,
and all appurtenances, easements, water and water rights, and pumps and pumping
plants, and all shares of stock evidencing these; all machinery, equipment,
appliances, and fixtures for generating or distributing air, water, heat,
electricity, light, fuel, or refrigeration or for ventilating or sanitary
purposes or for the exclusion of vermin or insects or for the removal of dust,
refuse, or garbage; all wall safes, built-in furniture, and installations,
shelving, lockers, partitions, doorstops, vaults, elevators, dumbwaiters,
awnings, window shades, venetian blinds, light fixtures, fire hoses and brackets
and boxes for them, fire sprinklers, alarm systems, draperies, drapery rods and
brackets, screens, linoleum, carpets, furniture, furnishings, fixtures,
plumbing, laundry tubs and trays, iceboxes, refrigerators, heating units,
stoves, water heaters, incinerators, and communication systems and installations
for which
-1-
<PAGE>
any Building is specially designed; all of these items, whether now or later
installed, being declared to be for all purposes of this Deed of Trust a part of
the Land, the specific enumerations in this Deed of Trust not excluding the
general;
(2) the rents, issues, profits, and proceeds; and
(3) the Property to the extent not included in clauses (1) and (2) above.
For the purpose of securing, in the order of priority that Beneficiary
determines
(1) payment of the indebtedness evidenced by a Promissory Note of Trustor
of the same date as this Deed of Trust in the principal amount of Two Million
Seven Hundred Ninety-Nine Thousand, Four Hundred and Ninety Dollars and No/Cents
($2,799,490.00) ("NOTE"), payable to Beneficiary or to order, and all
extensions, modifications, or renewals of that Note;
(2) payment of the interest on that indebtedness according to the terms of
the Note;
(3) payment of all other sums (with interest as provided in this Deed of
Trust) becoming due and payable to Beneficiary or Trustee pursuant to the terms
of this Deed of Trust;
(4) performance of every obligation contained in this Deed of Trust, the
Note, any instrument now or later evidencing or securing any indebtedness
secured by this Deed of Trust, and any agreements, supplemental agreements, or
other instruments of security executed by Trustor as of the same date of this
Deed of Trust or at any time subsequent to the date of this Deed of Trust for
the purpose of further securing any indebtedness secured by this Deed of Trust,
or any part of it, or for the purpose of supplementing or amending this Deed of
Trust or any instrument secured by this Deed of Trust; and
(5) payment of all other obligations owed by Trustor to Beneficiary that
by their terms recite that they are secured by this Deed of Trust, including
those incurred as primary obligor or as guarantor.
Regardless of anything stated above or any other term contained in this
Deed of Trust or in the Loan Documents (as defined in this Deed of Trust), none
of Trustor's obligations under or pursuant to the Certification Agreement (as
defined in this Deed of Trust) will be secured by the lien of this Deed of
Trust.
1. DEFINITIONS.
-----------
1.1 CERTAIN DEFINED TERMS. As used in this Deed of Trust the following
---------------------
terms will have the following meanings:
-2-
<PAGE>
"ASSIGNMENT OF LEASES": The Assignment of Leases and Rents dated as
of the same date as this Deed of Trust executed by Trustor in favor of
Beneficiary.
"BUILDINGS": The Buildings as defined above in this Deed of Trust.
"CERTIFICATION AGREEMENT": The Environmental Certification Agreement
and Indemnity of Borrower dated on the same date as this Deed of Trust and
executed by Trustor in favor of Beneficiary.
"COLLATERAL": The Collateral as defined in Section 9.1 of this Deed
-----------
of Trust.
"DEFAULT RATE": A rate of interest per annum equal to five percent
(5%) per annum above the Loan Rate.
"FIXTURES": All fixtures located on the Improvements (as defined in
this Deed of Trust) or now or later installed in, or used in connection with,
any of the Improvements, including, but not limited to, all partitions, screens,
awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators,
cleaning and sprinkler systems, fire-extinguishing apparatus and equipment,
water tanks, heating, ventilating, air-conditioning and air-cooling equipment,
built-in refrigerators, and gas and electric machinery, appurtenances, and
equipment, whether or not permanently affixed to the Land or the Improvements.
"HAZARDOUS SUBSTANCE":
(a) any oil, flammable substance, explosive, radioactive material,
hazardous waste or substance, toxic waste or substance, or any other waste,
material, or pollutant that:
(1) poses a hazard to the Property or to persons on the
Property, or
(2) causes the Property to be in violation of any Hazardous
Substance Law;
(b) asbestos in any form;
(c) urea formaldehyde foam insulation;
(d) transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls;
(e) radon gas;
(f) any chemical, material, or substance defined as or included in
the definition of hazardous substance, hazardous substances, hazardous wastes,
hazardous
-3-
<PAGE>
materials, extremely hazardous waste,restricted hazardous waste, or toxic
substances or words of similar import under any applicable local, state, or
federal law or under the regulations adopted or publications promulgated
pursuant to those laws, including, but not limited to, any Hazardous Substance
Law, Code of Civil Procedure (S) 564, as amended from time to time, Code of
Civil Procedure (S) 726.5, as amended from time to time, Code of Civil Procedure
(S) 736, as amended from time to time, and Civil Code (S) 2929.5, as amended
from time to time;
(g) any other chemical, material, or substance, exposure to which is
prohibited, limited, or regulated by any governmental authority or which may
pose a hazard to the health and safety of the occupants of the Property or the
owners or occupants of property adjacent to or surrounding the Property, or any
other person coming on the Property or any adjacent property; and
(h) any other chemical, material, or substance that may pose a
hazard to the environment.
"HAZARDOUS SUBSTANCE CLAIM": Any enforcement, cleanup, removal,
remedial, or other governmental, regulatory, or private actions, agreements, or
orders threatened, instituted, or completed pursuant to any Hazardous Substance
Law, together with all claims made or threatened by any third party against
Trustor or the Property relating to damage, contribution, cost-recovery
compensation, loss, or injury resulting from the presence, release, or discharge
of any Hazardous Substance.
"HAZARDOUS SUBSTANCE LAW": Any federal, state, or local law,
ordinance, regulation, or policy relating to the environment, health, and
safety, any Hazardous Substance (including, without limitation, the use,
handling, transportation, production, disposal, discharge, or storage of the
substance), industrial hygiene, soil, groundwater, and indoor and ambient air
conditions or the environmental conditions on the Property, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended from time to time; the Hazardous Substances
Transportation Act, as amended from time to time; the Resource Conservation and
Recovery Act, as amended from time to time; the Federal Water Pollution Control
Act, as amended from time to time; the Hazardous Substance Account Act, as
amended from time to time; the Hazardous Waste Control Law, as amended from time
to time; the Medical Waste Management Act, as amended from time to time; the
Emergency Planning and Community Right-to-Know Act of 1986, as amended from time
to time; the Solid Waste Disposal Act, as amended from time to time; the Clean
Water Act, as amended from time to time; the Clean Air Act, as amended from time
to time; the Toxic Substances Control Act, as amended from time to time; the
Safe Drinking Water Act, as amended from time to time; the Occupational Safety
and Health Act, as amended from time to time; and the Porter-Cologne Water
Quality Control Act, as amended from time to time, and all rules and regulations
adopted in respect of the foregoing laws whether presently in force or coming
into being and/or effectiveness hereafter.
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<PAGE>
"IMPOSITIONS" All real estate and personal property taxes and other
taxes and assessments, water and sewer rates and charges, and all other
governmental charges and any interest or costs or penalties with respect to
those charges, assessments, or taxes, ground rent and charges for any easement
or agreement maintained for the benefit of the Property, general and special,
ordinary and extraordinary, foreseen or unforeseen, of any kind that at any time
prior to or after the execution of the Loan Documents may be assessed, levied,
imposed, or become a lien on the Property or the rent or income received from
the Property, or any use or occupancy of the Property; and any charges,
expenses, payments, or assessments of any nature, if any, that are or may become
a lien on the Property or the rent or income received from the Property.
"IMPOSITION AND INSURANCE IMPOUND FUND": The fund that Trustor is
required to maintain pursuant to Section 4.4(c) of this Deed of Trust for the
--------------
payment of Impositions and Insurance Premiums.
"IMPROVEMENTS": All Buildings, improvements, and appurtenances on the
Land, and all improvements, additions, and replacements of those improvements
and other buildings and improvements, at any time later constructed or placed on
the Land.
"INDEBTEDNESS": The principal of and interest on, and all other
amounts, payments, and premiums due under, the Note and any extensions or
renewals (including, without limitation, extensions or renewals at a different
rate of interest, regardless of whether evidenced by a new or additional
promissory note or notes), and all other indebtedness of Trustor to Beneficiary
under or secured by the Security Documents (defined in this Deed of Trust),
together with all other sums owed by Trustor to Beneficiary, including those
incurred as primary obligor or as guarantor, that recite that they are secured
by the Security Documents.
"INSURANCE PREMIUMS": The amounts Trustor is required to pay as
provided in Section 4.4(d).
--------------
"LAND": The Land as defined in this Deed of Trust.
All leasehold interests, including subleases and tenancies
following attornment, affecting or covering any portion of the Property.
"LOAN": The loan secured by this Deed of Trust and evidenced by the
Note.
"LOAN DOCUMENTS": The Note, the Security Documents, and all other
documents (including guaranties) evidencing, securing, or relating to the Loan,
except the Certification Agreement.
"LOAN PARTIES": Trustor and any guarantors of the loan or any
obligations under the loan, together with their respective affiliates and their
respective members and officers.
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<PAGE>
"LOAN RATE": Twelve percent (12%) per annum.
"MATERIAL ADVERSE CHANGE": Any material and adverse change in:
(a) the business or properties or condition (financial or
otherwise) of Trustor, or
(b) the condition or operation of the Property.
"NOTE": The Note as defined in this Deed of Trust.
"OBLIGATIONS" All of the covenants, promises, and other obligations
(other than the Indebtedness):
(a) made or owing by Trustor to or due to Beneficiary under or
as set forth in the Loan Documents, and
(b) made or owing by Trustor to every other Person, a breach
of which would or may affect Trustor's ownership, development, or operation of
the Property, except any covenants, promises, and other obligations of Trustor
to Beneficiary under the Certification Agreement.
"PERSON": Any natural person, corporation, firm, association,
government, governmental agency, or any other entity, whether acting in an
individual, fiduciary, or other capacity.
"PERSONALTY": Trustor's interest in all accounts, contract rights,
and general intangibles (specifically including any insurance proceeds and
condemnation awards) arising out of the ownership, development, or operation of
the Property, and all furniture, furnishings, equipment, machinery, construction
materials and supplies, leasehold interests in personal property, and all other
personal property (other than Fixtures) now or later on the Property, together
with all present and future attachments, accessions, replacements,
substitutions, and additions, and the cash and noncash proceeds.
"PROPERTY": The Land, the Improvements, the Fixtures, and the
Personalty, together with:
(a) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, and appurtenances of the Land or the Improvements now or later
belonging to the Property, and all right, title, and interest of Trustor in any
streets, ways, alleys, strips, or gores of land adjoining the Land; and
(b) all of Trustor's right, title, and interest in the Land, the
Improvements, the Fixtures, and the Personalty, including any award for any
change
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<PAGE>
of grade of streets affecting the Land, the Improvements, the Fixtures, or
the Personalty.
"RECEIVER": Any trustee, receiver, custodian, fiscal agent,
liquidator, or similar officer.
"RELEASE": Any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment, including continuing migration, of Hazardous Substances that
goes into the soil, surface water, or groundwater of the Property, whether or
not caused by, contributed to, permitted by, acquiesced to, or known to Trustor.
"SECURITY DOCUMENTS": This Deed of Trust, the Assignment of Leases
and all other documents now or later securing any part of the payment of the
Indebtedness or the observance or performance of the Obligations.
"TITLE POLICY": The title insurance policy issued by Stewart Title
Guaranty Company to Beneficiary.
"USER": Any person, other than Trustor, who occupies, used, or comes
into or has occupied, used, or come into the Property or any part of it and any
agent or contractor of that person.
2. WARRANTY OF TITLE. Trustor warrants that:
-----------------
(a) Trustor is the lawful owner of the Property,
(b) Trustor will maintain and preserve the lien of this Deed of
Trust until the Indebtedness has been paid in full,
(c) Trustor has good, right, and lawful authority to grant the
Property as provided in this Deed of Trust, and
(d) Trustor will forever warrant and defend the grant made in this
Deed of Trust against all claims and demands, except as are specifically
set forth in this Deed of Trust.
3. REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
------------------------------
Beneficiary that as of the date of this Deed of Trust:
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<PAGE>
3.1 ORGANIZATION OF THE LOAN PARTIES.
--------------------------------
(a) Trustor is a limited liability company organized, validly
existing, and in good standing under the laws of the State of California and is
qualified to do business in California.
(b) Trustor has the requisite power and authority to own and manage
its properties, to carry on its business as now being conducted, and to own,
develop, and operate the Property.
(c) Trustor is qualified to do business in every jurisdiction in
which the nature of its business or its properties makes qualification
necessary.
(d) Trustor and its third party operator of the Property is in
compliance with all laws, regulations, ordinances, and orders of public
authorities applicable to it.
(e) Trustor's third party operator of the Property shall operate a
nursing care facility on the Property in compliance with all laws, regulations,
ordinances and orders of public authority.
3.2 VALIDITY OF LOAN DOCUMENTS.
--------------------------
(a) The execution, delivery, and performance by the Loan Parties of
the Loan Documents and the borrowings evidenced by the Note:
(1) are within the power of the Loan Parties,
(2) have been duly authorized by all requisite limited
liability company, corporate or partnership actions, as appropriate,
(3) have received all necessary governmental approval, and
(4) will not violate any provision of law, any order of any
court or agency of government, the charter documents of any Loan Party, or any
indenture, agreement, or any other instrument to which any Loan Party is a party
or by which any Loan Party or any of its property is bound, nor will they
conflict with, result in a breach of, or constitute (with due notice and lapse
of time) a default under any indenture, agreement, or other instrument, or
result in the creation or imposition of any lien, charge, or encumbrance of any
nature on any of the property or assets of any Loan Party, except as
contemplated by the provisions of the Loan Documents.
(b) Each of the Loan Documents, when executed and delivered to
Beneficiary, will constitute a valid obligation, enforceable in accordance with
its terms.
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<PAGE>
(c) The Note, this Deed of Trust and the other Loan Documents are
not subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, nor would the operation of any of the terms of
the Note, this Deed of Trust or any of the other Loan Documents, or the exercise
of any right thereunder, render this Deed of Trust unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury.
3.3 FINANCIAL STATEMENTS.
--------------------
(a) All financial statements and data that have been given to
Beneficiary with respect to any Loan Party:
(1) are complete and correct in all material respects;
(2) accurately present the financial condition of that Loan
Party on each date as of which they have been furnished, and accurately present
the results of the operations of that Loan Party for the periods for which they
have been furnished; and
(3) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered.
(b) All balance sheets and the notes with respect to the Loan
Parties furnished to Beneficiary disclose all liabilities of the Loan Parties,
fixed and contingent, as of their respective dates, as well as all obligations
of those Loan Parties under any guaranties.
(c) There has been no Material Adverse Change in the financial
condition or operations of Trustor since:
(1) the date of the most recent financial statement given to
Beneficiary with respect to Trustor of the Property, or
(2) the date of the financial statements given to Beneficiary
immediately prior to the date of this Deed of Trust, other than changes in the
ordinary course of business, none of which constitute a Material Adverse Change,
either individually or in the aggregate.
3.4 USE OF PROCEEDS OF LOAN. Trustor will use the Loan to assist in the
-----------------------
acquisition of the Property.
3.5 OTHER ARRANGEMENTS. Trustor is not a party to any agreement or
------------------
instrument materially and adversely affecting Trustor's present or proposed
business, properties, assets, operation, or condition, financial or otherwise;
and Trustor is not in default in the performance, observance, or fulfillment of
any of the material obligations, covenants, or conditions in any agreement or
instrument to which Trustor is a party that materially affect
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<PAGE>
Trustor's present or proposed business, properties, assets, operation, or
condition, financial or otherwise.
3.6 OTHER INFORMATION. All other reports, papers, data, and information
-----------------
given to Beneficiary with respect to Trustor and the Property are accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Beneficiary a true and accurate knowledge of the subject
matter.
3.7 LITIGATION. There is not now pending against or affecting any Loan
----------
Party, nor to the knowledge of any Loan Party is there threatened, any action,
suit, or proceeding at law or in equity or before any administrative agency
that, if adversely determined, would materially impair or affect:
(a) the financial condition or operations of Trustor, or
(b) the condition or operation of the Property.
3.8 OTHER WARRANTIES.
----------------
(a) The Property is not used for agricultural or grazing purposes,
and
(b) Trustor's third party operator of the Property is engaged in the
operation of a nursing care facility.
3.9 TAXES. Trustor has filed all federal, state, county, and municipal
-----
income tax returns required to have been filed and has paid all taxes that have
become due pursuant to those returns or pursuant to any assessments received by
Trustor, and Trustor does not know of any basis for any additional assessment
against Trustor in respect of those taxes.
3.10 COMPLIANCE WITH LAWS. Except as otherwise provided in this Deed of
--------------------
Trust, the Property and the proposed and actual use of the Property comply with
all laws, ordinances, rules, and regulations of all local, regional, county,
state, and federal governmental authorities having jurisdiction (including, but
not limited to, the Americans With Disabilities Act), and there is no action or
proceeding pending or, to the knowledge of Trustor after due inquiry, threatened
before any court, quasi-judicial body, or administrative agency at the time of
any disbursement by Beneficiary relating to the validity of the Loan or the
proposed or actual use of the Property. All rights to appeal any decision
rendered will have expired prior to the date of this Deed of Trust.
3.11 SINGLE ASSET ENTITY. Trustor does not own and will not own any other
-------------------
asset or property other than (i) the Property, and (ii) incidental personal
property necessary for the ownership and operation of the Property.
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<PAGE>
3.12 BROKERS, AGENTS, ADVISORS, CONSULTANTS AND FINDERS. No financial
--------------------------------------------------
advisors, brokers, underwriters, placement agents, agents or finders have been
dealt with by the Trustor in connection with the Loan.
3.13 TAXED AS PARTNERSHIP. Trustor is currently taxed as a partnership
--------------------
for income tax purposes.
4. AFFIRMATIVE COVENANTS. Until the entire Indebtedness has been paid in
---------------------
full, Trustor covenants to and agrees with Beneficiary as follows:
4.1 OBLIGATIONS OF TRUSTOR. Trustor will pay the Indebtedness and
----------------------
Trustor will continue to be liable for the payment of the Indebtedness until it
has been paid in full. Trustor:
(a) will timely perform all the covenants, agreements, terms, and
conditions to be performed by Trustor:
(1) under this Deed of Trust;
(2) as seller under each contract of sale of, and as lessor
under each lease of, for any portion of the Property for which a contract of
sale or lease has been approved in writing by Beneficiary;
(3) as required of Trustor under each document and agreement
constituting one of the Security Documents;
(4) under all other agreements between Trustor and Beneficiary
in accordance with the respective terms of the agreement; and
(5) as required of Trustor under all other agreements to which
Trustor is a party with respect to the Property;
(b) will not cancel, surrender, modify, amend, or permit the
cancellation, surrender, modification, or amendment of any of the previously
mentioned agreements or any of the covenants, agreements, terms, or conditions
contained in any of them without the prior written consent, in each case, of
Beneficiary; and
(c) will keep Beneficiary indemnified against all actions,
proceedings, costs (including, without limitation, Beneficiary's counsel fees
and disbursements), claims, and damages incurred or sustained by Beneficiary in
respect of the nonpayment of any charges or the nonobservance or nonperformance
of any of the covenants, agreements, terms, or conditions in any of the
previously mentioned agreements.
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<PAGE>
4.2 INSURANCE.
---------
(a) Trustor, at its sole cost and expense, will keep the Property
insured for the mutual benefit of Trustor and Beneficiary against loss or damage
by earthquake and fire, and against loss or damage by other risks embraced by
coverage of the type now known as the broad form of extended coverage,
including, but not limited to, riot and civil commotion, vandalism, malicious
mischief, burglary, theft, and mysterious disappearance, and against any other
risks or hazards that Beneficiary may from time to time reasonably designate, in
an amount not less than one hundred percent (100%) of the then full replacement
cost of the Improvements, without deduction for physical depreciation. The
policies of insurance carried in accordance with this section shall contain the
Replacement Cost Endorsement with a waiver of depreciation, and shall have a
deductible no greater than $10,000.00 unless so agreed by Beneficiary.
Notwithstanding the above, with respect to earthquake insurance, (A) such
insurance shall be required only to the extent it is available at commercially
reasonable prices, and (B) such insurance shall be on commercially reasonable
terms and with commercially reasonable deductible amounts.
(b) Trustor, at its sole cost and expense, but for the mutual benefit
of Trustor and Beneficiary, will maintain during the term of this Deed of Trust
the following policies of insurance:
(i) Flood insurance if any part of the Property is located in
an area identified by the Federal Emergency Management Agency as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Program in an amount at least equal to the
outstanding principal amount of the Loan or the maximum limit of coverage
available with respect to the Property under said Program, whichever is less.
(ii) Commercial general liability insurance, including broad
form property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages and containing minimum limits per occurrence of
$1,000,000 and $2,000,000 in the aggregate for any policy year. In addition, at
least $5,000,000 excess and/or umbrella liability insurance shall be obtained
and maintained for any and all claims, including all legal liability imposed
upon Trustor and all court costs and attorneys' fees incurred in connection with
the ownership, operation and maintenance of the Property.
(iii) Rental loss and/or business interruption insurance in an
amount equal to the greater of (A) estimated gross revenues for eighteen (18)
months from the operations of the Property or (B) the projected operating
expenses (including debt service) for eighteen (18) months for the maintenance
and operation of the Property.
(iv) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in the Improvements (without
exclusion for explosions), to the extent that such items now or
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<PAGE>
hereafter exist upon the Property, in an amount at least equal to the
outstanding principal amount of the Note.
(v) If the Property includes commercial property, workers'
compensation insurance with respect to any employees of Trustor, as required by
any governmental authority or legal requirement.
(vi) During any period of repair or restoration, builder's "all
risk" insurance in an amount equal to not less than the full insurable value of
the Property insuring against such risks (including, without limitation, fire
and extended coverage and collapse of the Improvements to agreed limits) as
Beneficiary may request, in form and substance acceptable to Beneficiary.
(vii) Ordinance or law coverage to compensate for the cost of
demolition and the increased cost of construction.
(viii) Such other insurance as may from time to time be
reasonably required by Beneficiary in order to protect its interests, including
earthquake insurance coverage.
(c) Effective on the occurrence of any Event of Default, all of
Trustor's right, title, and interest in all policies of property insurance and
any unearned premiums paid are assigned to Beneficiary, who may assign them to
any purchaser of the Property at any foreclosure sale.
(d) All policies of insurance (the "POLICIES") required pursuant to
this Section: (i) shall be issued by companies approved by Beneficiary and
licensed to do business in the state where the Property is located, with a
claims paying ability rating of "AA" or better by Standard & Poor's Rating
Services, a division of the McGraw Hill Companies, Inc. and/or a rating of "A:X"
or better in the current Best's Insurance Reports; (ii) shall name Beneficiary
and its successors and/or assigns as their interest may appear as the
beneficiary/ mortgagee; (iii) shall contain a non-contributory standard
mortgagee clause and a lender's loss payable endorsement or their equivalents,
naming Beneficiary as the person to which all payments made by such insurance
company shall be paid; (iv) shall contain a waiver of subrogation against
Beneficiary; (v) shall be maintained throughout the term of this Deed of Trust
without cost to Beneficiary; (vi) shall be assigned and the originals delivered
to Beneficiary; (vii) shall contain such provisions as Beneficiary deems
reasonably necessary or desirable to protect its interest including, without
limitation, endorsements providing that neither Trustor, Beneficiary nor any
other party shall be a co-insurer under said Policies and that Beneficiary shall
receive at least thirty (30) days prior written notice of any modification,
reduction or cancellation; and (viii) shall be satisfactory in form and
substance to Beneficiary and shall be approved by Beneficiary as to amounts,
form, risk coverage, deductibles, loss payees and insureds. Trustor shall pay
the premiums for such Policies (the "INSURANCE PREMIUMS") as the same become due
and payable and shall furnish to Beneficiary evidence of the renewal of each of
the Policies with receipts for
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<PAGE>
the payment of the Insurance Premiums or other evidence of such payment
reasonably satisfactory to Beneficiary (provided, however, that Trustor is not
required to furnish such evidence of payment to Beneficiary in the event that
such Insurance Premiums have been paid by Beneficiary pursuant to Section 4.4
-----------
hereof). If Trustor does not furnish such evidence and receipts at least thirty
(30) days prior to the expiration of any expiring Policy, then Beneficiary may
procure, but shall not be obligated to procure, such insurance and pay the
Insurance Premiums promptly on demand. Within thirty (30) days after required
by Beneficiary, Trustor shall obtain such increases in the amounts of coverage
required hereunder as may be reasonably requested by Beneficiary, taking into
consideration changes in the value of money over time, changes in liability
laws, changes in prudent customs and practices.
4.3 MAINTENANCE, WASTE, AND REPAIR. Trustor will maintain the
------------------------------
Improvements now or later existing in good and tenantable repair, and will not
structurally alter them without the prior written consent of Beneficiary, or
remove or demolish them in whole or in part, nor will Trustor suffer any waste
of the Property or make any change in the use of the Property that will in any
way increase any ordinary fire or other hazard insurance premiums or permit
anything that may in any way impair the security of this Deed of Trust. Trustor
will not abandon the Property or lease the Property unprotected, vacant, or
deserted.
4.4 IMPOSITION AND INSURANCE; IMPOUNDS.
----------------------------------
(a) Trustor will pay when due all Impositions that are or that may
become a lien on the Property or are assessed against the Property or its rents,
royalties, profits, and income.
(b) Trustor will file all federal, state, provincial, county, and
municipal income tax returns required to be filed and will pay all taxes that
become due pursuant to the returns or pursuant to any assessments received by
Trustor.
(c) Trustor shall pay to Beneficiary on the first day of each
calendar month (a) one-twelfth of the Impositions that Beneficiary estimates
will be payable during the next ensuing twelve (12) months in order to
accumulate with Beneficiary sufficient funds to pay all such Impositions at
least thirty (30) days prior to their respective due dates, and (b) one-twelfth
of the Insurance Premiums that Beneficiary estimates will be payable for the
renewal of the coverage afforded by the Policies upon the expiration thereof in
order to accumulate with Beneficiary sufficient funds to pay all such Insurance
Premiums at least thirty (30) days prior to the expiration of the Policies (said
amounts in (a) and (b) above hereinafter called the "IMPOSITION AND INSURANCE
IMPOUND FUND"). The Imposition and Insurance Impound Fund and the payments of
interest or principal or both, payable pursuant to the Note, shall be added
together and shall be paid as an aggregate sum by Trustor to Beneficiary.
Beneficiary will apply the Imposition and Insurance Impound Fund to payments of
Impositions and Insurance Premiums required to be made by Trustor pursuant to
Sections 4.2(f) and 4.4(a) hereof. In making any payment relating to the
- --------------------------
Imposition and Insurance Impound Fund, Beneficiary may do so according to any
bill, statement or estimate procured
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<PAGE>
from the appropriate public office (with respect to Impositions) or insurer or
agent (with respect to Insurance Premiums), without inquiry into the accuracy of
such bill, statement or estimate or into the validity of any tax, assessment,
sale, forfeiture, tax lien or title or claim thereof. If the amount of the
Imposition and Insurance Impound Fund shall exceed the amounts due for
Impositions and Insurance Premiums pursuant to Sections 4.2(f) and 4.4(a)
--------------------------
hereof, Beneficiary shall, in its sole discretion, return any excess to Trustor
or credit such excess against future payments to be made to the Imposition and
Insurance Impound Fund. In allocating such excess, Beneficiary may deal with
the person shown on the records of Beneficiary to be the owner of the Property.
If at an time Beneficiary determines that the Imposition and Insurance Impound
Fund is not or will not be sufficient to pay the items set forth in (a) and (b)
above, Beneficiary shall notify Trustor of such determination and Trustor shall
increase its monthly payments to Beneficiary by the amount that Beneficiary
estimates is sufficient to make up the deficiency at least thirty (30) days
prior to delinquency of the Impositions and/or expiration of the Policies, as
the case may be. Until expended or applied as above provided, any amounts in
the Imposition and Insurance Impound Fund shall constitute additional security
for the Indebtedness. The Imposition and Insurance Impound Fund shall not
constitute a trust fund. No earnings or interest on the Imposition and
Insurance Impound Fund shall be payable to Trustor. If Beneficiary so elects at
any time, Trustor shall provide, at Trustor's expense, a tax service contract
for the Loan term issued by a tax reporting agency acceptable to Beneficiary.
If Beneficiary does not so elect, Trustor shall reimburse Beneficiary for the
cost of making annual tax searches throughout the Loan term.
(d) Trustor hereby pledges to Beneficiary and grants to Beneficiary a
security interest in any and all monies now or hereafter deposited in the
Imposition and Insurance Impound Fund as additional security for the payment of
the Indebtedness. Upon the occurrence of an Event of Default, Beneficiary may
apply any sums then present in the Imposition and Insurance Impound Fund to the
payment of the Indebtedness in any order in its sole discretion.
(e) By exercising any of its rights or remedies under this Section
-------
4.4 (including, without limitation, taking possession of the Imposition and
- ---
Insurance Impound Fund), Beneficiary shall not be deemed to have exercised any
equitable right of setoff, foreclosed any statutory banker's lien, initiated or
prosecuted any "action" to enforce the rights and obligations secured by this
Deed of Trust, or the Loan Documents, as the term "action" is used in California
Code of Civil Procedure Section 726 ("SECTION 726"), or to have violated the
"security first" principle of Section 726. Accordingly, the exercise of any or
all of Beneficiary's rights and remedies under this Section 4.4 shall not in any
-----------
way prejudice or affect Beneficiary's right to initiate and complete a judicial
or nonjudicial foreclosure under this Deed of Trust. This Deed of Trust
evidences the consensual granting of a personal property security interest in
the Imposition and Insurance Impound Fund as permitted by the California
Commercial Code; the parties do not intend that the exercise by Beneficiary of
any of its rights or remedies hereunder shall have any different consequences
under Section 726 than the exercise of rights or remedies under any other
security agreement
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<PAGE>
under which a secured party has been granted a security interest in other types
of personal property.
4.5 COMPLIANCE WITH LAW. Trustor will preserve and keep in full force
-------------------
its existence, rights, and powers. Trustor will promptly and faithfully comply
with all present and future laws, ordinances, rules, regulations, and
requirements of every governmental authority or agency and of every board of
fire underwriters (or similar body exercising similar functions) having
jurisdiction that may be applicable to it or to the Property or to the use or
manner of occupancy, possession, operation, maintenance, alteration, or repair
of the Property or any part of it, whether the law, ordinance, rule, order,
regulation, or requirement necessitates structural changes or improvements or
interferes with the use or enjoyment of the Property.
4.6 BOOKS AND RECORDS. Trustor will maintain complete books of account
-----------------
and other records reflecting the results of Trustor's operations (in conjunction
with its other operations as well as its operation of the Property), in a form
satisfactory to Beneficiary, and furnish to Beneficiary any information about
the financial condition of Trustor, and the sales and operations of the Property
as Beneficiary reasonably requests, including, but not limited to, the following
information, which will be furnished without request:
(a) within twenty (20) days after the end of each month, a statement
of revenues and expenses relating to all of Trustor's business operations for
the month just ended, including without limitation, operations of the Property
for the month just ended;
(b) as soon as available and in any event within sixty (60) days
after the end of each fiscal year of Trustor, a copy of the annual audit report
for the fiscal year for Trustor, including a balance sheet of Trustor as of the
end of the fiscal year, and statements of income and retained earnings and of
change in financial position of Trustor for the fiscal year, in each case
certified in a manner acceptable to Beneficiary by independent public
accountants acceptable to Beneficiary;
(c) promptly upon their becoming available, copies of all financial
statements, reports, and notices (including tax returns) sent by Trustor to its
partners or any governmental authority succeeding to any of its functions; and
(d) promptly upon receipt, copies of any reports by independent
public accountants submitted to Trustor concerning its properties or operations.
Beneficiary will have the right, at all reasonable times and on reasonable
notice, to audit, at Trustor's sole cost and expense, Trustor's books of account
and records, all of which will be made available to Beneficiary and
Beneficiary's representatives for that purpose, from time to time, on
Beneficiary's request. Trustor's failure to comply with the requirements of this
Section 4.6 within fifteen (15) days after written notice from Beneficiary
- -----------
shall be an Event of Default hereunder. Notwithstanding the above, if the above
records and information are within the control of any third party operator,
Trustor shall not be in default hereunder so long as
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<PAGE>
Trustor exercises commercially reasonable efforts to require such operator to
provide such information under its lease or other operative agreement with
Trustor.
4.7 FURTHER ASSURANCES. Trustor, at Trustor's expense and at any time on
------------------
the reasonable request of Beneficiary, will execute, acknowledge, and deliver
any additional papers and instruments (including, without limitation, a
declaration of no setoff) and any further assurances of title and will do or
cause to be done all further acts and things that may be proper or reasonably
necessary to carry out the purpose of this Deed of Trust and of the Loan
Documents and to subject to the liens any property intended by the terms to be
covered and any renewals, additions, substitutions, replacements, or
betterments.
4.8 STATEMENT BY TRUSTOR. Trustor, on ten (10) days' written request,
--------------------
will furnish a statement of the amount due or outstanding on the Note and a
statement of any offsets, counterclaims, or defenses to the payment.
4.9 INDEMNITY. In addition to any other indemnifications provided
---------
herein or in the other Loan Documents, Trustor shall protect, defend, indemnify
and save harmless Beneficiary and Trustee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation, reasonable attorneys'
fees and disbursements whether or not suit is filed), imposed upon or incurred
by or asserted against Beneficiary or Trustee by reason of (a) ownership of this
Deed of Trust, the Property or any interest therein or receipt of any Payments;
(b) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(c) any use, nonuse or condition in, on or about the Property or any part
thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (d) any failure on the part of Trustor or Trustee to
perform or comply with any of the terms of this Deed of Trust; (e) performance
of any labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (f) the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release, or threatened release
of any Hazardous Substance on, from or affecting the Property; (g) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or related to such Hazardous Substance; (h) any lawsuit brought or
threatened, settlement reached, or government order relating to such Hazardous
Substance; (i) any violation of the Hazardous Substance Laws, which are based
upon or in any way related to such Hazardous Substance including, without
limitation, the costs and expenses of any remedial work, attorney and consultant
fees and disbursements, investigation and laboratory fees, court costs, and
litigation expenses; (j) any failure of the Property to comply with any Access
Laws; (k) any representation or warranty made in the Note, this Deed of Trust or
any of the other Loan Documents being false or misleading in any material
respect as of the date such representation or warrant was made; (l) any claim by
brokers, finders or similar persons claiming to be entitled to a commission in
connection with the Loan or other transaction involving the Property or any part
thereof under any legal requirement or any liability asserted against
Beneficiary with respect thereto; and (m) the claims of any lessee of any
portion of the Property or any person acting through or under any lessee or
otherwise
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arising under or as a consequence of any Leases. Any amounts payable to
Beneficiary or Trustee by reason of the application of this paragraph shall be
secured by this Deed of Trust and shall become immediately due and payable and
shall bear interest at the Default Rate from the date loss or damage is
sustained by Beneficiary or Trustee until paid. The obligations and liabilities
of Trustor under this Section 4.9 shall survive the termination, satisfaction,
-----------
or assignment of this Deed of Trust and the exercise by Beneficiary of any of
its rights or remedies hereunder, including, but not limited to, the acquisition
of the Property by foreclosure or a conveyance in lieu of foreclosure.
4.10 REIMBURSEMENT. Beneficiary will have the right to declare
-------------
immediately due any amount paid by it for any tax, stamp tax, assessment, water
rate, sewer rate, Insurance Premium, repair, rent charge, debt, claim,
inspection, or lien having priority over this Deed of Trust, or over any other
agreement given to secure the Indebtedness.
4.11 LITIGATION. Trustor will promptly give written notice to Beneficiary
----------
of any litigation commenced or threatened affecting Trustor or the Property
other than unlawful detainer proceedings brought by Trustor.
4.12 TAX RECEIPTS. Subject to the provisions of Section 4.4 of this Deed
------------ -----------
of Trust, Trustor will exhibit to Beneficiary, within seven (7) days after
demand, bills (that will be receipted from and after the date receipted bills
are obtainable) showing the payment to the extent then due of all taxes,
assessments (including those payable in periodic installments), water rates,
sewer rates, or any other Imposition that may have become a lien on the Property
or any Personalty prior to the lien of this Deed of Trust.
4.13 DUPLICATE PLANS. Trustor will submit to Beneficiary a duplicate set
---------------
of plans and specifications for approval before any material improvements,
repairs, or alterations are begun that affect the Property.
4.14 ADDITIONAL INFORMATION. Trustor will furnish to Beneficiary, within
----------------------
seven (7) days after written request, all information that Beneficiary may
request concerning the performance by Trustor of the covenants of the Loan
Documents, and Trustor will permit Beneficiary or its representatives at all
reasonable times to make investigation or examination concerning that
performance.
4.15 RIGHT OF ENTRY. Trustor grants to Beneficiary and its agents,
--------------
employees, consultants, and contractors the right to enter on the Property for
the purpose of making any inspections, reports, tests (including, without
limitation, soils borings, groundwater testing, wells, or soils analysis),
inquiries, and reviews that Beneficiary, in its sole and absolute discretion,
deems necessary to assess the then current condition of the Property.
Beneficiary will provide Trustor with one (1) business day's notice of the
entry. However, Trustor's consent will not be required for entry or for the
performance of tests. All costs, fees, and expenses (including, without
limitation, those of Beneficiary's outside counsel and consultants) incurred by
Beneficiary with respect to the inspections, reports, tests, inquiries, and
reviews, together with all related preparation, consultation, analyses, and
review, will be
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<PAGE>
paid by Trustor to Beneficiary on demand, will accrue interest at the Default
Rate until paid, and will be secured by this Deed of Trust, prior to any right,
title, or interest in or claim on the Property attaching or accruing subsequent
to the lien of this Deed of Trust.
4.16 HANDICAPPED ACCESS.
------------------
(a) The Property shall at all times strictly comply to the extent
applicable with the requirements of the Americans with Disabilities Act of 1990,
the Fair Housing Amendments Act of 1988 (if applicable), all state and local
laws and ordinances related to handicapped access and all rules, regulations,
and order issued pursuant thereto including, without limitation, the Americans
with Disabilities Act Accessibility Guidelines for Buildings and Facilities
(collectively, "ACCESS LAWS").
(b) Trustor agrees to give prompt notice to Beneficiary of the
receipt by Trustor of any complaints related to violation of any Access Laws and
of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
4.17 TAXED AS PARTNERSHIP. Trustor will continue to be taxed as a
--------------------
partnership for income tax purposes during the term of this Deed of Trust.
4.18 LIMITED LIABILITY COMPANY FILINGS. Trustor will make all filings as
---------------------------------
required under the Beverly-Killea Limited Liability Company Act, as amended from
time to time, and deliver same to Beneficiary within ten (10) days of filing.
4.19 THIRD PARTY OPERATOR. Trustor will preserve and keep in full force
--------------------
and effect that certain lease between Trustor, as lessor, and M.C. Word, CPA, a
Professional Corporation, as lessee, with respect to the operation of the
Property as a nursing care facility, or will enter into and keep in full force
and effect and maintain during the entire term of the Loan a lease with such
other third party operator which is acceptable to Beneficiary (which acceptance
shall have been obtained from Beneficiary in writing prior to entering into such
lease) concerning the operation of the Property as a nursing care facility.
5. NEGATIVE COVENANTS. Until the entire Indebtedness has been paid in full,
------------------
Trustor covenants to and agrees with Beneficiary as follows:
5.1 RESTRICTIVE USES. Trustor covenants not to initiate, join in, or
----------------
consent to any change in any zoning ordinance, private restrictive covenant,
assessment proceedings, or other public or private restriction limiting or
restricting the uses that may be made of the Property or any part of it without
the prior written consent of Beneficiary.
5.2 OTHER FINANCING. Except for the liens securing the Indebtedness,
---------------
Trustor will not create or permit to continue in existence any mortgage, pledge,
encumbrance, lien, or charge of any kind (including purchase money and
conditional sale liens) on any of the Property except for:
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<PAGE>
(a) liens for taxes not yet delinquent, and
(b) any other liens or charges that are specifically approved in
writing by Beneficiary prior to the recordation.
Any transaction in violation of this section will cause all Indebtedness,
irrespective of the maturity dates, at the option of the holder and without
demand or notice, to immediately become due, together with any prepayment
premium in accordance with the terms of the Note.
5.3 TRANSFER OR ENCUMBRANCE OF THE PROPERTY.
---------------------------------------
(a) Trustor acknowledges that Beneficiary has examined and relied on
the creditworthiness and experience of Trustor in owning and operating the
Property in agreeing to make the Loan, and that Beneficiary will continue to
rely on Trustor's ownership of the Property as a means of maintaining the value
of the Property as security for repayment of the Indebtedness. Trustor
acknowledges that Beneficiary has a valid interest in maintaining the value of
the Property so as to ensure that, should Trustor default in the repayment of
the Indebtedness, Beneficiary can recover the Indebtedness by a sale of the
Property. Trustor shall not, without the prior written consent of Beneficiary,
sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer the
Property or any part thereof, or permit the Property or any part thereof to be
sold, conveyed, alienated, mortgaged, encumbered, pledged or otherwise
transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this Section 5.3 shall be deemed to include (i)
-----------
an installment sales agreement wherein Trustor agrees to sell the Property or
any part thereof for a price to be paid in installments; (ii) an agreement by
Trustor leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Trustor's right, title and interest
in and to any Leases or any Payments; (iii) if Trustor or any general partner or
managing member of Trustor is a corporation, the voluntary or involuntary sale,
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by operation of
law or otherwise) or the creation or issuance of new stock in one or a series of
transactions by which an aggregate of more than 50% of such corporation's stock
shall be vested in a party or parties who are not now stockholders or any change
in the control of such corporation; (iv) if Trustor or any general partner of
Trustor is a limited or general partnership, joint venture or limited liability
company, the change, removal, resignation or addition of a general partner,
managing partner, or joint venturer or the transfer of any ownership interest of
any general partner, managing partner or joint venturer or the transfer,
assignment or pledge of any ownership interest of any general partner, managing
partner or joint venturer; (v) if Trustor is a limited partnership, the
voluntary or involuntary sale, conveyance, transfer or pledge of any limited
partnership interests or the creation or issuance of new limited partnership
interests, by which an aggregate of more than 50% of such limited partnership
interests are held by parties who are
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<PAGE>
not currently limited partners; or (vi) if Trustor is a limited liability
company, the voluntary or involuntary sale, conveyance or transfer of more than
50% of the members' interests. Notwithstanding anything herein to the contrary,
the following transfers of ownership interests in any Trustor entity shall be
permitted transfers hereunder without Beneficiary's consent and shall not
constitute a default hereunder: (i) any transfers into or out of a trust,
family limited partnership, or other similar entity or device for tax or estate
planning purposes; and (ii) any transfers resulting from the death of an
individual, including without limitation, pursuant to a will, trust or intestate
proceeding.
(c) Beneficiary shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Indebtedness immediately due and payable upon Trustor's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property without Beneficiary's consent. This provision shall apply to every
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property.
(d) Beneficiary's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be deemed to
be a waiver of Beneficiary's right to require such consent to any future
occurrence of same. Any sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Property made in contravention of this Section shall
be null and void and of no force and effect.
(e) Trustor agrees to bear and shall pay or reimburse Beneficiary on
demand for all reasonable expenses (including, without limitation, reasonable
attorneys' fees and disbursements, title search costs and title insurance
endorsement premiums) incurred by Beneficiary in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
(f) Beneficiary's consent to the sale or transfer of the Property will
not be unreasonably withheld after consideration of all relevant factors,
provided that:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of
Default shall have occurred and remain uncured;
(ii) the proposed transferee ("TRANSFEREE") shall be a reputable
entity or person of good character, creditworthy, with
sufficient financial worth considering the obligations
assumed and undertaken, as evidenced by financial
statements and other information reasonably requested by
Beneficiary;
(iii) the Transferee and its property manager (if any) shall
have sufficient experience in the ownership and management
of
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<PAGE>
properties similar to the Property, and Beneficiary shall
be provided with reasonable evidence thereof;
(iv) the Transferee shall have executed and delivered to
Beneficiary an assumption agreement in form and substance
acceptable to Beneficiary, evidencing such Transferee's
agreement to abide and be bound by the terms of the Note,
this Deed of Trust and the other Loan Documents, together
with such legal opinions and title insurance endorsements
as may be reasonably requested by Beneficiary; and
(v) Beneficiary shall have received the payment of all costs
and expenses incurred by Beneficiary in connection with
such assumption (including reasonable attorneys' fees and
costs).
5.4 REPLACEMENT OF FIXTURES AND PERSONALTY. Trustor will not permit any
--------------------------------------
of the Fixtures or Personalty to be removed at any time from the Property
without the prior written consent of Beneficiary unless actually replaced by
articles of equal suitability and value owned by Trustor free and clear of any
lien or security interest except as may be approved in writing by Beneficiary.
5.5 LIMITED LIABILITY COMPANY CHANGES. Trustor will make no material
---------------------------------
changes nor materially amend or modify Trustor's articles of organization or
operating agreement without first obtaining Beneficiary's prior written consent
(which consent shall not be unreasonably withheld or delayed), nor compromise
any members' obligations to contribute capital or enter into any merger or
consolidation without first obtaining Beneficiary's prior written consent of
same. Trustor will in writing immediately notify Beneficiary of any planned or
anticipated dissolution of Trustor or of any event likely to result in
dissolution of Trustor.
6. ENVIRONMENTAL PROVISIONS.
------------------------
6.1 REPRESENTATIONS AND WARRANTIES. Except as disclosed in writing to,
------------------------------
and acknowledged in writing by, Beneficiary, Trustor represents and warrants
that:
(a) during the period of Trustor's ownership of the Property:
(1) there has been no use, generation, manufacture, storage,
treatment, disposal, discharge, Release, or threatened Release of any Hazardous
Substance by any person on or around the Property; and
(2) there have been no Hazardous Substances transported over or
through the Property;
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<PAGE>
(b) after diligent inquiry, Trustor has no knowledge of, or reason to
believe that, there has been:
(1) any use, generation, manufacture, storage, treatment,
disposal, Release, or threatened Release of any hazardous waste or substance by
any prior owners or prior occupants of the Property or by any third parties onto
the Property; or
(2) any actual or threatened litigation or claims of any kind by
any person relating to these matters;
(c) no Hazardous Substances in excess of permitted levels or
reportable quantities under applicable Hazardous Substance Laws are present in
or about the Property or any nearby real property that could migrate to the
Property;
(d) no Release or threatened Release exists or has occurred;
(e) no underground storage tanks of any kind are or ever have been
located in or about the Property;
(f) the Property and all operations and activities at, and the use and
occupancy of, the Property, comply with all applicable Hazardous Substance Laws;
(g) Trustor and every User has, and is now in strict compliance with,
every permit, license, and approval required by all applicable Hazardous
Substance Laws for all activities and operations at, and the use and occupancy
of, the Property;
(h) to the best of Trustor's knowledge, after diligent inquiry, there
are no Hazardous Substance Claims pending or threatened with regard to Property
or against Trustor or any Guarantor;
(i) the Property has not been nor is it within 2,000 feet of any other
property designated as hazardous waste property or border zone property pursuant
to Health and Safety Code (S)(S) 25220 et seq., and no proceedings for a
determination of this designation are pending or threatened;
(j) to the best of its knowledge after diligent inquiry, there exists
no occurrence or condition on any real property adjoining or within 2,000 feet
of the Property that would cause the Property or any part of it to be designated
as hazardous waste property or border zone property under the provisions of
Health and Safety Code (S)(S) 25220 et seq. and any regulation adopted in
accordance with that section;
(k) that the current use of the Property is as a nursing care
facility;
(l) any written disclosure submitted by or on behalf of Trustor to
Beneficiary concerning any Release or threatened Release, past or present
compliance by
-23-
<PAGE>
Trustor, or any User or other person of any Hazardous Substance Laws applicable
to the Property, the past and present use and occupancy of the Property, and any
environmental concerns relating to the Property, was true and complete when
submitted and continues to be true and complete as of the date of this Deed of
Trust.
6.2 COVENANTS. Trustor agrees, except in the ordinary course of business
---------
and in strict compliance with all applicable Hazardous Substance Laws, as
follows:
(a) not to cause or permit the Property to be used as a site for the
use, generation, manufacture, storage, treatment, Release, discharge, disposal,
transportation, or presence of any Hazardous Substance;
(b) not to cause, contribute to, permit, or acquiesce in any Release
or threatened Release;
(c) not to change or modify the use of the Property without the prior
written consent of Beneficiary;
(d) to comply with and to cause the Property and every User of the
Property to comply with all Hazardous Substance Laws;
(e) to immediately notify Beneficiary in writing and to provide
Beneficiary with a reasonably detailed description of:
(1) any noncompliance of the Property with any Hazardous Substance
Laws;
(2) any Hazardous Substance Claim;
(3) any Release or threatened Release;
(4) the discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Property that would cause the
Property or any part of it to be designated as hazardous waste property or
border zone property under the provisions of Health and Safety Code (S)(S) 25220
et seq. and any regulation adopted in accordance with that section;
(f) in the event that Trustor discovers a Release or the presence of
any Hazardous Substance on or about the Property in violation of any Hazardous
Substance Law, to:
(1) notify Beneficiary of that discovery together with a
reasonably detailed description;
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<PAGE>
(2) promptly after a request by Beneficiary, engage a qualified
environmental engineer reasonably satisfactory to Beneficiary to investigate
these matters and prepare and submit to Beneficiary a written report containing
the findings and conclusions resulting from that investigation, all at the sole
expense of Trustor; and
(3) take, at Trustor's sole expense, all necessary actions to
remedy, repair, clean up, or detoxify any Release or Hazardous Substance,
including, but not limited to, any remedial action required by any Hazardous
Substance Laws or any judgment, consent, decree, settlement, or compromise in
respect of any Hazardous Substance Claims, these actions to be performed:
(i) in accordance with Hazardous Substance Laws;
(ii) in a good and proper manner;
(iii) under the supervision of a qualified environmental
engineer approved in writing by Beneficiary;
(iv) in accordance with plans and specifications for these
actions approved in writing by Beneficiary; and
(v) using licensed and insured qualified contractors
approved in writing by Beneficiary;
(g) immediately furnish to Beneficiary copies of all written
communications received by Trustor from any governmental authority or other
person or given by Trustor to any person and any other information Beneficiary
may reasonably request concerning any Release, threatened Release, Hazardous
Substance Claim, or the discovery of any Hazardous Substance on or about the
Property in violation of any Hazardous Substance Law; and
(h) Beneficiary generally informed regarding any Release, threatened
Release, Hazardous Substance Claim, or the discovery of any Hazardous Substance
on or about the Property in violation of any Hazardous Substance Law.
6.3 ENVIRONMENTAL MONITORING. Trustor shall permit Beneficiary to join
------------------------
and participate in, as a party if it so elects, any legal proceedings or action
initiated with respect to the Property in connection with any Environmental
Substance Law or Hazardous Substance, and Trustor shall pay all attorneys' fees
and disbursements incurred by Beneficiary in connection therewith. Upon
Beneficiary's request, at any time and from time to time while this Deed of
Trust is in effect, but not more frequently than once per calendar year, unless
Beneficiary has determined (in the exercise of its good faith judgment) that
reasonable cause exists for the performance of an environmental inspection or
audit of the Property, Trustor shall provide at Trustor's sole expense an
inspection or audit of the Property prepared by a licensed hydrogeologist or
licensed environmental engineer approved by Beneficiary indicating the presence
or absence of Hazardous Substances in, or near the
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<PAGE>
Property. If Trustor fails to provide such inspections or audits within thirty
(30) days after such request, Beneficiary may order same, and Trustor hereby
grants to Beneficiary and its employees and agents access to the Property and a
license to undertake those inspections or audits. The cost of such inspections
or audits shall be added to the principal balance of the sums due under the Note
and the Deed of Trust and shall bear interest thereafter until paid at the
Default Rate (as defined in the Note). In the event that any environmental site
assessment report prepared in connection with such inspection or audit
recommends that an operations and maintenance plan be implemented for any
Hazardous Substance, Trustor shall cause such operations and maintenance plan to
be prepared and implemented at Trustor's expense upon request of Beneficiary.
Trustor shall commence and thereafter diligently prosecute to completion any
remedial work within thirty (30) days after written demand by Beneficiary for
performance thereof (or any such shorter period of time as may be required under
applicable law). All remedial work shall be performed by contractors approved
in advance by Beneficiary, and under the supervision of a consulting engineer
approved by Beneficiary. All costs and expenses of such remedial work shall be
paid by Trustor including, without limitation, Beneficiary's reasonable
attorneys' fees and costs incurred in connection with monitoring or review of
such remedial work. In the event Trustor shall fail to timely commence, or
cause to be commenced, or fail to diligently prosecute to completion, such
remedial work, Beneficiary may, but shall not be required to, cause such
remedial work to be performed, and all costs and expenses thereof, or incurred
in connection therewith, shall become part of the Indebtedness and shall bear
interest thereafter until paid at the Default Rate.
6.4 INSPECTION AND RECEIVERSHIP RIGHTS. Upon Beneficiary's reasonable
----------------------------------
belief of the existence of a past or present Release or threatened Release not
previously disclosed by Trustor in connection with the making of the Loan or the
execution of this Deed of Trust or upon Beneficiary's reasonable belief that
Trustor has failed to comply with any environmental provision of this Deed of
Trust or any other Loan Document and upon reasonable prior notice (except in the
case of an emergency) to Trustor, Beneficiary or its representatives, employees,
and agents, may from time to time and at all reasonable times (or at any time in
the case of an emergency) enter and inspect the Property and every part of it
(including all samples of building materials, soil, and groundwater, and all
books, records, and files of Trustor relating to the Property) and perform those
acts and things that Beneficiary deems necessary or desirable to inspect,
investigate, assess, and protect the security of this Deed of Trust, for the
purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release;
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law; and
(c) the compliance by Trustor of every environmental provision of this
Deed of Trust and every other Loan Document. In furtherance of the purposes
above, without limitation of any of its other rights, Beneficiary may:
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<PAGE>
(1) obtain a court order to enforce Beneficiary's right to enter
and inspect the Property under Civil Code (S) 2929.5, to which the decision of
Beneficiary as to whether there exists a Release, a threatened Release, any
Hazardous Substances on or about the Property in violation of any Hazardous
Substance Law, or a breach by Trustor of any environmental provision of this
Deed of Trust or any other Loan Document, will be deemed reasonable and
conclusive as between the parties; and
(2) have a receiver appointed under Code of Civil Procedure (S)
564 to enforce Beneficiary's right to enter and inspect the Property for the
purpose set forth above.
All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including without limitation court costs, consultant's fees, and
attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until those sums have been paid in full. Except as provided by law, any
inspections or tests made by Beneficiary or its representatives, employees, and
agents will be for Beneficiary's purposes only and will not be construed to
create any responsibility or liability on the part of Beneficiary to Trustor or
to any other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision contained in this Deed
of Trust or any Loan Document.
6.5 RELEASE AND INDEMNITY. Trustor:
---------------------
(a) releases and waives any future claims against Beneficiary for
indemnity or contribution in the event Trustor becomes liable for cleanup or
other costs under any Hazardous Substance Laws or under any Hazardous Substance
Claim;
(b) agrees to reimburse Beneficiary, on demand, for all costs and
expenses incurred by Beneficiary in connection with any review, approval,
consent, or inspection relating to the environmental provisions in this Deed of
Trust together with interest, after demand, at the Default Rate; and
(c) agrees to indemnify, defend, and hold Beneficiary and Trustee
harmless from all losses, costs, claims, damages, penalties, liabilities, causes
of action, judgments, court costs, attorney fees and other legal expenses, costs
of evidence of title, cost of evidence of value, and other expenses
(collectively, "Expenses"), including, but not limited to, any Expenses incurred
or accruing after the foreclosure of the lien of this Deed of Trust, which
either may suffer or incur and which directly or indirectly arises out of or is
in any way connected with the breach of any environmental provision either in
this Deed of Trust or in any Loan Document or as a consequence of any Release or
threatened Release on
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the presence, use, generation, manufacture, storage, disposal, transportation,
Release, or threatened Release of any Hazardous Substance on or about the
Property, including the soils and groundwaters, caused or permitted by Trustor,
any prior owner or operator of the Property, any adjoining landowner or any
other party, including, without limitation, the cost of any required or
necessary repair, cleanup, remedy, or detoxification of any Hazardous Substance
and the preparation of any closure, remedial action, or other required plans,
whether that action is required or necessary by reason of acts or omissions
occurring prior to or following the recordation of this Deed of Trust. Trustor's
obligations will survive the satisfaction, release, or cancellation of the
Indebtedness, the release and reconveyance or partial release and reconveyance
of this Deed of Trust, and the foreclosure of the lien of this Deed of Trust or
deed in lieu of the Deed of Trust.
6.6 REQUEST FOR INFORMATION. Trustor and Beneficiary agree that:
-----------------------
(a) this Section 6.6 is intended as Beneficiary's written request for
-----------
information and Trustor's written response concerning the environmental
condition of the Property as provided by Code of Civil Procedure (S) 726.5; and
(b) each representation, warranty, covenant, or indemnity made by
Trustor in this Section 6 or in any other provision of this Deed of Trust or any
---------
Loan Document that relates to the environmental condition of the Property is
intended by Trustor and Beneficiary to be an environmental provision for
purposes of Code of Civil Procedure (S) 736 and will survive the payment of the
Indebtedness and the termination or expiration of this Deed of Trust and will
not be affected by Beneficiary's acquisition of any interest in the Property,
whether by full credit bid at foreclosure, deed in lieu of that, or otherwise.
If there is any transfer of any portion of Trustor's interest in the Property,
any successor-in-interest to Trustor agrees by its succession to that interest
that the written request made pursuant to this Article will be deemed remade to
the successor-in-interest without any further or additional action on the part
of Beneficiary and that by assuming the debt secured by this Deed of Trust or by
accepting the interest of Trustor subject to the lien of this Deed of Trust, the
successor remakes each of the representations and warranties in this Deed of
Trust and agrees to be bound by each covenant in this Deed of Trust, including,
but not limited to, any indemnity provision.
6.7 EFFECT OF SITE ASSESSMENT. Even though Trustor may have provided
-------------------------
Beneficiary with an environmental site assessment or other environmental report
together with other relevant information regarding the environmental condition
of the Property, Trustor acknowledges and agrees that Beneficiary is not
accepting the Property as security for the Loan based on that assessment,
report, or information. Rather Beneficiary has relied on the representations and
warranties of Trustor in this Deed of Trust, and Beneficiary is not waiving any
of its rights and remedies in the environmental provisions of this Deed of Trust
or any other Loan Document.
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7. CASUALTIES AND CONDEMNATION.
---------------------------
7.1 CASUALTIES.
----------
(a) Trustor will promptly notify Beneficiary in writing after any loss
or damage caused by fire or other casualty to the Property, and prior to the
making of any repairs. Trustor will furnish to Beneficiary within sixty (60)
days after the loss or damage the following:
(1) evidence satisfactory to Beneficiary of the cost of repair or
reconstruction;
(2) evidence satisfactory to Beneficiary that sufficient funds are
available or committed for the benefit of Beneficiary, including insurance
proceeds, payment and performance bonds, or otherwise, to complete the repair or
reconstruction; and
(3) evidence satisfactory to Beneficiary that the repair or
reconstruction may be completed in accordance with all applicable laws, rules,
regulations, and ordinances and that all necessary permits and approvals have
been or will be obtained.
If Trustor does not furnish this evidence to Beneficiary within the sixty-
day period, or if Beneficiary in its reasonable discretion determines that
repair or reconstruction is not economically feasible, then within sixty (60)
days after the expiration of the sixty-day period, Beneficiary will have the
option ("REPAYMENT OPTION") to have all insurance proceeds applied against the
Indebtedness. If Beneficiary elects the Repayment Option, Trustor will
immediately transfer to Beneficiary all insurance proceeds received by it, if
any, to the extent of the Indebtedness, and Beneficiary will apply the insurance
proceeds received by it, if any, against the Indebtedness. If the insurance
proceeds held by Trustor and Beneficiary exceed the Indebtedness, any excess
insurance proceeds will belong and be paid over to, or be retained, by Trustor.
(b) If Beneficiary does not elect the Repayment Option within the
specified time period, Trustor will, with all diligence, repair or otherwise
reconstruct the damage to the Property, all according to the original plans and
specifications for the Improvements or any modified plans and specifications
conforming to the then laws and regulations as will first have been approved in
writing by Beneficiary and any occupants of the Improvements having the right to
approve. Beneficiary will use all insurance proceeds, if any, received by it
relating to the damage or destruction to reimburse Trustor from time to time for
expenditures made for repair of the damage or for the erection of any building,
structure, or improvements in their place if permitted as follows:
(1) At the end of each month against Trustor's architect's
certificate, an amount that will be that proportion of the insurance proceeds
held in trust that ninety percent (90%) of the payments to be made to the
contractors or materialmen for work
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done, materials supplied, and services rendered during that month bears to the
total contract price.
(2) At the completion of the work, the balance of the proceeds
required for completing the payments for the work will be paid to or for the
account of Trustor, provided that at the time of the payment:
(i) there are no liens (as evidenced by an endorsement
satisfactory to Beneficiary issued by Trustee) against the Property by reason of
the work, or proof satisfactory to Beneficiary has been submitted that all costs
of the work have been paid; and
(ii) Trustor's architect will certify that all required work
is completed and is proper and of a quality and class of the original work
required by the original plans and specifications and in accordance with the
approved plans and specifications.
If the insurance proceeds exceed the costs of completing the work, the
excess insurance proceeds will belong and be retained by or be paid over to
Beneficiary to be applied against the Indebtedness. If the costs of completing
the work exceed the insurance proceeds, Trustor will, no later than ninety (90)
days before commencement of the work, provide evidence satisfactory to
beneficiary that Trustor has the funds to complete the work and shall, before
commencement of the work, deposit with Beneficiary said funds which shall be
used to reimburse Trustor in the same manner as insurance proceeds.
7.2 CONDEMNATION. Trustor, immediately upon obtaining knowledge of the
------------
institution of any proceedings for the condemnation of the Property or any
portion of it, will notify Trustee and Beneficiary of the pendency of the
proceedings. Trustee and Beneficiary may participate in any proceedings and
Trustor from time to time will deliver to Beneficiary all instruments requested
by Beneficiary to permit participation. If there are condemnation proceedings,
the award or compensation payable is assigned to and will be paid to
Beneficiary. Beneficiary will be under no obligation to question the amount of
any award or compensation and may accept it in the amount in which it is paid.
In any condemnation proceedings, Beneficiary may be represented by counsel
selected by Beneficiary. The proceeds of any award or compensation received will
be paid over to Trustor for restoration of the Improvements in accordance with
the provisions of Section 7.1 of this Deed of Trust or, if the Improvements will
-----------
not be restored, will be applied, without premium, to the prepayment of the
Note.
8. EVENTS OF DEFAULT AND REMEDIES OF BENEFICIARY.
---------------------------------------------
8.1 EVENTS OF DEFAULT. The following events are each an Event of Default:
-----------------
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(a) Default in the payment of any sum of principal or interest when
due under the Note or any other sum due under the Loan Documents, provided that
such failure continues for five (5) business days after written notice of such
default.
(b) The failure (without cure during the applicable period, if any,
for cure) of any Loan Party to observe, perform, or discharge any obligation,
term, covenant, or condition of Loan Documents, any agreement relating to the
Property, or any agreement or instrument between any Loan Party and Beneficiary,
provided that such failure continues for thirty (30) days after written notice
of such default, or such longer period of time up to one-hundred twenty (120)
days to cure such default if Trustor commences a cure within such 30 day period
and thereafter diligently prosecutes such cure to completion.
(c) The entry of an order for relief under federal bankruptcy laws as
to Trustor or the adjudication of Trustor as insolvent or bankrupt pursuant to
the provisions of any state insolvency or bankruptcy act; the commencement by
Trustor of any case, proceeding, or other action seeking any reorganization,
arrangement, composition, adjustment, liquidation, dissolution, or other relief
for debtors; Trustor's consent to, acquiescence in, or attempt to secure the
appointment of, any Receiver of all or any substantial part of its properties or
of the Property; Trustor's generally not paying its debts as they become due or
admitting in writing its inability to pay its debts or making a general
assignment for the benefit of creditors; or Trustor's taking of any action to
authorize any of the acts set forth above in this section.
(d) Any case, proceeding, or other action against Trustor is
commenced, seeking to have an order for relief entered against it as a debtor or
seeking any reorganization, arrangement, composition, adjustment, liquidation,
dissolution, or similar relief under any present or future statute, law, or
regulation relating to bankruptcy, insolvency, reorganization, or other relief
for debtors, or seeking appointment of any Receiver for Trustor or for all or
any substantial part of its property or for the Property, and that case,
proceeding, or other action:
(1) results in the entry of an order for relief against it that is
not fully stayed within sixty (60) days after the entry, or
(2) remains undismissed for an aggregate of sixty (60) days
(whether or not consecutive);
or the possibility that any portion of the Property would, by operation of law
or otherwise, devolve on or pass to any Person other than Trustor and that
situation continues and is not remedied by Trustor within sixty (60) days after
the happening of the event.
(e) The assignment by Trustor, as lessor or sublessor, as the case may
be, of the rents or the income of the Property or any part of it (other than to
Beneficiary) without first obtaining the written consent of Beneficiary.
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(f) The following events:
(1) The filing of any claim or lien against the Property or any
part of it, whether or not the lien is prior to this Deed of Trust, and the
continued maintenance of the claim or lien for a period of sixty (60) days
without discharge, satisfaction, or adequate bonding in accordance with the
terms of this Deed of Trust;
(2) the existence of any interest in the Property other than those
of Trustor, Beneficiary, and any tenants of Trustor; or
(3) the sale, hypothecation, conveyance, or other disposition of
the Property except in accordance with Sections 5.2 or 5.3 of this Deed of
-------------------
Trust, any of which will be an Event of Default because Trustor's obligation to
own and operate the Property is one of the inducements to Beneficiary to make
the Loan;
(g) Default under any agreement to which Trustor is a party, which
agreement relates to the borrowing of money by Trustor from any Person.
(h) Any representation or warranty made by any Loan Party or any other
Person under this Deed of Trust or in, under, or pursuant to the Loan Documents,
is false or misleading in any material respect as of the date on which the
representation or warranty was made.
(i) Any of the Loan Documents, at any time after their respective
execution and delivery and for any reason, cease to be in full force or are
declared null and void, or the validity or enforceability is contested by any
Loan Party or any stockholder or partner of any Loan Party, or any Loan Party
denies that it has any or further liability or obligation under any of the Loan
Documents to which it is a party.
(j) Any of the Security Documents, at any time after their respective
execution and delivery and for any reason, cease to constitute valid and
subsisting liens or valid and perfected security interests in and to the
property purported to be subject to any of the Security Documents;
(k) Any representation made by any Loan Party in the Certification
Agreement is false or misleading in any material respect as of the date made, or
any breach or default in any of Trustor's obligations under the Certification
Agreement.
(l) The occurrence of any Material Adverse Change.
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<PAGE>
If one or more Event of Default occurs and is continuing, then Beneficiary
may declare all the Indebtedness to be due and the Indebtedness will become due
without any further presentment, demand, protest, or notice of any kind, and
Beneficiary may:
(1) in person, by agent, or by a receiver, and without regard to
the adequacy of security, the solvency of Trustor, or the existence of waste,
enter on and take possession of the Property or any part of it in its own name
or in the name of Trustee, sue for or otherwise collect the rents, issues, and
profits, and apply them, less costs and expenses of operation and collection,
including reasonable attorney fees, upon the Indebtedness, all in any order that
Beneficiary may determine. The entering on and taking possession of the
Property, the collection of rents, issues, and profits, and the application of
them will not cure or waive any default or notice of default or invalidate any
act done pursuant to the notice;
(2) commence an action to foreclose this Deed of Trust in the
manner provided by law for the foreclosure of mortgages of real property;
(3) deliver to Trustee a written declaration of default and demand
for sale, and a written notice of default and election to cause the Property to
be sold, which notice Trustee or Beneficiary will cause to be filed for record;
(4) with respect to any Personalty, proceed as to both the real
and personal property in accordance with Beneficiary's rights and remedies in
respect of the Land, or proceed to sell the Personalty separately and without
regard to the Land in accordance with Beneficiary's rights and remedies; or
(5) exercise any of these remedies in combination or any other
remedy at law or in equity.
8.2 POWER OF SALE.
-------------
(a) If Beneficiary elects to foreclose by exercise of the power of
sale in this Deed of Trust, Beneficiary will also deposit with Trustee this Deed
of Trust, the Note, and any receipts and evidence of expenditures made and
secured as Trustee may require. If notice of default has been given as then
required by law, and after lapse of the time that may then be required by law,
after recordation of the notice of default, Trustee, without demand on Trustor,
will, after notice of sale having been given as required by law, sell the
Property at the time and place of sale fixed by it in the notice of sale, either
as a whole or in separate parcels as Trustee determines, and in any order that
it may determine, at public auction to the highest bidder. Trustee may postpone
sale of all or any portion of the Property by public announcement at the time
and place of sale, and from time to time after that may postpone the sale by
public announcement at the time fixed by the preceding postponement, and without
further notice make the sale at the time fixed by the last postponement; or
Trustee may, in its discretion, give a new notice of sale. Beneficiary may
rescind any notice of default at any time before Trustee's sale by executing a
notice of rescission and recording it.
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The recordation of the notice will constitute a cancellation of any prior
declaration of default and demand for sale and of any acceleration of maturity
of Indebtedness affected by any prior declaration or notice of default. The
exercise by Beneficiary of the right of rescission will not constitute a waiver
of any default then existing or subsequently occurring, or impair the right of
Beneficiary to execute other declarations of default and demand for sale, or
notices of default and of election to cause the Property to be sold, nor
otherwise affect the Note or this Deed of Trust, or any of the rights,
obligations, or remedies of Beneficiary or Trustee. After sale, Trustee will
deliver to the purchaser its deed conveying the property sold, but without any
covenant or warranty, express or implied. The recitals in the deed of any
matters or facts will be conclusive proof of their truthfulness. Any Person,
including Trustor, Trustee, or Beneficiary, may purchase at that sale. If
allowed by law, Beneficiary, if it is the purchaser, may turn in the Note at the
amount owing on it toward payment of the purchase price (or for endorsement of
the purchase price as a payment on the Note if the amount owing exceeds the
purchase price). Trustor expressly waives any right of redemption after sale
that Trustor may have at the time of sale or that may apply to the sale.
(b) Trustee, upon the sale, will make (without any covenant or
warranty, express or implied), execute and, after due payment made, deliver to a
purchaser and its heirs or assigns a deed or other record of interest, as the
case may be, to the Property sold, which will convey to the purchaser all the
title and interest of Trustor in the Property and will apply the proceeds of the
sale in payment:
(1) first, of the expenses of the sale together with the expenses
of the trust, including, without limitation, attorney fees, that will become due
on any default made by Trustor, and also any sums that Trustee or Beneficiary
have paid for procuring a search of the title to the Property subsequent to the
execution of this Deed of Trust; and
(2) second, in payment of the Indebtedness then remaining unpaid,
and the amount of all other monies with interest in this Deed of Trust agreed or
provided to be paid by Trustor.
Trustee will pay the balance or surplus of the proceeds of sale to Trustor
and its successors or assigns as its interests may appear.
8.3 PROOF OF DEFAULT. If there is a sale of the Property, or any part of
----------------
it, and the execution of a deed for it, the recital of default and of recording
notice of breach and election of sale, and of the elapsing of the required time
between the recording and the following notice, and of the giving of notice of
sale, and of a demand by Beneficiary that the sale should be made, will be
conclusive proof of the default, recording, election, elapsing of time, and the
due giving of notice, and that the sale was regularly and validly made on proper
demand by Beneficiary. Any deed with these recitals will be effectual and
conclusive against Trustor, its successors, and assigns, and all other Persons.
The receipt for the purchase money recited or in any deed executed to the
purchaser will be sufficient discharge to the purchaser from all obligations to
see to the proper application of the purchase money.
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8.4 PROTECTION OF SECURITY. If an Event of Default occurs and is
----------------------
continuing, Beneficiary or Trustee, without limitation to do so, without notice
to or demand upon Trustor, and without releasing Trustor from any obligations or
defaults may:
(a) enter on the Property in any manner and to any extent that either
deems necessary to protect the security of this Deed of Trust;
(b) appear in and defend any action or proceeding purporting to
affect, in any manner, the Obligations or the Indebtedness, the security of this
Deed of Trust, or the rights or powers of Beneficiary or Trustee;
(c) pay, purchase, or compromise any encumbrance, charge, or lien that
in the judgment of Beneficiary or Trustee is prior or superior to this Deed of
Trust; and
(d) pay necessary expenses, employ counsel, and pay reasonable
attorney fees.
Trustor agrees to repay on demand all sums expended by Trustee or Beneficiary
pursuant to this section with interest at the Default Rate, and those sums, with
interest, will be secured by this Deed of Trust.
8.5 RECEIVER. If an Event of Default occurs and is continuing,
--------
Beneficiary, as a matter of strict right and without notice to Trustor or anyone
claiming under Trustor and without regard to the then value of the Property,
will have the right to apply ex parte or by noticed motion to any court having
jurisdiction to appoint a Receiver of the Property. Any Receiver will have all
the powers and duties of receivers in similar cases and all the powers and
duties of Beneficiary in case of entry as provided in this Deed of Trust, and
will continue as such and exercise all those powers until the date of
confirmation of sale, unless the receivership is terminated sooner.
8.6 CURING THE DEFAULTS. If Trustor at any time fails to perform or
-------------------
comply with any of the terms, covenants, and conditions required on Trustor's
part to be performed and complied with under this Deed of Trust, the Note, any
of the other Loan Documents, or any other agreement that, under the terms of
this Deed of Trust, Trustor is required to perform, then Beneficiary, after ten
(10) days' notice to Trustor (or without notice if Beneficiary determines that
an emergency exists), and without waiving or releasing Trustor from any of the
Obligations, may, subject to the provisions of any of the agreements:
(a) make from its own funds any payments payable by Trustor and take
out, pay for, and maintain any of the insurance policies provided for; and
(b) perform any other acts on the part of Trustor to be performed and
enter on the Property for that purpose. The making by Beneficiary of payments
out of Beneficiary's own funds will not, however, be deemed to cure the default
by Trustor, and they will not be cured unless and until Trustor reimburses
Beneficiary for the payments. All
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sums paid and all reasonable costs and expenses incurred by Beneficiary in
connection with the performance of any act, together with interest on unpaid
balances at the Default Rate from the respective dates of Beneficiary's making
of each payment, will be added to the principal of the Indebtedness, will be
secured by the Security Documents and by the lien of this Deed of Trust, prior
to any right, title, or interest in or claim on the Property attaching or
accruing subsequent to the lien of this Deed of Trust, and will be payable by
Trustor to Beneficiary on demand.
8.7 INSPECTION RIGHTS. On reasonable notice (except in the case of an
-----------------
emergency), and without releasing Trustor from any obligation to cure any
default of Trustor, Beneficiary or its agents, representatives, and employees
acting by themselves or through a court-appointed receiver, may, from time to
time and at all reasonable times (or at any time in the case of an emergency)
enter and inspect the Property and every part of it (including all samples of
building materials, soil, and groundwater, and all books, records, and files of
Trustor relating to the Property) and perform any acts and things as Beneficiary
deems necessary or desirable to inspect, investigate, assess, and protect the
security of this Deed of Trust, for the purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release,
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law, and
(c) the compliance by Trustor of every environmental provision of
this Deed of Trust and every other Loan Document.
In furtherance of these purposes, without limitation of any of its other
rights, Beneficiary may:
(a) obtain a court order to enforce Beneficiary's right to enter and
inspect the Property under Civil Code (S) 2929.5, to which the decision of
Beneficiary as to whether there exists a Release, threatened Release, any
Hazardous Substances on or about the Property in violation of any Hazardous
Substance Law, or a breach by Trustor of any environmental provision of this
Deed of Trust or any other Loan Document, will be deemed reasonable and
conclusive as between Trustor, Trustee, and Beneficiary; and
(b) have a receiver appointed under Code of Civil Procedure (S) 564 to
enforce Beneficiary's right to enter and inspect the Property for Hazardous
Substances.
All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including, without limitation, court costs, consultants fees, and
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attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until they have been paid in full. Except as provided by law, any inspections or
tests made by Beneficiary or its representatives, employees, and agents, will be
for Beneficiary's purposes only and will not be construed to create any
responsibility or liability on the part of Beneficiary to Trustor or to any
other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision in this Deed of Trust or
any Loan Document.
8.8 JUDGMENT ON ENVIRONMENTAL PROVISION. Beneficiary or its agents,
-----------------------------------
representatives, and employees may seek a judgment that Trustor has breached its
covenants, representations, or warranties in Article 6 of this Deed of Trust or
---------
any other covenants, representations, or warranties that are deemed to be
environmental provisions pursuant to Code of Civil Procedure (S) 736 (each an
"ENVIRONMENTAL PROVISION"), by commencing and maintaining an action or actions
in any court of competent jurisdiction pursuant to Code of Civil Procedure (S)
736, whether commenced prior to or after foreclosure of the lien of this Deed of
Trust. Beneficiary or its agents, representatives, and employees may also seek
an injunction to cause Trustor to abate any action in violation of any
Environmental Provision and may seek the recovery of all costs, damages,
expenses, fees, penalties, fines, judgments, indemnification payments to third
parties, and other out-of-pocket costs or expenses actually incurred by
Beneficiary (collectively, "ENVIRONMENTAL COSTS") incurred or advanced by
Beneficiary relating to the cleanup, remedy, or other response action required
by any Hazardous Substances Law, or any Hazardous Substance Claim, or which
Beneficiary believes necessary to protect the Property. It will be conclusively
presumed between Beneficiary and Trustor that all Environmental Costs incurred
or advanced by Beneficiary relating to the cleanup, remedy, or other response
action of or to the Property were made by Beneficiary in good faith. All
Environmental Costs incurred by Beneficiary under this subsection (including,
without limitation, court costs, consultant fees, and attorney fees, whether
incurred in litigation and whether before or after judgment) will bear interest
at the Default Rate from the date of expenditure until those sums have been paid
in full. Beneficiary will be entitled to bid, at any trustee's or foreclosure
sale of the Property, the amount of the costs, expenses, and interest in
addition to the amount of other Indebtedness.
8.9 WAIVE LIEN. Beneficiary or its agents, representatives, and
----------
employees may waive its lien against the Property or any portion of it,
including the Improvements and the Personal Property, to the extent that the
Property is found to be environmentally impaired in accordance with Code of
Civil Procedure (S) 726.5, and to exercise all rights and remedies of an
unsecured creditor against Trustor and all of Trustor's assets and property for
the recovery of any deficiency and Environmental Costs, including, but not
limited to, seeking an attachment order under Code of Civil Procedure (S)
483.010. As between Beneficiary and Trustor, for purposes of Code of Civil
Procedure (S) 726.5, Trustor will have the burden of proving that Trustor or any
related party (or any affiliate or agent of Trustor or any related party) was
not in any way negligent in permitting the Release or threatened Release of the
Hazardous Substances.
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8.10 REMEDIES CUMULATIVE. All remedies of Beneficiary provided for in
-------------------
this Deed of Trust are cumulative and will be in addition to all other rights
and remedies provided in the other Loan Documents or provided by law, including
any banker's lien and right of offset. The exercise of any right or remedy by
Beneficiary will not in any way constitute a cure or waiver of default, will not
invalidate any act done pursuant to any notice of default, nor will it prejudice
Beneficiary in the exercise of any of its rights unless, in the exercise of
those rights, Beneficiary collects the total amount of the Indebtedness.
9. SECURITY AGREEMENT.
------------------
9.1 GRANT OF SECURITY INTEREST. Trustor also grants to Beneficiary a
--------------------------
security interest in all of Trustor's right, title, and interest now owned or
later acquired to the following property (collectively, "COLLATERAL") now or
later affixed to or located on the Property, or used in connection with the
operation of the Property or the Improvements and all the rents and proceeds of
that property: the Personalty; the Fixtures; all machinery, equipment, engines,
appliances, and fixtures for generating or distributing air, water, heat,
electricity, light, fuel, or refrigeration, or for ventilating or sanitary
purposes, or for the exclusion of vermin or insects, or for the removal of dust,
refuse, or garbage; all wallbeds, wall safes, built-in furniture and
installations, shelving, lockers, partitions, doorstops, vaults, motors,
elevators, dumbwaiters, awnings, window shades, venetian blinds, light fixtures,
fire hoses and brackets and boxes for them, fire sprinklers, alarm systems,
draperies, drapery rods and brackets, mirrors, mantles, screens, linoleum,
carpets and carpeting, plumbing, bathtubs, sinks, basins, pipes, faucets, water
closets, laundry equipment, washers, dryers, iceboxes, refrigerators, heating
units, stoves, ovens, ranges, dishwashers, disposals, water heaters,
incinerators, furniture, fixtures, and furnishings; all communication systems;
all specifically designed installations and furnishings; all building materials,
supplies, and equipment now or later delivered to the Property; all office
equipment, including, without limitation, all computers, computer systems,
hardware and software, access codes, access keys, computer programs, file names,
typewriters, duplicating machines, word processing equipment, adding machines,
calculators, dictating equipment, printing presses, and related equipment; all
inventories and supplies, including, without limitation, office supplies, soap,
light bulbs, toilet paper, and linens; all clocks, television sets, radios, and
other electronic or audio/video equipment; all podiums, microphones, movie and
slide projectors and screens, and other property relating to conference and
convention facilities; all security and cleaning deposits collected from any
tenants or lessees of any part of the Property, all deposits collected from
purchasers pursuant to contracts for sale of the Property or any portion of the
Property; and, subject to the other provisions of this Deed of Trust, all
proceeds of any fire and builders' risk insurance policy, or of any policy
insuring the Property (and the contents of the Improvements) against any other
perils, all awards made in eminent domain proceedings, or purchased in lieu of
that, made with respect to the Property, and any compensation, award, payment,
or relief given by any governmental agency or other source because of damage to
the Property resulting from earthquake, flood, windstorm, or any emergency or
any other event or circumstance. The specific enumerations in this Deed of Trust
do not exclude the general.
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The security interest also includes all additions to, substitutions for,
changes in, or replacements of the whole or any part of these articles of
property, together with all contract rights of Trustor in construction
contracts, bonds, agreements for purchase and sale of the Property, all policies
of insurance arising out of the improvement or ownership of the Property, and
all accounts, contract rights, chattel paper, instruments, general intangibles,
receivables and other obligations of any kind now or later existing, arising out
of, or in connection with the operation or development of the Property. The
security interest also includes all rights now or later existing in all security
agreements, leases, and other contracts securing or otherwise relating to any
accounts, contract rights, chattel paper, instruments, general intangibles, or
obligations; all causes of action and recoveries now or later existing for any
loss or diminution in value of the Property; all proceeds of any of the
Collateral; and, to the extent not otherwise included, all payments under
insurance (whether Beneficiary is the loss payee), or any indemnity, warranty,
or guaranty payable by reason of loss or damage to or otherwise with respect to
any of the Collateral.
9.2 REMEDIES. This Deed of Trust constitutes a security agreement with
--------
respect to the Collateral in which Beneficiary is granted a security interest.
Beneficiary has all of the rights and remedies of a secured party under the
California Uniform Commercial Code as well as all other rights and remedies
available at law or in equity. Trustor agrees to execute and deliver on demand,
and irrevocably constitutes and appoints Beneficiary the attorney-in-fact of
Trustor to execute, deliver, and file, any security agreements, financing
statements, continuation statements, or other instruments that Beneficiary may
request to impose, perfect, or continue the perfection of the lien or security
interest created by this Deed of Trust. On the occurrence of any Event of
Default (taking into account any applicable period of grace or cure),
Beneficiary will have the right to sell at any public or private sales as
permitted by applicable law any of the Collateral that is personal property.
Beneficiary will also have any other rights and remedies, whether at law, in
equity, or by statute that are available to secured creditors. Any disposition
may be conducted by an employee or agent of Beneficiary or Trustee. Any Person,
including both Trustor and Beneficiary, will be eligible to purchase any part or
all of the Collateral at any disposition.
9.3 EXPENSES.
--------
Expenses of retaking, holding, and preparing for sale, selling, or the like
will be borne by Trustor and will include Beneficiary's and Trustee's attorney
fees and legal expenses. Trustor, on demand of Beneficiary, will assemble the
Collateral and make it available to Beneficiary at the Property, a place deemed
to be reasonably convenient to Beneficiary and Trustor. Beneficiary will give
Trustor at least ten (10) days' prior written notice of the time and place of
any public sale or other disposition of the Collateral or of the time of or
after which any private sale or any other intended disposition is to be made. If
the notice is sent to Trustor in the manner provided for the mailing of notices
in this Deed of Trust, it is deemed reasonable notice to Trustor.
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9.4 FIXTURE FILING.
--------------
(a) This Deed of Trust constitutes a financing statement filed as a
fixture filing in the Official Records of the County Recorder of the county in
which the Property is located with respect to all Fixtures included within the
term Property as used in this Deed of Trust and with respect to any goods,
Collateral, or other personal property that may now be or later become fixtures.
(b) It is understood and agreed that, to protect Beneficiary against
the effect of Uniform Commercial Code (S) 9313, if any fixture owned by Trustor
on the Property, or any part of any fixture, is replaced or added to, or any new
fixture owned by Trustor is installed by Trustor, and in each case the fixture
has a cost or fair market value in excess of One Thousand Dollars ($1,000.00)
and the fixture is or may be subject to a security interest held by a seller or
any other party, the following will apply:
(1) Trustor or any owner of all or any part of the Property
will, before the replacement, addition, or installation of any fixture, obtain
the prior written approval of Beneficiary, and give Beneficiary written notice
that a security agreement with respect to the fixture has been or will be
consummated, and the notice will contain the following information:
(i) description of the fixtures to be replaced, added to,
installed, or substituted;
(ii) a recital of the location at which the fixtures will
be replaced, added to, installed, or substituted;
(iii) a statement of the name and address of the holder
and amount of the security interest; and
(iv) the date of the purchase of the fixtures.
Neither this subsection nor any consent by Beneficiary pursuant to this
subsection will constitute an agreement to subordinate any right of Beneficiary
in fixtures or other property covered by this Deed of Trust.
(2) Beneficiary may at any time pay the balance due under the
security agreement and the amount paid will be:
(i) secured by this Deed of Trust and will be a lien on
the Property, enjoying the same priorities as this Deed of Trust,
(ii) added to the amount of the Note or other obligation
secured by this Deed of Trust, and
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(iii) on demand with interest at the Default Rate from the
time of the payment; and if Trustor is in default for ten (10) days after
demand, the entire principal sum secured with all unpaid interest will, at the
Beneficiary's option, become immediately due, regardless of any contrary
provision in this Deed of Trust or the Note; or Beneficiary will have the
privilege of acquiring by assignment from the holder of the security interest
any contract rights, accounts receivable, chattel paper, negotiable or
nonnegotiable instruments, or other evidence of Trustor's indebtedness for the
fixtures, and, on acquiring these interests by assignment, will have the right
to enforce the security interest as an assignee, in accordance with the
California Uniform Commercial Code and other applicable law.
(3) Whether Beneficiary has paid or taken an assignment of the
security interest, if at any time Trustor is in default for a period of ten (10)
days under the security agreement covering the fixtures, that default will be
considered a material breach of Trustor's covenants under this Deed of Trust,
and will, at Beneficiary's option, constitute a default under this Deed of
Trust, and the principal sum secured will, at Beneficiary's option, become
immediately due.
(4) The provisions of subsections (ii) and (iii) above will not
apply if the goods that may become fixtures are of at least equivalent value and
quality as any property being replaced and if the rights of the party holding
the security interest have been expressly subordinated, at no cost to
Beneficiary, to the lien of this Deed of Trust in a manner satisfactory to
Beneficiary, including, without limitation, at Beneficiary's option, providing
to Beneficiary a satisfactory opinion of counsel that this Deed of Trust
constitutes a valid and subsisting first lien on the fixtures that is not
subordinate to the lien of the security interest under any applicable law,
including, without limitation, the provisions of Uniform Commercial Code (S)
9313.
9.5 ASSIGNMENT OF AGREEMENTS.
------------------------
(a) As partial security for the Loan, Trustor sells, assigns,
transfers, sets over, and delivers to Beneficiary all of Trustor's right, title,
and interest in all agreements, permits, and contracts pertaining to the use or
operation of the Property, including, but not limited to, environmental impact
reports; negative declarations; map approvals; grading and construction permits;
conditional use permits; applications for all permits; management agreements;
all development rights in the Property that Trustor may now or later acquire
(including, without limitation, development rights arising in connection with
any action by a governmental entity, including, by way of illustration, but not
of limitation, inducement resolutions of county, municipal, or other
governmental entities); agreements with contractors, suppliers, and construction
managers; and agreements pertaining to the transfer of development rights or
permitted floor area under applicable laws or ordinances (collectively,
"AGREEMENTS"), as they may be amended or otherwise modified from time to time,
including, without limitation, the right of Trustor to terminate any of the
Agreements, to perform under them, and to compel performance and otherwise
exercise all remedies under them, together with the immediate and continuing
right to collect and receive all sums
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that may become due to Trustor, or which Trustor may now or later become
entitled to demand or claim, arising or issuing out of the Agreements,
including, without limitation, claims of Trustor for damages arising out of
breach of or default under any of the Agreements and all rights of Trustor to
receive proceeds of any insurance, indemnity, warranty, or guaranty with respect
to any of the Agreements. However, so long as no Event of Default has occurred
and is continuing, Trustor will have the right under a license granted to
collect and retain all sums that may become payable to Trustor under the
Agreements.
(b) Trustor covenants and agrees to punctually observe, perform, and
discharge the obligations, terms, covenants, conditions, and warranties to be
observed, performed, and discharged by it under the Agreements. Beneficiary,
upon an Event of Default, at its option and upon written notice to Trustor, will
have the right to declare the assignment in this Section 9.5 to be absolute,
-----------
and, in addition, Beneficiary will have the complete right then or later to
exercise and enforce all of the rights and remedies provided by law.
(c) The acceptance by Beneficiary of the assignment in this Section
-------
9.5, with all the rights, powers, privileges, and authority granted will not,
- ---
prior to the exercise of Beneficiary's right to declare the assignment in this
Section 9.5 to be absolute, obligate Beneficiary to assume any obligations under
- -----------
the Agreements or to take any action under them, or to expend any money or incur
any expense or perform or discharge any obligation, duty, or liability under the
Agreements, or to assume any obligation or responsibility for the nonperformance
of the provisions by Trustor.
10. ASSIGNMENT OF LEASES AND RENTS.
------------------------------
10.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary:
----------
(a) all of Trustor's right, title, and interest in all leases;
licenses; agreements relating to the management, leasing, or operation of the
Property; and other agreements of any kind relating to the use or occupancy of
the Property, whether now existing or entered into after the date of this Deed
of Trust, including, without limitation, that certain lease between Trustor, as
lessor, and M.C. Word CPA, a Professional Corporation, as lessee ("LEASES"), and
(b) the rents, issues, and profits of the Property, including,
without limitation, all amounts payable and all rights and benefits accruing to
Trustor under the Leases ("PAYMENTS"), for the purposes and on the terms and
conditions below. The term Leases will also include all guarantees of and
security for the lessees' performance, and all amendments, extensions, renewals,
or modifications that are permitted. This is a present and absolute assignment,
not an assignment for security purposes only, and Beneficiary's right to the
Leases and Payments is not contingent on, and may be exercised without,
possession of the Property.
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10.2 LICENSE. Beneficiary confers on Trustor a license ("LICENSE") to
-------
collect and retain the Payments as they become due until the occurrence of an
Event of Default. Upon an Event of Default, the License will be automatically
revoked and Beneficiary may collect and retain the Payments without notice and
without taking possession of the Property. Trustor irrevocably authorizes and
directs the lessees under the Leases to rely on and comply with any notice or
demand by Beneficiary for the payment to Beneficiary of any rental or other sums
that may at any time become due under the Leases, or for the performance of any
of the lessees' undertakings under the Leases. The lessees will have no right or
duty to inquire as to whether any Default has actually occurred or is then
existing. Trustor relieves the lessees from any liability to Trustor by reason
of relying on and complying with any notice or demand by Beneficiary.
10.3 EFFECT OF ASSIGNMENT. The assignment will not impose on Beneficiary
--------------------
any duty to produce rents, issues, or profits from the Property, or cause
Beneficiary to be:
(a) a mortgagee-in-possession for any purpose;
(b) responsible for performing any of the obligations of the lessor
under any of the Leases; or
(c) responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any negligence
in the management, upkeep, repair, or control of the Property. Beneficiary will
not be liable to Trustor or any other party as a consequence of the exercise of
the rights granted to Beneficiary under this assignment or the failure of
Beneficiary to perform any obligation of Trustor arising under the Leases.
10.4 LEASING COVENANTS. Trustor covenants and agrees as follows:
-----------------
(a) At Trustor's sole cost to:
(1) perform all obligations of the lessor under the Leases and
enforce performance by the lessees of their obligations under the Leases;
(2) subject to the provisions of Section 10.4(b)(iv) below,
-------------------
enforce all remedies available to Trustor in case of default by the lessees
under any of the Leases and prosecute and defend any action, arbitration, or
other controversy relating to any of the Leases or to Trustor's interest in any
of the Leases;
(3) give Beneficiary prompt notice of any default that occurs
under any of the Leases, whether by the lessees or Trustor;
(4) exercise diligent, good-faith efforts to keep all portions
of the Property leased at all times and at rentals not less than the fair market
rental value;
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(5) promptly upon execution, deliver to Beneficiary fully
executed counterpart originals of the Leases; and
(b) except with Beneficiary's prior written consent, not to:
(1) enter into any Leases after the date of this Deed of Trust;
(2) only enter into leases which provide solely for the payment
of rent which qualifies as "rents from real property" as that phrase is defined
in Internal Revenue Code Section 856(d);
(3) execute any other assignment relating to any of the Leases
or the Payments;
(4) discount any rent or other sums due under the Leases or
collect them in advance, other than to collect rent one (1) month in advance of
the time when it becomes due;
(5) terminate, modify, or amend any of the terms of the Leases
or release or discharge the lessees from any obligations;
(6) consent to any assignment or subletting by any lessee; or
(7) subordinate any of the Leases to any other deed of trust or
encumbrance.
Any attempted action in violation of the provisions of Section 10.4(b) will be
---------------
voidable at Beneficiary's election.
10.5 APPLICATION OF RENTS. Beneficiary, in its sole discretion, may
--------------------
apply, or require the application of, all amounts received pursuant to the
assignment to the payment of any one or more of the Obligations in any order
that Beneficiary may elect.
10.6 ESTOPPEL CERTIFICATES. Within twenty (20) days after request by
---------------------
Beneficiary, Trustor will deliver to Beneficiary and to any party designated by
Beneficiary estoppel certificates executed by Trustor and by each of the
lessees, in recordable form, certifying:
(a) that the assignment and the Leases are in full force;
(b) the date of each lessee's most recent payment of rent;
(c) that there are no defenses or offsets outstanding, or stating
those claimed by Trustor or lessees under the assignment or the Leases,; and
(d) any other information reasonably requested by Beneficiary.
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10.7 REMEDIES. In addition to any other remedies in this Deed of Trust,
--------
Beneficiary will have the following rights and remedies upon the occurrence of
an Event of Default:
(a) To receive the Payments and any other amounts arising or accruing
under the Leases or from the Property;
(b) To collect, sue for, settle, compromise, and give releases for
the Payments and pursue any remedies for the enforcement of the Leases or
Trustor's rights under the Leases; and
(c) To take possession of the Property, and hold, manage, lease, and
operate it on any terms and for any period of time that Beneficiary may deem
proper and, either with or without taking possession of the Property, in its own
name, make from time to time all alterations, renovations, repairs, or
replacements that Beneficiary may deem proper.
10.8 DEFINITIONS. The terms lessor and lessors as used in this Deed of
-----------
Trust will include all owners, landlords, licensors, and other parties in a
similar position with respect to the Leases. The terms lessee and lessees will
include any tenants and licensees and any other parties in a similar position
and will also include any guarantors of or other obligors under the Leases.
10.9 NONDISTURBANCE AGREEMENTS. At Trustor's request, Beneficiary shall
-------------------------
enter into a nondisturbance and attornment agreement with respect to Trustor's
lease of the Property to a third party operator, which shall provide that
Beneficiary shall recognize the lessee's rights under the lease following a
foreclosure if the lessee is not in default under the lease at the time of the
foreclosure.
11. MISCELLANEOUS.
-------------
11.1 SUCCESSOR TRUSTEE. Beneficiary may remove Trustee or any successor
-----------------
trustee at any time and appoint a successor trustee by recording a written
substitution in the county where the Property is located, or in any other manner
permitted by law. Upon that appointment, all of the powers, rights, and
authority of Trustee will immediately become vested in the successor.
11.2 CHANGE OF LAW. If any law is passed, after the date of this Deed of
-------------
Trust, that deducts from the value of the Property, for the purposes of
taxation, any lien on it, or changes in any way the laws now in force for the
taxation of mortgages, deeds of trust, or debts secured by mortgage or deed of
trust (other than laws imposing taxes on income) or the manner of the collection
of any taxes so as to affect adversely the rights of Beneficiary as holder of
the Note and Beneficiary under this Deed of Trust, the Indebtedness will become
due at Beneficiary's option, exercised by thirty (30) days' notice to Trustor
unless Trustor, within that thirty (30) day period, if permitted by law, assumes
the payment of any tax or
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other charge imposed on Beneficiary for the period remaining until full payment
by Trustor of the Indebtedness.
11.3 NO WAIVER. No waiver by Beneficiary of any default or breach by
---------
Trustor will be implied from any omission by Beneficiary to take action on
account of that default if the default persists or is repeated. Also, no express
waiver will affect any default other than the default in the waiver and the
waiver will be operative only for the time and to the extent stated. Waivers of
any covenant, term, or condition in this Deed of Trust will not be construed as
a waiver of any subsequent breach of the same covenant, term, or condition. The
consent or approval by Beneficiary for any act by Trustor requiring further
consent or approval will not be deemed to waive or render unnecessary the
consent or approval for any subsequent similar act.
11.4 ABANDONMENT. Subject to any chattel mortgages, security agreements,
-----------
or other liens on title that may exist with the consent of Beneficiary, or any
provided for in this Deed of Trust, all Personalty that upon foreclosure of the
Property is owned by Trustor and is used in connection with the operation of the
Property will be deemed at Beneficiary's option to have become on that date a
part of the Property and abandoned to Beneficiary in its then condition.
11.5 NOTICES. All notices, advices, demands, requests, consents,
-------
statements, satisfactions, waivers, designations, refusals, confirmations, or
denials that may be required or contemplated under this Deed of Trust for any
party to serve on or give to any other will be in writing, and, if not in
writing, will not be deemed to have been given. Also, they must be either
personally served or sent with return receipt requested by registered or
certified mail with postage (including registration or certification charges)
prepaid in a securely enclosed and sealed envelope as follows:
(a) If to Trustor, addressed to:
Continuum Health Incorporated
31105 Rancho Viejo Road, No. 5
San Juan Capistrano, CA 92675
Attention: Johann Keil
(b) If to Beneficiary, addressed to:
G&L Realty Partnership, L.P.
439 North Bedford Drive
Beverly Hills, CA 90210
Attn: Mark Hamermesh
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With a copy to:
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
Attn: James R. Andrews, Esq.
11.6 SURVIVAL. The covenants and agreements in this Deed of Trust will
--------
bind and inure to the benefit of Beneficiary and Trustor and their successors
and assigns. It is agreed that Beneficiary may assign to or grant a
participation in any one or more lenders, free from any right of counterclaim,
recoupment, or setoff by Trustor, Beneficiary's rights and obligations in whole
or in part under the Loan Documents. Nothing in this Section 11.6 is intended to
------------
limit other provisions in the Loan Documents that by their terms survive the
repayment of the Indebtedness or the termination of any Loan Document.
11.7 SEVERABILITY. If any term, provision, covenant, or condition of this
------------
Deed of Trust or any application of it is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, in whole or in part, all
terms, provisions, covenants, and conditions of this Deed of Trust and all
applications of it not held invalid, void, or unenforceable will continue in
full force and will not be affected, impaired, or invalidated.
11.8 REFERENCES TO FORECLOSURE. References in this Deed of Trust to
-------------------------
foreclosure and related phrases are references to the appropriate procedure in
connection with Trustee's private power of sale, any judicial foreclosure
proceeding, and any deed given in lieu of foreclosure.
11.9 JOINDER OF FORECLOSURE. If Beneficiary holds any other or additional
----------------------
security for the payment of any Indebtedness or performance of any Obligation,
its sale or foreclosure, on any default in the payment or performance, in
Beneficiary's sole discretion, may be prior to, subsequent to, or joined or
otherwise contemporaneous with any sale or foreclosure. In addition to the
rights in this Deed of Trust specifically conferred, Beneficiary, at any time
and from time to time, may exercise any right or remedy now or later given by
law to beneficiaries under deeds of trust generally, or to the holders of any
obligations of the kind secured.
11.10 RIGHTS OF BENEFICIARY AND TRUSTEE. At any time and from time to
---------------------------------
time, without liability and without notice, and without releasing or otherwise
affecting the liability of any person for payment of any Indebtedness,
(a) Beneficiary, at its sole discretion and only in writing, may
extend the time for or release any Person now or later liable for payment of any
Indebtedness, or accept or release additional security, or subordinate the lien
or charge of this Deed of Trust, or
(b) Trustee, on written request of Beneficiary and presentation of
the Note, any additional notes secured by this Deed of Trust, and this Deed of
Trust for
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endorsement, may reconvey any part of the Property, consent to the making of any
map or plat of it, join in granting any easement on it, or join in any agreement
of extension or subordination.
On Beneficiary's written request and surrender of the Note, any additional
notes secured by this Deed of Trust, and this Deed of Trust to Trustee for
cancellation, and on payment to Trustee of its fees and expenses, Trustee will
reconvey without warranty the then trust property. The recitals in any
reconveyance will be conclusive proof of the truthfulness of them, and the
grantee in any reconveyance may be described as the person legally entitled.
11.11 COPIES. Trustor will promptly give to Beneficiary copies of all:
------
(a) notices of violation that Trustor receives from any governmental
agency or authority, and
(b) notices of default that Trustor receives under any agreement
relating to the borrowing of money by Trustor from any Person.
11.12 ERISA COMPLIANCE. Trustor will at all times comply with the
----------------
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to any retirement or other employment benefit plan to
which it is a party as employer. As soon as possible after Trustor knows, or has
reason to know, that any Reportable Event (defined in ERISA) with respect to any
plan of Trustor has occurred, it will furnish to Beneficiary a statement in
writing setting forth details about the Reportable Event and the action, if any,
that Trustor proposes to take, together with a copy of the notice of the
Reportable Event furnished to the Pension Benefit Guaranty Corporation. In
addition, if at any time the loan evidenced by the Note is deemed in whole or in
part to be a transaction prohibited by the provisions of ERISA, Trustor will
immediately reimburse Beneficiary on demand for all taxes levied against or
costs incurred by Beneficiary or Trustee by reason of the Reportable Event.
11.13 SUBORDINATION. At the option of Beneficiary, this Deed of Trust will
-------------
become subject and subordinate, in whole or in part (but not with respect to
priority of entitlement to any insurance proceeds, damages, awards, or
compensation resulting from damage to the Property or condemnation or exercise
of power of eminent domain), to any contracts of sale or any leases of the
Property on the execution by Beneficiary and recording of a unilateral
declaration to that effect in the official records of the county and state where
the Property is located. Beneficiary may require the issuance of any title
insurance endorsements to the Title Policy in connection with any subordination
that Beneficiary, in its judgment, determines are appropriate, and Trustor will
be obligated to pay any cost or expense incurred in connection with the
issuance.
11.14 NO MERGER. So long as any of the Indebtedness remains unpaid or
---------
Trustor has any further obligation under the Loan Documents, unless Beneficiary
otherwise consents
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in writing, the fee estate of Trustor in the Property or any part of it will not
merge, by operation of law or otherwise, with any leasehold or other estate in
the Property or any part of it, but will always be kept separate and distinct,
regardless of the union of the fee estate and the leasehold or other estate in
Trustor or any other Person.
11.15 INSPECTION OF PROPERTY. Beneficiary is authorized by itself or its
----------------------
agents, employees, or workers, to enter at any reasonable time on prior written
notice to Trustor on any part of the Property for the purpose of inspecting it,
and for the purpose of performing any of the acts it is authorized to perform
under the terms of this Deed of Trust. Trustor agrees to cooperate with
Beneficiary to facilitate any inspection.
11.16 PERFORMANCE BY TRUSTOR. Trustor will faithfully perform every
----------------------
covenant to be performed by Trustor under any lien or encumbrance, including,
without limiting the generality of this Deed of Trust, mortgages, deeds of
trust, leases, declarations or covenants, conditions and restrictions, and other
agreements that affect the Property, in law or in equity, that Beneficiary
reasonably believes may be prior and superior to or on a parity with the lien or
charge of this Deed of Trust. A breach of or a default under any lien or
encumbrance that exists after any applicable grace period in the pertinent
instrument has expired without that breach or default having been cured, will
constitute an Event of Default under this Deed of Trust. If Trustor fails to do
so, Beneficiary, without demand or notice and in its sole judgment, may do any
things required by Trustor by any of the provisions in this Deed of Trust and
incur and pay expenses in connection with that. Nothing in this section affects
Trustor's obligations pursuant to Sections 5.2 and 5.3 of this Deed of Trust or
--------------------
limits Beneficiary's rights.
11.17 PERSONALTY SECURITY INSTRUMENTS. Trustor agrees that if Beneficiary
-------------------------------
at any time holds additional security for any obligations secured by this Deed
of Trust, it may enforce the terms of it or otherwise realize on it, at its
option, either before or concurrently or after a sale is made under this Deed of
Trust, and may apply the proceeds on the Indebtedness secured without affecting
the status or waiving any right to exhaust any other security, including the
security under this Deed of Trust, and without waiving any breach or default or
any right or power, whether exercised under this Deed of Trust or in any other
security.
11.18 SUITS TO PROTECT PROPERTY. Trustor agrees to appear in and defend
-------------------------
any action or proceeding purporting to affect the security of this Deed of Trust
or any additional or other security for the obligations secured, the interest of
Beneficiary or the rights, powers, or duties of Trustee, and to pay all costs
and expenses, including, without limitation, cost of evidence of title and
attorney fees, in any action or proceeding in which Beneficiary or Trustee may
appear or be made a party, including, but not limited to, foreclosure or other
proceeding commenced by those claiming a right to any part of the Property under
subordinate liens, in any action to partition or condemn all or part of the
Property, whether pursued to final judgment, and in any exercise of the power of
sale in this Deed of Trust, whether the sale is actually consummated.
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11.19 JUNIOR LIENS. Trustor agrees:
------------
(a) that as of the date of this Deed of Trust there are no
encumbrances to secure debts junior to this Deed of Trust; and
(b) that there are to be none as of the date when this Deed of Trust
becomes of record.
11.20 FURTHER ADVANCES. On the request of Trustor or its permitted
----------------
successors in ownership of the Land, Beneficiary may, at its option, at any time
before full payment of the Indebtedness, make further advances to Trustor or the
successors in ownership, with interest and late charges to be secured by this
Deed of Trust. However, the amount of principal secured by this Deed of Trust
and remaining unpaid will not at the time of and including any advance exceed
the original principal sum secured. Also, if Beneficiary, at its option, makes a
further advance or advances, Trustor or the successors in ownership agree to
execute and deliver to Beneficiary a note, payable on or before the maturity of
the Indebtedness secured and bearing any other terms that Beneficiary will
require.
11.21 WAIVER OF STATUTE OF LIMITATIONS. The pleading of any statute of
--------------------------------
limitations as a defense to any obligations secured by this Deed of Trust is
waived, to the fullest extent permissible by law.
11.22 CHARGES FOR STATEMENTS. Trustor agrees to pay Beneficiary's
----------------------
reasonable charge, to the maximum amount permitted by law, for any statement
regarding the obligations secured by this Deed of Trust requested by Trustor or
on its behalf.
11.23 ENTIRE AGREEMENT. This Deed of Trust and the other Loan Documents
----------------
set forth the entire understanding between Trustor and Beneficiary and they will
not be amended except by a written instrument duly executed by each of Trustor
and Beneficiary. Any previous representations, warranties, agreements, and
understandings among the parties regarding the subject matter of the Loan or the
Loan Documents, whether written or oral, are superseded by this Deed of Trust
and the other Loan Documents.
11.24 INCORPORATION. All terms of the Loan Documents are incorporated in
-------------
this Deed of Trust by this reference. All persons who may have or acquire an
interest in the Property will be deemed to have notice of the terms of the Loan
Documents and to have notice, if provided for, that the rate of interest on one
or more Obligations may vary from time to time.
11.25 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
---------------------------
claiming through or under Trustor, and for all parties who may acquire a lien on
or interest in the Property, waives all rights to have the Property or any other
property that is now or later may be security for any Obligation ("OTHER
PROPERTY") marshaled on any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Obligations. Beneficiary will
have the right to sell, and any court in which foreclosure proceedings may
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be brought will have the right to order a sale of, the Property and any of the
Other Property as a whole or in separate parcels, in any order that Beneficiary
may designate.
11.26 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts
-------------------------------------------------
this trust when this Deed of Trust is recorded. From time to time on written
request of Beneficiary and presentation of this Deed of Trust for endorsement,
and without affecting the personal liability of any person for payment of any
indebtedness or the performance of any obligations, Trustee may, without
liability and without notice:
(a) reconvey all or any part of the Property;
(b) consent to the making of any map or plat; and
(c) join in any grant of easement, any declaration of covenants,
conditions, and restrictions, any extension agreement, or any agreement
subordinating the lien or charge of this Deed of Trust. Except as may be
required by applicable law, Trustee or Beneficiary may from time to time apply
to any court of competent jurisdiction for aid and direction in the execution of
the trust and the enforcement of the rights and remedies available, and may
obtain orders or decrees directing, confirming, or approving acts in the
execution of the trust and the enforcement of the remedies. Trustee has no
obligation to notify any party of any pending sale or any action or proceeding,
including, without limitation, actions in which Trustor, Beneficiary, or Trustee
will be a party, unless held or commenced and maintained by Trustee under this
Deed of Trust. Trustee will not be obligated to perform any act required of it
under this Deed of Trust unless the performance of the act is requested in
writing and Trustee is reasonably indemnified and held harmless against any
loss, cost, liability, or expense.
11.27 RELEASES, EXTENSIONS, MODIFICATIONS, AND ADDITIONAL SECURITY.
------------------------------------------------------------
Without notice to or the consent, approval, or agreement of any persons or
entities having any interest at any time in the Property or in any manner
obligated under the Obligations ("INTERESTED PARTIES"), Beneficiary may, from
time to time, release any person or entity from liability for the payment or
performance of any Obligation; take any action or make any agreement extending
the maturity or otherwise altering the terms or increasing the amount of any
Obligation; or accept additional security or release the Property or other
security for any Obligation. None of these actions will release or reduce the
personal liability of any of the Interested Parties, or release or impair the
lien of this Deed of Trust, or the priority of it on the Property. However, no
action taken or agreement made by Beneficiary to extend the maturity or
otherwise alter the terms or increase the amount of any Obligation will be
binding on Trustor without Trustor's consent.
11.28 RECONVEYANCE. Upon the payment and performance of all Obligations,
------------
including, without limitation, Beneficiary's receipt of all sums owing and
outstanding under the Note, Beneficiary will deliver to Trustee a written
request for reconveyance, and will surrender to Trustee for cancellation this
Deed of Trust and any note or instrument evidencing the Obligations. However,
Beneficiary will have no obligation to deliver the
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written request and documents until Beneficiary has been paid by Trustor, in
immediately available funds, all escrow, closing, and recording costs, the costs
of preparing and issuing the reconveyance, and any trustee's or reconveyance
fees. On Trustee's receipt of the written request by Beneficiary and the
documents, Trustee will reconvey, without warranty, the Property or that portion
then held. To the extent permitted by law, the reconveyance may describe the
grantee as the person or persons legally entitled and the recitals of any
matters or facts in any reconveyance will be conclusive proof of the
truthfulness of them. Neither Beneficiary nor Trustee will have any duty to
determine the rights of persons claiming to be rightful grantees of any
reconveyance. When the Property has been fully reconveyed, the last reconveyance
will operate as a reassignment of all future rents, issues, and profits of the
Property to the person legally entitled.
11.29 SUBROGATION. Beneficiary will be subrogated to the lien of all
-----------
encumbrances, whether released of record, paid in whole or in part by
Beneficiary pursuant to this Deed of Trust, or by the proceeds of any loan
secured by this Deed of Trust.
11.30 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person
-----------------------------------------
has executed this Deed of Trust as Trustor, the obligations of all those persons
will be joint and several.
11.31 RECOURSE TO SEPARATE PROPERTY. Any married person who executes this
-----------------------------
Deed of Trust as a Trustor agrees that any money judgment that Beneficiary or
Trustee obtains pursuant to the terms of this Deed of Trust or any other
obligation of that married person secured by this Deed of Trust may be collected
by execution on that person's separate property, and any community property of
which that person is a manager.
11.32 RULES OF CONSTRUCTION. When the identity of the parties or other
---------------------
circumstances make it appropriate, the singular number includes the plural.
11.33 SUCCESSORS IN INTEREST. The terms, covenants, and conditions in this
----------------------
Deed of Trust will be binding on and inure to the benefit of the heirs,
successors, and assigns of the parties. However, this section does not waive the
provisions of Section 5.3.
-----------
11.34 NO OFFSET. Trustor will pay to Beneficiary all amounts owing under
---------
the Note, this Deed of Trust, or any of the other Obligations without deduction,
offset, or counterclaim of any kind.
11.35 GOVERNING LAW. The parties expressly agree that this Deed of Trust
-------------
(including, without limitation, all questions regarding permissive rates of
interest) will be governed by or construed in accordance with the laws of the
state in which the Property is located and the applicable laws of the United
States of America.
11.36 WAIVER OF JURY TRIAL. TRUSTOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH
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RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY TRUSTOR,
AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BENEFICIARY IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY TRUSTOR.
11.37 NO DEFAULT AFFIDAVITS. After request by Beneficiary, Trustor shall
---------------------
within ten (10) days furnish Beneficiary with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest
of the Note, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Indebtedness, if any,
(vi) that the Note, this Deed of Trust and the other Loan Documents are valid,
legal and binding obligations and have not been modified or if modified, giving
particulars of such modification; and (vii) reaffirming all representations and
warranties of Trustor set forth herein and in the other Loan Documents as of the
date requested by Beneficiary or, to the extent of any changes to any such
representations and warranties, so stating such changes.
11.38 CONTROLLING AGREEMENT. It is expressly stipulated and agreed to be
---------------------
the intent of Trustor, and Beneficiary at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Beneficiary to contract for, charge, take, reserve, or receive a greater amount
of interest than under state law) and that this Section 11.38 (and the similar
-------------
paragraph contained in the Note) shall control every other covenant and
agreement in this Deed of Trust and the other Loan Documents. If the applicable
law (state or federal) is ever judicially interpreted so as to render usurious
any amount called for under the Note or under any of the other Loan Documents,
or contracted for, charged, taken, reserved, or received with respect to the
Indebtedness, or if Beneficiary's exercise of the option to accelerate the
maturity of the Note, or if any prepayment by Trustor results in Trustor having
paid any interest in excess of that permitted by applicable law, then it is
Trustor's and Beneficiary's express intent that all excess amounts theretofore
collected by Beneficiary shall be credited on the principal balance of the Note
and all other Indebtedness (or, if the Note and all other Indebtedness have been
or would thereby be paid in full, refunded to Trustor), and the provisions of
the Note and the other Loan Documents immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid or agreed to be paid to
Beneficiary for the use, forbearance, or detention of the Indebtedness shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Indebtedness until payment in full
so that the rate or amount of interest on account of the Indebtedness does not
exceed the maximum lawful rate from time to time in
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effect and applicable to the Indebtedness for so long as the Indebtedness is
outstanding. Notwithstanding anything to the contrary contained herein or in
any of the other Loan Documents, it is not the intention of Beneficiary to
accelerate the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of acceleration.
11.39 CHANGES IN LAWS REGARDING TAXATION. If any statute, federal or
----------------------------------
state, is enacted or adopted or amended after the date of this Deed of Trust,
which statute deducts the Indebtedness from the value of the Property for the
purpose of taxation or which imposes a tax, either directly or indirectly, on
the Indebtedness or Beneficiary's interest in the Property, Trustor will pay
such tax, with interest and penalties thereon, if any. In the event Beneficiary
is advised by counsel chosen by it that the payment of such tax or interest and
penalties by Trustor would be unlawful or taxable to Beneficiary or
unenforceable or provide the basis for a defense of usury, then in any such
event, Beneficiary shall have the option, by written notice of not less than
ninety (90) days, to declare the Indebtedness immediately due and payable.
11.40 NO CREDITS ON ACCOUNT OF THE DEBT. Trustor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Indebtedness for any
part of the Impositions assessed against the Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof, for real estate tax purposes by reason of this
Deed of Trust or the Indebtedness. In the event such claim, credit and
deduction shall be required by law, Beneficiary shall have the option, by
written notice of not less than ninety (90) days, to declare the Indebtedness
immediately due and payable.
11.41 DOCUMENTARY STAMPS. If at any time the United States of
------------------
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Note or this Deed of Trust, or
impose any other tax or charge on the same, Trustor will pay for the same, with
interest and penalties thereon, if any.
11.42 REASONABLENESS. Lender shall act reasonably and in good faith in
--------------
exercising any approval rights or other rights hereunder.
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<PAGE>
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day
and year first above written.
VALLEY CONVALESCENT, LLC,
a California limited liability company
By: Continuum Health Incorporated, a Delaware
corporation, its Manager
By: /s/ Johann Keil
-------------------------------------------
Name: Johann Keil
--------------------------------------
Title: President
-------------------------------------
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EXHIBIT A
---------
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY
OF IMPERIAL, AND IS DESCRIBED AS FOLLOWS:
THE SOUTH 222 FEET OF BLOCK 7 OF SOUTH PARK
NO.1, IN THE CITY OF EL CENTRO, COUNTY OF
IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO
MAP ON FILE IN BOOK 8, PAGE 43 OF FINAL MAPS
IN THE OFFICE OF THE COUNTY RECORDER OF
IMPERIAL COUNTY.
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<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of California )
) ss.
County of ORANGE )
On August 29, 1997 (date) before me, Shirley D. Winick (name and title "
Notary Public"), personally appeared Johann Keil (name of signer(s), personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
-----------------------------------------------------
person(s) whose name(s) is/are subscribed to the within instrument and
- ------ ---- --
acknowledged to me that he/she/they executed the same in his/her/their
-- ---
authorized capacity(ies), and that by his/her/their signature(s) on the
-------- --- ---------
instrument the person(s), or the entity upon behalf of which the person(s)
------ ------
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Shirley D. Winick
- ----------------------
(signature of Notary) (seal of Notary)
<PAGE>
EXHIBIT 10.70
Recording Requested By And
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401-1000
ASSIGNMENT OF LEASES AND RENTS
------------------------------
THIS ASSIGNMENT OF LEASES AND RENTS ("ASSIGNMENT") made as of August 29,
--
1997, by VALLEY CONVALESCENT, LLC a California limited liability company, having
its principal place of business at 31105 Rancho Viejo Road, No. 5, San Juan
Capistrano, California 92675 ("ASSIGNOR"), to G&L REALTY PARTNERSHIP, L.P., a
Delaware limited partnership, having an office at 439 North Bedford Drive,
Beverly Hills, California 90210 ("ASSIGNEE").
WITNESSETH:
THAT Assignor for good and valuable consideration, receipt whereof is
hereby acknowledged, hereby grants, transfer and absolutely and unconditionally
assigns to Assignee the entire lessor's interest in and to all current and
future leases, including, but not limited to, that certain lease between
Assignor, as lessor, and M.C. Word CPA, a Professional Corporation, as lessee,
and other agreements affecting the use, enjoyment, or occupancy of all or any
part of the land, more particularly described in Exhibit A annexed hereto and
---------
made a part hereof, together with the buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs, replacements and
improvements now or hereafter located thereon (hereinafter collectively referred
to as the "PROPERTY").
TOGETHER WITH all other leases and other agreements affecting the use,
enjoyment or occupancy of any part of the Property now or hereafter made
affecting the Property or any portion thereof, together with any extensions or
renewals of the same, this Assignment of other present and future leases and
present and future agreements being effective without further or supplemental
assignment;
The leases and other agreements described above together with all other
present and future leases and present and future agreements and any extension or
renewal of the same are hereinafter collectively referred to as the "LEASES";
TOGETHER WITH all accounts, deposits, rents, income, issues, revenues,
receipts, insurance proceeds and profits arising from the Leases and renewals
thereof and together with all rents, income, issues and profits (including, but
not limited to, all oil and gas or
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<PAGE>
other mineral royalties and bonuses) from the use, enjoyment and occupancy of
the Property, or the sale, lease, sublease, license, concession or other grant
of right to use or occupy any portion thereof, vending machine proceeds, and any
compensation received for the rendering of services by Assignor (hereinafter
collectively referred to as the "RENTS").
THIS ASSIGNMENT is made in consideration of that certain loan made by
Assignee to Assignor evidenced by that certain note made by Assignor to
Assignee, dated the date hereof, in the principal sum of Two Million Seven
Hundred Ninety-Nine Thousand Four Hundred Ninety Dollars and No Cents
($2,799,490.00) (the "NOTE"), and secured by that certain deed of trust,
security agreement, and fixture filing with assignment of rents and agreements
given by Assignor to Assignee, dated the date hereof covering the Property and
intended to be duly recorded (the "SECURITY INSTRUMENT").
The principal sum, interest and all other sums due and payable under the
Note and Security Instrument are hereinafter collectively referred to as the
"DEBT". This Assignment, the Note, the Security Instrument and any other
documents now or hereafter executed by Assignor and/or others and by or in favor
of Assignee which evidences, secures or guarantees all or any portion of the
payments due under the Note or otherwise is executed and/or delivered in
connection with the Note and the Security Instrument are hereinafter referred to
as the "LOAN DOCUMENTS".
ASSIGNOR WARRANTS that (A) Assignor is the sole owner of the entire
lessor's interest in the Leases; (B) the Leases are valid, enforceable and in
full force and effect and have not been altered, modified or amended in any
manner whatsoever; (C) none of the Rents have been assigned or otherwise pledged
or hypothecated; (D) none of the Rents have been collected for more than two (2)
months in advance; (E) Assignor has full power and authority to execute and
deliver this Assignment and the execution and delivery of this Assignment has
been duly authorized and does not conflict with or constitute a default under
any law, judicial order or other agreement affecting Assignor or the Property;
(F) the premises demised under the Leases have been completed and the tenants
under the Leases have accepted the same and have taken possession of the same on
a rent-paying basis; and (G) there exist on offsets or defenses to the payment
of any portion of the Rents.
ASSIGNOR COVENANTS with Assignee that Assignor (A) shall observe and
perform all the obligations imposed upon the lessor under the Leases and shall
not do or permit to be done anything to impair the value of the Leases as
security for the Debt; (B) shall promptly send copies to Assignee of all notices
of default which Assignor shall send or receive thereunder; (C) shall enforce
all of the terms, covenants and conditions contained in the Leases upon the part
of the lessee thereunder to be observed and performed, short of termination
thereof; (D) shall not collect any of the Rents more than one (1) month in
advance; (E) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents; (F) shall deliver to Assignee, upon request, tenant
estoppel certificates from each commercial tenant at the Property in form and
substance reasonably satisfactory to Assignee, provided that Assignor shall not
be required to deliver such certificates more frequently than two (2) times in
any calendar year; and (G) shall execute and deliver at the request of
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<PAGE>
Assignee all such further assurances, confirmations and assignments in
connection with the Property as Assignee shall from time to time require.
ASSIGNOR FURTHER COVENANTS with Assignee that Assignor shall not, without
the prior consent of Assignee (i) enter into any Lease of all or any part of the
Property in excess of 5% of gross leasable area rentable square feet (a "MAJOR
LEASE"), (ii) cancel, terminate, abridge or otherwise modify the terms of any
Major Lease, or accept a surrender thereof, (iii) consent to any transfer,
assignment of or subletting under any Major Lease, (iv) cancel, terminate,
abridge or otherwise modify any guaranty of any Major Lease or the terms
thereof, (v) accept prepayments of installments of Rents for a period of more
than one (1) month in advance or (vi) further assign the whole or any part of
the Leases or the Rents. In addition to the foregoing, Assignor shall not, (i)
lease all or any part of the Property, (ii) cancel, terminate, abridge or
otherwise modify the terms of any Lease, or accept a surrender thereof, (iii)
consent to any transfer, assignment of or subletting under any Lease not in
accordance with its terms or (iv) cancel, terminate, abridge or otherwise modify
any guaranty of any Lease or the terms thereof unless such actions are exercised
for a commercially reasonable purpose in an arms-length transaction on market
rate terms.
ASSIGNOR FURTHER COVENANTS with Assignee that (A) all Leases shall provide
that the tenant agrees to attorn to Assignee; (B) none of the Leases shall
contain any option to purchase, any right of first refusal to lease or purchase,
or any right to terminate the lease term (except in the event of the destruction
of all or substantially all of the Property); (C) Leases executed after the date
hereof shall not contain any provisions which adversely affect the Property or
which might adversely affect the rights of the Assignee, and (D) each tenant
shall conduct business only in that portion of the Property covered by its
lease. Upon request, Assignor shall furnish Assignee with executed copies of
all Leases.
THIS ASSIGNMENT is made on the following terms, covenants and conditions:
1. PRESENT ASSIGNMENT. Assignor does hereby absolutely and
------------------
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, it being intended by Assignor that this
assignment constitutes a present, absolute and unconditional assignment and not
an assignment for additional security only. Such assignment to Assignee shall
not be construed to bind Assignee to the performance of any of the covenants,
conditions, or provisions contained in any such Lease or otherwise to impose any
obligation upon Assignee. Assignor agrees to execute and deliver to Assignee
such additional instruments, in form and substance satisfactory to Assignee, as
may hereinafter be requested by Assignee to further evidence and confirm said
assignment. Nevertheless, subject to the terms of this paragraph, Assignee
grants to Assignor a revocable license to operate and manage the Property and to
collect the Rents. Assignor shall hold the Rents, or a portion thereof,
sufficient to discharge all current sums due on the Debt for use in the payment
of such sums. Upon an Event of Default (as defined in the Security Instrument),
the license granted to Assignor herein shall automatically be revoked by
Assignee and Assignee shall immediately be entitled to receive and apply all
Rents, whether or not Assignee enters upon and takes control of the Property.
Assignee and Trustee (as defined in
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<PAGE>
the Security Instrument) are hereby granted and assigned by Assignor the right,
at its option, upon the revocation of the license granted herein to enter upon
the Property in person, by agent or by court-appointed received to collect the
Rents. Any Rents collected after the revocation of the license herein granted
may be applied toward payment of the Debt in such priority and proportion as
Assignee, in its discretion, shall deem proper.
2. REMEDIES OF ASSIGNEE. Upon or at any time after an Event of Default,
--------------------
Assignee may, at its option, without waiving such Event of Default, without
notice and without regard to the adequacy of the security for the Debt, either
in person or by agent, with or without bringing any action or proceeding, or by
a receiver appointed by a court, take possession of the Property and have, hold,
manage, lease and operate the Property on such terms and for such period of time
as Assignee may deem proper and either with or without taking possession of the
Property in its own name, demand, sue for or otherwise collect and receive all
Rents, including those past due and unpaid, with full power to make from time to
time all alterations, renovations, repairs or replacements thereto or thereof as
may seem proper to Assignee and may apply the Rents to the payment of the
following in such order and proportion as Assignee in its sole discretion may
determine, any law, custom or use to the contrary notwithstanding: (a) all
expenses of managing and securing the Property, including, without being limited
thereto, the salaries, fees and wages of a managing agent and such other
employees or agents a Assignee may deem necessary or desirable and all expenses
of operating and maintaining the Property, including, without being limited
thereto, all taxes, charges, claims, assessments, water charges, sewer rents and
any other liens, and premiums for all insurance which Assignee may deem
necessary or desirable, and the cost of all alterations, renovations, repairs or
replacements, and all expenses incident to taking and retaining possession of
the Property; and (b) the Debt, together with all costs and attorneys' fees. In
addition to the rights which Assignee may have herein, upon the occurrence of an
Event of Default, Assignee, at its option, may either require Assignor to pay
monthly in advance to Assignee, or any receiver appointed to collect the Rents,
the fair and reasonable rental value for the use and occupation of such part of
the Property as may be in possession of Assignor or require Assignor to vacate
and surrender possession of the Property to Assignee or to such receiver and, in
default thereof, Assignor may be evicted by summary proceedings or otherwise.
Additionally, Assignee shall have the right to establish a lock box for the
deposit of all Rents and other receivables of Assignor relating to the Property.
For purposes of paragraphs 1 and 2 hereof, Assignor grants to assignee its
irrevocable power of attorney, coupled with an interest, to take any and all of
the aforementioned actions and any or all other actions designated by Assignee
for the proper management and preservation of the Property. The exercise by
Assignee of the option granted it in this paragraph and the collection of the
Rents and the application thereof as herein provided shall not be considered a
waiver of any default by Assignor under the Note, the Security Instrument, the
Leases, this Assignment or the other Loan Documents.
3. NO LIABILITY OF ASSIGNOR. Assignee shall not be liable for any loss
------------------------
sustained by Assignor resulting from Assignee's failure to let the Property
after an Event of Default or from any other act or omission of Assignee in
managing the Property after an Event of Default. Assignee shall not be
obligated to perform or discharge any obligation, duty or
-4-
<PAGE>
liability under the Leases or under or by reason of this Assignment and Assignor
shall, and hereby agrees, to indemnify Assignee for, and to hold Assignee
harmless from, any and all liability, loss or damage which may or might be
incurred under the Leases or under or by reason of this Assignment and from any
and all claims and demands whatsoever, including the defense of any such claims
and demands whatsoever, including the defense of any such claims or demands
which may be asserted against Assignee by reason of any alleged obligations and
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in the Leases. Should Assignee incur any such liability,
the amount thereof, including costs, expenses and attorneys' fees, shall be
secured hereby and by the Security Instrument and the other Loan Documents and
Assignor shall reimburse Assignee therefor immediately upon demand and upon the
failure of Assignor so to do Assignee may, at its option, declare all sums
secured hereby, the Note, the Security Instrument and the other Loan Documents
immediately due and payable. This Assignment shall not operate to place any
obligation or liability for the control, care, management or repair of the
Property upon Assignee, for the carrying out of any of the terms and conditions
of the Leases; nor shall it operate to make Assignee responsible or liable for
any waste committed on the Property by the tenants or any other parties, or for
any dangerous or defective condition of the Property, including, without
limitation, the presence of any Hazardous Substances (as defined in the Security
Instrument), or for any negligence in the management, upkeep, repair or control
of the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger.
4. NOTICE TO LESSEES. Assignor hereby authorized and directs the
-----------------
tenants named in the Leases or any other or future tenants or occupants of the
Property upon receipt from Assignee of written notice to the effect that the
Assignee is then the holder of the Note and that a default exists hereunder or
under this Assignment, the Note, the Security Instrument or the other Loan
Documents to pay over to Assignee all rents and to continue to do so until
otherwise notified by Assignee.
5. OTHER SECURITY. Assignee may take or release other security for the
--------------
payment of the Debt, may release any party primarily or secondarily liable
therefor and may apply any other security held by it to the reduction or
satisfaction of the Debt without prejudice to any of its rights under this
Assignment.
6. OTHER REMEDIES. Nothing contained in this Assignment and no act done
--------------
or omitted by Assignee pursuant to the power and rights granted to Assignee
hereunder shall be deemed to be a waiver by Assignee of its rights and remedies
under the Note, the Security Instrument or the other Loan Documents and this
Assignment is made and accepted without prejudice to any of the rights and
remedies possessed by Assignee under the terms thereof. The right of Assignee
to collect the Debt and to enforce any other security therefor held by it may be
exercised by Assignee either prior to, simultaneously with, or subsequent to any
action taken by it hereunder.
7. NO MORTGAGEE IN POSSESSION. Nothing herein contained shall be
--------------------------
construed as constituting Assignee a "mortgagee in possession" in the absence of
the taking of actual
-5-
<PAGE>
possession of the Property by Assignee. In the exercise of the powers herein
granted Assignee, no liability shall be asserted or enforced against Assignee,
all such liability being expressly waived and released by Assignor.
8. CONFLICT OF TERMS. In case of any conflict between the terms of this
-----------------
Assignment and the terms of the Security Instrument, the terms of the Security
Instrument shall prevail.
9. NO ORAL CHANGE. This Assignment and any provisions hereof may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally,
or by any act or failure to act on the part of Assignor or Assignee, but only
by an agreement in writing signed by the party against whom the enforcement of
any modification, amendment, waiver, extension, change, discharge or termination
is sought.
10. CERTAIN DEFINITIONS. Unless the content clearly indicates a contrary
-------------------
intent or unless otherwise specifically provided herein, words used in this
Assignment may be used interchangeable in singular or plural form and the word
"ASSIGNOR" shall mean each Assignor and any subsequent owner or owners of the
Property or any part thereof or any interest therein, the word "ASSIGNEE" shall
mean Assignee and any subsequent holder of the Note, the word "NOTE" shall mean
the Note and any other evidence of indebtedness secured by the Security
Instrument, the word "PERSON" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the word "PROPERTY" shall include any portion
of the Property and any interest therein; whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms; and the singular form of nouns and pronouns shall include the
plural and vice versa.
11. NON-WAIVER. The failure of Assignee to insist upon strict
----------
performance of any term shall not be deemed to be a waiver of any term of this
Assignment. Assignor shall not be relieved of Assignor's obligations hereunder
by reason of (i) failure of Assignee to comply with any request of Assignor or
any other party to take any action to enforce any of the provisions hereof or of
the Security Instrument, the Note or the other Loan Documents, (ii) the release
regardless of consideration, of the whole or any part of the Property, or (iii)
any agreement or stipulation by Assignee extending the time of payment or
otherwise modifying or supplementing the terms of this Assignment, the Note, the
Security Instrument or the other Loan Documents. Assignee may resort for the
payment of the Debt to any other security held by Assignee in such order and
manner as Assignee, in its discretion, may elect. Assignee may take any action
to recover the Debt, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Assignee thereafter to enforce its rights
under this Assignment. The rights of Assignee under this Assignment shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Assignee shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provisions.
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<PAGE>
12. INAPPLICABLE PROVISIONS. If any term, covenant or condition of this
-----------------------
Assignment is held to be invalid, illegal or unenforceable in any respect, this
Assignment shall be construed without such provision.
13. DUPLICATE ORIGINALS. This Assignment may be executed in any number
-------------------
of duplicate originals and each such duplicate original shall be deemed to be an
original.
14. GOVERNING LAW. This Assignment shall be governed and construed in
-------------
accordance with the laws of the state in which the real property encumbered by
the Security Instrument is located.
15. TERMINATION OF ASSIGNMENT. Upon payment in full of the Debt and the
-------------------------
delivery and recording of a satisfaction, release, reconveyance or discharge of
the Security Instrument duly executed by Assignee, this Assignment shall become
and be void and of no effect.
16. WAIVER OF JURY TRIAL. ASSIGNOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS ASSIGNMENT, THE SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
ASSIGNOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. ASSIGNEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY ASSIGNOR.
THIS ASSIGNMENT shall inure to the benefit of Assignee and any subsequent
holder of the Note and shall be binding upon Assignor, and Assignor's heirs,
executors, administrators, successors and assigns and any subsequent owner of
the Property.
Assignor has executed this instrument the day and year first above written.
ASSIGNOR:
VALLEY CONVALESCENT, LLC
a California limited liability company
By: Continuum Health Incorporated, a Delaware
corporation, its Manager
By: /s/ Johann Keil
------------------------
Name: Johann Keil
---------------------
Title: President
--------------------
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<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of California )
)ss.
County of ORANGE )
On August 29, 1997 (date) before me, Shirley D. Winick name and title
"Notary Public"), personally appeared JOHANN KEIL (name of signer(s)),
personally known to me (or proved to me on the basis of satisfactory evidence)
--------------------------------------------------
to be the person(s) whose name(s) is/are subscribed to the within instrument and
------ ---- --
acknowledged to me that he/she/they executed the same in his/her/their
--
authorized capacity(ies), and that by his/her/their signature(s) on the
-------- --- ---------
instrument the person(s), or the entity upon behalf of which the person(s)
------ ------
acted, executed the instrument.
WITNESS my hand official seal.
/s/ Shirley D. Winick
- -----------------------------
(signature of Notary) (seal of Notary)
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF
IMPERIAL, AND IS DESCRIBED AS FOLLOWS:
THE SOUTH 222 FEET OF BLOCK 7 OF SOUTH PARK
NO. 1, IN THE CITY OF EL CENTRO, COUNTY OF
IMPERIAL, STATE OF CALIFORNIA, ACCORDING TO
MAP ON FILE IN BOOK 8, PAGE 43 OF FINAL MAPS
IN THE OFFICE OF THE COUNTY RECORDER OF
IMPERIAL COUNTY.
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<PAGE>
EXHIBIT 10.71
PROMISSORY NOTE
$870,000.00 September 29, 1997
For value received, the undersigned, BURLEY SKILLED NURSING FACILITY, LLC,
a Delaware limited liability company ("BORROWER"), promises to pay to the order
of G&L REALTY PARTNERSHIP, L.P., a Delaware limited partnership ("LENDER"), at
439 North Bedford Drive, Beverly Hills, California 90210 or at any other place
that may be designated in writing by Lender, the principal sum of Eight Hundred
Seventy Thousand Dollars and No/Cents ($870,000.00) ("LOAN AMOUNT"), with
interest as set forth herein (calculated on the basis of a 360-day year). All
sums due are payable in lawful money of the United States of America. The
principal sum will bear interest at the London Interbank Offered Rate fixed for
30-day maturities ("LIBOR") (as defined below) plus 650 basis points.
LIBOR shall mean for 30-day maturities an interest rate per annum which is
the arithmetic mean (rounded upward to the nearest whole multiple of one-
sixteenth of one percent) of the respective London Interbank Offered Rates
offered to the principal office of Bank of America in London, England, by prime
banks in the London interbank market at 11:00 a.m. (London time), two business
days (defined as a day of the year on which dealings are carried on in the
London interbank market and banks are open for business in London and not
required or authorized to close in New York City) before the first day of such
30-day maturity period, for a period equal to such 30-day maturity period.
This Note is secured by, among other things, (i) a certain Deed of Trust,
Security Agreement, and Fixture Filing, with Assignment of Rents and Agreements
dated as of the same date as this Note, executed by Borrower, as trustor, in
favor of Lender, as beneficiary ("BURLEY DEED OF TRUST"), and encumbering the
real property described in the Burley Deed of Trust ("BURLEY PROPERTY"), and
(ii) a certain Deed of Trust, Security Agreement, and Fixture Filing, with
Assignment of Rents and Agreements dated as of the same date as this Note,
executed by Valley Living Center, LLC, a Delaware limited liability company, as
trustor, in favor of Lender, as beneficiary ("VALLEY LIVING DEED OF TRUST"), and
encumbering property described in the Valley Living Deed of Trust ("VALLEY
LIVING PROPERTY"). The Burley Deed of Trust and the Valley Living Deed of Trust
are collectively referred to herein as the "DEED OF TRUST." The Burley Property
and the Valley Living Property are collectively referred to herein as the
"PROPERTY." The holder of this Note will be entitled to the benefits of the
security provided by the Deed of Trust and will have the right to enforce the
covenants and agreements contained in the Deed of Trust.
Borrower will pay to Lender the principal amount of this Note, and accrued
interest, as follows:
Borrower will make an initial payment of interest only at the LIBOR rate
plus 650 basis points as determined by Lender, in accordance with the LIBOR
definition herein, and
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<PAGE>
communicated in writing to Borrower prior to the initial interest payment date,
on the first day of the first month after the date of disbursement of the Loan
Amount, covering interest accrued on this Note from the date of disbursement of
the Loan Amount to the end of the month in which the disbursement of the Loan
Amount will occur. After that, Borrower will make monthly payments of interest
only (at the LIBOR rate communicated in writing to Borrower prior to the
interest payment date, plus 650 basis points), on the first day of the second
month after the date of disbursement of the Loan Amount and the first day of
each succeeding month after that.
The entire unpaid principal balance of this Note, together with all accrued
and unpaid interest, will be due on April 1, 1998 ("MATURITY DATE"). The
Maturity Date may be extended to May 1, 1998, by the payment to Lender of the
sum of $4,350.00 on or before April 1, 1998. If the due date is so extended, it
may be further extended to June 1, 1998, by the payment to Lender of an
additional sum of $4,350.00 on or before May 1, 1998. If the due date is so
extended, it may be further extended to July 1, 1998, by the payment to Lender
of an additional sum of $4,350.00 on or before June 1, 1998. If the due date is
so extended, it may be further extended to August 1, 1998, by the payment to
Lender of an additional sum of $4,350.00 on or before July 1, 1998. If the due
date is so extended, it may be further extended to September 1, 1998, by the
payment to the Lender of an additional sum of $4,350.00 on or before August 1,
1998. If the due date is so extended, it may be further extended to October 1,
1998, by the payment to the Lender of an additional sum of $4,350.00 on or
before September 1, 1998. The aforementioned extension payments shall not be
applied to principal and interest otherwise owing under the terms of this Note.
In the event Lender fails to notify Borrower of the applicable LIBOR rate
before a date when interest is payable, the LIBOR rate previously determined by
Lender and communicated in writing to Borrower shall apply, and, if necessary,
for the next following interest payment date an adjustment will be made in the
interest payment amount payable by Borrower hereunder based upon the difference,
if any, in the LIBOR rate actually in effect during such period in question and
the LIBOR rate paid.
If the LIBOR rate is unavailable for a date when interest on any portion of
the Loan Amount outstanding is to be determined and paid, then that portion of
the Loan Amount outstanding shall bear interest at the rate per annum announced
publicly and most recently by Bank of America as its prime rate plus 500 basis
points.
If Borrower fails to make any required payment on or before five (5) days
following the date on which it becomes due, Borrower will pay, at Lender's
option, a late charge equal to five percent (5%) of the amount of the unpaid
payment.
From and after the Maturity Date, or an earlier date on which all sums
owing under this Note become due by acceleration or otherwise, all sums owing
under this Note will bear interest until paid in full at a rate equal to five
percent (5%) per annum in excess of the rate of interest specified above
("DEFAULT RATE").
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<PAGE>
All payments on this Note will be applied first to the payment of any
costs, fees, late charges, or other charges incurred in connection with the
indebtedness evidenced by this Note; next, to the payment of accrued interest;
then to the reduction of the principal balance; or in any other order that
Lender requires.
If:
(a) Borrower fails to pay when due any sums payable under this Note;
provided that such failure continues for five (5) business days after
written notice of such default;
(b) an Event of Default (defined in the Deed of Trust) occurs; or
(c) any other event or condition occurs that, under the terms of the
Deed of Trust, gives rise to a right of acceleration of sums owing under
this Note,
then Lender, at its sole option, will have the right to declare all sums owing
under the Note immediately due. However, if any document related to this Note
provides for the automatic acceleration of payment of sums owing under this
Note, all sums owing will be automatically due in accordance with the terms of
that document.
Borrower will have the right to pay, without penalty or premium, on any
monthly payment date, all or any portion of the outstanding principal amount of
this Note prior to the Maturity Date on not less than five (5) days' prior
written notice to Lender. Lender will apply all prepayments first to the
payment of any costs, fees, late charges, or other charges incurred in
connection with the indebtedness evidenced by this Note; next, to the payment of
accrued interest; then to the outstanding principal amount of this Note in
inverse order of maturity, or, at the option of Lender, in the regular order of
maturity; or in any other order that Lender requires.
Borrower will pay to Lender all sums owing under this Note without
deduction, offset, or counterclaim of any kind. The relationship of Borrower and
Lender under this Note is solely that of borrower and lender, and the loan
evidenced by this Note and secured by the Deed of Trust will in no manner make
Lender the partner or joint venturer of Borrower.
If any attorney is engaged by Lender to enforce or construe any provision
of this Note, the Deed of Trust or the other Loan Documents (defined in the Deed
of Trust) or as a consequence of any Event of Default, with or without the
filing of any legal action or proceeding, then Borrower will immediately pay to
Lender on demand all attorney fees and other costs incurred by Lender, including
attorneys' fees and costs at trial, upon appeal or any petition for review,
together with interest from the date of the demand until paid at the Default
Rate.
No previous waiver or failure or delay by Lender in acting with respect to
the terms of this Note, the Deed of Trust, or the other Loan Documents will
constitute a waiver of any
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<PAGE>
breach, default, or failure of condition under this Note, the Deed of Trust, or
the other Loan Documents. A waiver of any term of this Note, the Deed of Trust,
or the other Loan Documents must be made in writing and will be limited to the
express written terms of the waiver. If there are any inconsistencies between
the terms of this Note and the terms of any of the other Loan Documents, the
terms of this Note will prevail.
All notices required or permitted in connection with this Note will be in
writing and will be given at the place and in the manner provided in the Deed of
Trust for the giving of notices.
If this Note is executed by more than one person or entity as Borrower, the
obligations of each person or entity will be joint and several. No person or
entity will be a mere accommodation maker, but each will be primarily and
directly liable. Borrower waives presentment; demand; notice of dishonor; notice
of default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs, expenses, or losses and interest; notice of
interest on interest and late charges; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of the
rights or interests to properties securing payment of this Note. Time is of the
essence with respect to every provision of this Note. This Note will be
construed and enforced in accordance with the laws of the state in which the
Property is located, except to the extent that federal laws pre-empt state law,
and all persons and entities in any manner obligated under this Note consent to
the jurisdiction of any federal or state court where the Property is located
having proper venue and also consent to service of process by any means
authorized by the state court where the Property is located or federal law.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note and the other Loan
Documents and that this Note and the other Loan Documents constitute valid and
binding obligations of Borrower.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS,
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
-4-
<PAGE>
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of Lender, and then only to the extent therein specifically
set forth. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Borrower" and "Lender" shall include their
respective successions, assigns, heirs, executors and administrators.
BORROWER:
BURLEY SKILLED NURSING FACILITY, LLC,
a Delaware limited liability company
By: /s/ Johann Keil
------------------------------------
Name: JOHANN KEIL
----------------------------------
Title: Member
---------------------------------
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<PAGE>
EXHIBIT 10.72
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
DEED OF TRUST, SECURITY AGREEMENT, AND FIXTURE FILING
WITH ASSIGNMENT OF RENTS AND AGREEMENTS
This Deed of Trust, Security Agreement, and Fixture Filing with Assignment
of Rents and Agreements (this "DEED OF TRUST") is made as of September 29, 1997,
by BURLEY SKILLED NURSING FACILITY, LLC, A Delaware limited liability company
("TRUSTOR"), to LAND TITLE AND ESCROW, INC., an Idaho corporation ("TRUSTEE"),
for the benefit of G&L REALTY PARTNERSHIP, L.P., a Delaware limited partnership
("BENEFICIARY").
Witnesseth:
Trustor does irrevocably grant, transfer, and assign to Trustee, in trust,
with power of sale, all Trustor's right, title, and interest now owned or later
acquired in the real property ("LAND") located in Cassia County, Idaho, and more
particularly described in attached Exhibit A, incorporated by reference (Trustor
---------
agrees that any greater title to the Land later acquired during the term of this
Deed of Trust will be subject to this Deed of Trust); together with the rents,
issues, and profits, subject however, to the right, power, and authority granted
and conferred on Trustor in this Deed of Trust to collect and apply the rents,
issues, and profits; and Trustor also irrevocably grants, transfers, and assigns
to Trustee, in trust, with power of sale, all of Trustor's right, title, and
interest now owned or later acquired to the following property (including the
rights or interests pertaining to the property) located at the Property:
(1) all buildings ("BUILDINGS") and improvements now or later on the Land,
and all appurtenances, easements, water and water rights, and pumps and pumping
plants, and all shares of stock evidencing these; all machinery, equipment,
appliances, and fixtures for generating or distributing air, water, heat,
electricity, light, fuel, or refrigeration or for ventilating or sanitary
purposes or for the exclusion of vermin or insects or for the removal of dust,
refuse, or garbage; all wall safes, built-in furniture, and installations,
shelving, lockers, partitions, doorstops, vaults, elevators, dumbwaiters,
awnings, window shades, venetian blinds, light fixtures, fire hoses and brackets
and boxes for them, fire sprinklers, alarm systems, draperies, drapery rods and
brackets, screens, linoleum, carpets, furniture, furnishings, fixtures,
plumbing, laundry tubs and trays, iceboxes, refrigerators, heating units,
stoves, water heaters, incinerators, and communication systems and installations
for which
-1-
<PAGE>
any Building is specially designed; all of these items, whether now or later
installed, being declared to be for all purposes of this Deed of Trust a part of
the Land, the specific enumerations in this Deed of Trust not excluding the
general;
(2) the rents, issues, profits, and proceeds; and
(3) the Property to the extent not included in clauses (1) and (2) above.
For the purpose of securing, in the order of priority that Beneficiary
determines:
(1) payment of the indebtedness evidenced by (i) a Promissory Note of
Trustor dated as of the same date as this Deed of Trust in the principal amount
of Eight Hundred Seventy Thousand Dollars and No/Cents ($870,000.00)("NOTE"),
payable to Beneficiary or to order, and all extensions, modifications, or
renewals of the Note; and (ii) a Promissory Note of Valley Living Center, LLC, a
Delaware limited liability company ("VLC"), dated as of the same date as this
Deed of Trust in the principal amount of One Hundred Fifteen Thousand Two
Hundred Seventy-Two Dollars and No/Cents ($115,272.00) ("VALLEY LIVING NOTE"),
payable to Beneficiary or to order, and all extensions, modifications, or
renewals of the Valley Living Note.
(2) payment of the interest on that indebtedness according to the terms of
the Note;
(3) payment of all other sums (with interest as provided in this Deed of
Trust) becoming due and payable to Beneficiary or Trustee pursuant to the terms
of this Deed of Trust;
(4) performance of every obligation contained in this Deed of Trust, the
Note, any instrument now or later evidencing or securing any indebtedness
secured by this Deed of Trust, and any agreements, supplemental agreements, or
other instruments of security executed by Trustor as of the same date of this
Deed of Trust or at any time subsequent to the date of this Deed of Trust for
the purpose of further securing any indebtedness secured by this Deed of Trust,
or any part of it, or for the purpose of supplementing or amending this Deed of
Trust or any instrument secured by this Deed of Trust;
(5) payment of all other obligations owed by Trustor to Beneficiary that
by their terms recite that they are secured by this Deed of Trust, including
those incurred as primary obligor or as guarantor; and
(6) performance of every obligation contained in that certain Deed of
Trust, Security Agreement, and Fixture Filing With Assignment of Rents and
Agreements dated as of the same date as this Deed of Trust from VLC, as trustor,
in favor of Beneficiary ("VALLEY LIVING DEED OF TRUST") any instrument now or
later evidencing or securing any indebtedness secured by the Valley Living Deed
of Trust, and any agreements, supplemental agreements, or other instruments of
security executed as of the same date of the Valley
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<PAGE>
Living Deed of Trust or at any time subsequent to the date of the Valley Living
Deed of Trust for the purpose of further securing any indebtedness secured by
the Valley Living Deed of Trust, or any part of it, or for the purpose of
supplementing or amending the Valley Living Deed of Trust or any instrument
secured by the Valley Living Deed of Trust.
Regardless of anything stated above or any other term contained in this
Deed of Trust or in the Loan Documents (as defined in this Deed of Trust), none
of Trustor's obligations under or pursuant to the Certification Agreement (as
defined in this Deed of Trust) will be secured by the lien of this Deed of
Trust.
1. DEFINITIONS.
-----------
1.1 CERTAIN DEFINED TERMS. As used in this Deed of Trust the following
---------------------
terms will have the following meanings:
"ASSIGNMENT OF LEASES": The Assignment of Leases and Rents dated as
of the same date as this Deed of Trust executed by Trustor in favor of
Beneficiary.
"BUILDINGS": The Buildings as defined above in this Deed of Trust.
"CERTIFICATION AGREEMENT": The Environmental Certification Agreement
and Indemnity of Borrower dated on the same date as this Deed of Trust and
executed by Trustor in favor of Beneficiary.
"COLLATERAL": The Collateral as defined in Section 9.1 of this Deed
-----------
of Trust.
"DEFAULT RATE": A rate of interest per annum equal to five percent
(5%) per annum above the Loan Rate.
"FIXTURES": All fixtures located on the Improvements (as defined in
this Deed of Trust) or now or later installed in, or used in connection with,
any of the Improvements, including, but not limited to, all partitions, screens,
awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators,
cleaning and sprinkler systems, fire-extinguishing apparatus and equipment,
water tanks, heating, ventilating, air-conditioning and air-cooling equipment,
built-in refrigerators, and gas and electric machinery, appurtenances, and
equipment, whether or not permanently affixed to the Land or the Improvements.
"HAZARDOUS SUBSTANCE":
(a) any oil, flammable substance, explosive, radioactive material,
hazardous waste or substance, toxic waste or substance, or any other waste,
material, or pollutant that:
(1) poses a hazard to the Property or to persons on the
Property, or
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<PAGE>
(2) causes the Property to be in violation of any Hazardous
Substance Law;
(b) asbestos in any form;
(c) urea formaldehyde foam insulation;
(d) transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls;
(e) radon gas;
(f) any chemical, material, or substance defined as or included in
the definition of hazardous substance, hazardous substances, hazardous wastes,
hazardous materials, extremely hazardous waste, restricted hazardous waste, or
toxic substances or words of similar import under any applicable local, state,
or federal law or under the regulations adopted or publications promulgated
pursuant to those laws, including, but not limited to, any Hazardous Substance
Law, as amended from time to time;
(g) any other chemical, material, or substance, exposure to which is
prohibited, limited, or regulated by any governmental authority or which may
pose a hazard to the health and safety of the occupants of the Property or the
owners or occupants of property adjacent to or surrounding the Property, or any
other person coming on the Property or any adjacent property; and
(h) any other chemical, material, or substance that may pose a hazard
to the environment.
"HAZARDOUS SUBSTANCE CLAIM": Any enforcement, cleanup, removal,
remedial, or other governmental, regulatory, or private actions, agreements, or
orders threatened, instituted, or completed pursuant to any Hazardous Substance
Law, together with all claims made or threatened by any third party against
Trustor or the Property relating to damage, contribution, cost-recovery
compensation, loss, or injury resulting from the presence, release, or discharge
of any Hazardous Substance.
"HAZARDOUS SUBSTANCE LAW": Any federal, state, or local law,
ordinance, regulation, or policy relating to the environment, health, and
safety, any Hazardous Substance (including, without limitation, the use,
handling, transportation, production, disposal, discharge, or storage of the
substance), industrial hygiene, soil, groundwater, and indoor and ambient air
conditions or the environmental conditions on the Property, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended from time to time; the Hazardous Substances
Transportation Act, as amended from time to time; the Resource Conservation and
Recovery Act, as amended from time to time; the Federal Water Pollution Control
Act, as amended from time to time; the Hazardous Substance Account Act, as
amended from time to time; the Hazardous Waste
-4-
<PAGE>
Control Law, as amended from time to time; the Medical Waste Management Act, as
amended from time to time; the Emergency Planning and Community Right-to-Know
Act of 1986, as amended from time to time; the Solid Waste Disposal Act, as
amended from time to time; the Clean Water Act, as amended from time to time;
the Clean Air Act, as amended from time to time; the Toxic Substances Control
Act, as amended from time to time; the Safe Drinking Water Act, as amended from
time to time; the Occupational Safety and Health Act, as amended from time to
time; and the Porter-Cologne Water Quality Control Act, as amended from time to
time, and all rules and regulations adopted in respect of the foregoing laws
whether presently in force or coming into being and/or effectiveness hereafter.
"IMPOSITIONS" All real estate and personal property taxes and other
taxes and assessments, water and sewer rates and charges, and all other
governmental charges and any interest or costs or penalties with respect to
those charges, assessments, or taxes, ground rent and charges for any easement
or agreement maintained for the benefit of the Property, general and special,
ordinary and extraordinary, foreseen or unforeseen, of any kind that at any time
prior to or after the execution of the Loan Documents may be assessed, levied,
imposed, or become a lien on the Property or the rent or income received from
the Property, or any use or occupancy of the Property; and any charges,
expenses, payments, or assessments of any nature, if any, that are or may become
a lien on the Property or the rent or income received from the Property.
"IMPOSITION AND INSURANCE IMPOUND FUND": The fund that Trustor is
required to maintain pursuant to Section 4.4(c) of this Deed of Trust for the
--------------
payment of Impositions and Insurance Premiums.
"IMPROVEMENTS": All Buildings, improvements, and appurtenances on the
Land, and all improvements, additions, and replacements of those improvements
and other buildings and improvements, at any time later constructed or placed on
the Land.
"INDEBTEDNESS": The principal of and interest on, and all other
amounts, payments, and premiums due under, the Note, the Valley Living Note and
any extensions or renewals (including, without limitation, extensions or
renewals at a different rate of interest, regardless of whether evidenced by a
new or additional promissory note or notes), and all other indebtedness of
Trustor to Beneficiary under or secured by the Security Documents (defined in
this Deed of Trust), together with all other sums owed by Trustor to
Beneficiary, including those incurred as primary obligor or as guarantor, that
recite that they are secured by the Security Documents.
"INSURANCE PREMIUMS": The amounts Trustor is required to pay as
provided in Section 4.4(d).
--------------
"LAND": The Land as defined in this Deed of Trust.
"LEASES": All leasehold interests, including subleases and tenancies
following attornment, affecting or covering any portion of the Property.
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<PAGE>
"LOAN": The loan secured by this Deed of Trust and evidenced by the
Note.
"LOAN DOCUMENTS": The Note, the Valley Living Note, the Security
Documents (including, but not limited to, the Valley Living Deed of Trust), and
all other documents (including guaranties) evidencing, securing, or relating to
the Loan, except the Certification Agreement.
"LOAN PARTIES": Trustor, VLC and any guarantors of the loan or any
obligations under the Loan, together with their respective affiliates and their
respective members and officers.
"LOAN RATE": The rate at which the principal accrues interest as set
forth in the Note.
"MATERIAL ADVERSE CHANGE": Any material and adverse change in:
(a) the business or properties or condition (financial or
otherwise) of Trustor, or
(b) the condition or operation of the Property.
"NOTE": The Note as defined in this Deed of Trust.
"OBLIGATIONS" All of the covenants, promises, and other obligations
(other than the Indebtedness):
(a) made or owing by Trustor to or due to Beneficiary under or
as set forth in the Loan Documents, and
(b) made or owing by Trustor to every other Person, a breach of
which would or may affect Trustor's ownership, development, or operation of the
Property, except any covenants, promises, and other obligations of Trustor to
Beneficiary under the Certification Agreement.
"PERSON": Any natural person, corporation, firm, association,
government, governmental agency, or any other entity, whether acting in an
individual, fiduciary, or other capacity.
"PERSONALTY": Trustor's interest in all accounts, contract rights,
and general intangibles (specifically including any insurance proceeds and
condemnation awards) arising out of the ownership, development, or operation of
the Property, and all furniture, furnishings, equipment, machinery, construction
materials and supplies, leasehold interests in personal property, and all other
personal property (other than Fixtures) now or later on the Property, together
with all present and future attachments, accessions, replacements,
substitutions, and additions, and the cash and noncash proceeds.
-6-
<PAGE>
"PROPERTY": The Land, the Improvements, the Fixtures, and the
Personalty, together with:
(a) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, and appurtenances of the Land or the Improvements now or later
belonging to the Property, and all right, title, and interest of Trustor in any
streets, ways, alleys, strips, or gores of land adjoining the Land; and
(b) all of Trustor's right, title, and interest in the Land, the
Improvements, the Fixtures, and the Personalty, including any award for any
change of grade of streets affecting the Land, the Improvements, the
Fixtures, or the Personalty.
"RECEIVER": Any trustee, receiver, custodian, fiscal agent,
liquidator, or similar officer.
"RELEASE": Any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment, including continuing migration, of Hazardous Substances that
goes into the soil, surface water, or groundwater of the Property, whether or
not caused by, contributed to, permitted by, acquiesced to, or known to Trustor.
"SECURITY DOCUMENTS": This Deed of Trust, the Assignment of Leases,
the Valley Living Deed of Trust and all other documents now or later securing
any part of the payment of the Indebtedness or the observance or performance of
the Obligations.
"TITLE POLICY": The title insurance policy issued by Stewart Title
Guaranty Company to Beneficiary.
"USER": Any person, other than Trustor, who occupies, used, or comes
into or has occupied, used, or come into the Property or any part of it and any
agent or contractor of that person.
2. WARRANTY OF TITLE. Trustor warrants that:
-----------------
(a) Trustor is the lawful owner of the Property,
(b) Trustor will maintain and preserve the lien of this Deed of Trust
until the Indebtedness has been paid in full,
(c) Trustor has good, right, and lawful authority to grant the
Property as provided in this Deed of Trust, and
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<PAGE>
(d) Trustor will forever warrant and defend the grant made in this
Deed of Trust against all claims and demands, except as are specifically
set forth in this Deed of Trust.
3. REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
------------------------------
Beneficiary that as of the date of this Deed of Trust:
3.1 ORGANIZATION OF THE LOAN PARTIES.
--------------------------------
(a) Trustor is a limited liability company organized, validly
existing, and in good standing under the laws of the State of Delaware and is
qualified to do business in Oregon.
(b) Trustor has the requisite power and authority to own and manage
its properties, to carry on its business as now being conducted, and to own,
develop, and operate the Property.
(c) Trustor is qualified to do business in every jurisdiction in
which the nature of its business or its properties makes qualification
necessary.
(d) Trustor and its third party operator of the Property is in
compliance with all laws, regulations, ordinances, and orders of public
authorities applicable to it.
(e) Trustor's third party operator of the Property shall operate a
nursing care facility on the Property in compliance with all laws, regulations,
ordinances and orders of public authority.
3.2 VALIDITY OF LOAN DOCUMENTS.
--------------------------
(a) The execution, delivery, and performance by the Loan Parties of
the Loan Documents and the borrowings evidenced by the Note:
(1) are within the power of the Loan Parties,
(2) have been duly authorized by all requisite limited liability
company, corporate or partnership actions, as appropriate,
(3) have received all necessary governmental approval, and
(4) will not violate any provision of law, any order of any
court or agency of government, the charter documents of any Loan Party, or any
indenture, agreement, or any other instrument to which any Loan Party is a party
or by which any Loan Party or any of its property is bound, nor will they
conflict with, result in a breach of, or constitute (with due notice and lapse
of time) a default under any indenture, agreement, or
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<PAGE>
other instrument, or result in the creation or imposition of any lien, charge,
or encumbrance of any nature on any of the property or assets of any Loan Party,
except as contemplated by the provisions of the Loan Documents.
(b) Each of the Loan Documents, when executed and delivered to
Beneficiary, will constitute a valid obligation, enforceable in accordance with
its terms.
(c) The Note, this Deed of Trust and the other Loan Documents are not
subject to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, nor would the operation of any of the terms of the Note,
this Deed of Trust or any of the other Loan Documents, or the exercise of any
right thereunder, render this Deed of Trust unenforceable, in whole or in part,
or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury.
3.3 FINANCIAL STATEMENTS.
--------------------
(a) All financial statements and data that have been given to
Beneficiary with respect to any Loan Party:
(1) are complete and correct in all material respects;
(2) accurately present the financial condition of that Loan
Party on each date as of which they have been furnished, and accurately present
the results of the operations of that Loan Party for the periods for which they
have been furnished; and
(3) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered.
(b) All balance sheets and the notes with respect to the Loan Parties
furnished to Beneficiary disclose all liabilities of the Loan Parties, fixed and
contingent, as of their respective dates, as well as all obligations of those
Loan Parties under any guaranties.
(c) There has been no Material Adverse Change in the financial
condition or operations of Trustor since:
(1) the date of the most recent financial statement given to
Beneficiary with respect to Trustor of the Property, or
(2) the date of the financial statements given to Beneficiary
immediately prior to the date of this Deed of Trust, other than changes in the
ordinary course of business, none of which constitute a Material Adverse Change,
either individually or in the aggregate.
3.4 USE OF PROCEEDS OF LOAN. Trustor will use the Loan to assist in the
-----------------------
acquisition of the Property.
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<PAGE>
3.5 OTHER ARRANGEMENTS. Trustor is not a party to any agreement or
------------------
instrument materially and adversely affecting Trustor's present or proposed
business, properties, assets, operation, or condition, financial or otherwise;
and Trustor is not in default in the performance, observance, or fulfillment of
any of the material obligations, covenants, or conditions in any agreement or
instrument to which Trustor is a party that materially affect Trustor's present
or proposed business, properties, assets, operation, or condition, financial or
otherwise.
3.6 OTHER INFORMATION. All other reports, papers, data, and information
-----------------
given to Beneficiary with respect to Trustor and the Property are accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Beneficiary a true and accurate knowledge of the subject
matter.
3.7 LITIGATION. There is not now pending against or affecting any Loan
----------
Party, nor to the knowledge of any Loan Party is there threatened, any action,
suit, or proceeding at law or in equity or before any administrative agency
that, if adversely determined, would materially impair or affect:
(a) the financial condition or operations of Trustor, or
(b) the condition or operation of the Property.
3.8 OTHER WARRANTIES.
----------------
(a) The Property is not used for agricultural or grazing purposes,
and
(b) Trustor's third party operator of the Property is engaged in the
operation of a nursing care facility.
3.9 TAXES. Trustor has filed all federal, state, county, and municipal
-----
income tax returns required to have been filed and has paid all taxes that have
become due pursuant to those returns or pursuant to any assessments received by
Trustor, and Trustor does not know of any basis for any additional assessment
against Trustor in respect of those taxes.
3.10 COMPLIANCE WITH LAWS. Except as otherwise provided in this Deed of
--------------------
Trust, the Property and the proposed and actual use of the Property comply with
all laws, ordinances, rules, and regulations of all local, regional, county,
state, and federal governmental authorities having jurisdiction (including, but
not limited to, the Americans With Disabilities Act), and there is no action or
proceeding pending or, to the knowledge of Trustor after due inquiry, threatened
before any court, quasi-judicial body, or administrative agency at the time of
any disbursement by Beneficiary relating to the validity of the Loan or the
proposed or actual use of the Property. All rights to appeal any decision
rendered will have expired prior to the date of this Deed of Trust.
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<PAGE>
3.11 SINGLE ASSET ENTITY. Trustor does not own and will not own any other
-------------------
asset or property other than (i) the Property, and (ii) incidental personal
property necessary for the ownership and operation of the Property.
3.12 BROKERS, AGENTS, ADVISORS, CONSULTANTS AND FINDERS. No financial
--------------------------------------------------
advisors, brokers, underwriters, placement agents, agents or finders have been
dealt with by the Trustor in connection with the Loan.
3.13 TAXED AS PARTNERSHIP. Trustor is currently taxed as a partnership
--------------------
for income tax purposes.
4. AFFIRMATIVE COVENANTS. Until the entire Indebtedness has been paid in
---------------------
full, Trustor covenants to and agrees with Beneficiary as follows:
4.1 OBLIGATIONS OF TRUSTOR. Trustor will pay the Indebtedness and
----------------------
Trustor will continue to be liable for the payment of the Indebtedness until it
has been paid in full. Trustor:
(a) will timely perform all the covenants, agreements, terms, and
conditions to be performed by Trustor:
(1) under this Deed of Trust;
(2) as seller under each contract of sale of, and as lessor
under each lease of, for any portion of the Property for which a contract of
sale or lease has been approved in writing by Beneficiary;
(3) as required of Trustor under each document and agreement
constituting one of the Security Documents;
(4) under all other agreements between Trustor and Beneficiary
in accordance with the respective terms of the agreement; and
(5) as required of Trustor under all other agreements to which
Trustor is a party with respect to the Property;
(b) will not cancel, surrender, modify, amend, or permit the
cancellation, surrender, modification, or amendment of any of the previously
mentioned agreements or any of the covenants, agreements, terms, or conditions
contained in any of them without the prior written consent, in each case, of
Beneficiary; and
(c) will keep Beneficiary indemnified against all actions,
proceedings, costs (including, without limitation, Beneficiary's counsel fees
and disbursements), claims, and damages incurred or sustained by Beneficiary in
respect of the nonpayment of any
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<PAGE>
charges or the nonobservance or nonperformance of any of the covenants,
agreements, terms, or conditions in any of the previously mentioned agreements.
4.2 INSURANCE.
---------
(a) Trustor, at its sole cost and expense, will keep the Property
insured for the mutual benefit of Trustor and Beneficiary against loss or damage
by earthquake and fire, and against loss or damage by other risks embraced by
coverage of the type now known as the broad form of extended coverage,
including, but not limited to, riot and civil commotion, vandalism, malicious
mischief, burglary, theft, and mysterious disappearance, and against any other
risks or hazards that Beneficiary may from time to time reasonably designate, in
an amount not less than one hundred percent (100%) of the then full replacement
cost of the Improvements, without deduction for physical depreciation. The
policies of insurance carried in accordance with this section shall contain the
Replacement Cost Endorsement with a waiver of depreciation, and shall have a
deductible no greater than $10,000.00 unless so agreed by Beneficiary.
Notwithstanding the above, with respect to earthquake insurance, (A) such
insurance shall be required only to the extent it is available at commercially
reasonable prices, and (B) such insurance shall be on commercially reasonable
terms and with commercially reasonable deductible amounts.
(b) Trustor, at its sole cost and expense, but for the mutual benefit
of Trustor and Beneficiary, will maintain during the term of this Deed of Trust
the following policies of insurance:
(i) Flood insurance if any part of the Property is located in
an area identified by the Federal Emergency Management Agency as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Program in an amount at least equal to the
outstanding principal amount of the Loan or the maximum limit of coverage
available with respect to the Property under said Program, whichever is less.
(ii) Commercial general liability insurance, including broad
form property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages and containing minimum limits per occurrence of
$1,000,000 and $2,000,000 in the aggregate for any policy year. In addition, at
least $5,000,000 excess and/or umbrella liability insurance shall be obtained
and maintained for any and all claims, including all legal liability imposed
upon Trustor and all court costs and attorneys' fees incurred in connection with
the ownership, operation and maintenance of the Property.
(iii) Rental loss and/or business interruption insurance in an
amount equal to the greater of (A) estimated gross revenues for eighteen (18)
months from the operations of the Property or (B) the projected operating
expenses (including debt service) for eighteen (18) months for the maintenance
and operation of the Property.
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<PAGE>
(iv) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in the Improvements (without
exclusion for explosions), to the extent that such items now or hereafter exist
upon the Property, in an amount at least equal to the outstanding principal
amount of the Note.
(v) If the Property includes commercial property, workers'
compensation insurance with respect to any employees of Trustor, as required by
any governmental authority or legal requirement.
(vi) During any period of repair or restoration, builder's "all
risk" insurance in an amount equal to not less than the full insurable value of
the Property insuring against such risks (including, without limitation, fire
and extended coverage and collapse of the Improvements to agreed limits) as
Beneficiary may request, in form and substance acceptable to Beneficiary.
(vii) Ordinance or law coverage to compensate for the cost of
demolition and the increased cost of construction.
(viii) Such other insurance as may from time to time be
reasonably required by Beneficiary in order to protect its interests, including
earthquake insurance coverage.
(c) Effective on the occurrence of any Event of Default, all of
Trustor's right, title, and interest in all policies of property insurance and
any unearned premiums paid are assigned to Beneficiary, who may assign them to
any purchaser of the Property at any foreclosure sale.
(d) All policies of insurance (the "POLICIES") required pursuant to
this Section: (i) shall be issued by companies approved by Beneficiary and
licensed to do business in the state where the Property is located, with a
claims paying ability rating of "AA" or better by Standard & Poor's Rating
Services, a division of the McGraw Hill Companies, Inc. and/or a rating of "A:X"
or better in the current Best's Insurance Reports; (ii) shall name Beneficiary
and its successors and/or assigns as their interest may appear as the
beneficiary/ mortgagee; (iii) shall contain a non-contributory standard
mortgagee clause and a lender's loss payable endorsement or their equivalents,
naming Beneficiary as the person to which all payments made by such insurance
company shall be paid; (iv) shall contain a waiver of subrogation against
Beneficiary; (v) shall be maintained throughout the term of this Deed of Trust
without cost to Beneficiary; (vi) shall be assigned and the originals delivered
to Beneficiary; (vii) shall contain such provisions as Beneficiary deems
reasonably necessary or desirable to protect its interest including, without
limitation, endorsements providing that neither Trustor, Beneficiary nor any
other party shall be a co-insurer under said Policies and that Beneficiary shall
receive at least thirty (30) days prior written notice of any modification,
reduction or cancellation; and (viii) shall be satisfactory
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<PAGE>
in form and substance to Beneficiary and shall be approved by Beneficiary as to
amounts, form, risk coverage, deductibles, loss payees and insureds. Trustor
shall pay the premiums for such Policies (the "INSURANCE PREMIUMS") as the same
become due and payable and shall furnish to Beneficiary evidence of the renewal
of each of the Policies with receipts for the payment of the Insurance Premiums
or other evidence of such payment reasonably satisfactory to Beneficiary
(provided, however, that Trustor is not required to furnish such evidence of
payment to Beneficiary in the event that such Insurance Premiums have been paid
by Beneficiary pursuant to Section 4.4 hereof). If Trustor does not furnish
-----------
such evidence and receipts at least thirty (30) days prior to the expiration of
any expiring Policy, then Beneficiary may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums promptly on demand.
Within thirty (30) days after request by Beneficiary, Trustor shall obtain such
increases in the amounts of coverage required hereunder as may be reasonably
requested by Beneficiary, taking into consideration changes in the value of
money over time, changes in liability laws, changes in prudent customs and
practices.
4.3 MAINTENANCE, WASTE, AND REPAIR. Trustor will maintain the
------------------------------
Improvements now or later existing in good and tenantable repair, and will not
structurally alter them without the prior written consent of Beneficiary, or
remove or demolish them in whole or in part, nor will Trustor suffer any waste
of the Property or make any change in the use of the Property that will in any
way increase any ordinary fire or other hazard insurance premiums or permit
anything that may in any way impair the security of this Deed of Trust. Trustor
will not abandon the Property or lease the Property unprotected, vacant, or
deserted.
4.4 IMPOSITION AND INSURANCE; IMPOUNDS.
----------------------------------
(a) Trustor will pay when due all Impositions that are or that may
become a lien on the Property or are assessed against the Property or its rents,
royalties, profits, and income.
(b) Trustor will file all federal, state, provincial, county, and
municipal income tax returns required to be filed and will pay all taxes that
become due pursuant to the returns or pursuant to any assessments received by
Trustor.
(c) Trustor shall pay to Beneficiary on the first day of each
calendar month (a) one-twelfth of the Impositions that Beneficiary estimates
will be payable during the next ensuing twelve (12) months in order to
accumulate with Beneficiary sufficient funds to pay all such Impositions at
least thirty (30) days prior to their respective due dates, and (b) one-twelfth
of the Insurance Premiums that Beneficiary estimates will be payable for the
renewal of the coverage afforded by the Policies upon the expiration thereof in
order to accumulate with Beneficiary sufficient funds to pay all such Insurance
Premiums at least thirty (30) days prior to the expiration of the Policies (said
amounts in (a) and (b) above hereinafter called the "IMPOSITION AND INSURANCE
IMPOUND FUND"). The Imposition and Insurance Impound Fund and the payments of
interest or principal or both, payable pursuant to the Note, shall be added
together and shall be paid as an aggregate sum by Trustor to
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<PAGE>
Beneficiary. Beneficiary will apply the Imposition and Insurance Impound Fund
to payments of Impositions and Insurance Premiums required to be made by Trustor
pursuant to Sections 4.2(f) and 4.4(a) hereof. In making any payment relating
--------------------------
to the Imposition and Insurance Impound Fund, Beneficiary may do so according to
any bill, statement or estimate procured from the appropriate public office
(with respect to Impositions) or insurer or agent (with respect to Insurance
Premiums), without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax, assessment, sale, forfeiture, tax lien or title
or claim thereof. If the amount of the Imposition and Insurance Impound Fund
shall exceed the amounts due for Impositions and Insurance Premiums pursuant to
Sections 4.2(f) and 4.4(a) hereof, Beneficiary shall, in its sole discretion,
- --------------------------
return any excess to Trustor or credit such excess against future payments to be
made to the Imposition and Insurance Impound Fund. In allocating such excess,
Beneficiary may deal with the person shown on the records of Beneficiary to be
the owner of the Property. If at an time Beneficiary determines that the
Imposition and Insurance Impound Fund is not or will not be sufficient to pay
the items set forth in (a) and (b) above, Beneficiary shall notify Trustor of
such determination and Trustor shall increase its monthly payments to
Beneficiary by the amount that Beneficiary estimates is sufficient to make up
the deficiency at least thirty (30) days prior to delinquency of the Impositions
and/or expiration of the Policies, as the case may be. Until expended or
applied as above provided, any amounts in the Imposition and Insurance Impound
Fund shall constitute additional security for the Indebtedness. The Imposition
and Insurance Impound Fund shall not constitute a trust fund. No earnings or
interest on the Imposition and Insurance Impound Fund shall be payable to
Trustor. If Beneficiary so elects at any time, Trustor shall provide, at
Trustor's expense, a tax service contract for the Loan term issued by a tax
reporting agency acceptable to Beneficiary. If Beneficiary does not so elect,
Trustor shall reimburse Beneficiary for the cost of making annual tax searches
throughout the Loan term.
(d) Trustor hereby pledges to Beneficiary and grants to Beneficiary a
security interest in any and all monies now or hereafter deposited in the
Imposition and Insurance Impound Fund as additional security for the payment of
the Indebtedness. Upon the occurrence of an Event of Default, Beneficiary may
apply any sums then present in the Imposition and Insurance Impound Fund to the
payment of the Indebtedness in any order in its sole discretion.
(e) By exercising any of its rights or remedies under this Section
-------
4.4 (including, without limitation, taking possession of the Imposition and
- ---
Insurance Impound Fund), Beneficiary shall not be deemed to have exercised any
equitable right of setoff, foreclosed any statutory banker's lien, initiated or
prosecuted any "action" to enforce the rights and obligations secured by this
Deed of Trust, or the Loan Documents, as the term "action" is used under the
laws of the state where the Property is located, or to have violated the
"security first" principle, if any, under the laws of the state where the
Property is located. Accordingly, the exercise of any or all of Beneficiary's
rights and remedies under this Section 4.4 shall not in any way prejudice or
-----------
affect Beneficiary's right to initiate and complete a judicial or nonjudicial
foreclosure under this Deed of Trust. This Deed of Trust evidences the
consensual granting of a personal property security interest in the Imposition
-15-
<PAGE>
and Insurance Impound Fund as permitted by the Uniform Commercial Code of the
laws of the state where the Property is located; the parties do not intend that
the exercise by Beneficiary of any of its rights or remedies hereunder shall
have any different consequences under the laws of the state where the Property
is located than the exercise of rights or remedies under any other security
agreement under which a secured party has been granted a security interest in
other types of personal property.
4.5 COMPLIANCE WITH LAW. Trustor will preserve and keep in full force
-------------------
its existence, rights, and powers. Trustor will promptly and faithfully comply
with all present and future laws, ordinances, rules, regulations, and
requirements of every governmental authority or agency and of every board of
fire underwriters (or similar body exercising similar functions) having
jurisdiction that may be applicable to it or to the Property or to the use or
manner of occupancy, possession, operation, maintenance, alteration, or repair
of the Property or any part of it, whether the law, ordinance, rule, order,
regulation, or requirement necessitates structural changes or improvements or
interferes with the use or enjoyment of the Property.
4.6 BOOKS AND RECORDS. Trustor will maintain complete books of account
-----------------
and other records reflecting the results of Trustor's operations in a form
satisfactory to Beneficiary, and furnish to Beneficiary any information about
the financial condition of Trustor, and the sales and operations of the Property
as Beneficiary reasonably requests, including, but not limited to, the following
information, which will be furnished without request:
(a) within twenty (20) days after the end of each month, a statement
of revenues and expenses relating to all of Trustor's business operations for
the month just ended, including without limitation, operations of the Property
for the month just ended;
(b) as soon as available and in any event within sixty (60) days
after the end of each fiscal year of Trustor, a copy of the annual audit report
for the fiscal year for Trustor, including a balance sheet of Trustor as of the
end of the fiscal year, and statements of income and retained earnings and of
change in financial position of Trustor for the fiscal year, in each case
certified in a manner acceptable to Beneficiary by independent public
accountants acceptable to Beneficiary;
(c) promptly upon their becoming available, copies of all financial
statements, reports, and notices (including tax returns) sent by Trustor to its
partners or any governmental authority succeeding to any of its functions; and
(d) promptly upon receipt, copies of any reports by independent
public accountants submitted to Trustor concerning its properties or operations.
Beneficiary will have the right, at all reasonable times and on reasonable
notice, to audit, at Trustor's sole cost and expense, Trustor's books of account
and records, all of which will be made available to Beneficiary and
Beneficiary's representatives for that purpose, from time to time, on
Beneficiary's request. Trustor's failure to comply with the requirements of this
Section
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<PAGE>
4.6 within fifteen (15) days after written notice from Beneficiary shall be an
- ---
Event of Default hereunder. Notwithstanding the above, if the above records and
information are within the control of any third party operator, Trustor shall
not be in default hereunder so long as Trustor exercises commercially reasonable
efforts to require such operator to provide such information under its lease or
other operative agreement with Trustor.
4.7 FURTHER ASSURANCES. Trustor, at Trustor's expense and at any time on
------------------
the reasonable request of Beneficiary, will execute, acknowledge, and deliver
any additional papers and instruments (including, without limitation, a
declaration of no setoff) and any further assurances of title and will do or
cause to be done all further acts and things that may be proper or reasonably
necessary to carry out the purpose of this Deed of Trust and of the Loan
Documents and to subject to the liens any property intended by the terms to be
covered and any renewals, additions, substitutions, replacements, or
betterments.
4.8 STATEMENT BY TRUSTOR. Trustor, on ten (10) days' written request,
--------------------
will furnish a statement of the amount due or outstanding on the Note and a
statement of any offsets, counterclaims, or defenses to the payment.
4.9 INDEMNITY. In addition to any other indemnifications provided
---------
herein or in the other Loan Documents, Trustor shall protect, defend, indemnify
and save harmless Beneficiary and Trustee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation, reasonable attorneys'
fees and disbursements whether or not suit is filed), imposed upon or incurred
by or asserted against Beneficiary or Trustee by reason of (a) ownership of this
Deed of Trust, the Property or any interest therein or receipt of any Payments;
(b) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(c) any use, nonuse or condition in, on or about the Property or any part
thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (d) any failure on the part of Trustor or Trustee to
perform or comply with any of the terms of this Deed of Trust; (e) performance
of any labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (f) the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release, or threatened release
of any Hazardous Substance on, from or affecting the Property; (g) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or related to such Hazardous Substance; (h) any lawsuit brought or
threatened, settlement reached, or government order relating to such Hazardous
Substance; (i) any violation of the Hazardous Substance Laws, which are based
upon or in any way related to such Hazardous Substance including, without
limitation, the costs and expenses of any remedial work, attorney and consultant
fees and disbursements, investigation and laboratory fees, court costs, and
litigation expenses; (j) any failure of the Property to comply with any Access
Laws; (k) any representation or warranty made in the Note, this Deed of Trust or
any of the other Loan Documents being false or misleading in any material
respect as of the date such representation or warrant was made; (l) any claim by
brokers, finders or similar persons claiming to be entitled to a commission in
connection with the Loan or other
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transaction involving the Property or any part thereof under any legal
requirement or any liability asserted against Beneficiary with respect thereto;
and (m) the claims of any lessee of any portion of the Property or any person
acting through or under any lessee or otherwise arising under or as a
consequence of any Leases. Any amounts payable to Beneficiary or Trustee by
reason of the application of this paragraph shall be secured by this Deed of
Trust and shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Beneficiary or
Trustee until paid. The obligations and liabilities of Trustor under this
Section 4.9 shall survive the termination, satisfaction, or assignment of this
- -----------
Deed of Trust and the exercise by Beneficiary of any of its rights or remedies
hereunder, including, but not limited to, the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.
4.10 REIMBURSEMENT. Beneficiary will have the right to declare
-------------
immediately due any amount paid by it for any Impositions, tax, stamp tax,
assessment, water rate, sewer rate, Insurance Premium, repair, rent charge,
debt, claim, inspection, or lien having priority over this Deed of Trust, or
over any other agreement given to secure the Indebtedness.
4.11 LITIGATION. Trustor will promptly give written notice to Beneficiary
----------
of any litigation commenced or threatened affecting Trustor or the Property
other than unlawful detainer proceedings brought by Trustor.
4.12 TAX RECEIPTS. Subject to the provisions of Section 4.4 of this Deed
------------ -----------
of Trust, Trustor will exhibit to Beneficiary, within seven (7) days after
demand, bills (that will be receipted from and after the date receipted bills
are obtainable) showing the payment to the extent then due of all taxes,
assessments (including those payable in periodic installments), water rates,
sewer rates, or any other Imposition that may have become a lien on the Property
or any Personalty prior to the lien of this Deed of Trust.
4.13 DUPLICATE PLANS. Trustor will submit to Beneficiary a duplicate set
---------------
of plans and specifications for approval before any material improvements,
repairs, or alterations are begun that affect the Property.
4.14 ADDITIONAL INFORMATION. Trustor will furnish to Beneficiary, within
----------------------
seven (7) days after written request, all information that Beneficiary may
request concerning the performance by Trustor of the covenants of the Loan
Documents, and Trustor will permit Beneficiary or its representatives at all
reasonable times to make investigation or examination concerning that
performance.
4.15 RIGHT OF ENTRY. Trustor grants to Beneficiary and its agents,
--------------
employees, consultants, and contractors the right to enter on the Property for
the purpose of making any inspections, reports, tests (including, without
limitation, soils borings, groundwater testing, wells, or soils analysis),
inquiries, and reviews that Beneficiary, in its sole and absolute discretion,
deems necessary to assess the then current condition of the Property.
Beneficiary will provide Trustor with one (1) business day's notice of the
entry. However, Trustor's consent will not be required for entry or for the
performance of tests. All costs, fees, and
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expenses (including, without limitation, those of Beneficiary's outside counsel
and consultants) incurred by Beneficiary with respect to the inspections,
reports, tests, inquiries, and reviews, together with all related preparation,
consultation, analyses, and review, will be paid by Trustor to Beneficiary on
demand, will accrue interest at the Default Rate until paid, and will be secured
by this Deed of Trust, prior to any right, title, or interest in or claim on the
Property attaching or accruing subsequent to the lien of this Deed of Trust.
4.16 HANDICAPPED ACCESS.
------------------
(a) The Property shall at all times strictly comply to the extent
applicable with the requirements of the Americans with Disabilities Act of 1990,
the Fair Housing Amendments Act of 1988 (if applicable), all state and local
laws and ordinances related to handicapped access and all rules, regulations,
and order issued pursuant thereto including, without limitation, the Americans
with Disabilities Act Accessibility Guidelines for Buildings and Facilities
(collectively, "ACCESS LAWS").
(b) Trustor agrees to give prompt notice to Beneficiary of the
receipt by Trustor of any complaints related to violation of any Access Laws and
of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
4.17 TAXED AS PARTNERSHIP. Trustor will continue to be taxed as a
--------------------
partnership for income tax purposes during the term of this Deed of Trust.
4.18 LIMITED LIABILITY COMPANY FILINGS. Trustor will make all filings as
---------------------------------
required under the laws of the state where the Property is located concerning
foreign limited liability companies, and deliver same to Beneficiary within ten
(10) days of filing.
4.19 THIRD PARTY OPERATOR. Trustor will preserve and keep in full force
--------------------
and effect that certain Skilled Nursing Facility Lease dated September 12, 1997
between Trustor, as lessor, and Kimburida Management Group, an Idaho joint
venture, organized as an Idaho general partnership made up of Northwest Bec-
Corp, a Nevada corporation licensed to do business in Idaho, general partner,
and McNabb Grain, Inc., an Idaho corporation, general partner, as lessee, with
respect to the operation of the Property as a nursing care facility, or will
enter into and keep in full force and effect and maintain during the entire term
of the Loan a lease with such other third party operator which is acceptable to
Beneficiary (which acceptance shall have been obtained from Beneficiary in
writing prior to entering into such lease) concerning the operation of the
Property as a nursing care facility.
5. NEGATIVE COVENANTS. Until the entire Indebtedness has been paid in full,
------------------
Trustor covenants to and agrees with Beneficiary as follows:
5.1 RESTRICTIVE USES. Trustor covenants not to initiate, join in, or
----------------
consent to any change in any zoning ordinance, private restrictive covenant,
assessment proceedings, or other public or private restriction limiting or
restricting the uses that may be made of the Property or any part of it without
the prior written consent of Beneficiary.
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<PAGE>
5.2 OTHER FINANCING. Except for the liens securing the Indebtedness,
---------------
Trustor will not create or permit to continue in existence any mortgage, pledge,
encumbrance, lien, or charge of any kind (including purchase money and
conditional sale liens) on any of the Property except for:
(a) liens for taxes not yet delinquent, and
(b) any other liens or charges that are specifically approved in
writing by Beneficiary prior to the recordation.
Any transaction in violation of this section will cause all Indebtedness,
irrespective of the maturity dates, at the option of the holder and without
demand or notice, to immediately become due, together with any prepayment
premium in accordance with the terms of the Note.
5.3 TRANSFER OR ENCUMBRANCE OF THE PROPERTY.
---------------------------------------
(a) Trustor acknowledges that Beneficiary has examined and relied on
the creditworthiness and experience of Trustor in owning and operating the
Property in agreeing to make the Loan, and that Beneficiary will continue to
rely on Trustor's ownership of the Property as a means of maintaining the value
of the Property as security for repayment of the Indebtedness. Trustor
acknowledges that Beneficiary has a valid interest in maintaining the value of
the Property so as to ensure that, should Trustor default in the repayment of
the Indebtedness, Beneficiary can recover the Indebtedness by a sale of the
Property. Trustor shall not, without the prior written consent of Beneficiary,
sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer the
Property or any part thereof, or permit the Property or any part thereof to be
sold, conveyed, alienated, mortgaged, encumbered, pledged or otherwise
transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this Section 5.3 shall be deemed to include (i)
-----------
an installment sales agreement wherein Trustor agrees to sell the Property or
any part thereof for a price to be paid in installments; (ii) an agreement by
Trustor leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Trustor's right, title and interest
in and to any Leases or any Payments; (iii) if Trustor or any general partner or
managing member of Trustor is a corporation, the voluntary or involuntary sale,
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by operation of
law or otherwise) or the creation or issuance of new stock in one or a series of
transactions by which an aggregate of more than 50% of such corporation's stock
shall be vested in a party or parties who are not now stockholders or any change
in the control of such corporation; (iv) if Trustor or any general partner of
Trustor is a limited or general partnership, joint venture or limited liability
company, the change, removal, resignation or addition of a general partner,
managing partner, or joint venturer or the transfer of any ownership interest of
any general partner, managing partner or joint
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venturer or the transfer, assignment or pledge of any ownership interest of any
general partner, managing partner or joint venturer; (v) if Trustor is a limited
partnership, the voluntary or involuntary sale, conveyance, transfer or pledge
of any limited partnership interests or the creation or issuance of new limited
partnership interests, by which an aggregate of more than 50% of such limited
partnership interests are held by parties who are not currently limited
partners; or (vi) if Trustor is a limited liability company, the voluntary or
involuntary sale, conveyance or transfer of more than 50% of the members'
interests. Notwithstanding anything herein to the contrary, the following
transfers of ownership interests in any Trustor entity shall be permitted
transfers hereunder without Beneficiary's consent and shall not constitute a
default hereunder: (i) any transfers into or out of a trust, family limited
partnership, or other similar entity or device for tax or estate planning
purposes; and (ii) any transfers resulting from the death of an individual,
including without limitation, pursuant to a will, trust or intestate proceeding.
(c) Beneficiary shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Indebtedness immediately due and payable upon Trustor's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property without Beneficiary's consent. This provision shall apply to every
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property.
(d) Beneficiary's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be deemed to
be a waiver of Beneficiary's right to require such consent to any future
occurrence of same. Any sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Property made in contravention of this Section shall
be null and void and of no force and effect.
(e) Trustor agrees to bear and shall pay or reimburse Beneficiary on
demand for all reasonable expenses (including, without limitation, reasonable
attorneys' fees and disbursements, title search costs and title insurance
endorsement premiums) incurred by Beneficiary in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
(f) Beneficiary's consent to the sale or transfer of the Property will
not be unreasonably withheld after consideration of all relevant factors,
provided that:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of
Default shall have occurred and remain uncured;
(ii) the proposed transferee ("TRANSFEREE") shall be a
reputable entity or person of good character,
creditworthy, with sufficient financial worth considering
the obligations assumed
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<PAGE>
and undertaken, as evidenced by financial statements and
other information reasonably requested by Beneficiary;
(iii) the Transferee and its property manager (if any) shall
have sufficient experience in the ownership and management
of properties similar to the Property, and Beneficiary
shall be provided with reasonable evidence thereof;
(iv) the Transferee shall have executed and delivered to
Beneficiary an assumption agreement in form and substance
acceptable to Beneficiary, evidencing such Transferee's
agreement to abide and be bound by the terms of the Note,
this Deed of Trust and the other Loan Documents, together
with such legal opinions and title insurance endorsements
as may be reasonably requested by Beneficiary; and
(v) Beneficiary shall have received the payment of all costs
and expenses incurred by Beneficiary in connection with
such assumption (including reasonable attorneys' fees and
costs).
5.4 REPLACEMENT OF FIXTURES AND PERSONALTY. Trustor will not permit any
--------------------------------------
of the Fixtures or Personalty to be removed at any time from the Property
without the prior written consent of Beneficiary unless actually replaced by
articles of equal suitability and value owned by Trustor free and clear of any
lien or security interest except as may be approved in writing by Beneficiary.
5.5 LIMITED LIABILITY COMPANY CHANGES. Trustor will make no material
---------------------------------
changes nor materially amend or modify Trustor's articles of organization or
operating agreement without first obtaining Beneficiary's prior written consent
(which consent shall not be unreasonably withheld or delayed), nor compromise
any members' obligations to contribute capital or enter into any merger or
consolidation without first obtaining Beneficiary's prior written consent of
same. Trustor will in writing immediately notify Beneficiary of any planned or
anticipated dissolution of Trustor or of any event likely to result in
dissolution of Trustor.
6. ENVIRONMENTAL PROVISIONS.
------------------------
6.1 REPRESENTATIONS AND WARRANTIES. Except as disclosed in writing to,
------------------------------
and acknowledged in writing by, Beneficiary, Trustor represents and warrants
that:
(a) during the period of Trustor's ownership of the Property:
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<PAGE>
(1) there has been no use, generation, manufacture, storage,
treatment, disposal, discharge, Release, or threatened Release of any Hazardous
Substance by any person on or around the Property; and
(2) there have been no Hazardous Substances transported over or
through the Property;
(b) after diligent inquiry, Trustor has no knowledge of, or reason to
believe that, there has been:
(1) any use, generation, manufacture, storage, treatment,
disposal, Release, or threatened Release of any hazardous waste or substance by
any prior owners or prior occupants of the Property or by any third parties onto
the Property; or
(2) any actual or threatened litigation or claims of any kind by
any person relating to these matters;
(c) no Hazardous Substances in excess of permitted levels or
reportable quantities under applicable Hazardous Substance Laws are present in
or about the Property or any nearby real property that could migrate to the
Property;
(d) no Release or threatened Release exists or has occurred;
(e) no underground storage tanks of any kind are or ever have been
located in or about the Property;
(f) the Property and all operations and activities at, and the use and
occupancy of, the Property, comply with all applicable Hazardous Substance Laws;
(g) Trustor and every User has, and is now in strict compliance with,
every permit, license, and approval required by all applicable Hazardous
Substance Laws for all activities and operations at, and the use and occupancy
of, the Property;
(h) to the best of Trustor's knowledge, after diligent inquiry, there
are no Hazardous Substance Claims pending or threatened with regard to Property
or against Trustor or any Loan Parties;
(i) the Property has not been nor is it within 2,000 feet of any other
property designated as hazardous waste property or border zone property pursuant
to the laws of the state where the Property is located, and no proceedings for a
determination of this designation are pending or threatened;
(j) to the best of its knowledge after diligent inquiry, there exists
no occurrence or condition on any real property adjoining or within 2,000 feet
of the Property
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<PAGE>
that would cause the Property or any part of it to be designated as hazardous
waste property or border zone property under the laws of the state where the
Property is located;
(k) that the current use of the Property is as a nursing care
facility;
(l) any written disclosure submitted by or on behalf of Trustor to
Beneficiary concerning any Release or threatened Release, past or present
compliance by Trustor, or any User or other person of any Hazardous Substance
Laws applicable to the Property, the past and present use and occupancy of the
Property, and any environmental concerns relating to the Property, was true and
complete when submitted and continues to be true and complete as of the date of
this Deed of Trust.
6.2 COVENANTS. Trustor agrees, except in the ordinary course of business
---------
and in strict compliance with all applicable Hazardous Substance Laws, as
follows:
(a) not to cause or permit the Property to be used as a site for the
use, generation, manufacture, storage, treatment, Release, discharge, disposal,
transportation, or presence of any Hazardous Substance;
(b) not to cause, contribute to, permit, or acquiesce in any Release
or threatened Release;
(c) not to change or modify the use of the Property without the prior
written consent of Beneficiary;
(d) to comply with and to cause the Property and every User of the
Property to comply with all Hazardous Substance Laws;
(e) to immediately notify Beneficiary in writing and to provide
Beneficiary with a reasonably detailed description of:
(1) any noncompliance of the Property with any Hazardous
Substance Laws;
(2) any Hazardous Substance Claim;
(3) any Release or threatened Release;
(4) the discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Property that would cause the
Property or any part of it to be designated as hazardous waste property or
border zone property under the laws of the state where the Property is located;
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<PAGE>
(f) in the event that Trustor discovers a Release or the presence of
any Hazardous Substance on or about the Property in violation of any Hazardous
Substance Law, to:
(1) notify Beneficiary of that discovery together with a
reasonably detailed description;
(2) promptly after a request by Beneficiary, engage a qualified
environmental engineer reasonably satisfactory to Beneficiary to investigate
these matters and prepare and submit to Beneficiary a written report containing
the findings and conclusions resulting from that investigation, all at the sole
expense of Trustor; and
(3) take, at Trustor's sole expense, all necessary actions to
remedy, repair, clean up, or detoxify any Release or Hazardous Substance,
including, but not limited to, any remedial action required by any Hazardous
Substance Laws or any judgment, consent, decree, settlement, or compromise in
respect of any Hazardous Substance Claims, these actions to be performed:
(i) in accordance with Hazardous Substance Laws;
(ii) in a good and proper manner;
(iii) under the supervision of a qualified environmental
engineer approved in writing by Beneficiary;
(iv) in accordance with plans and specifications for these
actions approved in writing by Beneficiary; and
(v) using licensed and insured qualified contractors
approved in writing by Beneficiary;
(g) immediately furnish to Beneficiary copies of all written
communications received by Trustor from any governmental authority or other
person or given by Trustor to any person and any other information Beneficiary
may reasonably request concerning any Release, threatened Release, Hazardous
Substance Claim, or the discovery of any Hazardous Substance on or about the
Property in violation of any Hazardous Substance Law; and
(h) keep Beneficiary generally informed regarding any Release,
threatened Release, Hazardous Substance Claim, or the discovery of any Hazardous
Substance on or about the Property in violation of any Hazardous Substance Law.
6.3 ENVIRONMENTAL MONITORING. Trustor shall permit Beneficiary to join
------------------------
and participate in, as a party if it so elects, any legal proceedings or action
initiated with respect to the Property in connection with any Hazardous
Substance Law or Hazardous Substance, and Trustor shall pay all attorneys' fees
and disbursements incurred by Beneficiary in
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<PAGE>
connection therewith. Upon Beneficiary's request, at any time and from time to
time while this Deed of Trust is in effect, but not more frequently than once
per calendar year, unless Beneficiary has determined (in the exercise of its
good faith judgment) that reasonable cause exists for the performance of an
environmental inspection or audit of the Property, Trustor shall provide at
Trustor's sole expense an inspection or audit of the Property prepared by a
licensed hydrogeologist or licensed environmental engineer approved by
Beneficiary indicating the presence or absence of Hazardous Substances in, or
near the Property. If Trustor fails to provide such inspections or audits
within thirty (30) days after such request, Beneficiary may order same, and
Trustor hereby grants to Beneficiary and its employees and agents access to the
Property and a license to undertake those inspections or audits. The cost of
such inspections or audits shall be added to the principal balance of the sums
due under the Note and this Deed of Trust and shall bear interest thereafter
until paid at the Default Rate (as defined in the Note). In the event that any
environmental site assessment report prepared in connection with such inspection
or audit recommends that an operations and maintenance plan be implemented for
any Hazardous Substance, Trustor shall cause such operations and maintenance
plan to be prepared and implemented at Trustor's expense upon request of
Beneficiary. Trustor shall commence and thereafter diligently prosecute to
completion any remedial work within thirty (30) days after written demand by
Beneficiary for performance thereof (or any such shorter period of time as may
be required under applicable law). All remedial work shall be performed by
contractors approved in advance by Beneficiary, and under the supervision of a
consulting engineer approved by Beneficiary. All costs and expenses of such
remedial work shall be paid by Trustor including, without limitation,
Beneficiary's reasonable attorneys' fees and costs incurred in connection with
monitoring or review of such remedial work. In the event Trustor shall fail to
timely commence, or cause to be commenced, or fail to diligently prosecute to
completion, such remedial work, Beneficiary may, but shall not be required to,
cause such remedial work to be performed, and all costs and expenses thereof, or
incurred in connection therewith, shall become part of the Indebtedness and
shall bear interest thereafter until paid at the Default Rate.
6.4 INSPECTION AND RECEIVERSHIP RIGHTS. Upon Beneficiary's reasonable
----------------------------------
belief of the existence of a past or present Release or threatened Release not
previously disclosed by Trustor in connection with the making of the Loan or the
execution of this Deed of Trust or upon Beneficiary's reasonable belief that
Trustor has failed to comply with any environmental provision of this Deed of
Trust or any other Loan Document and upon reasonable prior notice (except in the
case of an emergency) to Trustor, Beneficiary or its representatives, employees,
and agents, may from time to time and at all reasonable times (or at any time in
the case of an emergency) enter and inspect the Property and every part of it
(including all samples of building materials, soil, and groundwater, and all
books, records, and files of Trustor relating to the Property) and perform those
acts and things that Beneficiary deems necessary or desirable to inspect,
investigate, assess, and protect the security of this Deed of Trust, for the
purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release;
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<PAGE>
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law; and
(c) the compliance by Trustor of every environmental provision of this
Deed of Trust and every other Loan Document. In furtherance of the purposes
above, without limitation of any of its other rights, Beneficiary may:
(1) obtain a court order to enforce Beneficiary's right to enter
and inspect the Property under the laws of the state where the Property is
located, to which the decision of Beneficiary as to whether there exists a
Release, a threatened Release, any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law, or a breach by Trustor of any
environmental provision of this Deed of Trust or any other Loan Document, will
be deemed reasonable and conclusive as between the parties; and
(2) have a receiver appointed to enforce Beneficiary's right to
enter and inspect the Property for the purpose set forth above.
All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including without limitation court costs, consultant's fees, and
attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until those sums have been paid in full. Except as provided by law, any
inspections or tests made by Beneficiary or its representatives, employees, and
agents will be for Beneficiary's purposes only and will not be construed to
create any responsibility or liability on the part of Beneficiary to Trustor or
to any other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision contained in this Deed
of Trust or any Loan Document.
6.5 RELEASE AND INDEMNITY. Trustor:
---------------------
(a) releases and waives any future claims against Beneficiary for
indemnity or contribution in the event Trustor becomes liable for cleanup or
other costs under any Hazardous Substance Laws or under any Hazardous Substance
Claim;
(b) agrees to reimburse Beneficiary, on demand, for all costs and
expenses incurred by Beneficiary in connection with any review, approval,
consent, or inspection relating to the environmental provisions in this Deed of
Trust together with interest, after demand, at the Default Rate; and
(c) agrees to indemnify, defend, and hold Beneficiary and Trustee
harmless from all losses, costs, claims, damages, penalties, liabilities, causes
of action,
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judgments, court costs, attorney fees and other legal expenses, costs of
evidence of title, cost of evidence of value, and other expenses (collectively,
"Expenses"), including, but not limited to, any Expenses incurred or accruing
after the foreclosure of the lien of this Deed of Trust, which either may suffer
or incur and which directly or indirectly arises out of or is in any way
connected with the breach of any environmental provision either in this Deed of
Trust or in any Loan Document or as a consequence of any Release or threatened
Release on the presence, use, generation, manufacture, storage, disposal,
transportation, Release, or threatened Release of any Hazardous Substance on or
about the Property, including the soils and groundwaters, caused or permitted by
Trustor, any prior owner or operator of the Property, any adjoining landowner or
any other party, including, without limitation, the cost of any required or
necessary repair, cleanup, remedy, or detoxification of any Hazardous Substance
and the preparation of any closure, remedial action, or other required plans,
whether that action is required or necessary by reason of acts or omissions
occurring prior to or following the recordation of this Deed of Trust. Trustor's
obligations will survive the satisfaction, release, or cancellation of the
Indebtedness, the release and reconveyance or partial release and reconveyance
of this Deed of Trust, and the foreclosure of the lien of this Deed of Trust or
deed in lieu of the Deed of Trust.
6.6 REQUEST FOR INFORMATION. Trustor and Beneficiary agree that:
-----------------------
(a) this Section 6.6 is intended as Beneficiary's written request for
-----------
information and Trustor's written response concerning the environmental
condition of the Property; and
(b) each representation, warranty, covenant, or indemnity made by
Trustor in this Section 6 or in any other provision of this Deed of Trust or any
---------
Loan Document that relates to the environmental condition of the Property is
intended by Trustor and Beneficiary to be an environmental provision for
purposes of the laws of the state where the Property is located and will survive
the payment of the Indebtedness and the termination or expiration of this Deed
of Trust and will not be affected by Beneficiary's acquisition of any interest
in the Property, whether by full credit bid at foreclosure, deed in lieu of
that, or otherwise. If there is any transfer of any portion of Trustor's
interest in the Property, any successor-in-interest to Trustor agrees by its
succession to that interest that the written request made pursuant to this
Article will be deemed remade to the successor-in-interest without any further
or additional action on the part of Beneficiary and that by assuming the debt
secured by this Deed of Trust or by accepting the interest of Trustor subject to
the lien of this Deed of Trust, the successor remakes each of the
representations and warranties in this Deed of Trust and agrees to be bound by
each covenant in this Deed of Trust, including, but not limited to, any
indemnity provision.
6.7 EFFECT OF SITE ASSESSMENT. Even though Trustor may have provided
-------------------------
Beneficiary with an environmental site assessment or other environmental report
together with other relevant information regarding the environmental condition
of the Property, Trustor acknowledges and agrees that Beneficiary is not
accepting the Property as security for the Loan based on that assessment,
report, or information. Rather Beneficiary has relied
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on the representations and warranties of Trustor in this Deed of Trust, and
Beneficiary is not waiving any of its rights and remedies in the environmental
provisions of this Deed of Trust or any other Loan Document.
7. CASUALTIES AND CONDEMNATION.
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7.1 CASUALTIES.
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(a) Trustor will promptly notify Beneficiary in writing after any loss
or damage caused by fire or other casualty to the Property, and prior to the
making of any repairs. Trustor will furnish to Beneficiary within sixty (60)
days after the loss or damage the following:
(1) evidence satisfactory to Beneficiary of the cost of repair
or reconstruction;
(2) evidence satisfactory to Beneficiary that sufficient funds
are available or committed for the benefit of Beneficiary, including insurance
proceeds, payment and performance bonds, or otherwise, to complete the repair or
reconstruction; and
(3) evidence satisfactory to Beneficiary that the repair or
reconstruction may be completed in accordance with all applicable laws, rules,
regulations, and ordinances and that all necessary permits and approvals have
been or will be obtained.
If Trustor does not furnish this evidence to Beneficiary within the sixty-
day period, or if Beneficiary in its reasonable discretion determines that
repair or reconstruction is not economically feasible, then within sixty (60)
days after the expiration of the sixty-day period, Beneficiary will have the
option ("REPAYMENT OPTION") to have all insurance proceeds applied against the
Indebtedness. If Beneficiary elects the Repayment Option, Trustor will
immediately transfer to Beneficiary all insurance proceeds received by it, if
any, to the extent of the Indebtedness, and Beneficiary will apply the insurance
proceeds received by it, if any, against the Indebtedness. If the insurance
proceeds held by Trustor and Beneficiary exceed the Indebtedness, any excess
insurance proceeds will belong and be paid over to, or be retained, by Trustor.
(b) If Beneficiary does not elect the Repayment Option within the
specified time period, Trustor will, with all diligence, repair or otherwise
reconstruct the damage to the Property, all according to the original plans and
specifications for the Improvements or any modified plans and specifications
conforming to the then laws and regulations as will first have been approved in
writing by Beneficiary and any occupants of the Improvements having the right to
approve. Beneficiary will use all insurance proceeds, if any, received by it
relating to the damage or destruction to reimburse Trustor from time to time for
expenditures made for repair of the damage or for the erection of any building,
structure, or improvements in their place if permitted as follows:
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(1) At the end of each month against Trustor's architect's
certificate, an amount that will be that proportion of the insurance proceeds
held in trust that ninety percent (90%) of the payments to be made to the
contractors or materialmen for work done, materials supplied, and services
rendered during that month bears to the total contract price.
(2) At the completion of the work, the balance of the proceeds
required for completing the payments for the work will be paid to or for the
account of Trustor, provided that at the time of the payment:
(i) there are no liens (as evidenced by an endorsement
satisfactory to Beneficiary issued by Trustee) against the Property by reason of
the work, or proof satisfactory to Beneficiary has been submitted that all costs
of the work have been paid; and
(ii) Trustor's architect will certify that all required work
is completed and is proper and of a quality and class of the original work
required by the original plans and specifications and in accordance with the
approved plans and specifications.
If the insurance proceeds exceed the costs of completing the work, the
excess insurance proceeds will belong and be retained by or be paid over to
Beneficiary to be applied against the Indebtedness. If the costs of completing
the work exceed the insurance proceeds, Trustor will, no later than ninety (90)
days before commencement of the work, provide evidence satisfactory to
beneficiary that Trustor has the funds to complete the work and shall, before
commencement of the work, deposit with Beneficiary said funds which shall be
used to reimburse Trustor in the same manner as insurance proceeds.
7.2 CONDEMNATION. Trustor, immediately upon obtaining knowledge of the
------------
institution of any proceedings for the condemnation of the Property or any
portion of it, will notify Trustee and Beneficiary of the pendency of the
proceedings. Trustee and Beneficiary may participate in any proceedings and
Trustor from time to time will deliver to Beneficiary all instruments requested
by Beneficiary to permit participation. If there are condemnation proceedings,
the award or compensation payable is assigned to and will be paid to
Beneficiary. Beneficiary will be under no obligation to question the amount of
any award or compensation and may accept it in the amount in which it is paid.
In any condemnation proceedings, Beneficiary may be represented by counsel
selected by Beneficiary. The proceeds of any award or compensation received will
be paid over to Trustor for restoration of the Improvements in accordance with
the provisions of Section 7.1 of this Deed of Trust or, if the Improvements will
-----------
not be restored, will be applied, without premium, to the prepayment of the
Note.
8. EVENTS OF DEFAULT AND REMEDIES OF BENEFICIARY.
---------------------------------------------
8.1 EVENTS OF DEFAULT. The following events are each an Event of Default:
-----------------
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(a) Default in the payment of any sum of principal or interest when
due under the Note or any other sum due under the Loan Documents, provided that
such failure continues for five (5) business days after written notice of such
default.
(b) The failure (without cure during the applicable period, if any,
for cure) of any Loan Party to observe, perform, or discharge any obligation,
term, covenant, or condition of the Loan Documents, any agreement relating to
the Property, or any agreement or instrument between any Loan Party and
Beneficiary, provided that such failure continues for thirty (30) days after
written notice of such default, or such longer period of time up to one-hundred
twenty (120) days to cure such default if Trustor commences a cure within such
30 day period and thereafter diligently prosecutes such cure to completion.
(c) The entry of an order for relief under federal bankruptcy laws as
to Trustor or the adjudication of Trustor as insolvent or bankrupt pursuant to
the provisions of any state insolvency or bankruptcy act; the commencement by
Trustor of any case, proceeding, or other action seeking any reorganization,
arrangement, composition, adjustment, liquidation, dissolution, or other relief
for debtors; Trustor's consent to, acquiescence in, or attempt to secure the
appointment of, any Receiver of all or any substantial part of its properties or
of the Property; Trustor's generally not paying its debts as they become due or
admitting in writing its inability to pay its debts or making a general
assignment for the benefit of creditors; or Trustor's taking of any action to
authorize any of the acts set forth above in this section.
(d) Any case, proceeding, or other action against Trustor is
commenced, seeking to have an order for relief entered against it as a debtor or
seeking any reorganization, arrangement, composition, adjustment, liquidation,
dissolution, or similar relief under any present or future statute, law, or
regulation relating to bankruptcy, insolvency, reorganization, or other relief
for debtors, or seeking appointment of any Receiver for Trustor or for all or
any substantial part of its property or for the Property, and that case,
proceeding, or other action:
(1) results in the entry of an order for relief against it that
is not fully stayed within sixty (60) days after the entry, or
(2) remains undismissed for an aggregate of sixty (60) days
(whether or not consecutive);
or the possibility that any portion of the Property would, by operation of law
or otherwise, devolve on or pass to any Person other than Trustor and that
situation continues and is not remedied by Trustor within sixty (60) days after
the happening of the event.
(e) The assignment by Trustor, as lessor or sublessor, as the case may
be, of the rents or the income of the Property or any part of it (other than to
Beneficiary) without first obtaining the written consent of Beneficiary.
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(f) The following events:
(1) The filing of any claim or lien against the Property or any
part of it, whether or not the lien is prior to this Deed of Trust, and the
continued maintenance of the claim or lien for a period of sixty (60) days
without discharge, satisfaction, or adequate bonding in accordance with the
terms of this Deed of Trust;
(2) the existence of any interest in the Property other than
those of Trustor, Beneficiary, and any tenants of Trustor; or
(3) the sale, hypothecation, conveyance, or other disposition of
the Property except in accordance with Sections 5.2 or 5.3 of this Deed of
-------------------
Trust, any of which will be an Event of Default because Trustor's obligation to
own and operate the Property is one of the inducements to Beneficiary to make
the Loan;
(g) Default under any agreement to which Trustor is a party, which
agreement relates to the borrowing of money by Trustor from any Person.
(h) Any representation or warranty made by any Loan Party or any other
Person under this Deed of Trust or in, under, or pursuant to the Loan Documents,
is false or misleading in any material respect as of the date on which the
representation or warranty was made.
(i) Any of the Loan Documents, at any time after their respective
execution and delivery and for any reason, cease to be in full force or are
declared null and void, or the validity or enforceability is contested by any
Loan Party or any stockholder or partner of any Loan Party, or any Loan Party
denies that it has any or further liability or obligation under any of the Loan
Documents to which it is a party.
(j) Any of the Security Documents, at any time after their respective
execution and delivery and for any reason, cease to constitute valid and
subsisting liens or valid and perfected security interests in and to the
property purported to be subject to any of the Security Documents;
(k) Any representation made by any Loan Party in the Certification
Agreement is false or misleading in any material respect as of the date made, or
any breach or default in any of Trustor's obligations under the Certification
Agreement.
(l) The occurrence of any Material Adverse Change.
If one or more Event of Default occurs and is continuing, then Beneficiary
may declare all the Indebtedness to be due and the Indebtedness will become due
without any further presentment, demand, protest, or notice of any kind, and
Beneficiary may:
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(1) in person, by agent, or by a receiver, and without regard to
the adequacy of security, the solvency of Trustor, or the existence of waste,
enter on and take possession of the Property or any part of it in its own name
or in the name of Trustee, sue for or otherwise collect the rents, issues, and
profits, and apply them, less costs and expenses of operation and collection,
including reasonable attorney fees, upon the Indebtedness, all in any order that
Beneficiary may determine. The entering on and taking possession of the
Property, the collection of rents, issues, and profits, and the application of
them will not cure or waive any default or notice of default or invalidate any
act done pursuant to the notice;
(2) commence an action to foreclose this Deed of Trust in the
manner provided by law for the foreclosure of mortgages of real property and
following any sale under judicial foreclosure, bring actions, suits and
proceedings against Trustor and any other Loan Parties, for any amount by which
the unpaid balance of the Indebtedness secured by this Deed of Trust exceeds the
net proceeds payable to Beneficiary, and Beneficiary shall be entitled to a
deficiency judgment in such amount;
(3) deliver to Trustee a written declaration of default and
demand for sale, and a written notice of default and election to cause the
Property to be sold, which notice Trustee or Beneficiary will cause to be filed
for record;
(4) with respect to any Personalty, proceed as to both the real
and personal property in accordance with Beneficiary's rights and remedies in
respect of the Land, or proceed to sell the Personalty separately and without
regard to the Land in accordance with Beneficiary's rights and remedies; or
(5) exercise any of these remedies in combination or any other
remedy at law or in equity.
8.2 POWER OF SALE.
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(a) If Beneficiary elects to foreclose by exercise of the power of
sale in this Deed of Trust, Beneficiary will also deposit with Trustee this Deed
of Trust, the Note, and any receipts and evidence of expenditures made and
secured as Trustee may require. If notice of default has been given as then
required by law, and after lapse of the time that may then be required by law,
after recordation of the notice of default, Trustee, without demand on Trustor,
will, after notice of sale having been given as required by law, sell the
Property at the time and place of sale fixed by it in the notice of sale, either
as a whole or in separate parcels as Trustee determines, and in any order that
it may determine, at public auction to the highest bidder. Trustee may postpone
sale of all or any portion of the Property by public announcement at the time
and place of sale, and from time to time after that may postpone the sale by
public announcement at the time fixed by the preceding postponement, and without
further notice make the sale at the time fixed by the last postponement; or
Trustee may, in its discretion, give a new notice of sale. Beneficiary may
rescind any notice of default at any time before Trustee's sale by executing a
notice of rescission and recording it.
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The recordation of the notice will constitute a cancellation of any prior
declaration of default and demand for sale and of any acceleration of maturity
of Indebtedness affected by any prior declaration or notice of default. The
exercise by Beneficiary of the right of rescission will not constitute a waiver
of any default then existing or subsequently occurring, or impair the right of
Beneficiary to execute other declarations of default and demand for sale, or
notices of default and of election to cause the Property to be sold, nor
otherwise affect the Note or this Deed of Trust, or any of the rights,
obligations, or remedies of Beneficiary or Trustee. After sale, Trustee will
deliver to the purchaser its deed conveying the property sold, but without any
covenant or warranty, express or implied. The recitals in the deed of any
matters or facts will be conclusive proof of their truthfulness. Any Person,
including Trustor, Trustee, or Beneficiary, may purchase at that sale. If
allowed by law, Beneficiary, if it is the purchaser, may turn in the Note at the
amount owing on it toward payment of the purchase price (or for endorsement of
the purchase price as a payment on the Note if the amount owing exceeds the
purchase price). Trustor expressly waives any right of redemption after sale
that Trustor may have at the time of sale or that may apply to the sale.
(b) Trustee, upon the sale, will make (without any covenant or
warranty, express or implied), execute and, after due payment made, deliver to a
purchaser and its heirs or assigns a deed or other record of interest, as the
case may be, to the Property sold, which will convey to the purchaser all the
title and interest of Trustor in the Property and will apply the proceeds of the
sale in payment:
(1) first, of the expenses of the sale together with the expenses
of the trust, including, without limitation, attorney fees, that will become due
on any default made by Trustor, and also any sums that Trustee or Beneficiary
have paid for procuring a search of the title to the Property subsequent to the
execution of this Deed of Trust; and
(2) second, in payment of the Indebtedness then remaining unpaid,
and the amount of all other monies with interest in this Deed of Trust agreed or
provided to be paid by Trustor.
Trustee will pay the balance or surplus of the proceeds of sale to Trustor
and its successors or assigns as its interests may appear.
8.3 PROOF OF DEFAULT. If there is a sale of the Property, or any part of
----------------
it, and the execution of a deed for it, the recital of default and of recording
notice of breach and election of sale, and of the elapsing of the required time
between the recording and the following notice, and of the giving of notice of
sale, and of a demand by Beneficiary that the sale should be made, will be
conclusive proof of the default, recording, election, elapsing of time, and the
due giving of notice, and that the sale was regularly and validly made on proper
demand by Beneficiary. Any deed with these recitals will be effectual and
conclusive against Trustor, its successors, and assigns, and all other Persons.
The receipt for the purchase money recited or in any deed executed to the
purchaser will be sufficient discharge to the purchaser from all obligations to
see to the proper application of the purchase money.
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8.4 PROTECTION OF SECURITY. If an Event of Default occurs and is
----------------------
continuing, Beneficiary or Trustee, without limitation to do so, without notice
to or demand upon Trustor, and without releasing Trustor from any obligations or
defaults may:
(a) enter on the Property in any manner and to any extent that either
deems necessary to protect the security of this Deed of Trust;
(b) appear in and defend any action or proceeding purporting to
affect, in any manner, the Obligations or the Indebtedness, the security of this
Deed of Trust, or the rights or powers of Beneficiary or Trustee;
(c) pay, purchase, or compromise any encumbrance, charge, or lien that
in the judgment of Beneficiary or Trustee is prior or superior to this Deed of
Trust; and
(d) pay necessary expenses, employ counsel, and pay reasonable
attorney fees.
Trustor agrees to repay on demand all sums expended by Trustee or Beneficiary
pursuant to this section with interest at the Default Rate, and those sums, with
interest, will be secured by this Deed of Trust.
8.5 RECEIVER. If an Event of Default occurs and is continuing,
--------
Beneficiary, as a matter of strict right and without notice to Trustor or anyone
claiming under Trustor and without regard to the then value of the Property,
will have the right to apply ex parte or by noticed motion to any court having
jurisdiction to appoint a Receiver of the Property. Any Receiver will have all
the powers and duties of receivers in similar cases and all the powers and
duties of Beneficiary in case of entry as provided in this Deed of Trust, and
will continue as such and exercise all those powers until the date of
confirmation of sale, unless the receivership is terminated sooner.
8.6 CURING THE DEFAULTS. If Trustor at any time fails to perform or
-------------------
comply with any of the terms, covenants, and conditions required on Trustor's
part to be performed and complied with under this Deed of Trust, the Note, any
of the other Loan Documents, or any other agreement that, under the terms of
this Deed of Trust, Trustor is required to perform, then Beneficiary, after ten
(10) days' notice to Trustor (or without notice if Beneficiary determines that
an emergency exists), and without waiving or releasing Trustor from any of the
Obligations, may, subject to the provisions of any of the agreements:
(a) make from its own funds any payments payable by Trustor and take
out, pay for, and maintain any of the insurance policies provided for; and
(b) perform any other acts on the part of Trustor to be performed and
enter on the Property for that purpose. The making by Beneficiary of payments
out of Beneficiary's own funds will not, however, be deemed to cure the default
by Trustor, and they will not be cured unless and until Trustor reimburses
Beneficiary for the payments. All
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sums paid and all reasonable costs and expenses incurred by Beneficiary in
connection with the performance of any act, together with interest on unpaid
balances at the Default Rate from the respective dates of Beneficiary's making
of each payment, will be added to the principal of the Indebtedness, will be
secured by the Security Documents and by the lien of this Deed of Trust, prior
to any right, title, or interest in or claim on the Property attaching or
accruing subsequent to the lien of this Deed of Trust, and will be payable by
Trustor to Beneficiary on demand.
8.7 INSPECTION RIGHTS. On reasonable notice (except in the case of an
-----------------
emergency), and without releasing Trustor from any obligation to cure any
default of Trustor, Beneficiary or its agents, representatives, and employees
acting by themselves or through a court-appointed receiver, may, from time to
time and at all reasonable times (or at any time in the case of an emergency)
enter and inspect the Property and every part of it (including all samples of
building materials, soil, and groundwater, and all books, records, and files of
Trustor relating to the Property) and perform any acts and things as Beneficiary
deems necessary or desirable to inspect, investigate, assess, and protect the
security of this Deed of Trust, for the purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release,
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law, and
(c) the compliance by Trustor of every environmental provision of
this Deed of Trust and every other Loan Document.
In furtherance of these purposes, without limitation of any of its other
rights, Beneficiary may:
(a) obtain a court order to enforce Beneficiary's right to enter and
inspect the Property, to which the decision of Beneficiary as to whether there
exists a Release, threatened Release, any Hazardous Substances on or about the
Property in violation of any Hazardous Substance Law, or a breach by Trustor of
any environmental provision of this Deed of Trust or any other Loan Document,
will be deemed reasonable and conclusive as between Trustor, Trustee, and
Beneficiary; and
(b) have a receiver appointed to enforce Beneficiary's right to enter
and inspect the Property for Hazardous Substances.
All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including, without limitation, court costs, consultants fees, and
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attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until they have been paid in full. Except as provided by law, any inspections or
tests made by Beneficiary or its representatives, employees, and agents, will be
for Beneficiary's purposes only and will not be construed to create any
responsibility or liability on the part of Beneficiary to Trustor or to any
other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision in this Deed of Trust or
any Loan Document.
8.8 JUDGMENT ON ENVIRONMENTAL PROVISION. Beneficiary or its agents,
-----------------------------------
representatives, and employees may seek a judgment that Trustor has breached its
covenants, representations, or warranties in Article 6 of this Deed of Trust or
---------
any other covenants, representations, or warranties that are deemed to be
environmental provisions under the laws of the state where the Property is
located (each an "ENVIRONMENTAL PROVISION"), by commencing and maintaining an
action or actions in any court of competent jurisdiction under the laws of the
state where the Property is located, whether commenced prior to or after
foreclosure of the lien of this Deed of Trust. Beneficiary or its agents,
representatives, and employees may also seek an injunction to cause Trustor to
abate any action in violation of any Environmental Provision and may seek the
recovery of all costs, damages, expenses, fees, penalties, fines, judgments,
indemnification payments to third parties, and other out-of-pocket costs or
expenses actually incurred by Beneficiary (collectively, "ENVIRONMENTAL COSTS")
incurred or advanced by Beneficiary relating to the cleanup, remedy, or other
response action required by any Hazardous Substances Law, or any Hazardous
Substance Claim, or which Beneficiary believes necessary to protect the
Property. It will be conclusively presumed between Beneficiary and Trustor that
all Environmental Costs incurred or advanced by Beneficiary relating to the
cleanup, remedy, or other response action of or to the Property were made by
Beneficiary in good faith. All Environmental Costs incurred by Beneficiary under
this subsection (including, without limitation, court costs, consultant fees,
and attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date of expenditure
until those sums have been paid in full. Beneficiary will be entitled to bid, at
any trustee's or foreclosure sale of the Property, the amount of the costs,
expenses, and interest in addition to the amount of other Indebtedness.
8.9 WAIVE LIEN. Beneficiary or its agents, representatives, and
----------
employees may waive its lien against the Property or any portion of it,
including the Improvements and the Personal Property, to the extent that the
Property is found to be environmentally impaired under the laws of the state
where the Property is located, and to exercise all rights and remedies of an
unsecured creditor against Trustor and all of Trustor's assets and property for
the recovery of any deficiency and Environmental Costs, including, but not
limited to, seeking an attachment order under the laws of the state where the
Property is located. As between Beneficiary and Trustor, Trustor will have the
burden of proving that Trustor or any related party (or any affiliate or agent
of Trustor or any related party) was not in any way negligent in permitting the
Release or threatened Release of the Hazardous Substances.
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8.10 REMEDIES CUMULATIVE. All remedies of Beneficiary provided for in
-------------------
this Deed of Trust are cumulative and will be in addition to all other rights
and remedies provided in the other Loan Documents or provided by law, including
any banker's lien and right of offset. The exercise of any right or remedy by
Beneficiary will not in any way constitute a cure or waiver of default, will not
invalidate any act done pursuant to any notice of default, nor will it prejudice
Beneficiary in the exercise of any of its rights unless, in the exercise of
those rights, Beneficiary collects the total amount of the Indebtedness.
9. SECURITY AGREEMENT.
------------------
9.1 GRANT OF SECURITY INTEREST. Trustor also grants to Beneficiary a
--------------------------
security interest in all of Trustor's right, title, and interest now owned or
later acquired to the following property (collectively, "COLLATERAL") now or
later affixed to or located on the Property, or used in connection with the
operation of the Property or the Improvements and all the rents, revenues,
issues, profits and proceeds of that property: the Personalty; the Fixtures; all
machinery, equipment, engines, appliances, and fixtures for generating or
distributing air, water, heat, electricity, light, fuel, or refrigeration, or
for ventilating or sanitary purposes, or for the exclusion of vermin or insects,
or for the removal of dust, refuse, or garbage; all wallbeds, wall safes, built-
in furniture and installations, shelving, lockers, partitions, doorstops,
vaults, motors, elevators, dumbwaiters, awnings, window shades, venetian blinds,
light fixtures, fire hoses and brackets and boxes for them, fire sprinklers,
alarm systems, draperies, drapery rods and brackets, mirrors, mantles, screens,
linoleum, carpets and carpeting, plumbing, bathtubs, sinks, basins, pipes,
faucets, water closets, laundry equipment, washers, dryers, iceboxes,
refrigerators, heating units, stoves, ovens, ranges, dishwashers, disposals,
water heaters, incinerators, furniture, fixtures, and furnishings; all
communication systems; all specifically designed installations and furnishings;
all building materials, supplies, and equipment now or later delivered to the
Property; all office equipment, including, without limitation, all computers,
computer systems, hardware and software, access codes, access keys, computer
programs, file names, typewriters, duplicating machines, word processing
equipment, adding machines, calculators, dictating equipment, printing presses,
and related equipment; all inventories and supplies, including, without
limitation, office supplies, soap, light bulbs, toilet paper, and linens; all
clocks, television sets, radios, and other electronic or audio/video equipment;
all podiums, microphones, movie and slide projectors and screens, and other
property relating to conference and convention facilities; all security and
cleaning deposits collected from any tenants or lessees of any part of the
Property, all deposits collected from purchasers pursuant to contracts for sale
of the Property or any portion of the Property; and, subject to the other
provisions of this Deed of Trust, all proceeds of any fire and builders' risk
insurance policy, or of any policy insuring the Property (and the contents of
the Improvements) against any other perils, all awards made in eminent domain
proceedings, or purchased in lieu of that, made with respect to the Property,
and any compensation, award, payment, or relief given by any governmental agency
or other source because of damage to the Property resulting from earthquake,
flood, windstorm, or any emergency or any other event or circumstance. The
specific enumerations in this Deed of Trust do not exclude the general.
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The security interest also includes all additions to, substitutions for,
changes in, or replacements of the whole or any part of these articles of
property, together with all contract rights of Trustor in construction
contracts, bonds, agreements for purchase and sale of the Property, all policies
of insurance arising out of the improvement or ownership of the Property, and
all accounts, contract rights, chattel paper, instruments, general intangibles,
receivables and other obligations of any kind now or later existing, arising out
of, or in connection with the operation or development of the Property. The
security interest also includes all rights now or later existing in all security
agreements, leases, and other contracts securing or otherwise relating to any
accounts, contract rights, chattel paper, instruments, general intangibles, or
obligations; all causes of action and recoveries now or later existing for any
loss or diminution in value of the Property; all proceeds of any of the
Collateral; and, to the extent not otherwise included, all payments under
insurance (whether Beneficiary is the loss payee), or any indemnity, warranty,
or guaranty payable by reason of loss or damage to or otherwise with respect to
any of the Collateral.
9.2 REMEDIES. This Deed of Trust constitutes a security agreement with
--------
respect to the Collateral in which Beneficiary is granted a security interest.
Beneficiary has all of the rights and remedies of a secured party under the
Uniform Commercial Code of the laws of the state where the Property is located
as well as all other rights and remedies available at law or in equity. Trustor
agrees to execute and deliver on demand, and irrevocably constitutes and
appoints Beneficiary the attorney-in-fact of Trustor to execute, deliver, and
file, any security agreements, financing statements, continuation statements, or
other instruments that Beneficiary may request to impose, perfect, or continue
the perfection of the lien or security interest created by this Deed of Trust.
On the occurrence of any Event of Default (taking into account any applicable
period of grace or cure), Beneficiary will have the right to sell at any public
or private sales as permitted by applicable law any of the Collateral that is
personal property. Beneficiary will also have any other rights and remedies,
whether at law, in equity, or by statute that are available to secured
creditors. Any disposition may be conducted by an employee or agent of
Beneficiary or Trustee. Any Person, including both Trustor and Beneficiary, will
be eligible to purchase any part or all of the Collateral at any disposition.
9.3 EXPENSES.
--------
Expenses of retaking, holding, and preparing for sale, selling, or the like
will be borne by Trustor and will include Beneficiary's and Trustee's attorney
fees and legal expenses. Trustor, on demand of Beneficiary, will assemble the
Collateral and make it available to Beneficiary at the Property, a place deemed
to be reasonably convenient to Beneficiary and Trustor. Beneficiary will give
Trustor at least ten (10) days' prior written notice of the time and place of
any public sale or other disposition of the Collateral or of the time of or
after which any private sale or any other intended disposition is to be made. If
the notice is sent to Trustor in the manner provided for the mailing of notices
in this Deed of Trust, it is deemed reasonable notice to Trustor.
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9.4 FIXTURE FILING.
--------------
(a) This Deed of Trust constitutes a financing statement filed as a
fixture filing in the Official Records of the County Recorder of the county in
which the Property is located with respect to all Fixtures included within the
term Property as used in this Deed of Trust and with respect to any goods,
Collateral, or other personal property that may now be or later become fixtures.
(b) It is understood and agreed that, to protect Beneficiary against
the effect of Uniform Commercial Code (S) 9313 or the state law equivalent of
the state where the Property is located, if any fixture owned by Trustor on the
Property, or any part of any fixture, is replaced or added to, or any new
fixture owned by Trustor is installed by Trustor, and in each case the fixture
has a cost or fair market value in excess of One Thousand Dollars ($1,000.00)
and the fixture is or may be subject to a security interest held by a seller or
any other party, the following will apply:
(1) Trustor or any owner of all or any part of the Property
will, before the replacement, addition, or installation of any fixture, obtain
the prior written approval of Beneficiary, and give Beneficiary written notice
that a security agreement with respect to the fixture has been or will be
consummated, and the notice will contain the following information:
(i) description of the fixtures to be replaced, added
to, installed, or substituted;
(ii) a recital of the location at which the fixtures will
be replaced, added to, installed, or substituted;
(iii) a statement of the name and address of the holder
and amount of the security interest; and
(iv) the date of the purchase of the fixtures.
Neither this subsection nor any consent by Beneficiary pursuant to this
subsection will constitute an agreement to subordinate any right of Beneficiary
in fixtures or other property covered by this Deed of Trust.
(2) Beneficiary may at any time pay the balance due under the
security agreement and the amount paid will be:
(i) secured by this Deed of Trust and will be a lien on
the Property, enjoying the same priorities as this Deed of Trust,
(ii) added to the amount of the Note or other obligation
secured by this Deed of Trust, and
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(iii) on demand with interest at the Default Rate from the
time of the payment; and if Trustor is in default for ten (10) days after
demand, the entire principal sum secured with all unpaid interest will, at the
Beneficiary's option, become immediately due, regardless of any contrary
provision in this Deed of Trust or the Note; or Beneficiary will have the
privilege of acquiring by assignment from the holder of the security interest
any contract rights, accounts receivable, chattel paper, negotiable or
nonnegotiable instruments, or other evidence of Trustor's indebtedness for the
fixtures, and, on acquiring these interests by assignment, will have the right
to enforce the security interest as an assignee, in accordance with the Uniform
Commercial Code, the laws of the state where the Property is located and/or
other applicable law.
(3) Whether Beneficiary has paid or taken an assignment of the
security interest, if at any time Trustor is in default for a period of ten (10)
days under the security agreement covering the fixtures, that default will be
considered a material breach of Trustor's covenants under this Deed of Trust,
and will, at Beneficiary's option, constitute a default under this Deed of
Trust, and the principal sum secured will, at Beneficiary's option, become
immediately due.
(4) The provisions of subsections (ii) and (iii) above will not
apply if the goods that may become fixtures are of at least equivalent value and
quality as any property being replaced and if the rights of the party holding
the security interest have been expressly subordinated, at no cost to
Beneficiary, to the lien of this Deed of Trust in a manner satisfactory to
Beneficiary, including, without limitation, at Beneficiary's option, providing
to Beneficiary a satisfactory opinion of counsel that this Deed of Trust
constitutes a valid and subsisting first lien on the fixtures that is not
subordinate to the lien of the security interest under any applicable law,
including, without limitation, the provisions of Uniform Commercial Code (S)
9313 or the state law equivalent of the state where the Property is located.
9.5 ASSIGNMENT OF AGREEMENTS.
------------------------
(a) As partial security for the Loan, Trustor sells, assigns,
transfers, sets over, and delivers to Beneficiary all of Trustor's right, title,
and interest in all agreements, permits, and contracts pertaining to the use or
operation of the Property, including, but not limited to, environmental impact
reports; negative declarations; map approvals; grading and construction permits;
conditional use permits; applications for all permits; management agreements;
all development rights in the Property that Trustor may now or later acquire
(including, without limitation, development rights arising in connection with
any action by a governmental entity, including, by way of illustration, but not
of limitation, inducement resolutions of county, municipal, or other
governmental entities); agreements with contractors, suppliers, and construction
managers; and agreements pertaining to the transfer of development rights or
permitted floor area under applicable laws or ordinances (collectively,
"AGREEMENTS"), as they may be amended or otherwise modified from time to time,
including, without limitation, the right of Trustor to terminate any of the
Agreements, to perform under them, and to compel performance and otherwise
exercise all remedies
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under them, together with the immediate and continuing right to collect and
receive all sums that may become due to Trustor, or which Trustor may now or
later become entitled to demand or claim, arising or issuing out of the
Agreements, including, without limitation, claims of Trustor for damages arising
out of breach of or default under any of the Agreements and all rights of
Trustor to receive proceeds of any insurance, indemnity, warranty, or guaranty
with respect to any of the Agreements. However, so long as no Event of Default
has occurred and is continuing, Trustor will have the right under a license
granted to collect and retain all sums that may become payable to Trustor under
the Agreements.
(b) Trustor covenants and agrees to punctually observe, perform, and
discharge the obligations, terms, covenants, conditions, and warranties to be
observed, performed, and discharged by it under the Agreements. Beneficiary,
upon an Event of Default, at its option and upon written notice to Trustor, will
have the right to declare the assignment in this Section 9.5 to be absolute,
-----------
and, in addition, Beneficiary will have the complete right then or later to
exercise and enforce all of the rights and remedies provided by law.
(c) The acceptance by Beneficiary of the assignment in this Section
-------
9.5, with all the rights, powers, privileges, and authority granted will not,
- ---
prior to the exercise of Beneficiary's right to declare the assignment in this
Section 9.5 to be absolute, obligate Beneficiary to assume any obligations under
- -----------
the Agreements or to take any action under them, or to expend any money or incur
any expense or perform or discharge any obligation, duty, or liability under the
Agreements, or to assume any obligation or responsibility for the nonperformance
of the provisions by Trustor.
10. ASSIGNMENT OF LEASES AND RENTS.
------------------------------
10.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary:
----------
(a) all of Trustor's right, title, and interest in all leases;
licenses; agreements relating to the management, leasing, or operation of the
Property; and other agreements of any kind relating to the use or occupancy of
the Property, whether now existing or entered into after the date of this Deed
of Trust, including, without limitation, that certain lease referenced in
Section 4.19 hereof ("LEASES"), and
- ------------
(b) the rents, issues, and profits of the Property, including,
without limitation, all amounts payable and all rights and benefits accruing to
Trustor under the Leases ("PAYMENTS"), for the purposes and on the terms and
conditions below. The term Leases will also include all guarantees of and
security for the lessees' performance, and all amendments, extensions, renewals,
or modifications that are permitted. This is a present and absolute assignment,
not an assignment for security purposes only, and Beneficiary's right to the
Leases and Payments is not contingent on, and may be exercised without,
possession of the Property.
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10.2 LICENSE. Beneficiary confers on Trustor a license ("LICENSE") to
-------
collect and retain the Payments as they become due until the occurrence of an
Event of Default. Upon an Event of Default, the License will be automatically
revoked and Beneficiary may collect and retain the Payments without notice and
without taking possession of the Property. Trustor irrevocably authorizes and
directs the lessees under the Leases to rely on and comply with any notice or
demand by Beneficiary for the payment to Beneficiary of any rental or other sums
that may at any time become due under the Leases, or for the performance of any
of the lessees' undertakings under the Leases. The lessees will have no right or
duty to inquire as to whether any Default has actually occurred or is then
existing. Trustor relieves the lessees from any liability to Trustor by reason
of relying on and complying with any notice or demand by Beneficiary.
10.3 EFFECT OF ASSIGNMENT. The assignment will not impose on Beneficiary
--------------------
any duty to produce rents, issues, or profits from the Property, or cause
Beneficiary to be:
(a) a mortgagee-in-possession for any purpose;
(b) responsible for performing any of the obligations of the lessor
under any of the Leases; or
(c) responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any negligence
in the management, upkeep, repair, or control of the Property. Beneficiary will
not be liable to Trustor or any other party as a consequence of the exercise of
the rights granted to Beneficiary under this assignment or the failure of
Beneficiary to perform any obligation of Trustor arising under the Leases.
10.4 LEASING COVENANTS. Trustor covenants and agrees as follows:
-----------------
(a) At Trustor's sole cost to:
(1) perform all obligations of the lessor under the Leases and
enforce performance by the lessees of their obligations under the Leases;
(2) subject to the provisions of Section 10.4(b)(5) below,
------------------
enforce all remedies available to Trustor in case of default by the lessees
under any of the Leases and prosecute and defend any action, arbitration, or
other controversy relating to any of the Leases or to Trustor's interest in any
of the Leases;
(3) give Beneficiary prompt notice of any default that occurs
under any of the Leases, whether by the lessees or Trustor;
(4) exercise diligent, good-faith efforts to keep all portions
of the Property leased at all times and at rentals not less than the fair market
rental value;
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(5) promptly upon execution, deliver to Beneficiary fully
executed counterpart originals of the Leases; and
(b) except with Beneficiary's prior written consent, not to:
(1) enter into any Leases after the date of this Deed of Trust;
(2) enter into any leases except those which provide solely for
the payment of rent which qualifies as "rents from real property" as that phrase
is defined in Internal Revenue Code Section 856(d);
(3) execute any other assignment relating to any of the Leases
or the Payments;
(4) discount any rent or other sums due under the Leases or
collect them in advance, other than to collect rent one (1) month in advance of
the time when it becomes due;
(5) terminate, modify, or amend any of the terms of the Leases
or release or discharge the lessees from any obligations;
(6) consent to any assignment or subletting by any lessee; or
(7) subordinate any of the Leases to any other deed of trust or
encumbrance.
Any attempted action in violation of the provisions of Section 10.4(b) will be
---------------
voidable at Beneficiary's election.
10.5 APPLICATION OF RENTS. Beneficiary, in its sole discretion, may
--------------------
apply, or require the application of, all amounts received pursuant to the
assignment to the payment of any one or more of the Obligations in any order
that Beneficiary may elect.
10.6 ESTOPPEL CERTIFICATES. Within twenty (20) days after request by
---------------------
Beneficiary, Trustor will deliver to Beneficiary and to any party designated by
Beneficiary estoppel certificates executed by Trustor and by each of the
lessees, in recordable form, certifying:
(a) that the assignment and the Leases are in full force;
(b) the date of each lessee's most recent payment of rent;
(c) that there are no defenses or offsets outstanding, or stating
those claimed by Trustor or lessees under the assignment or the Leases,; and
(d) any other information reasonably requested by Beneficiary.
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10.7 REMEDIES. In addition to any other remedies in this Deed of Trust,
--------
Beneficiary will have the following rights and remedies upon the occurrence of
an Event of Default:
(a) To receive the Payments and any other amounts arising or
accruing under the Leases or from the Property;
(b) To collect, sue for, settle, compromise, and give releases for
the Payments and pursue any remedies for the enforcement of the Leases or
Trustor's rights under the Leases; and
(c) To take possession of the Property, and hold, manage, lease, and
operate it on any terms and for any period of time that Beneficiary may deem
proper and, either with or without taking possession of the Property, in its own
name, make from time to time all alterations, renovations, repairs, or
replacements that Beneficiary may deem proper.
10.8 DEFINITIONS. The terms lessor and lessors as used in this Deed of
-----------
Trust will include all owners, landlords, licensors, and other parties in a
similar position with respect to the Leases. The terms lessee and lessees will
include any tenants and licensees and any other parties in a similar position
and will also include any guarantors of or other obligors under the Leases.
10.9 NONDISTURBANCE AGREEMENTS. At Trustor's request, Beneficiary shall
-------------------------
enter into a nondisturbance and attornment agreement with respect to Trustor's
lease of the Property to a third party operator, which shall provide that
Beneficiary shall recognize the lessee's rights under the lease following a
foreclosure if the lessee is not in default under the lease at the time of the
foreclosure.
11. MISCELLANEOUS.
-------------
11.1 SUCCESSOR TRUSTEE. Beneficiary may remove Trustee or any successor
-----------------
trustee at any time and appoint a successor trustee by recording a written
substitution in the county where the Property is located, or in any other manner
permitted by law. Upon that appointment, all of the powers, rights, and
authority of Trustee will immediately become vested in the successor.
11.2 CHANGE OF LAW. If any law is passed, after the date of this Deed of
-------------
Trust, that deducts from the value of the Property, for the purposes of
taxation, any lien on it, or changes in any way the laws now in force for the
taxation of mortgages, deeds of trust, or debts secured by mortgage or deed of
trust (other than laws imposing taxes on income) or the manner of the collection
of any taxes so as to affect adversely the rights of Beneficiary as holder of
the Note and Beneficiary under this Deed of Trust, the Indebtedness will become
due at Beneficiary's option, exercised by thirty (30) days' notice to Trustor
unless Trustor, within that thirty (30) day period, if permitted by law, assumes
the payment of any tax or
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other charge imposed on Beneficiary for the period remaining until full payment
by Trustor of the Indebtedness.
11.3 NO WAIVER. No waiver by Beneficiary of any default or breach by
---------
Trustor will be implied from any omission by Beneficiary to take action on
account of that default if the default persists or is repeated. Also, no express
waiver will affect any default other than the default in the waiver and the
waiver will be operative only for the time and to the extent stated. Waivers of
any covenant, term, or condition in this Deed of Trust will not be construed as
a waiver of any subsequent breach of the same covenant, term, or condition. The
consent or approval by Beneficiary for any act by Trustor requiring further
consent or approval will not be deemed to waive or render unnecessary the
consent or approval for any subsequent similar act.
11.4 ABANDONMENT. Subject to any chattel mortgages, security agreements,
-----------
or other liens on title that may exist with the consent of Beneficiary, or any
provided for in this Deed of Trust, all Personalty that upon foreclosure of the
Property is owned by Trustor and is used in connection with the operation of the
Property will be deemed at Beneficiary's option to have become on that date a
part of the Property and abandoned to Beneficiary in its then condition.
11.5 NOTICES. All notices, advices, demands, requests, consents,
-------
statements, satisfactions, waivers, designations, refusals, confirmations, or
denials that may be required or contemplated under this Deed of Trust for any
party to serve on or give to any other will be in writing, and, if not in
writing, will not be deemed to have been given. Also, they must be either
personally served or sent with return receipt requested by registered or
certified mail with postage (including registration or certification charges)
prepaid in a securely enclosed and sealed envelope as follows:
(a) If to Trustor, addressed to:
Burley Skilled Nursing Facility, LLC
c/o Continuum Health Incorporated
31105 Rancho Viejo Road, No. 5
San Juan Capistrano, CA 92675
Attention: Johann Keil
(b) If to Beneficiary, addressed to:
G&L Realty Partnership, L.P.
439 North Bedford Drive
Beverly Hills, CA 90210
Attn: Mark Hamermesh
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<PAGE>
With a copy to:
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
Attn: James R. Andrews, Esq.
11.6 SURVIVAL. The covenants and agreements in this Deed of Trust will
--------
bind and inure to the benefit of Beneficiary and Trustor and their successors
and assigns, provided that nothing herein shall waive the provisions of Section
-------
5.3. It is agreed that Beneficiary may assign to or grant a participation in
- ---
any one or more lenders, free from any right of counterclaim, recoupment, or
setoff by Trustor, Beneficiary's rights and obligations in whole or in part
under the Loan Documents. Nothing in this Section 11.6 is intended to limit
------------
other provisions in the Loan Documents that by their terms survive the repayment
of the Indebtedness or the termination of any Loan Document.
11.7 SEVERABILITY. If any term, provision, covenant, or condition of this
------------
Deed of Trust or any application of it is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, in whole or in part, all
terms, provisions, covenants, and conditions of this Deed of Trust and all
applications of it not held invalid, void, or unenforceable will continue in
full force and will not be affected, impaired, or invalidated.
11.8 REFERENCES TO FORECLOSURE. References in this Deed of Trust to
-------------------------
foreclosure and related phrases are references to the appropriate procedure in
connection with Trustee's private power of sale, any judicial foreclosure
proceeding, and any deed given in lieu of foreclosure.
11.9 JOINDER OF FORECLOSURE. If Beneficiary holds any other or additional
----------------------
security for the payment of any Indebtedness or performance of any Obligation,
its sale or foreclosure, on any default in the payment or performance, in
Beneficiary's sole discretion, may be prior to, subsequent to, or joined or
otherwise contemporaneous with any sale or foreclosure. In addition to the
rights in this Deed of Trust specifically conferred, Beneficiary, at any time
and from time to time, may exercise any right or remedy now or later given by
law to beneficiaries under deeds of trust generally, or to the holders of any
obligations of the kind secured.
11.10 COPIES. Trustor will promptly give to Beneficiary copies of all:
------
(a) notices of violation that Trustor receives from any governmental
agency or authority, and
(b) notices of default that Trustor receives under any agreement
relating to the borrowing of money by Trustor from any Person.
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11.11 ERISA COMPLIANCE. Trustor will at all times comply with the
----------------
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to any retirement or other employment benefit plan to
which it is a party as employer. As soon as possible after Trustor knows, or has
reason to know, that any Reportable Event (defined in ERISA) with respect to any
plan of Trustor has occurred, it will furnish to Beneficiary a statement in
writing setting forth details about the Reportable Event and the action, if any,
that Trustor proposes to take, together with a copy of the notice of the
Reportable Event furnished to the Pension Benefit Guaranty Corporation. In
addition, if at any time the loan evidenced by the Note is deemed in whole or in
part to be a transaction prohibited by the provisions of ERISA, Trustor will
immediately reimburse Beneficiary on demand for all taxes levied against or
costs incurred by Beneficiary or Trustee by reason of the Reportable Event.
11.12 SUBORDINATION. At the option of Beneficiary, this Deed of Trust will
-------------
become subject and subordinate, in whole or in part (but not with respect to
priority of entitlement to any insurance proceeds, damages, awards, or
compensation resulting from damage to the Property or condemnation or exercise
of power of eminent domain), to any contracts of sale or any leases of the
Property on the execution by Beneficiary and recording of a unilateral
declaration to that effect in the official records of the county and state where
the Property is located. Beneficiary may require the issuance of any title
insurance endorsements to the Title Policy in connection with any subordination
that Beneficiary, in its judgment, determines are appropriate, and Trustor will
be obligated to pay any cost or expense incurred in connection with the
issuance.
11.13 NO MERGER. So long as any of the Indebtedness remains unpaid or
---------
Trustor has any further obligation under the Loan Documents, unless Beneficiary
otherwise consents in writing, the fee estate of Trustor in the Property or any
part of it will not merge, by operation of law or otherwise, with any leasehold
or other estate in the Property or any part of it, but will always be kept
separate and distinct, regardless of the union of the fee estate and the
leasehold or other estate in Trustor or any other Person.
11.14 INSPECTION OF PROPERTY. Beneficiary is authorized by itself or its
----------------------
agents, employees, or workers, to enter at any reasonable time on prior written
notice to Trustor on any part of the Property for the purpose of inspecting it,
and for the purpose of performing any of the acts it is authorized to perform
under the terms of this Deed of Trust. Trustor agrees to cooperate with
Beneficiary to facilitate any inspection.
11.15 PERFORMANCE BY TRUSTOR. Trustor will faithfully perform every
----------------------
covenant to be performed by Trustor under any lien or encumbrance, including,
without limiting the generality of this Deed of Trust, mortgages, deeds of
trust, leases, declarations or covenants, conditions and restrictions, and other
agreements that affect the Property, in law or in equity, that Beneficiary
reasonably believes may be prior and superior to or on a parity with the lien or
charge of this Deed of Trust. A breach of or a default under any lien or
encumbrance that exists after any applicable grace period in the pertinent
instrument has expired without that breach or default having been cured, will
constitute an Event of Default under this Deed of
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Trust. If Trustor fails to do so, Beneficiary, without demand or notice and in
its sole judgment, may do any things required by Trustor by any of the
provisions in this Deed of Trust and incur and pay expenses in connection with
that. Nothing in this section affects Trustor's obligations pursuant to Sections
--------
5.2 and 5.3 of this Deed of Trust or limits Beneficiary's rights.
- -----------
11.16 PERSONALTY SECURITY INSTRUMENTS. Trustor agrees that if Beneficiary
-------------------------------
at any time holds additional security for any obligations secured by this Deed
of Trust, it may enforce the terms of it or otherwise realize on it, at its
option, either before or concurrently or after a sale is made under this Deed of
Trust, and may apply the proceeds on the Indebtedness secured without affecting
the status or waiving any right to exhaust any other security, including the
security under this Deed of Trust, and without waiving any breach or default or
any right or power, whether exercised under this Deed of Trust or in any other
security.
11.17 SUITS TO PROTECT PROPERTY. Trustor agrees to appear in and defend
-------------------------
any action or proceeding purporting to affect the security of this Deed of Trust
or any additional or other security for the obligations secured, the interest of
Beneficiary or the rights, powers, or duties of Trustee, and to pay all costs
and expenses, including, without limitation, cost of evidence of title and
attorney fees, in any action or proceeding in which Beneficiary or Trustee may
appear or be made a party, including, but not limited to, foreclosure or other
proceeding commenced by those claiming a right to any part of the Property under
subordinate liens, in any action to partition or condemn all or part of the
Property, whether pursued to final judgment, and in any exercise of the power of
sale in this Deed of Trust, whether the sale is actually consummated.
11.18 JUNIOR LIENS. Trustor agrees:
------------
(a) that as of the date of this Deed of Trust there are no
encumbrances to secure debts junior to this Deed of Trust; and
(b) that there are to be none as of the date when this Deed of Trust
becomes of record.
11.19 FURTHER ADVANCES. On the request of Trustor or its permitted
----------------
successors in ownership of the Land, Beneficiary may, at its option, at any time
before full payment of the Indebtedness, make further advances to Trustor or the
successors in ownership, with interest and late charges to be secured by this
Deed of Trust. However, the amount of principal secured by this Deed of Trust
and remaining unpaid will not at the time of and including any advance exceed
the original principal sum secured. Also, if Beneficiary, at its option, makes a
further advance or advances, Trustor or the successors in ownership agree to
execute and deliver to Beneficiary a note, payable on or before the maturity of
the Indebtedness secured and bearing any other terms that Beneficiary will
require.
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11.20 WAIVER OF STATUTE OF LIMITATIONS. The pleading of any statute of
--------------------------------
limitations as a defense to any obligations secured by this Deed of Trust is
waived, to the fullest extent permissible by law.
11.21 CHARGES FOR STATEMENTS. Trustor agrees to pay Beneficiary's
----------------------
reasonable charge, to the maximum amount permitted by law, for any statement
regarding the obligations secured by this Deed of Trust requested by Trustor or
on its behalf.
11.22 ENTIRE AGREEMENT. This Deed of Trust and the other Loan Documents
----------------
set forth the entire understanding between Trustor and Beneficiary and they will
not be amended except by a written instrument duly executed by each of Trustor
and Beneficiary. Any previous representations, warranties, agreements, and
understandings among the parties regarding the subject matter of the Loan or the
Loan Documents, whether written or oral, are superseded by this Deed of Trust
and the other Loan Documents.
11.23 INCORPORATION. All terms of the Loan Documents are incorporated in
-------------
this Deed of Trust by this reference. All persons who may have or acquire an
interest in the Property will be deemed to have notice of the terms of the Loan
Documents and to have notice, if provided for, that the rate of interest on one
or more Obligations may vary from time to time.
11.24 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
---------------------------
claiming through or under Trustor, and for all parties who may acquire a lien on
or interest in the Property, waives all rights to have the Property or any other
property that is now or later may be security for any Obligation ("OTHER
PROPERTY") marshaled on any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Obligations. Beneficiary will
have the right to sell, and any court in which foreclosure proceedings may be
brought will have the right to order a sale of, the Property and any of the
Other Property as a whole or in separate parcels, in any order that Beneficiary
may designate.
11.25 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts
-------------------------------------------------
this trust when this Deed of Trust is recorded. From time to time on written
request of Beneficiary and presentation of this Deed of Trust for endorsement,
and without affecting the personal liability of any person for payment of any
indebtedness or the performance of any obligations, Trustee may, without
liability and without notice:
(a) reconvey all or any part of the Property;
(b) consent to the making of any map or plat; and
(c) join in any grant of easement, any declaration of covenants,
conditions, and restrictions, any extension agreement, or any agreement
subordinating the lien or charge of this Deed of Trust. Except as may be
required by applicable law, Trustee or Beneficiary may from time to time apply
to any court of competent jurisdiction for aid and direction in the execution of
the trust and the enforcement of the rights and remedies
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available, and may obtain orders or decrees directing, confirming, or approving
acts in the execution of the trust and the enforcement of the remedies. Trustee
has no obligation to notify any party of any pending sale or any action or
proceeding, including, without limitation, actions in which Trustor,
Beneficiary, or Trustee will be a party, unless held or commenced and maintained
by Trustee under this Deed of Trust. Trustee will not be obligated to perform
any act required of it under this Deed of Trust unless the performance of the
act is requested in writing and Trustee is reasonably indemnified and held
harmless against any loss, cost, liability, or expense.
11.26 RELEASES, EXTENSIONS, MODIFICATIONS, AND ADDITIONAL SECURITY.
------------------------------------------------------------
Without notice to or the consent, approval, or agreement of any persons or
entities having any interest at any time in the Property or in any manner
obligated under the Obligations ("INTERESTED PARTIES"), Beneficiary may, from
time to time, release any person or entity from liability for the payment or
performance of any Obligation; take any action or make any agreement extending
the maturity or otherwise altering the terms or increasing the amount of any
Obligation; or accept additional security or release the Property or other
security for any Obligation. None of these actions will release or reduce the
personal liability of any of the Interested Parties, or release or impair the
lien of this Deed of Trust, or the priority of it on the Property. However, no
action taken or agreement made by Beneficiary to extend the maturity or
otherwise alter the terms or increase the amount of any Obligation will be
binding on Trustor without Trustor's consent.
11.27 RECONVEYANCE.
------------
(a) Upon the payment and performance of all Obligations and payment
of all Indebtedness, including, without limitation, Beneficiary's receipt of all
sums owing and outstanding under the Note, Beneficiary will deliver to Trustee a
written request for reconveyance, and will surrender to Trustee for cancellation
this Deed of Trust and any note or instrument evidencing the Obligations.
However, Beneficiary will have no obligation to deliver the written request and
documents until Beneficiary has been paid by Trustor, in immediately available
funds, all escrow, closing, and recording costs, the costs of preparing and
issuing the reconveyance, and any trustee's or reconveyance fees. On Trustee's
receipt of the written request by Beneficiary and the documents, Trustee will
reconvey, without warranty, the Property or that portion then held. To the
extent permitted by law, the reconveyance may describe the grantee as the person
or persons legally entitled and the recitals of any matters or facts in any
reconveyance will be conclusive proof of the truthfulness of them. Neither
Beneficiary nor Trustee will have any duty to determine the rights of persons
claiming to be rightful grantees of any reconveyance. When the Property has been
fully reconveyed, the last reconveyance will operate as a reassignment of all
future rents, issues, and profits of the Property to the person legally
entitled.
(b) Anything to the contrary herein notwithstanding, provided no
Event of Default has occurred and is continuing, Trustor shall be entitled to
the release of the Property from the lien of this Deed of Trust, and from the
lien of any and all other Loan Documents encumbering this Property, upon payment
to Beneficiary of all sums due and
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payable under the Note, including, but not limited to, all accrued but unpaid
principal and interest payable thereunder. Trustor will pay all costs and
expenses incurred in connection with any such release, including, but not
limited to, all Trustee's fees, reconveyance fees, recording fees, premiums for
title insurance endorsements, Beneficiary's costs in connection with such
release (including attorneys' fees and costs) and escrow fees.
11.28 SUBROGATION. Beneficiary will be subrogated to the lien of all
-----------
encumbrances, whether released of record, paid in whole or in part by
Beneficiary pursuant to this Deed of Trust, or by the proceeds of any loan
secured by this Deed of Trust.
11.29 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person
-----------------------------------------
has executed this Deed of Trust as Trustor, the obligations of all those persons
will be joint and several.
11.30 RECOURSE TO SEPARATE PROPERTY. Any married person who executes this
-----------------------------
Deed of Trust as a Trustor agrees that any money judgment that Beneficiary or
Trustee obtains pursuant to the terms of this Deed of Trust or any other
obligation of that married person secured by this Deed of Trust may be collected
by execution on that person's separate property, and any community property of
which that person is a manager.
11.31 RULES OF CONSTRUCTION. When the identity of the parties or other
---------------------
circumstances make it appropriate, the singular number includes the plural.
11.32 NO OFFSET. Trustor will pay to Beneficiary all amounts owing under
---------
the Note, this Deed of Trust, or any of the other Loan Documents without
deduction, offset, or counterclaim of any kind.
11.33 GOVERNING LAW. The parties expressly agree that this Deed of Trust
-------------
(including, without limitation, all questions regarding permissive rates of
interest) will be governed by or construed in accordance with the laws of the
state in which the Property is located and the applicable laws of the United
States of America.
11.34 WAIVER OF JURY TRIAL. TRUSTOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY TRUSTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. BENEFICIARY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY TRUSTOR.
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11.35 NO DEFAULT AFFIDAVITS. After request by Beneficiary, Trustor shall
---------------------
within ten (10) days furnish Beneficiary with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest
of the Note, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Indebtedness, if any,
(vi) that the Note, this Deed of Trust and the other Loan Documents are valid,
legal and binding obligations and have not been modified or if modified, giving
particulars of such modification; and (vii) reaffirming all representations and
warranties of Trustor set forth herein and in the other Loan Documents as of the
date requested by Beneficiary or, to the extent of any changes to any such
representations and warranties, so stating such changes.
11.36 CONTROLLING AGREEMENT. It is expressly stipulated and agreed to be
---------------------
the intent of Trustor, and Beneficiary at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Beneficiary to contract for, charge, take, reserve, or receive a greater amount
of interest than under state law) and that this Section 11.36 (and the similar
-------------
paragraph contained in the Note) shall control every other covenant and
agreement in this Deed of Trust and the other Loan Documents. If the applicable
law (state or federal) is ever judicially interpreted so as to render usurious
any amount called for under the Note or under any of the other Loan Documents,
or contracted for, charged, taken, reserved, or received with respect to the
Indebtedness, or if Beneficiary's exercise of the option to accelerate the
maturity of the Note, or if any prepayment by Trustor results in Trustor having
paid any interest in excess of that permitted by applicable law, then it is
Trustor's and Beneficiary's express intent that all excess amounts theretofore
collected by Beneficiary shall be credited on the principal balance of the Note
and all other Indebtedness (or, if the Note and all other Indebtedness have been
or would thereby be paid in full, refunded to Trustor), and the provisions of
the Note and the other Loan Documents immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid or agreed to be paid to
Beneficiary for the use, forbearance, or detention of the Indebtedness shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Indebtedness until payment in full
so that the rate or amount of interest on account of the Indebtedness does not
exceed the maximum lawful rate from time to time in effect and applicable to the
Indebtedness for so long as the Indebtedness is outstanding. Notwithstanding
anything to the contrary contained herein or in any of the other Loan Documents,
it is not the intention of Beneficiary to accelerate the maturity of any
interest that has not accrued at the time of such acceleration or to collect
unearned interest at the time of acceleration.
11.37 NO CREDITS ON ACCOUNT OF THE DEBT. Trustor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Indebtedness for any
part of the Impositions assessed against the Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof,
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for real estate tax purposes by reason of this Deed of Trust or the
Indebtedness. In the event such claim, credit and deduction shall be required
by law, Beneficiary shall have the option, by written notice of not less than
ninety (90) days, to declare the Indebtedness immediately due and payable.
11.38 DOCUMENTARY STAMPS. If at any time the United States of America, any
------------------
State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Deed of Trust, or impose any
other tax or charge on the same, Trustor will pay for the same, with interest
and penalties thereon, if any.
11.39 REASONABLENESS. Lender shall act reasonably and in good faith in
--------------
exercising any approval rights or other rights hereunder.
11.40 ATTORNEYS' FEES AND COSTS. If the Indebtedness is not paid when due
-------------------------
after the expiration of any grace period, or if any Event of Default occurs,
Trustor promises to pay all costs of enforcement and collection, including, but
not limited to, court costs and reasonable attorneys' fees, whether or not such
enforcement and collection includes the filing of a lawsuit. All provisions in
this Deed of Trust for payment of attorneys' fees in any suit, action or other
proceeding shall be construed to include all such fees in any bankruptcy,
receivership or other proceedings, at any trial, on any appeal, and on any
petition for review, in addition to all other sums provided by law.
11.41 WAIVERS.
-------
(a) Trustor warrants that (i) Beneficiary has made no representation
to Trustor as to the creditworthiness of VLC, and (ii) Trustor has established
adequate means of obtaining from VLC on a continuing basis financial and other
information pertaining to VLC's financial condition. Trustor agrees to keep
adequately informed from such means as it deems appropriate of any facts, events
or circumstances which might in any way affect Trustor's risks hereunder and
Trustor further agrees that Beneficiary shall have no further obligation to
disclose to Trustor information or materials required in the course of
Beneficiary's relationship with VLC.
(b) Trustor hereby waives any right to require Beneficiary to: (i)
proceed against any person, including VLC, (ii) proceed against or exhaust any
security held from VLC or any other person, (iii) pursue any other remedy in
Beneficiary's power, or (iv) make any presentments or demands for performance or
give any notices of nonperformance, protest, or dishonor in connection with any
of the indebtedness held by Beneficiary. Trustor waives any defense arising by
reason of: (1) any disability or other defense of VLC or any other person, (2)
the cessation or limitation of the liability of VLC for any cause whatsoever,
other than payment in full of all indebtedness owed to Beneficiary, (3) the
application by VLC of the proceeds of any obligation secured hereby for purposes
other than the purposes represented by VLC to Beneficiary or intended or
understood by Beneficiary or VLC, (4) any act or omission by Beneficiary which
directly or indirectly results in or aids the discharge of VLC or any obligation
secured hereby by operation of law or otherwise, or
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<PAGE>
(5) any modification of the obligations secured hereby in any form whatsoever,
including, without limitation, the renewal, extension, acceleration or other
change in the terms of such obligations or any part thereof, including increase
or decrease of the rate of interest thereon. Trustor waives all rights and
defenses arising out of an election of remedies by the creditor, even though
that election of remedies,such as a nonjudicial foreclosure with respect to
security for a guaranteed obligation, has destroyed the Trustor's rights of
subrogation and reimbursement against the principal by the operation of law or
otherwise. Trustor shall have no right of subrogation and Trustor waives any
defense that may have been based upon any election of remedies by Beneficiary
which destroys Trustor's rights to proceed against VLC for reimbursement,
including, without limitation, any loss of rights Trustor may suffer by reason
of any rights, powers, or remedies of VLC in connection with any anti-deficiency
laws or any other laws limiting, qualifying or discharging Trustor's
obligations. Trustor further waives any right to enforce any remedy which
Beneficiary now has or may hereafter have against VLC or any other person and
waives any benefit of or any right to participate in any security whatsoever now
or hereafter held by Beneficiary. If any amount shall be paid to Trustor at any
time when any indebtedness owing to Beneficiary shall not have been paid in
full, such amount shall be held in trust for the benefit of Beneficiary and
shall forthwith be paid to Beneficiary to be credited and applied upon such
indebtedness, whether matured or unmatured. Trustor warrants and agrees that
each of the waivers set forth above is made with Trustor's full knowledge of its
significance and consequences and that under the circumstances the waivers are
reasonable. If any said waivers are determined to be contrary to any
application of law or public policy, such waivers shall be effective only to the
extent permitted by law.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day
and year first above written.
BURLEY SKILLED NURSING FACILITY, LLC,
a Delaware limited liability company
By: /s/ Johann Keil
----------------------------------
Name: JOHANN KEIL
-----------------------------
Title: Member
----------------------------
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<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
) ss.
County of Los Angeles )
On Sept. 29, 1997 (date) before me, Helen Nelson (name and title "Notary
Public"), personally appeared Johann Keil (name of signer(s)), personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Helen Nelson
- --------------------------------------
(signature of Notary) (seal of Notary)
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<PAGE>
State of California )
) ss.
County of Los Angeles )
On this 29th, day of September, in the year 1997, before me, Helen Nelson,
a Notary Public, personally appeared Johann Keil known or identified to me (or
proved to me on the oath of ______________) to be one of the members in the
limited liability company (Burley Skilled Nursing Facility, LLC, a Delaware
limited liability company), and the member or one of the members who subscribed
said limited liability company name to the foregoing instrument, and
acknowledged to me that he executed the same in said limited liability company
name.
WITNESS my hand and official seal.
/s/ Helen Nelson
- --------------------------------------
(signature of Notary) (seal of Notary)
<PAGE>
EXHIBIT A
---------
[Legal Description]
Lots 2, 3, 4, 5, 6 and 7 in Block 11 of Miller's First Addition to the City
of Burley, Cassia County, Idaho, as the same is platted in the official
plat thereof, now of record in the office of the Recorder of said County.
A-1
<PAGE>
EXHIBIT 10.73
Recording Requested By And
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401-1000
ASSIGNMENT OF LEASES AND RENTS
------------------------------
THIS ASSIGNMENT OF LEASES AND RENTS ("ASSIGNMENT") is made as of September
29, 1997, by BURLEY SKILLED NURSING FACILITY, LLC, a Delaware limited liability
company, having its principal place of business at 31105 Rancho Viejo Road, No.
5, San Juan Capistrano, California 92675 ("ASSIGNOR"), to G&L REALTY
PARTNERSHIP, L.P., a Delaware limited partnership, having an office at 439 North
Bedford Drive, Beverly Hills, California 90210 ("ASSIGNEE").
WITNESSETH:
THAT Assignor for good and valuable consideration, receipt whereof is
hereby acknowledged, hereby grants, transfer and absolutely and unconditionally
assigns to Assignee the entire lessor's interest in and to all current and
future leases, and other agreements affecting the use, enjoyment, or occupancy
of all or any part of the land, more particularly described in Exhibit A annexed
---------
hereto and made a part hereof, together with the buildings, structures,
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter located thereon (hereinafter
collectively referred to as the "PROPERTY").
TOGETHER WITH all other leases and other agreements affecting the use,
enjoyment or occupancy of any part of the Property now or hereafter made
affecting the Property or any portion thereof, together with any extensions or
renewals of the same, this Assignment of other present and future leases and
present and future agreements being effective without further or supplemental
assignment;
The leases and other agreements described above together with all other
present and future leases and present and future agreements and any extension or
renewal of the same are hereinafter collectively referred to as the "LEASES";
TOGETHER WITH all accounts, deposits, rents, income, issues, revenues,
receipts, insurance proceeds and profits arising from the Leases and renewals
thereof and together with all rents, income, issues and profits (including, but
not limited to, all oil and gas or
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other mineral royalties and bonuses) from the use, enjoyment and occupancy of
the Property, or the sale, lease, sublease, license, concession or other grant
of right to use or occupy any portion thereof, vending machine proceeds, and any
compensation received for the rendering of services by Assignor (hereinafter
collectively referred to as the "RENTS").
THIS ASSIGNMENT is made in consideration of (A) that certain loan made by
Assignee to Assignor evidenced by that certain note made by Assignor to
Assignee, dated the date hereof, in the principal sum of Eight Hundred Seventy
Thousand Dollars and No Cents ($870,000.00) (the "NOTE"), and (B) that certain
loan made by Assignee to Valley Living Center, LLC, a Delaware limited liability
company ("VLC"), evidenced by that certain note made by VLC to Assignee, dated
the date hereof, in the principal sum of One Hundred and Fifteen Thousand Two
Hundred Seventy-Two Dollars and No Cents (the "VALLEY LIVING NOTE"), secured by
(i) that certain deed of trust, security agreement, and fixture filing with
assignment of rents and agreements given by Assignor to Assignee, dated the date
hereof covering the Property and intended to be duly recorded (the "BURLEY
SECURITY INSTRUMENT"), and (ii) that certain deed of trust, security agreement,
and fixture filing with assignment of rents and agreements given by VLC to
Assignee, dated the date hereof, covering certain property described therein and
intended to be duly recorded (the "VALLEY LIVING SECURITY INSTRUMENT"). The
Burley Security Instrument and the Valley Living Security Instrument are
collectively referred to herein as the "SECURITY INSTRUMENT."
The principal sum, interest and all other sums due and payable under the
Note, the Valley Living Note and Security Instrument are hereinafter
collectively referred to as the "DEBT". This Assignment, the Note, the Valley
Living Note, the Security Instrument and any other documents now or hereafter
executed by Assignor and/or others and by or in favor of Assignee which
evidences, secures or guarantees all or any portion of the payments due under
the Note or otherwise is executed and/or delivered in connection with the Note
and the Security Instrument are hereinafter referred to as the "LOAN DOCUMENTS".
ASSIGNOR WARRANTS that (A) Assignor is the sole owner of the entire
lessor's interest in the Leases; (B) the Leases are valid, enforceable and in
full force and effect and have not been altered, modified or amended in any
manner whatsoever; (C) none of the Rents have been assigned or otherwise pledged
or hypothecated; (D) none of the Rents have been collected for more than two (2)
months in advance; (E) Assignor has full power and authority to execute and
deliver this Assignment and the execution and delivery of this Assignment has
been duly authorized and does not conflict with or constitute a default under
any law, judicial order or other agreement affecting Assignor or the Property;
(F) the premises demised under the Leases have been completed and the tenants
under the Leases have accepted the same and have taken possession of the same on
a rent-paying basis; and (G) there exist on offsets or defenses to the payment
of any portion of the Rents.
ASSIGNOR COVENANTS with Assignee that Assignor (A) shall observe and
perform all the obligations imposed upon the lessor under the Leases and shall
not do or permit to be done anything to impair the value of the Leases as
security for the Debt; (B) shall promptly send copies to Assignee of all notices
of default which Assignor shall send or
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<PAGE>
receive thereunder; (C) shall enforce all of the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed
and performed, short of termination thereof; (D) shall not collect any of the
Rents more than one (1) month in advance; (E) shall not execute any other
assignment of the lessor's interest in the Leases or the Rents; (F) shall
deliver to Assignee, upon request, tenant estoppel certificates from each
commercial tenant at the Property in form and substance reasonably satisfactory
to Assignee, provided that Assignor shall not be required to deliver such
certificates more frequently than two (2) times in any calendar year; and (G)
shall execute and deliver at the request of Assignee all such further
assurances, confirmations and assignments in connection with the Property as
Assignee shall from time to time require.
ASSIGNOR FURTHER COVENANTS with Assignee that Assignor shall not, without
the prior consent of Assignee (i) enter into any Lease of all or any part of the
Property in excess of 5% of gross leasable area rentable square feet (a "MAJOR
LEASE"), (ii) cancel, terminate, abridge or otherwise modify the terms of any
Major Lease, or accept a surrender thereof, (iii) consent to any transfer,
assignment of or subletting under any Major Lease, (iv) cancel, terminate,
abridge or otherwise modify any guaranty of any Major Lease or the terms
thereof, (v) accept prepayments of installments of Rents for a period of more
than one (1) month in advance or (vi) further assign the whole or any part of
the Leases or the Rents. In addition to the foregoing, Assignor shall not, (i)
lease all or any part of the Property, (ii) cancel, terminate, abridge or
otherwise modify the terms of any Lease, or accept a surrender thereof, (iii)
consent to any transfer, assignment of or subletting under any Lease not in
accordance with its terms or (iv) cancel, terminate, abridge or otherwise modify
any guaranty of any Lease or the terms thereof unless such actions are exercised
for a commercially reasonable purpose in an arms-length transaction on market
rate terms.
ASSIGNOR FURTHER COVENANTS with Assignee that (A) all Leases shall provide
that the tenant agrees to attorn to Assignee; (B) none of the Leases shall
contain any option to purchase, any right of first refusal to lease or purchase,
or any right to terminate the lease term (except in the event of the destruction
of all or substantially all of the Property); (C) Leases executed after the date
hereof shall not contain any provisions which adversely affect the Property or
which might adversely affect the rights of the Assignee, and (D) each tenant
shall conduct business only in that portion of the Property covered by its
lease. Upon request, Assignor shall furnish Assignee with executed copies of
all Leases.
THIS ASSIGNMENT is made on the following terms, covenants and conditions:
1. PRESENT ASSIGNMENT. Assignor does hereby absolutely and
------------------
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, it being intended by Assignor that this
assignment constitutes a present, absolute and unconditional assignment and not
an assignment for additional security only. Such assignment to Assignee shall
not be construed to bind Assignee to the performance of any of the covenants,
conditions, or provisions contained in any such Lease or otherwise to impose any
obligation upon Assignee. Assignor agrees to execute and deliver to Assignee
such additional instruments, in form and substance satisfactory to Assignee, as
may hereinafter be
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<PAGE>
requested by Assignee to further evidence and confirm said assignment.
Nevertheless, subject to the terms of this paragraph, Assignee grants to
Assignor a revocable license to operate and manage the Property and to collect
the Rents. Assignor shall hold the Rents, or a portion thereof, sufficient to
discharge all current sums due on the Debt for use in the payment of such sums.
Upon an Event of Default (as defined in the Security Instrument), the license
granted to Assignor herein shall automatically be revoked by Assignee and
Assignee shall immediately be entitled to receive and apply all Rents, whether
or not Assignee enters upon and takes control of the Property. Assignee and
Trustee (as defined in the Security Instrument) are hereby granted and assigned
by Assignor the right, at its option, upon the revocation of the license granted
herein to enter upon the Property in person, by agent or by court-appointed
received to collect the Rents. Any Rents collected after the revocation of the
license herein granted may be applied toward payment of the Debt in such
priority and proportion as Assignee, in its discretion, shall deem proper.
2. REMEDIES OF ASSIGNEE. Upon or at any time after an Event of Default,
--------------------
Assignee may, at its option, without waiving such Event of Default, without
notice and without regard to the adequacy of the security for the Debt, either
in person or by agent, with or without bringing any action or proceeding, or by
a receiver appointed by a court, take possession of the Property and have, hold,
manage, lease and operate the Property on such terms and for such period of time
as Assignee may deem proper and either with or without taking possession of the
Property in its own name, demand, sue for or otherwise collect and receive all
Rents, including those past due and unpaid, with full power to make from time to
time all alterations, renovations, repairs or replacements thereto or thereof as
may seem proper to Assignee and may apply the Rents to the payment of the
following in such order and proportion as Assignee in its sole discretion may
determine, any law, custom or use to the contrary notwithstanding: (a) all
expenses of managing and securing the Property, including, without being limited
thereto, the salaries, fees and wages of a managing agent and such other
employees or agents a Assignee may deem necessary or desirable and all expenses
of operating and maintaining the Property, including, without being limited
thereto, all taxes, charges, claims, assessments, water charges, sewer rents and
any other liens, and premiums for all insurance which Assignee may deem
necessary or desirable, and the cost of all alterations, renovations, repairs or
replacements, and all expenses incident to taking and retaining possession of
the Property; and (b) the Debt, together with all costs and attorneys' fees. In
addition to the rights which Assignee may have herein, upon the occurrence of an
Event of Default, Assignee, at its option, may either require Assignor to pay
monthly in advance to Assignee, or any receiver appointed to collect the Rents,
the fair and reasonable rental value for the use and occupation of such part of
the Property as may be in possession of Assignor or require Assignor to vacate
and surrender possession of the Property to Assignee or to such receiver and, in
default thereof, Assignor may be evicted by summary proceedings or otherwise.
Additionally, Assignee shall have the right to establish a lock box for the
deposit of all Rents and other receivables of Assignor relating to the Property.
For purposes of paragraphs 1 and 2 hereof, Assignor grants to assignee its
irrevocable power of attorney, coupled with an interest, to take any and all of
the aforementioned actions and any or all other actions designated by Assignee
for the proper management and preservation of the Property. The exercise by
Assignee of the option
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<PAGE>
granted it in this paragraph and the collection of the Rents and the application
thereof as herein provided shall not be considered a waiver of any default by
Assignor under the Note, the Security Instrument, the Leases, this Assignment or
the other Loan Documents.
3. NO LIABILITY OF ASSIGNOR. Assignee shall not be liable for any loss
------------------------
sustained by Assignor resulting from Assignee's failure to let the Property
after an Event of Default or from any other act or omission of Assignee in
managing the Property after an Event of Default. Assignee shall not be
obligated to perform or discharge any obligation, duty or liability under the
Leases or under or by reason of this Assignment and Assignor shall, and hereby
agrees, to indemnify Assignee for, and to hold Assignee harmless from, any and
all liability, loss or damage which may or might be incurred under the Leases or
under or by reason of this Assignment and from any and all claims and demands
whatsoever, including the defense of any such claims and demands whatsoever,
including the defense of any such claims or demands which may be asserted
against Assignee by reason of any alleged obligations and undertakings on its
part to perform or discharge any of the terms, covenants or agreements contained
in the Leases. Should Assignee incur any such liability, the amount thereof,
including costs, expenses and attorneys' fees, shall be secured hereby and by
the Security Instrument and the other Loan Documents and Assignor shall
reimburse Assignee therefor immediately upon demand and upon the failure of
Assignor so to do Assignee may, at its option, declare all sums secured hereby,
the Note, the Security Instrument and the other Loan Documents immediately due
and payable. This Assignment shall not operate to place any obligation or
liability for the control, care, management or repair of the Property upon
Assignee, for the carrying out of any of the terms and conditions of the Leases;
nor shall it operate to make Assignee responsible or liable for any waste
committed on the Property by the tenants or any other parties, or for any
dangerous or defective condition of the Property, including, without limitation,
the presence of any Hazardous Substances (as defined in the Security
Instrument), or for any negligence in the management, upkeep, repair or control
of the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger.
4. NOTICE TO LESSEES. Assignor hereby authorizes and directs the
-----------------
tenants named in the Leases or any other or future tenants or occupants of the
Property upon receipt from Assignee of written notice to the effect that the
Assignee is then the holder of the Note and that a default exists hereunder or
under this Assignment, the Note, the Security Instrument or the other Loan
Documents to pay over to Assignee all rents and to continue to do so until
otherwise notified by Assignee.
5. OTHER SECURITY. Assignee may take or release other security for the
--------------
payment of the Debt, may release any party primarily or secondarily liable
therefor and may apply any other security held by it to the reduction or
satisfaction of the Debt without prejudice to any of its rights under this
Assignment.
6. OTHER REMEDIES. Nothing contained in this Assignment and no act done
--------------
or omitted by Assignee pursuant to the power and rights granted to Assignee
hereunder shall be deemed to be a waiver by Assignee of its rights and remedies
under the Note, the Security
-5-
<PAGE>
Instrument or the other Loan Documents and this Assignment is made and accepted
without prejudice to any of the rights and remedies possessed by Assignee under
the terms thereof. The right of Assignee to collect the Debt and to enforce any
other security therefor held by it may be exercised by Assignee either prior to,
simultaneously with, or subsequent to any action taken by it hereunder.
7. NO MORTGAGEE IN POSSESSION. Nothing herein contained shall be
--------------------------
construed as constituting Assignee a "mortgagee in possession" in the absence of
the taking of actual possession of the Property by Assignee. In the exercise of
the powers herein granted Assignee, no liability shall be asserted or enforced
against Assignee, all such liability being expressly waived and released by
Assignor.
8. CONFLICT OF TERMS. In case of any conflict between the terms of this
-----------------
Assignment and the terms of the Security Instrument, the terms of the Security
Instrument shall prevail.
9. NO ORAL CHANGE. This Assignment and any provisions hereof may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally,
or by any act or failure to act on the part of Assignor or Assignee, but only
by an agreement in writing signed by the party against whom the enforcement of
any modification, amendment, waiver, extension, change, discharge or termination
is sought.
10. CERTAIN DEFINITIONS. Unless the content clearly indicates a contrary
-------------------
intent or unless otherwise specifically provided herein, words used in this
Assignment may be used interchangeable in singular or plural form and the word
"ASSIGNOR" shall mean each Assignor and any subsequent owner or owners of the
Property or any part thereof or any interest therein, the word "ASSIGNEE" shall
mean Assignee and any subsequent holder of the Note, the word "NOTE" shall mean
the Note and any other evidence of indebtedness secured by the Security
Instrument, the word "PERSON" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the word "PROPERTY" shall include any portion
of the Property and any interest therein; whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms; and the singular form of nouns and pronouns shall include the
plural and vice versa.
11. NON-WAIVER. The failure of Assignee to insist upon strict
----------
performance of any term shall not be deemed to be a waiver of any term of this
Assignment. Assignor shall not be relieved of Assignor's obligations hereunder
by reason of (i) failure of Assignee to comply with any request of Assignor or
any other party to take any action to enforce any of the provisions hereof or of
the Security Instrument, the Note or the other Loan Documents, (ii) the release
regardless of consideration, of the whole or any part of the Property, or (iii)
any agreement or stipulation by Assignee extending the time of payment or
otherwise modifying or supplementing the terms of this Assignment, the Note, the
Security Instrument or the other Loan Documents. Assignee may resort for the
payment of the Debt to any other security held by Assignee in such order and
manner as Assignee, in its discretion, may elect.
-6-
<PAGE>
Assignee may take any action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Assignee
thereafter to enforce its rights under this Assignment. The rights of Assignee
under this Assignment shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. No act of Assignee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provisions.
12. INAPPLICABLE PROVISIONS. If any term, covenant or condition of this
-----------------------
Assignment is held to be invalid, illegal or unenforceable in any respect, this
Assignment shall be construed without such provision.
13. DUPLICATE ORIGINALS. This Assignment may be executed in any number
-------------------
of duplicate originals and each such duplicate original shall be deemed to be an
original.
14. GOVERNING LAW. This Assignment shall be governed and construed in
-------------
accordance with the laws of the state in which the real property encumbered by
the Security Instrument is located.
15. TERMINATION OF ASSIGNMENT. Upon payment in full of the Debt and the
-------------------------
delivery and recording of a satisfaction, release, reconveyance or discharge of
the Security Instrument duly executed by Assignee, this Assignment shall become
and be void and of no effect.
16. WAIVER OF JURY TRIAL. ASSIGNOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS ASSIGNMENT, THE SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
ASSIGNOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. ASSIGNEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY ASSIGNOR.
17. WAIVERS.
-------
(a) Assignor warrants that (i) Assignee has made no representation to
Assignor as to the creditworthiness of VLC, and (ii) Assignor has established
adequate means of obtaining from VLC on a continuing basis financial and other
information pertaining to VLC's financial condition. Assignor agrees to keep
adequately informed from such means as it deems appropriate of any facts, events
or circumstances which might in any way affect Assignor's risks hereunder and
Assignor further agrees that Assignee shall have no further
-7-
<PAGE>
obligation to disclose to Assignor information or materials required in the
course of Assignee's relationship with VLC.
(b) Assignor hereby waives any right to require Assignee to: (i)
proceed against any person, including VLC, (ii) proceed against or exhaust any
security held from VLC or any other person, (iii) pursue any other remedy in
Assignee's power, or (iv) make any presentments or demands for performance or
give any notices of nonperformance, protest, or dishonor in connection with any
of the indebtedness held by Assignee. Assignor waives any defense arising by
reason of: (1) any disability or other defense of VLC or any other person, (2)
the cessation or limitation of the liability of VLC for any cause whatsoever,
other than payment in full of all indebtedness owed to Assignee, (3) the
application by VLC of the proceeds of any obligation secured hereby for purposes
other than the purposes represented by VLC to Assignee or intended or understood
by Assignee or VLC, (4) any act or omission by Assignee which directly or
indirectly results in or aids the discharge of VLC or any obligation secured
hereby by operation of law or otherwise, or (5) any modification of the
obligations secured hereby in any form whatsoever, including, without
limitation, the renewal, extension, acceleration or other change in the terms of
such obligations or any part thereof, including increase or decrease of the rate
of interest thereon. Assignor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of remedies,such
as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the Assignor's rights of subrogation and reimbursement
against the principal by the operation of law or otherwise. Assignor shall have
no right of subrogation and Assignor waives any defense that may have been based
upon any election of remedies by Assignee which destroys Assignor's rights to
proceed against VLC for reimbursement, including, without limitation, any loss
of rights Assignor may suffer by reason of any rights, powers, or remedies of
VLC in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging Assignor's obligations. Assignor further waives any
right to enforce any remedy which Assignee now has or may hereafter have against
VLC or any other person and waives any benefit of or any right to participate in
any security whatsoever now or hereafter held by Assignee. If any amount shall
be paid to Assignor at any time when any indebtedness owing to Assignee shall
not have been paid in full, such amount shall be held in trust for the benefit
of Assignee and shall forthwith be paid to Assignee to be credited and applied
upon such indebtedness, whether matured or unmatured. Assignor warrants and
agrees that each of the waivers set forth above is made with Assignor's full
knowledge of its significance and consequences and that under the circumstances
the waivers are reasonable. If any said waivers are determined to be contrary
to any application of law or public policy, such waivers shall be effective only
to the extent permitted by law.
THIS ASSIGNMENT shall inure to the benefit of Assignee and any subsequent
holder of the Note and shall be binding upon Assignor, and Assignor's heirs,
executors, administrators, successors and assigns and any subsequent owner of
the Property.
-8-
<PAGE>
Assignor has executed this instrument the day and year first above written.
ASSIGNOR:
BURLEY SKILLED NURSING CENTER, LLC,
a Delaware limited liability company
By: /s/ Johann Keil
---------------------------------
Name: JOHANN KEIL
---------------------------
Title: Member
---------------------------
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<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
) ss.
County of Los Angeles )
On Sept. 29, 1997 (date) before me, Helen Nelson (name and title "Notary
Public"), personally appeared Johann Keil (name of signer(s)), personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Helen Nelson
- -------------------------
(signature of Notary) (seal of Notary)
-10-
<PAGE>
State of California )
) ss.
County of Los Angeles )
On this 29th day of September, in the year 1997, before me, Helen Nelson, a
---- --------- ---- ------------
Notary Public, personally appeared Johann Keil, known or identified to me (or
-----------
proved to me on the oath of _________), to be one of the members in the limited
liability company (Burley Skilled Nursing Facility, LLC, a Delaware limited
liability company), and the member or one of the members who subscribed said
limited liability company name to the foregoing instrument, and acknowledged to
me that he executed the same in said limited liability company name.
WITNESS my hand and official seal. [HELEN NELSON OFFICIAL NOTARY SEAL]
/s/ Helen Nelson
- ----------------------------------
(signature of Notary) (seal of Notary)
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
Lots 2, 3, 4, 5, 6 and 7 in Block 11 of Miller's First Addition to the City
of Burley, Cassia County, Idaho, as the same is platted in the official
plat thereof, now of record in the office of the Recorder of said County.
A-1
<PAGE>
EXHIBIT 10.74
PROMISSORY NOTE
$115,272.00 September 29, 1997
For value received, the undersigned, VALLEY LIVING CENTER, LLC, a Delaware
limited liability company ("BORROWER"), promises to pay to the order of G&L
REALTY PARTNERSHIP, L.P., a Delaware limited partnership ("LENDER"), at 439
North Bedford Drive, Beverly Hills, California 90210 or at any other place that
may be designated in writing by Lender, the principal sum of One Hundred Fifteen
Thousand Two Hundred Seventy-Two Dollars and No/Cents ($115,272.00) ("LOAN
AMOUNT"), with interest as set forth herein (calculated on the basis of a 360-
day year). All sums due are payable in lawful money of the United States of
America. The principal sum will bear interest at the London Interbank Offered
Rate fixed for 30-day maturities ("LIBOR") (as defined below) plus 650 basis
points.
LIBOR shall mean for 30-day maturities an interest rate per annum which is
the arithmetic mean (rounded upward to the nearest whole multiple of one-
sixteenth of one percent) of the respective London Interbank Offered Rates
offered to the principal office of Bank of America in London, England, by prime
banks in the London interbank market at 11:00 a.m. (London time), two business
days (defined as a day of the year on which dealings are carried on in the
London interbank market and banks are open for business in London and not
required or authorized to close in New York City) before the first day of such
30-day maturity period, for a period equal to such 30-day maturity period.
This Note is secured by, among other things, (i) a certain Deed of Trust,
Security Agreement, and Fixture Filing, with Assignment of Rents and Agreements
dated as of the same date as this Note, executed by Borrower, as trustor, in
favor of Lender, as beneficiary ("VALLEY LIVING DEED OF TRUST"), and encumbering
the real property described in the Valley Living Deed of Trust ("VALLEY LIVING
PROPERTY"), and (ii) a certain Deed of Trust, Security Agreement, and Fixture
Filing, with Assignment of Rents and Agreements dated as of the same date as
this Note, executed by Burley Skilled Nursing Facility, LLC, a Delaware limited
liability company, as trustor, in favor of Lender, as beneficiary ("BURLEY DEED
OF TRUST"), and encumbering property described in the Burley Deed of Trust
("BURLEY PROPERTY"). The Valley Living Deed of Trust and the Burley Deed of
Trust are collectively referred to herein as the "DEED OF TRUST." The Valley
Living Property and the Burley Property are collectively referred to herein as
the "PROPERTY." The holder of this Note will be entitled to the benefits of the
security provided by the Deed of Trust and will have the right to enforce the
covenants and agreements contained in the Deed of Trust.
Borrower will pay to Lender the principal amount of this Note, and accrued
interest, as follows:
Borrower will make an initial payment of interest only at the LIBOR rate
plus 650 basis points as determined by Lender, in accordance with the LIBOR
definition herein, and
-1-
<PAGE>
communicated in writing to Borrower prior to the initial interest payment date,
on the first day of the first month after the date of disbursement of the Loan
Amount, covering interest accrued on this Note from the date of disbursement of
the Loan Amount to the end of the month in which the disbursement of the Loan
Amount will occur. After that, Borrower will make monthly payments of interest
only (at the LIBOR rate communicated in writing to Borrower prior to the
interest payment date, plus 650 basis points), on the first day of the second
month after the date of disbursement of the Loan Amount and the first day of
each succeeding month after that.
The entire unpaid principal balance of this Note, together with all accrued
and unpaid interest, will be due on April 1, 1998 ("MATURITY DATE"). The
Maturity Date may be extended to May 1, 1998, by the payment to Lender of the
sum of $576.36 on or before April 1, 1998. If the due date is so extended, it
may be further extended to June 1, 1998, by the payment to Lender of an
additional sum of $576.36 on or before May 1, 1998. If the due date is so
extended, it may be further extended to July 1, 1998, by the payment to Lender
of an additional sum of $576.36 on or before June 1, 1998. If the due date is so
extended, it may be further extended to August 1, 1998, by the payment to Lender
of an additional sum of $576.36 on or before July 1, 1998. If the due date is so
extended, it may be further extended to September 1, 1998, by the payment to the
Lender of an additional sum of $576.36 on or before August 1, 1998. If the due
date is so extended, it may be further extended to October 1, 1998, by the
payment to the Lender of an additional sum of $576.36 on or before September 1,
1998. The aforementioned extension payments shall not be applied to principal
and interest otherwise owing under the terms of this Note.
In the event Lender fails to notify Borrower of the applicable LIBOR rate
before a date when interest is payable, the LIBOR rate previously determined by
Lender and communicated in writing to Borrower shall apply, and, if necessary,
for the next following interest payment date an adjustment will be made in the
interest payment amount payable by Borrower hereunder based upon the difference,
if any, in the LIBOR rate actually in effect during such period in question and
the LIBOR rate paid.
If the LIBOR rate is unavailable for a date when interest on any portion of
the Loan Amount outstanding is to be determined and paid, then that portion of
the Loan Amount outstanding shall bear interest at the rate per annum announced
publicly and most recently by Bank of America as its prime rate plus 500 basis
points.
If Borrower fails to make any required payment on or before five (5) days
following the date on which it becomes due, Borrower will pay, at Lender's
option, a late charge equal to five percent (5%) of the amount of the unpaid
payment.
From and after the Maturity Date, or an earlier date on which all sums
owing under this Note become due by acceleration or otherwise, all sums owing
under this Note will bear interest until paid in full at a rate equal to five
percent (5%) per annum in excess of the rate of interest specified above
("DEFAULT RATE").
-2-
<PAGE>
All payments on this Note will be applied first to the payment of any
costs, fees, late charges, or other charges incurred in connection with the
indebtedness evidenced by this Note; next, to the payment of accrued interest;
then to the reduction of the principal balance; or in any other order that
Lender requires.
If:
(a) Borrower fails to pay when due any sums payable under this Note;
provided that such failure continues for five (5) business days after
written notice of such default;
(b) an Event of Default (defined in the Deed of Trust) occurs; or
(c) any other event or condition occurs that, under the terms of the
Deed of Trust, gives rise to a right of acceleration of sums owing under
this Note,
then Lender, at its sole option, will have the right to declare all sums owing
under the Note immediately due. However, if any document related to this Note
provides for the automatic acceleration of payment of sums owing under this
Note, all sums owing will be automatically due in accordance with the terms of
that document.
Borrower will have the right to pay, without penalty or premium, on any
monthly payment date, all or any portion of the outstanding principal amount of
this Note prior to the Maturity Date on not less than five (5) days' prior
written notice to Lender. Lender will apply all prepayments first to the payment
of any costs, fees, late charges, or other charges incurred in connection with
the indebtedness evidenced by this Note; next, to the payment of accrued
interest; then to the outstanding principal amount of this Note in inverse order
of maturity, or, at the option of Lender, in the regular order of maturity; or
in any other order that Lender requires.
Borrower will pay to Lender all sums owing under this Note without
deduction, offset, or counterclaim of any kind. The relationship of Borrower and
Lender under this Note is solely that of borrower and lender, and the loan
evidenced by this Note and secured by the Deed of Trust will in no manner make
Lender the partner or joint venturer of Borrower.
If any attorney is engaged by Lender to enforce or construe any provision
of this Note, the Deed of Trust or the other Loan Documents (defined in the Deed
of Trust) or as a consequence of any Event of Default, with or without the
filing of any legal action or proceeding, then Borrower will immediately pay to
Lender on demand all attorney fees and other costs incurred by Lender, including
attorneys' fees and costs at trial, upon appeal or any petition for review,
together with interest from the date of the demand until paid at the Default
Rate.
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<PAGE>
No previous waiver or failure or delay by Lender in acting with respect to
the terms of this Note, the Deed of Trust, or the other Loan Documents will
constitute a waiver of any breach, default, or failure of condition under this
Note, the Deed of Trust, or the other Loan Documents. A waiver of any term of
this Note, the Deed of Trust, or the other Loan Documents must be made in
writing and will be limited to the express written terms of the waiver. If there
are any inconsistencies between the terms of this Note and the terms of any of
the other Loan Documents, the terms of this Note will prevail.
All notices required or permitted in connection with this Note will be in
writing and will be given at the place and in the manner provided in the Deed of
Trust for the giving of notices.
If this Note is executed by more than one person or entity as Borrower, the
obligations of each person or entity will be joint and several. No person or
entity will be a mere accommodation maker, but each will be primarily and
directly liable. Borrower waives presentment; demand; notice of dishonor; notice
of default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs, expenses, or losses and interest; notice of
interest on interest and late charges; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of the
rights or interests to properties securing payment of this Note. Time is of the
essence with respect to every provision of this Note. This Note will be
construed and enforced in accordance with the laws of the state in which the
Property is located, except to the extent that federal laws pre-empt state law,
and all persons and entities in any manner obligated under this Note consent to
the jurisdiction of any federal or state court where the Property is located
having proper venue and also consent to service of process by any means
authorized by the state court where the Property is located or federal law.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note and the other Loan
Documents and that this Note and the other Loan Documents constitute valid and
binding obligations of Borrower.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS,
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER,
AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY BORROWER.
-4-
<PAGE>
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of Lender, and then only to the extent therein specifically
set forth. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Borrower" and "Lender" shall include their
respective successions, assigns, heirs, executors and administrators.
BORROWER:
VALLEY LIVING CENTER, LLC,
a Delaware limited liability company
By:_____________________________________
Name:___________________________________
Title:__________________________________
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<PAGE>
EXHIBIT 10.75
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
DEED OF TRUST, SECURITY AGREEMENT, AND FIXTURE FILING
WITH ASSIGNMENT OF RENTS AND AGREEMENTS
This Deed of Trust, Security Agreement, and Fixture Filing with Assignment
of Rents and Agreements (this "DEED OF TRUST") is made as of September 29, 1997,
by VALLEY LIVING CENTER, LLC, A Delaware limited liability company ("TRUSTOR"),
to BONNEVILLE LAND & TITLE COMPANY, an Idaho corporation ("TRUSTEE"), for the
benefit of G&L REALTY PARTNERSHIP, L.P., a Delaware limited partnership
("BENEFICIARY").
Witnesseth:
Trustor does irrevocably grant, transfer, and assign to Trustee, in trust,
with power of sale, all Trustor's right, title, and interest now owned or later
acquired in the real property ("LAND") located in Bonneville County, Idaho, and
more particularly described in attached Exhibit A, incorporated by reference
---------
(Trustor agrees that any greater title to the Land later acquired during the
term of this Deed of Trust will be subject to this Deed of Trust); together with
the rents, issues, and profits, subject however, to the right, power, and
authority granted and conferred on Trustor in this Deed of Trust to collect and
apply the rents, issues, and profits; and Trustor also irrevocably grants,
transfers, and assigns to Trustee, in trust, with power of sale, all of
Trustor's right, title, and interest now owned or later acquired to the
following property (including the rights or interests pertaining to the
property) located at the Property:
(1) all buildings ("BUILDINGS") and improvements now or later on the Land,
and all appurtenances, easements, water and water rights, and pumps and pumping
plants, and all shares of stock evidencing these; all machinery, equipment,
appliances, and fixtures for generating or distributing air, water, heat,
electricity, light, fuel, or refrigeration or for ventilating or sanitary
purposes or for the exclusion of vermin or insects or for the removal of dust,
refuse, or garbage; all wall safes, built-in furniture, and installations,
shelving, lockers, partitions, doorstops, vaults, elevators, dumbwaiters,
awnings, window shades, venetian blinds, light fixtures, fire hoses and brackets
and boxes for them, fire sprinklers, alarm systems, draperies, drapery rods and
brackets, screens, linoleum, carpets, furniture,
-1-
<PAGE>
furnishings, fixtures, plumbing, laundry tubs and trays, iceboxes,
refrigerators, heating units, stoves, water heaters, incinerators, and
communication systems and installations for which any Building is specially
designed; all of these items, whether now or later installed, being declared to
be for all purposes of this Deed of Trust a part of the Land, the specific
enumerations in this Deed of Trust not excluding the general;
(2) the rents, issues, profits, and proceeds; and
(3) the Property to the extent not included in clauses (1) and (2) above.
For the purpose of securing, in the order of priority that Beneficiary
determines:
(1) payment of the indebtedness evidenced by (i) a Promissory Note of
Trustor dated as of the same date as this Deed of Trust in the principal amount
of One Hundred Fifteen Thousand Two Hundred Seventy-Two Dollars and No/Cents
($115,272.00)("NOTE"), payable to Beneficiary or to order, and all extensions,
modifications, or renewals of the Note; and (ii) a Promissory Note of Burley
Skilled Nursing Facility, LLC, a Delaware limited liability company ("BSNF"),
dated as of the same date as this Deed of Trust in the principal amount of Eight
Hundred Seventy Thousand Dollars and No/Cents ($870,000.00) ("BURLEY NOTE"),
payable to Beneficiary or to order, and all extensions, modifications, or
renewals of the Burley Note.
(2) payment of the interest on that indebtedness according to the terms of
the Note;
(3) payment of all other sums (with interest as provided in this Deed of
Trust) becoming due and payable to Beneficiary or Trustee pursuant to the terms
of this Deed of Trust;
(4) performance of every obligation contained in this Deed of Trust, the
Note, any instrument now or later evidencing or securing any indebtedness
secured by this Deed of Trust, and any agreements, supplemental agreements, or
other instruments of security executed by Trustor as of the same date of this
Deed of Trust or at any time subsequent to the date of this Deed of Trust for
the purpose of further securing any indebtedness secured by this Deed of Trust,
or any part of it, or for the purpose of supplementing or amending this Deed of
Trust or any instrument secured by this Deed of Trust;
(5) payment of all other obligations owed by Trustor to Beneficiary that
by their terms recite that they are secured by this Deed of Trust, including
those incurred as primary obligor or as guarantor; and
(6) performance of every obligation contained in that certain Deed of
Trust, Security Agreement, and Fixture Filing With Assignment of Rents and
Agreements dated as of the same date as this Deed of Trust from BSNF, as
trustor, in favor of Beneficiary ("BURLEY
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<PAGE>
DEED OF TRUST") any instrument now or later evidencing or securing any
indebtedness secured by the Burley Deed of Trust, and any agreements,
supplemental agreements, or other instruments of security executed as of the
same date of the Burley Deed of Trust or at any time subsequent to the date of
the Burley Deed of Trust for the purpose of further securing any indebtedness
secured by the Burley of Trust, or any part of it, or for the purpose of
supplementing or amending the Burley Deed of Trust or any instrument secured by
the Burley Deed of Trust.
Regardless of anything stated above or any other term contained in this
Deed of Trust or in the Loan Documents (as defined in this Deed of Trust), none
of Trustor's obligations under or pursuant to the Certification Agreement (as
defined in this Deed of Trust) will be secured by the lien of this Deed of
Trust.
1. DEFINITIONS.
-----------
1.1 CERTAIN DEFINED TERMS. As used in this Deed of Trust the following
---------------------
terms will have the following meanings:
"ASSIGNMENT OF LEASES": The Assignment of Leases and Rents dated as
of the same date as this Deed of Trust executed by Trustor in favor of
Beneficiary.
"BUILDINGS": The Buildings as defined above in this Deed of Trust.
"CERTIFICATION AGREEMENT": The Environmental Certification Agreement
and Indemnity of Borrower dated on the same date as this Deed of Trust and
executed by Trustor in favor of Beneficiary.
"COLLATERAL": The Collateral as defined in Section 9.1 of this Deed
-----------
of Trust.
"DEFAULT RATE": A rate of interest per annum equal to five percent
(5%) per annum above the Loan Rate.
"FIXTURES": All fixtures located on the Improvements (as defined in
this Deed of Trust) or now or later installed in, or used in connection with,
any of the Improvements, including, but not limited to, all partitions, screens,
awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators,
cleaning and sprinkler systems, fire-extinguishing apparatus and equipment,
water tanks, heating, ventilating, air-conditioning and air-cooling equipment,
built-in refrigerators, and gas and electric machinery, appurtenances, and
equipment, whether or not permanently affixed to the Land or the Improvements.
"HAZARDOUS SUBSTANCE":
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(a) any oil, flammable substance, explosive, radioactive material,
hazardous waste or substance, toxic waste or substance, or any other waste,
material, or pollutant that:
(1) poses a hazard to the Property or to persons on the
Property, or
(2) causes the Property to be in violation of any Hazardous
Substance Law;
(b) asbestos in any form;
(c) urea formaldehyde foam insulation;
(d) transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls;
(e) radon gas;
(f) any chemical, material, or substance defined as or included in
the definition of hazardous substance, hazardous substances, hazardous wastes,
hazardous materials, extremely hazardous waste, restricted hazardous waste, or
toxic substances or words of similar import under any applicable local, state,
or federal law or under the regulations adopted or publications promulgated
pursuant to those laws, including, but not limited to, any Hazardous Substance
Law, as amended from time to time;
(g) any other chemical, material, or substance, exposure to which is
prohibited, limited, or regulated by any governmental authority or which may
pose a hazard to the health and safety of the occupants of the Property or the
owners or occupants of property adjacent to or surrounding the Property, or any
other person coming on the Property or any adjacent property; and
(h) any other chemical, material, or substance that may pose a
hazard to the environment.
"HAZARDOUS SUBSTANCE CLAIM": Any enforcement, cleanup, removal,
remedial, or other governmental, regulatory, or private actions, agreements, or
orders threatened, instituted, or completed pursuant to any Hazardous Substance
Law, together with all claims made or threatened by any third party against
Trustor or the Property relating to damage, contribution, cost-recovery
compensation, loss, or injury resulting from the presence, release, or discharge
of any Hazardous Substance.
"HAZARDOUS SUBSTANCE LAW": Any federal, state, or local law,
ordinance, regulation, or policy relating to the environment, health, and
safety, any Hazardous Substance (including, without limitation, the use,
handling, transportation, production, disposal,
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<PAGE>
discharge, or storage of the substance), industrial hygiene, soil, groundwater,
and indoor and ambient air conditions or the environmental conditions on the
Property, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended from time to time;
the Hazardous Substances Transportation Act, as amended from time to time; the
Resource Conservation and Recovery Act, as amended from time to time; the
Federal Water Pollution Control Act, as amended from time to time; the Hazardous
Substance Account Act, as amended from time to time; the Hazardous Waste Control
Law, as amended from time to time; the Medical Waste Management Act, as amended
from time to time; the Emergency Planning and Community Right-to-Know Act of
1986, as amended from time to time; the Solid Waste Disposal Act, as amended
from time to time; the Clean Water Act, as amended from time to time; the Clean
Air Act, as amended from time to time; the Toxic Substances Control Act, as
amended from time to time; the Safe Drinking Water Act, as amended from time to
time; the Occupational Safety and Health Act, as amended from time to time; and
the Porter-Cologne Water Quality Control Act, as amended from time to time, and
all rules and regulations adopted in respect of the foregoing laws whether
presently in force or coming into being and/or effectiveness hereafter.
"IMPOSITIONS" All real estate and personal property taxes and other
taxes and assessments, water and sewer rates and charges, and all other
governmental charges and any interest or costs or penalties with respect to
those charges, assessments, or taxes, ground rent and charges for any easement
or agreement maintained for the benefit of the Property, general and special,
ordinary and extraordinary, foreseen or unforeseen, of any kind that at any time
prior to or after the execution of the Loan Documents may be assessed, levied,
imposed, or become a lien on the Property or the rent or income received from
the Property, or any use or occupancy of the Property; and any charges,
expenses, payments, or assessments of any nature, if any, that are or may become
a lien on the Property or the rent or income received from the Property.
"IMPOSITION AND INSURANCE IMPOUND FUND": The fund that Trustor is
required to maintain pursuant to Section 4.4(c) of this Deed of Trust for the
--------------
payment of Impositions and Insurance Premiums.
"IMPROVEMENTS": All Buildings, improvements, and appurtenances on
the Land, and all improvements, additions, and replacements of those
improvements and other buildings and improvements, at any time later constructed
or placed on the Land.
"INDEBTEDNESS": The principal of and interest on, and all other
amounts, payments, and premiums due under, the Note, the Burley Note and any
extensions or renewals (including, without limitation, extensions or renewals at
a different rate of interest, regardless of whether evidenced by a new or
additional promissory note or notes), and all other indebtedness of Trustor to
Beneficiary under or secured by the Security Documents (defined in this Deed of
Trust), together with all other sums owed by Trustor to Beneficiary, including
those incurred as primary obligor or as guarantor, that recite that they are
secured by the Security Documents.
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<PAGE>
"INSURANCE PREMIUMS": The amounts Trustor is required to pay as
provided in Section 4.4(d).
--------------
"LAND": The Land as defined in this Deed of Trust.
"LEASES": All leasehold interests, including subleases and tenancies
following attornment, affecting or covering any portion of the Property.
"LOAN": The loan secured by this Deed of Trust and evidenced by the
Note.
"LOAN DOCUMENTS": The Note, the Burley Note, the Security Documents
(including, but not limited to, the Burley Deed of Trust), and all other
documents (including guaranties) evidencing, securing, or relating to the Loan,
except the Certification Agreement.
"LOAN PARTIES": Trustor, BSNF and any guarantors of the loan or any
obligations under the Loan, together with their respective affiliates and their
respective members and officers.
"LOAN RATE": The rate at which the principal accrues interest as set
forth in the Note.
"MATERIAL ADVERSE CHANGE": Any material and adverse change in:
(a) the business or properties or condition (financial or
otherwise) of Trustor, or
(b) the condition or operation of the Property.
"NOTE": The Note as defined in this Deed of Trust.
"OBLIGATIONS" All of the covenants, promises, and other obligations
(other than the Indebtedness):
(a) made or owing by Trustor to or due to Beneficiary under or
as set forth in the Loan Documents, and
(b) made or owing by Trustor to every other Person, a breach of
which would or may affect Trustor's ownership, development, or operation of the
Property, except any covenants, promises, and other obligations of Trustor to
Beneficiary under the Certification Agreement.
"PERSON": Any natural person, corporation, firm, association,
government, governmental agency, or any other entity, whether acting in an
individual, fiduciary, or other capacity.
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<PAGE>
"PERSONALTY": Trustor's interest in all accounts, contract rights,
and general intangibles (specifically including any insurance proceeds and
condemnation awards) arising out of the ownership, development, or operation of
the Property, and all furniture, furnishings, equipment, machinery, construction
materials and supplies, leasehold interests in personal property, and all other
personal property (other than Fixtures) now or later on the Property, together
with all present and future attachments, accessions, replacements,
substitutions, and additions, and the cash and noncash proceeds.
"PROPERTY": The Land, the Improvements, the Fixtures, and the
Personalty, together with:
(a) all rights, privileges, tenements, hereditaments, rights-of-way,
easements, and appurtenances of the Land or the Improvements now or later
belonging to the Property, and all right, title, and interest of Trustor in any
streets, ways, alleys, strips, or gores of land adjoining the Land; and
(b) all of Trustor's right, title, and interest in the Land, the
Improvements, the Fixtures, and the Personalty, including any award for any
change of grade of streets affecting the Land, the Improvements, the
Fixtures, or the Personalty.
"RECEIVER": Any trustee, receiver, custodian, fiscal agent,
liquidator, or similar officer.
"RELEASE": Any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment, including continuing migration, of Hazardous Substances that
goes into the soil, surface water, or groundwater of the Property, whether or
not caused by, contributed to, permitted by, acquiesced to, or known to Trustor.
"SECURITY DOCUMENTS": This Deed of Trust, the Assignment of Leases,
the Burley Deed of Trust and all other documents now or later securing any part
of the payment of the Indebtedness or the observance or performance of the
Obligations.
"TITLE POLICY": The title insurance policy issued by Stewart Title
Guaranty Company to Beneficiary.
"USER": Any person, other than Trustor, who occupies, used, or comes
into or has occupied, used, or come into the Property or any part of it and any
agent or contractor of that person.
2. WARRANTY OF TITLE. Trustor warrants that:
-----------------
(a) Trustor is the lawful owner of the Property,
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<PAGE>
(b) Trustor will maintain and preserve the lien of this Deed of
Trust until the Indebtedness has been paid in full,
(c) Trustor has good, right, and lawful authority to grant the
Property as provided in this Deed of Trust, and
(d) Trustor will forever warrant and defend the grant made in this
Deed of Trust against all claims and demands, except as are specifically
set forth in this Deed of Trust.
3. REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants to
------------------------------
Beneficiary that as of the date of this Deed of Trust:
3.1 ORGANIZATION OF THE LOAN PARTIES.
--------------------------------
(a) Trustor is a limited liability company organized, validly
existing, and in good standing under the laws of the State of Delaware and is
qualified to do business in Oregon.
(b) Trustor has the requisite power and authority to own and manage
its properties, to carry on its business as now being conducted, and to own,
develop, and operate the Property.
(c) Trustor is qualified to do business in every jurisdiction in
which the nature of its business or its properties makes qualification
necessary.
(d) Trustor and its third party operator of the Property is in
compliance with all laws, regulations, ordinances, and orders of public
authorities applicable to it.
(e) Trustor's third party operator of the Property shall operate a
nursing care facility on the Property in compliance with all laws, regulations,
ordinances and orders of public authority.
3.2 VALIDITY OF LOAN DOCUMENTS.
--------------------------
(a) The execution, delivery, and performance by the Loan Parties of
the Loan Documents and the borrowings evidenced by the Note:
(1) are within the power of the Loan Parties,
(2) have been duly authorized by all requisite limited
liability company, corporate or partnership actions, as appropriate,
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<PAGE>
(3) have received all necessary governmental approval, and
(4) will not violate any provision of law, any order of any
court or agency of government, the charter documents of any Loan Party, or any
indenture, agreement, or any other instrument to which any Loan Party is a party
or by which any Loan Party or any of its property is bound, nor will they
conflict with, result in a breach of, or constitute (with due notice and lapse
of time) a default under any indenture, agreement, or other instrument, or
result in the creation or imposition of any lien, charge, or encumbrance of any
nature on any of the property or assets of any Loan Party, except as
contemplated by the provisions of the Loan Documents.
(b) Each of the Loan Documents, when executed and delivered to
Beneficiary, will constitute a valid obligation, enforceable in accordance with
its terms.
(c) The Note, this Deed of Trust and the other Loan Documents are
not subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, nor would the operation of any of the terms of
the Note, this Deed of Trust or any of the other Loan Documents, or the exercise
of any right thereunder, render this Deed of Trust unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury.
3.3 FINANCIAL STATEMENTS.
--------------------
(a) All financial statements and data that have been given to
Beneficiary with respect to any Loan Party:
(1) are complete and correct in all material respects;
(2) accurately present the financial condition of that Loan
Party on each date as of which they have been furnished, and accurately present
the results of the operations of that Loan Party for the periods for which they
have been furnished; and
(3) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered.
(b) All balance sheets and the notes with respect to the Loan
Parties furnished to Beneficiary disclose all liabilities of the Loan Parties,
fixed and contingent, as of their respective dates, as well as all obligations
of those Loan Parties under any guaranties.
(c) There has been no Material Adverse Change in the financial
condition or operations of Trustor since:
(1) the date of the most recent financial statement given to
Beneficiary with respect to Trustor of the Property, or
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<PAGE>
(2) the date of the financial statements given to Beneficiary
immediately prior to the date of this Deed of Trust, other than changes in the
ordinary course of business, none of which constitute a Material Adverse Change,
either individually or in the aggregate.
3.4 USE OF PROCEEDS OF LOAN. Trustor will use the Loan to assist in the
-----------------------
acquisition of the Property.
3.5 OTHER ARRANGEMENTS. Trustor is not a party to any agreement or
------------------
instrument materially and adversely affecting Trustor's present or proposed
business, properties, assets, operation, or condition, financial or otherwise;
and Trustor is not in default in the performance, observance, or fulfillment of
any of the material obligations, covenants, or conditions in any agreement or
instrument to which Trustor is a party that materially affect Trustor's present
or proposed business, properties, assets, operation, or condition, financial or
otherwise.
3.6 OTHER INFORMATION. All other reports, papers, data, and information
-----------------
given to Beneficiary with respect to Trustor and the Property are accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Beneficiary a true and accurate knowledge of the subject
matter.
3.7 LITIGATION. There is not now pending against or affecting any Loan
----------
Party, nor to the knowledge of any Loan Party is there threatened, any action,
suit, or proceeding at law or in equity or before any administrative agency
that, if adversely determined, would materially impair or affect:
(a) the financial condition or operations of Trustor, or
(b) the condition or operation of the Property.
3.8 OTHER WARRANTIES.
----------------
(a) The Property is not used for agricultural or grazing purposes,
and
(b) Trustor's third party operator of the Property is engaged in the
operation of a nursing care facility.
3.9 TAXES. Trustor has filed all federal, state, county, and municipal
-----
income tax returns required to have been filed and has paid all taxes that have
become due pursuant to those returns or pursuant to any assessments received by
Trustor, and Trustor does not know of any basis for any additional assessment
against Trustor in respect of those taxes.
3.10 COMPLIANCE WITH LAWS. Except as otherwise provided in this Deed of
--------------------
Trust, the Property and the proposed and actual use of the Property comply with
all laws, ordinances,
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rules, and regulations of all local, regional, county, state, and federal
governmental authorities having jurisdiction (including, but not limited to, the
Americans With Disabilities Act), and there is no action or proceeding pending
or, to the knowledge of Trustor after due inquiry, threatened before any court,
quasi-judicial body, or administrative agency at the time of any disbursement by
Beneficiary relating to the validity of the Loan or the proposed or actual use
of the Property. All rights to appeal any decision rendered will have expired
prior to the date of this Deed of Trust.
3.11 SINGLE ASSET ENTITY. Trustor does not own and will not own any other
-------------------
asset or property other than (i) the Property, and (ii) incidental personal
property necessary for the ownership and operation of the Property.
3.12 BROKERS, AGENTS, ADVISORS, CONSULTANTS AND FINDERS. No financial
--------------------------------------------------
advisors, brokers, underwriters, placement agents, agents or finders have been
dealt with by the Trustor in connection with the Loan.
3.13 TAXED AS PARTNERSHIP. Trustor is currently taxed as a partnership
--------------------
for income tax purposes.
4. AFFIRMATIVE COVENANTS. Until the entire Indebtedness has been paid in
---------------------
full, Trustor covenants to and agrees with Beneficiary as follows:
4.1 OBLIGATIONS OF TRUSTOR. Trustor will pay the Indebtedness and
----------------------
Trustor will continue to be liable for the payment of the Indebtedness until it
has been paid in full. Trustor:
(a) will timely perform all the covenants, agreements, terms, and
conditions to be performed by Trustor:
(1) under this Deed of Trust;
(2) as seller under each contract of sale of, and as lessor
under each lease of, for any portion of the Property for which a contract of
sale or lease has been approved in writing by Beneficiary;
(3) as required of Trustor under each document and agreement
constituting one of the Security Documents;
(4) under all other agreements between Trustor and Beneficiary
in accordance with the respective terms of the agreement; and
(5) as required of Trustor under all other agreements to which
Trustor is a party with respect to the Property;
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<PAGE>
(b) will not cancel, surrender, modify, amend, or permit the
cancellation, surrender, modification, or amendment of any of the previously
mentioned agreements or any of the covenants, agreements, terms, or conditions
contained in any of them without the prior written consent, in each case, of
Beneficiary; and
(c) will keep Beneficiary indemnified against all actions,
proceedings, costs (including, without limitation, Beneficiary's counsel fees
and disbursements), claims, and damages incurred or sustained by Beneficiary in
respect of the nonpayment of any charges or the nonobservance or nonperformance
of any of the covenants, agreements, terms, or conditions in any of the
previously mentioned agreements.
4.2 INSURANCE.
---------
(a) Trustor, at its sole cost and expense, will keep the Property
insured for the mutual benefit of Trustor and Beneficiary against loss or damage
by earthquake and fire, and against loss or damage by other risks embraced by
coverage of the type now known as the broad form of extended coverage,
including, but not limited to, riot and civil commotion, vandalism, malicious
mischief, burglary, theft, and mysterious disappearance, and against any other
risks or hazards that Beneficiary may from time to time reasonably designate, in
an amount not less than one hundred percent (100%) of the then full replacement
cost of the Improvements, without deduction for physical depreciation. The
policies of insurance carried in accordance with this section shall contain the
Replacement Cost Endorsement with a waiver of depreciation, and shall have a
deductible no greater than $10,000.00 unless so agreed by Beneficiary.
Notwithstanding the above, with respect to earthquake insurance, (A) such
insurance shall be required only to the extent it is available at commercially
reasonable prices, and (B) such insurance shall be on commercially reasonable
terms and with commercially reasonable deductible amounts.
(b) Trustor, at its sole cost and expense, but for the mutual
benefit of Trustor and Beneficiary, will maintain during the term of this Deed
of Trust the following policies of insurance:
(i) Flood insurance if any part of the Property is located in
an area identified by the Federal Emergency Management Agency as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Program in an amount at least equal to the
outstanding principal amount of the Loan or the maximum limit of coverage
available with respect to the Property under said Program, whichever is less.
(ii) Commercial general liability insurance, including broad
form property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages and containing minimum limits per occurrence of
$1,000,000 and $2,000,000 in the aggregate for any policy year. In addition, at
least $5,000,000 excess and/or umbrella liability insurance shall be obtained
and maintained for any and all claims,
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<PAGE>
including all legal liability imposed upon Trustor and all court costs and
attorneys' fees incurred in connection with the ownership, operation and
maintenance of the Property.
(iii) Rental loss and/or business interruption insurance in an
amount equal to the greater of (A) estimated gross revenues for eighteen (18)
months from the operations of the Property or (B) the projected operating
expenses (including debt service) for eighteen (18) months for the maintenance
and operation of the Property.
(iv) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in the Improvements (without
exclusion for explosions), to the extent that such items now or hereafter exist
upon the Property, in an amount at least equal to the outstanding principal
amount of the Note.
(v) If the Property includes commercial property, workers'
compensation insurance with respect to any employees of Trustor, as required by
any governmental authority or legal requirement.
(vi) During any period of repair or restoration, builder's
"all risk" insurance in an amount equal to not less than the full insurable
value of the Property insuring against such risks (including, without
limitation, fire and extended coverage and collapse of the Improvements to
agreed limits) as Beneficiary may request, in form and substance acceptable to
Beneficiary.
(vii) Ordinance or law coverage to compensate for the cost of
demolition and the increased cost of construction.
(viii) Such other insurance as may from time to time be
reasonably required by Beneficiary in order to protect its interests, including
earthquake insurance coverage.
(c) Effective on the occurrence of any Event of Default, all of
Trustor's right, title, and interest in all policies of property insurance and
any unearned premiums paid are assigned to Beneficiary, who may assign them to
any purchaser of the Property at any foreclosure sale.
(d) All policies of insurance (the "POLICIES") required pursuant to
this Section: (i) shall be issued by companies approved by Beneficiary and
licensed to do business in the state where the Property is located, with a
claims paying ability rating of "AA" or better by Standard & Poor's Rating
Services, a division of the McGraw Hill Companies, Inc. and/or a rating of "A:X"
or better in the current Best's Insurance Reports; (ii) shall name Beneficiary
and its successors and/or assigns as their interest may appear as the
beneficiary/ mortgagee; (iii) shall contain a non-contributory standard
mortgagee clause and a lender's loss payable
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<PAGE>
endorsement or their equivalents, naming Beneficiary as the person to which all
payments made by such insurance company shall be paid; (iv) shall contain a
waiver of subrogation against Beneficiary; (v) shall be maintained throughout
the term of this Deed of Trust without cost to Beneficiary; (vi) shall be
assigned and the originals delivered to Beneficiary; (vii) shall contain such
provisions as Beneficiary deems reasonably necessary or desirable to protect its
interest including, without limitation, endorsements providing that neither
Trustor, Beneficiary nor any other party shall be a co-insurer under said
Policies and that Beneficiary shall receive at least thirty (30) days prior
written notice of any modification, reduction or cancellation; and (viii) shall
be satisfactory in form and substance to Beneficiary and shall be approved by
Beneficiary as to amounts, form, risk coverage, deductibles, loss payees and
insureds. Trustor shall pay the premiums for such Policies (the "INSURANCE
PREMIUMS") as the same become due and payable and shall furnish to Beneficiary
evidence of the renewal of each of the Policies with receipts for the payment of
the Insurance Premiums or other evidence of such payment reasonably satisfactory
to Beneficiary (provided, however, that Trustor is not required to furnish such
evidence of payment to Beneficiary in the event that such Insurance Premiums
have been paid by Beneficiary pursuant to Section 4.4 hereof). If Trustor does
-----------
not furnish such evidence and receipts at least thirty (30) days prior to the
expiration of any expiring Policy, then Beneficiary may procure, but shall not
be obligated to procure, such insurance and pay the Insurance Premiums promptly
on demand. Within thirty (30) days after request by Beneficiary, Trustor shall
obtain such increases in the amounts of coverage required hereunder as may be
reasonably requested by Beneficiary, taking into consideration changes in the
value of money over time, changes in liability laws, changes in prudent customs
and practices.
4.3 MAINTENANCE, WASTE, AND REPAIR. Trustor will maintain the
------------------------------
Improvements now or later existing in good and tenantable repair, and will not
structurally alter them without the prior written consent of Beneficiary, or
remove or demolish them in whole or in part, nor will Trustor suffer any waste
of the Property or make any change in the use of the Property that will in any
way increase any ordinary fire or other hazard insurance premiums or permit
anything that may in any way impair the security of this Deed of Trust. Trustor
will not abandon the Property or lease the Property unprotected, vacant, or
deserted.
4.4 IMPOSITION AND INSURANCE; IMPOUNDS.
----------------------------------
(a) Trustor will pay when due all Impositions that are or that may
become a lien on the Property or are assessed against the Property or its rents,
royalties, profits, and income.
(b) Trustor will file all federal, state, provincial, county, and
municipal income tax returns required to be filed and will pay all taxes that
become due pursuant to the returns or pursuant to any assessments received by
Trustor.
(c) Trustor shall pay to Beneficiary on the first day of each
calendar month (a) one-twelfth of the Impositions that Beneficiary estimates
will be payable during the next ensuing twelve (12) months in order to
accumulate with Beneficiary sufficient funds to pay all
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<PAGE>
such Impositions at least thirty (30) days prior to their respective due dates,
and (b) one-twelfth of the Insurance Premiums that Beneficiary estimates will be
payable for the renewal of the coverage afforded by the Policies upon the
expiration thereof in order to accumulate with Beneficiary sufficient funds to
pay all such Insurance Premiums at least thirty (30) days prior to the
expiration of the Policies (said amounts in (a) and (b) above hereinafter called
the "IMPOSITION AND INSURANCE IMPOUND FUND"). The Imposition and Insurance
Impound Fund and the payments of interest or principal or both, payable pursuant
to the Note, shall be added together and shall be paid as an aggregate sum by
Trustor to Beneficiary. Beneficiary will apply the Imposition and Insurance
Impound Fund to payments of Impositions and Insurance Premiums required to be
made by Trustor pursuant to Sections 4.2(f) and 4.4(a) hereof. In making any
--------------------------
payment relating to the Imposition and Insurance Impound Fund, Beneficiary may
do so according to any bill, statement or estimate procured from the appropriate
public office (with respect to Impositions) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof. If the amount of the Imposition and Insurance
Impound Fund shall exceed the amounts due for Impositions and Insurance Premiums
pursuant to Sections 4.2(f) and 4.4(a) hereof, Beneficiary shall, in its sole
--------------------------
discretion, return any excess to Trustor or credit such excess against future
payments to be made to the Imposition and Insurance Impound Fund. In allocating
such excess, Beneficiary may deal with the person shown on the records of
Beneficiary to be the owner of the Property. If at an time Beneficiary
determines that the Imposition and Insurance Impound Fund is not or will not be
sufficient to pay the items set forth in (a) and (b) above, Beneficiary shall
notify Trustor of such determination and Trustor shall increase its monthly
payments to Beneficiary by the amount that Beneficiary estimates is sufficient
to make up the deficiency at least thirty (30) days prior to delinquency of the
Impositions and/or expiration of the Policies, as the case may be. Until
expended or applied as above provided, any amounts in the Imposition and
Insurance Impound Fund shall constitute additional security for the
Indebtedness. The Imposition and Insurance Impound Fund shall not constitute a
trust fund. No earnings or interest on the Imposition and Insurance Impound Fund
shall be payable to Trustor. If Beneficiary so elects at any time, Trustor shall
provide, at Trustor's expense, a tax service contract for the Loan term issued
by a tax reporting agency acceptable to Beneficiary. If Beneficiary does not so
elect, Trustor shall reimburse Beneficiary for the cost of making annual tax
searches throughout the Loan term.
(d) Trustor hereby pledges to Beneficiary and grants to Beneficiary
a security interest in any and all monies now or hereafter deposited in the
Imposition and Insurance Impound Fund as additional security for the payment of
the Indebtedness. Upon the occurrence of an Event of Default, Beneficiary may
apply any sums then present in the Imposition and Insurance Impound Fund to the
payment of the Indebtedness in any order in its sole discretion.
(e) By exercising any of its rights or remedies under this Section
-------
4.4 (including, without limitation, taking possession of the Imposition and
- ---
Insurance Impound Fund), Beneficiary shall not be deemed to have exercised any
equitable right of setoff,
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<PAGE>
foreclosed any statutory banker's lien, initiated or prosecuted any "action" to
enforce the rights and obligations secured by this Deed of Trust, or the Loan
Documents, as the term "action" is used under the laws of the state where the
Property is located, or to have violated the "security first" principle, if any,
under the laws of the state where the Property is located. Accordingly, the
exercise of any or all of Beneficiary's rights and remedies under this Section
-------
4.4 shall not in any way prejudice or affect Beneficiary's right to initiate and
- ---
complete a judicial or nonjudicial foreclosure under this Deed of Trust. This
Deed of Trust evidences the consensual granting of a personal property security
interest in the Imposition and Insurance Impound Fund as permitted by the
Uniform Commercial Code of the laws of the state where the Property is located;
the parties do not intend that the exercise by Beneficiary of any of its rights
or remedies hereunder shall have any different consequences under the laws of
the state where the Property is located than the exercise of rights or remedies
under any other security agreement under which a secured party has been granted
a security interest in other types of personal property.
4.5 COMPLIANCE WITH LAW. Trustor will preserve and keep in full force
-------------------
its existence, rights, and powers. Trustor will promptly and faithfully comply
with all present and future laws, ordinances, rules, regulations, and
requirements of every governmental authority or agency and of every board of
fire underwriters (or similar body exercising similar functions) having
jurisdiction that may be applicable to it or to the Property or to the use or
manner of occupancy, possession, operation, maintenance, alteration, or repair
of the Property or any part of it, whether the law, ordinance, rule, order,
regulation, or requirement necessitates structural changes or improvements or
interferes with the use or enjoyment of the Property.
4.6 BOOKS AND RECORDS. Trustor will maintain complete books of account
-----------------
and other records reflecting the results of Trustor's operations in a form
satisfactory to Beneficiary, and furnish to Beneficiary any information about
the financial condition of Trustor, and the sales and operations of the Property
as Beneficiary reasonably requests, including, but not limited to, the following
information, which will be furnished without request:
(a) within twenty (20) days after the end of each month, a statement
of revenues and expenses relating to all of Trustor's business operations for
the month just ended, including without limitation, operations of the Property
for the month just ended;
(b) as soon as available and in any event within sixty (60) days
after the end of each fiscal year of Trustor, a copy of the annual audit report
for the fiscal year for Trustor, including a balance sheet of Trustor as of the
end of the fiscal year, and statements of income and retained earnings and of
change in financial position of Trustor for the fiscal year, in each case
certified in a manner acceptable to Beneficiary by independent public
accountants acceptable to Beneficiary;
(c) promptly upon their becoming available, copies of all financial
statements, reports, and notices (including tax returns) sent by Trustor to its
partners or any governmental authority succeeding to any of its functions; and
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<PAGE>
(d) promptly upon receipt, copies of any reports by independent
public accountants submitted to Trustor concerning its properties or operations.
Beneficiary will have the right, at all reasonable times and on reasonable
notice, to audit, at Trustor's sole cost and expense, Trustor's books of account
and records, all of which will be made available to Beneficiary and
Beneficiary's representatives for that purpose, from time to time, on
Beneficiary's request. Trustor's failure to comply with the requirements of this
Section 4.6 within fifteen (15) days after written notice from Beneficiary shall
- -----------
be an Event of Default hereunder. Notwithstanding the above, if the above
records and information are within the control of any third party operator,
Trustor shall not be in default hereunder so long as Trustor exercises
commercially reasonable efforts to require such operator to provide such
information under its lease or other operative agreement with Trustor.
4.7 FURTHER ASSURANCES. Trustor, at Trustor's expense and at any time on
------------------
the reasonable request of Beneficiary, will execute, acknowledge, and deliver
any additional papers and instruments (including, without limitation, a
declaration of no setoff) and any further assurances of title and will do or
cause to be done all further acts and things that may be proper or reasonably
necessary to carry out the purpose of this Deed of Trust and of the Loan
Documents and to subject to the liens any property intended by the terms to be
covered and any renewals, additions, substitutions, replacements, or
betterments.
4.8 STATEMENT BY TRUSTOR. Trustor, on ten (10) days' written request,
--------------------
will furnish a statement of the amount due or outstanding on the Note and a
statement of any offsets, counterclaims, or defenses to the payment.
4.9 INDEMNITY. In addition to any other indemnifications provided
---------
herein or in the other Loan Documents, Trustor shall protect, defend, indemnify
and save harmless Beneficiary and Trustee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation, reasonable attorneys'
fees and disbursements whether or not suit is filed), imposed upon or incurred
by or asserted against Beneficiary or Trustee by reason of (a) ownership of this
Deed of Trust, the Property or any interest therein or receipt of any Payments;
(b) any accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(c) any use, nonuse or condition in, on or about the Property or any part
thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (d) any failure on the part of Trustor or Trustee to
perform or comply with any of the terms of this Deed of Trust; (e) performance
of any labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (f) the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, release, or threatened release
of any Hazardous Substance on, from or affecting the Property; (g) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or related to such Hazardous Substance; (h) any lawsuit brought or
threatened, settlement reached, or government order relating to such Hazardous
Substance; (i) any violation of the Hazardous Substance Laws, which are based
upon or in any way related to
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<PAGE>
such Hazardous Substance including, without limitation, the costs and expenses
of any remedial work, attorney and consultant fees and disbursements,
investigation and laboratory fees, court costs, and litigation expenses; (j) any
failure of the Property to comply with any Access Laws; (k) any representation
or warranty made in the Note, this Deed of Trust or any of the other Loan
Documents being false or misleading in any material respect as of the date such
representation or warrant was made; (l) any claim by brokers, finders or similar
persons claiming to be entitled to a commission in connection with the Loan or
other transaction involving the Property or any part thereof under any legal
requirement or any liability asserted against Beneficiary with respect thereto;
and (m) the claims of any lessee of any portion of the Property or any person
acting through or under any lessee or otherwise arising under or as a
consequence of any Leases. Any amounts payable to Beneficiary or Trustee by
reason of the application of this paragraph shall be secured by this Deed of
Trust and shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Beneficiary or
Trustee until paid. The obligations and liabilities of Trustor under this
Section 4.9 shall survive the termination, satisfaction, or assignment of this
- -----------
Deed of Trust and the exercise by Beneficiary of any of its rights or remedies
hereunder, including, but not limited to, the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.
4.10 REIMBURSEMENT. Beneficiary will have the right to declare
-------------
immediately due any amount paid by it for any Impositions, tax, stamp tax,
assessment, water rate, sewer rate, Insurance Premium, repair, rent charge,
debt, claim, inspection, or lien having priority over this Deed of Trust, or
over any other agreement given to secure the Indebtedness.
4.11 LITIGATION. Trustor will promptly give written notice to Beneficiary
----------
of any litigation commenced or threatened affecting Trustor or the Property
other than unlawful detainer proceedings brought by Trustor.
4.12 TAX RECEIPTS. Subject to the provisions of Section 4.4 of this Deed
------------ -----------
of Trust, Trustor will exhibit to Beneficiary, within seven (7) days after
demand, bills (that will be receipted from and after the date receipted bills
are obtainable) showing the payment to the extent then due of all taxes,
assessments (including those payable in periodic installments), water rates,
sewer rates, or any other Imposition that may have become a lien on the Property
or any Personalty prior to the lien of this Deed of Trust.
4.13 DUPLICATE PLANS. Trustor will submit to Beneficiary a duplicate set
---------------
of plans and specifications for approval before any material improvements,
repairs, or alterations are begun that affect the Property.
4.14 ADDITIONAL INFORMATION. Trustor will furnish to Beneficiary, within
----------------------
seven (7) days after written request, all information that Beneficiary may
request concerning the performance by Trustor of the covenants of the Loan
Documents, and Trustor will permit Beneficiary or its representatives at all
reasonable times to make investigation or examination concerning that
performance.
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<PAGE>
4.15 RIGHT OF ENTRY. Trustor grants to Beneficiary and its agents,
--------------
employees, consultants, and contractors the right to enter on the Property for
the purpose of making any inspections, reports, tests (including, without
limitation, soils borings, groundwater testing, wells, or soils analysis),
inquiries, and reviews that Beneficiary, in its sole and absolute discretion,
deems necessary to assess the then current condition of the Property.
Beneficiary will provide Trustor with one (1) business day's notice of the
entry. However, Trustor's consent will not be required for entry or for the
performance of tests. All costs, fees, and expenses (including, without
limitation, those of Beneficiary's outside counsel and consultants) incurred by
Beneficiary with respect to the inspections, reports, tests, inquiries, and
reviews, together with all related preparation, consultation, analyses, and
review, will be paid by Trustor to Beneficiary on demand, will accrue interest
at the Default Rate until paid, and will be secured by this Deed of Trust, prior
to any right, title, or interest in or claim on the Property attaching or
accruing subsequent to the lien of this Deed of Trust.
4.16 HANDICAPPED ACCESS.
------------------
(a) The Property shall at all times strictly comply to the extent
applicable with the requirements of the Americans with Disabilities Act of 1990,
the Fair Housing Amendments Act of 1988 (if applicable), all state and local
laws and ordinances related to handicapped access and all rules, regulations,
and order issued pursuant thereto including, without limitation, the Americans
with Disabilities Act Accessibility Guidelines for Buildings and Facilities
(collectively, "ACCESS LAWS").
(b) Trustor agrees to give prompt notice to Beneficiary of the
receipt by Trustor of any complaints related to violation of any Access Laws and
of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
4.17 TAXED AS PARTNERSHIP. Trustor will continue to be taxed as a
--------------------
partnership for income tax purposes during the term of this Deed of Trust.
4.18 LIMITED LIABILITY COMPANY FILINGS. Trustor will make all filings as
---------------------------------
required under the laws of the state where the Property is located concerning
foreign limited liability companies, and deliver same to Beneficiary within ten
(10) days of filing.
4.19 THIRD PARTY OPERATOR. Trustor will preserve and keep in full force
--------------------
and effect that certain Skilled Nursing Facility Lease dated September 12, 1997
between Trustor, as lessor, and Kimburida Management Group, an Idaho joint
venture, organized as an Idaho general partnership made up of Northwest Bec-
Corp, a Nevada corporation licensed to do business in Idaho, general partner,
and McNabb Grain, Inc., an Idaho corporation, general partner, as lessee, with
respect to the operation of the Property as a nursing care facility, or will
enter into and keep in full force and effect and maintain during the entire term
of the Loan a lease with such other third party operator which is acceptable to
Beneficiary (which acceptance shall have been obtained from Beneficiary in
writing prior to entering into such lease) concerning the operation of the
Property as a nursing care facility.
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<PAGE>
5. NEGATIVE COVENANTS. Until the entire Indebtedness has been paid in full,
------------------
Trustor covenants to and agrees with Beneficiary as follows:
5.1 RESTRICTIVE USES. Trustor covenants not to initiate, join in, or
----------------
consent to any change in any zoning ordinance, private restrictive covenant,
assessment proceedings, or other public or private restriction limiting or
restricting the uses that may be made of the Property or any part of it without
the prior written consent of Beneficiary.
5.2 OTHER FINANCING. Except for the liens securing the Indebtedness,
---------------
Trustor will not create or permit to continue in existence any mortgage, pledge,
encumbrance, lien, or charge of any kind (including purchase money and
conditional sale liens) on any of the Property except for:
(a) liens for taxes not yet delinquent, and
(b) any other liens or charges that are specifically approved in
writing by Beneficiary prior to the recordation.
Any transaction in violation of this section will cause all Indebtedness,
irrespective of the maturity dates, at the option of the holder and without
demand or notice, to immediately become due, together with any prepayment
premium in accordance with the terms of the Note.
5.3 TRANSFER OR ENCUMBRANCE OF THE PROPERTY.
---------------------------------------
(a) Trustor acknowledges that Beneficiary has examined and relied on
the creditworthiness and experience of Trustor in owning and operating the
Property in agreeing to make the Loan, and that Beneficiary will continue to
rely on Trustor's ownership of the Property as a means of maintaining the value
of the Property as security for repayment of the Indebtedness. Trustor
acknowledges that Beneficiary has a valid interest in maintaining the value of
the Property so as to ensure that, should Trustor default in the repayment of
the Indebtedness, Beneficiary can recover the Indebtedness by a sale of the
Property. Trustor shall not, without the prior written consent of Beneficiary,
sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer the
Property or any part thereof, or permit the Property or any part thereof to be
sold, conveyed, alienated, mortgaged, encumbered, pledged or otherwise
transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this Section 5.3 shall be deemed to include (i)
-----------
an installment sales agreement wherein Trustor agrees to sell the Property or
any part thereof for a price to be paid in installments; (ii) an agreement by
Trustor leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Trustor's right, title and interest
in and to any Leases or any Payments; (iii) if Trustor or any general partner or
managing member of Trustor is a corporation, the voluntary or involuntary sale,
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by operation of
law or otherwise) or the creation or issuance of new stock in one or a series of
transactions by which an aggregate of more than 50% of such
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<PAGE>
corporation's stock shall be vested in a party or parties who are not now
stockholders or any change in the control of such corporation; (iv) if Trustor
or any general partner of Trustor is a limited or general partnership, joint
venture or limited liability company, the change, removal, resignation or
addition of a general partner, managing partner, or joint venturer or the
transfer of any ownership interest of any general partner, managing partner or
joint venturer or the transfer, assignment or pledge of any ownership interest
of any general partner, managing partner or joint venturer; (v) if Trustor is a
limited partnership, the voluntary or involuntary sale, conveyance, transfer or
pledge of any limited partnership interests or the creation or issuance of new
limited partnership interests, by which an aggregate of more than 50% of such
limited partnership interests are held by parties who are not currently limited
partners; or (vi) if Trustor is a limited liability company, the voluntary or
involuntary sale, conveyance or transfer of more than 50% of the members'
interests. Notwithstanding anything herein to the contrary, the following
transfers of ownership interests in any Trustor entity shall be permitted
transfers hereunder without Beneficiary's consent and shall not constitute a
default hereunder: (i) any transfers into or out of a trust, family limited
partnership, or other similar entity or device for tax or estate planning
purposes; and (ii) any transfers resulting from the death of an individual,
including without limitation, pursuant to a will, trust or intestate proceeding.
(c) Beneficiary shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Indebtedness immediately due and payable upon Trustor's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property without Beneficiary's consent. This provision shall apply to every
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property regardless of whether voluntary or not, or whether or not Beneficiary
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property.
(d) Beneficiary's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be deemed to
be a waiver of Beneficiary's right to require such consent to any future
occurrence of same. Any sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Property made in contravention of this Section shall
be null and void and of no force and effect.
(e) Trustor agrees to bear and shall pay or reimburse Beneficiary on
demand for all reasonable expenses (including, without limitation, reasonable
attorneys' fees and disbursements, title search costs and title insurance
endorsement premiums) incurred by Beneficiary in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
(f) Beneficiary's consent to the sale or transfer of the Property
will not be unreasonably withheld after consideration of all relevant factors,
provided that:
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(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event
of Default shall have occurred and remain uncured;
(ii) the proposed transferee ("TRANSFEREE") shall be a
reputable entity or person of good character,
creditworthy, with sufficient financial worth considering
the obligations assumed and undertaken, as evidenced by
financial statements and other information reasonably
requested by Beneficiary;
(iii) the Transferee and its property manager (if any) shall
have sufficient experience in the ownership and
management of properties similar to the Property, and
Beneficiary shall be provided with reasonable evidence
thereof;
(iv) the Transferee shall have executed and delivered to
Beneficiary an assumption agreement in form and substance
acceptable to Beneficiary, evidencing such Transferee's
agreement to abide and be bound by the terms of the Note,
this Deed of Trust and the other Loan Documents, together
with such legal opinions and title insurance endorsements
as may be reasonably requested by Beneficiary; and
(v) Beneficiary shall have received the payment of all costs
and expenses incurred by Beneficiary in connection with
such assumption (including reasonable attorneys' fees and
costs).
5.4 REPLACEMENT OF FIXTURES AND PERSONALTY. Trustor will not permit any
--------------------------------------
of the Fixtures or Personalty to be removed at any time from the Property
without the prior written consent of Beneficiary unless actually replaced by
articles of equal suitability and value owned by Trustor free and clear of any
lien or security interest except as may be approved in writing by Beneficiary.
5.5 LIMITED LIABILITY COMPANY CHANGES. Trustor will make no material
---------------------------------
changes nor materially amend or modify Trustor's articles of organization or
operating agreement without first obtaining Beneficiary's prior written consent
(which consent shall not be unreasonably withheld or delayed), nor compromise
any members' obligations to contribute capital or enter into any merger or
consolidation without first obtaining Beneficiary's prior written consent of
same. Trustor will in writing immediately notify Beneficiary of any planned or
anticipated dissolution of Trustor or of any event likely to result in
dissolution of Trustor.
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<PAGE>
6. ENVIRONMENTAL PROVISIONS.
------------------------
6.1 REPRESENTATIONS AND WARRANTIES. Except as disclosed in writing to,
------------------------------
and acknowledged in writing by, Beneficiary, Trustor represents and warrants
that:
(a) during the period of Trustor's ownership of the Property:
(1) there has been no use, generation, manufacture, storage,
treatment, disposal, discharge, Release, or threatened Release of any Hazardous
Substance by any person on or around the Property; and
(2) there have been no Hazardous Substances transported over or
through the Property;
(b) after diligent inquiry, Trustor has no knowledge of, or reason to
believe that, there has been:
(1) any use, generation, manufacture, storage, treatment,
disposal, Release, or threatened Release of any hazardous waste or substance by
any prior owners or prior occupants of the Property or by any third parties onto
the Property; or
(2) any actual or threatened litigation or claims of any kind by
any person relating to these matters;
(c) no Hazardous Substances in excess of permitted levels or
reportable quantities under applicable Hazardous Substance Laws are present in
or about the Property or any nearby real property that could migrate to the
Property;
(d) no Release or threatened Release exists or has occurred;
(e) no underground storage tanks of any kind are or ever have been
located in or about the Property;
(f) the Property and all operations and activities at, and the use
and occupancy of, the Property, comply with all applicable Hazardous Substance
Laws;
(g) Trustor and every User has, and is now in strict compliance with,
every permit, license, and approval required by all applicable Hazardous
Substance Laws for all activities and operations at, and the use and occupancy
of, the Property;
(h) to the best of Trustor's knowledge, after diligent inquiry, there
are no Hazardous Substance Claims pending or threatened with regard to Property
or against Trustor or any Loan Parties;
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<PAGE>
(i) the Property has not been nor is it within 2,000 feet of any
other property designated as hazardous waste property or border zone property
pursuant to the laws of the state where the Property is located, and no
proceedings for a determination of this designation are pending or threatened;
(j) to the best of its knowledge after diligent inquiry, there exists
no occurrence or condition on any real property adjoining or within 2,000 feet
of the Property that would cause the Property or any part of it to be designated
as hazardous waste property or border zone property under the laws of the state
where the Property is located;
(k) that the current use of the Property is as a nursing care
facility;
(l) any written disclosure submitted by or on behalf of Trustor to
Beneficiary concerning any Release or threatened Release, past or present
compliance by Trustor, or any User or other person of any Hazardous Substance
Laws applicable to the Property, the past and present use and occupancy of the
Property, and any environmental concerns relating to the Property, was true and
complete when submitted and continues to be true and complete as of the date of
this Deed of Trust.
6.2 COVENANTS. Trustor agrees, except in the ordinary course of business
---------
and in strict compliance with all applicable Hazardous Substance Laws, as
follows:
(a) not to cause or permit the Property to be used as a site for the
use, generation, manufacture, storage, treatment, Release, discharge, disposal,
transportation, or presence of any Hazardous Substance;
(b) not to cause, contribute to, permit, or acquiesce in any Release
or threatened Release;
(c) not to change or modify the use of the Property without the prior
written consent of Beneficiary;
(d) to comply with and to cause the Property and every User of the
Property to comply with all Hazardous Substance Laws;
(e) to immediately notify Beneficiary in writing and to provide
Beneficiary with a reasonably detailed description of:
(1) any noncompliance of the Property with any Hazardous
Substance Laws;
(2) any Hazardous Substance Claim;
(3) any Release or threatened Release;
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<PAGE>
(4) the discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Property that would cause the
Property or any part of it to be designated as hazardous waste property or
border zone property under the laws of the state where the Property is located;
(f) in the event that Trustor discovers a Release or the presence of
any Hazardous Substance on or about the Property in violation of any Hazardous
Substance Law, to:
(1) notify Beneficiary of that discovery together with a
reasonably detailed description;
(2) promptly after a request by Beneficiary, engage a qualified
environmental engineer reasonably satisfactory to Beneficiary to investigate
these matters and prepare and submit to Beneficiary a written report containing
the findings and conclusions resulting from that investigation, all at the sole
expense of Trustor; and
(3) take, at Trustor's sole expense, all necessary actions to
remedy, repair, clean up, or detoxify any Release or Hazardous Substance,
including, but not limited to, any remedial action required by any Hazardous
Substance Laws or any judgment, consent, decree, settlement, or compromise in
respect of any Hazardous Substance Claims, these actions to be performed:
(i) in accordance with Hazardous Substance Laws;
(ii) in a good and proper manner;
(iii) under the supervision of a qualified environmental
engineer approved in writing by Beneficiary;
(iv) in accordance with plans and specifications for these
actions approved in writing by Beneficiary; and
(v) using licensed and insured qualified contractors
approved in writing by Beneficiary;
(g) immediately furnish to Beneficiary copies of all written
communications received by Trustor from any governmental authority or other
person or given by Trustor to any person and any other information Beneficiary
may reasonably request concerning any Release, threatened Release, Hazardous
Substance Claim, or the discovery of any Hazardous Substance on or about the
Property in violation of any Hazardous Substance Law; and
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<PAGE>
(h) keep Beneficiary generally informed regarding any Release,
threatened Release, Hazardous Substance Claim, or the discovery of any Hazardous
Substance on or about the Property in violation of any Hazardous Substance Law.
6.3 ENVIRONMENTAL MONITORING. Trustor shall permit Beneficiary to join
------------------------
and participate in, as a party if it so elects, any legal proceedings or action
initiated with respect to the Property in connection with any Hazardous
Substance Law or Hazardous Substance, and Trustor shall pay all attorneys' fees
and disbursements incurred by Beneficiary in connection therewith. Upon
Beneficiary's request, at any time and from time to time while this Deed of
Trust is in effect, but not more frequently than once per calendar year, unless
Beneficiary has determined (in the exercise of its good faith judgment) that
reasonable cause exists for the performance of an environmental inspection or
audit of the Property, Trustor shall provide at Trustor's sole expense an
inspection or audit of the Property prepared by a licensed hydrogeologist or
licensed environmental engineer approved by Beneficiary indicating the presence
or absence of Hazardous Substances in, or near the Property. If Trustor fails
to provide such inspections or audits within thirty (30) days after such
request, Beneficiary may order same, and Trustor hereby grants to Beneficiary
and its employees and agents access to the Property and a license to undertake
those inspections or audits. The cost of such inspections or audits shall be
added to the principal balance of the sums due under the Note and this Deed of
Trust and shall bear interest thereafter until paid at the Default Rate (as
defined in the Note). In the event that any environmental site assessment
report prepared in connection with such inspection or audit recommends that an
operations and maintenance plan be implemented for any Hazardous Substance,
Trustor shall cause such operations and maintenance plan to be prepared and
implemented at Trustor's expense upon request of Beneficiary. Trustor shall
commence and thereafter diligently prosecute to completion any remedial work
within thirty (30) days after written demand by Beneficiary for performance
thereof (or any such shorter period of time as may be required under applicable
law). All remedial work shall be performed by contractors approved in advance
by Beneficiary, and under the supervision of a consulting engineer approved by
Beneficiary. All costs and expenses of such remedial work shall be paid by
Trustor including, without limitation, Beneficiary's reasonable attorneys' fees
and costs incurred in connection with monitoring or review of such remedial
work. In the event Trustor shall fail to timely commence, or cause to be
commenced, or fail to diligently prosecute to completion, such remedial work,
Beneficiary may, but shall not be required to, cause such remedial work to be
performed, and all costs and expenses thereof, or incurred in connection
therewith, shall become part of the Indebtedness and shall bear interest
thereafter until paid at the Default Rate.
6.4 INSPECTION AND RECEIVERSHIP RIGHTS. Upon Beneficiary's reasonable
----------------------------------
belief of the existence of a past or present Release or threatened Release not
previously disclosed by Trustor in connection with the making of the Loan or the
execution of this Deed of Trust or upon Beneficiary's reasonable belief that
Trustor has failed to comply with any environmental provision of this Deed of
Trust or any other Loan Document and upon reasonable prior notice (except in the
case of an emergency) to Trustor, Beneficiary or its representatives, employees,
and agents, may from time to time and at all reasonable times (or at any time in
the case of an
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emergency) enter and inspect the Property and every part of it (including all
samples of building materials, soil, and groundwater, and all books, records,
and files of Trustor relating to the Property) and perform those acts and things
that Beneficiary deems necessary or desirable to inspect, investigate, assess,
and protect the security of this Deed of Trust, for the purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release;
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law; and
(c) the compliance by Trustor of every environmental provision of
this Deed of Trust and every other Loan Document. In furtherance of the purposes
above, without limitation of any of its other rights, Beneficiary may:
(1) obtain a court order to enforce Beneficiary's right to enter
and inspect the Property under the laws of the state where the Property is
located, to which the decision of Beneficiary as to whether there exists a
Release, a threatened Release, any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law, or a breach by Trustor of any
environmental provision of this Deed of Trust or any other Loan Document, will
be deemed reasonable and conclusive as between the parties; and
(2) have a receiver appointed to enforce Beneficiary's right to
enter and inspect the Property for the purpose set forth above.
All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including without limitation court costs, consultant's fees, and
attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until those sums have been paid in full. Except as provided by law, any
inspections or tests made by Beneficiary or its representatives, employees, and
agents will be for Beneficiary's purposes only and will not be construed to
create any responsibility or liability on the part of Beneficiary to Trustor or
to any other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision contained in this Deed
of Trust or any Loan Document.
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6.5 RELEASE AND INDEMNITY. Trustor:
---------------------
(a) releases and waives any future claims against Beneficiary for
indemnity or contribution in the event Trustor becomes liable for cleanup or
other costs under any Hazardous Substance Laws or under any Hazardous Substance
Claim;
(b) agrees to reimburse Beneficiary, on demand, for all costs and
expenses incurred by Beneficiary in connection with any review, approval,
consent, or inspection relating to the environmental provisions in this Deed of
Trust together with interest, after demand, at the Default Rate; and
(c) agrees to indemnify, defend, and hold Beneficiary and Trustee
harmless from all losses, costs, claims, damages, penalties, liabilities, causes
of action, judgments, court costs, attorney fees and other legal expenses, costs
of evidence of title, cost of evidence of value, and other expenses
(collectively, "Expenses"), including, but not limited to, any Expenses incurred
or accruing after the foreclosure of the lien of this Deed of Trust, which
either may suffer or incur and which directly or indirectly arises out of or is
in any way connected with the breach of any environmental provision either in
this Deed of Trust or in any Loan Document or as a consequence of any Release or
threatened Release on the presence, use, generation, manufacture, storage,
disposal, transportation, Release, or threatened Release of any Hazardous
Substance on or about the Property, including the soils and groundwaters, caused
or permitted by Trustor, any prior owner or operator of the Property, any
adjoining landowner or any other party, including, without limitation, the cost
of any required or necessary repair, cleanup, remedy, or detoxification of any
Hazardous Substance and the preparation of any closure, remedial action, or
other required plans, whether that action is required or necessary by reason of
acts or omissions occurring prior to or following the recordation of this Deed
of Trust. Trustor's obligations will survive the satisfaction, release, or
cancellation of the Indebtedness, the release and reconveyance or partial
release and reconveyance of this Deed of Trust, and the foreclosure of the lien
of this Deed of Trust or deed in lieu of the Deed of Trust.
6.6 REQUEST FOR INFORMATION. Trustor and Beneficiary agree that:
-----------------------
(a) this Section 6.6 is intended as Beneficiary's written request for
-----------
information and Trustor's written response concerning the environmental
condition of the Property; and
(b) each representation, warranty, covenant, or indemnity made by
Trustor in this Section 6 or in any other provision of this Deed of Trust or any
---------
Loan Document that relates to the environmental condition of the Property is
intended by Trustor and Beneficiary to be an environmental provision for
purposes of the laws of the state where the Property is located and will survive
the payment of the Indebtedness and the termination or expiration of this Deed
of Trust and will not be affected by Beneficiary's acquisition of any interest
in the Property, whether by full credit bid at foreclosure, deed in lieu of
that, or otherwise. If there is
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any transfer of any portion of Trustor's interest in the Property, any
successor-in-interest to Trustor agrees by its succession to that interest that
the written request made pursuant to this Article will be deemed remade to the
successor-in-interest without any further or additional action on the part of
Beneficiary and that by assuming the debt secured by this Deed of Trust or by
accepting the interest of Trustor subject to the lien of this Deed of Trust, the
successor remakes each of the representations and warranties in this Deed of
Trust and agrees to be bound by each covenant in this Deed of Trust, including,
but not limited to, any indemnity provision.
6.7 EFFECT OF SITE ASSESSMENT. Even though Trustor may have provided
-------------------------
Beneficiary with an environmental site assessment or other environmental report
together with other relevant information regarding the environmental condition
of the Property, Trustor acknowledges and agrees that Beneficiary is not
accepting the Property as security for the Loan based on that assessment,
report, or information. Rather Beneficiary has relied on the representations and
warranties of Trustor in this Deed of Trust, and Beneficiary is not waiving any
of its rights and remedies in the environmental provisions of this Deed of Trust
or any other Loan Document.
7. CASUALTIES AND CONDEMNATION.
---------------------------
7.1 CASUALTIES.
----------
(a) Trustor will promptly notify Beneficiary in writing after any
loss or damage caused by fire or other casualty to the Property, and prior to
the making of any repairs. Trustor will furnish to Beneficiary within sixty (60)
days after the loss or damage the following:
(1) evidence satisfactory to Beneficiary of the cost of repair
or reconstruction;
(2) evidence satisfactory to Beneficiary that sufficient funds
are available or committed for the benefit of Beneficiary, including insurance
proceeds, payment and performance bonds, or otherwise, to complete the repair or
reconstruction; and
(3) evidence satisfactory to Beneficiary that the repair or
reconstruction may be completed in accordance with all applicable laws, rules,
regulations, and ordinances and that all necessary permits and approvals have
been or will be obtained.
If Trustor does not furnish this evidence to Beneficiary within the sixty-
day period, or if Beneficiary in its reasonable discretion determines that
repair or reconstruction is not economically feasible, then within sixty (60)
days after the expiration of the sixty-day period, Beneficiary will have the
option ("REPAYMENT OPTION") to have all insurance proceeds applied against the
Indebtedness. If Beneficiary elects the Repayment Option, Trustor will
immediately transfer to Beneficiary all insurance proceeds received by it, if
any, to the extent of the Indebtedness, and Beneficiary will apply the insurance
proceeds received by it, if any, against
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the Indebtedness. If the insurance proceeds held by Trustor and Beneficiary
exceed the Indebtedness, any excess insurance proceeds will belong and be paid
over to, or be retained, by Trustor.
(b) If Beneficiary does not elect the Repayment Option within the
specified time period, Trustor will, with all diligence, repair or otherwise
reconstruct the damage to the Property, all according to the original plans and
specifications for the Improvements or any modified plans and specifications
conforming to the then laws and regulations as will first have been approved in
writing by Beneficiary and any occupants of the Improvements having the right to
approve. Beneficiary will use all insurance proceeds, if any, received by it
relating to the damage or destruction to reimburse Trustor from time to time for
expenditures made for repair of the damage or for the erection of any building,
structure, or improvements in their place if permitted as follows:
(1) At the end of each month against Trustor's architect's
certificate, an amount that will be that proportion of the insurance proceeds
held in trust that ninety percent (90%) of the payments to be made to the
contractors or materialmen for work done, materials supplied, and services
rendered during that month bears to the total contract price.
(2) At the completion of the work, the balance of the proceeds
required for completing the payments for the work will be paid to or for the
account of Trustor, provided that at the time of the payment:
(i) there are no liens (as evidenced by an endorsement
satisfactory to Beneficiary issued by Trustee) against the Property by reason of
the work, or proof satisfactory to Beneficiary has been submitted that all costs
of the work have been paid; and
(ii) Trustor's architect will certify that all required work
is completed and is proper and of a quality and class of the original work
required by the original plans and specifications and in accordance with the
approved plans and specifications.
If the insurance proceeds exceed the costs of completing the work, the
excess insurance proceeds will belong and be retained by or be paid over to
Beneficiary to be applied against the Indebtedness. If the costs of completing
the work exceed the insurance proceeds, Trustor will, no later than ninety (90)
days before commencement of the work, provide evidence satisfactory to
beneficiary that Trustor has the funds to complete the work and shall, before
commencement of the work, deposit with Beneficiary said funds which shall be
used to reimburse Trustor in the same manner as insurance proceeds.
7.2 CONDEMNATION. Trustor, immediately upon obtaining knowledge of the
------------
institution of any proceedings for the condemnation of the Property or any
portion of it, will notify Trustee and Beneficiary of the pendency of the
proceedings. Trustee and Beneficiary
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may participate in any proceedings and Trustor from time to time will deliver to
Beneficiary all instruments requested by Beneficiary to permit participation. If
there are condemnation proceedings, the award or compensation payable is
assigned to and will be paid to Beneficiary. Beneficiary will be under no
obligation to question the amount of any award or compensation and may accept it
in the amount in which it is paid. In any condemnation proceedings, Beneficiary
may be represented by counsel selected by Beneficiary. The proceeds of any award
or compensation received will be paid over to Trustor for restoration of the
Improvements in accordance with the provisions of Section 7.1 of this Deed of
-----------
Trust or, if the Improvements will not be restored, will be applied, without
premium, to the prepayment of the Note.
8. EVENTS OF DEFAULT AND REMEDIES OF BENEFICIARY.
---------------------------------------------
8.1 EVENTS OF DEFAULT. The following events are each an Event of
-----------------
Default:
(a) Default in the payment of any sum of principal or interest when
due under the Note or any other sum due under the Loan Documents, provided that
such failure continues for five (5) business days after written notice of such
default.
(b) The failure (without cure during the applicable period, if any,
for cure) of any Loan Party to observe, perform, or discharge any obligation,
term, covenant, or condition of the Loan Documents, any agreement relating to
the Property, or any agreement or instrument between any Loan Party and
Beneficiary, provided that such failure continues for thirty (30) days after
written notice of such default, or such longer period of time up to one-hundred
twenty (120) days to cure such default if Trustor commences a cure within such
30 day period and thereafter diligently prosecutes such cure to completion.
(c) The entry of an order for relief under federal bankruptcy laws as
to Trustor or the adjudication of Trustor as insolvent or bankrupt pursuant to
the provisions of any state insolvency or bankruptcy act; the commencement by
Trustor of any case, proceeding, or other action seeking any reorganization,
arrangement, composition, adjustment, liquidation, dissolution, or other relief
for debtors; Trustor's consent to, acquiescence in, or attempt to secure the
appointment of, any Receiver of all or any substantial part of its properties or
of the Property; Trustor's generally not paying its debts as they become due or
admitting in writing its inability to pay its debts or making a general
assignment for the benefit of creditors; or Trustor's taking of any action to
authorize any of the acts set forth above in this section.
(d) Any case, proceeding, or other action against Trustor is
commenced, seeking to have an order for relief entered against it as a debtor or
seeking any reorganization, arrangement, composition, adjustment, liquidation,
dissolution, or similar relief under any present or future statute, law, or
regulation relating to bankruptcy, insolvency, reorganization, or other relief
for debtors, or seeking appointment of any Receiver for Trustor or for all or
any substantial part of its property or for the Property, and that case,
proceeding, or other action:
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(1) results in the entry of an order for relief against it that
is not fully stayed within sixty (60) days after the entry, or
(2) remains undismissed for an aggregate of sixty (60) days
(whether or not consecutive);
or the possibility that any portion of the Property would, by operation of law
or otherwise, devolve on or pass to any Person other than Trustor and that
situation continues and is not remedied by Trustor within sixty (60) days after
the happening of the event.
(e) The assignment by Trustor, as lessor or sublessor, as the case
may be, of the rents or the income of the Property or any part of it (other than
to Beneficiary) without first obtaining the written consent of Beneficiary.
(f) The following events:
(1) The filing of any claim or lien against the Property or any
part of it, whether or not the lien is prior to this Deed of Trust, and the
continued maintenance of the claim or lien for a period of sixty (60) days
without discharge, satisfaction, or adequate bonding in accordance with the
terms of this Deed of Trust;
(2) the existence of any interest in the Property other than
those of Trustor, Beneficiary, and any tenants of Trustor; or
(3) the sale, hypothecation, conveyance, or other disposition of
the Property except in accordance with Sections 5.2 or 5.3 of this Deed of
-------------------
Trust, any of which will be an Event of Default because Trustor's obligation to
own and operate the Property is one of the inducements to Beneficiary to make
the Loan;
(g) Default under any agreement to which Trustor is a party, which
agreement relates to the borrowing of money by Trustor from any Person.
(h) Any representation or warranty made by any Loan Party or any
other Person under this Deed of Trust or in, under, or pursuant to the Loan
Documents, is false or misleading in any material respect as of the date on
which the representation or warranty was made.
(i) Any of the Loan Documents, at any time after their respective
execution and delivery and for any reason, cease to be in full force or are
declared null and void, or the validity or enforceability is contested by any
Loan Party or any stockholder or partner of any Loan Party, or any Loan Party
denies that it has any or further liability or obligation under any of the Loan
Documents to which it is a party.
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<PAGE>
(j) Any of the Security Documents, at any time after their respective
execution and delivery and for any reason, cease to constitute valid and
subsisting liens or valid and perfected security interests in and to the
property purported to be subject to any of the Security Documents;
(k) Any representation made by any Loan Party in the Certification
Agreement is false or misleading in any material respect as of the date made, or
any breach or default in any of Trustor's obligations under the Certification
Agreement.
(l) The occurrence of any Material Adverse Change.
If one or more Event of Default occurs and is continuing, then Beneficiary
may declare all the Indebtedness to be due and the Indebtedness will become due
without any further presentment, demand, protest, or notice of any kind, and
Beneficiary may:
(1) in person, by agent, or by a receiver, and without regard to
the adequacy of security, the solvency of Trustor, or the existence of waste,
enter on and take possession of the Property or any part of it in its own name
or in the name of Trustee, sue for or otherwise collect the rents, issues, and
profits, and apply them, less costs and expenses of operation and collection,
including reasonable attorney fees, upon the Indebtedness, all in any order that
Beneficiary may determine. The entering on and taking possession of the
Property, the collection of rents, issues, and profits, and the application of
them will not cure or waive any default or notice of default or invalidate any
act done pursuant to the notice;
(2) commence an action to foreclose this Deed of Trust in the
manner provided by law for the foreclosure of mortgages of real property and
following any sale under judicial foreclosure, bring actions, suits and
proceedings against Trustor and any other Loan Parties, for any amount by which
the unpaid balance of the Indebtedness secured by this Deed of Trust exceeds the
net proceeds payable to Beneficiary, and Beneficiary shall be entitled to a
deficiency judgment in such amount;
(3) deliver to Trustee a written declaration of default and
demand for sale, and a written notice of default and election to cause the
Property to be sold, which notice Trustee or Beneficiary will cause to be filed
for record;
(4) with respect to any Personalty, proceed as to both the real
and personal property in accordance with Beneficiary's rights and remedies in
respect of the Land, or proceed to sell the Personalty separately and without
regard to the Land in accordance with Beneficiary's rights and remedies; or
(5) exercise any of these remedies in combination or any other
remedy at law or in equity.
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8.2 POWER OF SALE.
-------------
(a) If Beneficiary elects to foreclose by exercise of the power of
sale in this Deed of Trust, Beneficiary will also deposit with Trustee this Deed
of Trust, the Note, and any receipts and evidence of expenditures made and
secured as Trustee may require. If notice of default has been given as then
required by law, and after lapse of the time that may then be required by law,
after recordation of the notice of default, Trustee, without demand on Trustor,
will, after notice of sale having been given as required by law, sell the
Property at the time and place of sale fixed by it in the notice of sale, either
as a whole or in separate parcels as Trustee determines, and in any order that
it may determine, at public auction to the highest bidder. Trustee may postpone
sale of all or any portion of the Property by public announcement at the time
and place of sale, and from time to time after that may postpone the sale by
public announcement at the time fixed by the preceding postponement, and without
further notice make the sale at the time fixed by the last postponement; or
Trustee may, in its discretion, give a new notice of sale. Beneficiary may
rescind any notice of default at any time before Trustee's sale by executing a
notice of rescission and recording it. The recordation of the notice will
constitute a cancellation of any prior declaration of default and demand for
sale and of any acceleration of maturity of Indebtedness affected by any prior
declaration or notice of default. The exercise by Beneficiary of the right of
rescission will not constitute a waiver of any default then existing or
subsequently occurring, or impair the right of Beneficiary to execute other
declarations of default and demand for sale, or notices of default and of
election to cause the Property to be sold, nor otherwise affect the Note or this
Deed of Trust, or any of the rights, obligations, or remedies of Beneficiary or
Trustee. After sale, Trustee will deliver to the purchaser its deed conveying
the property sold, but without any covenant or warranty, express or implied. The
recitals in the deed of any matters or facts will be conclusive proof of their
truthfulness. Any Person, including Trustor, Trustee, or Beneficiary, may
purchase at that sale. If allowed by law, Beneficiary, if it is the purchaser,
may turn in the Note at the amount owing on it toward payment of the purchase
price (or for endorsement of the purchase price as a payment on the Note if the
amount owing exceeds the purchase price). Trustor expressly waives any right of
redemption after sale that Trustor may have at the time of sale or that may
apply to the sale.
(b) Trustee, upon the sale, will make (without any covenant or
warranty, express or implied), execute and, after due payment made, deliver to a
purchaser and its heirs or assigns a deed or other record of interest, as the
case may be, to the Property sold, which will convey to the purchaser all the
title and interest of Trustor in the Property and will apply the proceeds of the
sale in payment:
(1) first, of the expenses of the sale together with the
expenses of the trust, including, without limitation, attorney fees, that will
become due on any default made by Trustor, and also any sums that Trustee or
Beneficiary have paid for procuring a search of the title to the Property
subsequent to the execution of this Deed of Trust; and
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(2) second, in payment of the Indebtedness then remaining
unpaid, and the amount of all other monies with interest in this Deed of Trust
agreed or provided to be paid by Trustor.
Trustee will pay the balance or surplus of the proceeds of sale to Trustor
and its successors or assigns as its interests may appear.
8.3 PROOF OF DEFAULT. If there is a sale of the Property, or any part of
----------------
it, and the execution of a deed for it, the recital of default and of recording
notice of breach and election of sale, and of the elapsing of the required time
between the recording and the following notice, and of the giving of notice of
sale, and of a demand by Beneficiary that the sale should be made, will be
conclusive proof of the default, recording, election, elapsing of time, and the
due giving of notice, and that the sale was regularly and validly made on proper
demand by Beneficiary. Any deed with these recitals will be effectual and
conclusive against Trustor, its successors, and assigns, and all other Persons.
The receipt for the purchase money recited or in any deed executed to the
purchaser will be sufficient discharge to the purchaser from all obligations to
see to the proper application of the purchase money.
8.4 PROTECTION OF SECURITY. If an Event of Default occurs and is
----------------------
continuing, Beneficiary or Trustee, without limitation to do so, without notice
to or demand upon Trustor, and without releasing Trustor from any obligations or
defaults may:
(a) enter on the Property in any manner and to any extent that either
deems necessary to protect the security of this Deed of Trust;
(b) appear in and defend any action or proceeding purporting to
affect, in any manner, the Obligations or the Indebtedness, the security of this
Deed of Trust, or the rights or powers of Beneficiary or Trustee;
(c) pay, purchase, or compromise any encumbrance, charge, or lien
that in the judgment of Beneficiary or Trustee is prior or superior to this Deed
of Trust; and
(d) pay necessary expenses, employ counsel, and pay reasonable
attorney fees.
Trustor agrees to repay on demand all sums expended by Trustee or Beneficiary
pursuant to this section with interest at the Default Rate, and those sums, with
interest, will be secured by this Deed of Trust.
8.5 RECEIVER. If an Event of Default occurs and is continuing,
--------
Beneficiary, as a matter of strict right and without notice to Trustor or anyone
claiming under Trustor and without regard to the then value of the Property,
will have the right to apply ex parte or by noticed motion to any court having
jurisdiction to appoint a Receiver of the Property. Any Receiver will have all
the powers and duties of receivers in similar cases and all the powers
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and duties of Beneficiary in case of entry as provided in this Deed of Trust,
and will continue as such and exercise all those powers until the date of
confirmation of sale, unless the receivership is terminated sooner.
8.6 CURING THE DEFAULTS. If Trustor at any time fails to perform or
-------------------
comply with any of the terms, covenants, and conditions required on Trustor's
part to be performed and complied with under this Deed of Trust, the Note, any
of the other Loan Documents, or any other agreement that, under the terms of
this Deed of Trust, Trustor is required to perform, then Beneficiary, after ten
(10) days' notice to Trustor (or without notice if Beneficiary determines that
an emergency exists), and without waiving or releasing Trustor from any of the
Obligations, may, subject to the provisions of any of the agreements:
(a) make from its own funds any payments payable by Trustor and take
out, pay for, and maintain any of the insurance policies provided for; and
(b) perform any other acts on the part of Trustor to be performed and
enter on the Property for that purpose. The making by Beneficiary of payments
out of Beneficiary's own funds will not, however, be deemed to cure the default
by Trustor, and they will not be cured unless and until Trustor reimburses
Beneficiary for the payments. All sums paid and all reasonable costs and
expenses incurred by Beneficiary in connection with the performance of any act,
together with interest on unpaid balances at the Default Rate from the
respective dates of Beneficiary's making of each payment, will be added to the
principal of the Indebtedness, will be secured by the Security Documents and by
the lien of this Deed of Trust, prior to any right, title, or interest in or
claim on the Property attaching or accruing subsequent to the lien of this Deed
of Trust, and will be payable by Trustor to Beneficiary on demand.
8.7 INSPECTION RIGHTS. On reasonable notice (except in the case of an
-----------------
emergency), and without releasing Trustor from any obligation to cure any
default of Trustor, Beneficiary or its agents, representatives, and employees
acting by themselves or through a court-appointed receiver, may, from time to
time and at all reasonable times (or at any time in the case of an emergency)
enter and inspect the Property and every part of it (including all samples of
building materials, soil, and groundwater, and all books, records, and files of
Trustor relating to the Property) and perform any acts and things as Beneficiary
deems necessary or desirable to inspect, investigate, assess, and protect the
security of this Deed of Trust, for the purpose of determining:
(a) the existence, location, nature, and magnitude of any past or
present Release or threatened Release,
(b) the presence of any Hazardous Substances on or about the Property
in violation of any Hazardous Substance Law, and
(c) the compliance by Trustor of every environmental provision of
this Deed of Trust and every other Loan Document.
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In furtherance of these purposes, without limitation of any of its other
rights, Beneficiary may:
(a) obtain a court order to enforce Beneficiary's right to enter and
inspect the Property, to which the decision of Beneficiary as to whether there
exists a Release, threatened Release, any Hazardous Substances on or about the
Property in violation of any Hazardous Substance Law, or a breach by Trustor of
any environmental provision of this Deed of Trust or any other Loan Document,
will be deemed reasonable and conclusive as between Trustor, Trustee, and
Beneficiary; and
(b) have a receiver appointed to enforce Beneficiary's right to enter
and inspect the Property for Hazardous Substances.
All costs and expenses incurred by Beneficiary with respect to the audits,
tests, inspections, and examinations that Beneficiary or its agents,
representatives, or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, will be paid by Trustor.
All costs or expenses incurred by Trustee and Beneficiary pursuant to this
subsection (including, without limitation, court costs, consultants fees, and
attorney fees, whether incurred in litigation and whether before or after
judgment) will bear interest at the Default Rate from the date they are incurred
until they have been paid in full. Except as provided by law, any inspections or
tests made by Beneficiary or its representatives, employees, and agents, will be
for Beneficiary's purposes only and will not be construed to create any
responsibility or liability on the part of Beneficiary to Trustor or to any
other person. Beneficiary will have the right, but not the obligation, to
communicate with any governmental authority regarding any fact or reasonable
belief of Beneficiary that constitutes or could constitute a breach of any of
Trustor's obligations under any environmental provision in this Deed of Trust or
any Loan Document.
8.8 JUDGMENT ON ENVIRONMENTAL PROVISION. Beneficiary or its agents,
-----------------------------------
representatives, and employees may seek a judgment that Trustor has breached its
covenants, representations, or warranties in Article 6 of this Deed of Trust or
---------
any other covenants, representations, or warranties that are deemed to be
environmental provisions under the laws of the state where the Property is
located (each an "ENVIRONMENTAL PROVISION"), by commencing and maintaining an
action or actions in any court of competent jurisdiction under the laws of the
state where the Property is located, whether commenced prior to or after
foreclosure of the lien of this Deed of Trust. Beneficiary or its agents,
representatives, and employees may also seek an injunction to cause Trustor to
abate any action in violation of any Environmental Provision and may seek the
recovery of all costs, damages, expenses, fees, penalties, fines, judgments,
indemnification payments to third parties, and other out-of-pocket costs or
expenses actually incurred by Beneficiary (collectively, "ENVIRONMENTAL COSTS")
incurred or advanced by Beneficiary relating to the cleanup, remedy, or other
response action required by any Hazardous Substances Law, or any Hazardous
Substance Claim, or which Beneficiary believes necessary to protect the
Property. It will be conclusively presumed between Beneficiary and Trustor that
all Environmental Costs incurred or advanced by
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Beneficiary relating to the cleanup, remedy, or other response action of or to
the Property were made by Beneficiary in good faith. All Environmental Costs
incurred by Beneficiary under this subsection (including, without limitation,
court costs, consultant fees, and attorney fees, whether incurred in litigation
and whether before or after judgment) will bear interest at the Default Rate
from the date of expenditure until those sums have been paid in full.
Beneficiary will be entitled to bid, at any trustee's or foreclosure sale of the
Property, the amount of the costs, expenses, and interest in addition to the
amount of other Indebtedness.
8.9 WAIVE LIEN. Beneficiary or its agents, representatives, and
----------
employees may waive its lien against the Property or any portion of it,
including the Improvements and the Personal Property, to the extent that the
Property is found to be environmentally impaired under the laws of the state
where the Property is located, and to exercise all rights and remedies of an
unsecured creditor against Trustor and all of Trustor's assets and property for
the recovery of any deficiency and Environmental Costs, including, but not
limited to, seeking an attachment order under the laws of the state where the
Property is located. As between Beneficiary and Trustor, Trustor will have the
burden of proving that Trustor or any related party (or any affiliate or agent
of Trustor or any related party) was not in any way negligent in permitting the
Release or threatened Release of the Hazardous Substances.
8.10 REMEDIES CUMULATIVE. All remedies of Beneficiary provided for in
-------------------
this Deed of Trust are cumulative and will be in addition to all other rights
and remedies provided in the other Loan Documents or provided by law, including
any banker's lien and right of offset. The exercise of any right or remedy by
Beneficiary will not in any way constitute a cure or waiver of default, will not
invalidate any act done pursuant to any notice of default, nor will it prejudice
Beneficiary in the exercise of any of its rights unless, in the exercise of
those rights, Beneficiary collects the total amount of the Indebtedness.
9. SECURITY AGREEMENT.
------------------
9.1 GRANT OF SECURITY INTEREST. Trustor also grants to Beneficiary a
--------------------------
security interest in all of Trustor's right, title, and interest now owned or
later acquired to the following property (collectively, "COLLATERAL") now or
later affixed to or located on the Property, or used in connection with the
operation of the Property or the Improvements and all the rents, revenues,
issues, profits and proceeds of that property: the Personalty; the Fixtures; all
machinery, equipment, engines, appliances, and fixtures for generating or
distributing air, water, heat, electricity, light, fuel, or refrigeration, or
for ventilating or sanitary purposes, or for the exclusion of vermin or insects,
or for the removal of dust, refuse, or garbage; all wallbeds, wall safes, built-
in furniture and installations, shelving, lockers, partitions, doorstops,
vaults, motors, elevators, dumbwaiters, awnings, window shades, venetian blinds,
light fixtures, fire hoses and brackets and boxes for them, fire sprinklers,
alarm systems, draperies, drapery rods and brackets, mirrors, mantles, screens,
linoleum, carpets and carpeting, plumbing, bathtubs, sinks, basins, pipes,
faucets, water closets, laundry equipment, washers, dryers, iceboxes,
refrigerators, heating units, stoves, ovens, ranges, dishwashers, disposals,
water heaters, incinerators, furniture, fixtures, and furnishings; all
communication
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systems; all specifically designed installations and furnishings; all building
materials, supplies, and equipment now or later delivered to the Property; all
office equipment, including, without limitation, all computers, computer
systems, hardware and software, access codes, access keys, computer programs,
file names, typewriters, duplicating machines, word processing equipment, adding
machines, calculators, dictating equipment, printing presses, and related
equipment; all inventories and supplies, including, without limitation, office
supplies, soap, light bulbs, toilet paper, and linens; all clocks, television
sets, radios, and other electronic or audio/video equipment; all podiums,
microphones, movie and slide projectors and screens, and other property relating
to conference and convention facilities; all security and cleaning deposits
collected from any tenants or lessees of any part of the Property, all deposits
collected from purchasers pursuant to contracts for sale of the Property or any
portion of the Property; and, subject to the other provisions of this Deed of
Trust, all proceeds of any fire and builders' risk insurance policy, or of any
policy insuring the Property (and the contents of the Improvements) against any
other perils, all awards made in eminent domain proceedings, or purchased in
lieu of that, made with respect to the Property, and any compensation, award,
payment, or relief given by any governmental agency or other source because of
damage to the Property resulting from earthquake, flood, windstorm, or any
emergency or any other event or circumstance. The specific enumerations in this
Deed of Trust do not exclude the general.
The security interest also includes all additions to, substitutions for,
changes in, or replacements of the whole or any part of these articles of
property, together with all contract rights of Trustor in construction
contracts, bonds, agreements for purchase and sale of the Property, all policies
of insurance arising out of the improvement or ownership of the Property, and
all accounts, contract rights, chattel paper, instruments, general intangibles,
receivables and other obligations of any kind now or later existing, arising out
of, or in connection with the operation or development of the Property. The
security interest also includes all rights now or later existing in all security
agreements, leases, and other contracts securing or otherwise relating to any
accounts, contract rights, chattel paper, instruments, general intangibles, or
obligations; all causes of action and recoveries now or later existing for any
loss or diminution in value of the Property; all proceeds of any of the
Collateral; and, to the extent not otherwise included, all payments under
insurance (whether Beneficiary is the loss payee), or any indemnity, warranty,
or guaranty payable by reason of loss or damage to or otherwise with respect to
any of the Collateral.
9.2 REMEDIES. This Deed of Trust constitutes a security agreement with
--------
respect to the Collateral in which Beneficiary is granted a security interest.
Beneficiary has all of the rights and remedies of a secured party under the
Uniform Commercial Code of the laws of the state where the Property is located
as well as all other rights and remedies available at law or in equity. Trustor
agrees to execute and deliver on demand, and irrevocably constitutes and
appoints Beneficiary the attorney-in-fact of Trustor to execute, deliver, and
file, any security agreements, financing statements, continuation statements, or
other instruments that Beneficiary may request to impose, perfect, or continue
the perfection of the lien or security interest created by this Deed of Trust.
On the occurrence of any Event of Default (taking into account any applicable
period of grace or cure), Beneficiary will have the right to sell at any
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public or private sales as permitted by applicable law any of the Collateral
that is personal property. Beneficiary will also have any other rights and
remedies, whether at law, in equity, or by statute that are available to secured
creditors. Any disposition may be conducted by an employee or agent of
Beneficiary or Trustee. Any Person, including both Trustor and Beneficiary, will
be eligible to purchase any part or all of the Collateral at any disposition.
9.3 EXPENSES.
--------
Expenses of retaking, holding, and preparing for sale, selling, or the like
will be borne by Trustor and will include Beneficiary's and Trustee's attorney
fees and legal expenses. Trustor, on demand of Beneficiary, will assemble the
Collateral and make it available to Beneficiary at the Property, a place deemed
to be reasonably convenient to Beneficiary and Trustor. Beneficiary will give
Trustor at least ten (10) days' prior written notice of the time and place of
any public sale or other disposition of the Collateral or of the time of or
after which any private sale or any other intended disposition is to be made. If
the notice is sent to Trustor in the manner provided for the mailing of notices
in this Deed of Trust, it is deemed reasonable notice to Trustor.
9.4 FIXTURE FILING.
--------------
(a) This Deed of Trust constitutes a financing statement filed as a
fixture filing in the Official Records of the County Recorder of the county in
which the Property is located with respect to all Fixtures included within the
term Property as used in this Deed of Trust and with respect to any goods,
Collateral, or other personal property that may now be or later become fixtures.
(b) It is understood and agreed that, to protect Beneficiary against
the effect of Uniform Commercial Code (S) 9313 or the state law equivalent of
the state where the Property is located, if any fixture owned by Trustor on the
Property, or any part of any fixture, is replaced or added to, or any new
fixture owned by Trustor is installed by Trustor, and in each case the fixture
has a cost or fair market value in excess of One Thousand Dollars ($1,000.00)
and the fixture is or may be subject to a security interest held by a seller or
any other party, the following will apply:
(1) Trustor or any owner of all or any part of the Property
will, before the replacement, addition, or installation of any fixture, obtain
the prior written approval of Beneficiary, and give Beneficiary written notice
that a security agreement with respect to the fixture has been or will be
consummated, and the notice will contain the following information:
(i) description of the fixtures to be replaced, added to,
installed, or substituted;
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(ii) a recital of the location at which the fixtures will
be replaced, added to, installed, or substituted;
(iii) a statement of the name and address of the holder
and amount of the security interest; and
(iv) the date of the purchase of the fixtures.
Neither this subsection nor any consent by Beneficiary pursuant to this
subsection will constitute an agreement to subordinate any right of Beneficiary
in fixtures or other property covered by this Deed of Trust.
(2) Beneficiary may at any time pay the balance due under the
security agreement and the amount paid will be:
(i) secured by this Deed of Trust and will be a lien on
the Property, enjoying the same priorities as this Deed of Trust,
(ii) added to the amount of the Note or other obligation
secured by this Deed of Trust, and
(iii) on demand with interest at the Default Rate from the
time of the payment; and if Trustor is in default for ten (10) days after
demand, the entire principal sum secured with all unpaid interest will, at the
Beneficiary's option, become immediately due, regardless of any contrary
provision in this Deed of Trust or the Note; or Beneficiary will have the
privilege of acquiring by assignment from the holder of the security interest
any contract rights, accounts receivable, chattel paper, negotiable or
nonnegotiable instruments, or other evidence of Trustor's indebtedness for the
fixtures, and, on acquiring these interests by assignment, will have the right
to enforce the security interest as an assignee, in accordance with the Uniform
Commercial Code, the laws of the state where the Property is located and/or
other applicable law.
(3) Whether Beneficiary has paid or taken an assignment of the
security interest, if at any time Trustor is in default for a period of ten (10)
days under the security agreement covering the fixtures, that default will be
considered a material breach of Trustor's covenants under this Deed of Trust,
and will, at Beneficiary's option, constitute a default under this Deed of
Trust, and the principal sum secured will, at Beneficiary's option, become
immediately due.
(4) The provisions of subsections (ii) and (iii) above will not
apply if the goods that may become fixtures are of at least equivalent value and
quality as any property being replaced and if the rights of the party holding
the security interest have been expressly subordinated, at no cost to
Beneficiary, to the lien of this Deed of Trust in a manner satisfactory to
Beneficiary, including, without limitation, at Beneficiary's option, providing
to
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Beneficiary a satisfactory opinion of counsel that this Deed of Trust
constitutes a valid and subsisting first lien on the fixtures that is not
subordinate to the lien of the security interest under any applicable law,
including, without limitation, the provisions of Uniform Commercial Code (S)
9313 or the state law equivalent of the state where the Property is located.
9.5 ASSIGNMENT OF AGREEMENTS.
------------------------
(a) As partial security for the Loan, Trustor sells, assigns,
transfers, sets over, and delivers to Beneficiary all of Trustor's right, title,
and interest in all agreements, permits, and contracts pertaining to the use or
operation of the Property, including, but not limited to, environmental impact
reports; negative declarations; map approvals; grading and construction permits;
conditional use permits; applications for all permits; management agreements;
all development rights in the Property that Trustor may now or later acquire
(including, without limitation, development rights arising in connection with
any action by a governmental entity, including, by way of illustration, but not
of limitation, inducement resolutions of county, municipal, or other
governmental entities); agreements with contractors, suppliers, and construction
managers; and agreements pertaining to the transfer of development rights or
permitted floor area under applicable laws or ordinances (collectively,
"AGREEMENTS"), as they may be amended or otherwise modified from time to time,
including, without limitation, the right of Trustor to terminate any of the
Agreements, to perform under them, and to compel performance and otherwise
exercise all remedies under them, together with the immediate and continuing
right to collect and receive all sums that may become due to Trustor, or which
Trustor may now or later become entitled to demand or claim, arising or issuing
out of the Agreements, including, without limitation, claims of Trustor for
damages arising out of breach of or default under any of the Agreements and all
rights of Trustor to receive proceeds of any insurance, indemnity, warranty, or
guaranty with respect to any of the Agreements. However, so long as no Event of
Default has occurred and is continuing, Trustor will have the right under a
license granted to collect and retain all sums that may become payable to
Trustor under the Agreements.
(b) Trustor covenants and agrees to punctually observe, perform, and
discharge the obligations, terms, covenants, conditions, and warranties to be
observed, performed, and discharged by it under the Agreements. Beneficiary,
upon an Event of Default, at its option and upon written notice to Trustor, will
have the right to declare the assignment in this Section 9.5 to be absolute,
-----------
and, in addition, Beneficiary will have the complete right then or later to
exercise and enforce all of the rights and remedies provided by law.
(c) The acceptance by Beneficiary of the assignment in this Section
-------
9.5, with all the rights, powers, privileges, and authority granted will not,
- ---
prior to the exercise of Beneficiary's right to declare the assignment in this
Section 9.5 to be absolute, obligate Beneficiary to assume any obligations under
- -----------
the Agreements or to take any action under them, or to expend any money or incur
any expense or perform or discharge any obligation, duty, or liability under the
Agreements, or to assume any obligation or responsibility for the nonperformance
of the provisions by Trustor.
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10. ASSIGNMENT OF LEASES AND RENTS.
------------------------------
10.1 ASSIGNMENT. Trustor irrevocably assigns to Beneficiary:
----------
(a) all of Trustor's right, title, and interest in all leases;
licenses; agreements relating to the management, leasing, or operation of the
Property; and other agreements of any kind relating to the use or occupancy of
the Property, whether now existing or entered into after the date of this Deed
of Trust, including, without limitation, that certain lease referenced in
Section 4.19 hereof ("LEASES"), and
- ------------
(b) the rents, issues, and profits of the Property, including,
without limitation, all amounts payable and all rights and benefits accruing to
Trustor under the Leases ("PAYMENTS"), for the purposes and on the terms and
conditions below. The term Leases will also include all guarantees of and
security for the lessees' performance, and all amendments, extensions, renewals,
or modifications that are permitted. This is a present and absolute assignment,
not an assignment for security purposes only, and Beneficiary's right to the
Leases and Payments is not contingent on, and may be exercised without,
possession of the Property.
10.2 LICENSE. Beneficiary confers on Trustor a license ("LICENSE") to
-------
collect and retain the Payments as they become due until the occurrence of an
Event of Default. Upon an Event of Default, the License will be automatically
revoked and Beneficiary may collect and retain the Payments without notice and
without taking possession of the Property. Trustor irrevocably authorizes and
directs the lessees under the Leases to rely on and comply with any notice or
demand by Beneficiary for the payment to Beneficiary of any rental or other sums
that may at any time become due under the Leases, or for the performance of any
of the lessees' undertakings under the Leases. The lessees will have no right or
duty to inquire as to whether any Default has actually occurred or is then
existing. Trustor relieves the lessees from any liability to Trustor by reason
of relying on and complying with any notice or demand by Beneficiary.
10.3 EFFECT OF ASSIGNMENT. The assignment will not impose on Beneficiary
--------------------
any duty to produce rents, issues, or profits from the Property, or cause
Beneficiary to be:
(a) a mortgagee-in-possession for any purpose;
(b) responsible for performing any of the obligations of the lessor
under any of the Leases; or
(c) responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any negligence
in the management, upkeep, repair, or control of the Property. Beneficiary will
not be liable to Trustor or any other party as a consequence of the exercise of
the rights granted to Beneficiary under this assignment or the failure of
Beneficiary to perform any obligation of Trustor arising under the Leases.
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10.4 LEASING COVENANTS. Trustor covenants and agrees as follows:
-----------------
(a) At Trustor's sole cost to:
(1) perform all obligations of the lessor under the Leases and
enforce performance by the lessees of their obligations under the Leases;
(2) subject to the provisions of Section 10.4(b)(5) below,
enforce all remedies available to Trustor in case of default by the lessees
under any of the Leases and prosecute and defend any action, arbitration, or
other controversy relating to any of the Leases or to Trustor's interest in any
of the Leases;
(3) give Beneficiary prompt notice of any default that occurs
under any of the Leases, whether by the lessees or Trustor;
(4) exercise diligent, good-faith efforts to keep all portions of
the Property leased at all times and at rentals not less than the fair market
rental value;
(5) promptly upon execution, deliver to Beneficiary fully
executed counterpart originals of the Leases; and
(b) except with Beneficiary's prior written consent, not to:
(1) enter into any Leases after the date of this Deed of Trust;
(2) enter into any leases except those which provide solely for
the payment of rent which qualifies as "rents from real property" as that phrase
is defined in Internal Revenue Code Section 856(d);
(3) execute any other assignment relating to any of the Leases
or the Payments;
(4) discount any rent or other sums due under the Leases or
collect them in advance, other than to collect rent one (1) month in advance of
the time when it becomes due;
(5) terminate, modify, or amend any of the terms of the Leases
or release or discharge the lessees from any obligations;
(6) consent to any assignment or subletting by any lessee; or
(7) subordinate any of the Leases to any other deed of trust or
encumbrance.
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Any attempted action in violation of the provisions of Section 10.4(b) will be
---------------
voidable at Beneficiary's election.
10.5 APPLICATION OF RENTS. Beneficiary, in its sole discretion, may
--------------------
apply, or require the application of, all amounts received pursuant to the
assignment to the payment of any one or more of the Obligations in any order
that Beneficiary may elect.
10.6 ESTOPPEL CERTIFICATES. Within twenty (20) days after request by
---------------------
Beneficiary, Trustor will deliver to Beneficiary and to any party designated by
Beneficiary estoppel certificates executed by Trustor and by each of the
lessees, in recordable form, certifying:
(a) that the assignment and the Leases are in full force;
(b) the date of each lessee's most recent payment of rent;
(c) that there are no defenses or offsets outstanding, or stating
those claimed by Trustor or lessees under the assignment or the Leases,; and
(d) any other information reasonably requested by Beneficiary.
10.7 REMEDIES. In addition to any other remedies in this Deed of Trust,
--------
Beneficiary will have the following rights and remedies upon the occurrence of
an Event of Default:
(a) To receive the Payments and any other amounts arising or accruing
under the Leases or from the Property;
(b) To collect, sue for, settle, compromise, and give releases for
the Payments and pursue any remedies for the enforcement of the Leases or
Trustor's rights under the Leases; and
(c) To take possession of the Property, and hold, manage, lease, and
operate it on any terms and for any period of time that Beneficiary may deem
proper and, either with or without taking possession of the Property, in its own
name, make from time to time all alterations, renovations, repairs, or
replacements that Beneficiary may deem proper.
10.8 DEFINITIONS. The terms lessor and lessors as used in this Deed of
-----------
Trust will include all owners, landlords, licensors, and other parties in a
similar position with respect to the Leases. The terms lessee and lessees will
include any tenants and licensees and any other parties in a similar position
and will also include any guarantors of or other obligors under the Leases.
10.9 NONDISTURBANCE AGREEMENTS. At Trustor's request, Beneficiary shall
-------------------------
enter into a nondisturbance and attornment agreement with respect to Trustor's
lease of the Property
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to a third party operator, which shall provide that Beneficiary shall recognize
the lessee's rights under the lease following a foreclosure if the lessee is not
in default under the lease at the time of the foreclosure.
11. MISCELLANEOUS.
-------------
11.1 SUCCESSOR TRUSTEE. Beneficiary may remove Trustee or any successor
-----------------
trustee at any time and appoint a successor trustee by recording a written
substitution in the county where the Property is located, or in any other manner
permitted by law. Upon that appointment, all of the powers, rights, and
authority of Trustee will immediately become vested in the successor.
11.2 CHANGE OF LAW. If any law is passed, after the date of this Deed of
-------------
Trust, that deducts from the value of the Property, for the purposes of
taxation, any lien on it, or changes in any way the laws now in force for the
taxation of mortgages, deeds of trust, or debts secured by mortgage or deed of
trust (other than laws imposing taxes on income) or the manner of the collection
of any taxes so as to affect adversely the rights of Beneficiary as holder of
the Note and Beneficiary under this Deed of Trust, the Indebtedness will become
due at Beneficiary's option, exercised by thirty (30) days' notice to Trustor
unless Trustor, within that thirty (30) day period, if permitted by law, assumes
the payment of any tax or other charge imposed on Beneficiary for the period
remaining until full payment by Trustor of the Indebtedness.
11.3 NO WAIVER. No waiver by Beneficiary of any default or breach by
---------
Trustor will be implied from any omission by Beneficiary to take action on
account of that default if the default persists or is repeated. Also, no express
waiver will affect any default other than the default in the waiver and the
waiver will be operative only for the time and to the extent stated. Waivers of
any covenant, term, or condition in this Deed of Trust will not be construed as
a waiver of any subsequent breach of the same covenant, term, or condition. The
consent or approval by Beneficiary for any act by Trustor requiring further
consent or approval will not be deemed to waive or render unnecessary the
consent or approval for any subsequent similar act.
11.4 ABANDONMENT. Subject to any chattel mortgages, security agreements,
-----------
or other liens on title that may exist with the consent of Beneficiary, or any
provided for in this Deed of Trust, all Personalty that upon foreclosure of the
Property is owned by Trustor and is used in connection with the operation of the
Property will be deemed at Beneficiary's option to have become on that date a
part of the Property and abandoned to Beneficiary in its then condition.
11.5 NOTICES. All notices, advices, demands, requests, consents,
-------
statements, satisfactions, waivers, designations, refusals, confirmations, or
denials that may be required or contemplated under this Deed of Trust for any
party to serve on or give to any other will be in writing, and, if not in
writing, will not be deemed to have been given. Also, they must be
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either personally served or sent with return receipt requested by registered or
certified mail with postage (including registration or certification charges)
prepaid in a securely enclosed and sealed envelope as follows:
(a) If to Trustor, addressed to:
Valley Living Center, LLC
c/o Continuum Health Incorporated
31105 Rancho Viejo Road, No. 5
San Juan Capistrano, CA 92675
Attention: Johann Keil
(b) If to Beneficiary, addressed to:
G&L Realty Partnership, L.P.
439 North Bedford Drive
Beverly Hills, CA 90210
Attn: Mark Hamermesh
With a copy to:
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401
Attn: James R. Andrews, Esq.
11.6 SURVIVAL. The covenants and agreements in this Deed of Trust will
--------
bind and inure to the benefit of Beneficiary and Trustor and their successors
and assigns, provided that nothing herein shall waive the provisions of Section
-------
5.3. It is agreed that Beneficiary may assign to or grant a participation in
- ---
any one or more lenders, free from any right of counterclaim, recoupment, or
setoff by Trustor, Beneficiary's rights and obligations in whole or in part
under the Loan Documents. Nothing in this Section 11.6 is intended to limit
------------
other provisions in the Loan Documents that by their terms survive the repayment
of the Indebtedness or the termination of any Loan Document.
11.7 SEVERABILITY. If any term, provision, covenant, or condition of this
------------
Deed of Trust or any application of it is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, in whole or in part, all
terms, provisions, covenants, and conditions of this Deed of Trust and all
applications of it not held invalid, void, or unenforceable will continue in
full force and will not be affected, impaired, or invalidated.
11.8 REFERENCES TO FORECLOSURE. References in this Deed of Trust to
-------------------------
foreclosure and related phrases are references to the appropriate procedure in
connection with Trustee's
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private power of sale, any judicial foreclosure proceeding, and any deed given
in lieu of foreclosure.
11.9 JOINDER OF FORECLOSURE. If Beneficiary holds any other or additional
----------------------
security for the payment of any Indebtedness or performance of any Obligation,
its sale or foreclosure, on any default in the payment or performance, in
Beneficiary's sole discretion, may be prior to, subsequent to, or joined or
otherwise contemporaneous with any sale or foreclosure. In addition to the
rights in this Deed of Trust specifically conferred, Beneficiary, at any time
and from time to time, may exercise any right or remedy now or later given by
law to beneficiaries under deeds of trust generally, or to the holders of any
obligations of the kind secured.
11.10 COPIES. Trustor will promptly give to Beneficiary copies of all:
------
(a) notices of violation that Trustor receives from any governmental
agency or authority, and
(b) notices of default that Trustor receives under any agreement
relating to the borrowing of money by Trustor from any Person.
11.11 ERISA COMPLIANCE. Trustor will at all times comply with the
----------------
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to any retirement or other employment benefit plan to
which it is a party as employer. As soon as possible after Trustor knows, or has
reason to know, that any Reportable Event (defined in ERISA) with respect to any
plan of Trustor has occurred, it will furnish to Beneficiary a statement in
writing setting forth details about the Reportable Event and the action, if any,
that Trustor proposes to take, together with a copy of the notice of the
Reportable Event furnished to the Pension Benefit Guaranty Corporation. In
addition, if at any time the loan evidenced by the Note is deemed in whole or in
part to be a transaction prohibited by the provisions of ERISA, Trustor will
immediately reimburse Beneficiary on demand for all taxes levied against or
costs incurred by Beneficiary or Trustee by reason of the Reportable Event.
11.12 SUBORDINATION. At the option of Beneficiary, this Deed of Trust will
-------------
become subject and subordinate, in whole or in part (but not with respect to
priority of entitlement to any insurance proceeds, damages, awards, or
compensation resulting from damage to the Property or condemnation or exercise
of power of eminent domain), to any contracts of sale or any leases of the
Property on the execution by Beneficiary and recording of a unilateral
declaration to that effect in the official records of the county and state where
the Property is located. Beneficiary may require the issuance of any title
insurance endorsements to the Title Policy in connection with any subordination
that Beneficiary, in its judgment, determines are appropriate, and Trustor will
be obligated to pay any cost or expense incurred in connection with the
issuance.
11.13 NO MERGER. So long as any of the Indebtedness remains unpaid or
---------
Trustor has any further obligation under the Loan Documents, unless Beneficiary
otherwise consents in
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writing, the fee estate of Trustor in the Property or any part of it will not
merge, by operation of law or otherwise, with any leasehold or other estate in
the Property or any part of it, but will always be kept separate and distinct,
regardless of the union of the fee estate and the leasehold or other estate in
Trustor or any other Person.
11.14 INSPECTION OF PROPERTY. Beneficiary is authorized by itself or its
----------------------
agents, employees, or workers, to enter at any reasonable time on prior written
notice to Trustor on any part of the Property for the purpose of inspecting it,
and for the purpose of performing any of the acts it is authorized to perform
under the terms of this Deed of Trust. Trustor agrees to cooperate with
Beneficiary to facilitate any inspection.
11.15 PERFORMANCE BY TRUSTOR. Trustor will faithfully perform every
----------------------
covenant to be performed by Trustor under any lien or encumbrance, including,
without limiting the generality of this Deed of Trust, mortgages, deeds of
trust, leases, declarations or covenants, conditions and restrictions, and other
agreements that affect the Property, in law or in equity, that Beneficiary
reasonably believes may be prior and superior to or on a parity with the lien or
charge of this Deed of Trust. A breach of or a default under any lien or
encumbrance that exists after any applicable grace period in the pertinent
instrument has expired without that breach or default having been cured, will
constitute an Event of Default under this Deed of Trust. If Trustor fails to do
so, Beneficiary, without demand or notice and in its sole judgment, may do any
things required by Trustor by any of the provisions in this Deed of Trust and
incur and pay expenses in connection with that. Nothing in this section affects
Trustor's obligations pursuant to Sections 5.2 and 5.3 of this Deed of Trust or
--------------------
limits Beneficiary's rights.
11.16 PERSONALTY SECURITY INSTRUMENTS. Trustor agrees that if Beneficiary
-------------------------------
at any time holds additional security for any obligations secured by this Deed
of Trust, it may enforce the terms of it or otherwise realize on it, at its
option, either before or concurrently or after a sale is made under this Deed of
Trust, and may apply the proceeds on the Indebtedness secured without affecting
the status or waiving any right to exhaust any other security, including the
security under this Deed of Trust, and without waiving any breach or default or
any right or power, whether exercised under this Deed of Trust or in any other
security.
11.17 SUITS TO PROTECT PROPERTY. Trustor agrees to appear in and defend
-------------------------
any action or proceeding purporting to affect the security of this Deed of Trust
or any additional or other security for the obligations secured, the interest of
Beneficiary or the rights, powers, or duties of Trustee, and to pay all costs
and expenses, including, without limitation, cost of evidence of title and
attorney fees, in any action or proceeding in which Beneficiary or Trustee may
appear or be made a party, including, but not limited to, foreclosure or other
proceeding commenced by those claiming a right to any part of the Property under
subordinate liens, in any action to partition or condemn all or part of the
Property, whether pursued to final judgment, and in any exercise of the power of
sale in this Deed of Trust, whether the sale is actually consummated.
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11.18 JUNIOR LIENS. Trustor agrees:
------------
(a) that as of the date of this Deed of Trust there are no
encumbrances to secure debts junior to this Deed of Trust; and
(b) that there are to be none as of the date when this Deed of Trust
becomes of record.
11.19 FURTHER ADVANCES. On the request of Trustor or its permitted
----------------
successors in ownership of the Land, Beneficiary may, at its option, at any time
before full payment of the Indebtedness, make further advances to Trustor or the
successors in ownership, with interest and late charges to be secured by this
Deed of Trust. However, the amount of principal secured by this Deed of Trust
and remaining unpaid will not at the time of and including any advance exceed
the original principal sum secured. Also, if Beneficiary, at its option, makes a
further advance or advances, Trustor or the successors in ownership agree to
execute and deliver to Beneficiary a note, payable on or before the maturity of
the Indebtedness secured and bearing any other terms that Beneficiary will
require.
11.20 WAIVER OF STATUTE OF LIMITATIONS. The pleading of any statute of
--------------------------------
limitations as a defense to any obligations secured by this Deed of Trust is
waived, to the fullest extent permissible by law.
11.21 CHARGES FOR STATEMENTS. Trustor agrees to pay Beneficiary's
----------------------
reasonable charge, to the maximum amount permitted by law, for any statement
regarding the obligations secured by this Deed of Trust requested by Trustor or
on its behalf.
11.22 ENTIRE AGREEMENT. This Deed of Trust and the other Loan Documents
----------------
set forth the entire understanding between Trustor and Beneficiary and they will
not be amended except by a written instrument duly executed by each of Trustor
and Beneficiary. Any previous representations, warranties, agreements, and
understandings among the parties regarding the subject matter of the Loan or the
Loan Documents, whether written or oral, are superseded by this Deed of Trust
and the other Loan Documents.
11.23 INCORPORATION. All terms of the Loan Documents are incorporated in
-------------
this Deed of Trust by this reference. All persons who may have or acquire an
interest in the Property will be deemed to have notice of the terms of the Loan
Documents and to have notice, if provided for, that the rate of interest on one
or more Obligations may vary from time to time.
11.24 WAIVER OF MARSHALING RIGHTS. Trustor, for itself and for all parties
---------------------------
claiming through or under Trustor, and for all parties who may acquire a lien on
or interest in the Property, waives all rights to have the Property or any other
property that is now or later may be security for any Obligation ("OTHER
PROPERTY") marshaled on any foreclosure of this Deed of Trust or on a
foreclosure of any other security for any of the Obligations. Beneficiary will
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have the right to sell, and any court in which foreclosure proceedings may be
brought will have the right to order a sale of, the Property and any of the
Other Property as a whole or in separate parcels, in any order that Beneficiary
may designate.
11.25 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts
-------------------------------------------------
this trust when this Deed of Trust is recorded. From time to time on written
request of Beneficiary and presentation of this Deed of Trust for endorsement,
and without affecting the personal liability of any person for payment of any
indebtedness or the performance of any obligations, Trustee may, without
liability and without notice:
(a) reconvey all or any part of the Property;
(b) consent to the making of any map or plat; and
(c) join in any grant of easement, any declaration of covenants,
conditions, and restrictions, any extension agreement, or any agreement
subordinating the lien or charge of this Deed of Trust. Except as may be
required by applicable law, Trustee or Beneficiary may from time to time apply
to any court of competent jurisdiction for aid and direction in the execution of
the trust and the enforcement of the rights and remedies available, and may
obtain orders or decrees directing, confirming, or approving acts in the
execution of the trust and the enforcement of the remedies. Trustee has no
obligation to notify any party of any pending sale or any action or proceeding,
including, without limitation, actions in which Trustor, Beneficiary, or Trustee
will be a party, unless held or commenced and maintained by Trustee under this
Deed of Trust. Trustee will not be obligated to perform any act required of it
under this Deed of Trust unless the performance of the act is requested in
writing and Trustee is reasonably indemnified and held harmless against any
loss, cost, liability, or expense.
11.26 RELEASES, EXTENSIONS, MODIFICATIONS, AND ADDITIONAL SECURITY.
------------------------------------------------------------
Without notice to or the consent, approval, or agreement of any persons or
entities having any interest at any time in the Property or in any manner
obligated under the Obligations ("INTERESTED PARTIES"), Beneficiary may, from
time to time, release any person or entity from liability for the payment or
performance of any Obligation; take any action or make any agreement extending
the maturity or otherwise altering the terms or increasing the amount of any
Obligation; or accept additional security or release the Property or other
security for any Obligation. None of these actions will release or reduce the
personal liability of any of the Interested Parties, or release or impair the
lien of this Deed of Trust, or the priority of it on the Property. However, no
action taken or agreement made by Beneficiary to extend the maturity or
otherwise alter the terms or increase the amount of any Obligation will be
binding on Trustor without Trustor's consent.
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11.27 RECONVEYANCE.
------------
(a) Upon the payment and performance of all Obligations and payment
of all Indebtedness, including, without limitation, Beneficiary's receipt of all
sums owing and outstanding under the Note, Beneficiary will deliver to Trustee a
written request for reconveyance, and will surrender to Trustee for cancellation
this Deed of Trust and any note or instrument evidencing the Obligations.
However, Beneficiary will have no obligation to deliver the written request and
documents until Beneficiary has been paid by Trustor, in immediately available
funds, all escrow, closing, and recording costs, the costs of preparing and
issuing the reconveyance, and any trustee's or reconveyance fees. On Trustee's
receipt of the written request by Beneficiary and the documents, Trustee will
reconvey, without warranty, the Property or that portion then held. To the
extent permitted by law, the reconveyance may describe the grantee as the person
or persons legally entitled and the recitals of any matters or facts in any
reconveyance will be conclusive proof of the truthfulness of them. Neither
Beneficiary nor Trustee will have any duty to determine the rights of persons
claiming to be rightful grantees of any reconveyance. When the Property has been
fully reconveyed, the last reconveyance will operate as a reassignment of all
future rents, issues, and profits of the Property to the person legally
entitled.
(b) Anything to the contrary herein notwithstanding, provided no
Event of Default has occurred and is continuing, Trustor shall be entitled to
the release of the Property from the lien of this Deed of Trust, and from the
lien of any and all other Loan Documents encumbering this Property, only upon
payment to Beneficiary of (i) all sums due and payable under the Note,
including, but not limited to, all accrued but unpaid principal and interest
payable thereunder, plus (ii) the difference between the amount payable in (i)
above and Four Hundred Ninety-Two Thousand Six Hundred Thirty-Six Dollars and
No/Cents ($492,636.00). Trustor will pay all costs and expenses incurred in
connection with any such release, including, but not limited to, all Trustee's
fees, reconveyance fees, recording fees, premiums for title insurance
endorsements, Beneficiary's costs in connection with such release (including
attorneys' fees and costs) and escrow fees.
11.28 SUBROGATION. Beneficiary will be subrogated to the lien of all
-----------
encumbrances, whether released of record, paid in whole or in part by
Beneficiary pursuant to this Deed of Trust, or by the proceeds of any loan
secured by this Deed of Trust.
11.29 OBLIGATIONS OF TRUSTOR, JOINT AND SEVERAL. If more than one person
-----------------------------------------
has executed this Deed of Trust as Trustor, the obligations of all those persons
will be joint and several.
11.30 RECOURSE TO SEPARATE PROPERTY. Any married person who executes this
-----------------------------
Deed of Trust as a Trustor agrees that any money judgment that Beneficiary or
Trustee obtains pursuant to the terms of this Deed of Trust or any other
obligation of that married person secured by this Deed of Trust may be collected
by execution on that person's separate property, and any community property of
which that person is a manager.
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11.31 RULES OF CONSTRUCTION. When the identity of the parties or other
---------------------
circumstances make it appropriate, the singular number includes the plural.
11.32 NO OFFSET. Trustor will pay to Beneficiary all amounts owing under
---------
the Note, this Deed of Trust, or any of the other Loan Documents without
deduction, offset, or counterclaim of any kind.
11.33 GOVERNING LAW. The parties expressly agree that this Deed of Trust
-------------
(including, without limitation, all questions regarding permissive rates of
interest) will be governed by or construed in accordance with the laws of the
state in which the Property is located and the applicable laws of the United
States of America.
11.34 WAIVER OF JURY TRIAL. TRUSTOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY TRUSTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. BENEFICIARY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY TRUSTOR.
11.35 NO DEFAULT AFFIDAVITS. After request by Beneficiary, Trustor shall
---------------------
within ten (10) days furnish Beneficiary with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest
of the Note, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Indebtedness, if any,
(vi) that the Note, this Deed of Trust and the other Loan Documents are valid,
legal and binding obligations and have not been modified or if modified, giving
particulars of such modification; and (vii) reaffirming all representations and
warranties of Trustor set forth herein and in the other Loan Documents as of the
date requested by Beneficiary or, to the extent of any changes to any such
representations and warranties, so stating such changes.
11.36 CONTROLLING AGREEMENT. It is expressly stipulated and agreed to be
---------------------
the intent of Trustor, and Beneficiary at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Beneficiary to contract for, charge, take, reserve, or receive a greater amount
of interest than under state law) and that this Section 11.36 (and the similar
-------------
paragraph contained in the Note) shall control every other covenant and
agreement in this Deed of Trust and the other Loan Documents. If the applicable
law (state or federal) is ever judicially interpreted so as to render usurious
any amount called for under the Note or under any of the other Loan Documents,
or contracted for, charged, taken, reserved,
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or received with respect to the Indebtedness, or if Beneficiary's exercise of
the option to accelerate the maturity of the Note, or if any prepayment by
Trustor results in Trustor having paid any interest in excess of that permitted
by applicable law, then it is Trustor's and Beneficiary's express intent that
all excess amounts theretofore collected by Beneficiary shall be credited on the
principal balance of the Note and all other Indebtedness (or, if the Note and
all other Indebtedness have been or would thereby be paid in full, refunded to
Trustor), and the provisions of the Note and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid or agreed to be paid to Beneficiary for the use, forbearance, or
detention of the Indebtedness shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full stated term of
the Indebtedness until payment in full so that the rate or amount of interest on
account of the Indebtedness does not exceed the maximum lawful rate from time to
time in effect and applicable to the Indebtedness for so long as the
Indebtedness is outstanding. Notwithstanding anything to the contrary contained
herein or in any of the other Loan Documents, it is not the intention of
Beneficiary to accelerate the maturity of any interest that has not accrued at
the time of such acceleration or to collect unearned interest at the time of
acceleration.
11.37 NO CREDITS ON ACCOUNT OF THE DEBT. Trustor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Indebtedness for any
part of the Impositions assessed against the Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof, for real estate tax purposes by reason of this
Deed of Trust or the Indebtedness. In the event such claim, credit and
deduction shall be required by law, Beneficiary shall have the option, by
written notice of not less than ninety (90) days, to declare the Indebtedness
immediately due and payable.
11.38 DOCUMENTARY STAMPS. If at any time the United States of America, any
------------------
State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Deed of Trust, or impose any
other tax or charge on the same, Trustor will pay for the same, with interest
and penalties thereon, if any.
11.39 REASONABLENESS. Lender shall act reasonably and in good faith in
--------------
exercising any approval rights or other rights hereunder.
11.40 ATTORNEYS' FEES AND COSTS. If the Indebtedness is not paid when due
-------------------------
after the expiration of any grace period, or if any Event of Default occurs,
Trustor promises to pay all costs of enforcement and collection, including, but
not limited to, court costs and reasonable attorneys' fees, whether or not such
enforcement and collection includes the filing of a lawsuit. All provisions in
this Deed of Trust for payment of attorneys' fees in any suit, action or other
proceeding shall be construed to include all such fees in any bankruptcy,
receivership or other proceedings, at any trial, on any appeal, and on any
petition for review, in addition to all other sums provided by law.
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11.41 WAIVERS.
-------
(a) Trustor warrants that (i) Beneficiary has made no representation
to Trustor as to the creditworthiness of BSNF, and (ii) Trustor has established
adequate means of obtaining from BSNF on a continuing basis financial and other
information pertaining to BSNF's financial condition. Trustor agrees to keep
adequately informed from such means as it deems appropriate of any facts, events
or circumstances which might in any way affect Trustor's risks hereunder and
Trustor further agrees that Beneficiary shall have no further obligation to
disclose to Trustor information or materials required in the course of
Beneficiary's relationship with BSNF.
(b) Trustor hereby waives any right to require Beneficiary to: (i)
proceed against any person, including BSNF, (ii) proceed against or exhaust any
security held from BSNF or any other person, (iii) pursue any other remedy in
Beneficiary's power, or (iv) make any presentments or demands for performance or
give any notices of nonperformance, protest, or dishonor in connection with any
of the indebtedness held by Beneficiary. Trustor waives any defense arising by
reason of: (1) any disability or other defense of BSNF or any other person, (2)
the cessation or limitation of the liability of BSNF for any cause whatsoever,
other than payment in full of all indebtedness owed to Beneficiary, (3) the
application by BSNF of the proceeds of any obligation secured hereby for
purposes other than the purposes represented by BSNF to Beneficiary or intended
or understood by Beneficiary or BSNF, (4) any act or omission by Beneficiary
which directly or indirectly results in or aids the discharge of BSNF or any
obligation secured hereby by operation of law or otherwise, or (5) any
modification of the obligations secured hereby in any form whatsoever,
including, without limitation, the renewal, extension, acceleration or other
change in the terms of such obligations or any part thereof, including increase
or decrease of the rate of interest thereon. Trustor waives all rights and
defenses arising out of an election of remedies by the creditor, even though
that election of remedies,such as a nonjudicial foreclosure with respect to
security for a guaranteed obligation, has destroyed the Trustor's rights of
subrogation and reimbursement against the principal by the operation of law or
otherwise. Trustor shall have no right of subrogation and Trustor waives any
defense that may have been based upon any election of remedies by Beneficiary
which destroys Trustor's rights to proceed against BSNF for reimbursement,
including, without limitation, any loss of rights Trustor may suffer by reason
of any rights, powers, or remedies of BSNF in connection with any anti-
deficiency laws or any other laws limiting, qualifying or discharging Trustor's
obligations. Trustor further waives any right to enforce any remedy which
Beneficiary now has or may hereafter have against BSNF or any other person and
waives any benefit of or any right to participate in any security whatsoever now
or hereafter held by Beneficiary. If any amount shall be paid to Trustor at any
time when any indebtedness owing to Beneficiary shall not have been paid in
full, such amount shall be held in trust for the benefit of Beneficiary and
shall forthwith be paid to Beneficiary to be credited and applied upon such
indebtedness, whether matured or unmatured. Trustor warrants and agrees that
each of the waivers set forth above is made with Trustor's full knowledge of its
significance and consequences and that under the circumstances the waivers are
reasonable. If
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any said waivers are determined to be contrary to any application of law or
public policy, such waivers shall be effective only to the extent permitted by
law.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day
and year first above written.
VALLEY LIVING CENTER, LLC,
a Delaware limited liability company
By:____________________________________
Name:_______________________________
Title:______________________________
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CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
) ss.
County of _______________ )
On ______________ (date) before me, _____________________ (name and title
"Notary Public"), personally appeared ________________________ (name of
signer(s)), personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________
(signature of Notary) (seal of Notary)
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EXHIBIT A
---------
[Legal Description]
Beginning at a point on the North right-of-way line of 17th Street that is
East 1072.50 feet along the City Monumented Section line and North 40.00
feet from the Southwest Corner of Section 22, Township 2 North, Range 38
East of the Boise Meridian, Bonneville County, Idaho; and running thence
East 140.64 feet along said North right-of-way line; thence North 495.00
feet; thence West 140.64 feet; thence South 495.00 feet to the point of
beginning.
A-1
<PAGE>
[Acknowledgements]
Acknowledgements - Page 1
<PAGE>
EXHIBIT 10.78
Recording Requested By And
When Recorded Mail To:
James R. Andrews, Esq.
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, CA 90401-1000
ASSIGNMENT OF LEASES AND RENTS
------------------------------
THIS ASSIGNMENT OF LEASES AND RENTS ("ASSIGNMENT") is made as of September
__, 1997, by VALLEY LIVING CENTER, LLC, a Delaware limited liability company,
having its principal place of business at 31105 Rancho Viejo Road, No. 5, San
Juan Capistrano, California 92675 ("ASSIGNOR"), to G&L REALTY PARTNERSHIP, L.P.,
a Delaware limited partnership, having an office at 439 North Bedford Drive,
Beverly Hills, California 90210 ("ASSIGNEE").
WITNESSETH:
THAT Assignor for good and valuable consideration, receipt whereof is
hereby acknowledged, hereby grants, transfer and absolutely and unconditionally
assigns to Assignee the entire lessor's interest in and to all current and
future leases, and other agreements affecting the use, enjoyment, or occupancy
of all or any part of the land, more particularly described in Exhibit A annexed
---------
hereto and made a part hereof, together with the buildings, structures,
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter located thereon (hereinafter
collectively referred to as the "PROPERTY").
TOGETHER WITH all other leases and other agreements affecting the use,
enjoyment or occupancy of any part of the Property now or hereafter made
affecting the Property or any portion thereof, together with any extensions or
renewals of the same, this Assignment of other present and future leases and
present and future agreements being effective without further or supplemental
assignment;
The leases and other agreements described above together with all other
present and future leases and present and future agreements and any extension or
renewal of the same are hereinafter collectively referred to as the "LEASES";
TOGETHER WITH all accounts, deposits, rents, income, issues, revenues,
receipts, insurance proceeds and profits arising from the Leases and renewals
thereof and together with
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all rents, income, issues and profits (including, but not limited to, all oil
and gas or other mineral royalties and bonuses) from the use, enjoyment and
occupancy of the Property, or the sale, lease, sublease, license, concession or
other grant of right to use or occupy any portion thereof, vending machine
proceeds, and any compensation received for the rendering of services by
Assignor (hereinafter collectively referred to as the "RENTS").
THIS ASSIGNMENT is made in consideration of (A) that certain loan made by
Assignee to Assignor evidenced by that certain note made by Assignor to
Assignee, dated the date hereof, in the principal sum of One Hundred Fifteen
Thousand Two Hundred Seventy-Two Dollars and No/Cents ($115,272.00) (the
"NOTE"), and (B) that certain loan made by Assignee to Burley Skilled Nursing
Facility, LLC, a Delaware limited liability company ("BSNF"), evidenced by that
certain note made by BSNF to Assignee, dated the date hereof, in the principal
sum of Eight Hundred Seventy Thousand Dollars and No Cents ($870,000.00) (the
"BURLEY NOTE"), secured by (i) that certain deed of trust, security agreement,
and fixture filing with assignment of rents and agreements given by Assignor to
Assignee, dated the date hereof covering the Property and intended to be duly
recorded (the "VALLEY LIVING SECURITY INSTRUMENT"), and (ii) that certain deed
of trust, security agreement, and fixture filing with assignment of rents and
agreements given by BSNF to Assignee, dated the date hereof, covering certain
property described therein and intended to be duly recorded (the "BURLEY
SECURITY INSTRUMENT"). The Valley Living Security Instrument and the Burley
Security Instrument are collectively referred to herein as the "SECURITY
INSTRUMENT."
The principal sum, interest and all other sums due and payable under the
Note, the Burley Note and Security Instrument are hereinafter collectively
referred to as the "DEBT". This Assignment, the Note, the Burley Note, the
Security Instrument and any other documents now or hereafter executed by
Assignor and/or others and by or in favor of Assignee which evidences, secures
or guarantees all or any portion of the payments due under the Note or otherwise
is executed and/or delivered in connection with the Note and the Security
Instrument are hereinafter referred to as the "LOAN DOCUMENTS".
ASSIGNOR WARRANTS that (A) Assignor is the sole owner of the entire
lessor's interest in the Leases; (B) the Leases are valid, enforceable and in
full force and effect and have not been altered, modified or amended in any
manner whatsoever; (C) none of the Rents have been assigned or otherwise pledged
or hypothecated; (D) none of the Rents have been collected for more than two (2)
months in advance; (E) Assignor has full power and authority to execute and
deliver this Assignment and the execution and delivery of this Assignment has
been duly authorized and does not conflict with or constitute a default under
any law, judicial order or other agreement affecting Assignor or the Property;
(F) the premises demised under the Leases have been completed and the tenants
under the Leases have accepted the same and have taken possession of the same on
a rent-paying basis; and (G) there exist on offsets or defenses to the payment
of any portion of the Rents.
ASSIGNOR COVENANTS with Assignee that Assignor (A) shall observe and
perform all the obligations imposed upon the lessor under the Leases and shall
not do or permit to be
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<PAGE>
done anything to impair the value of the Leases as security for the Debt; (B)
shall promptly send copies to Assignee of all notices of default which Assignor
shall send or receive thereunder; (C) shall enforce all of the terms, covenants
and conditions contained in the Leases upon the part of the lessee thereunder to
be observed and performed, short of termination thereof; (D) shall not collect
any of the Rents more than one (1) month in advance; (E) shall not execute any
other assignment of the lessor's interest in the Leases or the Rents; (F) shall
deliver to Assignee, upon request, tenant estoppel certificates from each
commercial tenant at the Property in form and substance reasonably satisfactory
to Assignee, provided that Assignor shall not be required to deliver such
certificates more frequently than two (2) times in any calendar year; and (G)
shall execute and deliver at the request of Assignee all such further
assurances, confirmations and assignments in connection with the Property as
Assignee shall from time to time require.
ASSIGNOR FURTHER COVENANTS with Assignee that Assignor shall not, without
the prior consent of Assignee (i) enter into any Lease of all or any part of the
Property in excess of 5% of gross leasable area rentable square feet (a "MAJOR
LEASE"), (ii) cancel, terminate, abridge or otherwise modify the terms of any
Major Lease, or accept a surrender thereof, (iii) consent to any transfer,
assignment of or subletting under any Major Lease, (iv) cancel, terminate,
abridge or otherwise modify any guaranty of any Major Lease or the terms
thereof, (v) accept prepayments of installments of Rents for a period of more
than one (1) month in advance or (vi) further assign the whole or any part of
the Leases or the Rents. In addition to the foregoing, Assignor shall not, (i)
lease all or any part of the Property, (ii) cancel, terminate, abridge or
otherwise modify the terms of any Lease, or accept a surrender thereof, (iii)
consent to any transfer, assignment of or subletting under any Lease not in
accordance with its terms or (iv) cancel, terminate, abridge or otherwise modify
any guaranty of any Lease or the terms thereof unless such actions are exercised
for a commercially reasonable purpose in an arms-length transaction on market
rate terms.
ASSIGNOR FURTHER COVENANTS with Assignee that (A) all Leases shall provide
that the tenant agrees to attorn to Assignee; (B) none of the Leases shall
contain any option to purchase, any right of first refusal to lease or purchase,
or any right to terminate the lease term (except in the event of the destruction
of all or substantially all of the Property); (C) Leases executed after the date
hereof shall not contain any provisions which adversely affect the Property or
which might adversely affect the rights of the Assignee, and (D) each tenant
shall conduct business only in that portion of the Property covered by its
lease. Upon request, Assignor shall furnish Assignee with executed copies of all
Leases.
THIS ASSIGNMENT is made on the following terms, covenants and conditions:
1. PRESENT ASSIGNMENT. Assignor does hereby absolutely and
------------------
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, it being intended by Assignor that this
assignment constitutes a present, absolute and unconditional assignment and not
an assignment for additional security only. Such assignment to Assignee shall
not be construed to bind Assignee to the performance of any of the
-3-
<PAGE>
covenants, conditions, or provisions contained in any such Lease or otherwise to
impose any obligation upon Assignee. Assignor agrees to execute and deliver to
Assignee such additional instruments, in form and substance satisfactory to
Assignee, as may hereinafter be requested by Assignee to further evidence and
confirm said assignment. Nevertheless, subject to the terms of this paragraph,
Assignee grants to Assignor a revocable license to operate and manage the
Property and to collect the Rents. Assignor shall hold the Rents, or a portion
thereof, sufficient to discharge all current sums due on the Debt for use in the
payment of such sums. Upon an Event of Default (as defined in the Security
Instrument), the license granted to Assignor herein shall automatically be
revoked by Assignee and Assignee shall immediately be entitled to receive and
apply all Rents, whether or not Assignee enters upon and takes control of the
Property. Assignee and Trustee (as defined in the Security Instrument) are
hereby granted and assigned by Assignor the right, at its option, upon the
revocation of the license granted herein to enter upon the Property in person,
by agent or by court-appointed received to collect the Rents. Any Rents
collected after the revocation of the license herein granted may be applied
toward payment of the Debt in such priority and proportion as Assignee, in its
discretion, shall deem proper.
2. REMEDIES OF ASSIGNEE. Upon or at any time after an Event of Default,
--------------------
Assignee may, at its option, without waiving such Event of Default, without
notice and without regard to the adequacy of the security for the Debt, either
in person or by agent, with or without bringing any action or proceeding, or by
a receiver appointed by a court, take possession of the Property and have, hold,
manage, lease and operate the Property on such terms and for such period of time
as Assignee may deem proper and either with or without taking possession of the
Property in its own name, demand, sue for or otherwise collect and receive all
Rents, including those past due and unpaid, with full power to make from time to
time all alterations, renovations, repairs or replacements thereto or thereof as
may seem proper to Assignee and may apply the Rents to the payment of the
following in such order and proportion as Assignee in its sole discretion may
determine, any law, custom or use to the contrary notwithstanding: (a) all
expenses of managing and securing the Property, including, without being limited
thereto, the salaries, fees and wages of a managing agent and such other
employees or agents a Assignee may deem necessary or desirable and all expenses
of operating and maintaining the Property, including, without being limited
thereto, all taxes, charges, claims, assessments, water charges, sewer rents and
any other liens, and premiums for all insurance which Assignee may deem
necessary or desirable, and the cost of all alterations, renovations, repairs or
replacements, and all expenses incident to taking and retaining possession of
the Property; and (b) the Debt, together with all costs and attorneys' fees. In
addition to the rights which Assignee may have herein, upon the occurrence of an
Event of Default, Assignee, at its option, may either require Assignor to pay
monthly in advance to Assignee, or any receiver appointed to collect the Rents,
the fair and reasonable rental value for the use and occupation of such part of
the Property as may be in possession of Assignor or require Assignor to vacate
and surrender possession of the Property to Assignee or to such receiver and, in
default thereof, Assignor may be evicted by summary proceedings or otherwise.
Additionally, Assignee shall have the right to establish a lock box for the
deposit of all Rents and other receivables of Assignor relating to the Property.
For purposes of
-4-
<PAGE>
paragraphs 1 and 2 hereof, Assignor grants to assignee its irrevocable power of
attorney, coupled with an interest, to take any and all of the aforementioned
actions and any or all other actions designated by Assignee for the proper
management and preservation of the Property. The exercise by Assignee of the
option granted it in this paragraph and the collection of the Rents and the
application thereof as herein provided shall not be considered a waiver of any
default by Assignor under the Note, the Security Instrument, the Leases, this
Assignment or the other Loan Documents.
3. NO LIABILITY OF ASSIGNOR. Assignee shall not be liable for any loss
------------------------
sustained by Assignor resulting from Assignee's failure to let the Property
after an Event of Default or from any other act or omission of Assignee in
managing the Property after an Event of Default. Assignee shall not be obligated
to perform or discharge any obligation, duty or liability under the Leases or
under or by reason of this Assignment and Assignor shall, and hereby agrees, to
indemnify Assignee for, and to hold Assignee harmless from, any and all
liability, loss or damage which may or might be incurred under the Leases or
under or by reason of this Assignment and from any and all claims and demands
whatsoever, including the defense of any such claims and demands whatsoever,
including the defense of any such claims or demands which may be asserted
against Assignee by reason of any alleged obligations and undertakings on its
part to perform or discharge any of the terms, covenants or agreements contained
in the Leases. Should Assignee incur any such liability, the amount thereof,
including costs, expenses and attorneys' fees, shall be secured hereby and by
the Security Instrument and the other Loan Documents and Assignor shall
reimburse Assignee therefor immediately upon demand and upon the failure of
Assignor so to do Assignee may, at its option, declare all sums secured hereby,
the Note, the Security Instrument and the other Loan Documents immediately due
and payable. This Assignment shall not operate to place any obligation or
liability for the control, care, management or repair of the Property upon
Assignee, for the carrying out of any of the terms and conditions of the Leases;
nor shall it operate to make Assignee responsible or liable for any waste
committed on the Property by the tenants or any other parties, or for any
dangerous or defective condition of the Property, including, without limitation,
the presence of any Hazardous Substances (as defined in the Security
Instrument), or for any negligence in the management, upkeep, repair or control
of the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger.
4. NOTICE TO LESSEES. Assignor hereby authorizes and directs the
-----------------
tenants named in the Leases or any other or future tenants or occupants of the
Property upon receipt from Assignee of written notice to the effect that the
Assignee is then the holder of the Note and that a default exists hereunder or
under this Assignment, the Note, the Security Instrument or the other Loan
Documents to pay over to Assignee all rents and to continue to do so until
otherwise notified by Assignee.
5. OTHER SECURITY. Assignee may take or release other security for the
--------------
payment of the Debt, may release any party primarily or secondarily liable
therefor and may apply any other security held by it to the reduction or
satisfaction of the Debt without prejudice to any of its rights under this
Assignment.
-5-
<PAGE>
6. OTHER REMEDIES. Nothing contained in this Assignment and no act done
--------------
or omitted by Assignee pursuant to the power and rights granted to Assignee
hereunder shall be deemed to be a waiver by Assignee of its rights and remedies
under the Note, the Security Instrument or the other Loan Documents and this
Assignment is made and accepted without prejudice to any of the rights and
remedies possessed by Assignee under the terms thereof. The right of Assignee to
collect the Debt and to enforce any other security therefor held by it may be
exercised by Assignee either prior to, simultaneously with, or subsequent to any
action taken by it hereunder.
7. NO MORTGAGEE IN POSSESSION. Nothing herein contained shall be
--------------------------
construed as constituting Assignee a "mortgagee in possession" in the absence of
the taking of actual possession of the Property by Assignee. In the exercise of
the powers herein granted Assignee, no liability shall be asserted or enforced
against Assignee, all such liability being expressly waived and released by
Assignor.
8. CONFLICT OF TERMS. In case of any conflict between the terms of this
-----------------
Assignment and the terms of the Security Instrument, the terms of the Security
Instrument shall prevail.
9. NO ORAL CHANGE. This Assignment and any provisions hereof may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally,
or by any act or failure to act on the part of Assignor or Assignee, but only
by an agreement in writing signed by the party against whom the enforcement of
any modification, amendment, waiver, extension, change, discharge or termination
is sought.
10. CERTAIN DEFINITIONS. Unless the content clearly indicates a contrary
-------------------
intent or unless otherwise specifically provided herein, words used in this
Assignment may be used interchangeable in singular or plural form and the word
"ASSIGNOR" shall mean each Assignor and any subsequent owner or owners of the
Property or any part thereof or any interest therein, the word "ASSIGNEE" shall
mean Assignee and any subsequent holder of the Note, the word "NOTE" shall mean
the Note and any other evidence of indebtedness secured by the Security
Instrument, the word "PERSON" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the word "PROPERTY" shall include any portion
of the Property and any interest therein; whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms; and the singular form of nouns and pronouns shall include the
plural and vice versa.
11. NON-WAIVER. The failure of Assignee to insist upon strict
----------
performance of any term shall not be deemed to be a waiver of any term of this
Assignment. Assignor shall not be relieved of Assignor's obligations hereunder
by reason of (i) failure of Assignee to comply with any request of Assignor or
any other party to take any action to enforce any of the provisions hereof or of
the Security Instrument, the Note or the other Loan Documents, (ii) the release
regardless of consideration, of the whole or any part of the Property, or (iii)
any
-6-
<PAGE>
agreement or stipulation by Assignee extending the time of payment or otherwise
modifying or supplementing the terms of this Assignment, the Note, the Security
Instrument or the other Loan Documents. Assignee may resort for the payment of
the Debt to any other security held by Assignee in such order and manner as
Assignee, in its discretion, may elect. Assignee may take any action to recover
the Debt, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Assignee thereafter to enforce its rights under this
Assignment. The rights of Assignee under this Assignment shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Assignee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provisions.
12. INAPPLICABLE PROVISIONS. If any term, covenant or condition of this
-----------------------
Assignment is held to be invalid, illegal or unenforceable in any respect, this
Assignment shall be construed without such provision.
13. DUPLICATE ORIGINALS. This Assignment may be executed in any number
-------------------
of duplicate originals and each such duplicate original shall be deemed to be an
original.
14. GOVERNING LAW. This Assignment shall be governed and construed in
-------------
accordance with the laws of the state in which the real property encumbered by
the Security Instrument is located.
15. TERMINATION OF ASSIGNMENT. Upon payment in full of the Debt and the
-------------------------
delivery and recording of a satisfaction, release, reconveyance or discharge of
the Security Instrument duly executed by Assignee, this Assignment shall become
and be void and of no effect.
16. WAIVER OF JURY TRIAL. ASSIGNOR HEREBY AGREES NOT TO ELECT A TRIAL BY
--------------------
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS ASSIGNMENT, THE SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS
OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
ASSIGNOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. ASSIGNEE IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY ASSIGNOR.
17. WAIVERS.
-------
(a) Assignor warrants that (i) Assignee has made no representation to
Assignor as to the creditworthiness of BSNF, and (ii) Assignor has established
adequate means
-7-
<PAGE>
of obtaining from BSNF on a continuing basis financial and other information
pertaining to BSNF's financial condition. Assignor agrees to keep adequately
informed from such means as it deems appropriate of any facts, events or
circumstances which might in any way affect Assignor's risks hereunder and
Assignor further agrees that Assignee shall have no further obligation to
disclose to Assignor information or materials required in the course of
Assignee's relationship with BSNF.
(b) Assignor hereby waives any right to require Assignee to: (i)
proceed against any person, including BSNF, (ii) proceed against or exhaust any
security held from BSNF or any other person, (iii) pursue any other remedy in
Assignee's power, or (iv) make any presentments or demands for performance or
give any notices of nonperformance, protest, or dishonor in connection with any
of the indebtedness held by Assignee. Assignor waives any defense arising by
reason of: (1) any disability or other defense of BSNF or any other person, (2)
the cessation or limitation of the liability of BSNF for any cause whatsoever,
other than payment in full of all indebtedness owed to Assignee, (3) the
application by BSNF of the proceeds of any obligation secured hereby for
purposes other than the purposes represented by BSNF to Assignee or intended or
understood by Assignee or BSNF, (4) any act or omission by Assignee which
directly or indirectly results in or aids the discharge of BSNF or any
obligation secured hereby by operation of law or otherwise, or (5) any
modification of the obligations secured hereby in any form whatsoever,
including, without limitation, the renewal, extension, acceleration or other
change in the terms of such obligations or any part thereof, including increase
or decrease of the rate of interest thereon. Assignor waives all rights and
defenses arising out of an election of remedies by the creditor, even though
that election of remedies,such as a nonjudicial foreclosure with respect to
security for a guaranteed obligation, has destroyed the Assignor's rights of
subrogation and reimbursement against the principal by the operation of law or
otherwise. Assignor shall have no right of subrogation and Assignor waives any
defense that may have been based upon any election of remedies by Assignee which
destroys Assignor's rights to proceed against BSNF for reimbursement, including,
without limitation, any loss of rights Assignor may suffer by reason of any
rights, powers, or remedies of BSNF in connection with any anti-deficiency laws
or any other laws limiting, qualifying or discharging Assignor's obligations.
Assignor further waives any right to enforce any remedy which Assignee now has
or may hereafter have against BSNF or any other person and waives any benefit of
or any right to participate in any security whatsoever now or hereafter held by
Assignee. If any amount shall be paid to Assignor at any time when any
indebtedness owing to Assignee shall not have been paid in full, such amount
shall be held in trust for the benefit of Assignee and shall forthwith be paid
to Assignee to be credited and applied upon such indebtedness, whether matured
or unmatured. Assignor warrants and agrees that each of the waivers set forth
above is made with Assignor's full knowledge of its significance and
consequences and that under the circumstances the waivers are reasonable. If any
said waivers are determined to be contrary to any application of law or public
policy, such waivers shall be effective only to the extent permitted by law.
-8-
<PAGE>
THIS ASSIGNMENT shall inure to the benefit of Assignee and any subsequent
holder of the Note and shall be binding upon Assignor, and Assignor's heirs,
executors, administrators, successors and assigns and any subsequent owner of
the Property.
-9-
<PAGE>
Assignor has executed this instrument the day and year first above written.
ASSIGNOR:
VALLEY LIVING CENTER, LLC,
a Delaware limited liability company
By:________________________________________
Name:___________________________________
Title:__________________________________
-10-
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
) ss.
County of_____________ )
On _____________ (date) before me, ____________ (name and title "Notary
Public"), personally appeared ____________ (name of signer(s)), personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
_____________________________
(signature of Notary) (seal of Notary)
-11-
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
Beginning at a point on the North right-of-way line of 17th Street that is
East 1072.50 feet along the City Monumented Section line and North 40.00
feet from the Southwest Corner of Section 22, Township 2 North, Range 38
East of the Boise Meridian, Bonneville County, Idaho; and running thence
East 140.64 feet along said North right-of-way line; thence North 495.00
feet; thence West 140.64 feet; thence South 495.00 feet to the point of
beginning.
A-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER
31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,136,000
<SECURITIES> 0
<RECEIVABLES> 35,704,000
<ALLOWANCES> 1,164,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 131,690,000
<DEPRECIATION> 13,052,000
<TOTAL-ASSETS> 164,346,000
<CURRENT-LIABILITIES> 4,262,000
<BONDS> 103,939,000
0
15,000
<COMMON> 40,000
<OTHER-SE> 55,769,000
<TOTAL-LIABILITY-AND-EQUITY> 164,346,000
<SALES> 0
<TOTAL-REVENUES> 6,863,000
<CGS> 0
<TOTAL-COSTS> 1,490,000
<OTHER-EXPENSES> 1,433,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,074,000
<INCOME-PRETAX> 2,160,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,991,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,991,000
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0
</TABLE>
