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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER: 0-26980
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ARV ASSISTED LIVING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0160968
<S> <C>
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
245 FISCHER AVENUE, SUITE D-1 92626
COSTA MESA, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------- -----------------------------------------
<S> <C>
COMMON STOCK, NO PAR VALUE AMERICAN STOCK EXCHANGE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No [ ]
As of March 25, 1999, the aggregate market value of the voting stock held
by non-affiliates of registrant was $28,971,032 (for purposes of calculating the
preceding amount only, all directors, executive officers and shareholders
holding 5% or greater of the registrant's Common Stock are assumed to be
affiliates). The number of shares of Common Stock of the registrant outstanding
as of March 25, 1999 was 15,873,498.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The following table set forth certain information regarding our executive
officers and directors as of March 31, 1999.
<TABLE>
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NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Douglas M. Pasquale 44 Chief Executive Officer, President, Chief Operating
Officer and Director
Patricia J. Gifford 51 Senior Vice President and Chief Medical Officer
Abdo Khoury 49 Senior Vice President, Chief Financial Officer and
Secretary
John A. Booty 60 Director
Robert P. Freeman 54 Director
David P. Collins 61 Director
Kenneth M Jacobs 40 Director
Maurice J. Dewald 59 Director
Murry N. Gunty 32 Director
</TABLE>
DOUGLAS M. PASQUALE. Mr. Pasquale was appointed chief executive officer on
March 29, 1999. He joined us as president and chief operating officer on June 1,
1998, and was named a director in October 1998. Prior to joining the Company,
Mr. Pasquale was employed for 12 years by Richfield Hospitality Services, Inc.,
and Regal Hotels International-North America, a leading hotel ownership and
hotel management company based in Englewood, CO. He served as its president and
chief executive officer from 1996 to 1998 and as chief financial officer from
1994 to 1996.
PATRICIA J. GIFFORD, M.D. Dr. Gifford, a geriatrician, was appointed senior
vice president and chief medical officer on June 12, 1998. Prior to joining the
company she served as medical director for the Monarch Healthcare medical group,
an independent practice association made up of 130 primary care physicians in
Southern California. She joined Monarch in 1996 as clinical director, Subacute
Service. From 1995 to 1998 Dr. Gifford also served as medical director of
Wellness and Geriatrics for Saddleback Memorial Medical Center in Laguna Hills,
CA, a role that became a part-time position when she joined Monarch. From 1995
to 1997, she also served part-time as medical director of the Freedom Village
Continuing Care Residential Community in Lake Forest, CA. Dr. Gifford was
clinical director of Geriatrics at Huntington Memorial Hospital in Pasadena, CA
from 1990 to 1995.
ABDO H. KHOURY. Mr. Khoury was appointed senior vice president and chief
financial officer on March 30, 1999. Previously he had served the Company as
vice president, asset strategy and treasury, since January 1999, and as
president of the Apartment Division since coming to the Company in May 1997. Mr.
Khoury's prior background includes more than 25 years in accounting and real
estate. He was a principal with Financial Performance Group in Newport Beach,
CA, from 1991 to 1997.
JOHN A. BOOTY. Mr. Booty, one of our founders, retired in September 1996
after serving as president since the Company's inception in 1985. Since his
retirement he has served as a consultant to the Company. He also served as
interim president from October 1997 to January 1998 and as interim chief
executive officer from October 1997 to December 1997. He has served as a
director of the Company since 1985.
ROBERT P. FREEMAN. Mr. Freeman, a private investor, was a principal and
chief investment officer of Lazard Freres Real Estate Investors LLC, as well as
a managing director of Lazard Freres & Co. LLC, from 1992 through April 1999. He
currently is a director of American Apartment Communities, Atlantic American
Properties Trust, Commonwealth Atlantic Properties, The Fortress Group and
Kapson Senior Quarters Corp. He has served as a director of the Company since
1997.
DAVID P. COLLINS. Mr. Collins has served the Company in several capacities
since 1981. He currently is president of ARV Assisted Living International,
Inc., our wholly owned subsidiary. He has served as a director of the Company
since 1985.
KENNETH M. JACOBS. Mr. Jacobs is a managing director in the Banking Group
of Lazard Freres & Co., LLC, a position he has held since 1991. He has served as
a director of the Company since 1997.
MAURICE J. DEWALD. Mr. DeWald is chairman and chief executive officer of
Verity Financial Group, Inc., a firm he founded in 1992. He currently is a
director of Tenet Healthcare Corporation, Dai-Ichi Kangyo Bank of California and
Monarch Funds. He has served as a director of the Company since 1995.
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MURRY N. GUNTY. Mr. Gunty, a private investor, was a principal of Lazard
Freres Real Estate Investors LLC, from 1995 through April 1999. From 1993 to
1995 he was associated with J. E. Robert Company, a real estate investment
company. He currently is a director of Atlantic American Properties Trust,
Kapson Senior Quarters Corp., The Fortress Group and The Rubenstein Company. He
has served as a director of the Company since 1997.
INFORMATION ON COMMITTEES OF THE BOARD AND MEETINGS
The Board established a Compensation Committee and an Audit Committee at
or about the time of the initial public offering of our common stock in October
1995. In addition, our Board has occasionally appointed special committees of
one or more directors to analyze and/or take action on items of interest to the
Board.
The Compensation Committee establishes salaries, incentives and other
forms of compensation for directors and executive officers, administers the 1995
Stock Option and Incentive Plan (the "1995 Stock Option Plan") and recommends
policies relating to benefit plans. During the year ended December 31, 1998, the
Compensation Committee consisted of John J. Rydzewski, Maurice J. DeWald and
Murry N. Gunty. The Compensation Committee met 11 times during the year ended
December 31, 1998 and at least two members were in attendance at every meeting.
The Audit Committee reviews our accounting practices, internal accounting
controls and financial results and oversees the engagement of our independent
auditors. The Audit Committee, during the year ended December 31, 1998,
consisted of Maurice J. DeWald, R. Bruce Andrews and Robert P. Freeman. The
Audit Committee met two times in year ended December 31, 1998 and at least two
members were in attendance at every meeting.
During the year ended December 31, 1998, there were 13 meetings of the
Board and all directors attended at least 75% of the meetings of the Board.
COMPENSATION OF DIRECTORS
Prior to January 28, 1998, non-employee directors received $12,000 as an
annual retainer, paid quarterly in advance, and $500 for each meeting of the
Board or committee of the Board that they attended. Commencing January 28, 1998,
the annual retainer was increased to $18,000 and the per meeting fee to $1,000.
In addition, an annual committee chairmanship fee of $3,000 was added as of
January 28, 1998. In October 1995, the Company established the 1995 Stock Option
Plan which provides, among other things, that each non-employee director who is
initially elected or appointed to the Board will, upon such election or
appointment, be automatically granted an option to purchase 10,000 shares of
Common Stock, vesting at the rate of 2,500 per year measured from the date of
grant, at an exercise price equal to the fair market value of the Common Stock
on the date of grant. In addition, every fourth year following the date on which
such non-employee director is elected or appointed, on the date of the annual
meeting of the shareholders of the Company, if such person has continuously
served as a non-employee director, such non-employee director shall
automatically receive an option to purchase 10,000 shares of Common Stock, at an
exercise price equal to the fair market value of the Common Stock on the date of
grant, vesting at the rate of 2,500 per year measured from the date of grant. In
addition, as of January 28, 1998, each non-employee director participates in a
stock-based cash compensation plan that is intended to provide them with
compensation on a deferred basis and link their interests more directly with
those of our shareholders. Under the plan, 2,500 "stock units" (each stock unit
is deemed to be equivalent to one outstanding share of Common Stock) are
credited on each January 1 to each non-employee director who served as a
non-employee director for the entire preceding calendar year. Stock units are
payable in cash based on the fair market value of the Common Stock at the time
the payment is triggered and are fully vested at the time of crediting. Stock
units become payable on the first to occur of:
- three years after the date such stock units were first credited;
- a change of control of the Company, as defined by the plan;
- the director's no longer serving as a member of our Board of Directors
(for any reason); or
- termination of the plan.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information with respect to
compensation earned by individuals who served as Chief Executive Officer and the
four next most highly compensated executive officers whose annual salary and
bonus exceeded $100,000, and two additional individuals (the "Named Executive
Officers") for the year ended December 31, 1998, the nine-month period ended
December 31, 1997 and the fiscal year ended March 31, 1997. In October 1997, the
Company changed its fiscal year end from March 31 to December 31. Accordingly,
the nine-month period ended December 31, 1997 (denoted below as 1997T) is the
transition period beginning April 1, 1997 and ending December 31, 1997.
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LONG-TERM
ANNUAL COMPENSATION COMPENSATION OTHER
NAME AND ------------------------------------- AWARDS SECURITIES COMPENSATION
PRINCIPAL POSITION YEAR SALARY (1) BONUS UNDERLYING OPTIONS(1) (2)(3)(4)
------------------ ---- ---------- ----- --------------------- ---------
<S> <C> <C> <C> <C> <C>
Howard G. Phanstiel, 1998 $ 354,167 $ 189,578 100,000 $1,008,360
Chairman and Chief Executive Officer 1997T 16,186 -- 150,000 685
(appointed December 5, 1997 and 1997 -- -- -- --
resigned March 24, 1999)
Douglas M. Pasquale 1998 175,000 137,500 150,000 4,586
President and Chief Operating Officer 1997T -- -- -- --
(appointed June 1, 1998) 1997 -- -- -- --
Sheila M. Muldoon, 1998 185,000 37,500 25,000 194,249
Senior Vice President, General Counsel 1997T 132,250 15,583 -- 4,502
and Secretary 1997 156,981 7,000 20,000 2,624
(resigned March 19, 1999)
Abdo H. Khoury 1998 125,000 17,314 7,500 8,868
Vice President, Asset Strategy 1997T 30,000 3,000 22,500 60,983
And Treasury 1997 -- -- -- --
Patricia J. Gifford 1998 108,333 30,000 30,000 2,229
Vice President, Chief Medical 1997T -- -- -- --
Officer 1997 -- -- -- --
(appointed June 12, 1998)
Graham P. Espley-Jones, 1998 122,500 -- 10,000 602,738
Executive Vice President and 1997T 149,587 33,242 -- 7,303
Chief Financial Officer 1997 193,882 -- 10,000 7,226
(resigned July 31, 1998)
Eric K. Davidson, 1998 134,135 25,783 5,000 45,439
Senior Vice President 1997T 112,500 33,783 -- 6,149
(resigned September 30, 1998) 1997 132,230 6,167 20,000 5,741
</TABLE>
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(1) Amounts shown include cash compensation earned by the executive
officers. The amounts do not include the value of certain perquisites
that in the aggregate did not exceed the lesser of either $50,000 or 10
percent of the total annual salary and bonus reported for the named
executive officer.
(2) Includes payments for consulting services provided (after resignation)
during the year ended December 31, 1998, by Mr. Espley-Jones of $30,648.
During the nine-month period ended December 31, 1997, we paid consulting
fees to Mr. Khoury for services prior to his employment of $59,624.
(3) Also includes premiums for term life, medical, dental and disability
insurance purchased for the benefit of certain of the Named Executive
Officers in the following amounts: Mr. Phanstiel -- $8,360, $685 and $0;
Mr. Pasquale -- $4,586, $0 and $0; Ms. Muldoon -- $9,249, $4,502 and
$2,624; Mr. Khoury -- $8,868, $1,359 and $0; Dr. Gifford -- $2,229, $0
and $0; Mr. Espley-Jones -- $7,859, $7,303 and $7,226; and Mr. Davidson
-- $6,687, $6,149 and $5,741 for the year ended December 31, 1998, the
nine-month period ended December 31, 1997, and the fiscal year ended
March 31, 1997, respectively. These amounts represent insurance premiums
we paid over what we pay for other similarly situated employees.
(4) Includes payments and accruals in accordance with Separation Agreements
(see "-- Employment Agreements"): Mr. Phanstiel -- $1,000,000; Ms.
Muldoon -- $185,000; Mr. Espley-Jones -- $564,231 and Mr. Davidson --
$38,752.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth-certain information regarding options
granted during the year ended December 31, 1998 to the Named Executive Officers
pursuant to the 1995 Stock Option Plan.
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POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED(1) FISCAL YEAR(2) PER SHARE DATE 5% 10%
---- ----------- -------------- --------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Phanstiel ..... 100,000 11.9% $16.00 January 1, 2008 $1,006,231 $2,549,988
Douglas M. Pasquale ..... 150,000 17.9% 11.13 June 1, 2008 1,049,940 2,660,753
Sheila M. Muldoon ....... 25,000 3.0% 13.75 March 19, 2008 216,183 547,849
Patricia J. Gifford ..... 30,000 3.6% 11.75 June 15, 2008 221,685 561,794
Abdo H. Khoury .......... 7,500 0.9% 13.75 March 19, 2008 64,855 164,355
</TABLE>
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(1) These options were granted for a term of 10 years, subject to
termination in certain events related to termination of employment, and
become exercisable in four annual installments beginning in 2001.
(2) In 1998, we granted options to employees to purchase an aggregate of
837,500 shares under the 1995 Stock Option Plan and this number was used
in calculating the percentage set forth in this column. During 1998,
options to purchase 773,452 shares under the 1995 Stock Option Plan were
canceled due to termination of employment.
(3) Assumed rates of stock price appreciation are calculated based on
requirements promulgated by the Securities and Exchange Commission and
are for illustrative purposes only. Actual stock prices will vary from
time to time based upon market factors and our financial performance.
There can be no assurance that the assumed rates of appreciation will be
achieved.
FISCAL YEAR-END OPTION VALUES.
None of the Named Executive Officers exercised options during the year
ended December 31, 1998. The following table sets forth certain information
regarding options held as of the end of such fiscal year by each of the Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ON VALUE ------------------------------ ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Phanstiel -- -- -- 250,000 $ -- $ --
Douglas M. Pasquale -- -- -- 150,000 -- --
Sheila M. Muldoon -- -- 10,000 45,000 -- --
Patricia J. Gifford -- -- -- 30,000 -- --
Abdo H. Khoury -- -- -- 30,000 -- --
</TABLE>
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(1) Options are "in-the-money" if the fair market value of the underlying
securities on that date exceeds the exercise price of the option. Based on
the last sale price of $6.13 per share of Common Stock on December 31,
1998 (as reported on the American Stock Exchange), none of the options
held by the Named Executive Officers were "in the money" at year end.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of the Named
Executive Officers.
On December 5, 1997, we entered into an employment agreement with Howard
G. Phanstiel, which was amended and restated as of December 21, 1998. Mr.
Phanstiel's employment agreement required him to devote his full productive time
to the Company during the term of the agreement, unless otherwise permitted by
the Board, and to refrain from competing with us in the business of assisted
living or long-term healthcare for a period of one year following expiration of
the term of the agreement.
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Mr. Phanstiel's employment agreement as amended provided for a base salary,
performance-based increases in the base salary each year beginning in 1999, a
guaranteed bonus of $93,750 payable July 1, 1998, 1999, 2000 and 2001, and
additional bonuses based on the achievement of agreed-upon targets in the range
of 30% to 90% of his base salary. Mr. Phanstiel was granted an option to
purchase 150,000 shares of Common Stock upon the execution of his employment
agreement and, as of January 2, 1998, received an additional option to purchase
100,000 shares of Common Stock. Mr. Phanstiel's employment agreement provides
that we could terminate Mr. Phanstiel without cause by making him a payment
equal to the greater of:
- the two times the sum of his current annual base salary plus target
bonus (defined as 60% of his then current base salary); or
- the sum of his current annual base salary plus divided by 12 and
multiplied by the number of remaining months from termination and
December 5, 2001, plus target bonuses through that date; and
- the payment of premiums for COBRA benefits for the maximum period of
eligibility.
The agreement further provided that if Mr. Phanstiel voluntarily terminates
his employment, he would receive a lump-sum payment equal to three months' base
salary. The covenant not to compete discussed above is not applicable, however,
in the event severance pay is waived. On March 24, 1999, Mr. Phanstiel resigned
as Chief Executive Officer and Chairman of the Board pursuant to a separation
agreement with us.
On June 1, 1998, we entered into an employment agreement with Douglas
M. Pasquale. Mr. Pasquale's employment agreement has an initial termination date
of June 1, 2001; provided, however, that if we have not given Mr. Pasquale
written notice of our intent to terminate the agreement at least two years prior
to the termination date, the term will automatically be extended for successive
periods of one year. Mr. Pasquale's employment agreement requires him to devote
his full productive time to the Company during the term of the agreement, unless
otherwise permitted by the Board, and to refrain from competing with us in the
business of assisted living or long-term healthcare for a period of one year
following expiration of the term of the agreement.
Mr. Pasquale's employment agreement provides for a base salary,
performance-based increases in the base salary each year beginning in 1999, a
guaranteed bonus of 37.5% of his base salary, and additional bonuses based on
the achievement of agreed-upon targets. Mr. Pasquale was granted an option to
purchase 150,000 shares of Common Stock upon the execution of his employment
agreement and an additional 90,000 shares as of January 2, 1999. Mr. Pasquale's
employment agreement is being renegotiated in light of his promotion to Chief
Executive Officer and the option to acquire 90,000 shares has not been issued.
Mr. Pasquale's employment agreement provides that we may terminate Mr. Pasquale
without cause by making him a payment equal to the greater of:
- the sum of his current annual base salary plus target bonus plus any
additional bonus paid in the last twelve months; or
- the sum of his current annual base salary plus his minimum bonus
divided by 12 and multiplied by the number of remaining months under
the employment agreement plus any additional bonus paid in the last
twelve months; and
- the payment of premiums for COBRA benefits for the maximum period of
eligibility.
The agreement further provides that if Mr. Pasquale's voluntarily
terminates his employment, he will receive a lump-sum payment equal to three
months' base salary. The covenant not to compete discussed above is not
applicable, however, in the event severance pay is waived.
On April 23, 1997, we entered into a written employment agreement, as
amended, with Ms. Muldoon. The agreement required Ms. Muldoon to devote her full
productive time to the Company during the term of the agreement, unless
otherwise permitted by the Board, and to refrain from competing with us in the
business of assisted living or long-term healthcare for a period of one year
following expiration of the term of the agreement. The agreement included
provisions for a base salary paid on a monthly basis, annual increases in Base
Salary and bonuses no later than December 31 of each year, both as determined at
the discretion of the Compensation Committee following receipt of
recommendations therefore from our management. Ms. Muldoon was granted certain
stock options. We had the right to terminate Ms. Muldoon without cause by making
her a cash payment equal to one year's base salary. On March 19, 1999, Ms.
Muldoon resigned as our Senior Vice President and General Counsel pursuant to a
separation agreement with us. She continues to advise us under the terms of a
consulting agreement that expires on May 31, 1999 unless earlier terminated by
either party.
During 1998, we entered into written employment agreements with Mr. Khoury
and Dr. Gifford. These agreements require Mr. Khoury and Dr. Gifford to devote
their full productive time to the Company during the term of the agreement,
unless otherwise permitted by the Board, and to refrain from competing with us
in the business of assisted living or long-term healthcare for a period of one
year following expiration of the term of the agreements. The agreements include
provisions for a base salary paid on a monthly basis, annual increases in Base
Salary and bonuses no later than December 31 of each year, both as determined at
the discretion of the Compensation Committee following receipt of
recommendations therefore from our management. Mr. Khoury and Dr. Gifford have
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also been granted certain stock options.
Change in Control Arrangements.
To better assure that the Named Executive Officers would continue to
provide independent leadership consistent with our best interests in the event
of an actual or threatened change of control of the Company, the employment
agreements of each of the Named Executive Officers provide certain protections
in the event of a change in control. A "change in control" of the Company is
defined as a change in ownership such that any one person, or more than one
person acting as a group, would have possession of more than 50% of the total
fair market value or the total voting power of the our capital stock; or a
change in effective control of the Company such that any one person or more than
one person acting as a group would acquire ownership of capital stock possessing
50% or more of our voting power, or a majority of the members of the Board was
replaced during any 12 month period by directors whose appointment or election
was not endorsed by a majority of the members of the Board prior to the date of
such appointment or election; or a change in the ownership of a substantial
portion of our assets such that any one person or more than one person acting as
a group would acquire, within a 12 month period, assets from us having a total
fair market value equal to or more than 33 1/3% of the total fair market value
of all of our assets immediately prior to such acquisitions. Upon any "change in
control," the Named Executive Officers other than Mr. Pasquale whose employment
agreements have not otherwise been terminated are entitled to receive lump sum
payments equal to one times the total compensation received during the
immediately preceding calendar year in the event their employment is terminated,
voluntarily or involuntarily, within three months thereafter. In addition, the
stock option agreements between the Company and the Named Executive Officers
include a provision authorizing the Compensation Committee to accelerate vesting
of the options, and the Compensation Committee has authorized such vesting
acceleration in the Employment Agreements discussed above in the event of a
change in control.
Mr. Pasquale's employment agreement also provides for certain protections
in the event of a change in control. Mr. Pasquale's employment agreement defines
a "change in control" as any of the following:
- the acquisition by any person or group of greater than 50% of the
combined voting power of our outstanding voting securities;
- the acquisition by any person other than Prometheus of greater
than 20% of our outstanding voting securities if the Board
determines that a change of control has occurred;
- the replacement of a majority of the members of the Board during
any 12 month period by directors whose appointment or election
was not endorsed by a majority of the members of the Board prior
to the date of such appointment or election; or
- the date on which any person acquired assets from us that have
total fair market value equal to or more than 33 1/3% of the
total fair market value of all of our assets.
Following a change of control, in the event that Mr. Pasquale's employment
is terminated for any reason, with or without cause, voluntarily within nine
months of the change of control, or involuntarily within 12 months of a change
of control, in lieu of his severance payment, if any, the Company will pay Mr.
Pasquale the sum of:
- his base salary and his accrued vacation pay;
- reimbursement for expenses through the date of the change of
control; and
- three times the sum of his base salary and target bonus (equal
to 60% of his base salary).
In addition, in the event that Mr. Pasquale's employment is terminated
voluntarily within nine months of a change of control or involuntarily within 12
months of a change of control, any stock options held by Mr. Pasquale will
become fully vested.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation Committee consisted of John J. Rydzewski, Robert P.
Freeman and Maurice J. DeWald during the year ending December 31, 1998. Mr.
Rydzewski resigned as a member of our Board and the Compensation Committee as
of January 13, 1999. No member of the Compensation Committee is or was either
an officer or employee of ARV.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE SHALL NOT BE DEEMED
FILED FOR PURPOSES OF THE SECURITIES ACT OF 1933 OR THE SECURITIES AND EXCHANGE
ACT OF 1934, AS AMENDED, NOR SHALL IT BE DEEMED TO BE INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS 10-K INTO
ANY FILINGS OF THE COMPANY PURSUANT TO EITHER OF THE SUCH ACTS, EXCEPT TO THE
EXTENT THE COMPANY SPECIFICALLY INCORPORATES THE REPORT BY REFERENCE THEREIN.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions regarding compensation of our executive officers, including
those related to stock and stock options, are considered by the Compensation
Committee, based upon the recommendations and analysis performed by our senior
management. The Compensation Committee (the "Committee") is currently composed
of Maurice J. DeWald and Robert P. Freeman. Until January 12, 1999, when he
resigned from our Board of Directors, the Committee was chaired by John J.
Rydzewski. Subsequent to January 12, 1999, Maurice J. DeWald has chaired the
committee.
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In the recent past, ARV has undergone a period of transition. A new
professional management team was retained over the past year to develop and
implement strategies for growth and profitability, implement needed management
systems and processes, and build value for shareholders. Uncertainty resulting
from a number of issues negatively influenced the effectiveness of ARV's
compensation arrangements and increased the difficulty of attracting and
retaining qualified key employees.
Existing compensation practices had evolved on an "ad hoc" basis. The terms
and provisions of senior management hiring packages had been individually
negotiated and varied from one individual to another. Increases in base salary,
bonus and stock option programs were based on recommendations of management
without any strict criteria regarding company performance or industry standards.
Compensation Study
In the fall of 1998, the Committee retained a nationally known compensation
consulting firm to review our compensation programs. Objectives of the study
included:
- an assessment of ARV's current compensation practice;
- recommendations for a philosophical underpinning and framework
for the design and administration of an appropriate compensation
program going forward; and
- a review of existing employment agreements to assess market
competitiveness.
Key recommendations arising from the study included:
- adoption of a compensation framework for ARV's senior management
team that will help to manage the level, mix and focus of
compensation appropriately going forward;
- establishment of base salary grades for corporate office
employees to provide a more consistent basis for the
administration of individual salary levels;
- formalization of annual bonus opportunities in the form of a
basic management incentive plan that provides specified incentive
opportunities contingent on the level of achievement against
pre-established goals and performance objectives supporting ARV's
business objectives; and
- adoption of consistent guidelines for the award of stock options
to key employees.
The review of the employment agreements in force found that base salary
practices were within the competitive range of industry practice. Formal salary
ranges have been adopted to provide continuing consistent, competitive
administration. Pursuant to the consultant's recommendation, a formal bonus
program has been implemented which follows general industry competitive
practice. Stock option guidelines have been developed to administer competitive
grants on a go-forward basis.
Employment Agreements for Named Executive Officers
The basic compensation for Howard G. Phanstiel Chief Executive Officer and
Chairman of the Board is as specified in his employment agreement, which was
approved by the Committee on December 5, 1997, and amended as of December 21,
1998, again as approved by the Committee. Under Mr. Phanstiel's amended
employment agreement, there was no set term of employment. However, upon
termination of the agreement without cause, Mr. Phanstiel was to receive the
greater of (i) an amount equal to two years' base pay and target bonus, or (ii)
an amount equal to the sum of Mr. Phanstiel's then monthly base pay times the
number of months remaining until December 5, 2001, plus a target bonus through
such termination date. For purposes of termination, "target bonus" was defined
as 60% of Mr. Phanstiel's base pay. Pursuant to the terms of a separation
agreement, Mr. Phanstiel resigned as Chief Executive Officer and Chairman of the
Board in March 1999.
The basic compensation level for Douglas M. Pasquale as President and Chief
Operating Officer is specified in his employment agreement, which was approved
by the Committee on June 1, 1998. Mr. Pasquale's employment agreement has an
initial termination date of June 1, 2001; provided, however, that if the Company
does not notify Mr. Pasquale in writing of its intent to terminate the agreement
at least two years before the termination date, the term will automatically be
extended for successive periods of one year. Mr. Pasquale's employment agreement
is being renegotiated in light of his promotion to Chief Executive Officer
following the resignation of Howard G. Phanstiel.
8
<PAGE> 9
The basic compensation for Graham Espley-Jones for Fiscal 1998 was set
prior to the Company's initial public offering and prior to the creation of the
Committee. As a privately-help company, the Company's compensation procedures
were determined by the Board of Directors and were informal. Commencing on
October 1, 1995, Mr. Espley-Jones, then our Chief Financial Officer, entered
into a three-year employment agreement ending September 30, 1998, subject to
automatic renewal unless otherwise notified. During the fiscal year ended March
31, 1997 and in July of 1997, Mr. Espley-Jones' agreement was amended to state
that he receive at least two years' notice prior to the termination date. Under
a separation agreement with the Company, Mr. Espley-Jones resigned as Chief
Financial Officer effective July 31, 1998. Following his resignation, the
Company and Mr. Espley-Jones entered into a consulting agreement under which Mr.
Espley-Jones was paid an hourly rate (with an incentive compensation component
for successful completion of stated objectives within the stated time frame) for
services rendered. The consulting agreement was terminated in February 1999.
The basic compensation level for Patricia J. Gifford, M.D., is specified in
her employment agreement, which was approved by the Committee on June 15, 1998.
Dr. Gifford's employment agreement has an initial termination date of June 15,
2000. Under this agreement, she may be terminated without cause upon payment to
her of an amount equal to the remaining amount of her base salary that would
have been paid if employment continued through the end of the initial two-year
term.
The compensation level for the remaining two Named Executive Officers,
Sheila M. Muldoon and Abdo Khoury, both of whom were given written employment
agreements, are examined yearly when the Compensation Committee reviews the
compensation of all officers and highly compensated employees of the Company.
Ms. Muldoon's agreement, as amended, commenced April 23, 1997. Under this
agreement, she could be terminated without cause upon payment to her of an
amount equal to 12 months' base salary. Pursuant to the terms of a separation
agreement and consulting agreement, Ms. Muldoon resigned as Senior Vice
President, Secretary and General Counsel in March 1999 and acts as Special
Counsel to the President until the happening of certain stated events or May 31,
1999, whichever is earlier. Mr. Khoury's agreement commenced December 5, 1997,
and is being re-evaluated since his promotion to Senior Vice President, Chief
Financial Officer and Secretary in March 1999.
Fiscal 1998 Executive Compensation Components
Executive compensation consists of three components: base salary, bonus and
long-term incentive awards.
BASE SALARY. Base salaries for the named Executive Officers were established in
their respective employment contracts, resulting in payment, during Fiscal 1998
of $354,167, $175,000, $122,500, $108,333, $185,000 and $125,000 to Mr.
Phanstiel, Mr. Pasquale, Mr. Espley-Jones, Dr. Gifford, Ms. Muldoon and Mr.
Khoury respectively. The salaries of all Named Officers are subject to
performance-based increases in each year.
BONUS. Mr. Phanstiel was entitled to a guaranteed bonus of $93,750 and
additional bonuses based on achievement of agreed-upon targets in the range of
$31,250 to $156,250. Mr. Pasquale is entitled to a guaranteed bonus of $112,500
and additional bonuses based on achievement of agreed-upon targets up to a
maximum of $112,500.
For Fiscal 1998, Dr. Gifford was paid a guaranteed bonus of $30,000 as
stated in her employment agreement.
Regarding the remaining Named Officers, for Fiscal 1998, bonuses were
awarded at the discretion of management, subject to the approval of the
Committee. In Fiscal 1998, no bonus was paid to Mr. Espley-Jones. Bonuses of
$37,500 and $17,314 were paid to Ms. Muldoon and Mr. Khoury, respectively, in
recognition of performance in 1998.
Long Term Incentive Awards. Stock options are granted to provide a long-term
incentive opportunity that is directly linked to shareholder value. Under his
employment agreement, Howard G. Phanstiel was granted an option to purchase
100,000 shares of ARV common stock during Fiscal 1998, at an exercise price
equal to the market value on the date of grant ($16). The option would have
become exercisable in 25% annual increments on October 17, 1999, 2000, 2001 and
2002, respectively. Mr. Phanstiel's options to purchase ARV stock terminated on
his resignation.
As part of his employment agreement, Douglas M. Pasquale was granted an
option to purchase 150,000 shares of common stock during Fiscal 1998. The
exercise price is equal to the market value of the Common Stock on the date of
grant ($11.13) and the option becomes exercisable in 25% annual increments on
June 1, 2000, 2001, 2002 and 2003, respectively.
9
<PAGE> 10
Under her employment agreement, Dr. Gifford was granted an option to
purchase 30,000 shares of common stock during Fiscal 1998. The exercise price is
equal to the market value of our common stock on the date of the grant ($11.75)
and the option becomes exercisable in 25% annual increments on June 15, 2000,
2001, 2002, and 2003, respectively.
Ms. Muldoon and Mr. Khoury were granted options to purchase 25,000 and
7,500 shares, respectively, during Fiscal 1998. The exercise price is equal to
the market value of our common stock on the date of the grant ($13.75) and the
options become exercisable in 25% annual increments on March 19, 2000, 2001,
2002, and 2003, respectively. Ms. Muldoon's options to purchase ARV stock
terminated on her resignation.
In Fiscal 1998, we granted stock options to 94 employees, 8 of whom were
hired in that period.
Policy with Respect to Section 162(m)
Section 162(m) of the Code includes potential limitations on the
deductibility for federal income tax purposes of compensation in excess of $1
million paid or accrued with respect to any of the executive officers whose
compensation is required to be reported in the Company's proxy statement.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. For fiscal 1998, the Committee does not
contemplate that there will be any such nondeductible compensation.
COMPENSATION COMMITTEE
MAURICE J. DEWALD, CHAIR
ROBERT P. FREEMAN
THE FOLLOWING PERFORMANCE GRAPH SHALL NOT BE DEEMED FILED FOR PURPOSES OF
THE SECURITIES ACT OF 1933 OR THE SECURITIES AND EXCHANGE ACT OF 1934, AS
AMENDED, NOR SHALL IT BE DEEMED TO BE INCORPORATED BY REFERENCE BY ANY GENERAL
STATEMENT INCORPORATING BY REFERENCE THIS 10-K INTO ANY FILINGS OF THE COMPANY
PURSUANT TO EITHER OF THE SUCH ACTS, EXCEPT TO THE EXTENT THE COMPANY
SPECIFICALLY INCORPORATES THE GRAPH BY REFERENCE THEREIN.
Performance Graph
The following line graph compares the yearly percentage change in the
cumulative total shareholder return on the Common Stock against the cumulative
total return of a peer group of nine assisted living companies selected by the
Company (the "Peer Group") and the AMEX Market Value Index, each for the period
from October 19, 1995 to December 31, 1998. The performance graph assumes the
investment of $100 on October 19, 1995 in the Common Stock and in each index
(except the AMEX Market Value Index, which assumes investment on September 30,
1995), and that all dividends were reinvested.
The Peer Group consists of Alternative Living Services, Inc.; Assisted
Living Concepts, Inc.; Carematrix Corporation; Greenbriar Corporation; Emeritus
Corporation; Just Like Home, Inc.; Karrington Health, Inc.; Regent Assisted
Living, Inc.; and Sunrise Assisted Living, Inc. All of the companies in the Peer
Group are weighted by their respective market capitalization. Atria
Communities, Inc. was deleted from the Peer Group in 1998 because it became a
private company.
COMPARISON OF 39 MONTH CUMULATIVE TOTAL RETURN*
AMONG ARV ASSISTED LIVING INC., THE AMEX MARKET VALUE INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
Peer Group Cumulative Return Weighted Cumulative Total Return
----------------------------------------------
(Weighted Average by Market Value) 10/19/95 3/96 3/97 12/97 12/98
<S> <C> <C> <C> <C> <C>
ARV Assisted Living, Inc. 100 121 70 114 44
Peer Group Weighted Average 100 115 84 125 129
AMEX Market Value 100 105 107 130 132
</TABLE>
- -----------------
* $100 INVESTED ON 10/19/95 IN STOCK OR 9/30/95
IN INDEX -- INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 25, 1999 (based on a total of
15,873,498 outstanding shares of Common Stock) by each of our directors, each of
the Named Executive Officers and all executive officers and directors as a
group. Except as otherwise indicated, we believe the persons named in the table
have sole voting and investment power with respect to all shares beneficially
owned, subject to community property laws where applicable.
Amounts and percentages listed below include warrants and options that are
exercisable within 60 days of March 25, 1999.
<TABLE>
<CAPTION>
AMOUNT OF
SHARES BENEFICIALLY PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED BENEFICIALLY OWNED
--------------------------------------- ------------------- ------------------
<S> <C> <C>
Prometheus Assisted Living LLC(2) ........................... 7,595,069 47.9%
Robert P. Freeman (2) ....................................... 2,500 *
Murry N. Gunty (2) .......................................... 2,500 *
Kenneth M. Jacobs (2) ....................................... 2,500 *
John A. Booty(3)(4) ......................................... 519,356 3.3%
David P. Collins(3)(5) ...................................... 510,815 3.2%
Douglas M. Pasquale ......................................... 2,000 *
Abdo H. Khoury .............................................. 500 *
Patricia J. Gifford ......................................... 0 *
Maurice J. DeWald(6) ........................................ 11,000 *
All directors and executive officers as a group (9 persons).. 8,646,240 54.4%
</TABLE>
- ------------
* Less than 1%.
(1) Except where otherwise noted, the address of the Company's directors and
executive officers is c/o ARV Assisted Living, Inc., 245 Fischer Avenue,
Costa Mesa, California 92626.
(2) Messrs. Freeman and Gunty are each Directors of Kapson Senior Quarters and
The Fortress Group, and prior to April 1999 were Principals of LFREI, the
managing member of Prometheus. Mr. Jacobs is a Managing Director of Lazard
Freres & Co, LLC, the managing member of LFREI. Mr. Jacobs has voting and
investment power over the securities held by Prometheus and may be deemed
to beneficially own Prometheus' shares. Mr. Jacobs disclaims beneficial
ownership of Prometheus' shares except to the extent of his pecuniary
interest therein. Each of Messrs. Freeman, Gunty and Jacobs has 2,500
options exercisable within 60 days of March 25, 1999.
10
<PAGE> 11
(3) Excludes 329,600 shares owned of record by our employee stock ownership
plan (the "ESOP"), of which Messrs. Pasquale and Khoury are trustees.
(4) Of the 519,356 shares beneficially owned by Mr. Booty, 359,028 shares are
held by the Booty Family Trust (as to which Mr. Booty has shared voting and
investment power), 1,328 shares are held in Mr. Booty's name alone, 79,500
shares are owned by the Karen A. Booty Charitable Remainder Trust of which
Mr. Booty has sole voting and investment power, and the remaining 79,500
shares are owned by the John A. Booty Charitable Remainder Uni Trust (of
which Mr. Booty has sole voting and investment power).
(5) Of the 510,815 shares beneficially owned by Mr. Collins, 98,678 are held of
record by the D & V Collins Family Limited Partnership (as to which Mr.
Collins has shared voting and investment power), 410,501 shares are held by
the Collins Family Community Property Trust (as to which Mr. Collins has
shared voting and investment power) and 9,743 shares are held by the David
P. Collins Annuity Trust. Excludes 8,993 shares beneficially owned by Mr.
Collins held of record by the ESOP on December 31, 1998.
(6) Of the 11,000 shares beneficially owned by Mr. DeWald, as non-employee
directors, Mr. Dewald holds 3,500 and 7,500 are options exercisable within
60 days of March 25, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 25, 1999, the following persons are known to the Company to be the
beneficial owners of more than five percent of the Company's Common Stock. The
numbers shown on the table should be interpreted in light of the related
footnote.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------- ------------------- -------------------- ----------------
<S> <C> <C> <C>
Common Prometheus Assisted Living LLC (1) 7,595,069 47.9 %
Thirty Rockefeller Plaza, 63rd Floor
New York, NY 10020
Common Dimensional Fund Advisors Inc. (2) 914,700 5.76%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
- ------------
(1) According to the Schedule 13D filed on January 26, 1998 by Prometheus
Assisted Living LLC.
(2) According to Schedule 13G dated February 11, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John A. Booty, former President of the Company and the current Vice
Chairman of the Board of Directors, provided consulting services to the Company
for which Mr. Booty was paid a varying sum not to exceed $30,000 per month for
development and acquisition services between October 1996 and September 1997.
During the nine-month period ended December 31, 1997 and the fiscal year ended
March 31, 1997, Mr. Booty was paid $175,000 and $180,000 for consulting
services, respectively. No consulting fees were paid to Mr. Booty during the
year ended December 31, 1998.
We utilize the services of J&D Design, as well as others, for interior
design work at our communities. The principal of J&D Design is Joan Davidson,
wife of former Senior Vice President Eric Davidson and daughter-in-law of the
former Chairman, President and Chief Executive Officer, Gary Davidson. Services
provided by J&D Design include design work and the purchase of furniture,
fixtures and equipment ("FF&E") for developed ALCs and rehabilitation of
existing or newly acquired ALCs. We paid J&D Design approximately $560,000,
$755,000 and $431,000 for the year ended December 31, 1998, the nine-month
period ended December 31, 1997 and the fiscal year ended March 31, 1997,
respectively, a portion of which was for design services and a portion of which
was for reimbursement of costs for FF&E.
Mr. R. Bruce Andrews, a former member of our Board of Directors, is
President of Nationwide Health Properties, Inc. ("NHP"), a Health Care REIT. NHP
is the owner of 16 ALCs which are leased to the Company. Of that number, leases
for 13 ALCs were entered into prior to November 29, 1995, the date Mr. Andrews
became a Board member, and leases for three ALCs were entered into during Mr.
Andrews' tenure as Board member. Lease payments have aggregated approximately
$11.3 million, $8.2 million and $10.3 million for the year ended December 31,
1998, the nine-month period ended December 31, 1997 and the fiscal year ended
March 31, 1997, respectively.
11
<PAGE> 12
John J. Rydzewski, a former member of our Board of Directors and
Compensation Committee, is a principal in the investment banking firm of
Benedetto, Gartland and Company, Inc. ("BG&C"). We retained BG&C to provide
advice concerning our investment in Senior Income Fund L.P., a Delaware limited
partnership owning four congregate care facilities in Southern California. We
paid BG&C approximately $206,000 during the fiscal year ended March 31, 1997. No
amounts were paid to BG&C during the year ended December 31, 1998 and the nine
month period ended December 31, 1997.
Robert P. Freeman, a Director of the Company, is a private investor. From
1992 through April 1999 Mr. Freeman was a Principal and Chief Investment Officer
of LFREI, the managing member of Prometheus Assisted Living, LLC, as well as a
Managing Director of Lazard Freres & Co., LLC, the managing member of LFREI.
Murry N. Gunty, a Director of the Company, is a private investor. From 1995
through April 1999, Mr. Gunty was a Principal of LFREI, the managing member of
Prometheus Assisted Living, LLC. Messrs. Freeman and Gunty both serve as
Directors of Kapson Senior Quarters Corp. and The Fortress Group. Kenneth M.
Jacobs, also a Director of the Company, is a Managing Director of Lazard Freres
& Co., LLC, the managing member of LFREI. On October 29, 1997, Prometheus
committed to purchase $60,000,000 aggregate principal amount of the Company's
6.75% Convertible Subordinated Notes due 2007. Pursuant to a related agreement,
Prometheus previously purchased 1,921,012 shares of Common Stock for an
aggregate purchase price of $26,894,168. In connection with these transactions,
the Company entered into a registration rights agreement with Prometheus and a
Stockholders Agreement with Prometheus and LFREI. Pursuant to the registration
rights agreement between the Company and Prometheus, the Company granted
Prometheus limited demand registration rights to facilitate the resale of
certain securities owned by it and certain piggyback rights to sell a portion of
its securities in connection with certain offerings of securities of the
Company.
Pursuant to the Stockholders Agreement, as amended, as of October 30, 1997,
the Board was expanded to its nine members, and Messrs. Freeman, Jacobs and
Gunty, each nominees of Prometheus, were appointed as our Directors. Until the
occurrence of a termination event, at each annual or special meeting of our
shareholders, Prometheus had the right pursuant to the Stockholders
Agreement and our Bylaws to designate three nominees to the Board if the Board
is a single class or one designee per class if the Board is divided into three
classes. A termination event occurred if either:
- Prometheus no longer owns at least 5% of the Common Stock on a fully
diluted basis; or
- Prometheus no longer owns at least $25 million of Common Stock.
The Stockholders Agreement, as amended, further provided that during a
standstill period of three years (which period is subject to early termination
in certain circumstances), Prometheus would be subject to certain limitations
and restrictions relating to, among other matters, acquisitions of additional
shares of Common Stock (generally limiting Prometheus to beneficially owning no
more than 49.9% of the shares of Common Stock on a fully diluted basis),
transfers of Common Stock held by Prometheus and seeking representation on the
Board other than as contemplated by the Stockholders Agreement. In addition,
during the standstill period, Prometheus was required to vote all shares of
Common Stock owned by it representing an aggregate ownership in excess of 35.8%
of the outstanding shares of Common Stock in one of the following two manners:
in accordance with the recommendation of the Board or proportionally in
accordance with the votes of the other holders of Common Stock. Prometheus was
also required to vote its shares of Common Stock in favor of the election of all
directors nominated by our nominating committee, if any, or the Board, provided
such nominations are in accordance with certain provisions of the Amended
Stockholders Agreement. Prometheus currently owns 7,595,069 shares, or
approximately 47.9%, of our Common Stock.
On October 21, 1998, we announced that a termination event occurred on
October 12, 1998, when the price of our common stock dropped to a point where
LFREI no longer beneficially owned our common stock having a market value of at
least $25 million. As a result of the termination event, LFREI's standstill
obligations would have terminated on January 11, 1999. However, on December 7,
1997, the Superior Court of the State of California, County of Orange issued an
order in favor of LFREI's cross complaint concluding that their standstill
obligations terminated as of April 1998.
To address certain structural issues in connection with tax credit
partnerships, Pacific Demographics Corporation ("Pacific Demographics")
(formerly ARVTC, Inc.), was formed in August 1994 by Messrs. Booty, Collins and
Espley-Jones, as well as three former officers, to provide certain development
services for these partnerships in exchange for cash and deferred development
fees generated by the tax credit partnerships. In order to lessen potential
conflicts of interest, in July 1995, the Company's then principal shareholders,
who included but were not limited to Messrs. Booty, Collins and Espley-Jones
sold Pacific Demographics, Inc. to the Company for $100,000 in cash. In
addition, they formed a general partnership, Hunter Development ("Hunter"), and
became co-developers with Pacific Demographics and retained the right to receive
20% of all developer fees up to a maximum of $850,000. Subsequently each of the
general partners of Hunter assigned his interest in Hunter to Redhill
Development, LLC. Of the maximum amount of $850,000 which could be distributed,
$300,428 has been distributed to date of which Messrs. Booty, Collins and
Espley-Jones have received $111,627, $65,714 and $37,153, respectively.
12
<PAGE> 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(c) EXHIBITS: The following exhibits are filed as part of, or incorporated by
reference into this report on Form 10-K/A:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2 Agreement and Plan of Merger, by and between ARV Assisted
Living, Inc. and ARV Delaware, Inc., incorporated by reference
to the Company's Proxy Statement for the 1997 Meeting of
Shareholders of ARV Assisted Living, Inc., filed with the
Securities and Exchange Commission on Schedule 14A on December
31, 1997.
3.1 Certificate of Incorporation of ARV Delaware, Inc.,
incorporated by reference to the Company's Proxy Statement for
the 1997 Meeting of Shareholders of ARV Assisted Living, Inc.,
filed with the Securities and Exchange Commission on Schedule
14A on December 31, 1997.
3.2 By-laws of ARV Delaware, Inc., as amended, incorporated by
reference to our 8-K filed October 21, 1998.
4.1 Rights Agreement, dated May 14, 1998, between ARV Assisted
Living Inc., and ChaseMellon Shareholder Services LLC which
includes the form of Certificate of Determination of the
Series D Junior Participating Preferred Stock of ARV Assisted
Living, Inc. as Exhibit A, the form of Right Certificate as
Exhibit B, and the Summary of Rights to Purchase Preferred
Shares as Exhibit C, incorporated by reference to our 10-Q
filed with the Securities and Exchange Commission on May 15,
1998.
4.2 First Amendment to the Right Agreement, dated October 21,
1998, by and between ARV Assisted Living Inc., and ChaseMellon
Shareholder Services LLC, incorporated by reference to our *-K
filed October 21, 1998.
10.1 Purchase and Sale Agreement by and between 270 Center
Associates, Limited Partnership and ARV Assisted Living, Inc.
dated as of February 12, 1998, incorporated by reference to
Exhibit 10.1 to our 8-K filed with the Securities and Exchange
Commission on May 11, 1998.
10.2 Amendment to Purchase and Sale Agreement by and between 270
Center Associated, Limited Partnership and ARV Assisted
Living, Inc. dated as of March 2, 1998, incorporated by
reference to Exhibit 10.2 to our 8-K filed with the Securities
and Exchange Commission on May 11, 1998.
10.3 Second Amendment to Purchase and Sale Agreement by and between
270 Center Associated, Limited Partnership and ARV Assisted
Living, Inc. dated as of April 10, 1998, incorporated by
reference to Exhibit 10.3 to our 8-K filed with the Securities
and Exchange Commission on May 11, 1998.
10.4 Purchase and Sale Agreement by and between TH Group, Inc. and
ARV Assisted Living, Inc. dated as of February 12, 1998,
incorporated by reference to Exhibit 10.4 to our 8-K filed
with the Securities and Exchange Commission on May 11, 1998.
10.5 Amendment to Purchase and Sale Agreement by and between TH
Group, Inc. and ARV Assisted Living, Inc. dated as of March 2,
1998, incorporated by reference to Exhibit 10.5 to our 8-K
filed with the Securities and Exchange Commission on May 11,
1998.
10.6 Second Amendment to Purchase and Sale Agreement by and between
TH Group, Inc. and ARV Assisted Living, Inc. dated as of April
10, 1998, incorporated by reference to Exhibit 10.6 to our 8-K
filed with the Securities and Exchange Commission on May 11,
1998.
10.7 Purchase and Sale Agreement by and between The Hillsdale
Group, LP and ARV Assisted Living, Inc. dated as of February
12, 1998, incorporated by reference to Exhibit 10.7 to our 8-K
filed with the Securities and Exchange Commission on May 11,
1998.
10.8 Amendment to Purchase and Sale Agreement by and between The
Hillsdale Group, LP and ARV Assisted Living, Inc. dated as of
March 2, 1998, incorporated by reference to Exhibit 10.8 to
our 8-K filed with the Securities and Exchange Commission on
May 11, 1998.
10.9 Second Amendment to Purchase and Sale Agreement by and between
The Hillsdale Group, LP and ARV Assisted Living, Inc. dated as
of April 6, 1998, incorporated by reference to Exhibit 10.9 to
our 8-K filed with the Securities and Exchange Commission on
May 11, 1998.
10.10 Executive Employment Agreement, dated December 5, 1997, by and
between ARV Assisted Living, Inc. and Howard G. Phanstiel,
incorporated by reference to our 10-Q filed with the
Securities and Exchange Commission on August 14, 1998.
10.11 Amendment to Executive Employment Agreement, effective
December 5, 1997, by and between ARV Assisted Living,
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
Inc. and Howard G. Phanstiel, incorporated by reference to our
10-Q filed with the Securities and Exchange Commission on
August 14, 1998.
10.12 Executive Employment Agreement, as amended, dated June 1,
1998, by and between ARV Assisted Living, Inc. and Douglas M.
Pasquale, incorporated by reference to our 10-Q filed with the
Securities and Exchange Commission on August 14, 1998.
10.13 Employment Agreement, as amended, dated June 15, 1998, by and
between ARV Assisted Living, Inc. and Patricia J. Gifford, MD,
incorporated by reference to our 10-Q filed with the
Securities and Exchange Commission on August 14, 1998.
10.14 Loan and Security Agreement, dated November 16, 1998, by and
between Bayspring Village, LLC, Inn at Lakewood Development,
LLC, Laurel Ridge Development, LLC, Lynnbrooke - Irvine, LLC
and Finova Capital Corporation.
10.15 Master Loan and Security Agreement, dated October 30, 1998, by
and between Berkshire Renovation, LLC, Encino Renovation, LLC,
Rossmore Renovation, LLC and Finova Capital Corporation.
10.16 Schedule to Master Loan and Security Agreement, dated October
30, 1998, by and between Berkshire Renovation, LLC, Encino
Renovation, LLC, Rossmore Renovation, LLC and Finova Capital
Corporation.
10.17 Projected Cash Shortfall Protection Agreement, dated November
16, 1998, by and between ARV Assisted Living, Bayspring
Village, LLC, Inn at Lakewood Development, LLC, Laurel Ridge
Development, LLC, Lynnbrooke - Irvine, LLC, and Finova Capital
Corporation.
10.18 Projected Cash Shortfall Protection Agreement, dated November
16, 1998, by and between ARV Assisted Living, Berkshire
Renovation, LLC, Encino Renovation, LLC, Rossmore Renovation,
LLC and Finova Capital Corporation.
10.19 Purchase and Sale Agreement, dated March 19, 1999, by and
between ARV Assisted Living, Inc., Bella Vita ARV, Inc., Aspen
Amber Park, LLC, Aspen Bella Vita, LLC, Aspen Gayton Terrace,
LLC and Aspen Wyndham Lakes, LLC.
10.20 Separation and Mutual Release Agreement, dated March 23, 1999,
by and between Howard G. Phanstiel and ARV Assisted Living,
Inc.
10.21 Separation and Mutual Release Agreement, dated March 17, 1999,
by and between Sheila M. Muldoon and ARV Assisted Living,
Inc.
99.1 Complaint in ARV Assisted Living, Inc. v. Lazard Freres Real
Estate Investors LLC, et al., case no. 787788, incorporated by
reference to our 8-K filed with the Securities and Exchange
Commission on May 26, 1998.
</TABLE>
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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.
ARV ASSISTED LIVING, INC.
By: /s/ DOUGLAS M. PASQUALE
-------------------------------------
Douglas M. Pasquale
President and Chief Executive Officer
Date: April 30, 1999
Pursuant to the requirements of the Securities Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DOUGLAS M. PASQUALE President and Chief Executive Officer April 30, 1999
- -----------------------------------------------
Douglas M. Pasquale
/s/ ABDO H. KHOURY Senior Vice President and Chief April 30, 1999
- ----------------------------------------------- Financial Officer
Abdo H. Khoury
/s/ JOHN A. BOOTY Director April 30, 1999
- -----------------------------------------------
John A. Booty
/s/ DAVID P. COLLINS Director April 30, 1999
- -----------------------------------------------
David P. Collins
/s/ MAURICE J. DEWALD Director April 30, 1999
- -----------------------------------------------
Maurice J. DeWald
/s/ ROBERT P. FREEMAN Director April 30, 1999
- -----------------------------------------------
Robert P. Freeman
/s/ MURRY N. GUNTY Director April 30, 1999
- -----------------------------------------------
Murry N. Gunty
/s/ KENNETH M. JACOBS Director April 30, 1999
- -----------------------------------------------
Kenneth M. Jacobs
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2 Agreement and Plan of Merger, by and between ARV Assisted
Living, Inc. and ARV Delaware, Inc., incorporated by reference
to the Company's Proxy Statement for the 1997 Meeting of
Shareholders of ARV Assisted Living, Inc., filed with the
Securities and Exchange Commission on Schedule 14A on December
31, 1997.
3.1 Certificate of Incorporation of ARV Delaware, Inc.,
incorporated by reference to the Company's Proxy Statement for
the 1997 Meeting of Shareholders of ARV Assisted Living, Inc.,
filed with the Securities and Exchange Commission on Schedule
14A on December 31, 1997.
3.2 By-laws of ARV Delaware, Inc., as amended, incorporated by
reference to our 8-K filed October 21, 1998.
4.1 Rights Agreement, dated May 14, 1998, between ARV Assisted
Living Inc., and ChaseMellon Shareholder Services LLC which
includes the form of Certificate of Determination of the
Series D Junior Participating Preferred Stock of ARV Assisted
Living, Inc. as Exhibit A, the form of Right Certificate as
Exhibit B, and the Summary of Rights to Purchase Preferred
Shares as Exhibit C, incorporated by reference to our 10-Q
filed with the Securities and Exchange Commission on May 15,
1998.
4.2 First Amendment to the Right Agreement, dated October 21,
1998, by and between ARV Assisted Living Inc., and ChaseMellon
Shareholder Services LLC, incorporated by reference to our *-K
filed October 21, 1998.
10.1 Purchase and Sale Agreement by and between 270 Center
Associates, Limited Partnership and ARV Assisted Living, Inc.
dated as of February 12, 1998, incorporated by reference to
Exhibit 10.1 to our 8-K filed with the Securities and Exchange
Commission on May 11, 1998.
10.2 Amendment to Purchase and Sale Agreement by and between 270
Center Associated, Limited Partnership and ARV Assisted
Living, Inc. dated as of March 2, 1998, incorporated by
reference to Exhibit 10.2 to our 8-K filed with the Securities
and Exchange Commission on May 11, 1998.
10.3 Second Amendment to Purchase and Sale Agreement by and between
270 Center Associated, Limited Partnership and ARV Assisted
Living, Inc. dated as of April 10, 1998, incorporated by
reference to Exhibit 10.3 to our 8-K filed with the Securities
and Exchange Commission on May 11, 1998.
10.4 Purchase and Sale Agreement by and between TH Group, Inc. and
ARV Assisted Living, Inc. dated as of February 12, 1998,
incorporated by reference to Exhibit 10.4 to our 8-K filed
with the Securities and Exchange Commission on May 11, 1998.
10.5 Amendment to Purchase and Sale Agreement by and between TH
Group, Inc. and ARV Assisted Living, Inc. dated as of March 2,
1998, incorporated by reference to Exhibit 10.5 to our 8-K
filed with the Securities and Exchange Commission on May 11,
1998.
10.6 Second Amendment to Purchase and Sale Agreement by and between
TH Group, Inc. and ARV Assisted Living, Inc. dated as of April
10, 1998, incorporated by reference to Exhibit 10.6 to our 8-K
filed with the Securities and Exchange Commission on May 11,
1998.
10.7 Purchase and Sale Agreement by and between The Hillsdale
Group, LP and ARV Assisted Living, Inc. dated as of February
12, 1998, incorporated by reference to Exhibit 10.7 to our 8-K
filed with the Securities and Exchange Commission on May 11,
1998.
10.8 Amendment to Purchase and Sale Agreement by and between The
Hillsdale Group, LP and ARV Assisted Living, Inc. dated as of
March 2, 1998, incorporated by reference to Exhibit 10.8 to
our 8-K filed with the Securities and Exchange Commission on
May 11, 1998.
10.9 Second Amendment to Purchase and Sale Agreement by and between
The Hillsdale Group, LP and ARV Assisted Living, Inc. dated as
of April 6, 1998, incorporated by reference to Exhibit 10.9 to
our 8-K filed with the Securities and Exchange Commission on
May 11, 1998.
10.10 Executive Employment Agreement, dated December 5, 1997, by and
between ARV Assisted Living, Inc. and Howard G. Phanstiel,
incorporated by reference to our 10-Q filed with the
Securities and Exchange Commission on August 14, 1998.
10.11 Amendment to Executive Employment Agreement, effective
December 5, 1997, by and between ARV Assisted Living,
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
Inc. and Howard G. Phanstiel, incorporated by reference to our
10-Q filed with the Securities and Exchange Commission on
August 14, 1998.
10.12 Executive Employment Agreement, as amended, dated June 1,
1998, by and between ARV Assisted Living, Inc. and Douglas M.
Pasquale, incorporated by reference to our 10-Q filed with the
Securities and Exchange Commission on August 14, 1998.
10.13 Employment Agreement, as amended, dated June 15, 1998, by and
between ARV Assisted Living, Inc. and Patricia J. Gifford, MD,
incorporated by reference to our 10-Q filed with the
Securities and Exchange Commission on August 14, 1998.
10.14 Loan and Security Agreement, dated November 16, 1998, by and
between Bayspring Village, LLC, Inn at Lakewood Development,
LLC, Laurel Ridge Development, LLC, Lynnbrooke - Irvine, LLC
and Finova Capital Corporation.
10.15 Master Loan and Security Agreement, dated October 30, 1998, by
and between Berkshire Renovation, LLC, Encino Renovation, LLC,
Rossmore Renovation, LLC and Finova Capital Corporation.
10.16 Schedule to Master Loan and Security Agreement, dated October
30, 1998, by and between Berkshire Renovation, LLC, Encino
Renovation, LLC, Rossmore Renovation, LLC and Finova Capital
Corporation.
10.17 Projected Cash Shortfall Protection Agreement, dated November
16, 1998, by and between ARV Assisted Living, Bayspring
Village, LLC, Inn at Lakewood Development, LLC, Laurel Ridge
Development, LLC, Lynnbrooke - Irvine, LLC, and Finova Capital
Corporation.
10.18 Projected Cash Shortfall Protection Agreement, dated November
16, 1998, by and between ARV Assisted Living, Berkshire
Renovation, LLC, Encino Renovation, LLC, Rossmore Renovation,
LLC and Finova Capital Corporation.
10.19 Purchase and Sale Agreement, dated March 19, 1999, by and
between ARV Assisted Living, Inc., Bella Vita ARV, Inc., Aspen
Amber Park, LLC, Aspen Bella Vita, LLC, Aspen Gayton Terrace,
LLC and Aspen Wyndham Lakes, LLC.
10.20 Separation and Mutual Release Agreement, dated March 23, 1999,
by and between Howard G. Phanstiel and ARV Assisted Living,
Inc.
10.21 Separation and Mutual Release Agreement, dated March 17, 1999,
by and between Sheila M. Muldoon and ARV Assisted Living,
Inc.
99.1 Complaint in ARV Assisted Living, Inc. v. Lazard Freres Real
Estate Investors LLC, et al., case no. 787788, incorporated by
reference to our 8-K filed with the Securities and Exchange
Commission on May 26, 1998.
</TABLE>
<PAGE> 1
EXHIBIT 10.14
FINOVA
SCHEDULE TO MASTER
LOAN AND SECURITY AGREEMENT
BORROWER: BAY SPRING VILLAGE, LLC
INN AT LAKEWOOD DEVELOPMENT, LLC
LAUREL RIDGE DEVELOPMENT, LLC
LYNNBROOKE-IRVINE, LLC
ADDRESS: C/O ARV ASSISTED LIVING, INC.
245 FISCHER AVENUE, D-1
COSTA MESA, CALIFORNIA 92626
TAX I.D. NO.: SEE SECTION 9.16
DATED AS OF: NOVEMBER 16, 1998
This Schedule forms an integral part of the Master Loan and Security Agreement
between the above Borrowers and FINOVA Capital Corporation dated the above date,
and all references herein and therein to this "Agreement" shall be deemed to
refer to said Agreement and to this Schedule.
===============================================================================
TOTAL FACILITY (SECTION 1.1):
$51,000,000, which shall be divided into two
tranches, in the amounts of up to $45,000,000
("Loan B1") and up to $6,000,000 ("Loan B2"),
and which shall be further allocated among the
Borrowers as follows:
(a) Bay Spring - $10,700,000 from Loan B1
and $1,500,000 from Loan B2, inclusive
of a total Allocated Interest Reserve
Amount of $1,479,068 as of the date
hereof;
(b) Lakewood - $11,800,000 from Loan B1 and
$1,500,000 from Loan B2, inclusive of a
total Allocated Interest Reserve Amount
of $1,867,611 as of the date hereof;
(c) Laurel Ridge - $9,900,000 from Loan B1
and $1,500,000 from Loan B2, inclusive
of a total Allocated Interest Reserve
Amount of $1,519,029 as of the date
hereof; and
(d) Lynnbrooke - $11,600,000 from Loan B1
and $1,500,000 from Loan B2, inclusive
of a total Allocated Interest Reserve
Amount of $1,641,955 as of the date
hereof.
All references in this Agreement to the Loan shall mean and include all
outstanding amounts in respect of both Loan B1 and Loan B2.
1
<PAGE> 2
================================================================================
LOANS AND BORROWING TERM (SECTION 1.2):
The proceeds of the Loan shall be funded to Borrowers, up to the
amounts set forth in Section 1.1 above, and together with equity to be
contributed by the members of Borrowers, shall be used (i) to finance the
acquisition of undeveloped land and the construction of the following projects:
(A) a new 140 unit facility in Irvine, California, by Lynnbrooke; (B) a new 120
unit facility in Highlands Ranch, Colorado by Laurel Ridge; (C) a new 137 unit
facility in Lakewood, Colorado by Lakewood; and (D) a new 126 unit facility in
Barrington, Rhode Island by Bay Spring; and (ii) to pay closing costs, loan fees
and other costs incurred in connection with the Loan including, without
limitation, architectural and engineering reports, appraisal fees, and
attorneys' fees and expenses. Amounts advanced under the Loan shall be deemed
funded first from Loan B2, until any individual Borrower's allocated portion of
Loan B2 has been exhausted, and then under Loan B1. The Loan shall include a
reserve for capitalized interest (in the aggregate, the "Interest Reserve," and
as to each Borrower, the "Allocated Interest Reserve Amount") in the amounts
shown under the line items "Construction Interest " and "Lease Up Reserve" on
the Budget for each Borrower as most recently approved by FINOVA. Total Advances
of Loan B1 shall be subject to the further limitation that in no event shall the
total fundings made to any individual Borrower in respect of Loan B1 exceed
75.0% of the total acquisition, development and construction costs applicable to
the particular Facility to be owned and operated by such Borrower. The Borrowers
shall be required to have acquired each of the parcels of Real Property upon
which the Facilities are to be constructed by a date not later than December 31,
1998. Each of the Borrowers shall thereafter be permitted to request Advances of
the Loan proceeds allocated to such Borrower during a term of up to sixteen (16)
months from the date each Borrower acquires the parcel of Real Property upon
which its individual Facility is to be constructed.
================================================================================
CONDITIONS PRECEDENT (SECTION 2.1):
The obligation of FINOVA to make the initial Advance of any Loan hereunder is
subject to the fulfillment, to the satisfaction of FINOVA and its counsel, of
each of the following conditions, in addition to the conditions set forth in
Section 2.1 above. To the extent individual items relate to the Facilities or
the Collateral, such items shall be interpreted to refer solely to the
individual Facility to be acquired by an individual Borrower and the other
Collateral to be provided by such Borrower, on a Borrower by Borrower basis.
Such conditions are designated with an "*":
A. Appraisal.* FINOVA has received and approved an MAI stabilized fair
market value appraisal of each Facility, in a form and from an appraiser
satisfactory to FINOVA in its Permitted Discretion, which shall support a loan
to value ratio of not greater than eighty-five percent (85%), as determined by
reference to that portion of the Loan which as has been allocated to the
applicable Borrower. All such appraisals must be satisfactory to FINOVA, and
shall be dated not more than thirty (30) days prior to the Closing Date
applicable to the particular Borrower;
B. Management Agreements. FINOVA has received and approved the
Management Agreements. Without limiting the generality of the foregoing, the
amount of management fees payable to ARV by each Borrower shall be subject to
FINOVA's approval (such management fees as are approved by FINOVA being referred
to herein as the "Permitted Management Fees"). In addition, ARV shall have
entered into the Subordination Agreements with FINOVA, in form and substance
satisfactory to FINOVA, subordinating payment of the Permitted Management Fees
to repayment of the Borrower's Obligations to FINOVA, and providing for a
suspension of remedies on the part of ARV for periods during which an Event of
Default under the Loan Documents is in existence.
C. Food Plain/Earthquake.* FINOVA has received satisfactory evidence
that the Real Property is not located within a flood plain or earthquake zone or
that Borrower has federal flood insurance and earthquake insurance in an amount,
form and issuer acceptable to FINOVA.
D. Material Agreements and Licenses. FINOVA's satisfactory review of:
Equipment Leases and Operating/Capital Leases;
Most current financial statements with comparable from prior year; and
Three (3) years of projected operating budgets.
E. Cash Shortfall Protection. ARV shall have undertaken, for the benefit
of each Borrower and FINOVA, to bear the risk of (i) cost overruns during the
construction phase in excess of budgeted amounts and (ii) operating losses in
excess of projected operating losses, in each case as detailed in the Budget and
projections to be attached to the applicable Loan Documents (all such
2
<PAGE> 3
amounts as may hereafter arise being referred to as the "Projected Cash
Shortfalls"). ARV's assurance in this regard (the "Projected Cash Shortfall
Protection") shall be in form and substance satisfactory to FINOVA and shall be
specifically enforceable by FINOVA as a named third party beneficiary thereof.
ARV shall assure against Projected Cash Shortfalls in an aggregate amount of up
to $5,000,000. The foregoing amount will not be segregated among Borrowers, such
that each Borrower shall have the right to receive payments thereunder until the
full amount of ARV's assurance has been exhausted. Without limiting the
generality of FINOVA's right to be satisfied with the terms and conditions of
the Projected Cash Shortfall Protection, the Projected Cash Shortfall Protection
shall specifically provide that, if there exists any Event of Default under the
Loans, any payments owed by ARV shall be paid directly to FINOVA.
F. [INTENTIONALLY NOT USED.]
G. Interest Reserve. Evidence satisfactory to FINOVA that the amount
budgeted for the Interest Reserve shall be sufficient to pay interest, at the
applicable Interest Rate, on amounts outstanding from time to time from the date
of the first disbursement of the proceeds of the Loan through the projected
Conversion Date. FINOVA's acceptance and approval of each Borrower's Budget for
the construction period, if such Budget supports the sufficiency of the Interest
Reserve, shall be sufficient to satisfy this condition.
H. Equity Structure. FINOVA shall have reviewed and approved Borrower's
organizational documents and the ownership structure of Borrower.
I. Pending Litigation. FINOVA and its counsel shall have reviewed and
found satisfactory the status of any and all litigation matters affecting any
individual Borrower, one or more Borrowers as a group, ARV, or Vintage. Without
limiting the generality of the foregoing, ARV shall have provided FINOVA current
status reports with respect to its pending litigation with Emeritus Corporation
(the "Emeritus Litigation") and with respect to the matter of ARV Assisted
Living, Inc. v. Lazard Freres Real Estate Investors LLC, et al., Case Number
794211, Superior Court of the State of California for Orange County (the "Lazard
Litigation"). The status of all remaining matters as to the Lazard Litigation
and the Emeritus Litigation shall be satisfactory to FINOVA and its counsel in
all respects.
J. Other Indebtedness. No Borrower shall have any other outstanding
Indebtedness, other than in connection with trade payables incurred in the
ordinary course of business and not past due.
K. [INTENTIONALLY NOT USED.]
L. Contribution of Equity. The members of each Borrower shall have
contributed the necessary equity to provide sufficient funding for such Borrower
to have adequate resources (together with Loan proceeds) to pay for all items as
shown on the Budgets. The required equity for each Borrower, and for all
Borrowers together, shall have been contributed on or before the first Closing
Date applicable to any Borrower; provided, however, that upon request of the
Borrowers, FINOVA may permit the required equity contribution to designated
Borrowers to be deferred for a period of not more than thirty (30) days
following the initial Closing Date applicable to any Borrower (but in no event
subsequent to the Closing Date applicable to the particular Borrower involved),
and at the request of Bay Spring, the required equity as to Bay Spring may be
contributed immediately prior to the date any Advances under the Loan are made
by FINOVA to or for the benefit of Bay Spring (and such equity contribution
shall be a condition precedent to the first such Advance). The sum of each
Borrower's allocated portion of Loan B2 plus required equity contributions for
each of the Borrowers shall be not less than 25% of the total acquisition,
development and construction costs applicable to the particular Facility to be
owned and operated by such Borrower. All required equity contributions shall be
in cash; provided, however, that Vintage shall be permitted to receive credit
for the contribution of its development fee with respect to the various
Facilities (i.e., Vintage may allocate such fee directly to the various
Borrowers as its equity contribution, rather than being paid such fee in cash),
in an amount as to each Borrower to be approved by FINOVA, but in no event shall
the total equity contributed to all Borrowers in a non-cash form exceed, in the
aggregate $950,000.
M. Current Financial Statements and Projections.* Each Borrower shall
provide FINOVA with updated copies of such Borrower's operating budgets for the
first three (3) years of the term of the Loan, and Borrower's pro forma balance
sheet as of the Closing of such Borrower's allocated portion of the Loan.
Without limiting the generality of the foregoing, each set of projections shall
include a detailed analysis of "lease-up" period applicable to the particular
Facility and the anticipated point at which such Facility shall achieve a level
of Operating Cash Flow sufficient to satisfy the Debt Service Coverage Covenant
and Debt Service After Management Fee Coverage Covenant, each as set forth in
Section 10.14 herein.
3
<PAGE> 4
N. Regulatory Matters.* Review and approval of the regulatory scheme
having jurisdiction over assisted living communities in the states in which the
Facilities are located or are to be located, including FINOVA's review and
approval of FINOVA's ability to obtain a lien on Borrower's licenses necessary
for the operation of each of the Facilities as an assisted living community or
confirmation satisfactory to FINOVA that FINOVA will not need a lien on the
aforementioned license in order to operate any Facility for its intended
purposes through a licensed designee acceptable to FINOVA.
O. ARV's Financial Information. ARV shall provide FINOVA with copies of
its federal income tax returns for the years ended March 31, 1996, and March 31,
1997 (including all schedules and attachments thereto), its most recent audited
financial statements dated no later than December 31, 1997, and its interim
unaudited financial statements for the six month period ending June 30, 1998
(together with comparable information for the same portion of ARV's immediately
preceding fiscal year). Such information may be provided by ARV through delivery
of copies of ARV's most recent filings made with the SEC.
P. Residency Agreements. Satisfactory review and approval by FINOVA of
the form of residency agreement which Borrowers shall use in the operation of
the Facilities.
Q. Market Feasibility Studies.* Satisfactory review and approval by
FINOVA of a market feasibility study with respect to each Facility, which shall
indicate a need for the capacity represented by such Facility in its relevant
geographic market. Without limiting the generality of the foregoing, each market
feasibility study shall address, in addition to all competing projects currently
in operation, those competing projects under construction or otherwise in a
development stage and known to the public.
Borrower shall cause all of the conditions precedent set forth in Section 2.1 of
this Agreement and set forth above in this Schedule to be satisfied on or before
the Closing Date applicable to each Borrower.
================================================================================
INTEREST AND FEES (SECTION 3.1):
1. Interest Rate.
1.1 Loan B1. Interest shall accrue on Loan B1 at a variable rate per
annum equal to the Prime Rate plus one-half of one percent (0.50%) (the "Loan B1
Interest Rate"). The Prime Rate shall mean that rate of interest publicly
announced by Citibank, N.A., in New York, New York, as Citibank's base lending
rate to its most creditworthy commercial customers, notwithstanding the fact
that some persons may borrow at rates of interest less than the announced Prime
Rate. Changes in the Loan B1 Interest Rate shall take effect immediately upon
any change in the Prime Rate.
1.2 Loan B2. Interest shall accrue on Loan B2 at a fixed rate per annum
equal to eleven percent (11.0%) (the "Loan B2 Interest Rate").
2. Loan Fees. Each Borrower shall have paid to FINOVA a loan fee for the Loan in
the amount of one percent (1%) of the total Loan proceeds as are allocated to
such Borrower, as set forth in Section 1.1 above (the "Loan Fee"). Borrowers
acknowledge that the Loan Fee has been fully earned and is nonrefundable.
Payment of the Loan Fee shall be made concurrently with the execution and
delivery of this Agreement.
3. Conversion Fees. Each Borrower shall pay to FINOVA a fee (herein, the
"Conversion Fees") in the amount of one percent (1%) of the sum of (i) total
actual fundings to or for the benefit of such Borrower up through and including
the Conversion Date plus (ii) any remaining undisbursed portion of such
Borrower's Allocated Interest Reserve Amount, in consideration for FINOVA's
agreement to provide financing following completion of the construction phase,
which fees shall be payable by each such Borrower on the Conversion Date
applicable to its particular portion of the Loan. The Conversion Fees are
compensation to FINOVA in consideration of its agreement to fund the Loans
during and after the construction phases applicable thereto, and shall not be
applied against the outstanding principal, accrued interest, or any other
amounts owing to FINOVA with respect to the Loans.
4. Prepayment.
4.1 Voluntary, Full Prepayment. The Prepayment Premium shall be computed
as follows:
<TABLE>
<CAPTION>
Period Percent of the outstanding principal balance
of the Loan as of the Notice Date
-------------------------------------------
<S> <C>
First Loan Year 5%
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
Second Loan Year 4%
Third Loan Year 3%
Fourth Loan Year 1%
and thereafter
</TABLE>
4.2 Prepayment Upon Default. The Prepayment Premium payable in the case
of a prepayment upon an Event of Default and acceleration by FINOVA shall be as
set forth above.
4.3 Reduced Prepayment Events. Notwithstanding the provisions of
Paragraph 4.1 above, in the event that the Loan is prepaid in full on or after
the third anniversary of the last Closing Date applicable to any Borrower, and
such prepayments occur through the proceeds of long-term mortgage financing
which the applicable Borrowers or their affiliates have obtained from FINOVA
Realty Capital, Inc., or one or more of its affiliates, then the Prepayment
Premium shall be reduced from the amount set forth in Paragraph 4.1 above to
one-half of one percent (0.50%) of the principal amount being prepaid.
4.4 Limited Waiver of Prepayment Premium. In the event that any of the
Facilities, or the outstanding ownership interests in any Borrower, are acquired
by ARV (or an affiliate of ARV provided that such affiliate has the same or
greater financial strength and wherewithal as ARV) pursuant to those terms and
conditions in such Borrower's Articles of Organization (or in agreements entered
into directly between ARV and Vintage ABR Development) which provide ARV with
certain rights to acquire the Borrower or its Facility, no Prepayment Premium
required by Paragraph 4.1 above shall be payable in connection with any such
sale if either (x) ARV (or its affiliate) is able to prepay that portion of the
Loan as has been allocated to the applicable Borrower from ARV's (or such
affiliate's) available cash resources, without obtaining new financing secured
by the Facility owned by such Borrower (in which event the condition set forth
above requiring that such affiliate have the same or greater financial strength
and wherewithal as ARV shall be deemed satisfied), or (y) ARV (or its affiliate)
either (i) continues the existing financing with respect to the Loans, (ii)
obtains new financing through FINOVA or one of FINOVA's affiliates, or (iii)
gives FINOVA a first right of refusal to provide new financing as follows:
If ARV or its affiliate has received a bona fide offer from a third
party for such financing which ARV or its affiliate wishes to accept, ARV or its
affiliate shall give FINOVA written notice of such offer together with a copy of
a written bona-fide proposal for such financing from the prospective third party
lender. FINOVA shall have five (5) business days from the receipt of such notice
and proposal to issue a financing proposal to ARV or its affiliate to extend
such financing upon terms substantially equivalent to or better than those
contained in the proposal from the third party lender (it being understood
however that FINOVA has no obligation to issue such proposal). The failure of
FINOVA to issue a proposal within the foregoing five (5) business day period
shall be deemed an election by FINOVA not to extend such financing. Following
ARV or its affiliate's acceptance of the financing proposal issued by FINOVA,
FINOVA shall have fifteen (15) business days thereafter within which to issue a
commitment to ARV or its affiliate for such financing (it being understood
however that FINOVA has no obligation to issue such commitment). The failure of
FINOVA to issue such commitment within the foregoing fifteen (15) business day
time period shall be deemed an election by FINOVA not to extend such financing.
In addition, in the event FINOVA determines prior to the expiration of said
fifteen (15) business day period that FINOVA does not wish to commit to provide
such financing, FINOVA shall promptly notify ARV to that effect. If FINOVA
elects not to extend such financing, ARV or its affiliate shall have the right
to accept the financing proposal from the third party lender and close such
financing on terms which are in no material respect more favorable to the third
party lender than those contained in its proposal. ARV or its affiliate shall
not however have the right to close such financing with the third party lender
on terms materially more favorable to the third party lender than those
contained in the proposal from such third party lender, and be relieved of the
Prepayment Premium obligation, unless FINOVA is first given the right to provide
ARV or its affiliate with financing on terms substantially equivalent to or
better than those offered by such third party lender, as more fully provided
above. Nothing contained in this Paragraph 4.4 is intended or shall be construed
as limiting the potential obligation of any Borrower with respect to the Yield
Maintenance Fee described in Paragraph 8 of this Section 3.1.
4.5 Release Provision. Upon payment by any Borrower to FINOVA of all
amounts due and owing to FINOVA by such Borrower, as allocated to such Borrower
in the final Loan Documents (including, without limitation, any applicable
Prepayment Premium as required by this Paragraph 4 of this Section 3.1), such
Borrower shall be entitled to a release of such Borrower's Facility and of all
other Collateral which has been encumbered by such Borrower from the lien of
FINOVA's security interest in such assets; provided, however, that the foregoing
shall be subject to the provisions set forth in Section 13.1 of this Agreement
requiring the simultaneous prepayment in full of any outstanding Intra-Borrower
Loan in conjunction with the prepayment of its allocated Loan amount hereunder
by the applicable Over-Budget Borrower that incurred such Intra-Borrower Loan.
5
<PAGE> 6
5. Construction Monitoring Fee. Each Borrower shall pay FINOVA a construction
monitoring fee equal to $2,000 per month for the period commencing with the
Closing Date applicable to such Borrower and ending on such Borrower's
Conversion Date.
6. Interest Payments.
6.1 Loan B1. During the construction phase applicable to each of the
Facilities, and for a period of twelve (12) months after the completion of the
construction phase for each Facility, interest on the outstanding balance of
Loan B1 shall be payable monthly on the first day of each calendar month
following the first disbursement of proceeds under Loan B1, calculated at the
Loan B1 Interest Rate. The construction phase applicable to each Borrower shall
commence on such Borrower's Closing Date and shall run until the earlier to
occur of the date construction is actually completed and the last disbursement
of either Basic Retainage or Additional Retainage (as described in Section
2.3(c) hereof) occurs or the Required Completion Date. The earlier of such
events shall be referred to herein as the "Conversion Date." Prior to the
Conversion Date, interest on the outstanding balance of Loan B1 shall be payable
by each Borrower through advances made from such Borrower's Allocated Interest
Reserve Amount, so long as (i) no Event of Default exists and is continuing and
(ii) such Borrower's Allocated Interest Reserve Amount has not been fully drawn
upon. Following the Conversion Date, interest accruing during Borrower's twelve
month interest-only period shall be payable by Borrower first from Operating
Cash Flow, and thereafter from any remaining amounts in the such Borrower's
Allocated Interest Reserve Amount, to the extent such Borrower has experienced
an Available Operating Cash Flow Shortfall. The first monthly installment coming
due following expiration of the foregoing twelve (12) month interest only period
shall be referred to herein as the "Amortization Date."
6.2 Loan B2. Interest which accrues on Loan B2 during the first
twenty-four (24) months following the Closing Date shall be documented on a
quarterly basis in the form of non-interest bearing Promissory Notes (the "PIK
Notes") in favor of FINOVA, payable on the Maturity Date or upon the earlier
occurrence of a Triggering Event. Following the expiration of such 24-month
period, interest on the unpaid principal balance of Loan B2 (exclusive of the
PIK Notes) shall be payable monthly by Borrowers in cash.
7. Principal Payments.
7.1 Loan B1. Following completion of the interest-only period described
at the end of Paragraph 6.1 above, the principal balance of Loan B1 and all
accrued interest shall be paid in that number of monthly installments which is
equal to forty-eight (48) minus the number of monthly installments of interest
only which were paid through and including the Conversion Date (with the result
that the total term of Loan B1 applicable to each Borrower shall be sixty (60)
months). The final (i.e., sixtieth) monthly installment date with respect to
each Borrower shall be referred to herein as such Borrower's "Maturity Date."
Each installment of principal and interest shall be referred to herein as a
"Permanent Loan Installment." The Permanent Loan Installments under Loan B1
shall commence on the Amortization Date (i.e., the due date of the thirteenth
(13th) monthly installment following the Conversion Date), and shall continue on
the first day of each month thereafter, through but excluding the Maturity Date.
Other than for the Permanent Loan Installment due on the Maturity Date, each of
the Permanent Loan Installments shall be in an amount equal to the sum of (i)
interest calculated at the Loan B1 Interest Rate, plus (ii) a principal
component equal to the principal portion of a two hundred forty (240) month
amortization schedule, calculated based upon the Loan B1 Interest Rate and the
principal balance of Loan B1 outstanding on the Amortization Date. On the
Maturity Date, all remaining unpaid principal and any other sums due and owing
pursuant to each Borrower's obligations to FINOVA in respect of Loan B1, plus
all unpaid accrued interest on Loan B1, if not sooner paid, shall be due and
payable in full. The Closing Date, Conversion Date, Amortization Date, Start
Date, and Maturity Date applicable to each Borrower shall be separate and
distinct, and shall be determined solely by reference to such Borrower's
acquisition of its individual parcel of Real Property and the construction
schedule resulting from the construction of its Facility thereon. Effective as
of the Amortization Date applicable to each Borrower, no further Advances from
such Borrower's Allocated Interest Reserve Amount shall be made.
7.2 Loan B2. The entire unpaid principal balance of Loan B2 and any
other sums due and owing pursuant to each Borrower's obligations to FINOVA in
respect of Loan B2, including, without limitation, all unpaid accrued interest
on Loan B2, if not sooner paid, shall be due and payable in full on the Maturity
Date.
8. Yield Maintenance Fee. In consideration for FINOVA's agreement to fund Loan
B2, each of the Borrowers agrees to pay FINOVA a fee (the "Yield Maintenance
Fee"), upon the occurrence of any "Triggering Event" (as hereafter defined) in
an amount which is sufficient, when added to the sum of (i) that amount of
interest (inclusive of the full amount received by FINOVA upon payment of the
PIK Notes) paid by such Borrower with respect to such Borrower's portion of the
outstanding principal balance of Loan B2, plus (ii) that portion of the Loan Fee
which is allocable to such Borrower's portion of Loan B2 (on a dollar-for-dollar
pro rata basis calculated by reference to the committed proceeds allocated to
Loan B2), plus (iii) any Prepayment Premium paid in
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<PAGE> 7
accordance with Paragraph 4 of this Section 3.1 and attributable to such
Borrower's portion of Loan B2, to cause FINOVA's internal rate of return on the
$1,500,000 originally funded principal amount outstanding in respect of each
Borrower, calculated in accordance with accepted financial practice, to equal
17% per annum. For purposes of this provision, the following events shall
constitute "Triggering Events" under the Loan Documents: (i) the occurrence of
the Maturity Date applicable to such Borrower's portion of Loan B2, or the
earlier acceleration of the maturity of such Borrower's portion of Loan B2; (ii)
any prepayment or refinance of such Borrower's portion of the outstanding
balance of Loan B2; (iii) any sale, transfer, assignment or other disposition of
the ownership interests in any Borrower, with the result that ARV is no longer
the majority owner of such Borrower; and (iv) any Event of Default shall occur
with respect to the Loan (after giving effect to any applicable grace periods).
Upon the occurrence of any Triggering Event, the full amount of the Yield
Maintenance Fee shall become due and payable in full, and shall be secured by
all Collateral which has been pledged or encumbered in favor of FINOVA by
Borrowers, subject to the release provisions set forth in Paragraph 4.5 above.
The Yield Maintenance Fee shall be additional compensation to FINOVA in
consideration for the
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<PAGE> 8
funding of Loan B2, and shall not be applied against the outstanding principal,
accrued interest, or any other amounts owing to FINOVA in connection with Loan
B2.
================================================================================
REPORTING REQUIREMENTS (SECTION 5.2):
1. Borrower shall provide FINOVA with annual operating budgets (including income
statements, balance sheets and cash flow statements, by month) for the upcoming
fiscal year of Borrower within ninety (90) days prior to the end of each fiscal
year of Borrower.
2. Borrower shall provide FINOVA with copies of any notices from any public or
private entity having jurisdiction over the lawful operation of the Facilities,
within five (5) Business Days after receipt of same.
3. Borrower shall provide FINOVA with copies of any notices received from any
applicable licensure or certification authority with respect to the compliance
or non-compliance of the Facilities under applicable state or federal law,
including any notices of the pendency of any de-certification, de-licensure,
non-renewal of licensure or certification or any similar proceedings immediately
upon receipt.
4. Borrower shall provide FINOVA with copies of any notices, submissions or
other filings made by or on behalf of Borrower to the healthcare regulatory
agency for the state in which the Facilities are located or to any municipal
public health or safety agency pursuant to any applicable law, regulation or
ordinance with respect to operation of the Facilities as assisted living
communities.
5. Borrower shall provide FINOVA with comparisons showing Borrower's actual
operating results achieved for the then current fiscal year compared against
results projected in the last annual operating budget provided to FINOVA
pursuant to Paragraph 1 above.
6. Borrower shall provide promptly to FINOVA, or shall cause ARV to provide
directly to FINOVA, copies of all reports concerning the operation of the
Facilities which are prepared by ARV in accordance with the terms of the
Management Agreements.
7. Borrower shall provide to FINOVA copies of Borrower's federal income tax
returns (including all schedules and attachments thereto) concurrently with the
filing of each such return (but in no event later than the 15th day of the
seventh calendar month following the end of Borrower's fiscal year). In the
event Borrower files an extension for the time in which to file its federal
income tax return, Borrower shall provide to FINOVA a copy of such extension
request.
================================================================================
PERMITTED ENCUMBRANCES (SECTION 9.8):
Permitted Encumbrances shall mean:
1. Liens, security interests or other encumbrances for taxes, assessments and
other governmental charges or levies arising by operation of law in the ordinary
course of business for sums which are not yet due and payable, or such liens the
enforcement of which are, at all times, effectively and fully stayed and are
being contested in good faith by appropriate proceedings diligently conducted,
and for which reserves as required under GAAP shall have been established;
2. Liens arising in the ordinary course of business in respect of claims or
demands of landlords, carriers, warehousemen, vendors, mechanics, laborers,
materialmen, workers, repairmen and other similar Persons, whether arising by
operation of law, contractually or otherwise, provided that the amounts
respectively secured thereby are not past due or if past due, the enforcement of
any such liens are at all times stayed, and such liens are being contested in
good faith by appropriate proceedings diligently conducted and reserves as
required under GAAP shall have been established therefor;
3. Liens in favor of FINOVA; and
4. Those matters set forth on the attached Exhibit B.
8
<PAGE> 9
================================================================================
BORROWER INFORMATION (SECTION 9):
BAY SPRING VILLAGE, LLC
<TABLE>
<S> <C>
Borrower's State of Organization (Section 9.1): Delaware
Fictitious Names/Prior Names (Section 9.2): None
Borrower Locations (Section 9.16): See attached List of Collateral Locations
Pending Litigation: See attached Schedule of Pending Litigation
Federal Employer ID No.: 33-0824695
Fiscal Year End: December 31
INN AT LAKEWOOD DEVELOPMENT, LLC
Borrower's State of Organization (Section 9.1): Delaware
Fictitious Names/Prior Names (Section 9.2): None
Borrower Locations (Section 9.16): See attached List of Collateral Locations
Pending Litigation: See attached Schedule of Pending Litigation
Federal Employer ID No.: 33-0824699
Fiscal Year End: December 31
LAUREL RIDGE DEVELOPMENT, LLC
Borrower's State of Organization (Section 9.1): Delaware
Fictitious Names/Prior Names (Section 9.2): None
Borrower Locations (Section 9.16): See attached List of Collateral Locations
Pending Litigation: See attached Schedule of Pending Litigation
Federal Employer ID No.: 33-0824701
Fiscal Year End: December 31
LYNNBROOKE-IRVINE, LLC
Borrower's State of Organization (Section 9.1): Delaware
Fictitious Names/Prior Names (Section 9.2): None
Borrower Locations (Section 9.16): See attached List of Collateral Locations
Pending Litigation: See attached Schedule of Pending Litigation
Federal Employer ID No.: 33-0824705
</TABLE>
9
<PAGE> 10
Fiscal Year End: December 31
================================================================================
FINANCIAL COVENANTS (SECTION 10.14):
Borrower shall comply with all of the following covenants. Compliance shall be
determined as of the end of each quarter.
Debt Service Coverage Ratio: Maintain a ratio (the "Debt Service Coverage
Ratio") of Operating Cash Flow to Contractual Debt Service of no less than 1.25
to 1.0 (the "Debt Service Coverage Covenant"). The foregoing covenant shall be
tested quarterly commencing with the first calendar quarter following the "Start
Date" (as hereafter defined). The Start Date shall be the first day of the first
calendar month following the month in which the earlier of the following two
events occurs: (i) a Facility attains an occupancy level of ninety-two percent
(92%) or greater or (ii) a Borrower's actual operating results have achieved a
Debt Service Coverage Ratio at least equal to 1.25:1.0; provided, however, that
in the event the Start Date has not previously occurred, each of the following
shall become the Start Date for the applicable Borrowers: for Bay Spring, April
1, 2001; for Lakewood, June 1, 2001; for Laurel Ridge, May 1, 2001; and for
Lynnbrooke, May 1, 2001. For the first twelve (12) months following the Start
Date, the foregoing covenant shall be tested for the period from the Start Date
through the end of the relevant quarter. Thereafter, the Debt Service Coverage
Covenant shall be tested on a rolling and trailing 12-month basis.
Debt Service After Management Fee Coverage Ratio: Maintain a ratio (the "Debt
Service After Management Fee Coverage Ratio") of Post Management Fees Cash Flow
to Contractual Debt Service at all times equal to at least 1.15 to 1.0 (the
"Debt Service After Management Fee Coverage Covenant"). The foregoing covenant
shall be tested from and after the Start Date, with the same frequency, and in
the same manner, as the Debt Service Coverage Covenant.
Net Worth: Each Borrower shall maintain Net Worth in an amount not less than the
following amounts: Bay Spring - $_________; Lakewood - $__________; Laurel Ridge
- - $__________; and Lynnbrooke - $____________. The foregoing covenant shall be
tested at the end of each fiscal quarter of Borrower.
================================================================================
NEGATIVE COVENANTS (SECTION 11):
Capital Expenditures: No Borrower shall make or incur any capital expenditure
if, after giving effect thereto, the aggregate of all
capital expenditures made by such Borrower in any fiscal
year will exceed One Hundred Thousand Dollars
($100,000), provided, that to the extent any Borrower
makes any capital expenditures which are paid for
through additional invested equity, such expenditures
shall not be counted against the foregoing annual limit.
The foregoing covenant shall be tested annually, on a
fiscal year basis, commencing with the period following
the Conversion Date. Testing of the foregoing covenant
for the fiscal year in which the Conversion Date occurs
shall disregard the period prior to the Conversion Date,
and shall prorate the foregoing amount for the remaining
portion of such fiscal year. All capital expenditures
made by Borrower shall be made only out of Borrower's
internally generated funds or additional equity
invested.
Management Fees: Borrower shall not, during the term of the Loan, pay
management fees in excess of the Permitted Management
Fees during any fiscal year.
Distributions: No Borrower shall be permitted to pay dividends,
management fees (except for Permitted Management Fees),
capital distributions or other payments to its members
or other Persons (all of the foregoing, collectively
"Distributions") during the term of the Loan without
FINOVA's prior written consent, until the first month in
which such Borrower first achieves compliance with the
Debt Service Coverage Covenant. Thereafter, dividends
and capital distributions may be made quarterly in an
amount not in excess of the balance obtained when
Operating Cash Flow is reduced by the sum of Permitted
Management Fees and one hundred fifteen percent (115%)
of Contractual Debt Service, as pertaining to such
Borrower and such Facility. It shall however be a
condition to the making of such dividend or
distribution, that before and after taking into account
the payment of such dividend or distribution there does
not exist an Event of Default or Incipient Default. The
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<PAGE> 11
foregoing restrictions on dividends and
distributions shall apply to all equity contributed
as capital, whether contributed in the form of cash
or as foregone development fees.
The foregoing notwithstanding, each Borrower shall
be permitted to make quarterly Distributions ("Tax
Distributions") to its members in an amount
sufficient for the payment of federal and state
income taxes payable by such members resulting from
the inclusion in such members' taxable income of the
members' pro rata share of the income of the
Borrower, subject to reasonable assumptions as to
the marginal tax bracket to which the members of the
Borrower generally are subject. If, at the end of
the Borrower's fiscal year, there exists a tax
credit as a result of overestimated quarterly
distributions having been made (i.e., distributions
in excess of the amount ultimately required for such
members, on an aggregate basis, to pay the tax due
as a result of the inclusion in such members'
taxable income of the members' pro rata share of the
income of the Borrower), future quarterly tax
distributions shall cease until such credit has been
fully recaptured, unless the Borrower's Articles of
Organization provide for refund of excess
distributions or earlier recapture of such amounts.
The Borrower shall provide to FINOVA an annual
reconciliation of all quarterly tax distributions
compared against Borrower's final annual taxable
income and the final tax distributions determined
therefrom, no later than thirty (30) days after the
final determination of the Borrower's taxable income
is made; and
Additional Indebtedness: Without the prior written consent and approval of
- ----------------------- FINOVA, Borrower shall not modify the terms and
conditions of any existing or future debt or incur
any debt other than (i) unsecured trade debt
incurred in the ordinary course of business and
(ii) purchase money financing incurred in the
ordinary course of business which purchase money
financing shall not exceed Fifty Thousand Dollars
($50,000) in any one fiscal year.
================================================================================
CONSTRUCTION-RELATED COVENANTS, REPRESENTATIONS AND WARRANTIES:
1. Construction Loan Amount. FINOVA hereby agrees to make the
Advances to each Borrower in a principal sum not to exceed the amounts
set forth in Section 1.1 above, provided Borrower has complied with, and
subject to the terms and conditions of, this Agreement and all other
Loan Documents. Unless FINOVA, in its Permitted Discretion, agrees in
writing with Borrower to make such Advances thereafter on terms and
conditions satisfactory to FINOVA, Borrower shall not be entitled to
obtain Advances after the expiration of the Borrowing Term.
2. Use of Proceeds. Borrower shall use Advances (after the
initial Advance) only for payment of and reimbursement for hard and soft
construction costs and interest reserve set forth in the Budget and
designated as costs to be paid from the Loan proceeds. All Advances
shall be subject to the conditions and limitations of Sections 2.2 and
2.3 of the Agreement.
3. Initial Advance. The proceeds of the initial Advance shall be
disbursed by FINOVA on the Closing Date to or for the benefit of
Borrower for use in strict accordance with the Initial Advance
Disbursement Schedule attached hereto as Exhibit G.
4. No Prior Work. Borrower represents and warrants to FINOVA
that no services, work, equipment or materials of any kind that may give
rise to any mechanics or similar statutory lien, including, without
limitation, site work, clearing, grubbing, draining or fencing of the
Real Property has been performed or commenced on the Real Property or
otherwise provided in connection with the Work, except to the extent
that such services, work, equipment, materials have been fully disclosed
in writing to FINOVA and Title Company and the Title Policy insures the
priority of the Mortgage over all mechanics and similar liens.
5. Utilities. Borrower represents and warrants to FINOVA that
all utility services (including water, storm and sanitary sewer, gas,
electric and telephone facilities and garbage removal) necessary for the
Completion of the Work and the intended use of each of the Facilities as
an assisted living community are available to the Real Property (or will
be upon Completion); the suppliers of such utilities have the capacity
to serve the Real Property and are committed to supply such utilities in
such amounts as are required upon Completion; and all fees and deposits
due to the suppliers of such utilities have been paid current or amounts
adequate for such purposes have been reserved in the Budget.
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<PAGE> 12
6. FINOVA's Inspector. FINOVA shall employ an independent
architect or engineer ("FINOVA's Inspector") to: (a) review the Plans,
the Budget and the Construction Contracts; (b) make periodic inspections
of the Real Property and Work so that FINOVA may monitor whether
Borrower is in compliance with the terms and conditions of this
Agreement with respect to completion of the Work; and (c) review and
approve the monthly draw request, perform an analysis of the anticipated
cost of the Work, and certify that each Work-Related Advance Request is
not in excess of the Work completed and the amount to which Borrower is
entitled under the terms and conditions of this Agreement. The cost of
retaining FINOVA's Inspector shall be borne by Borrower.
6.1 FINOVA may require an inspection of the Work by
FINOVA's Inspector (a) prior to each Work-Related Advance; (b)
monthly or more frequently if deemed necessary by FINOVA during
the course of construction of the Work; (c) upon Completion of
the Work; and (d) at such other time as FINOVA may deem
necessary due to actual or suspected non-compliance with the
Plans, Construction Contract(s), the Loan Documents, any law,
regulation or private restriction, sound architectural,
engineering or construction principles or commonly accepted
safety standards or Borrower's failure to satisfy the
requirements of the Loan Documents.
6.2 FINOVA shall have no duty to supervise or to review
and inspect the Plans, the Construction Contract(s), any budget
proposed to be the Budget, the construction of the Work, or any
books and records pertaining thereto. Any inspection made by
FINOVA shall be for the sole purpose of determining whether the
Obligations are being performed and preserving FINOVA's rights
under the Loan Documents. If FINOVA, or FINOVA's Inspector
acting on behalf of FINOVA, should review or inspect the Plans,
the Construction Contract(s), the Budget, the construction of
the Work or any books and records pertaining thereto, FINOVA and
FINOVA's Inspector shall have no liability or obligation to
Borrower or any third person arising out of such inspection; and
neither Borrower nor any third person shall be entitled to rely
upon any such inspection or review. Inspection not followed by
notice of default shall not constitute (a) a waiver of any
default then existing; (b) an acknowledgment or representation
by FINOVA or FINOVA's Inspector that there has been or will be
compliance with the Plans, the Construction Contract(s), the
Budget, the Loan Documents, applicable laws, regulations and
private restrictions, sound construction, engineering or
architectural principles or commonly accepted safety standards,
or that the construction is free from defective materials or
workmanship; or (c) a waiver of FINOVA's right to insist that
Completion of the Work occur in accordance with the Plans,
Construction Contract(s), the Budget, Loan Documents, applicable
laws, regulations and restrictions of record, sound
construction, engineering or architectural principles or
commonly safety standards and free from defective materials and
workmanship. FINOVA and FINOVA's Inspector owe no duty of care
to Borrower or any third person to protect against, or inform
Borrower or any third person of, the existence of negligence,
faulty, inadequate or defective design or construction of the
Work.
6.3 To the extent that any construction with respect to
any Facility is funded by sources other than the Loan
contemplated herein (including Borrower's equity), Borrower
shall allow FINOVA's Inspector (at Borrower's expense) to review
and inspect such construction work and such construction work
must meet FINOVA's standards and specifications.
7. Enforcement of Contracts. Borrower shall strictly enforce all
material provisions of the Construction Contract, the Architect/Engineer
Agreement and all other contract(s) for the construction of the
Improvements to ensure that the other parties thereto are required to
promptly and diligently perform all of its obligations thereunder and in
such a manner as to preserve FINOVA's security in the Collateral and the
Facilities. Borrower shall timely perform all its obligations under the
aforementioned agreements and contracts. No material change, amendment
or modification shall be made to such contract(s) without the prior
written consent of FINOVA.
8. No Other Encumbrances. No materials, equipment, fixtures or
any other part of the Improvements, or articles of personal property
placed in the Facilities, shall be purchased or installed under any
security agreement or other arrangements wherein the seller reserves or
purports to reserve the right to remove or to repossess any such items
or to consider them personal property after their incorporation into the
Facilities.
9. Construction Commencement and Completion. Borrower shall
commence construction of the Improvements within 45 days following the
Closing Date, and shall continue the Work without material interruption,
and shall cause Completion on or before the Required Completion Date.
Borrower shall (a) permit no material deviations to occur in the
progress, timing or completion of construction of the Improvements; (b)
cause the Improvements to be
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<PAGE> 13
constructed in accordance with the Budget; (c) otherwise abide by the
Work Progress Schedule and Budget in all respects; and (d) cause the
Completion of the Work in a good and workmanlike manner substantially
according to the Plans, free from all legal charges, encumbrances and
rights of third parties (other than the Permitted Encumbrances), and in
accordance with all applicable ordinances and statutes, including zoning
laws, all covenants, conditions and restrictions running with the land,
and all regulations and building codes of any governmental or municipal
agency having jurisdiction over the Real Property.
10. Assurances. Borrower shall pay when due all costs, expenses
and claims pertaining to the Work and deliver to FINOVA during the
course of the Work in order to monitor and/or provide assurance that the
Work is proceeding lien free in accordance with the requirements of this
Agreement: bills of sale, conveyances and paid invoices pertaining to
the Work; all waivers and releases of lien or claims on the Real
Property and/or the Improvements on account of the Work FINOVA may deem
necessary or may request for its protection; and from persons acceptable
to FINOVA, additional engineering or architectural studies and reports
as FINOVA or FINOVA's Inspector may require.
11. Plans and Specifications. The Work shall be completed
substantially in accordance with the final drawings, plans and
specifications which have been approved by FINOVA (the "Plans") prepared
by the Architect(s)/Engineer(s), as approved by FINOVA, Construction
Contract(s), applicable laws, regulations and private restrictions, the
Loan Documents, sound construction, engineering and architectural
principles and commonly accepted safety standards and free from
defective materials and workmanship. No material changes, alterations or
modifications shall be made in the Plans or in any of the other
Principal Work-Related Items without FINOVA's prior written approval.
The foregoing notwithstanding, Borrower shall be permitted to make
changes in the Plans to the extent that such change order (a) does not
increase the cost of the Work by more than Ten Thousand Dollars
($10,000) or, with all other changes, does not increase the cost of the
Work by more than One Hundred Thousand Dollars ($100,000), and (b) does
not materially affect the design, structural integrity or quality of the
Improvements. Borrower shall deliver to FINOVA, immediately upon
execution thereof, all change orders with respect to the Work including
those within the scope of clauses (a) and (b) above.
12. Other Contracts. Borrower shall not enter into any
Architect/Engineer Agreement or Construction Contract (other than those
contracts and agreements which FINOVA approved prior to the Closing
Date) with respect to the Work except upon terms and with such parties
as FINOVA may approve in writing.
13. Notice of Commencement. Borrower shall record all notices of
commencement/completion and similar notices permitted by applicable laws
and regulations which have the effect of shortening periods within which
mechanics and similar liens may be filed.
14. Delivery of Contracts. Borrower shall deliver to FINOVA true
and complete copies of all Principal Work-Related Items and all other
Contracts, Intangibles, Licenses and Permits.
15. Borrower's Performance. Borrower shall perform all its
obligations and preserve its rights under the Principal Work-Related
Items in force and secure the performance of the other parties to the
Principal Work-Related Items and all other Contracts, Intangibles,
Licenses and Permits.
16. Endorsements. Borrower shall deliver to FINOVA prior to or
concurrently with each Work-Related Advance, a date down endorsement in
a form acceptable to FINOVA issued by the Title Company insuring that
the Mortgage at the time of each Work-Related Advance, constitutes a
valid first lien upon the Real Property or title, subject only to the
Permitted Encumbrances; upon construction of the foundation for any
building comprising part of the Improvements deliver to FINOVA an
endorsement ("foundation endorsement") insuring that the foundations, as
constructed, are located within all set-back and boundary lines of the
Real Property and do not encroach upon any easements, rights of way
(public or private) or upon any other adjoining landowner's property;
and upon the final advance of the retainage, Borrower shall deliver, or
cause Title Agent to deliver, to FINOVA a date down endorsement or a
re-issued title policy ("Re-Issued Title Policy") meeting the
substantive requirements set forth above.
17. Cost Overruns. Borrower shall notify FINOVA in writing if
and when the unpaid costs of Completion of the Work exceeds or appears
likely to exceed the undisbursed portion of the Loan and any undisbursed
Required Completion Assurance Deposit(s) held by FINOVA.
18. Additional Surveys. Borrower shall deliver to FINOVA
promptly after the completion of the foundation and, if required by
FINOVA, after the pouring of a street, curbstone or concrete slab on the
Real Property, a survey prepared
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<PAGE> 14
in accordance with the requirements of Section 2.1(m) of the Agreement,
showing such Improvements, their location within Real Property lines and
set back lines and a lack of encroachments, and deliver to FINOVA
promptly upon the Completion, a survey which is certified to FINOVA,
showing the "as-built" Improvements and showing all easements and other
matters affecting the Real Property, and otherwise satisfying the
requirements of Section 2.1(m) of the Agreement;
19. Defects in Work. Borrower shall, after obtaining knowledge
or receiving notice thereof, correct or cause to be corrected (a) any
material defect in the Work, (b) any material departure in the
completion of the Work from the Plans and the Construction Contract(s)
unless expressly permitted in this Agreement or consented to in writing
by FINOVA, (c) any failure of the Work to comply with applicable laws,
regulations or restrictions of record, sound construction, engineering
or architectural principles or commonly accepted safety standards or (d)
any encroachment of any part of the Improvements on any set-back or
boundary line, easement, or other restricted area.
20. Notice of Defects. Borrower shall promptly deliver to FINOVA
any and all notices received by Borrower that it is not complying with
applicable laws, regulations and private restrictions pertaining to the
Work or that the Work is not being completed in accordance with the
Plans, the Construction Contract(s), sound construction, engineering and
architectural principles and commonly accepted safety standards.
21. Safeguarding Materials. Borrower shall cause all materials
supplied for or intended to be utilized in the Completion of the Work,
but previously not affixed to or incorporated into the Improvements, to
be stored on the Real Property with adequate safeguards, to prevent
loss, theft, damage or commingling with other materials.
22. Building Permits. Borrower shall, promptly after receipt by
Borrower, deliver to FINOVA copies of all building permits and
certificates of acceptance and/or occupancy relating to the Work.
23. Required Completion Assurance Deposit Assurances. If at any
time the remaining costs which must be incurred before Completion can
occur ("Completion Costs") are more than the committed and undisbursed
portion of the Loan, and in any event within ten (10) days after
FINOVA's demand that it do so, Borrower shall deliver to FINOVA cash
deposits equal to the shortfall (the "Required Completion Assurance
Deposits"). In the event of any dispute, the necessity for an amount of
any Required Completion Assurance Deposit shall be determined by FINOVA
in its Permitted Discretion based upon the approved Budget and the
advice of FINOVA's Inspector. The Required Completion Assurance Deposits
shall be deposited in a separate interest bearing account for the
benefit of Borrower. FINOVA shall disburse the Required Completion
Assurance Deposits to pay and/or reimburse Borrower for the cost of the
Work prior to any further disbursement of Loan proceeds for such
purposes, but subject to the terms and conditions of the Loan Documents.
================================================================================
ADDITIONAL PROVISIONS:
1. Intermediaries. Borrower represents and warrants to FINOVA that it has
not engaged or dealt in any way with any broker in connection with the
transactions contemplated by this Agreement. Borrower shall pay, and
FINOVA shall have no liability for and shall be held harmless by
Borrower against any liabilities in respect of, any commission or other
amounts claimed by or payable to any broker. The terms of this paragraph
shall survive the Closing and any termination of this Agreement.
[SIGNATURES ON FOLLOWING PAGES.]
14
<PAGE> 15
SCHEDULE TO MASTER LOAN AND SECURITY AGREEMENT SIGNATURE PAGE
Borrower:
BAY SPRING VILLAGE, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a
Delaware corporation, Manager
/s/ Todd W. Smith By: /s/ Sheila M. Muldoon
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Development),
LLC, a Delaware limited liability
company, Manager
/s/ Todd W. Smith By: /s/ Thomas R. Burton
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Thomas R. Burton
Manager
/s/ Todd W. Smith By: /s/ Eric K. Davidson
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Eric K. Davidson
Manager
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- ----------------------------------
15
<PAGE> 16
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- --------------------------
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- --------------------------
16
<PAGE> 17
INN AT LAKEWOOD DEVELOPMENT, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a
Delaware corporation, Manager
/s/ Todd W. Smith By: /s/ Sheila M. Muldoon
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Development),
LLC, a Delaware limited liability
company, Manager
/s/ Todd W. Smith By: /s/ Thomas R. Burton
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Thomas R. Burton
Manager
/s/ Todd W. Smith By: /s/ Eric K. Davidson
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Eric K. Davidson
Manager
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
17
<PAGE> 18
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
18
<PAGE> 19
LAUREL RIDGE DEVELOPMENT, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a
Delaware corporation, Manager
/s/ Todd W. Smith By: /s/ Sheila M. Muldoon
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Development),
LLC, a Delaware limited liability
company, Manager
/s/ Todd W. Smith By: /s/ Thomas R. Burton
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Thomas R. Burton
Manager
/s/ Todd W. Smith By: /s/ Eric K. Davidson
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Eric K. Davidson
Manager
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
19
<PAGE> 20
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
20
<PAGE> 21
LYNNBROOKE-IRVINE, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a
Delaware corporation, Manager
/s/ Todd W. Smith By: /s/ Sheila M. Muldoon
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Development),
LLC, a Delaware limited liability
company, Manager
/s/ Todd W. Smith By: /s/ Thomas R. Burton
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Thomas R. Burton
Manager
/s/ Todd W. Smith By: /s/ Eric K. Davidson
- ---------------------------------- ---------------------------------
Name: Todd W. Smith Eric K. Davidson
Manager
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
21
<PAGE> 22
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- ---------------------
8/2/99
THE STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
On this 17th day of November, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Vicki Rae Stump
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
8/2/99
- -----------------------------
FINOVA:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Anne M. McNeil
----------------------------
Vice President
22
<PAGE> 23
SCHEDULE TO LOAN AND SECURITY AGREEMENT
LIST OF COLLATERAL LOCATIONS
23
<PAGE> 24
SCHEDULE TO THE LOAN AND SECURITY AGREEMENT
PENDING LITIGATION MATTERS:
BAY SPRING - NONE
LAKEWOOD - NONE
LAUREL RIDGE - NONE
LYNNBROOKE - NONE
<PAGE> 25
EXHIBIT A
REAL PROPERTY
3
<PAGE> 26
EXHIBIT A-1
LEGAL DESCRIPTION OF PROPERTY
LEGAL DESCRIPTION OF PROPERTY
(BAY SPRING VILLAGE, LLC)
That certain tract or parcel of land with all the buildings and improvements
thereon, situated at the intersection of the northeasterly line of Bay Spring
Avenue with the southeasterly line of Narragansett Avenue, in the Town of
Barrington, County of Bristol, State of Rhode Island, bounded and described as
follows:
Beginning at a point at the intersection of the northeasterly line of Bay Spring
Avenue with the southeasterly line of Narragansett Avenue, said point being the
most westerly corner of the within described parcel; thence running
northeasterly bounding northwesterly on Narragansett Avenue a distance of five
hundred fifty-four and 29/100 (554.29) feet to land now or formerly of the Rhode
Island Metropolitan Park; thence turning an interior angle of 93 degrees28'05"
and running in a general easterly direction bounding northerly on last named
land a distance of three hundred eighty-eight and 59/00 (388.59) feet to a
granite bound, and land now formerly of Mark D. and Joann Stevens; thence
turning an interior angle of 86 degrees33'15" and running southwesterly bounding
southeasterly in part on last named land, in part on land now or formerly of
Jones P. and Pamela A. Nituni, in part on land now or formerly of Joseph R.
Miller, in part on land now or formerly of Douglas and Christine DiOrio, in part
on land now or formerly of Manual C. and Debra T. Roque, a distance of three
hundred seventy-seven and 84/100 (377.84) feet to an angle and an iron rod set
fence post; thence turning an interior angle of 270 degrees and running
southeasterly bounding northeasterly on last named land a distance of five (5)
feet to an angle and an iron rod set fence post; thence turning an interior
angle of 90 degrees and running southwesterly bounding southeasterly in part on
last named land, in part on land now or formerly of Edward W. Barlow, and in
part on land now or formerly of Christopher B. and Therese E. Stevens, a
distance of one hundred ninety-nine and 96/100 (199.96) feet to Bay Spring
Avenue; thence turning an interior angle of 89 degrees58'40" and running
northwesterly bounding southwesterly on Bay Spring Avenue a distance of three
hundred ninety-three and 10/100 (393.10) feet to Narragansett Avenue and the
point and place of beginning. The last described line and the first described
line form an interior angle of 90 degrees00'00".
Together with rights appurtenant set forth in Book 18 at page 457 of the
Barrington Land Evidence Records, insofar as they affect the above described
premises.
4
<PAGE> 27
EXHIBIT A-2
LEGAL DESCRIPTION OF PROPERTY
(INN AT LAKEWOOD DEVELOPMENT, LLC)
A PARCEL OF LAND LOCATED IN THE EAST ONE-HALF OF THE NORTHEAST ONE-QUARTER OF
SECTION 14, TOWNSHIP 4 SOUTH, RANGE 69 WEST OF THE 6TH PRINCIPAL MERIDIAN,
COUNTY OF JEFFERSON, STATE OF COLORADO, BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS: (FOR THE PURPOSE OF THIS LEGAL DESCRIPTION THE EAST LINE OF SAID
SECTION 14 BEARS SOUTH 00 DEGREES 02 MINUTES 52 SECONDS EAST)
BEGINNING AT THE NORTHEAST CORNER OF SAID SECTION 14;
THENCE SOUTH 00 DEGREES 02 MINUTES 52 SECONDS EAST ALONG THE EAST LINE OF SAID
SECTION 14, A DISTANCE OF 1190.87 FEET TO THE TRUE POINT OF BEGINNING;
THENCE CONTINUING SOUTH 00 DEGREES 02 MINUTES 52 SECONDS EAST ALONG SAID EAST
LINE, A DISTANCE OF 948.59 FEET; THENCE SOUTH 89 DEGREES 34 MINUTES 23 SECONDS
WEST PARALLEL WITH THE NORTH LINE OF SAID SECTION 14, A DISTANCE OF 180.26 FEET
TO THE SOUTHEAST CORNER OF VILLA ITALIA SHOPPING CENTER SUBDIVISION;
THENCE NORTH 00 DEGREES 04 MINUTES 08 SECONDS WEST ALONG THE EASTERLY LINE OF
SAID SUBDIVISION, A DISTANCE OF 814.65 FEET;
THENCE NORTH 89 DEGREES 34 MINUTES 05 SECONDS EAST ALONG SAID EASTERLY LINE, A
DISTANCE OF 0.61 FEET; THENCE NORTH 00 DEGREES 04 MINUTES 08 SECONDS WEST ALONG
SAID EASTERLY LINE, A DISTANCE OF 133.94 FEET; THENCE DEPARTING SAID EASTERLY
LINE NORTH 89 DEGREES 34 MINUTES 23 SECONDS EAST PARALLEL WITH THE NORTH LINE OF
SAID SECTION 14, A DISTANCE OF 180.00 FEET, MORE OR LESS, TO THE TRUE POINT OF
BEGINNING,
5
<PAGE> 28
EXHIBIT A-3
LEGAL DESCRIPTION OF PROPERTY
(LAUREL RIDGE DEVELOPMENT, LLC)
PARCEL A:
LOT 3B, HIGHLANDS RANCH FILING NO. 26 - 1ST AMENDMENT, COUNTY OF DOUGLAS,
STATE OF COLORADO.
PARCEL B:
THE RIGHTS AND BENEFITS AS CONTAINED IN RECIPROCAL ACCESS AND DRIVEWAY EASEMENT
AGREEMENT (TO BE RECORDED) AND THAT CERTAIN TERMINATION AND GRANT OF EASEMENTS
AGREEMENT RECORDED FEBRUARY 7, 1986 IN BOOK 623 AT PAGE 43 AND 63.
6
<PAGE> 29
EXHIBIT A-4
LEGAL DESCRIPTION OF PROPERTY
(LYNNBROOKE-IRVINE, LLC)
ALL THAT CERTAIN LAND SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ORANGE,
CITY OF IRVINE, AND IS DESCRIBED AS FOLLOWS:
PARCEL A:
PARCEL 2 OF PARCEL MAP NO. 91-255 AS SHOWN ON A MAP FILED IN BOOK 277, PAGES
22 AND 23 OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA.
PARCEL B:
AN EASEMENT FOR INGRESS AND EGRESS OVER THAT PORTION OF PARCEL 7, AS SHOWN ON A
MAP FILED IN BOOK 135, PAGES 11 TO 15 INCLUSIVE, OF PARCEL MAPS, IN THE OFFICE
OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF SAID PARCEL 7; THENCE NORTH 16
degrees10'48" EAST 87.00 FEET ALONG THE EASTERLY LINE OF SAID PARCEL 7; THENCE
AT RIGHT ANGLES TO SAID EASTERLY LINE, NORTH 73 degrees49'12" WEST 18.00 FEET;
THENCE SOUTH 16 degrees10'48" WEST 74.24 FEET TO THE BEGINNING OF A CURVE
CONCAVE WESTERLY HAVING A RADIUS OF 24.00 FEET; THENCE SOUTHERLY ALONG SAID
CURVE THROUGH A CENTRAL ANGLE OF 32 degrees17'28" AN ARC DISTANCE OF 13.53 FEET
TO A POINT ON THE SOUTHERLY LINE OF SAID PARCEL 7, SAID POINT BEING ON A
NON-TANGENT CURVE CONCAVE SOUTHERLY HAVING A RADIUS OF 3602.00 FEET. A RADIAL
LINE TO SAID POINT BEARS NORTH 15 degrees50'50" EAST; THENCE EASTERLY ALONG SAID
CURVE THROUGH A CENTRAL ANGLE OF 0 degrees20'43" AN ACR DISTANCE OF 21.71 FEET
TO THE POINT OF BEGINNING.
7
<PAGE> 30
EXHIBIT B
PERMITTED ENCUMBRANCES
8
<PAGE> 31
LIST OF CONSTRUCTION LOAN EXHIBITS
Exhibit C Budget
Exhibit D Work Progress Schedule
Exhibit E Standard Construction Loan and Administrative
Procedures (Work-Related Advance)
Exhibit F-1 AIA 702 and 703 Forms
Exhibit F-2 Affidavit of Borrower
Exhibit F-3 Waiver of Liens
Exhibit F-4 Change Order Approval Request (AIA Document G713)
Exhibit G Initial Advance Disbursement Schedule
9
<PAGE> 32
EXHIBIT C
Budget
<PAGE> 33
EXHIBIT D
Work Progress Schedule
<PAGE> 34
EXHIBIT E
FINOVA CAPITAL CORPORATION ("Lender")
STANDARD CONSTRUCTION LOAN
ADMINISTRATIVE PROCEDURES
INITIAL AND SUBSEQUENT LOAN ADVANCE
REQUIREMENTS AND EVENTS
A. With each Work-Related Advance Request Borrower must
complete, execute and deliver to Lender:
1. An Application and Certificate For Payment (AIA
Document G702) and Continuation Sheet(s) (AIA
Document G703) for all direct costs (Exhibit F-1).
2. Affidavit of Borrower for Advance (Exhibit F-2).
3. Waiver of Liens (Exhibit F-3) or such form as is
required by law for previous payment.
4. Change Order Approval Request (AIA Document G713)
when applicable (Exhibit F-4).
5. Invoices supporting all amounts shown in columns E
and F of AIA Document G702 and G703.
6. Any required surveys.
7. Such other items as Lender requests which are
necessary to evaluate the request for the
Work-Related Advance and the satisfaction of the
conditions precedent thereto.
B. The following events must take place prior to each
Work-Related Advance:
1. Contractor requests site inspection from Lender's
Inspector.
2. Contractor provides Lender's Inspector with a copy
of the AIA Document G702 and G703.
3. Lender's Inspector will perform a physical
inspection to review the work in place and make a
certification and recommendation to Lender.
Lender's Inspector forwards his report,
certification and recommendation to Lender.
4. Lender will request that the Title Agent review the
public records, advise Lender of the same, and
forward to Lender endorsement(s) as required
pursuant to the Loan and Security Agreement
(herein, the "Loan Agreement"), such endorsements
to be dated as of the date of Work-Related Advance.
5. Lender will review the Work-Related Advance Request
and input of Lender's Inspector of the Title Agent.
The Work-Related Advance Request must be
appropriate, complete and in proper order. The
order of the Work-Related Advance Request package
will determine the processing time needed.
<PAGE> 35
6. Borrower shall have all applicable licenses,
permits and certificates for all Work under
construction at the time the Work-Related Advance
was requested.
7. All other conditions of the Loan Documents are
satisfied.
C. Upon receipt from Lender (or Title Agent, if applicable),
Borrower will execute and deliver to Lender a funding letter in connection with
the Work-Related Advance.
D. All items, except for the escrow funding letter required to be
delivered to Lender pursuant to this Exhibit shall be delivered to Lender and
Lender's Inspector at least ten (10) Business Days prior to the requested
Work-Related Advance.
2
<PAGE> 36
EXHIBIT F-1
AIA 702 and 703 Forms
<PAGE> 37
EXHIBIT F-2
BORROWER'S AFFIDAVIT FOR ADVANCE
Borrower:_____________________________________ Date:________________
Project:______________________________________
Request No.:_________________
Loan No.:_____________________Period________________to___________________
Amount:______________________
In connection with and in order to induce FINOVA Capital Corporation
("Lender"), to advance the amount requested above, Borrower hereby represents,
warrants and stipulates as follows:
1. The work listed in this Work-Related Advance Request Package
("Request") has been completed in accordance with the Loan and Security
Agreement dated ____________________ between the undersigned and Lender (with
any amendments, the "Loan Agreement"); all obligations for work submitted and
received on previous Borrower's Work-Related Advance Request have now been paid
in full (except for retainage); the funds requested at this time shall be
applied only to the obligations for work set forth in this Request and that all
insurance policies (including without limitation, Builder's Risk and General
Liability Coverage policies) required by the Loan Agreement are in full force
and effect.
2. Attached hereto are the names of all contractors, subcontractors,
suppliers and materialmen who have performed or who will be performing Work and
whose names have not been previously delivered to Lender in writing. Copies are
attached hereto of contracts with all such contractors, subcontractors,
suppliers and materialmen whose contracts are required to be, but have not yet
been, delivered to Lender pursuant to the terms of the Loan Agreement.
3. All Work performed is in substantial accordance with the approved
Plans and no changes have been made in the approved Plans, except as are
permitted pursuant to the Loan Agreement or have been previously approved in
writing by Lender.
4. The amounts and percentages set forth on the attached schedules,
along with supporting documentation for each budgeted item and the Balance To
Finish in accordance with the AIA Document G702 and G703 are true and correct to
the best of Borrower's knowledge.
5. The following are included as part of this Request:
Application and Certificate for Payment (AIA G702)
Continuation Sheets (AIA G703)
Request for Advance - Indirect Costs
Check Sheet Form
6. No material adverse change has occurred in the Improvements or, since
the date of the latest financial statements given by or on behalf of Borrower to
Lender, in the financial condition of Borrower or in Borrower's business or
operations.
7. All representations and warranties by Borrower contained in the Loan
Documents are true and correct as of the date hereof.
<PAGE> 38
8. No Event of Default, or no act or event which after notice and/or
lapse of time would constitute an Event of Default, has occurred and is
continuing.
9. Borrower has complied with all other agreements or conditions
required by the Agreement to be performed or complied with prior to or at the
date of the requested Advance.
10. Capitalized terms not otherwise defined herein shall have the
meaning given to them in the Loan Agreement.
Very truly yours,
By:
---------------------------------
Name:
Title:
5
<PAGE> 39
EXHIBIT F-3
Release of Lien
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
________________________________ for and in consideration of the sum of
___________________ Dollars (US $___________) lawful money of the United States
of America, to the undersigned in hand paid, the receipt whereof is hereby
acknowledged, does hereby waive, release, remise and relinquish the
undersigned'/s right to claim, demand, impress or impose a lien or liens in the
sum of ___________________ Dollars ($__________) for materials furnished (or any
other kind or class of lien whatsoever) up to the _____ day of
__________________, 199__, on the following described property:
[Legal Description]
Dated this ______ day of ______________, 199__, at
______________________ County, California.
LIENOR'S NAME
By:_______________________________
Authorized Representative
<PAGE> 40
EXHIBIT F-4
Change Order Approval Request AIA G713
<PAGE> 41
EXHIBIT G
Initial Advance Disbursement Schedule
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FINOVA LOAN AND SECURITY AGREEMENT
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Exhibit 10.15
FINOVA
MASTER LOAN
AND SECURITY AGREEMENT
BORROWER: BERKSHIRE RENOVATION, LLC
ENCINO RENOVATION, LLC
ROSSMORE RENOVATION, LLC
ADDRESS: c/o ARV ASSISTED LIVING, INC.
245 FISCHER AVENUE, D-1
COSTA MESA, CALIFORNIA 92626
TAX ID NO.: SEE SCHEDULE, SECTION 9.16
DATED AS OF: OCTOBER 30, 1998
THIS MASTER LOAN AND SECURITY AGREEMENT ("Agreement") dated the date set forth
above, is entered into by and between the borrowers named above (individually, a
"Borrower," and collectively, the "Borrowers"), whose primary addresses are as
set forth on the Schedule, and who may be given notice at the address set forth
above, and FINOVA CAPITAL CORPORATION ("FINOVA"), whose address is 311 South
Wacker Drive, Suite 4400, Chicago, Illinois 60606, for the purpose of financing
the acquisition by each of the above Borrowers of an assisted living community
(hereinafter referred to collectively as the "Facilities") and the construction
of certain improvements and upgrades to each Facility's physical plant. As used
herein, the terms "Borrower" and "Borrowers" shall mean and apply to each of the
above-referenced entities, both individually and collectively. As a result, any
provision of this Agreement which imposes an affirmative obligation on Borrower
or Borrowers to perform some duty or obligation shall apply equally to all
entities comprising Borrower, and each provision hereof imposing a negative
restriction obligating Borrower or Borrowers to avoid or refrain from a
specified activity or conduct shall be construed to apply equally to each entity
comprising Borrower.
1. LOANS.
1.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or Incipient Default shall have occurred and
be continuing, FINOVA shall, upon Borrower's request and subject to the other
terms and conditions of this Agreement, make advances to Borrower in an
aggregate outstanding principal amount not to exceed the Total Facility amount
(the "Total Facility") set forth on the schedule hereto (the "Schedule"). The
Schedule is an integral part of this Agreement and all references to "herein",
"herewith" and words of similar import shall for all purposes be deemed to
include the Schedule.
1.2 Loans. Advances under the Total Facility (the "Loans" and
individually, a "Loan") shall be comprised of the amounts shown on the Schedule.
1.3 Loan Account. All Advances made hereunder shall be added to and
deemed part of the Obligations when made. FINOVA may from time to time charge
all Obligations of Borrower to Borrower's loan account with FINOVA.
2. CONDITIONS PRECEDENT.
2.1 Initial Advance. The obligation of FINOVA to make the initial
Advance hereunder is subject to the fulfillment, to the satisfaction of FINOVA
and its counsel, of each of the following conditions on or prior to the date set
forth on the Schedule. To the extent individual items below relate to the
Facilities or the Collateral, such items shall be interpreted to refer solely to
the individual Facility to be acquired or developed by an individual Borrower
and the other Collateral to be provided by such Borrower, on a Borrower by
Borrower basis. Such conditions are designated with an "*":
(a) Loan Documents. FINOVA shall have received (i) each of the
Loan Documents, executed by each of the parties thereto and, if
applicable, duly acknowledged for
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FINOVA LOAN AND SECURITY AGREEMENT
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recording or filing in the appropriate governmental offices; and (ii)
such other documents, instruments and agreements in connection herewith
as FINOVA shall reasonably require, executed, certified and/or
acknowledged by such parties as FINOVA shall designate. Except to the
extent specifically required under this Agreement, the Loan Documents
shall be delivered by each of the individual Borrowers separately, in
connection with the individual Closing applicable to such Borrower with
respect to its particular Facility. In addition to this Agreement and
the Schedule, which shall be executed and delivered by all Borrowers
collectively, the Projected Cash Shortfall Protection and the Operating
Deficit and Deficiency Payment Agreement shall be executed and delivered
by ARV, or jointly by ARV and Vintage ABR Hillsdale, respectively,
concurrently with the execution and delivery of this Agreement;
(b) Termination By Existing Lender. Borrower's existing
lender(s) shall have executed and delivered UCC Termination Statements
and other documents evidencing the termination of its liens and security
interest in the assets of Borrower;
(c) Charter Documents. FINOVA shall have received copies of
Borrower's, ARV's, and Vintage ABR Hillsdale's Articles of Organization,
as amended, modified, or supplemented to the Closing Date, certified by
the Secretary of Borrower;
(d) Good Standing. FINOVA shall have received a certificate of
standing with respect to Borrower and, if required by FINOVA, with
respect to the other Loan Parties, dated within ten (10) Business Days
of the Closing Date, by the Secretary of State of the state of
organization of Borrower or such Loan Party (other than a Borrower's
general contractor, architect, and/or engineer), which certificate shall
indicate that Borrower or such Loan Party is in good standing in such
state;
(e) Foreign Qualification. FINOVA shall have received
certificates of foreign qualification with respect to Borrower, dated
within ten (10) Business Days of the Closing Date, issued by the
secretary of state of each state in which Borrower's failure to be duly
qualified or licensed will have a material adverse affect on the
financial condition or assets of Borrower, indicating that Borrower is
in good standing;
(f) References and Searches. Satisfactory customer, vendor,
credit and bank reference checks and satisfactory UCC, tax lien,
judgment and litigation searches on each Borrower and on each of ARV,
Vintage ABR Hillsdale, and Vintage ABR Development, all to be performed
or obtained by FINOVA at Borrower's expense. With respect to any such
entity which is newly formed, FINOVA agrees to coordinate with Borrowers
relative to the appropriate scope of searches to be requested, and to
consider alternate methods of obtaining assurance that such entities
have not incurred debt or other liabilities, and have not become subject
to any liens, subsequent to their formation. With respect to any entity
which is a reporting company to the Securities and Exchange Commission
(the "SEC"), FINOVA agrees to accept copies of such entity's SEC reports
in lieu of conducting searches, to the extent such reports set forth in
reasonable detail comparable information to that being sought by FINOVA.
Without limiting the scope of the bank reference checks described above,
FINOVA shall be satisfied that ARV has not been in monetary default with
respect to its existing lending arrangements, and that no covenant
defaults which may have occurred were formally declared as such by the
applicable lending institution;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have
received a certificate from the managing members of Borrower attesting
to (i) the adoption of resolutions by Borrower's members authorizing the
borrowing of money from FINOVA and execution and delivery of this
Agreement and the other Loan Documents to which Borrower is a party, and
authorizing specific officers of Borrower to execute same, and (ii) the
authenticity of original specimen signatures of such officers;
(h) Insurance.* FINOVA shall have received the insurance
certificates and certified copies of policies required by Section 4.4
hereof, in form and substance reasonably satisfactory to FINOVA and its
counsel;
(i) No Material Adverse Changes. Prior to the Closing Date,
there shall have occurred no material adverse change in the financial
condition of Borrower, the Facilities, ARV, or Vintage from that shown
on the financial statements for Borrower, ARV, or Vintage, as
applicable, most recently delivered to FINOVA prior to the date hereof
(which shall not be dated earlier than forty-five (45) days prior to the
Closing) or in the Collateral from the date the Collateral was last
inspected by FINOVA. At the closing, Borrower shall deliver to FINOVA an
officer's certification confirming that Borrower is unaware of the
existence of any such material adverse change in Borrower's financial
condition;
(j) Searches; Certificates of Title.* FINOVA shall have received
searches reflecting the filing of its financing statements and fixture
filings in such jurisdictions as it shall determine;
(k) Governmental Approvals.* Borrower shall deliver to FINOVA,
and FINOVA shall be satisfied with all certificate(s) of occupancy for
the Facilities, any environmental licenses or approvals for operation
within or on the Real Property, if any; and any other applicable
governmental permits, approvals, consents, licenses and certificates for
the use and operation of the Property or which may affect the value of
the Collateral, including without limitation any and all Licenses.
FINOVA shall have reviewed and approved the regulatory scheme having
jurisdiction over assisted living communities in the states in which the
Facilities are located;
(l) Title Insurance Commitment.* Borrower shall deliver to
FINOVA a commitment (the "Title Commitment") to issue an ALTA extended
coverage lender's policy of title insurance or equivalent form
acceptable to FINOVA (the "Title Policy") underwritten by a title
company acceptable to FINOVA (the "Title Company") in an amount not less
than the amount of the Loan and insuring the lien of the Mortgage to be
a first priority lien on the Real Property, subject only to the
Permitted Encumbrances and including such reasonable endorsements and
co-insurance as FINOVA requires in its discretion. The Title Policy
shall contain no exception for mechanics' or materialmen's liens and
shall otherwise be satisfactory in form and substance to FINOVA;
(m) Survey.* Borrower shall deliver to FINOVA an ALTA/ACSM
survey (or a survey prepared in accordance with equivalent state
standards acceptable to FINOVA) of the Real Property by a licensed
surveyor acceptable to FINOVA and the Title Company dated not more than
sixty (60) days prior to the Closing Date and certified in favor of
Borrower, FINOVA, and the Title Company (which certification shall be in
a form acceptable to FINOVA and the Title Company) showing, without
limitation, the location of any existing improvements contained in the
Facilities, means of ingress and egress to a public right of way, and
all easements and other title exceptions able to be located thereon;
(n) Taxes.* Borrower shall provide evidence that all taxes and
assessments levied against or affecting Borrower or the Collateral
(including payroll taxes) have been paid current; or in the event
Borrower has commenced a legal or administrative challenge to any such
tax or assessment, evidence that such liability has been bonded over, or
that funds for the payment thereof (in the amount of the original
assessment) have been escrowed with an independent third party with
provisions for the payment thereof satisfactory to FINOVA;
(o) Fees. Borrower shall have paid all fees payable by it on the
Closing Date pursuant to this Agreement;
(p) Opinion of Counsel. FINOVA shall have received an opinion of
Borrower's counsel covering such matters as FINOVA shall determine in
its sole discretion;
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FINOVA LOAN AND SECURITY AGREEMENT
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(q) Officer's Closing Certificate.* FINOVA shall have received a
certificate from the managing members of each Borrower, attesting to the
accuracy of each of the representations and warranties of Borrower set
forth in this Agreement, the fulfillment of all conditions precedent to
the initial Advance hereunder and the compliance with all covenants;
(r) Solvency Certificate.* If requested by FINOVA, a signed
certificate of the Borrower's managing members concerning the solvency
and financial condition of Borrower, in a form acceptable to FINOVA;
(s) Mortgage Banker. FINOVA has received and approved evidence
that any fee due to any broker or mortgage banker retained by Borrower
to arrange the Loan has been paid or shall be paid at Closing. In any
event, all such fees are to be borne solely by Borrower, and Borrower
shall indemnify and hold FINOVA harmless from any liability for the
payment of such brokerage fees.
(t) Hazardous Waste; Structural and Mechanical.* Borrower shall
provide to FINOVA, at Borrower's sole cost and expense, a structural
inspection report and mechanical inspection report covering the real and
personal property components of the Collateral prepared by a
construction consultant or engineer either selected or recommended by
FINOVA or otherwise reasonably acceptable to FINOVA. To the extent that
such report requires the making of any Capital Expenditures, Borrower
shall include such Capital Expenditures in its Budget, and FINOVA's
inspector shall have reviewed and approved the Budget. Borrower shall
also provide to FINOVA, at Borrower's sole cost and expense, a Phase I
Environmental Site Assessment of the Property (the "Site Assessment").
The results of such Site Assessment and structural and mechanical
inspections must be satisfactory to FINOVA. FINOVA has the right to
require Borrower to retain the services of an environmental engineer
and/or structural/mechanical engineer either selected or recommended by
FINOVA, or otherwise reasonably acceptable to FINOVA, to perform such
additional structural and mechanical assessments and/or any additional
environmental investigations as may be required by FINOVA, in its
discretion. Such investigations may include but are not limited to soil
and ground water testing to fully identify the scope of any
environmental issues impacting the Real Property and/or an assessment of
the mechanical and structural fitness of the improvements located on the
Real Property. All costs incurred in performing any additional
investigation, whether environmental, structural or mechanical, shall be
borne by Borrower. If any environmental, structural and/or mechanical
issues exist prior to the closing of the Loan, FINOVA reserves the
right, in its discretion, to terminate this Agreement if FINOVA in good
faith believes that such issues materially and adversely effect either
the applicable Real Property, the Facility located thereon, or both.
However, if FINOVA determines, that known environmental, structural
and/or mechanical problems with respect to the Real Property are capable
of being resolved at a reasonable cost, FINOVA may proceed with the
closing and funding of the Loan provided that sufficient funds, as
determined by FINOVA, are held back from the Loan proceeds and deposited
into an escrow account for the purpose of securing all aspects of
correcting the subject environmental, structural and/or mechanical
problems. Release of such escrowed funds will be controlled exclusively
by FINOVA;
(u) Zoning.* Borrower shall provide evidence satisfactory to
FINOVA that the Real Property is properly zoned for its present and
contemplated use and that any and all zoning stipulations have been
complied with, together with evidence that Borrower has obtained a
special use permit and any other permits or approvals necessary, under
applicable zoning regulations, to use each of the Facilities for their
intended purpose;
(v) Access, Parking and Common Areas.* FINOVA shall be satisfied
that all easements and other agreements providing for public access to,
adequate parking for, and the maintenance of any and all common areas
related to the Facilities are in effect, fully enforceable, and fully
assignable to FINOVA as part of its collateral for the Loan and that the
Property has legal access to publicly dedicated streets. In that regard,
FINOVA shall have received satisfactory evidence that the ratio of
parking spaces to number of residents for each of the Facilities is in
compliance with all applicable codes and regulations;
(w) Utilities.* Borrower shall provide evidence satisfactory to
FINOVA that all utilities, including without limitation, water, sewer,
gas and electricity, are available to the Facilities in amounts
necessary for its present and contemplated use;
(x) Construction Information.* Borrower shall provide FINOVA
with legible copies of all ongoing construction agreements for any and
all construction on the Real Property (and all permits therefor),
as-built plans and specifications for the buildings (to the extent
available), any warranties for building systems and all service
contracts for building systems affecting the Facilities;
(y) Review and Approval of Property-Related Documentation.*
Borrower shall have provided to FINOVA, and FINOVA shall have reviewed
and approved all documentation deemed material by FINOVA to the
operation and present and contemplated use of the Facilities. Such
material shall include, without limitation, all license or franchise
agreements; employment or management agreements; warranties; service
and/or support maintenance agreements; reservation system agreements;
service contracts; parking, common area and common wall easement
agreements and management agreements currently in effect. Borrower shall
further have provided evidence satisfactory to FINOVA that the
Management Agreement has been amended to provide for the payment of
management fees in an amount no greater than that set forth in the
Negative Covenants section of the Schedule;
(z) Equipment Leases.* FINOVA shall have reviewed and approved
such leases and financing agreements covering furniture, fixtures,
equipment and other personal property used on the Property (the
"Equipment Leases") as FINOVA requests to review. The obligations under
the Equipment Leases shall be considered "indebtedness for borrowed
money", "debt" and "expense" of Borrower for purposes of this Agreement.
In addition, Borrower shall use its best efforts to provide to FINOVA
written agreements from each of the equipment lessors or financiers
under such Equipment Leases as FINOVA deems material granting to FINOVA
rights to notice and cure upon any default by Borrower under such
Equipment Leases;
(aa) Title Insurance Policy.* Borrower shall have provided to
FINOVA the Title Policy as defined in Section 2.1(l) hereof together
with evidence that the liens and security interests to be granted to
FINOVA have been duly perfected as first and prior liens and security
interests, and that there are no other financing statements or liens
filed against Borrower, or the property of Borrower except for the
Permitted Encumbrances. In lieu of the Title Policy, Borrower may
deliver an irrevocable commitment from the Title Company to insure the
Mortgage as a first and prior mortgage subject only to the Permitted
Encumbrances;
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FINOVA LOAN AND SECURITY AGREEMENT
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(bb) Pro Forma Financial Statements.* FINOVA has received and
approved a pro forma balance sheet and cash flow projections of Borrower
effective as of the Loan Closing and assuming an advance of the full
amount of the Loan has been made. Such balance sheets and cash flow
projections shall show that the Borrower will have a tangible net worth
in a minimum amount to be considered solvent immediately following
initial funding of the Loan, that the Borrower will have reasonably
sufficient capital for the conduct of its business following initial
funding of the Loan, and that the Borrower will not incur debts beyond
its ability to pay such debts as they mature;
(cc) ADA Compliance.* As of the Closing Date, the Facilities and
the applicable Borrower's employment practices shall be in compliance
with the Americans with Disabilities Act of 1990 ("ADA"), or, if any
renovations of Borrower's facilities or modifications of Borrower's
employment practices shall be required to bring them into compliance
with the ADA, review and approval by FINOVA of Borrower's proposed plan
to come into such compliance. Borrower shall deliver representations and
warranties to FINOVA concerning Borrower's compliance with the ADA, and
no evidence shall have come to the attention of FINOVA indicating that
Borrower is not in compliance with the ADA (except to the extent that
FINOVA has reviewed and approved Borrower's plan to come into
compliance);
(dd) Disclosure. There shall not have occurred any determination
by FINOVA that Borrower has failed to disclose any material fact or
misrepresented any material fact reasonably relied upon by FINOVA in
issuing the Commitment;
(ee) Events of Default. No Event of Default and no Incipient
Default shall have occurred and be continuing.
(ff) Schedule Conditions. Borrower shall have complied with all
additional conditions precedent as set forth in the Schedule attached
hereto; and
(gg) Other Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall
have been delivered, executed and recorded and shall be in form and
substance satisfactory to FINOVA and its counsel.
2.2 Construction Term Advances - General Conditions. The obligation of
FINOVA to make Advances of the Loan is subject to the fulfillment, to the
satisfaction of FINOVA and its counsel, of each of the following conditions, in
addition to the conditions set forth above and set forth in Section 2.1 above:
(a) Borrower shall have provided to FINOVA and FINOVA shall have
approved in all respects:
(i) The general Construction Contract with the General
Contractor, covering the Work (as the same may be modified from
time to time with FINOVA's prior written consent, the "General
Contract"), which shall be a "stipulated sum" (i.e., guaranteed
maximum price) contract reflecting a total cost of construction
in an amount not greater than the construction costs reflected
in the Budget, and which shall provide, without limitation (a)
terms regarding the timing and manner of payments to the General
Contractor acceptable to FINOVA; (b) that the Work shall be
fully completed for the guaranteed fixed or maximum price (as
approved by FINOVA); (c) that the General Contractor must begin
and complete construction by certain specified dates in
accordance with the Loan Documents; (d) each Borrower must have
committed to an acceptable schedule of construction prior to the
first Advance made with respect to such Borrower; and (e) change
orders will be permitted only up to amounts of Ten Thousand
Dollars ($10,000) for any single occurrence and up to One
Hundred Thousand Dollars ($100,000) in the aggregate;
(ii) Consent from the General Contractor and any other
Contractor to the assignment of their contracts to FINOVA; and
such certificates and financial information as FINOVA may
request from the General Contractor and any other direct
Contractors regarding their financial viability, the adequacy of
the Budget and such other matters as FINOVA may deem
appropriate;
(iii) A list of all Contractors and major sub-Contractors
who will perform work (including a summary of trades for which
each such sub-Contractor shall be responsible) and a resume and
client references for the General Contractor and major
sub-Contractors. FINOVA shall have reviewed and approved the
financial statements, client and project list, and client
references with respect to the General Contractor and such major
sub-contractors. Without limiting the generality of the
foregoing, FINOVA must be satisfied with the financial strength
and qualifications of the General Contractor and all major
sub-contractors;
(iv) The Architect/Engineer Agreement and consent to the
assignment of that agreement to FINOVA; such certificates as
FINOVA may require from the Architect/Engineer regarding the
adequacy of the Plans (including, without limitation, their
compliance with the Americans With Disabilities Act and all
other applicable laws and regulations) and the Budget and such
other matters as FINOVA may deem pertinent;
(v) The Plans which shall indicate that they have been
approved by all necessary governmental authorities;
(vi) The Budget;
(vii) A detailed draw schedule;
(viii) The Work Progress Schedule;
(ix) All other Principal Work-Related Items and all other
Contracts, Intangibles, Licenses and Permits;
(x) A payment and performance bond or bonds which is/are
issued by a surety satisfactory to FINOVA and in a form
satisfactory to FINOVA, covering contracts for the Improvements
and naming FINOVA as co-obligee;
(xi) A soils test report with respect to the suitability of
the soils on the Real Property for purposes of constructing the
Work;
(xii) If required by FINOVA, a traffic study with respect to
the impact of existing and anticipated traffic upon the
Facilities;
(xiii) A flood and drainage study with respect to the Real
Property and the Improvements;
(xiv) Financial statements for the last two (2) years and
federal employer tax identification numbers for the General
Contractor, any other direct Contractors, and, if required by
FINOVA, the major sub-Contractors; and
(xv) Copies of all other direct contracts with Contractors
and all major sub-Contracts all of which shall be acceptable to
FINOVA.
(b) FINOVA's representatives shall have completed an inspection
of each Facility and shall be satisfied in their Permitted Discretion with the
findings of such inspection. FINOVA shall have received a satisfactory report
from FINOVA's Inspector.
(c) FINOVA shall have received satisfactory evidence that
Borrower has obtained all necessary approvals and permits of governmental
agencies having jurisdiction over each Facility for the construction of the
Improvements.
(d) FINOVA shall have approved the manner in which construction
costs will be paid.
(e) Borrower shall not have commenced any Work on the Real
Property prior to recordation of the Mortgage, if it would affect priority of
the Mortgage.
(f) Adverse Events Affecting ARV. In the event that, during the
construction phase of the Facilities, ARV goes into material default with
respect of its lending arrangements, FINOVA shall have the right, at FINOVA's
option, to withdraw FINOVA's commitment to fund the acquisition and development
of the Facility by any Borrower as to which such Borrower's Closing has not yet
occurred (but without such event giving rise to an Event of Default under any
portion of the Loan as to which a Closing has occurred unless such event would
independently constitute an Event of Default under the Projected Cash Shortfall
Protection). For purposes hereof, the term "Material Default" means a monetary
default resulting
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FINOVA LOAN AND SECURITY AGREEMENT
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either from the failure of ARV to make one or more then due payments aggregating
in excess of $250,000 (including, without limitation, any failure to pay
Indebtedness in excess of $250,000 which has become due pursuant to an
acceleration of the maturity of such Indebtedness), an event of insolvency or
bankruptcy, or any default pursuant to which the lender under such lending
arrangement gives ARV a default notice.
2.3 Conditions Specific to Individual Construction Term Advances. In
addition to all other terms and conditions set forth herein, each Advance shall
be subject to satisfaction of all of the following conditions and limitations:
(a) Advances shall be made no more frequently than monthly as the
Work progresses and each such monthly disbursement shall be based upon actual
completed work in place rather than upon percentage of completion. Each Advance
shall be in an amount not to exceed ninety percent (90%) of expenditures for
labor performed and materials supplied in connection with the construction of
the Improvements for the period immediately proceeding that particular Advance
(provided that FINOVA may, but shall not be obligated to, advance more than
ninety percent (90%) of the costs of certain materials, if deemed appropriate by
FINOVA in its sole discretion, exercised in good faith,).
(b) FINOVA shall have no obligation to make an Advance
(including, without limitation, the initial Advance) if the undisbursed portion
of the Loan (or, in reference to the initial Advance, the full Loan amount) is
less than the remaining Completion Costs, as defined in Section 23 of the
Construction Covenants Section, until Borrower has deposited the Required
Completion Assurance Deposits.
(c) FINOVA shall withhold from each Work-Related Advance an
amount equal to ten percent (10%) of such costs (the "Basic Retainage") or such
greater amount as is provided for in the General Contract or any other
Construction Contract for the Work (such greater amount being referred to herein
as the "Additional Retainage"). The Basic Retainage shall be funded by FINOVA
to, or at the direction of, Borrower upon Borrower's written certification to
FINOVA that all "punch list items" have been resolved to Borrower's
satisfaction, accompanied by a certificate from the Borrower's
Architect/Engineer and FINOVA's Inspector certifying to the same, and subject to
FINOVA's approval of such items. The Additional Retainage shall be released at
the times specified in the applicable Construction Contract;
(d) Each Work-Related Advance shall be conditioned upon FINOVA's
receipt and approval of all items required to be delivered by Borrower pursuant
to Exhibit E hereof.
(e) Advances shall be subject to the receipt of the Title Policy,
Title Policy endorsements required pursuant to Section 16 of the Construction
Covenants Section , trailing mechanics' and materialmen's lien waivers on a
thirty (30) day basis and any surveys required pursuant to Section 18 of the
Construction Covenants Section.
(f) FINOVA will make the initial Advance and the final Advance
directly to the Title Agent. Other Advances may, at Borrower's election, be made
directly to Borrower provided that all conditions precedent to the making of an
Advance have been satisfied.
(g) FINOVA shall have the right to approve or disapprove
disbursements for stored or ordered goods. Without limiting the generality of
such right, FINOVA may condition its approval of disbursements of the Loan for
payments of or deposits upon stored or ordered goods upon FINOVA's prior receipt
of the following:
(i) Evidence satisfactory to FINOVA that such goods are
covered by the insurance policies required to be delivered
pursuant to the Loan Agreement;
(ii) Evidence satisfactory to FINOVA from the vendor of such
goods that, upon full payment to the vendor, ownership of such
goods will vest in the name of Borrower free and clear of any
liens or claims of the vendor or any other third party;
(iii) (a) Evidence satisfactory to FINOVA that the goods are
and upon disbursement shall be stored upon the Real Property in
a manner which is adequate to protect the goods against theft
and damage and otherwise satisfactory to FINOVA; or
(b) if the goods will not be stored upon the Real
Property at disbursement, evidence (including the original
warehouse receipt) satisfactory to FINOVA that the goods are
being fabricated or sold by a reputable and creditworthy
vendor, that the goods are being or will be stored in a
bonded warehouse or storage yard unless the goods are still
being fabricated and that the warehouse or storage yard has
been notified of FINOVA's security interest.
(h) FINOVA shall have been provided with paid invoices relating
to the construction of Improvements for all Work through the date of the
previous Advance.
(i) No intervening matters shall have affected the priority of
FINOVA's Mortgage.
(j) FINOVA shall have been provided with a certification by
Borrower, Borrower's supervising architect, the General Contractor and FINOVA's
Inspector that: (a) all Work was performed in substantial accordance with the
Plans; (b) all governmental licenses and permits required for the Improvements
as then completed have been obtained; (c) the Improvements as then completed do
not violate and if further completed in accordance with the Plans will not
violate any law, ordinance, rule or regulation or any covenant, condition or
restriction affecting the Facility; (d) the remaining undisbursed proceeds of
the Loan are sufficient to pay for the completion of the Improvements; and (e)
the Advance is in an amount not in excess of the value of the Work and materials
for which the Advance is requested.
(k) FINOVA shall have been provided with evidence that any
inspections required by any governmental authority having jurisdiction over the
Facility have been completed with results satisfactory to that authority.
(l) There shall exist no Event of Default or Incipient Default,
and FINOVA shall have been provided with a certification to that effect from
Borrower.
3. INTEREST RATE AND OTHER CHARGES.
3.1 Interest; Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan account at the per annum rate set forth
on the Schedule. Borrower shall also pay FINOVA the fees set forth on the
Schedule.
3.2 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall pay FINOVA interest on the
daily outstanding balance of Borrower's loan account at a rate per annum (the
"Default Rate") which is two percent (2%) in excess of the rate which would
otherwise be applicable thereto pursuant to the Schedule.
3.3 Inspection Costs. Borrower shall pay FINOVA's reasonable travel
expenses and other out-of-pocket expenses incurred in inspecting the Facilities
on a periodic basis throughout the term of the Loan. Such inspections shall
occur no less frequently than monthly during the period of construction of the
improvements, and no less frequently than annually following the Conversion
Date. With respect to annual inspections following the Conversion Date, the
aggregate cost of such inspections which is required to be borne collectively by
Borrowers hereunder and by the Loan B Borrowers (in the absence of any Event of
Default) shall not exceed $12,000. At any time during the continuance of an
Event of Default, all costs of inspection shall be borne by Borrowers without
regard to the preceding limitation.
3.4 Excess Interest.
(a) The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the
principal balance of the Obligations in accordance with the provisions
of this Agreement; (ii) interest after an Event of Default, calculated
and applied to the amount of the Obligations in accordance with the
provisions hereof; and (iii) all Additional Sums (as herein defined), if
any. Borrower agrees to pay an effective contracted for rate of interest
which is the sum of the above-referenced elements. The examination fees,
attorneys' fees, expert witness fees, letter of credit fees, collateral
monitoring fees, closing fees, loan fees, facility fees, prepayment
premiums, other charges, goods, things in action or any other sums or
things of value paid or payable by Borrower (collectively, the
"Additional Sums"), whether pursuant to this Agreement or any other
documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to
this lending transaction, for the purpose of any applicable law that may
limit the maximum amount of interest to be charged with respect to this
lending transaction, shall be payable by
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Borrower as, and shall be deemed to be, additional interest and for such
purposes only, the agreed upon and "contracted for rate of interest" of
this lending transaction shall be deemed to be increased by the rate of
interest resulting from the inclusion of the Additional Sums.
(b) It is the intent of the parties to comply with the usury
laws of the State of Arizona (the "Applicable Usury Law"). Accordingly,
it is agreed that notwithstanding any provisions to the contrary in this
Agreement, or in any of the documents securing payment hereof or
otherwise relating hereto, in no event shall this Agreement or such
documents require the payment or permit the collection of interest in
excess of the maximum contract rate permitted by the Applicable Usury
Law (the "Maximum Interest Rate"). In the event (a) any such excess of
interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, or
(b) the maturity of the Obligations is accelerated in whole or in part,
or (c) all or part of the Obligations shall be prepaid, so that under
any of such circumstances the amount of interest contracted for, shared
or received in connection with the loan evidenced hereby, would exceed
the Maximum Interest Rate, then in any such event (1) the provisions of
this paragraph shall govern and control, (2) neither Borrower nor any
other person or entity now or hereafter liable for the payment of the
Obligations shall be obligated to pay the amount of such interest to the
extent that it is in excess of the Maximum Interest Rate, (3) any such
excess which may have been collected shall be either applied as a credit
against the then unpaid principal amount of the Obligations or refunded
to Borrower, at FINOVA's option, and (4) the effective rate of interest
shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that
to the extent permitted by the Applicable Usury Law; (x) all
calculations of interest which are made for the purpose of determining
whether such rate would exceed the Maximum Interest Rate shall be made
by amortizing, prorating, allocating and spreading during the period of
the full stated term of the loan evidenced hereby, all interest at any
time contracted for, charged or received from Borrower or otherwise in
connection with such loan; and (y) in the event that the effective rate
of interest on the loan should at any time exceed the Maximum Interest
Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid
to FINOVA from time to time, if and when the effective interest rate on
the loan otherwise falls below the Maximum Interest Rate, to the extent
that interest paid to the date of calculation does not exceed the
Maximum Interest Rate, until the entire amount of interest which would
otherwise have been collected had there been no ceiling imposed by the
Applicable Usury Law has been paid in full. Borrower further agrees that
should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to
all indebtedness evidenced hereby regardless of when incurred provided
that once the entire amount of interest that would have otherwise been
collected is collected, FINOVA will charge the lesser of the Maximum
Interest Rate and the interest rate set forth on the Schedule; but,
again to the extent not prohibited by the Applicable Usury Law, should
the Maximum Interest Rate be decreased because of a change in the
Applicable Usury Law, such decreases shall not apply to the indebtedness
evidenced hereby regardless of when incurred.
4. COLLATERAL.
4.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby (i) grants to FINOVA a
first priority security interest in all of Borrower's now owned or hereafter
acquired or arising Receivables, Inventory, Equipment, Trademarks and Licenses
and Patents, and General Intangibles, including, without limitation, all of
Borrower's Deposit Accounts, Investment Property (as defined in Section 9-115 of
the Code), real estate (including the Real Property), money, any and all
property now or at any time hereafter in FINOVA's possession (including claims
and credit balances), and all proceeds (including proceeds of any insurance
policies, proceeds of proceeds and claims against third parties), all products
and all books and records and computer data related to any of the foregoing, and
(ii) assigns, transfers and sets over to FINOVA all of its right, title and
interest, powers, privileges and other benefits of all leases, rental agreements
and related documents entered into by Borrower with respect to any Equipment
leased by Borrower, together with all income, proceeds and other benefits
thereof (all of the foregoing, together with all other property in which FINOVA
may be granted a lien or security interest, is referred to herein, collectively,
as the "Collateral"). In addition, each Borrower hereby grants to FINOVA a first
priority security interest in all of Borrower's now owned or hereafter acquired
or arising Collateral, for purposes of securing the payment and performance of
all obligations owed by the Loan B Borrowers to FINOVA with respect to Loan B.
4.2 Perfection and Protection of Security Interest. Borrower shall, at
its expense, take all actions reasonably requested by FINOVA at any time to
perfect, maintain, protect and enforce FINOVA's first priority security interest
and other rights in the Collateral and the priority thereof from time to time,
including, without limitation, (i) executing and filing financing or
continuation statements and amendments thereof and executing and delivering such
documents and titles in connection with motor vehicles as FINOVA shall require,
all in form and substance satisfactory to FINOVA, (ii) maintaining an accounting
system satisfactory to FINOVA and complete and accurate stock records, (iii)
placing notations on Borrower's books of account to disclose FINOVA's security
interest therein and (iv) delivering to FINOVA all letters of credit on which
Borrower is named beneficiary. If FINOVA requests Borrower's execution of a
financing statement and Borrower does not execute such financing statement(s)
within three (3) Business Days of such request, FINOVA may file, without
Borrower's signature, one or more financing statements disclosing FINOVA's
security interest under this Agreement. Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. From time to time,
Borrower shall, upon FINOVA's request, execute and deliver confirmatory written
instruments pledging the Collateral to FINOVA, but Borrower's failure to do so
shall not affect or limit FINOVA's security interest or other rights in and to
the Collateral. Until the Obligations have been fully satisfied and FINOVA's
obligation to make further advances hereunder has terminated, FINOVA's security
interest in the Collateral shall continue in full force and effect.
4.3 Preservation of Collateral. After an Event of Default or if FINOVA
requests Borrower to take such action and Borrower does not take such action
within five (5) Business Days of such request (provided, however, that FINOVA
shall be permitted to take action more quickly in the event there exists a
threat of imminent damage to or loss of the Collateral), then FINOVA may in its
Permitted Discretion, at any time discharge any lien or encumbrance on the
Collateral or bond the same, pay any insurance, maintain guards, pay any service
bureau, obtain any record or take any other action to preserve the Collateral
and charge the cost thereof to Borrower's loan account as an Obligation.
4.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of
such insurance as is required by FINOVA, written by insurers, in amounts, and
with mortgagee's and lender's loss payee and other endorsements, reasonably
satisfactory to FINOVA. All premiums with respect to such insurance shall be
paid by Borrower as and when due. Accurate certificates evidencing such
policies, together with supporting endorsements satisfactory to FINOVA, shall be
delivered by Borrower to FINOVA. If requested by FINOVA, Borrower shall deliver
complete copies of its insurance policies to FINOVA. If Borrower fails to comply
with this Section, FINOVA may (but shall not be required to) procure such
insurance at Borrower's expense and charge the cost thereof to Borrower's loan
account as an Obligation.
5. EXAMINATION OF RECORDS; FINANCIAL REPORTING.
5.1. Examinations. FINOVA shall at all reasonable times and during
normal business hours (absent the occurrence of an Event of Default) have full
access to and the right to examine, audit, make abstracts and copies from and
inspect Borrower's records, files, books of account and all other documents,
instruments and agreements relating to the Collateral and the right to check,
test and appraise the Collateral. Borrower shall deliver to FINOVA any
instrument necessary for FINOVA to obtain records from any service bureau
maintaining records for Borrower. All instruments and certificates prepared by
Borrower showing the value of any of the Collateral shall be accompanied, upon
FINOVA's request, by copies of related purchase orders and invoices. FINOVA may,
at any time after the occurrence of an Event of Default, remove from Borrower's
premises Borrower's books and records (or copies thereof) or require Borrower to
deliver such books and records or copies to FINOVA. FINOVA may, without expense
to FINOVA, use such of Borrower's personnel, supplies and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security interest.
5.2. Reporting Requirements. (a) Each Borrower shall furnish FINOVA,
upon request, such information and statements as FINOVA shall request from time
to time regarding Borrower's business affairs, financial condition and the
results of its operations. Without limiting the generality of the foregoing,
Borrower shall provide FINOVA with: (i) within
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thirty (30) days after the end of each month, unaudited financial statements for
Borrower with respect to the prior month prepared on a basis consistent with
such statements prepared in prior months and otherwise in accordance with GAAP;
(ii) annual audited financial statements for each Borrower, prepared in
accordance with GAAP applied on a basis consistent with the most recent Prepared
Financials provided to FINOVA by Borrower, including balance sheets, income and
cash flow statements, accompanied by the unqualified opinion thereon of
independent certified public accountants acceptable to FINOVA, as soon as
available, and in any event, within ninety (90) days after end of each of
Borrower's fiscal years, together with any management letters which may be
delivered by Borrower's accountants to management; (iii) the financial
information and reports required pursuant to the Schedule; (iv) a monthly
certificate from the managing members of Borrower delivered concurrently with
Borrower's monthly financial statements stating that such financial statements
are true, correct and complete; (v) together with each set of financial
statements provided at the end of a fiscal quarter of Borrower, a certificate
from the managing members of Borrower showing Borrower's compliance with each of
the financial covenants set forth in this Agreement, and stating whether any
Event of Default or Incipient Default has occurred, and if so, the steps being
taken to prevent or cure such Event of Default or Incipient Default; and (vi)
such certificates relating to the foregoing as FINOVA may request.
(b) Borrowers shall cause ARV to furnish to FINOVA within ninety
(90) days after the end of each fiscal year of ARV, a copy of ARV's current
financial statements. Such financial statements shall contain a (a) statement of
profit and loss, (b) balance sheet, (c) statement of cash flows, and (d)
statement of retained earnings, as of the end of such annual period (together,
in each case, with the comparable figures for the immediately preceding
corresponding period), all in reasonable detail and prepared in accordance with
GAAP. The annual financial statements of ARV shall be audited and certified by a
recognized firm of independent certified public accountants satisfactory to
FINOVA and shall contain an unqualified opinion from such accountants. In
addition to the foregoing, Borrowers shall cause ARV to provide to FINOVA a copy
of each quarterly report on Form 10-Q and each annual report on Form 10-K, as
filed with the SEC, together with copies of any other reports filed with the
SEC, concurrently with the filing of such reports.
6. PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL.
6.1 Principal Payments. The Loan shall be repayable by each Borrower as
set forth in the Note delivered by such Borrower.
6.2 Collections. Borrower may make collection of all Receivables,
provided, however, that following the occurrence and during the continuance of
an Event of Default, at the request of FINOVA, Borrower shall deliver all
payments to FINOVA in their original form as set forth below, duly endorsed in
blank. FINOVA or its designee may, at any time after the occurrence of an Event
of Default, notify account debtors that the Receivables have been assigned to
FINOVA and of FINOVA's security interest therein, and may collect the
Receivables directly and charge the collection costs and expenses to Borrower.
FINOVA shall not be required to credit Borrower's account for the amount of any
item of payment which FINOVA is unable to negotiate in the ordinary course of
business, and FINOVA may charge Borrower's account for the amount of any item of
payment which is returned to FINOVA unpaid.
6.3 Payments Without Deductions. Borrower shall pay principal, interest,
and all other amounts payable hereunder, or under any related agreement, without
any deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
6.4 Application of Payments. The amount of all payments or amounts
received by FINOVA with respect to the Loan shall be applied to the extent
applicable under this Agreement; (i) first, to accrued interest then due and
payable through the date of such payment, including any Default Interest; (ii)
then, to any late fees, construction monitoring fees, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder; and (iii)
last, the remaining balance, if any, to the unpaid principal of the Loan then
due and payable; provided, however, while an Event of Default exists, each
payment hereunder shall be applied to amounts owed to FINOVA by Borrower as
FINOVA in its sole discretion may determine. In calculating interest and
applying payments as set forth above: (a) interest shall be calculated and
collected through the date payment is actually received by FINOVA; (b) interest
on the outstanding balance shall be charged during any grace period permitted
hereunder; (c) at the end of each month, all accrued and unpaid interest and
other charges provided for hereunder that are then due but remain unpaid shall
be added to the principal balance of the Loan; and (d) to the extent that
Borrower makes a payment or FINOVA receives any payment or the proceeds of any
Collateral for Borrower's benefit that is subsequently invalidated, set aside or
required to be repaid to any other person or entity, then, to such extent, the
Obligations intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by FINOVA, and FINOVA may adjust the
Loan balances as FINOVA, in its sole discretion, deems appropriate under the
circumstances.
7. EQUIPMENT.
Borrower shall keep and maintain the Equipment in good operating
condition and repair and make all necessary replacements thereto to maintain and
preserve the value and operating efficiency thereof at all times consistent with
Borrower's past practice, ordinary wear and tear excepted.
8. OTHER LIENS, NO DISPOSITION OF COLLATERAL.
Borrower represents, warrants and covenants that (a) all Collateral is
and shall continue to be owned by it free and clear of all liens, claims and
encumbrances whatsoever (except for FINOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be permitted
by FINOVA in its sole discretion from time to time in writing), and (b) Borrower
shall not, without FINOVA's prior written approval, sell, encumber or dispose of
or permit the sale, lease, encumbrance or disposal of any Collateral or any
interest of Borrower therein, except for the sale of Inventory in the ordinary
course of Borrower's business. In the event FINOVA gives any such prior written
approval, the same may be conditioned on the sale price being equal to, or
greater than, an amount acceptable to FINOVA. The proceeds of any such sales
shall be remitted to FINOVA pursuant to this Agreement for application to the
Obligations.
9. GENERAL REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants that:
9.1 Due Organization. It is a limited liability company duly organized,
validly existing and in good standing under the laws of the State set forth on
the Schedule, is qualified and authorized to do business and is in good standing
in all states in which such qualification and good standing are necessary in
order for it to conduct its business and own its property, and has all requisite
power and authority to conduct its business as presently conducted, to own its
property and to execute and deliver each of the Loan Documents to which it is a
party and perform all of its Obligations thereunder, and has not taken any steps
to wind-up, dissolve or otherwise liquidate its assets;
9.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other organizational or fictitious name except as set
forth on the Schedule, nor has Borrower been the surviving entity of a merger or
consolidation or acquired all or substantially all of the assets of any person
during such time;
9.3 Due Authorization. The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party have been authorized by
all necessary action and do not and shall not constitute a violation of any
applicable law or of Borrower's Articles of Organization or any other document,
agreement or instrument to which Borrower is a party or by which Borrower or its
assets are bound;
9.4 Binding Obligation. Each of the Loan Documents to which Borrower is
a party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms;
9.5 Intangible Property. Borrower will possess on the Closing Date
adequate assets, licenses, patents, patent applications, copyrights, trademarks,
trademark applications and trade names for the present and planned future
conduct of its business without any known conflict with the rights of others,
and each is valid and has, if necessary, been duly registered or filed with the
appropriate governmental authorities;
9.6 Capital. As of the Closing Date, Borrower has capital sufficient to
conduct its business, is able to pay its debts as they mature, and owns property
having a fair salable value greater than the amount required to pay all of its
debts (including contingent debts);
9.7 Material Litigation. Except as described in the Schedule, Borrower
has no pending or overtly threatened litigation, actions or proceedings which
would materially and adversely affect its business, assets, operations,
prospects or condition, financial or otherwise, or the Collateral or any of
FINOVA's interests therein;
9.8 Title; Security Interests of FINOVA. On the Closing Date, Borrower
will have good, indefeasible and merchantable title to the personal property
Collateral and good and marketable title to the Real Property and, upon the
execution and delivery of the Loan Documents, and the filing of UCC-1 Financing
Statements in the appropriate offices, this Agreement and such documents shall
create valid and perfected first priority liens in the Collateral, subject only
to Permitted Encumbrances;
9.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, restriction, judgment, decree
or order materially and adversely affecting its business, assets, operations,
prospects or condition, financial or otherwise, or which restricts its right or
ability to incur Indebtedness, and it is not party to any labor dispute. In
addition, no labor contract is scheduled to expire during the Initial Term of
this Agreement, except as disclosed to FINOVA in writing prior to the date
hereof;
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9.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise.
Without limiting the generality of the foregoing, Borrowers and each of the
Facilities are in compliance with the ADA in all material respects, and upon
completion of all construction/renovation to the Facilities and the Real
Property, shall be in full compliance thereunder;
9.11 Consents. On the Closing Date Borrower will have obtained or caused
to be obtained or issued any required consent on behalf of Borrower of a
Governmental Authority or other Person in connection with the financing
contemplated hereby;
9.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to which it
is a party or by which it or its assets are bound, nor has any event occurred
which, with the giving of notice or the lapse of time, or both, would cause such
a default;
9.13 Financial Condition. The Prepared Financials will fairly present
Borrower's financial condition and results of operations and those of such other
Persons described therein as of the date thereof; there will be no material
omissions from the Prepared Financials or other facts or circumstances not
reflected in the Prepared Financials; and there will be no material and adverse
change in such financial condition or operations since the date of the initial
Prepared Financials delivered to FINOVA hereunder;
9.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has
been in violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a) or any of the published interpretations
thereunder, nor has Borrower or any ERISA Affiliate received any notice to such
effect. No notice of intent to terminate a Plan has been filed under Section
4041 of ERISA, nor has any Plan been terminated under ERISA. The PBGC has not
instituted proceedings to terminate, or appointed a trustee to administer, a
Plan. No lien upon the assets of Borrower has arisen with respect to a Plan. No
prohibited transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal liability
with respect to any Multiemployer Plan. Borrower and each ERISA Affiliate have
made all contributions required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated funding deficiency in any Plan, whether
or not waived;
9.15 Taxes. Borrower has filed all tax returns and such other reports as
it is required by law to file and has paid or made adequate provision for the
payment on or prior to the date when due of all taxes, assessments and similar
charges that are due and payable;
9.16 Locations; Fiscal Period and Federal Tax ID No. Borrower's chief
executive office and the offices and locations where it keeps the Collateral
(except for Collateral in transit) are at the locations set forth on the
Schedule, except to the extent that such locations may have been changed after
notice to FINOVA in accordance with Section 13.5 below. Borrower's fiscal year
and federal tax identification number are as shown on the Schedule;
9.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any significant client or any
group of significant clients whose unpaid claims individually or in the
aggregate are material to the business of Borrower, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially and adversely affect Borrower or prevent
Borrower from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted;
9.18 Utilities. All utilities, including without limitation, water,
sewer, gas and electricity, necessary for the present and future operation of
the Real Property are available for the use of the Real Property and the
residents of the Real Property, and Borrower has obtained all necessary permits
and permissions required from all governmental authorities for access to and use
of such services in the amounts required for the current operation of the Real
Property, and all fees and deposits due to the providers of such utilities have
been paid current;
9.19 Legal Access. The Real Property has legal access to publicly
dedicated streets;
9.20 No Joint Venture. The relationship of Borrower and FINOVA is that
of debtor and creditor, and it is not Borrower's intention by this Agreement or
any other instrument being executed in connection with the Loan to establish a
partnership, and the parties hereto shall not under any circumstances be
construed to be partners or joint venturers;
9.21 Year 2000. Borrower has taken all action necessary to assure that
there will be no material adverse change to Borrower's business by reason of the
advent of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1, 1999; and
9.22 Survival of Representations and Warranties. Each of the
representations and warranties made by Borrower in this Loan Agreement shall be
considered and determined to have been made by Borrower at the time of its
execution of this Agreement and to have been made again at the time of the Loan
Closing and shall survive funding of the Loan, and shall survive the Closing
Date.
10. AFFIRMATIVE COVENANTS.
Borrower covenants that, so long as any Obligation remains outstanding
and this Agreement is in effect, it shall:
10.1 Expenses. Promptly reimburse FINOVA for all costs, fees and
expenses incurred by FINOVA in connection with the negotiation, preparation,
execution, delivery, administration and enforcement of each of the Loan
Documents, including, but not limited to, the attorneys' and paralegals' fees of
in-house and outside counsel, expert witness fees, lien, title search and
insurance fees, appraisal fees, all charges and expenses incurred in connection
with any and all environmental and structural inspection reports and
environmental remediation activities, and all other costs, expenses, recording
taxes and filing or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such costs,
fees and expenses as FINOVA shall incur or for which FINOVA shall become
obligated in connection with (i) any inspection or verification of the
Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party, (iv)
enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral, and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed.
Borrower shall also pay all FINOVA charges in connection with bank wire
transfers, forwarding of loan proceeds, deposits of checks and other items of
payment, returned checks, establishment and maintenance of lockboxes and other
Blocked Accounts, and all other bank and administrative matters, in accordance
with FINOVA's schedule of bank and administrative fees and charges in effect
from time to time;
10.2 Taxes. File all tax returns and pay or make adequate provision for
the payment of all taxes, assessments and other charges on or prior to the date
when due;
10.3 Notice of Litigation. Promptly notify FINOVA in writing of any
litigation, suit or administrative proceeding which may materially and adversely
affect the Collateral or Borrower's business, assets, operations, prospects or
condition, financial or otherwise, whether or not the claim is covered by
insurance;
10.4 ERISA. Notify FINOVA in writing (i) promptly upon the occurrence of
any event described in Paragraph 4043 of ERISA, other than a termination,
partial termination or merger of a Plan or a transfer of a Plan's assets and
(ii) prior to any termination, partial termination or merger of a Plan or a
transfer of a Plan's assets;
10.5 Change in Location. Notify FINOVA in writing forty-five (45) days
prior to any change in the location of Borrower's chief executive office or the
location of any Collateral, or Borrower's opening or closing of any other place
of business;
10.6 Existence. Maintain its existence and its qualification to do
business and good standing in all states necessary for the conduct of its
business and the ownership of its property and maintain adequate assets,
licenses, patents, copyrights, trademarks and trade names for the conduct of its
business;
10.7 Labor Disputes. Promptly notify FINOVA in writing of any labor
dispute to which Borrower is or may become subject and the expiration of any
labor contract to which Borrower is a party or bound;
10.8 Violations of Law. Promptly notify FINOVA in writing of any
violation of any law, statute, regulation or ordinance of any governmental
entity, or of any agency thereof, applicable to Borrower which may materially
and adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
10.9 Defaults. Notify FINOVA in writing within five (5) Business Days of
Borrower's default under any note, indenture, loan agreement, mortgage, lease or
other agreement to which Borrower is a party or by which Borrower is bound, or
of any other default under any Indebtedness of Borrower;
10.10 Capital Expenditures. Promptly notify FINOVA in writing of the
making of any Capital Expenditure in excess of One Hundred Thousand Dollars
($100,000), in the aggregate, in any fiscal year;
10.11 Books and Records. Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with GAAP consistently applied, reflecting all of its financial
transactions;
10.12 Year 2000. Borrower shall take all action necessary to assure that
there will be no material adverse change to Borrower's business by reason of the
advent of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1, 1999. At FINOVA's request, Borrower
shall provide to FINOVA assurance reasonably acceptable to FINOVA that
Borrower's computer-based systems, embedded microchips and other processing
capabilities are year 2000 compatible;
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10.13 Additional Documents. At FINOVA's request, promptly execute or
cause to be executed and delivered to FINOVA any and all documents, instruments
or agreements deemed necessary by FINOVA to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents;
10.14 Financial Covenants. Comply with the financial covenants set forth
on the Schedule;
10.15 Subordination of Debt to Affiliates. Borrower shall obtain and
deliver to FINOVA subordination and standstill agreements (collectively, the
"Subordination Agreements") in form and substance satisfactory to FINOVA, from
all Affiliates of Borrower subordinating any and all obligations now or
hereafter owing to such subordinating party by Borrower (including, without
limitation, all management fees and salaries) (the "Subordinated Debt") to
Borrower's obligations to FINOVA under the Loan Documents; evidencing such
subordinating party's agreement to not exercise any remedies against Borrower
with respect to such obligations so long as the Loan is outstanding; evidencing
the Subordinating Parties' agreement not to accept and the Borrower's agreement
not to make any payment of any indebtedness subject to a Subordination Agreement
except as Permitted Management Fees pursuant to the Schedule; prohibiting the
Subordinating Parties from accepting and the Borrower from making any payment of
the Subordinated Debt upon the occurrence and during the continuance of an
Incipient Default or Event of Default; and prohibiting the taking of any lien on
or security interest in the assets of Borrower to secure the Subordinated Debt;
10.16 Annual Recertification Regarding Environmental Matters. Borrower
shall, on each anniversary of the Loan Closing, throughout the term of the Loan,
provide to FINOVA a written statement signed by an officer of Borrower
certifying that all representations and warranties set forth in the
Environmental Certificate executed by Borrower on the Loan Closing remain, as of
such anniversary date, true, correct and complete in all material respects,
together with a detailed explanation of any exceptions to such certification;
10.17 Maintenance of Licenses, etc. Borrower shall maintain in force at
all times, and apply in a timely manner for renewal of, all licenses, patents,
approvals, permits, authorizations, privileges, franchises, trademarks,
tradenames and other agreements including without limitation, the Licenses,
necessary to operate an assisted living community at each of the Facilities and
shall give FINOVA at least twenty (20) days prior written notice of the proposed
amendment of any of such licenses, patents, permits, authorizations, privileges,
franchises, trademarks, tradenames and other agreements. Borrower further
covenants that all such licenses, patents, approvals, permits, authorizations,
privileges, franchises, trademarks, tradenames and other agreements (a) have not
been and will not be transferred to any facility other than the Facilities, (b)
have not and will not be pledged as collateral security for any other loan or
indebtedness, (c) are held free from restrictions or known conflicts which would
materially impair the use and operation of the Facilities as intended, and (d)
are not provisional, probationary or restricted. Borrower shall not rescind,
withdraw, revoke, amend, modify, supplement, or otherwise alter the nature,
tenor or scope of such licenses, permits and approvals for the Facilities. The
Borrower shall continuously operate or cause to be operated the Facilities as
assisted living communities and shall comply in all material respects with all
applicable requirements of state and federal law, and regulations, together with
all zoning, land use and environmental laws, applicable to the ownership and/or
operation of the Real Property;
10.18 Acquisition of the Facilities. Each Borrower shall acquire the
Facility to be owned by it by a date not later than thirty (30) days following
the date of this Agreement. As of the date of this Agreement, ARV has acquired
both the Rossmore House and the Berkshire, and Encino has acquired the Encino
Hills Terrace (using the proceeds of funds advanced to Encino by ARV). Upon
satisfaction of all applicable conditions precedent to Closing, each of Rossmore
and Berkshire shall be permitted to acquire the applicable Facilities from ARV
at a cost no greater than ARV's direct acquisition cost plus any budgeted
renovation/construction expenses which ARV has, at that time, funded, less any
portion of such funded costs which ARV is required to contribute as equity to
such Borrower, and Encino shall be permitted to reimburse ARV for the amount of
direct acquisition costs plus any budgeted renovation/construction expenses
which Encino has at that time paid out of funds borrowed from ARV, less the
portion of any such funds which ARV is required to contribute as equity to
Encino;
10.19 Maintenance of Insurance. Throughout the term of the Loan,
Borrower shall maintain or cause to be maintained at all times in full force and
effect such insurance as FINOVA may require, written by insurers and in amounts
and forms reasonably satisfactory to FINOVA; and
10.20 Reserve Account. Commencing with the Start Date applicable to each
Borrower, such Borrower shall maintain a segregated account (the "Reserve
Account") with a federally insured bank approved by FINOVA for a reserve for the
replacement of capital items for the Facility owned by such Borrower. Such bank,
Borrower and FINOVA shall enter into a Collateral Assignment, Security Agreement
and Account Agreement (the "Account Agreement") acceptable to FINOVA, which
includes the bank's waiver of any right of set off and grants to FINOVA the
exclusive right to withdraw all funds in the account upon an event of default
under the Loan Documents. Borrower shall deposit into such account the required
Replacement Reserve amounts. If there is no Event of Default, Borrower shall
have the right to use, from time to time, funds from the Reserve Account for
replacement of capital items so long as Borrower promptly provides FINOVA with
copies of all receipts for such expenditures and any other related documents,
lien waivers and invoices which FINOVA may request.
10.21 Post-Closing Requirements. Within thirty (30) days following the
Closing Date, Berkshire shall cause National Elevator Company, or another
responsible service provider, to have repaired the seals to the elevator located
in the maintenance room of the Berkshire Facility, and to have cleaned up all
residual oil. Within ten (10) days following the completion of such tasks,
Berkshire shall deliver or cause to be delivered to FINOVA evidence reasonably
satisfactory to FINOVA verifying the completion of such work. Borrowers
acknowledge that, because the Closing Date for that portion of the Loan
allocated to Rossmore shall be deferred for some period of time following the
Pre-Closing Date, on or before the Closing Date applicable to Rossmore,
Borrowers and FINOVA may enter into a side letter agreement to evidence any
post-Closing requirements which FINOVA may have in connection with the funding
of that portion of the Loan allocated to Rossmore, including, without
limitation, environmental and credit enhancement matters.
11. NEGATIVE COVENANTS.
Without FINOVA's prior written consent, which consent FINOVA may
withhold in its sole discretion (except as otherwise set forth herein), so long
as any Obligation remains outstanding and this Agreement is in effect, no
Borrower shall:
11.1 No Change of Control. Without FINOVA's prior written consent: (a)
sell, lease, transfer or dispose of all or substantially all of its assets to
another entity (except for the sale of used furniture, fixtures and equipment
which is being replaced with items of similar quality in the ordinary course of
business, provided that if such sold items are replaced, FINOVA retains a first
priority security interest in such items); (b) consolidate with or merge into
another entity, permit any other entity to merge into it or consolidate with it,
permit any transfer of the ownership of or power to control Borrower, or in any
way change or alter its organizational structure (provided, however, Borrower
shall not be required to obtain FINOVA's consent to transfers of the ownership
interests of Borrower between the then existing members of Borrower), (c)
redeem, retire,
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purchase or repurchase, or otherwise acquire, directly or indirectly, any
ownership interest now or hereafter outstanding; (d) acquire or organize,
directly or indirectly, any subsidiary corporation or limited liability company,
or own stock or any other equity interest in or assets of any other business
entity, (e) further encumber the Collateral, or (f) make any other material
change in its capital structure or in its business or operations which might
adversely affect the repayment of the Obligations;
11.2 Loans. Make advances, loans or extensions of credit to, or invest
in, any Person; provided, however, that each of Berkshire and Encino shall be
permitted to make loans to the other if all of the following conditions have
been met (for purposes of this Section 11.2, the Borrower which is making such
intra-Borrower loan shall be referred to as the "Under-Budget Borrower," and the
Borrower which is receiving such intra-Borrower loan shall be referred to as the
"Over-Budget Borrower"): (a) there shall not exist any Event of Default or
Incipient Default at the time such loan is made; (b) the Under-Budget Borrower
shall have completed construction/renovation of its applicable Facility and
shall have received a Certificate of Occupancy therefor; (c) there shall remain
some portion of the Loan proceeds that were allocated to the Under-Budget
Borrower pursuant to Section 1.1 on the Schedule which the Under-Budget Borrower
did not have to borrow in order to complete its Facility (such amount being
referred to as the "Under-Budget Amount"); (d) the amount of such loan shall not
exceed the least of the following: (i) $250,000, (ii) the Under-Budget Amount,
(iii) that amount which, when added to the Loan proceeds advanced to the
Under-Budget Borrower, shall cause total advances to the Under-Budget Borrower
to equal 65.0% of the total acquisition, construction and renovation costs
applicable to the Under-Budget Borrower's Facility; or (iv) that amount which,
when added to the Loan proceeds allocated to the Over- Budget Borrower, shall
cause total advances to the Over- Budget Borrower to equal 65.0% of the total
acquisition, construction and renovation costs applicable to the Over- Budget
Borrower's Facility; (e) the Over-Budget Borrower shall demonstrate its ability,
after giving effect to the intra-Borrower loan, to be in compliance with the
Debt Service Coverage Ratio required by Section 10.14 on the Schedule; and (f)
any such loan (i) shall be evidenced by a promissory note from the Over-Budget
Borrower in favor of the Under- Budget Borrower, which note shall be pledged and
endorsed to FINOVA pursuant to a Note Pledge Agreement in form and substance
satisfactory to FINOVA, and (ii) shall be secured by a junior deed of trust on
the Real Property owned by the Over-Budget Borrower, together with appropriate
UCC-1 financing statements from the Over-Budget Borrower as "debtor" in favor of
the Under- Budget Borrower as "secured party," which deed of trust and UCC
financing statements shall be assigned to FINOVA;
11.3 Dividends and Capital Distributions. Declare or pay cash dividends
upon any of its outstanding ownership interests or distribute any of its
property or redeem, retire, purchase or acquire directly or indirectly any of
its outstanding ownership interests;
11.4 Adverse Transactions. Enter into any transaction which would
materially and adversely affect the Collateral or the Borrower's ability to
repay the Obligations in full as and when due;
11.5 Indebtedness of Others. Become directly or contingently liable for
the Indebtedness of any Person, except by endorsement of instruments for
deposit;
11.6 Material Business Changes. Without the prior written consent of
FINOVA, Borrower shall not be permitted to sell, lease, transfer, assign, or
otherwise dispose of any or all of Borrower's property, including, without
limitation, the Facilities or any of the other Collateral. This provision shall
not prohibit Borrower from selling or disposing of furniture, fixtures or
equipment relating to the operation of the Facilities in the ordinary course of
business provided that if such sold or disposed of items are replaced, FINOVA
obtains a first priority security interest in such items;
11.7 Name. Use any fictitious name other than its name as set forth in
its Articles of Organization on the date hereof or as set forth on the Schedule;
11.8 Prepayment. Prepay any Indebtedness other than trade payables and
other than the Obligations pursuant to Section 13.1 hereof;
11.9 Capital Expenditure. Make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures by
Borrower in any fiscal year would exceed the amount set forth on the Schedule;
11.10 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule, other than (i) the Obligations,
(ii) trade payables and other contractual obligations to suppliers and customers
incurred in the ordinary course of business, and (iii) other Indebtedness
existing on the date of this Agreement and reflected in the Prepared Financials
(except Indebtedness paid on the date of this Agreement from proceeds of the
initial Advances hereunder),
11.11 Affiliate Transactions. Except as set forth below, sell, transfer,
distribute or pay any money or property to any Affiliate, or invest in (by
capital contribution or otherwise) or purchase or repurchase any stock or other
ownership interests in, or Indebtedness or any property of, any Affiliate, or
become liable on any guaranty of the indebtedness, dividends or other
obligations of any Affiliate. Notwithstanding the foregoing, Borrower may pay
compensation to employees who are Affiliates and, if no Event of Default has
occurred, Borrower may (i) engage in transactions with Affiliates in the normal
course of business, in amounts and upon terms which are fully disclosed to
FINOVA and which are no less favorable to Borrower than would be obtainable in a
comparable arm's length transaction with a Person who is not an Affiliate, and
(ii) make payments to a Subordinating Creditor that is an Affiliate, subject to
and only to the extent expressly permitted in the Subordination Agreement
between such Subordinating Creditor and FINOVA;
11.12 Nature of Business. Enter into any new business or make any
material change in any of Borrower's business objectives, purposes or
operations;
11.13 FINOVA's Name. Use the name of FINOVA in connection with any of
Borrower's business or activities, except in connection with internal business
matters or as required in dealings with governmental agencies and financial
institutions or with trade creditors of Borrower, solely for credit reference
purposes;
11.14 Margin Security. At any time that the Loan has an outstanding
balance, own, purchase or acquire (or enter into any contract to purchase or
acquire) any "margin security" as defined by any regulation of the Federal
Reserve Board as now in effect or as the same may hereafter be in effect;
11.15 Limitation on Management Contract. Pay management fees in excess
of those permitted by the Schedule. Any management fees paid to Affiliates of
Borrower shall be subordinated to Borrower's obligations to FINOVA, pursuant to
a Subordination Agreement. Any Management Agreement entered into in connection
with the Facilities shall be reviewed by, and be acceptable to, FINOVA, and
Borrower shall not modify, amend or extend the term of any Management Agreement
approved by FINOVA without the prior written consent of FINOVA;
11.16 Prohibition on Payment of Certain Fees. Until the Conversion Date
applicable to each Borrower, such Borrower shall be prohibited from paying any
development fees or any management fees (including, without limitation, the
Permitted Management Fees), provided, however, that (i) partial payments of
Permitted Management Fees may be allowed, with the consent of FINOVA, to the
extent that an applicable Facility remains occupied or partially occupied during
the course of all or part of the renovation phase, and (ii) the payment of
certain fees to ABR, as disclosed in the Budgets approved by FINOVA, shall be
allowed. In particular, no development fee (which does not include that portion
of any development fee contributed as equity in accordance with Section 2.1(L)
on the Schedule), shall be paid until the issuance of a certificate of occupancy
for the applicable Facility (or, with respect to those Facilities which
previously obtained a certificate of occupancy, when such Facility receives the
comparable form of regulatory approval confirming that the renovation of such
Facility has been completed). The foregoing notwithstanding, Vintage shall be
entitled to the payment of a development fee in an amount not in excess of Two
Million One Hundred Thousand Dollars ($2,100,000) over the course of
construction and renovation of the Facilities, ninety percent (90%) of which
shall be payable during such construction and renovation and ten percent (10%)
of which shall be payable pro rata as to each Facility, when each Facility
obtains its certificate of occupancy (or, with respect to those Facilities which
previously obtained a certificate of occupancy, when such Facility receives the
comparable form of regulatory approval confirming that the renovation of such
Facility has been completed). In no event however shall the aforementioned
development fee be in excess of the actual bona fide out-of-pocket costs and
expenses incurred by Vintage in the construction and renovation of the
Facilities and such development fee shall not include any "developer fee" or
"profit";
11.17 ARV Management Agreement. Amend the Management Agreement between
such Borrower and ARV without FINOVA's prior written consent, which consent
shall not unreasonably be withheld. Each Borrower shall have the right to
terminate its applicable Management Agreement with ARV in accordance with the
termination provisions set forth in such Management Agreement, without FINOVA's
consent. If any Borrower decides to terminate ARV, such Borrower must notify
FINOVA in writing at least thirty (30) days in advance of such termination.
Borrower and FINOVA shall thereafter have thirty (30) days to mutually agree
upon a replacement manager and the terms of any replacement management
agreement. FINOVA shall have the right to approve both any replacement manager
and the terms of any replacement management agreement, which approval shall not
be unreasonably withheld or unduly delayed. If Borrower and FINOVA fail to have
agreed on a replacement manager and replacement management agreement within said
30-day period, ARV's termination as manager will be delayed until a replacement
manager has been agreed upon and a replacement management contract approved by
FINOVA and entered into between such Borrower and the replacement manager. Any
such replacement management agreement shall be required to satisfy the
conditions relative to subordination of management fees as set forth in Section
10.15; and
11.18 Compliance with ERISA. (a) Terminate or take any other action with
respect to, or permit any member of a controlled group (within the meaning of
Section 4001(a)(14) of ERISA) that includes Borrower (a "Controlled Group
Member") to terminate or take any other action with respect to, any employee
pension benefit plan subject to Title IV of ERISA ("Plan"), including without
limitation, a substantial cessation of operations within the meaning of Section
4068(f) of
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ERISA, which would result in any material liability of Borrower to the Pension
Benefit Guaranty Corporation ("PBGC") or any successor thereof, or to any Plan,
or (b) permit the occurrence of any "Reportable Event" (within the meaning of
Section 4043 of ERISA) or any other event or condition that would be the basis
under Section 4042 of ERISA for the PBGC to institute steps to terminate a Plan
maintained by Borrower or a Controlled Group Member, or (c) permit the present
value of all benefit liabilities under any Plan maintained by Borrower or a
controlled Group Member to exceed by a material amount the current value of the
assets of such Plan allocable to such benefit liabilities, or (d) permit with
respect to any Plan maintained by Borrower or a Controlled Group Member any
material unfunded benefit liabilities within the meaning of Section 4001(a)(18)
of ERISA allocable to Borrower or the Controlled Group Member. For the purpose
of this paragraph, "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, (or any successor statute thereto) and the rules and
regulations issued thereunder.
12. ENVIRONMENTAL MATTERS.
The Environmental Certificate is incorporated herein for all purposes as
if fully stated in this Agreement.
13. PREPAYMENT.
13.1 Voluntary, Full Prepayment. Berkshire and Encino jointly, and
Rossmore individually, shall have the right to prepay all (but not, except as
expressly provided herein, a portion) of the Loan allocated to such Borrower or
Borrowers, provided that FINOVA first receives from Borrower(s) no less than
thirty (30) days prior written notice (which notice shall be irrevocable) of
Borrower's intent to prepay the Loan (the "Notice Date"), and provided
Borrower(s) pay, in addition to the full outstanding principal balance of the
Note or Notes delivered by such Borrower(s) in favor of FINOVA, all accrued but
unpaid interest, all fees or other charges then outstanding, all reasonable
out-of-pocket fees and costs incurred by FINOVA in the preparation of any
documentation required in connection with such prepayment, and a Prepayment
Premium in the amount set forth on the Schedule hereto.
13.2 Unpermitted Partial Prepayment. In the event Borrower makes any
partial prepayment(s) of principal not permitted hereunder, such prepayment(s)
shall be deemed a payment(s) of the principal as of the Maturity Date, and
interest shall continue to accrue on the outstanding principal balance of the
Note, without giving effect to such prepayment(s) until the Maturity Date
13.3 Prepayment Upon Default. Upon (a) the occurrence of an Event of
Default hereunder or under any of the other Loan Documents at any time during
the term of the Loan which results in FINOVA's acceleration of all amounts due
under the Note, or (b) any sale of the Collateral, a Prepayment Premium in the
amount set forth on the Schedule as of such event shall be assessed and shall be
fully due and payable upon such sale or acceleration. Any such sale shall in all
events remain subject to the due on sale provisions of this Agreement and the
Mortgage.
14. DEFAULT.
14.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of
the Obligations at stated maturity, upon acceleration or otherwise, and
such failure continues for a period of five (5) days after the due date
thereof;
(b) Borrower or any other Loan Party fails or neglects to
perform, keep or observe any Obligation including, but not limited to,
any term, provision, condition, covenant or agreement contained in any
Loan Document to which Borrower or such other Loan Party is a party,
which failure: (i) if a failure to comply with the provisions of Section
5.1 and there does not then exist any other Event of Default, shall
continue unremedied for a period of three (3) Business Days; or (ii) if
a failure to provide financial reporting as required by Section 5.2,
shall continue unremedied for a period of ten (10) days thereafter; or
(iii) for any other default described by this Section 14(b), remains
unremedied for a period of thirty (30) days thereafter unless, if such
failure cannot reasonably be remedied within such thirty-day period,
Borrower begins to remedy such failure within such thirty-day period and
thereafter diligently pursues such remedy to completion;
(c) Any material adverse change occurs in Borrower's business,
assets, operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations
or the value or priority of FINOVA's security interest in the Collateral
is materially impaired;
(e) Any material portion of Borrower's assets is seized,
attached, subjected to a writ or distress warrant, is levied upon or
comes into the possession of any judicial officer;
(f) Borrower shall generally not pay its debts as they become
due (as demonstrated by some extrinsic evidence which FINOVA, in good
faith, believes to be credible) or shall enter into any agreement
(whether written or oral), or offer to enter into any agreement, with
all or a significant number of its creditors regarding any moratorium or
other indulgence with respect to its debts or the participation of such
creditors or their representatives in the supervision, management or
control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced
by Borrower, or any such proceeding is commenced against Borrower and
remains undischarged or unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record
with respect to any of Borrower's assets other than the Permitted
Encumbrances;
(i) Any judgments are entered against Borrower in an aggregate
amount exceeding Twenty-Five Thousand Dollars ($25,000) in any fiscal
year that are not covered by insurance and all such judgments shall not
have been satisfied or bonded pending appeal within thirty (30) days
from the entry thereof and all rights of action by such judgment
creditor against the Collateral have been stayed.
(j) Any default shall occur under any material agreement between
Borrower and any third party which default would result in a right by
such third party to accelerate the maturity of any Indebtedness of
Borrower to such third party;
(k) Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or
any other statement, document or report made or delivered to FINOVA in
connection therewith shall prove to have been incorrect or misleading in
any material respect;
(l) Any Prohibited Transaction or Reportable Event shall occur
with respect to a Plan which could have a material adverse effect on the
financial condition of Borrower; any lien upon the assets of Borrower in
connection with any Plan shall arise; Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which
Borrower or any of its ERISA Affiliates may be required to pay to any
Plan or any Multiemployer Plan as one or more contributions thereto;
Borrower or any of its ERISA Affiliates creates or permits the creation
of any accumulated funding deficiency in excess of Twenty-Five Thousand
Dollars ($25,000), whether or not waived;
(m) Any transfer, without FINOVA's prior written consent, to a
Person, who is not as of this date, a member of Borrower or a relative
of such a member of more than ten percent (10%), in the aggregate, of
the issued and outstanding membership interests or other evidence of
ownership of Borrower; (n) Borrower has transferred responsibility for
its day-to-day management to any Person other than ARV, except in
accordance with Section 11.17 hereof; or
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(o) An order or decree has been entered by any court of
competent jurisdiction enjoining the intended use of the Real Property
as an assisted living community and judgment is not vacated within
thirty (30) days after Borrower has obtained knowledge or notice
thereof;
(p) If any Borrower has its license to operate its Facility
revoked, suspended or not renewed by the applicable state or federal
authority, and said revocation, suspension or non-renewal is not stayed
pending an appeal thereof and is not reversed on appeal;
(q) If a ban on the admission of residents to any Facility shall
remain in the effect for a period of more than thirty (30) days; or
(r) Immediately upon (a) Borrower's failure to cause Completion
to occur on or before the Required Completion Date, or (b) at any time
prior to Completion of the Work, if (i) Borrower abandons the Work or
(ii) Borrower delays construction of the Improvements for any period of
time, for any reason whatsoever not covered by clause (i) above which in
the reasonable judgment of FINOVA will prevent Completion of the Work in
the ordinary course of construction on or before the Required Completion
Date.
14.2 Remedies. (a) At any time upon the occurrence of an Event of
Default, FINOVA may, at its option and in its sole discretion and in addition to
all of its other rights under the Loan Documents, terminate this Agreement and
declare all of the Obligations to be immediately payable in full. Borrower
agrees that FINOVA shall also have all of its rights and remedies under
applicable law, including, without limitation, the default rights and remedies
of a secured party under the Code. Upon the occurrence of an Event of Default
Borrower hereby consents to the appointment of a receiver by FINOVA in any
action initiated by FINOVA pursuant to this Agreement and to the jurisdiction
and venue set forth in Section 16.7 hereof, and Borrower waives notice and
posting of a bond in connection therewith. Further, FINOVA may, at any time,
take possession of the Collateral and keep it on Borrower's premises, at no cost
to FINOVA, or remove any part of it to such other place(s) as FINOVA may desire,
or Borrower shall, upon FINOVA's demand, at Borrower's sole cost, assemble the
Collateral and make it available to FINOVA at a place reasonably convenient to
FINOVA. FINOVA may sell and deliver any Collateral at public or private sales,
for cash, upon credit or otherwise, at such prices and upon such terms as FINOVA
deems advisable, at FINOVA's discretion, and may, if FINOVA deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement at the time
and place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Borrower agrees that FINOVA has no obligation to preserve rights
to the Collateral or marshall any Collateral for the benefit of any Person.
FINOVA is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, name, trade secrets, trade names,
trademarks and advertising matter, or any similar property, in completing
production, advertising or selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to FINOVA's benefit. Any
requirement of reasonable notice shall be met if such notice is mailed postage
prepaid to Borrower at its address set forth in the heading to this Agreement at
least five (5) Business Days before sale or other disposition. The proceeds of
sale shall be applied, first, to all attorneys' fees and other expenses of sale,
and second, to the Obligations in such order as FINOVA shall elect, in its sole
discretion. FINOVA shall return any excess to Borrower and Borrower shall remain
liable for any deficiency to the fullest extent permitted by law.
(b) Upon the occurrence of an Event of Default at any time prior to
Completion of the Work, FINOVA may, at its option, take one or more of the
following actions in connection with the construction of the Improvements: (a)
use any funds of Borrower, including without limitation, any Required Completion
Assurance Deposit then existing, and any sums which may remain unadvanced
hereunder, to continue and/or cause Completion of the Work (b) demand and
receive performances due under the Principal Work-Related Items and the other
Contracts, Intangibles, Permits and Licenses; (c) make such changes to the scope
of the Work and to the Principal Work-Related Items and other Contracts,
Intangibles, Permits and Licenses as FINOVA may deem necessary or desirable in
its sole and absolute judgment; (d) file claims, institute enforcement actions
and otherwise prosecute and defend all actions or proceedings relating to the
Work, the Principal Work-Related Items and the other Contracts, Intangibles,
Permits and Licenses as FINOVA may deem necessary or desirable in its sole and
absolute judgment; (e) pay, settle or compromise all existing bills and claims
which are or may be legal charges against the Collateral or any Contracts,
Intangibles, Permits and Licenses, or may be necessary or desirable for the
continuance or Completion of the Work related thereto or the clearance of title,
all without notice to Borrower; (f) execute in Borrower's name all applications,
certificates, notices and other instruments and give all instructions and
communications which may be required or permitted by the Principal Work-Related
Items, other Contracts, Intangibles, Permits and Licenses, as determined by
FINOVA in its sole and absolute judgment; (g) do any and every act with respect
to the Completion of the Work, the Principal Work-Related Items and the other
Contracts, Intangibles, Permits and Licenses which Borrower may do in its
behalf; (h) employ such contractors, subcontractors, suppliers, agents,
attorneys, architects, accountants, appraisers, security guards and inspectors
as FINOVA may in its sole and absolute judgment deem necessary or desirable to
accomplish any of the above purposes; and (i) receive, collect, open and read
all mail of Borrower for the sole purpose of obtaining all items pertaining to
the Work, the Principal Work-Related Items and the other Contracts, Intangibles,
Permits and Licenses.
14.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): any
public or private disposition: (i) as to which on no later than the fifth
Business Day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth Business Day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
Borrower or published if the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market); (ii)
which is conducted at any place designated by FINOVA, with or without the
Collateral being present; and (iii) which commences at any time between 8:00
a.m. and 5:00 p.m. Without limiting the generality of the foregoing, Borrower
expressly agrees that, with respect to any disposition of accounts, instruments
and general intangibles, it shall be commercially reasonable for FINOVA to
direct any prospective purchaser thereof to ascertain directly from Borrower any
and all information concerning the same, including, but not limited to, the
terms of payment, aging and delinquency, if any, the financial condition of any
obligor or account debtor thereon or guarantor thereof, and any collateral
therefor.
14.4 Right to Cure. If Borrower shall fail to comply with or fully
perform any of its obligations under the Loan Documents, regardless of whether
an Event of Default shall then exist, FINOVA may (but shall not be obligated
to), without further demand upon Borrower and without waiving or releasing
Borrower from any such obligation, remedy such defaults. All such sums, together
with interest thereon at the Default Rate, shall become additional indebtedness
secured by the Collateral. No such payment by FINOVA shall be deemed to relieve
Borrower from any default or Event of Default under any of the Loan Documents.
14.5 Power of Attorney. (a) For the purposes set forth under Sections
14.2 and 14.4, Borrower hereby irrevocably appoints FINOVA as Borrower's true
and lawful attorney-in-fact, with full power of substitution, to operate the
Facilities and to take such action and require such performance as it deems
necessary. Borrower hereby empowers FINOVA, as such attorney-in-fact, as
follows:
a. To take all actions reasonably necessary in connection therewith for
the purpose of operating the Facilities;
b. To employ such management companies as shall be convenient for said
purposes; and
c. To pay, settle, or compromise all existing or future bills and claims
which are or may be liens against the Real Property or may be reasonably
necessary or desirable for the operation of the Facilities.
(b) Borrower hereby ratifies and approves all acts of FINOVA as such
attorney-in-fact. Neither FINOVA nor any of its designees shall be liable for
any acts or omissions nor for any error of judgment or mistake of fact or law
while acting as Borrower's attorney, other than FINOVA's gross negligence or
willful misconduct. This power, being coupled with an interest, is irrevocable
until the Obligations have been fully satisfied and FINOVA's obligation to
provide loans hereunder shall have terminated.
15. DEFINITIONS.
15.1 Defined Terms. As used in this Agreement, the following terms have
the definitions set forth below:
"ABR" means Alex Brown Realty, Inc., a Maryland corporation.
"Account Agreement" shall have the meaning set forth in Section 10.20.
"ADA" has the meaning set forth in Section 2.1(cc) hereof.
"Additional Retainage" has the meaning set forth in Section 2.3(c).
"Additional Sums" has the meaning set forth in Section 3.4(a) hereof.
"Advance" means any disbursement of a portion of the Loan, subject to
the terms and upon the conditions contained in this Agreement.
"Affiliate" means any Person controlling, controlled by or under common
control with Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause direction of
the management and policies of any Person, whether through ownership of common
or preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any member, officer, director, employee or other agent of Borrower,
any equity owner or subsidiary of Borrower, and any other Person with whom or
which Borrower has common members, shareholders, officers or directors.
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"Allocated Interest Reserve Amount" has the meaning set forth in Section
1.2 on the Schedule.
"Amortization Date" has the meaning set forth in Paragraph 7 of Section
3.1 on the Schedule.
"Applicable Usury Law" has the meaning set forth in Section 3.4(b)
hereof.
"Architect/Engineer" means an architect or engineer employed by Borrower
to perform architectural or engineering services.
"Architect/Engineer Agreement" means a contract (written or oral, now or
hereafter in effect) between Borrower and an Architect/Engineer for the
performance of architectural or engineering services, as approved by FINOVA in
writing and modified from time to time with FINOVA's prior written consent.
"Articles of Organization" shall mean the charter, articles, operating
agreement, partnership agreement, by-laws and any other written documents
evidencing the formation, organization, governance and continuing existence of
an entity.
"ARV" means ARV Assisted Living, Inc., a Delaware corporation.
"Assignment" shall mean an Assignment of Contracts, Intangibles,
Licenses and Permits assigning to FINOVA as security for the Loan (to the extent
assignable under applicable law), all contracts, intangible property rights,
licenses and permits in which Borrower has an interest and which are used in the
operation, management and/or maintenance of the Real Property, and all
construction, engineering and architectural contracts, plans or specifications
relating to the Real Property, and all franchise agreements, reservation system
agreements, equipment leases; together with such consents from third parties
under such contracts as FINOVA deems necessary upon its review of such
contracts.
"Available Operating Cash Flow Shortfall" shall mean, as to any
Borrower, any negative amount resulting from the following formula: such
Borrower's Operating Cash Flow generated on a fiscal year-to-date basis, plus
any amounts funded from the Interest Reserve during such fiscal year-to-date for
the payment of interest installments coming due during such period, less such
Borrower's Contractual Debt Service during the same period.
"Basic Retainage" has the meaning set forth in Section 2.3(c).
"Berkshire" means Berkshire Renovation, LLC, a Delaware limited
liability company and one of the Borrowers.
"Berkshire Facility" means The Berkshire, an assisted living community
located at 2235 Sacramento Street, Berkeley, California, which Facility shall be
acquired by Berkshire.
"Borrowing Term" means the period of time during which FINOVA is
committed to make Advances, which commitment shall terminate, as to each
Borrower, on the date described in Section 1.2 on the Schedule.
"Budget" means a detailed "all-in" construction budget and cost
itemization prepared by Borrower with respect to construction of the Work, and
approved in writing by FINOVA, supported by firm, fixed price contracts or
purchase orders, including the contingency reserve and all hard and soft costs
to be incurred in the construction and Completion of all Improvements to be
constructed with respect to the applicable Facility, which specifies by item the
cost, source of payment and draw schedule of (a) all labor, materials and
services necessary for Completion of the Work; and (b) all other expenses
incidental to the Completion of the Work. The Budget shall include a ten percent
(10%) basic retainage and an interest reserve and contingency reserve acceptable
to FINOVA in its Permitted Discretion. In addition to the foregoing, the Budget
shall project on a monthly basis costs incurred and anticipated Advances under
the Loan throughout the term of construction. The Budget is attached to the
Schedule as Exhibit C and is incorporated herein by reference.
"Business Day" means any day on which commercial banks in all of Los
Angeles, California, Chicago, Illinois, and Phoenix, Arizona are open for
business.
"Capital Expenditures" means all expenditures made and liabilities
incurred, other than as provided for in the Budgets, for the acquisition of any
fixed asset or improvement, replacement, substitution or addition thereto which
has a useful life of more than one year and including, without limitation, those
arising in connection with Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of Borrower.
"Certificate of Completion" means, with respect to the Work, a
certificate issued by the governmental authority having jurisdiction over the
Work when all of the Work has been completed, allowing the use of the
Improvements by Borrower for their intended purpose.
"Closing" means, as to each individual Borrower, the first Advance of
funds by FINOVA for the purpose of permitting such Borrower to acquire the
Facility to be operated by it (or in the case of Encino, to permit Encino to
reimburse ARV for funds previously loaned to Encino for purposes of
accomplishing such acquisition).
"Closing Date" means, as to each Borrower, the date upon which the
Closing applicable to such Borrower occurred.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 4.1 above.
"Commitment" means that certain Commitment Letter from FINOVA addressed
to Messrs. Brian Flornes and Eric Davidson dated August 25, 1998, as accepted by
ARV, ABR, and Messrs. Flornes and Davidson on behalf of the Borrowers, on August
26, 1998.
"Completion" or "Completion of the Work" means completion of the Work
(excluding certain "punch-list" items which are not necessary for the full
operation of the Facility), substantially in accordance with the Plans, the
Construction Contract, all applicable, zoning, building and other governmental
laws, regulations and private restrictions, the Loan Documents, sound
construction, engineering and architectural principles and commonly accepted
safety standards, and free of rights of third parties and free of defective
materials and workmanship; and receipt by FINOVA of the following in form and
substance satisfactory to it:
(a) A certificate of completion from Borrower and its
Architect/Engineer and, if FINOVA elects, from FINOVA's Inspector, certifying
that the Work has been so completed in accordance with the Loan Documents
including, without limitation, the Construction Contract, in a good and
workmanlike manner, all utilities necessary to serve the Property have been
connected and are operating, and the Improvements are ready for occupancy;
(b) A Certificate of Completion;
(c) The "as-built survey" required pursuant to Section 18 of the
Construction Covenant Section and "as built plans" for the Property; ----------
(d) All licenses or approvals for operation within or on the
Facility if any; and any other applicable governmental permits, approvals,
consents, licenses and certificates for the use and operation of the Facilities
as assisted living communities;
(e) Evidence satisfactory to FINOVA that there are no material
judgments or pending litigation or, to the best of Borrower's knowledge,
threatened litigation of a material nature outstanding against the Borrower, or
the Real Property, including but not limited to litigation or judgments which
may affect title or FINOVA's lien position with respect to any of the Collateral
or any litigation or judgment which might materially affect the ability of
Borrower to perform its Obligations;
(f) If applicable laws provide that the recording of a notice of
completion for the Work will cause the expiration upon a date certain of the
statutory period within which mechanics' and similar liens can be filed,
verification of the recording of such notice in the manner prescribed by such
laws;
(g) The Re-Issued Title Policy required pursuant to Section 16 of
the Construction Covenants Section; and
(h) Final lien waivers (which may be conditional on payments only
with respect to the work, material, equipment, or services to be paid from
proceeds of the final Advance).
"Construction Contract" means a contract (written or oral, now or
hereafter in effect) between Borrower and a Contractor, or between any
Contractor and any other person or entity relating in any way to the Completion
of the Work, including the performing of labor and the furnishing of equipment,
materials or services (other than architectural or engineering services), as
approved by FINOVA in writing and modified from time to time with FINOVA's prior
written consent.
"Construction Covenants Section" means the Construction-Related
Covenants, Representations and Warranties section of the Schedule.
"Contractual Debt Service" means, for any given accounting period, all
regularly scheduled principal and interest payments due under the Note and any
other Indebtedness approved by FINOVA.
"Contractor" means a contractor employed by Borrower to provide labor
and/or to furnish equipment, materials or services for any portion of the Work.
"Contracts, Intangibles, Licenses and Permits" means those property
rights which are the subject matter of the Assignment.
"Conversion Date" has the meaning set forth in Paragraph 6 of Section
3.1 on the Schedule.
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"Current Assets" at any date means the amount at which the current
assets of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP, provided that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP.
"Debt Service After Management Fee Coverage Covenant" has the meaning
set forth in Section 10.14 on the Schedule.
"Debt Service After Management Fee Coverage Ratio" has the meaning set
forth in Section 10.14 on the Schedule.
"Debt Service Coverage Covenant" has the meaning set forth in Section
10.14 on the Schedule.
"Debt Service Coverage Ratio" has the meaning set forth in Section 10.14
on the Schedule.
"Default Rate" shall mean the Default Rate of interest more fully
described and set forth in Section 3.2 hereof.
"Deposit Accounts" has the meaning set forth in Section 9-105 of the
Code.
"Distributions" shall have the meaning set forth in the Negative
Covenants section of this Schedule.
"Encino" means Encino Renovation, LLC, a Delaware limited liability
company and one of the Borrowers.
"Encino Facility" means the Encino Hills Terrace located at 16025
Ventura Boulevard, Encino, California, which Facility is owned by Encino.
"Environmental Certificate" shall mean an Environmental Certificate with
Representations, Covenants and Warranties executed by Borrower and such other
Loan Parties as required by FINOVA, as it may be from time to time renewed,
amended, restated or replaced.
"Equipment" means all of Borrower's present and hereafter acquired
equipment, durable and non-durable medical equipment, machinery, furniture,
furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 14.1 of
this Agreement.
"Facility/ies" means, individually, each of the Berkshire Facility, the
Encino Facility, and the Rossmore Facility, and collectively, all of the
Berkshire Facility, the Encino Facility and the Rossmore Facility. As the
context requires, references to an individual Facility applicable to a
particular Borrower, or to an individual Borrower generally, shall refer to the
Facility to be owned and operated by such Borrower.
"FINOVA's Inspector" has the meaning set forth in Section 6 of the
Construction Covenants Section.
"Force Majeure Event" means any "Act of God," governmental moratorium,
civil commotion, enemy action, fire, strike, casualty, or governmental order, or
injunction issued by a court of competent jurisdiction, which are entered for
reasons other than for Borrower's acts or omissions which would constitute a
default under this Agreement, or similar occurrences beyond Borrower's control.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to FINOVA
prior to the date hereof.
"General Contract" has the meaning set forth in Section 2.2(A)(i).
"General Contractor" means the Persons to be designated on Exhibit 1
hereto as to each Facility.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against FINOVA, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation credit, liability,
property and other insurance) tax refunds and claims, computer programs, discs,
tapes and tape files, claims under guaranties, security interests or other
security held by or granted to Borrower to secure payment of any of the
Receivables by an account debtor, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Authority" means any nation or government, governmental
agency or instrumentality, any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Improvements" means all improvements to be constructed upon the Real
Property as part of the Work, together with any off-site improvements which must
be completed in connection therewith, all as set forth in the Plans and the
Construction Contract(s) and as described in the Budget.
"Incipient Default" means an act or event which with notice, passage of
time or both would constitute an Event of Default.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities, and
(v) deferred taxes.
"Interest Reserve" means that portion of the Loan, in the total amount
of $3,076,725, as referenced in Section 1.2 on the Schedule, which has been
allocated for the payment of interest from the Closing Date through the
Amortization Date. The portion of the Interest Reserve allocated to each
Borrower is the Allocated Interest Reserve Amount, as specified in Section 1.2
on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, including all
raw materials, supplies, building materials, and other items which are to be
incorporated into the Improvements, whether in transit to the Real Property or
located upon the Real Property, and regardless of the state of incorporation of
such items into the Improvements. Following the Completion of the Work,
Inventory shall include all goods, merchandise or other personal property,
wherever located, used or consumed by Borrower in the operation of each of the
Facilities as an assisted living community.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lease Assignment" shall mean an Assignment of Leases and Rents
assigning to FINOVA as security for the Loan (to the extent assignable under
applicable law) the Leases and all rents arising from the Real Property or any
portion thereof.
"Leases" shall mean all of the leases of the Real Property or any
portion thereof together with any and all other existing or future leases or
other agreements for the use and/or occupancy of the Real Property or any
portion thereof by Borrower as landlord, as the same may from time to time be
modified or amended.
"Licenses" means, collectively, the certificate of need for any Facility
issued by the healthcare regulatory agency of the state in which the Facility is
located and any other licenses or permits necessary or appropriate for the
operation of the Facility as an assisted living community.
"Loan B" means that certain loan, in the principal amount of up to
$51,000,000 to be made by FINOVA to the Loan B Borrowers for purposes of the
construction and development of the Loan B Facilities.
"Loan B Borrowers" means, individually and collectively, each of
Lynnbrooke - Irvine, LLC, a Delaware limited liability company, Laurel Ridge
Development, LLC, a Delaware limited liability company, Inn at Lakewood
Development, LLC, a Delaware limited liability company, and Bay Spring Village,
LLC, a Delaware limited liability company, all of which are Affiliates of ARV,
ABR, and Vintage.
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"Loan B Facilities" means, individually and collectively, each of the
facilities located in Irvine, California, Highlands Ranch, Colorado, Lakewood,
Colorado, and Barrington, Rhode Island, to be developed by the Loan B Borrowers
with the proceeds of Loan B.
"Loan Documents" shall mean, collectively, this Agreement, the Notes,
the Mortgages, the Projected Cash Shortfall Protection, the Operating Deficit
and Deficiency Payment Agreement, the Assignments, the Account Agreements, the
Environmental Certificates, the Subordination Agreements, UCC-1 Financing
Statements for filing and recording as required to perfect all of the security
interests granted or created pursuant to the Loan Documents, the Lease
Assignment, and any other agreement entered into in connection with this
Agreement or evidencing, securing or otherwise ancillary to the Loan as more
fully described in the Schedule together with all alterations, amendments,
changes, extensions, modifications, refinancings, refundings, renewals,
replacements, restatements, or supplements, of or to any of the foregoing.
"Loan Party" means Borrower, ARV, Vintage ABR Hillsdale, each
Subordinating Creditor and each other party (other than FINOVA) to any Loan
Document.
"Loan" has the meaning set forth in Section 1.2 hereof.
"Loan Year" means each twelve (12) month period commencing on the
Closing Date.
"Management Agreements" mean those certain Management Agreement between
Borrower and ARV governing the management of the Facilities.
"Maturity Date" shall mean, for each Borrower, the date upon which the
sixtieth (60th) monthly installment payable by such Borrower, as described in
Paragraph 7 of Section 3.1 on the Schedule, shall become due and payable.
"Maximum Interest Rate" has the meaning set forth in Section 3.4(b)
hereof.
"Mortgage" shall mean the deed of trust (if available under applicable
state law) or mortgage securing the Note and all of Borrower's obligations under
the Loan Documents, and constituting: (a) a first and prior lien on the fee
title to the Real Property, including all buildings and improvements now or
hereafter located on the Real Property, and all fixtures and attachments of and
to the buildings now on the Real Property, if any, and those to be erected on
the Real Property and all rights and interest appurtenant thereto; and (b) a
first priority assignment of all Borrower's interest in and to the Leases
including without limitation all rents, issues or profits therefrom.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of
Borrower or any ERISA Affiliate.
"Net Worth" at any date means a Borrower's net worth as determined in
accordance with GAAP, consistently applied.
"Note(s)" shall mean the promissory note or notes of Borrower evidencing
the Loan.
"Notice Date" has the meaning set forth in Section 13.1.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to FINOVA, whether evidenced by this Agreement, any note or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by FINOVA in Borrower's debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, examination fees, letter of credit fees, collateral monitoring
fees, closing fees, facility fees, loan fees, prepayment premiums, and any other
sums chargeable to Borrower hereunder or under any other agreement with FINOVA.
"Operating Cash Flow" means, for any period, Borrower's net income or
loss (excluding the effect of any extraordinary gains or losses), determined in
accordance with GAAP, plus each of the following items, without duplication, to
the extent deducted from the revenues of Borrower in the calculation of net
income or loss: (i) depreciation; (ii) amortization and other non-cash charges;
and (iii) interest expense paid or accrued, including, without limitation,
interest on Capital Leases imputed in accordance with GAAP; less, without
duplication, each of (a) Tax Distributions actually paid during such period; and
(b) the Replacement Reserve.
"Operating Deficit and Deficiency Payment Agreement" means those certain
credit enhancements to be provided by ARV and Vintage ABR Hillsdale in favor of
FINOVA and Rossmore pursuant to Section 2.1(F) on the Schedule.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permanent Loan Installment" has the meaning given in Paragraph 7 under
Section 3.1 on the Schedule.
"Permitted Discretion" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower, any Loan
Party or any of the Collateral; or (iv) creates or reasonably could be expected
to create an Event of Default. In exercising such judgment, FINOVA may also take
into consideration the financial and business climate of the Borrower's industry
and general macroeconomic conditions affecting Borrower. The burden of
establishing lack of good faith hereunder shall be on the Borrower.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on Exhibit B to the Schedule and incorporated
herein by this reference.
"Permitted Management Fees" means those management fees which are
payable to ARV (or any permitted successor manager) pursuant to Management
Agreements that have been reviewed and approved by FINOVA.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Plans" has the meaning set forth in Section 11 of the Construction
Covenants Section.
"Post Management Fees Cash Flow" means, for any period, a Borrower's
Operating Cash Flow minus Permitted Management Fees paid by Borrower during such
period.
"Prepared Financials" means the balance sheets of Borrower as of the
date set forth in the Schedule, and as of each subsequent date on which audited
balance sheets are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in members' equity and changes in cash
flow for the periods ended on such dates.
"Prepayment Premium" has the meaning set forth in Paragraph 4 of Section
3.1 on the Schedule.
"Prime Rate" means that rate of interest publicly announced by Citibank,
N.A., in New York, New York, as Citibank's base lending rate to its most
creditworthy commercial customers, notwithstanding the fact that some persons
may borrow at rates of interest less than the announced Prime Rate. In the event
that Citibank, N.A., ever ceases to publish the Prime Rate, FINOVA shall
designate a substitute comparable rate to be used as the benchmark for
determining the Interest Rate from among the applicable prime rate or other
reference rates published by one of the ten largest commercial lending
institutions based in the United States, or alternatively shall select a rate
based upon a composite of the standard reference rates published by such
institutions.
"Principal Work-Related Items" means the Plans and all agreements
between Borrower and third parties pertaining to the Work, including, without
limitation, the Construction Contract(s) and the Architect/Engineer
Agreement(s), as approved by FINOVA in writing and modified from time to time
with FINOVA's prior written consent.
"Prohibited Transaction" means any transaction described in Section 406
of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC or otherwise exempt from section 406 of
Erisa of 4975(c) of the IRC pursuant to an administrative or personal exemption.
"Projected Cash Shortfall Protection" means those certain credit
enhancements to be provided by ARV in favor of FINOVA and the individual
Borrowers pursuant to Section 2.1(E) on the Schedule.
"Projected Cash Shortfalls" has the meaning set forth in Section 2.1(E)
on the Schedule.
"Project Documents" shall mean all management, shared use, access,
engineering, marketing, construction, operating, owners' association and other
agreements relating to the use, ownership, or operation of the Facilities and
all of Borrower's rights, as a "declarant", "developer", "owner" and/or
otherwise under the governing documents and restrictive covenants affecting the
Real Property, including, without limitation, the deed or declaration of
division, owners' association charters or articles or certificates of
incorporation, bylaws and rules and regulations relating thereto whether now
existing or hereafter created.
15
<PAGE> 16
FINOVA LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
"Real Property" shall mean the parcels of real property legally
described on Exhibits A-1, A-2, and A-3 attached to the Schedule and
incorporated herein by this reference, upon which the Facilities are located,
and all improvements and additions thereto, and all mineral rights, easements
and other rights appurtenant thereto, all as more fully described in the
Mortgages.
"Receivables" or "Receivable" means all of Borrower's now owned and
hereafter acquired accounts (whether or not earned by performance), proceeds of
any letters of credit naming Borrower as beneficiary, contract rights, chattel
paper, instruments, documents and all other forms of obligations at any time
owing to Borrower, all guaranties and other security therefor, whether secured
or unsecured, and all rights of stoppage in transit and all other rights or
remedies of an unpaid vendor, lienor or secured party. Receivables includes all
accounts and general intangibles, all rights, remedies, guaranties, security
interests and liens, all records (other than medical records, unless patient
consents with respect thereto have been received) and other property evidencing
any and all proceeds which relate to or are associated with such Receivables,
subject to confidentiality rights under applicable law and under rights and
rules of the Joint Commission for the Accreditation of Healthcare Organizations
("JCAHO").
"Replacement Reserve" means a reserve for Capital Expenditures, in an
amount equal to the following: (i) $350 per unit for Rossmore and (ii) $250 per
unit for each of Encino and Berkshire for the one year period commencing upon
the Conversion Date and $350 per unit at all times thereafter; provided,
however, that Borrowers shall only be required to maintain the Replacement
Reserve, and the Replacement Reserve shall only be deducted in determining
Operating Cash Flow, for the period commencing with the Start Date applicable to
such Borrower.
"Reportable Event" means a reportable event described in Section 4043 of
ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4068(f)
of ERISA.
"Required Completion Assurance Deposits" shall mean all amounts
deposited by Borrower with FINOVA pursuant to Section 23 of the Construction
Covenants Section.
"Required Completion Date" shall mean, with respect to Encino and
Berkshire, the date which is twelve (12) months after the applicable Closing
Date, subject to Force Majeure Events not exceeding sixty (60) days in the
aggregate, and, with respect to Rossmore, the date which is twenty (20) months
after the Pre-Closing Date, subject to Force Majeure Events not exceeding sixty
(60) days in the aggregate.
"Reserve Account" shall have the meaning set forth in Section 10.20.
"Rossmore" means Rossmore Renovation, LLC, a Delaware limited liability
company and one of the Borrowers.
"Rossmore Facility" means the Rossmore House located at 445 North
Rossmore, Los Angeles, California, which Facility is to be acquired and operated
by Rossmore.
"Schedule" has the meaning set forth in the preamble.
"Start Date" has the meaning set forth in Section 10.14 on the Schedule.
"Subordinated Debt" means liabilities of Borrower the repayment of which
is subordinated, to the payment and performance of the Obligations, pursuant to
a subordination agreement acceptable to FINOVA.
"Subordination Agreement" shall have the meaning set forth in Section
10.15 hereof.
"Subordinating Creditor" means each of the members of Borrower and ARV.
"Tax Distributions" shall have the meaning set forth in the Negative
Covenants, Section 11 of the Schedule.
"Title Agent" shall mean Fidelity National Title Insurance Company.
"Title Company" shall mean Fidelity National Title Insurance Company.
"Title Policy" shall have the meaning set forth in Section 2.1(l) of the
Loan Agreement
"Total Facility" has the meaning set forth on the Schedule.
"Trademarks, Licenses and Patents" means all of Borrower's right, title
and interest in and to: (i) trademarks, trademark registrations, trade names,
trade name registrations, and trademark or trade name applications, including
without limitation such as are listed on the Schedule as the same may be amended
from time to time, and (a) renewals thereof, (b) all income, royalties, damages
and payments now and hereafter due and/or payable with respect thereof,
including, without limitation, damages and payments for past or future
infringements thereof, (c) the right to sue for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout the
world, and (e) the goodwill of the business operated by assignor connected with
and symbolized by any trademarks or trade names; (ii) license agreements,
including without limitation such as are listed on the Schedule and the right to
prepare for sale, sell, and advertise for sale any Inventory now or hereafter
owned by Assignor and now or hereafter covered by such licenses; and (iii)
patents and patent applications, registered or pending, including without
limitation such as are listed on the Schedule, attached hereto, together with
all income, royalties, shop rights, damages and payments thereto, the right to
sue for infringements thereof, and all rights thereto throughout the world and
all reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, and all goodwill of the business connected with
the use of and symbolized by such patents.
"Uncovered Cost of the Work" shall mean the amount equal to the excess
(if any) of (a) the remaining unpaid costs of Completion of the Work over (b)
the committed and undisbursed portion of the Loan and any Required Completion
Assurance Deposits held by FINOVA.
"Vintage" means Vintage Senior Housing, LLC, a California limited
liability company and an Affiliate of each Borrower.
"Vintage ABR Development" means Vintage/ABR (Development), LLC, a
Delaware limited liability company and, indirectly, the minority owner of each
Loan B Borrower.
"Vintage ABR Hillsdale" means Vintage/ABR (Hillsdale), LLC, a Delaware
limited liability company and the minority member of each Loan A Borrower.
"Vintage/Davidson " means Vintage/Davidson, LLC, a California limited
liability company.
"Work" means the construction of the Improvements with respect to each
of the Facilities and the installation of any and all furniture, furnishings,
fixtures and/or equipment required by this Agreement or shown as costs on the
Budget, the Plans or the Construction Contract(s) for the Improvements.
"Work Progress Schedule" shall mean a schedule showing that planned
timing, progress of construction and completion date for the development and the
construction of the Improvements with respect to each of the Facilities in the
form attached to the Schedule as Exhibit D.
"Work-Related Advance" means any Advance made for the purpose of paying
or reimbursing Borrower for the costs of the Work.
"Work-Related Advance Request" means the written application of Borrower
on FINOVA's standard forms made by Borrower specifying by name and amount all
parties to whom Borrower is obligated for labor, materials, equipment or
services supplied for the Completion of the Work whether or not specified in the
Budget, and requesting a Work-Related Advance for payment of such items,
accompanied by an Affidavit of Borrower and such schedules, affidavits,
releases, waivers, statements, invoices, bills and other documents as FINOVA may
request.
15.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP, consistently applied. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.
16. MISCELLANEOUS.
16.1 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination of
this Agreement; recourse to security shall not be required at any time. Borrower
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Borrower might otherwise be entitled.
16.2 No Waiver by FINOVA. Neither FINOVA's failure to exercise any
right, remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of this Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.
16.3 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FINOVA's and Borrower's respective representatives, successors and assigns.
16.4 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
16.5 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this Agreement
or any other Loan Document, or any portion thereof, including, without
limitation, any of Borrower's rights, title, interests,
16
<PAGE> 17
FINOVA LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
remedies, powers and duties hereunder or thereunder. Borrower hereby consents to
FINOVA's participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of this Agreement and any of the other Loan Documents,
or of any portion hereof or thereof, including, without limitation, FINOVA's
rights, title, interests, remedies, powers and duties hereunder or thereunder.
In connection therewith, FINOVA may disclose all documents and information which
FINOVA now or hereafter may have relating to Borrower or Borrower's business. To
the extent that FINOVA assigns its rights and obligations hereunder to a third
party, FINOVA shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
16.6 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding of
the parties with respect to the transactions contemplated hereby.
16.7 Governing Law; Waivers. THIS AGREEMENT SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE
STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE OF ARIZONA OR, AT THE
SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH FINOVA SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND
VENUE. BORROWER FURTHER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT,
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH IN
SECTION 16.12 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT
IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
16.8 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties. No termination of this Agreement or of any
guaranty of the Obligations shall affect or impair the powers, obligations,
duties, rights, representations, warranties or liabilities of the parties hereto
and all shall survive such termination.
16.9 Evidence of Obligations. Each Obligation may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by
Borrower to FINOVA. If not so evidenced, such Obligation shall be evidenced
solely by entries upon FINOVA's books and records.
16.10 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i) exchange,
enforce, waive or release any of the Collateral, (ii) apply Collateral and
direct the order or manner of sale thereof as it may determine, and (iii)
settle, compromise, collect or otherwise liquidate any Collateral in any manner
without affecting its right to take any other action with respect to any other
Collateral.
16.11 Application of Collateral. FINOVA shall have the continuing and
exclusive right to apply or reverse and re-apply any and all payments to any
portion of the Obligations in such order and manner as FINOVA shall determine in
its sole discretion. To the extent that Borrower makes a payment or FINOVA
receives any payment or proceeds of the Collateral for Borrower's benefit which
is subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession, receiver or
any other party under any bankruptcy law, common law or equitable cause, then,
to such extent, the Obligations or part thereof intended to be satisfied shall
be revived and continue as if such payment or proceeds had not been received by
FINOVA.
16.12 Notices. Any notice required hereunder shall be in writing and
addressed to Borrower and FINOVA at their addresses set forth at the beginning
of this Agreement. Notices hereunder shall be deemed received on the earlier of
receipt, whether by mail, personal delivery, facsimile, or otherwise, or three
(3) Business Days following deposit in the United States mail, postage prepaid.
16.13 Brokerage Fees. Borrower represents and warrants to FINOVA that,
with respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission, and Borrower agrees to
indemnify and hold FINOVA harmless against any and all such claims. Borrowers
and FINOVA each hereby confirm that no broker or mortgage banker has been
engaged, or is entitled to any commission or brokerage fees, in connection with
the transactions contemplated by this Agreement.
16.14 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to FINOVA in writing with respect to the transactions contemplated by this
Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
16.15 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof. Borrower shall it its
expense, erect a sign upon the Real Property within thirty (30) days following
the Closing Date indicating that FINOVA is the source of the financing of the
construction of the Improvements with such sign to contain FINOVA's "logo" and
be subject to the reasonable approval of FINOVA. FINOVA agrees to supply
Borrower with "camera-ready" artwork for inclusion with such sign.
16.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
16.17 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or discharge any of its Obligations under this
Agreement, any remedy at law may prove to be inadequate relief to FINOVA.
Therefore, FINOVA, if it so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
16.18 Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
16.19 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments
or exhibits hereto.
16.20 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
16.21 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or any
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, whether or not relating hereto
or thereto, occurred, done, omitted or suffered to be done by FINOVA, or by
FINOVA's directors, officers, employees, agents, accountants or attorneys,
whether sounding in contract or in tort or otherwise, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within the applicable
statute of limitations, which begins on the date upon which Borrower, in the
exercise of reasonable diligence should have discovered the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based and service of a summons and complaint on an officer of FINOVA
or any other person authorized to accept service of process on behalf of FINOVA,
within thirty (30) days thereafter. Borrower agrees that such statute of
limitations period of time is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The statute of
limitations period provided herein shall not be waived, tolled, or extended
except by a specific written agreement of FINOVA. This provision shall survive
any termination of this Loan Agreement or any other agreement.
16.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in connection
with any breach of contract, tort or other wrong relating to this Agreement or
the Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if FINOVA has been advised of the possibility of such
damages. Neither FINOVA, nor any FINOVA Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by Borrower through the ordinary negligence of FINOVA, or
any FINOVA Affiliate. "FINOVA Affiliate" shall mean FINOVA's directors,
officers, employees, agents, attorneys or any other person or entity affiliated
with or representing FINOVA.
16.23 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or any
attorney of FINOVA or (ii) any defense to the payment of the Obligations for any
reason, including, but not limited to, commission of a tort or violation of any
contractual duty or duty implied by law. Borrower agrees that unless such notice
is fully given as promptly as possible (and in any event within thirty (30)
days) after Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action, inaction or defense, Borrower
shall not assert, and Borrower shall be deemed to have waived, any claim or
defense arising therefrom.
16.24 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; (II) ANY OTHER
PRESENT OR FUTURE
17
<PAGE> 18
FINOVA LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR (III) ANY CONDUCT, ACTS
OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR MEMBERS, DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH FINOVA OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
16.25 Indemnification. Borrower shall indemnify, defend and hold FINOVA
harmless from and against all claims, costs, expenses, actions, suits,
proceedings, losses, damages, and liabilities of any kind whatsoever, including
but not limited to, attorneys' fees and expenses, arising out of any matter
relating to the Loan or to the ownership, development, construction, sale,
rental or financing of the Real Property and whether resulting from internal
disputes of Borrower, disputes between Borrower and any Affiliate or whether
involving other third persons or entities, or out of any other matter whatsoever
related to this Agreement, any of the Loan Documents or any property encumbered
thereby; excluding, however, claims, costs, expenses, actions, suits,
proceedings, losses, damages and liabilities of any kind whatsoever which result
from FINOVA's gross negligence or willful misconduct. This indemnity provision
shall continue in full force and effect and shall survive not only the making of
the Loan and all advances thereof but shall also survive the repayment of the
Loan and the performance of all of Borrower's other Obligations under this
Agreement.
16.26 Additional Documents. Borrower shall execute and deliver any and
all documents which may reasonably be requested by FINOVA in order to effectuate
the purposes of this Agreement.
16.27 No Third-Party Beneficiary. This Agreement is made solely between
Borrower and FINOVA. No other person shall have any right of action hereunder.
Borrower and FINOVA expressly agree that no person shall be a third-party
beneficiary to this Agreement.
16.28 Incorporation. The Recitals and all of the exhibits attached
hereto are an integral part hereof and are fully incorporated herein by this
reference.
16.29 No Joint Venture. Under no circumstances shall FINOVA and Borrower
be deemed partners and/or joint venturers with respect to the Real Property, the
Facilities, the Loan, or any other agreement between the parties.
[SIGNATURE PAGE TO FOLLOW]
SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT
Borrower:
ROSSMORE RENOVATION, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a Delaware
corporation, Manager
/s/ Bernard Wheeler-Medley By: /s/ Sheila M. Muldoon
- ------------------------------- -------------------------------
Name: Bernard Wheeler-Medley Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Hillsdale), LLC,
a Delaware limited liability
company, Manager
/s/ Todd J. Deltufo By: /s/ Thomas R. Burton
- ------------------------------- -------------------------------
Name: Todd J. Deltufo Thomas R. Burton
Manager
/s/ Bernard Wheeler-Medley By: /s/ Eric K. Davidson
- ------------------------------- -------------------------------
Name: Bernard Wheeler-Medley Eric K. Davidson
------------------------------- Manager
THE STATE OF California )
- -------------------------------------
)
COUNTY OF Orange )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
-------------------------------------
Notary Public
(SEAL)
18
<PAGE> 19
My Commission Expires:
- -------------------------------------
19
<PAGE> 20
THE STATE OF Maryland )
- -------------------------------------
)
COUNTY OF Baltimore )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Patricia L. Baxivanos
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
10/1/99
- -------------------------------------
THE STATE OF California )
- -------------------------------------
)
COUNTY OF Orange )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- -------------------------------------
20
<PAGE> 21
ENCINO RENOVATION, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a Delaware
corporation, Manager
/s/ Bernard Wheeler-Medley By: /s/ Sheila M. Muldoon
- ------------------------------- -------------------------------
Name: Bernard Wheeler-Medley Sheila M. Muldoon
--------------------------- Senior Vice President
WITNESS: By: Vintage/ABR (Hillsdale), LLC,
a Delaware limited liability company,
Manager
/s/ Todd J. Deltufo By: /s/ Thomas R. Burton
- ------------------------------- -------------------------------
Name: Todd J. Deltufo Thomas R. Burton
--------------------------- Manager
/s/ Bernard Wheeler-Medley By: /s/ Eric K. Davidson
- ------------------------------- -------------------------------
Name: Bernard Wheeler-Medley Eric K. Davidson
--------------------------- Manager
THE STATE OF California )
- -------------------------------------
)
COUNTY OF Orange )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- -------------------------------------
21
<PAGE> 22
THE STATE OF Maryland )
- -------------------------------------
)
COUNTY OF Baltimore )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Patricia L. Baxivanos
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
10/1/99
- -------------------------------------
THE STATE OF California )
- -------------------------------------
)
COUNTY OF Orange )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- -------------------------------------
22
<PAGE> 23
BERKSHIRE RENOVATION, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a Delaware
corporation, Manager
/s/ Bernard Wheeler-Medley By: /s/ Sheila M. Muldoon
- ------------------------------- -------------------------------
Name: Bernard Wheeler-Medley Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Hillsdale), LLC,
a Delaware limited liability company,
Manager
/s/ Todd J. Deltufo By: /s/ Thomas R. Burton
- ------------------------------- -------------------------------
Name: Todd J. Deltufo Thomas R. Burton
-------------------------- Manager
/s/ Bernard Wheeler-Medley By: /s/ Eric K. Davidson
- ------------------------------- -------------------------------
Name: Bernard Wheeler-Medley Eric K. Davidson
- ------------------------------- Manager
THE STATE OF California )
- -------------------------------------
)
COUNTY OF Orange )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- -------------------------------------
23
<PAGE> 24
THE STATE OF Maryland )
- -------------------------------------
)
COUNTY OF Baltimore )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Patricia L. Baxivanos
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
10/1/99
- -------------------------------------
THE STATE OF California )
- -------------------------------------
)
COUNTY OF Orange )
- -------------------------------------
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
-------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- -------------------------------------
FINOVA:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Anne M. McNeil
----------------------------
Vice President
24
<PAGE> 1
Exhibit 10.16
FINOVA
SCHEDULE TO MASTER
LOAN AND SECURITY AGREEMENT
BORROWER: BERKSHIRE RENOVATION, LLC
ENCINO RENOVATION, LLC
ROSSMORE RENOVATION, LLC
ADDRESS: C/O ARV ASSISTED LIVING, INC.
245 FISCHER AVENUE, D-1
COSTA MESA, CALIFORNIA 92626
TAX I.D. NO.: SEE SECTION 9.16
DATED AS OF: OCTOBER 30, 1998
This Schedule forms an integral part of the Master Loan and Security Agreement
between the above Borrowers and FINOVA Capital Corporation dated the above date,
and all references herein and therein to this "Agreement" shall be deemed to
refer to said Agreement and to this Schedule.
================================================================================
TOTAL FACILITY (SECTION 1.1):
$26,000,000, allocated as follows:
(a)Berkshire - $5,500,000, including an Allocated Interest
Reserve Amount of $556,280;
(b)Encino - $4,700,000, including an Allocated Interest
Reserve Amount of $285,551; and
(c)Rossmore - $15,800,000, including an Allocated Interest
Reserve Amount of $2,234,894.
================================================================================
LOANS AND BORROWING TERM (SECTION 1.2):
The proceeds of the Loan shall be funded to Borrowers, up to the amounts
set forth in Section 1.1 above, and together with equity to be contributed by
the members of Borrowers, shall be used (i) to finance the
1
<PAGE> 2
acquisition and renovation of following facilities: (A) the Encino Hills Terrace
in Encino, California, by Encino; (B) the Rossmore House in Los Angeles,
California, by Rossmore; and (C) the Berkshire in Berkeley, California, by
Berkshire; and (ii) to pay closing costs, loan fees and other costs incurred in
connection with the Loan including, without limitation, architectural and
engineering reports, appraisal fees, and attorneys' fees and expenses. The Loan
shall include a reserve for capitalized interest (in the aggregate, the
"Interest Reserve," and as to each Borrower, the "Allocated Interest Reserve
Amount") in the amounts set forth in Section 1.1 above. Total Advances of the
Loan shall be subject to the further limitation that in no event shall the total
fundings made to any individual Borrower exceed 65.0% of the total acquisition,
construction and renovation costs applicable to the particular Facility to be
owned and operated by such Borrower. The Borrowers shall be required to have
acquired each of the foregoing Facilities by a date not later than thirty (30)
days following the execution of this Agreement. Each of the Borrowers shall
thereafter be permitted to request Advances of the Loan proceeds allocated to
such Borrower during a term of up to twelve (12) months (as to Encino and
Berkshire) from the Closing Dates applicable to Encino and Berkshire, and up to
twenty (20) months (as to Rossmore) from the Pre-Closing Date.
================================================================================
CONDITIONS PRECEDENT (SECTION 2.1):
The obligation of FINOVA to make the initial Advance of any Loan
hereunder is subject to the fulfillment, to the satisfaction of FINOVA
and its counsel, of each of the following conditions, in addition to the
conditions set forth in Section 2.1 above. To the extent individual
items relate to the Facilities or the Collateral, such items shall be
interpreted to refer solely to the individual Facility to be acquired by
an individual Borrower and the other Collateral to be provided by such
Borrower, on a Borrower by Borrower basis. Such conditions are
designated with an "*":
A. Appraisal.* FINOVA has received and approved an MAI
stabilized fair market value appraisal of each Facility, in a
form and from an appraiser satisfactory to FINOVA in its
Permitted Discretion, which shall support a loan to value ratio
of not greater than eighty-five percent (85%), as determined by
reference to that portion of the Loan which as has been
allocated to the applicable Borrower. All such appraisals must
be satisfactory to FINOVA, and shall be dated not more than
thirty (30) days prior to the Closing Date applicable to the
particular Borrower;
B. Management Agreements. FINOVA has received and
approved the Management Agreements. Without limiting the
generality of the foregoing, the amount of management fees
payable to ARV by each Borrower shall be subject to FINOVA's
approval (such management fees as are approved by FINOVA being
referred to herein as the "Permitted Management Fees"). In
addition, ARV shall have entered into the Subordination
Agreements with FINOVA, in form and substance satisfactory to
FINOVA, subordinating payment of the Permitted Management Fees
to repayment of the Borrower's Obligations to FINOVA, and
providing for a suspension of remedies on the part of ARV for
periods during which an Event of Default under the Loan
Documents is in existence.
C. Food Plain/Earthquake.* FINOVA has received
satisfactory evidence that the Real Property is not located
within a flood plain or earthquake zone or that Borrower has
federal flood insurance and earthquake insurance in an amount,
form and issuer acceptable to FINOVA.
D. Material Agreements and Licenses. FINOVA's
satisfactory review of:
(i) Equipment Leases and Operating/Capital
Leases;
(ii) Most current financial statements with
comparable from prior year; and
(iii) Three (3) years of projected operating
budgets.
E. Cash Shortfall Protection. ARV shall have undertaken,
for the benefit of each Borrower and FINOVA, to bear the risk of
(i) cost overruns during the construction/renovation phase in
excess of budgeted amounts and (ii) operating losses in excess
of projected operating
2
<PAGE> 3
losses, in each case as detailed in the Budget and projections
to be attached to the applicable Loan Documents (all such
amounts as may hereafter arise being referred to as the
"Projected Cash Shortfalls"). ARV's assurance in this regard
(the "Projected Cash Shortfall Protection") shall be in form and
substance satisfactory to FINOVA and shall be specifically
enforceable by FINOVA as a named third party beneficiary
thereof. ARV shall assure against Projected Cash Shortfalls in
an aggregate amount of up to $4,000,000. The foregoing amount
will not be segregated among Borrowers, such that each Borrower
shall have the right to receive payments thereunder until the
full amount of ARV's assurance has been exhausted. Without
limiting the generality of FINOVA's right to be satisfied with
the terms and conditions of the Projected Cash Shortfall
Protection, the Projected Cash Shortfall Protection shall
specifically provide that, if there exists any Event of Default
under the Loans, any payments owed by ARV shall be paid directly
to FINOVA.
F. Additional Enhancement Applicable to Rossmore
Facility. In addition to the Projected Cash Shortfall Protection
described in Section 2.1(E) above, ARV and Vintage ABR Hillsdale
shall provide additional credit enhancement, in form and
substance satisfactory to FINOVA, to support all operating cash
flow deficits which may be incurred by Rossmore and to provide
protection regarding the repayment of any deficiency resulting
from a sale or other disposition of the Facility owned by
Rossmore for an amount which generates insufficient proceeds to
pay in full that portion of the Loan allocated to Rossmore. Such
additional credit enhancement shall be in the form of an
Operating Deficit and Deficiency Payment Agreement from ARV and
Vintage ABR Hillsdale in favor of FINOVA, the final form of
which shall be determined by FINOVA and agreed upon by ARV and
Vintage ABR Hillsdale prior to the Closing Date applicable to
Rossmore.
G. Interest Reserve. Evidence satisfactory to FINOVA
that the amount budgeted for the Interest Reserve shall be
sufficient to pay interest, at the Interest Rate, on amounts
outstanding from time to time from the date of the first
disbursement of the proceeds of the Loan through the projected
Conversion Date. FINOVA's acceptance and approval of each
Borrower's budget for the construction period, if such budget
supports the sufficiency of the Interest Reserve, shall be
sufficient to satisfy this condition.
H. Equity Structure. FINOVA shall have reviewed and
approved Borrower's organizational documents and the ownership
structure of Borrower.
I. Pending Litigation. FINOVA and its counsel shall have
reviewed and found satisfactory the status of any and all
litigation matters affecting any individual Borrower, one or
more Borrowers as a group, ARV, or Vintage. Without limiting the
generality of the foregoing, ARV shall have provided FINOVA
current status reports with respect to its pending litigation
with Emeritus Corporation (the "Emeritus Litigation") and with
respect to the matter of ARV Assisted Living, Inc. v. Lazard
Freres Real Estate Investors LLC, et al., Case Number 794211,
Superior Court of the State of California for Orange County (the
"Lazard Litigation"). The status of all remaining matters as to
the Lazard Litigation and the Emeritus Litigation shall be
satisfactory to FINOVA and its counsel in all respects.
J. Other Indebtedness. No Borrower shall have any other
outstanding Indebtedness, other than in connection with trade
payables incurred in the ordinary course of business and not
past due.
K. Relocation of Residents. Rossmore shall not commence
the renovation phase on the Rossmore House until all existing
residents of such Facility have been relocated to other
premises, unless FINOVA has reviewed and approved Rossmore's
plan for assuring the continued safety and care of residents who
may be remaining in the Facility during renovation.
L. Contribution of Equity. The members of each Borrower
shall have contributed the necessary equity to provide
sufficient funding for such Borrower to have adequate resources
3
<PAGE> 4
(together with Loan proceeds) to pay for all items as shown on
the Budgets. The required equity for each Borrower, and for all
Borrowers together, shall have been contributed on or before the
first Closing Date applicable to any Borrower (except to the
extent set forth below with respect to Rossmore). The required
equity contributions for each of the Borrowers shall be not less
than 35% of the total acquisition, construction and renovation
costs applicable to the particular Facility to be owned and
operated by such Borrower. The total equity required to be
contributed to Rossmore shall be contributed at such time as
Rossmore has obtained all necessary permits and approvals to
renovate the Rossmore House, but in no event subsequent to the
Closing Date applicable to Rossmore. All required equity
contributions shall be in cash; provided, however, that Vintage
shall be permitted to receive credit for the contribution of its
development fee with respect to the various Facilities (i.e.,
Vintage may allocate such fee directly to the various Borrowers
as its equity contribution, rather than being paid such fee in
cash), in an amount as to each Borrower to be approved by
FINOVA, but in no event shall the total equity contributed to
all Borrowers in a non-cash form exceed, in the aggregate,
$1,050,000.
M. Current Financial Statements and Projections.* Each
Borrower shall provide FINOVA with updated copies of such
Borrower's operating budgets for the first three (3) years of
the term of the Loan, and Borrower's pro forma balance sheet as
of the Closing of such Borrower's allocated portion of the Loan.
Without limiting the generality of the foregoing, each set of
projections shall include a detailed analysis of "lease-up"
period applicable to the particular Facility and the anticipated
point at which such Facility shall achieve a level of Operating
Cash Flow sufficient to satisfy the Debt Service Coverage
Covenant and Debt Service After Management Fee Coverage
Covenant, each as set forth in Section 10.14 herein.
N. Regulatory Matters.* Review and approval of the
regulatory scheme having jurisdiction over assisted living
communities in the states in which the Facilities are located or
are to be located, including FINOVA's review and approval of
FINOVA's ability to obtain a lien on Borrower's licenses
necessary for the operation of each of the Facilities as an
assisted living community or confirmation satisfactory to FINOVA
that FINOVA will not need a lien on the aforementioned license
in order to operate any Facility for its intended purposes
through a licensed designee acceptable to FINOVA.
O. ARV's Financial Information. ARV shall provide FINOVA
with copies of its federal income tax returns for the years
ended March 31, 1996, and March 31, 1997 (including all
schedules and attachments thereto), its most recent audited
financial statements dated no later than December 31, 1997, and
its interim unaudited financial statements for the six month
period ending June 30, 1998 (together with comparable
information for the same portion of ARV's immediately preceding
fiscal year). Such information may be provided by ARV through
delivery of copies of ARV's most recent filings made with the
SEC.
P. Residency Agreements. Satisfactory review and
approval by FINOVA of the form of residency agreement which
Borrowers shall use in the operation of the Facilities.
Q. Market Feasibility Studies.* Satisfactory review and
approval by FINOVA of a market feasibility study with respect to
each Facility, which shall indicate a need for the capacity
represented by such Facility in its relevant geographic market.
Without limiting the generality of the foregoing, each market
feasibility study shall address, in addition to all competing
projects currently in operation, those competing projects under
construction or otherwise in a development stage and known to
the public.
Borrower shall cause all of the conditions precedent set forth in
Section 2.1 of this Agreement and set forth above in this Schedule to be
satisfied on or before the Closing Date applicable to each Borrower.
================================================================================
INTEREST AND FEES (SECTION 3.1):
4
<PAGE> 5
1. Interest Rate. Interest shall accrue on the Loan at a variable rate
per annum equal to the Prime Rate plus one-half of one percent (0.50%)
(the "Interest Rate"). The Prime Rate shall mean that rate of interest
publicly announced by Citibank, N.A., in New York, New York, as
Citibank's base lending rate to its most creditworthy commercial
customers, notwithstanding the fact that some persons may borrow at
rates of interest less than the announced Prime Rate. Changes in the
Interest Rate shall take effect immediately upon any change in the Prime
Rate.
2. Loan Fees. Each Borrower shall have paid to FINOVA a loan fee for the
Loan in the amount of one percent (1%) of the total Loan proceeds as are
allocated to such Borrower, as set forth in Section 1.1 above (the "Loan
Fee"). Borrowers acknowledge that the Loan Fee has been fully earned and
is nonrefundable. Payment of the Loan Fee shall be made concurrently
with the execution and delivery of this Agreement (provided, however,
that in the event Rossmore has not yet obtained all permits and
approvals necessary to renovate the Rossmore House, payment by Rossmore
of that portion of the Loan Fee attributable to Rossmore based upon the
total Loan proceeds which are committed to Rossmore, as set forth in
Section 1.1 above, shall be deferred until such time as all such permits
and approvals have been obtained).
3. Conversion Fees. Each Borrower shall pay to FINOVA a fee (herein, the
"Conversion Fees") in the amount of one percent (1%) of the sum of (i)
total actual fundings to or for the benefit of such Borrower up through
and including the Conversion Date plus (ii) any remaining undisbursed
portion of such Borrower's Allocated Interest Reserve Amount, in
consideration for FINOVA's agreement to provide financing following
completion of the construction phase, which fees shall be payable by
each such Borrower on the Conversion Date applicable to its particular
portion of the Loan. The Conversion Fees are compensation to FINOVA in
consideration of its agreement to fund the Loans during and after the
construction phases applicable thereto, and shall not be applied against
the outstanding principal, accrued interest, or any other amounts owing
to FINOVA with respect to the Loans.
4. Prepayment.
4.1 Voluntary, Full Prepayment. The Prepayment Premium shall be
computed as follows:
<TABLE>
<CAPTION>
Percent of the outstanding principal balance
Period of the Loan as of the Notice Date
------ ---------------------------------
<S> <C>
First Loan Year 5%
Second Loan Year 4%
Third Loan Year 3%
Fourth Loan Year 1%
and thereafter
</TABLE>
4.2 Prepayment Upon Default. The Prepayment Premium payable in
the case of a prepayment upon an Event of Default and acceleration by
FINOVA shall be as set forth above.
4.3 Reduced Prepayment Events. Notwithstanding the provisions of
Paragraph 4.1 above, in the event that either (i) that portion of the
Loan which is allocated and funded to Encino and Berkshire is prepaid in
full on or after the third anniversary of the last Closing Date
applicable to Encino and Berkshire, or (ii) that portion of the Loan
allocated and funded to Rossmore is prepaid in full on or after the
third anniversary of the Closing Date applicable to Rossmore, and such
prepayments occur through the proceeds of long-term mortgage financing
which the applicable Borrowers or their affiliates have obtained from
FINOVA Realty Capital, Inc., or one or
5
<PAGE> 6
more of its affiliates, then the Prepayment Premium shall be reduced
from the amount set forth in Paragraph 4.1 above to one-half of one
percent (0.50%) of the principal amount being prepaid.
4.4 Limited Waiver of Prepayment Premium. In the event that any
of the Facilities, or the outstanding ownership interests in any
Borrower, are acquired by ARV (or an affiliate of ARV provided that such
affiliate has the same or greater financial strength and wherewithal as
ARV) pursuant to those terms and conditions in such Borrower's Articles
of Organization (or in agreements entered into directly between ARV and
Vintage ABR Hillsdale) which provide ARV with certain rights to acquire
the Borrower or its Facility, no Prepayment Premium required by
Paragraph 4.1 above shall be payable in connection with any such sale if
either (x) ARV (or its affiliate) is able to prepay that portion of the
Loan as has been allocated to the applicable Borrower from ARV's (or
such affiliate's) available cash resources, without obtaining new
financing secured by the Facility owned by such Borrower (in which event
the condition set forth above requiring that such affiliate have the
same or greater financial strength and wherewithal as ARV shall be
deemed satisfied), or (y) ARV (or its affiliate) either (i) continues
the existing financing with respect to the Loans, (ii) obtains new
financing through FINOVA or one of FINOVA's affiliates, or (iii) gives
FINOVA a first right of refusal to provide new financing as follows:
If ARV or its affiliate has received a bona fide offer
from a third party for such financing which ARV or its affiliate
wishes to accept, ARV or its affiliate shall give FINOVA written
notice of such offer together with a copy of a written bona-fide
proposal for such financing from the prospective third party
lender. FINOVA shall have five (5) business days from the
receipt of such notice and proposal to issue a financing
proposal to ARV or its affiliate to extend such financing upon
terms substantially equivalent to or better than those contained
in the proposal from the third party lender (it being understood
however that FINOVA has no obligation to issue such proposal).
The failure of FINOVA to issue a proposal within the foregoing
five (5) business day period shall be deemed an election by
FINOVA not to extend such financing. Following ARV or its
affiliate's acceptance of the financing proposal issued by
FINOVA, FINOVA shall have fifteen (15) business days thereafter
within which to issue a commitment to ARV or its affiliate for
such financing (it being understood however that FINOVA has no
obligation to issue such commitment). The failure of FINOVA to
issue such commitment within the foregoing fifteen (15) business
day time period shall be deemed an election by FINOVA not to
extend such financing. In addition, in the event FINOVA
determines prior to the expiration of said fifteen (15) business
day period that FINOVA does not wish to commit to provide such
financing, FINOVA shall promptly notify ARV to that effect. If
FINOVA elects not to extend such financing, ARV or its affiliate
shall have the right to accept the financing proposal from the
third party lender and close such financing on terms which are
in no material respect more favorable to the third party lender
than those contained in its proposal. ARV or its affiliate shall
not however have the right to close such financing with the
third party lender on terms materially more favorable to the
third party lender than those contained in the proposal from
such third party lender, and be relieved of the Prepayment
Premium obligation, unless FINOVA is first given the right to
provide ARV or its affiliate with financing on terms
substantially equivalent to or better than those offered by such
third party lender, as more fully provided above.
4.5 Release Provision. Upon payment by any Borrower to FINOVA of
all amounts due and owing to FINOVA by such Borrower, as allocated to
such Borrower in the final Loan Documents (including, without
limitation, any applicable Prepayment
6
<PAGE> 7
Premium as required by this Paragraph 4 of this Section 3.1), such
Borrower shall be entitled to a release of such Borrower's Facility and
of all other Collateral which has been encumbered by such Borrower from
the lien of FINOVA's security interest in such assets.
5. Construction Monitoring Fee. Each Borrower shall pay FINOVA a
construction monitoring fee equal to $2,000 per month for the period
commencing with the Closing Date applicable to such Borrower and ending
on such Borrower's Conversion Date.
6. Interest Payments. During the construction/renovation phase
applicable to each of the Facilities, and for a period of twelve (12)
months after the completion of the renovation/construction phase for
each Facility, interest on the outstanding balance of the Loan shall be
payable monthly on the first day of each calendar month following the
first disbursement of proceeds under the Loan, calculated at the
Interest Rate. The construction/renovation phase applicable to each
Borrower shall commence on such Borrower's Closing Date and shall run
until the earlier to occur of the date construction is actually
completed and the last disbursement of either Basic Retainage or
Additional Retainage (as described in Section 2.3(c) hereof) occurs or
the Required Completion Date. The earlier of such events shall be
referred to herein as the "Conversion Date." Prior to the Conversion
Date, interest on the outstanding balance of the Loan shall be payable
by each Borrower through advances made from such Borrower's Allocated
Interest Reserve Amount, so long as (i) no Event of Default exists and
is continuing and (ii) such Borrower's Allocated Interest Reserve Amount
has not been fully drawn upon. Following the Conversion Date, interest
accruing during Borrower's twelve month interest-only period shall be
payable by Borrower first from Operating Cash Flow, and thereafter from
any remaining amounts in the such Borrower's Allocated Interest Reserve
Amount, to the extent such Borrower has experienced an Available
Operating Cash Flow Shortfall.
7. Principal Payments. Following completion of the foregoing
interest-only period, the principal balance of the Loan and all accrued
interest shall be paid in that number of monthly installments which is
equal to forty-eight (48) minus the number of monthly installments of
interest only which were paid through and including the Conversion Date
(with the result that the total term of the Loan applicable to each
Borrower shall be sixty (60) months). The final (i.e., sixtieth) monthly
installment date with respect to each Borrower shall be referred to
herein as such Borrower's "Maturity Date." Each installment of principal
and interest shall be referred to herein as a "Permanent Loan
Installment." The Permanent Loan Installments under the Loan shall
commence on the due date of the thirteenth (13th) monthly installment
following the Conversion Date (which date shall be referred to herein as
the "Amortization Date"), and shall continue on the first day of each
month thereafter, through but excluding the Maturity Date. Other than
for the Permanent Loan Installment due on the Maturity Date, each of the
Permanent Loan Installments shall be in an amount equal to the sum of
(i) interest calculated at the Interest Rate, plus (ii) a principal
component equal to the principal portion of a two hundred forty (240)
month amortization schedule, calculated based upon the Interest Rate and
the principal balance of the Loan outstanding on the Amortization Date.
On the Maturity Date, all remaining unpaid principal and any other sums
due and owing pursuant to each Borrower's obligations to FINOVA in
respect of the Loan, plus all unpaid accrued interest on the Loan, if
not sooner paid, shall be due and payable in full. The Closing Date,
Conversion Date, Amortization Date, Start Date, and Maturity Date
applicable to each Borrower shall be separate and distinct, and shall be
determined solely by reference to such Borrower's acquisition of its
individual Facility and the construction schedule resulting from its
renovation thereof. Effective as of the Amortization Date applicable to
each Borrower, no further Advances from such Borrower's Allocated
Interest Reserve Amount shall be made.
7
<PAGE> 8
================================================================================
REPORTING REQUIREMENTS (SECTION 5.2):
1. Borrower shall provide FINOVA with annual operating
budgets (including income statements, balance sheets and
cash flow statements, by month) for the upcoming fiscal
year of Borrower within ninety (90) days prior to the
end of each fiscal year of Borrower.
2. Borrower shall provide FINOVA with copies of any
notices from any public or private entity having
jurisdiction over the lawful operation of the
Facilities, within five (5) Business Days after receipt
of same.
3. Borrower shall provide FINOVA with copies of any
notices received from any applicable licensure or
certification authority with respect to the compliance
or non-compliance of the Facilities under applicable
state or federal law, including any notices of the
pendency of any de-certification, de-licensure,
non-renewal of licensure or certification or any similar
proceedings immediately upon receipt.
4. Borrower shall provide FINOVA with copies of any
notices, submissions or other filings made by or on
behalf of Borrower to the healthcare regulatory agency
for the state in which the Facilities are located or to
any municipal public health or safety agency pursuant to
any applicable law, regulation or ordinance with respect
to operation of the Facilities as assisted living
communities.
5. Borrower shall provide FINOVA with comparisons
showing Borrower's actual operating results achieved for
the then current fiscal year compared against results
projected in the last annual operating budget provided
to FINOVA pursuant to Paragraph 1 above.
6. Borrower shall provide promptly to FINOVA, or shall
cause ARV to provide directly to FINOVA, copies of all
reports concerning the operation of the Facilities which
are prepared by ARV in accordance with the terms of the
Management Agreements.
7. Borrower shall provide to FINOVA copies of Borrower's
federal income tax returns (including all schedules and
attachments thereto) concurrently with the filing of
each such return (but in no event later than the 15th
day of the seventh calendar month following the end of
Borrower's fiscal year). In the event Borrower files an
extension for the time in which to file its federal
income tax return, Borrower shall provide to FINOVA a
copy of such extension request.
================================================================================
PERMITTED ENCUMBRANCES (SECTION 9.8):
Permitted Encumbrances shall mean:
1. Liens, security interests or other encumbrances for
taxes, assessments and other governmental charges or
levies arising by operation of law in the ordinary
course of business for sums which are not yet due and
payable, or such liens the enforcement of which are, at
all times, effectively and fully stayed and are being
contested in good faith by appropriate proceedings
diligently conducted, and for which reserves as required
under GAAP shall have been established;
2. Liens arising in the ordinary course of business in
respect of claims or demands of landlords, carriers,
warehousemen, vendors, mechanics, laborers, materialmen,
workers, repairmen and other similar Persons, whether
arising by operation of law, contractually or otherwise,
provided that the amounts
8
<PAGE> 9
respectively secured thereby are not past due or if past
due, the enforcement of any such liens are at all times
stayed, and such liens are being contested in good faith
by appropriate proceedings diligently conducted and
reserves as required under GAAP shall have been
established therefor;
3. Liens in favor of FINOVA; and
4. Those matters set forth on the attached Exhibit B.
================================================================================
BORROWER INFORMATION (SECTION 9):
<TABLE>
<S> <C>
ROSSMORE RENOVATION, LLC
Borrower's State of Organization (Section 9.1): Delaware
Fictitious Names/Prior Names (Section 9.2): Rossmore House
Borrower Locations (Section 9.16): See attached List of Collateral Locations
Pending Litigation: See attached Schedule of Pending Litigation
Federal Employer ID No.: 33-0824707
Fiscal Year End: December 31
ENCINO RENOVATION, LLC
Borrower's State of Organization (Section 9.1): Delaware
Fictitious Names/Prior Names (Section 9.2): Encino Hills Terrace
Borrower Locations (Section 9.16): See attached List of Collateral Locations
Pending Litigation: See attached Schedule of Pending Litigation
Federal Employer ID No.: 33-0824702
Fiscal Year End: December 31
BERKSHIRE RENOVATION, LLC
Borrower's State of Organization (Section 9.1): Delaware
Fictitious Names/Prior Names (Section 9.2): The Berkshire
Borrower Locations (Section 9.16): See attached List of Collateral Locations
Pending Litigation: See attached Schedule of Pending Litigation
Federal Employer ID No.: 33-0824698
Fiscal Year End: December 31
</TABLE>
9
<PAGE> 10
================================================================================
FINANCIAL COVENANTS (SECTION 10.14):
Borrower shall comply with all of the following covenants. Compliance shall be
determined as of the end of each quarter.
Debt Service Coverage Ratio: Maintain a ratio (the "Debt Service Coverage
Ratio") of Operating Cash Flow to Contractual Debt Service of no less than 1.25
to 1.0 (the "Debt Service Coverage Covenant"). The foregoing covenant shall be
tested quarterly commencing with the first calendar quarter following the "Start
Date" (as hereafter defined). The Start Date shall be the first day of the first
calendar month following the month in which the earlier of the following two
events occurs: (i) a Facility attains an occupancy level of ninety-two percent
(92%) or greater or (ii) a Borrower's actual operating results have achieved a
Debt Service Coverage Ratio at least equal to 1.25:1.0; provided, however, that
in the event the Start Date has not previously occurred, each of the following
shall become the Start Date for the applicable Borrowers: for Berkshire, January
1, 2000; for Encino, January 1, 2000; and for Rossmore, October 1, 2001. For the
first twelve (12) months following the Start Date, the foregoing covenant shall
be tested for the period from the Start Date through the end of the relevant
quarter. Thereafter, the Debt Service Coverage Covenant shall be tested on a
rolling and trailing 12-month basis.
Debt Service After Management Fee Coverage Ratio: Maintain a ratio (the "Debt
Service After Management Fee Coverage Ratio") of Post Management Fees Cash Flow
to Contractual Debt Service at all times equal to at least 1.15 to 1.0 (the
"Debt Service After Management Fee Coverage Covenant"). The foregoing covenant
shall be tested from and after the Start Date, with the same frequency, and in
the same manner, as the Debt Service Coverage Covenant.
Net Worth: Each Borrower shall maintain Net Worth in an amount not less than the
following amounts: Berkshire - $2,200,000; Encino - $2,000,000; and Rossmore -
$____________. The foregoing covenant shall be tested at the end of each fiscal
quarter of Borrower.
================================================================================
NEGATIVE COVENANTS (SECTION 11):
Capital Expenditures: No Borrower shall make or incur any capital
expenditure if, after giving effect thereto, the
aggregate of all capital expenditures made by such
Borrower in any fiscal year will exceed One
Hundred Thousand Dollars ($100,000), provided,
that to the extent any Borrower makes any capital
expenditures which are paid for through additional
invested equity, such expenditures shall not be
counted against the foregoing annual limit. The
foregoing covenant shall be tested annually, on a
fiscal year basis, commencing with the period
following the Conversion Date. Testing of the
foregoing covenant for the fiscal year in which
the Conversion Date occurs shall disregard the
period prior to the Conversion Date, and shall
prorate the foregoing amount for the remaining
portion of such fiscal year. All capital
expenditures made by Borrower shall be made only
out of Borrower's internally generated funds or
additional equity invested.
Management Fees: Borrower shall not, during the term of the Loan,
pay management fees in excess of the Permitted
Management Fees during any fiscal year.
Distributions: No Borrower shall be permitted to pay dividends,
management fees (except for Permitted Management
Fees), capital distributions or other payments to
its members or other Persons (all of the
foregoing, collectively "Distributions") during
the term of the Loan without FINOVA's prior
written consent, until the first month in which
such Borrower first achieves compliance with the
Debt Service Coverage Covenant. Thereafter,
dividends and capital distributions may be made
quarterly in an amount not in excess of the
balance obtained when Operating Cash Flow is
reduced by the sum of Permitted Management Fees
and
10
<PAGE> 11
one hundred fifteen percent (115%) of Contractual
Debt Service, as pertaining to such Borrower and
such Facility. It shall however be a condition to
the making of such dividend or distribution, that
before and after taking into account the payment
of such dividend or distribution there does not
exist an Event of Default or Incipient Default.
The foregoing restrictions on dividends and
distributions shall apply to all equity
contributed as capital, whether contributed in the
form of cash or as foregone development fees.
The foregoing notwithstanding, each Borrower shall
be permitted to make quarterly Distributions ("Tax
Distributions") to its members in an amount
sufficient for the payment of federal and state
income taxes payable by such members resulting
from the inclusion in such members' taxable income
of the members' pro rata share of the income of
the Borrower, subject to reasonable assumptions as
to the marginal tax bracket to which the members
of the Borrower generally are subject. If, at the
end of the Borrower's fiscal year, there exists a
tax credit as a result of overestimated quarterly
distributions having been made (i.e.,
distributions in excess of the amount ultimately
required for such members, on an aggregate basis,
to pay the tax due as a result of the inclusion in
such members' taxable income of the members' pro
rata share of the income of the Borrower), future
quarterly tax distributions shall cease until such
credit has been fully recaptured, unless the
Borrower's Articles of Organization provide for
refund of excess distributions or earlier
recapture of such amounts. The Borrower shall
provide to FINOVA an annual reconciliation of all
quarterly tax distributions compared against
Borrower's final annual taxable income and the
final tax distributions determined therefrom, no
later than thirty (30) days after the final
determination of the Borrower's taxable income is
made; and
Additional Indebtedness: Without the prior written consent and approval of
FINOVA, Borrower shall not modify the terms and
conditions of any existing or future debt or incur
any debt other than (i) unsecured trade debt
incurred in the ordinary course of business and
(ii) purchase money financing incurred in the
ordinary course of business which purchase money
financing shall not exceed Fifty Thousand Dollars
($50,000) in any one fiscal year.
================================================================================
CONSTRUCTION-RELATED COVENANTS, REPRESENTATIONS AND WARRANTIES:
1. Construction Loan Amount. FINOVA hereby agrees to make the
Advances to each Borrower in a principal sum not to exceed the amounts
set forth in Section 1.1 above, provided Borrower has complied with, and
subject to the terms and conditions of, this Agreement and all other
Loan Documents. Unless FINOVA, in its Permitted Discretion, agrees in
writing with Borrower to make such Advances thereafter on terms and
conditions satisfactory to FINOVA, Borrower shall not be entitled to
obtain Advances after the expiration of the Borrowing Term.
2. Use of Proceeds. Borrower shall use Advances (after the
initial Advance) only for payment of and reimbursement for hard and soft
construction costs and interest reserve set forth in the Budget and
designated as costs to be paid from the Loan proceeds. All Advances
shall be subject to the conditions and limitations of Sections 2.2 and
2.3 of the Agreement.
3. Initial Advance. The proceeds of the initial Advance shall be
disbursed by FINOVA on the Closing Date to or for the benefit of
Borrower for use in strict accordance with the Initial Advance
Disbursement Schedule attached hereto as Exhibit G.
4. No Prior Work. Borrower represents and warrants to FINOVA
that no services, work, equipment or materials of any kind that may give
rise to any mechanics or similar statutory lien, including, without
limitation, site work, clearing, grubbing, draining or fencing of the
Real Property has been
11
<PAGE> 12
performed or commenced on the Real Property or otherwise provided in
connection with the Work, except to the extent that such services, work,
equipment, materials have been fully disclosed in writing to FINOVA and
Title Company and the Title Policy insures the priority of the Mortgage
over all mechanics and similar liens.
5. Utilities. Borrower represents and warrants to FINOVA that
all utility services (including water, storm and sanitary sewer, gas,
electric and telephone facilities and garbage removal) necessary for the
Completion of the Work and the intended use of each of the Facilities as
an assisted living community are available to the Real Property (or will
be upon Completion); the suppliers of such utilities have the capacity
to serve the Real Property and are committed to supply such utilities in
such amounts as are required upon Completion; and all fees and deposits
due to the suppliers of such utilities have been paid current or amounts
adequate for such purposes have been reserved in the Budget.
6. FINOVA's Inspector. FINOVA shall employ an independent
architect or engineer ("FINOVA's Inspector") to: (a) review the Plans,
the Budget and the Construction Contracts; (b) make periodic inspections
of the Real Property and Work so that FINOVA may monitor whether
Borrower is in compliance with the terms and conditions of this
Agreement with respect to completion of the Work; and (c) review and
approve the monthly draw request, perform an analysis of the anticipated
cost of the Work, and certify that each Work-Related Advance Request is
not in excess of the Work completed and the amount to which Borrower is
entitled under the terms and conditions of this Agreement. The cost of
retaining FINOVA's Inspector shall be borne by Borrower.
6.1 FINOVA may require an inspection of the Work by
FINOVA's Inspector (a) prior to each Work-Related Advance; (b)
monthly or more frequently if deemed necessary by FINOVA during
the course of construction of the Work; (c) upon Completion of
the Work; and (d) at such other time as FINOVA may deem
necessary due to actual or suspected non-compliance with the
Plans, Construction Contract(s), the Loan Documents, any law,
regulation or private restriction, sound architectural,
engineering or construction principles or commonly accepted
safety standards or Borrower's failure to satisfy the
requirements of the Loan Documents.
6.2 FINOVA shall have no duty to supervise or to review
and inspect the Plans, the Construction Contract(s), any budget
proposed to be the Budget, the construction of the Work, or any
books and records pertaining thereto. Any inspection made by
FINOVA shall be for the sole purpose of determining whether the
Obligations are being performed and preserving FINOVA's rights
under the Loan Documents. If FINOVA, or FINOVA's Inspector
acting on behalf of FINOVA, should review or inspect the Plans,
the Construction Contract(s), the Budget, the construction of
the Work or any books and records pertaining thereto, FINOVA and
FINOVA's Inspector shall have no liability or obligation to
Borrower or any third person arising out of such inspection; and
neither Borrower nor any third person shall be entitled to rely
upon any such inspection or review. Inspection not followed by
notice of default shall not constitute (a) a waiver of any
default then existing; (b) an acknowledgment or representation
by FINOVA or FINOVA's Inspector that there has been or will be
compliance with the Plans, the Construction Contract(s), the
Budget, the Loan Documents, applicable laws, regulations and
private restrictions, sound construction, engineering or
architectural principles or commonly accepted safety standards,
or that the construction is free from defective materials or
workmanship; or (c) a waiver of FINOVA's right to insist that
Completion of the Work occur in accordance with the Plans,
Construction Contract(s), the Budget, Loan Documents, applicable
laws, regulations and restrictions of record, sound
construction, engineering or architectural principles or
commonly safety standards and free from defective materials and
workmanship. FINOVA and FINOVA's Inspector owe no duty of care
to Borrower or any third person to protect against, or inform
Borrower or any third person of, the existence of negligence,
faulty, inadequate or defective design or construction of the
Work.
6.3 To the extent that any construction with respect to
any Facility is funded by sources other than the Loan
contemplated herein (including Borrower's equity), Borrower
shall
12
<PAGE> 13
allow FINOVA's Inspector (at Borrower's expense) to review and
inspect such construction work and such construction work must
meet FINOVA's standards and specifications.
7. Enforcement of Contracts. Borrower shall strictly enforce all
material provisions of the Construction Contract, the Architect/Engineer
Agreement and all other contract(s) for the construction of the
Improvements to ensure that the other parties thereto are required to
promptly and diligently perform all of its obligations thereunder and in
such a manner as to preserve FINOVA's security in the Collateral and the
Facilities. Borrower shall timely perform all its obligations under the
aforementioned agreements and contracts. No material change, amendment
or modification shall be made to such contract(s) without the prior
written consent of FINOVA.
8. No Other Encumbrances. No materials, equipment, fixtures or
any other part of the Improvements, or articles of personal property
placed in the Facilities, shall be purchased or installed under any
security agreement or other arrangements wherein the seller reserves or
purports to reserve the right to remove or to repossess any such items
or to consider them personal property after their incorporation into the
Facilities.
9. Construction Commencement and Completion. Borrower shall
commence construction of the Improvements within 45 days following the
Closing Date, and shall continue the Work without material interruption,
and shall cause Completion on or before the Required Completion Date.
Borrower shall (a) permit no material deviations to occur in the
progress, timing or completion of construction of the Improvements; (b)
cause the Improvements to be constructed in accordance with the Budget;
(c) otherwise abide by the Work Progress Schedule and Budget in all
respects; and (d) cause the Completion of the Work in a good and
workmanlike manner substantially according to the Plans, free from all
legal charges, encumbrances and rights of third parties (other than the
Permitted Encumbrances), and in accordance with all applicable
ordinances and statutes, including zoning laws, all covenants,
conditions and restrictions running with the land, and all regulations
and building codes of any governmental or municipal agency having
jurisdiction over the Real Property.
10. Assurances. Borrower shall pay when due all costs, expenses
and claims pertaining to the Work and deliver to FINOVA during the
course of the Work in order to monitor and/or provide assurance that the
Work is proceeding lien free in accordance with the requirements of this
Agreement: bills of sale, conveyances and paid invoices pertaining to
the Work; all waivers and releases of lien or claims on the Real
Property and/or the Improvements on account of the Work FINOVA may deem
necessary or may request for its protection; and from persons acceptable
to FINOVA, additional engineering or architectural studies and reports
as FINOVA or FINOVA's Inspector may require.
11. Plans and Specifications. The Work shall be completed
substantially in accordance with the final drawings, plans and
specifications which have been approved by FINOVA (the "Plans") prepared
by the Architect(s)/Engineer(s), as approved by FINOVA, Construction
Contract(s), applicable laws, regulations and private restrictions, the
Loan Documents, sound construction, engineering and architectural
principles and commonly accepted safety standards and free from
defective materials and workmanship. No material changes, alterations or
modifications shall be made in the Plans or in any of the other
Principal Work-Related Items without FINOVA's prior written approval.
The foregoing notwithstanding, Borrower shall be permitted to make
changes in the Plans to the extent that such change order (a) does not
increase the cost of the Work by more than Ten Thousand Dollars
($10,000) or, with all other changes, does not increase the cost of the
Work by more than One Hundred Thousand Dollars ($100,000), and (b) does
not materially affect the design, structural integrity or quality of the
Improvements. Borrower shall deliver to FINOVA, immediately upon
execution thereof, all change orders with respect to the Work including
those within the scope of clauses (a) and (b) above.
12. Other Contracts. Borrower shall not enter into any
Architect/Engineer Agreement or Construction Contract (other than those
contracts and agreements which FINOVA approved prior to the Closing
Date) with respect to the Work except upon terms and with such parties
as FINOVA may approve in writing.
13
<PAGE> 14
13. Notice of Commencement. Borrower shall record all notices of
commencement/completion and similar notices permitted by applicable laws
and regulations which have the effect of shortening periods within which
mechanics and similar liens may be filed.
14. Delivery of Contracts. Borrower shall deliver to FINOVA true
and complete copies of all Principal Work-Related Items and all other
Contracts, Intangibles, Licenses and Permits.
15. Borrower's Performance. Borrower shall perform all its
obligations and preserve its rights under the Principal Work-Related
Items in force and secure the performance of the other parties to the
Principal Work-Related Items and all other Contracts, Intangibles,
Licenses and Permits.
16. Endorsements. Borrower shall deliver to FINOVA prior to or
concurrently with each Work-Related Advance, a date down endorsement in
a form acceptable to FINOVA issued by the Title Company insuring that
the Mortgage at the time of each Work-Related Advance, constitutes a
valid first lien upon the Real Property or title, subject only to the
Permitted Encumbrances; upon construction of the foundation for any
building comprising part of the Improvements deliver to FINOVA an
endorsement ("foundation endorsement") insuring that the foundations, as
constructed, are located within all set-back and boundary lines of the
Real Property and do not encroach upon any easements, rights of way
(public or private) or upon any other adjoining landowner's property;
and upon the final advance of the retainage, Borrower shall deliver, or
cause Title Agent to deliver, to FINOVA a date down endorsement or a
re-issued title policy ("Re-Issued Title Policy") meeting the
substantive requirements set forth above.
17. Cost Overruns. Borrower shall notify FINOVA in writing if
and when the unpaid costs of Completion of the Work exceeds or appears
likely to exceed the undisbursed portion of the Loan and any undisbursed
Required Completion Assurance Deposit(s) held by FINOVA.
18. Additional Surveys. Borrower shall deliver to FINOVA
promptly after the completion of the foundation and, if required by
FINOVA, after the pouring of a street, curbstone or concrete slab on the
Real Property, a survey prepared in accordance with the requirements of
Section 2.1(m) of the Agreement, showing such Improvements, their
location within Real Property lines and set back lines and a lack of
encroachments, and deliver to FINOVA promptly upon the Completion, a
survey which is certified to FINOVA, showing the "as-built" Improvements
and showing all easements and other matters affecting the Real Property,
and otherwise satisfying the requirements of Section 2.1(m) of the
Agreement;
19. Defects in Work. Borrower shall, after obtaining knowledge
or receiving notice thereof, correct or cause to be corrected (a) any
material defect in the Work, (b) any material departure in the
completion of the Work from the Plans and the Construction Contract(s)
unless expressly permitted in this Agreement or consented to in writing
by FINOVA, (c) any failure of the Work to comply with applicable laws,
regulations or restrictions of record, sound construction, engineering
or architectural principles or commonly accepted safety standards or (d)
any encroachment of any part of the Improvements on any set-back or
boundary line, easement, or other restricted area.
20. Notice of Defects. Borrower shall promptly deliver to FINOVA
any and all notices received by Borrower that it is not complying with
applicable laws, regulations and private restrictions pertaining to the
Work or that the Work is not being completed in accordance with the
Plans, the Construction Contract(s), sound construction, engineering and
architectural principles and commonly accepted safety standards.
21. Safeguarding Materials. Borrower shall cause all materials
supplied for or intended to be utilized in the Completion of the Work,
but previously not affixed to or incorporated into the Improvements, to
be stored on the Real Property with adequate safeguards, to prevent
loss, theft, damage or commingling with other materials.
22. Building Permits. Borrower shall, promptly after receipt by
Borrower, deliver to FINOVA copies of all building permits and
certificates of acceptance and/or occupancy relating to the Work.
14
<PAGE> 15
23. Required Completion Assurance Deposit Assurances. If at any
time the remaining costs which must be incurred before Completion can
occur ("Completion Costs") are more than the committed and undisbursed
portion of the Loan, and in any event within ten (10) days after
FINOVA's demand that it do so, Borrower shall deliver to FINOVA cash
deposits equal to the shortfall (the "Required Completion Assurance
Deposits"). In the event of any dispute, the necessity for an amount of
any Required Completion Assurance Deposit shall be determined by FINOVA
in its Permitted Discretion based upon the approved Budget and the
advice of FINOVA's Inspector. The Required Completion Assurance Deposits
shall be deposited in a separate interest bearing account for the
benefit of Borrower. FINOVA shall disburse the Required Completion
Assurance Deposits to pay and/or reimburse Borrower for the cost of the
Work prior to any further disbursement of Loan proceeds for such
purposes, but subject to the terms and conditions of the Loan Documents.
================================================================================
ADDITIONAL PROVISIONS:
1. Intermediaries. Borrower represents and warrants to FINOVA that it has
not engaged or dealt in any way with any broker in connection with the
transactions contemplated by this Agreement. Borrower shall pay, and
FINOVA shall have no liability for and shall be held harmless by
Borrower against any liabilities in respect of, any commission or other
amounts claimed by or payable to any broker. The terms of this paragraph
shall survive the Closing and any termination of this Agreement.
SCHEDULE TO MASTER LOAN AND SECURITY AGREEMENT SIGNATURE PAGE
Borrower:
ROSSMORE RENOVATION, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a Delaware
corporation, Manager
/s/ Bernard Wheeler-Medley By: /s/ Sheila M. Muldoon
- ---------------------------------- -----------------------------------
Name: Bernard Wheeler-Medley Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Hillsdale), LLC, a
Delaware limited liability
company, Manager
/s/ Todd J. Deltufo By: /s/ Thomas R. Burton
- ---------------------------------- -----------------------------------
Name: Todd J. Deltufo Thomas R. Burton
Manager
/s/ Bernard Wheeler-Medley By: /s/ Eric K. Davidson
- ---------------------------------- -----------------------------------
Name:_Bernard Wheeler-Medley Eric K. Davidson
Manager
THE STATE OF California )
)
COUNTY OF Orange )
On this 30th day of October, 1998, before me, the undersigned notary
public, duly commissioned and sworn, personally appeared Sheila M. Muldoon,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person that executed the within instrument and acknowledged to me that
he or she
15
<PAGE> 16
executed the same in his or her authorized capacity and that by
his or her signature in the instrument the person, or the entity on behalf of
which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- ----------------------------------
16
<PAGE> 17
THE STATE OF Maryland )
)
COUNTY OF Baltimore )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Patricia L. Baxivanos
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
10/1/99
- ----------------------------------
THE STATE OF California )
)
COUNTY OF Orange )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- ----------------------------------
ENCINO RENOVATION, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a
Delaware corporation, Manager
/s/ Bernard Wheeler-Medley By: /s/ Sheila M. Muldoon
- ---------------------------------- -----------------------------------
Name: Bernard Wheeler-Medley Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Hillsdale), LLC,
a Delaware limited liability
company, Manager
/s/ Todd J. Deltufo By: /s/ Thomas R. Burton
- ---------------------------------- -----------------------------------
17
<PAGE> 18
Name: Todd J. Deltufo Thomas R. Burton
- ---------------------------------- Manager
/s/ Bernard Wheeler-Medley By: /s/ Eric K. Davidson
- ---------------------------------- -----------------------------------
Name: Bernard Wheeler-Medley Eric K. Davidson
Manager
THE STATE OF California )
)
COUNTY OF Orange )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- ----------------------------------
18
<PAGE> 19
THE STATE OF Maryland )
)
COUNTY OF Baltimore )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Patricia L. Baxivanos
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
10/1/99
- -----------------------------
THE STATE OF California )
)
COUNTY OF Orange )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- -----------------------------
19
<PAGE> 20
BERKSHIRE RENOVATION, LLC,
a Delaware limited liability company
WITNESS: By: ARV Assisted Living, Inc., a
Delaware corporation, Manager
/s/ Bernard Wheeler-Medley By: /s/ Sheila M. Muldoon
- ---------------------------------- ---------------------------------
Name: Bernard Wheeler-Medley Sheila M. Muldoon
Senior Vice President
WITNESS: By: Vintage/ABR (Hillsdale), LLC, a
Delaware limited liability company,
Manager
/s/ Todd J. Deltufo By: /s/ Thomas R. Burton
- ---------------------------------- ---------------------------------
Name: Todd J. Deltufo Thomas R. Burton
Manager
/s/ Bernard Wheeler-Medley By: /s/ Eric K. Davidson
- ---------------------------------- ---------------------------------
Name: Bernard Wheeler-Medley Eric K. Davidson
Manager
THE STATE OF California )
)
COUNTY OF Orange )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Sheila M.
Muldoon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- ----------------------------------
20
<PAGE> 21
THE STATE OF Maryland )
)
COUNTY OF Baltimore )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Thomas R.
Burton, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Patricia L. Baxivanos
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
10/1/99
- -----------------------------
THE STATE OF California )
)
COUNTY OF Orange )
On this 30th day of October, 1998, before me, the undersigned
notary public, duly commissioned and sworn, personally appeared Eric K.
Davidson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person that executed the within instrument and acknowledged
to me that he or she executed the same in his or her authorized capacity and
that by his or her signature in the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
In witness whereof, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Karen Gerner
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
- -----------------------------
21
<PAGE> 22
FINOVA:
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Anne M. McNeil
----------------------------
Vice President
22
<PAGE> 23
23
<PAGE> 24
SCHEDULE TO LOAN AND SECURITY AGREEMENT
LIST OF COLLATERAL LOCATIONS
<PAGE> 25
SCHEDULE TO THE LOAN AND SECURITY AGREEMENT
PENDING LITIGATION MATTERS:
BERKSHIRE - NONE
ENCINO - NONE
ROSSMORE - NONE
<PAGE> 26
EXHIBIT A
REAL PROPERTY
3
<PAGE> 27
EXHIBIT A-1
LEGAL DESCRIPTION OF PROPERTY
(BERKSHIRE RENOVATION, LLC)
CITY OF BERKELEY
PORTION OF BLOCK 2, AS SAID BLOCK IS SHOWN ON THE "MAP SHOWING THE PROPERTY AND
LOCATION OF THE SPAULDING TRACT AT BERKELEY", FILED AUGUST 7, 1876; IN BOOK 2 OF
MAPS, PAGE 62, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY, DESCRIBED
AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE WESTERN LINE OF SPAULDING AVENUE, WITH THE
NORTHERN LINE OF BANCROFT WAY, AS SAID AVENUE AND WAY ARE SHOWN ON THE "MAP OF
BANCROFT WAY OPENING, BERKELEY, CALIFORNIA" FILED NOVEMBER 20, 1916 IN BOOK 22
OF MAPS, PAGE 87, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY AND
RUNNING THENCE ALONG SAID LINE OF BANCROFT WAY, WESTERLY 192.92 FEET; THENCE
TANGENT WITH THE LAST NAMED COURSE WESTERLY AND NORTHERLY ON A CURVE TO THE
RIGHT, WITH A RADIUS OF 15 FEET A DISTANCE OF 22.40 FEET TO THE SOUTHERN LINE OF
LOT 39, IN SAID BLOCK 2; THENCE ALONG THE LAST NAMED LINE WESTERLY, 0.20 OF A
FOOT TO THE EASTERN LINE OF SACRAMENTO STREET, AS SAID STREET NOW EXISTS; THENCE
ALONG THE LAST NAMED LINE NORTHERLY 253.12 FEET TO THE NORTH LINE OF LOT 34, IN
BLOCK 2; THENCE ALONG THE LAST NAMED LINE AND ALONG THE NORTHERN LINE OF LOT 33,
IN BLOCK 2, EASTERLY 208.25 FEET TO SAID LINE OF SPAULDING AVENUE; AND THENCE
ALONG THE LAST NAMED LINE SOUTHERLY, 248.96 FEET TO THE POINT OF BEGINNING.
4
<PAGE> 28
EXHIBIT A-2
LEGAL DESCRIPTION OF PROPERTY
(ENCINO RENOVATION, LLC)
PARCEL 1:
THOSE PORTIONS OF LOTS 3 AND 4 IN BLOCK 25 OF TRACT NO. 2955, IN THE CITY OF LOS
ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK
31 PAGES 62 TO 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT 4, DISTANT SOUTH 80
DEGREES 39 MINUTES EAST 186.49 FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT 4;
THENCE NORTH 0 DEGREES 03 MINUTES 30 SECONDS WEST 435.60 FEET; THENCE SOUTH 80
DEGREES 39 MINUTES EAST 101.36 FEET; THENCE SOUTH 0 DEGREES 03 MINUTES 30
SECONDS EAST 435.60 FEET TO A POINT IN THE SOUTHERLY LINE OF SAID LOT 3 IN THE
NORTHERLY LINE OF VENTURA COUNTY ROAD; THENCE ALONG SAID ROAD, NORTH 80 DEGREES
39 MINUTES WEST 101.36 FEET TO THE POINT OF BEGINNING.
EXCEPT THEREFROM THE NORTH 185.00 FEET THEREOF.
PARCEL 2:
AN EASEMENT FOR DRAINAGE PURPOSES OVER THE EASTERLY 5 FEET OF THE NORTH 185.00
FEET OF THOSE PORTIONS OF LOTS 3 AND 4 IN BLOCK 25 OF TRACT NO. 2955, IN THE
CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 31 PAGES 62 TO 70 INCLUSIVE OF MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTHERLY LINE OF SAID LOT 4, DISTANT SOUTH 80
DEGREES 39 MINUTES EAST 186.49 FEET FROM THE SOUTHWESTERLY CORNER OF SAID LOT 4;
THENCE NORTH 0 DEGREES 03 MINUTES 30 SECONDS WEST 435.60 FEET; THENCE SOUTH 80
DEGREES 39 MINUTES EAST 101.38 FEET; THENCE SOUTH 0 DEGREES 03 MINUTES 30
SECONDS EAST 435.60 FEET TO A POINT IN THE SOUTHERLY LINE OF SAID LOT 3 IN THE
NORTHERLY LINE OF VENTURA COUNTY ROAD; THENCE ALONG SAID ROAD, NORTH 80 DEGREES
39 MINUTES WEST 101.36 FEET TO THE BEGINNING.
5
<PAGE> 29
EXHIBIT A-3
LEGAL DESCRIPTION OF PROPERTY
(ROSSMORE RENOVATION, LLC)
THAT PORTION OF LOT 7 OF TRACT NO. 215, IN THE CITY OF LOS ANGELES, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 14 PAGES 42 AND 43
OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS
FOLLOWS:
BEGINNING AT A POINT IN THE SOUTH LINE OF ROSEWOOD AVENUE, AS SHOWN ON MAP OF
TRACT NO. 3345, AS PER MAP RECORDED IN BOOK 42 PAGES 63 AND 64 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, SAID POINT BEING IN THE WESTERLY
END OF CURVE OF THE PROPERTY LINE CURVE, AT THE SOUTHWEST CORNER OF ROSEWOOD
AVENUE, AND ROSSMORE AVENUE; THENCE SOUTH 89 DEGREES 57 MINUTES 45 SECONDS WEST
244.85 FEET; THENCE SOUTH 0 DEGREES 14 MINUTES 46 SECONDS WEST 150 FEET TO THE
BEGINNING OF A TANGENT CURVE CONCAVE TO THE NORTHEAST HAVING A RADIUS OF 99.51
FEET; THENCE SOUTHEASTERLY ALONG SAID CURVE, 156.80 FEET TO THE END OF SAME;
THENCE SOUTH 0 DEGREES 14 MINUTES 45 SECONDS WEST 85 FEET; THENCE NORTH 89
DEGREES 57 MINUTES 45 SECONDS EAST 175 FEET TO THE WEST LINE OF ROSSMORE AVENUE;
THENCE NORTH 0 DEGREES 14 MINUTES 15 SECONDS EAST ALONG THE WEST LINE OF
ROSSMORE AVENUE, 304.85 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE TO THE
SOUTHWEST, HAVING A RADIUS OF 30 FEET; THENCE NORTHWESTERLY ALONG SAID CURVE,
47.27 FEET TO THE POINT OF BEGINNING.
6
<PAGE> 30
EXHIBIT B
PERMITTED ENCUMBRANCES
7
<PAGE> 31
LIST OF CONSTRUCTION LOAN EXHIBITS
Exhibit C Budget
Exhibit D Work Progress Schedule
Exhibit E Standard Construction Loan and Administrative
Procedures
(Work-Related Advance)
Exhibit F-1 AIA 702 and 703 Forms
Exhibit F-2 Affidavit of Borrower
Exhibit F-3 Waiver of Liens
Exhibit F-4 Change Order Approval Request (AIA Document G713)
Exhibit G Initial Advance Disbursement Schedule
8
<PAGE> 32
EXHIBIT C
Budget
<PAGE> 33
EXHIBIT D
Work Progress Schedule
<PAGE> 34
EXHIBIT E
FINOVA CAPITAL CORPORATION ("Lender")
STANDARD CONSTRUCTION LOAN
ADMINISTRATIVE PROCEDURES
INITIAL AND SUBSEQUENT LOAN ADVANCE
REQUIREMENTS AND EVENTS
A. With each Work-Related Advance Request Borrower must
complete, execute and deliver to Lender:
1. An Application and Certificate For Payment (AIA
Document G702) and Continuation Sheet(s) (AIA
Document G703) for all direct costs (Exhibit F-1).
2. Affidavit of Borrower for Advance (Exhibit F-2).
3. Waiver of Liens (Exhibit F-3) or such form as is
required by law for previous payment.
4. Change Order Approval Request (AIA Document G713)
when applicable (Exhibit F-4).
5. Invoices supporting all amounts shown in columns E
and F of AIA Document G702 and G703.
6. Any required surveys.
7. Such other items as Lender requests which are
necessary to evaluate the request for the
Work-Related Advance and the satisfaction of the
conditions precedent thereto.
B. The following events must take place prior to each
Work-Related Advance:
1. Contractor requests site inspection from Lender's
Inspector.
2. Contractor provides Lender's Inspector with a copy
of the AIA Document G702 and G703.
3. Lender's Inspector will perform a physical
inspection to review the work in place and make a
certification and recommendation to Lender.
Lender's Inspector forwards his report,
certification and recommendation to Lender.
4. Lender will request that the Title Agent review the
public records, advise Lender of the same, and
forward to Lender endorsement(s) as required
pursuant to the Loan and Security Agreement
(herein, the "Loan Agreement"), such endorsements
to be dated as of the date of Work-Related Advance.
5. Lender will review the Work-Related Advance Request
and input of Lender's Inspector of the Title Agent.
The Work-Related Advance Request must be
appropriate, complete and in proper order. The
order of the Work-Related Advance Request package
will determine the processing time needed.
<PAGE> 35
6. Borrower shall have all applicable licenses,
permits and certificates for all Work under
construction at the time the Work-Related Advance
was requested.
7. All other conditions of the Loan Documents are
satisfied.
C. Upon receipt from Lender (or Title Agent, if applicable),
Borrower will execute and deliver to Lender a funding letter in connection with
the Work-Related Advance.
D. All items, except for the escrow funding letter required to be
delivered to Lender pursuant to this Exhibit shall be delivered to Lender and
Lender's Inspector at least ten (10) Business Days prior to the requested
Work-Related Advance.
2
<PAGE> 36
EXHIBIT F-1
AIA 702 and 703 Forms
<PAGE> 37
EXHIBIT F-2
BORROWER'S AFFIDAVIT FOR ADVANCE
Borrower: ___________________________________ Date:_______________
Project: ___________________________________
Request No.:_________________
Loan No.:_____________________Period________________to__________________
Amount:______________________
In connection with and in order to induce FINOVA Capital Corporation
("Lender"), to advance the amount requested above, Borrower hereby represents,
warrants and stipulates as follows:
1. The work listed in this Work-Related Advance Request Package
("Request") has been completed in accordance with the Loan and Security
Agreement dated ___________ between the undersigned and Lender (with any
amendments, the "Loan Agreement"); all obligations for work submitted and
received on previous Borrower's Work-Related Advance Request have now been paid
in full (except for retainage); the funds requested at this time shall be
applied only to the obligations for work set forth in this Request and that all
insurance policies (including without limitation, Builder's Risk and General
Liability Coverage policies) required by the Loan Agreement are in full force
and effect.
2. Attached hereto are the names of all contractors, subcontractors,
suppliers and materialmen who have performed or who will be performing Work and
whose names have not been previously delivered to Lender in writing. Copies are
attached hereto of contracts with all such contractors, subcontractors,
suppliers and materialmen whose contracts are required to be, but have not yet
been, delivered to Lender pursuant to the terms of the Loan Agreement.
3. All Work performed is in substantial accordance with the approved
Plans and no changes have been made in the approved Plans, except as are
permitted pursuant to the Loan Agreement or have been previously approved in
writing by Lender.
4. The amounts and percentages set forth on the attached schedules,
along with supporting documentation for each budgeted item and the Balance To
Finish in accordance with the AIA Document G702 and G703 are true and correct to
the best of Borrower's knowledge.
5. The following are included as part of this Request:
Application and Certificate for Payment (AIA G702)
Continuation Sheets (AIA G703)
Request for Advance - Indirect Costs
Check Sheet Form
6. No material adverse change has occurred in the Improvements or, since
the date of the latest financial statements given by or on behalf of Borrower to
Lender, in the financial condition of Borrower or in Borrower's business or
operations.
7. All representations and warranties by Borrower contained in the Loan
Documents are true and correct as of the date hereof.
<PAGE> 38
8. No Event of Default, or no act or event which after notice and/or
lapse of time would constitute an Event of Default, has occurred and is
continuing.
9. Borrower has complied with all other agreements or conditions
required by the Agreement to be performed or complied with prior to or at the
date of the requested Advance.
10. Capitalized terms not otherwise defined herein shall have the
meaning given to them in the Loan Agreement.
Very truly yours,
By:
---------------------------------
Name:
Title:
5
<PAGE> 39
EXHIBIT F-3
Release of Lien
KNOW ALL MEN BY THESE PRESENTS, that the undersigned ___________________
for and in consideration of the sum of __________ Dollars (US $___________)
lawful money of the United States of America, to the undersigned in hand paid,
the receipt whereof is hereby acknowledged, does hereby waive, release, remise
and relinquish the undersigned'/s right to claim, demand, impress or impose a
lien or liens in the sum of __________ Dollars ($__________) for materials
furnished (or any other kind or class of lien whatsoever) up to the _____ day of
__________________, 199__, on the following described property:
[Legal Description]
Dated this ______ day of _________, 199__, at _____________ County,
California.
LIENOR'S NAME
By:_______________________________
Authorized Representative
<PAGE> 40
EXHIBIT F-4
Change Order Approval Request AIA G713
<PAGE> 41
EXHIBIT G
Initial Advance Disbursement Schedule
<PAGE> 1
Exhibit 10.17
PROJECTED CASH SHORTFALL PROTECTION AGREEMENT
THIS PROJECTED CASH SHORTFALL PROTECTION AGREEMENT (this "Agreement") is
made and entered into as of November 16, 1998, by and among Lynnbrooke-Irvine,
LLC, a Delaware limited liability company ("Lynnbrooke"), Laurel Ridge
Development, LLC, a Delaware limited liability company ("Laurel"), Bay Spring
Village, LLC, a Delaware limited liability company ("Bay Spring") and Inn at
Lakewood Development, LLC, a Delaware limited liability company ("Lakewood"),
(Lynnbrooke, Laurel, Bay Spring and Lakewood may collectively be referred to
herein as the "Owners" and, individually, as an "Owner"), FINOVA Capital
Corporation, a Delaware corporation ("Lender"), and ARV Assisted Living, Inc., a
Delaware corporation ("ARV").
RECITALS
WHEREAS, each of the Owners is the owner of certain real property (each,
a "Property") upon which an assisted living facility (each, a "Facility") is to
be constructed (each such Property and Facility collectively referred to as a
"Project") ; and
WHEREAS, ARV is a Member of each Owner; and
WHEREAS, as of October 21, 1998, ARV entered into a separate Management
Agreement (each, a "Management Agreement") with each Owner covering the
operation and management of the Project owned by such Owner; and
WHEREAS, the Owners have entered into that certain Master Loan and
Security Agreement (including the Schedule to Master Loan and Security Agreement
which is incorporated as an integral part thereof), dated of even date herewith,
with Lender (herein, the "Loan Agreement"), pursuant to which Lender has agreed
to provide a credit facility to each Owner in connection with the acquisition
and construction of such Owner's applicable Project; and
WHEREAS, it is a condition precedent to Lender's obligations under the
Loan Agreement that ARV provide certain assurances in favor of the Owners and
Lender with respect to certain construction cost overruns and operating deficits
in excess of projected operating losses; and
WHEREAS, in order to induce Lender to enter into the Loan Agreement and
to fund the Loans described therein, ARV is willing to provide the required
assurances in such amounts, for such period and under such terms as are set
forth in this Agreement.
NOW, THEREFORE, in order to induce Lender to provide the financing
described above, and in consideration of the mutual promises of the parties
hereto and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1
<PAGE> 2
1. Definitions. Terms used herein with initial capital letters, to the
extent not otherwise defined herein, shall have the meanings given such terms in
the Loan Agreement. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
The term "Actual Costs" shall mean, with respect to any Facility at any
time, the total actual costs and expenses of the construction or renovation of
that Facility incurred by the Owner up to such time. "Actual Costs" shall not
include either: (i) costs and expenses of marketing and lease-up; or (ii)
additional costs and expenses directly attributable to change orders required by
Lender (other than any change orders required by Lender in order to bring the
Facility into compliance with applicable law), to the extent such additional
costs and expenses exceed the itemized budgeted costs and expenses under the
Budget. "Actual Costs" shall include, however, without limitation, the
additional costs and expenses related to change order requests from the Owner,
the General Contractor, and/or consultants, and any other additional costs and
expenses of construction or renovation of the Facility, arising for any other
reason and whether or not within the control of ARV.
The term "Approval Date" has the meaning set forth in Section 6(a)
hereof.
The term "Approved Cost Report" has the meaning set forth in Section
6(a) hereof.
The term "Borrowing Owner" shall mean any Owner which is the borrower
with respect to an Under-Budget Borrower Loan.
The term "Budgeted Costs" shall mean, with respect to any Facility at
any time, the total costs and expenses budgeted for that Facility from inception
up to such time, as set forth on the Budgets for each Facility attached hereto
as Exhibits A-1, A-2, A-3, and A-4. "Budgeted Costs" as of any date shall be
calculated by multiplying (a) the total budgeted costs and expenses to the Owner
of the Facility from inception through completion (excluding the costs and
expenses of marketing and lease-up), plus budgeted contingencies, as set forth
in the Facility's initial Budget by (b) the Completion Percentage for that
Facility as of such date.
The term "Capital Reserve" shall mean a reserve for each Facility, in an
amount to be agreed upon between the Owner of such Facility and ARV in its
capacity of manager of such Facility pursuant to the Management Agreement, which
reserve is to be used for capital improvements and replacements. At such time as
any Owner is required to maintain the Replacement Reserve described in Section
10.20 of the Loan Agreement, the term "Capital Reserve" shall mean and refer to
such Replacement Reserve account.
The term "Completion Percentage" shall mean, with respect to any
Facility at any time, the particular stage of completion of construction or
renovation of such Facility at that time, expressed as a percentage of
completion, based on calculations therefor determined pursuant to the Loan
Agreement.
2
<PAGE> 3
The term "Cost Overruns" shall mean, with respect to any Facility at any
time, the amount (if any) by which (a) the Actual Costs incurred by the Owner of
the Facility up to such time, exceed (b) the Budgeted Costs for that Facility at
such time.
The term "Cost Report" has the meaning set forth in Section 6 hereof.
The term "Cost Savings" shall mean, with respect to any Facility at any
time, the amount (if any) by which (a) the Budgeted Costs for that Facility at
such time, exceed (b) the Actual Costs incurred by the Owner for the Facility up
to such time.
The term "Cumulative Operating Deficit" shall mean, with respect to the
period from the Conversion Date applicable to each Facility through the end of
the most recent calendar month, the amount by which (a) all ordinary operating
expenses of the Facility (including, without limitation, expenses of
maintenance, insurance, "qualified debt service," taxes, amounts required to
maintain the Capital Reserve and the Emergency Reserve, and such other expenses
and charges as would normally be considered operating expenses of the Facility
under recognized and customary accounting principles and practices, but
excluding non-cash charges) exceed (b) the sum of (i) all gross revenues from
ordinary operations (including the proceeds of business interruption insurance,
if applicable) of the Facility for said period, and (ii) any amounts received by
the Owner of such Facility from ARV in the form of an "Operating Deficit
Payment," as defined in that certain Operating Deficit Payment Agreement dated
as of October 21, 1998 by and among ARV and each of the owners of the Group A
Facilities and the Group B Facilities (the "ODP Agreement"), and (iii) the
amount, if any, then remaining in the Operating Reserve. For purposes of this
Agreement, "qualified debt service" means debt service on any loan obtained with
respect to the Facility for the primary purpose of acquiring and developing
and/or renovating the Facility and paying expenses relating to the Facility.
The term "Cumulative Projected Results from Operations" shall mean those
amounts which are shown by the line item "Net Operating Income" in the
projections attached hereto as Exhibits B-1, B-2, B-3 and B-4 for each of the
Group B Facilities (exclusive of the Rossmore Facility), respectively, with
respect to the period from the projected Conversion Date for such Facility
through the end of the same number of months of operation as have been included
from the actual Conversion Date for such Facility in the calculation of its
Cumulative Operating Deficit.
The term "Emergency Reserve" shall mean a cash reserve, in the amount of
$__________ for each Facility, to be maintained to address contingencies and
which may be withdrawn by the applicable Owner at any time and from time to
time.
The term "Excess Operating Losses" shall mean the amount by which the
Cumulative Operating Deficit of a given Facility, calculated from the Conversion
Date applicable to such Facility through the end of the most recent calendar
month, exceeds the Cumulative Projected Results from Operations for the same
period, as shown on the projections for each of the Facilities which are
attached hereto as Exhibits B-1, B-2, B-3, and B-4.
3
<PAGE> 4
The term "Group" shall mean the Group A Facilities or the Group B
Facilities, as the context may require.
The term "Group A Facilities" shall mean the Facilities on the
Properties owned respectively by Berkshire Renovation, LLC and Encino
Renovation, LLC.
The term "Group B Facilities" shall mean the Facilities on the
Properties owned respectively by Rossmore Renovation, LLC, Bay Spring Village,
LLC, Inn At Lakewood Development, LLC, Laurel Ridge Development, LLC and
Lynnbrooke-Irvine, LLC.
The term "Net Cash Flow" for any period means the amount by which (a)
the cash funds derived from operations of the Facility with respect to the
period in question, without reduction for any non-cash charges, exceeds (b) the
cash funds used, with respect to the period in question, to (i) pay all ordinary
operating expenses of the Facility (including, without limitation, expenses of
maintenance, insurance, "qualified debt service," taxes and such other expenses
and charges as would normally be considered operating expenses of the Facility
under recognized and customary accounting principles and practices) and (ii)
establish and maintain the Capital Reserve and the Emergency Reserve.
The term "Request Date" shall mean the date any Owner requests Lender to
fund an Under-Budge Borrower Loan.
The term "Under-Budget Borrower Loan" has the meaning set forth in
Section 2(a) hereof.
2. ARV to Fund Cost Overruns; Timing and Procedure for Funding.
(a) ARV hereby covenants and agrees to fund any Cost Overruns
incurred in connection with the operation of the Projects, subject to
the limitations set forth herein. The foregoing notwithstanding, in the
event any Owner experiences a Cost Overrun, but such Owner is permitted,
in accordance with Section 11.2 of the Loan Agreement, to obtain a loan
from another Owner for the reason that such other Owner constitutes an
Under-Budget Borrower as described in said Section (any such loan being
referred to herein as an "Under-Budget Borrower Loan"), then ARV shall
be entitled to reduce the amount of the Cost Overrun required to be
funded by it hereunder by first giving effect to all permitted
Under-Budget Borrower Loans.
(b) In the event that any Project incurs a Cost Overrun
described in Section 2(a) above for which ARV is responsible, the Owner
shall, within ten (10) days following the applicable Cost Report
identifying such Cost Overrun, or otherwise as soon as practicable after
receipt of such Owner's most recent monthly reports from the manager of
the Project, whichever is later, give written notice to ARV specifying
the amount of the Cost Overrun to be funded by ARV. Within five (5)
business days following the receipt of such notice by ARV, ARV shall pay
to the Owner, in cash, the amount of such Cost Overrun (each such
payment being referred to herein as a "Cost Overrun Payment").
4
<PAGE> 5
3. ARV to Fund Excess Operating Losses; Timing and Procedure for
Funding.
(a) ARV hereby covenants and agrees to fund any Excess Operating
Losses incurred in connection with the operation of the Projects, in
each case during the period from the Conversion Date applicable to such
the Project through the date of release set forth in Section 4 below
with respect to such Project.
(b) In the event that any Project has incurred Excess Operating
Losses as of the end of any calendar month falling within the period of
ARV's obligations described herein, the Owner shall, within ten (10)
days following the end of such month, or as soon as practicable after
receipt of that month's reports from the manager of the Project,
whichever is later, give written notice to ARV specifying the amount of
the Excess Operating Losses incurred. Within five (5) business days
following the receipt of such notice by ARV, ARV shall pay to the Owner,
in cash, the amount of such Excess Operating Losses (each such payment
an "Excess Operating Deficit Payment"), less the amount of all Excess
Operating Deficit Payments previously made by ARV to such Owner.
4. RELEASE FROM COVERAGE. ARV SHALL BE RELEASED FROM ITS OBLIGATION TO
MAKE EXCESS OPERATING DEFICIT PAYMENTS WITH RESPECT TO A PARTICULAR PROJECT UPON
THE EARLIER OF (I) EIGHTEEN (18) MONTHS AFTER THE DATE OF STABILIZATION FOR SUCH
PROJECT; OR (II) THE CLOSING OF A SALE OF THE PROJECT TO A THIRD PARTY;
PROVIDED, HOWEVER, THAT ARV SHALL REMAIN LIABLE WITH RESPECT TO THE REMAINING
PROJECTS IN AN AGGREGATE AMOUNT EQUAL TO ANY REMAINING UNFUNDED PORTION OF ITS
COMMITMENT HEREUNDER.
5. Definition of "Date of Stabilization." For purposes of this
Agreement, the term "Date of Stabilization" means the earlier of (i) the date a
given Facility has maintained a ninety-two percent (92%) occupancy level for
three consecutive months ("Stabilization"), or (ii) the first day of the first
calendar month following the period during which the Project has achieved
positive "Net Cash Flow" for each of three (3) consecutive calendar months.
6. Cost Reports and Approved Cost Reports.
(a) Preparation of Cost Reports. In connection with each request
for Lender to approve an Under-Budget Borrower Loan, ARV shall promptly
prepare and deliver to Lender and each Owner whose Facility is in the
same Group as the Borrowing Owner's Facility a report (a "Cost Report")
that sets forth the Cost Overruns incurred (or Cost Savings realized)
for each Facility in the Group as of the Request Date. Each Cost Report
shall be in such detail as required by Lender and shall in addition be
supported by a statement from the Architect for each Facility as to the
Completion Percentage for such Facility at that time. Each Cost Report
approved by Lender as establishing the right of one or more Owners to
make an Under-Budget Borrower Loan to a Borrowing Owner shall be
referred to as an "Approved Cost Report," and the date of such approval
is the "Approval Date".
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<PAGE> 6
(b) Disputes; Failure to Deliver Cost Report. If the conclusions
of a Cost Report are disputed by the Owner of the relevant Facility or
by Lender, or if ARV fails to timely deliver a Cost Report for such
Facility, then the Owner may prepare and deliver to ARV and Lender a
Cost Report for its Facility.
7. Maximum Liability of ARV. ARV's total liability hereunder with
respect to the making of Cost Overrun Payments and Excess Operating Deficit
Payments shall not exceed $5,000,000. The foregoing amount shall not be
segregated among Owners, such that each Owner shall have the right to receive
payments hereunder until ARV has funded a total of $5,000,000.
8. Enforcement by Lender. ARV acknowledges and agrees that ARV's
obligations under this Agreement have been specifically negotiated for by Lender
and were a material consideration to Lender in its willingness to enter into the
Loan Agreement and to fund the Loans thereunder. Accordingly, this Agreement
shall be specifically enforceable by Lender against ARV, ARV agreeing that
monetary damages shall be inadequate to fully compensate Lender for damages
which it shall experience in the event of the failure of ARV to perform its
obligations hereunder. At any time where there an exists an Event of Default
under the Loan Agreement, any Cost Overrun Payments or Excess Operating Deficit
Payments required to be made by ARV hereunder shall be made directly to Lender,
and each of the Owners hereby irrevocably consents to the making of such
payments by ARV directly to Lender.
9. No Other Compensation for Payment. ARV shall not be entitled to
receive any compensation for the payments made by it herein or for the
performance of its obligations hereunder.
10. Miscellaneous.
(a) Entire Agreement. This Agreement, together with the Loan
Agreement, represents the entire and integrated agreement between the
parties regarding the matters described herein and supersedes all prior
negotiations, representations or agreements, either written or oral the.
This Agreement may be amended only by a written instrument signed by the
parties hereto. Except to the extent expressly provided otherwise in
this Agreement, this Agreement and the definitions herein shall apply to
each Real Property and Facility separately. Notwithstanding anything
contained herein, this Agreement is not intended to alter the rights or
duties of the various parties under the ODP Agreement.
(b) Governing Law. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of Arizona.
Any action to interpret or enforce this Agreement shall be solely
brought in the State of Arizona. To the extent permitted by law, the
parties agree that the sole venue for such action shall be Maricopa
County, Arizona.
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<PAGE> 7
(c) No Waiver. No failure by a party to insist upon the strict
performance of any term or covenant of this Agreement or to exercise any right
or remedy consequent upon a breach thereof, shall constitute a waiver of any
such breach or of any such term or covenant. No waiver by Lender or any Owner of
any breach by ARV shall affect or alter this Agreement, but each and every term
and covenant of this Agreement shall continue in full force and effect with
respect to any other then existing or subsequent breach hereof.
(d) Notices. Any approvals, disapprovals, consents or other
notices required or permitted to be sent or given hereunder shall be in writing
and delivered personally, sent by facsimile, mailed, certified mail, return
receipt requested, or delivered by overnight or other courier service to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been given upon confirmation of
receipt thereof by the individual who is the addressee of such communication,
which confirmation may be in writing (including by facsimile) or may be verbal
(including by telephone):
If to any Owner, to:
c/o ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Chief Executive Officer
Fax: (714) 751-1743
With a copy to:
c/o ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Legal Department
Fax: (714) 435-7102
With a copy to:
Alex Brown Realty, Inc.
225 East Redwood Street
Baltimore, MD 21202
Attention: Thomas R. Burton
Fax: (410) 625-2694
and to:
Vintage Senior Housing, LLC
500 Newport Center Drive, Suite 200
Newport Beach, CA 92660
Attention: Eric K. Davidson
7
<PAGE> 8
Fax: (949) 721-8558
If to ARV, to:
ARV ASSISTED LIVING, INC.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: President
Fax: (714) 751-1743
With a copy to:
ARV ASSISTED LIVING, INC.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Legal Department
Fax: (714) 435-7102
If to Lender, to:
FINOVA Capital Corporation
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Attention: Portfolio Manager
Fax: (312) 322-3553
with a copy to:
FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President-Associate General Counsel
Fax: (602) 874-6445
8
<PAGE> 9
and to:
FINOVA Capital Corporation
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Attention: Vice President-Group Counsel
Fax: (312) 322-3553
(e) Waiver of Jury Trial; Legal Costs. Each of the parties hereto
specifically waives any right to a trial by jury in any court with respect to
any matter arising out of this Agreement. The prevailing party in any action
arising under this Agreement shall be entitled to be paid all costs and
reasonable attorneys' fees incurred therein.
(f) Rules of Construction. The captions throughout this Agreement
are for convenience of reference only and the words contained therein shall in
no way be held or deemed to limit, explain, modify, or add to the interpretation
or meaning of any provision or the scope or intent of this Agreement, nor in any
way affect this Agreement.
(g) Gender. The use of any gender herein shall be deemed to
include the other gender and the use of the singular herein shall be deemed to
include the plural (and vice versa) whenever appropriate.
(h) Severability. 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
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
(i) Time of the Essence. TIME IS OF THE ESSENCE TO EACH AND EVERY
PROVISION HEREOF.
(j) Further Assurances. Each party covenants and agrees to
execute such other and further documents and to do such further acts as may be
reasonable required to carry out the terms and provisions of this Agreement upon
request by the other party.
[SIGNATURES APPEAR ON NEXT PAGE.]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have hereunto executed
this Agreement as of the day and year first above written.
ARV: OWNERS:
ARV ASSISTED LIVING, INC. LYNNBROOKE-IRVINE, LLC
BAY SPRING VILLAGE, LLC
INN AT LAKEWOOD DEVELOPMENT, LLC
LAUREL RIDGE DEVELOPMENT, LLC
By: /s/ Sheila M. Muldoon
---------------------------------
Name: Sheila M. Muldoon Executed in each case by:
Title: Senior Vice President
ARV Assisted Living, Inc., Manager
By: /s/ Sheila M. Muldoon
-----------------------------
Sheila M. Muldoon
Senior Vice President
Vintage/ABR (Development), LLC,
Manager
By: /s/ Thomas R. Burton
-----------------------------
Thomas R. Burton
Manager
By: /s/ Eric K. Davidson
-----------------------------
Eric K. Davidson
Manager
LENDER:
FINOVA CAPITAL CORPORATION
By: /s/ Anne M. McNeil
---------------------------------
Name: Anne M. McNeil
Title: Vice President
Regional Underwriting
Manager
<PAGE> 1
EXHIBIT 10.18
PROJECTED CASH SHORTFALL PROTECTION AGREEMENT
THIS PROJECTED CASH SHORTFALL PROTECTION AGREEMENT (this "Agreement") is
made and entered into as of October 30, 1998, by and among Berkshire Renovation,
LLC, a Delaware limited liability company ("Berkshire"), Encino Renovation, LLC,
a Delaware limited liability company ("Encino") and Rossmore Renovation, LLC, a
Delaware limited liability company ("Rossmore"; Berkshire, Encino, and Rossmore
may collectively be referred to herein as the "Owners" and, individually, as an
"Owner"), FINOVA Capital Corporation, a Delaware corporation ("Lender"), and ARV
Assisted Living, Inc., a Delaware corporation ("ARV").
RECITALS
WHEREAS, each of the Owners is the owner of certain real property (each,
a "Property") which includes an assisted living facility (each, a "Facility") to
be renovated or constructed thereon (each such Property and Facility
collectively referred to as a "Project") ; and
WHEREAS, ARV is a Member of each Owner; and
WHEREAS, as of October 21, 1998, ARV entered into a separate Management
Agreement (each, a "Management Agreement") with each Owner covering the
operation and management of the Project owned by such Owner; and
WHEREAS, the Owners have entered into that certain Master Loan and
Security Agreement (including the Schedule to Master Loan and Security Agreement
which is incorporated as an integral part thereof), dated of even date herewith,
with Lender (herein, the "Loan Agreement"), pursuant to which Lender has agreed
to provide a credit facility to each Owner in connection with the acquisition
and renovation or construction of such Owner's applicable Project; and
WHEREAS, it is a condition precedent to Lender's obligations under the
Loan Agreement that ARV provide certain assurances in favor of the Owners and
Lender with respect to certain construction cost overruns and operating deficits
in excess of projected operating losses; and
WHEREAS, in order to induce Lender to enter into the Loan Agreement and
to fund the Loans described therein, ARV is willing to provide the required
assurances in such amounts, for such period and under such terms as are set
forth in this Agreement.
NOW, THEREFORE, in order to induce Lender to provide the financing
described above, and in consideration of the mutual promises of the parties
hereto and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
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<PAGE> 2
1. Definitions. Terms used herein with initial capital letters, to the
extent not otherwise defined herein, shall have the meanings given such terms in
the Loan Agreement. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
The term "Actual Costs" shall mean, with respect to any Facility at any
time, the total actual costs and expenses of the construction or renovation of
that Facility incurred by the Owner up to such time. "Actual Costs" shall not
include either: (i) costs and expenses of marketing and lease-up; or (ii)
additional costs and expenses directly attributable to change orders required by
Lender (other than any change orders required by Lender in order to bring the
Facility into compliance with applicable law), to the extent such additional
costs and expenses exceed the itemized budgeted costs and expenses under the
Budget. "Actual Costs" shall include, however, without limitation, the
additional costs and expenses related to change order requests from the Owner,
the General Contractor, and/or consultants, and any other additional costs and
expenses of construction or renovation of the Facility, arising for any other
reason and whether or not within the control of ARV.
The term "Approval Date" has the meaning set forth in Section 6(a)
hereof.
The term "Approved Cost Report" has the meaning set forth in Section
6(a) hereof.
The term "Borrowing Owner" shall mean any Owner which is the borrower
with respect to an Under-Budget Borrower Loan.
The term "Budgeted Costs" shall mean, with respect to any Facility at
any time, the total costs and expenses budgeted for that Facility from inception
up to such time, as set forth on the Budgets for each Facility attached hereto
as Exhibits A-1, A-2 and A-3. "Budgeted Costs" as of any date shall be
calculated by multiplying (a) the total budgeted costs and expenses to the Owner
of the Facility from inception through completion (excluding the costs and
expenses of marketing and lease-up), plus budgeted contingencies, as set forth
in the Facility's initial Budget by (b) the Completion Percentage for that
Facility as of such date.
The term "Capital Reserve" shall mean a reserve for each Facility, in an
amount to be agreed upon between the Owner of such Facility and ARV in its
capacity of manager of such Facility pursuant to the Management Agreement, which
reserve is to be used for capital improvements and replacements. At such time as
any Owner is required to maintain the Replacement Reserve described in Section
10.20 of the Loan Agreement, the term "Capital Reserve" shall mean and refer to
such Replacement Reserve account.
The term "Completion Percentage" shall mean, with respect to any
Facility at any time, the particular stage of completion of construction or
renovation of such Facility at that time, expressed as a percentage of
completion, based on calculations therefor determined pursuant to the Loan
Agreement.
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<PAGE> 3
The term "Cost Overruns" shall mean, with respect to any Facility at any
time, the amount (if any) by which (a) the Actual Costs incurred by the Owner of
the Facility up to such time, exceed (b) the Budgeted Costs for that Facility at
such time.
The term "Cost Report" has the meaning set forth in Section 6 hereof.
The term "Cost Savings" shall mean, with respect to any Facility at any
time, the amount (if any) by which (a) the Budgeted Costs for that Facility at
such time, exceed (b) the Actual Costs incurred by the Owner for the Facility up
to such time.
The term "Cumulative Operating Deficit" shall mean, with respect to the
period from the Conversion Date applicable to each Facility through the end of
the most recent calendar month, the amount by which (a) all ordinary operating
expenses of the Facility (including, without limitation, expenses of
maintenance, insurance, "qualified debt service," taxes, amounts required to
maintain the Capital Reserve and the Emergency Reserve, and such other expenses
and charges as would normally be considered operating expenses of the Facility
under recognized and customary accounting principles and practices, but
excluding non-cash charges) exceed (b) the sum of (i) all gross revenues from
ordinary operations (including the proceeds of business interruption insurance,
if applicable) of the Facility for said period, and (ii) any amounts received by
the Owner of such Facility from ARV in the form of an "Operating Deficit
Payment," as defined in that certain Operating Deficit Payment Agreement dated
as of October 21, 1998 by and among ARV and each of the owners of the Group A
Facilities and the Group B Facilities (the "ODP Agreement"), and (iii) the
amount, if any, then remaining in the Operating Reserve. For purposes of this
Agreement, "qualified debt service" means debt service on any loan obtained with
respect to the Facility for the primary purpose of acquiring and developing
and/or renovating the Facility and paying expenses relating to the Facility.
The term "Cumulative Projected Results from Operations" shall mean those
amounts which are shown by the line item "Net Operating Income" in the
projections attached hereto as Exhibits B-1, B-2, and B-3 for each of the Group
A Facilities and the Rossmore Facility, respectively, with respect to the period
from the projected Conversion Date for such Facility through the end of the same
number of months of operation as have been included from the actual Conversion
Date for such Facility in the calculation of its Cumulative Operating Deficit.
The term "Emergency Reserve" shall mean a cash reserve, in the amount of
$100,000 for each Facility, to be maintained to address contingencies and which
may be withdrawn by the applicable Owner at any time and from time to time.
The term "Excess Operating Losses" shall mean the amount by which the
Cumulative Operating Deficit of a given Facility, calculated from the Conversion
Date applicable to such Facility through the end of the most recent calendar
month, exceeds the Cumulative Projected Results from Operations for the same
period, as shown on the projections for each of the Facilities which are
attached hereto as Exhibits B-1, B-2, and B-3.
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<PAGE> 4
The term "Group" shall mean the Group A Facilities or the Group B
Facilities, as the context may require.
The term "Group A Facilities" shall mean the Facilities on the
Properties owned respectively by Berkshire Renovation, LLC and Encino
Renovation, LLC.
The term "Group B Facilities" shall mean the Facilities on the
Properties owned respectively by Rossmore Renovation, LLC, Bay Spring Village,
LLC, Inn At Lakewood Development, LLC, Laurel Ridge Development, LLC and
Lynnbrooke-Irvine, LLC.
The term "Net Cash Flow" for any period means the amount by which (a)
the cash funds derived from operations of the Facility with respect to the
period in question, without reduction for any non-cash charges, exceeds (b) the
cash funds used, with respect to the period in question, to (i) pay all ordinary
operating expenses of the Facility (including, without limitation, expenses of
maintenance, insurance, "qualified debt service," taxes and such other expenses
and charges as would normally be considered operating expenses of the Facility
under recognized and customary accounting principles and practices) and (ii)
establish and maintain the Capital Reserve and the Emergency Reserve.
The term "Request Date" shall mean the date any Owner requests Lender to
fund an Under-Budge Borrower Loan.
The term "Under-Budget Borrower Loan" has the meaning set forth in
Section 2(a) hereof.
2. ARV to Fund Cost Overruns; Timing and Procedure for Funding.
(a) ARV hereby covenants and agrees to fund any Cost Overruns
incurred in connection with the operation of the Projects, subject to
the limitations set forth herein. The foregoing notwithstanding, in the
event either Berkshire or Encino experience a Cost Overrun, but such
Owner is permitted, in accordance with Section 11.2 of the Loan
Agreement, to obtain a loan from the other for the reason that the other
Owner constitutes an Under-Budget Borrower as described in said Section
(any such loan being referred to herein as an "Under-Budget Borrower
Loan"), or with respect to Rossmore, if Rossmore experiences a Cost
Overrun, but Rossmore is permitted to obtain an Under-Budget Borrower
Loan from one or more of the Loan B Borrowers by reason of such Loan B
Borrower qualifying as an Under-Budget Borrower in accordance with the
provisions of Section 11.2 of the Master Loan and Security Agreement
applicable to Loan B, then ARV shall be entitled to reduce the amount of
the Cost Overrun required to be funded by it hereunder by first giving
effect to all permitted Under-Budget Borrower Loans.
(b) In the event that any Project incurs a Cost Overrun
described in Section 2(a) above for which ARV is responsible, the Owner
shall, within ten (10) days following the applicable Cost Report
identifying such Cost Overrun, or otherwise as soon as practicable after
receipt of such Owner's most recent monthly reports from the manager of
the Project, whichever is later, give written notice to
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<PAGE> 5
ARV specifying the amount of the Cost Overrun to be funded by ARV.
Within five (5) business days following the receipt of such notice by
ARV, ARV shall pay to the Owner, in cash, the amount of such Cost
Overrun (each such payment being referred to herein as a "Cost Overrun
Payment").
3. ARV to Fund Excess Operating Losses; Timing and Procedure for
Funding.
(a) ARV hereby covenants and agrees to fund any Excess Operating
Losses incurred in connection with the operation of the Projects, in
each case during the period from the Conversion Date applicable to such
the Project through the date of release set forth in Section 4 below
with respect to such Project.
(b) In the event that any Project has incurred Excess Operating
Losses as of the end of any calendar month falling within the period of
ARV's obligations described herein, the Owner shall, within ten (10)
days following the end of such month, or as soon as practicable after
receipt of that month's reports from the manager of the Project,
whichever is later, give written notice to ARV specifying the amount of
the Excess Operating Losses incurred. Within five (5) business days
following the receipt of such notice by ARV, ARV shall pay to the Owner,
in cash, the amount of such Excess Operating Losses (each such payment
an "Excess Operating Deficit Payment"), less the amount of all Excess
Operating Deficit Payments previously made by ARV to such Owner.
4. RELEASE FROM COVERAGE. ARV SHALL BE RELEASED FROM ITS OBLIGATION TO
MAKE EXCESS OPERATING DEFICIT PAYMENTS WITH RESPECT TO A PARTICULAR PROJECT UPON
THE EARLIER OF (I) EIGHTEEN (18) MONTHS AFTER THE DATE OF STABILIZATION FOR SUCH
PROJECT; OR (II) THE CLOSING OF A SALE OF THE PROJECT TO A THIRD PARTY;
PROVIDED, HOWEVER, THAT ARV SHALL REMAIN LIABLE WITH RESPECT TO THE REMAINING
PROJECTS IN AN AGGREGATE AMOUNT EQUAL TO ANY REMAINING UNFUNDED PORTION OF ITS
COMMITMENT HEREUNDER.
5. Definition of "Date of Stabilization." For purposes of this
Agreement, the term "Date of Stabilization" means the earlier of (i) the date a
given Facility has maintained a ninety-two percent (92%) occupancy level for
three consecutive months ("Stabilization"), or (ii) the first day of the first
calendar month following the period during which the Project has achieved
positive "Net Cash Flow" for each of three (3) consecutive calendar months.
6. Cost Reports and Approved Cost Reports.
(a) Preparation of Cost Reports. In connection with each request
for Lender to approve an Under-Budget Borrower Loan, ARV shall promptly
prepare and deliver to Lender and each Owner whose Facility is in the
same Group as the Borrowing Owner's Facility a report (a "Cost Report")
that sets forth the Cost Overruns incurred (or Cost Savings realized)
for each Facility in the Group as of the Request Date. Each Cost Report
shall be in such detail as required by Lender and shall in addition be
supported by a statement from the Architect for each Facility as to the
Completion Percentage for such Facility at that time. Each Cost Report
approved by Lender as establishing the right of one or more Owners to
make an Under-Budget Borrower Loan to a Borrowing Owner shall be
referred to as an "Approved Cost Report," and the date of such approval
is the "Approval Date".
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<PAGE> 6
(b) Disputes; Failure to Deliver Cost Report. If the conclusions
of a Cost Report are disputed by the Owner of the relevant Facility or
by Lender, or if ARV fails to timely deliver a Cost Report for such
Facility, then the Owner may prepare and deliver to ARV and Lender a
Cost Report for its Facility.
7. Maximum Liability of ARV. ARV's total liability hereunder with
respect to the making of Cost Overrun Payments and Excess Operating Deficit
Payments shall not exceed $4,000,000. The foregoing amount shall not be
segregated among Owners, such that each Owner shall have the right to receive
payments hereunder until ARV has funded a total of $4,000,000.
8. Enforcement by Lender. ARV acknowledges and agrees that ARV's
obligations under this Agreement have been specifically negotiated for by Lender
and were a material consideration to Lender in its willingness to enter into the
Loan Agreement and to fund the Loans thereunder. Accordingly, this Agreement
shall be specifically enforceable by Lender against ARV, ARV agreeing that
monetary damages shall be inadequate to fully compensate Lender for damages
which it shall experience in the event of the failure of ARV to perform its
obligations hereunder. At any time where there an exists an Event of Default
under the Loan Agreement, any Cost Overrun Payments or Excess Operating Deficit
Payments required to be made by ARV hereunder shall be made directly to Lender,
and each of the Owners hereby irrevocably consents to the making of such
payments by ARV directly to Lender.
9. No Other Compensation for Payment. ARV shall not be entitled to
receive any compensation for the payments made by it herein or for the
performance of its obligations hereunder.
10. Miscellaneous.
(a) Entire Agreement. This Agreement, together with the Loan
Agreement, represents the entire and integrated agreement between the
parties regarding the matters described herein and supersedes all prior
negotiations, representations or agreements, either written or oral the.
This Agreement may be amended only by a written instrument signed by the
parties hereto. Except to the extent expressly provided otherwise in
this Agreement, this Agreement and the definitions herein shall apply to
each Real Property and Facility separately. Notwithstanding anything
contained herein, this Agreement is not intended to alter the rights or
duties of the various parties under the ODP Agreement.
(b) Governing Law. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of Arizona.
Any action to interpret or enforce this Agreement shall be solely
brought in the State of Arizona. To the extent permitted by law, the
parties agree that the sole venue for such action shall be Maricopa
County, Arizona.
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<PAGE> 7
(c) No Waiver. No failure by a party to insist upon the strict
performance of any term or covenant of this Agreement or to exercise any
right or remedy consequent upon a breach thereof, shall constitute a
waiver of any such breach or of any such term or covenant. No waiver by
Lender or any Owner of any breach by ARV shall affect or alter this
Agreement, but each and every term and covenant of this Agreement shall
continue in full force and effect with respect to any other then
existing or subsequent breach hereof.
(d) Notices. Any approvals, disapprovals, consents or other
notices required or permitted to be sent or given hereunder shall be in
writing and delivered personally, sent by facsimile, mailed, certified
mail, return receipt requested, or delivered by overnight or other
courier service to the following addresses, or such other addresses as
shall be given by notice delivered hereunder, and shall be deemed to
have been given upon confirmation of receipt thereof by the individual
who is the addressee of such communication, which confirmation may be in
writing (including by facsimile) or may be verbal (including by
telephone):
If to any Owner, to:
c/o ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Chief Executive Officer
Fax: (714) 751-1743
With a copy to:
c/o ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Legal Department
Fax: (714) 435-7102
With a copy to:
Alex Brown Realty, Inc.
225 East Redwood Street
Baltimore, MD 21202
Attention: Thomas R. Burton
Fax: (410) 625-2694
and to:
Vintage Senior Housing, LLC
500 Newport Center Drive, Suite 200
Newport Beach, CA 92660
Attention: Eric K. Davidson
7
<PAGE> 8
Fax: (949) 721-8558
If to ARV, to:
ARV ASSISTED LIVING, INC.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: President
Fax: (714) 751-1743
With a copy to:
ARV ASSISTED LIVING, INC.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Legal Department
Fax: (714) 435-7102
If to Lender, to:
FINOVA Capital Corporation
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Attention: Portfolio Manager
Fax: (312) 322-3553
with a copy to:
FINOVA Capital Corporation
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attention: Vice President-Associate General Counsel
Fax: (602) 874-6445
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<PAGE> 9
and to:
FINOVA Capital Corporation
311 South Wacker Drive, Suite 4400
Chicago, Illinois 60606
Attention: Vice President-Group Counsel
Fax: (312) 322-3553
(e) Waiver of Jury Trial; Legal Costs. Each of the parties
hereto specifically waives any right to a trial by jury in any court
with respect to any matter arising out of this Agreement. The prevailing
party in any action arising under this Agreement shall be entitled to be
paid all costs and reasonable attorneys' fees incurred therein.
(f) Rules of Construction. The captions throughout this
Agreement are for convenience of reference only and the words contained
therein shall in no way be held or deemed to limit, explain, modify, or
add to the interpretation or meaning of any provision or the scope or
intent of this Agreement, nor in any way affect this Agreement.
(g) Gender. The use of any gender herein shall be deemed to
include the other gender and the use of the singular herein shall be
deemed to include the plural (and vice versa) whenever appropriate.
(h) Severability. 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 term and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
(i) Time of the Essence. TIME IS OF THE ESSENCE TO EACH AND
EVERY PROVISION HEREOF.
(j) Further Assurances. Each party covenants and agrees to
execute such other and further documents and to do such further acts as
may be reasonable required to carry out the terms and provisions of this
Agreement upon request by the other party.
[SIGNATURES APPEAR ON NEXT PAGE.]
<PAGE> 1
EXHIBIT 10.19
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of the 18th day of March, 1999, by and between ARV ASSISTED LIVING,
INC., a Delaware corporation ("ARV"), and BELLA VITA ARV, INC., a Florida
corporation ("BVARV") (both of the foregoing being sometimes hereinafter
collectively referred to as "Sellers"), and ASPEN AMBER PARK, LLC, a Colorado
limited liability company ("Aspen Amber Park"), ASPEN BELLA VITA, LLC, a
Colorado limited liability company ("Aspen Bella Vita"), ASPEN GAYTON TERRACE,
LLC, a Colorado limited liability company ("Aspen Gayton Terrace"), ASPEN
WOODSIDE VILLAGE, LLC, a Colorado limited liability company ("Aspen Woodside
Village"), and ASPEN WYNDHAM LAKES, LLC, a Colorado limited liability company
("Aspen Wyndham Lakes") (all of the foregoing being sometimes hereinafter
collectively referred to as "Purchasers").
RECITALS
This Agreement is made with respect to the following facts:
A. ARV is the owner of that certain 122-unit retirement facility
commonly known as "Amber Park," located at 3801 East Galbraith Road, in the City
of Cincinnati, County of Hamilton, State of Ohio, consisting of (1) the real
property legally described in EXHIBIT A attached hereto (the "Amber Park Land"),
(2) all buildings and other improvements located on the Amber Park Land (the
"Amber Park Improvements"), and (3) those items of equipment and personal
property owned by ARV which are used in connection with the maintenance and
operation of the Amber Park Land and the Amber Park Improvements (the "Amber
Park Personal Property").
B. BVARV is the owner of that certain 114-unit retirement facility
commonly known as "Bella Vita," located at 1420 E. Venice Avenue, in the City of
Venice, County of Sarasota, State of Florida, consisting of (1) the real
property legally described in EXHIBIT B attached hereto (the "Bella Vita Land"),
(2) all buildings and other improvements located on the Bella Vita Land (the
"Bella Vita Improvements"), and (3) those items of equipment and personal
property owned by BVARV or ARV which are used in connection with the maintenance
and operation of the Bella Vita Land and the Bella Vita Improvements (the "Bella
Vita Personal Property").
C. ARV is the owner of that certain 96-unit retirement facility commonly
known as "Gayton Terrace," located at 12401 Gayton Road, in the County of
Henrico, State of Virginia, consisting of (1) the real property legally
described in EXHIBIT C attached hereto (the "Gayton Terrace Land"), (2) all
buildings and other improvements located on the Gayton Terrace Land (the "Gayton
Terrace Improvements"), and (3) those items of equipment and personal property
owned by ARV which are used in connection with the maintenance and operation of
the Gayton Terrace Land and the Gayton Terrace Improvements (the "Gayton Terrace
Personal Property").
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D. ARV is the owner of that certain 215-unit retirement facility
commonly known as "Woodside Village," located at 19455 Rockside Road, in the
City of Bedford, County of Cuyahoga, State of Ohio, consisting of (1) the real
property legally described in EXHIBIT D attached hereto (the "Woodside Village
Land"), (2) all buildings and other improvements located on the Woodside Village
Land (the "Woodside Village Improvements"), and (3) those items of equipment and
personal property owned by ARV which are used in connection with the maintenance
and operation of the Woodside Village Land and the Woodside Village Improvements
(the "Woodside Village Personal Property").
E. ARV is the owner of that certain 246-unit retirement facility
commonly known as "Wyndham Lakes," located at 10660 Old St. Augustine Road, in
the City of Jacksonville, County of Duval, State of Florida, consisting of (1)
the real property legally described in EXHIBIT E attached hereto (the "Wyndham
Lakes Land"), (2) all buildings and other improvements located on the Wyndham
Lakes Land (the "Wyndham Lakes Improvements"), and (3) those items of equipment
and personal property owned by ARV which are used in connection with the
maintenance and operation of the Wyndham Lakes Land and the Wyndham Lakes
Improvements (the "Wyndham Lakes Personal Property").
F. Subject to and upon the terms and conditions set forth in this
Agreement, (1) ARV wishes to sell the Amber Park Property (hereinafter defined)
to Aspen Amber Park, and Aspen Amber Park wishes to acquire the Amber Park
Property, (2) BVARV wishes to sell the Bella Vita Property (hereinafter defined)
to Aspen Bella Vita, and Aspen Bella Vita wishes to acquire the Bella Vita
Property, (3) ARV wishes to sell the Gayton Terrace Property (hereinafter
defined) to Aspen Gayton Terrace, and Aspen Gayton Terrace wishes to acquire the
Gayton Terrace Property, (4) ARV wishes to sell the Woodside Village Property
(hereinafter defined) to Aspen Woodside Village, and Aspen Woodside Village
wishes to acquire the Woodside Village Property, and (5) ARV wishes to sell the
Wyndham Lakes Property (hereinafter defined) to Aspen Wyndham Lakes, and Aspen
Wyndham Lakes wishes to acquire the Wyndham Lakes Property.
AGREEMENT
In consideration of the mutual promises and agreements set forth below, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. Incorporation of Recitals and Exhibits. The Recitals set forth above and
the exhibits attached to this Agreement are hereby incorporated by this
reference.
2. Definitions. As used in this Agreement, the following terms shall have the
following meanings:
2.1 "Amber Park Loan" shall mean that certain loan from Bank United to ARV
having an approximate principal balance of $3,500,000.
2.2 "Amber Park Property" shall mean, collectively, (a) the Amber Park Real
Property, (b) the Amber Park Personal Property, (c) ARV's right, title and
interest in and to all Contracts relating to the Amber Park Real Property
or the Amber Park Personal Property, (d) ARV's
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right, title and interest as landlord under all Leases affecting the Amber
Park Real Property, (e) ARV's right, title and interest in and to all
assignable Permits relating to the Amber Park Real Property, (f) ARV's
right, title and interest in and to all Warranties relating to the Amber
Park Real Property or the Amber Park Personal Property, (g) ARV's right,
title and interest in and to all Plans relating to the Amber Lake Real
Property and (h) ARV's right, title and interest in and to all Intangible
Property relating to the Amber Park Real Property including, without
limitation, the name "Amber Park."
2.3 "Amber Park Real Property" shall mean, collectively, the Amber Park Land
and the Amber Park Improvements.
2.4 "Bella Vita Loan" shall mean that certain loan from Washington Federal
Savings Bank to BVARV having an approximate principal balance of
$6,280,000.
2.5 "Bella Vita Property" shall mean, collectively, (a) the Bella Vita Real
Property, (b) the Bella Vita Personal Property, (c) BVARV's right, title
and interest in and to all Contracts relating to the Bella Vita Real
Property or the Bella Vita Personal Property, (d) BVARV's right, title and
interest as landlord under all Leases affecting the Bella Vita Real
Property, (e) BVARV's right, title and interest in and to all assignable
Permits relating to the Bella Vita Real Property, (f) BVARV's right, title
and interest in and to all Warranties relating to the Bella Vita Real
Property or the Bella Vita Personal Property, (g) BVARV's right, title and
interest in and to all Plans relating to the Bella Vita Real Property and
(h) BVARV's right, title and interest in and to all Intangible Property
relating to the Bella Vita Real Property including, without limitation, the
name "Bella Vita."
2.6 "Bella Vita Real Property" shall mean, collectively, the Bella Vita Land
and the Bella Vita Improvements.
2.7 "Contracts" shall mean, collectively, all agreements for the repair or
maintenance of, or provision of services to, the Amber Park Real Property
or the Amber Park Personal Property, the Bella Vita Real Property or the
Bella Vita Personal Property, the Gayton Terrace Real Property or the
Gayton Terrace Personal Property, the Woodside Village Real Property or the
Woodside Village Personal Property, or the Wyndham Lakes Real Property or
the Wyndham Lakes Personal Property, to the extent a Seller's interest
thereunder is assignable and subject to Section 9.9 hereof.
2.8 "Gayton Terrace Property" shall mean, collectively, (a) the Gayton Terrace
Real Property, (b) the Gayton Terrace Personal Property, (c) ARV's right,
title and interest in and to all Contracts relating to the Gayton Terrace
Real Property or the Gayton Terrace Personal Property, (d) ARV's right,
title and interest as landlord under all Leases affecting the Gayton
Terrace Real Property, (e) ARV's right, title and interest in and to all
assignable Permits relating to the Gayton Terrace Real Property, (f) ARV's
right, title and interest in and to all Warranties relating to the Gayton
Terrace Real Property or the Gayton Terrace Personal Property, (g) ARV's
right, title and interest in and to all Plans relating to the Gayton
Terrace Real Property and (h) ARV's right, title and interest in and to all
Intangible Property relating to the Gayton Terrace Real Property including,
without limitation, the name "Gayton Terrace."
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2.9 "Gayton Terrace Real Property" shall mean, collectively, the Gayton Terrace
Land and the Gayton Terrace Improvements.
2.10 "Improvements" shall mean, collectively, the Amber Park Improvements, the
Bella Vita Improvements, the Gayton Terrace Improvements, the Woodside
Village Improvements and the Wyndham Lakes Improvements.
2.11 "Intangible Property" shall mean any and all rights, privileges and
appurtenances owned by each Seller and in any way related to, or used in
connection with, the operation of the Real Property or Personal Property
owned by such Seller, excluding such Seller's Real Property, Improvements,
Personal Property, Leases, Contracts, Warranties, Permits and Plans.
2.12 "Leases" shall mean those leases or occupancy agreements affecting the
Amber Park Property, the Bella Vita Property, the Gayton Terrace Property,
the Woodside Village Property or the Wyndham Lakes Property, and all rent,
income and proceeds arising therefrom and security and other deposits made
by the tenants thereunder.
2.13 "Loans" shall mean, collectively, the Amber Park Loan, the Bella Vita Loan,
the Woodside Village Loan and the Wyndham Lakes Loan.
2.14 "Permits" shall mean all governmental permits, licenses, certificates and
authorizations relating to the use or operation of any of the Real Property
including, without limitation, all permits, licenses, certificates and
authorizations required for the use, occupancy, operation and management of
the Real Property as an assisted living or residential care facility with
all services currently provided at such Real Property as of the Effective
Date.
2.15 "Personal Property" shall mean, collectively, the Amber Park Personal
Property, the Bella Vita Personal Property, the Gayton Terrace Personal
Property, the Woodside Village Personal Property and the Wyndham Lakes
Personal Property.
2.16 "Plans" shall mean all site plans, surveys, soil and substratus studies,
architectural drawings, plans and specifications, engineering plans and
studies, electrical and mechanical plans and studies, floor plans,
landscape plans, environmental assessment reports, engineering, structural
or physical inspection reports, appraisals, feasibility studies, marketing
plans and promotional materials, tenant questionnaires and studies and
other plans and studies of any kind if existing and in a Seller's
possession or control that relate to the Real Property or the Personal
Property owned by such Seller.
2.17 "Properties" shall mean, collectively, the Amber Park Property, the Bella
Vita Property, the Gayton Terrace Property, the Woodside Village Property
and the Wyndham Lakes Property. A "Property" refers to one of the
Properties, as the context may require.
2.18 "Real Property" shall mean, collectively, the Amber Park Real Property, the
Bella Vita Real Property, the Gayton Terrace Real Property, the Woodside
Village Real Property and the Wyndham Lakes Property.
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2.19 "Woodside Village Loan" shall mean that certain loan from Bank United to
ARV having an approximate principal balance of $5,250,000.
2.20 "Woodside Village Property" shall mean, collectively, (a) the Woodside
Village Real Property, (b) the Woodside Village Personal Property, (c)
ARV's right, title and interest in and to all Contracts relating to the
Woodside Village Real Property or the Woodside Village Personal Property,
(d) ARV's right, title and interest as landlord under all Leases affecting
the Woodside Village Real Property, (e) ARV's right, title and interest in
and to all assignable Permits relating to the Woodside Village Real
Property, (f) ARV's right, title and interest in and to all Warranties
relating to the Woodside Village Real Property or the Woodside Village
Personal Property, (g) ARV's right, title and interest in and to all Plans
relating to the Woodside Village Real Property and (h) ARV's right, title
and interest in and to all Intangible Property relating to the Woodside
Village Real Property including, without limitation, the name "Woodside
Village."
2.21 "Woodside Village Real Property" shall mean, collectively, the Woodside
Village Land and the Woodside Village Improvements.
2.22 "Warranties" shall mean all unexpired assignable warranties and guarantees
relating to the Amber Park Real Property or the Amber Park Personal
Property, the Bella Vita Real Property or the Bella Vita Personal Property,
the Gayton Terrace Real Property or the Gayton Terrace Personal Property,
the Woodside Village Real Property or the Woodside Village Personal
Property, or the Wyndham Lakes Real Property or the Wyndham Lakes Personal
Property.
2.23 "Wyndham Lakes Loan" shall mean that certain loan from HRPT Properties
Trust to ARV having an approximate principal balance of $5,000,000.
2.24 "Wyndham Lakes Property" shall mean, collectively, (a) the Wyndham Lakes
Real Property, (b) the Wyndham Lakes Personal Property, (c) ARV's right,
title and interest in and to all Contracts relating to the Wyndham Lakes
Real Property or the Wyndham Lakes Personal Property, (d) ARV's right,
title and interest as landlord under all Leases affecting the Wyndham Lakes
Real Property, (e)ARV's right, title and interest in and to all assignable
Permits relating to the Wyndham Lakes Real Property, (f) ARV's right, title
and interest in and to all Warranties relating to the Wyndham Lakes Real
Property or the Wyndham Lakes Personal Property, (g) ARV's right, title and
interest in and to all Plans relating to the Wyndham Lakes Real Property
and (h) ARV's right, title and interest in and to all Intangible Property
relating to the Wyndham Lakes Real Property including, without limitation,
the name "Wyndham Lakes."
2.25 "Wyndham Lakes Real Property" shall mean, collectively, the Wyndham Lakes
Land and the Wyndham Lakes Improvements.
3. Purchase and Sale. Subject to and upon the terms and conditions set forth
in this Agreement, (a) ARV wishes to sell the Amber Park Property to Aspen
Amber Park, and Aspen Amber Park wishes to acquire the Amber Park Property,
(b) BVARV wishes to sell the Bella Vita Property to Aspen Bella Vita, and
Aspen Bella Vita wishes to acquire the Bella Vita
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Property, (c) ARV wishes to sell the Gayton Terrace Property to Aspen
Gayton Terrace, and Aspen Gayton Terrace wishes to acquire the Gayton
Terrace Property, (d) ARV wishes to sell the Woodside Village Property to
Aspen Woodside Village, and Aspen Woodside Village wishes to acquire the
Woodside Village Property, and (e) ARV wishes to sell the Wyndham Lakes
Property to Aspen Wyndham Lakes, and Aspen Wyndham Lakes wishes to acquire
the Wyndham Lakes Property. For purposes of this Agreement, "Effective
Date" shall mean the date of mutual execution and delivery of this
Agreement by all of the parties hereto.
4. Purchase Price. The aggregate purchase price for the Properties (the
"Purchase Price") shall be $32,250,000.
4.1 Allocation of Purchase Price. The Purchase Price shall be allocated as
follows:
<TABLE>
<S> <C>
Amber Park $ 2,850,000
Bella Vita 8,500,000
Gayton Terrace 7,300,000
Woodside Village 11,350,000
Wyndham Lakes 2,250,000
-----------
TOTAL $32,250,000
</TABLE>
Such allocation shall be binding on Sellers and Purchasers for all purposes
under this Agreement, including, without limitation, whenever and wherever the
values of the Properties must be separately stated in any instrument or document
which, pursuant to applicable law, must be filed with any public agency or
entity in connection with the closing of the transaction contemplated by this
Agreement.
4.2 Payment of Purchase Price. The Purchase Price shall be payable as follows:
4.2.1 The sum of $1,000,000 (together with all accrued interest thereon, the
"Deposit") shall be paid by Purchaser to First American Heritage Title
Company, 633 Seventeenth Street, Suite 1700, Denver, Colorado 80202
("Escrow Agent"), in immediately available funds on or before March 26,
1999. Escrow Agent shall deposit such sum in an interest-bearing account
and hold such money as an earnest money deposit hereunder. The Deposit
shall be allocated among the Properties as follows:
<TABLE>
<S> <C>
Amber Park $ 88,375
Bella Vita 263,550
Gayton Terrace 226,350
Woodside Village 351,950
</TABLE>
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<TABLE>
<S> <C>
Wyndham Lakes 69,775
----------
TOTAL $1,000,000
</TABLE>
This Agreement constitutes the joint instructions of Sellers and Purchasers
to Escrow Agent to hold and disburse the Deposit in accordance with the
provisions of this Agreement, and to perform all other duties and obligations of
Escrow Agent hereunder. If requested by Escrow Agent, Sellers and Purchasers
shall join in the execution of separate instructions confirming the duties and
obligations of Escrow Agent with respect to the Deposit and otherwise.
4.2.2 A portion of the Purchase Price shall be paid by Purchasers' assumption of
the Loans, in accordance with the terms and conditions of Section 7 hereof.
The Purchase Price shall be credited in an amount equal to the aggregate
principal indebtedness at the time of Closing under the Loans which were
assumed by Purchasers. Without limiting the foregoing, but subject to
Section 7.1.5 hereof, if the outstanding principal balance of a Loan
assumed by a Purchaser is greater than the portion of the Purchase Price
allocable to the Property to which such Loan relates, then the aggregate
Purchase Price allocable to the other Properties not yet closed shall be
credited in an amount equal to such excess outstanding indebtedness.
4.2.3 The balance of the Purchase Price, subject to adjustment in accordance
with Section 11 hereof, shall be delivered into escrow with Escrow Agent at
least one (1) business day prior to the closing of the purchase transaction
contemplated hereby with respect to each Property (the "Closing") in cash,
by certified or cashier's check, wire transfer or other immediately
available funds.
5. Purchasers' Investigations.
5.1 Inspection Period. Purchasers shall have until 11:59 p.m., Mountain Time,
on March 18, 1999 (the "Inspection Period") to investigate the Properties
and all matters relevant to the acquisition, financing, ownership,
operation and marketability thereof. Such right of investigation shall
include, without limitation, the right to have made, at Purchasers'
expense, any studies or inspections of the Properties that Purchasers may
reasonably deem necessary or appropriate. Sellers agree to cooperate
reasonably with any such investigations, inspections or studies made by or
at Purchasers' direction so long as such cooperation is at no expense or
liability to any Sellers. Purchasers shall conduct all such inspections in
a reasonable manner consistent with and not likely to disturb the normal
operations of the Properties and so as to minimize disruption to the
residents of the Properties. Promptly after undertaking any testing or
inspection, Purchasers shall restore each Property to its condition prior
to any such test or inspection. If Purchasers terminate this Agreement
under this Section, then, upon Sellers' reimbursement of Purchasers for any
costs incurred in connection therewith, Purchasers shall provide Sellers
with the results of any test, report, study or other non-privileged
document obtained by Purchasers in connection with any of their
inspections.
5.2 Due Diligence Materials.
5.2.1 Property Documents. At all times from and after the Effective Date,
Sellers shall make available to Purchasers, at the offices of Aspen
Retirement Corporation, 252 Clayton Street,
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Second Floor, Denver, Colorado 80206, and/or at the Properties, all of the
books, records and documents in any way related to the development,
ownership, use, financing, operation, maintenance, occupancy or
marketability of any of the Properties which are in the possession or
control of Sellers or Sellers' agents, including, without limitation, the
following: (a) a list of the Personal Property, (b) a written description
of all inventories of food and medical supplies (the "Food and Medical
Inventories") then maintained by Sellers in connection with the Properties,
(c) a list of all Contracts, together with copies of all written Contracts
and a written description of all unwritten or oral Contracts, (d) copies of
any Permits and Warranties, (e) copies of the Leases, (f) copies of all
documents relating to the Loans, including, but not limited to, promissory
notes, deeds of trust, guaranties, environmental indemnity agreements,
default notices, and all other certificates, affidavits, notices,
agreements and other instruments relating to the Loans, (g) copies of each
Seller's financial statements for the years 1996, 1997 and 1998 and each
Seller's financial statements for the first two (2) months of 1999, (h)
copies of the most recent ad valorem tax statements covering the Real
Property and the Personal Property, together with a copy of any notice of
increase in valuation or taxes received by each Seller since such tax
statements were issued, (i) copies of all inspection reports and surveys
relating to any of the Properties, including without limitation, all
department of health, social services, sanitation and fire reports and
surveys, (j) all Plans and (k) such other documents as Purchasers may
request including, without limitation, those materials described in EXHIBIT
F attached hereto.
5.2.2 Rent Roll. Each Seller has delivered to the applicable Purchaser a rent
roll (the "Rent Roll"), certified by such Seller as true, accurate and
complete as of a date no earlier than the Effective Date, containing the
following information for each of the Leases: the name of the tenant; the
apartment, by number, leased by each tenant; the type of apartment leased
by each tenant (e.g., studio, 1-bedroom, etc.) and the area, in square
feet, of each such apartment, together with the same information for each
vacant apartment in the Improvements; the term of each such lease, tenancy
or other occupancy arrangement; the amount of any security or other
refundable deposit held on behalf of any tenant; the total amount of rent
(including base rent and any additional rent, e.g. for rental of
appliances, assisted living or other services) due from each tenant per
month; the current asking rent for each apartment; any existing monetary
defaults by the tenants under any of such Leases and any existing defaults
by the landlord or nonmonetary defaults by the tenants under any of such
Leases; any concessions or free rent that any of such tenants have been
granted in the past or to which they are entitled in the future; and the
amount of any rents that have been paid in advance under any of such
leases, tenancies or other occupancy arrangements (other than for the
current month).
5.2.3 Title and Survey. Sellers represent to Purchasers that Sellers have
furnished Purchasers with true and complete copies of (a) each Seller's
owner's title insurance policy relating to the Properties and (b) the most
recent survey of each Property in the possession or control of Sellers or
Sellers' agents (the "Surveys"). Purchaser has requested title insurance
commitments or title reports from First American Title Insurance Company
(the "Title Company"), including copies of all recorded exceptions to title
referred to therein (collectively, the "Title Commitments"), reflecting
title to each Property. Sellers acknowledge receipt from Purchasers'
counsel of three letters dated March 23, 1999 and March 24, 1999
(collectively, the "Title Letter"), setting forth Purchasers' objections
with
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respect to the Title Commitments and UCC searches conducted by Purchasers,
and Sellers shall, at their sole expense, prior to the Closing, use their
best efforts to cure such objections. Failure of Purchasers to disapprove
of any exception not objected to in the Title Letter will be deemed to
evidence Purchasers' approval of such exception (but without waiving any
covenant, warranty or representation of Sellers pursuant to this
Agreement). Sellers' obligation to cure such exceptions may, if such method
is acceptable to Purchasers as to any specific exception, include the
obligation to obtain title insurance for the applicable Purchaser against
such exception and to pay additional premiums or costs which the Title
Company charges for such protection. If despite Sellers' best efforts to
cure such exceptions, each of such exceptions has not been cured by Sellers
prior to the Closing, then, notwithstanding anything to the contrary in
this Agreement, Purchasers may at their option terminate this Agreement and
receive a refund of the Deposit, whereupon the parties will be relieved
from all obligations hereunder except for those obligations which survive
termination of this Agreement (the "Surviving Obligations") or waive their
objections to title and proceed in accordance with this Agreement. If
Purchasers do not terminate this Agreement pursuant to this Section or
Section 5.3 hereof, then the "Permitted Exceptions" hereunder shall be any
encumbrance or exception arising from the acts or omissions of Purchasers
and the exceptions to title disclosed in the Title Commitments, excluding
(a) any delinquent taxes or assessments, (b) subject to Section 7 hereof,
any monetary liens or encumbrances, (c) the standard printed exceptions or
(d) any exceptions to which Purchasers object in writing during the
Inspection Period. If required to cause the Title Company to delete the
standard printed exceptions from any owner's title insurance policy to be
issued to a Purchaser at the Closing, Sellers will execute such
certificates, affidavits or other instruments as the Title Company may
require to confirm that no changes have been made to any Property since the
date of the Survey applicable to such Property.
5.3 Termination. If, on or before 11:59 p.m., Mountain Time, on March 18, 1999,
Purchasers give Sellers written notice ("Notice of Disapproval") setting
forth Purchasers' dissatisfaction with the Properties for any reason
whatsoever in Purchasers' sole discretion, and states in such notice
Purchasers' unequivocal election to terminate this Agreement, then the
Deposit shall be returned to Purchasers, this Agreement shall terminate and
both parties shall be relieved from any further liability hereunder, except
for the Surviving Obligations. Subject to Section 5.2.3 hereof, Purchasers'
failure to provide a Notice of Disapproval on or before the expiration of
the Inspection Period shall constitute Purchasers' approval of all such
matters relating to the Properties, but without waiving or limiting any
rights Purchasers have with respect to any violation of any covenant,
warranty or representation of Sellers pursuant to this Agreement. If
Purchasers do not terminate this Agreement as described in the preceding
sentence, then this Agreement shall remain in full force and effect in
accordance with its terms, and the Deposit shall become nonrefundable,
subject only to those terms of this Agreement which provide for a refund of
the Deposit to Purchasers after expiration of the Inspection Period.
5.4 Indemnity. The applicable Purchaser shall indemnify, defend and hold the
applicable Seller, its shareholders, directors, officers, employees,
agents, successors and assigns harmless from and against any expenses,
damages and liabilities, including reasonable attorneys' fees, that such
Seller, its shareholders, directors, officers, employees, agents,
successors or assigns may suffer or incur arising out of any claims for
property damage, personal injury or claims
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from materialmen or laborers which in turn arise from such Purchaser's
investigations under this Section 5. These indemnification obligations of
Purchasers shall survive any termination of this Agreement.
6. Title Defects. If any update of a Title Commitment delivered after the
Inspection Period shall show any exceptions which are not Permitted
Exceptions (each, a "New Exception") or shall contain any additional
requirements, Sellers shall, at their sole expense, use their best efforts
prior to Closing, to cure such New Exceptions and satisfy such
requirements. Sellers' obligation to cure such New Exceptions shall, if
such method is acceptable to Purchasers as to any specific exception,
include the obligation to obtain title insurance for Purchasers against
such exception and to pay additional premiums or costs which the Title
Company charges for such protection. If Sellers are unable, after using
their best efforts, to cure a New Exception, Purchasers shall be entitled
to all rights and remedies therefor, including, without limitation,
specific performance with abatement, damages and/or termination of this
Agreement. If this Agreement is terminated under any provision of this
Section, the Deposit shall be returned to Purchasers and all parties shall
be relieved of any further obligations hereunder.
7. Financings; Approvals.
7.1.1 Assumption of Loans. Sellers have informed Purchasers that (a) the Amber
Park Property is financed by the Amber Park Loan, (b) the Bella Vita
Property is financed by the Bella Vita Loan, (c) the Woodside Village
Property is financed by the Woodside Village Loan and (d) the Wyndham Lakes
Property is financed by the Wyndham Lakes Loan. Aspen Amber Park wishes to
assume the Amber Park Loan, Aspen Bella Vita wishes to assume the Bella
Vita Loan, Aspen Woodside Village wishes to assume the Woodside Village
Loan, and Aspen Wyndham Lakes wishes to assume the Wyndham Lakes Loan. In
furtherance hereof, Sellers authorize Purchasers to communicate with the
lenders ("Lenders"; for purposes of the Bella Vita Loan, the term "Lender"
shall include the U.S. Department of Housing and Urban Development ("HUD"))
under the Loans for the purpose of evaluating the applicable Purchaser's
assumption of the applicable Loan, and Sellers and Purchasers agree to
cooperate with each other to obtain the applicable Lender's consent to
assumption of its Loan by the applicable Purchaser, and such cooperation
will include the parties' prompt delivery to the Lenders of such financial
and other information as the Lenders may reasonably require.
7.1.2 Loan Terms. Except as otherwise expressly provided in this Section 7.1.2
with respect to the Amber Park Loan and the Woodside Village Loan, no
Purchaser shall be deemed to have agreed to assume any Loan if a Lender's
consent thereto is conditioned upon a requirement that any person or entity
provides any guaranties of the Loan or upon any change in the terms of such
Loan or if the assumption documents are not satisfactory in form and
substance to Purchasers in their sole discretion; provided, however, that
notwithstanding the foregoing, the parties agree to cooperate with each
other in requesting the Lender of the Amber Park Loan and the Woodside
Village Loan to extend the stated maturity date of such Loans. If a Lender
states its willingness to allow a Purchaser to assume the Loan provided
that such Purchaser causes another person or entity to provide a guaranty
or agrees to a change in the terms thereof (either of which is referred to
herein as "Changed Loan Terms"),
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including without limitation, an increased interest rate or shortened
maturity date, or if the assumption documents are not satisfactory in form
and substance to Purchasers in their sole discretion, then, subject to the
provisions of Section 7.1.4 and 7.1.5, Purchasers may prior to Closing
elect to terminate this Agreement, whereupon the Deposit shall be returned
to Purchasers and both parties shall be relieved of any further liabilities
or obligations hereunder except for the Surviving Obligations.
7.1.3 Lender Fees and Expenses. Purchasers shall be responsible for the payment
of any and all review fees, processing fees, transfer fees, assumption
fees, appraisal fees, title insurance premiums and other fees and expenses,
including attorneys' fees and expenses, incurred by Lenders in connection
with their review and evaluation of the sale of the applicable Property and
the applicable Purchaser's assumption of the applicable Loan (collectively,
"Lenders' Fees"), except that Sellers shall be responsible for all Lenders'
Fees payable in connection with Aspen Bella Vita's assumption of the Bella
Vita Loan and except that Sellers and Purchaser will share equally any
assumption fee charged by the Lender of the Wyndham Lakes Loan. The
parties' liability for the payment of Lenders' Fees shall survive Closing
or any termination of this Agreement.
7.1.4 Amber Park and Woodside Village Loans. If the Lender under the Amber Park
Loan and/or the Woodside Village Loan shall fail to approve the applicable
Purchaser's assumption of such Loan on or before the date of Closing, or
shall condition such approval on the applicable Purchaser's consent to
Changed Loan Terms or upon the applicable Purchaser's execution of
assumption documents not satisfactory in form and substance to such
Purchaser in its sole discretion, then the parties shall nonetheless
proceed to Closing (subject to Sections 7.1.5 and 7.2 hereof), the
applicable Purchaser shall pay the Purchase Price for such Property in cash
or other immediately available funds, and the applicable Seller shall cause
such Lender to release the applicable Property from all of its liens. In
such instance, the applicable Seller shall be responsible for the payment
of all prepayment fees or penalties arising out of the prepayment of any
such Loan.
7.1.5 Bella Vita and Wyndham Lakes Loans. If the Lender under the Bella Vita
Loan and/or the Wyndham Lakes Loan shall fail to approve the applicable
Purchaser's assumption of such Loan on or before the Closing Date, or shall
condition such approval on the applicable Purchaser's consent to Changed
Loan Terms, or upon the applicable Purchaser's execution of assumption
documents not satisfactory in form and substance to such Purchaser in its
sole discretion, then the applicable Purchaser may elect by written notice
to Sellers to periodically extend the Closing Date with respect to the
applicable Property for a total period not to exceed one hundred eighty
(180) days within which the applicable Purchaser shall continue its efforts
to obtain the Lender's approval without any Changed Loan Terms; provided,
that such 180-day period may be extended at such Purchaser's election for
an additional period not to exceed ninety (90) days so long as the
applicable Lender is continuing to review the parties' application for such
Purchaser's assumption of the Loan. If,at the expiration of such one
hundred eighty (180)- day period, as it may have been extended, (a) the
Lender under the Bella Vita Loan has not granted such approval, then this
Agreement shall terminate with respect to the Bella Vita Property, and
Sellers and Purchasers shall be relieved of all further obligations
hereunder (except Surviving Obligations) insofar as such obligations apply
to the Bella Vita Property, and the allocable
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portion of the Deposit will be returned to Purchasers, and (b) the Lender
under the Wyndham Lakes Loan has not granted such approval, then Aspen
Wyndham Lakes shall pay the Purchase Price for the Wyndham Lakes Property
in cash or other immediately available funds, and ARV shall cause such
Lender to release the Wyndham Lakes Property from all of its liens; in such
instance, ARV shall be responsible for the payment of all prepayment fees
or penalties arising out of the prepayment of such Loan. Notwithstanding
anything in Section 4.2.2 hereof to the contrary, if the principal amount
to be assumed under the Wyndham Lakes Loan is greater than the Purchase
Price allocable to the Wyndham Lakes Property and the sale of all of the
other Properties has previously closed, then ARV shall (a) prepay such
portion of the Wyndham Lakes Loan as is necessary to reduce the outstanding
principal balance of such Loan to the principal amount of such Loan to be
assumed by Aspen Wyndham Lakes and shall pay all prepayment fees and
penalties associated therewith (and Aspen agrees that ARV may negotiate the
amount of such prepayment fees and penalties with the Lender) and (b) pay
to Aspen Wyndham Lakes an amount equal to the difference between the
Purchase Price allocable to the Wyndham Lakes Property and the outstanding
principal indebtedness to be assumed by Aspen Wyndham Lakes with respect to
the Wyndham Lakes Loan; provided, that if ARV shall fail to make the
payments described in the preceding sentence, this Agreement shall
terminate with respect to the Wyndham Lakes Property and Sellers and
Purchasers shall be relieved of all further obligations hereunder (except
Surviving Obligations) insofar as such obligations apply to the Wyndham
Lakes Property, and the allocable portion of the Deposit will be returned
to Purchasers. Purchasers shall proceed diligently and in good faith to
obtain the approval of the applicable Lenders to the applicable Purchaser's
assumption of the Bella Vita Loan and the Wyndham Lakes Loan, provided that
nothing herein shall obligate Purchasers to accept any Changed Loan Terms
or assumption documents not satisfactory to it in its sole discretion.
7.2 Gayton Terrace Approval.
7.2.1 HUD Consent. The parties acknowledge that pursuant to a Foreclosure Sale
Use Agreement dated August 26, 1996, between ARV and HUD, HUD must deliver
its written consent (the "HUD Consent") to ARV's sale of the Gayton Terrace
Property to Aspen Gayton Terrace. Sellers and Purchasers agree to cooperate
with each other to obtain the HUD Consent, and Purchasers shall proceed
diligently and in good faith to obtain the HUD Consent. If the HUD Consent,
in form and substance reasonably satisfactory to Purchasers, has not been
obtained on or before the Closing Date, then Aspen Gayton Terrace may elect
by written notice to ARV to periodically extend the Closing Date with
respect to the Gayton Terrace Property for a total period not to exceed one
hundred eighty (180) days within which Aspen Gayton Terrace shall continue
its efforts to obtain the HUD Consent; provided, that such 180-day period
may be extended at Aspen Gayton Terrace's election for an additional period
not to exceed ninety (90) days so long as HUD is continuing to review the
parties' application for Aspen Gayton Terrace's acquisition fo the Gayton
Terrace Property. If, at the expiration of such one hundred eighty (180)-
day period, as it may have been extended, HUD has not delivered the HUD
Consent, then this Agreement shall terminate with respect to the Gayton
Terrace Property, and Sellers and Purchasers shall be relieved of all
further obligations hereunder (except Surviving Obligations) insofar as
such obligations apply to the
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Gayton Terrace Property, and the allocable portion of the Deposit will be
returned to Purchasers.
7.2.2 Gayton Terrace Loan. If the parties have not received the HUD Consent on
or before the Closing Date, then Aspen Gayton Terrace shall on the Closing
Date make a loan to ARV (the "Gayton Terrace Loan") in the stated principal
amount of $2,000,000, subject to and upon the terms and conditions set
forth in this Section. The Gayton Terrace Loan shall bear interest at a
non-default rate of fifteen percent (15%) per annum and shall mature on
March 30, 2000; prior to the maturity of the Gayton Terrace Loan, payments
of interest only in arrears shall be due and payable on the first (1st) day
of each month. The Loan shall be evidenced by a promissory note made by ARV
to Aspen Gayton Terrace and will be secured by a deed of trust or mortgage,
as customary in the Commonwealth of Virginia (the "Gayton Terrace
Mortgage"), and by an assignment of leases and rents. Such loan documents
shall be negotiated by the parties prior to the Closing Date, and Aspen
Gayton Terrace's agreement to make the Gayton Terrace Loan shall be subject
to ARV's execution and delivery of loan documents in form and substance
satisfactory to Aspen Gayton Terrace in its sole discretion. The Gayton
Terrace Mortgage shall constitute a second lien against the Gayton Terrace
Property, subject only to a first lien in favor of Imperial Bank, as agent
("Imperial"), securing a line of credit in the stated amount of $10,000,000
(the "Imperial Bank Lien"). A default under the Imperial Bank Lien or the
loan secured thereby shall constitute a default under the Gayton Terrace
Loan. It shall be a condition to Aspen Gayton Terrace making the Gayton
Terrace Loan that Imperial Bank and Aspen Gayton Terrace enter into one or
more subordination and intercreditor agreements (collectively, the
"Intercreditor Agreement") that provide, among other things, that (a)
Imperial shall approve the Gayton Terrace Loan and the recordation of the
Gayton Terrace Mortgage, (b) Imperial shall be obligated to release the
Imperial Bank Lien upon payment of a release price of $4,571,622, and (c)
Aspen Gayton Terrace shall acknowledge that the Gayton Terrace Mortgage
shall be junior and subordinate to the Imperial Lien. If the Intercreditor
Agreement has not been executed and delivered by Imperial on or before the
Closing Date, then the period for obtaining the Intercreditor Agreement and
Aspen Gayton Terrace's making the Gayton Terrace Loan shall be extended to
April 30, 1999; if the Intercreditor Agreement has not been executed and
delivered by Imperial on or before April 30, 1999, (i) Aspen Gayton Terrace
shall not make the Gayton Terrace Loan, and (ii) Aspen Gayton Terrace's
right to acquire the Gayton Terrace Property in accordance with the terms
and conditions of this Agreement shall remain in full force and effect, and
the parties shall proceed under Section 7.3 hereof. At the Closing of the
Gayton Terrace Property, all principal of, accrued interest on and other
amounts outstanding under the Gayton Terrace Loan shall be credited against
the Purchase Price allocable to the Gayton Terrace Property, which credit
shall satisfy the Gayton Terrace Loan. ARV shall be responsible for all
out-of-pocket costs and expenses relating to the Gayton Terrace Loan,
including recording costs and the costs of a mortgagee's title insurance
policy in favor of Aspen Gayton Terrace, insuring the Gayton Terrace
Mortgage in the amount of the Gayton Terrace Loan, subject only to the
Permitted Exceptions and the Imperial Bank Lien. All of ARV's obligations
under and with respect to the Gayton Terrace Loan shall be deemed to be
Surviving Obligations for purposes of this Agreement.
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7.3 Escrowed Documents. In the event that, on or before the Closing Date, the
Lender under the Bella Vita Loan has not approved Aspen Bella Vita's
assumption of the Bella Vita Loan, the Lender under the Wyndham Lakes Loan
has not approved Aspen Wyndham Lakes' assumption of the Wyndham Lakes Loan
and/or HUD has not delivered the HUD Consent with respect to the Gayton
Terrace Property, then the parties shall nonetheless execute all of the
documents contemplated by Section 10.2 hereof with respect to the Bella
Vita Property, the Wyndham Lakes Property and the Gayton Terrace Property
(except the settlement statements described in Section 10.2.18) and deliver
original, undated counterparts of all such documents to the Title Company
to hold in escrow pending the parties' receipt of the applicable approvals.
On the Closing Date, the parties will execute (a) an escrow agreement
directing the Title Company to hold all such documents relating to the
Bella Vita Property in escrow until the first to occur of (i) the parties'
receipt of the Lender's approval of Aspen Bella Vita's assumption of the
Bella Vita Loan in accordance with Section 7.1.5 hereof, in which event the
Title Company shall be directed to close the sale of the Bella Vita
Property and the parties shall execute settlement statements and such other
remaining documents as may be required to close the sale of the Bella Vita
Property or (ii) termination of this Agreement with respect to the Bella
Vita Property in accordance with Section 7.1.5 hereof, whereupon the Title
Company shall be directed to return all of the escrowed documents to the
respective parties who deposited such documents; (b) an escrow agreement
directing the Title Company to hold all such documents relating to the
Wyndham Lakes Property in escrow until the first to occur of the parties'
receipt of the Lender's approval of Aspen Wyndham Lakes' assumption of the
Wyndham Lakes Loan in accordance with Section 7.1.5 hereof or the Lender's
failure to grant such approval, in which event the Title Company shall be
directed to close the sale of the Wyndham Lakes Property and the parties
shall execute settlement statements and such other remaining documents as
may be required to close the sale of the Wyndham Lakes Property in
accordance with Section 7.1.5 hereof; and (c) an escrow agreement directing
the Title Company to hold all such documents relating to the Gayton Terrace
Property in escrow until the first to occur of (i) the parties' receipt of
the HUD Consent in the form prescribed by Section 7.2.1 hereof, in which
event the Title Company shall be directed to close the sale of the Gayton
Terrace Property and the parties shall execute settlement statements and
such other remaining documents as may be required to close the sale of the
Gayton Terrace Property or (ii) termination of this Agreement with respect
to the Gayton Terrace Property in accordance with Section 7.2.1 hereof,
whereupon the Title Company shall be directed to return all of the escrowed
documents to the respective parties who deposited such documents. The
parties will share equally all escrow fees charged by the Title Company in
connection with the escrow agreements described herein.
8. Representations and Warranties.
8.1 Seller Representations. Each Seller represents and warrants to the
applicable Purchaser, with respect to such Seller and the Property to be
conveyed to such Purchaser by such Seller, as follows:
8.1.1 ARV is a corporation, duly organized and existing and in good standing
under the laws of the State of Delaware. ARV is qualified to transact
business, and is in good standing, as a foreign corporation in the States
of Florida, Ohio and Virginia. ARV has full right and authority to enter
into this Agreement and to consummate the transactions contemplated
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hereby. Each of the persons signing this Agreement on behalf of ARV is
authorized to do so. ARV shall furnish to Purchasers any and all documents
to evidence such authority as Purchasers shall reasonably request.
8.1.2 BVARV is a corporation, duly organized and existing and in good standing
under the laws of the State of Florida. BVARV has full right and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. Each of the persons signing this Agreement on behalf
of BVARV is authorized to do so. BVARV shall furnish to Purchasers any and
all documents to evidence such authority as Purchasers shall reasonably
request.
8.1.3 Seller is not a "foreign person" within the meaning of Section 1445 of the
Internal Revenue Code.
8.1.4 Seller has not granted to any party other than Purchaser any option,
contract or other agreement with respect to a purchase or sale of the
Property to be conveyed by Seller or any portion thereof.
8.1.5 No third party approval or consent is required to enter into this
Agreement or to consummate the transaction contemplated hereby, except to
the extent that Lender approvals are required under Section 7 hereof and
except for the HUD Consent. To the best of Seller's knowledge, the entering
into and consummation of the transactions contemplated hereby will not
conflict with, or with or without notice or the passage of time or both,
constitute a default under, any contract, lease or other agreement to which
Seller is a party or by which Seller may be bound or of any law, rule,
license, regulation, judgment, order or decree governing or affecting any
Seller or Property. This Agreement and all documents required hereby to be
executed by Seller are and shall be valid, legally binding obligations of
and enforceable against Seller in accordance with their terms.
8.1.6 To Seller's knowledge, Seller is not in default of any of its obligations
under the Permitted Exceptions or the Contracts. There are no Contracts
other than those set forth on the list of Contracts made available by
Seller to Purchaser hereunder. The copies of all Contracts delivered by
Seller to Purchaser hereunder are true, accurate and complete copies of
such documents (including all amendments or modifications thereto) and the
written descriptions of oral or unwritten Contracts are true, accurate and
complete and do not omit any material terms. All Contracts which are
assigned to Purchaser at Closing pursuant to Section 9.9 are in full force
and effect and unmodified and no party to such Contracts is in default or
breach under the terms and conditions thereof. Except for the Permitted
Exceptions, the Leases and the Contracts assigned to Purchaser at Closing
pursuant to Section 9.9, there are no contracts, agreements or obligations
of any kind or nature relating to the Property and to which Purchaser will
be bound or the Property will be subject after Closing.
8.1.7 Seller has not entered into any labor union agreements or collective
bargaining agreements with respect to the Property or any employee working
at or for the Property. Subject to Sections 9.1 and 10.3 hereof, there are
no employees of Seller employed in connection with the use, management,
maintenance or operation of the Property whose
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employment will continue after the Closing Date. Pending Seller's receipt
of a notice from Purchaser as described in Section 9.1 hereof, Seller will
not transfer any employees to other facilities owned or operated by Seller
or any of its affiliates or offer other employment to any employees
employed in connection with the use, management, maintenance or operation
of the Property. Seller has not received any notice of any violation of any
law applicable to the employment of persons at the Property to be conveyed
by such Seller. No labor union or collective bargaining representative
represents any of the employees at the Property and there is no ongoing
union campaign to solicit the employees' authorization of a union or to
request National Labor Relations Board certification of a union election.
8.1.8 Seller has not received any notice of a violation of the Occupational
Safety and Health Act or similar applicable federal or state laws.
8.1.9 Seller has good and marketable fee simple title to the Property, free and
clear of all matters affecting title to the Property, except for the
Permitted Exceptions and the Leases.
8.1.10 Except for any parties in possession pursuant to, and any rights of
possession granted under, the Leases, the Permitted Exceptions or the
Contracts, there are no parties in possession of any part of the Real
Property, and there are no other rights of possession which have been
granted to any third party or parties.
8.1.11 There are no mechanics' or materialmen's liens of record against the
Property, nor are there any unsatisfied charges, debts, liabilities, claims
or obligations arising from the construction, ownership, maintenance or
operation of or otherwise relating to the Property, which could give rise
to any mechanic's or materialmen's or constitutional, statutory or common
law lien against the Property, or any part thereof.
8.1.12 Each of the Leases is with a bona fide tenant in possession or with a
right to possession of the demised premises. Each of the Leases is in full
force and effect, has not been modified, amended or rescinded and the
rights of each tenant thereunder are as tenants only (no tenant under any
of the Leases has any ownership interest or option or right of first
refusal to acquire any ownership interest in the Property and no such
tenant has any right or option to renew or extend the lease term or to
lease additional space except as provided in its Lease and as specifically
noted in the Rent Roll). No Lease has a term longer than twelve (12)
months. No commissions to any broker or leasing agent are due or will
become due on account of any of the Leases or upon extension or renewal of
the original term thereof, whether or not pursuant to an option contained
in such lease. To Seller's knowledge, no default (including a default with
respect to the payment of rent) exists or is claimed to exist on the part
of the tenant under any of the Leases and no right or claim of set-off
against rent exists or has been asserted by any tenant under such leases
except as described in the Rent Roll. The Rent Roll discloses all security
and other deposits made by each of the tenants under the Leases, and no
tenant is entitled to any rebate, deduction or concession which is not
disclosed thereon. All decorating, alterations or other work or furnishing
of services required by any enforceable agreement to be performed on or
prior to Closing by or on behalf of Seller for any tenant of the Property,
or the cost thereof to be reimbursed to any such tenant, have been
performed or reimbursed or will be performed or reimbursed by Seller at its
cost (or a proration credit extended to Purchaser) prior to or at the
Closing.
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Seller has not received any advance payment of rent (other than for the
current month) on account of any of the Leases except as shown in the Rent
Roll. There are no written or oral leases or tenancies or other occupancy
arrangements of any kind or nature whatsoever affecting the Property other
than those listed in the Rent Roll.
8.1.13 All financial statements delivered to or made available to Purchaser
under Section 5.2.1 hereof are true and correct and do not omit any
material information relating to the Property.
8.1.14 Except as expressly disclosed in this Section 8.1.14, Seller has no
knowledge of a material defect in or to any of the design, workmanship,
materials, quality or condition of any of the Improvements, the Real
Property, the Personal Property or with respect to the air conditioning,
heating, plumbing and electrical systems, and any other mechanical or
operating systems or the roof, foundation and load-bearing structure. At
the Closing, ARV will assign to Aspen Woodside Village any claim that ARV
has with respect to the Woodside Village Improvements under its insurance
policies and all of ARV's insurance proceeds in connection with such claims
and will credit Aspen Woodside Village with the amount of any deductible
under ARV's insurance policy (reduced by the amount of any funds
theretofore actually expended by Sellers to repair the damage covered by
such insurance proceeds); Sellers represent that they have not settled and
will not settle any such insurance claim.
8.1.15 All water, sewer, gas, electricity, telephone and other utilities serving
the Improvements are supplied directly to the Improvements by facilities of
public utilities and the cost of installation of such utilities has been
fully paid. All such utility services are fully functional and operational,
and Seller has no knowledge of, and has not received any notice of, any
potential stoppage or interruption of such utility services.
8.1.16 To Seller's knowledge, the Property is in compliance in all material
respects (both as to condition and use) with all applicable statutes,
ordinances, codes (including, but not limited to, zoning, building,
subdivision, pollution, environmental protection, water disposal, health,
fire and safety engineering codes), and the rules and regulations of, any
governmental authority having jurisdiction over the Property. Seller has
not received notice of any violation of any of the foregoing or notice that
any alterations are required to the Property to comply with any of the
foregoing.
8.1.17 There are no requirements of any insurance carrier covering the Property
or any portion thereof with which Seller has not fully complied.
8.1.18 All Permits required for the operation of the Property as it is currently
being operated have been obtained and are in full force and effect. There
are no violations under any of the Permits and, except as disclosed in
writing to Purchasers, there have been no prior violations (either actual
or alleged) under any of the Permits. Seller has no knowledge of any
circumstance which could reasonably be expected to result in the
withdrawal, revocation or suspension of any Permit. Neither Seller nor the
Property has applied for or received any allowable variances or other
exemptions from applicable regulatory requirements.
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8.1.19 There are no actions, suits, proceedings or claims pending or, to
Seller's knowledge, threatened with respect to or in any manner affecting
the Property or the ability of the Seller to consummate the transaction
contemplated by this Agreement. Seller covenants and agrees to indemnify
and hold harmless (including for all reasonable legal fees and all other
costs and expenses) Purchaser on account of any actions, demands, suits,
proceedings, liabilities or obligations arising or accruing in connection
with the Property from acts or omissions of Seller occurring prior to
Closing.
8.1.20 There are no pending or threatened condemnation or similar proceedings
affecting the Property, or any part thereof, and to the best of Seller's
knowledge, no such proceeding is contemplated by any governmental
authority. The Property is not situated within any special assessment
district other than the districts revealed by the most recent statement for
real property taxes for the Property. The Property is not subject to any
special assessments except for those relating to such districts. Seller has
no knowledge of any proposal under which the Property is to be placed in
any other special assessment district.
8.1.21 To the best of Seller's knowledge,
(a) the Property does not contain asbestos or material containing asbestos;
(b) the Property does not contain PCBs or PCB Items, as those terms are defined
in 40 C.F.R. Part 761;
(c) the Property does not contain above ground or underground storage tanks, as
those terms are defined in 42 U.S.C. Section 6901 et seq. ("RCRA");
(d) there is and has been no release of petroleum into the environment from an
above ground or underground storage tank at the Property, as those terms
are defined in RCRA;
(e) there is and has been no release or threatened release, other than
federally permitted releases, of hazardous substances or pollutants or
contaminants into the environment from or through the Property as those
terms are defined in 42 U.S.C. Section 9601 et seq. ("CERCLA");
(f) the Property is not used, and has not been used, for the generation,
transportation, treatment, storage or disposal of hazardous substances,
pollutants, or contaminants, as those terms are defined in CERCLA and RCRA;
(g) the Property is in compliance with all applicable federal, state and local
environmental statutes, regulations, ordinances, and any permits,
approvals, or judicial or administrative orders issued thereunder; and
(h) the Property contains no conditions that could result in recovery by any
governmental or private party of remedial or removal costs, natural
resource damages, property damages, damages for personal injuries, or other
costs, expenses or damages, or could result in injunctive relief, arising
from any alleged injury or threat of injury to health, safety, or the
environment relating to the Property.
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Without limiting the representation in this Section 8.1.21, Sellers agree to
indemnify, defend and hold harmless Purchasers from and against any and all
liabilities, losses, damages, claims, costs and expenses (including, without
limitation, reasonable attorneys' fees) arising in connection with the presence
of any hazardous substance on, under, in or about the Woodside Village Property
resulting directly or indirectly from any leaks in any underground storage tanks
now or heretofore located under the real property situated northwest of the
Woodside Village Property across Rockside Road, which real property is as of the
Effective Date referred to as the "Sam's Club site." This indemnity shall
survive the Closing for a period of two (2) years from the Closing Date.
8.1.22 The stated maturity date of the Amber Park Loan is October 1, 1999; the
stated maturity date of the Bella Vita Loan is July 1, 2035; the stated
maturity date of the Woodside Village Loan is October 1, 1999; and the
stated maturity date of the Wyndham Lakes Loan is March 31, 2006; and none
of the foregoing maturity dates has been accelerated or extended as of the
date hereof. The copies of all documents delivered by Seller to Purchaser
hereunder with respect to each Loan relating to a Property are true,
accurate and complete copies of such documents (including all amendments or
modifications thereto) and do not omit any material terms. To Seller's
knowledge, there exists no default or event which, with the passing of time
or the giving of notice or both, could constitute a default under any of
the documents evidencing or securing or otherwise relating to such Loan.
8.1.23 All representations and warranties made by Sellers in this Agreement, and
all information contained in any statement, document or certificate
furnished to Purchasers in connection with this transaction, are free from
any untrue statement of material fact and do not omit to state any material
facts necessary to make the statements contained herein or therein not
misleading. The copies of any documents furnished to Purchasers in
connection with this transaction are true and complete copies of the
documents they purport to be.
8.2 Purchaser Representations. Each Purchaser represents and warrants to the
applicable Seller with respect to such Purchaser that:
8.2.1 Aspen Amber Park is a limited liability company duly organized and
existing and in good standing under the laws of the State of Colorado.
Purchaser has full right and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Each of the persons
signing this Agreement on behalf of Purchaser is authorized to do so.
8.2.2 Aspen Bella Vita is a limited liability company duly organized and
existing and in good standing under the laws of the State of Colorado.
Purchaser has full right and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Each of the persons
signing this Agreement on behalf of Purchaser is authorized to do so.
8.2.3 Aspen Woodside Village is a limited liability company duly organized and
existing and in good standing under the laws of the State of Colorado.
Purchaser has full right and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Each of the persons
signing this Agreement on behalf of Purchaser is authorized to do so.
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8.2.4 Aspen Wyndham Lakes is a limited liability company duly organized and
existing and in good standing under the laws of the State of Colorado.
Purchaser has full right and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Each of the persons
signing this Agreement on behalf of Purchaser is authorized to do so.
8.2.5 No third party approval or consent is required to enter into this
Agreement or to consummate the transaction contemplated hereby, except to
the extent that Lender approvals are required under Section 7 hereof and
except for the HUD Consent. To the best of Purchaser's knowledge, the
entering into and consummation of the transactions contemplated hereby will
not conflict with, or with or without notice or the passage of time or
both, constitute a default under, any contract, lease or other agreement to
which Purchaser is a party or by which Purchaser may be bound or of any
law, rule, license, regulation, judgment, order or decree governing or
affecting any Purchaser or Property. This Agreement and all documents
required hereby to be executed by Purchaser are and shall be valid, legally
binding obligations of and enforceable against Purchaser in accordance with
their terms.
8.2.6 Purchasers have available funds sufficient to pay the Purchase Price.
8.3 Effective Date; Survival. All of the representations and warranties made by
Sellers or Purchasers in this Section 8 are made as of the Effective Date.
At Closing, each Seller shall deliver to the applicable Purchaser a
certificate pursuant to which such Seller shall reaffirm the
representations and warranties made by such Seller in Section 8.1 as of the
date of Closing, and each Purchaser shall deliver to the applicable Seller
a certificate pursuant to which such Purchaser shall reaffirm the
representations and warranties in Section 8.2 as of the date of Closing.
All of such representations shall survive Closing.
8.4 No Other Representations. Purchasers acknowledge and agree as follows: (a)
except as specifically set forth in this Agreement, Sellers have made no
representations or warranties of any kind whatsoever, express or implied,
in connection with this Agreement, the purchase of the Properties by
Purchasers, the physical condition of any Property or whether any Property
is appropriate for Purchaser's intended use; (b) prior to the expiration of
the Inspection Period, Purchasers shall have (or shall have chosen not to
have) fully investigated the Properties and all matters pertaining thereto;
(c) Purchasers have entered into this Agreement with the intention of
making and relying on their own investigation of the physical,
environmental, economic and legal condition of the Properties; and (d)
Purchasers are not relying on any statements, representations or
warranties, other than those specifically set forth in this Agreement, made
by Sellers or anyone acting or claiming to act on Sellers' behalves
concerning the Properties, and that Purchasers shall purchase the
Properties in their "as is" condition on the Closing Date and assume the
risk that adverse physical, environmental, economic or legal conditions may
exist. Nothing in this Section 8.4 shall be deemed to waive, modify, limit
or otherwise affect any covenant, warranty or representation or agreement
by Sellers pursuant to this Agreement, it being intended that all such
covenants, representations and warranties and agreements shall remain in
full force and effect for the benefit of Purchasers regardless of anything
herein to the contrary.
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9. Covenants of Seller. With respect to the Property owned by it, each Seller
hereby covenants with Purchasers as follows:
9.1 Operation of Property Until Closing. Prior to Closing, each Seller shall
operate and manage the Property to be conveyed by it in a normal
businesslike manner, in compliance with all applicable laws, rules and
regulations, maintaining present services and Permits, and shall perform
when due all of its obligations under the Leases, the Contracts and the
Permitted Exceptions. Prior to Closing, Purchasers will provide Sellers
with notice (the "Employment Notice") identifying which employees Purchaser
wishes to retain at the Property after the Closing (the "Designated
Employees"); upon Sellers' receipt of the Employment Notice, but subject to
Section 10.3 hereof, Sellers will terminate all employees effective as of
the Closing Date, and Purchasers shall be entitled to employ all Designated
Employees identified in the Employment Notice, and Sellers will not
thereafter transfer any Designated Employees to other facilities owned or
operated by Seller or any of its affiliates or offer other employment to
any Designated Employees. Prior to the date on which Sellers receive the
Employment Notice, Sellers will not transfer any employees to other
facilities owned or operated by Seller or any of its affiliates or offer
other employment to any employees employed in connection with the use,
management, maintenance or operation of the Property. Each Seller shall be
solely responsible for the payment and satisfaction of all liabilities
arising in favor of the terminated employees for periods prior to Closing,
and shall indemnify and hold Purchaser harmless from any such liabilities,
which obligation shall survive the Closing. Purchaser assumes no
responsibilities under or in connection with any employment agreements or
arrangements entered into by any Seller.
New Agreements. After the expiration of the Inspection Period, no Seller shall
enter into any new Leases or Contracts which will after the Closing affect
the use, operation or enjoyment of the Property to be conveyed by such
Seller without Purchaser's prior written consent, which consent may be
withheld in Purchaser's sole discretion, provided that nothing herein shall
prohibit a Seller from entering into a Lease which has a term of twelve
(12) months or less and a rental not less than those reflected on the Rent
Roll as current asking rent. Sellers shall promptly notify the applicable
Purchaser of any Leases or Contracts entered into by a Seller prior to the
expiration of the Inspection Period and shall furnish such Purchaser with a
copy thereof.
9.2 Rent. No Seller shall accept any payments of rent under any of the Leases
in advance of the then-current month.
9.3 Insurance. Each Seller shall maintain in full force and effect an "all
risk" insurance policy covering the Improvements in an amount not less than
their full replacement cost.
9.4 Condition of Property. Each Seller shall operate and maintain the Property
in good order, condition and repair.
9.5 Taxes. Each Seller shall pay, prior to delinquency, all real property and
personal property taxes which become due and payable with respect to the
Property.
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9.6 Litigation. Each Seller shall promptly advise Purchasers of the
commencement of any litigation by or against such Seller pertaining to the
Property.
9.7 Loan Documents. Each Seller shall (a) make all regular payments of
interest, principal and escrow payments on the Loans which become due and
payable on or before the Closing Date and (b) comply with all of the terms
of the documents relating to the Loans and not modify or request the waiver
of any of the terms thereof without Purchasers' prior written consent.
9.8 Termination of Contracts. Sellers shall assign to the applicable Purchaser
at Closing those Contracts which are listed in EXHIBIT G attached hereto.
Each Seller agrees to terminate, by written notice to the other party(ies)
thereto, all Contracts other than those which are listed in EXHIBIT G,
which termination shall be effective as of the earliest termination date
permitted under each such Contract. Without limiting the indemnity
contemplated by Section 10.2.7 hereof, Sellers agree to indemnify, defend
and hold harmless Purchasers from and against any and all liabilities,
losses, damages, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) arising in connection with any Contracts which
are not listed in EXHIBIT G or terminated in accordance with this Section
9.9; this indemnity shall survive the Closing. Each Seller shall deliver
copies of all notices of termination given by any Seller hereunder to
Purchasers.
9.9 No Further Encumbrances. Prior to the Closing of any individual Property,
no Seller will grant any deed of trust, mortgage, lien, security interest
or other encumbrance encumbering such Property or Seller's interest therein
except for the Gayton Terrace Loan.
10. Closing. Purchasers and Sellers agree that the purchase of the Properties
will be consummated as follows:
10.1 Closing Date. The Closing will occur on March 30, 1999 (the "Closing
Date"), at 10:00 a.m. Denver time at the offices of Purchasers' attorneys,
Otten, Johnson, Robinson, Neff & Ragonetti, P.C., 950 Seventeenth Street,
Denver, Colorado 80202.
10.2 Closing. Each of the following shall take place at the Closing:
10.2.1 Each Seller will deliver to the applicable Purchaser a duly executed and
acknowledged deed, conveying to Purchaser all of Seller's right, title and
interest in and to the Real Property owned by such Seller, subject only to
the Leases and the Permitted Exceptions. Each deed delivered pursuant to
this Section 10.2.1 shall be a special warranty deed unless a Property is
situated in a jurisdiction that does not recognize special warranty deeds,
in which event the deed shall be in the form customarily used in such
jurisdiction for commercial property transactions.
10.2.2 Purchasers will pay to Sellers the balance of the Purchase Price, subject
to adjustment as set forth in Section 11 hereof.
10.2.3 Sellers will deliver to Purchasers possession of the Properties.
10.2.4 Sellers will deliver to Purchasers all keys to the Improvements and any
motor vehicles and the originals of all Leases, Contracts, Permits and
Warranties in Sellers' possession.
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10.2.5 Each Seller will deliver to the applicable Purchaser a duly executed
special warranty bill of sale, conveying all of such Seller's right, title
and interest in and to the Personal Property owned by such Seller. In
addition, to the extent any of the Personal Property consists of motor
vehicles, Sellers will deliver to Purchasers the original titles to such
vehicles, free and clear from any and all liens. Without limiting the
foregoing, ARV will also deliver to Aspen Amber Park title to the phones
and phone system used in connection with the Amber Park Property, as
described in Schedule A/Addendum A to that certain agreement dated August
8, 1995, between Amber Park Retirement Community and The Huntington Leasing
Company, and such phones and phone system will be delivered free and clear
from any and all liens, including any lien of The Huntington Leasing
Company.
10.2.6 Each Seller and Purchaser will deliver to each other a duly executed
assignment and assumption of leases, pursuant to which each Seller shall
assign all of its right, title and interest in and to the Leases pertaining
to its Property to the applicable Purchaser, and such Purchaser shall
assume and agree to perform all of the landlord's obligations under the
Leases arising from and after the Closing Date; such Seller shall agree to
indemnify, protect, defend and hold such Purchaser harmless from and
against any and all claims, damages, liabilities, losses, costs or
expenses, including reasonable attorneys' fees, asserted against or
suffered or incurred by such Purchaser as a result of or in connection with
any liabilities or obligations arising under the Leases and relating to
periods prior to the Closing Date; and such Purchaser shall agree to
indemnify, protect, defend and hold such Seller harmless from and against
any and all claims, damages, liabilities, losses, costs and expenses,
including reasonable attorneys' fees, asserted against or suffered or
incurred by such Seller as a result of or in connection with any
liabilities or obligations arising under the Leases and relating to periods
from and after the Closing Date.
10.2.7 Each Seller and Purchaser will deliver to each other a duly executed
general assignment, pursuant to which such Seller shall assign to the
applicable Purchaser all of such Seller's right, title and interest in and
to the Contracts, the Permits, the Warranties, the Plans and the Intangible
Property, and such Purchaser shall assume and agree to perform all of such
Seller's obligations thereunder; such Seller shall agree to indemnify,
protect, defend and hold such Purchaser harmless from and against any and
all claims, damages, liabilities, losses, costs or expenses, including
reasonable attorneys' fees, asserted against or suffered or incurred by
such Purchaser as a result of or in connection with any liabilities or
obligations arising under the Contracts and relating to periods prior to
the Closing Date; and such Purchaser shall agree to indemnify, protect,
defend and hold such Seller harmless from and against any and all claims,
damages, liabilities, losses, costs and expenses, including reasonable
attorneys' fees, asserted against or suffered or incurred by such Seller as
a result of or in connection with any liabilities or obligations arising
under the Contracts and relating to periods from and after the Closing
Date. In furtherance hereof, Sellers will cooperate with Purchasers to file
such trade name affidavits or similar instruments as may be required to
transfer to Purchasers the names under which the Properties operate.
10.2.8 Sellers shall deliver to Purchasers signed notifications to be sent to
each tenant under the Leases after Closing advising of the transfer of
ownership and directing that all further payments of rent be made as
directed by Purchasers.
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10.2.9 Sellers and Purchasers shall execute and/or deliver, as applicable, such
assumption agreements, legal opinions, certificates, title insurance
policies or endorsements and other documents as a Lender may require in
connection with assumption of its Loan. If no Loan is to be assumed with
respect to a Property, then Seller shall instead deliver to the Title
Company at the Closing such payoff letters and/or releases as the Title
Company requires to cause a release of any liens or encumbrances affecting
such Property as of the Closing Date.
10.2.10 Sellers and Purchasers will deliver to each other a duly executed
certificate as contemplated by Section 8.3 hereof. Each Seller's
certificate will contain an update to the Rent Roll indicating any matters
thereon that have changed from the date of the Rent Roll to the Closing
Date.
10.2.11 ARV will deliver to Aspen Woodside Village such documents as are
necessary or desirable to assign the claims and insurance proceeds
described in Section 8.1.14 hereof.
10.2.12 To the extent applicable, the applicable Sellers and Purchasers will
execute the escrow agreements contemplated by Section 7.3 hereof.
10.2.13 Sellers shall cause the Title Company to issue, or unconditionally
commit to issue, to Purchaser its standard form ALTA extended coverage
owner's policy of title insurance insuring marketable, insurable title to
each parcel of Real Property in the amount of that portion of the Purchase
Price allocable thereto, subject only to the Permitted Exceptions and the
Leases (collectively, the "Title Policies").
10.2.14 Each Seller and Purchaser will deliver to the Title Company such
affidavits and agreements as the Title Company may require or request to
consummate the transactions contemplated by this Agreement.
10.2.15 Each Seller will deliver to the applicable Purchaser an affidavit of
such Seller that evidences that it is exempt from the withholding
requirements of Section 1445 of the Internal Revenue Code.
10.2.16 To the extent required by law, each Seller will deliver to the
applicable Purchaser an affidavit of such Seller concerning compliance
with, or exemption from, any applicable withholding laws of the states in
which the Properties are located.
10.2.17 Sellers and Purchasers will execute and deliver any applicable transfer
tax, transfer declaration, ownership information or other similar
disclosure forms or reports required by the laws of the states in which the
Properties are located.
10.2.18 Each Seller and Purchaser will execute settlement statements reflecting
the Purchase Price allocable to the Property conveyed by such Seller to the
applicable Purchaser and all adjustments and prorations to be made thereto
pursuant to this Agreement including, without limitation, Section 11 below,
and will pay, in immediately available funds, any amounts required to be
paid by such party thereunder.
10.2.19 Sellers and Purchasers shall execute and deliver such other documents
and shall take such other action at Closing as may be necessary or
appropriate to carry out their
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respective obligations under this Agreement, without further
representations or warranties other than those contained herein.
10.3 Interim Management. If a Purchaser is unable to obtain all required permits
and licenses with respect to any Property on or before the Closing Date,
then Purchasers and Sellers shall nevertheless proceed to Closing (subject
to Section 7 hereof), and, with respect to the Property or Properties for
which a Purchaser has not obtained such permits and licenses (the
"Non-Licensed Properties"), the applicable Purchaser will acquire title to
the Non-Licensed Properties, and concurrently therewith each Seller
conveying a Non-Licensed Property and such Purchaser will enter into a
written lease and/or management agreement in substantially the forms
attached hereto as EXHIBIT H. The parties agree to make such changes to
such lease and/or management agreements as are reasonably necessary to
comply with the requirements of all authorities responsible for issuing
permits and licenses for the Properties. To the extent that any fines,
penalties, assessments or other amounts are levied by any governmental or
quasi-governmental authority or agency as a result of (a) the parties'
failure to provide notice of the sale of the Properties within the required
time period and/or (b) the Closing taking place prior to the expiration of
any applicable notice periods, then, in any such event, Sellers shall be
responsible for the payment of all such fines, penalties, assessments and
other amounts, and Sellers' obligations with respect thereto shall survive
the Closing. In furtherance hereof, Sellers will provide Purchasers with a
credit against the Purchase Price allocable to the Bella Vita Property and
the Wyndham Lakes Property in the amount of $5,000 for each such Property,
representing the parties' estimate of the fines that may be assessed
against the parties and/or such Properties as a result of the Closing
taking place prior to the expiration of all applicable notice periods.
Notwithstanding anything to the contrary in this Section, if any
governmental or quasi-governmental authority or agency is required to
review any lease/management arrangement contemplated hereby and such
authority or agency rejects or disallows such lease/management arrangement
for any reason whatsoever, then, at Purchasers' option, this Agreement
shall terminate, the Deposit shall be returned to Purchasers, and the
parties shall be relieved from all obligations hereunder except Surviving
Obligations. Upon termination of the lease/management arrangement described
in this Section 10.3, Purchasers shall be entitled to employ all Designated
Employees and Sellers will not thereafter transfer any Designated Employees
to other facilities owned or operated by Seller or any of its affiliates or
offer other employment to any Designated Employees.
10.4 Right of First Refusal; Exclusive Right to Negotiate.
10.4.1 Right of First Refusal. For the period from the Effective Date to and
including March 31, 2000, Purchasers and/or their affiliates (the "Buying
Parties") shall have a first right of refusal (the "Right of First
Refusal") with respect to the sale or transfer of any of the real property
or real property interests (including, without limitation, leasehold
interests) of Sellers and/or their affiliates (the "Selling Parties") as of
the date hereof in those properties listed in EXHIBIT I attached hereto
(which real property, together with any interest a Selling Party has in an
entity which owns or leases such real property or real property interests,
are referred to herein as the "Other Assets"), and Sellers hereby grant to
Buying Parties such Right of First Refusal with respect to the Other
Assets. If at any time or times during the term of such Right of First
Refusal, any Selling Party receives an offer acceptable to it for
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the purchase or transfer of an Other Asset, then the applicable party will
forthwith forward a copy of such offer ("Acceptable Offer") to the Buying
Parties at the address set forth in Section 16.9 of this Agreement. Buying
Parties shall have a period of thirty (30) days after receiving such copy
of the Acceptable Offer within which to notify the applicable Selling Party
that Buying Parties wish to purchase the Property on the terms contained in
the Acceptable Offer. If Buying Parties do not notify the applicable
Selling Party within such 30-day period, then the applicable Selling Party
may sell or transfer such Other Asset to the party who submitted the
Acceptable Offer on the terms specified therein. Notwithstanding any such
relinquishment, Buying Parties' rights under the Right of First Refusal
shall remain in effect with respect to any Other Asset not covered by the
Acceptable Offer, and if the transaction contemplated by the Acceptable
Offer fails to close for any reason within one hundred twenty (120) days
after Buying Parties' rejection or deemed rejection of an Acceptable Offer,
with respect to any subsequent offer to purchase or transfer any or all of
the Other Assets covered by such Acceptable Offer. On or before the
Closing, Sellers will provide Purchasers with a list of the Other Assets,
together with legal descriptions therefor. At Purchasers' request, Sellers
will execute and deliver to Purchasers one or more memoranda describing the
Right of First Refusal, and Sellers agree that Purchasers may record such
memoranda in all applicable real estate records; provided, that if any
existing loan documents or lease documents relating to any Other Asset
prohibit the recording of a memorandum, Sellers shall use their best
efforts to obtain the consent of any lender and/or landlord, as applicable,
to recordation of such a memorandum, and the parties shall not record a
memorandum with respect to an Other Asset until the applicable consents are
obtained. The parties' agreements and obligations under this Section shall
survive the Closing.
10.4.2 Exclusive Right to Negotiate. For the period from the Effective Date to
and including April 30, 1999, Buying Parties shall have the sole and
exclusive right to negotiate with Selling Parties for the sale or transfer
of any or all of the Other Assets. Sellers agree that during such period of
time, Sellers shall not offer for sale or transfer, solicit any offer for
sale or transfer, entertain any offer for sale or transfer, discuss the
possible sale or transfer of, list or market, directly or indirectly, any
or all of the Other Assets. The parties will negotiate with each other in
good faith during such period of time to endeavor to reach a definitive
agreement(s) with respect to the Other Assets; provided, this provision
shall not impose on any party an enforceable obligation to enter into any
such purchase and sale agreement. In furtherance hereof, Sellers, on behalf
of themselves and Selling Parties, shall cease any and all current
negotiations, and not pursue any prior negotiations, with other parties for
the sale or transfer or all or any of the Other Assets.
11. Adjustments and Prorations. The applicable Seller and the applicable
Purchaser shall make the adjustments and prorations at the Closing for each
of the Properties, which adjustments and prorations shall be reflected,
where appropriate, on the settlement sheets described in Section 10.2.18
above:
11.1 Rentals. All income from the Leases and any portion of the Property (such
as, e.g., parking rents or laundry income) shall be prorated as of the
Closing on the basis that Purchaser shall receive a credit for all rent
which Seller has actually received as of the Closing which is allocable to
the period after the Closing. Purchaser shall receive all income
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accruing on the Closing Date and thereafter. Seller shall receive all
income accruing prior to the Closing Date. Delinquent rent due from tenants
under the Leases prior to the Closing collected by Purchaser after the
Closing shall be paid over by Purchaser to Seller as and when collected.
Any rents collected by Purchaser after Closing shall be first applied to
the current month's rent due on the date of receipt or rent to become due
within fourteen days thereafter, then to delinquent rents for any period
occurring from and after the Closing Date and then to delinquent rents for
any period occurring prior to the Closing Date. Each Seller shall also give
Purchaser credit for any security and other deposits held under the terms
of the Leases.
11.2 Ad Valorem Taxes. All real estate and personal property taxes attributable
to the Properties shall be prorated at Closing. Each Seller shall pay all
such taxes attributable to its Property for any period prior to the Closing
Date. If the applicable tax rate and assessments for the Property have not
been established for the year in which Closing occurs, the proration of
real estate and/or personal property taxes, as the case may be, shall be
based upon the most recent tax statement for each Property, with such
proration to be adjusted in cash between Sellers and Purchasers promptly
after presentation of written evidence that the actual taxes payable for
the year in which Closing occurs differ from the amounts used for proration
purposes at Closing. Without limiting the foregoing, Sellers have
represented to Purchasers that, with respect to the Woodside Village
Property, Sellers have filed B.O.R. Complaint No. 1658 (1997) with the
Cuyahoga County Board of Revision and, with respect to the Amber Park
Property, Sellers have filed Tax Appeal No. 98-N-168 with the Ohio Board of
Tax Appeals (together, the "Tax Challenge"), relating to periods prior to
the year of Closing. At Sellers' sole cost and expense, Sellers shall have
the right, but not the obligation, to exclusively prosecute, settle and
appeal the Tax Challenge, and Sellers shall be entitled to all refunds (and
responsible for any increases) attributable thereto for the period prior to
the year of Closing of the Woodside Village Property and the Amber Park
Property.
11.3 Operating Expenses. Sellers and Purchasers shall attempt to have all
Contracts and any other agreements that affect the Properties and for which
the charges are based upon usage (including utilities) billed or read as of
a date as close to the Closing Date as is reasonably possible. Charges for
any of the same which are not read on the Closing Date shall be prorated
between Purchaser and Seller based on the number of days during the period
covered by the statement therefor during which each party owned the
Property, allocating the Closing Date to Purchaser. Each Seller shall be
entitled to a credit at Closing for the amount of any deposits that such
Seller has made with any of the utility services or companies servicing the
Property to be conveyed by such Seller. Purchaser shall arrange with all
utility services and companies servicing the Properties to have new
accounts started in the name of Purchaser beginning at 12:01 a.m. local
time on the Closing Date. Notwithstanding anything to the contrary in this
Section 11.3 (or elsewhere in this Agreement), Sellers shall be solely
responsible as provided in Section 9.1 for all liabilities arising in favor
of terminated employees for periods prior to Closing, and there shall be no
proration or adjustment therefor.
11.4 Food and Medical Inventories. Between the Effective Date and the Closing
Date, Sellers shall maintain Food and Medical Inventories with a cost basis
to Sellers in approximately the same amount as the cost basis of the Food
and Medical Inventories reflected in the
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description delivered by Sellers to Purchasers pursuant to Section 5.2
hereof (the "Basic Inventory Amount"). If, at the time of Closing, the
Sellers' cost basis for the Food and Medical Inventories then on hand shall
exceed the Basic Inventory Amount, then Purchasers shall reimburse Sellers
for the excess food and medical inventories, based on Sellers' actual cost
thereof. If, at the time of Closing, the Sellers' cost basis for the food
and medical inventories then on hand is less than the Basic Inventory
Amount, then Sellers shall pay to Purchasers an amount equal to the actual
cost of restoring the Food and Medical Inventories to the Basic Inventory
Amount. Possession of the Food and Medical Inventories shall be delivered
to Purchasers at Closing..
11.5 Interest. Interest payments with respect to the Loans shall be prorated as
of the Closing Date. All escrow and reserve accounts, if any, maintained by
any Lender shall be transferred to the applicable Purchasers.
11.6 Excise, Transfer and Sales Taxes. Sellers, on the one hand, and Purchasers,
on the other hand, shall bear in equal shares all excise, sales and use
taxes imposed with respect to the transaction contemplated by this
Agreement, and Sellers shall pay all transfer taxes (including the payment
of documentary fees) associated with the conveyance of the Properties to
Purchasers.
11.7 Closing Costs. Sellers shall be responsible for the payment of (a) with
respect to each Property, the premium for a standard ALTA owner's title
insurance policy in the amount of the Purchase Price allocable to such
Property, (b) any Lenders' Fees attributable to the Bella Vita Loan,
one-half of any assumption fee relating to the Wyndham Lakes Loan and any
prepayment fees or penalties arising in connection with any Loan not
assumed by Purchasers, (c) all recording costs, (d) the fees of Sellers'
attorneys and (e) one-half of any closing fee charged by the Title Company.
Purchasers shall be responsible for the payment of (a) all costs of
conducting its investigations of the Properties, (b) any Lenders' Fees
attributable to any of the Loans other than the Bella Vita Loan, provided
that Purchasers shall be responsible for only one-half of any assumption
fee relating to the Wyndham Lakes Loan, (c) any premium attributable to
obtaining extended coverage under the owner's title insurance policies
and/or the issuance of special endorsements to such policies, (d) the fees
of Purchasers' attorneys, and (e) one-half of any closing fee charged by
the Title Company.
11.8 Insurance. Purchasers understand that Sellers shall cause all property and
liability insurance currently being carried by Sellers to be canceled at
Closing, and Purchasers shall be responsible for obtaining new insurance
coverage with respect to the Properties as of Closing.
11.9 Date of Prorations. The prorations and adjustments provided for in this
Section 11 shall be made so that the Purchasers shall receive the income
and be charged with the expense of the operation of each Property after the
Closing Date.
12. Casualty Damage.
12.1 Notice and Estimate. If any of the Improvements are damaged by any casualty
prior to Closing, Sellers shall promptly give Purchasers written notice of
such occurrence, and as
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soon thereafter as practicable, shall provide Purchasers with an estimate
made by an architect, engineer or contractor selected by Sellers of the
cost and amount of time required to repair such damage. If it is so
estimated that it will take longer than until the Closing Date to repair
such damage and if neither Sellers nor Purchasers terminates this Agreement
pursuant to Section 12.3, then Purchasers shall be given an opportunity to
review and approve any construction contract which any Seller proposes to
enter into to have such damage repaired.
12.2 Minor Damage. If the estimated cost of repairing such damage is less than
$250,000.00, then the Seller which owns the Improvements affected shall
promptly contract for and commence the repairs and complete so much thereof
as may be accomplished prior to Closing. If such repairs are not completed
on or before Closing, then at the applicable Purchaser's option (which
shall be exercised by notice to Sellers given on or before the Closing
Date), either (a) the Closing Date shall be extended by the period of time
that Sellers' architect, engineer or contractor then estimates it will take
to complete the repairs and, upon completion thereof, the parties shall
schedule a new Closing Date (not later than 10 days following such
completion) and then close the transaction contemplated hereby in
accordance with the terms hereof; or (b) the Closing shall take place as
scheduled and, at Closing, such Seller shall assign to the applicable
Purchaser so much of the insurance proceeds resulting from such damage as
have not then been expended for repairs, such Seller shall credit the
applicable Purchaser with the amount of any deductible under Seller's
insurance policy that has not then been expended for repairs and such
Seller shall assign to the applicable Purchaser, and the applicable
Purchaser shall assume, the rights and obligations under any construction
contract pursuant to which such repairs are being completed. Such Seller
shall also assign to the applicable Purchaser the proceeds of any business
interruption insurance which would supplement the income from the
Improvements during the period of any restoration thereof, but only to the
extent of any such proceeds which relate to periods after Closing.
12.3 Major Damage. If the estimated cost of such repairs is $250,000.00 or more,
then Purchasers may elect to terminate this Agreement with respect to the
Property affected by the casualty upon written notice to Sellers given
within ten (10) days after Purchasers' receipt of the estimate described in
Section 12.1, in which event this Agreement shall terminate with respect to
such Property, all parties shall be relieved of any further obligations
hereunder with respect to such Property except for any Surviving
Obligations, and the allocable portion of the Deposit shall be refunded to
Purchasers; however, if Purchasers do not elect to so terminate this
Agreement, then this Agreement shall remain in full force and effect and
the parties shall proceed in accordance with Section 12.2 above.
13. Condemnation.
13.1 Notice. If prior to Closing, Sellers learn of any actual or threatened
taking in condemnation or by eminent domain (or a sale in lieu thereof) of
all or any portion of the Real Property, Sellers will notify Purchasers
promptly thereof.
Termination. Other than with respect to an "Immaterial Taking" (as defined
below), any actual or threatened taking or condemnation for any public or
quasi-public purpose or use by any
29
<PAGE> 30
competent authority in appropriate proceedings or by any right of eminent
domain of all or any part of the Real Property between the Effective Date
and the Closing shall, at Purchasers' option, cause a termination of this
Agreement. The election to terminate provided hereby must be exercised by
Purchasers (or will be deemed to have been waived) by written notice to
Sellers to that effect given within 15 days following Purchasers' receipt
of Sellers' notice pursuant to Section 13.1 above. Upon delivery of such
termination notice, Purchasers and Sellers shall be relieved of any
obligations hereunder except for Surviving Obligations, and the Deposit
shall be refunded to Purchasers. If Purchasers shall not elect to so
terminate this Agreement, or in the event of an Immaterial Taking, Sellers
shall be relieved of all obligations under this Agreement with respect to
the portion of the Real Property so taken or condemned, but the applicable
Purchaser will be entitled to receive all proceeds of any such taking or
condemnation, and Sellers agree that they will not make any adjustment or
settlement of any such taking or condemnation proceeding without
Purchasers' consent and will take at Closing all action necessary to assign
their entire interest in such award to the applicable Purchaser. Any taking
or condemnation for any public or quasi-public purpose or use which does
not affect access or, if applicable, reduce parking or take any part of the
Improvements shall be deemed an "Immaterial Taking."
14. Brokers and Commissions.
14.1 Broker's Fee. Sellers and Purchasers represent and warrant to each other
that they have not negotiated or dealt with any real estate broker,
salesperson or agent in connection with the making of this Agreement or the
transaction contemplated hereby, or incurred any liability for the payment
of any brokerage fee, commission or compensation to any such broker,
salesperson or agent.
14.2 Other Commissions. Sellers agree to indemnify and hold Purchasers harmless
from and against any loss, liability, damage, cost or expense (including,
without limitation, court costs and reasonable attorneys' fees) paid or
incurred by any Purchaser by reason of any claim to any broker's, finder's
or other fee in connection with this transaction by any party claiming by,
through or under Sellers. Purchasers agree to indemnify and hold Sellers
harmless from and against any loss, liability, damage or expense
(including, without limitation, court costs and reasonable attorneys' fees)
paid or incurred by any Seller by reason of any claim to any broker's,
finder's or other fee in connection with this transaction claiming by,
through or under Purchasers.
15. Remedies.
15.1 Sellers' Default. In the event that any Seller shall fail to perform any of
the material covenants or agreements contained herein which are to be
performed by such Seller, Purchasers may, at their option, either (i)
terminate this Agreement by giving written notice of termination to
Sellers, whereupon Escrow Agent shall return the Deposit to Purchaser and
both Purchasers and Sellers shall be relieved of any further obligations or
liabilities hereunder except for Surviving Obligations; or (ii) seek
specific performance of this Agreement and/or damages.
30
<PAGE> 31
Purchaser's Default. In the event that any Purchaser shall fail to perform any
of the material covenants or agreements contained herein which are to be
performed by such Purchaser, Sellers may, at their option and as their
exclusive remedy, terminate this Agreement by giving written notice of
termination to Purchasers, whereupon Escrow Agent shall pay the Deposit to
Sellers as liquidated damages and both Purchasers and Sellers shall be
relieved of any further obligations or liabilities hereunder except for
Surviving Obligations.
16. General Provisions. The parties further agree as follows:
16.1 Confidentiality. Each party shall hold in strict confidence all documents
and information concerning the other and its business and properties and if
the transaction contemplated hereby should not close, such confidence shall
be maintained, and all such documents and information (in written form)
shall immediately thereafter be returned to the party originally furnishing
the same. No public disclosure, either written or oral, of the existence or
terms of this Agreement shall be made by either Purchasers or Sellers
without the consent of the other. The foregoing provision shall not,
however, be construed to prohibit any party from making any disclosures to
any governmental authority which it is required to make by law or to
prohibit any party from disclosing to its investors, lenders, accountants,
consultants and attorneys such terms of this transaction as are customarily
disclosed to them in connection with similar acquisitions.
16.2 Conditions Precedent. Sellers' obligations to close under this Agreement
shall be subject to Purchasers' performance of all of the covenants,
agreements and obligations required to be performed by Purchasers under
this Agreement. Purchasers' obligations to close under this Agreement shall
be subject to Sellers' performance of all of the covenants, agreements and
obligations required to be performed by Sellers under this Agreement.
16.3 Time. Time is of the essence of this Agreement and Sellers' and Purchaser's
obligations hereunder.
16.4 Attorneys' Fees. In the event it becomes necessary for any Purchaser or
Seller to file a suit to enforce this Agreement or any provisions contained
herein, the prevailing party in such suit shall be entitled to recover, in
addition to all other remedies or damages, reasonable attorneys' fees and
court costs incurred in such suit.
16.5 Entire Agreement. No change or modification of this Agreement shall be
valid unless the same is in writing and signed by the parties hereto. This
Agreement contains the entire agreement between the parties relating to the
purchase and sale of the Properties. All prior negotiations and writings
between the parties are merged in this Agreement and there are no promises,
agreements, conditions, undertakings, warranties or representations, oral
or written, express or implied, between the parties other than as set forth
herein.
16.6 Survival. All of the parties' representations, warranties, covenants and
agreements hereunder, to the extent not fully performed or discharged by or
through the Closing, shall not be deemed merged into any instrument
delivered at Closing and shall remain fully enforceable thereafter.
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<PAGE> 32
16.7 Dates. If any date set forth in this Agreement for the delivery of any
document or the happening of any event should, under the terms hereof, fall
on a weekend or holiday, then such date shall be automatically extended to
the next succeeding weekday that is not a holiday.
16.8 Governing Law. This Agreement shall be construed and enforced in accordance
with the laws of the State of Colorado.
16.9 Notices. All notices, demands or other communications required or permitted
to be given hereunder shall be in writing and any and all such items shall
be deemed to have been duly delivered upon personal delivery; or as of the
third business day after mailing by United States mail, certified, return
receipt requested, postage prepaid, addressed as follows; or as of 12:00
Noon on the immediately following business day after deposit with Federal
Express or a similar overnight courier service, addressed as follows; or as
of the third business hour (a business hour being one of the hours from
8:00 a.m. to 5:00 p.m. on business days) after transmitting by telecopier
to the telecopy number set forth below:
If to Sellers, to:
ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Douglas M. Pasquale
Telecopy No.: (714) 708-3523
with a copy to:
ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, California 92626
Attention: Douglas Armstrong
Telecopy No.: (714) 435-7102
If to Purchaser, to:
Aspen Retirement Corporation
252 S. Clayton Street, Fourth Floor
Denver, Colorado 80206
Attention: Robert J. Jacobs
Telecopy: (303) 393-8636
with a copy to:
Frank L. Robinson, Esq.
Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 Seventeenth Street, Suite 1600
Denver, Colorado 80202
Telecopy: (303) 825-6525
or to such other address or such other person as any party shall designate
to the other for such purpose in the manner hereinabove set forth.
32
<PAGE> 33
16.10 Section 1031 Exchange. Notwithstanding anything to the contrary in this
Agreement, Sellers and Purchasers agree that Purchasers, or any of them,
may assign this Agreement (or all or any portion thereof or rights therein)
to one or more qualified intermediaries (collectively, an "Intermediary"),
as that term is defined in the deferred like-kind exchange regulations (the
"Regulations") promulgated under Section 1031 of the Internal Revenue Code
of 1986, as amended, to act in place of any Purchaser as the purchaser of
the Property to be conveyed to such Purchaser by the applicable Seller in
effecting a deferred or simultaneous like-kind exchange of one or more of
the Properties under the Regulations. Upon assignment of a Purchaser's
rights under this Agreement to an Intermediary, Purchaser's Intermediary
shall be substituted for such Purchaser in this Agreement as the purchaser
of the Property to be acquired by such Purchaser; provided, however, that
such Purchaser shall not be released of any of its obligations hereunder as
a result of such assignment. Sellers agree to accept the consideration and
all other required performance under this Agreement and any written
instructions from a Purchaser's Intermediary and to render its performance
of all of its obligations to such Purchaser's Intermediary. Sellers agree
that performance by a Purchaser's Intermediary will be treated as
performance by the applicable Purchaser. Purchasers agree that Sellers'
cooperation with Purchasers hereunder shall not require Sellers to incur
any out-of-pocket expenses, and Purchasers further agree to indemnify and
hold harmless Sellers from and against any and all damages, losses,
liabilities, costs and expenses (including reasonable attorneys' fees and
expenses but excluding any attorneys' fees and expenses incurred by Sellers
in connection with their review of the documents reasonably necessary to
effect Purchasers' exchange) incurred by Sellers as a result of a
Purchaser's assignment of this Agreement (or portions thereof or rights
thereunder) to an Intermediary.
16.11 No Recording. Neither this Agreement nor any memorandum hereof may be
recorded by any party hereto; provided, however, that on the Closing Date,
BVARV will execute and deliver to Aspen Bella Vita a memorandum setting
forth Aspen Bella Vita's right to acquire the Bella Vita Property subject
only to the parties' receipt of the consent of the Lender of the Bella Vita
Loan, and Sellers agree that Aspen Bella Vita may record such memorandum in
the real property records of Sarasota County, Florida.
16.12 Headings. The headings which appear in some of the Sections of this
Agreement are for purposes of convenience and reference and are not in any
sense to be construed as modifying the Sections in which they appear.
16.13 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed a duplicate original.
16.14 Assignment. Except as provided in Section 16.10 hereof, this Agreement
cannot be assigned in whole or in part by either party without the prior
written consent of the other; provided, that Purchasers, or any of them,
may assign their interests in this Agreement to any parent, subsidiary or
other affiliate of Purchasers without Sellers' consent.
16.15 Successors and Assigns. Subject to Section 16.14, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
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<PAGE> 34
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
set forth below.
SELLERS:
ARV ASSISTED LIVING, INC., a Delaware
corporation
Date: March 26 , 1999 By: /s/ Abdo H. Khoury
------ ------------------------------------
Title: Vice President - Asset Strategy
------------------------------------
BELLA VITA ARV, INC., a Florida
corporation
Date: March 26 , 1999 By: /s/ Abdo H. Khoury
------ ------------------------------------
Title: Vice President, Treasurer
------------------------------------
PURCHASERS:
ASPEN AMBER PARK, LLC, a Colorado
limited liability company
Date: March , 1999 By: /s/ Robert J. Jacobs
------ ------------------------------------
Robert J. Jacobs, Manager
ASPEN BELLA VITA, LLC, a Colorado
limited liability company
Date: March , 1999 By: /s/ Robert J. Jacobs
------ ------------------------------------
Robert J. Jacobs, Manager
ASPEN GAYTON TERRACE, LLC, a Colorado
limited liability company
Date: March , 1999 By: /s/ Robert J. Jacobs
------ ------------------------------------
Robert J. Jacobs, Manager
ASPEN WOODSIDE VILLAGE, LLC, a Colorado
limited liability company
Date: March , 1999 By: /s/ Robert J. Jacobs
------ ------------------------------------
Robert J. Jacobs, Manager
ASPEN WYNDHAM LAKES, LLC, a Colorado
limited liability company
Date: March , 1999 By: /s/ Robert J. Jacobs
------ ------------------------------------
Robert J. Jacobs, Manager
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<PAGE> 35
EXHIBIT A
(AMBER PARK LAND)
Situate in Section 19, Township 4, Entire Range 1, Sycamore Township, City of
Deer Park, Hamilton County, Ohio, and being more particularly described as
follows:
Beginning at a point in the centerline of East Galbraith Road, said point being
in the north line of Section 19 and 1933.00 feet from the northeast corner of
said Section 19 as measured along the said north line of Section 19, South 0
degrees 55' West, 300.02 feet to an iron pin; thence North 88 degrees 54' West,
517.54 feet to an iron pin; thence North 0 degrees 25' 30" East, 300.02 feet to
a point in the said centerline of East Galbraith Road and the north line of
Section 19; thence with the said centerline of East Galbraith Road, South 88
degrees 54' East, 520.11 feet to the place of beginning.
EXHIBIT A
Page 1
<PAGE> 36
EXHIBIT B
(BELLA VITA LAND)
Commence at the Northwest corner of Section 9, Township 39 South, Range 19 East,
thence North 89 degrees35'07" East along the Section line 1324.61 feet to the
Northwest corner of the West 1/2 of the East 3/4 of Section 9; thence South 00
degrees31'18" East, along the West line of the said West 1/2 of the East 3/4,
2385.46 feet; thence North 89 degrees34'18" East, 322.99 feet for a Point of
Beginning; thence continue North 89 degrees34'18" East, 175.00 feet; thence
North 00 degrees40'04" West, 25.00 feet; thence North 89 degrees34'18" East,
149.00 feet; thence South 00 degrees40'04" East, 682 feet to the North
right-of-way line of Venice Avenue East; thence South 89 degrees34'18" West
along said right-of-way line, 324.00 feet; thence North 00 degrees40'04" West,
657.00 feet to the Point of Beginning; all lying and being in Sarasota County,
Florida.
EXHIBIT B
Page 1
<PAGE> 37
EXHIBIT C
(GAYTON TERRACE LAND)
The following described property located in the County of Henrico, Commonwealth
of Virginia, to wit:
BEGINNING at an iron rod in the western right-of-way line of Poplar Forest
Drive, corner to Universal Wilton, Inc., and from said rod, with Universal
Wilton, Inc., N 88 degrees 38' 36" W, 739.61' to a point in the eastern
right-of-way line of Gayton Road, thence with said Gayton Road, N 03 degrees 50'
31" E, 309.57' to the P.C. of a curve concave to the right, said curve having a
radius of 1403.82', a tangent of 147.81' and a chord of 293.99', bearing N 09
degrees 51' 09" E, thence through a delta of 12 degrees 01' 15" and a length of
294.53' to the p.t., thence N 15 degrees 51' 46" E, 82.72' to a point corner to
Gievco Corp., thence with Gievco Corp., S 73 degrees 26' 52" E, 708.60' to an
iron rod, a point on curve in the western right of way line of Poplar Forest
Drive, thence with said Poplar Forest Drive, along said curve concave to the
left, said curve having a radius of 3046.43', a tangent of 179.33', and a chord
of 358.04', bearing S 04 degrees 48' 49" W, thence through a delta of 06 degrees
44' 16", and a length of 358.25' to the P.T., thence S 01 degrees 26' 41" W,
137.00' to the POINT OF BEGINNING.
EXHIBIT C
Page 1
<PAGE> 38
EXHIBIT D
(WOODSIDE VILLAGE LAND)
Parcel No. 1
Situated in the City of Bedford, County of Cuyahoga and State of Ohio, and known
as being part of the Suburban Land & Homes Co.'s Metropolitan Park Subdivision
No. 2 of record in Plat Volume 98, Page 22 (all references to deeds or plats in
this description refer to the records of the Recorder's Office, Cuyahoga County,
Ohio) as consolidated by Ordinance No. 3514-87 and shown for record in Plat
Volume 240, page 84 and being all of all 19.998 acre tract conveyed to Cardinal
Retirement Village of Bedford, Limited Partnership of record in Volume 88-0372,
Page 66 of Cuyahoga County Records, and being more particularly described as
follows:
Beginning at 3/4" hollow iron pin found at 40 feet right of center line station
17 + 11.00 as shown on the center line survey of Rockside Road, dated May 1952
of record in Cuyahoga County Engineer's Office, being on the Easterly right of
way line of said Rockside Road; thence Northeasterly along the Easterly right of
way line of said Rockside Road being the arc of a curve to the right, having a
radius of 3779.72 feet, a central angle of 4 deg. 58' 04", the chord of which
bears North 54 deg. 07' 25" East 327.62 feet to a 5/8" rebar set; thence the
following 4 courses being along Northerly lines of said 19.988+ acre tract and
Southerly lines of that 6.243+ acre tract conveyed to City-Bedford Partners, a
California Limited Partnership, recorded in Volume 89-6501, Page 31 of Cuyahoga
County Records;
1. thence North 89 deg. 53' 32" East 275 feet to a 5/8" rebar set;
2. thence South 42 deg. 19' 40" East 275 feet to a 5/8" rebar set;
3. thence North 47 deg. 40' 20" East 20 feet to a 5/8" rebar set;
4. thence South 42 deg. 19' 13" East 423.26 feet to a 3/4" iron pin found;
thence South 54 deg. 35' 44" West 70.74 feet along the Northerly line of Lot No.
451 of said Plat Volume 98, Page 22 of Cuyahoga County Records, to a 5/8" rebar
set on the Easterly right of way line of Kenyon Avenue; thence South 60 deg. 50'
18" West 25 feet, along the Northerly end of said Kenyon Avenue as partially
vacated by said Ordinance No. 5814-87, to a 5/8" rebar set; thence South 29 deg.
09' 42" East 181.41 feet, along the former center line of said Kenyon Avenue
(former 50 foot wide right of way) to a 5/8" rebar set; thence South 89 deg. 51'
37" West 169.02 feet, along the former center line of Natalia Road (formerly 50
foot wide right of way) to a 3/4" hollow iron pin found; thence the following 8
courses being along Southerly lines of said 19.998 acre tract and Northerly
lines of lots 204 through 213 inclusive and 215 through 233 inclusive of The
Suburban Land & Homes Co.'s Metropolitan Park Subdivision, by recorded plat in
Volume 82 of Maps, Page 1 of Cuyahoga County Records;
1. thence South 00 deg. 07' 14" East 132.04 feet to a 3/4" hollow iron pin
found;
2. thence South 59 deg. 15' 41" West 80.37 feet to a 3/4" hollow iron pin
found;
3. thence South 75 deg. 59' 31" West 136.74 feet to a 3/4" hollow iron pin
found;
4. thence South 88 deg. 10' 18" West 141.72 feet to a 5/8" rebar inside of 1"
hollow iron pin found;
5. thence North 84 deg. 12' 19" West 248.23 feet to a 1-1/2" hollow iron pin
found;
6. thence North 58 deg. 13' 19" West 332.31 feet, passing a 1" hollow iron pin
found at 257.30 feet, to an old 3/4" hollow iron pin found;
7. thence North 84 deg. 00' 39" West 146.97 feet to an old 3/4" hollow iron
pin found;
8. thence South 78 deg. 38' 07" West 210.91 feet to a 5/8" rebar found;
thence South 82 deg. 22' 03" West 25 feet along the Northerly end of partially
vacated Lombard Road (formerly 50 foot wide right of way) as vacated by said
Ordinance No. 5814-87, to a 3/4" hollow iron pin found; thence Northerly along
the former center line of said Lombard Road (West side of right of way was not
vacated) being the arc of a curve to the right, having a radius of 1008.17, a
central angle of 8 deg. 03' 07", the chord of which bears North 3 deg. 36' 24"
West 141.57 feet to a point; thence North 0 deg. 25' 10" East 110.28 feet to a
5/8" rebar set on the Easterly right of way line of said Rockside Road (80 foot
wide right of way); thence North 51 deg. 39' 28" East 501.21 feet to the point
of beginning.
EXHIBIT D
Page 1
<PAGE> 39
Parcel No. 2
TOGETHER WITH the beneficial rights in and to that certain non-exclusive
easement for ingress and egress, sanitary sewer, storm sewer, water line and
asphalt driveway contained in the Deed from Cardinal Industries Development
Corporation to Cardinal Retirement Village of Bedford, Limited Partnership,
dated January 27, 1988 and recorded in Volume 88-0372, Page 66 of Cuyahoga
County Records, and described as follows:
Situated in the City of Bedford, County of Cuyahoga and State of Ohio, and being
part of Original Bedford Township Lot 25, being all out of the 6.243 acres tract
of land described on Exhibit B of the deed to Cardinal Retirement Village
Bedford, Limited Partnership, recorded in Volume 88-0372, page 66 of Cuyahoga
County Records, being further described as follows:
Commencing at a point on the Easterly right of way line of Rockside Road, being
40 feet right of center line station 37 + 11.00 on the center line survey of
Rockside Road dated May 1962 of record in the Cuyahoga County Engineer's Office;
thence Northeasterly along said right of way line, being the arc of a curve to
the right, having a radius of 3779.72 feet, a central angle of 4 deg. 58' 04",
the chord of which bears North 54 deg. 07' 25" East 327.62 feet to the point of
beginning; thence continuing along said right of way line, being a Westerly line
of said 6.243 acre tract, and being the arc of curve to the right, having a
radius of 3779.72 feet, a central angle of 1 deg. 42' 02", the chord of which
bears North 57 deg. 33' 14" East 112.17 feet to a point; thence North 89 deg.
53' 32" East 198 feet, along a Northerly line of said 6.243 acre tract,
Southerly line of a 6.601 acre tract of land described in a deed to Valleyfield
Apartments of Bedford, Ltd., recorded in Volume 85-4202, Page 31 of Cuyahoga
County Records, to a point; thence South 00 deg. 06' 28" East 60 feet to a
point; thence South 89 deg. 53' 32" West 292.77 feet, along a line of said 6.263
acre tract, to the point of beginning.
Parcel No. 3
TOGETHER WITH the beneficial rights in and to that certain non-exclusive
easement for storm sewer contained in the Deed from Cardinal Industries
Development Corporation to Cardinal Retirement Village of Bedford, Limited
Partnership, dated January 27, 1988 and recorded in Volume 88-0372, Page 66 of
Cuyahoga County Records, and described as follows;
Situated in the City of Bedford, County of Cuyahoga and State of Ohio, and
particularly described as follows:
Commencing at a point on the Easterly right of way line of Rockside Road being
40 feet right of center line station 37 + 11.00 on the center line survey of
Rockside Road dated May 1962 of record in the Cuyahoga County Engineer's Office;
thence Northeasterly along said right of way line, being the arc of a curve to
the right, having a radius of 3779.72 feet, a central angle of 4 deg. 58' 04",
the chord of which bears North 54 deg. 07' 25" East 327.62 feet to a point;
thence along lines of said 6.423 acre tract the following 4 courses;
1. North 89 deg. 53' 32" East 275 feet;
2. South 42 deg. 19' 40" East 275 feet;
3. North 47 deg. 40' 20" East 20 feet;
4. South 42 deg. 19' 40" East 339.66 feet to the point of beginning;
thence North 47 deg. 40' 20" East 20 feet to a point; thence South 42 deg. 19'
40" East 30 feet to a point; thence South 47 deg. 40' 20" West 20 feet to a
point; thence North 42 deg. 19' 40" West 30 feet to the point of beginning.
Parcel No. 4
TOGETHER WITH the beneficial rights in and to that certain non-exclusive
easement for storm sewer, sanitary sewer, water line and asphalt driveway
contained in the Deed from Cardinal Industries Development Corporation to
Cardinal Retirement Village of Bedford, Limited Partnership, dated January 27,
1988 and recorded in Volume 88-0372, Page 66 of Cuyahoga County Records, and
described as follows:
EXHIBIT D
Page 2
<PAGE> 40
Situated in the City of Bedford, County of Cuyahoga and State of Ohio, and being
a part of Original Bedford Township Lot 25, being all out of the 6.601 acre
tract of land described in a deed to Valleyfield Apartments of Bedford, Ltd.,
recorded in Volume 85-4202, Page 31 of Cuyahoga County Records, and being more
particularly described as follows:
Beginning at a point on the Easterly right of way line of Rockside Road being 40
feet right of the center line the most Westerly corner of said 6.601 acre tract;
thence Northeasterly along said right of way line being the arc of a curve to
the right, having a radius of 3779.72 feet, a central angle of 3 deg. 08' 18"
the chord of which bears North 59 deg. 52' 38" East 207 feet to a point; thence
South 10 deg. 22' 27" East 105.23 feet to a point on the Southerly line of said
6.601 acre tract; thence South 89 deg. 53' 32" West 198 feet along said line to
the point of beginning.
EXHIBIT D
Page 3
<PAGE> 41
EXHIBIT E
(WYNDHAM LAKES PROPERTY)
PARCEL I:
A parcel of land lying in Sections 4 and 5, Township 4 South, Range 27 East,
Jacksonville, DUVAL County, Florida, being more particularly described as
follows to wit:
For a point of reference, commence at the point of intersection of the Southerly
right of way line of Hartley Road (a 60 foot wide right of way) with the
Westerly right of way line of Old St. Augustine Road (a 100 foot right of way)
and run South 19 degrees57'00" East, along the Westerly right of way, a distance
of 254.08 feet to a point for the Point of Beginning. From the Point of
Beginning thus described continue South 19 degrees57'00" East, along said
Westerly right of way line, a distance of 101.10 feet to the Northeasterly
corner of that certain tract described in Instrument recorded in O.R. Book 5455,
Page 531 of the Public Records of DUVAL County, Florida; run thence along the
boundary of said tract, the following courses: First Course, Southwesterly along
the arc of a curve concave Northwesterly with a radius of 30 feet, an arc
distance of 57.75 feet to the point of tangency of said curve, said arc being
subtended by a chord bearing and distance of South 35 degrees11'40" West, 49.24
feet; Second Course, North 89 degrees39'40" West, a distance of 475.72 feet;
Third Course, South 00 degrees20'20" West, a distance of 25.00 feet to a point;
Fourth Course, South 45 degrees20'20" West, a distance of 310.14 feet to a
point; Fifth Course, South 44 degrees39'40" East, a distance of 270.01 feet to a
point; Sixth Course, South 00 degrees23'40" East, a distance of 83.74 feet to a
point; run thence South 89 degrees36'20" West a distance of 846.81 feet to a
point; run thence North 01 degrees55'59" West, a distance of 12.28 feet to a
point; run thence North 00 degrees19'20" West, a distance of 652.80 feet to a
point; run thence South 89 degrees39'40" East, a distance of 1,350.87 feet to
the Point of Beginning.
PARCEL II:
A part of the Southeast 1/4 of the Northeast 1/4 of Section 5, township 4 South,
Range 27 East, Jacksonville, DUVAL County, Florida; being portions of those
lands described in Instrument recorded in O.R. Book 1444, Page 142 and in O.R.
Book 2813, Page 1004 of the Public Records of DUVAL County, Florida, being more
particularly described as follows:
For a point of reference, commence at the Southwest corner of said Southeast 1/4
of the Northeast 1/4 and run South 89 degrees39'40" East along the South line of
said Southeast 1/4 of the Northeast 1/4, a distance of 515.94 feet to the Point
of Beginning of the land hereinafter to be described; run thence North 00
degrees00'06" West a distance of 100.00 feet; run thence South 89 degrees39'40"
East a distance of 146.28 feet; run thence South 00 degrees00'40" East a
distance of 50.00 feet; run thence South 89 degrees39'40" East a distance of
321.39 feet; run thence South 00 degrees06'24" West a distance of 50.00 feet to
the South line of said Southeast 1/4 of the Northeast 1/4; run thence along said
South line North 89 degrees39'40" West a distance of 467.59 feet to the Point of
Beginning.
PARCEL III:
Together with easement rights as defined in GRANT OF EASEMENT dated February 7,
1986, recorded March 3, 1986 in O.R. Book 6093, Page 773, as affected by AMENDED
AND CORRECTED GRANT OF EASEMENT dated December 21, 1992, recorded January 27,
1993 in O.R. Book 7505, Page 1154 in the Public Records of DUVAL County,
Florida.
PARCEL IV:
Perpetual non-exclusive easements as defined in GRANT OF EASEMENT AGREEMENT
dated December 21, 1992, recorded January 27, 1993 in O.R. Book 7505, Page 1161
in the Public records of DUVAL County, Florida.
EXHIBIT E
Page 1
<PAGE> 42
PARCEL V:
Together with rights as defined in GRANT OF EASEMENT AND MODIFICATION OF
EASEMENT dated April 27, 1993, recorded April 30, 1993 in O.R. Book 7567, Page
864 in the Public Records of DUVAL County, Florida.
EXHIBIT E
Page 2
<PAGE> 43
EXHIBIT F
(DUE DILIGENCE MATERIALS)
EXHIBIT F
Page 1
<PAGE> 44
EXHIBIT G
(CONTRACTS TO BE ASSUMED)
Amber Park
Dover Elevator
National Heating & Air Conditioning
ADT Security
Bella Vita
Dehart Alarm Systems
Comcast Cablevision
Gayton Terrace
Continental Cablevision
General Elevator
Automatic Laundry
Virginia Linen
Woodside Village
None
Wyndham Lakes
MediaOne Cable
EXHIBIT G
Page 1
<PAGE> 45
EXHIBIT H
(LEASE/MANAGEMENT AGREEMENTS)
[NOTE: THE ATTACHED FORMS RELATE TO THE GAYTON TERRACE PROPERTY AND THE WYNDHAM
LAKES PROPERTY. THE DOCUMENTS FOR THE BELLA VITA PROPERTY WILL BE IN THE FORM OF
THE WYNDHAM LAKES DOCUMENTS. TO THE EXTENT THAT SIMILAR TYPES OF DOCUMENTS WILL
NEED TO BE EXECUTED FOR THE AMBER PARK PROPERTY OR THE WOODSIDE VILLAGE
PROPERTY, THE PARTIES WILL EXECUTE DOCUMENTS IN THE SUBSTANTIALLY SAME FORM AS
THOSE COMPRISING THIS EXHIBIT H, DEPENDING ON WHETHER THE STATE OF OHIO WILL
REQUIRE A LEASE AND MANAGEMENT AGREEMENT OR A MANAGEMENT AGREEMENT ONLY.]
EXHIBIT H
Page 1
<PAGE> 46
EXHIBIT I
(OTHER ASSETS)
<TABLE>
<CAPTION>
Name Location
- ---- --------
<S> <C>
Amberwood Port Richie, Florida
Baypoint Village Hudson, Florida
Collier Park Beaumont, Texas
Eastlake Terrace Elkhart, Indiana
Kinghaven Manor Riverview, Michigan
Lodge of Montgomery Cincinnati, Ohio
Mallard Cove Sharonville, Ohio
Northgate Park Cincinnati, Ohio
Shorehaven Manor Sterling Heights, Michigan
Tanglewood Trace Mishawaka, Indiana
Woodside Village of Columbus Columbus, Ohio
Canterbury Woods Attleboro, Massachusetts
Lakes Fort Myers, Florida
Vista Del Rio Albuquerque, New Mexico
</TABLE>
EXHIBIT I
Page 1
<PAGE> 1
Exhibit 10.20
SEPARATION AND MUTUAL GENERAL RELEASE AGREEMENT
This Separation and Mutual General Release Agreement ("Agreement"),
made this 23rd day of March, 1999, by and between Howard G. Phanstiel, an
individual ("Phanstiel"), and ARV Assisted Living, Inc., a corporation, and its
parent, subsidiaries, affiliates, and related entities ("ARV") is a separation
agreement which includes a mutual general release of claims. Lazard Freres Real
Estate Investors L.L.C., LF Strategic Realty Investors II L.P., LFSRI II
Alternative Partnership LP, LFSRI II-CADIM Alternative Partnership L.P., Atria
Communities, Inc., Kapson Senior Quarters Corp., and Prometheus Assisted Living
LLC ("Lazard") are parties to this Agreement only with respect to Sections 2,
13-25, and 27-39.
In consideration of the covenants undertaken and the releases
contained in this Agreement, Phanstiel and ARV agree, and Lazard agrees with
respect to Sections 2, 13-25, and 27-39 as follows:
1. Phanstiel's position as Chief Executive Officer of ARV and as an
employee of ARV in any other capacity is terminated, such termination to be
effective March 23, 1999 (the "Separation Date"). Phanstiel hereby resigns as a
member of the Board of Directors of ARV effective as of March 23, 1999.
2. That certain December 21, 1998 Amended and Restated Executive
Employment Agreement ("Amended Employment Agreement") between Phanstiel and ARV
shall terminate, such termination to be effective March 23, 1999. All payments
due to Phanstiel from ARV shall be determined under this Agreement, and no
payments shall be made under the Amended Employment Agreement. All payments due
to Phanstiel under this Agreement shall be the sole responsibility of ARV, or
its surviving or successor entity in the event of a Change of Control as that
term is defined in Section 7.5 of the Amended Employment Agreement, sale, or
merger, and such payments shall not be the responsibility of Lazard or any of
Lazard's affiliates.
3. Phanstiel agrees that he will not, for a period of one year
following the Separation Date, directly solicit any ARV employee earning an
annual salary of $75,000 or more to work for any business, individual,
partnership, firm, corporation or other entity then in competition with the
business of ARV or any subsidiary or affiliate of ARV.
4. ARV shall pay to Phanstiel severance in the total amount of
$1,000,000.00 less standard withholding and authorized deductions (the
"Severance Payment"). That sum shall be paid to Phanstiel via wire transfer in
equal installments over the twelve month period commencing on the eighth day
after the execution of this Agreement, subject to the acceleration provisions of
this Agreement. In the event of Phanstiel's death, the Severance Payment shall
be made to Phanstiel's estate pursuant to the provisions of this Agreement.
Simultaneously with the issuance of ARV's Quarterly Report, ARV's auditors shall
advise Phanstiel if any acceleration event has occurred during the previous
quarter.
<PAGE> 2
5. ARV agrees to accelerate unpaid portions of the Severance Payment
in the event of ARV's receipt of Cumulative Net Proceeds from asset sales
pursuant to the following schedule:
(a) Cumulative Net Proceeds of at least $15,000,000.00 but no
greater than $17,500,000.00 will result in acceleration of
$200,000.00;
(b) Cumulative Net Proceeds of at least $17,500,000.00 but no
greater than $20,000,000.00 will result in acceleration of
$333,333.33 less any amounts previously paid under Section
5(a); and
(c) Cumulative Net Proceeds of $20,000,000.00 will result in
acceleration of $650,000.00 less any amounts previously paid
under Sections 5(a) and/or 5(b).
For purposes of this Agreement, Cumulative Net Proceeds shall mean
the net amount received by ARV after the deduction of all transaction costs,
repayment of debt secured by such assets, and partnership distributions that are
required to be made pursuant to the applicable partnership agreement.
6. ARV agrees to accelerate unpaid portions of the Severance Payment
in the event of ARV's receipt of Cumulative Net Proceeds from mortgage
refinancing pursuant to the following schedule:
(a) Cumulative Net Proceeds of $9,000,000.00 will result in
acceleration of $300,000.00;
(b) Each $1,000,000.00 of Cumulative Net Proceeds received in
excess of $9,000,000.00 will result in an additional
$100,000.00 acceleration.
For purposes of this Section, Cumulative Net Proceeds from mortgage
refinancing shall not include the proceeds of any bridge loan from Lazard, or
any of its affiliates, to ARV, or any of its affiliates. In addition, Cumulative
Net Proceeds under Section 5 shall be determined independently of Section 6 and
in no event shall such amounts be aggregated for any purpose under this
Agreement. In the event a portion of the Severance Payment is accelerated under
either Sections 5 or 6, the accelerated payment shall be made to Phanstiel in a
lump sum within ten (10) days of the date the Cumulative Net Proceeds reached
the applicable threshold amount. The total amount of the Severance Payment set
forth in Section 4 ($1,000,000.00) shall in no event be increased or decreased
by the occurrence of any acceleration event.
7. In the event of a "Change of Control" as defined in paragraphs
7.5.1(i), (ii) and (iii) of the Amended Employment Agreement which occurs after
the Separation Date, ARV will accelerate the full Severance Payment or the
remaining portion thereof and shall pay Phanstiel the full Severance Payment or
the remaining portion thereof within ten (10) days of the Change of Control.
2
<PAGE> 3
8. In the event ARV's unrestricted cash balance exceeds the sum of
$15,000,000.00 for a sustained period of ninety (90) days on or after April 2,
1999, ARV will accelerate the full Severance Payment or the remaining portion
thereof and shall pay Phanstiel the full Severance Payment or the remaining
portion thereof within ten (10) days. For the purpose of determining the
unrestricted cash balance, only one-half (1/2) of the Cumulative Net Proceeds
from the sale of assets shall be included.
9. Phanstiel acknowledges that he has already received through
direct deposit his salary through March 15, 1999. On March 23, 1999, ARV will
pay to Phanstiel $34,612.95, less withholding and authorized deductions, which
amount reflects accrued but unpaid salary and accrued but unused vacation as
reflected in ARV's books through the Separation Date.
10. Any options to purchase the common stock of ARV granted to
Phanstiel prior to the Separation Date and not otherwise vested shall terminate
as of the Separation Date.
11. ARV will maintain coverage for Phanstiel's telephone for a
period of sixty days after the Separation Date.
12. ARV shall pay, on behalf of Phanstiel, for the maximum period
for which COBRA coverage is available, the premiums payable in order to continue
the same coverage of Phanstiel and Phanstiel's family under ARV's health
insurance plan which exists as of the Separation Date, unless and until
Phanstiel and Phanstiel's family are otherwise covered by another health
insurance plan (the "Continuation Coverage").
13. The Parties agree that any reference requests regarding
Phanstiel from potential employers shall be directed only to Doug Pasquale,
Laura Loda, or another individual designated in writing by Phanstiel on or after
the date of this Agreement.
14. The parties agree that Phanstiel is hereby released from any
obligations under paragraph 9 of the Amended Employment Agreement.
15. Phanstiel on the one hand, and ARV and Lazard collectively on
the other, agree that each shall not (1) directly or indirectly, make or ratify
any statement, public or private, oral or written, that disparages, either
professionally or personally, the other party or parties, the other party or
parties' subsidiaries and affiliates, past and present, and each of them, as
well as its and their trustees, directors, officers, agents, attorneys,
insurers, employees, stockholders, representatives, assigns, and successors,
past and present, and each of them, or (2) make any statement or engage in any
conduct that has the purpose or effect of disrupting the business of the other
party or parties. The parties hereby agree that any statement made in violation
of the foregoing shall constitute and be treated as a material breach of this
Agreement. This Section 15 shall not apply to or in any way limit (i) testimony
given by a party in any court, arbitral or governmental proceeding or (ii) a
party's private consultation with its attorneys or other professional advisors.
16. The parties expressly deny any violation of any policies, procedures,
state or federal laws or regulations. Accordingly, while this Agreement resolves
all issues between Phanstiel, on the one hand, and ARV and Lazard, on the other
hand, relating to any alleged
3
<PAGE> 4
violation of ARV's policies or procedures or any state or federal law or
regulation, this Agreement does not constitute an adjudication or finding on the
merits and it is not, and shall not be construed as, an admission by Phanstiel,
ARV, or Lazard of any violation of ARV's policies, procedures, state or federal
laws or regulations. Moreover, neither this Agreement nor anything in this
Agreement shall be construed to be or shall be admissible in any proceeding as
evidence of or an admission by Phanstiel, ARV, or Lazard of any violation of
ARV's policies, procedures, state or federal laws or regulations. This Agreement
may be introduced, however, in any proceeding to enforce the Agreement. Such
introduction shall be pursuant to an order protecting its confidentiality.
17. Except for those obligations created by or arising out of this
Agreement, Phanstiel on behalf of himself, his descendants, dependents, heirs,
executors, administrators, assigns, and successors, and each of them, hereby
covenants not to sue and fully releases and discharges ARV, Lazard, LF Strategic
Realty Investors II L.P., LFSRI II Alternative Partnership LP, LFSRI II-CADIM
Alternative Partnership L.P., Atria Communities, Inc., Kapson Senior Quarters
Corp., Prometheus Assisted Living LLC, their respective predecessors, successors
and assigns, and their respective past, present and future parents,
subsidiaries, affiliates, trustees, executors, administrators, officers,
directors, owners, associates, heirs, agents, insurers, stockholders, partners,
employees, licensees, representatives, lawyers, consultants, investment bankers,
accountants or any of them and including, without limitation, Robert P. Freeman,
Murry N. Gunty and Kenneth M. Jacobs, and each of them, hereinafter together and
collectively referred to as "Releasees," with respect to and from any and all
manner of action or actions, cause or causes of action, in law or equity, and
any suits, debts, liens, liabilities, claims, counter-claims, cross-claims,
demands, rights, obligations, damages, losses, costs, expenses, attorneys' fees,
judgments, orders or indemnities, or all and any nature whatsoever, whether
individual or derivative, state or federal, known or unknown, fixed or
contingent, suspected or unsuspected, and whether or not concealed or hidden,
against said Releasees, or any of them, that Phanstiel: (i) may have or may now
have up to the date of this Agreement; or (ii) may hereafter have based upon,
arising out of, related to or in any way connected with his service as a
director, officer or employee of ARV, his separation from his position as a
director, officer and employee of ARV, or his employment by, or status as an
officer or director of, any ARV affiliate, or any other transactions,
occurrences, acts or omissions or any loss, damage or injury whatever, known or
unknown, suspected or unsuspected, resulting from any act or omission by or on
the part of said Releasees, or any of them, committed or omitted prior to the
date of this Agreement including, without limiting the generality of the
foregoing, any claim that was or could have been alleged in, or any of the facts
giving rise to or allegedly giving rise to, those certain actions entitled ARV
Assisted Living, Inc. v. Lazard Freres Real Estate Investors LLC et al., Case
No. 794211, Superior Court for the State of California for the County of Orange
and related cross-actions ("ARV v. LFREI") and/or Prometheus Assisted Living LLC
v. Howard G. Phanstiel et al., Civil Action No. 16846 In the Court of Chancery
of the State of Delaware in and for New Castle County ("Prometheus v.
Phanstiel"), any claim under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, Americans with Disabilities Act, the
Family and Medical Leave Act of 1993, the California Fair Employment and Housing
Act, the California Family Rights Act, or any claim for severance pay, bonus,
sick leave, holiday pay, vacation pay, life insurance, health or medical
insurance or any other fringe benefit, workers' compensation or disability.
Notwithstanding anything to the contrary herein, the releases given
4
<PAGE> 5
herein do not include any claim Phanstiel now has or may hereafter have for
indemnification under that certain Indemnification Agreement between Phanstiel
and ARV dated December 5, 1997 (the "Indemnity Agreement"), and any and all such
claims are hereby specifically preserved.
18. Except for those obligations created by or arising out of this
Agreement or the Indemnity Agreement, ARV, Lazard, LF Strategic Realty Investors
II L.P., LFSRI II Alternative Partnership LP, LFSRI II-CADIM Alternative
Partnership L.P., Atria Communities, Inc., Kapson Senior Quarters Corp.,
Prometheus Assisted Living LLC, Robert P. Freeman, Murry N. Gunty and Kenneth M.
Jacobs, hereby acknowledge full and complete satisfaction of and release and
discharge, and covenant not to sue, Phanstiel, and Phanstiel's descendants,
dependents, heirs, executors, administrators, and each of them, hereinafter
together and collectively referred to as "Phanstiel Releasees," with respect to
and from any and all manner of action or actions, cause or causes of action, in
law or equity, and any suits, debts, liens, liabilities, claims, counter-claims,
cross-claims, demands, rights, obligations, damages, losses, costs, expenses,
attorneys' fees, judgments, orders or indemnities, or all and any nature
whatsoever, whether individual or derivative, state or federal, known or
unknown, fixed or contingent, suspected or unsuspected, and whether or not
concealed or hidden, against said Phanstiel Releasees, or any of them, that ARV,
Lazard, Robert P. Freeman, Murry N. Gunty and Kenneth M. Jacobs : (i) may have
or may now have up to the date of this Agreement; or (ii) may hereafter have
based upon, arising out of, related to or in any way connected with Phanstiel's
service as a director, officer or employee of ARV, his separation from his
position as a director, officer and employee of ARV, or any other transactions,
occurrences, acts or omissions or any loss, damage or injury whatever, known or
unknown, suspected or unsuspected, resulting from any act or omission by or on
the part of said Phanstiel Releasees, or any of them, committed or omitted prior
to the date of this Agreement including, without limiting the generality of the
foregoing, any claim that was or could have been alleged in, or any of the facts
giving rise to or allegedly giving rise to, those certain actions entitled ARV
Assisted Living, Inc. v. Lazard Freres Real Estate Investors LLC et al., Case
No. 794211, Superior Court for the State of California for the County of Orange
and related cross-actions ("ARV v. LFREI") and/or Prometheus Assisted Living LLC
v. Howard G. Phanstiel et al., Civil Action No. 16846 In the Court of Chancery
of the State of Delaware in and for New Castle County ("Prometheus v.
Phanstiel").
19. Phanstiel, ARV, Lazard, LF Strategic Realty Investors II L.P.,
LFSRI II Alternative Partnership LP, LFSRI II-CADIM Alternative Partnership
L.P., Atria Communities, Inc., Kapson Senior Quarters Corp., Prometheus Assisted
Living LLC, Robert P. Freeman, Murry N. Gunty and Kenneth M. Jacobs, and each of
them, hereby represent, warrant, and acknowledge to each other, that they have
received independent legal advice from their respective attorneys regarding the
advisability of executing this Agreement and giving the releases provided for
herein, and hereby acknowledge the provisions of Section 1542 of the California
Civil Code, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
5
<PAGE> 6
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Phanstiel, ARV and Lazard, LF Strategic Realty Investors II L.P., LFSRI II
Alternative Partnership LP, LFSRI II-CADIM Alternative Partnership L.P., Atria
Communities, Inc., Kapson Senior Quarters Corp., Prometheus Assisted Living LLC,
Robert P. Freeman, Murry N. Gunty and Kenneth M. Jacobs and each of them, being
aware of Section 1542, hereby expressly waive and relinquish any rights or
benefits they have or may have thereunder in connection with the releases
provided herein, as well as under any other California or any Federal or state
statute or common law principle of similar effect. Each of Phanstiel, ARV,
Lazard, LF Strategic Realty Investors II L.P., LFSRI II Alternative Partnership
LP, LFSRI II-CADIM Alternative Partnership L.P., Atria Communities, Inc., Kapson
Senior Quarters Corp., Prometheus Assisted Living LLC, Robert P. Freeman, Murry
N. Gunty and Kenneth M. Jacobs acknowledges that it is aware that it or its
attorney may hereafter discover facts different from or in addition to the facts
which it or its attorney now knows or believes to be true with respect to the
subject matter of this Agreement but that it is their intention hereby to settle
and release fully, finally, absolutely and forever any and all claims, disputes
and differences, known or unknown, suspected or unsuspected, which now exist,
may hereafter exist, or heretofore have existed arising from, or in any way
connected with the released matters set forth in Sections 17 or 18 of this
Agreement, and without regard to the subsequent discovery or existence of such
different or additional facts. In furtherance of this intention, the releases
herein given shall be and remain in effect as full and complete releases, except
as expressly set forth herein, notwithstanding the discovery of any such
additional facts. Phanstiel, ARV and Lazard acknowledge that they understand the
significance and consequence of such release and such specific waiver of SECTION
1542.
The parties, and each of them, hereby further represent, warrant,
and acknowledge to the other parties, and each of them, that there is a risk
that, subsequent to the date of this Agreement, they will incur damage or loss
that they deem in some way attributable to the subject matter of this Agreement,
or to the actions prior to the date of this Agreement of Phanstiel, ARV, Lazard,
LF Strategic Realty Investors II L.P., LFSRI II Alternative Partnership LP,
LFSRI II-CADIM Alternative Partnership L.P., Atria Communities, Inc., Kapson
Senior Quarters Corp., Prometheus Assisted Living LLC, Robert P. Freeman, Murry
N. Gunty or Kenneth M. Jacobs as the case may be, but which are unknown and
unanticipated as of the date of this Agreement, or that damages presently known
may become progressive, greater or more serious than is now known, expected or
anticipated, or that facts alleged in the subject matter of this Agreement are
found to be different from the facts now believed by them to be true. The
parties hereby expressly accept such risks and agree that this Agreement is and
will remain effective notwithstanding such risks, if they occur.
20. Phanstiel expressly acknowledges and agrees that, by entering
into this Agreement, he is waiving any and all rights or claims that he may have
arising under the Age Discrimination in Employment Act of 1967, as amended,
which have arisen on or before the date of execution of this Agreement.
Phanstiel further expressly acknowledges and agrees that:
(a) In return for this Agreement, he will receive general
releases that he was not already entitled to receive before entering into
this Agreement;
6
<PAGE> 7
(b) He was orally advised by ARV and is hereby advised in
writing by this Agreement to consult with an attorney before signing this
Agreement;
(c) He was given a copy of this Agreement on March 23, 1999,
and informed that he had 21 days within which to consider the Agreement;
and
(d) He was informed that he has seven (7) days following the
date of execution of the Agreement in which to revoke the Agreement.
21. Phanstiel may revoke this Agreement in its entirety during the
seven (7) days following execution of the Agreement by Phanstiel. Any revocation
of the Agreement must be in writing and hand delivered during the revocation
period. This Agreement will become effective and enforceable seven (7) days
following execution by Phanstiel, unless this Agreement is revoked during the
seven-day period.
22. Phanstiel acknowledges that by reason of his position with ARV
he has been given access to, received, and been entrusted with confidential
information, including but in no way limited to development, marketing,
organizational, financial, management, administrative, production, distribution
and sales information, data, specifications and processes owned by ARV or its
agents or consultants, or used in the course of its business that is not
otherwise part of the public domain (collectively, the "Confidential Material").
Phanstiel represents that he has held all Confidential Material confidential
and will continue to do so, and that he will not use Confidential Material for
any business (which term herein includes a partnership, firm, corporation or any
other entity) without the prior written consent of ARV.
Phanstiel shall return to ARV and shall not take or copy in any form
or manner Confidential Materials.
23. Phanstiel agrees that upon reasonable notice he shall make
himself available to cooperate in the transition of any matters to the successor
Chief Executive Officer of ARV and to provide information to the successor Chief
Executive Officer regarding any proceedings that involve the operation of ARV's
business while Phanstiel was employed by ARV.
24. Phanstiel, ARV and Lazard agree that the terms and conditions of
this Agreement shall remain confidential as between the parties and they shall
not (except as required by law, including disclosures required to shareholders
or regulators, and in the press release attached hereto as Exhibit A) disclose
them to any other person. The parties shall mutually agree upon the text and the
substance of any other comments regarding the fact of Phanstiel's separation and
the reasons therefor. Except as provided for in the mutually agreed disclosures,
the parties will not respond to or in any way participate in or contribute to
any public discussion, notice or other publicity concerning, or in any way
relating to, execution of this Agreement or the events (including any
negotiations) which led to its execution. The parties hereby agree that
disclosure by them of any of the terms and conditions of the Agreement in
violation of the foregoing shall constitute and be treated as a material breach
of this Agreement. Notwithstanding the foregoing, this Section 24 shall not
apply to or in any way limit (i)
7
<PAGE> 8
testimony given by a party in any court, arbitral or governmental proceeding or
(ii) a party's private consultation with its attorneys or other professional
advisors.
25. Phanstiel, ARV and Lazard each warrant and represent that there
has been no assignment or other transfer of any interest in the released matters
set forth in this Agreement, any claims, counterclaims, cross-claims, demands,
causes of action, or any part or portion thereof, that, but for such assignment
or transfer, would be subject to the releases set forth in this Agreement and
each agrees to indemnify, defend and hold harmless the others from any
liabilities, action or actions, cause or causes of action in law or equity,
suits, debts, liens, and from any claims made upon, demands upon, damages
asserted against, and costs, expenses and attorneys' fees incurred (whether or
not litigation is actually commenced) by the other parties, or any of them,
based on or in connection with or arising out of any such assignment or transfer
made, purported or claimed..
26. Phanstiel and ARV acknowledge that any employment or contractual
relationship between them terminated on March 23, 1999, and that they have no
further employment or contractual relationship except as may arise out of this
Agreement and that Phanstiel waives any right or claim to reinstatement as an
employee of ARV.
27. Phanstiel agrees that Phanstiel shall be exclusively liable for
the payment of all federal and state taxes which may be due as the result of the
consideration received from the settlement of disputed claims as set forth
herein.
28. This instrument and the Indemnity Agreement constitute and
contain the entire agreement and understanding concerning Phanstiel's
employment, separation from the same and the other subject matters addressed
herein between the parties, and supersede and replace all prior negotiations and
all agreements proposed or otherwise, whether written or oral, concerning the
subject matters hereof. This is an integrated document.
29. If any provision of this Agreement or the application thereof is
held invalid, the invalidity shall not affect other provisions or applications
of the Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
30. This Agreement shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with, and
governed by, the laws of the State of California without regard to principles of
conflict of laws.
31. Each party has cooperated in the drafting and preparation of
this Agreement. Hence, in any construction to be made of this Agreement, the
same shall not be construed against any party on the basis that the party was
the drafter.
32. This Agreement may be executed in counterparts, and each
counterpart, when executed, shall have the efficacy of a signed original.
Photographic copies of such signed counterparts may be used in lieu of the
originals for any purpose.
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<PAGE> 9
33. Any dispute arising out of or relating to this Agreement or
Phanstiel's employment by ARV shall be submitted to arbitration in Orange
County, California, before a sole arbitrator (the "Arbitrator") selected from
the American Arbitration Association ("AAA"), and shall be conducted in
accordance with the AAA's Labor Arbitration Rules (including the Expedited Labor
Arbitration Procedures) and the provisions of California Code of Civil Procedure
Section 1280 et seq. as the exclusive remedy of such dispute; provided, however,
that provisional injunctive relief may, but need not, be sought in a court of
law while arbitration proceedings are pending, and any provisional injunctive
relief granted by such court shall remain effective until the matter is finally
determined by the Arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief which the Arbitrator deems just and
equitable, including permanent injunctive relief or specific performance or
both, and the Arbitrator is hereby empowered to award such relief. Any award or
relief granted by the Arbitrator hereunder shall be final and binding on the
parties hereto and may be enforced by any court of competent jurisdiction.
Phanstiel, ARV, and Lazard understand and agree that they are hereby waiving any
rights to trial by jury in any action, proceeding or counterclaim brought by any
of the parties against another in connection with any matter whatsoever arising
out of or in any way connected with this Agreement.
34. In the event of litigation or arbitration in connection with or
concerning the subject matter of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses incurred by such party in connection
therewith, including reasonable attorneys' fees.
35. No waiver of any breach of any term or provision of this
Agreement shall be construed to be, or shall be, a waiver of any other breach of
this Agreement. No waiver shall be binding unless in writing and signed by the
party waiving the breach.
36. In entering this Agreement, the parties represent that they have
relied upon the advice of their attorneys, who are attorneys of their own
choice, and that the terms of this Agreement have been completely read and
explained to them by their attorneys, and that those terms are fully understood
and voluntarily accepted by them.
37. ARV and Phanstiel shall each pay their own attorneys' fees
incurred with respect to Phanstiel's employment, the termination thereof, and
the negotiation, preparation, and execution of this Agreement. Neither Lazard
nor its affiliates shall be responsible for any such fees incurred by ARV or
Phanstiel.
38. Each party acknowledges that each other party would not have an
adequate remedy at law for money damages in the event that this Agreement is not
performed in accordance with its terms, and therefore agrees that each other
party shall be entitled to specific enforcement of the terms hereof in addition
to any other remedy to which it may be entitled, at law or in equity.
39. All parties agree to cooperate fully and to execute any and all
supplementary documents and to take all additional actions that may be necessary
or appropriate to give full force to the basic terms and intent of this
Agreement and which are not inconsistent with its terms.
9
<PAGE> 10
I have read the foregoing Agreement and I accept and agree to the
provisions it contains and hereby execute it voluntarily with full understanding
of its consequences.
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
EXECUTED this 23rd day of March 1999, at Los Angeles County,
California.
/s/ Howard G. Phanstiel
-------------------------------------------
Howard G. Phanstiel
Approved as to form:
TROOP STEUBER PASICH REDDICK & TOBEY
By /s/ Alisa M. Chevalier
- ------------------------------------
Alisa M. Chevalier
Attorneys for Howard G. Phanstiel
EXECUTED this 26th day of March 1999, at Orange County, California.
ARV Assisted Living, Inc.
By /s/ Douglas M. Pasquale
-----------------------------------------
Its President
-------------------------------------
10
<PAGE> 11
Approved as to form:
O'MELVENY & MYERS LLP
By /s/ Larry A. Walraven
------------------------------------
Larry A. Walraven
Attorneys for ARV Assisted Living, Inc.
EXECUTED this _____ day of March 1999, at ________________ County,
________________.
Lazard Freres Real Estate Investors L.L.C.,
only with respect to Sections 2, 13-25, and
27-39
By /s/ Robert P. Freeman
-----------------------------------------
Its Principal
------------------------------------
Approved as to form:
QUINN, EMANUEL, URQUHART,
OLIVER & HEDGES, LLP
By /s/ John B. Quinn
------------------------------------
John Corey John B. Quinn
Attorneys for Lazard Freres
Real Estate Investors L.L.C.
11
<PAGE> 12
ENDORSEMENT
I, Howard G. Phanstiel, hereby acknowledge that I was given 21 days
to consider the foregoing Agreement and voluntarily chose to sign the Agreement
prior to the expiration of the 21-day period.
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
EXECUTED this _23rd_ day of March 1999, at _Los Angeles_ County,
California.
/s/ Howard G. Phanstiel
-----------------------------------------
Howard G. Phanstiel
12
<PAGE> 1
Exhibit 10.21
SEPARATION AND MUTUAL GENERAL RELEASE AGREEMENT
This Separation and Mutual General Release Agreement ("Agreement"),
made this 17th day of March 1999, by and between Sheila M. Muldoon, an
individual ("Muldoon"), and ARV Assisted Living, Inc., a corporation ("ARV") is
a separation agreement which includes a mutual general release of claims. Lazard
Freres Real Estate Investors L.L.C. ("Lazard") is a party to this Agreement only
with respect to paragraphs 2, 6, 8, 9, 14, 15, and 18-27.
In consideration of the covenants undertaken and the releases
contained in this Agreement, Muldoon and ARV agree, and Lazard agrees with
respect to paragraphs 2, 6, 8, 9, 14, 15, and 18-27, as follows:
1. Muldoon's position as Senior Vice President and General
Counsel of ARV is terminated, such termination to be effective
March 17, 1999 (the "Separation Date").
2. That certain April 23, 1997 Employment Agreement ("Employment
Agreement") and the October 21, 1997 Amendment to that
Employment Agreement ("Amended Employment Agreement") between
Muldoon and ARV shall terminate, such termination to be
effective March 15, 1999. All payments due to Muldoon from
ARV shall be determined under this Agreement and the
Consulting Agreement, and no payments shall be made under the
Employment Agreement or Amended Employment Agreement. All
payments due to Muldoon under this Agreement shall be the sole
responsibility of ARV and not of Lazard or any of Lazard's
affiliates.
3. Concurrently with the execution of this Agreement, and in
consideration of the promises given and payments made
hereunder, Muldoon and ARV shall execute the Consulting
Agreement attached hereto as Exhibit A. Any breach of the
Consulting Agreement shall also constitute a breach of this
Agreement.
4. ARV shall pay to Muldoon severance in a total amount of
$185,000.00, less standard withholding and authorized
deductions. One-half of such amount ($92,500.00) shall be paid
to Muldoon on or before ten (10) days after Muldoon's
execution of this Agreement. The remaining one-half shall be
paid to Muldoon on the earlier of (i) May 31, 1999, (ii) the
date on which the Company terminates the Consulting Agreement
for reasons other than a breach by Muldoon, or (iii) ten (10)
days after the date ARV closes its pending financing
transaction with Bank One. In addition, Muldoon acknowledges
that she has already received through direct deposit her
accrued but unpaid salary through March 15, 1999. On March
1
<PAGE> 2
17, 1999, ARV shall pay to Muldoon accrued but unused vacation
in the amount of $21,346.18, and unpaid salary in the amount
of $1,422.88, each less standard withholding and authorized
deductions.
5. During the term of the Consulting Agreement, ARV shall
reimburse Muldoon for the amount of her premiums for COBRA
continuation coverage under ARV's welfare benefit plans.
6. Muldoon on the one hand, and ARV and Lazard collectively on
the other, agree that each shall not (1) directly or
indirectly, make or ratify any statement, public or private,
oral or written, that disparages, either professionally or
personally, the other party or parties, the other party or
parties' subsidiaries and affiliates, past and present, and
each of them, as well as its and their trustees, directors,
officers, agents, attorneys, insurers, employees,
stockholders, representatives, assigns, and successors, past
and present, and each of them, or (2) make any statement or
engage in any conduct that has the purpose or effect of
disrupting the business of the other party or parties. The
parties hereby agree that any statement made in violation of
the foregoing shall constitute and be treated as a material
breach of this Agreement. This Section 6 shall not apply to
or in any way limit (i) statements made by a party in any
court, arbitral or governmental proceeding or (ii) a party's
private consultation with its attorneys or other professional
advisors.
7. ARV expressly denies any violation of any of its policies,
procedures, state or federal laws or regulations.
Accordingly, while this Agreement resolves all issues between
Muldoon and ARV relating to any alleged violation of ARV's
policies or procedures or any state or federal law or
regulation, this Agreement does not constitute an adjudication
or finding on the merits and it is not, and shall not be
construed as, an admission by ARV of any violation of its
policies, procedures, state or federal laws or regulations.
Moreover, neither this Agreement nor anything in this
Agreement shall be construed to be or shall be admissible in
any proceeding as evidence of or an admission by ARV of any
violation of its policies, procedures, state or federal laws
or regulations. This Agreement may be introduced, however, in
any proceeding to enforce the Agreement. Such introduction
shall be pursuant to a stipulation agreeing to an order
protecting its confidentiality.
8. Except for those obligations created by or arising out of
this Agreement or the Consulting Agreement, Muldoon on behalf
of herself, her descendants, dependents, heirs, executors,
administrators, assigns, and successors, and each of them,
hereby covenants not to sue and fully releases and discharges
ARV, Lazard, LF Strategic Realty Investors II L.P., LFSRI II
Alternative Partnership LP, LFSRI II-CADIM Alternative
Partnership L.P., Atria Communities, Inc., Kapson Senior
Quarters Corp., Prometheus
2
<PAGE> 3
Assisted Living LLC, their respective predecessors, successors
and assigns, and their respective past, present and future
parents, subsidiaries, affiliates, trustees, executors,
administrators, officers, directors, owners, associates,
heirs, agents, insurers, stockholders, partners, employees,
licensees, representatives, lawyers, consultants, investment
bankers, accountants or any of them and including, without
limitation, Robert P. Freeman, Murry N. Gunty and Kenneth M.
Jacobs, and each of them, hereinafter together and
collectively referred to as "Releasees," with respect to and
from any and all manner of action or actions, cause or causes
of action, in law or equity, and any suits, debts, liens,
liabilities, claims, counter-claims, cross-claims, demands,
rights, obligations, damages, losses, costs, expenses,
attorneys' fees, judgments, orders or indemnities, of all and
any nature whatsoever, whether individual or derivative, state
or federal, known or unknown, fixed or contingent, suspected
or unsuspected, and whether or not concealed or hidden, that
against said Releasees, or any of them, Muldoon: (i) may have
or may now have up to the date of this Agreement; or (ii) may
hereafter have based upon, arising out of, related to or in
any way connected with her service as an officer or employee
of ARV, her separation from her position as Senior Vice
President and General Counsel of ARV or her employment by, or
status as an officer of, any ARV affiliate, or any other
transactions, occurrences, acts or omissions or any loss,
damage or injury whatever, known or unknown, suspected or
unsuspected, resulting from any act or omission by or on the
part of said Releasees, or any of them, committed or omitted
prior to the date of this Agreement including, without
limiting the generality of the foregoing, any claim that was
or could have been alleged in, or any of the facts giving rise
to or allegedly giving rise to, those certain actions entitled
ARV Assisted Living, Inc. v. Lazard Freres Real Estate
Investors LLC et al., Case No. 794211, Superior Court for the
State of California for the County of Orange and related
cross-actions ("ARV v. LFREI") and/or Prometheus Assisted
Living LLC v. Howard G. Phanstiel et al., Civil Action No.
16846 In the Court of Chancery of the State of Delaware in and
for New Castle County ("Prometheus v. Phanstiel"), any claim
under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with
Disabilities Act, the Family and Medical Leave Act of 1993,
the California Fair Employment and Housing Act, the California
Family Rights Act, or any claim for severance pay, bonus, sick
leave, holiday pay, vacation pay, life insurance, health or
medical insurance or any other fringe benefit, workers'
compensation or disability. Notwithstanding anything to the
contrary herein, the releases given herein do not include any
claim Muldoon now has or may hereafter have for
indemnification under that certain Indemnification Agreement
between Muldoon and ARV dated August 13, 1996 (the "Indemnity
Agreement") or under ARV's Articles of Incorporation or By
Laws.
3
<PAGE> 4
Except for those obligations created by or arising out of this
Agreement, the Consulting Agreement, or the Indemnity Agreement, ARV and Lazard
hereby acknowledge full and complete satisfaction of and release and discharge,
and covenant not to sue, Muldoon from and with respect to any and all claims,
agreements, obligations, losses, damages, injuries, demands and causes of
action, known or unknown, suspected or unsuspected, arising out of or in any way
connected with Muldoon's service as Senior Vice President and General Counsel of
ARV or as any officer or director of any ARV subsidiaries, or the separation
from such positions, or any other transactions, occurrences, acts or omissions
or any loss, damage or injury whatever, known or unknown, suspected or
unsuspected, resulting from any act or omission by or on the part of Muldoon
committed or omitted prior to the date of this Agreement which ARV and/or Lazard
now owns or holds or has at any time heretofore owned or held as against Muldoon
including, without limiting the generality of the foregoing, any claim that was
or could have been alleged against Muldoon in ARV v. LFREI and/or Prometheus v.
Phanstiel.
9. Muldoon, ARV, and Lazard, and each of them, hereby represent,
warrant, and acknowledge to each other, that they have
received independent legal advice from their respective
attorneys regarding the advisability of executing this
Agreement and giving the releases provided for herein, and
hereby acknowledge the provisions of Section 1542 of the
California Civil Code, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Muldoon, ARV and Lazard, and each of them, being aware of Section 1542, hereby
expressly waive and relinquish any rights or benefits they have or may have
thereunder in connection with the releases provided herein, as well as under any
other California or any Federal or state statute or common law principle of
similar effect. Each of Muldoon, ARV and Lazard acknowledges that it is aware
that it or its attorney may hereafter discover facts different from or in
addition to the facts which it or its attorney now knows or believes to be true
with respect to the subject matter of this Agreement but that it is their
intention hereby to settle and release fully, finally, absolutely and forever
any and all claims, disputes and differences, known or unknown, suspected or
unsuspected, which now exist, may hereafter exist, or heretofore have existed
arising from, related to or in any way connected with the released matters set
forth in paragraph 8 of this Agreement, and without regard to the subsequent
discovery or existence of such different or additional facts except as expressly
set forth herein, which do now exist or heretofore have existed between the
parties. In furtherance of this intention, the releases herein given shall be
and remain in effect as full and complete releases, except as expressly set
forth herein, notwithstanding the discovery of any such additional facts.
Muldoon, ARV and Lazard acknowledge that they understand the significance and
consequence of such release and such specific waiver of SECTION 1542. The
parties, and each of them, hereby further represent, warrant, and acknowledge to
the other parties, and each of them, that there is a risk that,
4
<PAGE> 5
subsequent to the date of this Agreement, they will incur damage or loss that
they deem in some way attributable to the subject matter of this Agreement, or
to the actions prior to the date of this Agreement of Muldoon, ARV, Lazard, LF
Strategic Realty Investors II L.P., LFSRI II Alternative Partnership LP, LFSRI
II-CADIM Alternative Partnership L.P., Atria Communities, Inc., Kapson Senior
Quarters Corp., Prometheus Assisted Living LLC, Robert P. Freeman, Murry N.
Gunty, or Kenneth M. Jacobs, as the case may be, but which are unknown and
unanticipated as of the date of this Agreement, or that damages presently known
may become progressive, greater or more serious than is now known, expected or
anticipated, or that facts alleged in the subject matter of this Agreement are
found to be different from the facts now believed by them to be true. The
parties hereby expressly accept such risks and agree that this Agreement is and
will remain effective notwithstanding such risks, if they occur.
10. Muldoon expressly acknowledges and agrees that, by entering
into this Agreement, she is waiving any and all rights or
claims that she may have arising under the Age Discrimination
in Employment Act of 1967, as amended, which have arisen on or
before the date of execution of this Agreement. Muldoon
further expressly acknowledges and agrees that:
a. In return for this Agreement, she will receive consideration (the
releases given herein) beyond that which she was already entitled to
receive before entering into this Agreement;
b. She was orally advised by ARV and is hereby advised in writing by
this Agreement to consult with an attorney before signing this
Agreement;
c. She was given a copy of this Agreement on March 17, 1999, and
informed that she had 21 days within which to consider the
Agreement; and
d. She was informed that she has seven (7) days following the date
of execution of the Agreement in which to revoke the Agreement.
11. Muldoon acknowledges that by reason of her position with ARV
she has been given access to, received, and been entrusted
with confidential information, including but in no way limited
to development, marketing, organizational, financial,
management, administrative, production, distribution and sales
information, data, specifications and processes owned by ARV
or its agents or consultants, or used in the course of its
business that is not otherwise part of the public domain
(collectively, the "Confidential Material"). Muldoon
represents that she has held all Confidential Material
confidential and will continue to do so, and that she will not
use Confidential Material for any business (which term herein
includes a partnership, firm, corporation or any other entity)
without the prior written consent of ARV. Muldoon hereby
acknowledges that the sale or unauthorized use or disclosure
of any of ARV's Confidential Material by any means whatsoever
shall constitute unfair competition.
5
<PAGE> 6
Muldoon agrees that she shall not engage in unfair competition
at any time on or after the date of this Agreement.
12. Muldoon promises and agrees that she will not, during her
engagement pursuant to the Consulting Agreement attached
hereto as Exhibit A and for a period of one year following
termination of such engagement or the expiration of the
Consulting Agreement, influence or attempt to influence
customers of ARV or any of its present or future subsidiaries
or affiliates, either directly or indirectly, to divert their
business to any individual, partnership, firm, corporation or
other entity then in competition with the business of ARV, or
any subsidiary or affiliate of ARV. The performance of legal
services for an ARV competitor after the termination of the
Consulting Agreement shall not itself constitute a violation
of this Section 12, provided, however, that such legal
services provided by Muldoon in no way relate to any
proceeding or transaction in which ARV is a subject, party, or
participant.
13. Muldoon promises and agrees that she will not, during her
engagement pursuant to the Consulting Agreement attached
hereto as Exhibit A and for a period of one year following the
earlier of termination of such engagement or the expiration of
the Consulting Agreement, directly or indirectly solicit any
ARV employees who earned annually $25,000 or more as an ARV
employee during the last six months of his or her own
employment to work for any business, individual, partnership,
firm, corporation, or other entity then in competition with
the business of ARV or any subsidiary or affiliate of ARV.
14. Muldoon, ARV and Lazard agree that the terms and conditions of
this Agreement shall remain confidential as between the
parties and they shall not (except as required by law,
including disclosures required to shareholders or regulators,
and in a press release provided for herein) disclose them to
any other person. The parties shall mutually agree upon the
text of a press release announcing the separation of Muldoon
from her position as Senior Vice President and General Counsel
at ARV and the substance of any other comments (including any
announcement to ARV employees) regarding the fact of Muldoon's
separation from such position and the reasons therefor. Except
as provided for in the mutually agreed disclosures, the
parties will not respond to or in any way participate in or
contribute to any public discussion, notice or other publicity
concerning, or in any way relating to, execution of this
Agreement or the events (including any negotiations) which led
to its execution. Without limiting the generality of the
foregoing, the parties specifically agree that they shall not
disclose information regarding this Agreement to any current
or former employee of ARV or any of its subsidiaries. The
parties hereby agree that disclosure by them of any of the
terms and conditions of the Agreement in violation of the
foregoing shall constitute and be treated as a
6
<PAGE> 7
material breach of this Agreement. This Section 14 shall not
apply to or in any way limit (i) statements made by a party in
any court, arbitral or governmental proceeding or (ii) a
party's private consultation with its attorneys or other
professional advisors.
15. Muldoon, ARV and Lazard each warrant and represent that there
has been no assignment or other transfer of any interest in
the released matters set forth in Sections 8 or 9 of this
Agreement, any claims, counterclaims, cross-claims, demands,
causes of action, or any part or portion thereof, that, but
for such assignment or transfer, would be subject to the
releases set forth in Sections 8 or 9 of this Agreement and
each agrees to indemnify, defend and hold harmless the others
from any liabilities, action or actions, cause or causes of
action in law or equity, suits, debts, liens, and from any
claims made upon, demands upon, damages asserted against, and
costs, expenses and attorneys' fees incurred (whether or not
litigation is actually commenced) by the other parties, or any
of them, based on or in connection with or arising out of any
such assignment or transfer made, purported or claimed.
16. Muldoon and ARV acknowledge that they have no further
employment or contractual relationship except as arises out of
this Agreement and as set forth in (i) the Consulting
Agreement attached hereto as Exhibit A and (ii) the Indemnity
Agreement, and that Muldoon waives any right or claim to
reinstatement as an employee of ARV.
17. This instrument, the Consulting Agreement attached hereto as
Exhibit A, and the Indemnity Agreement constitute and contain
the entire agreement and understanding concerning Muldoon's
relationship with ARV and the other subject matters addressed
herein between the parties, and supersedes and replaces all
prior negotiations and all agreements proposed or otherwise,
whether written or oral, concerning the subject matters
hereof. This is an integrated document.
18. Muldoon may revoke this Agreement in its entirety during the
seven (7) days following execution of the Agreement by
Muldoon. Any revocation of the Agreement must be in writing
and hand delivered during the revocation period. This
Agreement and the Consulting Agreement will become effective
and enforceable seven (7) days following execution by Muldoon,
unless this Agreement is revoked during the seven-day period.
19. If any provision of this Agreement or the application thereof
is held invalid, the invalidity shall not affect other
provisions or applications of the Agreement which can be given
effect without the invalid provisions or applications and to
this end the provisions of this Agreement are declared to be
severable.
7
<PAGE> 8
20. This Agreement shall be deemed to have been executed and
delivered within the State of California, and the rights and
obligations of the parties hereunder shall be construed and
enforced in accordance with, and governed by, the laws of the
State of California without regard to principles of conflict
of laws.
21. Each party has cooperated in the drafting and preparation of
this Agreement. Hence, in any construction to be made of this
Agreement, the same shall not be construed against any party
on the basis that the party was the drafter.
22. This Agreement may be executed in counterparts, and each
counterpart, when executed, shall have the efficacy of a
signed original. Photographic copies of such signed
counterparts may be used in lieu of the originals for any
purpose.
23. Any controversy arising out of or relating to this Agreement,
its enforcement or interpretation, or because of an alleged
breach, default, or misrepresentation in connection with any
of its provisions, shall be submitted to arbitration in Orange
County, California, before a sole arbitrator selected from
Judicial Arbitration and Mediation Services, Inc., Orange
County, California, or its successor ("JAMS"), or if JAMS is
no longer able to supply the arbitrator, such arbitrator shall
be selected from the American Arbitration Association, and
shall be conducted in accordance with the provisions of
California Civil Procedure Code Sections 1280 et seq. as the
exclusive remedy of such dispute; provided, however, that
provisional injunctive relief may, but need not, be sought in
a court of law while arbitration proceedings are pending, and
any provisional injunctive relief granted by such court shall
remain effective until the matter is finally determined by the
Arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief which the
Arbitrator deems just and equitable, including permanent
injunctive relief or specific performance, or both, and the
Arbitrator is hereby empowered to award such relief. Any award
or relief granted by the Arbitrator hereunder shall be final
and binding on the parties hereto and may be enforced by any
court of competent jurisdiction. Muldoon and ARV understand
and agree that they are hereby waiving any rights to trial by
jury in any action, proceeding or counterclaim brought by
either of the parties against the other in connection with any
matter whatsoever arising out of or in any way connected with
this Agreement.
24. In the event of litigation or arbitration in connection with
or concerning the subject matter of this Agreement, the
prevailing party (as determined by the tribunal or arbitrator)
shall be entitled to recover all costs and expenses incurred
by such party in connection therewith, including reasonable
attorneys' fees.
8
<PAGE> 9
25. No waiver of any breach of any term or provision of this
Agreement shall be construed to be, or shall be, a waiver of
any other breach of this Agreement. No waiver shall be binding
unless in writing and signed by the party waiving the breach.
26. In entering this Agreement, the parties represent that they
have relied upon the advice of their attorneys, who are
attorneys of their own choice, and that the terms of this
Agreement have been completely read and explained to them by
their attorneys, and that those terms are fully understood and
voluntarily accepted by them.
27. All parties agree to cooperate fully and to execute any and
all supplementary documents and to take all additional actions
that may be necessary or appropriate to give full force to the
basic terms and intent of this Agreement and which are not
inconsistent with its terms.
I have read the foregoing Agreement and I accept and agree to the
provisions it contains and hereby execute it voluntarily with full understanding
of its consequences.
EXECUTED this 17th day of March 1999, at Orange County, California.
/s/ Sheila M. Muldoon
-----------------------------------------
Sheila M. Muldoon
Approved as to form:
PAUL, HASTINGS, JANOFSKY & WALKER LLP
By /s/ Peter J. Tennyson
----------------------------------
Peter J. Tennyson
Attorneys for Sheila M. Muldoon
EXECUTED this 17th day of March 1999, at Orange County, California.
ARV Assisted Living, Inc.
By /s/ Douglas M. Pasquale
-----------------------------------------
Its President and Chief Operations
Officer
Approved as to form:
9
<PAGE> 10
O'MELVENY & MYERS LLP
By /s/ Larry A. Walraven
------------------------------------
Larry A. Walraven
Attorneys for ARV Assisted Living, Inc.
EXECUTED this _____ day of March 1999, at ________________ County,
_____________.
Lazard Freres Real Estate Investors L.L.C.,
with respect to paragraphs 2, 6, 8, 9, 14,
15, 18-27 only
By /s/ Robert P. Freeman
-----------------------------------------
Its Principal
Approved as to form:
QUINN, EMANUEL, URQUHART,
OLIVER & HEDGES, LLP
By /s/ John B. Quinn
---------------------------------
Attorneys for Lazard Freres
Real Estate Investors L.L.C.
John B. Quinn
10
<PAGE> 11
ENDORSEMENT
I, Sheila M. Muldoon, hereby acknowledge that I was given 21 days to
consider the foregoing Agreement and voluntarily chose to sign the Agreement
prior to the expiration of the 21-day period.
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
EXECUTED this 17th day of March 1999, at Orange County, California.
/s/ Sheila M. Muldoon
-------------------------------------
Sheila M. Muldoon
11
