EXHIBIT 10.6
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LOAN AGREEMENT
Dated as of August 19, 2003
Between
THE ENTITIES LISTED ON SCHEDULE I ANNEXED HERETO,
as Borrower
and
COLUMN FINANCIAL, INC.,
as Lender
FOUNTAIN VIEW PORTFOLIO
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TABLE OF CONTENTS
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I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1. Definitions................................................................. 1
Section 1.2. Principles of Construction.................................................. 27
II. GENERAL TERMS
Section 2.1. Loan Commitment; Disbursement to Borrower................................... 27
Section 2.2. Interest Rate............................................................... 28
Section 2.3. Loan Payment................................................................ 34
Section 2.4. Prepayments................................................................. 35
Section 2.5. Release of Property......................................................... 36
Section 2.6. Cash Management............................................................. 37
Section 2.7. Assumption of a Portion of the Loan......................................... 41
III. CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to Closing............................................. 46
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1. Borrower Representations.................................................... 50
Section 4.2. Health Care Representations................................................. 58
Section 4.3. Survival of Representations................................................. 60
V. BORROWER COVENANTS
Section 5.1. Affirmative Covenants....................................................... 60
Section 5.2. Negative Covenants.......................................................... 72
VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
Section 6.1. Insurance................................................................... 79
Section 6.2. Casualty.................................................................... 83
Section 6.3. Condemnation................................................................ 83
Section 6.4. Restoration................................................................. 84
VII. RESERVE FUNDS
Section 7.1. Required Repair Funds....................................................... 88
Section 7.2. Tax and Insurance Escrow Fund............................................... 89
Section 7.3. Replacements and Replacement Reserve........................................ 89
Section 7.4. Debt Service Reserve........................................................ 90
Section 7.5. Reserve Funds, Generally.................................................... 90
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Section 7.6. Casualty Insurance Deductible Reserve....................................... 91
Section 7.7. Professional Liability Insurance Deductible Reserve........................ 92
VIII. DEFAULTS
Section 8.1. Event of Default............................................................ 93
Section 8.2. Remedies.................................................................... 95
IX. SPECIAL PROVISIONS
Section 9.1. Sale of Notes and Securitization............................................ 97
Section 9.2. Securitization Indemnification.............................................. 98
Section 9.3. Administration of Bankruptcy Claims......................................... 101
Section 9.4. Exculpation................................................................. 101
Section 9.5. Intentionally Omitted....................................................... 103
Section 9.6. Servicer.................................................................... 103
X. MISCELLANEOUS
Section 10.1. Survival.................................................................... 104
Section 10.2. Lender's Discretion......................................................... 104
Section 10.3. Governing Law............................................................... 104
Section 10.4. Modification, Waiver in Writing............................................. 106
Section 10.5. Delay Not a Waiver.......................................................... 106
Section 10.6. Notices..................................................................... 106
Section 10.7. Trial by Jury............................................................... 108
Section 10.8. Headings.................................................................... 108
Section 10.9. Severability................................................................ 108
Section 10.10. Preferences................................................................. 108
Section 10.11. Waiver of Notice............................................................ 108
Section 10.12. Remedies of Borrower........................................................ 108
Section 10.13. Expenses; Indemnity......................................................... 109
Section 10.14. Schedules Incorporated...................................................... 110
Section 10.15. Offsets, Counterclaims and Defenses......................................... 110
Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries............... 110
Section 10.17. Publicity................................................................... 111
Section 10.18. Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets..... 111
Section 10.19. Waiver of Counterclaim...................................................... 111
Section 10.20. Conflict; Construction of Documents; Reliance............................... 111
Section 10.21. Brokers and Financial Advisors.............................................. 112
Section 10.22. Prior Agreements............................................................ 112
Section 10.23. Note Register; Ownership of Promissory Note B............................... 112
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SCHEDULES
Schedule I - Properties and Borrowers
Schedule II - Allocated Loan Amounts
Schedule III - Required Repairs - Deadlines for Completion
Schedule IV - Organizational Structure
Schedule V - Licensed Bed Capacity
Schedule VI - Allocation of Debt Service Reserve
Schedule VII - Form of Occupancy Report
Schedule VIII - Fictitious Business Names
Schedule IX - Exception to Health Care Representations
Schedule X - Interim Management Agreements and Subleases
Schedule XI - Properties with Provisional Licenses
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of August 19, 2003 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this
"AGREEMENT"), between COLUMN FINANCIAL, INC., having an address at 11 Madison
Avenue, New York, New York 10010 ("LENDER"), and the entities set forth on
Schedule I annexed hereto and made a part hereof, jointly and severally, each
having its principal place of business at 27442 Portola Parkway, Suite 200,
Foothill Ranch, California 92610 (collectively, "BORROWER").
W I T N E S S E T H:
WHEREAS, Borrower desires to obtain the Loan (as hereinafter
defined) from Lender; and
WHEREAS, Lender is willing to make the Loan to Borrower,
subject to and in accordance with the terms of this Agreement and the other Loan
Documents (as hereinafter defined).
NOW THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereto hereby covenant, agree, represent and
warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1. DEFINITIONS. For all purposes of this Agreement,
except as otherwise expressly required or unless the context clearly indicates a
contrary intent:
"ACCEPTABLE COUNTERPARTY" shall mean any counterparty to the
Interest Rate Cap Agreement that has and shall maintain, until the expiration of
the applicable Interest Rate Cap Agreement a long-term unsecured debt rating of
at least "AAA" by S&P and "Aaa" from Moody's, which rating shall not include a
"t" or otherwise reflect a termination risk.
"ADDITIONAL INSOLVENCY OPINION" shall have the meaning set
forth in Section 4.1.30(c) hereof.
"AFFILIATE" shall mean, as to any Person, any other Person
that, directly or indirectly, is in control of, is controlled by or is under
common control with such Person or is a director or officer of such Person or of
an Affiliate of such Person.
"AFFILIATED LOANS" shall mean a loan made by Lender to an
Affiliate of Borrower or any Guarantor.
"AFFILIATED MANAGER" shall mean any manager of any Individual
Property in which Borrower, Principal, or any Guarantor has, directly or
indirectly, any legal, beneficial or economic interest.
"ALLOCATED LOAN AMOUNT" shall mean, for each Individual
Property, the amount set forth on Schedule II hereto.
"ALTA" shall mean American Land Title Association, or any
successor thereto.
"ANNUAL BUDGET" shall mean the operating budget, including all
planned Capital Expenditures, for the Properties and each Individual Property
separately, prepared by Borrower for the applicable Fiscal Year or other period.
"APPLICABLE INTEREST RATE" shall mean the rate or rates at
which the outstanding principal amount of the Loan bears interest from time to
time in accordance with the provisions of Section 2.2.3 hereof.
"APPROVED ANNUAL BUDGET" shall have the meaning set forth in
Section 5.1.11(l) hereof.
"ASSIGNMENT OF LEASES" shall mean, with respect to each
Individual Property, that certain first priority Assignment of Leases and Rents,
dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee,
assigning to Lender all of Borrower's interest in and to the Leases and Rents of
such Individual Property as security for the Loan, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"ASSUMED LOAN" shall have the meaning set forth in Section
2.7.1(g).
"ASSUMED LOAN BORROWER" shall have the meaning set forth in
Section 2.7.1(e).
"ASSUMED LOAN DOCUMENTS" shall have the meaning set forth in
Section 2.7.1(h).
"ASSUMED PROPERTIES" shall have the meaning set forth in
Section 2.7.1.
"ASSUMED PROPERTY" shall have the meaning set forth in Section
2.7.1.
"ASSUMED PROPERTY DEPOSIT" shall have the meaning set forth in
Section 2.7.1(t).
"AWARD" shall mean any compensation paid by any Governmental
Authority in connection with a Condemnation with respect to all or any part of
any Individual Property.
"BANKRUPTCY ACTION" shall mean with respect to any Person (a)
such Person filing a voluntary petition under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary
petition against such Person under the Bankruptcy Code or any other Federal or
state bankruptcy or insolvency law, or soliciting or causing to be solicited
petitioning creditors for any involuntary petition against such Person; (c) such
Person filing an answer consenting to or otherwise acquiescing in or joining in
any involuntary petition filed against it, by any other Person under the
Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or
soliciting or causing to be solicited petitioning creditors for any involuntary
petition from any Person; (d) such Person consenting to or
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acquiescing in or joining in an application for the appointment of a custodian,
receiver, trustee, or examiner for such Person or any portion of the Property;
or (e) such Person making an assignment for the benefit of creditors, or
admitting, in writing or in any legal proceeding, its insolvency or inability to
pay its debts as they become due.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of
1978, as amended, 11 U.S.C., Section 101, et seq., and the regulations adopted
and promulgated pursuant thereto.
"BASIC CARRYING COSTS" shall mean, for any period, with
respect to each Individual Property, the sum of the following costs associated
with such Individual Property for such period: (a) Taxes and (b) Insurance
Premiums.
"BORROWER" shall mean, individually and collectively, each of
the entities set forth on Schedule I annexed hereto and made a part hereof,
together with their successors and assigns. Each reference to Borrower shall
refer to such entities collectively and individually to each entity constituting
Borrower.
"BREAKAGE COSTS" shall have the meaning set forth in Section
2.2.3(h) hereof.
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or any other day on which national banks in New York, New York are not
open for business.
"CAPITAL EXPENDITURES" shall mean, for any period, the amount
expended for items capitalized under GAAP (including expenditures for building
improvements or major repairs, leasing commissions and tenant improvements).
"CASH EXPENSES" shall mean, for any period, the Operating
Expenses for the operation of the Properties as set forth in an Approved Annual
Budget to the extent that such expenses are actually incurred by Borrower minus
any payments into the Tax and Insurance Escrow Fund and the Replacement Reserve
Fund.
"CASH MANAGEMENT ACCOUNT" shall have the meaning set forth in
Section 2.6.4(a) hereof.
"CASH MANAGEMENT AGREEMENT" shall mean that certain Cash
Management Agreement, dated as of the date hereof, by and among Borrower,
Skilled Healthcare LLC, Skilled Healthcare II LLC and Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"CASUALTY" shall have the meaning set forth in Section 6.2
hereof.
"CASUALTY CONSULTANT" shall have the meaning set forth in
Section 6.4(b)(iii) hereof.
"CASUALTY INSURANCE DEDUCTIBLE RESERVE ACCOUNT" shall have the
meaning set forth in Section 7.6.1 hereof.
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"CASUALTY INSURANCE DEDUCTIBLE RESERVE FUND" shall have the
meaning set forth in Section 7.6.1 hereof.
"CASUALTY RETAINAGE" shall have the meaning set forth in
Section 6.4(b)(iv) hereof.
"CATCH-UP AMOUNT" shall have the meaning set forth in Section
2.3.2 hereof.
"CLOSING DATE" shall mean the date of the funding of the Loan.
"CLOSING DATE DEBT SERVICE COVERAGE RATIO" shall mean 2.0:1.
"CLOSING DATE LOAN-TO VALUE RATIO" shall mean forty-nine
percent (49%).
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, as it may be further amended from time to time, and any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"COLLATERAL ASSIGNMENT OF INTEREST RATE CAP AGREEMENT" shall
mean that certain Collateral Assignment of Interest Rate Cap Agreement, dated as
of the date hereof, executed by Borrower in connection with the Loan for the
benefit of the Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"CONDEMNATION" shall mean a temporary or permanent taking by
any Governmental Authority as the result or in lieu or in anticipation of the
exercise of the right of condemnation or eminent domain, of all or any part of
any Individual Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting such
Individual Property or any part thereof.
"CONDEMNATION PROCEEDS" shall have the meaning set forth in
Section 6.4(b) hereof.
"CONTRACT" shall have the meaning set forth in the Mortgages.
"COUNTERPARTY" shall mean, with respect to the Interest Rate
Cap Agreement, SMBC Derivative Products Limited, and with respect to any
Replacement Interest Rate Cap Agreement, any substitute Acceptable Counterparty.
"COVERED DISCLOSURE INFORMATION" shall have the meaning set
forth in Section 9.2(b) hereof.
"CSFB" shall mean Credit Suisse First Boston LLC and its
successors in interest.
"DEBT" shall mean the outstanding principal amount set forth
in, and evidenced by, this Agreement and the Note together with all interest
accrued and unpaid thereon and all other sums due to Lender in respect of the
Loan under the Note, this Agreement, the Mortgages and the other Loan Documents.
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"DEBT SERVICE" shall mean, with respect to any particular
period of time, scheduled principal and/or interest payments due under this
Agreement and the Note.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the
applicable period in which:
(a) the numerator is the Net Operating Income (excluding
interest on credit accounts) for such period as set forth in the financial
statements required hereunder; and
(b) the denominator is the applicable Debt Service due
and payable on the Note A.
"DEBT SERVICE RESERVE ACCOUNT" shall have the meaning set
forth in Section 7.4.1 hereof.
"DEBT SERVICE RESERVE FUND" shall have the meaning set forth
in Section 7.4.1 hereof.
"DEFAULT" shall mean the occurrence of any event hereunder or
under any other Loan Document which, but for the giving of notice or passage of
time, or both, would be an Event of Default.
"DEFAULT RATE" shall mean a rate per annum equal to the lesser
of (a) the Maximum Legal Rate and (b) five percent (5%) above the Applicable
Interest Rate.
"DETERMINATION DATE" shall mean, with respect to any Interest
Period, the date that is two (2) London Business Days prior to the fifteenth
(15th) day of the calendar month in which such Interest Period commences.
"DISCLOSURE DOCUMENT" shall mean a prospectus, prospectus
supplement, private placement memorandum, offering memorandum, offering
circular, term sheet, road show presentation materials or other offering
documents or marketing materials, in each case in preliminary or final form,
used to offer Securities in connection with a Securitization.
DOPNA shall have the meaning set forth in Section 5.1.28
hereof.
"ELIGIBLE ACCOUNT" shall mean a separate and identifiable
account from all other funds held by the holding institution that is either (a)
an account or accounts maintained with a federal or state-chartered depository
institution or trust company which complies with the definition of Eligible
Institution or (b) a segregated trust account or accounts maintained with a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity which, in the case of a state chartered depository
institution or trust company, is subject to regulations substantially similar to
12 C.F.R. Section. 9.10(b), having in either case a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal and
state authority. An Eligible Account will not be evidenced by a certificate of
deposit, passbook or other instrument.
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"ELIGIBLE INSTITUTION" shall mean a depository institution or
trust company, the short term unsecured debt obligations or commercial paper of
which are rated at least "A-1+" by S&P, "P-1" by Moody's and "F-1+" by Fitch, if
rated by such Rating Agency, in the case of accounts in which funds are held for
thirty (30) days or less (or, in the case of accounts in which funds are held
for more than thirty (30) days, the long term unsecured debt obligations of
which are rated at least "AA" by Fitch and S&P and "Aa2" by Moody's, if rated by
such Rating Agency). Lender acknowledges that each of Bank of America and Wells
Fargo Bank, N.A. shall be deemed to be an Eligible Institutions so long as its
short term unsecured debt obligations or commercial paper (in the case of
accounts in which funds are held for thirty (30) days or less) are rated at
least "A-2+" by S&P, "P-2" by Moody's and "F-1" by Fitch, if rated by such
Rating Agency, or its long term unsecured debt obligations (in the case of
accounts in which funds are held for more than thirty (30) days) are rated at
least "A" by Fitch and S&P and "A2" by Moody's, if rated by such Rating Agency.
For accounts into which checks are deposited by Borrower from private pay
residents of the Facilities, other than the Lockbox Account and the
Medicare/Medicaid Account, a depository institution or trust company, that
insures deposits held by such a depository institution or trust company through
the Federal Deposit Insurance Corporation, so long as the amounts on deposit in
all accounts of any Borrower at such institution does not exceed $100,000 at any
one time.
"EMBARGOED PERSON" shall have the meaning set forth in Section
4.1.35 hereof.
"ENVIRONMENTAL INDEMNITY" shall mean that certain
Environmental Indemnity Agreement, dated as of the date hereof, executed by
Borrower and Guarantor in connection with the Loan for the benefit of Lender, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
8.1(a) hereof.
"EXCESS CASH FLOW" means for any fiscal year of Borrower, (a)
the sum, without duplication, of (i) the net income or loss of Borrower for such
fiscal year, calculated in accordance with GAAP, excluding, however, all gains
and losses (together with any related provision for federal and state income
taxes on such gains and losses) realized in connection with any sale or other
disposition by Borrower of any asset (other than the sales of inventory in the
ordinary course of business); (ii) the aggregate amount of all interest expense
of Borrower during such fiscal year, calculated in accordance with GAAP, whether
paid or accrued; (iii) the aggregate amount of all federal and state income
taxes incurred by Borrower during such fiscal year, calculated in accordance
with GAAP, whether paid or accrued; (iv) the aggregate amount of all
depreciation expense and amortization expense of Borrower during such fiscal
year, calculated in accordance with GAAP; (v) the aggregate amount of all
non-cash extraordinary losses (together with any related provision for federal
and state income taxes on such extraordinary losses) of Borrower during such
fiscal year, calculated in accordance with GAAP; (vi) an amount equal to any
decrease in the Working Capital during such fiscal year up to $1,500,000 per
year and (vii) any capital contributions made by Guarantor or any Affiliate of
Guarantor to Borrower; minus (b) the sum, without duplication, of (i) the
Maintenance Capital
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Expenditures for such fiscal year; (ii) the aggregate amount of all interest
expense of Borrower paid or payable during such fiscal year, (iii) an amount
equal to any increase in the Working Capital during such fiscal year up to
$1,500,000 per year; (iv) the aggregate amount of all scheduled payments and
mandatory prepayments of principal actually made or required to be made during
such fiscal year with respect to the Loan (including any required posting of
cash collateral in connection with property releases or loans), the Revolving
Credit Loan and the Mezzanine Loan, (v) the aggregate amount of all voluntary
prepayments of principal actually made with respect to the Loan and the
Mezzanine Loan; (vi) the aggregate amount of all federal and state income taxes
paid or payable by Borrower during such fiscal year; and (vii) the aggregate
amount of all non-cash extraordinary gains (together with any related provisions
for federal and state income taxes on such extraordinary gains) of Borrower
during the such fiscal year, calculated in accordance with GAAP.
"EXCHANGE ACT" shall have the meaning set forth in Section
9.2(a) hereof.
"EXTRAORDINARY EXPENSE" shall have the meaning set forth in
Section 5.1.11(e) hereof.
"FACILITY" shall have the meaning set forth in the granting
clause of the related Security Instrument with respect to each Individual
Property.
"FISCAL YEAR" shall mean each twelve (12) month period
commencing on January 1 and ending on December 31 during each year of the term
of the Loan.
"FITCH" shall mean Fitch, Inc.
"FOREIGN TAXES" shall have the meaning set forth in Section
2.2.3(e) hereof.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as of the date of the applicable financial report.
"GOVERNMENTAL AUTHORITY" shall mean any court, board, agency,
commission, office or other authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence.
"GROSS INCOME FROM OPERATIONS" shall mean, for any period, all
income, computed in accordance with GAAP, derived from the ownership and
operation of the Properties from whatever source during such period, including,
but not limited to, Rents, utility charges, escalations, forfeited security
deposits, interest on credit accounts, service fees or charges, license fees,
parking fees, rent concessions or credits, and other pass-through or
reimbursements paid by tenants under the Leases of any nature but excluding
Rents from month-to-month tenants or tenants that are included in any Bankruptcy
Action, sales, use and occupancy or other taxes on receipts required to be
accounted for by Borrower to any Governmental Authority, refunds and
uncollectible accounts, sales of furniture, fixtures and equipment, Insurance
Proceeds and Condemnation Proceeds (other than business interruption or other
loss of income insurance), and any disbursements to the Borrower from the Tax
and Insurance Escrow Fund, the Replacement Reserve Fund, the Debt Service
Reserve Fund, or any other escrow fund established by the Loan Documents.
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"GUARANTOR" shall mean Fountain View, Inc., a Delaware
corporation.
"GUARANTY" shall mean that certain Guaranty, dated as of the
date hereof, from Guarantor to Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"HEALTH CARE AUTHORITIES" shall mean any federal, state or
local governmental or quasi-governmental authority or any agency, intermediary,
board, authority or entity concerned with the ownership, operation, use or
occupancy of any Individual Property as a skilled nursing facility or assisted
living facility.
"HERITAGE PARTNERS" shall mean Heritage Partners, Inc., its
Affiliates, and its and their successors and assigns.
"IMPROVEMENTS" shall have the meaning set forth in the
granting clause of the related Mortgage with respect to each Individual
Property.
"INDEBTEDNESS" of a Person, at a particular date, means the
sum (without duplication) at such date of (a) all indebtedness or liability of
such Person (including, without limitation, amounts for borrowed money and
indebtedness in the form of mezzanine debt and preferred equity); (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations under letters of credit; (e)
obligations under acceptance facilities; (f) all guaranties, endorsements (other
than for collection or deposit in the ordinary course of business) and other
contingent obligations to purchase, to provide funds for payment, to supply
funds, to invest in any Person or entity, or otherwise to assure a creditor
against loss; and (g) obligations secured by any Liens, whether or not the
obligations have been assumed.
"INDEMNIFIED LIABILITIES" shall have the meaning set forth in
Section 10.13(b).
"INDEMNIFIED PERSON" shall have the meaning set forth in
Section 9.2(b) hereof.
"INDEMNIFYING PERSON" shall mean each of Borrower, Principal
and Guarantor.
"INDEPENDENT DIRECTOR" or "INDEPENDENT MANAGER" shall mean a
natural Person who is not at the time of initial appointment, or at any time
while serving as a director or manager, as applicable, and has not been at any
time during the preceding five (5) years: (a) a stockholder, director (with the
exception of serving as the Independent Director or Independent Manager),
officer, employee, partner, member, attorney or counsel of the Principal, the
Borrower or any Affiliate of either of them (provided, however, that no person
may serve both as an Independent Director of the Borrower and the Mezzanine
Borrower); (b) a creditor, customer, supplier or other person who derives any of
its purchases or revenues from its activities with the Principal, the Borrower
or any Affiliate of either of them; (c) a Person or other entity controlling or
under common control with any such stockholder, partner, member, creditor,
customer, supplier or other Person; or (d) a member of the immediate family of
any such stockholder, director, officer, employee, partner, member, creditor,
customer, supplier or other Person. As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct
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or cause the direction of management, policies or activities of a person or
entity, whether through ownership of voting securities, by contract or
otherwise.
A natural person who satisfies the foregoing definition other
than subparagraph (b) shall not be disqualified from serving as an Independent
Director or Independent Manager of the Principal or Borrower if such individual
is an independent director provided by a nationally-recognized company that
provides professional independent directors and that also provides other
corporate services in the ordinary course of its business.
A natural person who otherwise satisfies the foregoing
definition except for being the independent director of a "special purpose
entity" affiliated with Borrower that does not own a direct or indirect equity
interest in Borrower or any co-borrower shall not be disqualified from serving
as an Independent Director or Independent Manager of the Principal or Borrower
if such individual is at the time of initial appointment, or at any time while
serving as an Independent Director or Independent Manager of the Principal or
Borrower, an Independent Director or Independent Manager of a Special Purpose
Entity affiliated with Borrower or the Principal (other than any entity that
owns a direct or indirect equity interest in Borrower or any co-borrower) if
such individual is an independent director or independent manager provided by a
nationally-recognized company that provides professional independent directors
or independent managers.
"INDIVIDUAL PROPERTY" shall mean each parcel of real property,
the Improvements thereon and all personal property owned by Borrower and
encumbered by a Mortgage, together with all rights pertaining to such property
and Improvements, as more particularly described in the Granting Clauses of each
Mortgage and referred to therein as the "Property."
"INSOLVENCY OPINION" shall mean that certain non-consolidation
opinion letter dated the date hereof delivered by Latham & Watkins LLP in
connection with the Loan.
"INSURANCE PREMIUMS" shall have the meaning set forth in
Section 6.1(b) hereof.
"INSURANCE PROCEEDS" shall have the meaning set forth in
Section 6.4(b) hereof.
"INTEREST PERIOD" shall mean, with respect to any Payment
Date, the period commencing on the ninth (9th) day of the preceding calendar
month and terminating on the eighth (8th) day of the calendar month in which
such Payment Date occurs; provided, however, that no Interest Period shall end
later than the Maturity Date (other than for purposes of calculating interest at
the Default Rate), and the initial Interest Period shall begin on the Closing
Date and shall end on the immediately following eighth (8th) day of the calendar
month.
"INTEREST RATE CAP AGREEMENT" shall mean, as applicable, an
Interest Rate Cap Agreement (together with the confirmation and schedules
relating thereto) in form and substance reasonably satisfactory to Lender
between Borrower and an Acceptable Counterparty or a Replacement Interest Rate
Cap Agreement.
"LEASE" shall mean any lease, rental agreement, occupancy
agreement, residency agreement, sublease or subsublease, letting, license,
concession or other agreement of whatever form, including, without limitation,
service, consulting and administrative agreement (whether written or oral and
whether now or hereafter in effect) pursuant to which any Person is granted a
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possessory interest in, or right to use or occupy all or any portion of any
space in any Individual Property, and (a) every modification, amendment,
extension, renewal, replacement or other agreement relating to such lease,
sublease, subsublease, or other agreement entered into in connection with such
lease, sublease, subsublease, or other agreement and (b) every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.
"LEGAL REQUIREMENTS" shall mean, with respect to each
Individual Property, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities or Health Care Authorities
affecting such Individual Property or any part thereof, or the construction,
use, alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all permits, licenses and authorizations and
regulations relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to
Borrower, at any time in force affecting such Individual Property or any part
thereof, including, without limitation, any which may (a) require repairs,
modifications or alterations in or to such Individual Property or any part
thereof, or (b) in any way limit the use and enjoyment thereof.
"LENDER" shall have the meaning set forth in the introductory
paragraph hereto, together with its successors and assigns.
"LETTER OF CREDIT" shall mean an irrevocable, unconditional,
transferable, clean sight draft letter of credit acceptable to Lender and the
Rating Agencies (either an evergreen letter of credit or one which does not
expire until at least thirty (30) Business Days after the Maturity Date) in
favor of Lender and entitling Lender to draw thereon in New York, New York,
issued by a domestic Eligible Institution or the U.S. agency or branch of a
foreign Eligible Institution. If at any time the bank issuing any such Letter of
Credit shall cease to be an Eligible Institution, Lender shall have the right
immediately to draw down the same in full and hold the proceeds of such draw in
accordance with the applicable provisions hereof.
"LIABILITIES" shall have the meaning set forth in Section
9.2(b) hereof.
"LIBOR" shall mean, with respect to each Interest Period, the
rate (expressed as a percentage per annum and rounded upward, if necessary, to
the next nearest 1/8 of 1%) for deposits in U.S. dollars, for a one-month
period, that appears on Telerate Page 3750 (or the successor thereto) as of
11:00 a.m., London time, on the related Determination Date. If such rate does
not appear on Telerate Page 3750 as of 11:00 a.m., London time, on such
Determination Date, LIBOR shall be the arithmetic mean of the offered rates
(expressed as a percentage per annum) for deposits in U.S. dollars for a
one-month period that appear on the Reuters Screen Libor Page as of 11:00 a.m.,
London time, on such Determination Date, if at least two such offered rates so
appear. If fewer than two such offered rates appear on the Reuters Screen Libor
Page as of 11:00 a.m., London time, on such Determination Date, Lender shall
request the principal London office of any four major reference banks in the
London interbank market selected by Lender to provide such bank's offered
quotation (expressed as a percentage per annum) to prime banks in the London
interbank market for deposits in U.S. dollars for a one-month period as of 11:00
a.m., London time, on such Determination Date for the amounts of
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not less than U.S. $1,000,000. If at least two such offered quotations are so
provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than
two such quotations are so provided, Lender shall request any three major banks
in New York City selected by Lender to provide such bank's rate (expressed as a
percentage per annum) for loans in U.S. dollars to leading European banks for a
one-month period as of approximately 11:00 a.m., New York City time on the
applicable Determination Date for amounts of not less than U.S. $1,000,000. If
at least two such rates are so provided, LIBOR shall be the arithmetic mean of
such rates. LIBOR shall be determined conclusively by Lender or its agent,
absent manifest error. Notwithstanding anything to the contrary contained herein
in no event shall LIBOR be less than one and seventy-five hundredths percent
(1.75%) per annum.
"LIBOR LOAN" shall mean the Loan at such time as interest
thereon accrues at a rate of interest based upon LIBOR.
"LICENSES" shall have the meaning set forth in Section 4.2(a)
hereof.
"LIEN" shall mean, with respect to each Individual Property,
any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security
interest, or any other encumbrance, charge or transfer of, on or affecting
Borrower, the related Individual Property, any portion thereof or any interest
therein, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, the filing of any financing statement, and
mechanic's, materialmen's and other similar liens and encumbrances.
"LOAN" shall mean the loan in the principal amount of Ninety
Five Million and No/100 Dollars ($95,000,000.00) made by Lender to Borrower
pursuant to this Agreement.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Note, the Mortgages, the Assignments of Leases, the Environmental Indemnity, the
O&M Agreement, the Guaranty, the Cash Management Agreement, the Collateral
Assignment of Interest Rate Cap Agreement, the Subordination of Agreements and
all other documents executed and/or delivered in connection with the Loan.
"LOAN-TO-VALUE RATIO" shall mean the ratio, as of a particular
date, in which the numerator is equal to the outstanding principal balance of
Note A and the denominator is equal to (a) on the Closing Date, the appraised
value of the Properties as set forth in the Appraisals delivered by Borrower to
Lender in accordance with the provisions of Section 3.1.18 thereof, and (b)
thereafter, the fair market value of the Properties, as determined by Lender in
its reasonable discretion.
"LOCKBOX ACCOUNT" shall have the meaning set forth in Section
2.6.2(a) hereof.
"LOCKBOX BANK" shall mean Wells Fargo Bank, N.A., or any other
Eligible Institution at which accounts comprising the Lockbox Account are
maintained or any successor or permitted assigns thereof.
"LOCKOUT RELEASE DATE" shall mean the first Payment Date that
occurs three (3) years after the Closing Date.
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"LONDON BUSINESS DAY" shall mean any day other than a
Saturday, Sunday or any other day on which commercial banks in London, England
are not open for business.
"MAINTENANCE CAPITAL EXPENDITURES" means, for any fiscal year,
the aggregate amount of all non-financed capital expenditures (other than
capital expenditures that are made in connection with an acquisition) incurred
or made by Borrower during such fiscal year; provided that, for purposes of this
definition, the maximum amount of such capital expenditures deducted in any
fiscal year (for any fiscal year, the "MAXIMUM AMOUNT") shall not exceed (a) for
fiscal year 2003, $4,500,000 and (b) for any fiscal year thereafter, $4,500,000
plus the Maximum Amount for the immediately preceding fiscal year minus the
actual amount of Maintenance Capital Expenditures included in this definition
pursuant to clause (a) in such immediately preceding fiscal year.
"MASTER LEASE" shall mean, individually and collectively,
those certain leases dated as of the date hereof between Owner, as lessor and a
Master Lessee, as lessee, pursuant to which such Master Lessee is leasing its
Individual Properties.
"MASTER LESSEE" shall mean, collectively, the Borrowers set
forth on Schedule I under the column labeled "Master Lessee," which are leasing
their respective Individual Properties pursuant to a Master Lease.
"MATURITY DATE" shall mean September 9, 2008, or such other
date on which the final payment of principal of the Note becomes due and payable
as therein or herein provided, whether at such stated maturity date, by
declaration of acceleration, or otherwise.
"MAXIMUM LEGAL RATE" shall mean the maximum nonusurious
interest rate, if any, that at any time or from time to time may be contracted
for, taken, reserved, charged or received on the indebtedness evidenced by the
Note and as provided for herein or the other Loan Documents, under the laws of
such state or states whose laws are held by any court of competent jurisdiction
to govern the interest rate provisions of the Loan.
"MEDICAL PAYORS" shall mean the Center for Medicare and
Medicaid Services and any other federal or state governmental authority or any
other governmental Person responsible for making payment of any
Medicare/Medicaid Account.
"MEDICARE/MEDICAID ACCOUNT" shall mean any account payable by
any Medical Payor under the Medicare or Medicaid programs, any similar or
implementing state statutes and the rules and regulations promulgated pursuant
to any thereof.
"MEDICARE/MEDICAID RECEIVABLES ACCOUNT" shall have the meaning
set forth in the Section 2.6.1(a) hereof.
"MEZZANINE BORROWER" shall mean, collectively, SHG Property
Resources, LLC, a Delaware limited liability company, and SHG Investments, LLC,
a Delaware limited liability company, together with their respective successors
and permitted assigns.
"MEZZANINE CASH MANAGEMENT AGREEMENT" shall mean that certain
Mezzanine Cash Management Agreement dated as of the date hereof among Borrower,
Mezzanine Borrower
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and Mezzanine Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"MEZZANINE LENDER" shall mean CapitalSource Finance LLC, as
agent for the mezzanine lenders under the Mezzanine Loan, its successors and
assigns.
"MEZZANINE LOAN" shall mean the loan from Mezzanine Lender to
Mezzanine Borrower in the original principal amount of Twenty Three Million and
No/100 Dollars ($23,000,000.00).
"MEZZANINE LOAN AGREEMENT" shall mean that certain Mezzanine
Loan Agreement dated as of the date hereof between Mezzanine Borrower and
Mezzanine Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
"MEZZANINE LOAN DOCUMENTS" shall mean the term "LOAN
DOCUMENTS" as defined in the Mezzanine Loan Agreement as of the date hereof.
"MOODY'S" shall mean Moody's Investors Service, Inc.
"MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean,
with respect to any Payment Date, the aggregate monthly installments of interest
and principal, if any, then due and payable under the Mezzanine Loan.
"MONTHLY OPERATING EXPENSE AMOUNT" shall mean, with respect to
any calendar month, the monthly Cash Expenses for the Properties set forth in
the Approved Annual Budget then in effect.
"MONTHLY SPREAD AMOUNT" shall mean, with respect to any
prepayment of Promissory Note A, for each Payment Date following the Payment
Date on which, or with respect to which, such prepayment is made to the Maturity
Date, an amount equal to the product of (i) the principal amount of such
prepayment which is due on such Payment Date, (ii) the Spread with respect to
Promissory Note A, and (iii) a fraction, the numerator of which shall equal the
actual number of days in each related Interest Period and the denominator of
which is 360.
"MONUMENT HILL PROPERTY" shall have the meaning set forth in
Section 5.1.28 hereof.
"MORTGAGE" shall mean, with respect to each Individual
Property, that certain first priority Deed of Trust and Security Agreement,
dated the date hereof, executed and delivered by Borrower as security for the
Loan and encumbering such Individual Property, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"NET CASH FLOW" shall mean, for any period, the amount
obtained by subtracting Operating Expenses and Capital Expenditures for such
period from Gross Income from Operations for such period.
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"NET CASH FLOW SCHEDULE" shall have the meaning set forth in
Section 5.1.11(b) hereof.
"NET OPERATING INCOME" shall mean, for any period, the amount
obtained by subtracting Operating Expenses for such period from Gross Income
from Operations for such period.
"NET PROCEEDS" shall have the meaning set forth in Section
6.4(b) hereof.
"NET PROCEEDS DEFICIENCY" shall have the meaning set forth in
Section 6.4(b)(vi) hereof.
"NEW REVOLVING CREDIT LOAN" shall have the meaning set forth
in Section 5.2.11(c) hereof.
"NOTE" shall mean, collectively, Promissory Note A and
Promissory Note B.
"NOTE A ADJUSTED ALLOCATED LOAN AMOUNT" shall mean, for each
Individual Property, the product of (a) the quotient obtained by dividing the
Note A Allocated Loan Amount for such Individual Property by the sum of the
original Note A Allocated Loan Amounts for all Properties then encumbered by the
lien of the Mortgage, including the Individual Property to be released,
multiplied by (b) the then outstanding principal balance of Promissory Note A.
"NOTE A ALLOCATED LOAN AMOUNT" shall mean, for each Individual
Property, the amount set forth on Schedule II hereto.
"NOTE A MONTHLY PRINCIPAL PAYMENT AMOUNT" shall mean a payment
of principal on account of Promissory Note A in the amount of $283,333.33,
provided, however, that the Monthly Principal Payment Amount shall be reduced on
each Payment Date by an amount equal to $283,333.33 multiplied by a fraction,
the numerator of which is the Allocated Loan Amount with respect to (a) any
Individual Property previously released from the Lien of the Mortgage pursuant
to Section 2.5.1 and (b) any Individual Property which has previously been
severed from the Loan pursuant to Section 2.7, and the denominator of which is
the original principal balance of the Loan.
"NOTE A RELEASE AMOUNT" shall mean, for each Individual
Property, one hundred twenty-five percent (125%) of the product of Note A
Adjusted Allocated Loan Amount
"NOTE B ALLOCATED LOAN AMOUNT" shall mean, for each Individual
Property, the amount set forth on Schedule II hereto.
"NOTE B GUARANTY OF PAYMENT" shall mean that Guaranty of
Payment given by Guarantor in favor of Note B Holder.
"NOTE B HOLDER" shall mean the holder of Note B from time to
time.
"NOTE B MONTHLY PRINCIPAL PAYMENT AMOUNT" shall mean a payment
of principal on account of Promissory Note B in the amount equal to (a) the
outstanding principal
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balance of Promissory Note B on the thirty-first (31st) Payment Date divided by
thirty (30), or (b) if the Mezzanine Loan is paid in full prior to the thirty
first (31st) Payment Date, the outstanding principal balance of Promissory Note
B on the first Payment Date to occur after the Mezzanine Loan has been paid in
full divided by the number of Payment Dates from such Payment Date to and
including the Maturity Date.
"NOTE B RELEASE AMOUNT" shall mean, for each Individual
Property, one hundred twenty-five percent (125%) of the product of (a) the
quotient obtained by dividing the Note B Allocated Loan Amount for such
Individual Property by the sum of the original Note B Allocated Loan Amounts for
all Properties then encumbered by the lien of the Mortgage, including the
Individual Property to be released, multiplied by (b) the then outstanding
principal balance of Promissory Note B.
"O&M AGREEMENT" shall mean, with respect to any Individual
Property (if at all), that certain Operations and Maintenance Agreement, dated
as of the date hereof, between Borrower and Lender given in connection with the
Loan, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"OCCUPANCY REPORT" shall mean a true, correct and complete
schedule, in substantially the form attached hereto as Schedule VII (provided in
accordance with legal requirements related to privacy) which accurately and
completely sets forth, the number and percentage of beds or units at the
Facility that are occupied, the average rent and other charges payable with
respect to each bed or unit at an Individual Property, the form of payment or
reimbursement (e.g. Medicare, Medical, other insurance, private payments)
applicable thereto and the aggregate arrearages in payments.
"OFFICER'S CERTIFICATE" shall mean a certificate delivered to
Lender by Borrower which is signed by an authorized senior officer of the
general partner or managing member of Borrower, as applicable.
"OPERATING EXPENSES" shall mean, for any period, the total of
all expenditures, computed in accordance with GAAP, of whatever kind during such
period relating to the operation, maintenance and management of the Properties
that are incurred on a regular monthly or other periodic basis, including
without limitation, utilities, ordinary repairs and maintenance (which ordinary
repairs and maintenance for the purposes of determining the Debt Service
Coverage Ratio shall be no less than an assumed monthly expense of one-twelfth
(1/12th) of $400 per bed for any Individual Property that is a skilled nursing
facility and one-twelfth (1/12th) of $400 per unit for any Individual Property
that is an assisted living facility), insurance, license fees, property taxes
and assessments, advertising expenses, legal fees, consulting fees, management
fees, payroll and related taxes, computer processing charges, tenant
improvements and leasing commissions, operational equipment or other lease
payments as approved by Lender, and other similar costs, but excluding
depreciation, Debt Service, Capital Expenditures, and contributions to the
Replacement Reserve Fund, the Tax and Insurance Escrow Fund, the Debt Service
Reserve Fund and any other reserves required under the Loan Documents.
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"OPERATING LEASE" shall mean, individually and collectively,
those certain leases dated as of the date hereof between a Master Lessee, as
lessor and an Operator, as lessee, pursuant to which such Operator is leasing
its Individual Property.
"OPERATOR" shall mean, collectively, the Borrowers set forth
on Schedule I under the column labeled "Operator," which are operating their
respective Individual Properties pursuant to an Operating Lease.
"OTHER CHARGES" shall mean all ground rents, maintenance
charges, impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining any Individual Property, now or hereafter levied or
assessed or imposed against such Individual Property or any part thereof.
"OWNER" shall mean, collectively, the Borrowers set forth on
Schedule I under the column labeled "Fee Owners," each of which is the fee owner
of its respective Individual Property.
"PAYMENT DATE" shall mean the ninth (9th) day of each calendar
month during the term of the Loan or, if such day is not a Business Day, the
immediately preceding Business Day.
"PERMITTED ENCUMBRANCES" shall mean, with respect to an
Individual Property, collectively, (a) the Liens and security interests created
by the Loan Documents, (b) the Liens and security interests created by the
Revolving Credit Loan Agreement, (c) all Liens, encumbrances and other matters
disclosed in the Title Insurance Policies relating to such Individual Property
or any part thereof, (d) Liens, if any, for Taxes imposed by any Governmental
Authority not yet due or delinquent, and (e) such other title and survey
exceptions as Lender has approved or may approve in writing in Lender's sole
discretion.
"PERMITTED INVESTMENTS" shall have the meaning set forth in
the Cash Management Agreement.
"PERSON" shall mean any individual, corporation, partnership,
joint venture, limited liability company, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"PERSONAL PROPERTY" shall have the meaning set forth in the
granting clauses of the Mortgage with respect to each Individual Property.
"PHYSICAL CONDITIONS REPORT" shall mean, with respect to each
Individual Property, a report prepared by a company satisfactory to Lender
regarding the physical condition of such Individual Property, satisfactory in
form and substance to Lender in its reasonable discretion.
"PLAN OF REORGANIZATION" shall mean Debtors' Third Amended
Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, dated
April 22, 2003, in Case No. LA 01-39678BB through LA 01-39697BB and LA
01-45516BB, LA 01-45520BB and
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LA 01-45525BB, in the United States Bankruptcy Court for the Central District of
California, Los Angeles Division, as such may be modified, amended or
supplemented from time to time.
"POLICIES" shall have the meaning specified in Section 6.1(b)
hereof.
"PREPAYMENT PREMIUM" shall mean, if the prepayment of
Promissory Note A occurs on or prior to March 9, 2008, an amount equal to the
greater of (i) one percent (1%) of the principal balance of the Promissory Note
A being prepaid and (ii) the Spread Maintenance Premium.
"PRIME RATE" shall mean the annual rate of interest publicly
announced by Citibank, N.A. in New York, New York, as its base rate, as such
rate shall change from time to time. If Citibank, N.A. ceases to announce a base
rate, Prime Rate shall mean the rate of interest published in The Wall Street
Journal from time to time as the "Prime Rate." If more than one "Prime Rate" is
published in The Wall Street Journal for a day, the average of such "Prime
Rates" shall be used, and such average shall be rounded up to the nearest
one-eighth of one percent (0.125%). If The Wall Street Journal ceases to publish
the "Prime Rate," the Lender shall select an equivalent publication that
publishes such "Prime Rate," and if such "Prime Rates" are no longer generally
published or are limited, regulated or administered by a governmental or
quasigovernmental body, then Lender shall reasonably select a comparable
interest rate index.
"PRIME RATE LOAN" shall mean the Loan at such time as interest
thereon accrues at a rate of interest based upon the Prime Rate.
"PRIME RATE SPREAD" shall mean, with respect to Promissory
Note A and Promissory Note B, the difference (expressed as the number of basis
points) between (a) LIBOR plus the Spread applicable to Promissory Note A and
Promissory Note B, as the case may be, on the date LIBOR was last applicable to
the Loan and (b) the Prime Rate on the date that LIBOR was last applicable to
the Loan; provided, however, in no event shall such difference be a negative
number.
"PRINCIPAL" shall mean the Special Purpose Entity which is the
general partner of the Borrower in the event that the Borrower is a limited
partnership.
"PROFESSIONAL LIABILITY INSURANCE DEDUCTIBLE RESERVE ACCOUNT"
shall have the meaning set forth in Section 7.7.1 hereof.
"PROFESSIONAL LIABILITY INSURANCE DEDUCTIBLE RESERVE FUND"
shall have the meaning set forth in Section 7.7.1 hereof.
"PROMISSORY NOTE A" shall mean that certain Promissory Note A
of even date herewith in the principal amount of Eighty Five Million and No/100
Dollars ($85,000,000.00), made by Borrower in favor of Lender, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.
"PROMISSORY NOTE B" shall mean, collectively, Promissory Note
B-1, Promissory Note B-2 and Promissory Note B-3.
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"PROMISSORY NOTE B-1" shall mean that certain Promissory Note
B-1 of even date herewith in the principal amount of Five Million and No/100
Dollars ($5,000,000.00), made by Borrower in favor of Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"PROMISSORY NOTE B-2" shall mean that certain Promissory Note
B-2 of even date herewith in the principal amount of Two Million Five Hundred
Thousand and No/100 Dollars ($2,500,000.00) made by Borrower in favor of Lender,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"PROMISSORY NOTE B-3" shall mean that certain Promissory Note
B-3 of even date herewith in the principal amount of Two Million Five Hundred
Thousand and No/100 Dollars ($2,500,000.00) made by Borrower in favor of Lender,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"PROPERTIES" shall mean, collectively, each and every
Individual Property which is subject to the terms of this Agreement.
"PROVIDED INFORMATION" shall mean any and all financial and
other information provided at any time by, or on behalf of, any Indemnifying
Person with respect to the Properties, Borrower, Principal and/or Guarantor.
"QUALIFIED MANAGER" shall mean, in the reasonable judgment of
Lender, a reputable and experienced management organization (which may be an
Affiliate of Borrower) possessing experience in managing properties similar in
size, scope, use and value as the Properties, provided, that Borrower shall have
obtained prior written confirmation from the applicable Rating Agencies that
management of the Properties by such Person will not cause a downgrade,
withdrawal or qualification of the then current ratings of the Securities or any
class thereof.
"RATING AGENCIES" shall mean each of S&P, Moody's and Fitch,
or any other nationally recognized statistical rating agency which has been
approved by Lender.
"RELEASE AMOUNT" shall mean, for each Individual Property, the
aggregate of the Note A Release Amount and the Note B Release Amount for such
Individual Property.
"REMAINING CROSSED LOAN" shall have the meaning set forth in
Section 2.7.1(h).
"REMAINING CROSSED PROPERTIES" shall have the meaning set
forth in Section 2.7.1(d).
"REMAINING CROSSED PROPERTIES DEPOSIT" shall have the meaning
set forth in Section 2.7.1(q).
"REMIC TRUST" shall mean a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code that holds the Note.
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"RENTS" shall mean, with respect to each Individual Property,
all accounts (including any rights of Borrower in accounts arising from the
operations conducted at or by the Facility), deposits (whether for security or
otherwise but excluding any resident trust accounts), rents, issues, profits,
revenues, royalties, rights, benefits, and income of every nature of and from
the Individual Property and the operations conducted or to be conducted thereon,
including, without limitation, minimum rents, additional rents, termination
payments, forfeited security deposits, any rights to payment earned under Leases
for the operation of ongoing retail businesses such as newsstands, concession
stands, barbershops, beauty shops, gift shops, cafeterias, dining rooms,
restaurants, lounges, vending machines, physicians' offices, pharmacies,
laboratories, gymnasiums, swimming pools, tennis courts, golf courses,
recreational centers and specialty shops, liquidated damages following default
and all proceeds payable under any policy of insurance covering loss of rents
resulting from untenantability due to destruction or damage to the Individual
Property, together with the immediate and continuing right to collect and
receive the same, whether now due or hereafter becoming due, and together with
all rights and claims of any kind that Borrower may have against any tenant,
lessee or licensee under the Leases or against any other occupant of the
Individual Property.
"REPLACEMENT INTEREST RATE CAP AGREEMENT" means an interest
rate cap agreement from an Acceptable Counterparty with terms identical to the
Interest Rate Cap Agreement except that the same shall be effective in
connection with replacement of the Interest Rate Cap Agreement following a
downgrade, withdrawal or qualification of the long-term unsecured debt rating of
the Counterparty; provided that to the extent any such interest rate cap
agreement does not meet the foregoing requirements, a "Replacement Interest Rate
Cap Agreement" shall be such interest rate cap agreement approved in writing by
each of the Rating Agencies with respect thereto.
"REPLACEMENT MANAGEMENT AGREEMENT" shall mean a management
agreement with a Qualified Manager, which management agreement shall be
reasonably acceptable to Lender in form and substance; provided, Lender, at its
option, may require that Borrower obtain confirmation from the applicable Rating
Agencies that such management agreement will not cause a downgrade, withdrawal
or qualification of the then current rating of the Securities or any class
thereof; and (b) an assignment of management agreement and subordination of
management fees substantially in the form then used by Lender (or of such other
form and substance reasonably acceptable to Lender), executed and delivered to
Lender by Borrower and such Qualified Manager at Borrower's expense.
"REPLACEMENT RESERVE ACCOUNT" shall have the meaning set forth
in Section 7.3.1 hereof.
"REPLACEMENT RESERVE FUND" shall have the meaning set forth in
Section 7.3.1 hereof.
"REPLACEMENT RESERVE MONTHLY DEPOSIT" shall have the meaning
set forth in Section 7.3.1 hereof.
"REPLACEMENTS" shall have the meaning set forth in Section
7.3.1 hereof.
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"REQUIRED REPAIR ACCOUNT" shall have the meaning set forth in
Section 7.1.1 hereof.
"REQUIRED REPAIR FUND" shall have the meaning set forth in
Section 7.1.1 hereof.
"REQUIRED REPAIRS" shall have the meaning set forth in Section
7.1.1 hereof.
"RESERVE FUNDS" shall mean, collectively, the Tax and
Insurance Escrow Fund, the Replacement Reserve Fund, the Debt Service Reserve
Fund, the Required Repair Fund, the Casualty Insurance Deductible Reserve Fund,
the Professional Liability Insurance Deductible Reserve Fund, and any other
escrow fund established pursuant to the Loan Documents.
"RESTORATION" shall mean the repair and restoration of an
Individual Property after a Casualty or Condemnation as nearly as commercially
practicable to the condition the Individual Property was in immediately prior to
such Casualty or Condemnation, with such alterations as may be reasonably
approved by Lender.
"RESTRICTED PARTY" shall mean, collectively, (a) Borrower,
Principal and any Guarantor and (b) any shareholder, partner, member, non-member
manager, direct or indirect legal or beneficial owner of, Borrower or Principal.
"REVOLVING CREDIT LENDER" shall mean (a) CapitalSource Finance
LLC, as administrative agent and collateral agent for the lenders specified in
the Revolving Credit Loan Agreement, its and their successors and assigns or (b)
the lender under any New Revolving Credit Loan entered into in accordance with
the provisions of Section 5.2.11 terms of this Agreement.
"REVOLVING CREDIT LOAN DOCUMENTS" shall mean the term "Loan
Documents" as defined in the Revolving Credit Loan Agreement as of the date
hereof.
"REVOLVING CREDIT LOAN" shall mean the loan from Revolving
Credit Lender to Borrower in the principal amount of up to Eleven Million and
No/100 Dollars ($11,000,000.00) and any New Revolving Credit Loan entered into
in accordance with the provisions of Section 5.2.11.
"REVOLVING CREDIT LOAN AGREEMENT" shall mean that certain
Revolving Credit and Security Agreement dated as of the date hereof between
Operator and Revolving Credit Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"S&P" shall mean Standard & Poor's Ratings Group, a division
of The McGraw-Hill Companies.
"SALE OR PLEDGE" shall mean a voluntary or involuntary sale,
conveyance, assignment, transfer, encumbrance or pledge of a legal or beneficial
interest.
"SECURITIES" shall have the meaning set forth in Section 9.1
hereof.
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"SECURITIES ACT" shall have the meaning set forth in Section
9.2(a) hereof.
"SECURITIZATION" shall have the meaning set forth in Section
9.1 hereof.
"SERVICER" shall have the meaning set forth in Section 9.6
hereof.
"SERVICING AGREEMENT" shall have the meaning set forth in
Section 9.6 hereof.
"SEVERANCE" shall have the meaning set forth in Section 2.7.1.
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in
Section 8.2(c) hereof.
"SPECIAL PURPOSE ENTITY" shall mean a corporation, limited
partnership or limited liability company which at all times on and after the
date hereof:
(a) is organized solely for the purpose of (i) acquiring,
developing, owning, holding, maintaining, improving, mortgaging, encumbering,
selling, leasing, transferring, exchanging, managing and/or operating the
Properties, or acting as a general partner of the limited partnership that owns,
operates or leases the Properties, (ii) entering into and performing its
obligations under the Loan Documents and the Revolving Credit Loan Documents, in
each case to which it is a party, (iii) refinancing the Properties in connection
with a permitted repayment of the Loan, and (iv) transacting lawful business
that is incident, reasonably necessary and appropriate to accomplish the
foregoing;
(b) is not engaged and will not engage, directly or
indirectly, in any business unrelated to those activities required or permitted
to be performed under the Loan Documents, including this definition of "Special
Purpose Entity" and subsection (a) above, as applicable;
(c) does not have and will not have any assets other than
(i) those related to the Properties or its partnership interest in the limited
partnership, for those acting as general partners of the limited partnership
that owns, operates or leases the Properties, and (ii) incidental personal
property necessary for the ownership or operation of the Properties, as
applicable;
(d) has not engaged, sought or consented to and will not
engage in, seek or consent to any dissolution, winding up, liquidation,
consolidation, merger, sale of all or substantially all of its assets, transfer
of partnership or membership interests (if such entity is a general partner in a
limited partnership or a member in a limited liability company) or amendment of
its limited partnership agreement, articles of incorporation, articles of
organization, certificate of formation or operating agreement (as applicable)
with respect to the matters set forth in this definition, except as expressly
permitted pursuant to any provision of the Loan Documents;
(e) if such entity is a limited partnership, has, as its
only general partners, Special Purpose Entities that are corporations, limited
partnerships or limited liability companies;
(f) if such entity is a corporation, has at least two (2)
Independent Directors, and has not caused or allowed and will not cause or allow
the board of directors of such entity to
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take any action requiring the unanimous affirmative vote of one hundred percent
(100%) of the members of its board of directors unless two Independent Directors
shall have participated in such vote;
(g) if such entity is a limited liability company with
more than one member, has at least one member that is a Special Purpose Entity
that is a corporation that has at least two Independent Directors and that owns
at least one percent (1.0%) of the equity of the limited liability company;
(h) if such entity is a limited liability company with
only one member, is a limited liability company organized in the State of
Delaware that (i) is managed by a board of managers, (ii) has at least two
Independent Managers and has not caused or allowed and will not cause or allow
the board of managers of such entity to take any action requiring the unanimous
affirmative vote of one hundred percent (100%) of the managers unless two
Independent Managers shall have participated in such vote and (iii) at least two
springing members, one of which will become a non-managing member of such entity
upon the dissolution of the existing member;
(i) if such entity is (i) a limited liability company,
has articles of organization, a certificate of formation and/or an operating
agreement, as applicable, (ii) a limited partnership, has a limited partnership
agreement, or (iii) a corporation, has a certificate of incorporation or
articles that, in each case, provide that such entity will not, without the
written consent of any applicable Governmental Authority, if required: (A)
dissolve, merge, liquidate, consolidate; (B) sell all or substantially all of
its assets or the assets of the Borrower (as applicable) without the consent of
Lender; (C) engage in any other business activity, or amend its organizational
documents with respect to the matters set forth in this definition without the
written consent of the Lender; or (D) without the affirmative vote of two
Independent Directors and of all other directors of the limited liability
company (that is such entity or the general partner of such entity), take a
Bankruptcy Action with respect to itself or to any other entity in which it has
a direct or indirect legal or beneficial ownership interest;
(j) is and will remain solvent and pay its debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from its assets as the same shall become due, and is maintaining and will
maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;
(k) has not failed and will not fail to correct any known
misunderstanding regarding its separate identity;
(l) has maintained and will maintain its bank accounts,
books and records separate from any other Person and will file its own tax
returns (except to the extent that it is disregarded for federal income tax
purposes), and pay any taxes required to be paid under applicable law;
(m) has maintained and will maintain its own records,
books, resolutions and agreements;
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(n) other than as provided in the Cash Management
Agreement, (i) has not commingled and will not commingle its funds or assets
with those of any other Person and (ii) has not participated and will not
participate in any cash management system with any other Person, except that if
Borrower and its Affiliates use a centralized disbursement system, administered
by an Affiliate pursuant to written paying agency agreement acceptable to Lender
to pay expenses, Borrower may, on any day when Borrower shall pay such expenses,
transfer the amount of such payment to the disbursement account used for such
centralized system and cause such disbursement to be made on the same day,
provided that such disbursement shall indicate that such disbursement is made on
behalf of Borrower and Borrowers shall keep, and shall cause such Affiliates
accurate record reflecting all deposits made by Borrower and all disbursements
made on Borrower's behalf;
(o) has held and will hold its assets in its own name;
(p) has conducted and will conduct its business in its
name, in the fictitious business name under which it operates its Individual
Property set forth on Schedule VIII, or in a name franchised or licensed to it
by an entity other than an Affiliate of Borrower, except for services rendered
under a business management services agreement with an Affiliate that complies
with the terms contained in Subsection (dd) below, so long as the manager, or
equivalent thereof, under such business management services agreement holds
itself out as an agent of the Borrower;
(q) has maintained and will maintain its financial
statements, accounting records and other entity documents separate from any
other Person and has not permitted and will not permit its assets or liabilities
to be listed as assets or liabilities on the financial statement of any other
entity except as required by GAAP; provided, however, that any such consolidated
financial statement shall contain a note indicating that its separate assets and
liabilities are neither available to pay the debts of the consolidated entity
nor constitute obligations of the consolidated entity;
(r) has paid and will pay its own liabilities and
expenses, including the salaries of its own employees, out of its own funds and
assets, and has maintained and will maintain a sufficient number of employees in
light of its contemplated business operations and in accordance with all Legal
Requirements;
(s) has observed and will observe all partnership,
corporate or limited liability company formalities, as applicable;
(t) has and will have no Indebtedness other than (i) the
Loan, (ii) with respect to the Operators only, the Revolving Credit Loan (iii)
liabilities incurred in the ordinary course of business relating to the
ownership and operation of the Properties and the routine administration of
Borrower, in amounts not to exceed $4,000,000 (increasing by five percent (5%)
during each year of the Loan) in the aggregate for all the Properties and
excluding administrative fees paid by Borrower under the respective Employee
Services Agreements between each of the Operators and Summit Care Corporation
and under the respective Administrative Services Agreements between each
Operator and Skilled Healthcare, LLC, Taxes, Insurance Premiums, wages and
benefits, which liabilities are not more than sixty (60)
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days past the date incurred, are not evidenced by a note and are paid when due,
and which amounts are normal and reasonable under the circumstances, and (iv)
such other liabilities that are permitted pursuant to this Agreement;
(u) has not and will not assume or guarantee or become
obligated for the debts of any other Person or hold out its credit as being
available to satisfy the obligations of any other Person except as permitted
pursuant to this Agreement; provided, however, that this provision shall not be
deemed to prohibit indemnification and contribution agreements in favor of the
Lender, the Revolving Credit Lender, or among the Borrowers entered into under
or in connection with the Loan Documents or the Revolving Credit Loan Documents;
(v) has not and will not acquire obligations or
securities of its partners, members or shareholders or any other Affiliate;
(w) has allocated and will allocate fairly, reasonably
and in accordance with all Legal Requirements any overhead expenses or other
common expenses that are shared with any Affiliate, including, but not limited
to, paying for shared office space and services performed by any employee of an
Affiliate;
(x) maintains and uses and will maintain and use separate
stationery, invoices and checks bearing its name. The stationery, invoices, and
checks utilized by the Special Purpose Entity or utilized to collect its funds
or pay its expenses shall bear its own name and shall not bear the name of any
other entity unless such entity is clearly designated as being the Special
Purpose Entity's agent;
(y) has not pledged and will not pledge its assets for
the benefit of any other Person, except as otherwise permitted by the Loan
Documents or the Revolving Credit Loan Documents;
(z) has held itself out and identified itself and will
hold itself out and identify itself as a separate and distinct entity under its
own name, in the fictitious business name under which it operates its Individual
Property set forth on Schedule VIII or in a name franchised or licensed to it by
an entity other than an Affiliate of Borrower and not as a division or part of
any other Person, except (i) for services rendered under a business management
services agreement with an Affiliate that complies with the terms contained in
Subsection (dd) below, so long as the manager, or equivalent thereof, under such
business management services agreement holds itself out as an agent of the
Borrower; or (ii) to the extent a single member limited liability company is
treated as a division of its member for federal income tax purposes;
(aa) has maintained and will maintain its assets in such a
manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Person;
(bb) except as contemplated under the Cash Management
Agreement, has not made and will not make loans to any Person or hold evidence
of indebtedness issued by any other Person or entity (other than cash and
investment-grade securities issued by an entity that is not an Affiliate of or
subject to common ownership with such entity);
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(cc) has not identified and will not identify its
partners, members or shareholders, or any Affiliate of any of them, as a
division or part of it, and has not identified itself and shall not identify
itself as a division of any other Person, except to the extent a single-member
limited liability company is treated as a division of its member for tax
purposes;
(dd) has not entered into or been a party to, and will not
enter into or be a party to, any transaction with its partners, members,
shareholders or Affiliates except (A) in the ordinary course of its business and
on terms which are intrinsically fair, commercially reasonable and are in
compliance with all Legal Requirements and no less favorable to it than would be
obtained in a comparable arm's-length transaction with an unrelated third party
and (B) in connection with the Loan Documents;
(ee) has not and will not have any obligation to, and will
not, indemnify its partners, officers, directors or members, as the case may be,
unless such an obligation is fully subordinated to the Debt and will not
constitute a claim against it in the event that cash flow in excess of the
amount required to pay the Debt is insufficient to pay such obligation;
(ff) if such entity is a single-member limited liability
company, it shall consider the interests of its creditors in connection with all
corporate actions;
(gg) does not and will not have any of its obligations
guaranteed by any Affiliate, except as otherwise provided for in the Loan
Documents or the Revolving Credit Loan Documents;
(hh) if such entity is a Delaware limited liability
company, it shall have its own board of directors or board of managers, and
shall cause such board to meet at least annually or act pursuant to written
consent and keep minutes of such meetings and actions and observe all other
corporate formalities;
(ii) has not and will not form, acquire, or hold any
subsidiary or own any equity interest in any other entity except that a Special
Purpose Entity that is acting as a Principal may own an equity interest in the
Special Purpose Entity of which it is a general partner;
(jj) has not and will not permit any other Person
independent access to its bank accounts except an administrator or agent
pursuant to a written agreement;
(kk) has caused and will cause all representatives of the
Borrower to act at all times with respect to the Borrower consistently and in
furtherance of the foregoing and in the best interests of the Borrower; and
(ll) has complied and will comply with all of the terms
and provisions contained in its organizational documents. The statement of facts
contained in its organizational documents are true and correct and will remain
true and correct.
"SPREAD" shall mean four and one-half percent (4.50%) with
respect to Promissory Note A and eighteen and eight hundred seventy-five
thousandths percent (18.875%) with respect to Promissory Note B.
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"SPREAD MAINTENANCE PREMIUM" shall be an amount equal to the
present value of all Monthly Spread Amounts through and including the Maturity
Date, discounted at a rate per annum equal to LIBOR (as in effect for the
Interest Period in which such prepayment shall occur). In the event that any
such prepayment is made on any date other than a Payment Date, such Spread
Maintenance Premium shall also include an amount equal to (a) the product of the
principal amount of such prepayment multiplied by the Spread with respect to
Promissory Note A, multiplied by (b) a fraction, the numerator of which shall
equal the actual number of days remaining in the related Interest Period and the
denominator of which is 360.
"STATE" shall mean, with respect to an Individual Property,
the State or Commonwealth in which such Individual Property or any part thereof
is located.
"STRIKE PRICE" shall mean four and one half percent (4.50%)
with respect to Promissory Note A.
"SUBORDINATION OF AGREEMENTS" means that certain Subordination
of Administrative Services Agreements and Subordination of Employee Services
Agreements, dated as of the date hereof, among Borrower, Lender, Summit Care
Corporation, Summit Care Texas L.P. and Skilled Healthcare LLC, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.
"SURVEY" shall mean a survey of the Individual Property in
question prepared pursuant to the requirements contained in Section 3.1.3(c)
hereof.
"TAX AND INSURANCE ESCROW FUND" shall have the meaning set
forth in Section 7.2 hereof.
"TAXES" shall mean all real estate and personal property
taxes, assessments, water rates or sewer rents, now or hereafter levied or
assessed or imposed against any Individual Property or part thereof.
"THRESHOLD AMOUNT" shall have the meaning set forth in Section
5.1.21 hereof.
"TITLE INSURANCE POLICIES" shall mean, with respect to each
Individual Property, an ALTA mortgagee title insurance policy in a form
acceptable to Lender (or, if an Individual Property is in a State which does not
permit the issuance of such ALTA policy, such form as shall be permitted in such
State and acceptable to Lender) issued with respect to such Individual Property
and insuring the lien of the Mortgage encumbering such Individual Property.
"TRANSFER" shall have the meaning set forth in Section
5.2.10(b) hereof.
"TRANSITION YEAR MAXIMUM AMOUNT" shall have the meaning set
forth in Section 2.3.2 hereof.
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean the Uniform
Commercial Code as in effect in the applicable State in which an Individual
Property is located.
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"U.S. OBLIGATIONS" shall mean non-redeemable securities
evidencing an obligation to timely pay principal and/or interest in a full and
timely manner that are direct obligations of the United States of America for
the payment of which its full faith and credit is pledged.
"WORKING CAPITAL" means, as of any date, (a) the sum, without
duplication, of (i) current assets (other than cash and cash equivalents) and
(ii) cash and cash equivalents held in restricted accounts minus (b) the sum,
without duplication, of (i) current liabilities (other than the current portion
of long term debt) and (ii) long term liabilities related to accrued insurance,
in each case calculated on such date for Borrower.
"ZONING REPORTS" shall have the meaning set forth in Section
3.1.3(f).
SECTION 1.2. PRINCIPLES OF CONSTRUCTION. All references to
sections and schedules are to sections and schedules in or to this Agreement
unless otherwise specified. All uses of the word "including" shall mean
"including, without limitation" unless the context shall indicate otherwise.
Unless otherwise specified, the words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Unless otherwise specified, all meanings attributed to defined terms herein
shall be equally applicable to both the singular and plural forms of the terms
so defined.
II. GENERAL TERMS
SECTION 2.1. LOAN COMMITMENT; DISBURSEMENT TO BORROWER.
2.1.1 AGREEMENT TO LEND AND BORROW. Subject to and upon the
terms and conditions set forth herein, Lender hereby agrees to make and Borrower
hereby agrees to accept the Loan on the Closing Date.
2.1.2 SINGLE DISBURSEMENT TO BORROWER. Borrower may request
and receive only one borrowing hereunder in respect of the Loan and any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
2.1.3 THE NOTE, MORTGAGES AND LOAN DOCUMENTS. The Loan shall
be evidenced by the Note and secured by the Mortgages, the Assignments of Leases
and the other Loan Documents.
2.1.4 USE OF PROCEEDS. Borrower shall use the proceeds of the
Loan to (a) acquire the Properties and/or repay and discharge any existing loans
relating to the Properties, (b) pay all past-due Basic Carrying Costs, if any,
with respect to the Properties, (c) make deposits into the Reserve Funds on the
Closing Date in the amounts provided herein, (d) pay costs and expenses incurred
in connection with the closing of the Loan, as approved by Lender, (e) fund any
working capital requirements of the Properties and (f) distribute the balance,
if any, to Borrower to be used for other general corporate needs of Borrower or
its Affiliates.
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SECTION 2.2. INTEREST RATE.
2.2.1 INTEREST GENERALLY. Interest on the outstanding
principal balance of Promissory Note A and Promissory Note B shall accrue from
the Closing Date to but excluding the Maturity Date at the Applicable Interest
Rate with respect to Promissory Note A and Promissory Note B, respectively.
Borrower shall pay to Lender on each Payment Date the interest accrued on
Promissory Note A and Promissory Note B for the immediately preceding Interest
Period.
2.2.2 INTEREST CALCULATION. Interest on the outstanding
principal balance of Promissory Note A and Promissory Note B shall be calculated
by multiplying (a) the actual number of days elapsed in the period for which the
calculation is being made by (b) a daily rate based on a three hundred sixty
(360) day year by (c) the outstanding principal balance of Promissory Note A and
Promissory Note B, as applicable.
2.2.3 DETERMINATION OF INTEREST RATE. (a) The Applicable
Interest Rate with respect to Promissory Note A and Promissory Note B shall be:
(i) LIBOR plus the applicable Spread with respect to the applicable Interest
Period for a LIBOR Loan or (ii) the Prime Rate plus the applicable Prime Rate
Spread for a Prime Rate Loan if the Loan is converted to a Prime Rate Loan
pursuant to the provisions of Section 2.2.3(c) or (f).
(b) Subject to the terms and conditions of this Section
2.2.3, the Loan shall be a LIBOR Loan and Borrower shall pay interest on the
outstanding principal amount of the Loan at LIBOR plus the Spread for the
applicable Interest Period. Any change in the rate of interest hereunder due to
a change in the Applicable Interest Rate shall become effective as of the
opening of business on the first day on which such change in the Applicable
Interest Rate shall become effective. Each determination by Lender of the
Applicable Interest Rate shall be conclusive and binding for all purposes,
absent manifest error.
(c) In the event that Lender shall have determined (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that by reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining LIBOR, then
Lender shall forthwith give notice by telephone of such determination, confirmed
in writing, to Borrower at least one (1) Business Day prior to the last day of
the related Interest Period. If such notice is given, the related outstanding
LIBOR Loan shall be converted, on the last day of the then current Interest
Period, to a Prime Rate Loan.
(d) If, pursuant to the terms of this Agreement, any
portion of the Loan has been converted to a Prime Rate Loan and Lender shall
determine (which determination shall be conclusive and binding upon Borrower
absent manifest error) that the event(s) or circumstance(s) which resulted in
such conversion shall no longer be applicable, Lender shall give notice by
telephone of such determination, confirmed in writing, to Borrower at least one
(1) Business Day prior to the last day of the related Interest Period. If such
notice is given, the related outstanding Prime Rate Loan shall be converted to a
LIBOR Loan on the last day of the then current Interest Period.
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(e) With respect to a LIBOR Loan, all payments made by
Borrower hereunder shall be made free and clear of, and without reduction for or
on account of, income, stamp or other taxes, levies, imposts, duties, charges,
fees, deductions, reserves or withholdings imposed, levied, collected, withheld
or assessed by any Governmental Authority, which are imposed, enacted or become
effective after the date hereof (such non-excluded taxes being referred to
collectively as "FOREIGN TAXES"), excluding income and franchise taxes of the
United States of America or any political subdivision or taxing authority
thereof or therein (including Puerto Rico). If any Foreign Taxes are required to
be withheld from any amounts payable to Lender hereunder, the amounts so payable
to Lender shall be increased to the extent necessary to yield to Lender (after
payment of all Foreign Taxes) interest or any such other amounts payable
hereunder at the rate or in the amounts specified hereunder; provided, however,
that if:
(i) Lender is a "foreign corporation, partnership or
trust" within the meaning of the Internal Revenue Code, Lender agrees
with and in favor of Borrower, to deliver to Borrower:
(A) if Lender claims an exemption from,
or a reduction of, withholding tax under a United
States of America tax treaty, properly completed IRS
Forms W-8BEN and W-8ECI before the payment of any
interest in the first calendar year and before the
payment of any interest in each third succeeding
calendar year during which interest may be paid under
this Agreement;
(B) if Lender claims that interest paid
under this Agreement is exempt from United States of
America withholding tax because it is effectively
connected with a United States of America trade or
business of Lender, two properly completed and
executed copies of IRS Form W-8ECI before the payment
of any interest is due in the first taxable year of
Lender and in each succeeding taxable year of Lender
during which interest may be paid under this
Agreement, and IRS Form W-9; and
(C) such other form or forms as may be
required under the Internal Revenue Code or other
laws of the United States of America as a condition
to exemption from, or reduction of, United States of
America withholding tax.
Lender agrees to promptly notify Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(ii) Lender claims exemption from, or reduction of,
withholding tax under a United States of America tax treaty by
providing IRS Form FW-8BEN and Lender sells, assigns, grants a
participation in, or otherwise transfers all or part of the Debt owing
to Lender, Lender agrees to notify Borrower of the percentage amount in
which it is no longer the beneficial owner of Debt of Borrower to
Lender. To the extent of such percentage amount, Borrower will treat
Lender's IRS Form W-8BEN as no longer valid.
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(iii) Lender is claiming exemption from United States of
America withholding tax by filing IRS Form W-8ECI with the Agent sells,
assigns, grants a participation in, or otherwise transfers all or part
of the Debt owing to Lender, Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements
imposed by Section 1441 and 1442 of the Code.
(iv) Lender is entitled to a reduction in the applicable
withholding tax, Borrower may withhold from any interest payment to
Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation
required by subsection (a) of this Section are not delivered to
Borrower, then Borrower may withhold from any interest payment to
Lender not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
Whenever any Foreign Tax is payable pursuant to applicable law
by Borrower, as promptly as possible thereafter, Borrower shall send to Lender
an original official receipt, if available, or certified copy thereof showing
payment of such Foreign Tax. Borrower hereby indemnifies Lender for any
incremental taxes, interest or penalties that may become payable by Lender which
may result from any failure by Borrower to pay any such Foreign Tax when due to
the appropriate taxing authority or any failure by Borrower to remit to Lender
the required receipts or other required documentary evidence.
(f) If any requirement of law or any change therein or in
the interpretation or application thereof, shall hereafter make it unlawful for
Lender to make or maintain a LIBOR Loan as contemplated hereunder (i) the
obligation of Lender hereunder to make a LIBOR Loan or to convert a Prime Rate
Loan to a LIBOR Loan shall be canceled forthwith and (ii) any outstanding LIBOR
Loan shall be converted automatically to a Prime Rate Loan on the next
succeeding Payment Date or within such earlier period as required by law.
Borrower hereby agrees promptly to pay Lender, upon demand, any additional
amounts necessary to compensate Lender for any Breakage Costs. Lender's notice
of such costs, as certified to Borrower, shall be conclusive absent manifest
error.
(g) In the event that any change in any requirement of
law or in the interpretation or application thereof, or compliance by Lender
with any request or directive (whether or not having the force of law) hereafter
issued from any central bank or other Governmental Authority:
(i) shall hereafter impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of Lender which is not
otherwise included in the determination of LIBOR hereunder;
(ii) shall hereafter have the effect of reducing the rate
of return on Lender's capital as a consequence of its obligations
hereunder to a level below that which Lender could have achieved but
for such adoption, change or compliance (taking into consideration
Lender's policies with respect to capital adequacy) by any amount
reasonably deemed by Lender to be material; or
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(iii) shall hereafter impose on Lender any other condition
and the result of any of the foregoing is to increase the cost to
Lender of making, renewing or maintaining loans or extensions of credit
or to reduce any amount receivable hereunder;
then, in any such case, Borrower shall promptly pay Lender, upon demand, any
additional amounts necessary to compensate Lender for such additional cost or
reduced amount receivable which Lender deems to be material as reasonably
determined by Lender. If Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.2.3(g), Lender shall provide Borrower with not less
than ninety (90) days notice specifying in reasonable detail the event by reason
of which it has become so entitled and the additional amount required to fully
compensate Lender for such additional cost or reduced amount. A certificate as
to any additional costs or amounts payable pursuant to the foregoing sentence
submitted by Lender to Borrower shall be conclusive in the absence of manifest
error. This provision shall survive payment of the Note and the satisfaction of
all other obligations of Borrower under this Agreement and the Loan Documents.
(h) Borrower agrees to indemnify Lender and to hold
Lender harmless from any loss or expense which Lender sustains or incurs as a
consequence of (i) any default by Borrower in payment of the principal of or
interest on a LIBOR Loan, including, without limitation, any such loss or
expense arising from interest or fees payable by Lender to lenders of funds
obtained by it in order to maintain a LIBOR Loan hereunder, (ii) any prepayment
(whether voluntary or mandatory) of the LIBOR Loan on a day that (A) is not the
Payment Date immediately following the last day of an Interest Period with
respect thereto or (B) is the Payment Date immediately following the last day of
an Interest Period with respect thereto if Borrower did not give the prior
notice of such prepayment required pursuant to the terms of this Agreement,
including, without limitation, such loss or expense arising from interest or
fees payable by Lender to lenders of funds obtained by it in order to maintain
the LIBOR Loan hereunder and (iii) the conversion (for any reason whatsoever,
whether voluntary or involuntary) of the Applicable Interest Rate from LIBOR
plus the Spread to the Prime Rate plus the Prime Rate Spread with respect to any
portion of the outstanding principal amount of the Loan then bearing interest at
LIBOR plus the Spread on a date other than the Payment Date immediately
following the last day of an Interest Period, including, without limitation,
such loss or expenses arising from interest or fees payable by Lender to lenders
of funds obtained by it in order to maintain a LIBOR Loan hereunder (the amounts
referred to in clauses (i), (ii) and (iii) are herein referred to collectively
as the "BREAKAGE COSTS"); provided, however, Borrower shall not indemnify Lender
from any loss or expense arising from Lender's willful misconduct or gross
negligence. This provision shall survive payment of the Note in full and the
satisfaction of all other obligations of Borrower under this Agreement and the
other Loan Documents.
(i) Lender shall not be entitled to claim compensation
pursuant to this Section 2.2.3 for any Foreign Taxes, increased cost or
reduction in amounts received or receivable hereunder, or any reduced rate of
return, which was incurred or which accrued more than ninety (90) days before
the date Lender notified Borrower of the change in law or other circumstance on
which such claim of compensation is based and delivered to Borrower a written
statement setting forth in reasonable detail the basis for calculating the
additional amounts owed to Lender under this Section 2.2.3, which statement
shall be conclusive and binding upon all parties hereto absent manifest error.
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2.2.4 ADDITIONAL COSTS. Lender will use reasonable efforts
(consistent with legal and regulatory restrictions) to maintain the availability
of the LIBOR Loan and to avoid or reduce any increased or additional costs
payable by Borrower under Section 2.2.3, including, if requested by Borrower, a
transfer or assignment of the Loan to a branch, office or Affiliate of Lender in
another jurisdiction, or a redesignation of its lending office with respect to
the Loan, in order to maintain the availability of the LIBOR Loan or to avoid or
reduce such increased or additional costs, provided that the transfer or
assignment or redesignation (a) would not result in any additional costs,
expenses or risk to Lender that are not reimbursed by Borrower and (b) would not
be disadvantageous in any other respect to Lender as determined by Lender in its
sole discretion.
2.2.5 DEFAULT RATE. In the event that, and for so long as, any
Event of Default shall have occurred and be continuing, the outstanding
principal balance of the Loan and, to the extent permitted by law, all accrued
and unpaid interest in respect of the Loan and any other amounts due pursuant to
the Loan Documents, shall accrue interest at the Default Rate, calculated from
the date such payment was due without regard to any grace or cure periods
contained herein.
2.2.6 USURY SAVINGS. This Agreement, the Note and the other
Loan Documents are subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance of
the Loan at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the Maximum Legal Rate. If, by the
terms of this Agreement or the other Loan Documents, Borrower is at any time
required or obligated to pay interest on the principal balance due hereunder at
a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the
Default Rate, as the case may be, shall be deemed to be immediately reduced to
the Maximum Legal Rate and all previous payments in excess of the Maximum Legal
Rate shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder. All sums paid or agreed to be paid to
Lender for the use, forbearance, or detention of the sums due under the Loan,
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Loan does not
exceed the Maximum Legal Rate of interest from time to time in effect and
applicable to the Loan for so long as the Loan is outstanding.
2.2.7 INTEREST RATE CAP AGREEMENT. (a) Prior to or
contemporaneously with the Closing Date, Borrower shall enter into an Interest
Rate Cap Agreement with respect to Promissory Note A with a LIBOR strike price
equal to the Strike Price. The Interest Rate Cap Agreement (i) shall be in a
form and substance reasonably acceptable to Lender, (ii) shall be with an
Acceptable Counterparty, (iii) shall direct such Acceptable Counterparty to
deposit directly into the Lockbox Account any amounts due Borrower under such
Interest Rate Cap Agreement so long as any portion of the Debt evidenced by
Promissory Note A exists, provided that the Debt evidenced by Promissory Note A
shall be deemed to exist if the Properties transferred by judicial or
non-judicial foreclosure or deed-in-lieu thereof, (iv) shall be for a period
equal to the term of the Loan and (v) shall have an initial notional amount
equal to the principal balance of the Promissory Note A. Borrower shall
collaterally assign to Lender, pursuant to the Collateral Assignment of Interest
Rate Cap Agreement, all of its right, title and interest to receive any and all
payments under the Interest Rate Cap Agreement, and shall deliver to Lender an
executed
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counterpart of such Interest Rate Cap Agreement (which shall, by its
terms, authorize the assignment to Lender and require that payments be deposited
directly into the Lockbox Account).
(b) Borrower shall comply in all material respects with
all of its obligations under the terms and provisions of the Interest Rate Cap
Agreement. All amounts paid by the Counterparty under the Interest Rate Cap
Agreement to Borrower or Lender shall be deposited immediately into the Lockbox
Account or if the Lockbox Account is not then required to be in effect, into
such account as specified by Lender. Borrower shall take all actions reasonably
requested by Lender to enforce Lender's rights under the Interest Rate Cap
Agreement in the event of a default by the Counterparty and shall not waive,
amend or otherwise modify any of its rights thereunder.
(c) In the event of any downgrade, withdrawal or
qualification of the rating of the Counterparty by S&P or Moody's, Borrower
shall replace the Interest Rate Cap Agreement with a Replacement Interest Rate
Cap Agreement not later than ten (10) Business Days following receipt of notice
from Lender of such downgrade, withdrawal or qualification.
(d) In the event that Borrower fails to purchase and
deliver to Lender the Interest Rate Cap Agreement or fails to maintain the
Interest Rate Cap Agreement in accordance with the terms and provisions of this
Agreement, Lender may purchase the Interest Rate Cap Agreement and the cost
incurred by Lender in purchasing such Interest Rate Cap Agreement shall be paid
by Borrower to Lender with interest thereon at the Default Rate from the date
such cost was incurred by Lender until such cost is reimbursed by Borrower to
Lender.
(e) In connection with the Interest Rate Cap Agreement,
Borrower shall obtain and deliver to Lender an opinion from counsel (which
counsel may be in-house counsel for the Counterparty) for the Counterparty (upon
which Lender and its successors and assigns may rely) which shall provide, in
relevant part, that:
(i) the Counterparty is duly organized, validly existing,
and in good standing under the laws of its jurisdiction of
incorporation and has the organizational power and authority to execute
and deliver, and to perform its obligations under, the Interest Rate
Cap Agreement;
(ii) the execution and delivery of the Interest Rate Cap
Agreement by the Counterparty, and any other agreement which the
Counterparty has executed and delivered pursuant thereto, and the
performance of its obligations thereunder have been and remain duly
authorized by all necessary action and do not contravene any provision
of its certificate of incorporation or by-laws (or equivalent
organizational documents) or any law, regulation or contractual
restriction binding on or affecting it or its property;
(iii) all consents, authorizations and approvals required
for the execution and delivery by the Counterparty of the Interest Rate
Cap Agreement, and any other agreement which the Counterparty has
executed and delivered pursuant thereto, and the performance of its
obligations thereunder have been obtained and remain in full force and
effect, all conditions thereof have been duly complied with, and no
other action by, and
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no notice to or filing with any governmental authority or regulatory
body is required for such execution, delivery or performance; and
(iv) the Interest Rate Cap Agreement, and any other
agreement which the Counterparty has executed and delivered pursuant
thereto, has been duly executed and delivered by the Counterparty and
constitutes the legal, valid and binding obligation of the
Counterparty, enforceable against the Counterparty in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
SECTION 2.3. LOAN PAYMENT.
2.3.1 PAYMENTS GENERALLY. Borrower shall pay to Lender on the
date hereof interest on the Loan from the Closing Date through September 8,
2003. Borrower shall pay to Lender on the Payment Date occurring in October 2003
and on each Payment Date thereafter (a) interest accrued on Promissory Note A
for the preceding Interest Period, (b) the Note A Monthly Principal Payment
Amount, (c) interest accrued on Promissory Note B for the preceding Interest
Period and (d) commencing on the earlier of the first Payment Date after the
Mezzanine Loan is paid in full and the thirty-first (31st) Payment Date, the
Note B Monthly Principal Payment Amount. For purposes of making payments
hereunder, but not for purposes of calculating interest accrual periods, if the
day on which such payment is due is not a Business Day, then amounts due on such
date shall be due on the immediately preceding Business Day and with respect to
payments of principal due on the Maturity Date, interest shall be payable at the
Applicable Interest Rate or the Default Rate, as the case may be, through and
including the day immediately preceding such Maturity Date. All amounts due
pursuant to this Agreement and the other Loan Documents shall be payable without
setoff, counterclaim, defense or any other deduction whatsoever.
2.3.2 Commencing in the calendar year after the calendar year
in which the Mezzanine Loan has been paid in full, and during each calendar year
thereafter during the term of the Loan until Promissory Note B shall have been
paid in full, upon the earlier to occur of (i) April 30th of such year and (ii)
not later than ten (10) days following delivery of the annual financial
statements to Lender referred to in and required by Section 5.1.11(b) with
respect to the prior calendar year, Borrower shall make a principal payment on
account of Promissory Note B to the Note B Holder in an amount equal to the
lesser of (i) 100% of the Excess Cash Flow of Borrower for the immediately
preceding calendar year and (ii) the positive excess of (x) Ten Million Dollars
($10,000,000) (or for the calendar year in which the Mezzanine Loan is paid in
full, the Transition Year Maximum Amount (as defined below)) plus any Catch-Up
Amounts (defined below) with respect to years prior to the immediately preceding
calendar year, if applicable, over (y) monthly amortization payments made by
Borrower to Lender on account of Promissory Note B during such preceding
calendar, if any, pursuant to Section 2.3.1 or any voluntary prepayment on
account of Promissory Note B (it being understood and agreed that any prepayment
made under Section 2.5 or Section 2.7 shall not be deemed a voluntary
prepayment). To the extent that, with respect to any calendar year, the
aggregate amount of principal payments under this Section 2.3.2 and Section
2.3.1 is less than $10,000,000, the positive excess of $10,000,000 over such
payments shall be defined as a "CATCH-UP AMOUNT". For purposes of
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the foregoing calculation for the calendar year in which the Mezzanine Loan is
paid in full, an amount equal to (I) $10,000,000 less (II) the amount of
principal paid under the Mezzanine Loan in such year (the "TRANSITION YEAR
MAXIMUM AMOUNT") shall be substituted for "$10,000,000" in such calculation.
2.3.3 PAYMENT ON MATURITY DATE. Borrower shall pay to Lender
on the Maturity Date the outstanding principal balance of the Loan, all accrued
and unpaid interest and all other amounts due hereunder and under the Note, the
Mortgages and the other Loan Documents.
2.3.4 LATE PAYMENT CHARGE. If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower by the date on
which it is due, Borrower shall pay to Lender upon demand an amount equal to the
lesser of five percent (5%) of such unpaid sum or the maximum amount permitted
by applicable law in order to defray the expense incurred by Lender in handling
and processing such delinquent payment and to compensate Lender for the loss of
the use of such delinquent payment. Any such amount shall be secured by the
Mortgages and the other Loan Documents to the extent permitted by applicable
law.
2.3.5 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
and the Note shall be made to Lender not later than 1:00 p.m., New York City
time, on the date when due and shall be made in lawful money of the United
States of America in immediately available funds at Lender's office or as
otherwise directed by Lender, and any funds received by Lender after such time
shall, for all purposes hereof, be deemed to have been paid on the next
succeeding Business Day.
SECTION 2.4. PREPAYMENTS.
2.4.1 VOLUNTARY PREPAYMENTS. Provided that no Event of Default
shall have occurred and be continuing, Borrower shall have the right to prepay
Promissory Note B, in whole or in part, at any time without premium or penalty.
Prior to the Lockout Release Date, the outstanding principal amount of
Promissory Note A may not be prepaid in whole or in part. On any Payment Date
occurring on, or after, the Lockout Release Date, Borrower may, at its option
and upon thirty (30) days prior notice to Lender, prepay Promissory Note A in
whole, but not in part, except in connection with the release of an Individual
Property pursuant to Section 2.5.2; provided that such prepayment is accompanied
by the Prepayment Premium, if any. Provided no Event of Default has occurred and
is continuing, any partial prepayment, other than a prepayment in connection
with the release of an Individual Property pursuant to Section 2.5.2, 2.4.2 or
2.4.3, shall be applied (a) first, to the payment of the outstanding principal
balance of Promissory Note B until Promissory Note B shall have been paid in
full and (b) second, to the payment of the outstanding principal balance of
Promissory Note A. Lender shall not be obligated to accept any prepayment unless
it is accompanied by the Prepayment Premium due in connection therewith. Any
partial prepayment shall be applied to the last payments of principal due under
the Loan.
2.4.2 MANDATORY PREPAYMENTS. On the next occurring Payment
Date following the date on which Lender actually receives any Net Proceeds, if
Lender is not obligated to make such Net Proceeds available to Borrower for the
Restoration of any Individual
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Property, Borrower shall prepay, or authorize Lender to apply Net Proceeds as a
prepayment of, the outstanding principal balance of the Note in an amount equal
to one hundred percent (100%) of such Net Proceeds. Provided no Event of Default
has occurred and is continuing, any partial prepayment under this Section shall
be applied first to the payment of the outstanding principal balance of
Promissory Note A until Promissory Note A shall have been paid in full and the
balance, if any, to the payment of the outstanding principal balance of
Promissory Note B. Other than following an Event of Default, no Prepayment
Premium shall be due in connection with any prepayment made pursuant to this
Section 2.4.2. The Release Amount with respect to such Individual Property shall
be reduced in an amount equal to such prepayment and Borrower shall have the
right to simultaneously obtain a release of such Individual Property in
accordance with the provisions of Section 2.5.2, upon payment of the balance of
the Release Amount with respect to such Individual Property, and no Prepayment
Premium shall be due in connection with such prepayment. Any partial prepayment
under this Section 2.4.2 shall be applied to the last payments of principal due
under the Loan.
2.4.3 PREPAYMENTS AFTER DEFAULT. If, following an Event of
Default, payment of all or any part of the Debt is tendered by Borrower or
otherwise recovered by Lender (including through application of any Reserve
Funds), such tender or recovery shall be (a) made on the next occurring Payment
Date together with the monthly payment of Debt Service and (b) deemed a
voluntary prepayment by Borrower in violation of the prohibition against
prepayment set forth in Section 2.4.1 and Borrower shall pay, in addition to the
Debt, an amount equal to the greater of (i) five percent (5%) of the outstanding
principal balance of the Loan to be prepaid or satisfied, and (ii) the
Prepayment Premium. Any amounts so received may be applied by Lender to the
payment of the Debt in such order and priority, including, without limitation,
alternating applications thereof between interest and principal and allocating
payments to Promissory Note A and Promissory Note B, as Lender shall determine
in its sole discretion.
SECTION 2.5. RELEASE OF PROPERTY. Except as set forth in
Section 2.4.2 and this Section 2.5, no repayment or prepayment of all or any
portion of the Note shall cause, give rise to a right to require, or otherwise
result in, the release of any Lien of any Mortgage on any Individual Property.
2.5.1 RELEASE OF INDIVIDUAL PROPERTY. On and after the Lockout
Release Date, Borrower may obtain the release of an Individual Property from the
Lien of the Mortgage thereon (and related Loan Documents) and the release of
Borrower's obligations under the Loan Documents with respect to such Individual
Property (other than those expressly stated to survive), upon the satisfaction
of each of the following conditions:
(a) No Event of Default shall have occurred and be
continuing;
(b) Borrower shall submit to Lender, not less than thirty
(30) days prior to the date of such release, a release of Lien (and related Loan
Documents) for such Individual Property for execution by Lender. Such release
shall be in a form appropriate in each jurisdiction in which the Individual
Property is located and that contains standard provisions, if any, protecting
the rights of the releasing lender. In addition, Borrower shall provide all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release, together with an Officer's Certificate certifying
that such documentation (i) is in compliance with all
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Legal Requirements, (ii) will effect such release in accordance with the terms
of this Agreement, and (iii) will not impair or otherwise adversely affect the
Liens, security interests and other rights of Lender under the Loan Documents
not being released (or as to the parties to the Loan Documents and Properties
subject to the Loan Documents not being released);
(c) After giving effect to such release, the Debt Service
Coverage Ratio for the Properties then remaining subject to the Liens of the
Mortgages shall be equal to or greater than the greater of (i) Closing Date Debt
Service Coverage Ratio, and (ii) the Debt Service Coverage Ratio for all of the
then remaining Properties (including the Individual Property to be released) for
the twelve (12) full calendar months immediately preceding the release of the
Individual Property, provided, however, that in no event shall the Debt Service
Coverage Ratio required under this Section 2.5.1(c) be greater than 3.0/1.0;
(d) The Individual Property to be released shall be
conveyed to a Person other than a Borrower or any of its Affiliates;
(e) Borrower shall pay to Lender the Note A Release
Amount for the applicable Individual Property and the Prepayment Premium, if
any, due in connection therewith and shall pay to the Note B Holder the Note B
Release Amount for the applicable Individual Property; and
(f) After giving effect to such release, the
Loan-to-Value Ratio for the Properties then remaining subject to the Liens of
the Mortgages shall be equal to or less than the lesser of (i) Closing Date
Loan-to-Value Ratio and (ii) the Loan-to-Value Ratio for all of the remaining
Properties (including the Individual Property to be released immediately
preceding the release of the Individual Property, provided, however, that in no
event shall the Loan-to-Value Ratio required under this Section 2.5.1(f), be
less than 45%.
(g) Borrower shall have delivered to Lender a release of
the Accounts of the Individual Property to be released from the lien of the
Revolving Credit Lender under the Revolving Credit Loan Agreement.
2.5.2 RELEASE ON PAYMENT IN FULL. Lender shall, upon the
written request and at the expense of Borrower, upon payment in full of all
principal and interest due on the Loan and all other amounts due and payable
under the Loan Documents in accordance with the terms and provisions of the Note
and this Agreement, release the Lien of the Mortgage on each Individual Property
not theretofore released.
SECTION 2.6. CASH MANAGEMENT.
2.6.1 MEDICARE/MEDICAID RECEIVABLES ACCOUNT. (a) Borrower
shall establish and maintain a separate segregated Eligible Account for each
Individual Property for the purpose of depositing all payments made on account
of Medicare/Medicaid Accounts relating to the Individual Properties (each a
"MEDICARE/MEDICAID RECEIVABLES ACCOUNT") with Lockbox Bank in the name of the
Operator of the applicable Individual Property. Borrower hereby grants to Lender
a first priority security interest in the Medicare/Medicaid Receivables Accounts
and all deposits at any time contained therein and the proceeds thereof and will
take all actions necessary to maintain in favor of Lender a perfected first
priority security interest in the
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Medicare/Medicaid Receivables Accounts, including, without limitation, executing
and filing UCC-1 Financing Statements and continuations thereof. Notwithstanding
anything herein to the contrary, the Medicare/Medicaid Receivables Accounts
shall be under the sole dominion and control of the Borrower that is the
Operator of the respective Facility. All costs and expenses for establishing and
maintaining the Medicare/Medicaid Receivables Accounts shall be paid by
Borrower.
(b) Borrower shall deliver written instructions to all
Medical Payors to deliver all payments made on account of Medicare/Medicaid
Accounts directly to the applicable Medicare/Medicaid Receivables Account and
shall execute and deliver to each Medical Payor such other documentation as such
Medical Payor shall require to make payments with respect to Medicare/Medicaid
Accounts directly to the applicable Medicare/Medicaid Receivables Account.
Notwithstanding the foregoing, if Borrower receives any checks for such
payments, Borrower shall deposit any funds received by Borrower on account of a
Medicare/Medicaid Account maintained by Borrower into the Cash Management
Account within one (1) Business Day after receipt.
(c) Borrower shall obtain from Lockbox Bank its agreement
to transfer to the Cash Management Account in immediately available funds by
federal wire transfer all amounts on deposit in the Medicare/Medicaid
Receivables Accounts once every Business Day throughout the term of the Loan.
2.6.2 LOCKBOX ACCOUNT. (a) Borrower shall establish and
maintain a segregated Eligible Account (the "LOCKBOX ACCOUNT") with Lockbox Bank
in trust for the benefit of Lender, which Lockbox Account shall be under the
sole dominion and control of Lender. The Lockbox Account shall be entitled
"Column Financial, Inc., as Lender, pursuant to Loan Agreement dated as of
August 19, 2003 - Lockbox Account." Borrower hereby grants to Lender a first
priority security interest in the Lockbox Account and all deposits at any time
contained therein and the proceeds thereof and will take all actions necessary
to maintain in favor of Lender a perfected first priority security interest in
the Lockbox Account, including executing and filing UCC-1 Financing Statements
and continuations thereof. Lender and Servicer shall have the sole right to make
withdrawals from the Lockbox Account and all costs and expenses for establishing
and maintaining the Lockbox Account shall be paid by Borrower.
(b) Borrower shall deposit all Rents received by private
pay tenants or residents within one (1) Business Day after receipt into either
(i) the Lockbox Account or (ii) an Eligible Account of Borrower provided that
Borrower has given the depository institution holding such account instructions
to wire transfer all amounts held in such account on a daily basis to the
Lockbox Account. Borrower shall deposit all amounts received by Borrower
constituting Rents from insurance carriers or other third-party payors, other
than payments on account of Medicare/Medicaid Accounts, into the Lockbox Account
within one (1) Business Day after receipt.
(c) Borrower shall obtain from Lockbox Bank its agreement
to transfer to the Cash Management Account in immediately available funds by
federal wire transfer all amounts on deposit in the Lockbox Account once every
Business Day throughout the term of the Loan.
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2.6.3 REVOLVING CREDIT CASH MANAGEMENT. Notwithstanding the
foregoing provisions of Section 2.6.1 and 2.6.2, provided that (a) the Revolving
Credit Loan is outstanding, (b) amounts on account of Medicare/Medicaid
Receivables and Rents from the Properties are being deposited with the Revolving
Credit Lender pursuant to the Revolving Credit Loan Agreement, and (c) the
Revolving Credit Lender is disbursing the proceeds of the Revolving Credit Loan
and any funds deposited with Revolving Credit Lender pursuant to the Revolving
Credit Loan Agreement in the excess of amounts payable under the Revolving
Credit Loan into the Cash Management Account, Borrower shall not be required to
make deposits of Medicare/Medicaid Receivables and Rents into the
Medicare/Medicaid Receivables Account and Lockbox Accounts, respectively, in
accordance with the provisions of Section 2.6.1 and 2.6.2 hereof. Borrower
hereby authorizes Lender to request and obtain advances under the Revolving
Credit Loan Agreement on each Payment Date to pay any shortfall between the
amount on deposit in the Cash Management Account on such Payment Date and the
amounts payable by Borrower on such Payment Date.
2.6.4 CASH MANAGEMENT ACCOUNT. (a) Borrower shall establish
and maintain a segregated Eligible Account (the "CASH MANAGEMENT ACCOUNT") to be
held by Servicer in trust for the benefit of Lender, which Cash Management
Account shall be under the sole dominion and control of Lender. The Cash
Management Account shall be entitled "Column Financial, Inc., as Lender,
pursuant to Loan Agreement dated as of August 19, 2003 - Cash Management
Account." Borrower hereby grants to Lender a first priority security interest in
the Cash Management Account and all deposits at any time contained therein and
the proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Cash Management
Account, including executing and filing UCC-1 Financing Statements and
continuations thereof. Borrower will not in any way alter or modify the Cash
Management Account and will notify Lender of the account number thereof. Lender
and Servicer shall have the sole right to make withdrawals from the Cash
Management Account and all costs and expenses for establishing and maintaining
the Cash Management Account shall be paid by Borrower.
(b) Provided no Event of Default shall have occurred and
be continuing, on each Business Day all funds on deposit in the Cash Management
Account shall be applied by Lender to the payment of the following items in the
order indicated:
(i) First, payments to the Tax and Insurance Escrow Fund
in accordance with the terms and conditions of Section 7.2 hereof;
(ii) Second, payment of the monthly Debt Service payable
on the next Payment Date with respect to Note A, applied first to the
payment of interest computed at the Applicable Interest Rate with
respect to the outstanding principal amounts of Promissory Note A with
the remainder applied to the Note A Monthly Principal Payment Amount;
(iii) Third, payments to the Replacement Reserve Fund in
accordance with the terms and conditions hereof;
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(iv) Fourth, payment to Lender of any other amounts then
due and payable under the Loan Documents, other than monthly Debt
Service payable with respect to Note B;
(v) Fifth, payment of the monthly Debt Service payable on
the next Payment Date with respect to Note B, applied first to the
payment of interest computed at the Applicable Interest Rate with
respect to the outstanding principal amounts of Promissory Note B, and,
with the remainder, commencing on the earlier of the thirty-first(31st)
Payment Date or the Payment Date first occurring after the Mezzanine
Loan is paid in full, applied to the Note B Monthly Principal Payment
Amount;
(vi) Sixth, funds necessary to pay the Monthly Operating
Expense Amount for the next calendar month, shall be transferred to
Borrower;
(vii) Seventh, payments to Borrower in the amount of any
Extraordinary Expense approved by Lender;
(viii) Eighth, payments to the Debt Service Reserve Fund in
accordance with the provisions of Section 5.1.27 hereof;
(ix) Ninth, provided no Event of Default then exists, any
excess amounts deposited into the Cash Management Account with respect
to any month and remaining after all applications pursuant to the
preceding clauses (i) through (vii) have been made shall be transferred
to the Mezzanine Deposit Account under the Mezzanine Cash Management
Agreement and applied in accordance with the Mezzanine Loan Agreement
and the Mezzanine Cash Management Agreement, which amounts shall be
deemed to be distributed by Borrower to Mezzanine Borrower pursuant to
Borrower's operating agreement; and
(x) Lastly, provided (a) no Event of Default then exists
and (b) the Mezzanine Loan has been paid in full, all such excess
amounts shall be transferred to Borrower.
(c) The insufficiency of funds on deposit in the Cash
Management Account shall not relieve Borrower from the obligation to make any
payments, as and when due pursuant to this Agreement and the other Loan
Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
(d) All funds on deposit in the Cash Management Account
following the occurrence of an Event of Default may be applied by Lender in such
order and priority as Lender shall determine.
2.6.5 PAYMENTS RECEIVED UNDER THE CASH MANAGEMENT AGREEMENT.
Notwithstanding anything to the contrary contained in this Agreement and the
other Loan Documents, and provided no Event of Default has occurred and is
continuing, Borrower's obligations with respect to the monthly payment of Debt
Service and amounts due for the Tax and Insurance Escrow Fund, Required Repair
Fund, Replacement Reserve Fund, Debt Service Reserve Fund and any other payment
reserves established pursuant to this Agreement or any other Loan Document shall
be deemed satisfied to the extent sufficient amounts are deposited in
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the Cash Management Account established pursuant to the Cash Management
Agreement to satisfy such obligations on the dates each such payment is
required, regardless of whether any of such amounts are so applied by Lender.
2.6.6 PAYMENTS INTO CASH MANAGEMENT ACCOUNT. Borrower shall
have the right at any time to make deposits into the Cash Management Account and
Lender agrees that so long as there are sufficient funds on deposit in the Cash
Management Account to pay the items described in subsections (i) through (v) of
Section 2.6.4 that are payable on the next Payment Date, all amounts in excess
thereof shall be transferred on each Business Day to the Mezzanine Deposit
Account under the Mezzanine Cash Management Agreement, or, if the Mezzanine Loan
shall have been paid in full, to Borrower.
SECTION 2.7. ASSUMPTION OF A PORTION OF THE LOAN. Subject to
the terms and conditions set forth in this Section 2.7, prior to the Lockout
Release Date, Lender shall consent to Transfers of one or more Individual
Properties (individually, an "Assumed Property" and collectively, the "Assumed
Properties") subject to the Lien of the Mortgage and to the severance of the
Loan with respect thereto (a "Severance"), provided that the following
conditions precedent are satisfied:(a) No Event of Default shall have occurred
and be continuing and Borrower shall be in compliance in all material respects
with all terms and conditions set forth in this Agreement and in each Loan
Document on Borrower's part to be observed or performed. Lender shall have
received a certificate from Borrower confirming the foregoing, stating that the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of the Severance with respect to Borrower, the Remaining Crossed
Properties and the Assumed Property and containing any other representations and
warranties with respect to Borrower, the Remaining Crossed Properties, the
Assumed Property or the Loan as Lender or the Rating Agencies may require, such
certificate to be in form and substance reasonably satisfactory to Lender and
satisfactory to the Rating Agencies.
(b) Borrower shall be permitted to Transfer no more than
five Properties pursuant to this Section 2.7 and the aggregate Allocated Loan
Amounts of all Assumed Properties Transferred pursuant to this Section 2.7 shall
not exceed $17,000,000.
(c) Borrower shall submit to Lender, not less than thirty
(30) days prior to the date of the proposed Severance, a request in writing for
consent to the proposed Transfer and Severance which shall identify the Assumed
Property.
(d) Lender shall have received (i) an appraisal of the
Assumed Property, dated no more than sixty (60) days prior to the date of the
Severance, by an appraiser reasonably acceptable to the Lender, and, (ii) for
the Properties to remain as collateral for the Loan ( the "Remaining Crossed
Properties"), if the latest appraisal obtained by or delivered to Lender is more
than twelve (12) months old, an updated or summary appraisal by an appraiser
reasonably acceptable to the Lender and current Occupancy Reports for each
Individual Property.
(e) The Assumed Property shall be conveyed to a Person
other than a Borrower or any of its Affiliates (the "ASSUMED LOAN BORROWER").
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(f) Borrower shall have complied with the conditions set
forth in Section 5.2.10(e)(i), (ii), (iii), (v), (vi), (vii), (ix), (xi) and
(xii) with respect to the Transfer.
(g) The Loan shall be severed into two or more separate
loans, one such loan (the "REMAINING CROSSED LOAN") to be in the amount of the
outstanding principal balance of the Loan immediately prior to the Severance
less the Note A Adjusted Allocated Loan Amount for the Assumed Properties, to be
secured by the Remaining Crossed Properties, and the other such loans (the
"ASSUMED LOAN") in the principal amount equal to aggregate of the Note A
Adjusted Allocated Loan Amounts(s) for the Assumed Properties, to be secured by
the Assumed Properties.
(h) In connection with the Severance, (A) the Owner, the
Master Lessee and the Operator of the Assumed Property shall have executed and
delivered to Lender a severed promissory note on the principal amount of the
Assumed Loan, a severed loan agreement, a cash management agreement, an
environmental indemnity agreement, modifications of the Mortgage and the
Assignment of Lease and Rents encumbering the Assumed Property providing the
such instruments shall secure only the Assumed Loan and such other documents as
may be reasonably request by Lender to evidence and secure the Assumed Loan
(such documents, together with the Mortgage and the Assignment of Leases and
Rents applicable to the Assumed Property being referred to herein as the
"ASSUMED LOAN DOCUMENTS"), (B) Borrower shall have executed and delivered to
Lender such modifications to the Loan Documents as Lender shall reasonably
request in order to effectuate the Severance, and (C) Assumed Loan Borrower
shall have executed and delivered to Lender, an Assumption Agreement in form and
substance satisfactory to Lender, UCC-1 Financing Statements and such other
documents as Lender may reasonably request, pursuant to which Assumed Loan
Borrower shall have assumed all of the obligations of Borrower under the Assumed
Loan Documents and shall have delivered to Lender a guaranty, in substantially
the form of the Guaranty, from a principal of Assumed Loan Borrower satisfactory
to Lender. The Assumed Loan Documents shall be the same in form and substance as
the counterparts of such documents executed and delivered with respect to the
Loan subject to modifications reflecting only the Assumed Property as the
Individual Property that is the subject of such documents and such modifications
reflecting the laws of the state in which the Assumed Property is located as
shall be recommended for similar transactions by the counsel admitted to
practice in such state and delivering the opinion as to the enforceability of
such documents required pursuant to Section 2.7.1(i) below, provided, that the
Monthly Principal Payment Amount for the Assumed Loan shall the an amount equal
to $283,333, multiplied by a fraction, the numerator of this is the Allocated
Loan Amount for the Assumed Property and the denominator of which is the
original principal amount of the Loan.
(i) Lender shall have received the following opinions in
form and substance satisfactory to a prudent lender acting reasonably, and, if
the Loan is part of a Securitization, the Rating Agencies from counsel
reasonably acceptable to Lender: (A) an opinion or opinions of counsel admitted
to practice under the laws of the state in which the Assumed Property is located
stating that the Assumed Loan Documents are valid and enforceable in accordance
with their terms, subject to the laws applicable to creditors' rights and
equitable principles, and that Assumed Loan Borrower is qualified to do business
and in good standing under the laws of the jurisdiction where the Assumed
Property is located or that Assumed Loan Borrower is not required by applicable
law to qualify to do business in such jurisdiction, (B) an opinion of
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counsel stating that the Assumed Loan Documents were duly authorized, executed
and delivered by Borrower and Assumed Loan Borrower, as applicable, that the
execution and delivery of such Loan Documents and the performance by Borrower or
Assumed Loan Borrower of their respective obligations thereunder will not cause
a breach of, or a default under, any agreement, document or instrument to which
Borrower or Assumed Loan Borrower is a party or to which they or their
respective properties are bound, (C) an Additional Insolvency Opinion with
respect to the Assumed Loan and the Assumed Loan Borrower; and (D) if the Loan
is part of a Securitization, an opinion of counsel that the severance does not
constitute a "significant modification" of the Loan under Section 1001 of the
Code or otherwise cause a tax to be imposed on a "prohibited transaction" by any
REMIC Trust.
(j) Lender shall have received (A) an endorsement to the
Title Insurance Policy insuring the Lien of the Mortgage with respect to the
Assumed Property, insuring, as of the date of the Severance, that the Lien of
the Mortgage, as modified in connection with the Severance and assumed by the
Assumed Loan Borrower, with respect to the Assumed Property continues to be a
valid first lien on the Assumed Property encumbered thereby, free and clear of
all exceptions from coverage other than Permitted Encumbrances, and (B) an
endorsement to the Title Insurance Policies insuring the Lien of the Mortgage
with respect to the Remaining Crossed Properties insuring, as of the date of the
Severance, that the Lien of the Mortgage with respect to the Remaining Pool
Properties, as modified in connection with the Severance, continues to be a
valid first lien on the Remaining Cross Properties encumbered thereby, free and
clear of all exceptions from coverage other than Permitted Encumbrances.
(k) Lender shall have received valid certificates of
insurance indicating that the requirements for the policies of insurance
required for an Individual Property hereunder have been satisfied with respect
to the Assumed Property and evidence of the payment of all premiums payable for
the existing policy period.
(l) Borrower shall have delivered or caused to be
delivered to Lender (A) all organizational documentation with respect to the
formation, structure, existence, good standing and/or qualification to do
business, including good standing certificates and certificates of qualification
to do business with respect to the Borrower making the Transfer, the Assumed
Loan Borrower and such other entity as may be reasonably requested by Lender;
and (B) resolutions of Borrower and Assumed Loan Borrower authorizing the
Transfer of the Assumed Property and the Severance and any actions taken in
connection with the Transfer and the Severance.
(m) If the Loan is part of a Securitization, Lender shall
have received confirmation in writing from the Rating Agencies to the effect
that such Transfer and Severance will not result in a withdrawal, qualification
or downgrade of the respective ratings in effect immediately prior to such
Transfer and Severance for the Securities issued in connection with the
Securitization that are then outstanding; if the Loan is not part of a
Securitization, Lender shall have consented in writing to such Transfer and
Severance;
(n) Lender shall have received evidence reasonably
satisfactory to Lender that such Transfer and Severance will not impair or
otherwise adversely affect the Liens, security interests and other rights of
Lender under the Loan Documents with respect to the Remaining
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Crossed Properties and the Assumed Properties (or as to the parties to the Loan
Documents, the Borrower or the Assumed Loan Borrower);
(o) After giving effect to the Severance, the Debt
Service Coverage Ratio for the Remaining Crossed Properties shall be equal to or
greater than the greater of (i) the Closing Date Debt Service Coverage Ratio,
and (ii) the Debt Service Coverage Ratio for all of the then remaining
Properties (including the Individual Property to be Severed) for the twelve (12)
full calendar months immediately preceding the Severance, provided, however,
that in no event shall the Debt Service Coverage Ratio required under this
Section 2.7(o) be greater than 3.0/1.0;
(p) After giving effect to the Severance, the
Loan-to-Value Ratio for Remaining Crossed Properties shall be equal to or less
than the lesser of (i) the Closing Date Loan-to-Value Ratio and (ii) the
Loan-to-Value Ratio for all of the Remaining Crossed Properties (including the
Assumed Property) immediately preceding the Severance, provided, however, that
in no event shall the Loan-to-Value Ratio required under this Section 2.7(p) be
less than 45%.
(q) In the event Borrower fails to satisfy the Debt
Service Coverage Ratio in Section 2.7.1(p), or fails to satisfy the
Loan-to-Value Ratio in Section 2.7.1(o), Borrower shall have the right to
satisfy such requirements by providing Lender with a cash deposit (the
"Remaining Crossed Properties Deposit") to be held by Lender as additional
collateral for the Loan and the Remaining Crossed Properties, subject to a
pledge and security agreement provided by Lender, and in an interest bearing
account, or at the election of Borrower, in U.S. Obligations, provided that
Borrower, or after an Event of Default, Lender shall select the actual U.S.
Obligations. The Remaining Crossed Properties Deposit shall be equal to the
greater of (x) an amount such that, when the interest that will be earned on the
Remaining Crossed Properties Deposit (as determined by Lender in its reasonable
discretion) is added to Net Operating Income, the Debt Service Coverage Ratio in
Section 2.7.1(o) hereof will be satisfied and (y) an amount, such that, when
included in determining "value" in calculating the Loan-to-Value Ratio in
Section 2.7.1(p), such Loan-to-Value Ratio will be satisfied;
(r) After giving effect to the Severance, the Debt
Service Coverage Ratio for the Assumed Property (calculated based upon the Note
A Adjusted Allocated Loan Amount of the Assumed Property) shall be equal to or
greater than the greater of (i) the Closing Date Debt Service Coverage Ratio,
and (ii) the Debt Service Coverage Ratio for all of the then remaining
Properties (including the Assumed Property) for the twelve (12) full calendar
months immediately preceding the Severance, provided, however, that in no event
shall the Debt Service Coverage Ratio required under this Section 2.7(p) be
greater than 3.0/1.0;
(s) After giving effect to the Severance, the
Loan-to-Value Ratio for the Assumed Property (calculated based upon the
Allocated Loan Amount of the Assumed Property) shall be equal to or less than
the lesser of (i) the Note A Adjusted Closing Date Loan-to-Value Ratio and (ii)
the Loan-to-Value Ratio for all of the Remaining Crossed Properties (including
the Assumed Property) immediately preceding the Severance, provided, however,
that in no event shall the Loan-to-Value Ratio required under this Section
2.7(s) be less than 45%;
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(t) In the event the Assumed Property Borrower fails to
satisfy the Debt Service Coverage Ratio in Section 2.7.1(r), or fails to satisfy
the Loan-to-Value Ratio in Section 2.7.1(s), Assumed Loan Borrower shall have
the right to satisfy such requirements by providing Lender with a cash deposit
(the "Assumed Property Deposit") to be held by Lender as additional collateral
for the Loan and the Assumed Property, subject to a pledge and security
agreement provided by Lender, and in an interest bearing account, or at the
election of Assumed Loan Borrower, in U.S. Obligations, provided that Assumed
Loan Borrower, or after an Event of Default, Lender shall select the actual U.S.
Obligations. The Assumed Property Deposit shall be equal to the greater of (x)
an amount such that, when the interest that will be earned on the Assumed
Property Deposit (as determined by Lender in its reasonable discretion) is added
to Net Operating Income, the Debt Service Coverage Ratio in Section 2.7.1(r)
hereof will be satisfied and (y) an amount, such that, when included in
determining "value" in calculating the Loan to Value Ratio in Section 2.7.1(s),,
such Loan to Value Ratio will be satisfied.
(u) As of the date of the Severance, (a) the outstanding
principal amount of the Remaining Crossed Loan does not exceed one hundred
percent (100%) of the fair market value of the Remaining Crossed Property and
(b) the outstanding principal amount of the Assumed Loan does not exceed one
hundred percent (100%) of the fair market value of the Assumed Properties. For
the purposes of this clause, the term "fair market value" shall not include (i)
the amount of any indebtedness secured by a lien affecting the Remaining Crossed
Properties or the Assumed Properties that is prior to, or on a parity with, the
lien of the Mortgage, and (ii) the value of any property that is not "real
property" within the meaning of Treas. Reg. Sections. 1.860G-2 and 1.856-3(d);
(v) Borrower shall have paid or reimbursed Lender for all
reasonable costs and expenses incurred by Lender (including, without limitation,
reasonable attorneys fees and disbursements) in connection with the Severance
and Borrower shall have paid all recording charges, filing fees, taxes or other
expenses (including, without limitation, mortgage and intangibles taxes and
documentary stamp taxes) payable in connection with the Severance. Borrower
shall have paid all costs and expenses of the Rating Agencies incurred in
connection with the Severance; and
(w) Borrower shall have paid to Note B Holder the Note B
Release Amount applicable to the Assumed Property and Mezzanine Borrower shall
have paid to Mezzanine Lender the Mezzanine Loan Release Amount (as defined in
the Mezzanine Loan Agreement) applicable to the Assumed Property and Borrower
shall have obtained a release of the Accounts of the Assumed Property from the
lien of the Revolving Credit Lender under the Revolving Credit Loan Agreement.
In lieu of making the deposits with Lender required under
Sections 2.7(q) and (t), Borrower or the Assumed Loan Borrower, as applicable
may deliver to Lender a Letter of Credit in the amounts required under Sections
2.7(q) and (t) in accordance with the provisions of this Section 2.7. Borrower
or the Assumed Loan Borrower, as applicable shall not be entitled to draw from
any such Letter of Credit. Upon thirty (30) days notice to Lender, Borrower or
the Assumed Loan Borrower, as applicable may replace a Letter of Credit with a
cash deposit. Each Letter of Credit delivered under this Agreement shall be
additional security for the payment of the Debt or the Assumed Loan as
applicable. Upon the occurrence of an Event of Default under
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the Remaining Crossed Loan or the Assumed Loan, as applicable, Lender shall have
the right, at its option, to draw on the respective Letter of Credit and to
apply all or any part thereof to payment of the Debt in such order, proportion
or priority as Lender may determine. Any such application to the Debt shall be
subject to the Prepayment Premium. On the Maturity Date, any such Letter of
Credit may be applied to reduce the Debt. In addition to any other right Lender
may have to draw upon a Letter of Credit pursuant to the terms and conditions of
this Agreement or the Loan Agreement with respect to the Assumed Loan, Lender
shall have the additional rights to draw in full any Letter of Credit: (a) with
respect to any evergreen Letter of Credit, if Lender has received a notice from
the issuing bank that the Letter of Credit will not be renewed and a substitute
Letter of Credit is not provided at least thirty (30) days prior to the date on
which the outstanding Letter of Credit is scheduled to expire; (b) with respect
to any Letter of Credit with a stated expiration date, if Lender has not
received a notice from the issuing bank that it has renewed the Letter of Credit
at least thirty (30) days prior to the date on which such Letter of Credit is
scheduled to expire and a substitute Letter of Credit is not provided at least
thirty (30) days prior to the date on which the outstanding Letter of Credit is
scheduled to expire; (c) upon receipt of notice from the issuing bank that the
Letter of Credit will be terminated (except if a substitute Letter of Credit is
provided at least thirty (30) days prior to the effective date of such
termination); or (d) if Lender has received notice that the bank issuing the
Letter of Credit shall cease to be an Eligible Institution. Notwithstanding
anything to the contrary contained in the above, Lender is not obligated to draw
any Letter of Credit upon the happening of an event specified in (a), (b), (c)
or (d) above and shall not be liable for any losses sustained by Borrower or the
Assumed Loan Borrower due to the insolvency of the bank issuing the Letter of
Credit if Lender has not drawn the Letter of Credit.
Upon the completion of the Severance in accordance with the
provisions of this Section 2.7, Lender shall release Borrower and Guarantor from
their obligations with respect to the Assumed Property arising from and after
the date of the Severance.
III. CONDITIONS PRECEDENT
SECTION 3.1. CONDITIONS PRECEDENT TO CLOSING. The obligation
of Lender to make the Loan hereunder is subject to the fulfillment by Borrower
or waiver by Lender of the following conditions precedent no later than the
Closing Date:
3.1.1 REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
CONDITIONS. The representations and warranties of Borrower contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on and as
of such date, and no Default or an Event of Default shall have occurred and be
continuing; and Borrower shall be in compliance in all material respects with
all terms and conditions set forth in this Agreement and in each other Loan
Document on its part to be observed or performed.
3.1.2 LOAN AGREEMENT AND NOTE. Lender shall have received a
copy of this Agreement and the Note, in each case, duly executed and delivered
on behalf of Borrower.
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3.1.3 DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE; REPORTS;
LEASES.
(a) MORTGAGES, ASSIGNMENTS OF LEASES. Lender shall have
received from Borrower fully executed and acknowledged counterparts of the
Mortgages and the Assignments of Leases and evidence that counterparts of the
Mortgages and Assignments of Leases have been delivered to the title company for
recording, in the reasonable judgment of Lender, so as to effectively create
upon such recording valid and enforceable Liens upon each Individual Property,
of the requisite priority, in favor of Lender (or such other trustee as may be
required or desired under local law), subject only to the Permitted Encumbrances
and such other Liens as are permitted pursuant to the Loan Documents. Lender
shall have also received from Borrower fully executed counterparts of the other
Loan Documents.
(b) TITLE INSURANCE. Lender shall have received Title
Insurance Policies issued by a title company acceptable to Lender and dated as
of the Closing Date. Such Title Insurance Policies shall (i) provide coverage in
an amount equal to the Allocated Loan Amount for each Individual Property with
tie-in endorsements for all such Title Insurance Properties, (ii) insure Lender
that the relevant Mortgage creates a valid lien on the Individual Property
encumbered thereby of the requisite priority, free and clear of all exceptions
from coverage other than Permitted Encumbrances and standard exceptions and
exclusions from coverage (as modified by the terms of any endorsements), (iii)
contain such endorsements and affirmative coverages as Lender may reasonably
request, and (iv) name Lender as the insured. The Title Insurance Policies shall
be assignable. Lender also shall have received evidence that all premiums in
respect of such Title Insurance Policies have been paid.
(c) SURVEY. Lender shall have received a current Survey
for each Individual Property, certified to the title company and Lender and
their successors and assigns, in form and content satisfactory to Lender and
prepared by a professional and properly licensed land surveyor satisfactory to
Lender in accordance with the Accuracy Standards for ALTA/ACSM Land Title
Surveys as adopted by ALTA, American Congress on Surveying & Mapping and
National Society of Professional Surveyors in 1999. Each such Survey shall
reflect the same legal description contained in the Title Insurance Policies
relating to such Individual Property and shall include, among other things, a
metes and bounds description of the real property comprising part of such
Individual Property reasonably satisfactory to Lender. The surveyor's seal shall
be affixed to each Survey and the surveyor shall provide a certification for
each Survey in form and substance acceptable to Lender.
(d) INSURANCE. Lender shall have received valid
certificates of insurance for the Policies required hereunder, satisfactory to
Lender in its sole discretion, and evidence of the payment of all Insurance
Premiums payable for the existing policy period.
(e) ENVIRONMENTAL REPORTS. Lender shall have received a
Phase I environmental report (and, if recommended by the Phase I environmental
report, a Phase II environmental report) in respect of each Individual Property,
in each case satisfactory in form and substance to Lender.
(f) ZONING. With respect to each Individual Property,
Lender shall have received, at Lender's option, either (i) (A) letters or other
evidence with respect to each
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Individual Property from the appropriate municipal authorities (or other
Persons) concerning applicable zoning and building laws, and (B) an ALTA 3.1
zoning endorsement for the applicable Title Insurance Policy or (ii) a zoning
report, in each case in substance reasonably satisfactory to Lender ("Zoning
Reports").
(g) ENCUMBRANCES. Borrower shall have taken or caused to
be taken such actions in such a manner so that Lender has a valid and perfected
first priority Lien as of the Closing Date with respect to each Mortgage on the
applicable Individual Property, subject only to applicable Permitted
Encumbrances and such other Liens as are permitted pursuant to the Loan
Documents, and Lender shall have received satisfactory evidence thereof.
3.1.4 RELATED DOCUMENTS. Each additional document not
specifically referenced herein, but relating to the transactions contemplated
herein, shall be in form and substance reasonably satisfactory to Lender, and
shall have been duly authorized, executed and delivered by all parties thereto
and Lender shall have received and approved certified copies thereof.
3.1.5 DELIVERY OF ORGANIZATIONAL DOCUMENTS. Borrower shall
deliver or cause to be delivered to Lender copies certified by Borrower of all
organizational documentation related to Borrower and/or the formation,
structure, existence, good standing and/or qualification to do business, as
Lender may request in its reasonable discretion, including good standing
certificates dated not more than thirty (30) days prior to the Closing Date,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loan and incumbency certificates.
3.1.6 OPINIONS OF BORROWER'S COUNSEL. Lender shall have
received opinions from Borrower's counsel with respect to non-consolidation and
the due execution, authority, enforceability of the Loan Documents and such
other matters as Lender may require, all such opinions in form, scope and
substance satisfactory to Lender and Lender's counsel in their reasonable
discretion.
3.1.7 BUDGETS. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current Fiscal Year.
3.1.8 BASIC CARRYING COSTS. Borrower shall have paid (or will
pay with proceeds from the Loan) all Basic Carrying Costs relating to the
Properties which are in arrears, including without limitation, (a) accrued but
unpaid Insurance Premiums, (b) currently due Taxes (including any in arrears)
and (c) currently due Other Charges, which amounts shall be funded with proceeds
of the Loan.
3.1.9 COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be reasonably satisfactory in form and substance to
Lender, and Lender shall have received all such counterpart originals or
certified copies of such documents as Lender may reasonably request.
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3.1.10 PAYMENTS. All payments, deposits or escrows required to
be made or established by Borrower under this Agreement, the Note and the other
Loan Documents on or before the Closing Date shall have been paid.
3.1.11 ORIGINATION FEE; TRANSACTION COSTS. Borrower shall have
paid to Lender an origination fee of $850,000.00 and shall have paid or
reimbursed Lender for all title insurance premiums, recording and filing fees,
costs of environmental reports, Physical Conditions Reports, appraisals and
other reports, the fees and costs of Lender's counsel and all other third party
out-of-pocket expenses incurred in connection with the origination of the Loan.
3.1.12 MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the financial condition or business condition of
Borrower or the Properties since the date of the most recent financial
statements delivered to Lender. The income and expenses of the Properties, the
occupancy thereof, and all other features of the transaction shall be as
represented to Lender without material adverse change. Neither Borrower nor any
of its Affiliates shall be the subject of any bankruptcy, reorganization, or
insolvency proceeding.
3.1.13 LEASES. Lender shall have received copies of all
material Leases other than residential Leases or occupancy agreements. Lender
shall have received a current certified Occupancy Report for the Properties,
reasonably satisfactory in form and substance to Lender.
3.1.14 TAX LOT. Lender shall have received evidence that each
Individual Property constitutes one (1) or more separate tax lots, which
evidence shall be reasonably satisfactory in form and substance to Lender.
3.1.15 PHYSICAL CONDITIONS REPORTS. Lender shall have received
Physical Conditions Reports with respect to each Individual Property, which
reports shall be reasonably satisfactory in form and substance to Lender.
3.1.16 OPERATING LEASES/MASTER LEASES. Lender shall have
received a copy of the Operating Leases and the Master Leases, which shall be
satisfactory in form and substance to Lender, and copies of all necessary
approvals in accordance with all Legal Requirements.
3.1.17 O&M AGREEMENT. Lender shall have received a copy of any
required O&M Agreement, which shall be satisfactory in form and substance to
Lender, and copies of all necessary approvals in accordance with Legal
Requirements.
3.1.18 APPRAISAL. Lender shall have received an appraisal of
each Individual Property, which shall be satisfactory in form and substance to
Lender.
3.1.19 FINANCIAL STATEMENTS. Lender shall have received a
balance sheet with respect to each Individual Property for the two most recent
Fiscal Years and statements of income and statements of cash flows with respect
to each Individual Property for the three most recent Fiscal Years, each in form
and substance satisfactory to Lender.
3.1.20 MEDICARE/MEDICAID AGREEMENTS. Lender shall have
received, in form and substance reasonably acceptable to Lender, copies of
Borrower's current and valid Medicare and Medicaid provider numbers and
agreements, copies of the most recent state surveys, copies
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of all participation agreements relating to health plans, and information
pertaining to the patient census for each Individual Property.
3.1.21 APPROVAL OF REORGANIZATION PLAN. Lender shall have
received evidence of the approval of the Plan of Reorganization by the
Bankruptcy Court having jurisdiction thereof; and a certificate of Borrower
stating that all of the conditions to the occurrence of the "Effective Date"
under the Plan of Reorganization have been satisfied or waived.
3.1.22 FURTHER DOCUMENTS. Lender or its counsel shall have
received such other and further approvals, opinions, documents and information
as Lender or its counsel may have reasonably requested including the Loan
Documents in form and substance satisfactory to Lender and its counsel.
IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1. BORROWER REPRESENTATIONS. Borrower represents and
warrants as of the date hereof and as of the Closing Date that:
4.1.1 ORGANIZATION. Borrower has been duly organized and is
validly existing and in good standing with requisite power and authority to own
its properties and to transact the businesses in which it is now engaged.
Borrower is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its
properties, businesses and operations. Borrower possesses all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to entitle it
to own its properties and to transact the businesses in which it is now engaged,
and the sole business of Borrower is the ownership, leasing, management and
operation of the Properties. The ownership interests of Borrower are as set
forth on the organizational chart attached hereto as Schedule IV.
4.1.2 PROCEEDINGS. Borrower has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents. This Agreement and such other Loan Documents have been
duly executed and delivered by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
4.1.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement and the other Loan Documents by Borrower will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, partnership agreement, management agreement or other
agreement or instrument to which Borrower is a party or by which any of
Borrower's property or assets is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority having jurisdiction over Borrower or any of
Borrower's properties or assets, and any consent, approval, authorization,
order, registration or
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qualification of or with any such Governmental Authority required for the
execution, delivery and performance by Borrower of this Agreement or any other
Loan Documents has been obtained and is in full force and effect.
4.1.4 LITIGATION. There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending or, to Borrower's knowledge, threatened against or affecting Borrower,
Principal, Guarantor or any Individual Property, which actions, suits or
proceedings, if determined against Borrower, Principal, Guarantor or any
Individual Property, might reasonably be expected to have a material adverse
effect on the condition (financial or otherwise) or business of Borrower,
Principal, Guarantor or the condition or ownership of any Individual Property.
4.1.5 AGREEMENTS. Borrower is not a party to any agreement or
instrument or subject to any restriction which might materially and adversely
affect Borrower or any Individual Property, or Borrower's business, properties
or assets, operations or condition, financial or otherwise. Borrower is not in
default in any material respect in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement or
instrument to which it is a party or by which Borrower or any of the Properties
are bound. Borrower has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which Borrower is a party or by which Borrower or the Properties is otherwise
bound, other than (a) obligations incurred in the ordinary course of the
operation of the Properties as permitted pursuant to clause (t) of the
definition of "Special Purpose Entity" set forth in Section 1.1 hereof, (b)
obligations under the Loan Documents, and (c) obligations under the Revolving
Credit Loan Documents.
4.1.6 TITLE. Owner has good and insurable fee simple title to
the real property comprising part of each Individual Property, Master Lessee has
good and insurable leasehold title to the real property comprising part of each
Individual Property and other leasehold estate created in the Master Lease,
Operator has good and insurable leasehold title to the real property comprising
part of each Individual Property and other leasehold estate created in the
Operating Lease and Borrower has good title to the balance of such Individual
Property, free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to or created by the
Loan Documents or the Revolving Credit by the Loan Documents. The Permitted
Encumbrances in the aggregate do not materially and adversely affect the value,
operation or use of the applicable Individual Property (as currently used) or
Borrower's ability to repay the Loan. Each Mortgage, when properly recorded in
the appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (a) a
valid, perfected first priority lien on the applicable Individual Property,
subject only to Permitted Encumbrances and the Liens created by the Loan
Documents and (b) perfected security interests in and to, and perfected
collateral assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. There are no claims for
payment for work, labor or materials affecting the Properties which are or may
become a Lien prior to, or of equal priority with, the Liens created by the Loan
Documents.
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4.1.7 SOLVENCY. Borrower has (a) not entered into the
transaction or executed the Note, this Agreement or any other Loan Documents
with the actual intent to hinder, delay or defraud any creditor and (b) received
reasonably equivalent value in exchange for its obligations under such Loan
Documents. The fair saleable value of Borrower's assets exceeds and will,
immediately following the making of the Loan, exceed Borrower's total
liabilities, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities. The fair saleable value of Borrower's assets is and
will, immediately following the making of the Loan, be greater than Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
on its debts as such debts become absolute and matured. Borrower's assets do not
and, immediately following the making of the Loan will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Borrower does not intend to, and does not believe that it will,
incur debt and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debt and liabilities as they mature
(taking into account the timing and amounts of cash to be received by Borrower
and the amounts to be payable on or in respect of obligations of Borrower).
Except the petition that commenced the reorganization proceedings titled In re
Fountain View, Inc, et al (jointly administered under Case No. LA 01-39678BB) in
the United States Bankruptcy Court for the Central District of California, no
petition in bankruptcy has been filed against Borrower or any Affiliate, and
neither Borrower nor any Affiliate has ever made an assignment for the benefit
of creditors or taken advantage of any insolvency act for the benefit of
debtors. Neither Borrower nor any of its Affiliates are contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
laws or the liquidation of all or a major portion of Borrower's assets or
properties, and Borrower has no knowledge of any Person contemplating the filing
of any such petition against it or such constituent Persons.
4.1.8 FULL AND ACCURATE DISCLOSURE. No statement of fact made
by Borrower in this Agreement or in any of the other Loan Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading. There
is no material fact presently known to Borrower which has not been disclosed to
Lender which adversely affects, nor as far as Borrower can foresee, might
reasonably be anticipated to have a material adverse effect on any Individual
Property or the business, operations or condition (financial or otherwise) of
Borrower.
4.1.9 NO PLAN ASSETS. Borrower is not an "employee benefit
plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and
none of the assets of Borrower constitutes or will constitute "plan assets" of
one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In
addition, (a) Borrower is not a "governmental plan" within the meaning of
Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject
to any state statute regulating investments of, or fiduciary obligations with
respect to, governmental plans similar to the provisions of Section 406 of ERISA
or Section 4975 of the Code currently in effect, which prohibit or otherwise
restrict the transactions contemplated by this Loan Agreement.
4.1.10 COMPLIANCE. Except as set forth in the Zoning Reports,
Borrower and the Properties (including the use thereof) comply in all material
respects with all applicable Legal Requirements, including building and zoning
ordinances and codes. Borrower is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority,
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except where any default or violation could not reasonably be expected to have a
material adverse effect. There has not been committed by Borrower or any other
Person in occupancy of or involved with the operation or use of the Properties
any act or omission affording the federal government or any other Governmental
Authority the right of forfeiture as against any Individual Property or any part
thereof or any monies paid in performance of Borrower's obligations under any of
the Loan Documents.
4.1.11 FINANCIAL INFORMATION. All financial data, including
cost reports and the statements of cash flow and income and operating expense,
that have been delivered to Lender in connection with the Loan (i) are true,
complete and correct in all material respects, (ii) accurately represent the
financial condition of the Properties as of the date of such reports, and (iii)
to the extent prepared or audited by an independent certified public accounting
firm, have been prepared in accordance with GAAP throughout the periods covered,
except as disclosed therein. Except for Permitted Encumbrances, Borrower does
not have any contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Borrower and reasonably likely to have a
materially adverse effect on any Individual Property or the operation of each
Individual Property as a skilled nursing facility or assisted living facility,
in each case as indicated on Schedule I attached hereto, except as referred to
or reflected in said financial statements. Since the date of such financial
statements, there has been no material adverse change in the financial
condition, operation or business of Borrower from that set forth in said
financial statements.
4.1.12 CONDEMNATION. No Condemnation or other proceeding has
been commenced or, to Borrower's best knowledge, is threatened or contemplated
with respect to all or any portion of any Individual Property or for the
relocation of roadways providing access to any Individual Property.
4.1.13 FEDERAL RESERVE REGULATIONS. No part of the proceeds of
the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent with
such Regulation U or any other Regulations of such Board of Governors, or for
any purposes prohibited by Legal Requirements or by the terms and conditions of
this Agreement or the other Loan Documents.
4.1.14 UTILITIES AND PUBLIC ACCESS. Each Individual Property
has rights of access to public ways and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service such Individual Property
for its respective intended uses. All public utilities necessary or convenient
to the full use and enjoyment of each Individual Property are located either in
the public right-of-way abutting such Individual Property (which are connected
so as to serve such Individual Property without passing over other property) or
in recorded easements serving such Individual Property and such easements are
set forth in and insured by the Title Insurance Policies. All roads necessary
for the use of each Individual Property for their current respective purposes
have been completed and dedicated to public use and accepted by all Governmental
Authorities.
4.1.15 NOT A FOREIGN PERSON. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
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4.1.16 SEPARATE LOTS. Each Individual Property is comprised of
one (1) or more parcels which constitute a separate tax lot or lots and does not
constitute a portion of any other tax lot not a part of such Individual
Property.
4.1.17 ASSESSMENTS. There are no pending or, to Borrower's
knowledge, proposed special or other assessments for public improvements or
otherwise affecting any Individual Property, nor are there any contemplated
improvements to any Individual Property that may result in such special or other
assessments.
4.1.18 ENFORCEABILITY. The Loan Documents are not subject to
any right of rescission, set-off, counterclaim or defense by Borrower, Principal
or Guarantor, including the defense of usury, nor would the operation of any of
the terms of the Loan Documents, or the exercise of any right thereunder, render
the Loan Documents unenforceable (subject to principles of equity and
bankruptcy, insolvency and other laws generally affecting creditors' rights and
the enforcement of debtors' obligations), and Borrower, Principal and Guarantor
have not asserted any right of rescission, set-off, counterclaim or defense with
respect thereto.
4.1.19 NO PRIOR ASSIGNMENT. There are no prior assignments of
the Leases or any portion of the Rents due and payable or to become due and
payable which are presently outstanding.
4.1.20 INSURANCE. Borrower has obtained and has delivered to
Lender certified copies of all Policies reflecting the insurance coverages,
amounts and other requirements set forth in this Agreement. No claims have been
made under any such Policies, and no Person, including Borrower, has done, by
act or omission, anything which would impair the coverage of any such Policies.
4.1.21 USE OF PROPERTY. Each Individual Property is used
exclusively as a skilled nursing facility or assisted living facility, in each
case as indicated on Schedule I attached hereto, and other appurtenant and
related uses.
4.1.22 CERTIFICATE OF OCCUPANCY. The use being made of each
Individual Property is in conformity with the certificate of occupancy issued
for such Individual Property (or the equivalent thereto).
4.1.23 FLOOD ZONE. Except as set forth in the Surveys, none of
the Improvements on any Individual Property are located in an area as identified
by the Federal Emergency Management Agency as an area having special flood
hazards or, if so located, the flood insurance required pursuant to Section
6.1(a)(i) is in full force and effect with respect to each such Individual
Property.
4.1.24 PHYSICAL CONDITION. Except as set forth in the Physical
Conditions Report, each Individual Property, including, without limitation, all
buildings, improvements, parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection systems, electrical
systems, equipment, elevators, exterior sidings and doors, landscaping,
irrigation systems and all structural components, are in good condition, order
and repair in all material respects; to Borrower's knowledge, there exists no
structural or other material defects or damages in any Individual Property,
whether latent or otherwise, and
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Borrower has not received notice from any insurance company or bonding company
of any defects or inadequacies in any Individual Property, or any part thereof,
which would adversely affect the insurability of the same or cause the
imposition of extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.
4.1.25 BOUNDARIES. To Borrower's knowledge, all of the
improvements which were included in determining the appraised value of each
Individual Property lie wholly within the boundaries and building restriction
lines of such Individual Property, and other than as disclosed to Lender on the
Survey for such Individual Property, (a) no improvements on adjoining properties
encroach upon such Individual Property, and (b) no easements or other
encumbrances upon the applicable Individual Property encroach upon any of the
improvements, so as to affect the value or marketability of the applicable
Individual Property except those which are insured against by the Title
Insurance Policy.
4.1.26 OCCUPANCY REPORT. Borrower has delivered to Lender a
true, correct and complete Occupancy Report for each Individual Property as of
the date hereof. All Leases comply with applicable law, regulation and/or policy
issued by any Health Care Authority that has direct or indirect authority or
oversight over Borrower, the applicable Individual Property or the operations
conducted on such Individual Property. No tenant/resident under any Lease has,
as of the date hereof, paid rent more than thirty (30) days in advance, and the
rents or charges under such Leases have not been waived, released, or otherwise
discharged or compromised.
4.1.27 SURVEY. The Survey for each Individual Property
delivered to Lender in connection with this Agreement has been prepared in
accordance with the provisions of Section 3.1.3(c) hereof, and, to Borrower's
knowledge, does not fail to reflect any material matter affecting such
Individual Property or the title thereto.
4.1.28 PRINCIPAL PLACE OF BUSINESS; STATE OF ORGANIZATION.
Borrower's principal place of business as of the date hereof is the address set
forth in the introductory paragraph of this Agreement. Each Borrower is
organized under the laws of the State of Delaware.
4.1.29 FILING AND RECORDING TAXES. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements currently
in effect in connection with the transfer of the Properties to Borrower have
been paid. All mortgage, mortgage recording, stamp, intangible or other similar
tax required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery, recordation,
filing, registration, perfection or enforcement of any of the Loan Documents,
including, without limitation, the Mortgages, have been paid, and, under current
Legal Requirements, each of the Mortgages is enforceable in accordance with
their respective terms by Lender (or any subsequent holder thereof), subject to
principles of equity and bankruptcy, insolvency and other laws generally
applicable to creditors' rights and the enforcement of debtors' obligations.
4.1.30 SPECIAL PURPOSE ENTITY/SEPARATENESS. (a) Until the Debt
has been paid in full, Borrower hereby represents, warrants and covenants that
(i) each Borrower is, shall be
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and shall continue to be a Special Purpose Entity, and (ii) each Principal is,
shall be and shall continue to be a Special Purpose Entity.
(c) The representations, warranties and covenants set forth in
Section 4.1.30(a) shall survive for so long as any amount remains payable to
Lender under this Agreement or any other Loan Document.
(b) All of the assumptions made in the Insolvency Opinion,
including, but not limited to, any exhibits attached thereto, are true and
correct in all respects and any assumptions made in any subsequent
non-consolidation opinion required to be delivered in connection with the Loan
Documents (an "ADDITIONAL INSOLVENCY OPINION"), including, but not limited to,
any exhibits attached thereto, will have been and shall be true and correct in
all respects. Borrower has complied and will comply with, and Principal has
complied and Borrower will cause Principal to comply with, all of the
assumptions made with respect to Borrower and Principal in the Insolvency
Opinion. Borrower will have complied and will comply with all of the assumptions
made with respect to Borrower and Principal in any Additional Insolvency
Opinion. Each entity other than Borrower and Principal with respect to which an
assumption shall be made in any Additional Insolvency Opinion will have complied
and will comply with all of the assumptions made with respect to it in any
Additional Insolvency Opinion.
4.1.31 O&M AGREEMENT. Any O&M Agreements required by Lender
are in full force and effect and there is no default under any such agreement by
any party thereto and no event has occurred that, with the passage of time
and/or the giving of notice would constitute a default under any such agreement.
4.1.32 ILLEGAL ACTIVITY. No portion of any Individual Property
has been or will be purchased with proceeds of any illegal activity.
4.1.33 NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE. All
information submitted by Borrower to Lender and in all financial statements,
Occupancy Reports, reports, certificates and other documents submitted in
connection with the Loan or in satisfaction of the terms thereof and all
statements of fact made by Borrower in this Agreement or in any other Loan
Document, are accurate, complete and correct in all material respects. There has
been no material adverse change in any condition, fact, circumstance or event
that would make any such information inaccurate, incomplete or otherwise
misleading in any material respect or that otherwise materially and adversely
affects or might materially and adversely affect the use, operation or value of
the Properties or the business operations or the financial condition of
Borrower. Borrower has disclosed to Lender all material facts and has not failed
to disclose any material fact that could cause any Provided Information or
representation or warranty made herein to be materially misleading.
4.1.34 INVESTMENT COMPANY ACT. Borrower is not (a) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (b) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or
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(c) subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
4.1.35 EMBARGOED PERSON. At all times throughout the term of
the Loan, including after giving effect to any Transfers permitted pursuant to
the Loan Documents, (a) none of the funds or other assets of Borrower, Principal
and Guarantor constitute property of, or are beneficially owned, directly or
indirectly, by any person, entity or government subject to trade restrictions
under U.S. law, including, but not limited to, the International Emergency
Economic Powers Act, 50 U.S.C. Sections 1701, et seq., The Trading with the
Enemy Act, 50 U.S.C. App. 1, et seq., and any Executive Orders or regulations
promulgated thereunder with the result that the investment in Borrower,
Principal or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the Loan made by the Lender is in violation of law
("EMBARGOED PERSON"); (b) no Embargoed Person has any interest of any nature
whatsoever in Borrower, Principal or Guarantor, as applicable, with the result
that the investment in Borrower, Principal or Guarantor, as applicable (whether
directly or indirectly), is prohibited by law or the Loan is in violation of
law; and (c) none of the funds of Borrower, Principal or Guarantor, as
applicable, have been derived from any unlawful activity with the result that
the investment in Borrower, Principal or Guarantor, as applicable (whether
directly or indirectly), is prohibited by law or the Loan is in violation of
law.
4.1.36 CASH MANAGEMENT ACCOUNT. (a) This Agreement, together
with the other Loan Documents, creates a valid and continuing security interest
(as defined in the Uniform Commercial Code of the State of Delaware) in the
Lockbox Account, the Medicare/Medicaid Receivables Accounts and the Cash
Management Account in favor of Lender, which security interest is prior to all
other Liens, other than Permitted Encumbrances, and is enforceable as such
against creditors of and purchasers from Borrower. Other than in connection with
the Loan Documents and except for Permitted Encumbrances, Borrower has not sold
or otherwise conveyed the Lockbox Account, the Medicare/Medicaid Receivables
Accounts, and the Cash Management Account;
(b) Each of the Lockbox Account, the Medicare/Medicaid
Receivables Accounts and the Cash Management Account constitute "deposit
accounts" within the meaning of the Uniform Commercial Code of the state of
where such account is located;
(c) Pursuant and subject to the terms hereof, the Lockbox
Bank has agreed to comply with all instructions originated by Lender, without
further consent by Borrower, directing disposition of the Lockbox Account and
all sums at any time held, deposited or invested therein, together with any
interest or other earnings thereon, and all proceeds thereof (including proceeds
of sales and other dispositions), whether accounts, general intangibles, chattel
paper, deposit accounts, instruments, documents or securities; and
(d) The Lockbox Account, the Medicare/Medicaid
Receivables Accounts and the Cash Management Account are not in the name of any
Person other than the applicable Borrower, as pledgor, or Lender, as pledgee.
4.1.37 Operating Leases. All Operating Leases are in full
force and effect and there is no default under any such Operating Lease by any
party thereto and no event has
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occurred that, with the passage and/or the giving of notice would constitute a
default under any such Operating Lease.
4.1.38 Business Experience. Borrower represents that by reason
of the business and financial experience of Borrower and Guarantor, or that of
their professional advisors, Borrower has the capacity to protect its own
interests in connection with the Loan.
SECTION 4.2 HEALTH CARE REPRESENTATIONS. Borrower, for itself
and its successors and assigns, does hereby represent and warrant to Lender, its
successors and assigns, as of the date hereof, that:
(a) All certificates, certifications, permits, licenses and
approvals, including certificates of operation, completion and occupancy,
required for the legal use, occupancy and operation of each Facility
(collectively, the "LICENSES") have been obtained and are in full force and
effect except for Licenses which, if not maintained, would not have a material
adverse effect on the use or operating of the Facility. Borrower owns and/or
possesses, and holds free from restrictions or conflicts with the rights of
others, all such Licenses provided that with respect to the Facilities listed on
Schedule X, all such Licenses are held by Summit Care Corporation directly or as
successor by merger to Summit Care California, Inc., which has entered into an
interim sublease and management agreement with the applicable Operator to
operate such Facilities, which management agreement is effective to permit the
operation of such Facilities in accordance with all Legal Requirements.;
(b) Each Facility is duly licensed as a skilled nursing
facility or assisted living facility (as set forth on Schedule I attached
hereto) as required under the applicable laws of the State in which such
Facility is located. The licensed bed capacity of each Facility is as set forth
on Schedule V attached hereto. Borrower has not applied to reduce the number of
licensed or certified beds of any Facility or to move the right to any and all
of the licensed or certified beds of any Facility to any other location and
there are no proceedings or actions pending or contemplated to reduce the number
of licensed or certified beds of any Facility;
(c) Except as otherwise provided in paragraph (d), Borrower
(and the operation of each Facility) is in material compliance with the
applicable provisions of the laws, ordinances, statutes, regulations, orders,
standards, policies, restrictions or rules of any Health Care Authority having
jurisdiction over the operation of any Facility, including, (i) staffing
requirements, (ii) health and fire safety codes, (iii) federal, state or local
laws, rules, regulations or published interpretations or policies relating to
the prevention of fraud and abuse, (iv) insurance, reimbursement and cost
reporting requirements, and (v) any other applicable laws, regulations or
agreements for reimbursement for the type of care or services provided by
Operator with respect to each Facility. As used in this Section 4.2(c),
"material compliance" means a level of compliance that would keep the Borrower
(and the operation of the Facility) free from any proceedings or sanctions by
any Governmental Authority having jurisdiction over the operation of the
Facility and that would not be reasonably expected to have a material adverse
effect on Borrower's operations, including, but not limited to, its right to
receive reimbursement or insurance payments with no opportunity to contest or
correct;
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(d) Borrower is in substantial compliance with the
requirements for participation in the Medicare and Medicaid Programs with
respect to each Facility that currently participates in such programs and has a
current provider agreement under Title XVIII and/or XIX of the Social Security
Act. Borrower has not had any deficiencies on its most recent survey (standard
or complaint) that would result in a denial of payment for new admissions with
no opportunity to correct prior to termination other than as disclosed in
Schedule IX hereto. Other than as set forth on Schedule IX hereto, Borrower did
not have any deficiencies at level G or above on its most recent survey
(standard or complaint), nor has Borrower been cited with any substandard
quality of care deficiencies (as that term is defined in Part 488 of 42 C.F.R)
for the past two consecutive surveys.
(e) Borrower is not a participant in, subject to, or, to
Borrower's knowledge, a target of, any action, proceeding, suit, audit,
investigation or sanction by any Health Care Authority or any other
administrative or investigative body or entity or any other third party or any
patient or resident (including, without limitation, whistleblower suits, or
suits brought pursuant to federal or state False Claims Acts, and
Medicaid/Medicare/State fraud/abuse laws) which could reasonably be expected to
result in the imposition of a fine, penalty, alternative, interim or final
sanction, a lower rate certification, recoupment, recovery, suspension or
discontinuance of all or part of reimbursement from any Health Care Authority,
third-party payor, insurance carrier or private payor, a lower reimbursement
rate for services rendered to eligible patients, or any other civil or criminal
remedy, or which could reasonably be expected to have a material adverse effect
on Borrower or the operation of the Facility, or which could reasonably be
expected to result in the appointment of a receiver or manager, or in the
revocation, transfer, surrender, suspension or other impairment of a License,
nor has any such action, proceeding, suit, investigation proceeding or audit
been threatened;
(f) There are no agreements with residents of any Facility, or
with any other persons or organizations, which deviate in any material adverse
respect from, or which conflict with, any statutory or regulatory requirements.
All resident records at each Facility, including patient and/or resident
accounts records, are true, complete, and correct in all material respects;
(g) Neither the execution and delivery of the Note, this
Agreement, the Security Instruments or the other Loan Documents, Borrower's
performance thereunder, the recordation of the Security Instruments will (i)
adversely affect Borrower's right to receive Medicaid, Medicare, insurance
company, managed care company, or other third-party insurance payments or
reimbursements or to receive private payor payments or reimbursements, (ii)
materially reduce the Medicaid, Medicare, insurance company, managed care
company, or other third-party insurance payments or reimbursements or materially
reduce private payor payments or reimbursements which Borrower is receiving as
of the date hereof, or (iii) adversely affect the Licenses;
(h) Other than the Medicare and Medicaid programs and as set
forth on Schedule 4.2(h) attached hereto, Borrower is not a participant in any
federal, state or local program whereby any federal, state or local government
or quasi-governmental body, or any intermediary, agency, board or other
authority or entity may have the right to recover funds with respect to any
Individual Property by reason of the advance of federal, state or local funds,
including, without limitation, those authorized under the Hill-Burton Act (42
U.S.C. 291, et
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seq.). Borrower has received no notice, and is not aware of any violation of
applicable antitrust laws;
(i) Borrower's private payor, Medicaid, Medicare, and/or
managed care company, insurance company or other third-party insurance accounts
receivable with respect to each Individual Property are free of any liens;
(j) Except as set forth on Schedule 4.2(j) attached hereto,
Borrower is not a party to any collective bargaining agreement or other labor
contract applicable to persons employed by it at any Facility and, to Borrower's
knowledge, there are no threatened or pending labor disputes at any Facility;
(k) Borrower has instituted, and each Facility is operated in
substantial compliance with, a compliance plan which follows applicable
guidelines established by Health Care Authorities; and
(l) Borrower is in material compliance with the Healthcare
Insurance Portability and Accountability Act of 1996, and the regulations
promulgated thereunder.
SECTION 4.3 SURVIVAL OF REPRESENTATIONS. Borrower agrees that
all of the representations and warranties of Borrower set forth in Section 4.1
and elsewhere in this Agreement and in the other Loan Documents shall survive
for so long as any amount remains owing to Lender under this Agreement or any of
the other Loan Documents by Borrower. All representations, warranties, covenants
and agreements made in this Agreement, as qualified by the Schedules hereto, or
in the other Loan Documents by Borrower shall be deemed to have been relied upon
by Lender notwithstanding any investigation heretofore or hereafter made by
Lender or on its behalf.
V. BORROWER COVENANTS
SECTION 5.1 AFFIRMATIVE COVENANTS. From the date hereof and
until payment and performance in full of all obligations of Borrower under the
Loan Documents or the earlier release of the Liens of all Mortgages encumbering
the Properties (and all related obligations) in accordance with the terms of
this Agreement and the other Loan Documents, Borrower hereby covenants and
agrees with Lender that:
5.1.1 EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS. Borrower
shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its existence, rights, and all material licenses, permits
and franchises and comply in all material respects with all Legal Requirements
of all Governmental Authorities and Health Care Authorities applicable to
Borrower and the Properties, including, without limitation, Medicare, Medicaid,
or other Health Care Authority laws, orders, decrees, rules or regulations
relating to the operations conducted at the Facility, laws, orders, decrees,
rules or regulations concerning employment and compensation of persons engaged
in operation and maintenance of each Individual Property and any environmental
or ecological requirements. Borrower shall keep and maintain in full force and
effect all Licenses necessary for the operation of the Facility on each
Individual Property other than Licenses which, if not maintained, would not have
a material adverse effect on the use or operation of such Individual Property.
Borrower will cause the
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Facility located on the applicable Individual Property to remain in operation
without interruption in accordance with all Legal Requirement. Borrower shall
not commit nor permit any other Person in occupancy of or involved with the
operation or use of the Properties to commit any act or omission affording the
federal government or any state or local government the right of forfeiture
against any Individual Property or any part thereof or any monies paid in
performance of Borrower's obligations under any of the Loan Documents. Borrower
hereby covenants and agrees not to commit, permit or suffer to exist any act or
omission affording such right of forfeiture. Borrower shall at all times
maintain, preserve and protect all material franchises and trade names and
preserve all the remainder of its property used or useful in the conduct of its
business and shall keep the Properties in good working order and repair, and
from time to time make, or cause to be made, all reasonably necessary repairs,
renewals, replacements, betterments and improvements thereto, all as more fully
provided in the Mortgages. Borrower shall keep the Properties insured at all
times by financially sound and reputable insurers, to such extent and against
such risks, and maintain liability and such other insurance, as is more fully
provided in this Agreement. Borrower shall operate any Individual Property that
is the subject of the O&M Agreement in accordance with the terms and provisions
thereof in all material respects. After prior notice to Lender, Borrower, at its
own expense, may contest by appropriate legal proceeding promptly initiated and
conducted in good faith and with due diligence, the validity of any Legal
Requirement, the applicability of any Legal Requirement to Borrower or any
Individual Property or any alleged violation of any Legal Requirement, provided
that (i) no Event of Default has occurred and remains uncured; (ii) Borrower is
permitted to do so under the provisions of any mortgage or deed of trust
superior in lien to the applicable Mortgage; (iii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any
instrument to which Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be conducted in accordance with all
applicable statutes, laws and ordinances; (iv) no Individual Property nor any
part thereof or interest therein will be in danger of being sold, forfeited,
terminated, cancelled or lost; (v) Borrower shall promptly upon final
determination thereof comply with any such Legal Requirement determined to be
valid or applicable or cure any violation of any Legal Requirement; (vi) such
proceeding shall suspend the enforcement of the contested Legal Requirement
against Borrower and any Individual Property; and (vii) Borrower shall furnish
such security as may be required in the proceeding, or as may be reasonably
requested by Lender, to insure compliance with such Legal Requirement, together
with all interest and penalties payable in connection therewith. Lender may
apply any such security, as necessary to cause compliance with such Legal
Requirement at any time when, in the reasonable judgment of Lender, the
validity, applicability or violation of such Legal Requirement is finally
established or any Individual Property (or any part thereof or interest therein)
shall be in danger of being sold, forfeited, terminated, cancelled or lost.
5.1.2 TAXES AND OTHER CHARGES. Borrower shall pay all Taxes
and Other Charges now or hereafter levied or assessed or imposed against the
Properties or any part thereof as the same become due and payable; provided,
however, Borrower's obligation to directly pay Taxes shall be suspended for so
long as Borrower complies with the terms and provisions of Section 7.2 hereof.
Borrower will deliver to Lender receipts for payment or other evidence
satisfactory to Lender that the Taxes and Other Charges have been so paid or are
not then delinquent no later than ten (10) days prior to the date on which the
Taxes and/or Other Charges would otherwise be delinquent if not paid. Borrower
shall furnish to Lender receipts for the payment of the Taxes and the Other
Charges prior to the date the same shall become delinquent
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provided, however, Borrower is not required to furnish such receipts for payment
of Taxes in the event that such Taxes have been paid by Lender pursuant to
Section 7.2 hereof. Borrower shall not suffer and shall promptly cause to be
paid and discharged any Lien or charge whatsoever which may be or become a Lien
or charge against the Properties, and shall promptly pay for all utility
services provided to the Properties. After prior notice to Lender, Borrower, at
its own expense, may contest by appropriate legal proceeding, promptly initiated
and conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any Taxes, Other Charges or other Liens
against the Properties, provided that (a) no Event of Default has occurred and
remains uncured; (b) Borrower is permitted to do so under the provisions of any
mortgage or deed of trust superior in lien to the applicable Mortgage; (c) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (d) no Individual
Property nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, cancelled or lost; (e) Borrower shall promptly upon
final determination thereof pay the amount of any such Taxes, Other Charges or
other Liens, together with all costs, interest and penalties which may be
payable in connection therewith; (f) such proceeding shall suspend the
collection of such contested Taxes, Other Charges or other Liens from the
applicable Individual Property; and (g) Borrower shall furnish such security as
may be required in the proceeding, or as may be reasonably requested by Lender,
to insure the payment of any such Taxes, Other Charges or other Liens, together
with all interest and penalties thereon. Lender may pay over any such cash
deposit or part thereof held by Lender to the claimant entitled thereto at any
time when, in the reasonable judgment of Lender, the entitlement of such
claimant is established or any Individual Property (or part thereof or interest
therein) shall be in danger of being sold, forfeited, terminated, cancelled or
lost or there shall be any danger of the Lien of any Mortgage being primed by
any related Lien.
5.1.3 LITIGATION. Borrower shall give prompt notice to Lender
of any litigation or governmental proceedings pending or threatened against
Borrower, Principal and Guarantor which might reasonably be expected to have a
material adverse effect on Borrower's, Principal's or Guarantor's condition
(financial or otherwise) or business or any Individual Property.
5.1.4 ACCESS TO PROPERTIES. Borrower shall permit agents,
representatives and employees of Lender to inspect the Properties or any part
thereof at reasonable hours upon reasonable advance notice.
5.1.5 NOTICE OF DEFAULT. Borrower shall promptly advise Lender
of any material adverse change in Borrower's, Principal's or Guarantor's
condition, financial or otherwise, or of the occurrence of any Event of Default
of which Borrower has knowledge.
5.1.6 COOPERATE IN LEGAL PROCEEDINGS. Borrower shall cooperate
with Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings.
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5.1.7 PERFORM LOAN DOCUMENTS. Borrower shall observe, perform
and satisfy all the terms, provisions, covenants and conditions of, and shall
pay when due all costs, fees and expenses to the extent required under the Loan
Documents executed and delivered by, or applicable to, Borrower.
5.1.8 AWARD AND INSURANCE BENEFITS. Borrower shall cooperate
with Lender in obtaining for Lender the benefits of any Awards or Insurance
Proceeds lawfully or equitably payable in connection with any Individual
Property, and Lender shall be reimbursed for any expenses incurred in connection
therewith (including reasonable attorneys' fees and disbursements, and the
payment by Borrower of the expense of an appraisal on behalf of Lender in case
of Casualty or Condemnation affecting any Individual Property or any part
thereof) out of such Insurance Proceeds.
5.1.9 FURTHER ASSURANCES. Borrower shall, at Borrower's sole
cost and expense:
(a) furnish to Lender all instruments, documents,
boundary surveys, footing or foundation surveys, certificates, plans and
specifications, appraisals, title and other insurance reports and agreements
relating to any Individual Property, and each and every other document,
certificate, agreement and instrument required to be furnished by Borrower
pursuant to the terms of the Loan Documents or which are reasonably requested by
Lender in connection therewith;
(b) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the collateral
at any time securing or intended to secure the obligations of Borrower under the
Loan Documents, as Lender may reasonably require; and
(c) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement and the other Loan
Documents, as Lender shall reasonably require from time to time.
5.1.10 SUPPLEMENTAL MORTGAGE AFFIDAVITS. Borrower represents
that it has paid all state, county and municipal recording and all other taxes
imposed upon the execution and recordation of the Mortgages. If at any time
Lender determines, based on applicable law, that Lender is not being afforded
the maximum amount of security available from any one or more of the Properties
as a direct or indirect result of applicable taxes not having been paid with
respect to any Individual Property, Borrower agrees that Borrower will execute,
acknowledge and deliver to Lender, immediately upon Lender's request,
supplemental affidavits increasing the amount of the Debt attributable to any
such Individual Property (as set forth as the Allocated Loan Amount on Schedule
II annexed hereto) for which all applicable taxes have been paid to an amount
determined by Lender to be equal to the lesser of (a) the greater of the fair
market value of the applicable Individual Property (i) as of the date hereof and
(ii) as of the date such supplemental affidavits are to be delivered to Lender,
and (b) the amount of the Debt attributable to any such Individual Property (as
set forth as the Allocated Loan Amount on Schedule II annexed hereto), and
Borrower shall, on demand, pay any additional taxes.
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5.1.11 FINANCIAL REPORTING. (a) Borrower will keep and
maintain or will cause to be kept and maintained on a Fiscal Year basis, in
accordance with GAAP (or such other accounting basis acceptable to Lender),
books, records and accounts reflecting all of the financial affairs of Borrower
and all items of income and expense in connection with the operation on an
individual basis of the Properties, which such books, records and accounts shall
be proper and accurate in all material respects. Lender shall have the right
from time to time at all times during normal business hours upon reasonable
notice to examine such books, records and accounts at the office of Borrower or
any other Person maintaining such books, records and accounts and to make such
copies or extracts thereof as Lender shall desire. After the occurrence of an
Event of Default, Borrower shall pay any costs and expenses incurred by Lender
to examine Borrower's accounting records with respect to the Properties, as
Lender shall reasonably determine to be necessary or appropriate in the
protection of Lender's interest.
(b) Borrower will furnish to Lender annually, within
ninety (90) days following the end of each Fiscal Year of Borrower, a complete
copy of the annual consolidated financial statements of Fountain View, Inc.
audited by a "Big Four" accounting firm or other independent certified public
accountant acceptable to Lender in accordance with GAAP (or such other
accounting basis acceptable to Lender) covering Borrower and its Affiliates
(with a supplemental unaudited combining balance sheet by property for each
Individual Property and for the Properties on a combined basis), containing
statements of profit and loss for Borrower, each Individual Property and the
Properties in the aggregate, including the operations of the Facility and a
balance sheet for Borrower. Borrower's unaudited financial statements for each
Property shall include a balance sheet, statement of profit and loss, census and
occupancy schedule and Net Cash Flow statement. In addition, Borrower will
provide unaudited financial statements for all Properties, which such financial
statements shall include a combining balance sheet, profit and loss statement,
census and occupancy schedule and Net Cash Flow statement. Borrower's annual
consolidated financial statements shall be accompanied by (i) a comparison of
the budgeted income and expenses and the actual income and expenses for the
prior Fiscal Year, (ii) an unqualified opinion of a "Big Four" accounting firm
or other independent certified public accountant reasonably acceptable to
Lender, (iii) a schedule audited by such independent certified public accountant
reconciling Net Operating Income to Net Cash Flow (the "NET CASH FLOW
SCHEDULE"), which shall itemize all adjustments made to Net Operating Income to
arrive at Net Cash Flow deemed material by such independent certified public
accountant and (iv) an Officer's Certificate certifying that each annual
financial statement presents fairly the financial condition and the results of
operations of Borrower and the Properties being reported upon and that such
financial statements have been prepared in accordance with GAAP and as of the
date thereof whether there exists to Borrower's knowledge of an event or
circumstance which constitutes a Default or Event of Default under the Loan
Documents executed and delivered by, or applicable to, Borrower, and if such
Default or Event of Default exists, the nature thereof, the period of time it
has existed and the action then being taken to remedy the same.
(c) Borrower will furnish, or cause to be furnished, to
Lender on or before forty-five (45) days after the end of each calendar quarter
the following items, accompanied by an Officer's Certificate stating that such
items are true, correct, accurate, and complete in all material respects and
fairly present the financial condition and results of the operations of Borrower
and the Properties on a combined basis as well as each Individual Property
including the operations of the Facility (subject to normal year-end
adjustments) as applicable: (i) an
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Occupancy Report for the subject quarter; (ii) quarterly and year-to-date
operating statements for each Individual Property and for the Properties
combined, prepared for each calendar quarter, noting Net Operating Income, Gross
Income from Operations, and Operating Expenses (not including any contributions
to the Replacement Reserve Fund), and, upon Lender's request, other information
reasonably necessary and sufficient to fairly represent the financial position
and results of operation of the Properties during such quarter, and containing a
comparison of budgeted income and expenses and the actual income and expenses
together with a detailed explanation of any variances of ten percent (10%) or
more with respect to the line item entitled "Total Controllable Expenses" on the
Occupancy Report and five percent (5%) or more in the aggregate between budgeted
and actual amounts for such periods, all in form satisfactory to Lender; (iii) a
calculation reflecting the annual Debt Service Coverage Ratio for the
immediately preceding twelve (12) month period as of the last day of such
quarter; and (iv) a consolidated Net Cash Flow Schedule (including Capital
Expenditures) for the Properties. In addition, such Officer's Certificate shall
also state that the representations and warranties of Borrower set forth in
Section 4.1.30 are true and correct in all material respects as of the date of
such certificate and that there are no trade payables outstanding for more than
sixty (60) days.
(d) Prior to a Securitization of the Loan, Borrower shall
furnish or cause to be furnished to Lender, on or before the thirty (30) days
after the end of each calendar month the financial statement and other items
described in Section 5.1.10(c) above on a monthly basis.
(e) Intentionally Omitted;
(f) Borrower shall furnish Lender, within ten (10)
Business Days of the receipt by Borrower, all material notices (regardless of
form) from any Health Care Authority and/or any insurance company, managed care
company, or other third-party payor that Borrower's license, Medicare or
Medicaid certification, or accreditation or ranking by any Health Care
Authority, insurance company, managed care company, or other third-party payor
is being downgraded, revoked, or suspended, that action is pending, being
considered or being taken to downgrade, revoke, or suspend the Borrower's
license or certification or to fine, penalize or impose remedies upon the
Borrower, or that action is pending, being considered, or being, or could be,
taken, to discontinue, suspend, deny, decrease or recoup any payments due, made
or coming due to Borrower or related to the operation of any Individual
Property.
(g) Borrower shall file all required Medicare or Medicaid
cost reports on or prior to the date such reports are due and shall furnish
Lender, within thirty (30) days of the date of filing, a complete and accurate
copy of the annual Medicare or Medicaid cost report for Borrower, which will be
prepared by Borrower, and promptly furnish Lender any material amendments filed
with respect to such reports and all material notices, responses, audit reports
or inquiries with respect to such reports.
(h) Borrower shall furnish Lender, within thirty (30)
days of the receipt by Borrower, the annual Medicaid and Medicare provider
agreement(s) and the annual Medicaid and Medicare reimbursement rate sheets and
any new, revised or amended rate sheet which may be issued subsequent to the
annual reimbursement rate sheets.
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(i) Borrower shall furnish Lender, within ten (10)
Business Days of receipt but at least five (5) days prior to the earliest date
on which Borrower is required to take any action with respect thereto or would
suffer any adverse consequence, a copy of any material Medicare, Medicaid or
other licensing or accreditation or ranking agency or entity survey, report,
warning letter, or notice, and any statement of deficiencies, and within the
time period required by the particular agency for furnishing a plan of
correction also furnish or cause to be furnished to Lender a copy of the plan of
correction generated from such survey, report, warning letter, or notice for
Borrower and by subsequent correspondence related thereto, and correct or cause
to be corrected any deficiency, the curing of which is a condition of continued
licensure or of full participation in Medicare or Medicaid or a care program
offered by an insurance company, managed care company, or other third-party
payor by the date required for cure by such agency or entity (plus extensions
granted by such agency or entity).
(j) Borrower shall furnish Lender, within ten (10)
Business Days of receipt by Borrower, any other notices or charges issued
relating to the non-compliance by Borrower with any Health Care Authority,
insurance company, managed care company, or other third-party payor laws,
regulations, requirements, licenses, permits, certificates, authorizations or
approvals.
(k) Intentionally Omitted
(l) For each Fiscal Year commencing after the date
hereof, Borrower shall submit to Lender a proposed Annual Budget not later than
fifteen (15) days prior to the commencement of such period or Fiscal Year in
form reasonably satisfactory to Lender and a final Annual Budget not later than
thirty (30) days after the commencement of such Fiscal Year. To and until the
Mezzanine Loan has been paid in full, the Annual Budget shall be subject to
Lender's approval, which approval shall not be unreasonably withheld (each such
Annual Budget, an "APPROVED ANNUAL BUDGET"). In the event that Lender objects to
a proposed Annual Budget submitted by Borrower which requires the approval of
Lender hereunder, Lender shall advise Borrower of such objections within fifteen
(15) days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall promptly revise such Annual
Budget and resubmit the same to Lender. Lender shall advise Borrower of any
objections to such revised Annual Budget within ten (10) days after receipt
thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise the same in accordance with the
process described in this subsection until Lender approves the Annual Budget.
Until such time that Lender approves a proposed Annual Budget which requires the
approval of Lender hereunder, the most recently Approved Annual Budget shall
apply; provided, that such Approved Annual Budget shall be adjusted to reflect
actual increases in Taxes, Insurance Premiums and utilities expenses.
(m) In the event that Borrower must incur an
extraordinary Operating Expense or Capital Expenditure not set forth in the
Annual Budget (each, an "EXTRAORDINARY EXPENSE"), then Borrower shall promptly
deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for Lender's approval which approval shall not be
unreasonably withheld.
(n) Any reports, statements or other information required
to be delivered under this Agreement shall be delivered (i) in paper form, (ii)
on a diskette, and (iii) if requested
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by Lender and within the capabilities of Borrower's data systems without change
or modification thereto, in electronic form and prepared using a Microsoft Word
for Windows or WordPerfect for Windows files (which files may be prepared using
a spreadsheet program and saved as word processing files). Borrower agrees that
Lender may disclose information regarding the Properties and Borrower that is
provided to Lender pursuant to this Section in connection with the
Securitization to such parties requesting such information in connection with
such Securitization.
5.1.12 BUSINESS AND OPERATIONS. Borrower will continue to
engage in the businesses presently conducted by it as and to the extent the same
are necessary for the ownership, maintenance, management and operation of the
Properties. Borrower will qualify to do business and will remain in good
standing under the laws of each jurisdiction as and to the extent the same are
required for the ownership, maintenance, management and operation of the
Properties.
5.1.13 TITLE TO THE PROPERTIES. Borrower will warrant and
defend (a) the title to each Individual Property and every part thereof, subject
only to Liens permitted hereunder (including Permitted Encumbrances) and (b) the
validity and priority of the Liens of the Mortgages and the Assignments of
Leases, subject only to Liens permitted hereunder (including Permitted
Encumbrances), in each case against the claims of all Persons whomsoever.
Borrower shall reimburse Lender for any losses, costs, damages or expenses
(including reasonable attorneys' fees and court costs) incurred by Lender if an
interest in any Individual Property, other than as permitted hereunder, is
claimed by another Person.
5.1.14 COSTS OF ENFORCEMENT. In the event (a) that any
Mortgage encumbering any Individual Property is foreclosed in whole or in part
or that any such Mortgage is put into the hands of an attorney for collection,
suit, action or foreclosure, (b) of the foreclosure of any mortgage prior to or
subsequent to any Mortgage encumbering any Individual Property in which
proceeding Lender is made a party, or (c) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower or any of its
constituent Persons or an assignment by Borrower or any of its constituent
Persons for the benefit of its creditors, Borrower, its successors or assigns,
shall be chargeable with and agrees to pay all costs of collection and defense,
including reasonable attorneys' fees and costs, incurred by Lender or Borrower
in connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, together with all required service or use
taxes.
5.1.15 ESTOPPEL STATEMENT. After request by Lender, Borrower
shall within ten (10) days furnish Lender with a statement, duly acknowledged
and certified, setting forth (i) the original principal amount of the Loan, (ii)
the unpaid principal amount of the Loan, (iii) the Applicable Interest Rate of
the Loan, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi)
that the Note, this Agreement, the Mortgages and the other Loan Documents are
valid, legal and binding obligations and have not been modified or if modified,
giving particulars of such modification.
5.1.16 LOAN PROCEEDS. Borrower shall use the proceeds of the
Loan received by it on the Closing Date only for the purposes set forth in
Section 2.1.4.
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5.1.17 PERFORMANCE BY BORROWER. Borrower shall in a timely
manner observe, perform and fulfill each and every covenant, term and provision
of each Loan Document executed and delivered by, or applicable to, Borrower, and
shall not enter into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan Document executed and
delivered by, or applicable to, Borrower without the prior consent of Lender.
5.1.18 CONFIRMATION OF REPRESENTATIONS. Borrower shall
deliver, in connection with any Securitization, (a) one or more Officer's
Certificates certifying as to the accuracy of all representations made by
Borrower in the Loan Documents as of the date of the closing of such
Securitization, and (b) certificates of the relevant Governmental Authorities in
all relevant jurisdictions indicating the good standing and qualification of
Borrower and Principal as of the date of the Securitization.
5.1.19 NO JOINT ASSESSMENT. Borrower shall not suffer, permit
or initiate the joint assessment of any Individual Property (a) with any other
real property constituting a tax lot separate from such Individual Property, and
(b) which constitutes real property with any portion of such Individual Property
which may be deemed to constitute personal property, or any other procedure
whereby the lien of any taxes which may be levied against such personal property
shall be assessed or levied or charged to such real property portion of the
Individual Property.
5.1.20 LEASES AND CONTRACTS. All residential Leases shall be
written on the standard form (without any material changes) which Lender has
approved and shall be on arm's-length terms consistent with the terms for
similar residential Leases in the market area of each Individual Property, shall
provide for free rent only if the same is consistent with prevailing market
conditions and Legal Requirements and shall provide for charges and market rents
then prevailing in the market area of such Individual Property or as may be
required by law. Such residential Leases shall also provide for Security
Deposits in reasonable amounts if the same is consistent with prevailing market
conditions in the area where the applicable Individual Property is located.
Borrower shall also submit to Lender for Lender's approval, which approval shall
not be unreasonably withheld, prior to the execution thereof, any proposed Lease
or license of more than five percent (5%) of the rentable square footage of the
Improvements on any Individual Property other than residential leases. Borrower
shall not execute any Lease or license agreement for all or a substantial
portion of any Individual Property, except for an actual occupancy by the
tenant, lessee or licensee thereunder and with Lender's prior written consent.
Borrower shall at all times promptly and faithfully perform, or cause to be
performed, in all material respects, all of the covenants, conditions and
agreements contained in all Leases or licenses with respect to each Individual
Property, now or hereafter existing, on the part of the landlord, lessor or
licensor thereunder to be kept and performed. Upon the request of Lender,
Borrower shall deliver to Lender a copy of any non-residential Lease or Contract
that is not terminable upon 60 days notice or that requires annual payments of
$100,000 or more. Borrower shall not do or suffer to be done any act that might
reasonably be expected to result in a default by the landlord, lessor or
licensor or other party under any such Lease or Contract or allow the tenant,
resident, licensee or other contracting party thereunder to withhold payment or
rent and, shall not further assign any Lease or Contract or any Rents or other
payments. Borrower, at no cost or expense to Lender, shall enforce, short of
termination, the performance and observance of each and every material condition
and covenant of each of the parties under the Leases and
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Contracts. Borrower shall not, without the prior written consent of Lender,
modify any of the Leases or Contracts in any material respect, terminate or
accept the surrender of any Leases or Contracts, or waive or release any other
party from the performance or observance of any obligation or condition under
such Leases or Contracts, except in the normal course of business in a manner
which is consistent with past practices and with sound and customary leasing and
management practices for similar properties in the community in which the
applicable Individual Property is located. Borrower shall not permit the
prepayment of any rents under any of the Leases for more than one (1) month
prior to the due date thereof.
5.1.21 ALTERATIONS. Borrower shall obtain Lender's prior
consent to any alterations to any Improvements, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, Lender's consent shall not
be required in connection with any alterations that will not have a material
adverse effect on Borrower's financial condition, the value of the applicable
Individual Property or the Net Operating Income, provided that such alterations
(a) do not adversely affect any structural component of any Improvements, any
utility or HVAC system contained in any Improvements or the exterior of any
building constituting a part of any Improvements and the aggregate cost thereof
does not exceed Five Hundred Thousand and 00/100 Dollars ($500,000) or (b) are
performed in connection with the Restoration of an Individual Property after the
occurrence of a Casualty in accordance with the terms and provisions of this
Agreement. If the total unpaid amounts due and payable with respect to
alterations to the Improvements at any Individual Property (other than such
amounts to be paid or reimbursed by tenants under the Leases) shall at any time
exceed Five Hundred Thousand and 00/100 Dollars ($500,000) (the "THRESHOLD
AMOUNT"), Borrower shall promptly deliver to Lender as security for the payment
of such amounts and as additional security for Borrower's obligations under the
Loan Documents any of the following: (A) cash, (B) U.S. Obligations, (C) other
securities having a rating acceptable to Lender and that the applicable Rating
Agencies have confirmed in writing will not, in and of itself, result in a
downgrade, withdrawal or qualification of the initial, or, if higher, then
current ratings assigned to any Securities or any class thereof in connection
with any Securitization, or (D) a completion and performance bond or an
irrevocable Letter of Credit (payable on sight draft only) issued by a financial
institution having a rating by S&P of not less than "A-1+" if the term of such
bond or Letter of Credit is no longer than three (3) months or, if such term is
in excess of three (3) months, issued by a financial institution having a rating
that is acceptable to Lender and that the applicable Rating Agencies have
confirmed in writing will not, in and of itself, result in a downgrade,
withdrawal or qualification of the initial, or, if higher, then current ratings
assigned to any Securities or any class thereof in connection with any
Securitization. Such security shall be in an amount equal to the excess of the
total unpaid amounts with respect to alterations to the Improvements on the
applicable Individual Property (other than such amounts to be paid or reimbursed
by tenants under the Leases) over the Threshold Amount and Lender may apply such
security from time to time at the option of Lender to pay for such alterations.
5.1.22 ACCOUNTS. In the event that the Lockbox Account and/or
the Medicare/Medicaid Receiveables Account or any corresponding accounts
established pursuant to the Revolving Credit Loan Agreement are held in the name
of an entity as agent for the Borrowers such entity shall at all times be a
Special Purpose Entity whose sole purpose shall be to hold such accounts.
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5.1.23 CERTAIN FURTHER COVENANTS. Borrower further covenants
and agrees with Lender as follows:
(a) Borrower shall cause the operations conducted or to
be conducted at the Facility to be conducted at all times, at a minimum, in a
manner consistent with or better than (x) Legal Requirements, (y) the level of
operation of the Facility as of the Closing Date, and (z) with the level of
operation of other such facilities in the industry, and, in connection
therewith, Borrower shall:
(i) maintain or cause to be maintained the standard of
care for the residents of the Facility at all times at a level
necessary to insure a level of quality care for the residents of the
Facility in compliance with Legal Requirements and comparable to or
better than that existing on the Closing Date;
(ii) maintain or cause to be maintained a standard of care
in the storage, use, transportation and disposal of all medical
equipment, medical supplies, medical products or gases, and medical
waste, of any kind and in any form, that is in accordance with, at
least, that of the commercially reasonable industry standard and in
conformity with all applicable Legal Requirements;
(iii) operate the Facility in a commercially reasonable
manner in substantial and material compliance with applicable laws and
regulations relating thereto and cause all material Licenses,
reimbursement or care contracts, and any other agreements necessary for
the certification, licensure, accreditation or operation of the
Facility as may be necessary for participation in the Medicare or
Medicaid reimbursement programs, managed care company, insurance
company, or other third-party payor reimbursement programs to remain in
effect without reduction in the number of licensed beds or beds
authorized for use in Medicare or Medicaid reimbursement programs,
managed care company, insurance company, or other third-party payor
reimbursement programs;
(iv) take no action which has a reasonable likelihood of
resulting in a suspension, denial, elimination or material reduction of
reimbursement for services from Medicare or Medicaid (without
opportunity to correct), or any managed care company, insurance
company, or other commercial third-party payor; provided, however that
Borrower may cancel or terminate any managed care company, insurance
company or other third-party commercial payor contract (i) if such
managed care company, insurance company or third-party commercial payor
has materially breached such contract, or (ii) such cancellation or
termination does not have a material adverse effect on Net Operating
Income; and
(v) maintain or cause to be maintained all deposits,
including, without limitation, deposits relating to residents or
residency agreements. If such deposits are in cash, such deposits are
to be deposited and held by Borrower, or any manager of the Facility,
as the case may be, in accordance with any Legal Requirements, at such
commercial or savings bank or banks as may be reasonably satisfactory
to Lender. If such deposits are in any other form, such deposits are to
be maintained as Lender may expressly permit. Any bond or other
instrument which Borrower, or any manager of the
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Facility, as the case may be, is permitted to hold in lieu of cash
deposits under any applicable legal requirements shall be maintained in
full force and effect unless replaced by cash deposits as hereinabove
described, shall be issued by an institution reasonably satisfactory to
Lender, shall, if permitted pursuant to any Legal Requirements, name
Lender as payee or Lender thereunder (or at Lender's option, be fully
assignable to Lender) and shall, in all respects, comply with any
applicable legal requirements and otherwise be reasonably satisfactory
to Lender. Borrower shall, upon request, provide Lender with evidence
reasonably satisfactory to Lender of Borrower's compliance with the
foregoing.
(b) Borrower shall not assign or transfer any of its
interest in any Licenses or reimbursement or care contracts (including rights to
payment thereunder), including any Medicare, Medicaid, managed care company,
insurance company, or other third-party payor agreements, pertaining to Borrower
or the Facility, or assign, transfer, or remove or permit any other person to
assign, transfer, or remove any records pertaining to the Facility, including,
without limitation, resident records, medical and clinical records (except for
removal of such patient resident records as directed by the patients or
residents owning such records), without Lender's prior written consent, which
consent may be granted or refused in Lender's sole discretion.
(c) Borrower shall not enter into any transaction with
any person or entity affiliated with Borrower other than in the ordinary course
of its business and on fair and reasonable terms in compliance with Legal
Requirements and, no less favorable to Borrower than those it would obtain in a
comparable arms-length transaction with a person or entity not an affiliate.
(d) Borrower shall, upon request, deliver evidence of
compliance with any applicable post-transfer license requirements of Health Care
Authorities.
5.1.24 OPERATING LEASES/MASTER LEASES. Borrower shall not
modify, amend, supplement, terminate or cancel any Master Lease or any Operating
Lease without the prior written consent of Lender. In the event of any
inconsistency or conflict between any provisions of any Operating Lease or any
Master Lease and the provisions of this Agreement or any of the other Loan
Documents, this Agreement or such other Loan Documents shall control.
5.1.25 OWNERSHIP APPLICATIONS. Borrower shall file an
application or filing as appropriate to initiate the process to have each
Operator become the licensed operator of its respective Individual Property with
the applicable Health Care Authorities within thirty (30) days from the date
hereof and shall diligently prosecute such ownership application to completion.
Upon completion of all required approvals for the ownership application with
respect to any Individual Property, Borrower shall take all actions necessary to
transfer the operations of the applicable Individual Property (including the
related Facility) to the applicable Operator and to terminate any license or
management agreement with the current operator of such Individual Property.
Borrower agrees to complete the transfers of the operations of Individual
Properties with Allocated Loan Amounts at least equal, in the aggregate, to
seventy five percent (75%) of the original principal balance of the Loan on or
before March 1, 2004 and to complete all such transfers of operations on or
before July 1, 2004 and to deliver an opinion of counsel confirming
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that the Operators are properly licensed and that operations of the Facility
have been transferred to the applicable Operator.
5.1.26 COMPLIANCE WITH REORGANIZATION PLAN. Borrower shall
comply with the Plan of Reorganization approved by the Bankruptcy Court having
jurisdiction thereof and with the order of such Bankruptcy Court confirming the
Plan of Reorganization.
5.1.27 PROVISIONAL LICENSES. Borrower acknowledges that it has
obtained provisional Licenses for the Individual Properties listed on Schedule
XI. Borrower agrees to obtain annual Licenses for such Facilities on or before
ninety (90) days from the date hereof and to deliver copies of such annual
Licenses to Lender. In the event that Borrower fails to obtain and deliver the
annual Licenses to Lender within such ninety (90) day period, Borrower shall
deposit with Lender on the next succeeding Payment Date an amount equal to three
months Debt Service allocable to each Individual Property for which an annual
License has not been obtained, to be held by Lender in the Debt Service Reserve
Fund in accordance with the provisions of Section 7.4.1 hereof. Upon delivery to
Lender of an annual License for any Individual Property, the amount deposited in
the Debt Service Reserve Fund pursuant to this Section 5.1.27 allocated to such
Individual Property shall be released to Borrower.
5.1.28 Borrower shall deposit with Lender on the date hereof,
the sum of $63,181, to be held by Lender in the Debt Service Reserve Fund in
accordance with the provisions of Section 7.4.1 hereof. In the event that a
Denial of Payment for New Admissions ("DOPNA") is issued with respect to the
Individual Property know as Monument Hill Nursing Center (the "MONUMENT HILL
PROPERTY"), Borrower shall have ninety days from the date the DOPNA is issued to
submit evidence satisfactory to Lender that the DOPNA has been rescinded. Upon
delivery to Lender of evidence satisfactory to Lender that the DOPNA for the
Monument Hill Property has been rescinded, the amount deposited in the Debt
Service Reserve Fund pursuant to this Section 5.1.28 shall be released to
Borrower. It shall be an event of default hereunder if (1) the DOPNA is not
rescinded within ninety (90) days of the date, if any, that the DOPNA is issued
and (2) the Monument Hill Property is not released pursuant to the following
sentence. Notwithstanding anything to the contrary contained herein, Borrower
shall, have the right for a period of ninety (90) days from the Closing Date, to
pay to Lender the amount of $3,532,323 (which shall be the Release Amount for
the Monument Hill Property for the purposes of this Section and shall be applied
proportionately to the principal amounts of Note A and Note B) and obtain the
release of the Monument Hill Property from the Lien of the Mortgage otherwise in
accordance with the provisions of Section 2.5.1, except that no Prepayment
Premium shall be payable with respect to such prepayment. If the Monument Hill
Property is released pursuant to the foregoing sentence, then the amount
deposited in the Debt Service Reserve Fund pursuant to this Section 5.1.28 shall
be released to Borrower.
SECTION 5.2. NEGATIVE COVENANTS. From the date hereof until
payment and performance in full of all obligations of Borrower under the Loan
Documents or the earlier release of the Liens of all Mortgages in accordance
with the terms of this Agreement and the other Loan Documents, Borrower
covenants and agrees with Lender that it will not do, directly or indirectly,
any of the following:
5.2.1 INTENTIONALLY OMITTED.
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5.2.2 LIENS. Except for any Lien being contested in accordance
with the provisions of Section 5.1.2, Borrower shall not create, incur, assume
or suffer to exist any Lien on any portion of any Individual Property or permit
any such action to be taken, except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted pursuant to the Loan
Documents or the Revolving Credit Loan Documents; and
(iii) Liens for Taxes or Other Charges not yet due.
5.2.3 DISSOLUTION. Borrower shall not (a) engage in any
dissolution, liquidation or consolidation or merger with or into any other
business entity, (b) engage in any business activity not related to the
ownership, leasing and operation of the Properties, (c) transfer, lease or sell,
in one transaction or any combination of transactions, the assets or all or
substantially all of the properties or assets of Borrower except to the extent
permitted by the Loan Documents, (d) modify or amend in any manner affecting its
status as a Special Purpose Entity, waive or terminate its organizational
documents or its qualification and good standing in any jurisdiction or (e)
cause the Principal to (i) dissolve, wind up or liquidate or take any action, or
omit to take an action, as a result of which the Principal would be dissolved,
wound up or liquidated in whole or in part, or (ii) amend or modify in any
manner effecting its status as a Special Purpose Entity, waive or terminate the
certificate of incorporation or bylaws of the Principal, in each case, without
obtaining the prior consent of Lender.
5.2.4 CHANGE IN BUSINESS. Borrower shall not enter into any
line of business other than the ownership, leasing and operation of the
Properties, or make any material change in the scope or nature of its business
objectives, purposes or operations, or undertake or participate in activities
other than the continuance of its present business.
5.2.5 DEBT CANCELLATION. Borrower shall not cancel or
otherwise forgive or release any claim or debt (other than termination of Leases
in accordance herewith) owed to Borrower by any Person, except for adequate
consideration and in the ordinary course of Borrower's business.
5.2.6 ZONING. Borrower shall not initiate or consent to any
zoning reclassification of any portion of any Individual Property or seek any
variance under any existing zoning ordinance or use or permit the use of any
portion of any Individual Property in any manner that could result in such use
becoming a non-conforming use under any zoning ordinance or any other applicable
land use law, rule or regulation, without the prior consent of Lender.
5.2.7 INTENTIONALLY OMITTED.
5.2.8 PRINCIPAL PLACE OF BUSINESS AND ORGANIZATION. Borrower
shall not change its principal place of business set forth in the introductory
paragraph of this Agreement without first giving Lender thirty (30) days prior
notice. Borrower shall not change the place of its organization as set forth in
Section 4.1.28 without the consent of Lender, which consent shall not be
unreasonably withheld. Upon Lender's request, Borrower shall execute and deliver
additional financing statements, security agreements and other instruments which
may be
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necessary to effectively evidence or perfect Lender's security interest in the
Property as a result of such change of principal place of business or place of
organization.
5.2.9 ERISA. (a) Borrower shall not engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Lender of any of its rights under the Note, this Agreement or
the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA.
(b) Borrower further covenants and agrees to deliver to
Lender such certifications or other evidence from time to time throughout the
term of the Loan, as requested by Lender in its reasonable discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(3) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to any state
statute regulating investments of, or fiduciary obligations with respect to,
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);
(B) Less than twenty-five percent (25%) of each
outstanding class of equity interests in Borrower is held by "benefit
plan investors" within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29
C.F.R. Section 2510.3-101(c) or (e).
5.2.10 TRANSFERS. (a) Borrower acknowledges that Lender has
examined and relied on the experience of Borrower and its general partners,
members, principals and (if Borrower is a trust) beneficial owners in owning and
operating properties such as the Properties in agreeing to make the Loan, and
will continue to rely on Borrower's ownership of the Properties as a means of
maintaining the value of the Properties as security for repayment of the Debt
and the performance of the obligations contained in the Loan Documents. Borrower
acknowledges that Lender has a valid interest in maintaining the value of the
Properties so as to ensure that, should Borrower default in the repayment of the
Debt or the performance of the obligations contained in the Loan Documents,
Lender can recover the Debt by a sale of the Properties.
(b) Without the prior consent of Lender and except to the
extent otherwise set forth in this Section 5.2.10, Borrower shall not, and shall
not permit any Restricted Party to, (i) sell, convey, mortgage, grant, bargain,
encumber, pledge, assign, grant options with respect to, or otherwise transfer
or dispose of (directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, and whether or not for consideration or of
record) any Individual Property or any part thereof or any legal or beneficial
interest therein or (ii) permit a Sale or Pledge of an interest in any
Restricted Party (collectively, a "TRANSFER"), other than pursuant to Leases of
space in the Improvements to tenants in accordance with the provisions of
Section 5.1.20.
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(c) A Transfer shall include, but not be limited to, (i)
an installment sales agreement wherein Borrower agrees to sell an Individual
Property or any part thereof for a price to be paid in installments; (ii) an
agreement by Borrower leasing all or a substantial part of an Individual
Property for other than actual occupancy by a resident or space tenant
thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Borrower's right, title and interest in and to any Leases
or any Rents; (iii) if a Restricted Party is a corporation, any merger,
consolidation or Sale or Pledge of such corporation's stock or the creation or
issuance of new stock; (iv) if a Restricted Party is a limited or general
partnership or joint venture, any merger or consolidation or the change,
removal, resignation or addition of a general partner or the Sale or Pledge of
the partnership interest of any general partner or any profits or proceeds
relating to such partnership interest, or the Sale or Pledge of limited
partnership interests or any profits or proceeds relating to such limited
partnership interest or the creation or issuance of new limited partnership
interests; (v) if a Restricted Party is a limited liability company, any merger
or consolidation or the change, removal, resignation or addition of a managing
member or non-member manager (or if no managing member, any member) or the Sale
or Pledge of the membership interest of a managing member (or if no managing
member, any member) or any profits or proceeds relating to such membership
interest, or the Sale or Pledge of non-managing membership interests or the
creation or issuance of new non-managing membership interests; (vi) if a
Restricted Party is a trust or nominee trust, any merger, consolidation or the
Sale or Pledge of the legal or beneficial interest in a Restricted Party or the
creation or issuance of new legal or beneficial interests; or (vii) the removal
or the resignation of the managing agent (including, without limitation, an
Affiliated Manager) other than in accordance with Section 5.1.22 hereof.
(d) Notwithstanding the provisions of this Section
5.2.10, the following transfers shall not be deemed to be a Transfer: (i) the
sale or transfer, in one or a series of transactions, of not more than
forty-nine percent (49%) of the stock in a Restricted Party; provided, however,
no such sales or transfers shall result in the change of voting control in the
Restricted Party, and as a condition to each such sale or transfer, Lender shall
receive not less than thirty (30) days prior notice of such proposed sale or
transfer, (ii) the sale or transfer, in one or a series of transactions, of not
more than forty-nine percent (49%) of the limited partnership interests or
non-managing membership interests (as the case may be) in a Restricted Party;
provided, however, no such sales or transfers shall result in the change of
voting control in the Restricted Party, and as a condition to each such sale or
transfer, Lender shall receive not less than thirty (30) days prior notice of
such proposed sale or transfer, (iii) a sale or transfer of all or substantially
all of the stock of Guarantor, a merger or consolidation of Guarantor or a sale
or transfer of all or substantially all of the assets of Guarantor, provided
that (A) Lender shall receive not less than thirty (30) days prior notice of
such proposed merger, consolidation or acquisition, (B) the successor entity in
connection with any such merger or consolidation and the acquiring entity in
connection with any such acquisition shall have a net worth that is equal to or
greater than the greater of the net worth of Guarantor on the date hereof or the
net worth of Guarantor immediately prior to such merger, consolidation or
acquisition, (C) Lender shall have received confirmation in writing from the
Rating Agencies to the effect that such merger, consolidation or acquisition
shall not result in a re-qualification, reduction or withdrawal of the then
current rating assigned to the Securities or any class thereof in any applicable
Securitization and (D) Borrower shall have delivered to Lender an Additional
Insolvency Opinion reflecting the proposed merger, consolidation or acquisition
satisfactory in form and substance to Lender and
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the Rating Agencies; (iv) the issuance, sale or transfer of stock of Guarantor
in connection with an initial public offering of the stock of Guarantor,
provided that (A) Lender shall receive not less than thirty (30) days prior
notice of such proposed initial public offering, (B) such stock will be listed
on the New York Stock Exchange or such other nationally recognized stock
exchange immediately following such offering and such initial public offering is
widely marketed to institutional investors, and (C) Lender shall have received
confirmation in writing from the Rating Agencies to the effect that such initial
public offering shall not result in a re-qualification, reduction or withdrawal
of the then current rating assigned to the Securities or any class thereof in
any applicable Securitization, (v) the subsequent sale, transfer or issuance of
stock in Guarantor, provided such stock is listed on the New York Stock Exchange
or such other nationally recognized stock exchange, and (vi) the transfer of
interests in Borrower to an Affiliate of Guarantor, provided, that as a
condition to each such transfer, (A) Lender shall receive not less than thirty
(30) days prior notice of such proposed sale or transfer, and (B) Borrower shall
have delivered to Lender an Additional Insolvency Opinion reflecting the
transfer satisfactory in form and substance to Lender and the Rating Agencies.
In addition, at all times, Heritage Partners must continue to own, directly or
indirectly, at least a thirty three and one-third percent (33.33%) interest in
Borrower and Guarantor, provided, however, that in connection with an initial
public offering permitted pursuant to subsection (iv) above, Heritage Partners
must continue to own, directly or indirectly, at least a twenty five percent
(25%) interest in Borrower and Guarantor.
(e) No consent to any assumption of the Loan shall occur
on or before the first anniversary of the first Payment Date, except as
otherwise specifically provided in Section 2.7 hereof. After the first
anniversary of the first Payment Date, Lender shall consent to a one-time
Transfer of the Property or to a transfer all of the ownership interests in the
Borrower, provided that each of the following conditions are satisfied:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of Default
shall have occurred and remain uncured after the expiration of all
applicable grace periods;
(ii) the proposed transferee ("TRANSFEREE") shall be a
reputable entity or person of good character, creditworthy, with
sufficient financial worth considering the obligations assumed and
undertaken, as evidenced by financial statements and other information
reasonably requested by Lender with an organizational structure and
documentation reasonably acceptable to Lender;
(iii) the Transferee and its property manager shall have
sufficient experience in the ownership and management of properties
similar to the Property, and Lender shall be provided with reasonable
evidence thereof (and Lender reserves the right to approve the
Transferee without approving the substitution of the property manager)
and the property manager shall be a Qualified Manager;
(iv) the Transferee shall have executed and delivered to
Lender an assumption agreement in form and substance acceptable to
Lender, evidencing such Transferee's agreement to abide and be bound by
the terms of the Note, this Agreement and the other
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Loan Documents, together with such legal opinions and title insurance
endorsements as may be reasonably requested by Lender; and
(v) Borrower shall have delivered to Lender an Additional
Insolvency Opinion reflecting the proposed transfer satisfactory in
form and substance to Lender
(vi) and the Rating Agencies;
(vii) Transferee's shall comply with the representations
and covenants set forth in Section 4.1.30 and Section 5.2.9 hereof;
(viii) Borrower shall deliver to Lender evidence reasonably
satisfactory to Lender and satisfactory to the Rating Agencies that the
single purpose nature and bankruptcy remoteness of Transferee, its
shareholders, partners or members, as the case may be, are in
accordance with the then current standards of Lender and the Rating
Agencies;
(ix) Lender shall have received confirmation in writing
from the Rating Agencies to the effect that such transfer will not
result in a re-qualification, reduction or withdrawal of the then
current rating assigned to the Securities or any class thereof in any
applicable Securitization;
(x) Lender shall have received (a) an assumption fee
equal to one half of one percent (0.5%) of the Debt on the date of such
assumption (b) the payment of a non-refundable $5,000 application fee
and (c) the payment of, or reimbursement for, all costs and expenses
incurred by Lender in connection with such assumption (including
without limitation, the cost of any third party reports, reasonable
legal fees and expenses, Rating Agency fees and expenses or required
legal opinions);
(xi) prior to any release of the Guarantor, a substitute
guarantor reasonably acceptable to Lender shall have executed a
replacement guaranty and environmental indemnity substantially in the
form of the Guaranty and the Environmental Indemnity; and
(xii) Borrower shall have delivered to Lender evidence
reasonably satisfactory to Lender of the approval or consent of any
Health Care Authorities that have direct or indirect authority or
oversight over Borrower, the Property, or the operations conducted on
the Property to the change in the owner and operator of the Property
and the Facility operated thereon; and
(xiii) Borrower shall have obtained the consent of the
Mezzanine Lender and the Revolving Credit Lender, to the extent
required under the Mezzanine Loan Agreement and the Revolving Credit
Loan Agreement.
(f) Lender shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Debt immediately due and payable upon a Transfer without
Lender's consent. This provision shall apply to every
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Transfer regardless of whether voluntary or not, or whether or not Lender has
consented to any previous Transfer.
(g) Lender hereby consents to the pledge of interests in
Borrower to the Mezzanine Lender as security for the Mezzanine Loan.
(h) Borrower may sell or otherwise dispose of Equipment
and Personal Property (as each such term is defined in the Mortgage) that is no
longer useful in the operation of an Individual Property or which has become
obsolete or worn out without Lender's prior written consent, provided such
equipment is replaced by equipment of similar quality and usefulness if the same
is still useful in the operation of the Individual Property and, upon Borrower's
request, Lender agrees to release the lien of the Mortgage from such Equipment
or Personal Property.
5.2.11 REFINANCING OF REVOLVING CREDIT LOAN. Borrower shall
not refinance or replace the Revolving Credit Loan unless it obtains the prior
consent of Lender, provided that Lender shall consent to a refinancing or
replacement in full of the Revolving Credit Loan if, after considering the
following factors, Lender determines in its reasonable discretion that such
factors have been satisfied:
(a) Lender shall have received at least thirty (30) days
prior written notice of such refinancing;
(b) no Default or Event of Default under this Agreement
shall have occurred and be continuing;
(c) the new revolving credit loan ("NEW REVOLVING CREDIT
LOAN") shall have (A) an interest rate that is no higher than the current
interest rate provided for under the Revolving Credit Loan (or in the event the
Revolving Credit Loan is a floating rate loan, an interest rate that is
benchmarked off the same index and with a spread over such index which is no
greater than the then current spread applicable to the Revolving Loan), as
determined by Lender absent manifest error, (B) a maximum principal amount that
is no more than the maximum principal amount of the Revolving Credit Loan; (C) a
maturity date that is no earlier than that provided for under the Revolving
Credit Loan at the time of the closing hereof; (E) no provisions providing for
the payment of any additional interest, fees, participating interest or other
similar equity feature; (F) no provision in which collateral not granted for the
benefit of Revolving Credit Lender or otherwise encumbered with respect to the
Revolving Credit Loan as of the date hereof is granted for the benefit of or
with respect to the New Revolving Credit Loan; (G) no provision whereby the New
Revolving Credit Loan is cross-defaulted with any other Indebtedness; (H) a cash
management and lockbox arrangement substantially similar to that maintained
under the Revolving Credit Loan; and (I) no provisions that prohibit the
prepayment of the New Revolving Credit Loan without the payment of a prepayment
premium or penalty;
(d) the terms of the New Revolving Credit Loan shall
provide the same express rights to the Lender as the Revolving Credit Loan and
shall not conflict with the terms of the Loan and the lender under the New
Revolving Credit Loan shall enter into an intercreditor
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agreement with Lender no less favorable to Lender than the intercreditor
agreement between Lender and Revolving Credit Lender dated as of the date
hereof;
(e) Lender shall have received confirmation in writing
from the Rating Agencies to the effect that New Revolving Credit Loan will not
result in a re-qualification, reduction or withdrawal of the then current rating
assigned to the Securities or any class thereof in any applicable
Securitization;
(f) Borrower shall pay all costs and expenses of Lender
incurred in connection with the New Revolving Credit Loan, including, without
limitation, reasonable fees and expenses of Lender's counsel;
(g) Borrower shall execute and deliver such amendments to
this Agreement and the other Loan Documents as Lender may request in connection
with such New Revolving Credit Loan; and
(h) Lender shall have received such settlement
statements, pay-off letters, opinions and other documentation as it shall
reasonably request in connection with the New Revolving Credit Loan.
Upon the satisfaction of the foregoing, Borrower may consummate a replacement or
a refinancing of the Revolving Credit Loan, whereupon such New Revolving Credit
Loan shall be deemed to be the Revolving Credit Loan as defined herein.
VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
SECTION 6.1. INSURANCE. (a) Borrower shall obtain and
maintain, or cause to be maintained, insurance for Borrower and the Properties
(except for the coverage described in items (ii) and (xi)) providing at least
the following coverages:
(i) comprehensive all risk insurance on the Improvements
and the Personal Property, including contingent liability from
Operation of Building Laws, Demolition Costs and Increased Cost of
Construction Endorsements, in each case (A) in an amount equal to one
hundred percent (100%) of the "Full Replacement Cost," which for
purposes of this Agreement shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground utilities
and footings) with a waiver of depreciation, but the amount shall in no
event be less than the outstanding principal balance of the Loan; (B)
containing an agreed amount endorsement with respect to the
Improvements and Personal Property waiving all co-insurance provisions;
(C) providing for no deductible in excess of One Hundred Thousand and
No/100 Dollars ($100,000) for all such insurance coverage; and (D)
containing an "Ordinance or Law Coverage" or "Enforcement" endorsement
if any of the Improvements or the use of the Individual Property shall
at any time constitute legal non-conforming structures or uses. In
addition, Borrower shall obtain: (x) if any portion of the Improvements
is currently or at any time in the future located in a federally
designated "special flood hazard area," flood hazard insurance in an
amount equal to the lesser of (1) the Allocated Loan Amount for such
Individual Property or (2) the maximum amount of such insurance
available under the National Flood
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Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the
National Flood Insurance Reform Act of 1994, as each may be amended or
such greater amount as Lender shall require; (y) earthquake insurance
in amounts and in form and substance reasonably satisfactory to Lender
in the event the Individual Property is located in an area with a high
degree of seismic activity and (z) coastal windstorm insurance in
amounts and in form and substance satisfactory to Lender in the event
the Individual Property is located in any coastal region, provided that
the insurance pursuant to clauses (x), (y) and (z) hereof shall be on
terms consistent with the comprehensive all risk insurance policy
required under this Subsection (i);
(ii) commercial general liability insurance against claims
for personal injury, bodily injury, death or property damage occurring
upon, in or about the Individual Property, such insurance (A) to be on
the so-called "claims made" form with a combined limit of not less than
Five Million and No/100 Dollars ($5,000,000) in the aggregate and Four
Million and No/100 Dollars ($4,000,000) per occurrence; (B) to continue
at not less than the aforesaid limit until required to be reasonably
changed by Lender in writing by reason of changed economic conditions
making such protection inadequate; and (C) to cover at least the
following hazards: (1) premises and operations; (2) products and
completed operations on an "if any" basis; (3) independent contractors;
(4) blanket contractual liability for all legal contracts; and (5)
contractual liability covering the indemnities contained in Article 8
of the Mortgages to the extent the same is available; provided, however
that Borrower shall carry such insurance on a so-called "per
occurrence" form in the event that such coverage becomes available at
commercially reasonable rates, and provided further that if Borrower
changes its insurance from "claims made" to "per occurrence" insurance,
then Borrower shall maintain so-called "tail" coverage for a period of
six years on the previous "claims made" coverage;
(iii) business income insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered by the insurance
provided for in Subsection (i) above; (C) containing an extended period
of indemnity endorsement which provides that after the physical loss to
the Improvements and Personal Property has been repaired, the continued
loss of income will be insured until such income either returns to the
same level it was at prior to the loss, or the expiration of eighteen
(18) months from the date that the applicable Individual Property is
repaired or replaced and operations are resumed, whichever first
occurs, and notwithstanding that the policy may expire prior to the end
of such period; and (D) in an amount equal to one hundred percent
(100%) of the projected gross income from each Individual Property for
a period of eighteen (18) months from the date of such Casualty
(assuming such Casualty had not occurred) and notwithstanding that the
policy may expire at the end of such period. The amount of such
business income insurance shall be determined prior to the date hereof
and at least once each year thereafter based on Borrower's reasonable
estimate of the gross income from each Individual Property for the
succeeding eighteen (18) month period. Notwithstanding anything to the
contrary in Section 2.6 hereof, all proceeds payable to Lender pursuant
to this subsection shall be held by Lender and shall be applied in
Lender's sole discretion to (I) the obligations secured by the Loan
Documents from time to time due and payable hereunder and under the
Note or (II) Operating Expenses approved by Lender in its reasonable
discretion; provided, however, that nothing herein
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contained shall be deemed to relieve Borrower of its obligations to pay
the obligations secured by the Loan Documents on the respective dates
of payment provided for in the Note and the other Loan Documents except
to the extent such amounts are actually paid out of the proceeds of
such business income insurance;
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the Improvements,
and only if the Individual Property coverage form does not otherwise
apply, (A) owner's contingent or protective liability insurance
covering claims not covered by or under the terms or provisions of the
above mentioned commercial general liability insurance policy; and (B)
the insurance provided for in subsection (i) above written in a
so-called builder's risk completed value form (1) on a non-reporting
basis, (2) against all risks insured against pursuant to subsection (i)
above, (3) including permission to occupy the Individual Property, and
(4) with an agreed amount endorsement waiving co-insurance provisions;
(v) worker's compensation insurance with respect to any
employees of Borrower, as required by any Governmental Authority or
Legal Requirement;
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by Lender on
terms consistent with the commercial property insurance policy required
under Subsection (i) above;
(vii) Intentionally Omitted;
(viii) motor vehicle liability coverage for all owned and
non-owned vehicles, including rented and leased vehicles containing
minimum limits per occurrence, including umbrella coverage, of One
Million and No/100 Dollars ($1,000,000);
(ix) if an Individual Property is or becomes a legal
"non-conforming" use, ordinance or law coverage and insurance coverage
to compensate for the cost of demolition or rebuilding of the undamaged
portion of the Individual Property along with any reduced value and the
increased cost of construction in amounts as requested by Lender;
(x) the commercial property and business income insurance
required under Sections 6.1(a)(i) and (iii) above shall cover perils of
terrorism and acts of terrorism and Borrower shall maintain commercial
property and business income insurance for loss resulting from perils
and acts of terrorism on terms (including amounts) consistent with
those required under Sections 6.1(a)(i) and (iii) above at all times
during the term of the Loan;
(xi) professional liability and malpractice insurance with
limits of at least $2,000,000.00 per occurrence (claim)/$5,000,000.00
in the aggregate with an annual deductible of not more than $250,000 in
California and $1,000,000 in Texas. Borrower shall also require each
physician or nurse practitioner with clinical privileges at the
Facility, if any, to carry professional liability and malpractice
insurance with limits of not less than $1,000,000.00 per occurrence
(claim)/$3,000,000.00 in the aggregate; and
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(xii) upon sixty (60) days' notice, such other reasonable
insurance and in such reasonable amounts as Lender from time to time
may reasonably request against such other insurable hazards which at
the time are commonly insured against for property similar to the
Individual Property located in or around the region in which the
Individual Property is located.
(b) All insurance provided for in Section 6.1(a) shall be
obtained under valid and enforceable policies (collectively, the "POLICIES" or,
in the singular, the "POLICY"), and shall be subject to the reasonable approval
of Lender as to insurance companies, amounts, deductibles, loss payees and
insureds. The Policies shall be issued by financially sound and responsible
insurance companies authorized to do business in the State and having a claims
paying ability rating of "AA" or better (and the equivalent thereof) by at least
two (2) of the Rating Agencies rating the Securities (one of which shall be S&P
if they are rating the Securities and one of which will be Moody's if they are
rating the Securities), or if only one Rating Agency is rating the Securities,
then only by such Rating Agency. The Policies described in Section 6.1(a) (other
than those strictly limited to liability protection) shall designate Lender as
loss payee. Not less than ten (10) days prior to the expiration dates of the
Policies theretofore furnished to Lender, certificates of insurance evidencing
the Policies accompanied by evidence satisfactory to Lender of payment of the
premiums due thereunder (the "INSURANCE PREMIUMS"), shall be delivered by
Borrower to Lender.
(c) Any blanket insurance Policy shall specifically
allocate to the Individual Property the amount of coverage from time to time
required hereunder and shall otherwise provide the same protection as would a
separate Policy insuring only the Properties in compliance with the provisions
of Section 6.1(a).
(d) All Policies provided for or contemplated by Section
6.1(a), except for the Policy referenced in Section 6.1(a)(v), shall name
Borrower as the insured and Lender as the additional insured, as its interests
may appear, and in the case of property damage, boiler and machinery, flood and
earthquake insurance, shall contain a so-called New York standard
non-contributing mortgagee clause in favor of Lender providing that the loss
thereunder shall be payable to Lender.
(e) All Policies provided for in Section 6.1 shall
contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting
for Borrower, or of any tenant or other occupant, or failure to comply
with the provisions of any Policy, which might otherwise result in a
forfeiture of the insurance or any part thereof, shall in any way
affect the validity or enforceability of the insurance insofar as
Lender is concerned;
(ii) the Policies shall not be materially changed (other
than to increase the coverage provided thereby) or canceled without at
least thirty (30) days' notice to Lender and any other party named
therein as an additional insured;
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(iii) the issuers thereof shall give notice to Lender if
the Policies have not been renewed fifteen (15) days prior to its
expiration; and
(iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
(f) If at any time Lender is not in receipt of written
evidence that all Policies are in full force and effect, Lender shall have the
right, without notice to Borrower, to take such action as Lender deems necessary
to protect its interest in the Properties, including, without limitation, the
obtaining of such insurance coverage as Lender in its reasonable discretion
deems appropriate. All premiums incurred by Lender in connection with such
action or in obtaining such insurance and keeping it in effect shall be paid by
Borrower to Lender upon demand and, until paid, shall be secured by the
Mortgages and shall bear interest at the Default Rate.
SECTION 6.2. CASUALTY. If the Individual Property shall be
damaged or destroyed, in whole or in part, by fire or other casualty (a
"CASUALTY"), Borrower shall give prompt notice of such damage to Lender and
shall promptly commence and diligently prosecute the completion of the
Restoration of the Individual Property as nearly as possible to the condition
the Individual Property was in immediately prior to such Casualty, with such
alterations as may be reasonably approved by Lender and otherwise in accordance
with Section 6.4. Borrower shall pay all costs of such Restoration whether or
not such costs are covered by insurance. Lender may, but shall not be obligated
to make proof of loss if not made promptly by Borrower. In addition, Lender may
participate in any settlement discussions with any insurance companies with
respect to any Casualty in which the Net Proceeds or the costs of completing the
Restoration are equal to or greater than Five Hundred Thousand and No/100
Dollars ($500,000) and Borrower shall deliver to Lender all instruments required
by Lender to permit such participation.
SECTION 6.3. CONDEMNATION. Borrower shall promptly give Lender
notice of the actual or threatened commencement of any proceeding for the
Condemnation of any Individual Property and shall deliver to Lender copies of
any and all papers served in connection with such proceedings. Lender may
participate in any such proceedings, and Borrower shall from time to time
deliver to Lender all instruments reasonably requested by it to permit such
participation; provided, however, that (a) if the Net Proceeds shall be less
than the Threshold Amount, Borrowers shall have the authority to settle any such
proceeding, so long as no Event of Default has occurred and is continuing
hereunder, and (b) while an Event of Default has occurred and is continuing
hereunder, Lender shall have the right to settle any such proceeding without the
consent of Borrower. Borrower shall, at its expense, diligently prosecute any
such proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.
Notwithstanding any taking by any public or quasi-public authority through
Condemnation or otherwise (including, but not limited to, any transfer made in
lieu of or in anticipation of the exercise of such taking), Borrower shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Note and in this Agreement and the Debt shall not be reduced until any
Award shall have been actually received and applied by Lender, after the
deduction of expenses of collection, to the reduction or discharge of the Debt.
Lender shall not be limited to the interest paid on the Award by the condemning
authority but shall be entitled to receive out of the Award interest at the rate
or rates
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provided herein or in the Note. If any Individual Property or any portion
thereof is taken by a condemning authority, Borrower shall promptly commence and
diligently prosecute the Restoration of the applicable Individual Property and
otherwise comply with the provisions of Section 6.4. If any Individual Property
is sold, through foreclosure or otherwise, prior to the receipt by Lender of the
Award, Lender shall have the right, whether or not a deficiency judgment on the
Note shall have been sought, recovered or denied, to receive the Award, or a
portion thereof sufficient to pay the Debt.
SECTION 6.4. RESTORATION. The following provisions shall apply
in connection with the Restoration of any Individual Property:
(a) If the Net Proceeds shall be less than Five Hundred
Thousand and No/100 Dollars ($500,000) and the costs of completing the
Restoration shall be less than Five Hundred Thousand and No/100 Dollars
($500,000), the Net Proceeds will be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in Section 6.4(b)(i) are
met and Borrower delivers to Lender a written undertaking to expeditiously
commence and to satisfactorily complete with due diligence the Restoration in
accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Five
Hundred Thousand and No/100 Dollars ($500,000) or the costs of completing the
Restoration is equal to or greater than Five Hundred Thousand and No/100 Dollars
($500,000), the Net Proceeds will be held by Lender and Lender shall make the
Net Proceeds available for the Restoration in accordance with the provisions of
this Section 6.4. The term "NET PROCEEDS" for purposes of this Section 6.4 shall
mean: (i) the net amount of all insurance proceeds received by Lender pursuant
to Sections 6.1(a)(i), (iv), (vi), (ix) and (x) as a result of such damage or
destruction, after deduction of its reasonable costs and expenses (including,
but not limited to, reasonable counsel fees), if any, in collecting same
("INSURANCE PROCEEDS"), or (ii) the net amount of the Award, after deduction of
its reasonable costs and expenses (including, but not limited to, reasonable
counsel fees), if any, in collecting same ("CONDEMNATION PROCEEDS"), whichever
the case may be.
(i) The Net Proceeds shall be made available to Borrower
for Restoration upon the approval of Lender in its sole discretion that
the following conditions are met:
(A) no Event of Default shall have
occurred and be continuing;
(B) (1) in the event the Net Proceeds
are Insurance Proceeds, less than thirty-five percent
(35%) of the total floor area of the Improvements on
the Individual Property has been damaged, destroyed
or rendered unusable as a result of such Casualty or
(2) in the event the Net Proceeds are Condemnation
Proceeds, less than fifteen percent (15%) of the land
constituting the Individual Property is taken, and
such land is located along the perimeter or periphery
of the Individual Property, and no portion of the
Improvements is located on such land;
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(C) Borrower shall commence the
Restoration as soon as reasonably practicable (but in
no event later than sixty (60) days after such
Casualty or Condemnation, whichever the case may be,
occurs) and shall diligently pursue the same to
satisfactory completion;
(D) Lender shall be reasonably
satisfied that any operating deficits, including all
scheduled payments of principal and interest under
the Note, which will be incurred with respect to the
Individual Property as a result of the occurrence of
any such Casualty or Condemnation, whichever the case
may be, will be covered out of (1) the Net Proceeds,
(2) the insurance coverage referred to in Section
6.1(a)(iii), if applicable, or (3) by other funds of
Borrower;
(E) Lender shall be reasonably
satisfied that the Restoration will be completed on
or before the earliest to occur of (1) three (3)
months prior to the Maturity Date, (2) such time as
may be required under applicable Legal Requirements
or (3) the expiration of the insurance coverage
referred to in Section 6.1(a)(iii);
(F) the Individual Property and the use
thereof after the Restoration will be in compliance
with and permitted under all applicable Legal
Requirements;
(G) the Restoration shall be done and
completed by Borrower in an expeditious and diligent
fashion and in compliance with all applicable Legal
Requirements and all necessary or required approvals
or consent from all Governmental Authorities and
Health Care Authorities can, in Lender's reasonable
judgment, be obtained to allow the rebuilding,
reoccupancy and continued use of the Individual
Property as a Facility containing the current number
of beds;
(H) such Casualty or Condemnation, as
applicable, does not result in the loss of access to
the Individual Property or the related Improvements;
(I) the Debt Service Coverage Ratio
(using the Allocated Loan Amount) for the affected
Individual Property, after giving effect to the
Restoration, shall be equal to or greater than 1.4 to
1.0;
(J) the Loan-to-Value Ratio (using the
Allocated Loan Amount) for the effected Individual
Property, after giving effect to the Restoration,
shall be equal to or less than seventy five percent
75%);
(K) Borrower shall deliver, or cause to
be delivered, to Lender a signed detailed budget
approved in writing by Borrower's architect or
engineer stating the entire cost of completing the
Restoration, which budget shall be reasonably
acceptable to Lender; and
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(L) the Net Proceeds together with any
cash or cash equivalent deposited by Borrower with
Lender are sufficient in Lender's reasonable
discretion to cover the cost of the Restoration.
(ii) The Net Proceeds shall be held by Lender in an
interest-bearing account and, until disbursed in accordance with the
provisions of this Section 6.4(b), shall constitute additional security
for the Debt and other obligations under the Loan Documents. The Net
Proceeds shall be disbursed by Lender to, or as directed by, Borrower
from time to time during the course of the Restoration, upon receipt of
evidence satisfactory to Lender that (A) all materials installed and
work and labor performed (except to the extent that they are to be paid
for out of the requested disbursement) in connection with the
Restoration have been paid for in full, and (B) there exist no notices
of pendency, stop orders, mechanic's or materialman's liens or notices
of intention to file same, or any other liens or encumbrances of any
nature whatsoever on the Individual Property which have not either been
fully bonded to the satisfaction of Lender and discharged of record.
(iii) All plans and specifications required in connection
with the Restoration shall be subject to prior review and acceptance in
all respects by Lender and by an independent consulting engineer
selected by Lender (the "CASUALTY CONSULTANT"). Lender shall have the
use of the plans and specifications and all permits, licenses and
approvals required or obtained in connection with the Restoration. The
identity of the contractors, subcontractors and materialmen engaged in
the Restoration, as well as the contracts under which they have been
engaged, shall be subject to prior review and acceptance by Lender and
the Casualty Consultant. All costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration
including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal to the
costs actually incurred from time to time for work in place as part of
the Restoration, as certified by the Casualty Consultant, minus the
Casualty Retainage. The term "CASUALTY RETAINAGE" shall mean an amount
equal to ten percent (10%) of the costs actually incurred for work in
place as part of the Restoration, as certified by the Casualty
Consultant, until the Restoration has been completed. The Casualty
Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Section 6.4(b), be less than the
amount actually held back by Borrower from contractors, subcontractors
and materialmen engaged in the Restoration. The Casualty Retainage
shall not be released until the Casualty Consultant certifies to Lender
that the Restoration has been completed in accordance with the
provisions of this Section 6.4(b) and that all approvals necessary for
the re-occupancy and use of the Individual Property have been obtained
from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of
the Restoration have been paid in full or will be paid in full out of
the Casualty Retainage; provided, however, that Lender will release the
portion of the Casualty Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the Restoration as
of the date upon which the Casualty
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Consultant certifies to Lender that the contractor, subcontractor or
materialman has satisfactorily completed all work and has supplied all
materials in accordance with the provisions of the contractor's,
subcontractor's or materialman's contract, and the contractor,
subcontractor or materialman delivers conditional lien waivers,
conditional solely on final payment, and evidence of payment in full of
all sums due to the contractor, subcontractor or materialman as may be
reasonably requested by Lender or by the title company issuing the
Title Insurance Policy, and Lender receives an endorsement to the Title
Insurance Policy insuring the continued priority of the lien of the
related Mortgage and evidence of payment of any premium payable for
such endorsement. If required by Lender, the release of any such
portion of the Casualty Retainage shall be approved by the surety
company, if any, which has issued a payment or performance bond with
respect to the contractor, subcontractor or materialman.
(v) Lender shall not be obligated to make disbursements
of the Net Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed
balance thereof shall not, in the reasonable opinion of Lender in
consultation with the Casualty Consultant, be sufficient to pay in full
the balance of the costs which are estimated by the Casualty Consultant
to be incurred in connection with the completion of the Restoration,
Borrower shall deposit the deficiency (the "NET PROCEEDS DEFICIENCY")
with Lender before any further disbursement of the Net Proceeds shall
be made. The Net Proceeds Deficiency deposited with Lender shall be
held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to
the disbursement of the Net Proceeds, and until so disbursed pursuant
to this Section 6.4(b) shall constitute additional security for the
Debt and other obligations under the Loan Documents.
(vii) The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposited
with Lender after the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the provisions of
this Section 6.4(b), and the receipt by Lender of evidence satisfactory
to Lender that all costs incurred in connection with the Restoration
have been paid in full, shall be remitted by Lender to Borrower,
provided no Event of Default shall have occurred and shall be
continuing.
(c) All Net Proceeds not required (i) to be made
available for the Restoration or (ii) to be returned to Borrower as excess Net
Proceeds pursuant to Section 6.4(b)(vii) may be retained and applied by Lender
in accordance with Section 2.4.2 hereof toward the payment of the Debt whether
or not then due and payable in such order, priority and proportions as Lender in
its sole discretion shall deem proper, or, at the discretion of Lender, the same
may be paid, either in whole or in part, to Borrower for such purposes as Lender
shall approve, in its discretion.
(d) In the event of foreclosure of the Mortgage with
respect to the Individual Property, or other transfer of title to the Individual
Property in extinguishment in whole or in part of the Debt all right, title and
interest of Borrower in and to the Policies that are not blanket Policies then
in force concerning the Individual Property and all proceeds payable thereunder
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shall thereupon vest in the purchaser at such foreclosure or Lender or other
transferee in the event of such other transfer of title.
VII. RESERVE FUNDS
SECTION 7.1. REQUIRED REPAIR FUNDS.
7.1.1 DEPOSITS. Borrower shall perform the repairs at the
Properties, as more particularly set forth in each of the Physical Condition
Reports, on Appendix A therein (such repairs hereinafter collectively referred
to as "REQUIRED REPAIRS"). Borrower shall complete the Required Repairs on or
before the date six months after the Closing Date. It shall be an Event of
Default under this Agreement if (a) Borrower does not complete the Required
Repairs at each Individual Property by the required deadline for each such
repair, or (b) Borrower does not satisfy each condition contained in Section
7.1.2 hereof in all material respects. Upon the occurrence of such an Event of
Default, Lender, at its option, may withdraw all Required Repair Funds from the
Required Repair Account and Lender may apply such funds either to completion of
the Required Repairs at one or more of the Properties or toward payment of the
Debt in such order, proportion and priority as Lender may determine in its sole
discretion. Lender's right to withdraw and apply Required Repair Funds shall be
in addition to all other rights and remedies provided to Lender under this
Agreement and the other Loan Documents. On the Closing Date, Borrower shall
deposit with Lender the amount for each Individual Property set forth on such
Schedule III hereto to perform the Required Repairs for such Individual Property
multiplied by one hundred twenty-five percent (125%). Amounts so deposited with
Lender shall be held by Lender in accordance with Section 7.5 hereof. Amounts so
deposited shall hereinafter be referred to as Borrower's "REQUIRED REPAIR FUND"
and the account in which such amounts are held shall hereinafter be referred to
as Borrower's "REQUIRED REPAIR ACCOUNT."
7.1.2 RELEASE OF REQUIRED REPAIR FUNDS. Lender shall disburse
to Borrower the Required Repair Funds from the Required Repair Account from time
to time, but not more frequently than once in any thirty (30) day period, upon
satisfaction by Borrower of each of the following conditions: (a) Borrower shall
submit a written request for payment to Lender at least ten (10) days prior to
the date on which Borrower requests such payment be made and specifies the
Required Repairs to be paid, (b) on the date such request is received by Lender
and on the date such payment is to be made, no Default or Event of Default shall
exist and remain uncured, (c) Lender shall have received an Officer's
Certificate (i) stating that all Required Repairs at the applicable Individual
Property to be funded by the requested disbursement have been completed in good
and workmanlike manner and in accordance with all applicable federal, state and
local laws, rules and regulations, such Officer's Certificate to be accompanied
by a copy of any license, permit or other approval by any Governmental Authority
required to commence and/or complete the Required Repairs, (ii) identifying each
Person that supplied materials or labor in connection with the Required Repairs
performed at such Individual Property to be funded by the requested
disbursement, and (iii) stating that each such Person has been paid in full or
will be paid in full upon such disbursement, such Officer's Certificate to be
accompanied by lien waivers or other evidence of payment reasonably satisfactory
to Lender, (d) at Lender's option, a title search for such Individual Property
indicating that such Individual Property is free from all liens, claims and
other encumbrances not previously approved by Lender, and (e) Lender shall have
received such other evidence as Lender shall reasonably request that the
Required Repairs
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at such Individual Property to be funded by the requested disbursement have been
completed and are paid for or will be paid upon such disbursement to Borrower.
Lender shall not be required to make disbursements from the Required Repair
Account with respect to any Individual Property unless such requested
disbursement is in an amount greater than $5,000 (or a lesser amount if the
total amount in the Required Repair Account is less than $5,000, in which case
only one disbursement of the amount remaining in the account shall be made) and
such disbursement shall be made only upon satisfaction of each condition
contained in this Section 7.1.2.
SECTION 7.2. TAX AND INSURANCE ESCROW FUND. Borrower shall pay
to Lender on each Payment Date (a) one-twelfth of the Taxes that Lender
estimates will be payable during the next ensuing twelve (12) months in order to
accumulate with Lender sufficient funds to pay all such Taxes at least thirty
(30) days prior to their respective due dates, and (b) one-twelfth of the
Insurance Premiums that Lender estimates will be payable for the renewal of the
coverage afforded by the Policies upon the expiration thereof in order to
accumulate with Lender sufficient funds to pay all such Insurance Premiums at
least thirty (30) days prior to the expiration of the Policies; provided,
however, that the amount of the deposit each month with respect to Insurance
Premiums for California Worker's Compensation insurance will be the amount of
the payment due at the end of the month to the offshore captive insurance
company from the Borrower (said amounts in (a) and (b) above hereinafter called
the "TAX AND INSURANCE ESCROW FUND"). The Tax and Insurance Escrow Fund and the
payment of the monthly Debt Service, shall be added together and shall be paid
as an aggregate sum by Borrower to Lender. Subject to the terms hereof, Lender
shall apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance
Premiums required to be made by Borrower pursuant to Section 5.1.2 hereof and
under the Mortgages. In making any payment relating to the Tax and Insurance
Escrow Fund, Lender may do so according to any bill, statement or estimate
procured from the appropriate public office (with respect to Taxes) or insurer
or agent (with respect to Insurance Premiums), without inquiry into the accuracy
of such bill, statement or estimate or into the validity of any tax, assessment,
sale, forfeiture, tax lien or title or claim thereof. If the amount of the Tax
and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Sections 5.1.2 and 6.1 hereof, Lender shall, in its sole
discretion, return any excess to Borrower or credit such excess against future
payments to be made to the Tax and Insurance Escrow Fund. Any amount remaining
in the Tax and Insurance Escrow Fund after the Debt has been paid in full shall
be returned to Borrower. In allocating such excess, Lender may deal with the
Person shown on the records of Lender to be the owner of the Properties. If at
any time Lender reasonably determines that the Tax and Insurance Escrow Fund is
not or will not be sufficient to pay Taxes and Insurance Premiums by the dates
set forth in (a) and (b) above, Lender shall notify Borrower of such
determination and Borrower shall increase its monthly payments to Lender by the
amount that Lender estimates is sufficient to make up the deficiency at least
thirty (30) days prior to the due date of the Taxes and/or thirty (30) days
prior to expiration of the Policies, as the case may be.
SECTION 7.3. REPLACEMENTS AND REPLACEMENT RESERVE.
7.3.1 REPLACEMENT RESERVE FUND. Borrower shall pay to Lender
on each Payment Date one-twelfth (1/12) of $400 per bed for any Individual
Property that is a skilled nursing facility and $400 per unit for any Individual
Property that is an assisted living facility, which is the amount (the
"REPLACEMENT RESERVE MONTHLY DEPOSIT") reasonably estimated by
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Lender in its sole discretion to be due for replacements and repairs required to
be made to the Properties during the calendar year (collectively, the
"REPLACEMENTS"). Amounts so deposited shall hereinafter be referred to as
Borrower's "REPLACEMENT RESERVE FUND" and the account in which such amounts are
held shall hereinafter be referred to as Borrower's "REPLACEMENT RESERVE
ACCOUNT." Any amount held in the Replacement Reserve Account and allocated for
an Individual Property shall be retained by Lender and credited toward the
future Replacement Reserves Monthly Deposits required by Lender hereunder in the
event such Individual Property is released from the Lien of its related Mortgage
in accordance with Section 2.5 hereof.
7.3.2 DISBURSEMENTS FROM REPLACEMENT RESERVE ACCOUNT. Lender
shall make disbursements from the Replacement Reserve Fund as requested by
Borrower, and approved by Lender in its reasonable discretion, no more
frequently than once in any thirty (30) day period of no less than $5,000.00
upon delivery by Borrower of Lender's standard form of draw request accompanied
by copies of paid invoices for the amounts requested and, if required by Lender
for requests in excess of $10,000.00 for a single item, conditional lien waivers
(conditioned only upon final payment) and releases from all parties furnishing
materials and/or services in connection with the requested payment. Lender may
require an inspection of the Property at Borrower's expense prior to making a
monthly disbursement in order to verify completion of replacements and repairs
of items in excess of $30,000.00 for which reimbursement is sought.
7.3.3 BALANCE IN THE REPLACEMENT RESERVE ACCOUNT. The
insufficiency of any balance in the Replacement Reserve Account shall not
relieve Borrower from its obligation to fulfill all preservation and maintenance
covenants in the Loan Documents.
SECTION 7.4. DEBT SERVICE RESERVE.
7.4.1 DEBT SERVICE RESERVE. On the date hereof, Borrower shall
deposit with Lender the sum of $139,935, (said amount, and any additional
deposit to be made pursuant to Sections 5.1.27 and 5.1.28, hereinafter, the
"DEBT SERVICE RESERVE FUND" and the account in which such amount is held,
hereinafter, the "DEBT SERVICE RESERVE ACCOUNT"), which amount shall be held by
Lender as additional security for the Loan. The amount of the Debt Service
Reserve Fund allocable to each Individual Property is set forth on Schedule VI.
In addition, Borrower shall make additional deposits to the Debt Service Reserve
Fund in accordance with Sections 5.1.27 and 5.1.28. Upon the occurrence of an
Event of Default, Lender may apply the Debt Service Reserve Fund to the payment
of the Debt in such order and priority, including, without limitation,
alternating applications thereof between interest and principal, as Lender shall
determine in its sole discretion. Upon the approval of the ownership application
and the transfer of the Licenses for any Individual Property to the applicable
Operator in accordance with the provisions of Section 5.1.25, the amount of the
Debt Service Reserve Fund allocated to such Individual Property shall be
released to Borrower.
SECTION 7.5. RESERVE FUNDS, GENERALLY. (a) Borrower grants to
Lender a first-priority perfected security interest in each of the Reserve Funds
and any and all monies now or hereafter deposited in each Reserve Fund as
additional security for payment of the Debt. Until expended or applied in
accordance herewith, the Reserve Funds shall constitute additional security for
the Debt. Upon the occurrence of an Event of Default, Lender may, in addition to
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any and all other rights and remedies available to Lender, apply any sums then
present in any or all of the Reserve Funds to the payment of the Debt in any
order in its sole discretion. The Reserve Funds shall not constitute trust funds
and may be commingled with other monies held by Lender.
(b) Borrower shall not, without obtaining the prior
consent of Lender, further pledge, assign or grant any security interest in any
Reserve Fund or the monies deposited therein or permit any lien or encumbrance
to attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with
respect thereto.
(c) The Reserve Funds shall be held in an Eligible
Account and shall bear interest at a money market rate selected by Lender. All
interest or other earnings on a Reserve Fund (other than the Tax and Insurance
Escrow Fund, which shall be paid to Lender) shall be added to and become a part
of such Reserve Fund and shall be disbursed in the same manner as other monies
deposited in such Reserve Fund. Borrower shall have the right to direct Lender
to invest sums on deposit in the Eligible Account in Permitted Investments
provided (a) such investments are then regularly offered by Lender for accounts
of this size, category and type, (b) such investments are permitted by
applicable federal, state and local rules, regulations and laws, (c) the
maturity date of the Permitted Investment is not later than the date on which
the applicable Reserve Funds are required for payment of an obligation for which
such Reserve Fund was created, and (d) no Event of Default shall have occurred
and be continuing. Borrower shall be responsible for payment of any federal,
state or local income or other tax applicable to the interest or income earned
on the Reserve Funds. No other investments of the sums on deposit in the Reserve
Funds shall be permitted except as set forth in this Section 7.5. Borrower shall
bear all reasonable costs associated with the investment of the sums in the
account in Permitted Investments. Such costs shall be deducted from the income
or earnings on such investment, if any, and to the extent such income or
earnings shall not be sufficient to pay such costs, such costs shall be paid by
Borrower promptly on demand by Lender. Lender shall have no liability for the
rate of return earned or losses incurred on the investment of the sums in
Permitted Investments.
(d) Borrower shall indemnify Lender and hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations and costs and expenses (including
litigation costs and reasonable attorneys fees and expenses) arising from or in
any way connected with the Reserve Funds or the performance of the obligations
for which the Reserve Funds were established, except to the extent caused by
Lender's gross negligence or willful misconduct. Borrower shall assign to Lender
all rights and claims Borrower may have against all Persons supplying labor,
materials or other services which are to be paid from or secured by the Reserve
Funds; provided, however, that Lender may not pursue any such right or claim
unless an Event of Default has occurred and remains uncured.
SECTION 7.6. CASUALTY INSURANCE DEDUCTIBLE RESERVE.
7.6.1 CASUALTY INSURANCE DEDUCTIBLE RESERVE. On the date
hereof, Borrower shall deposit with Lender the sum of $75,000 (said amount, the
"CASUALTY INSURANCE DEDUCTIBLE RESERVE FUND" and the account in which such
amount is held, hereinafter, the
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"CASUALTY INSURANCE DEDUCTIBLE RESERVE ACCOUNT"), which amount shall be held by
Lender as additional security for the Loan. In the event of an insured Casualty,
provided no Event of Default shall have occurred and be continuing, Lender
shall, at Borrower's request, disburse Casualty Insurance Deductible Reserve
Funds to Borrower in an amount equal to the amount by which the deductible under
the Policy maintained pursuant to the provisions of Section 6.1(a)(i) exceeds
$25,000, for Restoration of the applicable Individual Property in accordance
with the provisions of Section 6.4 hereof; provided that Borrower shall deposit
with Lender to be held in the Casualty Insurance Deductible Reserve Fund an
amount equal to the amount so disbursed to Borrower within thirty (30) days of
such disbursement. Upon the occurrence of an Event of Default, Lender may apply
the Casualty Insurance Deductible Reserve Fund to the payment of the Debt in
such order and priority, including, without limitation, alternating applications
thereof between interest and principal, as Lender shall determine in its sole
discretion.
SECTION 7.7. PROFESSIONAL LIABILITY INSURANCE DEDUCTIBLE
RESERVE.
7.7.1 PROFESSIONAL LIABILITY INSURANCE DEDUCTIBLE RESERVE. On
the date hereof, Borrower shall deposit with Lender the sum of $1,250,000 (said
amount, the "PROFESSIONAL LIABILITY INSURANCE DEDUCTIBLE RESERVE FUND" and the
account in which such amount is held, hereinafter, the "PROFESSIONAL LIABILITY
INSURANCE DEDUCTIBLE RESERVE ACCOUNT"), which amount shall be held by Lender as
additional security for the Loan. In the event that the amount of the annual
deductible under the professional liability Policy maintained by Borrower is
reduced to below $250,000 in California and $1,000,000 in Texas, provided no
Event of Default shall have occurred and be continuing, Lender shall, at
Borrower's request, disburse to Borrower Professional Liability Insurance
Deductible Reserve Funds in an amount equal to the difference between such
amounts and the amount of the deductible under the professional liability Policy
maintained by Borrower; provided that in the event that the deductibles are
subsequently increased Borrower shall deposit with Lender such amounts as shall
be required so that at all time the amount on deposit in the Professional
Liability Insurance Deductible Reserve Funds shall equal the amount of the
annual deductibles under the professional liability Policies maintained by
Borrower. In the event of a final unappealable judgment against Borrower in any
action covered by a professional liability Policy, Lender shall have the right,
but not the obligation, to apply the Professional Liability Insurance Deductible
Reserve Funds to the payment of such judgment up to the amount of the deductible
under the professional liability Policy insuring such claim, provided that
Borrower shall deposit with Lender to be held in the Professional Liability
Insurance Deductible Reserve Fund an amount equal to the amount so disbursed
within thirty (30) days of such disbursement. Upon the occurrence of an Event of
Default, Lender may apply the Professional Liability Insurance Deductible
Reserve Fund to the payment of the Debt in such order and priority, including,
without limitation, alternating applications thereof between interest and
principal, as Lender shall determine in its sole discretion.
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VIII. DEFAULTS
SECTION 8.1. EVENT OF DEFAULT. (a) Each of the following
events shall constitute an event of default hereunder (an "EVENT OF DEFAULT"):
(i) if any portion of the Debt Service, including,
without limitation, any amounts due and payable on maturity, whether on
the scheduled Maturity Date or by acceleration or otherwise, is not
paid when due, or if any other amounts payable hereunder are not paid
within five (5) days after the date on which such amounts are due and
payable;
(ii) if any of the Taxes or Other Charges are not paid
when the same are due and payable and prior to delinquency;
(iii) if the Policies are not kept in full force and
effect, or if certified copies of the Policies are not delivered to
Lender upon request;
(iv) if Borrower Transfers or otherwise encumbers any
portion of the Properties without Lender's prior consent in violation
of the provisions of this Agreement or Article 6 of the Mortgage;
(v) if any representation or warranty made by Borrower
herein or in any other Loan Document, or in any report, certificate,
financial statement or other instrument, agreement or document
furnished to Lender shall have been false or misleading in any material
respect as of the date the representation or warranty was made;
(vi) if Borrower, Principal or any Guarantor shall make an
assignment for the benefit of creditors;
(vii) if a receiver, liquidator or trustee shall be
appointed for Borrower, Principal or Guarantor, or if Borrower,
Principal or Guarantor shall be adjudicated a bankrupt or insolvent, or
if any petition for bankruptcy, reorganization or arrangement pursuant
to federal bankruptcy law, or any similar federal or state law, shall
be filed by or against, consented to, or acquiesced in by, Borrower,
Principal or Guarantor, or if any proceeding for the dissolution or
liquidation of Borrower, Principal or Guarantor shall be instituted;
provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower, Principal
or Guarantor, upon the same not being discharged, stayed or dismissed
within sixty (60) days;
(viii) if Borrower attempts to assign its rights under this
Agreement or any of the other Loan Documents or any interest herein or
therein in contravention of the Loan Documents;
(ix) if Borrower breaches any of its respective negative
covenants contained in Section 5.2 or any covenant contained in Section
4.1.30 or Section 5.1.11 hereof;
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(x) with respect to any term, covenant or provision set
forth herein which specifically contains a notice requirement or grace
period, if Borrower shall be in default under such term, covenant or
condition after the giving of such notice or the expiration of such
grace period;
(xi) if any of the assumptions contained in the Insolvency
Opinion delivered to Lender in connection with the Loan, or in the
Additional Insolvency Opinion delivered subsequent to the closing of
the Loan, is or shall become untrue in any material respect;
(xii) if Borrower shall continue to be in Default under any
of the other terms, covenants or conditions of this Agreement not
specified in Subsections (i) to (xii) above, for ten (10) days after
notice to Borrower from Lender, in the case of any Default which can be
cured by the payment of a sum of money, or for thirty (30) days after
notice from Lender in the case of any other Default; provided, however,
that if such non-monetary Default is susceptible of cure but cannot
reasonably be cured within such thirty (30) day period, and provided,
further, that Borrower shall have commenced to cure such Default within
such thirty (30) day period and thereafter diligently and expeditiously
proceeds to cure the same, such thirty (30) day period shall be
extended for such time as is reasonably necessary for Borrower in the
exercise of due diligence to cure such Default, such additional period
not to exceed sixty (60) days;
(xiii) if there shall be default under any of the other Loan
Documents beyond any applicable cure periods contained in such
documents, whether as to Borrower or any Individual Property, or if any
other such event shall occur or condition shall exist, if the effect of
such event or condition is to accelerate the maturity of any portion of
the Debt or to permit Lender to accelerate the maturity of all or any
portion of the Debt;
(xiv) Borrower ceases to continuously operate any
Individual Property or any material portion thereof as a Facility for
any reason whatsoever (other than temporary cessation as a result of a
total Casualty or in connection with any Restoration thereof undertaken
with the consent of Lender);
(xv) Borrower, any manager of any Facility, or any
Facility violates any applicable law or regulation and shall fail to
correct, within the time deadlines set by any Health Care Authority,
managed care company, insurance company or other third-party payor any
deficiency, and the violation or deficiency would reasonably be
expected to result in any of the following actions by such entities
with respect to the Facility;
(a) a termination of Borrower's or the Facility's
Medicare contract or Medicaid contract, or the Facility
Licenses;
(b) a ban on payment for new admissions generally or on
payment for residents otherwise qualifying for Medicaid
or Medicare coverage with no opportunity to correct or
to contest (provided such contest shall stay
enforcement actions or exercise of remedies by Health
Care Authorities) prior to termination; or
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(c) a suspension, discontinuance, elimination or
material reduction or recoupment of reimbursement for
services (without opportunity to correct or to contest
(provided such contest shall stay enforcement actions
or exercise of remedies by Health Care Authorities));
or
(xvii) Borrower shall revoke or modify the "Lockbox
Agreements" (as such term is defined in the Revolving Credit Loan
Agreement) or any other agreement governing the direction of payments
of Medicare/Medicaid Accounts into the Medicare/Medicaid Receiveables
Account or the transfer of funds from the Medicare/Medicaid
Receiveables Account to the Cash Management Account without the prior
written consent of Lender.
(b) Upon the occurrence of an Event of Default (other
than an Event of Default described in clause (vi), (vii) or (viii) above) and at
any time thereafter, in addition to any other rights or remedies available to it
pursuant to this Agreement and the other Loan Documents or at law or in equity,
Lender may take such action, without notice or demand, that Lender deems
advisable to protect and enforce its rights against Borrower and in and to all
or any Individual Property, including, without limitation, declaring the Debt to
be immediately due and payable, and Lender may enforce or avail itself of any or
all rights or remedies provided in the Loan Documents against Borrower and any
or all of the Properties, including, without limitation, all rights or remedies
available at law or in equity; and upon any Event of Default described in clause
(vi), (vii) or (viii) above, the Debt and all other obligations of Borrower
hereunder and under the other Loan Documents shall immediately and automatically
become due and payable, without notice or demand, and Borrower hereby expressly
waives any such notice or demand, anything contained herein or in any other Loan
Document to the contrary notwithstanding.
SECTION 8.2. REMEDIES. (a) Upon the occurrence of an Event of
Default, all or any one or more of the rights, powers, privileges and other
remedies available to Lender against Borrower under this Agreement or any of the
other Loan Documents executed and delivered by, or applicable to, Borrower or at
law or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to all or any Individual Property. Any such actions taken
by Lender shall be cumulative and concurrent and may be pursued independently,
singularly, successively, together or otherwise, at such time and in such order
as Lender may determine in its sole discretion, to the fullest extent permitted
by law, without impairing or otherwise affecting the other rights and remedies
of Lender permitted by law, equity or contract or as set forth herein or in the
other Loan Documents. Without limiting the generality of the foregoing, Borrower
agrees that if an Event of Default is continuing (i) to the fullest extent
permitted by applicable law, Lender shall not be subject to any "one action" or
"election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against the Properties and each
Mortgage has been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full.
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(b) With respect to Borrower and the Properties, nothing
contained herein or in any other Loan Document shall be construed as requiring
Lender to resort to any Individual Property for the satisfaction of any of the
Debt in preference or priority to any other Individual Property, and Lender may
seek satisfaction out of all of the Properties or any part thereof, in its
absolute discretion in respect of the Debt. In addition, Lender shall have the
right from time to time to partially foreclose the Mortgages in any manner and
for any amounts secured by the Mortgages then due and payable as determined by
Lender in its sole discretion including, without limitation, the following
circumstances: (i) in the event Borrower defaults beyond any applicable grace
period in the payment of one or more scheduled payments Debt Service, Lender may
foreclose one or more of the Mortgages to recover such delinquent payments, or
(ii) in the event Lender elects to accelerate less than the entire outstanding
principal balance of the Loan, Lender may foreclose one or more of the Mortgages
to recover so much of the principal balance of the Loan as Lender may accelerate
and such other sums secured by one or more of the Mortgages as Lender may elect.
Notwithstanding one or more partial foreclosures, the Properties shall remain
subject to the Mortgages to secure payment of sums secured by the Mortgages and
not previously recovered.
(c) Lender shall have the right from time to time to
sever the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents (the "SEVERED LOAN DOCUMENTS") in such
denominations as Lender shall determine in its reasonable discretion for
purposes of evidencing and enforcing its rights and remedies provided hereunder.
Borrower shall execute and deliver to Lender from time to time, promptly after
the request of Lender, a severance agreement and such other documents as Lender
shall reasonably request in order to effect the severance described in the
preceding sentence, all in form and substance reasonably satisfactory to Lender.
Borrower hereby absolutely and irrevocably appoints Lender as its true and
lawful attorney, coupled with an interest, in its name and stead to make and
execute all documents necessary or desirable to effect the aforesaid severance,
Borrower ratifying all that its said attorney shall do by virtue thereof;
provided, however, Lender shall not make or execute any such documents under
such power until five (5) days after notice has been given to Borrower by Lender
of Lender's intent to exercise its rights under such power. Borrower shall not
be obligated to pay any costs or expenses incurred in connection with the
preparation, execution, recording or filing of the Severed Loan Documents, and
the Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents and any such representations and
warranties contained in the Severed Loan Documents will be given by Borrower
only as of the Closing Date.
(d) Remedies Cumulative; Waivers. The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Lender may have against Borrower pursuant
to this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise. Lender's rights, powers and remedies may be pursued singularly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrower shall not be construed to be a waiver of any subsequent
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Default or Event of Default by Borrower or to impair any remedy, right or power
consequent thereon.
IX. SPECIAL PROVISIONS
SECTION 9.1. SALE OF NOTES AND SECURITIZATION. Borrower
acknowledges and agrees that the Lender may sell all or any portion of the Loan
and the Loan Documents, or issue one or more participations therein, or
consummate one or more private or public securitizations of rated single- or
multi-class securities (the "SECURITIES") secured by or evidencing ownership
interests in all or any portion of the Loan and the Loan Documents or a pool of
assets that include the Loan and the Loan Documents (such sales, participations
and/or securitizations, collectively, a "SECURITIZATION"). At the request of
Lender, and to the extent not already required to be provided by Borrower under
this Agreement, Borrower shall use reasonable efforts to provide information not
in the possession of Lender or which may be reasonably required by Lender in
order to satisfy the market standards to which Lender customarily adheres or
which may be reasonably required by prospective investors and/or the Rating
Agencies in connection with any such Securitization including, without
limitation, to:
(a) provide additional and/or updated Provided
Information, together with appropriate verification and/or consents related to
the Provided Information through letters of auditors or opinions of counsel of
independent attorneys reasonably acceptable to Lender and the Rating Agencies;
(b) assist in preparing descriptive materials for
presentations to any or all of the Rating Agencies, and work with, and if
requested, supervise, third-party service providers engaged by Borrower, the
Principal and their respective affiliates to obtain, collect, and deliver
information requested or required by Lender or the Rating Agencies;
(c) deliver (i) updated opinions of counsel as to
non-consolidation, due execution and enforceability with respect to the
Property, Borrower, the Principal and their respective Affiliates and the Loan
Documents, including, without limitation, a so-called "10b-5" opinion and (ii)
revised organizational documents for Borrower, which counsel opinions and
organizational documents shall be reasonably satisfactory to Lender and the
Rating Agencies;
(d) if required by any Rating Agency, use commercially
reasonable efforts to deliver such additional tenant estoppel letters,
subordination agreements from commercial occupants of the Properties or other
agreements from parties to agreements that affect the Property, which estoppel
letters, subordination agreements or other agreements shall be reasonably
satisfactory to Lender and the Rating Agencies;
(e) make such representations and warranties as of the
closing date of the Securitization with respect to the Property, Borrower, the
Principal and the Loan Documents as may be reasonably requested by Lender or the
Rating Agencies and consistent with the facts covered by such representations
and warranties as they exist on the date thereof, including the representations
and warranties made in the Loan Documents;
(f) execute such amendments to the Loan Documents as may
be requested by Lender or the Rating Agencies to effect the Securitization
and/or deliver one or more new
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component notes to replace the original note or modify the original note to
reflect multiple components of the Loan (and such new notes or modified note
shall have the same initial weighted average coupon of the original note, but
such new notes or modified note may change the interest rate and amortization of
the Loan provided that the aggregate Debt Service payable each month under the
new or modified notes shall not exceed the monthly Debt Service under the
original note, absent an Event of Default), and modify the Cash Management
Agreement with respect to the newly created components such that the pricing and
marketability of the Securities and the size of each class of Securities and the
rating assigned to each such class by the Rating Agencies shall provide the most
favorable rating levels and achieve the optimum rating levels for the Loan;
(g) if requested by Lender, review any information
regarding the Property, Borrower, Principal and the Loan which is contained in a
preliminary or final private placement memorandum, prospectus, prospectus
supplement (including any amendment or supplement to either thereof), or other
disclosure document to be used by Lender or any affiliate thereof; and
(h) supply to Lender such documentation, financial
statements and reports in form and substance reasonably required in order to
comply with any applicable securities laws.
All reasonable third party costs and expenses incurred by
Borrower or Lender in connection with Borrower's complying with requests made
under this Section 9.1 (including, without limitation, the fees and expenses of
the Rating Agencies) shall be paid by Lender.
SECTION 9.2. SECURITIZATION INDEMNIFICATION. (a) Borrower
understands that certain of the Provided Information may be included in
Disclosure Documents in connection with the Securitization and may also be
included in filings with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or the Securities and
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or provided or made
available to investors or prospective investors in the Securities, the Rating
Agencies, and service providers relating to the Securitization. In the event
that the Disclosure Document is required to be revised prior to the sale of all
Securities, Borrower will cooperate with the holder of the Note in updating the
Disclosure Document by providing all current information necessary to keep the
Disclosure Document accurate and complete in all material respects.
(b) The Indemnifying Persons agree to provide, in
connection with the Securitization, an indemnification agreement (i) certifying
that (A) the Indemnifying Persons have carefully examined the Disclosure
Documents, including, without limitation, the sections entitled "Risk Factors,"
"Special Considerations," "Description of the Mortgages," "Description of the
Mortgage Loans and Mortgaged Property," "The Manager," "The Borrower" and
"Certain Legal Aspects of the Mortgage Loan," and (B) such sections and such
other information in the Disclosure Documents (to the extent such information
relates to or includes any Provided Information or any information regarding the
Properties, Borrower and/or the Loan) (collectively with the Provided
Information, the "COVERED DISCLOSURE INFORMATION") do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not misleading, (ii) jointly and severally indemnifying Lender, CSFB
(whether or not it is the Lender), any Affiliate of CSFB that has filed any
registration statement relating to the Securitization or has
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acted as the sponsor or depositor in connection with the Securitization, any
Affiliate of CSFB that acts as an underwriter, placement agent or initial
purchaser of Securities issued in the Securitization, any other co-underwriters,
co-placement agents or co-initial purchasers of Securities issued in the
Securitization, and each of their respective officers, directors, partners,
employees, representatives, agents and Affiliates and each Person or entity who
controls any such Person within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (collectively, the "INDEMNIFIED PERSONS"), for
any losses, claims, damages, liabilities, costs or expenses (including, without
limitation, legal fees and expenses for enforcement of these obligations
(collectively, the "LIABILITIES")) to which any such Indemnified Person may
become subject insofar as the Liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Covered Disclosure Information or arise out of or are based upon the
omission or alleged omission to state in the Covered Disclosure Information a
material fact required to be stated therein or necessary in order to make the
statements in the Covered Disclosure Information, in light of the circumstances
under which they were made, not misleading and (iii) agreeing to reimburse each
Indemnified Person for any reasonable legal or other expenses incurred by such
Indemnified Person, as they are incurred, in connection with investigating or
defending the Liabilities. This indemnity agreement will be in addition to any
liability which Borrower may otherwise have. Moreover, the indemnification
provided for in clauses (ii) and (iii) above shall be effective whether or not
an indemnification agreement described in clause (i) above is provided, provided
that Borrower has been given the opportunity to review the Covered Disclosure
Information.
(c) In connection with filings under the Exchange Act,
the Indemnifying Persons jointly and severally agree to indemnify (i) the
Indemnified Persons for Liabilities to which any such Indemnified Person may
become subject insofar as the Liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact in the Covered
Disclosure Information, or the omission or alleged omission to state in the
Covered Disclosure Information a material fact required to be stated therein or
necessary in order to make the statements in the Covered Disclosure Information,
in light of the circumstances under which they were made, not misleading and
(ii) reimburse each Indemnified Person for any legal or other expenses incurred
by such Indemnified Persons, as they are incurred, in connection with defending
or investigating the Liabilities provided that Borrower has been given the
opportunity to review the Covered Disclosure Information.
(d) Promptly after receipt by an Indemnified Person of
notice of any claim or the commencement of any action, the Indemnified Person
shall, if a claim in respect thereof is to be made against any Indemnifying
Person, notify such Indemnifying Person in writing of the claim or the
commencement of that action; provided, however, that the failure to notify such
Indemnifying Person shall not relieve it from any liability which it may have
under the indemnification provisions of this Section 9.2 except to the extent
that it has been materially prejudiced by such failure and, provided, further,
that the failure to notify such Indemnifying Person shall not relieve it from
any liability which it may have to an Indemnified Person otherwise than under
the provisions of this Section 9.2. If any such claim or action shall be brought
against an Indemnified Person, and it shall notify any Indemnifying Person
thereof, such Indemnifying Person shall be entitled to participate therein and,
to the extent that it wishes, assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Person. After notice from any Indemnifying
Person to the Indemnified Person of its election to assume
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the defense of such claim or action, such Indemnifying Person shall not be
liable to the Indemnified Person for any legal or other expenses subsequently
incurred by the Indemnified Person in connection with the defense thereof except
as provided in the following sentence; provided, however, if the defendants in
any such action include both an Indemnifying Person, on the one hand, and one or
more Indemnified Persons on the other hand, and an Indemnified Person shall have
reasonably concluded that there are any legal defenses available to it and/or
other Indemnified Persons that are different or in addition to those available
to the Indemnifying Person, the Indemnified Person or Persons shall have the
right to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Person
or Persons. The Indemnified Person shall instruct its counsel to maintain
reasonably detailed billing records for fees and disbursements for which such
Indemnified Person is seeking reimbursement hereunder and shall submit copies of
such detailed billing records to substantiate that such counsel's fees and
disbursements are solely related to the defense of a claim for which the
Indemnifying Person is required hereunder to indemnify such Indemnified Person.
No Indemnifying Person shall be liable for the expenses of more than one (1)
such separate counsel unless such Indemnified Person shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to another Indemnified Person.
(e) Without the prior consent of CSFB (which consent
shall not be unreasonably withheld), no Indemnifying Person shall settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless the
Indemnifying Person shall have given CSFB reasonable prior notice thereof and
shall have obtained an unconditional release of each Indemnified Person
hereunder from all liability arising out of such claim, action, suit or
proceedings. As long as an Indemnifying Person has substantially complied with
its obligations to defend and indemnify hereunder, such Indemnifying Person
shall not be liable for any settlement made by any Indemnified Person without
the consent of such Indemnifying Person (which consent shall not be unreasonably
withheld).
(f) The Indemnifying Persons agree that if any
indemnification or reimbursement sought pursuant to this Section 9.2 is finally
judicially determined to be unavailable for any reason or is insufficient to
hold any Indemnified Person harmless (with respect only to the Liabilities that
are the subject of this Section 9.2), then the Indemnifying Persons, on the one
hand, and such Indemnified Person, on the other hand, shall contribute to the
Liabilities for which such indemnification or reimbursement is held unavailable
or is insufficient: (x) in such proportion as is appropriate to reflect the
relative benefits to the Indemnifying Persons, on the one hand, and such
Indemnified Person, on the other hand, from the transactions to which such
indemnification or reimbursement relates; or (y) if the allocation provided by
clause (x) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (x)
but also the relative faults of the Indemnifying Persons, on the one hand, and
all Indemnified Persons, on the other hand, as well as any other equitable
considerations. Notwithstanding the provisions of this Section 9.2, (A) no party
found liable for a fraudulent misrepresentation shall be entitled to
contribution from any other party who is not also found liable for such
fraudulent misrepresentation, and (B) the Indemnifying Persons agree that in no
event shall the amount to be contributed by the
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Indemnified Persons collectively pursuant to this paragraph exceed the amount of
the fees (by underwriting discount or otherwise) actually received by the
Indemnified Persons in connection with the closing of the Loan or the
Securitization.
(g) The Indemnifying Persons agree that the
indemnification, contribution and reimbursement obligations set forth in this
Section 9.2 shall apply whether or not any Indemnified Person is a formal party
to any lawsuits, claims or other proceedings. The Indemnifying Persons further
agree that the Indemnified Persons are intended third party beneficiaries under
this Section 9.2.
(h) The liabilities and obligations of the Indemnified
Persons and the Indemnifying Persons under this Section 9.2 shall survive the
termination of this Agreement and the satisfaction and discharge of the Debt.
(i) Notwithstanding anything to the contrary contained
herein, Borrower shall have no obligation to act as depositor with respect to
the Loan or an issuer or registrant with respect to the Securities issued in any
Securitization.
SECTION 9.3. ADMINISTRATION OF BANKRUPTCY CLAIMS. Borrower and
Lender agree that, with respect to the applicable Lease between each of the
respective Owners and the applicable Operator for each Individual Property, each
Owner hereby transfers to Lender, in the event of any proceeding involving such
Operator under the Bankruptcy Code or any similar proceeding, all of such
Owner's rights to (a) file any proof of such claims, (b) cast any votes relating
to any claims of such Owner against such Operator in such proceedings, (c)
collect and receive any dividends payable with respect to such claims, (d) take
any action or commence any proceeding to collect such claims, (e) file any
motion for relief from the stay imposed under Section 362(a) of the Bankruptcy
Code or any similar statute, (f) file any motion to compel such Operator to
assume or reject such Lease under the Bankruptcy Code or any similar statute, or
(g) take any other actions to collect or protect such claims. Borrower agrees
that Lender shall be the sole party permitted to participate in the
administration of the estate of any Operator under any proceeding under the
Bankruptcy Code or any similar statute with respect any such claims.
SECTION 9.4. EXCULPATION. (a) Subject to the qualifications
below, Note A Holder shall not enforce the liability and obligation of Borrower
to perform and observe the obligations contained in the Note, this Agreement,
the Mortgages or the other Loan Documents by any action or proceeding wherein a
money judgment shall be sought against Borrower, except that Lender may bring a
foreclosure action, an action for specific performance or any other appropriate
action or proceeding to enable Lender to enforce and realize upon its interest
under the Note, this Agreement, the Mortgages and the other Loan Documents, or
in the Properties, the Rents, or any other collateral given to Lender pursuant
to the Loan Documents; provided, however, that, except as specifically provided
in this Section 9.4, any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of Borrower's interest in the
Properties, in the Rents and in any other collateral given to Lender, and
Lender, by accepting the Note, this Agreement, the Mortgages and the other Loan
Documents, agrees that it shall not sue for, seek or demand any deficiency
judgment against Borrower in any such action or proceeding under, or by reason
of, or in connection with, the Note, this Agreement, the Mortgages or the other
Loan Documents. The provisions of this Section shall not, however,
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(a) constitute a waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents; (b) impair the right of Lender to name
Borrower as a party defendant in any action or suit for foreclosure and sale
under any of the Mortgages; (c) affect the validity or enforceability of or any
Guaranty made in connection with the Loan or any of the rights and remedies of
Lender thereunder; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the enforcement of any of the Assignments of Leases; (f)
constitute a prohibition against Lender to seek a deficiency judgment against
Borrower to the extent reasonably necessary to fully realize the security
granted by each of the Mortgages or to commence any other appropriate action or
proceeding in order for Lender to exercise its remedies against all of the
Properties; or (g) constitute a waiver of the right of Lender to enforce the
liability and obligation of Borrower, by money judgment or otherwise, to the
extent of any loss, damage, cost, expense, liability, claim or other obligation
incurred by Lender (including attorneys' fees and costs reasonably incurred)
arising out of or in connection with the following:
(i) fraud or intentional misrepresentation by Borrower or
any Guarantor in connection with the Loan;
(ii) the gross negligence or willful misconduct of
Borrower in the operation of the Properties;
(iii) the breach of any representation, warranty, covenant
or indemnification provision in the Environmental Indemnity Agreement
or in the Mortgages concerning environmental laws, hazardous substances
and asbestos and any indemnification of Lender with respect thereto in
either document;
(iv) the removal or disposal of any material portion of
the Properties after an Event of Default;
(v) the misappropriation or conversion by Borrower of (A)
any Insurance Proceeds paid by reason of any Casualty, (B) any Awards
received in connection with a Condemnation, (C) any Rents following an
Event of Default, or (D) any Rents paid more than one (1) month in
advance;
(vi) failure to pay charges for labor or materials or
other charges that can create Liens on any portion of the Properties
which are superior to the Lien of the Mortgage to the extent that Rents
received by Borrower are not applied to Debt Service or Operating
Expenses or to pay any other amount to the Borrower has the obligation
to pay under the Loan Documents or otherwise paid to Lender;
(vii) any security deposits, advance deposits or any other
deposits collected with respect to the Properties which are not
delivered to Lender upon a foreclosure of the Properties or action in
lieu thereof, except to the extent any such security deposits were
applied in accordance with the terms and conditions of any of the
Leases prior to the occurrence of the Event of Default that gave rise
to such foreclosure or action in lieu thereof;
(viii) losses, damages, costs and expenses relating to any
audits, surveys, investigations, actions, suits or proceedings
including without limitation, audits, surveys,
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investigations, actions, suits or proceedings related to
Medicare/Medicaid, false claim, neglect or mistreatment, fraud or abuse
brought by any federal, state or local government or quasi-governmental
body, or by any intermediary, agency, board, authority, entity or any
other administrative or investigative body or entity or any other third
party, including any resident; and
(ix) except as otherwise specifically permitted herein,
any amounts (a) received by Borrower or any Affiliated Manager that are
not deposited into the Lockbox Account or the Medicare/Medicaid
Receivables Accounts to the extent required to be so deposited
hereunder or under the Cash Management Agreement or (b) disbursed from
the Lockbox Account or the Medicare/Medicaid Receivables Accounts other
than as provided herein or in the Cash Management Agreement.
(b) Notwithstanding anything to the contrary in this
Agreement, the Note or any of the Loan Documents, (A) Lender shall not be deemed
to have waived any right which Lender may have under Section 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for
the full amount of the Debt secured by the Mortgages or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Loan Documents, and (B) the Debt shall be fully recourse to
Borrower (i) in the event of: (a) Borrower filing a voluntary petition under the
Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b)
the filing of an involuntary petition against Borrower under the Bankruptcy Code
or any other Federal or state bankruptcy or insolvency law, or soliciting or
causing to be solicited petitioning creditors for any involuntary petition
against Borrower from any Person; (c) Borrower filing an answer consenting to or
otherwise acquiescing in or joining in any involuntary petition filed against
it, by any other Person under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law, or soliciting or causing to be solicited
petitioning creditors for any involuntary petition from any Person; (d) Borrower
consenting to or acquiescing in or joining in an application for the appointment
of a custodian, receiver, trustee, or examiner for Borrower or any portion of
the Property; (e) Borrower making an assignment for the benefit of creditors, or
admitting, in writing or in any legal proceeding, its insolvency or inability to
pay its debts as they become due; (ii) if the first full payment of Debt Service
is not paid when due; (iii) if Borrower fails to permit on-site inspections of
the Properties, fails to provide financial information, fails to maintain its
status as a Single Purpose Entity or fails to appoint a new property manager
upon the request of Lender, each as required by, and in accordance with, the
terms and provisions of the Loan Agreement or the Mortgage; (iv) if Borrower
fails to obtain Lender's prior consent to any Indebtedness or voluntary Lien
encumbering the Properties as required by the Loan Agreement or the Mortgages;
or (v) if Borrower fails to obtain Lender's prior consent to any Transfer as
required by the Loan Agreement or the Mortgages.
(c) Notwithstanding anything to the contrary contained
herein, Note B is fully recourse to Borrower and Guarantor.
SECTION 9.5. INTENTIONALLY OMITTED.
SECTION 9.6. SERVICER. At the option of Lender, the Loan may
be serviced by a servicer/trustee (the "SERVICER") selected by Lender and Lender
may delegate all or any
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portion of its responsibilities under this Agreement and the other Loan
Documents to the Servicer pursuant to a servicing agreement (the "SERVICING
AGREEMENT") between Lender and Servicer. Lender shall be responsible for all
fees and costs relating to or arising under the Servicing Agreement.
X. MISCELLANEOUS
SECTION 10.1. SURVIVAL. This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the making by Lender of the Loan and the
execution and delivery to Lender of the Note, and shall continue in full force
and effect so long as all or any of the Debt is outstanding and unpaid unless a
longer period is expressly set forth herein or in the other Loan Documents.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the legal representatives, successors and
assigns of such party. All covenants, promises and agreements in this Agreement,
by or on behalf of Borrower, shall inure to the benefit of the legal
representatives, successors and assigns of Lender.
SECTION 10.2. LENDER'S DISCRETION. Whenever pursuant to this
Agreement, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive. Whenever this Agreement expressly provides that Lender may not
withhold its consent or its approval of an arrangement or term, such provisions
shall also be deemed to prohibit Lender from delaying or conditioning such
consent or approval.
SECTION 10.3. GOVERNING LAW.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW
YORK, THE LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW
YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM
THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT,
THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE
(WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
APPLICABLE
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INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT
PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND
ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT
PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY
CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT,
THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER
OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS MAY AT LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN
THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW
OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES
HEREBY DESIGNATE AND APPOINT:
Latham & Watkins LLP
885 Third Avenue, Suite 1000
New York, New York 10022-4802
David C. Meckler, Esq.
and David Gordon, Esq.
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO
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HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A
SUCCESSOR.
SECTION 10.4. MODIFICATION, WAIVER IN WRITING. No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, or of the Note, or of any other Loan Document, nor
consent to any departure by Borrower therefrom, shall in any event be effective
unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to, or demand on Borrower, shall
entitle Borrower to any other or future notice or demand in the same, similar or
other circumstances. Notwithstanding the foregoing, if, at any time, city,
state, or federal statutes or regulations or any Governmental Authority,
including CMS, require or mandate modification of the terms and/or conditions of
Section 2.6 above, such Section 2.6 shall be deemed amended by the parties to
confirm to the requirements of such statues, regulations or Government
Authority.
SECTION 10.5. DELAY NOT A WAIVER. Neither any failure nor any
delay on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Note or under any other Loan Document, or any
other instrument given as security therefor, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
SECTION 10.6. NOTICES. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if hand delivered or
sent by (a) certified or registered United States mail, postage prepaid, return
receipt requested or (b) expedited prepaid delivery service, either commercial
or United States Postal Service, with proof of attempted delivery, and by
telecopier (with answer back acknowledged), addressed as follows (or at such
other address and Person as shall be designated from time to time by any party
hereto, as the case may be, in a notice to the other parties hereto in the
manner provided for in this Section 10.6):
If to Lender: Column Financial, Inc.
11 Madison Avenue
New York, New York 10010
Attention: Mark Silverstein
Facsimile No.: (212) 743-5540
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with a copy to: Column Financial, Inc.
One Madison Avenue
New York, New York 10019
Legal and Compliance Department
Attention: Pamela McCormack, Esq.
Facsimile No.: (917) 326-7805
with a copy to: Cadwalader, Wickersham & Taft LLP
100 Maiden Lane
New York, New York 10038
Attention: Robert F. McDonough, Esq.
Facsimile No.: (212) 504-6666
If to Borrower: 27442 Portola Parkway
Suite 200
Foothill Ranch, California 92610
Attention: General Counsel
Facsimile No.: (949) 282-5820
With a copy to: Latham & Watkins LLP
650 Town Center Drive, Suite 2000
Costa Mesa, CA 92626-1525
Attention: David C. Meckler, Esq.
Facsimile No.: (714) 755-8290
A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy, upon the first attempted delivery on a
Business Day; or in the case of telecopy, upon sender's receipt of a
machine-generated confirmation of successful transmission after advice by
telephone to recipient that a telecopy notice is forthcoming.
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SECTION 10.7. TRIAL BY JURY. BORROWER AND LENDER HEREBY AGREE
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE
ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED
TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO
A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER AND BORROWER ARE EACH HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY THE OTHER.
SECTION 10.8. HEADINGS. The Article and/or Section headings
and the Table of Contents in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
SECTION 10.9. SEVERABILITY. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
SECTION 10.10. PREFERENCES. Lender shall have the continuing
and exclusive right to apply or reverse and reapply any and all payments by
Borrower to any portion of the obligations of Borrower hereunder. To the extent
Borrower makes a payment or payments to Lender, which payment or proceeds or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be revived
and continue in full force and effect, as if such payment or proceeds had not
been received by Lender.
SECTION 10.11. WAIVER OF NOTICE. Borrower hereby expressly
waives, and shall not be entitled to, any notices of any nature whatsoever from
Lender except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by Lender
to Borrower and except with respect to matters for which Borrower is not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice.
SECTION 10.12. REMEDIES OF BORROWER. In the event that a claim
or adjudication is made that Lender or its agents have acted unreasonably or
unreasonably delayed acting in any case where by law or under this Agreement or
the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender
nor its agents shall be liable for any monetary damages, and Borrower's sole
remedies shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine
-108-
whether Lender has acted reasonably shall be determined by an action seeking
declaratory judgment.
SECTION 10.13. EXPENSES; INDEMNITY. (a) Borrower covenants and
agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of
notice from Lender for all reasonable costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Loan Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrower
(including without limitation any opinions requested by Lender as to any legal
matters arising under this Agreement or the other Loan Documents with respect to
the Properties); (ii) Borrower's ongoing performance of and compliance with
Borrower's respective agreements and covenants contained in this Agreement and
the other Loan Documents on its part to be performed or complied with after the
Closing Date, including, without limitation, confirming compliance with
environmental, healthcare and insurance requirements; (iii) Lender's ongoing
performance and compliance with all agreements and conditions contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date (except as otherwise expressly provided for herein);
(iv) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this Agreement and the
other Loan Documents and any other documents or matters reasonably requested by
Lender; (v) securing Borrower's compliance with any requests made pursuant to
the provisions of this Agreement; (vi) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for
providing to Lender all required legal opinions, and other similar expenses
incurred in creating and perfecting the Liens in favor of Lender pursuant to
this Agreement and the other Loan Documents; (vii) enforcing or preserving any
rights, either in response to third party claims or in prosecuting or defending
any action or proceeding or other litigation, in each case against, under or
affecting Borrower, this Agreement, the other Loan Documents, the Properties, or
any other security given for the Loan; and (viii) enforcing any obligations of
or collecting any payments due from Borrower under this Agreement, the other
Loan Documents or with respect to the Properties, including the Operators, or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or of any insolvency
or bankruptcy proceedings; provided, however, that Borrower shall not be liable
for the payment of any such costs and expenses to the extent the same arise by
reason of the gross negligence, illegal acts, fraud or willful misconduct of
Lender. Any cost and expenses due and payable to Lender may be paid from any
amounts in the Lockbox Account.
(b) Borrower shall indemnify, defend and hold harmless
Lender from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for Lender in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party thereto), that may
be imposed on, incurred by, or asserted against Lender in any manner relating to
or arising out of (i) any breach by Borrower of its obligations under, or any
material misrepresentation by Borrower contained in, this Agreement or the other
Loan Documents, or (ii) the use or intended use of the proceeds of the Loan
(collectively, the "INDEMNIFIED LIABILITIES"); provided, however, that Borrower
shall not
-109-
have any obligation to Lender hereunder to the extent that such Indemnified
Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of Lender. To the extent that the undertaking to indemnify, defend
and hold harmless set forth in the preceding sentence may be unenforceable
because it violates any law or public policy, Borrower shall pay the maximum
portion that it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Liabilities incurred by Lender.
(c) Borrower covenants and agrees to pay for or, if
Borrower fails to pay, to reimburse Lender for, any fees and expenses incurred
by any Rating Agency in connection with any Rating Agency review of the Loan,
the Loan Documents or any transaction contemplated thereby or any consent,
approval, waiver or confirmation obtained from such Rating Agency pursuant to
the terms and conditions of this Agreement or any other Loan Document and the
Lender shall be entitled to require payment of such fees and expenses as a
condition precedent to the obtaining of any such consent, approval, waiver or
confirmation.
SECTION 10.14. SCHEDULES INCORPORATED. The Schedules annexed
hereto are hereby incorporated herein as a part of this Agreement with the same
effect as if set forth in the body hereof.
SECTION 10.15. OFFSETS, COUNTERCLAIMS AND DEFENSES. Any
assignee of Lender's interest in and to this Agreement, the Note and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to such documents which Borrower may otherwise
have against any assignor of such documents, and no such unrelated counterclaim
or defense shall be interposed or asserted by Borrower in any action or
proceeding brought by any such assignee upon such documents and any such right
to interpose or assert any such unrelated offset, counterclaim or defense in any
such action or proceeding is hereby expressly waived by Borrower.
SECTION 10.16. NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES. (a) Borrower and Lender intend that the relationships created
hereunder and under the other Loan Documents be solely that of borrower and
lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in the Properties other than that of
mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are
solely for the benefit of Lender and Borrower and nothing contained in this
Agreement or the other Loan Documents shall be deemed to confer upon anyone
other than Lender and Borrower any right to insist upon or to enforce the
performance or observance of any of the obligations contained herein or therein.
All conditions to the obligations of Lender to make the Loan hereunder are
imposed solely and exclusively for the benefit of Lender and no other Person
shall have standing to require satisfaction of such conditions in accordance
with their terms or be entitled to assume that Lender will refuse to make the
Loan in the absence of strict compliance with any or all thereof and no other
Person shall under any circumstances be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lender if, in Lender's sole discretion, Lender deems it advisable or desirable
to do so.
-110-
SECTION 10.17. PUBLICITY. All news releases, publicity or
advertising by Borrower or their Affiliates through any media intended to reach
the general public, which refers to the Loan Documents, the financing evidenced
by the Loan Documents, Lender, CSFB, or any of their Affiliates, shall be
subject to the prior approval of Lender.
SECTION 10.18. CROSS-DEFAULT; CROSS-COLLATERALIZATION; WAIVER
OF MARSHALLING OF ASSETS. (a) Borrower acknowledges that Lender has made the
Loan to Borrower upon the security of its collective interest in the Properties
and in reliance upon the aggregate of the Properties taken together being of
greater value as collateral security than the sum of each Individual Property
taken separately. Borrower agrees that the Mortgages are and will be
cross-collateralized and cross-defaulted with each other so that (i) an Event of
Default under any of the Mortgages shall constitute an Event of Default under
each of the other Mortgages which secure the Note; (ii) an Event of Default
under the Note or this Loan Agreement shall constitute an Event of Default under
each Mortgage; (iii) each Mortgage shall constitute security for the Note as if
a single blanket lien were placed on all of the Properties as security for the
Note; and (iv) such cross-collateralization shall in no event be deemed to
constitute a fraudulent conveyance.
(b) To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling of the
assets of Borrower, Borrower's partners and others with interests in Borrower,
and of the Properties, or to a sale in inverse order of alienation in the event
of foreclosure of all or any of the Mortgages, and agrees not to assert any
right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Lender under the Loan Documents to a sale of the Properties for the
collection of the Debt without any prior or different resort for collection or
of the right of Lender to the payment of the Debt out of the net proceeds of the
Properties in preference to every other claimant whatsoever. In addition,
Borrower, for itself and its successors and assigns, waives in the event of
foreclosure of any or all of the Mortgages, any equitable right otherwise
available to Borrower which would require the separate sale of the Properties or
require Lender to exhaust its remedies against any Individual Property or any
combination of the Properties before proceeding against any other Individual
Property or combination of Properties; and further in the event of such
foreclosure Borrower does hereby expressly consent to and authorize, at the
option of Lender, the foreclosure and sale either separately or together of any
combination of the Properties.
SECTION 10.19. WAIVER OF COUNTERCLAIM. Borrower hereby waives
the right to assert a counterclaim, other than a compulsory counterclaim, in any
action or proceeding brought against it by Lender or its agents.
SECTION 10.20. CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
In the event of any conflict between the provisions of this Loan Agreement and
any of the other Loan Documents, the provisions of this Loan Agreement shall
control. The parties hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and execution of the Loan
Documents and that such Loan Documents shall not be subject to the principle of
construing their meaning against the party which drafted same. Borrower
acknowledges that, with respect to the Loan, Borrower shall rely solely on its
own
-111-
judgment and advisors in entering into the Loan without relying in any manner on
any statements, representations or recommendations of Lender or any parent,
subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any
of the Loan Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in Borrower, and Borrower
hereby irrevocably waives the right to raise any defense or take any action on
the basis of the foregoing with respect to Lender's exercise of any such rights
or remedies. Borrower acknowledges that Lender engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its
Affiliates.
SECTION 10.21. BROKERS AND FINANCIAL ADVISORS. Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Borrower hereby agrees to indemnify, defend and
hold Lender harmless from and against any and all claims, liabilities, costs and
expenses of any kind (including Lender's attorneys' fees and expenses) in any
way relating to or arising from a claim by any Person that such Person acted on
behalf of Borrower or Lender in connection with the transactions contemplated
herein. The provisions of this Section 10.21 shall survive the expiration and
termination of this Agreement and the payment of the Debt.
SECTION 10.22. PRIOR AGREEMENTS. This Agreement and the other
Loan Documents contain the entire agreement of the parties hereto and thereto in
respect of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or written, including,
without limitation, the Conditional Commitment Letter dated March 7, 2003 (as
amended) between Borrower and Lender are superseded by the terms of this
Agreement and the other Loan Documents.
SECTION 10.23. NOTE REGISTER; OWNERSHIP OF PROMISSORY NOTE B.
The ownership of an interest in Promissory Note B shall be registered on a
record of ownership maintained by Borrower or its agent. Notwithstanding
anything else in the Loan Agreement or Promissory Note B to the contrary, the
right to the principal of, and stated interest on, Promissory Note B may be
transferred only if the transfer is registered on such record of ownership and
the transferee is identified as the owner of an interest in the obligation.
Borrower shall be entitled to treat the registered holder of Promissory Note B
(as recorded on such record of ownership) as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in Promissory Note B on the part of any other person or entity.
-112-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
BRIARCLIFF NURSING AND
REHABILITATION CENTER, LP
By: Briarcliff Nursing and Rehabilitation Center GP,
LLC, its general partner
CALIFORNIA SECURED RESOURCES, LLC
CAREHOUSE HEALTHCARE CENTER, LLC
CLAIRMONT BEAUMONT, LP
By: Clairmont Beaumont GP, LLC, its general partner
CLAIRMONT LONGVIEW, LP
By: Clairmont Longview GP, LLC, its general partner
COLONIAL NEW BRAUNFELS CARE CENTER, LP
By: Colonial New Braunfels GP, LLC, its general
partner
COLONIAL TYLER CARE CENTER, LP
By: Colonial Tyler GP, LLC, its general partner
COMANCHE NURSING CENTER, LP
By: Comanche Nursing Center GP, LLC, its general
partner
CORONADO NURSING CENTER, LP
By: Coronado Nursing Center GP, LLC, its general
partner
DEVONSHIRE CARE CENTER, LLC
FLATONIA OAK MANOR, LP
By: Flatonia Oak Manor GP, LLC, its general partner
FOUNTAIN CARE CENTER, LLC
FOUNTAIN SENIOR ASSISTED LIVING, LLC
GUADALUPE VALLEY NURSING CENTER, LP
By: Guadalupe Valley Nursing Center GP, LLC, its
general partner
HALLETTSVILLE REHABILITATION AND NURSING CENTER,LP
By: Hallettsville Rehabilitation GP, LLC, its
general partner
HOSPITALITY NURSING AND REHABILITATION CENTER, LP
By: Hospitality Nursing GP, LLC, its general partner
LIVE OAK NURSING CENTER, LP
By: Live Oak Nursing Center GP, LLC, its general
partner
MONUMENT REHABILITATION AND NURSING CENTER, LP
By: Monument Rehabilitation GP, LLC, its general
partner
OAK CREST NURSING CENTER, LP
By: Oak Crest Nursing Center GP, LLC, its general
partner
OAKLAND MANOR NURSING CENTER, LP
By: Oakland Manor GP, LLC, its general partner
SHG SECURED RESOURCES, LP
By: Secured Resource Management GP, LLC, its general
partner
SOUTHWOOD CARE CENTER, LP
By: Southwood Care Center GP, LLC, its general
partner
SPRING SENIOR ASSISTED LIVING, LLC
TEXAS CITYVIEW CARE CENTER, LP
By: Texas Cityview Care Center GP, LLC, its general
partner
TEXAS HERITAGE OAKS NURSING AND REHABILITATION
CENTER, LP
By: Texas Heritage Oaks Nursing and Rehabilitation
Center GP, LLC, its general partner
TEXAS SECURED RESOURCES, LLC
THE CLAIRMONT TYLER, LP
By: The Clairmont Tyler GP, LLC, its general partner
THE EARLWOOD, LLC
TOWN AND COUNTRY MANOR, LP
By: Town and Country Manor GP, LLC, its general
partner
VALLEY HEALTHCARE CENTER, LLC
VILLA MARIA HEALTHCARE CENTER, LLC
WEST SIDE CAMPUS OF CARE, LP
By: West Side Campus of Care GP, LLC, its general
partner
WILLOW CREEK HEALTHCARE CENTER, LLC
By: \s\ Roland G. Rapp
------------------------------------------------
Name: Roland G. Rapp
Title: Secretary
COLUMN FINANCIAL, INC.
By: \s\ Edmund F. Taylor
------------------------------------------------
Name: Edmund F. Taylor
Title: Vice President
SCHEDULE I
(PROPERTIES AND BORROWERS)
BORROWERS
TYPE OF --------------------------------------------------------
INDIVIDUAL PROPERTIES FACILITY COUNTY STATE OPERATOR FEE OWNERS MASTER LESSEE
- ---------------------------------------------------------------------------------------------------------------------------
1. Carehouse Care Center SNF Orange CA Carehouse SHG Secured California Secured
Healthcare Center, Resources, LP Resources, LLC
LLC
2. Devonshire Care Center SNF Riverside CA Devonshire Care SHG Secured California Secured
Center, LLC Resources, LP Resources, LLC
3. Fountain Care Center SNF Orange CA Fountain Care SHG Secured California Secured
Center, LLC Resources, LP Resources, LLC
4. Fountain Senior Assisted ALF Orange CA Fountain Senior SHG Secured California Secured
Living Assisted Living, Resources, LP Resources, LLC
LLC
5. Spring Assisted Living ALF Los Angeles CA Spring Senior SHG Secured California Secured
and Retirement Assisted Living, Resources, LP Resources, LLC
LLC
6. Earlwood Care Center SNF Los Angeles CA The Earlwood, LLC SHG Secured California Secured
Resources, LP Resources, LLC
7. Valley Health Care Center SNF Fresno CA Valley Healthcare SHG Secured California Secured
Center, LLC Resources, LP Resources, LLC
8. Villa Maria Care Center SNF Santa Barbara CA Villa Maria SHG Secured California Secured
Healthcare Center, Resources, LP Resources, LLC
LLC
9. Willow Creek Health Care SNF Fresno CA Willow Creek SHG Secured California Secured
Center Healthcare Center, Resources, LP Resources, LLC
LLC
10. Briarcliff Nursing and SNF Hidalgo TX Briarcliff Nursing SHG Secured Texas Secured
Rehabilitation Center and Rehabilitation Resources, LP Resources, LLC
Center, LP
11. Clairmont Nursing Home SNF Jefferson TX Clairmont SHG Secured Texas Secured
(Beaumont) Beaumont, LP Resources, LP Resources, LLC
12. Clairmont Nursing Home SNF Gregg TX Clairmont SHG Secured Texas Secured
(Longview) Longview, LP Resources, LP Resources, LLC
13. Colonial Manor Care SNF Comal TX Colonial New SHG Secured Texas Secured
Center Braunfels Care Resources, LP Resources, LLC
Center, LP
14. Colonial Manor (Tyler) SNF Smith TX Colonial Tyler SHG Secured Texas Secured
Care Center, LP Resources, LP Resources, LLC
SCH. I-1
BORROWERS
TYPE OF -----------------------------------------------------
INDIVIDUAL PROPERTIES FACILITY COUNTY STATE OPERATOR FEE OWNERS MASTER LESSEE
- ------------------------------------------------------------------------------------------------------------------------
15. Comanche Trail Nursing SNF Howard TX Comanche Nursing SHG Secured Texas Secured
Center Center, LP Resources, LP Resources, LLC
16. Coronado Nursing Center SNF Taylor TX Coronado Nursing SHG Secured Texas Secured
Center, LP Resources, LP Resources, LLC
17. Oak Manor Nursing Center SNF Fayetee TX Flatonia Oak SHG Secured Texas Secured
Manor, LP Resources, LP Resources, LLC
18. Guadalupe Valley Nursing SNF Guadalupe TX Guadalupe Valley SHG Secured Texas Secured
Center Nursing Center, LP Resources, LP Resources, LLC
19. Hallettsville Nursing SNF Lavaca TX Hallettsville SHG Secured Texas Secured
Center Rehabilitation and Resources, LP Resources, LLC
Nursing Center, LP
20. Lubbock Hospitality House SNF Lubbock TX Hospitality SHG Secured Texas Secured
Nursing and Resources, LP Resources, LLC
Rehabilitation
Center, LP
21. Live Oak Nursing Center SNF Live Oak TX Live Oak Nursing SHG Secured Texas Secured
Center, LP Resources, LP Resources, LLC
22. Monument Hill Nursing SNF Fayette TX Monument SHG Secured Texas Secured
Center Rehabilitation and Resources, LP Resources, LLC
Nursing Center, LP
23. Oak Crest Nursing Center SNF Aransas TX Oak Crest Nursing SHG Secured Texas Secured
Center, LP Resources, LP Resources, LLC
24. Oakland Manor Nursing SNF Lee TX Oakland Manor SHG Secured Texas Secured
Center Nursing Center, LP Resources, LP Resources, LLC
25. Southwood Care Center SNF Travis TX Southwood Care SHG Secured Texas Secured
Center, LP Resources, LP Resources, LLC
26. Cityview Care Center SNF Tarrant TX Texas Cityview SHG Secured Texas Secured
Care Center, LP Resources, LP Resources, LLC
27. Heritage Oaks Nursing SNF Lubbock TX Texas Heritage SHG Secured Texas Secured
and Rehabilitation Center Oaks Nursing and Resources, LP Resources, LLC
Rehabilitation
Center, LP
28. Clairmont Nursing Home SNF Smith TX The Clairmont SHG Secured Texas Secured
(Tyler) Tyler, LP Resources, LP Resources, LLC
29. Town & Country Manor SNF Kendall TX Town and Country SHG Secured Texas Secured
Manor, LP Resources, LP Resources, LLC
30. West Side Campus of Care SNF Tarrant TX West Side Campus SHG Secured Texas Secured
of Care, LP Resources, LP Resources, LLC
SCH. I-2
SCHEDULE II
(PROPERTIES - ALLOCATED LOAN AMOUNTS)
INDIVIDUAL PROPERTY ALLOCATED LOAN AMOUNT NOTE A ALLOCATED LOAN AMOUNT NOTE B ALLOCATED LOAN
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
1. City View Care Center $ 3,032,668.99 $ 2,713,440.82 $ 319,228.17
2. Clairmont Beaumont $ 5,487,423.24 $ 4,909,800.00 $ 577,623.24
3. Clairmont of Longview $ 5,104,070.32 $ 4,566,800.00 $ 537,270.32
4. Colonial Manor Tyler $ 3,750,766.88 $ 3,355,949.49 $ 394,817.39
5. Clairmont of Tyler $ 4,545,470.35 $ 4,067,000.00 $ 478,470.35
6. Coronado Nursing Center $ 3,247,546.89 $ 2,905,700.00 $ 341,846.89
7. Colonial Manor Care Center $ 2,787,689.10 $ 2,494,248.27 $ 293,440.83
8. Lubbock Hospitality House $ 1,627,294.03 $ 1,456,000.00 $ 171,294.03
9. Halletsville Rehab and
Nursing Center $ 302,603.52 $ 270,750.54 $ 31,852.99
10. Heritage Oaks Nursing and
Rehab $ 4,514,176.23 $ 4,039,000.00 $ 475,176.23
11. Monument Hill Nursing $ 2,825,858.67 $ 2,528,400.00 $ 297,458.67
12. Oak Crest Center $ 730,100.00 $ 730,100.00 $ 85,899.07
13. Oak Manor Nursing Center $ 991,241.12 $ 886,900.00 $ 104,341.12
14. Oakland Manor Nursing
Center $ 381,810.80 $ 341,620.20 $ 40,190.59
15. Southwood Care Center $ 1,593,652.86 $ 1,425,900.00 $ 167,752.86
16. Town and Country Manor $ 1,572,529.33 $ 1,407,000.00 $ 165,529.33
17. West Side Campus of Care $ 2,562,988.10 $ 2,293,200.00 $ 269,788.10
18. Briarcliff Nursing and
Rehab Center $ 8,429,293.67 $ 7,542,000.00 $ 887,293.67
SCH. II-1
19. Comanche Trail Nursing
Center $ 1,110,941.12 $ 994,000.00 $ 116,941.12
20. Guadalupe Valley Nursing
Center $ 3,789,717.45 $ 3,390,800.00 $ 398,917.45
21. Live Oak Nursing Center $ 2,891,576.32 $ 2,587,200.00 $ 304,376.32
22. Fountain Assisted Living
Center $ 1,374,259.05 $ 1,229,600.27 $ 144,658.78
23. Spring Retirement Center $ 1,706,712.70 $ 1,527,058.81 $ 179,653.89
24. Carehouse Care Center $ 4,448,016.26 $ 3,979,804.23 $ 468,212.03
25. Devonshire Care Center $ 3,303,705.56 $ 2,955,947.23 $ 347,758.32
26. Earlwood Care Center $ 3,302,872.78 $ 2,955,202.11 $ 347,670.66
27. Fountain Care Center $ 3,648,104.60 $ 3,264,093.76 $ 384,010.84
28. Valley Health Care Center $ 5,981,699.53 $ 5,352,047.23 $ 629,652.30
29. Villa Maria Care Center $ 2,952,448.08 $ 2,641,664.21 $ 310,783.87
30. Willow Creek Care Center $ 6,916,863.39 $ 6,188,772.83 $ 728,090.56
SCH. II-2
SCHEDULE III
(REQUIRED REPAIR FUND)
$552,456.00, which is the aggregate amount of the estimated cost for the
Required Repairs for each Individual Property multiplied by one hundred twenty
five percent (125%).
SCH. III-1
SCHEDULE IV
(ORGANIZATIONAL STRUCTURE)
(attached hereto)
SCH. IV-1
SCHEDULE V
(LICENSED BED CAPACITY)
LICENSED
BED/UNIT
INDIVIDUAL PROPERTIES CAPACITY
- ------------------------------------------------------------------------
1. Carehouse Care Center 174 beds
2. Devonshire Care Center 99 beds
3. Fountain Care Center 179 beds
4. Fountain Senior Assisted Living 153 units
5. Spring Assisted Living and Retirement 51 units
6. Earlwood Care Center 87 beds
7. Valley Health Care Center 99 beds
8. Villa Maria Care Center 88 beds
9. Willow Creek Health Care Center 159 beds
10. Briarcliff Nursing and Rehabilitation Center 194 beds
11. Clairmont Nursing Home (Beaumont) 148 beds
12. Clairmont Nursing Home (Longview) 178 beds
13. Colonial Manor Care Center 172 beds
14. Colonial Manor (Tyler) 172 beds
15. Comanche Trail Nursing Center 119 beds
16. Coronado Nursing Center 221 beds
17. Oak Manor Nursing Center 90 beds
18. Guadalupe Valley Nursing Center 150 beds
19. Hallettsville Nursing Center 120 beds
20. Lubbock Hospitality House 117 beds
21. Live Oak Nursing Center 100 beds
22. Monument Hill Nursing Center 110 beds
SCH. V-1
LICENSED
BED/UNIT
INDIVIDUAL PROPERTIES CAPACITY
- ------------------------------------------------------------------------
23. Oak Crest Nursing Center 92 beds
24. Oakland Manor Nursing Center 120 beds
25. Southwood Care Center 120 beds
26. Cityview Care Center 210 beds
27. Heritage Oaks Nursing and Rehabilitation Center 159 beds
28. Clairmont Nursing Home (Tyler) 120 beds
29. Town & Country Manor 126 beds
30. West Side Campus of Care 240 beds
SCH. V-2
SCHEDULE VI
(ALLOCATION OF DEBT SERVICE RESERVE)
Fountain Senior Assisted Living $62,221.00
Spring Assisted Living and Retirement $77,714.00
SCH. VI-1
SCHEDULE VII
(FORM OF OCCUPANCY REPORT)
(attached hereto)
SCH. VII-1
SCHEDULE VIII
(FICTITIOUS BUSINESS NAMES)
ENTITY DBA
- --------------------------------------------------------------------------------------
Colonial New Braunfels Care Center, LP Colonial Manor Care Center
Comanche Nursing Center, LP Comanche Trail Nursing Center
Flatonia Oak Manor, LP Oak Manor Nursing Center
Hospitality Nursing and Rehabilitation Lubbock Hospitality House Nursing and
Center, LP Rehabilitation Center
Texas Cityview Care Center, LP Cityview Care Center
Texas Heritage Oaks Nursing and Heritage Oaks Nursing and Rehabilitation
Rehabilitation Center, LP Center
Villa Maria Healthcare Center, LLC Villa Maria Care Center
SCH. VIII-1
SCHEDULE IX
(EXCEPTIONS TO HEALTH CARE REPRESENTATIONS)
SUBSTANDARD QUALITY DENIAL OF
FACILITY SURVEY DATE TAG OF CARE DEFICIENCY PAYMENT
DEFICIENCY
- ----------------------------------------------------------------------------------------------------------------
Clairmont Nursing Home (Tyler) 4/16/03 F224G None None
Colonial Manor (Tyler) 6/13/03 F314G None None
Comanche Trail Nursing Center 6/19/03 F279G, F324G None None
Monument Hill Nursing Center 7/15/03 F224G None None
Guadalupe Valley Nursing Center 3/28/03 F327G None None
SCH.IX-1
SCHEDULE X
(INTERIM MANAGEMENT AGREEMENTS AND SUBLEASES)
Fountain Senior Assisted Living
Spring Assisted Living and Retirement
SCH. X-1
SCHEDULE XI
(PROPERTIES WITH PROVISIONAL LICENSES)
1. Carehouse Care Center
2. Devonshire Care Center
3. Fountain Care Center
4. Fountain Senior Assisted Living
5. Spring Assisted Living and Retirement
6. Earlwood Care Center
7. Valley Health Care Center
8. Villa Maria Care Center
9. Willow Creek Health Care Center
10. Briarcliff Nursing and Rehabilitation Center
11. Clairmont Nursing Home (Beaumont)
12. Clairmont Nursing Home (Longview)
13. Colonial Manor Care Center
14. Colonial Manor (Tyler)
15. Comanche Trail Nursing Center
16. Coronado Nursing Center
17. Oak Manor Nursing Center
18. Guadalupe Valley Nursing Center
19. Hallettsville Nursing Center
20. Lubbock Hospitality House
21. Live Oak Nursing Center
22. Monument Hill Nursing Center
23. Oak Crest Nursing Center
24. Oakland Manor Nursing Center
25. Southwood Care Center
26. Cityview Care Center
SCH. XI-1
27. Heritage Oaks Nursing and Rehabilitation Center
28. Clairmont Nursing Home (Tyler)
29. Town & Country Manor
30. West Side Campus of Care
SCH. XI-2
SCHEDULE 4.2(h)
(MEDICARE AND MEDICAID PROGRAMS)
MEDICARE PROVIDER
INDIVIDUAL PROPERTIES # MEDICAID PROVIDER #
- ------------------------------------------------------------------------------------------------
1. Carehouse Care Center 05-6332 LTC55765F
2. Devonshire Care Center 05-6095 ZZT06095F
3. Fountain Care Center 55-5259 LTC55259F
4. Earlwood Care Center 05-5032 ZZT05032G
5. Valley Health Care Center 05-6225 ZZR06225F
6. Villa Maria Care Center 05-5830 ZZT05830H
7. Willow Creek Health Care Center 55-5652 LTC55652F
8. Briarcliff Nursing and Rehabilitation Center 67-5162 H06751629
9. Clairmont Nursing Home (Beaumont) 45-5757 H04557577
10. Clairmont Nursing Home (Longview) 45-5684 H04556843
11. Colonial Manor Care Center 45-5020 H04550201
12. Colonial Manor (Tyler) 45-5429 H04554293
13. Comanche Trail Nursing Center 67-5462 H06754623
14. Coronado Nursing Center 67-5746 H04556817
15. Oak Manor Nursing Center 67-5445 H06754457
16. Guadalupe Valley Nursing Center 45-5869 H04558697
17. Hallettsville Nursing Center 67-5095 H06750955
18. Lubbock Hospitality House 45-5940 H04559403
19. Live Oak Nursing Center 67-5104 H06751045
20. Monument Hill Nursing Center 45-5715 H04557157
21. Oak Crest Nursing Center 45-5974 H04559745
22. Oakland Manor Nursing Center 67-5101 H06751011
SCH. 4.2(h)-1
MEDICARE PROVIDER
INDIVIDUAL PROPERTIES # MEDICAID PROVIDER #
- ------------------------------------------------------------------------------------------------
23. Southwood Care Center 45-5887 H04558871
24. Cityview Care Center 67-5622 001004921
25. Heritage Oaks Nursing and Rehabilitation 67-5346 H06753467
Center
26. Clairmont Nursing Home (Tyler) 45-5485 H04554855
27. Town & Country Manor 45-5796 H04557965
28. West Side Campus of Care 45-5592 H04555927
SCH. 4.2(h)-2
SCHEDULE 4.2(j)
(COLLECTIVE BARGAINING AGREEMENTS)
None.
SCH. 4.2(j)-1