EXHIBIT 10.20
LOAN AGREEMENT
By and Between
MLD DELAWARE TRUST,
a Delaware business trust
as "Lender"
and
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation
as "Borrower"
Dated as of September 3, 1998
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.............................................. 1
ARTICLE II THE LOAN................................................ 11
2.1 Agreement to Lend and Borrow................................ 11
2.2 Evidence of Indebtedness and Maturity....................... 11
2.3 Interest.................................................... 11
2.4 Security.................................................... 11
2.5 Environmental Indemnity..................................... 11
2.6 Prepayment.................................................. 12
ARTICLE III LOAN CLOSING CONDITIONS................................ 12
3.1 Conditions Precedent........................................ 12
ARTICLE IV CLOSING COSTS AND PRORATIONS............................ 13
4.1 Closing Costs............................................... 13
ARTICLE V DISBURSEMENTS OF THE LOAN................................ 14
5.1 Disbursements............................................... 14
5.2 Disbursement of the Loan.................................... 14
5.3 Liens....................................................... 14
ARTICLE VI REPRESENTATIONS AND WARRANTIES.......................... 14
6.1 Title....................................................... 14
6.2 Utilities................................................... 15
6.3 Physical Condition; Completeness............................ 15
6.4 Compliance.................................................. 15
6.5 Zoning...................................................... 16
6.6 No Notices of Non-Compliance................................ 16
6.7 Due Authorization, Execution, Organization, etc............. 16
6.8 True, Correct and Complete Information...................... 16
6.9 Existing Agreements......................................... 17
6.10 Default..................................................... 17
6.11 Litigation; Condemnation.................................... 17
6.12 No Taxes or Utilities Due................................... 17
6.13 Employee Benefit Plans...................................... 17
6.14 Union Agreements............................................ 18
6.15 Hazardous Materials Representations......................... 18
ARTICLE VII COVENANTS OF BORROWER.................................. 18
7.1 No Liens.................................................... 18
7.2 Compliance with Legal Requirements.......................... 19
7.3 Use of the Facility......................................... 19
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7.4 Payment of Impositions...................................... 19
7.5 Intentionally Omitted....................................... 20
7.6 Hazardous Material Covenants................................ 20
7.7 Environmental Matters....................................... 20
7.8 Participation in Hazardous Materials Claims................. 21
7.9 Environmental Inspections................................... 21
7.10 Environmental Indemnification............................... 21
7.11 Lender Inspections.......................................... 22
7.12 Financial Statements........................................ 22
7.13 Statements for Facility..................................... 22
7.14 Regulatory Reports.......................................... 23
7.15 Expenses.................................................... 23
7.16 Litigation.................................................. 23
7.17 Representations and Warranties.............................. 23
7.18 Further Assurances.......................................... 23
7.19 Operating Leases............................................ 24
7.20 ERISA Events................................................ 24
7.21 Maintenance Obligations..................................... 24
7.22 Upgrade Expenditures........................................ 24
7.23 Debt Service Reserve........................................ 25
ARTICLE VIII INSURANCE REQUIREMENTS................................ 25
8.1 Insurance Types............................................. 25
8.2 Replacement Cost Determination.............................. 27
8.3 Deductible Amounts.......................................... 27
8.4 Evidence of Insurance....................................... 27
8.5 Damages..................................................... 27
8.6 Waiver of Subrogation....................................... 28
8.7 Additional Insured.......................................... 28
8.8 No Separate Insurance....................................... 28
ARTICLE IX EVENTS OF DEFAULT AND REMEDIES.......................... 28
9.1 Events of Default........................................... 28
9.2 Remedies.................................................... 31
ARTICLE X MISCELLANEOUS............................................ 32
10.1 Assignment.................................................. 32
10.2 Notices..................................................... 32
10.3 Incorporation of Recitals and Exhibits...................... 33
10.4 Titles and Headings......................................... 33
10.5 Brokers..................................................... 33
10.6 Changes, Waivers, Discharge and Modifications in Writing.... 33
10.7 Choice of Law............................................... 33
10.8 Counterparts................................................ 33
10.9 Time is of the Essence...................................... 34
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10.10 Attorneys' Fees............................................. 34
10.11 Authority to File Notices................................... 34
10.12 Disclaimer by Lender........................................ 34
10.13 Indemnification............................................. 34
10.14 Inconsistencies with Loan Documents......................... 34
10.15 Disbursements in Excess of Loan Amount...................... 34
10.16 Participations.............................................. 35
10.17 Entire Agreement............................................ 35
10.18 Severability................................................ 35
10.19 Consent to Jurisdiction and Service of Process.............. 35
10.20 Waiver of Jury Trial........................................ 35
10.21 Terminology................................................. 36
10.22 Interpretation.............................................. 36
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EXHIBIT A LEGAL DESCRIPTION OF THE LAND
EXHIBIT B CLOSING CONDITIONS
EXHIBIT C FORM OF CLOSING PROCEDURE LETTER
EXHIBIT D FORM OF WRITTEN AUTHORIZATION TO CLOSE
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LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of the 3rd day of
September, 1998 by and between ASSISTED LIVING CONCEPTS, INC., a Nevada
corporation ("Borrower"), and MLD DELAWARE TRUST, a Delaware business trust
("Lender"), with respect to the following:
R E C I T A L S:
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A. Borrower owns fee simple title to that certain real property
located in the County of Berkeley, State of South Carolina and more particularly
described in Exhibit A attached hereto and by this reference incorporated herein
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(the "Land").
B. The Land is improved with certain buildings and other
Improvements (as hereinafter defined) and is presently operated as a 39-unit
community residential care (the "Facility").
C. Borrower desires to borrow from Lender, and Lender desires to
lend to Borrower, an amount up to Two Million Nine Hundred Fifty-Five Thousand
Dollars ($2,955,000) upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and conditions
herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein (including any Exhibits attached hereto), the following
terms shall have the meanings set forth below (unless expressly stated to the
contrary):
"Account" shall have the meaning ascribed such term in the Debt
Service Reserve Pledge Agreement.
"Adjoining Property" shall mean all roadways, sidewalks and curbs
appurtenant to the Facility and all utility vaults which are under Borrower's
control or which are required to be maintained by Borrower.
"Affiliate" shall mean, with respect to any Person, any other Person
which Controls, is controlled by or is under common Control with the first
person. Without limiting the generality of the foregoing, all of the following
shall be deemed to be Affiliates of Borrower: (i) any and all of the officers,
directors and shareholders in Borrower, and (ii) any and all of the partners and
shareholders of any and all of the officers, directors and shareholders in
Borrower.
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"Agreed Rate" shall mean the lesser of (a) the maximum rate permitted
under the laws of the State of South Carolina or (b) the Basic Interest (as
defined in the Note) plus four percent (4%).
"ALC Leases" shall mean any and all leases and the ancillary documents
executed in connection therewith between Borrower or any Affiliate of Borrower,
as tenant, and Lender or any Affiliate of Lender, as landlord.
"Alterations" shall mean all changes, additions, improvements or
repairs to, all alterations, reconstructions, renewals or removals of, and all
substitutions or replacements for, any of the Fixtures or Improvements, whether
interior or exterior, structural or non-structural, ordinary or extraordinary.
As used in this Agreement, "Alteration" shall not include any maintenance,
repair, replacement or restoration work the cost of which is included in the
Upgrade Expenditures.
"Basic Interest" shall have the meaning ascribed such term in the
Note.
"Borrower's Fiscal Year" shall mean the twelve (12) month period
beginning January 1 and ending December 31.
"Business Agreements" shall mean any and all leases, rental
agreements, management agreements, loan agreements, mortgages, deeds of trust,
easements, covenants, restrictions or other agreements or instruments affecting
all or a portion of the Facility and which is binding upon Borrower or all or
any portion of the Facility.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which national banks in the City of New York,
State of New York are authorized, or obligated, by law or executive order, to
close.
"Closing" shall mean the consummation of the loan transaction provided
for herein.
"Closing Procedure Letter" shall mean a letter to the Title Company
executed by Lender and Borrower setting forth directions for the Title Company
in connection with the Closing and in the form of Exhibit E attached hereto.
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"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all of Borrower's interest in all Fixtures,
Personal Property and Intangible Property.
"Condemnation" shall mean either (a) the taking by a Condemnor of the
Facility or any part thereof or interest therein, for public or quasi-public use
under the power of eminent domain, condemnation or otherwise, (b) a voluntary
sale or transfer of the Facility or any part thereof or interest therein by
Borrower to any Condemnor or to any other Person either under threat of
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condemnation or while legal proceedings for condemnation are pending, (c) a de
facto condemnation by a Condemnor.
"Condemnation Proceeds" shall mean all compensation, awards, damages,
rights of action and proceeds payable to Borrower or Lender by reason of any
Condemnation of all or any portion of the Facility or the Collateral or any part
of either.
"Condemnor" shall mean any Governmental Authority or Person having the
power of condemnation.
"Control" and "control" with correlative meanings for the terms
"controlling", "controlled by" and "under common control with" shall mean, as
applied to any Person, the possession, directly or indirectly, of the power to
direct the management and policies of that Person, whether through ownership,
voting control, by contract or otherwise.
"Cost of Living Index" shall mean the United States Department of
Labor, Bureau of Labor Statistics Consumer Price Index for all Urban Consumers,
United States Average, Subgroup "All Items" (1982 - 1984 = 100).
"County" shall mean the County in which the Facility is located.
"Debt Service Reserve" shall mean an amount equal to Eighty-Six
Thousand Five Hundred Eighty-Two Dollars ($86,582), given by Borrower to Lender
as additional security for Borrower's obligations under this Agreement and the
other Loan Documents, which amount shall be withheld by Lender from the
disbursement of the Loan pursuant to the provisions of Sections 5.2 and 7.23
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below.
"Debt Service Reserve Pledge Agreement" shall mean a pledge agreement,
between Borrower and Lender, in form and substance satisfactory to Lender,
pursuant to which Borrower shall pledge the amounts deposited therein to Lender
as security for the Loan.
"Employee Benefit Plan" shall mean any "employee benefit plan" as
defined in Section 3(3) of ERISA which is, or was at any time, maintained or
contributed to by Borrower or any of its ERISA Affiliates.
"Environmental Activities" shall mean the use, generation,
transportation, handling, discharge, production, treatment, storage, release or
disposal of any Hazardous Materials at any time to or from the Facility or
located on or present on or under the Facility.
"Environmental Indemnity" shall mean an indemnity relating to
Environmental Activities and other environmental matters concerning the
Facility, of even date herewith, executed by Borrower, in favor of Lender, in
form and substance acceptable to Lender.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
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"ERISA Affiliate", as applied to any Person, shall mean (a) any
corporation which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Code of which that
Person is, or was at any time, a member; (b) any trade or business (whether or
not incorporated) which is, or was at any time, a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the Code
of which that Person is, or was at any time, a member; and (c) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the Code
of which that Person, any corporation described in clause (a) above or any trade
or business described in clause (b) above is, or was at any time, a member.
"ERISA Event" shall mean (a) a "reportable event" within the meaning
of Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice to
the PBGC has been waived by regulation); (b) the failure to meet the minimum
funding standard of Section 412 of the Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Code) or the
failure to make by its due date a required installment under Section 412(m) of
the Code with respect to any Pension Plan or the failure to make any required
contribution to a Multiemployer Plan; (c) the provision by the administrator of
any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent
to terminate such plan in a distress termination described in Section 4041(c) of
ERISA; (d) the withdrawal by Borrower or any of its ERISA Affiliates from any
Pension Plan with two or more contributing sponsors or the termination of any
such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of
ERISA; (e) the institution by the PBGC of proceedings to terminate any Pension
Plan, or the occurrence of any event or condition which might constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (f) the imposition of liability on Borrower or any
of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by
reason of the application of Section 4212(c) of ERISA; (g) the withdrawal by
Borrower or any of its ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan if there is any potential liability therefor, or the receipt by Borrower or
any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(h) the occurrence of an act or omission which could give rise to the imposition
on Borrower or any of its ERISA Affiliates of fines, penalties, taxes or related
charges under Chapter 43 of the Code or under Section 409 or 502(c), (i) or (l)
or 4071 of ERISA in respect of any Employee Benefit Plan; (i) the assertion of a
material claim (other than routine claims for benefits) against any Employee
Benefit Plan other than a Multiemployer Plan or the assets thereof, or against
Borrower or any of its ERISA Affiliates in connection with any such Employee
Benefit Plan; (j) receipt from the Internal Revenue Service of notice of the
failure of any Pension Plan (or any other Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code) to qualify under Section 401(a) of
the Code, or the failure of any trust forming part of any Pension Plan to
qualify for exemption from taxation under Section 501(a) of the Code; or (k) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Code or
pursuant to ERISA with respect to any Pension Plan.
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"Event of Default" shall mean the occurrence of any of the events
listed in Section 9.1(a) and the expiration of any applicable notice and cure
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period provided in Section 9.1(b).
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"Existing Encumbrances" shall have the meaning given such term in
Section 4.1(c).
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"Facility" shall have the meaning ascribed to such term in Recital B.
"Financial Statement" shall mean a financial statement of the party
delivering such statement including a balance sheet and income statement, all
prepared in accordance with GAAP and certified as true and complete without
qualification by a general partner or officer, as applicable, of the party
delivering such statement.
"Financing Statement" shall mean a UCC-1 financing statement executed
by Borrower as debtor, in favor of Lender as secured party, and perfecting
Lender's security interest in the Collateral, in form and substance satisfactory
to Lender, to be filed in the Offices of the Secretary of State of South
Carolina and Nevada.
"Fixture Filing" shall mean a fixture filing (which may be a part of
the Mortgage if Lender so elects) executed by Borrower as debtor, in favor of
Lender as secured party, in form and substance satisfactory to Lender, to be
recorded in the Official Records of the County.
"Fixtures" shall mean all permanently affixed equipment, machinery,
fixtures and other items of real and/or personal property, including all
components thereof, now and hereafter located in, or used in connection with, or
permanently affixed to or incorporated into any of the Improvements or the Land,
including, without limitation, all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, together with all replacements, modifications, alterations
and additions thereto, all of which are hereby deemed to constitute real
property.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Governmental Authority" shall mean any governmental or quasi-
governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, court, administrative tribunal or public
utility.
"Hazardous Materials" shall mean (a) any petroleum products and/or by-
products (including any fraction thereof), flammable substances, explosives,
radioactive materials, hazardous wastes or substances, toxic wastes or
substances, known carcinogens or any other materials, contaminants or pollutants
which (i) pose a hazard to the Facility or to persons on or about the Facility
or (ii) cause the Facility to be in violation of any Hazardous Materials Laws;
(b) asbestos in any form which is or could become friable; (c) urea formaldehyde
in foam insulation or any other form; (d) transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty (50) parts per million or any other more restrictive standard
then prevailing; (e) any chemical, material or substance defined as or included
in the
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definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste," or "toxic substances"
or words of similar import under any applicable Hazardous Material Laws; (f)
medical wastes and biohazards; (g) radon gas above allowable levels; and (h) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any Governmental Authority or may or could pose a hazard to the
health and safety of the occupants of the Facility or the owners and/or
occupants of property adjacent to or surrounding the Facility.
"Hazardous Materials Claims" shall mean any and all enforcement,
clean-up, removal or other governmental or regulatory actions or orders
threatened, instituted or completed pursuant to any Hazardous Material Laws,
together with all claims made or threatened by any third party against the
Facility, Lender or Borrower relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials.
"Hazardous Materials Laws" shall mean any federal, state or local
laws, ordinances, regulations, rules, orders, guidelines or policies relating to
the environment, health and safety, Environmental Activities, Hazardous
Materials, air and water quality, waste disposal and other environmental
matters, including, but not limited to, the Clean Water Act, Clean Air Act,
Federal Water Pollution Control Act, Solid Waste Disposal Act, Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Section 1801, et. seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901, et. seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq.; the South
Carolina Pollution Control Act, S.C. Code Ann. (S) 48-1-10, et seq., the South
Carolina Hazardous Waste Management Act, S.C. Code Ann. (S) 44-56-10, et seq.;
and the rules, regulations and ordinances of the County and municipalities in
which the Facility is located, the State Department of Health Services, the
Regional Water Quality Control Board, the State Water Resources Control Board
(or the equivalent agencies or authorities) and the Environmental Protection
Agency or any other agency which regulates Hazardous Materials or Environmental
Activities.
"Impositions" shall mean, collectively, all utility charges incurred
by Borrower for the benefit of the Facility or which may become a lien against
the Facility and all assessments or charges of a similar nature, all taxes
(including, without limitation, all ad valorem, sales and use, single business,
gross receipts, transaction privilege, rent or similar taxes as the same relate
to or are imposed upon Borrower or its business conducted upon the Facility or
are levied or imposed upon Lender with respect to the Facility or measured by
any amount payable under the Loan Documents), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof), ground rents, water, sewer or
other rents and charges, excises, tax levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other levies or assessments by any Governmental Authority or private Persons
(including, without limitation, any and all mechanic's or materialmen's liens,
or similar liens or encumbrances), in each case whether general or special,
ordinary, or extraordinary, or foreseen or unforeseen, of every character in
respect of the Facility or the business conducted thereon (including all
interest and penalties thereon due to any failure in payment), which may be
assessed against or imposed upon (a) Borrower, (b) Lender's interest in the
Facility, (c) the Facility
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or any part thereof or any rent therefrom or any estate, right, title or
interest therein, (d) any occupancy, operation, use or possession of, or sales
or other revenue from, or activity conducted on, or in connection with the
Facility or the leasing or use of the Facility or any part thereof by Borrower
or (e) Lender as a result of or arising with respect to the Loan; (f) provided,
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however, "Impositions" shall not include any of the following, except to the
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extent that any Impositions in effect which Borrower is obligated to pay are
totally or partially repealed, and any of the following taxes, assessments, tax
levies or charges are levied, assessed or imposed in lieu thereof: (i) any tax
based on gross (except to the extent that any franchise, business use or other
similar tax is based on the gross income related to the Loan imposed upon
Lender) or net income related to the Loan imposed upon Lender, (ii) any tax
imposed with respect to the proceeds of the Loan, or (iii) any estate,
inheritance, gift or documentary transfer taxes related to the Loan imposed upon
Lender.
"Improvements" shall mean all buildings, improvements, structures and
Fixtures now or hereafter located on any of the Land, including, without
limitation, landscaped areas, parking lots and structures, roads, drainage and
other utility structures and other so-called "infrastructure" improvements.
"Insurance Proceeds" shall mean all proceeds of insurance payable as a
result of any fire, earthquake, act of God, or other casualty to or in
connection with the Facility or any part thereof.
"Insured Property" shall mean the Improvements, Fixtures and Personal
Property.
"Intangible Property" shall mean all of Borrower's right, title and
interest in and to (a) all rents, profits, income or revenue derived from the
use of rooms or other space within the Facility or the providing of services in
or from the Facility, documents, chattel paper, instruments, contract rights,
deposit accounts, general intangibles, chosen in action, now owned or hereafter
acquired by Borrower (including any right to any refund of any taxes or other
charges heretofore or hereafter paid to any Governmental Authority) arising from
or in connection with Borrower's operation or ownership of the Facility; (b) all
Permits; and (c) all other intangible property or any interest therein now or on
the Loan Closing Date owned or held by Borrower in connection with the Land, the
Improvements or the Fixtures, or any business or businesses now or hereafter
conducted by Borrower or any lessee thereon or with the use thereof, including
all rights of Borrower in and to all leases, contract rights, agreements, trade
names, water rights and reservations, zoning rights, business licenses and
warranties (including those relating to construction or fabrication) related to
the Land, the Improvements or the Fixtures, or any part thereof.
"Intended Use" shall mean the use of the Facility for operation of the
healthcare facility described in Recital B (or, with Lender's consent, which
shall not be unreasonably withheld, as a skilled nursing home, dedicated
Alzheimer's units, an independent nursing facility or other similar facility for
frail, elderly adults) and any other uses ancillary or reasonably related
thereto and for no other purpose.
"Land" shall have the meaning ascribed to such term in Recital A.
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"Legal Requirements" shall mean all federal, State, county, municipal
and other governmental and quasi-governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting the
Facility or the construction, use or alteration thereof, whether now or
hereafter enacted and in force including, without limitation, the Americans With
Disabilities Act, 42 U.S.C. (S)(S) 12101-12213 (1991) and including any zoning
or other land use entitlements and any requirements which may require repairs,
modifications or alterations in or to the Facility, and all permits, licenses
and authorizations and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances running in favor of any Person,
contained in any instruments, either of record or known to Borrower, at any time
in force affecting the Facility.
"Lender" shall mean MLD Delaware Trust, a Delaware business trust, its
successors and assigns and any party to which the Note is assigned or otherwise
transferred.
"Letter of Credit" shall mean an irrevocable letter of credit issued
pursuant to the Letter of Credit Agreement by a financial institution mutually
acceptable to Lender and Borrower in the initial face amount of the Debt Service
Reserve.
"Letter of Credit Agreement" shall mean a letter of credit agreement
on Lender's then standard form as of the applicable date of determination.
"Licensing Requirements" shall mean those Legal Requirements which
specifically relate to the use of the Facility for the Intended Use.
"Lien" shall mean any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any option, trust
or other preferential arrangement having the practical effect of any of the
foregoing.
"Loan" shall mean the loan described in this Agreement in the
principal amount of the Loan Amount.
"Loan Amount" shall mean the original principal amount of Two Million
Nine Hundred Fifty-Five Thousand Dollars ($2,955,000), or so much thereof as is
advanced, as such amount may be reduced through repayments by Borrower pursuant
to the Note.
"Loan Closing Date" shall mean the date on which the Loan is disbursed
to or for the benefit of Borrower.
"Loan Documents" shall mean the documents described in Section 3.1 of
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this Agreement.
"Loan Year" shall mean (a) the period beginning on the Loan Closing
Date and ending on the one (1) year anniversary of the last day of the calendar
month in which the Loan Closing Date falls, and (b) each subsequent and
consecutive twelve (12) month period.
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"Maturity Date" shall mean the date set forth in the Note upon which
the entire principal amount of the Loan shall be due and payable.
"Mortgage" shall mean a mortgage, assignment of rents, security
agreement, financing statement and fixture filing, in form and substance
satisfactory to Lender, executed by Borrower in favor of Lender, creating a lien
on the Land, the Facility, the Fixtures and the Improvements, and all rights and
easements appurtenant thereto.
"Multiemployer Plan" shall mean a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which Borrower or any of its ERISA Affiliates is
contributing, or ever has contributed, or to which Borrower or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
"Net Condemnation Proceeds" shall mean all Condemnation Proceeds
remaining after deduction of all expenses of collection and settlement thereof,
including, without limitation, attorneys' and adjustors' fees and expenses.
"Net Insurance Proceeds" shall mean all Insurance Proceeds remaining
after deduction of all expenses of collection and settlement thereof, including,
without limitation, attorneys' fees and expenses.
"Note" shall mean a secured promissory note, in the original principal
amount of Two Million Nine Hundred Fifty-Five Thousand Dollars ($2,955,000),
executed by Borrower as maker, in favor of Lender as holder, in form and
substance satisfactory to Lender.
"Other ALC Loans" shall mean any and all loan agreements, other than
this Agreement and the ancillary documents executed in connection therewith
between Borrower or any Affiliate of Borrower and Lender or any Affiliate of
Lender.
"Pension Plan" shall mean any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Code or Section 302
of ERISA.
"Permits" shall mean all permits, licenses, approvals, entitlements
and other governmental and quasi-governmental authorizations now owned or
hereafter acquired by Borrower (including, without limitation, certificates of
need, health care provider licenses and certificates of occupancy) and necessary
or desirable in connection with the ownership, planning, development,
construction, use, operation or maintenance of the Facility for the Intended
Use. As used herein, "quasi-governmental" shall include the providers of all
utilities services to the Facility.
"Permitted Exceptions" shall mean those title exceptions or defects
which have been approved in writing by Lender and, with respect to the Land and
Improvements, those exceptions or defects which Lender has approved in writing
to appear as exceptions on the Title Policy.
9
"Person" shall mean any individual, partnership, association,
corporation, Governmental Authority or other entity.
"Personal Property" shall mean all Intangible Property and all
machinery, equipment, furniture, tools, furnishings, movable walls or
partitions, computers or trade fixtures or other personal property (but
specifically excluding consumable inventory and supplies), acquired by or for
the account of Borrower and used or useful in the operation of Borrower's
business at the Facility whether now owned or hereafter acquired by Borrower,
together with all accessions, additions, parts, attachments, accessories or
appurtenances thereto.
"Phase 1 Site Assessment Report" shall mean that certain Phase 1
Environmental Site Assessment Report delivered to Lender in connection with the
Facility, dated July, 1997, prepared by C-K Associates, Inc.
"Potential Default" shall mean the existence of any event which, with
the giving of notice, the passage of time, or both, would constitute an Event of
Default under any of the Loan Documents.
"Proceeds" shall mean the Net Insurance Proceeds or Net Condemnation
Proceeds, as applicable.
"State" shall mean the State of South Carolina.
"Subdivision Map Act" shall mean the applicable statutes of the State
of South Carolina which govern the subdivision of real property for sale, lease
or finance.
"Title Company" shall mean the title insurance company selected by
Lender in its sole discretion to provide the Title Policy.
"Title Policy" shall mean a title insurance policy in the form of an
American Land Title Association Extended Coverage Loan Policy of Title Insurance
(1970 Form B, without modification, revision or amendment), insuring that on the
date of recordation of the Mortgage, Borrower owns fee simple title to the
Facility and that the Mortgage is a valid first priority lien on the Facility in
the amount of the Loan Amount. The Title Policy shall contain such endorsements
and reinsurance agreements as Lender reasonably requires and shall be subject
only to the Permitted Exceptions.
"Upgrade Expenditures" shall mean an annual sum of money to be
expended by Borrower for upgrades or improvements to the Facility which have the
effect of maintaining or improving the competitive position of the Facility in
its respective marketplace. Such expenditures shall include cash payments only
and shall not include any amount for depreciation, amortization, interest
payments or rent. Non-exclusive examples of Upgrade Expenditures are new or
replacement wallpaper, tiles, window coverings, lighting fixtures, painting,
upgraded landscaping, carpeting, architectural adornments, common area amenities
and the like. It is expressly understood that capital improvements or repairs
(such as but not limited to repairs or replacements to the structural elements
10
of the walls, parking area, or the roof or to the electrical, plumbing, HVAC or
other mechanical or structural systems in the Facility) shall not be considered
to be Upgrade Expenditures.
"Written Authorization" shall mean a letter to the Title Company, in
the form of Exhibit F, executed by Borrower and Lender, directing the Title
---------
Company to comply with the instructions in the Closing Procedure Letter.
ARTICLE II
THE LOAN
II.1 Agreement to Lend and Borrow. Subject to the terms and
conditions of this Agreement, Lender will lend and Borrower will borrow up to
the Loan Amount. Lender shall disburse the proceeds of the Loan in accordance
with the provisions of Article V of this Agreement. Notwithstanding the parties'
---------
intention that the transaction contemplated by the Loan Documents is a loan to
Borrower, Lender shall be entitled to account for the Loan on Lender's books in
any manner that Lender elects in its sole discretion, and any such accounting by
Lender shall not be deemed or construed to affect in any manner the rights and
obligations of Borrower and Lender under the Loan Documents.
II.2 Evidence of Indebtedness and Maturity. The Loan shall be
evidenced by the Note in the principal amount of the Loan Amount. The
outstanding principal balance of the Loan, together with accrued and unpaid
Basic Interest thereon, and all other amounts payable by Borrower under the
terms of the Loan Documents, shall be due and payable on the Maturity Date.
II.3 Interest. The Loan Amount shall bear interest at the rate per
annum specified in the Note, which interest shall be due and payable as
specified therein.
II.4 Security. Payment of the Note and performance of all of
Borrower's other obligations under the Loan Documents shall be secured by the
following: (a) the Mortgage; (b) the Financing Statement; (c) the Fixture
Filing; (d) the Debt Service Reserve Pledge Agreement; and (e) such other
security interests in property of Borrower as Lender shall require in the Loan
Documents.
II.5 Environmental Indemnity. Lender shall be indemnified with
respect to environmental matters by the Environmental Indemnity.
II.6 Prepayment. Except as provided in the Note, Borrower shall have
no right to prepay the Loan Amount, in whole or in part, prior to the Maturity
Date.
ARTICLE III
LOAN CLOSING CONDITIONS
11
III.1 Conditions Precedent. Lender's obligation to make the Loan and
to perform the remainder of its obligations under this Agreement are expressly
conditioned upon the occurrence of all of the following on or before the Loan
Closing Date:
(a) Lender's receipt and approval of all of the items set forth in
Exhibit B; and
---------
(b) Borrower's delivery to Lender of the following items and
documents, in form and content satisfactory to Lender, duly executed (and
acknowledged where necessary) by the appropriate parties thereto:
(i) This Agreement;
(ii) The Note;
(iii) The Mortgage, which shall be duly recorded in the
Official Records of the County;
(iv) The Financing Statement, which shall be duly filed in
the Offices of the Secretary of State of South Carolina and Nevada;
(v) The Fixture Filing, which shall be duly recorded in the
Official Records of the County;
(vi) The Debt Service Reserve Pledge Agreement;
(vii) The Environmental Indemnity; and
(viii) Such other documents that Lender may reasonably require.
(c) Upon receipt of the items described in this Article III, and
upon compliance with the other terms and conditions of this Agreement,
Borrower and Lender shall execute and deliver to Title Company the Written
Authorization.
ARTICLE IV
CLOSING COSTS AND PRORATIONS
IV.1 Closing Costs.
(a) Borrower shall pay:
(i) any and all state, municipal or other documentary or
transfer taxes payable in connection with the delivery of any
instrument or document provided in or contemplated by this Agreement,
any agreement or commitment described or referred to herein or the
transactions contemplated herein;
12
(ii) one-half of all escrow fees and charges;
(iii) the charges for or in connection with the recording and/or
filing of any instrument or document provided herein or contemplated
by this Agreement or any agreement or document described or referred
to herein.
(iv) any and all broker's fees or similar fees claimed by any
party employed by Borrower in connection with the transactions
contemplated herein, provided, however, Borrower shall not be deemed
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to have employed any party by merely receiving information concerning
Lender, the Facility or related to the transactions contemplated
hereunder or by executing any agreement to hold such information
confidential; and
(v) Borrower's legal, accounting and other professional fees
and expenses and the cost of all opinions, certificates, instruments,
documents and papers required to be delivered, or to cause to be
delivered, by Borrower hereunder, including, without limitation, the
cost of all performances by Borrower of its obligations hereunder;
(b) Lender shall pay:
(i) any and all broker's fees or similar fees claimed by any
party employed by Lender in connection with the transactions
hereunder, provided, however, Lender shall not be deemed to have
-------- -------
employed any party by merely receiving information concerning
Borrower, the Facility or related to the transactions contemplated
hereunder or by executing any agreement to hold such information
confidential;
(ii) Lender's legal fees and expenses and the costs of any site
inspections, environmental audits and surveys performed by or on
behalf of Lender, including travel and out-of-pocket expenses for such
inspections, audits and surveys; and
(iii) one-half of all escrow fees and charges and all expenses of
or related to the issuance of the Title Policy.
(c) If the Facility is presently encumbered by certain mortgages and
certain other security instruments (individually and collectively, the
"Existing Encumbrances"), Borrower shall cause the Existing Encumbrances
and all indebtedness secured thereby to be fully satisfied, released and
discharged of record on or prior to the Loan Closing Date (recognizing that
Borrower may use the proceeds of the loan contemplated hereby to satisfy
the same). Borrower acknowledges that such satisfaction, release and
discharge may involve prepayment penalties or premiums and other costs or
expenses, all of which shall be paid by Borrower at its sole cost and
expense on or before the Loan Closing Date.
13
ARTICLE V
DISBURSEMENTS OF THE LOAN
V.1 Disbursements. Lender shall have no obligation to make
disbursements of the Loan except as provided in this Article V.
---------
V.2 Disbursement of the Loan. Lender shall disburse the Loan Amount
to Borrower (less the Debt Service Reserve) upon Borrower's delivery and
satisfaction of the conditions precedent set forth in Section 3.1 of this
-----------
Agreement. Borrower acknowledges and agrees that although Lender shall deposit
the Debt Service Reserve into the Account pursuant to the provisions of Section
-------
7.23 below, Borrower shall be deemed to have been advanced the full amount of
- ----
the Loan at such time as Lender has disbursed the Loan proceeds in accordance
with the immediately preceding sentence.
V.3 Liens. All construction shall be free and clear of defects and
liens or claims for liens for materials supplied or labor or services performed
in connection with the Facility, except for liens which are being duly contested
in accordance with the provisions of Section 7.1 of this Agreement.
-----------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
As an inducement to Lender to execute this Agreement and to disburse
the proceeds of the Loan, Borrower represents and warrants to Lender the truth
and accuracy of the matters set forth in this Article VI.
VI.1 Title. Borrower has, or as of the Loan Closing Date will have,
good, marketable (and insurable with respect to the Land and Improvements) title
to, and the entire right, title, and interest in, the Facility, free and clear
of any and all leases, Liens, encumbrances or other liabilities, subject only to
the Permitted Exceptions.
VI.2 Utilities. To the best of Seller's knowledge, the Facility has
available to its boundary adequate utilities, including, without limitation,
adequate water supply, storm and sanitary sewage facilities, telephone, gas,
electricity and fire protection, as is required for the operation of the
Facility for the Intended Use.
VI.3 Physical Condition; Completeness.
(a) The Facility has been constructed in a good, workmanlike and
substantial manner, free from material defects and in accordance with all
Legal Requirements.
(b) Neither the zoning nor any other right to construct upon or to
use the Facility is to any extent dependent upon or related to any real
estate other than the Facility, the
14
improvement of such other real estate or the payment of any fees for the
improvement of such other real estate.
(c) The Facility, and each portion thereof, is in good condition and
repair and is free from material defects. Borrower will use its best
efforts to maintain the Facility in good condition and repair.
(d) There are no soil conditions adversely affecting the Facility in
any material respect.
(e) Other than as disclosed on the Phase I Site Assessment Report
there are and have been no Hazardous Materials installed or stored in or
otherwise existing at, on, in or under the Facility which are or have been
at any time in violation of any applicable Legal Requirements or which are
or have been at any time in amounts or concentrations sufficient to require
the reporting of such materials to any Governmental Authority, except in
the ordinary course of business in compliance with applicable laws.
VI.4 Compliance.
(a) Borrower has obtained and shall maintain all consents,
approvals, licenses, permits and other permissions related to the operation
of the Facility for the Intended Use as are required under Legal
Requirements and Licensing Requirements.
(b) Borrower has and shall maintain all Permits and all other
consents, approvals, licenses, permits and other permissions related to the
operation of the Facility for the Intended Use as are required under Legal
Requirements and Licensing Requirements.
(c) Notwithstanding the foregoing in (a) and (b) above, if any
additional consents, approvals, licenses, permits or other permissions are
required in connection with the operation of the Facility for the Intended
Use, Borrower hereby agrees that Borrower shall, as promptly as practical,
use its best efforts to obtain all such additional consents, approvals,
licenses, permits and other permissions related to such Intended Use and
required under any of the Legal Requirements or Licensing Requirements.
VI.5 Zoning. The Facility is properly and fully zoned for the
Intended Use and the Facility and the operation and use thereof, including,
without limitation, all boundary line adjustments to the Facility, complies, in
all material respects, with all applicable Legal Requirements (including,
without limitation, the Subdivision Map Act).
VI.6 No Notices of Non-Compliance. Borrower has not received any
notice that and Borrower has no knowledge that (a) any Government Authority or
any employee or official thereof considers that the operation or use of the
Facility for the Intended Use to have materially failed or will materially fail
to comply with any Legal Requirements, (b) any investigation has been commenced
or is contemplated respecting any such possible or actual failure of the
operation or use of the Facility for the Intended Use to comply with any of the
Legal Requirements, and (c) there are
15
any unsatisfied requests for material repairs, restorations or alterations with
regard to the Facility from any Person, including, but not limited to, any
lender, insurance carrier or Government Authority.
VI.7 Due Authorization, Execution, Organization, etc.
(a) This Agreement and all of the Loan Documents are, and on the
Loan Closing Date will be, duly authorized, executed and delivered by and
are binding in accordance with their terms upon Borrower, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium or other
similar laws of general application and of legal or equitable principles
generally and covenants of good faith and fair dealing.
(b) Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and duly qualified
to do business in the State of South Carolina.
(c) Borrower has the authority to enter into this Agreement, the
Loan Documents and all other agreements, instruments and documents herein
provided, and to consummate the transactions herein provided and nothing
prohibits or restricts the right or ability of Borrower to close the
transactions contemplated hereunder and carry out the terms hereof.
VI.8 True, Correct and Complete Information.
(a) To the best of Borrower's knowledge, all documents, plans,
surveys and other data or information prepared by parties other than
Borrower or Borrower's agents or employees and provided to Lender in
connection herewith, are true, correct and complete in all material
respects and disclose all material facts with no material omissions with
respect thereto.
(b) All documents and other data or information prepared by Borrower
or Borrower's employees or, to the best of Borrower's knowledge, agents are
true, correct and complete in all material respects with no material
omissions with respect thereto.
VI.9 Existing Agreements. To the best of Borrower's knowledge, there
are no material agreements or understandings (whether written or oral) to which
Borrower is a party or is bound, including, without limitation, any Business
Agreements, relating to the Facility or the operation or use thereof other than
the Permitted Exceptions and those documents and instruments which have been
delivered by Borrower to Lender prior to the Loan Closing Date.
VI.10 Default. Borrower is not in default with respect to any of its
material obligations or liabilities pertaining to the Facility.
VI.11 Litigation; Condemnation. There are no material actions, suits
or proceedings pending or, to the best of Seller's knowledge, threatened before
or by any judicial, administrative or union body, any arbiter or any
Governmental Authority, against or affecting
16
Borrower or the Facility or any portion thereof. To the best of Seller's
knowledge, there are no existing, proposed or threatened eminent domain or
similar proceedings which would affect the Land or Improvements in any manner
whatsoever.
VI.12 No Taxes or Utilities Due. To the best of Seller's knowledge,
Borrower is not in default (beyond any applicable cure periods) in the payment
of any and all insurance premiums relating to the Facility, real and personal
property taxes and assessments on the Facility and the cost of all gas, water,
electricity, heat, fuel, sewer, telecommunications and other utilities relating
to the Facility.
VI.13 Employee Benefit Plans.
(a) Borrower and each of its ERISA Affiliates are in compliance
with all applicable provisions and requirements of ERISA and the
regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed all their obligations under each
Employee Benefit Plan.
(b) No ERISA Event has occurred or is reasonably expected to occur.
(c) Except to the extent required under Section 4980B of the Code,
no Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees of
Borrower or any of its ERISA Affiliates.
(d) As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18)
of ERISA), individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans with respect
to which assets exceed benefit liabilities), does not exceed $20,000.
VI.14 Union Agreements. Borrower has delivered to Lender true and
correct copies of all collective bargaining and other agreements, if any, with
labor unions or other employee groups or associations which include or will
include Borrower's operations at the Facility.
VI.15 Hazardous Materials Representations. The Facility and the
Intended Use do currently, and will at all times throughout the term hereof
continue to, comply, in all material respects, with all applicable laws and
governmental regulations including, without limitation, all Hazardous Materials
Laws.
ARTICLE VII
COVENANTS OF BORROWER
As an inducement to Lender to execute this Agreement and to make each
disbursement of the Loan, Borrower hereby covenants as follows:
17
VII.1 No Liens; Permitted Contests. Borrower shall not cause or
permit any Lien to be placed or assessed against the Land or the Facility or the
operation thereof, or permit any receiver, trustee or assignee for the benefit
of creditors to be appointed to take possession of the Facility, or any portion
thereof; provided, however, Borrower shall be permitted in good faith and at
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Borrower's expense to contest the existence, amount or validity of any Lien upon
the Facility by appropriate proceedings sufficient to prevent (i) the collection
or other realization of the Lien or claim so contested, (ii) the sale,
forfeiture or loss of the Facility or any portion thereof, any (iii) any
interference with the use or occupancy of the Facility, (iv) any interference
with the payment of any amounts due under the Loan Documents, and (v) the
cancellation of any fire or other insurance policy or policies required under
any of the Loan Documents. Borrower shall provide Lender with security
satisfactory to Lender, in Lender's reasonable judgment, to assure the payment,
compliance, discharge, removal and/or other action in connection with such Lien,
including all costs, attorneys' fees, interest and penalties that may be or
become due in connection therewith. Borrower further agrees that each contest
permitted by this Section 7.1 shall be promptly and diligently prosecuted to a
-----------
final conclusion by Borrower. Borrower hereby agrees to indemnify, defend and
save Lender harmless against, any and all losses, judgments, decrees and costs
(including all reasonable attorneys' fees and expenses) in connection with any
such contest and shall, promptly after the final determination of such contest,
fully pay and discharge the amounts which shall be levied, assessed, charged or
imposed or be determined to be payable therein or in connection therewith,
together with all penalties, fines, interest, costs and expenses thereof or in
connection therewith, and perform all acts the performance of which shall be
ordered or decreed as a result thereof. In the event Borrower does not comply
with the provisions of this Section 7.1, Lender may, but shall not be required
-----------
to, procure the release of any such Lien and in furtherance thereof may, in its
sole discretion, effect any settlement or compromise with respect thereto. Any
amounts expended by Lender in settling, compromising or arranging for the
release of any Lien shall bear interest at the Agreed Rate from the date of
expenditure by Lender and shall be payable by Borrower upon demand by Lender.
Notwithstanding anything to the contrary contained herein, Borrower may grant
security interests encumbering specific items of Borrower's personal property
located on the Land or at the Facility (but not any fixtures attached to the
Facility) in favor of purchase-money lenders for such items of Borrower's
personal property, provided that (a) such personal property is permitted on the
Land or at the Facility in accordance with the Intended Use, (b) is not owned by
or subject to any claim or right of Lender, and (c) such liens secure
obligations of Borrower which do not require payments in excess, in the
aggregate, of One Thousand Five Hundred Dollars ($1,500) per month (unless
agreed in writing by Lender).
VII.2 Compliance with Legal Requirements. Borrower, at its expense,
shall promptly comply with all applicable Legal Requirements as well as the
certification requirements of Medicare and Medicaid, if and to the extent the
Facility is certified for participation therein, (or any successor programs)
with respect to the use, operation, maintenance, repair and restoration of the
Facility. Borrower covenants and agrees that Borrower's use of the Facility and
the maintenance, alteration, and operation of the same, and all parts thereof,
shall at all times conform to all Legal Requirements. Borrower shall promptly
give written notice to Lender of any violation of any Legal Requirement.
Borrower and Lender have expressly agreed that Borrower's obligation under this
Agreement to comply with Legal Requirements as to the Facility specifically
includes the
18
requirement that Borrower comply with the Americans with Disabilities Act, 42
U.S.C. (S)(S) 1201 et seq, and all rules and regulations adopted thereunder.
VII.3 Use of the Facility. Borrower shall continuously use or cause
to be used the Facility only for the Intended Use. Except with the prior written
consent of Lender, Borrower shall not decrease, or permit a decrease in, the
number of units available for residential occupancy or licensed beds being used
for the Intended Use. No use shall be made or permitted to be made of the
Facility, and no acts shall be done to or upon the Facility, which will cause
the cancellation of, or make void or voidable, any insurance policy covering the
Facility or any part thereof, nor shall Borrower sell or otherwise provide to
any Person therein, or permit to be kept, used or sold in or about the Facility
any article which may be prohibited by law or by any insurance policies required
to be carried hereunder, or fire underwriter's regulations. Borrower shall not
use or occupy the Facility or permit the Facility to be used or occupied, in a
manner which (a) violates any certificate of occupancy, or any equivalent
thereof, affecting the Facility or any other Legal Requirement in any material
respect, (b) makes it substantially more difficult or impossible to obtain fire
or other insurance which Borrower is required to furnish hereunder at
commercially reasonable rates, (c) causes structural injury to any of the
Improvements, (d) constitutes waste, (e) gives rise to a claim or claims of
adverse usage or adverse possession or of implied dedication of the Facility or
any portion thereof. Borrower shall not use or allow the Facility to be used for
any improper, immoral, unlawful or objectionable purpose, nor shall Borrower
cause, maintain or permit any nuisance in, on or about the Facility. Borrower
shall comply with all Legal Requirements and/or Licensing Requirements in all
material respects.
VII.4 Payment of Impositions. Subject to the provisions of Section
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7.1 relating to permitted contests, Borrower will pay, or cause to be paid prior
- ---
to delinquency, directly to the applicable Governmental Authority or Person, all
Impositions before delinquency, and Borrower will promptly, upon request by
Lender, furnish to Lender copies of official receipts or other satisfactory
proof evidencing such payments. Without limiting the generality of the
foregoing, Borrower will pay or reimburse Lender for all Impositions which are
sales, use, single business, gross receipts, transaction privilege, rent or
other excise taxes which are levied or imposed upon or measured by any amount
payable under the Loan Documents.
VII.5 Intentionally Omitted.
VII.6 Hazardous Material Covenants. Borrower shall at its expense
comply, and cause its agents, employees, contractors, partners, directors,
officers and shareholders, to comply with all Hazardous Materials Laws,
including, without limitation, obtaining and filing all applicable notices,
permits, licenses and similar authorizations. Borrower shall not create or
permit to continue in existence any lien upon the Facility or any portion
thereof pursuant to Hazardous Materials Laws. Subject to the provisions of
Section 7.3, Borrower shall not change or alter any use of the Facility or any
- -----------
portion thereof unless Borrower shall have notified Lender thereof in writing
and Lender shall have determined, in its sole and absolute discretion, that such
change or modification will not result in the presence of Hazardous Materials on
the Facility in violation of Hazardous Materials Laws or any portion thereof in
such a level that would increase the potential liability for Hazardous Materials
Claims. If Borrower fails to comply with any provision of this Section 7.7,
-----------
Lender may, at its sole
19
option, but without any obligation so to do, take any and all actions as Lender
shall deem necessary to cure such failure. Any amounts so paid by Lender,
together with interest thereon from the date of such expenditure at the Agreed
Rate, shall be payable by Borrower upon demand by Lender.
VII.7 Environmental Matters.
(a Without limiting the generality of Section 7.6, Borrower covenants
-----------
and agrees that it will not engage in nor will it permit the performance of
any Environmental Activities in connection with the Facility or any portion
thereof, to the extent any such Environmental Activities would violate any
Hazardous Materials Laws. In the event any Environmental Activities occur
in violation of any Hazardous Materials Laws, Borrower shall promptly and
at its sole cost and expense, (i) notify Lender of such occurrence in
writing, (ii) obtain all permits and approvals necessary to remedy any such
suspected problem through the removal of Hazardous Materials or otherwise;
and (iii) upon Lender's approval of the remediation plan, remedy any such
problem to the satisfaction of Lender, in accordance with all Hazardous
Materials Laws and good business practices.
(b Borrower shall immediately advise Lender in writing of (i) any and
all Hazardous Materials Claims against Borrower or the Facility or any
portion thereof, (ii) any remedial action taken by Borrower in response to
any (A) Hazardous Materials on, under or about the Facility or any portion
thereof in violation of any Hazardous Materials Laws or (B) Hazardous
Materials Claims, and (iii) Borrower's discovery of any occurrence or
condition on any of the Adjoining Property or in the vicinity of the
Facility that could, in Borrower's reasonable judgment, cause the Facility
or any part thereof to be classified as "border-zone property" under the
provisions of any applicable law of the State, or to be otherwise subject
to any restrictions on the ownership, occupancy, transferability or use of
the Facility or any portion thereof under any Hazardous Materials Laws. In
addition, Borrower shall provide Lender with copies of all communications
to or from Borrower, any Governmental Authority or any other Person
relating to Hazardous Materials Laws or Hazardous Materials Claims.
VII.8 Participation in Hazardous Materials Claims. Lender shall have
the right, at Borrower's sole cost and expense (including, without limitation,
Lender's reasonable attorneys' fees) and with counsel chosen by Lender in its
reasonable judgment, to join and participate in, as a party if it so elects, any
legal proceedings or actions initiated in connection with any Hazardous
Materials Claims.
VII.9 Environmental Inspections. Borrower hereby grants to Lender,
its agents, employees, consultants and contractors, the right to enter upon the
Facility upon reasonable advance notice, and to perform such tests on the
Facility as Lender reasonably deems necessary and to conduct such review and/or
investigation of the Facility as Lender deems necessary or desirable to confirm
Borrower's compliance with Section 7.6 and 7.7; provided, however, in the
------------------- -------- -------
exercise of such rights Lender shall take due care not to unreasonably interfere
with Borrower's operations at the Facility. Borrower shall pay for any such
tests performed by Lender, its agents, employees, consultants or contractors,
provided that Lender has reasonable grounds to believe that
20
Environmental Activities in violation of the Hazardous Materials Laws have
occurred or may imminently occur. For the purposes of the preceding sentence,
Lender shall be deemed to have reasonable grounds to believe that Environmental
Activities in violation of the Hazardous Materials Laws have occurred or may
immediately occur if the tests performed by or on behalf of Lender indicate that
Environmental Activities in violation of the Hazardous Materials Laws actually
occurred. Borrower hereby acknowledges and agrees that Lender, its agents,
employees, consultants and contractors will be deemed to be the agents of
Borrower when entering on the Facility and performing tests pursuant to the
foregoing sentence. Notwithstanding Lender's review and/or approval of any
environment reports, assessments, or evaluations, either before or after the
execution of this Agreement, Borrower shall have the sole responsibility of
ensuring its compliance with the provisions of Sections 7.6 and 7.7 and nothing
--------------------
contained in this Agreement shall be deemed or construed as placing any
responsibility upon Lender for any of Borrower's Environmental Activities.
Borrower shall not be relieved of its responsibility as set forth in the
preceding sentence as a result of any mistake, error, act or omission by Lender
or its agents, employees, consultants or contractors in connection with the
review, approval or enforcement of any environmental reports, assessments or
evaluations, whenever made, or the monitoring by Lender of Borrower's
Environmental Activities. In addition to the foregoing, no mistake, error, act
or omission by Lender or its agents, employees, consultants or contractors shall
create any rights in favor of any Person other than Borrower, including, without
limitation, third party beneficiary rights.
VII.10 Environmental Indemnification. To the fullest extent permitted
by law, Borrower agrees to protect, indemnify, defend, save and hold harmless
Lender, its directors, officers, shareholders, agents and employees from and
against any and all foreseeable or unforeseeable claim, action, suit,
proceeding, loss, cost, damage (including, without limitation, any consequential
damage), liability, deficiency, fine, penalty, damage or expense (including,
without limitation, punitive or consequential damages) of any kind or nature,
including reasonable attorneys' fees, from any suits, claims or demands, on
account of any matter or thing, action or failure to act arising out of or
based upon (a) any Environmental Activities in connection with the Facility or
any residual contamination affecting any natural resource or the environment; or
(b) the violation, or alleged violation, of any Hazardous Materials Laws with
respect to the Facility, including, without limitation, any Hazardous Materials
Claims. This indemnity shall include, without limitation, any damage,
liability, fine, penalty, punitive damage, cost or expense arising from or out
of any claim, action, suit or proceeding for personal injury (including
sickness, disease or death), tangible or intangible property damage,
compensation for lost wages, business income, profits or other economic loss,
damage to the natural resources or the environment, nuisance, pollution,
contamination, leak, spill, release or other adverse affect upon the
environment. Upon receiving knowledge of any suit, claim or demand asserted by
a third party that Lender believes is covered by this indemnity, Lender shall
give Borrower notice of the matter and an opportunity to defend it, at
Borrower's sole cost and expense, with legal counsel satisfactory to Lender.
Lender may require Borrower to so defend the matter or Lender may elect to
defend the matter with its own counsel selected in Lender's reasonable
discretion at Borrower's expense (including, without limitation, Lender's
reasonable attorneys' fees and costs). The obligations on the part of Borrower
set forth in this Section 7.10 shall, with respect to acts or omissions
------------
occurring prior to foreclosure or deed-in-lieu of foreclosure, survive the
repayment of the Loan and the release and reconveyance of the lien of the
Mortgage.
21
VII.11 Lender Inspections. During normal business hours and upon not
less than forty-eight (48) hours notice and, in the event of an emergency, at
any time, Borrower shall permit Lender and Lender's representatives, inspectors
and consultants to (a) enter upon the Facility, (b) inspect the Facility, and
(c) examine all contracts, books and records relating to Borrower's operations
at the Facility, and make copies of any such items at Lender's expense.
VII.12 Financial Statements.
(a Within forty-five (45) days of the end of each quarter of
Borrower's Fiscal Year, Borrower shall deliver to Lender a quarterly
unaudited Financial Statement for Borrower for such quarter, certified by
an officer of Borrower.
(b Within one hundred ten (110) days of the end of Borrower's Fiscal
Year, Borrower shall deliver to Lender an annual consolidated Financial
Statement for Borrower for such year, audited by a reputable certified
public accounting firm.
(c Promptly after the giving, sending or filing thereof, Borrower
shall transmit to Lender (i) copies of all reports, if any, which Borrower
or any of its subsidiaries or parent companies provide to the holders of
their respective capital stock or other securities, and (ii) all reports or
filings, if any, made by Borrower or any of its subsidiaries or parent
companies to or with the Securities Exchange Commission or any national
securities exchange.
VII.13 Statements for Facility. Within forty-five (45) days of the
end of each quarter of Borrower's Fiscal Year, Borrower shall deliver to Lender
an unaudited statement certified as true and correct without qualification by
Borrower setting forth the following as to the Facility with respect to each
month covered by such report: (a) gross revenues for the Facility; (b) gross
expenses for the Facility, including all cash expenses including management
fees; (c) net operating income for the Facility; (d) total patient days; (e)
occupancy percentage; and (f) payor mix.
VII.14 Regulatory Reports.
(a Borrower shall, within thirty (30) days of receipt thereof,
deliver to Lender all federal, state and local licensing and reimbursement
certification surveys, inspections and all other reports received by
Borrower as to the Facility from any Governmental Authority, including,
without limitation, the designated Medicare and Medicaid and other agencies
of the State or the United States governments with licensing or regulatory
oversight or other responsibility for the operation of the Facility for the
Intended Use. Within ninety (90) days of the end of each calendar year,
Borrower shall deliver to Lender an annual audited Medicaid cost report for
the Facility for such year certified by an independent auditor and in form
acceptable to Lender. Within fifteen (15) days of the end of each calendar
month, Borrower shall deliver to Lender a census report for the Facility in
form acceptable to Lender.
(b Within five (5) Business Days of receipt thereof, Borrower shall
give Lender written notice of any violation of any Licensing Requirement or
any suspension, termination, restriction, threatened suspension,
termination or restriction of any such licenses, permits,
22
approvals or certifications or of any material litigation threatened or
filed against the Facility or Borrower.
VII.15 Expenses. Borrower shall pay all expenses, costs and
disbursements of every kind and nature incurred by or on behalf of Borrower
during the term of the Loan with respect to the operation, maintenance and
management of the Facility.
VII.16 Litigation. Borrower shall give Lender prompt written notice
of any action or proceeding commenced or threatened against Borrower or the
Facility with an amount in controversy equal to or greater than Fifty Thousand
Dollars ($50,000) and will deliver to Lender copies of all notices, and other
information regarding such proceeding or action promptly upon receipt or
transmittal thereof.
VII.17 Representations and Warranties. Until the repayment in full of
the Note and all other obligations secured by the Mortgage, the representations
and warranties of Article VI shall remain true and complete.
----------
VII.18 Further Assurances. Borrower shall execute and deliver from
time to time, promptly after any reasonable request therefor by Lender, any and
all instruments, agreements and documents and shall take such other action as
may be reasonably necessary in the opinion of Lender to maintain, perfect or
insure Lender's security provided for herein and in the other Loan Documents,
including, without limitation, the execution of UCC-1 renewal statements, the
execution of such amendments to the Mortgage and the other Loan Documents and
the delivery of such endorsements to the Title Policy, all as Lender shall
reasonably require, and shall pay all fees and expenses (including reasonable
attorneys' fees) related thereto. Promptly upon the request of Lender, Borrower
shall execute and deliver a certification of non-foreign status consistent with
the requirements of Section 1445 of the Code.
VII.19 Operating Leases. Other than leases entered into by Borrower
in the ordinary course of business to occupants of the Facility, Borrower shall
not enter into any lease of any portion of the Facility without Lender's prior
written approval, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, Borrower may without Lender's consent lease up to
the greater of 2,000 square feet or ten percent (10%) of the total square
footage of the Facility to any person or entity providing any services related
or ancillary to the Intended Use or in connection with the provision of home
health services both within and outside the Facility. Any of the foregoing acts
without such approval shall be void, but shall, at the option of Lender in its
sole discretion, be an Event of Default hereunder.
VII.20 ERISA Events.
(a Promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any ERISA Event, Borrower will deliver to Lender a written
notice specifying the nature thereof, what action Borrower or any of the
ERISA Affiliates has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto.
23
(b With reasonable promptness, Borrower shall deliver to Lender
copies of (i) each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by Borrower or any of its ERISA Affiliates with
the Internal Revenue Service with respect to each Pension Plan; (ii) all
notices received by Borrower or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (iii) such other
documents or governmental reports or filings relating to any Employee
Benefit Plan as Lender shall reasonably request.
VII.21 Maintenance Obligations. Borrower shall keep and maintain the
Facility in good appearance, repair and condition and maintain proper
housekeeping. Borrower shall promptly make or cause to be made all repairs,
interior and exterior, structural and nonstructural, ordinary and extraordinary,
foreseen and unforeseen, necessary to keep the Facility in good and lawful order
and condition and in substantial compliance with all requirements for the
licensing of assisted living facilities in the State of South Carolina or as
otherwise required under all applicable local, state and federal laws and to the
extent applicable, certification for participation in Medicare and Medicaid (or
any successor programs). As part of Borrower's obligations under this Section
-------
7.21, Borrower shall be responsible to maintain, repair and replace all Personal
- ----
Property in good condition, ordinary wear and tear excepted, consistent with
prudent industry practice.
VII.22 Upgrade Expenditures. Without limiting Borrower's obligations
to maintain the Facility under this Agreement, Borrower shall spend an annual
average of at least Two Hundred Dollars ($200) per living unit on Upgrade
Expenditures, and upon request of Lender, Borrower shall provide Lender with
evidence satisfactory to Lender in the reasonable exercise of Lender's
discretion that it has made the Upgrade Expenditures required under this Section
7.22.
VII.23 Debt Service Reserve. Concurrently with the making of the
Loan, Lender shall deposit into the Account the amount of the Debt Service
Reserve, which Debt Service Reserve shall be held by Lender as additional
security for Borrower's obligations under the Loan Documents. Lender shall not
be deemed a trustee as to the Debt Service Reserve. Lender shall be entitled to
draw on the Debt Service Reserve one or more times for the purpose of
compensating Lender for any amounts due to Lender under this Agreement or the
other Loan Documents by reason of an Event of Default occurring under any of the
Loan Documents. Any amount drawn by Lender shall not be deemed: (a) to fix or
determine the amounts to which Lender is entitled to recover under this
Agreement or otherwise; (b) to waive or cure any default under this Agreement or
the other Loan Documents; or (c) to limit or waive Lender's right to pursue any
remedies provided for hereunder or under the other Loan Documents. If all or any
portion of the Debt Service Reserve is drawn against by Lender pursuant to the
provisions of this Section 7.23, Borrower shall, within ten (10) business days
after written demand by Lender, deposit into the Account immediately available
funds equal to the amount so drawn by Lender, such that at all times during the
term of this Agreement Lender shall have the ability to draw upon the entire
amount of the Debt Service Reserve. Borrower shall have the right to substitute
a Letter of Credit for the Debt Service Reserve issued by a financial
institution mutually acceptable to Lender and Borrower. In the event that
Borrower substitutes a Letter of Credit, Borrower and Lender shall execute a
Letter of Credit Agreement. Upon the
24
satisfaction in full of all of Borrower's obligations under the Loan Documents,
Lender shall return the Debt Service Reserve to Borrower, together with any
interest earned thereon.
ARTICLE VII
INSURANCE REQUIREMENTS
VIII.1 Insurance Types.
(a Borrower shall maintain at its sole cost and expense, the
following insurance on or in connection with the Facility:
(i) Insurance against loss or damage to the Insured Property by
fire and other risks from time to time included under standard
extended and additional extended coverage policies, including
vandalism and malicious mischief, sprinkler, flood insurance (if the
Facility is located in a flood zone) and earthquake insurance (if the
Facility is located in an earthquake zone), in amounts not less than
the actual replacement value of the Facility, excluding footings and
foundations and other parts of the Improvements which are not
insurable (or, in the case of plate glass insurance, the replacement
cost of all plate glass in the Facility). Such policies shall contain
replacement cost endorsements.
(ii) General public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the
Facility or the Adjoining Property, including, without limitation,
medical malpractice insurance and products liability insurance, in an
amount not less than Five Million Dollars ($5,000,000) for bodily
injury or death to any one person, not less than Five Million Dollars
($5,000,000) or any one accident, and not less than One Million
Dollars ($1,000,000) for property damage.
(iii) Insurance against liability imposed by law upon Borrower
and its Affiliates for damages on account of professional services
rendered or which should have been rendered by Borrower or any person
for which acts Borrower is legally liable on account of injury,
sickness or disease, including death at any time resulting therefrom,
and including damages allowed for loss of service, in a minimum amount
of Five Million Dollars ($5,000,000) for each claim and Five Million
Dollars ($5,000,000) in the aggregate.
(iv) Worker's compensation insurance covering all persons
employed by Borrower in connection with any work done on or about the
Facility for which claims for death or bodily injury could be asserted
against Lender, Borrower or the Facility.
(v) Boiler and pressure vessel insurance, including an
endorsement for boiler business interruption insurance, on any of the
Fixtures or any other equipment on or in the Facility which by reason
of its use or existence is capable of bursting,
25
erupting, collapsing or exploding, in an amount not less than Five
Million Dollars ($5,000,000) for damage to property, bodily injury or
death resulting from such perils.
(vi) Business interruption insurance or rental loss insurance
insuring against loss of rental value for a period of not less than
one (1) year.
(vii) Such other insurance on or in connection with the Facility
and the Insured Property as Lender may reasonably require, which at
the time is commonly obtained in connection with properties similar to
the Facility.
(b All insurance required to be carried pursuant to this Article VIII
------------
will be maintained with insurance carriers licensed and approved to do
business in the State, having a general policyholders rating of not less
than an "A-" and financial rating of not less than "X" in the then most
current Best's Insurance Report. All such insurance shall be for such
terms as Lender may approve and shall be in amounts sufficient at all times
to satisfy any coinsurance requirements thereof. In no event will such
insurance be terminated or otherwise allowed to lapse during the term
hereof. In the event of Borrower's failure to comply with any of the
foregoing requirements, Lender may, but shall not be obligated to, procure
such insurance. Any sums expended by Lender in procuring such insurance
shall be repaid by Borrower, together with interest thereon at the Agreed
Rate from the date of such expenditure by Lender, upon written demand
therefor by Lender. Any and all policies of insurance required under this
Agreement shall name Lender as an additional insured and shall be on an
"occurrence" basis. In addition, Lender shall be shown as the loss payable
beneficiary under the property insurance policy maintained by Borrower
pursuant to Section 8.1(a)(i).
(c Notwithstanding the foregoing, Borrower may provide the insurance
described in this Article VIII in whole or in part through a "blanket" or
------------
"umbrella" policy or policies covering other liabilities and properties of
Borrower; provided, however, that any such policy or policies shall: (i)
-------- -------
otherwise comply with this Article VIII, (ii) allocate to the Facility the
------------
full amount of insurance required hereunder, and (iii) contain, permit or
otherwise unconditionally authorize the waiver contained in Section 8.6.
-----------
The amount of insurance allocated to the Facility pursuant to any such
policy or policies shall either be set forth in such policy or policies or
a written statement from such insurer delivered to Lender.
VIII.2 Replacement Cost Determination. Borrower shall have the
replacement cost and insurable value of the Facility determined from time to
time as required by the replacement cost endorsements and shall deliver to
Lender the new replacement cost endorsements promptly upon Borrower's receipt
thereof. If, at any time, a replacement cost endorsement is not available,
Borrower shall have the replacement cost and insurable value of the Facility
determined at least once a year by the underwriter of fire insurance on the
Facility, or, if such underwriter will not determine the replacement costs, by a
qualified appraiser reasonably satisfactory to Lender. Borrower shall deliver
such determination to Lender promptly upon Borrower's receipt thereof.
26
VIII.3 Deductible Amounts. The policies of insurance which Borrower
is required to provide under this Article VIII will not have deductibles or
------------
self-insured retentions in excess of One Hundred Thousand Dollars ($100,000);
provided, however, and solely with respect to earthquake insurance and flood
- -------- -------
insurance coverage for property located in Flood Zone A, the deductible amount
for such insurance may be increased to Two Hundred Fifty Thousand Dollars
($250,000).
VIII.4 Evidence of Insurance. As evidence of the insurance coverage
required to be carried by Borrower pursuant to this Article VIII, Borrower shall
------------
deliver to Lender original or certified policies of such insurance, but Lender
may, as Lender reasonably deems appropriate, accept certificates issued by the
insurance carrier (meeting the criteria set forth in Section 8.1) showing such
-----------
policies in force for the specified period as evidence of such coverage.
Evidence of such insurance coverage shall be delivered to Lender promptly upon
the Loan Closing Date. Each policy and certificate shall be subject to
reasonable approval by Lender and shall provide that such policy shall not be
subject to material alteration to the detriment of Borrower or Lender or to
cancellation without thirty (30) days prior written notice to Lender. Borrower
shall deliver replacement policies of insurance to Lender at least two (2)
Business Days prior to the expiration of any policy of insurance required to be
carried pursuant to this Article VIII. Should any policy expire or be cancelled
------------
and should Borrower fail to immediately procure other insurance as specified
herein, Lender reserves the right, but shall have no obligation, to procure such
insurance for the benefit of Lender and Borrower, at Borrower's sole cost and
expense.
VIII.5 Damages. Nothing contained in these insurance requirements is
to be construed as limiting the type, quality or quantity of insurance Borrower
should maintain or the extent of Borrower's responsibility for payment of
damages resulting from the breach of its obligations hereunder nor shall
anything contained herein be deemed to place any responsibility on Lender for
ensuring that the insurance required hereunder is sufficient for the conduct of
Borrower's business.
VIII.6 Waiver of Subrogation. Borrower hereby waives all rights of
subrogation, which any insurance carrier, or Borrower, may have as to Lender by
reason of any provision in any policy of insurance required to be carried by
Borrower pursuant to this Agreement, provided such waiver does not thereby
invalidate the policy of insurance.
VIII.7 Additional Insured. Lender shall be included as an additional
insured under the coverage specified in this Article VIII, with the following
------------
endorsement or provision included within each applicable policy: "It is
understood and agreed that coverage afforded by this Policy shall also apply to
MLD Delaware Trust, a Delaware business trust, and its officers, directors,
agents, servants, employees, divisions, subsidiaries, partners, shareholders and
affiliated companies as additional insureds. This insurance is primary and any
other insurance maintained by such additional insured is noncontributing with
this insurance as respects claims or liability arising out of or resulting from
the acts or omissions of the named insured, or of others performed on behalf of
the named insured." Each insurance policy required to be carried pursuant to
this Article VIII shall (a) contain standard non-contributory mortgagee clauses
------------
(438 BFU) in favor of and acceptable to Lender and Lender's lenders, if any, and
(b) name Lender as a loss payee under a standard loss payee clause.
27
VIII.8 No Separate Insurance. Borrower shall not carry insurance
concurrent in form or contributing in the event of loss with the insurance
required by this Article VIII unless (a) Lender, and any lender of Lender, are
------------
named as additional insureds as provided in Section 8.7, (b) Lender approves
-----------
such separate insurance, and (c) such separate insurance shall otherwise comply
with this Article VIII. Upon obtaining any such separate insurance, Borrower
------------
shall immediately deliver original or certified policies of such insurance to
Lender.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
IX.1 Events of Default.
(a) Upon the expiration of any applicable cure period set forth in
Section 9.1(b) below, the occurrence of any one or more of the following
--------------
shall constitute an "Event of Default" under this Agreement:
(i) the failure to make payment of any amount due under the
Note or other Loan Documents when the same becomes due and payable;
(ii) the failure to make payment of any Impositions;
(iii) intentionally omitted;
(iv) intentionally omitted;
(v) any material misstatement or omission of fact in any
written report, notice or communication from Borrower to Lender with
respect to Borrower or the Facility;
(vi) the commencement of any action or proceeding which seeks as
one of its remedies the dissolution of Borrower;
(vii) any Governmental Authority, or any court at the instance
thereof, shall take possession of any substantial part of the property
of, or assume control over, the affairs or operations of, or a
receiver or trustee shall be appointed over all of or of any
substantial part of, or a writ or order of attachment or garnishment
(with respect to any claim in excess of One Hundred Thousand Dollars
($100,000)) shall be issued or made against any of, the property of
Borrower;
(viii) Borrower shall admit in writing its inability to pay its
debts when due, or shall make an assignment for the benefit of
creditors; or Borrower shall apply for or consent to the appointment
of any receiver, trustee or similar officer for Borrower for all or
any substantial part of the property of Borrower; or Borrower shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency,
28
reorganization, arrangement, readjustment of debts, dissolution,
liquidation, or similar proceedings relating to Borrower under the
laws of any jurisdiction;
(ix) an involuntary bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution or liquidation case or
proceeding, or other similar proceedings, which shall not be dismissed
within ninety (90) days (whether or not consecutive) after the same
shall have been commenced, shall be commenced (by petition,
application or otherwise) seeking relief with respect to Borrower or
all or a substantial part of the property of Borrower;
(x) a court of competent jurisdiction shall enter an order,
judgment or decree adjudicating Borrower a bankrupt or insolvent or
approving a petition filed against Borrower seeking any
reorganization, dissolution or similar relief under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, and such order,
judgment or decree shall not be discharged or dismissed within ninety
(90) days after the date of filing;
(xi) a writ of execution or attachment or any similar process
shall be issued or levied against all or any part or interest in the
Facility, or any judgment involving monetary damages in excess of One
Hundred Thousand Dollars ($100,000) in any such case shall be entered
against Borrower which shall become a lien on the Facility or any
portion thereof or Borrower's interest therein, and such writ of
execution, attachment, levy or judgment shall not be released or
discharged within ninety (90) days after the date of filing;
(xii) any representation or warranty of Borrower in (A) any of
the Loan Documents, or (B) any Financial Statement, certificate or
other financial information delivered to Lender, shall be materially
and adversely incorrect or misleading as of the date made;
(xiii) a final judgment or judgments for the payment of money in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate is
entered against Borrower and such judgment or judgments shall not be
discharged within a period of ninety (90) days;
(xiv) a material default by Borrower (or any Affiliate of
Borrower) under any other agreement entered into by Borrower (or any
Affiliate of Borrower) in connection with any other obligation owed by
Borrower (or any Affiliate of Borrower) to Lender or any Affiliate of
Lender (including, without limitation, the ALC Leases and the Other
ALC Loans), which default is not cured within any applicable cure
period;
(xv) intentionally omitted;
29
(xvi) if, except as a result of damage or destruction or a
partial or complete Condemnation with respect to all or any portion of
the Facility, Borrower voluntarily or involuntarily ceases operations
on the Facility or any material portion of the Facility is vacated or
abandoned;
(xvii) failure to deliver replacement policies of insurance to
Lender as required by the provisions of Section 8.4;
-----------
(xviii) the institution of any proceedings, hearings, suits or
other actions which seek to suspend, revoke or otherwise adversely
impair (including, without limitation, the imposition of any
operational restrictions) any license, approval certificate or other
authorization used or held by Borrower in connection with the
operation of the Facility for the Intended Use;
(xix) the occurrence of a default and the failure to cure such
default within the applicable cure period, if any, under the Debt
Service Reserve Pledge Agreement or under any of the other Loan
Documents; or
(xx) failure to observe or perform, in any material respect,
any other term, covenant or condition of this Agreement or any of the
other Loan Documents, which cannot be cured by the payment of money;
(b) Cure Periods.
(i) Borrower shall not be entitled to a cure period with
respect to the Events of Default described in subsections 9.1(a)(v),
---------------------
(vii) through (xvi), inclusive, and (xix), above, except as may be
------------------- -----
specifically provided therein.
(ii) The default described in subsection 9.1(a)(i) above is
--------------------
curable and shall be deemed cured if Borrower makes such payment
within five (5) days after the date such payment is due; provided,
--------
however, with the exception of the imposition of the late charge and
-------
the commencement of the accrual of Basic Interest at the Agreed Rate
as provided in the Note, Holder shall not proceed with the enforcement
of any other remedies available under this Agreement or the Loan
Documents or at law until the fifth (5/th/) day after Lender gives
Borrower written notice of such Event of Default.
(iii) The default described in subsection 9.1(a)(ii), above, is
---------------------
curable and shall be deemed cured if Borrower makes such payment
within five (5) days of written demand by Lender, or within such other
grace period applicable to such payment as specified elsewhere in this
Agreement.
(iv) The default described in subsection 9.1(a)(xvii), above,
-----------------------
is curable and shall be deemed cured if Borrower delivers replacement
policies of insurance to Lender within five (5) days of written demand
by Lender.
30
(v) The default described in subsections 9.1(a)(vi), (xviii) and
---------------------- -------
(xx), above, is curable and shall be deemed cured, if: (A) within
----
seven (7) days of Borrower's receipt of a notice of default from
Lender, Borrower gives Lender notice of its intent to cure such
default; and (B) Borrower cures such default within thirty (30) days,
or such other period as may be specified in this Agreement, after such
notice from Lender, unless such default cannot with due diligence be
cured within a period of thirty (30) days, or such other period as may
be specified in this Agreement, because of the nature of the default
or delays beyond the control of Borrower, and cure after such period
will not have a material and adverse effect upon the Facility, in
which case such default shall not be deemed to continue if cure of
such default is promptly commenced and diligently pursued to the
completion thereof, provided, however, no such default shall continue
-------- -------
for more than one hundred twenty (120) days in the aggregate.
(c) All notice and cure periods provided herein or in any other Loan
Document shall run concurrently with any notice or cure periods provided by
applicable law.
IX.2 Remedies.
(a) Notwithstanding any provision to the contrary herein or in any of
the other Loan Documents, upon the occurrence of any Event of Default under this
Agreement, or upon an Event of Default under any of the other Loan Documents:
(i) Lender's obligation to make further disbursements of the Loan, if any, shall
cease, (ii) Lender shall, at its option, have the rights and remedies provided
in the Loan Documents, including, without limitation, the option to declare all
outstanding indebtedness to be immediately due and payable without presentment,
demand, protest or further notice of any kind, to apply any of Borrower's funds
in its possession to the outstanding indebtedness under the Note whether or not
such indebtedness is then due, to draw on the Account (or a Letter of Credit if
the same replaced the Account) and apply such withdrawal to the outstanding
indebtedness under the Note whether or not such indebtedness is then due, to
obtain the appointment of a receiver and to, upon the occurrence of a monetary
Event of Default with respect to the Loan, file a confession of judgment, and
(iii) Lender may pursue any remedies available to it pursuant to law or in
equity. All sums expended by Lender for such purposes shall be deemed to have
been disbursed to and borrowed by Borrower and shall be secured by the Mortgage.
(b) All remedies of Lender provided for herein are cumulative and
shall be in addition to any and all other rights and remedies provided in the
Note, the Mortgage or any of the other Loan Documents or by law. The exercise
of any rights of Lender hereunder shall not in any way constitute a cure or
waiver of a default hereunder or elsewhere, or invalidate any act done pursuant
to any notice of default, or prejudice Lender in the exercise of any of its
other rights hereunder or elsewhere unless, in the exercise of said rights,
Lender realizes all amounts owed to it hereunder and under the Note, the
Mortgage and the other Loan Documents.
ARTICLE X
MISCELLANEOUS
31
X.1 Assignment. Borrower shall not assign any of its rights under
this Agreement.
X.2 Notices. All notices, demands, certificates, requests, consents,
approvals and other similar instruments under this Agreement shall be made in
writing to the addresses set forth below and shall be given by any of the
following means: (a) personal service; (b) electronic communication, whether by
telex, telegram or telecopying; (c) certified or registered mail, postage
prepaid, return receipt requested; or (d) nationally recognized courier or
delivery service. Such addresses may be changed by notice to the other parties
given in the same manner as provided above. Any notice, demand or request sent
pursuant to either subsection (a), (b) or (d) hereof shall be deemed received
------------------- ---
upon the actual delivery thereof, and, if sent pursuant to subsection (c) shall
--------------
be deemed received five (5) days following deposit in the mail. Refusal to
accept delivery of any notice, request or demand shall be deemed to be delivery
thereof. If Borrower is not an individual, notice may be made on any officer,
general partner or principal thereof. In the event Lender notifies Borrower of
the name and address of Lender's lender, Borrower shall cause a copy of all
notices delivered to Lender by Borrower to be concurrently therewith delivered
to such lender.
To Seller: To Buyer:
- ---------- ---------
Assisted Living Concepts, Inc. MLD Delaware Trust
9955 SE Washington, Suite 303 c/o Nationwide Health Properties, Inc.
Portland, Oregon 97216 610 Newport Center Drive, Suite 1150
Attn: Chief Executive Officer and Newport Beach, California 92660
General Counsel Attn: President and General Counsel
Facsimile: (503) 255-0048 Facsimile: (949) 759-6887
With Copy To: With Copy To:
- ------------- -------------
Rasmussen Coomber, LLP Sherry, Coleman & Holthouse LLP
660 South Figueroa Street, Suite 1450 610 Newport Center Drive, Suite 1200
Los Angeles, CA 90017-3452 Newport Beach, CA 92660
Attn: Richard G. Rasmussen, Esq. Attn: Kevin L. Sherry, Esq.
Facsimile: (213) 622-2829 Facsimile: (949) 719-1212
X.3 Incorporation of Recitals and Exhibits. The recitals and exhibits
hereto are hereby incorporated into this Agreement and made a part hereof.
X.4 Titles and Headings. The titles and headings of sections of this
Agreement are intended for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
X.5 Brokers. Lender and Borrower represent to each other that neither
of them knows of any brokerage commissions or finders' fee due or claimed with
respect to the transaction
32
contemplated hereby. Lender and Borrower shall indemnify and hold harmless the
other party from and against any and all loss, damage, liability, or expense,
including costs and reasonable attorney fees, which such other party may incur
or sustain by reason of or in connection with any misrepresentation by the
indemnifying party with respect to the foregoing.
X.6 Changes, Waivers, Discharge and Modifications in Writing. No
provision of this Agreement may be changed, waived, discharged or terminated
except by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought.
X.7 Choice of Law. Lender and Borrower agree that the rights and
obligations under this Agreement and the other Loan Documents shall be governed
by and construed and interpreted in accordance with the internal law of the
State of South Carolina without giving effect to the conflicts-of-law rules and
principles of such state.
X.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one agreement.
X.9 Time is of the Essence. Time is of the essence in this Agreement.
X.10 Attorneys' Fees. Borrower agrees to pay Lender all costs and
expenses, including, without limitation, attorneys' fees and costs, incurred by
Lender in enforcing any of the terms, covenants or conditions of this Agreement.
The terms "attorneys' fees" or "attorneys' fees and costs" shall also include,
without limitation, all such fees and expenses incurred with respect to appeals,
arbitrations and bankruptcy proceedings, and whether or not any action or
proceeding is brought with respect to the matter for which said fees and
expenses were incurred.
X.11 Authority to File Notices. Borrower irrevocably appoints Lender as
its attorney-in-fact, with full power of substitution, to file for record, at
the Borrower's cost and expense and in Borrower's name, any notices that Lender
considers necessary or desirable to protect its security.
X.12 Disclaimer by Lender. Lender shall not be liable to any
contractor, subcontractor, supplier, laborer, architect, engineer or any other
party for services performed or materials supplied in connection with the
Facility. Lender shall not be liable for any debts or claims accruing in favor
of any such parties against Borrower or others or against the Facility.
Borrower is not and shall not be an agent of Lender for any purpose. Lender is
not a joint venture partner with Borrower in any manner whatsoever. Approvals
granted by Lender for any matters covered under this Agreement shall be narrowly
construed to cover only the parties and acts identified in any written approval
or, if not in writing, such approvals shall be solely for the benefit of
Borrower.
X.13 Indemnification. To the fullest extent permitted by law, Borrower
agrees to protect, indemnify, defend and hold harmless Lender, its directors,
officers, agents and employees from and against any and all liability, expense,
loss or damage of any kind or nature and from any suits, claims or demands,
including reasonable attorneys' fees and costs, on account of any matter or
thing or action or failure to act by Lender, whether in suit or not, arising out
of this Agreement or in
33
connection herewith, unless such suit, claim or demand is caused solely by any
act, omission or willful malfeasance of Lender, its directors, officers, agents
and employees. Upon receiving knowledge of any suit, claim or demand asserted by
a third party that Lender believes is covered by this indemnity, Lender shall
give Borrower notice of the matter and an opportunity to defend it, at
Borrower's sole cost and expense, with legal counsel satisfactory to Lender.
Lender may also require Borrower to so defend the matter. This obligation on the
part of Borrower shall survive the closing of the Loan and the repayment
thereof.
X.14 Inconsistencies with Loan Documents. In the event of any
inconsistencies between the terms of this Agreement and any terms of any of the
Loan Documents, the terms of this Agreement shall govern and prevail.
X.15 Disbursements in Excess of Loan Amount. In the event the total
disbursements by Lender exceed the Loan Amount, to the extent permitted by the
laws of the State of South Carolina, the total of all disbursements shall be
secured by the Mortgage. All other sums expended by Lender pursuant to this
Agreement or any other Loan Document shall be deemed to have been paid to
Borrower and shall be secured by, among other things, the Mortgage.
X.16 Participations. Lender shall have the right at any time to sell,
assign or transfer the Loan or the Note or to sell or grant participations in
all or any part therein, all without notice to or the consent of Borrower.
Borrower hereby acknowledges and agrees that any such disposition will give rise
to a direct obligation of Borrower to each holder of the Note or the Loan or
each participant or assignee of all or any part of the Loan or Note. Lender may
disclose to third parties, including, without limitation, prospective purchasers
of the Loan or participation interests therein, financial or other information
in Lender's possession regarding Borrower or the Facility.
X.17 Entire Agreement. This Agreement and the Loan Documents constitute
the entire agreement and understanding of Lender and Borrower with respect to
the matters set forth herein and therein. No representation, warranty,
covenant, promise, understanding or condition shall be enforceable against any
party unless it is contained in this Agreement or the Loan Documents.
X.18 Severability. The invalidity or unenforceability of any one or
more provisions of this Agreement or any Loan Document shall not affect the
validity or enforceability of any other provision.
X.19 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF SOUTH CAROLINA, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT BORROWER ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT.
34
Borrower designates and appoints CSC The United States Corporation Company, and
such other Persons as may hereafter be selected by Borrower irrevocably agreeing
in writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by Borrower to be effective and binding service in every respect. A
copy of any such process so served shall be mailed by registered mail to
Borrower as provided in this Agreement; provided that, unless otherwise provided
--------
by applicable law, any failure to mail such copy shall not affect the validity
of service of such process. If any agent appointed by Borrower refuses to accept
service, Borrower hereby agrees that service of process sufficient for personal
jurisdiction in any action against Borrower in the State of South Carolina may
be made by registered or certified mail, return receipt requested, to Borrower
as provided in this Agreement, and Borrower hereby acknowledges that such
service shall be effective and binding in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Lender to bring proceedings against Borrower in the courts of
any other jurisdiction.
X.20 Waiver of Jury Trial. BORROWER AND LENDER HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL IN ANY ACTION, PROCEEDINGS OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER IN CONNECTION
WITH ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Borrower and Lender each acknowledge
that this waiver is a material inducement for Borrower and Lender to enter into
a business relationship, that Borrower and Lender have already relied on this
waiver in entering into this Agreement and the other Loan Documents and that
each will continue to rely on this waiver in their related future dealings.
Borrower and Lender further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
X.21 Terminology. Whenever the words "including", "include" or
"includes" are used in this Agreement, they should be interpreted in a non-
exclusive manner as though the words, "without limitation," immediately followed
the same. Except as otherwise indicated, all Section and Exhibit references in
this Agreement shall be deemed to refer to the Sections and Exhibits in or to
this Agreement.
X.22 Interpretation. Both Borrower and Lender have been represented by
counsel and this Agreement has been freely and fairly negotiated. Consequently,
all provisions of this Agreement shall be interpreted according to their fair
meaning and shall not be strictly construed against any party.
35
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to
be executed and delivered as of the date first above written.
"BORROWER"
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation
By:
----------------------------------
Its:
-----------------------------
"LENDER"
MLD DELAWARE TRUST,
a Delaware business trust
By:
----------------------------------
Mark L. Desmond, not in his individual
capacity, but solely as Trustee
36
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
ALL that certain piece, parcel or tract of land, situate, lying and being in
Crowfield Plantation, Berkeley County, South Carolina, shown and designated as
Tract L, Parcel XI-C, 4.896 acres on the plat prepared by Westvaco Development
Corporation, dated July 30, 1997, entitled "PLAT SHOWING TRACT "L", 4.552 ACRES,
A PORTION OF PARCEL XI-C, PROPERTY OF WESTVACO DEVELOPMENT CORPORATION, LOCATED
ON CROWFIELD PLANATATION, IN THE CITY OF GOOSE CREEK, BERKELEY COUNTY, SOUTH
CAROLINA", recorded in the Office of the RMC for Berkeley County, SC in Plat
Cabinet M, at Page 354-A; reference is hereby craved to said plat and same is
made a part and parcel of this description.
Being the same property conveyed to Assisted Living Concepts, Inc. by Deed of
Westvaco Development Corporation, dated August 22, 1997, recorded in the Office
of the RMC for Berkeley County, South Carolina in Book 1173, Page 0095.
1
EXHIBIT B
CLOSING CONDITIONS
Lender shall not be obligated to make any disbursements of the Loan or
perform any other obligation under the Loan Documents unless all of the
following conditions precedent are satisfied prior to the date set forth in
Section 3.1 of this Agreement:
1. There shall exist no Event of Default or Potential Default under
any of the Loan Documents.
2. All representations and warranties contained in this Agreement
and any other Loan Documents shall be true and correct in all material respects
as of the Loan Closing Date.
3. Lender shall have received each of the following items and
documents, all of which shall be in form and substance satisfactory to Lender:
(a) The Debt Service Reserve;
(b) A preliminary title report or reports with respect to the
Facility and evidence satisfactory to Lender that the Title Company is
prepared to issue the Title Policy;
(c) A search of the records of the Offices of the Secretary of the
States of South Carolina, and Nevada and the Official Records of the County
showing all Uniform Commercial Code financing statements and fixture
filings against Borrower and/or the Facility or any part thereof or
interest therein;
(d) The policies of insurance required under this Agreement;
(e) Certified copies of Borrower's articles of incorporation, bylaws
and other formation documents, together with a certificate of status from
the Secretary of the States of Nevada and South Carolina;
(f) Evidence satisfactory to Lender that Borrower has taken all
necessary action to authorize it to execute, deliver and be bound by the
Loan Documents, including, without limitation, corporate resolutions
together with incumbency certificates attached thereto;
(g) A search of the records of the Offices of the Secretary of State
of South Carolina and the Official Records of the County showing all
Uniform Commercial Code financing statements and fixture filings against
Borrower and/or the Facility or any part thereof or interest therein;
(h) an ALTA survey for the Facility;
1
(i) Financial Statements of Borrower for Borrower's most recent fiscal
year, together with interim 1998 statements if available, certified by an
officer of Borrower;
(j) Satisfactory evidence that Borrower has complied with all
applicable Licensing Requirements;
(k) Satisfactory evidence that the Facility complies with all zoning
ordinances, including, without limitation, a statement from the appropriate
Governmental Authority setting forth the current zoning designation for the
Land;
(l) The Phase I Site Assessment Report for the Facility, prepared by a
consultant satisfactory to Lender; and
(m) Such other documents and instruments as may be reasonably required
by Lender.
2
EXHIBIT C
FORM OF CLOSING PROCEDURE LETTER
September ___, 1998
First American Title Insurance Company
114 East Fifth Street
Santa Ana, California 92701
Attention: Mickey Elkinton
Re: $2,955,000 from MLD Delaware Trust, a Delaware business trust
("Lender") to Assisted Living Concepts, Inc., a Nevada
corporation ("Borrower"); Your Escrow No: N984114E
Ladies and Gentlemen:
Please refer to that certain Loan Agreement dated as of September 3,
1998 by and between Borrower and Lender, a copy of which is being delivered to
you with this letter. Except as otherwise defined herein, all initially-
capitalized terms used herein shall have the same meaning given such terms in
the Loan Agreement.
This letter shall constitute your instructions with respect to the
"Funds" and "Documents" described herein.
A. Delivery of Funds.
-----------------
On or before September ___, 1998, Lender shall wire-transfer to you
immediately available funds in the sum of (i) the Loan (less the amount of the
Debt Service Reserve) and (ii) such additional funds as may be due from Lender
pursuant to the Closing Statement described in Paragraph B(3) below (the
--------------
"Funds").
B. Delivery of Documents.
---------------------
1. Delivery of Recording Documents. Borrower or Lender shall deliver
to you one fully executed (and acknowledged where applicable) original of
each of the following documents (the "Recording Documents"):
(a) ___________________;
(b) ___________________; and
1
(c) ____________________.
2. Borrower's Delivery of Non-Recordation Documents. Borrower shall
deliver to you one fully executed original of each of the following
documents (the "Non-Recordation Documents"):
(a) Pay-off letters or demands (the "Pay-Off Letters") from the
then record holders or claimants of any encumbrance or monetary lien
affecting the Facility, stating the cash amount required to be paid
and where and to whom such amount is to be paid in order to satisfy
and discharge of record such encumbrances.
3. Delivery and Approval of Closing Statement. You shall prepare,
and Lender and Borrower shall approve and execute, a closing statement
showing the source and application of funds received by you and the costs
and expenses incurred in connection herewith (the "Closing Statement").
4. Definition of Documents. As used herein, "Documents" shall mean,
collectively, the Recording Documents, the Non-Recordation Documents and
the Closing Statement.
C. Conditions to Closing.
---------------------
The Funds shall not be disbursed and the Documents shall not be recorded or
delivered to any person or entity until each of the following conditions are
satisfied:
1. You have received the Funds and are unconditionally and
irrevocably prepared to disburse the same in accordance with Paragraph D
-----------
hereof.
2. You have received the Documents and are unconditionally and
irrevocably prepared to record the Recording Documents in accordance with
Paragraph D hereof.
-----------
3. You are unconditionally and irrevocably committed to issue the
Title Policy, together with a [DESCRIPTION OF ENDORSEMENTS] subject only to
those exceptions (the "Permitted Exceptions") which appear on the pro forma
title policy attached hereto as Exhibit A.
---------
4. You have received the Written Authorization.
D. Closing. When the conditions specified in Paragraph C above are satisfied,
------- -----------
then you shall immediately deliver to Borrower and Lender a written confirmation
of such satisfaction in the form of Exhibit B hereto (which confirmation shall
---------
evidence your agreement to immediately take or cause to be taken the actions
hereinafter specified), and thereafter you shall immediately:
1. Record the Recording Documents in the order listed below in
Official Records of Berkeley County, South Carolina:
2
(a) the ________________; and
(b) _______________________.
2. Disburse the respective amounts due to third parties (e.g., lien
holders) under the Closing Statement in accordance with the respective
instructions from such third parties.
3. Disburse any amounts due Lender under the Closing Statement in
accordance with the following wiring instructions:
Wells Fargo Bank
420 Montgomery Street
San Francisco, California
ABA No. 121000248
for the benefit of
Nationwide Health Properties, Inc.
Account No. 4692089329
Upon receipt, notify Mark Desmond by telephone at
(949) 718-4412
4. Disburse to Borrower the remainder of the Funds pursuant to the
instructions to be provided by Borrower.
5. Issue the Title Policy and deliver such Title Policy to Sherry,
Coleman & Holthouse LLP, at the address specified in Paragraph E hereof,
-----------
within 20 working days.
E. Delivery of Documents. As soon as they are available, please deliver the
---------------------
Documents as follows:
1. To Sherry, Coleman & Holthouse LLP, 610 Newport Center Drive,
Suite 1200, Newport Beach, California 92660, Attention: Kevin L. Sherry,
Esq., the following: (a) the recorded originals of each of the Recording
Documents, and (b) the originals of the Documents other than the Recording
Documents.
2. To Borrower, c/o Rasmussen Coomber, LLP, 660 Figueroa Street,
Suite 1450, Los Angeles, California 90017-3452, Attention: Richard G.
Rasmussen, Esq., a copy of each of the Documents.
F. Closing Costs. All closing costs incurred in carrying out your duties
-------------
under this letter are to be billed in accordance with Section 4.1 of the Loan
-----------
Agreement.
3
G. Investment of Funds.
-------------------
1. Lender's Funds. As soon as you receive any portion of the Funds,
you shall notify Lender of such fact. If Lender gives you written
instructions to do so, you shall invest the Funds in treasury bills (or
such other short-term investment as may be authorized by Lender) for the
benefit of Lender. The interest accrued on the Funds shall be delivered to
Lender, in accordance with Lender's wiring instructions, upon the closing
(or, if sooner, from time to time upon the oral or written request of
Lender).
H. Cancellation of Instructions. Notwithstanding anything to the contrary
----------------------------
herein, if the conditions specified in Paragraph C hereof are not satisfied on
-----------
or before September ___, 1998, then, if you receive written instructions to
cancel this transaction from either of the undersigned, the instructions set
forth in Paragraphs A through E above shall be deemed cancelled, you shall
------------ -
immediately return the Funds (and any interest thereon) to Lender, in accordance
with Lender's wiring instructions and you shall destroy the Documents on the
next business day thereafter.
I. Limitation of Liability. You are acting solely as closing agent, and you
-----------------------
shall be liable solely for your failure to comply with the terms of this letter.
The foregoing will not limit your liability as title insurer under the terms of
the Title Policy (such liability being in accordance with the terms of such
policy).
J. Execution by Counterparts; Facsimile Signatures. This letter of
-----------------------------------------------
instructions may be executed in two or more counterparts, each of which shall be
an original, but all of which shall constitute one and the same letter of
instructions. You are hereby authorized to accept facsimile signatures on this
letter of instructions as original signatures, and such facsimile signatures are
hereby deemed originals.
4
K. Interpleader. Borrower and Lender expressly agree that if they give you
------------
contradictory instructions, you shall have the right, at your election, to file
an action in interpleader requiring the Borrower and Lender to answer and
litigate their several claims and rights between themselves and you are
authorized to deposit with the clerk of the court all documents and funds held
by you. In the event such action is filed, Borrower and Lender agree to pay
your cancellation charges and costs, expenses and reasonable attorneys' fees
which you are required to expend or incur in the interpleader action, the amount
thereof to be fixed and judgment therefor to be rendered by the court. Upon the
filing of such an action, you shall be fully released and discharged from all
obligations to perform further any duties or obligations imposed hereunder.
"BORROWER"
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation
By:
-----------------------------------
Its:
-----------------------------
"LENDER"
MLD DELAWARE TRUST,
a Delaware business trust
By:
-----------------------------------
Mark L. Desmond, not in his individual
capacity, but solely as Trustee
ACCEPTED AND AGREED TO
as of the date first above written:
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
-------------------------------------
Its:
-------------------------------
5
SCHEDULE 1 TO EXHIBIT C
EXHIBIT A
PRO FORMA TITLE POLICY
[See Attached]
6
SCHEDULE 2 TO EXHIBIT C
EXHIBIT B
CONFIRMATION BY TITLE COMPANY
September ___, 1998
MLD Delaware Trust
c/o Sherry, Coleman & Holthouse LLP
610 Newport Center Drive, Suite 1200
Newport Beach, California 92660
Attention: Kevin L. Sherry, Esq.
Assisted Living Concepts, Inc.
c/o Rasmussen Coomber, LLP
660 Figueroa Street, Suite 1450
Los Angeles, California 90017-3452
Attention: Richard G. Rasmussen, Esq.
Re: $2,955,000 from MLD Delaware Trust, a Delaware business trust
("Lender") to Assisted Living Concepts, Inc., a Nevada
corporation ("Borrower"); Your Escrow No: N984114E
Ladies and Gentlemen:
Please refer to that certain letter (the "Letter of Instructions")
captioned "CLOSING PROCEDURE LETTER", dated as of September ___, 1998, from
Borrower and Lender to the undersigned.
Pursuant to Paragraph D of the Letter of Instructions, we hereby
-----------
confirm that each of the conditions to disbursement and recordation set forth in
Paragraph C of the Letter of Instructions has been satisfied.
- -----------
Very truly yours,
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
----------------------------------
Its:
-----------------------------
7
EXHIBIT D
FORM OF WRITTEN AUTHORIZATION TO CLOSE
September ___, 1998
First American Title Insurance Company
114 East Fifth Street
Santa Ana, California 92701
Attention: Mickey Elkinton
Re: $2,955,000 from MLD Delaware Trust, a Delaware business trust
("Lender") to Assisted Living Concepts, Inc., a Nevada corporation
("Borrower"); Your Escrow No: N984114E
Ladies and Gentlemen:
You are hereby authorized to comply with the instructions delivered to you
in our Closing Procedure Letter dated September ___, 1998.
Please confirm your receipt hereof and compliance with the aforementioned
instructions by contacting, via telephone, either Kevin L. Sherry, Esq., at
(949) 719-2190 or Andrew P. Hanson, Esq., at (949) 719-2199.
This Written Authorization to Close may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
Very truly yours,.
"BORROWER"
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation
By:
-----------------------------------
Its:
------------------------------
1
"LENDER"
MLD DELAWARE TRUST,
a Delaware business trust
By:
-----------------------------------
Mark L. Desmond, not in his individual
capacity, but solely as Trustee
2