EXHIBIT 4.1
================================================================================
LOAN AND SECURITY AGREEMENT
Dated as of December 12, 2001
between
VENTAS FINANCE I, LLC
as Borrower
and
MERRILL LYNCH MORTGAGE LENDING, INC.
as Lender
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms .................................................... 1
Section 1.2 Accounting Terms. ........................................................ 22
Section 1.3 Other Definitional Provisions. ........................................... 22
ARTICLE II
TERMS OF THE LOAN
Section 2.1 Loan. .................................................................... 22
Section 2.2 Interest. ................................................................ 23
Section 2.3 Interest Rate Cap Agreement. ............................................. 24
Section 2.4 Payments. ................................................................ 25
Section 2.5 Maturity ................................................................. 26
Section 2.6 Prepayment. .............................................................. 26
Section 2.7 Outstanding Balance ...................................................... 29
Section 2.8 Taxes .................................................................... 29
Section 2.9 Reasonableness of Charges ................................................ 29
Section 2.10 Funding Losses/Change in Law Etc ......................................... 29
ARTICLE III
CONDITIONS TO LOAN
Section 3.1 Conditions to Funding of the Loan on the Closing Date .................... 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Organization, Powers, Capitalization, Good Standing, Business. ........... 36
Section 4.2 Authorization of Borrowing, etc. ......................................... 36
Section 4.3 Financial Statements ..................................................... 37
Section 4.4 Indebtedness and Contingent Obligations .................................. 37
Section 4.5 Title to Properties ...................................................... 37
Section 4.6 Zoning; Compliance with Laws. ............................................ 38
Section 4.7 Leases; Agreements. ...................................................... 39
Section 4.8 Condition of Properties .................................................. 40
Section 4.9 Litigation; Adverse Facts ................................................ 41
Section 4.10 Payment of Taxes ......................................................... 41
Section 4.11 Adverse Contracts ........................................................ 41
Section 4.12 Performance of Agreements ................................................ 42
Section 4.13 Governmental Regulation .................................................. 42
Section 4.14 Employee Benefit Plans ................................................... 42
Section 4.15 Broker's Fees ............................................................ 42
i
Section 4.16 Environmental Compliance. ............................................... 42
Section 4.17 Solvency ................................................................ 43
Section 4.18 Disclosure .............................................................. 43
Section 4.19 Use of Proceeds and Margin Security ..................................... 43
Section 4.20 Insurance ............................................................... 43
Section 4.21 Separate Tax Lots ....................................................... 44
Section 4.22 Investments ............................................................. 44
Section 4.23 Bankruptcy .............................................................. 44
Section 4.24 Defaults ................................................................ 44
Section 4.25 No Plan Assets .......................................................... 44
Section 4.26 Governmental Plan ....................................................... 44
Section 4.27 Not Foreign Person ...................................................... 44
Section 4.28 No Collective Bargaining Agreements ..................................... 44
ARTICLE V
COVENANTS OF BORROWER PARTIES
Section 5.1 Financial Statements and Other Reports. ................................. 44
Section 5.2 Existence; Qualification ................................................ 49
Section 5.3 Payment of Impositions, Claims and Tax Claims. .......................... 49
Section 5.4 Maintenance of Insurance ................................................ 50
Section 5.5 Maintenance of the Property; Alterations; Casualty. ..................... 55
Section 5.6 Inspection .............................................................. 60
Section 5.7 Environmental Compliance. ............................................... 61
Section 5.8 Environmental Disclosure. ............................................... 62
Section 5.9 Compliance with Laws and Contractual Obligations; Operation of
Properties as Nursing Facilities ........................................ 62
Section 5.10 Further Assurances ...................................................... 63
Section 5.11 Performance of Agreements and Leases .................................... 63
Section 5.12 Leases. ................................................................. 63
Section 5.13 Management. ............................................................. 65
Section 5.14 Material Agreements ..................................................... 65
Section 5.15 Deposits; Application of Receipts ....................................... 65
Section 5.16 Estoppel Certificates. .................................................. 65
Section 5.17 Indebtedness ............................................................ 66
Section 5.18 Liens and Related Matters ............................................... 66
Section 5.19 Contingent Obligations .................................................. 66
Section 5.20 Restriction on Fundamental Changes ...................................... 67
Section 5.21 Transactions with Related Persons ....................................... 67
Section 5.22 ERISA. .................................................................. 67
Section 5.23 Lender's Expenses ....................................................... 68
ARTICLE VI
RESERVES
Section 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves. .... 68
Section 6.2 Funds Deposited with Lender. ............................................ 69
Section 6.3 Impositions and Insurance Reserve ....................................... 69
ii
Section 6.4 Debt Service Reserve ................................................. 71
Section 6.5 Replacement Reserve .................................................. 71
Section 6.6 Hazardous Materials Remediation Reserve .............................. 72
Section 6.7 Deferred Maintenance Reserve ......................................... 73
Section 6.8 Letters of Credit .................................................... 73
ARTICLE VII
CENTRAL ACCOUNT; CASH MANAGEMENT
Section 7.1 Establishment of Central Account. .................................... 74
Section 7.2 Flow of Funds. ....................................................... 75
Section 7.3 Application of Funds After Event of Default .......................... 75
ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES
Section 8.1 Event of Default. .................................................... 76
Section 8.2 Acceleration and Remedies. ........................................... 79
Section 8.3 Performance by Lender. ............................................... 81
ARTICLE IX
SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 9.1 Applicable to Primary Borrower Parties ............................... 81
Section 9.2 Applicable to Member and Borrower .................................... 83
ARTICLE X
RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS
Section 10.1 Secondary Market Transactions Generally .............................. 84
Section 10.2 Cooperation; Limitations ............................................. 85
Section 10.3 Information .......................................................... 85
Section 10.4 Additional Provisions ................................................ 86
Section 10.5 Formation of Depositor ............................................... 86
ARTICLE XI
RESTRICTIONS ON LIENS, TRANSFERS; RELEASE OF PROPERTIES
Section 11.1 Restrictions on Transfer and Encumbrance ............................. 87
Section 11.2 Transfers of Beneficial Interests in Borrower ........................ 87
Section 11.3 Assumability. ........................................................ 88
Section 11.4 Release of Properties ................................................ 90
Section 11.5 Leasehold Mortgages .................................................. 92
ARTICLE XII
RECOURSE; LIMITATIONS ON RECOURSE
Section 12.1 Limitations on Recourse .............................................. 93
Section 12.2 Partial Recourse ..................................................... 93
Section 12.3 Miscellaneous ........................................................ 94
iii
ARTICLE XIII
WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Expenses and Attorneys' Fees ........................................... 96
Section 14.2 Indemnity .............................................................. 97
Section 14.3 Amendments and Waivers ................................................. 98
Section 14.4 Retention of Borrower's Documents ...................................... 98
Section 14.5 Notices ................................................................ 98
Section 14.6 Survival of Warranties and Certain Agreements .......................... 99
Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative .................. 100
Section 14.8 Marshaling; Payments Set Aside ......................................... 100
Section 14.9 Severability ........................................................... 100
Section 14.10 Headings ............................................................... 100
Section 14.11 Applicable Law ......................................................... 100
Section 14.12 Successors and Assigns ................................................. 101
Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship ..... 101
Section 14.14 Reasonableness of Determinations ....................................... 101
Section 14.15 No Duty ................................................................ 101
Section 14.16 Entire Agreement ....................................................... 102
Section 14.17 Construction; Supremacy of Loan Agreement .............................. 102
Section 14.18 Consent to Jurisdiction ................................................ 102
Section 14.19 Waiver of Jury Trial ................................................... 102
Section 14.20 Counterparts; Effectiveness ............................................ 103
Section 14.21 Servicer ............................................................... 103
Section 14.22 Obligations of Borrower Parties ........................................ 103
Section 14.23 Guaranties Unsecured ................................................... 103
Section 14.24 Confidentiality ........................................................ 103
Section 14.25 Indiana Responsible Property Transfer Law .............................. 104
iv
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Loan Agreement") is
--------------
dated as of December 12, 2001 and entered into by and between VENTAS FINANCE I,
LLC, a Delaware limited liability company ("Borrower"); and MERRILL LYNCH
--------
MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and
assigns, "Lender").
------
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Borrower Parties and
Lender agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. The terms defined below are used in this Loan
---------------------
Agreement as so defined. Terms defined in the preamble to this Loan Agreement
are used in this Loan Agreement as so defined.
"Acceptable Replacement Cap" has the meaning set forth in Section 2.3.
--------------------------
"Account Collateral" means all of the right, title and interest of
------------------
Borrower in and to the Accounts, the Reserves, all monies and amounts which may
from time to time be on deposit therein, all monies, checks, notes, instruments,
documents, deposits, and credits from time to time in the possession of Lender
representing or evidencing such Accounts and Reserves and all earnings and
investments held therein and proceeds thereof.
"Accounts" means, collectively, the Deposit Accounts, the Central
--------
Account, the Sub-Accounts thereof, any Loss Proceeds Account and any other
accounts pledged to Lender pursuant to this Loan Agreement or any other Loan
Document.
"Accreditation" means certification by a generally recognized
-------------
independent agency or other organization that a facility fully complies with the
standards set by such agency or organization for operation of such a facility.
"Affiliate" means in relation to any Person, any other Person: (i)
---------
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding fifty percent
(50%) or more of any equity interest in the first Person; or (iii) fifty percent
(50%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the first Person. In addition, the Affiliates of
each Borrower Party include, without limitation, all other Borrower Parties,
irrespective of whether they now or hereafter satisfy the foregoing criteria.
For purposes of this definition, "control" (including with correlative meanings,
-------
the terms "controlling", "controlled by" and "under common control with") means
----------- ------------- -------------------------
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Where expressions such
as "[name of party] or any Affiliate" are used, the same shall refer to the
named party and any Affiliate of the named party.
"Allocated Loan Amount" means the portion of the original Principal
---------------------
Balance allocated to each Property (which initially shall be the respective
amounts with respect to such Property set forth on Exhibit A), as such amounts
---------
shall be adjusted from time to time as set forth in this Loan Agreement. Upon
each adjustment in the Principal Balance (each, a "Total Adjustment"), whether
----------------
as a result of amortization, prepayment or otherwise, each Allocated Loan Amount
shall be increased or decreased, as the case may be, by an amount equal to the
product of (i) the Total Adjustment and (ii) a fraction, the numerator of which
is the applicable Allocated Loan Amount (prior to the adjustment in question)
and the denominator of which is the Principal Balance prior to the adjustment to
the Principal Balance resulting in the recalculation of the Allocated Loan
Amount. However, when the Principal Balance is reduced as a result of the
Lender's receipt of Loss Proceeds or Net Proceeds, the Allocated Loan Amount for
the Property with respect to which the Loss Proceeds or Net Proceeds was
received shall be reduced to zero (such Allocated Loan Amount prior to such
reduction being referred to as the "Withdrawn Allocated Amount"), and each other
--------------------------
Allocated Loan Amount shall (i) if the Withdrawn Allocated Amount exceeds such
Loss Proceeds or Net Proceeds, as the case may be (such excess being referred to
as the "Proceeds Deficiency"), be increased by an amount equal to the product of
-------------------
(1) the Proceeds Deficiency and (2) a fraction (the "Allocation Fraction"), the
-------------------
numerator of which is the applicable Allocated Loan Amount (prior to the
adjustment in question) and the denominator of which is the aggregate of all of
the Allocated Loan Amounts other than the Withdrawn Allocated Amount or (ii) if
such Loss Proceeds or Net Proceeds, as the case may be, are greater than the
Withdrawn Allocated Amount (such excess being referred to as the "Proceeds
--------
Surplus"), be decreased by an amount equal to the product of (1) the Proceeds
- -------
Surplus and (2) the Allocation Fraction for such Allocated Loan Amount.
Notwithstanding the foregoing sentence, when the Principal Balance is reduced as
a result of Lender's application of Loss Proceeds, the Allocated Loan Amount for
the applicable Property shall not be reduced to zero (and the Allocated Loan
Amounts for the other Properties shall not be adjusted pursuant to the foregoing
provisions) unless the applicable Property is also being released from the Lien
of the Mortgage relating to such Property pursuant to Section 5.5(F) hereof; and
in the event that Loss Proceeds are applied to payment of the Obligation without
release of the applicable Property from the lien of the related Mortgage
pursuant to Section 5.5(F), then the Allocated Loan Amount for the applicable
Property only shall be reduced by the amount of such Loss Proceeds so applied.
In the event that any Property is released from the Lien of the Mortgages by
defeasance in accordance with Section 11.4 hereof, the Allocated Loan Amount for
the Property being released by defeasance (such Allocated Loan Amount, the
"Released Allocated Amount"), shall be reduced to zero, and each other Allocated
-------------------------
Loan Amount shall be reduced by an amount equal to the product of (1) the excess
of (a) the Release Price for such Property over (b) the Released Allocated
Amount, and (2) the Allocation Fraction for such Allocated Loan Amount.
"Annual Budget" means the annual budget for the operation of any
-------------
Property or the annual budget for the Properties in the aggregate delivered by
Lessee under the Master Lease for any year.
2
"Applicable Spread" means, for any Component, the rate per annum
-----------------
corresponding to such Component as set forth below:
Component
---------
A .8665%
B 1.1665%
C 1.5165%
D 1.9665%
E 2.6665%
F 3.1665%
"Architect" has the meaning set forth in Section 5.5(D).
---------
"Assignment of Rate Cap" means that certain Collateral Assignment of
----------------------
Interest Rate Protection Agreement of even date herewith from Borrower to
Lender, constituting an assignment of the Cap and the proceeds therefrom as
Collateral for the Loan, as same may be amended or modified from time to time
and any successor assignment thereto delivered in connection with any extension
or replacement of the Cap delivered hereunder.
"Assignments of Leases" means, collectively, the Assignments of Leases
---------------------
and Rents of even date herewith from Borrower to Lender, constituting
assignments of Borrower's right, title and interest in the Master Lease and any
other Leases for the Properties and proceeds therefrom as Collateral for the
Loan, as same may be amended or modified from time to time.
"Bankruptcy Code" means Title 11 of the United States Code, as amended
---------------
from time to time, and all rules and regulations promulgated thereunder.
"Borrower" has the meaning set forth in the preamble.
--------
"Borrower Party" and "Borrower Parties" mean, individually or
-------------- ----------------
collectively, the Borrower, the Member and Guarantor.
"Borrower Party Secretary" has the meaning set forth in Section 3.1.
------------------------
"Business Day" means any day excluding (i) Saturday, (ii) Sunday, (iii)
------------
any day which is a legal holiday under the laws of the State of New York, (iv)
any day which is a legal holiday in the state or states where the servicing
offices of the Servicer, and, if the Loan becomes a "specially serviced mortgage
loan" pursuant to the terms of any trust and servicing agreement entered into in
connection with any Securitization backed in whole or in part by the Loan, the
special servicer, are located or the state in which the corporate trust office
of the trustee under such trust and servicing agreement is located, and (v) any
day on which banking institutions located in any state referred to in (iii) or
(iv) above are generally not open for the conduct of regular business.
"Calculation Date" has the meaning set forth in Section 2.6(D)
----------------
"Cap" has the meaning set forth in Section 2.3.
---
3
"Cap Provider" has the meaning set forth in Section 2.3.
------------
"Cap Reserve" has the meaning set forth in Section 2.3.
-----------
"Cap Threshold Rate" has the meaning set forth in Section 2.3.
------------------
"Capital Expenditures" means expenditures for capital improvements,
--------------------
furnishings, fixtures and equipment (whether paid in cash or property or accrued
as liabilities) made by Borrower or Lessee, as the case may be, that, in
conformity with GAAP, are required to be included in the property, plant, or
equipment, or similar fixed asset account or otherwise capitalized.
"Cash Flow Sweep DSCR" has the meaning set forth in Section 2.6(D).
--------------------
"Cash Flow Sweep Event" has the meaning set forth in Section 2.6(C).
---------------------
"Cash Flow Sweep Sub-Account" has the meaning set forth in the Cash
---------------------------
Management Agreement.
"Cash Flow Sweep LCR" has the meaning set forth in Section 2.6(D).
-------------------
"Cash Management Agreement" means the Cash Management Agreement of even
-------------------------
date herewith among Borrower, Lender and Central Account Bank, as same may be
amended or modified from time to time.
"Central Account" has the meaning set forth in Section 7.1(A).
---------------
"Central Account Bank" means First Union National Bank, a national
--------------------
banking association.
"Claims" has the meaning set forth in Section 5.3.
------
"Closing" means the funding of the Loan contemplated by this Loan
-------
Agreement.
"Closing Date" means the date on which the Closing occurs.
------------
"CMS" means the Centers for Medicare and Medicaid Services (formerly
---
known as the Health Care Financing Administration ("HCFA")).
----
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
successor statutes thereto and any regulations promulgated thereunder.
"Collateral" means rights, interests, and property of every kind, real
----------
and personal, tangible and intangible, which is granted, pledged, liened,
conveyed, assigned or encumbered as security for the Loan or any of the other
Obligations under this Loan Agreement, the Mortgages, the Cash Management
Agreement or other Loan Documents, including without limitation the Properties,
the Improvements, the Rents and the Accounts.
"Compliance Certificate" has the meaning set forth in Section 5.1.
----------------------
4
"Component" has the meaning set forth in Section 2.1.
---------
"Component A" has the meaning set forth in Section 2.1.
-----------
"Component B" has the meaning set forth in Section 2.1.
-----------
"Component C" has the meaning set forth in Section 2.1.
-----------
"Component D" has the meaning set forth in Section 2.1.
-----------
"Component E" has the meaning set forth in Section 2.1.
-----------
"Component F" has the meaning set forth in Section 2.1.
-----------
"CON" means a certificate of need or similar permit or approval (not
---
including conventional building permits) from a Governmental Authority related
to the construction and/or operation of Improvements at any Property for use for
a specified number of beds in a Nursing Facility, or alteration of any such
Improvements or modifications of services provided at a Property used as a
Nursing Facility.
"Contingent Obligation", as applied to any Person, means any direct or
---------------------
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the
obligation of another, (ii) the obligation to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement, and (iii) any liability of such Person for the obligations of
another through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another. For
purposes of this definition, the amount of any Contingent Obligation at any time
shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Contractual Obligation", as applied to any Person, means any
----------------------
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party
5
or by which it or any of its properties is bound or to which it or any of its
properties is subject including, without limitation, the Loan Documents.
"Corporate Integrity Agreement" means that certain Corporate Integrity
-----------------------------
Agreement, dated July 24, 2000, between the Office of the Inspector General of
the United States Department of Health and Human Services and Kindred
Healthcare, Inc. (formerly known as Vencor, Inc.).
"Debt Service Coverage Ratio" shall mean, for any twelve (12) month
---------------------------
period, the ratio of (i) Pro Forma Net Operating Income for such period
immediately preceding the date of calculation to (ii) annual debt service on the
Loan for the twelve (12) month period following the date of calculation assuming
that interest were calculated on the outstanding principal amount of each
Component from time to time during such period (and giving effect to scheduled
principal amortization during such period) at an interest rate for each
Component equal to the sum of the Cap Threshold Rate plus the then Applicable
Spread for such Component and including required principal amortization payments
under Section 2.4(A).
"Debt Service Payment Sub-Account" has the meaning set forth in Section
-------------------------------
7.1.
"Debt Service Reserve" means the reserve established pursuant to
--------------------
Section 6.4.
"Default" means any breach or default under any of the Loan Documents,
-------
whether or not the same is an Event of Default, and also any condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.
"Defaulted Property Release" has the meaning set forth in Section 11.4.
--------------------------
"Default Rate" has the meaning set forth in Section 2.2.
------------
"Deferred Maintenance Reserve" has the meaning set forth in Section
----------------------------
6.7.
"Determination Date" means the day which is two (2) Eurodollar Business
------------------
Days prior to the first day of an Interest Accrual Period; provided that the
first Determination Date shall be the day which is two (2) Eurodollar Business
Days prior to the Closing Date. The LIBO Rate set on each Determination Date
shall be in effect for the Interest Accrual Period immediately following such
Determination Date.
"Dollars" and the sign "$" mean the lawful money of the United States
------- -
of America.
"Eligible Account" shall mean a separate and identifiable account from
----------------
all other funds held by the holding institution, which account is either (i) an
account maintained with an Eligible Bank or (ii) a segregated trust account
maintained by a corporate trust department of a federal depository institution
or a state chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations ss. 9.10(B), which has corporate trust powers and is acting in its
fiduciary capacity and in either case having combined capital and surplus of at
least $100,000,000 or otherwise acceptable to the Rating Agencies.
6
"Eligible Bank" shall mean a bank that (i) satisfies the Rating
-------------
Criteria and (ii) insures the deposits hereunder through the Federal Deposit
Insurance Corporation.
"Employee Benefit Plan" means any employee benefit plan within the
---------------------
meaning of Section 3(3) of ERISA (including any Multiemployer Plan).
"Engineer" has the meaning set forth in Section 5.5(D).
--------
"Environmental Claims" has the meaning set forth in Section 4.16.
--------------------
"Environmental Indemnity" means the Environmental Indemnity Agreement
-----------------------
of even date herewith from Borrower and Guarantor to Lender, as same may be
amended or modified from time to time.
"Environmental Laws" means any federal, state, or local law, ordinance
------------------
or regulation or any court judgment or order of any federal, state or local
agency or regulatory body applicable to Borrower or to any Property relating to
industrial hygiene, human health or safety or environmental conditions
including, but not limited to, those relating to the generation, manufacture,
storage, handling, transportation, disposal, release, emission or discharge of
Hazardous Material, and those relating to the atmosphere, soil, surface and
ground water, wetlands, stream sediments and vegetation on, under, in or about
any Property. "Environmental Laws" also shall include, but not be limited to,
------------------
the Comprehensive Environmental Response, Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the
Toxic Substance Control Act and the Safe Drinking Water Act and the Occupational
Safety and Health Act (but only as it relates to Hazardous Materials in the
environment), and all regulations adopted in respect to the foregoing laws.
"Environmental Reports" means, collectively, the environmental reports
---------------------
and audits with respect to each of the Properties listed on Schedule 4.16.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
-----
all rules and regulations promulgated thereunder.
"ERISA Affiliate" means any (i) corporation which is a member of the
---------------
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as Borrower, (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the Code) with Borrower, (iii) member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as Borrower or any
corporation described in clause (i) above or any partnership or trade or
business described in clause (ii) above or (iv) other Person which is required
to be aggregated with Borrower pursuant to Regulations promulgated under Section
414(o) of the Code.
"Eurodollar Business Day" means any day on which banks in the City of
-----------------------
London, England are generally open for interbank or foreign exchange
transactions and which is also a Business Day.
"Event of Default" has the meaning set forth in Section 8.1.
----------------
7
"Excess Interest" has the meaning set forth in Section 2.2(D).
---------------
"Exculpated Parties" has the meaning set forth in Section 12.1.
------------------
"Financial Statements" means (i) statements of operations and retained
--------------------
earnings, statements of cash flow, and balance sheets and (ii) such other
financial reports as the subject entity shall routinely and regularly prepare.
"Financing Statements" means the Uniform Commercial Code Financing
--------------------
Statements naming the Borrower as debtor, and Lender as secured party, required
under applicable state law to perfect the security interests created hereunder
or under the other Loan Documents.
"First Payment Date" has the meaning set forth in Section 2.4.
------------------
"Force Majeure" has the meaning set forth in Section 5.5(D)(viii).
-------------
"Funding Party" means any bank or other entity, if any, which is
-------------
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.
"GAAP" means generally accepted accounting principles as in effect in
----
the United States of America from time to time.
"Governmental Authority" means, with respect to any Person, any federal
----------------------
or state government or other political subdivision thereof (including, without
limitation, CMS, the United States Department of Health and Human Services and
any state department of health) and any entity, including any regulatory or
administrative authority or court, exercising executive, legislative, judicial,
regulatory or administrative or quasi-administrative powers and functions of or
pertaining to government, any federal or state government officials having
authority to exercise such powers and functions on behalf of any such
governmental authority (including, without limitation, the United States
Secretary of Health and Human Services), and any arbitration board or tribunal
in each case having jurisdiction over such applicable Person or such Person's
property, and any stock exchange on which shares of capital stock of such Person
are listed or admitted for trading.
"Gross Revenues" means, without duplication, all revenue derived from
--------------
the ownership and/or operation of the Properties by Borrower (other than Rents
received from Lessee under the Master Lease) and Lessee from whatever source
determined on an accrual basis, including, but not limited to, (i) Patient
Revenues received by Lessee or by any subtenant or licensee which is an
Affiliate of Lessee (but excluding any Patient Revenues received by any
subtenant or licensee which is not an Affiliate of Lessee) and (ii) rents
received by Lessee from any subtenant or licensee which is not an Affiliate of
Lessee (but excluding any rents received from any subtenant or licensee which is
an Affiliate of Lessee); but excluding (a) sales, use and occupancy or other
taxes on receipts required to be accounted for by Lessee to any governmental
authority, (b) non-recurring revenues as reasonably determined by Lender (e.g.
proceeds from a sale of assets or refinancing), (c) security deposits (except to
the extent determined by Lender to be properly utilized to offset a loss of rent
received by Lessee), (d) proceeds of casualty insurance and condemnation awards
(other than business interruption or other loss of income insurance related
8
to business interruption or loss of income for the period in question), (e) any
disbursements to Borrower from the Reserves or any other fund established by the
Loan Documents (or any disbursements to Lessee from any reserves established
under the Master Lease) and (f) any proceeds from the sale or refinancing of any
Property or recapitalization of Borrower (or Lessee). In addition, if required
by Lender, income accrued but not paid in cash during an accounting period shall
be discounted for an allowance for doubtful accounts in a manner consistent with
historical net realizable value.
"Guarantor" means Ventas, Inc., a Delaware corporation.
---------
"Guaranty" means the Exceptions to Non-Recourse Guaranty of even date
--------
herewith executed by Guarantor in favor of Lender, as same may be amended or
modified from time to time.
"Hazardous Material" means all or any of the following: (i) substances,
------------------
materials, compounds, wastes, products, emissions and vapors that are defined or
listed in, regulated by, or otherwise classified pursuant to, any applicable
Environmental Laws, as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances", "pollutants", "contaminants", or any other
formulation intended to regulate, define, list or classify substances by reason
of deleterious, harmful or dangerous properties; (ii) waste oil, oil, petroleum
or petroleum derived substances; (iii) any flammable substances or explosives or
any radioactive materials; (iv) asbestos in any form; (v) electrical or
hydraulic equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls; (vi) radon; (vii) urea formaldehyde; or (viii)
medical waste.
"Hazardous Materials Remediation Reserve" means the Reserve established
---------------------------------------
pursuant to Section 6.6.
"Impositions" means all real estate and personal property taxes, and
-----------
vault charges and all other taxes, levies, assessments and other similar
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of every kind and nature whatsoever (including any payments in lieu
of taxes), which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a governmental authority upon any
Property or the rents relating thereto or upon the ownership, use, occupancy or
enjoyment thereof, and any interest, cost or penalties imposed by such
governmental authority with respect to any of the foregoing. Impositions shall
not include any income, franchise, sales or use or similar taxes payable by
Borrower.
"Impositions and Insurance Reserve" means the reserve established
---------------------------------
pursuant to Section 6.3.
"Improvements" means all buildings, structures and improvements of
------------
every kind and nature existing and to be constructed upon the land which
comprises any portion of any Property.
"Indebtedness" or "indebtedness", as applied to any Person, means: (A)
------------ ------------
all indebtedness for borrowed money; (B) that portion of obligations with
respect to leases that is properly classified as a liability on a balance sheet
in conformity with GAAP (excluding any prepaid rents under Leases); (C) notes
payable and drafts accepted representing extensions of
9
credit whether or not representing obligations for borrowed money; (D) any
obligation owed for all or any part of the deferred purchase price of property
or services if the purchase price is due more than six months from the date the
obligation is incurred or is evidenced by a note or similar written instrument;
and (E) all indebtedness secured by any Lien on any property or asset owned or
held by that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is nonrecourse to the credit of that Person.
"Indemnified Liabilities" has the meaning set forth in Section 14.2.
-----------------------
"Independent Director" means an individual satisfactory to Lender who
--------------------
shall not have been at the time of such individual's appointment or at any time
while serving as a director of any Borrower Party, and may not have been at any
time during the preceding five years (i) a stockholder, director, officer,
employee, partner, attorney or counsel of Borrower, Guarantor or any Affiliate
of either of them (except that such individual may be an independent director of
Member or an independent manager or member of Borrower), (ii) a customer,
supplier or other Person who derives any of its purchases or revenues from its
activities with Borrower, Guarantor or any Affiliate of either of them, (iii) a
Person or other entity controlling or under common control with any such
stockholder, partner, customer, supplier or other Person, or (iv) a member of
the immediate family of any such stockholder, director, officer, employee,
partner, attorney, counsel, customer, supplier or other Person. As used in this
definition, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management, policies or
activities of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Insurance Premiums" means the annual insurance premiums for the
------------------
insurance policies required to be maintained with respect to the Properties
under Section 5.4.
"Intercreditor Agreements" means the side letter agreements to be
------------------------
executed by the Leasehold Mortgagees for each of the Leasehold Financings in
favor of Lender, agreeing to certain matters with respect to the Leasehold
Mortgages, in form and substance reasonably acceptable to Lender.
"Interest Accrual Period" means, with respect to any Payment Date, a
-----------------------
period commencing on the tenth (10/th/) day of the prior calendar month (or if
such day is not a Business Day the next Business Day after such tenth (10/th/)
day of such prior calendar month) and ending on the ninth (9/th/) day of the
calendar month in which such Payment Date occurs (unless the tenth (10/th/) day
of such calendar month is not a Business Day, then ending on the day immediately
prior to the next Business Day after such tenth (10/th/) day of such calendar
month).
"Interest Rate" has the meaning set forth in Section 2.2.
-------------
"Interim Operator" has the meaning set forth in Section 5.12(A).
----------------
"Involuntary Borrower Party Bankruptcy" means any involuntary case
-------------------------------------
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, in which Borrower Party is a debtor or
all or any portion of any Property is property of the estate therein.
10
"IRS" means the Internal Revenue Service or any successor thereto.
---
"Kindred" means, collectively, Kindred Healthcare, Inc., a Delaware
-------
corporation (f/k/a Vencor, Inc.) and Kindred Healthcare Operating, Inc., a
Delaware corporation (f/k/a/ Vencor Operating, Inc.).
"Knowledge" or "knowledge" whenever in this Loan Agreement or any of the
--------- ---------
Loan Documents, or in any document or certificate executed on behalf of Borrower
Party pursuant to this Loan Agreement or any of the Loan Documents, reference is
made to the knowledge of Borrower or any other Borrower Party (whether by use of
the words "knowledge" or "known", or other words of similar meaning, and whether
or not the same are capitalized), such shall be deemed to refer to the actual
knowledge, without duty of independent inquiry or investigation (except that the
persons described in clause (i) shall make reasonable inquiry of the persons
described in clause (ii) below), of (i) Debra A. Cafaro, T. Richard Riney and
John C. Thompson; and (ii) the individuals employed by any Borrower Party with
whom the persons mentioned in clause (i) above would reasonably be expected to
consult for information on the subject matter, including, without limitation,
the property manager, maintenance supervisor, or other individuals with
responsibility for management of the Property and/or the applicable entity, in
each case only if such person(s) are employed by a Borrower Party.
"Lease" means the Master Lease and any other lease, tenancy, license,
-----
sublease, assignment and/or other rental or occupancy agreement (including,
without limitation, any and all guarantees of any of the foregoing) heretofore
or hereafter entered into affecting the use, enjoyment or occupancy of any
Property or any portion thereof, including any extensions, renewals,
modifications or amendments thereof.
"Leasehold Financings" means, collectively, the indebtedness of Lessee
--------------------
under (i) that certain $120,000,000 Credit Agreement, dated as of April 20,
2001, among Lessee, Leasehold Mortgagee and the lenders parties thereto, and
(ii) that certain $300,000,000 Credit Agreement, dated as of April 20, 2001,
among Lessee, Leasehold Mortgagee and the lenders parties thereto.
"Leasehold Mortgage Documents" means all documents and agreements
----------------------------
evidencing and/or securing the Leasehold Financings, as amended, modified or
restated from time to time.
"Leasehold Mortgagee" means Morgan Guaranty Trust Company of New York, as
-------------------
administrative agent and collateral agent, for the lenders which are parties to
the respective Leasehold Financings.
"Leasehold Mortgages" means those certain leasehold mortgages/deeds of
-------------------
trust/security deeds encumbering or conveying security title to Lessee's
interest under the Master Lease, as security for the respective Leasehold
Financings, as amended, modified or restated from time to time.
"Legal Requirements" means as to any Property, all federal, state, county,
------------------
parish, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting such
Property or the maintenance, construction, use, operation or alteration thereof,
whether now or hereafter enacted and in force, including, without limitation,
(i) all zoning, subdivision and land use laws, regulations and ordinances,
11
health, fire, building codes and parking laws, (ii) skilled nursing facility,
residential care, personal care, adult care, boarding home and/or assisted
living facility laws, rules and regulations including, without limitation,
Medicare Regulations and Medicaid Regulations, (iii) any licensure requirements,
certification requirements under applicable federal and/or state cost
reimbursement programs, including Medicare and Medicaid (provided the applicable
Property participates in such reimbursement), building codes and zoning
regulations, (iv) all requirements of the Corporate Integrity Agreement, (v) any
which may (x) require repairs, modifications or alterations in or to such
Property or (y) in any way adversely affect the use and enjoyment thereof, and
(vi) all Permits necessary to operate such Property.
"Lender" is defined in the preamble.
------
"Lessee" means Kindred, in its capacity as lessee under the Master Lease,
------
or its successors or permitted assigns thereunder.
"Lessee Repair Default" has the meaning set forth in Section 6.5.
---------------------
"Letter of Credit" shall mean an irrevocable, unconditional, transferable,
----------------
clean sight draft letter of credit (either an evergreen letter of credit or one
which does not expire until at least sixty (60) days after the Maturity Date
(the "LC Expiration Date")), in favor of Lender, entitling Lender to draw
------------------
thereon in New York, New York based solely on a statement executed by an officer
or authorized signatory of Lender, in form and substance reasonably acceptable
to Lender and issued by an Eligible Bank. If at any time (a) the institution
issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if
the Letter of Credit is due to expire prior to the LC Expiration Date, Lender
shall have the right immediately to draw down the same in full and hold the
proceeds thereof in accordance with the provisions of this Loan Agreement,
unless Borrower shall deliver a replacement Letter of Credit from an Eligible
Bank within (i) as to (a) above, twenty (20) days after Lender delivers written
notice to Borrower that the institution issuing the Letter of Credit has ceased
to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior
to the expiration date of said Letter of Credit.
"LIBO Rate" means, for each Determination Date, the rate per annum reported
---------
on Telerate Access Service Page 3750 (British Bankers Association Settlement
Rate), as of 11:00 a.m., London, England time, as the non-reserve adjusted
London Interbank Offered Rate for U.S. dollar deposits having a 30-day term (or
on such other page as may replace Telerate Page 3750 on that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying such rate as determined by Lender in
its sole but good faith discretion). In the event that (i) more than one such
LIBO Rate is provided, the average of such rates shall apply or (ii) no such
LIBO Rate is published, then the LIBO Rate shall be the rate at which U.S.
dollar deposits approximately equal to the principal amount of the Loan having a
30-day term are offered by the principal London office of a leading "money
center" bank active in the London interbank market for U.S. dollar deposits, as
determined by Lender in its sole discretion, in immediately available funds in
the London interbank market on the Determination Date. The LIBO Rate for any
Interest Accrual Period shall be adjusted from time to time, by increasing the
rate thereof to compensate Lender and any Funding Party for any aggregate
reserve requirements (including, without limitation, all basic, supplemental,
marginal and other reserve requirements and taking into account any transitional
adjustments or other
12
scheduled changes in reserve requirements during any Interest Accrual Period)
which are required to be maintained by Lender or such Funding Party with respect
to "Eurocurrency liabilities" (as presently defined in Regulation D of the Board
of Governors of the Federal Reserve System) of the same term under Regulation D,
or any other regulations of a Governmental Authority having jurisdiction over
Lender or such Funding Party of similar effect, it being acknowledged by all
parties that such reserve requirement as of the date of this Loan Agreement is
zero percent (0%). Notwithstanding the foregoing, if the interest rate for
Lender or any Funding Party shall be increased in respect of reserve
requirements as provided in the immediately preceding sentence, Lender or such
Funding Party shall promptly notify Borrower in writing upon becoming aware that
Borrower may be required to make the foregoing compensation to Lender or such
Funding Party. Lender or any Funding Party that gives notice as provided herein
shall promptly withdraw such notice (by notice to Borrower) whenever Lender or
such Funding Party is no longer required to maintain such reserves or the
circumstances giving rise to such notice shall otherwise cease. Notwithstanding
the foregoing, Borrower shall not be required to pay any increased amounts
required by the third sentence of this definition to the extent that Lender or
the relevant Funding Party shall be compensated or reimbursed under Section 2.10
hereof for such amounts. The establishment of the LIBO Rate on each
Determination Date by Lender and Lender's calculation of the rate of interest
applicable to the Note shall (in the absence of manifest error) be final and
binding.
"Lien" means any lien, mortgage, pledge, security interest, security title,
----
charge or encumbrance of any kind, whether voluntary or involuntary (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" has the meaning set forth in Section 2.1.
----
"Loan Agreement" means this Loan and Security Agreement, as same may be
--------------
amended or modified from time to time (including all schedules, exhibits,
annexes and appendices hereto).
"Loan Documents" means this Loan Agreement, the Note, the Mortgages, the
--------------
Assignments of Leases, the Guaranty, the Environmental Indemnity, the Financing
Statements, the Cash Management Agreement and any and all other documents and
agreements accepted by Lender for the purposes of evidencing and/or securing the
Loan.
"Loss Proceeds" means, in the event of a casualty or condemnation affecting
-------------
any Property, the insurance proceeds received under any insurance policy in
connection with such casualty or the condemnation award or proceeds received in
respect of any such condemnation, in either case, less all reasonable costs and
expenses incurred by Lender, Lessee or Borrower, as the case may be, in
connection with the adjustment, settlement and collection of such insurance
proceeds or condemnation award, including, without limitation, reasonable
attorneys' fees and disbursements.
"Loss Proceeds Account" has the meaning given thereto in the Cash
---------------------
Management Agreement.
13
"Major Lease" means any Lease to any Person other than an Affiliate of
-----------
Borrower demising (together with all other Leases to the same tenant or any
Affiliate thereof) more than twenty percent (20%) of the rentable square footage
of any Property.
"Major Sublease" has the meaning set forth in Section 5.12(A).
--------------
"Management Agreement" means any management agreement covering one or more
--------------------
of the Properties which may hereafter be entered into in accordance with the
terms and conditions hereof.
"Manager" means any Person (approved by Lender in accordance with the terms
-------
and conditions hereof) that may hereafter be charged with management of one or
more of the Properties under any Management Agreement.
"Master Lease" means that certain Master Lease Agreement, dated as of the
------------
date hereof, between Borrower (successor-in-interest to Ventas Realty), as
lessor, and Lessee, as lessee, covering each of the Properties, as same may be
modified or amended from time to time in accordance with the terms and
conditions of this Loan Agreement.
"Master Lease Event of Default" means any default beyond applicable grace
-----------------------------
periods under the Master Lease.
"Material Adverse Effect" means any event or condition that has a material
-----------------------
adverse effect on (i) the business, operations, properties, assets or financial
condition of Borrower taken as a whole, (ii) the Properties taken as a whole,
(iii) the ability of Borrower to repay the principal amount of the Loan and
interest accrued thereon as same become due, or (iv) the ability of Lender to
enforce or collect any of the Obligations. In determining whether any individual
event would result in a Material Adverse Effect, notwithstanding that such event
does not of itself have such effect, a Material Adverse Effect shall be deemed
to have occurred if the cumulative effect of such event and all other then
occurring events and existing conditions would result in a Material Adverse
Effect.
"Material Alteration" means with respect to any Property any alterations or
-------------------
modifications to a Property, the cost of which (excluding cosmetic refurbishing
alterations or modifications, such as painting, wallpapering or carpeting), when
taken together with all other alterations and modifications (excluding cosmetic
refurbishing alterations or modifications) performed on such Property in the
twelve (12) month period immediately preceding the subject alterations or
modifications, would exceed Five Hundred Thousand Dollars ($500,000). Without
limiting the foregoing, "Material Alterations" shall include, without
limitation, (1) the construction of a new wing or new story on a Property, (2)
the repair, replacement, restoration, remodeling or rebuilding of the existing
improvements on a Property or any portion thereof, where the purpose and effect
of such work is to provide a functionally new facility needed to provide
services not previously offered and (3) any expansion, construction, renovation
or conversion in order to increase materially the bed capacity of any Property,
to change materially the purpose for which such beds are utilized or to improve
materially the quality of such Property.
14
"Maturity Date" shall mean December 9, 2006, or such other date on which
-------------
the final payment of principal of the Note becomes due and payable as therein or
herein provided, whether at such stated maturity date, by acceleration, or
otherwise.
"Maximum Rate" has the meaning set forth in Section 2.2(D).
------------
"Medicaid" means that certain program of medical assistance, funded jointly
--------
by the federal government and the states, including but not limited to the
Medi-Cal program administered by the State of California ("Medi-Cal"), for
--------
impoverished individuals who are aged, blind and/or disabled, and for members of
families with dependent children, which program is more fully described in Title
XIX of the Social Security Act (42 U.S.C. 1396 et seq.) and the regulations
promulgated thereunder.
"Medicaid Certification" means, with respect to any Person, health care
----------------------
facility, or Nursing Facility, certification by CMS or a state agency or entity
under contract with CMS that such Person, facility or Nursing Facility, as
applicable, complies with the conditions of participation set forth in Medicaid
Regulations or any similar certification issued by CMS or a state agency.
"Medicaid Regulations" means, collectively, (i) all federal statutes
--------------------
(whether set forth in Title XIX of the Social Security Act (42 U.S.C. (S)(S)
1396 et seq.) or elsewhere) affecting the medical assistance program established
------
by Title XIX of the Social Security Act; (ii) all applicable provisions of all
federal rules, regulations, manuals, orders and administrative, reimbursement
and other guidelines of all Governmental Authorities (whether or not having the
force of law) promulgated pursuant to or in connection with the statutes
described in clause (i) above; (iii) all state statutes enacted and all state
plans for medical assistance, including, but not limited to, Medi-Cal, and state
plan amendments filed by the state with CMS in connection with the statutes and
provisions described in clauses (i) and (ii) above; and (iv) all applicable
provisions of all rules, regulations, manuals, orders and administrative,
reimbursement, and other guidelines of all Governmental Authorities (whether or
not having the force of law) promulgated pursuant to or in connection with any
of the foregoing, in each case as may be amended, supplemented or otherwise
modified from time to time.
"Medicare" means that certain federal program providing health insurance
--------
for eligible elderly and other individuals, under which physicians, hospitals,
Nursing Facilities, home health care and other providers are reimbursed for
certain covered services they provide to the beneficiaries of such program,
which program is more fully described in Title XVIII of the Social Security Act
(42 U.S.C. (S)(S) 1395 et seq.) and the regulations promulgated thereunder.
"Medicare Certification" means, with respect to any Person, health care
----------------------
facility, or Nursing Facility, certification by CMS or a state agency or entity
under contract with CMS that such Person, facility or Nursing Facility, as
applicable, complies with the conditions of participation set forth in Medicare
Regulations or any similar certification issued by CMS or a state agency.
"Medicare Regulations" means, collectively, all federal statutes (whether
--------------------
set forth in Title XVIII of the Social Security Act (42 U.S.C.(S)(S) 1395 et
seq.) or elsewhere) affecting the
15
health insurance program for the aged and disabled established by Title XVIII of
the Social Security Act, together with all applicable provisions of all rules,
regulations, manuals, orders and administrative, reimbursement and other
guidelines of all Governmental Authorities promulgated pursuant to or in
connection with any of the foregoing (whether or not having the force of law),
as each may be amended, supplemented or otherwise modified from time to time.
"Member" means Ventas Finance I, Inc., a Delaware corporation, which is
------
the sole member of Borrower.
"Minimum Cash Flow Sweep DSCR" has the meaning set forth in Section
----------------------------
2.6(C).
"Minimum Cash Flow Sweep LCR" has the meaning set forth in Section
---------------------------
2.6(C).
"Monthly Debt Service Payment" has the meaning set forth in Section
----------------------------
2.4.
"Monthly Debt Service Payment Amount" has the meaning set forth in
-----------------------------------
Section 2.4(A).
"Moody's" means Moody's Investors Service.
-------
"Mortgages" means, collectively, (i) those certain Mortgages,
---------
Assignments of Leases and Rents, Security Agreements and Fixture Filings, (ii)
those certain Deeds of Trust, Assignments of Leases and Rents, Security
Agreements and Fixture Filings and (iii) that certain Deed to Secure Debt,
Assignment of Leases and Rent, Security Agreement and Fixture Filing, each of
even date herewith from Borrower to Lender, constituting Liens on the respective
Properties, as Collateral for the Loan, as same may be modified or amended from
time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
------------------
3(37) or Section 4001(a)(3) of ERISA to which Borrower or any Affiliate is
making, or is accruing an obligation to make, contributions or has made, or been
obligated to make, contributions within the preceding six (6) years, or for
which Borrower or any Affiliate has any liability, including contingent
liability.
"Net Operating Income" means, for any period, the amount by which Gross
--------------------
Revenues exceed Operating Expenses.
"Net Proceeds" means, with respect to any Property, (i) either (x)
------------
unless clause (y) below applies, the purchase price actually received by Lender
----------
from a third party purchaser with respect to such Property as a result of the
exercise by Lender of its rights, powers, privileges and other remedies after
the occurrence of an Event of Default or (y) in the event that Lender is the
purchaser at foreclosure of such Property, the amount of Lender's credit bid, in
either case less (ii) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and disbursements and any brokerage
fees, if applicable, incurred by Lender in connection with the exercise of such
remedies.
"Nondisqualification Opinion" means an opinion of independent tax
---------------------------
counsel reasonably acceptable to Lender to the effect that a contemplated action
would not materially adversely affect the federal income tax status as a REMIC,
trust or other vehicle of any REMIC, trust or other vehicle in which the Loan
may be included at the time such opinion is required.
16
"Note" has the meaning set forth in Section 2.1.
----
"Nursing Facility" means a skilled nursing facility and any other
----------------
general or specialized care facilities (including any Alzheimer's or dementia
care unit, sub acute facility, or any facility providing senior care,
residential care, assisted care or adult day care and services incidental
thereto), now or hereafter located on the Properties.
"O&M Plans" has the meaning set forth in Section 5.7.
---------
"Obligations" means the entire principal amount of the Loan, interest
-----------
thereon and all obligations, liabilities and indebtedness of every nature of
Borrower from time to time owed to Lender under the Loan Documents, including
the principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable under the Loan Documents whether before or after
the filing of a proceeding under the Bankruptcy Code by or against Borrower.
"Operating Expenses" means, without duplication, all costs and expenses
------------------
incurred by Lessee determined on an accrual basis, relating to the operation,
maintenance, repair, use and management of the Properties, including, without
limitation, utilities, repairs and maintenance, insurance, property taxes and
assessments, advertising expenses, payroll and related taxes, equipment lease
payments, actual management fees and all amounts paid into reserves but
excluding (i) lease payments made by Lessee under the Master Lease and
principal, interest and other payments made by Lessee under the Leasehold
Mortgage Documents and any other Indebtedness of Lessee, (ii) depreciation,
amortization and other non-cash expenses of the Properties; provided, however,
-------- -------
such costs and expenses shall be subject to reasonable adjustment by Lender to
normalize such costs and expenses and (iii) capital expenditures.
"Patient Revenues" means revenues generated from the sale of goods or
----------------
services at or through the Properties, whether by Lessee or any subtenant or
licensee of Lessee, or any other party, which revenues are primarily derived
from services provided to patients (including, without limitation, revenues
received or receivable for the use of or otherwise by reason of all rooms, beds
and other facilities provided, meals served, services performed or goods sold at
the Properties, but excluding rents received by Lessee from a permitted sublease
of any Property(ies) or any part thereof or other consideration received by
Lessee from a permitted assignment of the Master Lease or any part thereof), and
which revenues shall be measured and computed using the methodology required
under the Master Lease and net of contractual adjustments of governmental and
other third party payors.
"Payment Date" means the ninth (9/th/) day of each calendar month
------------
occurring during the term of the Loan (or if such ninth (9/th/) day in any
calendar month is not a Business Day, the Business Day immediately prior to such
ninth (9/th/) day).
"Pension Plan" means any Employee Benefit Plan, other than a
------------
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the IRC and (i) which is maintained for employees of Borrower, or
any of its ERISA Affiliates, (ii) which has at any time within the preceding six
(6) years been maintained for the employees of Borrower or any of
17
its ERISA Affiliates, or (iii) for which Borrower or any ERISA Affiliate has any
liability, including contingent liability.
"Permits" means CONs, Accreditations, Medicaid Certifications, Medicare
-------
Certifications and all other such federal, state and local approvals, licenses,
filings, permits, certificates, regulatory or other agreements (i) required
under applicable Legal Requirements by any Governmental Authority or (ii) used
or useful in connection with the ownership, operation, use or occupancy of the
Properties as Nursing Facilities, including, without limitation, certificates of
occupancy, business licenses, state health department licenses, environmental
permits, food service licenses, licenses to conduct business and all such other
permits, filings, licenses and rights, obtained from, or sent to any
governmental or quasi-governmental entity whatsoever.
"Permitted Encumbrances" means (i) the Mortgages and the other Liens of
----------------------
the Loan Documents in favor of Lender; (ii) the items shown in Schedule B to the
Title Policies as of Closing; (iii) future liens for property taxes and
assessments not then delinquent; (iv) Liens for Impositions not yet due and
payable or Liens arising after the date hereof which are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted in
accordance with Section 5.3(B) hereof; (v) in the case of Liens arising after
the date hereof, statutory Liens of carriers, warehousemen, mechanics,
materialmen and other similar Liens arising by operation of law, which are
incurred in the ordinary course of business and discharged by a Borrower by
payment, bonding or otherwise within thirty (30) days after the filing thereof
or which are being contested in good faith in accordance with Section 5.3(B)
hereof; (vi) Liens arising from reasonable and customary purchase money
financing of personal property and equipment leasing to the extent the same are
created in the ordinary course of business in accordance with Section 5.17(B)
hereof; (vii) all easements, rights-of-way, restrictions and other similar
charges or non-monetary encumbrances against real property which do not
materially and adversely affect (A) the ability of Borrower to pay any of the
Obligations as and when due, (B) the marketability of title to any Property, (C)
the fair market value of any Property, or (D) the use or operation of any
Property as of the Closing Date and thereafter; (viii) rights of Kindred, as
tenant under the Master Lease and any other existing and future tenants, as
tenants only, pursuant to the Leases; (ix) the Leasehold Mortgages (provided
that the Title Policies insure that such Leasehold Mortgages are Liens on
Lessee's interest in the Master Lease only and do not constitute Liens on the
fee interest of Borrower in and to any Property); and (x) any other Lien to
which Lender may expressly consent in writing.
"Permitted Investments" has the meaning set forth in the Cash
---------------------
Management Agreement.
"Person" means and includes natural persons, corporations, limited
------
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).
"Pre-Existing Condition" has the meaning set forth in Section 5.5.
----------------------
18
"Prepayment Consideration" has the meaning set forth in Section 2.6.
------------------------
"Primary Borrower Parties" means, collectively, Borrower and Member.
------------------------
"Principal Balance" means the outstanding principal balance of the Loan
-----------------
from time to time.
"Proceeds Release Condition" has the meaning set forth in Section
--------------------------
2.6(D).
"Pro Forma Net Operating Income" means Net Operating Income for any
------------------------------
period adjusted as follows: (i) if the actual occupancy percentage of a Property
is greater than 95%, Gross Revenues for such Property shall be reduced by the
product of (1) the difference between the actual occupancy percentage of such
Property and 95% (combined occupancy and bad debt adjustment) and (2) the Gross
Revenues for such Property, (ii) if the actual occupancy percentage of a
Property is equal to or less than 95%, Gross Revenues for such Property shall be
reduced by the product of (1) six-tenths of one percent (0.6%) (representing a
reduction for bad debt expenses) and (2) Gross Revenues for such Property; (iii)
a management fee for each Property equal to 5% of Gross Revenues for such
Property for such period (after deducting any vacancy factor and for bad debt
expenses as calculated in (i) or (ii) above, as applicable); (iv) a reserve for
Capital Expenditures equal to $400 per licensed bed at each of the Properties
per annum; and provided that Pro Forma Net Operating Income may further be
adjusted by Lender based upon Lender's sole good faith determination of the
underwriting criteria used in connection with its original underwriting of the
Loan prior to Closing (which shall be disclosed by Lender to Borrower) and shall
be final absent manifest error. An example of the calculation of Pro Forma Net
Operating Income and underwriting criteria used in connection therewith is
attached hereto as Exhibit D.
---------
"Properties" means the properties (including land and Improvements)
----------
listed on Exhibit A attached hereto which serve as Collateral for the Loan and
---------
which shall be encumbered by and are more particularly described in the
respective Mortgages.
"Property Adverse Effect" means a material adverse effect on the value,
-----------------------
use or operations of any Property.
"Property Release" has the meaning set forth in Section 11.4.
----------------
"Rating Agency" means any of S&P, Moody's or any other
-------------
nationally-recognized statistical rating organization designated by Lender in
its sole discretion.
"Rating Confirmation" means with respect to the transaction or matter
-------------------
in question, if all or any portion of the Loan, by itself or together with other
loans, has been the subject of a Securitization, then each applicable Rating
Agency shall have confirmed in writing that such transaction or matter shall not
result in a downgrade, qualification, or withdrawal of any rating then in effect
for any class of certificates or other securities issued in connection with such
Securitization.
"Rating Criteria" with respect to any Person, shall mean that (i) the
---------------
short-term unsecured debt obligations of such Person are rated at least "A-1+"
by S&P and "P-1" by
19
Moody's, if deposits are held by such Person for a period of less than one
month, or (ii) the long-term unsecured debt obligations of such Person are rated
at least "AA-" by S&P and "Aa3" by Moody's, if deposits are held by such Person
for a period of one month or more.
"Receipts" means all revenues, receipts and other payments of every
--------
kind arising from ownership or operation of the Properties and received by
Borrower or Affiliates thereof.
"Regulatory Permits" has the meaning set forth in Section 4.6(B).
------------------
"Reimbursement Contracts" means all third party reimbursement contracts
-----------------------
for the Properties which are now or hereafter in effect with respect to
residents or patients qualifying for coverage under the same, including, without
limitation, Medicare, Medicaid and private insurance agreements, and any
successor program or other similar reimbursement program and/or private
insurance agreements.
"Related Person" means in relation to any Person, any other Person that
--------------
is (i) an Affiliate of the first Person; (ii) the sibling of the first Person or
of the Affiliate; (iii) the then-current and former spouses of the first Person
or of the Affiliate; (iv) a Person that shares or has shared a residence with
the first Person or with the Affiliate; (v) the ancestor or descendant of the
first Person or of any other Person described in this items (i) through (iv)
above; or (vi) any other Person that, by reason of familial, economic, social or
other relationship, would reasonably be expected to favor the first Person or to
act as requested by the first Person. Where expressions such as "[name of party]
or any Related Person" are used, the same shall refer to the named party and any
Related Person of the named party.
"Release Date" has the meaning set forth in Section 11.4.
------------
"Release Price" means, with respect to any Property, an amount equal to
-------------
125% of the Allocated Loan Amount relating to such Property; provided, however,
that the "Release Price" for any Property that is being released (i) pursuant to
a Defaulted Property Release, (ii) in connection with a casualty to such
Property pursuant to Section 5.5(G) or (iii) in connection with a condemnation
affecting such Property pursuant to Section 6 of any Mortgage, shall be an
amount equal to the greater of (a) 115% of the Allocated Loan Amount for such
Property and (b) the amount of any consideration received by Borrower from
Lessee pursuant to the Master Lease in connection with the release of such
Property, but not to exceed 125% of the Allocated Loan Amount for such Property.
"Released Proceeds" has the meaning set forth in Section 2.6(D).
-----------------
"REMIC" means a real estate mortgage investment conduit as defined in
-----
Section 860D of the Code.
"Rents" has the meaning set forth in the granting clauses of each of
-----
the Mortgages.
"Replacement Reserve" means the reserve established pursuant to Section
-------------------
6.5.
"Required Repairs" has the meaning set forth in Section 6.7.
----------------
20
"Reserve Sub-Accounts" has the meaning set forth in Section 7.1.
--------------------
"Reserves" means the reserves held by or on behalf of Lender pursuant to
--------
this Loan Agreement or other Loan Documents, including without limitation, the
reserves established pursuant to Article VI.
"Restoration" has the meaning set forth in Section 5.5(B).
-----------
"Restoration Threshold" means, for any Property, an amount equal to the
---------------------
greater of (i) 5% of the Allocated Loan Amount for such Property and (ii)
$250,000.
"Retention Amount" has the meaning set forth in Section 5.5(D).
----------------
"S&P" shall mean Standard & Poor's Rating Services, a division of The
---
McGraw-Hill Companies, Inc.
"SEC" has the meaning set forth in Section 5.1(A).
---
"Secondary Market Transaction" has the meaning set forth in Section 10.1.
----------------------------
"Section 7.3 Master Lease Event of Default" has the meaning set forth in
-----------------------------------------
Section 7.3.
"Securities" (whether or not capitalized) means any stock, shares, voting
----------
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Securitization" means a public or private rated offering of securities
--------------
representing direct or indirect interests in one or more mortgage loans or the
right to receive income therefrom.
"Servicer" means a servicer selected by Lender from time to time in its
--------
sole discretion to service the Loan.
"Sub-Accounts" has the meaning set forth in Section 7.1.
------------
"Suits" has the meaning set forth in Section 4.9.
-----
"Survey" has the meaning set forth in Section 3.1(G).
------
"Sweep Event Determination Date" has the meaning set forth in Section
------------------------------
2.6(D).
"Tax Liabilities" has the meaning given to such term in Section 2.8.
---------------
"Term" shall mean the period from the date hereof through and including
----
the Maturity Date.
21
"Title Company" means First American Title Insurance Company or such
-------------
other national title insurance company as may be reasonably acceptable to
Lender.
"Title Policies" means the mortgagee policies of title insurance
--------------
pertaining to the Mortgages issued to Lender in connection with the Closing
meeting the requirements of Section 3.1(G).
"Transfer" has the meaning set forth in Section 11.2.
--------
"Vencor" means, collectively, Vencor, Inc., a Delaware corporation (n/k/a
------
Kindred Healthcare, Inc.), and Vencor Operating, Inc., a Delaware corporation
(n/k/a Kindred Healthcare Operating, Inc.).
"Ventas" means Ventas, Inc., a Delaware corporation.
------
"Ventas Realty" means Ventas Realty, Limited Partnership, a Delaware
-------------
limited partnership.
"Waiving Party" has the meaning set forth in Article XIII.
-------------
Section 1.2 Accounting Terms.
----------------
Except as otherwise expressly provided herein, all accounting terms not
otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP.
Section 1.3 Other Definitional Provisions.
-----------------------------
References to "Articles", "Sections", "Subsections", "Exhibits" and
-------- -------- ----------- --------
"Schedules" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
---------
respectively, of this Loan Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. In this Loan
Agreement, "hereof", "herein", "hereto", "hereunder" and the like mean and refer
------ ------ ------ ---------
to this Loan Agreement as a whole and not merely to the specific article,
section, subsection, paragraph or clause in which the respective word appears;
words importing any gender include the other genders; references to "writing"
-------
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "including", "includes" and "include" shall be
--------- -------- -------
deemed to be followed by the words "without limitation"; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document shall include subsequent amendments, assignments, and other
modifications thereto, and (ii) any reference to any Person may include such
Person's respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons.
ARTICLE II
TERMS OF THE LOAN
Section 2.1 Loan.
22
(A) Loan. Subject to the terms and conditions of this Loan Agreement and
----
in reliance upon the representations and warranties of Borrower contained
herein, Lender agrees to lend to Borrower, and Borrower agrees to borrow from
Lender, a loan in the amount of $225,000,000 (such loan and the obligation of
Borrower to repay the same together with all interest and other amounts from
time to time owing hereunder may be referred to as the "Loan"). The Loan shall
----
be comprised of the following six (6) components (each, a "Component"): (i) a
---------
Component in the original principal amount of $125,230,000 ("Component A"); (ii)
-----------
a Component in the original principal amount of $17,970,000 ("Component B");
-----------
(iii) a Component in the original principal amount of $8,860,000 ("Component
---------
C"); (iv) a Component in the original principal amount of $26,830,000;
- -
("Component D"); (v) a Component in the original principal amount of $26,830,000
-----------
("Component E"); and (vi) a Component in the original principal amount of
-----------
$19,280,000 ("Component F").
-----------
(B) Note. On the Closing Date, Borrower shall execute and deliver to
----
Lender a Promissory Note, dated of even date herewith (as amended, modified or
restated, and any replacement notes therefor, the "Note"), made by Borrower to
----
the order of Lender, in the original principal amount of $225,000,000.
(C) Use of Proceeds. The proceeds of the Loan funded at Closing shall be
---------------
used to (i) repay any existing indebtedness secured by any mortgage encumbering
all or any part of the Properties; (ii) pay all recording fees and taxes, title
insurance premiums, the reasonable costs and expenses incurred by Lender,
including the legal fees and expenses of counsel to Lender, and other costs and
expenses incurred by the Borrower Parties in connection with the Loan and
related transactions and (iii) establish the Reserves required hereunder. The
remaining proceeds of the Loan, if any, shall be disbursed to Borrower to be
disbursed to its Member. The Member shall in turn disburse such remaining
proceeds to its sole shareholder which may use such proceeds as it deems
appropriate in its sole discretion; provided, however, that any and all such
-------- -------
remaining proceeds of the Loan will be used for commercial purposes only and
will not be used for personal, family, agricultural or household use.
Section 2.2 Interest.
--------
(A) Rate of Interest. The outstanding principal balance of each Component
----------------
of the Loan shall bear interest at a rate per annum equal to the Interest Rate
in effect for such Component for each Interest Accrual Period during the term
hereof. The "Interest Rate" for any Component of the Loan for any Interest
-------------
Accrual Period shall be the rate of interest per annum equal to the sum of (i)
the Applicable Spread for such Component plus (ii) the LIBO Rate in effect for
such Interest Accrual Period.
(B) Default Rate. Notwithstanding the foregoing, upon the occurrence and
------------
during the continuance of an Event of Default and in any event from and after
the Maturity Date of the Loan, the outstanding principal balance of each
Component of the Loan and all other Obligations shall bear interest until paid
in full at a rate per annum that is three percent (3.0%) in excess of the
Interest Rate for each such Component otherwise applicable under this Loan
Agreement and the Note (the "Default Rate").
------------
23
(C) Computation of Interest. Interest on the Loan and all other
-----------------------
Obligations owing to Lender shall be computed on the basis of a 360-day year,
and shall be charged for the actual number of days elapsed during any month or
other accrual period. Interest shall be payable in arrears (except with respect
to the number of days from the Payment Date in any Interest Accrual Period to
the last day of such Interest Accrual Period (if such Interest Accrual Period
does not end on such Payment Date) as to which Interest shall be payable in
advance).
(D) Interest Laws. Notwithstanding any provision to the contrary contained
-------------
in this Loan Agreement or the other Loan Documents, Borrower shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("Excess
------
Interest"). If any Excess Interest is provided for or determined by a court of
- --------
competent jurisdiction to have been provided for in this Loan Agreement or in
any of the other Loan Documents, then in such event: (1) the provisions of this
subsection shall govern and control; (2) Borrower shall not be obligated to pay
any Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender's option, (a) applied as a credit against either
or both of the outstanding principal balance of the Loan or accrued and unpaid
interest thereunder (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the "Maximum
-------
Rate"), and this Loan Agreement and the other Loan Documents shall be deemed to
- ----
have been and shall be, reformed and modified to reflect such reduction; and (5)
Borrower shall not have any action against Lender for any damages arising out of
the payment or collection of any Excess Interest. Notwithstanding the foregoing,
if for any period of time interest on any Obligation is calculated at the
Maximum Rate rather than the applicable rate under this Loan Agreement, and
thereafter such applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Obligations shall, to the extent permitted by law,
remain at the Maximum Rate until Lender shall have received or accrued the
amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the applicable Interest Rate shall be applicable during any time
when the Default Rate would have been applicable hereunder, provided however
that if the Maximum Rate is greater or lesser than the applicable Interest Rate,
then the foregoing provisions of this paragraph shall apply.
(E) Late Charges. If an Event of Default relating to non-payment of
------------
principal (other than non-payment of the outstanding principal amount of the
Loan at the Maturity Date), interest or other sums due hereunder or under any of
the other Loan Documents shall occur, then Borrower shall pay to Lender, in
addition to all sums otherwise due and payable, a late fee in an amount equal to
three percent (3.0%) of such principal, interest or other sums due hereunder or
under any other Loan Document (or, in the case of a partial payment, the unpaid
portion thereof), such late charge to be immediately due and payable without
demand by Lender.
Section 2.3 Interest Rate Cap Agreement.
---------------------------
(A) As a condition to Closing, Borrower shall purchase and pledge and
deliver to Lender an interest rate cap agreement satisfying the criteria set
forth below (the "Cap"), and Borrower shall maintain such Cap in the possession
---
of Lender, in full force and effect, until all
24
Obligations are fully and finally repaid. The Cap (i) shall have a notional
amount equal to the outstanding principal balance of the Loan, (ii) shall
provide that to the extent that LIBO Rate exceeds eight percent (8%) per annum
(the "Cap Threshold Rate"), then the Cap Provider shall pay to Lender not less
------------------
than the amount of interest that would accrue on the Loan at a per annum rate
equal to difference between LIBO Rate and the Cap Threshold Rate, (iii) shall be
in form and substance reasonably satisfactory to Lender, (iv) shall have a term
equal to the Term of the Loan, and (v) shall be issued by a financial
institution (the "Cap Provider") having a financial rating by S&P of at least
------------
"AA", and by Moody's of at least "Aa2", and otherwise be acceptable to Lender in
Lender's reasonable discretion at the time that the Cap is issued.
(B) If at any time the long-term unsecured debt rating assigned to any Cap
Provider (if it carries a long-term rating) by S&P shall fall below "AA-" or by
Moody's shall fall below "Aa3" and the short-term unsecured debt rating assigned
to any Cap Provider (if it carries a short term rating) by S&P shall fall below
"A-1+" or by Moody's shall fall below "P-1", Borrower shall be required to
deliver a replacement Cap in substantially the form of the Cap delivered at
Closing issued by a Cap Provider having a long-term unsecured debt rating by S&P
of at least "AA-" and by Moody's of at least "Aa3" or having a short-term
unsecured debt rating by S&P of at least "A-1+" and by Moody's of at least
"P-1", providing for a cap "strike price" not greater than the Cap Threshold
Rate and otherwise reasonably acceptable to Lender (a replacement Cap meeting
all of the foregoing conditions, an "Acceptable Replacement Cap") within fifteen
--------------------------
(15) Business Days after such downgrade of the Cap Provider, together with an
assignment of such Cap substantially in the form of the Assignment of Rate Cap
and such Financing Statements and opinions of counsel to the Cap Provider as
Lender may require each in form and substance reasonably acceptable to Lender.
If, for any reason, Borrower is unable to deliver an Acceptable Replacement Cap
when required hereunder, then at or prior to the time when the replacement Cap
is due hereunder, Borrower shall deliver to Lender cash security (such cash
security together with any interest thereon, the "Cap Reserve") in an amount
-----------
sufficient to cover the amount of additional interest which Lender reasonably
estimates may be incurred during the remaining Term of the Loan as a result of
the LIBO Rate exceeding the Cap Threshold Rate, which Cap Reserve shall be held
by Lender and applied to the Obligations in accordance with Section 6.1. If
Borrower shall thereafter deliver an Acceptable Replacement Cap, the remaining
balance of the Cap Reserve shall be returned to Borrower. Borrower shall be
required to pay any and all reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by Lender
(and by any Servicer and trustee in connection with any Securitization backed in
whole or in part by the Loan) in connection with delivery of such Acceptable
Replacement Cap and all related documentation and opinions required above.
(C) All payments made by the Cap Provider under the Cap shall be deposited
directly by the Cap Provider into the Central Account and applied in accordance
with the Cash Management Agreement.
Section 2.4 Payments.
--------
(A) Payments of Interest and Principal. On January 9, 2002 (the "First
---------------------------------- -----
Payment Date"), Borrower shall make a payment to Lender of interest for the
- ------------
period from the Closing Date through the last day of the Interest Accrual Period
in which the Closing Date occurs, plus
25
the principal amount due for such Payment Date as set forth on the principal
amortization schedule attached hereto as Schedule 2.4 (the "Principal
------------ ---------
Amortization Schedule"). On each Payment Date thereafter through but excluding
- ---------------------
the Maturity Date, Borrower shall make monthly payments (each, a "Monthly Debt
------------
Service Payment") of (i) interest in an amount equal to interest accrued on the
- ---------------
outstanding principal balance of each Component of the Loan at the Interest Rate
in effect for such Component for the related Interest Accrual Period plus (ii)
the principal amount due for such Payment Date as set forth on the Principal
Amortization Schedule (the sum of clauses (i) and (ii), the "Monthly Debt
------------
Service Payment Amount"). All principal payments shall be applied first to
- ----------------------
reduce the outstanding principal of Component A until the principal amount of
such Component is paid in full and then sequentially to the other Components in
alphabetical and/or numerical order until the principal amount of each of the
other Components is, in turn, paid in full. The principal payments due under the
Principal Amortization Schedule were calculated based on a twenty-five (25) year
amortization schedule and assuming accrual of interest on the outstanding
principal balance of the Loan at a per annum rate equal to the sum of (i) the
Cap Threshold Rate plus (ii) 1.46% (the rounded initial weighted average of the
Applicable Spreads).
(B) Date and Time of Payment. Borrower shall receive credit for payments
------------------------
on the Loan which are transferred to the account of Lender as provided below (i)
on the day that such funds are received by Lender if such receipt occurs by 2:00
p.m. (New York time) on such day, or (ii) on the next succeeding Business Day
after such funds are received by Lender if such receipt occurs after 2:00 p.m.
(New York time). Whenever any payment to be made hereunder shall be stated to be
due on a day that is not a Business Day, the payment may be made on the next
succeeding Business Day.
(C) Manner of Payment. Borrower promises to pay all of the Obligations
-----------------
relating to the Loan as such amounts become due or are declared due pursuant to
the terms of this Loan Agreement. All payments by Borrower on the Loan shall be
made without deduction, defense, set off or counterclaim and all scheduled
payments of interest, principal or Reserve amounts shall be made in immediately
available funds delivered to Lender by wire transfer to such accounts at such
banks as Lender may from time to time designate in accordance with Article VII.
Section 2.5 Maturity. To the extent not sooner due and payable in accordance
--------
with the Loan Documents, the then outstanding principal balance of the Loan, all
accrued and unpaid interest thereon (including interest through the end of the
Interest Accrual Period then in effect), the applicable Prepayment Consideration
(if any), and all other sums then owing to Lender hereunder and under the Note,
the Mortgages and the other Loan Documents, shall be due and payable on the
Maturity Date.
Section 2.6 Prepayment.
----------
(A) Limitation on Prepayment; Prepayment Consideration Due on
---------------------------------------------------------
Acceleration. Borrower may prepay the Loan in whole or part at any time;
- ------------
provided, however, that if any such prepayment occurs prior to the first (1/st/)
anniversary of the First Payment Date such prepayment must be accompanied by
payment of Prepayment Consideration. Thereafter, Borrower may prepay the Loan in
whole or in part, without payment of Prepayment Consideration, provided
26
that, in any case, (i) Borrower shall provide to Lender not less than ten (10)
Business Days prior written notice of such prepayment (or five (5) Business Days
in the case of a prepayment in connection with a Defaulted Property Release),
(ii) together with such prepayment Borrower also shall pay all accrued and
unpaid interest and all other Obligations (or Obligations then due in the case
of a partial prepayment), (iii) if such prepayment occurs on any day other than
a Payment Date, then together therewith Borrower also shall pay to Lender the
amount of interest that would have accrued on the amount being prepaid from and
including the date of prepayment to the end of such Interest Accrual Period (and
all such amounts shall be held by Lender in the Debt Service Payment Sub-Account
and applied to payment of the Obligations on the next Payment Date) and (iv) no
partial prepayment shall be in an amount less than $1,000,000. Notwithstanding
the foregoing, whether before or after the first (1/st/) anniversary of the
First Payment Date, Borrower may prepay a portion of the Loan in connection with
the Release of one or more of the Properties in accordance with the terms and
conditions of Section 11.4.
(B) Prepayment Consideration Due. If any prepayment of all or any portion
----------------------------
of the Loan shall occur prior to the first (1/st/) anniversary of the First
Payment Date, whether voluntarily, on account of acceleration of the Loan due to
an Event of Default, or otherwise, then except only as expressly provided herein
to the contrary, Borrower shall be required to pay the Prepayment Consideration
to Lender together with such prepayment, as liquidated damages and compensation
for costs incurred, and in addition to all other amounts due and owing to
Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due
in connection with any principal prepayment resulting from the application to
the Obligations of (i) insurance or condemnation proceeds required by Lender
pursuant to this Loan Agreement or the Mortgages or (ii) any funds in the Cash
Flow Sweep Sub-Account pursuant to Section 3.3 of the Cash Management Agreement,
in any case provided that no Event of Default exists. The foregoing designation
of any amount of Prepayment Consideration in this Loan Agreement shall not
create a right to prepay at any time or in any circumstances where this Loan
Agreement does not expressly state that such a right exists.
(C) Mandatory Prepayments; Cash Flow Sweep Events. If, at any time prior
---------------------------------------------
to the repayment of the Obligations in full, a Cash Flow Sweep Event shall
occur, then, from and after the occurrence of such Cash Flow Sweep Event and for
so long as such Cash Flow Sweep Event continues to exist, pursuant to the Cash
Management Agreement all Excess Cash Flow shall be deposited in the Cash Flow
Sweep Sub-Account. A "Cash Flow Sweep Event" shall occur (i) as of any Sweep
---------------------
Event Determination Date when (a) the Cash Flow Sweep DSCR as of the immediately
prior Calculation Date is less than 1.50:1 (the "Minimum Cash Flow Sweep DSCR")
----------------------------
or (b) the Cash Flow Sweep LCR as of the immediately prior Calculation Date is
less than 1.0:1 (the "Minimum Cash Flow Sweep LCR"), and shall continue to exist
---------------------------
until the Minimum Cash Flow Sweep DSCR test and Minimum Cash Flow Sweep LCR test
referred to in the foregoing clauses (a) and (b), respectively, have each been
satisfied as of any subsequent Sweep Event Determination Date or (ii) upon the
existence or occurrence of a Proceeds Release Condition on or after the date
which is six (6) months prior to the Maturity Date, and shall continue to exist
until Excess Cash Flow in the amount of the Released Proceeds has been deposited
into the Cash Flow Sweep Sub-Account (or Borrower has made a principal
prepayment on the Loan in the amount of such Released Proceeds). Notwithstanding
that the Cash Flow Sweep DSCR shall be less than the Minimum Cash Flow Sweep
DSCR as of any Sweep Event Determination Date, provided that the Minimum Cash
Flow Sweep LCR test is
27
satisfied, Borrower may cure such Cash Flow Sweep Event under clause (i) above
by making a principal prepayment on the Loan (which prepayment amount shall be
held in the Debt Service Sub-Account and applied to payment of principal on the
next Payment Date (without imposition of any Prepayment Consideration)), within
two (2) Business Days after the date of delivery of Lender's notice, as
described below, that a Cash Flow Sweep Event has occurred, in an amount which
as determined by Lender, in its sole good faith discretion, would be sufficient
to cause the Cash Flow Sweep DSCR to exceed the Minimum Cash Flow Sweep DSCR if
interest payable on the Loan included in determining such Cash Flow Sweep DSCR
were recalculated assuming that such amount were applied to reduce the principal
amount of the Loan as of the first day of the relevant Measurement Period.
During the continuance of a Cash Flow Sweep Event, any funds on deposit in the
Cash Flow Sweep Sub-Account will be applied to payment of principal of the Loan
(without payment of any Prepayment Consideration) upon the Payment Date
following deposit of such funds. The existence of a Cash Flow Sweep Event shall
be determined by Lender in its sole good faith determination. If Lender
determines that a Cash Flow Sweep Event has occurred, Lender shall send Borrower
written notice thereof together, in the case of clause (i) above, with Lender's
calculations supporting such determination.
(D) Definitions. The following terms shall have the meanings indicated:
-----------
"Calculation Date" means the last day of each calendar quarter
----------------
commencing with the calendar quarter ended March 31, 2002.
"Cash Flow Sweep DSCR" for any Calculation Date, shall mean the ratio
--------------------
of (a) the Pro Forma Net Operating Income for the calendar quarter ended as
of such Calculation Date to (b) the lesser of (1) the actual Monthly Debt
Service Payments paid on the Loan for such calendar quarter (provided that,
for purposes of calculating debt service under this clause (b) such quarter
shall be deemed to start on the day after the first Payment Date during
such calendar quarter and to end on and include the first Payment Date
following the end of such calendar quarter (such quarter, as so adjusted,
the "Measurement Period") and (2) the debt service amount which would have
------------------
been payable during such Measurement Period if interest were recalculated
at an interest rate equal to the Cap Threshold Rate plus the then
Applicable Spread and including scheduled principal payments due hereunder.
"Cash Flow Sweep LCR" for any Calculation Date, shall mean the ratio
-------------------
of (a) the Pro Forma Net Operating Income for the calendar quarter ended as
of such Calculation Date to (b) the Base Rent payable (and as defined)
under the Master Lease during such calendar quarter.
"Prepayment Consideration" shall mean an amount equal to one percent
------------------------
(1%) of the Loan balance (or the portion thereof being prepaid) at the time
of prepayment.
A "Proceeds Release Condition" shall occur in the event that Lender is
--------------------------
required, pursuant to Section 5.5(C) of this Loan Agreement, to release any
insurance proceeds to Lessee for restoration of any Property.
28
"Released Proceeds" shall mean any insurance proceeds released to
-----------------
Lessee for restoration of any Property during a Proceeds Release Condition.
"Sweep Event Determination Date" for any Calculation Date, shall mean
------------------------------
the date of delivery of the financial statements for such Calculation Date
(or the date on which such financial statements are required to be
delivered pursuant to Section 5.1).
Section 2.7 Outstanding Balance. The balance on Lender's books and records
-------------------
any be presumptive evidence (absent manifest error) of the amounts owing to
Lender by Borrower; provided that any failure to record any transaction
affecting such balance or any error in so recording shall not limit or otherwise
affect Borrower's obligation to pay the Obligations.
Section 2.8 Taxes. Any and all payments or reimbursements made hereunder or
-----
under the Note shall be made free and clear of and without deduction for any and
all taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto arising out of or in connection with the
transactions contemplated by the Loan Documents (all such taxes, levies,
imposts, deductions, charges or withholdings and all liabilities with respect
thereto excluding taxes imposed on net income in accordance with the following
sentence herein "Tax Liabilities"). Notwithstanding the foregoing, Borrower
---------------
shall not be liable for taxes imposed on the net income of Lender or any Funding
Party by the jurisdictions under the laws of which Lender or any Funding Party
is organized or doing business or any political subdivision thereof or taxes
imposed on its net income by the jurisdictions of Lender's or any Funding
Party's applicable lending offices or any political subdivision thereof. If
Borrower shall be required by law to deduct any such Tax Liabilities (or amounts
in estimation or reimbursement for the same) from or in respect of any sum
payable hereunder to Lender, then the sum payable hereunder shall be increased
as may be necessary so that, after making all required deductions, Lender
receives an amount equal to the sum it would have received had no such
deductions been made.
Section 2.9 Reasonableness of Charges. Borrower Parties agree that (i) the
-------------------------
actual costs and damages that Lender would suffer by reason of an Event of
Default (exclusive of the attorneys' fees and other costs incurred in connection
with enforcement of Lender's rights under the Loan Documents) or a prepayment
would be difficult and needlessly expensive to calculate and establish, and (ii)
the amounts of interest at the Default Rate, the late charges, and the
Prepayment Consideration are reasonable, taking into consideration the
circumstances known to the parties at this time, and (iii) such interest at the
Default Rate and late charges and Lender's reasonable attorneys' fees and other
reasonable costs and expenses incurred in connection with enforcement of
Lender's rights under the Loan Documents shall be due and payable as provided
herein, and (iv) the obligations to pay interest at such Default Rate, late
charges, Prepayment Consideration, and the obligation to pay Lender's reasonable
attorneys' fees and other enforcement costs do not, individually or
collectively, constitute a penalty.
Section 2.10 Funding Losses/Change in Law Etc.
--------------------------------
(A) Borrower hereby agrees to pay to Lender any amount necessary to
compensate Lender and any Funding Party for any losses or costs (including,
without limitation, the costs of breaking any "LIBOR" contract, if applicable,
or funding losses determined on the basis of Lender's or such Funding Party's
reinvestment rate and the interest rate on the Loan)
29
(collectively, "Funding Losses") sustained by Lender or any Funding Party:
--------------
(i) if the Note, or any portion thereof, is repaid for any reason whatsoever on
any date other than a Payment Date (including, without limitation, from
condemnation or insurance proceeds); or (ii) as a consequence of (x) any
increased cost of funds that Lender or any Funding Party may sustain in
maintaining the borrowing evidenced hereby or (y) the reduction of any amounts
received or receivable from Borrower, in either case under clause (i) or (ii),
due to the introduction of, or any change in, any law or applicable regulation
or treaty adopted after the date hereof (including the administration or
interpretation thereof), whether or not having the force of law, or due to the
compliance by Lender or the Funding Party, as the case may be, with any
directive, whether or not having the force of law, or request from any central
bank or domestic or foreign governmental authority, agency or instrumentality
having jurisdiction made as of the date hereof.
(B) If Lender or any Funding Party shall have determined that the
applicability of any law, rule, regulation or guideline adopted pursuant to or
arising out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards", or the adoption of any other law,
rule, regulation or guideline (including but not limited to any United States
law, rule, regulation or guideline) regarding capital adequacy, or any change
becoming effective in any of the foregoing or in the enforcement or
interpretation or administration of any of the foregoing by any court or any
domestic or foreign governmental authority, central bank or comparable agency
charged with the enforcement or interpretation or administration thereof, or
compliance by Lender or its holding company or a Funding Party or its holding
company, as the case may be, with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency made after the date hereof, has or would have the
effect of reducing the rate of return on the capital of Lender or its holding
company, or of the Funding Party's or its holding company, as the case may be,
then, upon demand by Lender, Borrower shall pay to Lender, from time to time,
such additional amount or amounts as will compensate Lender or such Funding
Party for any such reduction suffered.
(C) Any amount payable by Borrower under Section 2.10(A) or 2.10(B) shall
be paid to Lender within ten (10) Business Days after receipt by Borrower of a
certificate signed by an officer of Lender setting forth the amount due and the
basis for the determination of such amount in reasonable detail and the
computations made by Lender to determine the amount due, which statement shall
be conclusive and binding upon Borrower, absent manifest error. Failure on the
part of Lender to demand payment from Borrower for any such amount attributable
to any particular period shall not constitute a waiver of Lender's right to
demand payment of such amount for any subsequent or prior period; except that
Borrower shall not be liable to any Funding Party or to Lender in respect of any
reduction described in Section 2.10(A) or 2.10(B) with respect to any period
more than three (3) months before Borrower receives the certificate required by
the previous sentence. Lender shall use reasonable efforts to deliver to
Borrower prompt notice of any event described in Section 2.10(A) or 2.10(B)
above and of the amount to be paid as a result thereof, provided, however, any
-------- -------
failure by Lender to so notify Borrower shall not affect its obligation to make
the payments to be made under this Section as a result thereof. All amounts
which may become due and payable by Borrower in accordance with the provisions
of this Section shall constitute additional interest under the Loan and shall be
secured by the Mortgages and the other Loan Documents.
30
(D) If Lender or any Funding Party requests compensation for any losses
or costs to be reimbursed pursuant to any one or more of the provisions of
clause (ii) of Section 2.10(A) or Section 2.10(B), then, upon request of
Borrower, Lender or such Funding Party shall use reasonable efforts in a manner
consistent with such institution's practice in connection with loans like the
Loan to eliminate, mitigate or reduce amounts that would otherwise be payable by
Borrower under the foregoing provisions, provided that such action would not be
otherwise prejudicial to Lender or such Funding Party, including, without
limitation, by designating another of Lender's or such Funding Party's offices,
branches or affiliates as the lending office, branch or affiliate; Borrower
hereby agreeing to pay all reasonably incurred costs and expenses incurred by
Lender or any Funding Party in connection with any such action.
ARTICLE III
CONDITIONS TO LOAN
Section 3.1 Conditions to Funding of the Loan on the Closing Date. The
-----------------------------------------------------
obligations of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. Where
in this Section any documents, instruments or information are to be delivered to
Lender, then the condition shall not be satisfied unless (i) the same shall be
in form and substance reasonably satisfactory to Lender, and (ii) if so required
by Lender, Borrower shall deliver to Lender a certificate duly executed by
Borrower stating that the applicable document, instrument or information is true
and complete and does not omit to state any information without which the same
might reasonably be deemed materially misleading.
(A) Loan Documents. On or before the Closing Date, Borrower shall
--------------
execute and deliver and cause to be executed and delivered to Lender all of the
Loan Documents specified in Schedule 3.1(A), together with such other Loan
---------------
Documents as may be reasonably required by Lender, each, unless otherwise noted,
of even date herewith, duly executed, in form and substance satisfactory to
Lender and in quantities designated by Lender (except for the Note, of which
only one shall be signed), which Loan Documents shall become effective upon the
Closing.
(B) Deposits. The deposits required herein, including without
--------
limitation, the initial deposits into the Reserves and Accounts, shall have been
made (and at the option of Borrower, the same may be made from the proceeds of
the Loan).
(C) Performance of Agreements, Truth of Representations and Warranties.
------------------------------------------------------------------
Each Borrower Party and all other Persons executing any agreement on behalf of
Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.
(D) Closing Certificate. On or before the Closing Date, Lender shall
-------------------
have received certificates of even date herewith executed on behalf of Borrower
by the chief financial officer (or similar officer of Borrower) truly and
correctly stating that: (i) on such date, no Event of Default has occurred and
is continuing; (ii) no material adverse change in the financial condition
31
or operations of the business of Borrower or the projected cash flow of Borrower
or, to Borrower's knowledge, any Property has occurred since the delivery to
Lender of any financial statements, budgets, proformas, or similar materials (or
if there has been any change, specifying such change in detail), and that, to
Borrower's knowledge, such materials delivered to Lender are true and materially
complete and fairly represent the financial condition of Borrower and the cash
flow of each Property as of the date thereof; and (iii) the representations and
warranties set forth in this Loan Agreement are true and correct in all material
respects on and as of such date with the same effect as though made on and as of
such date (or if any such representations or warranties require qualification,
specifying such qualification in detail) and (iv) to Borrower's knowledge, there
are no facts or conditions concerning any Property or Borrower Party that have
not been disclosed to Lender that are reasonably likely to result in a Material
Adverse Effect.
(E) Opinions of Counsel. On or before the Closing Date, Lender shall have
-------------------
received from Baker & McKenzie or Barack Ferrazzano Kirschbaum Perlman &
Nagelberg or other legal counsel for Borrower reasonably satisfactory to Lender,
such counsel's written opinion as to such matters as Lender shall reasonably
request, including opinions to the effect that (i) each of the Borrower Parties
is duly formed, validly existing, and in good standing in its state of
organization and, in the case of Borrower, in the states where the Properties
are located, (ii) this Loan Agreement, the Loan Documents and the Master Lease
have been duly authorized, executed and delivered by the Borrower Parties and
are enforceable against the Borrower Parties in accordance with their terms
subject to customary qualifications for bankruptcy and general equitable
principles; and (iii) neither Borrower nor Member would be consolidated in any
bankruptcy proceeding affecting Ventas or certain other Affiliates of Borrower
specified by Lender. Also on or before the Closing Date, Lender shall have
received (a) an opinion of local counsel to Borrower in each state where the
Properties are located as to the enforceability of the Mortgages and the
Assignments of Leases and such other matters as Lender may reasonably request
and (b) opinions of legal counsel for Borrower in the State of Delaware
reasonably satisfactory to Lender that, among other matters, (1) under Delaware
law (x) the prior written consent of Member and the unanimous written consent of
the board of directors of Member (including the Independent Directors thereof)
would be required for a voluntary bankruptcy filing by Member and Borrower and
(y) such unanimous consent requirements are enforceable against Member and the
sole shareholder of Member, as the case may be, in accordance with their terms;
(2) under Delaware law the bankruptcy or dissolution of Member would not cause
the dissolution of Borrower and the bankruptcy of the sole shareholder of Member
would not cause the dissolution of Member; (3) under Delaware law, creditors of
Member shall have no legal or equitable remedies with respect to the assets of
Borrower and creditors of the sole shareholder of Member shall have no legal or
equitable remedies with respect to the assets of Member; and (4) a federal
bankruptcy court would hold that Delaware law governs the determination of what
Persons have authority to file a voluntary bankruptcy petition on behalf of
Borrower and Member.
(F) Title Policies. On or before the Closing Date, Lender shall have
--------------
received and approved pro forma Title Policies for each of the Properties (one
title policy shall be issued for each state in which any of the Properties are
located), and as of the Closing, the Title Company shall be irrevocably
committed and prepared immediately to issue the Title Policies. Each Title
Policy shall be in form and substance reasonably satisfactory to Lender. Without
limitation, Lender may reasonably require that the Title Policies be issued on
the 1970 ALTA form (if
32
available) by the Title Company, together with such reinsurance and direct
access agreements as Lender may require, insuring that the Mortgages constitute
valid first and prior enforceable liens on Borrower's fee simple interest in the
Properties (including any easements appurtenant thereto, but without insuring
the priority of any such easement over any liens that encumber the property
burdened by the easement) subject only to Permitted Encumbrances and such other
exceptions to coverage as are reasonably acceptable to Lender. The Title
Policies shall contain such endorsements as Lender may require (to the extent
available in the state where the applicable Property is located) in form
reasonably acceptable to Lender, including deletion of the creditors' rights
exception and affirmative endorsement coverage for creditors' rights risks.
(G) Survey. Lender shall have received a survey of each Property,
------
certified to Lender and its successors, assigns and designees and to the Title
Company by a surveyor reasonably satisfactory to Lender (the "Survey"). All
------
surveys shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, shall substantially comply with Lender's survey
requirements and shall contain a certification substantially in the form of
Exhibit B attached hereto. Said surveys shall show no state of facts or
- ---------
conditions reasonably objectionable to Lender.
(H) Zoning. On or before the Closing Date, Lender shall have received
------
evidence reasonably satisfactory to Lender as to the zoning and subdivision
compliance of each Property.
(I) Certificates of Formation and Good Standing. On or before the Closing
-------------------------------------------
Date, Lender shall have received copies of the organizational documents and
filings of each Borrower Party, together with good standing certificates (or
similar documentation) (including verification of tax status if available) from
the state of its formation, from the states in which its principal place of
business is located, and from all states in which the laws thereof require such
Person to be qualified and/or licensed to do business (including, without
limitation, in the case of Borrower and, to the extent required by law, Member,
the states in which the Properties are located). Each such certificate shall be
dated not more than thirty (30) days prior to the Closing Date, and certified by
the applicable Secretary of State or other authorized governmental entity. In
addition, on or before the Closing Date the secretary or corresponding officer
of each Borrower Party, or the secretary or corresponding officer of the
partner, trustee, or other Person as required by such Borrower Party's
organizational documents (as the case may be, the "Borrower Party Secretary")
------------------------
shall have delivered to Lender a certificate stating that the copies of the
organizational documents as delivered to Lender are true and complete and are in
full force and effect, and that the same have not been amended except by such
amendments as have been so delivered to Lender.
(J) Certificates of Incumbency and Resolutions. On or before the Closing
------------------------------------------
Date, Lender shall have received certificates of incumbency and resolutions of
each Borrower Party and its constituents as requested by Lender, approving and
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Borrower Party Secretary as
being in full force and effect without modification or amendment.
(K) Financial Statements. On or before the Closing Date, Lender shall have
--------------------
received such financial statements and other financial information as shall be
satisfactory to
33
Lender for each Borrower Party and the Properties. All such financial statements
of each Borrower Party shall be certified to Lender by the applicable Borrower
Party (through its chief financial officer or other officer), which
certification shall be in form and substance reasonably satisfactory to Lender.
(L) Agreements. On or before the Closing Date, Lender shall have received
----------
copies of all material operating agreements, service contracts and equipment
leases, if any, relating to ownership and operation of each Property.
(M) Annual Budgets. On or before the Closing Date, Lender shall have
--------------
received the Annual Budget for each Property and for the Properties in the
aggregate for the remainder of the current calendar year.
(N) Master Lease, Estoppels. Prior to the Closing, Lender shall have
-----------------------
received a true and complete copy of the Master Lease and any other Leases in
Borrower's possession, and a tenant estoppel certificate and subordination,
non-disturbance and attornment agreements relating to each of the Mortgages
substantially in the form attached hereto as Exhibit C executed by Borrower and
---------
Kindred, in its capacity as tenant under the Master Lease.
(O) Licenses, Permits and Approvals. On or before Closing Date, Lender
-------------------------------
shall have received copies of the final, unconditional certificates of occupancy
issued with respect to each Property, together with all other applicable Permits
required for Borrower, Lessee or their respective Affiliates to own, use,
occupy, operate and maintain each Property for their current uses under
applicable Legal Requirements including, without limitation, all Permits
required for operation of each Property as a Nursing Facility, in each of the
foregoing cases, to the extent in Borrower's possession.
(P) Insurance Policies and Endorsements. On or before the Closing Date,
-----------------------------------
Lender shall have received copies of insurance policies required to be
maintained under this Loan Agreement and the other Loan Documents and
certificates of insurance (dated not more than 20 days prior to the Closing
Date) evidencing such insurance coverages, together with endorsements reasonably
satisfactory to Lender naming Lender as an additional insured under liability
policies and loss payee under property, boiler and machinery policies, as
required by Lender, under such policies. In addition, as to any insurance
matters arising under Environmental Laws or pertaining to any environmental
insurance that Borrower maintains with respect to any Property, the same shall
be endorsed to include Lender as an additional insured arising out of the
operations of the named insured.
(Q) Environmental Assessments. Lender shall have received and approved
-------------------------
Environmental Reports prepared or updated not later than ninety (90) days prior
to the Closing, relating to each of the Properties, together with a letter from
the preparer thereof entitling Lender and its successors and assigns to rely
upon said Environmental Report (if same is not addressed to Lender).
(R) Property Condition Reports. On or before the Closing Date, Lender
--------------------------
shall have received property condition reports for each of the Properties
addressed to Lender and its successors and assigns, which shall be prepared by
an engineer or other consultant reasonably
34
satisfactory to Lender and otherwise shall be in form and substance satisfactory
to Lender in its sole discretion. Such reports shall set forth any items of
deferred maintenance at each Property.
(S) Appraisals. On or before the Closing Date, Lender shall have received
----------
appraisals, dated not more than one hundred fifty (150) days prior to the
Closing Date, of each of the Properties each prepared by an independent
appraiser engaged by Lender, holding an M.A.I. designation, licensed in the
state where the respective Property is located and having experience in the
valuation of health care properties, which indicate an aggregate fair market
value of the Properties (based on the Net Operating Income of Lessee from the
Properties rather than Rents payable to Borrower under the Master Lease) which
would reflect a loan-to-value ratio for the Loan of not more than 57%, and are
otherwise satisfactory to Lender in its sole discretion in all respects. Each
such appraisal shall conform in all respects to the criteria for appraisals set
forth in the Financial Institutions Reform and Recovery Act of 1989 and the
regulations promulgated thereunder (as if Lender were an institution under the
jurisdiction thereof) and the Uniform Standards of Professional Appraisal
Practices of the Appraisal Foundation.
(T) Searches. Prior to the Closing Date, Lender shall have received
--------
certified copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and
litigation search reports with respect to each of the Borrower Parties, Lessee
and Vencor all dated not more than sixty (60) days prior to the Closing Date.
(U) Documentation Regarding Application of Proceeds. Prior to the Closing
-----------------------------------------------
Date, Lender shall have received payoff demand letters and wiring instructions
from each lender or other obligee of any existing indebtedness which is required
to be repaid pursuant to this Loan Agreement and by Borrower regarding the
application of any remaining available proceeds of the Loan.
(V) Leasehold Mortgage Documents; Intercreditor Agreements. On or before
------------------------------------------------------
the Closing Date, Lender shall have received true and complete copies of all
Leasehold Mortgage Documents in Borrower's possession which shall be in form and
substance acceptable to Lender and each Leasehold Mortgagee shall have executed
and delivered an Intercreditor Agreement.
(W) Legal Fees; Closing Expenses. Borrower shall have paid any and all
----------------------------
reasonable legal fees and expenses of counsel to Lender, together with all
recording fees and taxes, title insurance premiums, and other reasonable costs
and expenses related to the Closing.
(X) Other Review. Lender shall have completed all other review of Borrower
------------
Parties, the Properties, and such other items as it reasonably determines
relevant, and shall have determined based upon such review to fund the Loan.
Borrower Parties shall have satisfied such other reasonable criteria as Lender
may reasonably specify.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Loan Agreement and to make the
Loan, Borrower represents and warrants to Lender that the statements set forth
in this Article IV, after giving effect to the Closing, will be, true, correct
and complete in all material respects as of the Closing Date. Further, each of
the other Borrower Parties represents and warrants to Lender that
35
the statements set forth in this Article IV pertaining to such party, after
giving effect to the Closing, will be, true, correct and complete in all
material respects as of the Closing Date.
Section 4.1 Organization, Powers, Capitalization, Good Standing, Business.
-------------------------------------------------------------
(A) Organization and Powers. Borrower is a limited liability company and
-----------------------
Member is a corporation, each duly organized, validly existing and in good
standing under the laws of the State of Delaware. Guarantor is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each Borrower Party has all requisite power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted, and to enter into each Loan Document to which it is a
party and to perform the terms thereof.
(B) Qualification. Each Borrower Party is duly qualified and in good
-------------
standing in the state of its formation. Each of Borrower and, if required by
applicable law, Member are also duly qualified and in good standing in the
states where the respective Properties are located. In addition, Borrower is
duly qualified and in good standing in each state where necessary to carry on
its present business and operations, except in jurisdictions in which the
failure to be qualified and in good standing could not reasonably be expected to
have a Material Adverse Effect.
(C) Organization. The organizational chart set forth as Schedule 4.1(C)
------------ --------------
accurately sets forth the direct and indirect ownership structure of the
Borrower Parties.
Section 4.2 Authorization of Borrowing, etc.
-------------------------------
(A) Authorization of Borrowing. Borrower has the power and authority to
--------------------------
incur the Indebtedness evidenced by the Note. The execution, delivery and
performance by each Borrower Party of each of the Loan Documents to which it is
a party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary limited liability company, partnership, trust,
corporate or other action, as the case may be, and each of the Loan Documents
has been duly executed and delivered by each of the Borrower Parties.
(B) No Conflict. The execution, delivery and performance by each Borrower
-----------
Party of the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby do not and will not: (1) violate (x) any
provision of law applicable to Borrower Party; (y) the partnership agreement,
certificate of limited partnership, certificate of incorporation, bylaws,
declaration of trust, operating agreement or other organizational documents, as
the case may be, of such Borrower Party; or (z) any order, judgment or decree of
any court or other agency of government binding on Borrower Party or any of its
Affiliates; (2) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
such Borrower Party or any of its Affiliates except to the extent that such
conflict, breach or default could not reasonably be expected to have a Material
Adverse Effect or Property Adverse Effect; (3) result in or require the creation
or imposition of any material Lien (other than the Lien of the Loan Documents)
upon any Property or assets of Borrower Party or any of its Affiliates; or (4)
except as set forth on Schedule 4.2 and except for any approvals or consents the
------------
failure to obtain which could not reasonably be expected to have a Material
Adverse Effect or Property Adverse Effect, require any approval or
36
consent of any Person under any Contractual Obligation of Borrower Party,
which approvals or consents have been obtained on or before the dates required
under such Contractual Obligation, but in no event later than the Closing Date.
(C) Governmental Consents. The execution, delivery and performance by each
---------------------
Borrower Party of the Loan Documents to which it is a party, and the
consummation of the transactions contemplated thereby do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body except for the recording of the Mortgages and filings and
recordings required in connection with the creation or perfection of any other
security interests with respect to the Collateral granted under this Loan
Agreement or any of the other Loan Documents.
(D) Binding Obligations. This Loan Agreement is, and the Loan Documents,
-------------------
including the Note, when executed and delivered will be, the legally valid and
binding obligations of each Borrower Party, as applicable, enforceable against
each of the Borrower Parties, as applicable, in accordance with their respective
terms, subject to bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditor's rights generally or by equitable principles
relating to enforceability. No Borrower Party has any defense or offset to any
of its obligations under the Loan Documents. No Borrower Party has any claim
against Lender or any Affiliate of Lender in connection with the Loan Documents.
Section 4.3 Financial Statements. All financial statements concerning Borrower,
--------------------
its Affiliates and, to Borrower's knowledge, the Properties which have been
furnished by or on behalf of Borrower to Lender pursuant to this Loan Agreement
have been prepared in accordance with GAAP consistently applied (except as
disclosed therein) and present fairly the financial condition of the Persons
covered thereby as at the dates thereof and the results of their operations for
the periods then ended. Since the date of the most recent financial statements
of Guarantor and/or the Properties delivered to Lender, there has been no change
in the financial condition, operations or business of the Borrower Parties or
the Properties from that set forth in said financial statements that could
reasonably be expected to have a Material Adverse Effect or Property Adverse
Effect.
Section 4.4 Indebtedness and Contingent Obligations. As of the Closing, Primary
---------------------------------------
Borrower Parties shall have no Indebtedness or Contingent Obligations other than
the Obligations or any other Indebtedness expressly permitted under this Loan
Agreement or the other Loan Documents.
Section 4.5 Title to Properties. Borrower has good, marketable and insurable fee
-------------------
simple to each of the Properties, free and clear of all Liens except for
Permitted Encumbrances. Borrower owns and will own at all times all personal
property relating to the Properties (other than personal property which is (a)
leased by such Borrower (as to which such Borrower has valid leasehold title) or
(b) owned by Lessee or other tenants of the Properties), subject only to
Permitted Encumbrances. There are no pending proceedings in condemnation or
eminent domain affecting any Property, and to the knowledge of Borrower Parties,
none is threatened. No Person has any option or other right to purchase all or
any portion of Borrower's interest in any Property or any interest therein
(other than Lessee's rights to purchase a Property in connection with certain
casualties or upon the occurrence of certain defaults under the Master
37
Lease upon the terms and subject to the conditions of Section 14.2 and Section
16.12, respectively, of the Master Lease). There are no mechanic's,
materialman's or other similar liens or claims which have been filed for work,
labor or materials affecting any Property which are or may be liens prior to, or
equal or coordinate with, the liens of any Mortgage other than any liens which
have been insured over by the Title Company or as to which the Title Company has
provided endorsements or affirmative insurance acceptable to Lender. None of the
Permitted Encumbrances, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or Property Adverse Effect.
Section 4.6 Zoning; Compliance with Laws.
----------------------------
(A) Each Property is zoned for commercial use, which zoning designation is
unconditional, in full force and effect, and is beyond all applicable appeal
periods and permits the use of such Property as a Nursing Facility. Borrower,
each Property and the use thereof comply with all applicable Legal Requirements
except for any non-compliance which would not reasonably be expected to have a
Property Adverse Effect. To the knowledge of Borrower, there are no illegal
activities relating to controlled substances on any Property. All certificates
of occupancy or the equivalent and all other required Permits, for the lawful
use and operation of the Properties have been issued and are current and in full
force and effect except for those the non-possession of which would not
reasonably be expected to have a Property Adverse Effect. To the knowledge of
Borrower except as set forth in the zoning reports delivered to Lender prior to
the Closing Date, in the event that all or any part of the Improvements located
on any Property are destroyed or damaged, said Improvements can be legally
reconstructed to their condition prior to such damage or destruction, and
thereafter exist for the same use without violating any zoning or other
ordinances applicable thereto and without the necessity of obtaining any
variances or special permits, other than customary demolition, building and
other construction related permits except for any conditions or limitations
thereon which would not reasonably be expected to have a Property Adverse
Effect. No legal proceedings are pending or, to the knowledge of Borrower,
threatened with respect to the zoning of any Property. Neither the zoning nor
any other right to construct, use or operate any Property is in any way
dependent upon or related to any real estate other than such Property except
pursuant to any rights of Borrower with respect to the use or occupancy of any
Property under any easements, rights-of-way or similar agreements included in
the Permitted Encumbrances. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by Borrower
with respect to any Property without Lender's prior written consent, which
consent shall not be unreasonably withheld, delayed or conditioned.
(B) Borrower, Lessee and/or Affiliates of Lessee, as the case may be, are
the lawful owner of all Permits necessary for the proper and lawful operation of
the Properties as Nursing Facilities under applicable Legal Requirements by any
Governmental Authority (collectively, "Regulatory Permits"), except for any
------------------
Regulatory Permits the non-possession of which would not reasonably be expected
to have a Property Adverse Effect. All of such Regulatory Permits are held by
Borrower, Lessee or its Affiliates free from restrictions or known conflicts and
are not provisional, probationary or restricted in any material respect, except
for any restrictions, conflicts or exceptions which would not reasonably be
expected to have a Property Adverse Effect. To Borrower's knowledge, the number
of licensed beds at each Property is set forth on Schedule 4.6 hereto. Borrower
------------
and, to Borrower's knowledge, Lessee, as well as the operation
38
of each Property as a Nursing Facility are in compliance in all material
respects with all applicable Legal Requirements except for any non-compliance
which would not reasonably be expected to have a Property Adverse Effect.
Borrower has furnished to Lender true and complete copies of all Regulatory
Permits delivered to it by Lessee, which Regulatory Permits are described on
Schedule 4.6 attached hereto. To Borrower's knowledge, no waivers of any laws,
- ------------
rules, regulations or requirements (including, but not limited to minimum square
foot requirements per bed) are required for the Properties to operate at the
licensed bed capacities listed on Schedule 4.6 and in compliance with applicable
------------
Legal Requirements. To Borrower's knowledge, all Reimbursement Contracts
applicable to the Properties and Borrower or Lessee, as applicable, are as of
the Closing Date, in good standing with all applicable Governmental Authorities,
Permits, Medicare Certifications and/or Medicaid Certifications. To Borrower's
knowledge, Lessee is current in the payment of all so-called provider specific
taxes or other assessments with respect to any Reimbursement Contracts. Each
Property is currently operated as a Nursing Facility in material compliance with
applicable Regulatory Permits and Legal Requirements except for any
non-compliance which could not reasonably be expected to have a Property Adverse
Effect. There is no pending or, to Borrower's knowledge, threatened revocation,
suspension, termination, probation, material restriction or limitation, or
nonrenewal by any Governmental Authority, insurance program or third-party payor
of any Reimbursement Contract relating to the Properties which, if adversely
determined, could reasonably be expected to result in a Property Adverse Effect.
To Borrower's knowledge, all Medicaid, Medicare and private insurance cost
reports and financial reports submitted by each Nursing Facility are materially
accurate and complete and are not misleading in any material respects. In the
event Lender or its designee or assignee acquires any Property through
foreclosure or otherwise, under current law neither Lender, nor such designee or
assignee, a subsequent lessee or any subsequent purchaser (through foreclosure
or otherwise) must obtain a CON prior to applying for or receiving a license to
operate the Property as a Nursing Facility and certification to receive Medicare
and Medicaid payments (and their successor programs) for patients having
coverage thereunder, provided that (i) the number of beds and the scope of
services provided are not changed and (ii) Lender or its designee or assignee or
subsequent manager, lessee or purchaser submits prior notification of such
change to the applicable regulatory agency.
(C) Maintain Bed Capacity. Except as provided in the Master Lease, Borrower
---------------------
has not granted to any third party the right to reduce the number of licensed
beds in any Property or to apply for approval to transfer the right to any of
the licensed beds to any other location. Except as expressly permitted otherwise
under the Master Lease, Borrower, within a variance of ten percent (10%), shall
maintain or cause to be maintained the number of licensed beds at each Property
at the licensure/certification levels set forth in Schedule 4.6.
------------
Section 4.7 Leases; Agreements.
------------------
(A) Leases; Agreements. Borrower has delivered to Lender true and complete
------------------
copies of (i) the Master Lease and any other Leases entered into by Borrower or
Lessee (in the case of Leases entered into by Lessee provided that Borrower has
received notice of same) and (ii) material contracts and agreements affecting
the operation and management of each Property (to the extent in Borrower's
possession, in the case of contracts and agreements entered into by Lessee),
including, without limitation, any service and maintenance contracts (to the
extent in Borrower's possession, in the case of contracts entered into by
Lessee) and such Leases,
39
contracts and agreements have not been modified or amended by Borrower or,
to Borrower's knowledge, Lessee, except pursuant to amendments or modifications
delivered to Lender. Except for the Master Lease, there are no Major Leases
entered into by Borrower or Major Subleases entered into by Lessee (in the case
of Major Subleases entered into by Lessee, provided Borrower has received notice
of same) currently in effect relating to any Property except for the Major
Subleases set forth on Schedule 4.7. Neither Borrower nor, to Borrower's
------------
knowledge, Lessee has entered into any agreements pursuant to which any Person
has any right or obligation to manage any Property or to receive compensation in
connection with such management except pursuant to agreements true and complete
copies of which have been delivered to Lender. Neither Borrower nor, to
Borrower's knowledge, Lessee has entered into any agreements pursuant to which
any Person has any right or obligation to lease or solicit tenants for any
Property, or to receive compensation in connection with such leasing.
(B) Lease Issues. Except as set forth on Schedule 4.9, there are no legal
------------ ------------
proceedings commenced (or, to the knowledge of Borrower, threatened) against
Borrower or any Affiliate thereof and, to Borrower's knowledge, no legal
proceedings have been commenced or threatened against Lessee or any Affiliate
thereof, by any tenant or patient or former tenant or patient except for any
such proceedings as are fully covered by insurance (except to the extent of
commercially reasonable deductibles) or which if adversely determined would not
have a Property Adverse Effect. No rental in excess of one month's rent has been
prepaid under any of the Leases entered into by Borrower (except for security
deposits and estimated additional rent amounts paid on account of operating
expenses, taxes and other expense escalations or pass-throughs and certain rents
which were prepaid as of the date of the Original Master Lease (as defined in
the Master Lease)). Each of the Leases entered into by Borrower is valid and
binding on the parties thereto in accordance with its terms.
Section 4.8 Condition of Properties. To Borrower's knowledge, except as set
-----------------------
forth in the property condition reports for the Properties delivered to Lender,
all Improvements at the Properties including, without limitation, the roof and
all structural components, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior doors, parking
facilities, sidewalks and landscaping are in good condition and repair in all
material respects. To Borrower's knowledge and except as may be set forth in the
property condition reports for the Properties delivered to Lender prior to
Closing, no material latent or patent structural or other material defect or
deficiency exists in any Property. To Borrower's knowledge and except as may be
set forth in the property condition reports for the Properties delivered to
Lender prior to Closing, city water supply, storm and sanitary sewers, and
electrical, gas and telephone facilities are available to each Property within
the boundary lines of such Property, are fully connected to the Improvements and
are fully operational, are sufficient to meet the reasonable needs of such
Property as now used or presently contemplated to be used, and no other utility
facilities are necessary to meet the reasonable needs of such Property as now
used or presently contemplated. Except as may be set forth in the property
condition reports for the Properties delivered to Lender prior to Closing, the
design and as-built conditions of each Property are such that surface and storm
water does not accumulate on any Property (except in facilities specifically
designed for the same) and does not drain from any Property across land of
adjacent property owners or violate any applicable Legal Requirement, in any of
the foregoing cases, in any manner which would have a Property Adverse Effect.
To the knowledge of Borrower, except as may be shown on the Surveys, (i) no part
of any Property is within a flood
40
plain, (ii) none of the Improvements create encroachment over, across or upon
any Property's boundary lines, rights of way or easements, and (iii) no building
or other improvements on adjoining land create such an encroachment. Access to
each Property for the current and contemplated uses thereof is provided in all
material respects by means of public roads and streets which are physically and
legally open for use by the public or pursuant to written easements or
agreements benefiting the subject Property which are included in the Permitted
Encumbrances and copies of which have been provided to Lender. Any liquid or
solid waste disposal, septic or sewer system located at any Property is in good
and safe condition and repair and in compliance with all applicable Legal
Requirements, in each case except for deficiencies that could not reasonably be
expected to have a Property Adverse Effect.
Section 4.9 Litigation; Adverse Facts. Except as set forth on Schedule 4.9, (i)
------------------------- ------------
there are no judgments outstanding against any Borrower Party, or to Borrower's
knowledge, affecting any Property or any property of Borrower Party, (ii) there
is no action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration (collectively, "Suits") now pending or, to the
-----
knowledge of Borrower, threatened against any Borrower Party or Ventas Realty
(which in the case of Suits against Guarantor or Ventas Realty, could reasonably
be expected to result in a Material Adverse Effect or Property Adverse Effect)
or affecting any Property and (iii) to Borrower's knowledge, there are no
judgments outstanding and there are no pending or threatened Suits against
Lessee or its Affiliates relating to the Properties. The actions, charges,
claims, demand, suits, proceedings, petitions, investigations and arbitrations
set forth on Schedule 4.9, if adversely determined, could not reasonably be
------------
expected to result, either individually or in the aggregate, in any Material
Adverse Effect or Property Adverse Effect and do not relate to and will not
affect the consummation of the transactions contemplated hereby.
Section 4.10 Payment of Taxes. All federal, state and local tax returns and
----------------
reports of each Primary Borrower Party required to be filed have been timely
filed, and all taxes, assessments, fees and other governmental charges
(including any payments in lieu of taxes) upon such Person and upon its
properties, assets, income and franchises which are due and payable have been
paid when due and payable, except for those taxes which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established. Except as otherwise disclosed in writing to Lender, there is not
presently pending (and to the knowledge of Borrower, there is not contemplated)
any special assessment against any Property or any part thereof. No tax liens
have been filed against any Borrower Party and to the knowledge of Borrower
Parties, no claims are being asserted with respect to any such taxes owed by any
Borrower Party with respect to any of the Properties. The charges, accruals and
reserves on the books of Primary Borrower Parties in respect of any taxes or
other governmental charges are in accordance with GAAP.
Section 4.11 Adverse Contracts. Except for the Loan Documents (and, except in
-----------------
the case of Guarantor, the loan documents relating to its loan facility with
Bank of America, N.A., as administrative agent), none of the Borrower Parties is
a party to or bound by, nor is any property of such Person subject to or bound
by, any contract or other agreement which restricts such Person's ability to
conduct its business in the ordinary course or, either individually or in the
aggregate, has a Material Adverse Effect or Property Adverse Effect or could
reasonably be expected to have a Material Adverse Effect or Property Adverse
Effect.
41
Section 4.12 Performance of Agreements. Borrower is not in default in the
-------------------------
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any Contractual Obligation of Borrower
which could reasonably be expected to have a Material Adverse Effect or Property
Adverse Effect, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default.
Section 4.13 Governmental Regulation. Borrower is not subject to regulation
-----------------------
under the Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940 or to any federal or state statute or
regulation limiting its ability to incur indebtedness for borrowed money.
Section 4.14 Employee Benefit Plans. Except as set forth on Schedule 4.14, no
---------------------- -------------
Borrower Party maintains or contributes to, or has any obligation (including a
contingent obligation) under, any Employee Benefit Plan.
Section 4.15 Broker's Fees. No broker's or finder's fee, commission or similar
-------------
compensation will be payable by or pursuant to any contract or other obligation
of Borrower Party with respect to the making of the Loan or any of the other
transactions contemplated hereby or by any of the Loan Documents, other than
fees payable from Guarantor to Merrill Lynch pursuant to separate agreement.
Section 4.16 Environmental Compliance.
------------------------
(A) No Environmental Claims. To Borrower's knowledge, except as disclosed
-----------------------
in the Environmental Reports delivered to Lender prior to Closing, (i) there are
(a) no claims, liabilities, investigations, litigation, administrative
proceedings, pending or to the knowledge of Borrower, threatened, and (b) no
judgments or orders relating to any Hazardous Materials (collectively,
"Environmental Claims") asserted or threatened against Borrower or relating to
--------------------
any Property and (ii) none of the Borrower Parties nor any other Person has
caused or permitted any Hazardous Material to be used, generated, reclaimed,
transported, released, treated, stored or disposed of in a manner which would
reasonably be expected to form the basis for an Environmental Claim against
Borrower or Lessee or relating to any Property.
(B) Storage of Hazardous Materials. To Borrower's knowledge, except as
------------------------------
disclosed in the Environmental Reports delivered to Lender prior to Closing and
except for materials customarily used or stored in connection with operation and
management of properties similar to the Properties, which materials at the
Properties exist only in reasonable quantities and are stored, contained,
transported, used, released, and disposed of reasonably and without material
violation of any Environmental Laws, to the knowledge of Borrower: (i) no
Hazardous Materials are or were stored or otherwise located, and no underground
storage tanks or surface impoundments used for storing Hazardous Materials are
or were located, on any Property, or on adjacent parcels of real property, and
(ii) no part of such real property or such adjacent parcels of real property,
including the groundwater located therein or thereunder, is presently
contaminated by Hazardous Materials. Except as disclosed in the Environmental
Reports, to the knowledge of Borrower, no Property is listed by any Governmental
Authority as containing any Hazardous Materials.
42
(C) Compliance with Environmental Laws. To the knowledge of Borrower,
----------------------------------
except as may be set forth in the Environmental Reports, each of Borrower and
Lessee has been and is currently in compliance in all material respects with all
applicable Environmental Laws relating to the Properties, including obtaining
and maintaining in effect all permits, licenses or other authorizations required
by applicable Environmental Laws in connection with the Properties.
Section 4.17 Solvency. Borrower (a) has not entered into the transaction or any
--------
Loan Document with the actual intent to hinder, delay, or defraud any creditor
and (b) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents. Giving effect to the Loan, the fair saleable value of
Borrower's assets exceeds and will, immediately following the making of the
Loan, exceed Borrower's total liabilities, including, without limitation,
subordinated, unliquidated, disputed and Contingent Obligations. The fair
saleable value of Borrower's assets is and will, immediately following the
making of the Loan, be greater than Borrower's probable liabilities, including
the maximum amount of its Contingent Obligations on its debts as such debts
become absolute and matured. Borrower's assets do not and, immediately following
the making of the Loan will not, constitute unreasonably small capital to carry
out its business as conducted or as proposed to be conducted. Borrower does not
intend to, or believe that it will, incur Indebtedness and liabilities
(including Contingent Obligations and other commitments) beyond its ability to
pay such Indebtedness and liabilities as they mature (taking into account the
timing and amounts of cash to be received by Borrower and the amounts to be
payable on or in respect of obligations of Borrower).
Section 4.18 Disclosure. No financial statements of a Borrower Party, Loan
----------
Document or any other document, certificate or written statement furnished to
Lender by any Borrower Party and, to the knowledge of Borrower, no financial
statement prepared by Lessee and furnished to Lender and no document or
statement furnished by any third party on behalf of Borrower Party, for use in
connection with the Loan contains any untrue representation, warranty or
statement of a material fact, and, to Borrower's knowledge in the case of any
financial statement, document or other statement prepared and/or furnished by
Lessee or any third party, none omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
materially misleading.
Section 4.19 Use of Proceeds and Margin Security. Borrower Parties shall use the
-----------------------------------
proceeds of the Loan only for the purposes set forth herein and consistent with
all applicable laws, statutes, rules and regulations. No portion of the proceeds
of the Loan shall be used by Borrower or any Person in any manner that might
cause the borrowing or the application of such proceeds to violate Regulation T,
Regulation U or Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System.
Section 4.20 Insurance. Set forth on Schedule 4.20 is a complete and accurate
--------- -------------
description of all policies of insurance of Borrower and Lessee required under
Section 5.4 that are in effect as of the Closing Date. Borrower's and Lessee's
insurance under such policies satisfies in all material respects the
requirements contained in Section 5.4 hereof, no notice of cancellation has been
received with respect to such policies, and, to the knowledge of Borrower, it is
in compliance in all material respects with all conditions contained in such
policies.
43
Section 4.21 Separate Tax Lots. Each Property is comprised of one (1) or more
-----------------
parcels which constitute separate tax lots. No part of any Property is included
or assessed under or as part of another tax lot or parcel, and no part of any
other property is included or assessed under or as part of the tax lots or
parcels comprising any Property.
Section 4.22 Investments. No Primary Borrower Party has any (i) direct or
-----------
indirect interest in, including without limitation stock, partnership interest
or other securities of, any other Person (other than the interest of Member in
Borrower), or (ii) direct or indirect loan, advance or capital contribution to
any other Person (other than the capital contribution of Member in Borrower),
including all indebtedness and accounts receivable from that other Person.
Section 4.23 Bankruptcy. No Borrower Party is or has been a debtor, and no
----------
property of any of them (including any Property) is property of the estate, in
any voluntary or involuntary case under the Bankruptcy Code or under any
applicable bankruptcy, insolvency or other similar law. No Borrower Party and no
property of any of them is or has been under the possession or control of a
receiver, trustee or other custodian. No Borrower Party has made any assignment
for the benefit of creditors. No such assignment or bankruptcy or similar case
or proceeding is now contemplated. Notwithstanding the foregoing, Lender
acknowledges that Lessee was a debtor-in-possession under a voluntary
reorganization proceeding under Chapter 11 of the Bankruptcy Code which case was
concluded on April 20, 2001.
Section 4.24 Defaults. No Default or Event of Default exists.
--------
Section 4.25 No Plan Assets. Borrower is not and will not be (i) an employee
--------------
benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii)
a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section
4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan
assets" of any such employee benefit plan or plan for purposes of Title I of
ERISA or Section 4975 of the IRC.
Section 4.26 Governmental Plan. Borrower is not and will not be a "governmental
-----------------
plan" within the meaning of Section 3(32) of ERISA and transactions by or with
Borrower are not and will not be subject to state statutes applicable to
Borrower regulating investments of and fiduciary obligations with obligations
with respect to governmental plans.
Section 4.27 Not Foreign Person. No Borrower Party is a "foreign person"
------------------
within the meaning of Section 1445(f)(3) of the IRC.
Section 4.28 No Collective Bargaining Agreements. No Borrower Party is a party
------------------------------------
to any collective bargaining agreement.
ARTICLE V
COVENANTS OF BORROWER PARTIES
Each Borrower Party covenants and agrees that until payment in full of the
Obligations, unless Lender shall otherwise give its prior written consent, such
Person shall perform and comply with all covenants in this Article V applicable
to such Person.
Section 5.1 Financial Statements and Other Reports.
--------------------------------------
44
(A) Financial Statements.
--------------------
(i) Annual Reporting - Borrower. As soon as available but in no event
---------------------------
later than one hundred five (105) days after the end of each calendar year,
Borrower shall provide true and complete copies of its Financial Statements for
such year to Lender; which Financial Statements shall be audited by a "Big Five"
accounting firm or by another independent firm of certified public accountants
reasonably acceptable to Lender (as of the date hereof, Ernst & Young is
acceptable to Lender) (any such accounting firm, "Approved Accountants") and
--------------------
shall bear the certification of such accountants that such Financial Statements
present fairly in all material respects the financial position of the subject
company and which Financial Statements shall contain no exceptions or
qualifications except for any qualifications relating to accounting changes made
in accordance with GAAP. The annual Financial Statements shall be accompanied by
a certification executed on behalf of Borrower by its chief executive officer or
chief financial officer or similar financial officer, satisfying the criteria
set forth below and a Compliance Certificate (as defined below).
(ii) Quarterly Reporting - Borrower. As soon as available but in no
------------------------------
event later than fifty (50) days after the end of each calendar quarter,
Borrower shall provide true and complete copies of its Financial Statements for
such quarter to Lender, together with a certification executed on behalf of
Borrower by its chief executive officer or chief financial officer or similar
financial officer in accordance with the criteria set forth below and a
Compliance Certificate.
(iii) Annual/Quarterly Reporting - Guarantor. Within five (5) Business
--------------------------------------
Days of the filing of such reports with the Securities and Exchange Commission
("SEC"), Borrower shall provide, or cause to be provided, to Lender, copies of
-----
Guarantor's annual reports on Form 10K and quarterly reports on Form 10-Q. In
the event that Guarantor shall cease to be a publicly-traded entity, within one
hundred twenty (120) days after the end of the fiscal year of Guarantor, audited
Financial Statements of Guarantor prepared by Approved Accountants, which
statements shall be prepared in accordance with GAAP, certified by the chief
financial officer or similar financial officer of Guarantor to accurately
represent the financial condition of the Guarantor to the best of his or her
knowledge, information and belief.
(iv) Quarterly/Annual Reporting - Properties. Within sixty (60) days
---------------------------------------
after the end of each of the first three calendar quarters and one hundred and
ten (110) days after the end of each calendar year, Borrower shall provide to
Lender true and complete copies of unaudited statements of operations of the
Properties prepared on a basis consistent with the statements of operations of
the Properties prepared by Lessee for prior periods, which statements shall
include a statement of income and expenses for the quarter or year then ended.
Such quarterly and annual statements of operations shall show the separate
operations of each of the Properties including, without limitation, (1) a
breakdown of Patient Revenues and other revenues itemized by payor type and a
reasonably detailed breakdown of operating expenses and (2) patient census by
payor type. Such statements of operations shall be accompanied by a certificate
duly executed on behalf of Borrower by its chief executive officer, chief
financial officer or similar financial officer, stating the Cash Flow Sweep DSCR
and the Cash Flow Sweep LCR for the quarter ended as of the date of such
operating statements together with Borrower's supporting calculations thereof.
45
(v) Lessee Financial Statements. Within fifty (50) days after the
---------------------------
end of each calendar month, fifty-five (55) days after the end of each calendar
quarter and one hundred and five (105) days after the end of each calendar year,
Borrower shall provide to Lender true and complete copies of, respectively, the
monthly, quarterly and annual Financial Statements of Lessee required to be
delivered under the Master Lease together with copies of the officer's
certificates required to be delivered by Lessee therewith. Within five (5)
Business Days after receipt thereof from Lessee, copies of (x) any Forms 10K,
10Q and 8K and any other annual, quarterly, monthly or other reports filed by
Lessee with the SEC, (y) all registration statements and any other public
information which Lessee or any of its Affiliates files with the SEC or any
other Governmental Authority and (z) all statements, reports, notices and proxy
statements furnished to shareholders of Lessee.
(vi) Lessee Annual Estoppel Certificates. Within one hundred and
-----------------------------------
five (105) days after the end of each calendar year, Borrower shall provide to
Lender true and complete copies of the estoppel certificates regarding the
Master Lease and the compliance of the Properties with the Permits required to
be delivered by Lessee under Section 26.1(e) of the Master Lease.
(vii) Cash Flow Reports and Patient Census Reports. Within five (5)
--------------------------------------------
Business Days after receipt thereof from Lessee, Borrower shall provide to
Lender the weekly and monthly consolidated cash flow reports of Lessee and
consolidated patient census reports for Lessee required to be delivered by
Lessee under Section 26.1(i) of the Master Lease relative to the Properties.
(viii) Nursing Facility Survey Deficiency Summary Reports. Within
--------------------------------------------------
three (3) Business Days after receipt thereof from Lessee (but in no event later
than thirty (30) days after the end of each calendar month), Borrower shall
provide to Lender the monthly consolidated survey deficiency summary report
required to be delivered by Lessee under Section 26.1(i) of the Master Lease,
indicating for each Property whether any survey, citation or report alleging any
material deficiency with respect to such Property has been issued during the
prior month and, if so, setting forth, the identity of the Governmental
Authority that issued such survey, citation or report, a description of the
alleged deficiency and the timetable or deadline for same. Borrower shall also
deliver to Lender promptly after request therefor by Lender any other Property
specific survey reports requested by Lender.
(ix) Certification Regarding Licensed Bed and Medicaid Defaults.
----------------------------------------------------------
Within fifty-five (55) days after the end of each calendar quarter, Borrower
shall provide to Lender copies of the officer's certificates required to be
delivered by Lessee under Section 26.1(j) of the Master Lease, setting forth
whether any event(s) of default has occurred and is continuing under Section
16.1(m) (reduction of the number of licensed beds at any Property in violation
of the Master Lease) or Section 16.1(q) (revocation of certification for
reimbursement under Medicare or Medicaid with respect to any Property) of the
Master Lease.
(x) Additional Reporting. In addition to the foregoing, Borrower
--------------------
shall provide to Lender copies of any and all statements, reports, information
and data with respect to the Properties and/or Lessee promptly after receipt
thereof under the Master Lease and such further documents and information
concerning its operations, properties, ownership, and finances
46
as Lender shall from time to time reasonably request so long as such documents
and information are consistent with the types of documents and information
generally requested and utilized by mortgage lenders within the commercial
mortgage finance industry for loans similar in type to the Loan.
(xi) GAAP. Borrower Parties will maintain systems of accounting
----
established and administered in accordance with sound business practices and
sufficient in all respects to permit preparation of Financial Statements in
conformity with GAAP. All Financial Statements delivered under Sections
5.1(A)(i),(ii),(iii) and (v) above shall be prepared in accordance with GAAP,
consistently applied.
(xii) Certifications of Financial Statements and Other Documents,
----------------------------------------------------------
Compliance Certificate. Together with the Financial Statements provided to
- ----------------------
Lender by Borrower under paragraphs (A)(i) and (ii) of this Section 5.1,
Borrower also shall deliver to Lender a certification in form and substance
reasonably satisfactory to Lender, executed on behalf of Borrower by its chief
executive officer or chief financial officer, stating that, to such officer's
knowledge, such Financial Statements, documents, and information are true and
complete in all material respects and do not omit to state any material
information without which the same might reasonably be materially misleading. In
addition, (a) where this Loan Agreement requires a "Compliance Certificate", the
----------------------
Borrower Party required to submit the same shall deliver a certificate duly
executed on behalf of such Borrower Party by its chief executive officer, chief
financial officer or similar financial officer, in form and substance reasonably
satisfactory to Lender, stating that there does not exist any Default or Event
of Default under the Loan Documents (or if any exists, specifying the same in
detail) and (b) together with the operating statements of the Properties
required to be delivered under Section 5.1(A)(iv) above, Borrower shall be
required to submit a certificate duly executed by its chief executive officer,
chief financial officer or similar financial officer, in form and substance
reasonably satisfactory to Lender, stating (1) the Debt Service Coverage Ratio
for the twelve (12) month period ended as of the end of such quarter or other
period to which the applicable Financial Statements relate and (2) Cash Flow
Sweep DSCR and Cash Flow Sweep LCR for the quarter ended as of the Calculation
Date to which the applicable operating statements relate.
(xiii) Fiscal Year. Borrower represents that its fiscal year ends on
-----------
December 31, and agrees that it shall not change its fiscal year.
(B) Accountants' Reports. Promptly upon receipt thereof, Borrower will
--------------------
deliver copies of all significant reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
Financial Statements or other affairs of Borrower made by such accountants.
(C) Tax Returns. Within thirty (30) days after filing the same, Borrower
-----------
shall deliver to Lender a copy of its Federal income tax returns (or the return
of the applicable Person into which Borrower's Federal income tax return is
consolidated) certified on its behalf by its chief financial officer (or similar
position) to be true and correct.
(D) Annual Budgets. Within five (5) days after receipt from Lessee but in
--------------
no event later than sixty-five (65) days after the commencement of each calendar
year, Borrower shall
47
deliver to Lender for its review the Annual Budget delivered by Lessee under
the Master Lease for each Property and for the Properties in the aggregate for
such calendar year. Each Annual Budget shall identify and set forth all
operating revenue, costs, and expenses for each Property, and shall include, to
the extent reasonably available, a breakdown of projected Patient Revenues and
other revenues of Lessee and its Affiliates itemized by payor type and a
reasonably detailed breakdown of projected operating expenses itemized to
reflect, at a minimum, rental expense for such Property, overhead charges or
management fees, bad debt expense and any non-recurring charges.
(E) Material Notices.
----------------
(i) Borrower shall promptly deliver, or caused to be delivered to
Lender, copies of all notices of default given or received with respect to
noncompliance related to any Indebtedness of Borrower Party, including
Indebtedness under the Loan Documents and which, in the case of Guarantor, could
reasonably be expected to result in a Material Adverse Effect.
(ii) Borrower shall promptly deliver to Lender copies of any and all
material notices (including without limitation any notice alleging any default
or breach) received from Lessee, or any manager, franchisors, licensors, tenant
or subtenant for or pertaining to any Property.
(iii) Borrower shall deliver notice to Lender promptly after obtaining
knowledge of any material default by Lessee under the Master Lease.
(iv) Within one (1) Business Day after receipt thereof from Lessee,
copies of any notice delivered by Lessee under Section 26.2 of the Master Lease
with respect to the following: (x) any written notice of termination or
suspension of any Property from participation in Medicare or Medicaid or (y) any
written notice of non-renewal of any Permit affecting any Property or its
operation.
(v) Within one (1) Business Day after receipt thereof from Lessee,
copies of any material deficiency report from any Governmental Authority
delivered by Lessee under Section 8.1 of the Master Lease.
(F) Events of Default, etc. Promptly upon Borrower obtaining knowledge of
----------------------
any of the following events or conditions, Borrower shall deliver to Lender a
certificate executed on its behalf by its chief financial officer or similar
officer specifying the nature and period of existence of such condition or event
and what action Borrower or any Affiliate thereof has taken, is taking and
proposes to take with respect thereto: (i) any condition or event that
constitutes an Event of Default or Default; or (ii) any event which in its
reasonable opinion may have a Material Adverse Effect or Property Adverse
Effect; or (iii) the occurrence of any Event of Default under (and as defined
in) the Master Lease.
(G) Litigation. Promptly upon Borrower's obtaining knowledge of (1) the
----------
institution of any action, suit, proceeding, governmental investigation or
arbitration against or affecting Borrower or any Property not previously
disclosed in writing by Borrower to Lender or (2) any material development in
any action, suit, proceeding, governmental investigation or arbitration at any
time pending against or affecting Borrower or any Property which, in each case,
if adversely
48
determined would reasonably be expected to have a Material Adverse Effect,
Borrower will give notice thereof to Lender and provide such other information
as may be reasonably available to enable Lender and its counsel to evaluate such
matter.
(H) Other Information. With reasonable promptness, each Borrower Party will
-----------------
deliver such other information and data with respect to such Person and its
Affiliates or any Property as from time to time may be reasonably requested by
Lender in writing provided such information and data are consistent with the
types of information generally required by mortgage lenders within the finance
industry.
(I) Additional Copies. Simultaneously with delivery thereof to Lender,
-----------------
Borrower will deliver copies of all financial statements, reports, information
and notices delivered pursuant to this Section 5.1 to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Four World Financial Center, 250 Vesey Street, New
York, New York 10080, Attention: Mortgage Trading Desk - Carolyn Hubach.
Section 5.2 Existence; Qualification. Each Primary Borrower Party will at all
------------------------
times preserve and keep in full force and effect its existence as a limited
partnership, limited liability company, or corporation, as the case may be and
all rights and franchises material to its business, including its qualification
to do business in each state where it is required by law to so qualify. Without
limitation of the foregoing, Borrower and, to the extent required by applicable
law, Member shall at all times be qualified to do business in the states where
each Property is located.
Section 5.3 Payment of Impositions, Claims and Tax Claims.
---------------------------------------------
(A) Subject to Borrower's contest rights set forth in subsection (B) below,
Borrower will pay or cause to be paid (i) all Impositions with respect to the
Properties; (ii) all claims (including claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a Lien upon any Property or assets (hereinafter referred to as "Claims");
------
and (iii) all federal, state and local income taxes, sales taxes, excise taxes
and all other taxes and assessments of Borrower on its business, income or
assets (hereinafter referred to as "Tax Claims"); in each instance before any
----------
penalty or fine is incurred with respect thereto.
(B) Borrower shall not be required to pay, discharge or remove or cause to
be paid, discharged or removed any Imposition or Claim relating to a Property,
or any Tax Claim, or comply with or cause to be complied with, any Legal
Requirement, so long as Borrower or Lessee contests in good faith such
Imposition, Claim or Tax Claim or the validity, applicability or amount thereof,
or the legality or applicability of any Legal Requirement, by an appropriate
legal proceeding which operates to prevent the collection of such amounts and
the sale of the applicable Property or any portion thereof, so long as: (i) in
the event that Borrower (rather than Lessee pursuant to its contest rights under
the Master Lease) is conducting such contest, no Event of Default shall have
occurred and be continuing, (ii) prior to the date on which such Imposition,
Claim or Tax Claim would otherwise have become delinquent (or, in the case of
any contest by Lessee, promptly after Borrower receives notice from Lessee of
its intent to contest said Imposition, Claim or Tax Claim), Borrower or Lessee
shall have given Lender prior written notice of its intent to contest said
Imposition, Claim or Tax Claim; (iii) in the case of
49
Impositions, Claims or Tax Claims in excess of $100,000, promptly after
written demand therefor by Lender, Borrower or Lessee shall have deposited with
or delivered to Lender (or with a court of competent jurisdiction or other
appropriate body approved by Lender) (x) cash in an amount equal to 125% of (1)
the amount of the contested Imposition, Claim or Tax Claim plus (2) any
additional interest, charge or penalty arising from such contest, (y) a Letter
of Credit in such amount or (z) a surety bond in form and substance and issued
by a surety company reasonably acceptable to Lender, (iv) in the case of any
contest of any Legal Requirement, compliance therewith may legally be delayed
without loss of any Permit that would reasonably be expected to have a Property
Adverse Effect and (v) neither the applicable Property, nor any rent therefrom
or any portion thereof or interest therein would in Lender's reasonable
judgment, be reasonably likely to be in imminent danger of being sold,
forfeited, attached or lost during the pendency of such contest. Any such
contest shall be prosecuted by appropriate legal proceedings conducted in good
faith and with due diligence, and if such contest is finally determined
adversely to Borrower or Lessee, Borrower or Lessee, as the case may be, shall
promptly pay the amount of such contested Imposition, Claim or Tax Claim or
shall promptly comply with any contested Legal Requirement, as finally
determined, together with all interest and penalties payable in connection
therewith. Lender shall have full power and authority, but no obligation, to
apply any amount deposited with Lender under this subsection to the payment of
any unpaid Imposition, Claim or Tax Claim or to compliance with any contested
Legal Requirement to prevent the sale or forfeiture of the applicable Property
for non-payment thereof or non-compliance thereof, if Lender reasonably believes
that such sale or forfeiture is imminently threatened. Any surplus retained by
Lender after payment of the Imposition, Claim or Tax Claim or compliance with
any contested Legal Requirement for which a deposit was made shall be promptly
repaid to Borrower or Lessee, as the case may be. Notwithstanding any provision
of this Section to the contrary, Borrower shall pay or cause to be paid any
Imposition, Claim or Tax Claim or comply with any Legal Requirement which it
might otherwise be entitled to contest if an Event of Default shall occur, or
if, in the reasonable determination of Lender, the applicable Property, any
rents therefrom or any portion thereof or interest therein is reasonably likely
to be in imminent danger of being forfeited, attached or lost. If Borrower
refuses to pay or cause to be paid any such Imposition, Claim or Tax Claim or
comply with any Legal Requirement referred to in the preceding sentence, upon
five (5) Business Days' prior written notice, Lender may (but shall not be
obligated to) make such payment or comply with same and Borrower shall reimburse
Lender on demand for all such advances.
Section 5.4 Maintenance of Insurance. Borrower will maintain or cause to be
------------------------
maintained, with financially sound and reputable insurers, public liability,
property damage, business interruption and other types of insurance with respect
to its business and each Property (including all Improvements now existing or
hereafter erected thereon) against all losses, hazards, casualties, liabilities
and contingencies as customarily carried or maintained by Persons of established
reputation engaged in similar businesses and as Lender shall reasonably require
and in such amounts and for such periods as Lender shall reasonably require.
Without limitation of the foregoing, Borrower shall maintain or cause to be
maintained policies of insurance with respect to each Property in the following
amounts and covering the following risks:
(i) Property damage insurance covering loss or damage to each
Property caused by fire, lightning, hail, windstorm, flood, explosion,
hurricane (to the extent available at commercially reasonably premiums),
vandalism, malicious mischief, and such other losses,
50
hazards, casualties, liabilities and contingencies as are normally and
usually covered by fire policies in effect where such Property is located,
including business interruption insurance covering the entire repair and
restoration period and endorsed to include all of the extended coverage perils
and other broad form perils, including the standard "all risks" clauses, with
such endorsements as Lender may from time to time reasonably require including,
without limitation, building ordinance and law (including demolition costs and
increased cost of construction coverage), lightning, windstorm, civil commotion,
hail, riot, strike, water damage, sprinkler leakage, collapse and malicious
mischief. Each such policy shall be in an amount not less than $150,000,000 per
occurrence (but shall be written on a replacement cost basis); provided,
however, in the event that at any time after the date hereof, the Master Lease
shall no longer be in effect or the above insurance shall otherwise not be
maintained by Lessee pursuant to the Master Lease, then (a) Borrower shall be
required to maintain such property damage insurance in an amount not less than
100% of the full replacement cost of the Improvements at each Property (without
any deduction for depreciation), and (b) each such policy shall be required to
contain a replacement cost and agreed amount endorsement in an amount not less
than the Allocated Loan Amount for such Property. The deductible under each
policy shall not exceed an amount customarily required by institutional lenders
for similar properties in the general vicinity of the applicable Property, but
in no event in excess of $100,000 (except that the deductibles for: (1) flood
damage due to named storms (including from wind or hail) shall not exceed the
greater of 5% of the total insurable value of the applicable Property and
$250,000 and for flood damage not due to named storms shall not exceed $250,000,
(2) wind and hail damage for the Properties located in Wilmington, North
Carolina and Savannah, Georgia shall not exceed the greater of 5% of the total
insurable value of such Properties and $250,000 and (3) earthquake loss or
damage if and to the extent covered by such policy shall not exceed the greater
of 5% of the total insurable value of the applicable Property and $250,000).
(ii) Broad form boiler and machinery insurance for each Property in
an amount not less than $100,000,000 per occurrence (but shall be written on a
replacement cost basis) and including coverage against loss or damage from (1)
leakage of sprinkler systems and (2) damage, breakdown or explosion of steam
boilers, electrical machinery and equipment, air conditioning, refrigeration,
pressure vessels or similar apparatus and mechanical objects now or hereafter
installed at such Property.
(iii) Earthquake insurance covering each Property located in the State
of California in an amount not less than $50,000,000 per occurrence (but shall
be written on a replacement cost basis) and in the aggregate and with a
permissible deductible in an amount customarily required by institutional
lenders for similar properties in the general vicinity of such Properties, but
in no event in excess of the greater of (a) 5% of the total insurable value of
the Property and (b) $250,000.
(iv) Flood insurance for any Property that is located, in whole or in
part, in an area now or hereafter designated as "flood prone" or a "special
flood hazard area" (as defined under the National Flood Insurance Act of 1968,
the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform
Act of 1994 (as each may be amended, or any successor law, collectively, the
"Flood Insurance Acts")) shall be maintained under the property insurance
policies required under clause (i) above.
51
(v) In addition to the property damage insurance required under
clause (i) above and for so long as such property damage insurance is
maintained by Lessee pursuant to the Master Lease, Borrower shall also be
required to maintain contingent property insurance covering loss or damage from
the risks described in clause (i) in an amount not less than $50,000,000 per
occurrence.
(vi) During any period of reconstruction, renovation or alteration
of any Property, a complete value, "All Risks" Builders Risk form or "Course of
Construction" insurance policy in non-reporting form and in an amount reasonably
satisfactory to Lender.
(vii) Commercial General Liability and excess umbrella insurance
covering claims for bodily injury, death or property damage occurring upon, in
or about each Property in an amount not less than $50,000,000 per occurrence and
$88,000,000 in the aggregate with a deductible in an amount customarily required
by institutional lenders for similar properties in the general vicinity of the
respective Properties. If Lender permits such liability coverage to be written
on a blanket basis, then such policy shall provide that the aggregate limit of
insurance applies separately to each Property. In addition to the liability
insurance described in this clause (vii) and for so long as such liability
insurance is maintained by Lessee pursuant to the Master Lease, Borrower shall
also be required to maintain contingent general liability insurance covering the
above claims with respect to each of the Properties in an amount not less than
$100,000,000 per occurrence and in the aggregate.
(viii) If required by applicable state laws, worker's compensation or
employer's liability insurance in accordance with such laws.
(ix) As to Lessee, insurance covering claims arising out of
professional liability and malpractice in an amount not less than $25,000,000
per occurrence and in the aggregate.
(x) Borrower and Lessee shall maintain fidelity and crime insurance
in an amount not less than $5,000,000 in the aggregate, insuring against losses
resulting from dishonest or fraudulent acts committed by Borrower's and Lessee's
personnel, employees and agents.
(xi) Business interruption or rent loss insurance in an amount equal
to the Rents payable to Borrower under the Master Lease for each Property for an
indemnity period covering the entire repair and restoration period with respect
to casualty damage to any Property shall be maintained as part of the property
damage insurance required to be maintained under Section 5.4(i) above. Lender
shall be named as loss payee under such insurance.
(xii) Such other insurance and endorsements, if any, with respect to
the Properties and the operation thereof as Lender may reasonably require from
time to time, provided same are customarily required by institutional lenders
for similar properties in the general vicinity of the respective Properties, or
which are otherwise required by the Loan Documents.
Each carrier providing any insurance, or portion thereof, required by
this Section shall be licensed to do business in the jurisdictions in which the
Properties are located, and shall
52
have a claims-paying ability rating by S&P of not less than "AA-" and by Moody's
of not less than "A2" (to the extent such insurer is then rated by Moody's) and
an A.M. Best Company, Inc. rating of not less than A and financial size category
of not less than IX. However, if any insurance coverage required under this
Section 5.4 is maintained by a syndicate of insurers, the preceding ratings
requirements shall be deemed satisfied as long as at least seventy five percent
(75%) of the coverage (if there are four or fewer members of the syndicate) or
at least sixty percent (60%) of the coverage (if there are five or more members
of the syndicate) is maintained with carriers meeting the claims-paying ability
ratings requirements by S&P and Moody's (if applicable) set forth above and all
carriers in such syndicate have a claims-paying ability rating by S&P of not
less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by
Moody's). Notwithstanding the foregoing, Lender hereby approves the ratings of
the insurance carriers listed on Schedule 4.20 for the insurance coverages set
-------------
forth on said Schedule 4.20; provided, however, in the event that any of the
-------------
insurance provided by insurers referred to on Schedule 4.20 (that do not
-------------
currently meet the ratings requirements set forth in the first sentence of this
paragraph) shall hereafter be provided by another insurance carrier, any such
carrier shall thereafter be required to fully comply with such ratings
requirements (unless the carrier being replaced provides coverage as part of a
syndicate of insurers and such syndicate meets the syndicate ratings
requirements above after inclusion of such new carrier in the syndicate). In the
event that the claims-paying ability rating of any insurance carrier shall be
downgraded below the ratings requirements of the first sentence of this
paragraph, Borrower shall not be in default under this paragraph provided that
it replaces or causes Lessee to replace such carrier with another insurance
carrier meeting such ratings requirements by the earlier of (i) the date which
is six (6) months after the date of such downgrade and (ii) the date of renewal
of the applicable policy. Notwithstanding the foregoing, in the event that (i)
any carrier shall be downgraded below "BBB" by S&P or "Baa2" by Moody's,
Borrower shall be required to immediately replace such carrier with a carrier
meeting the ratings requirements of the first sentence of this paragraph (or if
such carrier provided coverage as part of a syndicate of insurers, such carrier
will be replaced with an insurer having ratings sufficient for the syndicate to
satisfy the syndicate ratings requirements set forth above) and (ii) the
downgrade of any carrier providing any coverage as part of a syndicate of
insurers does not cause such syndicate to fail to satisfy the syndicate ratings
requirements set forth in the second sentence, Borrower shall not be required to
replace such carrier. Except as otherwise expressly set forth in this Loan
Agreement, Borrower shall cause all insurance proceeds (except proceeds payable
under general public liability, malpractice, workers' compensation and fidelity
and crime insurance) payable on account of insurance carried in accordance with
this Section to be payable to Lender as a mortgagee and loss payee as its
interests may appear.
All insurance policies and renewals thereof (1) shall be in a form
reasonably acceptable to Lender, (2) shall provide for a term of not less than
one year, (3) shall provide by way of endorsement, rider or otherwise that such
insurance policy shall not be canceled, allowed to expire or materially altered
unless such insurer shall have first given Lender thirty (30) days prior written
notice thereof, (4) shall include a standard non-contributory mortgagee
endorsement or its equivalent in favor of and in form reasonably acceptable to
Lender, (5) shall provide for claims to be made on an occurrence basis (except
as provided in the last sentence of this paragraph), (6) shall contain an agreed
value clause updated annually (if the amount of coverage under such policy is
based upon the replacement cost of a Property) and (7) shall not contain any
exclusions from coverage for acts of terrorism, provided that the omission of
such exclusions
53
from any such policies shall not be required unless such omission (a) shall not
cause the premiums therefor to exceed commercially reasonable rates and (b) is
then customarily required by institutional lenders for properties similar to the
Properties. Lender acknowledges that, as of the Closing Date, the coverage
described in the foregoing clause (7) is not required; provided that, subject to
the foregoing conditions, such coverage under the foregoing clause (7) may be
required by the Lender after the date hereof. All property damage insurance
policies (except for flood and earthquake policies) must automatically reinstate
after each loss. Notwithstanding the provisions of clause (5) of this paragraph,
any policies required under clauses (vii) and (ix) of this Section 5.4 which are
maintained by Lessee under the Master Lease may be maintained by Lessee on a
claims made policy form (rather than on a per occurrence basis) provided that,
in the case of the insurance under clause (vii), in Lender's reasonable
judgment, Lessee has satisfied each of the conditions precedent to maintenance
of such policies on such alternate form under Section 13.1.4 of the Master
Lease, such claims made policies satisfy all of the other requirements of said
Section 13.1.4 including those with respect to the purchase of "tail" policies
relating to periods subsequent to the expiration of such claims made policies
and are otherwise in form and substance reasonably acceptable to Lender.
Notwithstanding anything to the contrary contained herein, Lender hereby
acknowledges and agrees that the insurance coverages set forth on Schedule 4.20
-------------
satisfy the requirements of this Section 5.4 as of the date hereof.
Prior to the end of each insurance policy period, Borrower will
deliver, or cause to be delivered, (a) binders or certificates of insurance
evidencing renewal of any existing coverages (or copies of any new insurance
policies not previously delivered to Lender) in form and substance reasonably
satisfactory to Lender, (b) a schedule outlining all material insurance coverage
maintained as of the date thereof by Borrower or Lessee, as the case may be, and
(c) evidence of payment in full of the premiums for such insurance policies.
Notwithstanding the foregoing, in the event that Borrower or Lessee, as the case
may be, shall fail to deliver binders or certificates of insurance evidencing
renewal of any insurance policy maintained by Borrower or Lessee at least five
(5) Business Days prior to the expiration of such policy, Lender (or Servicer on
its behalf) may negotiate the placement of such renewal coverage in accordance
with the requirements of this Section 5.4 with such insurance carrier(s) as
Lender (or Servicer) may elect in its sole discretion and Borrower shall be
required to pay any and all reasonable out-of-pocket costs and expenses of
Lender (or Servicer) in connection with arranging for the placement of such
insurance policy. Neither Lender nor Servicer shall purchase any such renewal
coverage(s) unless and until Borrower shall fail to deliver evidence of renewal
and/or payment within the applicable time period(s) provided above.
The insurance coverage required under this Section 5.4 may be effected
under a blanket policy or policies covering the Properties and other properties
and assets owned by Borrower or Lessee or their respective Affiliates; provided
that any such blanket policy shall specify any sublimits in such blanket policy
applicable to the Properties, which amounts shall not be less than the amounts
required pursuant to this Section 5.4 and which shall in any case comply in all
other respects with the requirements of this Section 5.4. Upon Lender's request
which shall not be more frequently than once for any twelve (12) month period,
Borrower shall deliver to Lender a certificate setting forth (v) the number of
properties covered by any such blanket policy or policies maintained by Borrower
or Lessee, (w) the location by city (if available, otherwise, county) and state
of the properties, (x) the average square footage of the properties (or the
aggregate square footage), (y) a brief description of the typical construction
type included in
54
the blanket policy and (z) such other information as Lender may reasonably
request. Borrower covenants and agrees that, at all times, the aggregate
coverage under such policy or policies shall be not less than the amount of
insurance which would be required for all properties covered by such blanket
policy or policies (including the Property) under Sections 5.4(i), (ii) and (v)
if such properties were covered by this Loan Agreement.
Provided that Borrower at all times maintains the contingent liability
insurance required under Section 5.4(vii), Lessee may maintain a portion of the
commercial general liability insurance required under Section 5.4(vii) and a
portion of the professional liability insurance required under Section 5.4(ix)
above, in each case, in an amount not to exceed $2,000,000 per occurrence and
$40,000,000 in the aggregate with an insurance company that is a wholly-owned
subsidiary of Lessee or by means of a self-insurance program, the terms and
conditions of which shall be reasonably acceptable to Lender. Promptly after
Lender's written request therefor, Borrower shall provide, or cause Lessee to
provide, Lender with financial and other information reasonably requested by
Lender with respect to any such wholly-owned insurance company or self-insurance
program, and Lender agrees to hold and use such information in a confidential
manner in accordance with Section 14.24. Lender agrees that the form of the
financial statements for Lessee's captive insurance company and other
information with respect to such insurance company provided to Lender prior to
the date hereof, as described on Exhibit E attached hereto, shall satisfy the
---------
foregoing requirements.
In the event that any insurance in amounts, covering the risks and/or
with deductibles required under Section 5.4(vii) or (ix) above is not available
at commercially reasonable rates in the insurance market for properties similar
to the Properties, Borrower may maintain insurance under Section 5.4(vii) or
(ix) in amounts, covering risks and subject to deductibles reasonably acceptable
to Lender. In addition, notwithstanding anything to the contrary contained in
this Section 5.4, Borrower may modify the requirements above with respect to the
amount of any insurance policy, the risks covered thereby, the deductibles
thereunder, the self-insurance permitted with respect thereto and/or the
required ratings for the carrier providing such policy provided that, in each
case, Borrower obtains Lender's prior written consent thereto (not to be
unreasonably withheld or delayed) and delivers a Rating Confirmation to Lender
with respect thereto.
Section 5.5 Maintenance of the Property; Alterations; Casualty.
--------------------------------------------------
(A) Borrower will maintain the Properties or cause the Properties to be
maintained by Lessee in all material respects in good repair, working order and
condition, subject to ordinary wear and tear and the provisions of this Loan
Agreement with respect to casualty and condemnation and will make or cause to be
made all material appropriate repairs, renewals and replacements thereof. All
work required or permitted under this Loan Agreement shall be performed in a
good and workmanlike manner and in compliance with all applicable laws. Borrower
may, without Lender's consent, perform or allow Lessee to perform alterations to
any Property which do not constitute a Material Alteration, provided that same
will not (i) materially alter the character or purpose of the applicable
Property, (ii) materially detract from the value or operating efficiency or
impair the revenue producing capability of the applicable Property or (iii)
materially adversely affect the ability of Lessee to comply with the Master
Lease. Borrower shall not perform or permit to be performed any Material
Alteration without Lender's prior
55
written consent, which consent shall not be unreasonably withheld or
delayed. Lender shall approve or disapprove any request for approval of any
Material Alteration within fifteen (15) Business Days after the submission by
Borrower to Lender of a written request for such approval together with a
reasonably detailed description of such Material Alteration including a
construction budget therefor on a line item basis, copies of the plans and
specifications for same, a list of all contractors and subcontractors providing
services or materials in connection with such Material Alteration and copies of
all material contracts and subcontracts. Lender's consent to any Material
Alteration shall be deemed given, if the correspondence from Borrower to Lender
requesting such approval contains a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY
DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) BUSINESS DAYS,
YOUR APPROVAL SHALL BE DEEMED GIVEN," and if Lender shall fail to respond to or
to expressly deny such request for approval in writing within fifteen (15)
Business Days after receipt of Borrower's written request therefor together with
the documents and information required above and any other information
reasonably requested by Lender in writing prior to the expiration of such
fifteen (15) Business Day period in order to adequately review the same. Lender
may, as a condition to giving its consent to a Material Alteration, require that
Borrower deliver to Lender evidence reasonably satisfactory to Lender that
Borrower or Lessee has cash available for payment of the cost of such Material
Alteration. Upon substantial completion of the Material Alteration, Borrower
shall provide evidence reasonably satisfactory to Lender that (i) the Material
Alteration was constructed in accordance with all applicable laws and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien or lien claims on
account of their work, materials or services are being contested in accordance
with Section 5.3(B) of this Loan Agreement and (iii) all material licenses
necessary for the use, operation and occupancy of the Material Alteration (other
than those which depend on the performance of tenant improvement work) have been
issued. Borrower shall reimburse Lender upon demand for all reasonable
out-of-pocket costs and expenses (including the reasonable fees of any
architect, engineer or other professional engaged by Lender) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 5.5(A).
(B)In the event of casualty or loss at any Property, immediately after
obtaining knowledge thereof, Borrower shall give written notice of the same to
the insurance carrier (if Lessee has not already done so) and to Lender and
Borrower shall, or shall cause Lessee to, promptly commence and diligently
prosecute to completion, in accordance with the terms hereof (and in the case of
Lessee, in accordance with the terms of the Master Lease), the repair and
restoration of such Property as nearly as possible to the Pre-Existing Condition
(hereinafter defined) (a "Restoration"). Borrower shall pay all costs of such
-----------
Restoration whether or not such costs are covered by insurance. Borrower, Lessee
and Lender shall participate jointly in the settlement of any insurance claims
involving an amount exceeding the Restoration Threshold, with Lessee maintaining
the lead role in negotiations with the insurers and Lender having full access to
information and the right to participate in such negotiations; provided,
however, that neither Borrower nor Lessee shall make proof of loss or adjust and
compromise any claim under any insurance policies involving losses in excess of
the Restoration Threshold without the prior
56
written consent of Lender which consent shall not be unreasonably withheld
or delayed. Borrower hereby authorizes and empowers Lender as attorney-in-fact
for Borrower, to collect and receive insurance proceeds from losses exceeding
the Restoration Threshold, and to deduct therefrom Lender's reasonable expenses
incurred in the collection of such proceeds; provided however, that nothing
contained in this Section shall require Lender to incur any expense or take any
action hereunder. Borrower further authorizes Lender, at Lender's option, (i) to
hold the balance of such proceeds to be used to reimburse Borrower and/or Lessee
for the cost of Restoration of the applicable Property or (ii) subject to
Subsection 5.5(C), to apply such proceeds to payment of the Obligations whether
or not then due, in any order, and, provided that no Event of Default has
occurred and is continuing, upon any such application of insurance proceeds to
the Obligations pursuant to the foregoing, no Prepayment Consideration shall be
due and payable. Notwithstanding the foregoing, in the event of a casualty to
any Property where the loss does not exceed the Restoration Threshold for such
Property, Borrower or Lessee may settle and adjust such claim without Lender's
consent; provided that (a) no Event of Default has occurred and is continuing
and (b) such adjustment is carried out in a commercially reasonable and timely
manner (and in the case of Lessee, in accordance with the terms of the Master
Lease).
(C) Lender shall not exercise Lender's option to apply insurance proceeds
to payment of the Obligations if all of the following conditions are met: (i) no
Section 7.3 Master Lease Event of Default then exists; (ii) Lender reasonably
determines that there will be sufficient funds to complete the Restoration of
the affected Property to at least the Pre-Existing Condition; (iii) the Master
Lease remains in full force and effect and Lessee continues to pay all rent due
thereunder during and after the Restoration of such Property, and (iv) Lender is
reasonably satisfied that the affected Property can be restored and repaired to
substantially the same condition it was in immediately prior to such casualty
and in compliance with all applicable zoning, building and other laws and codes
other than variances that would not have a Property Adverse Effect (the
"Pre-Existing Condition"). Notwithstanding anything to the contrary set forth in
----------------------
this Section 5.5, to the extent the insurance proceeds paid or payable with
respect to any casualty to any Property (either singly or when aggregated with
all other then unapplied proceeds with respect to such Property) do not exceed
the Restoration Threshold and the estimated cost of completing the applicable
Restoration shall not be greater than the Restoration Threshold, and provided
that no Master Lease Event of Default shall have occurred and be continuing, the
provisions of Section 5.5(D) below (and the provisions of Sections 5.5(E)(i) and
(ii) below, insofar as they refer to Lender's and/or an Architect's approval of
plans or specifications) shall not apply and such proceeds shall be paid
directly to Borrower or, subject to the terms and conditions of the Master
Lease, to Lessee to be applied to Restoration of such Property in accordance
with the terms hereof (except that insurance proceeds paid with respect to the
insurance maintained under Section 5.4(xi) shall be deposited directly to the
Central Account and, subject to the requirements of Section 14.1 of the Master
Lease, applied in accordance with the provisions of the Cash Management
Agreement).
(D) If Lender elects (or is required pursuant to Section 5.5(C) above or,
in the case of any condemnation award, pursuant to Section 6(b) of any Mortgage)
to make insurance proceeds or any condemnation award available for Restoration
of any Property, then such proceeds shall be deposited into a segregated
interest-bearing bank account at the Central Account Bank, which shall be an
Eligible Account, held by Lender and shall be paid out from time to time to
Borrower or Lessee as the Restoration progresses (less any cost to Lender of
recovering and paying out
57
such proceeds, including, without limitation, reasonable attorneys' fees and
costs allocable to inspecting the Restoration and the plans and specifications
therefor) subject to the provisions of the Cash Management Agreement and to all
of the following conditions:
(i) The Restoration shall be performed under the supervision of an
independent architect or engineer licensed in the state where the affected
Property is located and having at least five (5) years of experience, selected
by Borrower and reasonably acceptable to Lender (an "Architect" or "Engineer"),
--------- --------
and such Architect or Engineer shall have delivered to Lender a certificate
estimating the cost of completing the Restoration, and, if the amount set forth
therein is more than the sum of the amount of insurance proceeds then being held
by Lender in connection with a casualty and amounts agreed to be paid as part of
a final settlement under applicable insurance policies upon or before completion
of the Restoration, Borrower shall have delivered, or caused Lessee to deliver,
to Lender (x) cash collateral in an amount equal to such excess, (y) a Letter of
Credit in the amount of such excess and draws on such Letter of Credit may be
made by Lender to pay for the cost of such Restoration following exhaustion of
the insurance proceeds therefor or (z) a completion bond in form, substance and
issued by a surety company reasonably acceptable to Lender.
(ii) All plans and specifications required in connection with the
Restoration shall be subject to Lender's prior reasonable approval. The identity
of all material contractors, subcontractors and materialmen engaged in the
Restoration, as well as the contracts under which they have been engaged, shall
be subject to prior review and approval by Lender, which approval shall not be
unreasonably withheld or delayed. Neither the approval by Lender of any required
plans and specifications for the Restoration nor the inspection by Lender of the
Restoration shall make Lender responsible for the preparation of such plans and
specifications, or the compliance of such plans and specifications or the
Restoration, with any applicable Legal Requirement.
(iii) Each request for payment shall be made on not less than ten (10)
days' prior notice to Lender and shall be accompanied by a certificate of an
Architect or Engineer, stating that (w) payment is for a portion of the
Restoration that has been completed in compliance with the plans and
specifications, (x) the sum requested is required to reimburse Borrower (or
Lessee) for payments by Borrower (or Lessee) to date, or is due to the
contractors, subcontractors, materialmen, laborers, engineers, architects or
other Persons rendering services or materials for the Restoration (giving a
brief description of such services and materials), and that when added to all
sums previously paid out by Lender does not exceed the value of the Restoration
done to the date of such certificate, (y) if the sum requested is to cover
payment relating to repair and restoration of personal property required or
relating to the Property, title to the personal property items covered by the
request for payment is vested in Borrower or Lessee, as the case may be (unless
either Borrower or Lessee is lessee of such personal property), and (z) the
insurance proceeds and other amounts deposited by Borrower and/or Lessee and
held by Lender after such payment is equal to or more than the estimated
remaining cost to complete such Restoration. Additionally, each request for
payment shall contain a statement signed by Borrower or Lessee stating that the
requested payment is for Restoration satisfactorily done to date.
(iv) Each request for payment shall be accompanied by waivers of
lien, in customary form and substance, covering that part of the Restoration for
which payment or
58
reimbursement is being requested and, if required by Lender, a search prepared
by a title company or licensed abstractor, or by other evidence satisfactory to
Lender that there has not been filed with respect to the Property any mechanic's
or other lien or instrument for retention of title relating to any part of the
Restoration not discharged of record.
(v) Lender, or an architect or engineer engaged by Lender, shall
have the right to inspect the Restoration at all reasonable times upon
reasonable prior notice and may condition any disbursement of insurance proceeds
upon satisfactory compliance by Borrower or Lessee with the provisions hereof.
(vi) Insurance proceeds shall not be disbursed more frequently than
once every thirty (30) days.
(vii) Until such time as the Restoration has been substantially
completed substantially in accordance with the plans and specifications approved
by Lender and all applicable Legal Requirements, Lender shall not be obligated
to disburse up to ten percent (10%) of the cost of the Restoration (the
"Retention Amount") to Borrower. Upon substantial completion of the Restoration
----------------
in accordance with the foregoing, Borrower or Lessee shall send notice thereof
to Lender and, subject to the conditions of clauses (i)-(iv) above, Lender shall
disburse one-half of the Retention Amount to Borrower or Lessee; provided,
however, that the remaining one-half of the Retention Amount shall be disbursed
to Borrower or Lessee when Lender shall have received copies of any and all
final certificates of occupancy or other certificates, licenses and permits to
the extent required for the ownership, occupancy and operation of the Property
in accordance with all Legal Requirements. Borrower hereby covenants to
diligently seek to obtain, or cause Lessee to diligently seek to obtain, any
such certificates, licenses and permits.
(viii) Upon failure on the part of Borrower or Lessee promptly to
commence the Restoration or to proceed diligently and continuously to completion
of the Restoration, which failure shall continue for thirty (30) days after
notice to Borrower and Lessee (which period shall be extended for the period of
any delays caused by strikes, lockouts, acts of God, embargoes, governmental
restrictions and other causes beyond Borrower's or Lessee's control (any of the
foregoing causes, "Force Majeure")), Lender may apply any insurance proceeds or
-------------
condemnation proceeds it then or thereafter holds to the payment of the Debt in
accordance with the provisions of the Note.
(E) If Borrower (or Lessee, as applicable) (i) within ninety (90) days
after the occurrence of any damage to any Property or any portion thereof shall
fail to submit to Lender for approval plans and specifications for the
Restoration (approved by the Architect), (ii) after such plans and
specifications are approved by the Architect and Lender, shall fail to promptly
submit same for approval by all Governmental Authorities whose approval is
required and diligently seek to obtain such approvals, (iii) after any such
plans and specifications are approved by all Governmental Authorities, shall
fail to promptly commence such Restoration or (iv) shall fail to diligently
prosecute such Restoration to completion which failure shall continue for thirty
(30) days after notice to Borrower and Lessee (which period shall be extended
for the period of any delays caused by Force Majeure), then, in addition to all
other rights available hereunder, at law or in equity, Lender, or any receiver
of the Property or any portion thereof, upon ten (10)
59
days' prior notice to Borrower and Lessee (except in the event of emergency
in which case no notice shall be required), may (but shall have no obligation
to) perform or cause to be performed such Restoration, and may take such other
steps as it reasonably deems advisable. Borrower hereby waives any claim, other
than for gross negligence or willful misconduct, against Lender and any receiver
arising out of any act or omission of Lender or such receiver pursuant hereto,
and Lender may apply all or any portion of the insurance proceeds (without the
need to fulfill any other requirements of this Section 5.5) to reimburse Lender
and such receiver, for all costs not reimbursed to Lender or such receiver upon
demand together with interest thereon at the Default Rate from the date such
amounts are advanced until the same are paid to Lender or the receiver.
(F) If pursuant to Section 5.5(B), Lender has the right to and elects to
apply insurance proceeds against the Obligations as to the affected Property,
then Borrower, in any such instance, must prepay the Note in the amount of the
Release Price with respect to the relevant Property, all insurance proceeds
received in connection with such casualty (other than any proceeds of the
insurance policies to be maintained under Section 5.4(xi)) shall be applied
towards payment of such Release Price and the Allocated Loan Amounts for all
other Properties shall be increased or decreased in the manner provided in the
definition of Allocated Loan Amount. In the event that any portion of such
insurance proceeds is applied toward the repayment of the Obligations, subject
to the terms and conditions of Section 11.4, Borrower shall be entitled to
obtain from Lender a Property Release (without representation or warranty except
for the representations and warranties expressly required to be given by Lender
in connection with a Property Release in the last paragraph of Section 11.4
hereof) of the applicable Property from the Lien of the Mortgage relating to
such Property (in which event Borrower shall not be obligated to restore the
applicable Property pursuant to Section 5.5(B) above) provided that (i) no Event
of Default exists, (ii) Borrower shall comply with the provisions hereof and
(iii) notwithstanding anything to the contrary contained in the Master Lease
(and whether or not any consideration received by Borrower from Lessee in
connection with the exercise of any option of Lessee under the Master Lease to
purchase the affected Property as a result of such casualty shall be sufficient
to pay such Release Price), Borrower pays to Lender the amount, if any, by which
the Release Price for such Property exceeds the insurance proceeds received by
Lender and applied to repayment of the Obligations, in which case the Allocated
Loan Amount for such Property shall be reduced to zero. If any proceeds are
applied to reduce the Obligations under this Section 5.5, Lender shall apply the
same in accordance with the provisions of the Note, and, provided that no Event
of Default has occurred and is continuing, no Prepayment Consideration shall be
due and payable in connection with such application. Any excess proceeds over
the Release Price paid to Lender in connection with the release of any Property
pursuant to the foregoing, shall also be applied against the Obligations.
Section 5.6 Inspection. Borrower shall permit, and, subject to the applicable
----------
provisions of the Master Lease, shall cause Lessee to permit, any authorized
representatives designated by Lender to visit and inspect during normal business
hours the Properties and their business, including their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss their affairs, finances and business with their officers and independent
public accountants (with Borrower's or Lessee's representative(s) present if
required), at such reasonable times during normal business hours and as often as
may be reasonably requested, and in any of the foregoing cases provided, and on
the condition, that the activities of Lender and its
60
representatives do not materially interfere with Lessee's business operations at
the affected Properties. Unless an Event of Default has occurred, Lender shall
provide advance written notice of at least three (3) Business Days (or such
longer period as may be required by the terms of the Master Lease) prior to
visiting or inspecting any Property or Borrower's offices.
Section 5.7 Environmental Compliance.
------------------------
(A) Environmental Laws. Borrower shall at all times comply, and shall
------------------
exercise its rights under the Master Lease to cause Lessee to at all times
comply, in all material respects with all applicable Environmental Laws.
Borrower shall not and shall use reasonable efforts to exercise its rights under
the Master Lease to ensure that Lessee shall not: (i) violate any applicable
Environmental Law in any material respect; or (ii) generate, use, transport,
handle, store, release or dispose of any Hazardous Material in or into, on or
onto, or from any Property (except in accordance with applicable law); or (iii)
permit any Lien imposed pursuant to any Environmental Law to be imposed or to
remain on any Property (except to the extent same is being contested in
accordance with Section 5.3(B) hereof).
(B) Remedial Action. Upon obtaining knowledge of the presence, storage,
---------------
use, disposal, transportation, active or passive migration, release or discharge
of any Hazardous Materials on, under or about any Property in violation of any
Environmental Laws, Borrower, at its sole cost and expense, shall promptly
provide to Lender such reports, certificates, engineering studies or other
written material or data as Lender may reasonably require, and take and
diligently prosecute, or cause Lessee to promptly take and diligently prosecute,
any and all remedial actions required under applicable Environmental Laws . In
the event Borrower undertakes any remedial action with respect to any Hazardous
Materials on, under or about any Property, Borrower shall conduct and complete
such remedial action in material compliance with all applicable Environmental
Laws, and materially in accordance with the applicable policies, orders and
directives of all federal, state and local governmental authorities.
(C) Further Assurance. If Lender at any time has a reasonable basis to
-----------------
believe that a violation of any Environmental Law related to any Property has
occurred and is continuing or that any basis for an Environmental Claim
affecting Borrower or Lessee or related to any Property exists, then Borrower
agrees, promptly after written request from Lender, to provide Lender with such
reports, certificates, engineering studies or other written material or data as
Lender may reasonably require so as to satisfy Lender that Borrower, Lessee and
such Property are in material compliance with all applicable Environmental Laws
(unless any such reports, certificates, studies or materials disclose any
violation of Environmental Laws in which event the provisions of Section 5.7(B)
shall apply).
(D) O&M Plans. Borrower has delivered to Lender operation and maintenance
---------
programs prepared by the environmental consultant or engineer that prepared the
Environmental Reports (the "O&M Plans") with respect to asbestos and
---------
asbestos-containing materials and lead-based paint located in the Properties as
set forth in the Environmental Reports. Borrower shall at all times implement
and carry out, or cause Lessee to implement and carry out, the O&M Plans with
respect to all applicable Properties, in all material respects in accordance
with their terms. Lender's requirement that Borrower develop and comply with the
O&M Plans shall not be deemed to constitute a waiver or modification of any
covenants or agreements of Borrower or
61
Guarantor with respect to Hazardous Materials or Environmental Laws as set
forth herein or in the Environmental Indemnity.
Section 5.8 Environmental Disclosure.
------------------------
(A) Borrower shall promptly upon obtaining knowledge thereof advise Lender
in writing and in reasonable detail of: (1) any release, disposal or discharge
of any Hazardous Material on, under, or about any Property required to be
reported to any federal, state or local governmental or regulatory agency under
any applicable Environmental Laws except such releases, disposals or discharges
pursuant to and in compliance with valid permits, authorizations or
registrations under said Environmental Laws; (2) any and all written
communications sent or received by Borrower with respect to any Environmental
Claims or any release, disposal or discharge of Hazardous Material required to
be reported to any federal, state or local governmental or regulatory agency;
(3) any remedial action taken by Borrower or Lessee or any other Person in
response to any Hazardous Material on, under or about any Property; (4) the
discovery by Borrower or Lessee of any occurrence or condition on any real
property adjoining or in the vicinity of any Property that could cause such
Property or any part thereof to be classified as "border-zone property" or to be
otherwise subject to any restrictions on the ownership, occupancy,
transferability or use thereof under any Environmental Laws the existence of
which could result in an Environmental Claim with respect to any Property; and
(5) any request for information from any governmental agency that indicates such
agency is investigating whether Borrower or Lessee may be potentially
responsible for a release, disposal or discharge of Hazardous Materials.
(B) Borrower shall promptly notify Lender of any proposed action to be
taken by Borrower or, to the extent Borrower has knowledge thereof, Lessee
pertaining in any way to any Property to commence any operations that could
reasonably be expected to subject Borrower, Lessee or any Property to any
additional material obligations or requirements under any Environmental Laws.
Borrower shall, at its own expense, provide copies of such documents or
information as Lender may reasonably request in relation to any matters
disclosed pursuant to this Section.
Section 5.9 Compliance with Laws and Contractual Obligations; Operation of
--------------------------------------------------------------
Properties as Nursing Facilities. Borrower will (A) comply, or cause Lessee and
- --------------------------------
the operation of each Property to, at all times, comply, in all material
respects with all Legal Requirements other than those Legal Requirements the
noncompliance with which would not reasonably be expected to have, either
individually or in the aggregate, a Property Adverse Effect, (B) maintain, or
cause Lessee to maintain, all licenses and permits now held or hereafter
acquired by Borrower or Lessee, the loss, suspension, or revocation of which, or
failure to renew, would not reasonably be expected to have a Property Adverse
Effect and (C) perform, observe, comply and fulfill in all material respects all
of its obligations, covenants and conditions contained in any Contractual
Obligation, including the Loan Documents except for any Contractual Obligations
(other than the Loan Documents) the non-compliance with which would not
reasonably be expected to have a Property Adverse Effect. Borrower will operate
or cause Lessee to operate each of the Properties as Nursing Facilities in
accordance, in all material respects, with all applicable Legal Requirements
other than those Legal Requirements the noncompliance with which would not
62
reasonably be expected to have, either individually or in the aggregate, a
Property Adverse Effect.
Section 5.10 Further Assurances. Borrower Parties shall, from time to time,
------------------
execute and/or deliver such documents, instruments, agreements, financing
statements, and perform such acts as Lender at any time may reasonably request
to evidence, preserve and/or protect the Collateral at any time securing or
intended to secure the Obligations and/or to better and more effectively carry
out the purposes of this Loan Agreement and the other Loan Documents.
Section 5.11 Performance of Agreements and Leases. Each Borrower Party shall
------------------------------------
duly and punctually perform, observe and comply in all material respects with
all of the terms, provisions, conditions, covenants and agreements on its part
to be performed, observed and complied with (i) hereunder and under the other
Loan Documents to which it is a party, (ii) under the Master Lease and (iii) any
other agreements entered into or assumed by such Person in connection with any
Property, and will not suffer or permit any default or event of default (giving
effect to any applicable notice requirements and cure periods) by it to exist
under any of the foregoing, except to the extent that the failure to so perform,
observe or comply with any agreements under clause (iii) would not reasonably be
expected to have a Property Adverse Effect. Borrower shall enforce the material
terms, covenants and conditions contained in the Master Lease upon the part of
Lessee to be observed or performed and use reasonable efforts to exercise any
rights of Borrower to cure any defaults of Lessee under the Master Lease if and
to the extent permitted thereunder.
Section 5.12 Leases.
------
(A) Without the prior written consent of Lender (which consent of
Lender shall not be unreasonably withheld, conditioned or delayed in the case of
clauses (i)(w) (in the case of a partial termination of the Master Lease as a
result of a default by Lessee thereunder only), (i)(x), (i)(y), (ii) or (iii)
below), and without delivery of a Rating Confirmation in the case of clauses (i)
and (ii), Borrower shall not (i) (w) cancel or terminate the Master Lease in
whole or in part (including, without limitation, by exercise of its rights to
terminate the Master Lease with respect to one or more Properties under Section
25.1.5 thereof); (x) approve any assignment of the Master Lease (including,
without limitation, in connection with any foreclosure of any Leasehold Mortgage
or transfer-in-lieu thereof); (y) amend or modify any economic terms (including,
without limitation, by consenting to or acquiescing in the exercise of the Reset
Option (as defined in the Master Lease) by Ventas Realty under Section 3.2(e) of
the Master Lease), otherwise materially amend or modify (including, without
limitation, by amending the fixed term or any renewal term applicable to one or
more Properties) or waive any material provisions of the Master Lease; or (z)
cancel or modify any guaranty, or release any security deposit, letter of
credit, or other item constituting security pertaining to the Master Lease
(except as required pursuant to the express terms of the Master Lease); (ii)
enter into any Major Lease, or cancel, terminate, amend or modify any Major
Lease to which Borrower is a party; or (iii) approve any request for consent by
Lessee under the Master Lease to any of the following: (x) a proposed sublease
by Lessee of all or any portion of any Property constituting a Major Lease (any
such sublease, a "Major Sublease"); (y) assignment of any such Major Sublease;
--------------
or (z) material amendment or modification of any such Major Sublease. Whether or
not Lender's consent to any amendment, modification or waiver of any provision
of the Master Lease is required
63
pursuant to clause (i)(y) above, Borrower shall be required to deliver to
Lender at least ten (10) days' prior written notice describing the nature and
terms of the proposed amendment, modification or waiver and the proposed
effective date thereof, and Borrower shall deliver an executed copy of such
amendment, modification or waiver promptly after execution by each of the
parties. Notwithstanding the foregoing, if as a result of any default by Lessee
under the Master Lease, any Property shall be in risk of sale, loss or
forfeiture or being closed by any Governmental Authority or losing its
certification for reimbursement under Medicare or Medicaid, losing licensure of
any beds or of suffering a Property Adverse Effect, then Borrower may partially
terminate the Master Lease with respect to such Property only and replace
Lessee, on a temporary basis, with a substitute operator meeting the
requirements of Section 25.1.2(b) of the Master Lease (such substitute operator,
an "Interim Operator") without the consent of Lender; provided that (1) Borrower
----------------
gives Lender at least three (3) Business Days' notice of such partial
termination of the Master Lease including the identity of the Interim Operator
and any biographical or financial information regarding the Interim Operator
that Lender may reasonably request and that is available to Borrower, (2)
Borrower has theretofore given Lender notice of the default under the Master
Lease which gave rise to such condition in accordance with Section 5.1(E)(iii)
hereof and (3) such Interim Operator shall not be permitted to operate the
Property for more than forty-five (45) days in the aggregate without Lender's
consent, which shall not be unreasonably withheld or delayed, and delivery of a
Rating Confirmation. The foregoing shall not limit or affect Borrower's
obligation to obtain Lender's consent to any Major Lease or Management Agreement
to be entered into by Borrower with such Interim Operator or any other Person in
accordance with this Section 5.12 or 5.13, respectively, in each case to the
extent any such Major Lease or Management Agreement has a term in excess of
forty-five (45) days.
(B) Any request for approval of a Lease, or assignment, termination,
amendment or modification of the Master Lease or any other Lease, requiring
approval as set forth above shall be made to Lender in writing and together with
such request Borrower shall furnish to Lender: (i) such biographical and
financial information about the proposed assignee or subtenant and any guarantor
of such proposed Lease as Lender may reasonably require, (ii) a copy of the
proposed form of Lease (or amendment or modification), and (iii) a summary of
the material terms of such proposed Lease (or amendment or modification)
including, without limitation, rental terms and the term of the proposed Lease
and any options.
Except for security deposits, no Lease entered into by Borrower shall
provide for payment of rent more than one month in advance, and Borrower shall
not under any circumstances collect any rent more than one month in advance.
Borrower, at Lender's request, shall furnish Lender with executed copies of all
Leases hereafter entered into by Borrower or Lessee (to the extent in Borrower's
possession and not theretofore provided to Lender). Each Lease entered into by
Borrower shall specifically provide that, subject to the following sentence,
such Lease is subordinate to the applicable Mortgage encumbering the Property to
which such Lease relates; that the tenant will attorn to Lender, upon Lender's
acquisition of title to such Property; that the tenant agrees to execute such
further evidence of attornment as Borrower (or Lender) may from time to time
reasonably request; that the attornment of the tenant shall not be terminated by
foreclosure; that in no event shall Lender, as holder of the applicable Mortgage
or as successor landlord, be liable to the tenant for any act or omission of any
prior landlord or for any liability or obligation of any prior landlord
occurring prior to the date that Lender or any subsequent owner acquire title to
such Property.
64
Section 5.13 Management.
----------
(A) Borrower shall not enter into, or approve any request for consent by
Lessee under the Master Lease to enter into (to the extent that Borrower's
consent thereto is required), any Management Agreement without the prior written
consent of Lender, which consent shall not be unreasonably withheld, and
delivery of a Rating Confirmation. If any Management Agreement shall hereafter
be entered into in accordance with the provisions of this Section 5.13, Borrower
shall not, and shall not approve any request for consent thereto by Lessee under
the Master Lease (to the extent that Borrower's consent thereto is required),
surrender, terminate, cancel, materially modify, renew or extend such Management
Agreement, or enter into any other Management Agreement with Manager or any
other Person, or consent to the assignment by the Manager of its interest under
the Management Agreement, in each case without the express consent of Lender,
which consent shall not be unreasonably withheld, and delivery of a Rating
Confirmation.
(B) Lender shall have the right to require Borrower to replace any Manager
under any Management Agreement to which Borrower is a party with a Person chosen
by Lender, upon the earliest to occur of any one or more of the following
events: (i) upon the occurrence and during the continuance of an Event of
Default; (ii) thirty (30) days after notice from Lender to Borrower that Manager
has engaged in fraud, gross negligence or willful misconduct arising from or in
connection with its performance under the Management Agreement; or (iii) upon a
change of control of such Manager.
Section 5.14 Material Agreements. Except for Leases complying with the Loan
-------------------
Documents and any Management Agreement complying with the foregoing, Borrower
shall not, without Lender's prior written consent (which consent shall not be
unreasonably withheld, conditioned or delayed), enter into or become obligated
under, or approve any request for consent by Lessee under the Master Lease (to
the extent that Borrower has the right to consent to such matter under the
Master Lease) to, any material agreement pertaining to any Property, including
without limitation brokerage agreements, unless the same may be terminated
without cause and without payment of a penalty or premium, on not more than
thirty (30) day's prior written notice.
Section 5.15 Deposits; Application of Receipts. Borrower will deposit all
---------------------------------
Receipts from the Property into, and otherwise comply with, the Accounts
established from time to time hereunder. Subject to Article VII hereof and the
Cash Management Agreement, Borrower shall promptly apply such Receipts to the
payment of all current and past due Operating Expenses for which Borrower is
liable, and to the repayment of all sums currently due or past due under the
Loan Documents, including all payments into the Reserves.
Section 5.16 Estoppel Certificates.
---------------------
(A) Within ten (10) Business Days following a request by Lender, the
Borrower shall provide to Lender a duly acknowledged written statement
confirming (i) the amount of the outstanding principal balance of the Loan, (ii)
the terms of payment and maturity date of the Note, (iii) the date to which
interest has been paid, (iv) to the knowledge of the Borrower, whether any
offsets or defenses exist against the Obligations, and if any such offsets or
defenses are alleged to exist, the nature thereof shall be set forth in detail,
and (v) that this Loan
65
Agreement, the Note, the Mortgages and the other Loan Documents are valid,
legal and binding obligations of the Borrower and have not been modified or
amended, or, if modified or amended, giving particulars of any such modification
or amendment.
(B) Within ten (10) Business Days following a written request by the
Borrower, Lender shall provide to Borrower a duly acknowledged written statement
setting forth the amount of the outstanding principal balance of the Loan, the
date to which interest has been paid, and whether Lender has provided any
Borrower with written notice of any Event of Default which remains uncured.
Compliance by Lender with the requirements of this Section shall not be deemed
to be a waiver of any rights or remedies of Lender hereunder or under any other
Loan Document.
Section 5.17 Indebtedness. So long as the Loan is outstanding, no Primary
------------
Borrower Party will directly or indirectly create, incur, assume, guaranty, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness except:
(A) the Obligations; and
(B) (a) unsecured trade payables not evidenced by a note and arising
out of purchases of goods or services in the ordinary course of business and (b)
Indebtedness incurred in the financing of equipment or other personal property
used at the Properties in the ordinary course of business, provided that (1)
each such trade payable is paid not later than sixty (60) days after the
original invoice date and (2) the aggregate amount of such trade payables and
Indebtedness relating to financing of equipment and personal property referred
to in clause (b) above outstanding does not, at any time, exceed two percent
(2%) of the annual Base Rent payable to Borrower for each of the Properties
under (and as defined in) the Master Lease. In no event shall any Indebtedness
other than the Loan be secured, in whole or in part, by any Property or any
portion thereof or interest therein (except that the Leasehold Financings may be
secured by the Leasehold Mortgages and equipment and personal property
financings permitted above may be secured by Liens on such equipment and
personal property but not by Liens on any portion of any Property constituting
real property).
Section 5.18 Liens and Related Matters. The obligations of Borrower Parties
-------------------------
under this Section are in addition to and not in limitation of their obligations
under Article XI herein. So long as the Loan is outstanding:
(A) No Liens. No Primary Borrower Party shall directly or indirectly
--------
create, incur, assume or permit to exist any Lien on or with respect to the
Property, any other Collateral or any direct or indirect ownership interest in
Borrower, except Permitted Encumbrances.
(B) No Negative Pledges. No Primary Borrower Party shall enter into or
-------------------
assume any agreement (other than the Loan Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
Section 5.19 Contingent Obligations. No Primary Borrower Party shall directly or
----------------------
indirectly create or become or be liable with respect to any Contingent
Obligation (except in connection with the Cap or any Letter of Credit delivered
to Lender pursuant to this Loan Agreement).
66
Section 5.20 Restriction on Fundamental Changes. Except as otherwise expressly
----------------------------------
permitted under this Loan Agreement (or with the prior written consent of
Lender):
(A) No Primary Borrower Party shall, or shall permit any other Person
to, (i) amend, modify or waive any term or provision of such Primary Borrower
Party's partnership agreement, certificate of limited partnership, articles of
incorporation, by-laws, articles of organization, operating agreement, or other
organizational documents relating to any of the representations, warranties or
covenants of Article IX of this Loan Agreement or this Section 5.20 or any other
material term or provision of such Primary Borrower Party's organizational
documents unless required by law; or (ii) liquidate, wind-up or dissolve such
Primary Borrower Party.
(B) No Primary Borrower Party shall, nor permit or suffer any other
Person on its behalf, to (i) issue, sell, assign, pledge, convey, dispose or
otherwise encumber any stock, membership interest, partnership interest, or
other equity or beneficial interest in Borrower or (ii) grant any options,
warrants, purchase rights or other similar agreements or understandings with
respect thereto.
(C) No Primary Borrower Party shall acquire by purchase or otherwise
all or any part of the business or assets of, or stock or other evidence of
beneficial ownership of, any Person (other than Member's membership interest in
Borrower). Notwithstanding the foregoing, so long as no Event of Default has
occurred and is continuing hereunder, Borrower may exercise its option to
purchase Lessee's personal property at any Property upon the expiration or
termination of the Master Lease with respect to such Property in accordance with
Section 37.2 of the Master Lease; provided, however, that Borrower's right to
purchase any such personal property may be subject to the prior delivery to
Lender of a Nondisqualification Opinion if reasonably required by Lender. In
connection with any such acquisition of personal property by Borrower, Borrower
will execute, acknowledge and deliver to Lender any and all security agreements,
mortgages, assignments, UCC financing statements, transfers and assurances as
Lender shall reasonably require for the better creation, attachment, or
perfection of security interests in and to such personal property intended to be
granted to Lender hereunder and under the Mortgages.
Section 5.21 Transactions with Related Persons. Borrower shall not pay any
---------------------------------
management, consulting, director or similar fees to any Related Person of
Borrower or to any director (other than any customary fees of the Independent
Directors), officer or employee of Borrower. Borrower shall not directly or
indirectly enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Related Person of Borrower or with any director, officer or
employee of any Borrower Party, except transactions in the ordinary course of
and pursuant to the reasonable requirements of the business of Borrower and upon
fair and reasonable terms which are no less favorable to Borrower than would be
obtained in a comparable arm's length transaction with a Person that is not a
Related Person of Borrower. Borrower shall not make any payment or permit any
payment to be made to any Related Person of Borrower when or as to any time when
any Event of Default shall exist.
Section 5.22 ERISA.
-----
67
(A) No ERISA Plans. None of the Primary Borrower Parties will establish
--------------
any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence
making contributions to (or become obligated to make contributions to) any
Employee Benefit Plan, Pension Plan or Multiemployer Plan other than
contributions to the plans described in Schedule 4.14.
-------------
(B) Compliance with ERISA. Borrower shall not: (i) engage in any
---------------------
prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or
(ii) permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee Benefit Plan
which establishment or amendment could result in liability to Borrower or any
ERISA Affiliate or increase the obligation of Borrower.
(C) No Plan Assets. Borrower shall not at any time during the term of
--------------
this Loan Agreement become (1) an employee benefit plan defined in Section 3(3)
of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1)
of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental
plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose
underlying assets constitute "plan assets" of any such employee benefit plan,
plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the
IRC or any state statutes applicable to Borrower regulating investments of
governmental plans.
Section 5.23 Lender's Expenses. Borrower shall pay, on demand by Lender, all
-----------------
reasonable expenses, charges, costs and fees (including reasonable attorneys'
fees and expenses) in connection with the negotiation, documentation, closing,
administration, enforcement, interpretation, and collection of the Loan and the
Loan Documents, and in the preservation and protection of Lender's rights
hereunder and thereunder. Without limitation of the foregoing, Borrower shall
pay all costs and expenses, including reasonable attorneys' fees, incurred by
Lender in any case or proceeding under Title 11 of the United States Code (or
any law succeeding or replacing any of the same). At the Closing, Lender is
authorized to pay directly from the proceeds of the Loan any or all of the
foregoing expenses then or theretofore incurred.
ARTICLE VI
RESERVES
Section 6.1 Security Interest in Reserves; Other Matters Pertaining to
----------------------------------------------------------
Reserves.
--------
(A) Borrower hereby pledges, assigns and grants to Lender a security
interest in and to all of Borrower's right, title and interest in and to the
Reserves, as security for payment and performance of all of the Obligations
hereunder and under the Note and the other Loan Documents. The Reserves
constitute Account Collateral and are subject to the security interest in favor
of Lender created herein and all provisions of this Loan Agreement and the other
Loan Documents pertaining to Account Collateral.
(B) In addition to the rights and remedies provided in Article VII and
elsewhere herein, upon the occurrence of any Event of Default, Lender shall have
all rights and remedies pertaining to the Reserves as are provided for in any of
the Loan Documents or under any applicable law. Without limiting the foregoing,
upon and at all times after the occurrence and
68
during the continuance of any Event of Default, Lender, in its sole and
absolute discretion, may use the Reserves (or any portion thereof) for any
purpose, including but not limited to any combination of the following: (i)
payment of any of the Obligations including the Prepayment Consideration
applicable upon such payment in such order as Lender may determine in its sole
discretion; provided, however, that such application of funds shall not cure or
-------- -------
be deemed to cure any default; (ii) reimbursement of Lender for any losses or
expenses (including, without limitation, reasonable legal fees) suffered or
incurred as a result of such default; (iii) payment for the work or obligation
for which such Reserves were reserved or were required to be reserved; and (iv)
application of the Reserves in connection with the exercise of any and all
rights and remedies available to Lender at law or in equity or under this Loan
Agreement or pursuant to any of the other Loan Documents.
Section 6.2 Funds Deposited with Lender.
---------------------------
(A) Interest, Offsets. Except only as expressly provided otherwise
-----------------
herein, all funds of Borrower which are deposited with Lender as Reserves
hereunder shall be held by Lender in one or more Permitted Investments. Lender
is authorized to commingle any of the Reserves with each other. All interest
which accrues on the Reserves shall be taxable to Borrower and shall be added to
and disbursed in the same manner and under the same conditions as the principal
sum on which said interest accrued. Additional provisions pertaining to
investments are set forth in Article VII.
(B) Funding at Closing. Borrower shall deposit with Lender the amounts
------------------
necessary to fund each of the Reserves as set forth below. Deposits into the
Reserves at Closing may occur by deduction from the amount of the Loan that
otherwise would be disbursed to Borrower, followed by prompt deposit of the same
into the applicable Sub-Account of the Central Account in accordance with the
Cash Management Agreement. Notwithstanding such deductions, the Loan shall be
deemed for all purposes to be fully disbursed at Closing.
Section 6.3 Impositions and Insurance Reserve. On the Closing Date, Borrower
---------------------------------
shall deposit with Lender (or such agent of Lender as Lender may designate in
writing to Borrower from time to time) a $2,226,000 Letter of Credit on account
of annual Impositions (the "Impositions Letter of Credit") and, pursuant to the
----------------------------
Cash Management Agreement, Borrower shall deposit (or cause to be deposited by
Lessee) monthly, on each Payment Date commencing with the First Payment Date,
1/12th of the annual charges (as reasonably estimated by Lender from time to
time (but not more often than twice in any twelve (12) month period) and which
annual charges shall be reduced by the amount of any Letter(s) of Credit from
time to time being held by Lender on account of Impositions or Insurance
Premiums) for all Impositions and Insurance Premiums (other than Insurance
Premiums for the coverages required under Sections 5.4(viii) or (ix) or for
automobile insurance) payable with respect to the Properties hereunder (said
funds, together with any interest thereon and additions thereto, and together
with any Letter(s) of Credit delivered in lieu thereof, the "Impositions and
---------------
Insurance Reserve"). For purposes of this Section 6.3, the amount of Insurance
- -----------------
Premiums required to be escrowed hereunder in respect of any insurance coverages
required under Section 5.4 which are maintained under blanket insurance policies
covering other properties in addition to the Properties will be calculated
assuming that such insurance coverages were maintained for the Properties under
a blanket policy but on a stand-alone basis separate from properties other than
the Properties (such insurance policies, "Stand
-----
69
Alone Insurance Policies") as determined by Lender in its reasonable discretion.
- ------------------------
The initial amount of the monthly deposit to be made to the Impositions and
Insurance Reserve from and after the date hereof is $42,558 (which amount
represents one-twelfth (1/12th) of the annual Insurance Premiums of $510,696; it
being acknowledged that if the Impositions Letter of Credit were not delivered
by Borrower on the date hereof such initial monthly amount would be increased by
$185,500 (one-twelfth (1/12th) of the annual Impositions relative to the
Properties as of the date hereof) to $228,058). Borrower shall also deposit (or
cause to be deposited by Lessee) with Lender on demand, to be added to and
included within such reserve, a sum of money which Lender reasonably estimates,
together with such monthly deposits (and taking into account the amount of any
Letter(s) of Credit from time to time held by Lender on account of Impositions
and Insurance Premiums), will be sufficient to make the payment of each such
charge at least thirty (30) days prior to the date initially due. Borrower shall
provide Lender with bills and all other documents necessary for the payment of
Impositions at least thirty (30) days prior to the date on which each payment of
Impositions shall first become due (except if any tax bill is not issued by the
applicable taxing authority at least thirty (30) days prior to the due date,
Borrower shall deliver same promptly after receipt). So long as (i) no Section
7.3 Master Lease Event of Default has occurred and is continuing, (ii) Borrower
or Lessee has provided Lender with the foregoing tax bills and other documents
in a timely manner, and (iii) sufficient funds (excluding Letters of Credit)
have been deposited by Borrower or Lessee and are held by Lender for the payment
of Impositions relating to each of the Properties, Lender shall pay said
Impositions. Borrower shall also provide (or cause Lessee to provide)
certificates of insurance or other evidence of renewal (including evidence of
payment) of the insurance policies required to be maintained under Section 5.4
prior to the expiration of each of such insurance policies. If Borrower fails to
deliver (or cause Lessee to deliver) such certificates of insurance or other
evidence of renewal and payment within the above time period, Lender may use
funds available in the Impositions and Insurance Reserve (or draw down on any
Letter of Credit delivered in lieu thereof) to purchase Stand Alone Insurance
Policies for the Properties on Borrower's behalf. Borrower hereby appoints
Lender as Borrower's attorney-in-fact for such purposes, which power of attorney
is coupled with an interest and irrevocable. If the amount then held in the
Impositions and Insurance Reserve on account of Insurance Premiums (plus amounts
available under Letters of Credit on account of Insurance Premiums) shall be
less than the actual insurance premiums payable for such Stand Alone Insurance
Policies, Borrower shall be required to pay (or reimburse Lender for) such
deficiency within two (2) Business Days after request therefor from Lender. If
Borrower provides such certificates of insurance or evidence of renewal and
payment within the above time period, then Lender shall disburse to Borrower the
amount then held in the Impositions and Insurance Reserve on account of the
portion of Insurance Premiums attributable to the insurance policies for which
such evidence of renewal and payment was delivered; provided, that, if Borrower
and Lessee each deliver a portion of the funds held in the Imposition and
Insurance Reserve on account of Insurance Premiums, Lender shall only disburse
to Borrower or Lessee, as the case may be, the amount deposited by such party on
account of the insurance policies for which evidence of renewal and payment was
delivered. Provided that the balance in the Impositions and Insurance Reserve
Sub-Account exceeds the amount then required to be deposited therein (and will
continue to exceed such amount after such disbursement), as reasonably
determined by Lender, and no Section 7.3 Master Lease Event of Default then
exists, Lender shall cause the Central Account Bank to disburse any accrued
interest in the Impositions and Insurance Reserve Sub-Account to Borrower
promptly after the end of
70
each calendar quarter. Notwithstanding anything to the contrary contained in
this Section 6.3, if Borrower delivers (or causes Lessee to deliver) one or more
Letters of Credit to Lender in lieu of any funds required to be deposited in the
Impositions and Insurance Reserve, such Letter(s) of Credit shall be held by
Lender in accordance with Section 6.8 and, without limitation of Section 7.3
hereof, Lender shall not be obligated to draw on any such Letter of Credit (a)
to pay any Impositions or Insurance Premiums owing to a taxing authority or
insurer, as the case may be, or (b) to reimburse Borrower (or Lessee) for its
payment of any Impositions or Insurance Premiums. From time to time (but not
more often than twice in any twelve (12) month period) based on increases in the
annual charges for all Impositions or Insurance Premiums (for Stand-Alone
Insurance Policies), as the case may be, as reasonably determined by Lender,
Lender may increase its estimate of the annual charges for all Impositions and
Insurance Premiums (for Stand-Alone Insurance Policies) (other than Insurance
Premiums for the coverages required under Sections 5.4(viii) and (ix) and for
automobile insurance) payable with respect to the Properties, and, within ten
(10) Business Days after Borrower's and Lessee's receipt of written notice from
Lender of any such increased estimate, Borrower shall deliver, or cause Lessee
to deliver, to Lender such additional sum of money (or an amended or replacement
Letter of Credit in such amount) as will again bring Borrower into compliance
with the Reserve requirements relative to Impositions and Insurance Premiums
described in this Section 6.3.
Section 6.4 Debt Service Reserve. At Closing, Borrower shall reserve from the
--------------------
proceeds of the Loan and shall deposit with Lender (or its Servicer or agent)
$5,000,000, for the purpose of creating a reserve for payment of principal and
interest on the Loan (said funds, together with any interest thereon and
additions thereto, and together with any Letter(s) of Credit delivered in lieu
thereof, the "Debt Service Reserve"). Provided that no Event of Default has
--------------------
occurred and is continuing, Lender shall cause the Central Account Bank to
disburse to Borrower accrued interest in the Debt Service Reserve Sub-Account
promptly after the end of each calendar quarter.
Section 6.5 Replacement Reserve. At Closing, Borrower shall reserve from the
-------------------
proceeds of the Loan and shall deposit with Lender (or such agent as Lender may
designate in writing from time to time), an amount equal to $1,588,000 (which
amount is equal to the product of (i) $280 multiplied by (ii) the total number
of licensed beds at each of the Properties (the "Replacement Reserve Annual
--------------------------
Amount")) for the purpose of creating a reserve for Capital Expenditures to be
- ------
made at the Properties (said funds, together with any interest thereon and
additions thereto, and together with any Letter(s) of Credit delivered in lieu
thereof, the "Replacement Reserve"). Funds on deposit in the Replacement Reserve
-------------------
shall be held by Lender during the Term of the Loan as security for the
Obligations and shall not be made available to Borrower or Lessee, unless and
until Borrower is required to make monthly deposits into the Replacement Reserve
as provided below, whereupon such funds shall be made available to Borrower to
reimburse Borrower for Capital Expenditures made to the Properties upon the
terms and conditions set forth below. So long as, in Lender's reasonable
determination Lessee performs its obligations to repair and maintain, and make
replacements to, the Improvements in all material respects in accordance with
the Master Lease (or, in the case of any failure by Lessee to perform such
obligations in all material respects, such failure is cured within thirty (30)
days after notice thereof from Lender to Borrower or such longer period as may
be reasonably necessary to cure same with diligence (but in no event to exceed
sixty (60) days from date of such notice which period shall be subject to
reasonable delays for Force Majeure) (any such failure by Lessee after
71
the expiration of such grace period, a "Lessee Repair Default")) and no Event of
---------------------
Default has occurred and is continuing under this Loan Agreement or any other
Loan Document, Borrower shall not be required to make additional deposits into
the Replacement Reserve after the Closing Date. If at any time a Lessee Repair
Default shall occur or an Event of Default shall occur and be continuing,
commencing on the next Payment Date and on all subsequent Payment Dates during
the Term, Borrower shall be required to make monthly deposits in the Replacement
Reserve in an amount equal to one-twelfth (1/12) of the Replacement Reserve
Annual Amount. From and after the date that Borrower commences making monthly
deposits into the Replacement Reserve, pursuant to the foregoing sentence, funds
contained in the Replacement Reserve shall be made available solely to reimburse
Borrower (or Lessee) for the actual bona fide out-of-pocket cost of Capital
Expenditures performed during the term of the Loan and reasonably approved by
Lender ("Approved Capital Expenditures"), and shall not be used by Borrower for
-----------------------------
purposes for which any other Reserve is established. Upon Borrower's request for
disbursement, Lender shall disburse funds from the Replacement Reserve to or for
the account of Borrower (or Lessee), to reimburse Borrower (or Lessee) for such
Approved Capital Expenditures, on the Payment Date following such request, upon
satisfaction of such disbursement conditions as Lender may require in its
reasonable discretion. Notwithstanding the foregoing, Borrower acknowledges and
agrees that, upon the occurrence and during the continuance of an Event of
Default (whether or not a Master Lease Event of Default then exists), Lender, in
its sole discretion, may apply all or any portion of the Replacement Reserve to
the cost of any Capital Improvements then required to be made to the Properties
under the terms of the Master Lease or to payment of any of the Obligations in
such order of priority as Lender may determine. In the event that Lender so
applies all or any portion of the Replacement Reserve, Borrower shall repay to
Lender the amount of funds so applied to replenish the Replacement Reserve up to
the amount contained therein immediately prior to such application, and if
Borrower shall fail to repay such amounts within five (5) days after it receives
notice of such application, a further Event of Default shall exist hereunder,
which Event of Default shall not be cured unless and until Borrower repays such
amount or all Sub-Accounts have been fully funded from Rents for the current
month or prior months. Provided that Borrower is not then required to make
monthly deposits into the Replacement Reserve and no Event of Default has
occurred and is continuing, Lender shall cause the Central Account Bank to
disburse any accrued interest in the Replacement Reserve Sub-Account to Borrower
promptly after the end of each calendar quarter.
Section 6.6 Hazardous Materials Remediation Reserve. At Closing, Borrower shall
---------------------------------------
reserve from the proceeds of the Loan and shall deposit with Lender (or such
agent of Lender as Lender may designate in writing from time to time), an amount
equal to $39,700 (said funds, together with any interest thereon and additions
thereto, the "Hazardous Materials Remediation Reserve") for certain work related
---------------------------------------
to Hazardous Materials at certain Properties as indicated in the Environmental
Reports or the property condition reports for such Properties prepared and
delivered prior to the Closing and as such work is more particularly described
on Schedule 6.6 (the "Environmental Work"). Within six (6) months after the
------------ ------------------
Closing, Borrower shall complete or cause Lessee to complete such Environmental
Work and shall provide to Lender such closure reports, no-further-action
letters, and other evidence of compliance with law as Lender may reasonably
require. The funds contained in the Hazardous Materials Remediation Reserve
shall be utilized by Borrower solely for performance of the Environmental Work
in accordance with the Environmental Reports, and shall not be used by Borrower
for purposes for
72
which any other Reserve is established. Upon written application of Borrower,
Borrower shall be entitled to draw upon the Hazardous Materials Remediation
Reserve to pay for costs that have been incurred by Borrower or Lessee for such
Environmental Work, provided that (i) no Event of Default has occurred and is
continuing, (ii) Borrower or Lessee shall provide to Lender such documentation
and certifications as Lender may reasonably request to substantiate the
requirement for and entitlement to such disbursement, (iii) Borrower or Lessee
shall provide Lender with all invoices, receipts, lien waivers and other
documentation of lawful and workmanlike progress or completion, lien-free
status, and availability of sufficient funds, all as may be reasonably requested
by Lender, and (iv) Borrower or Lessee shall provide Lender such evidence as may
be reasonably satisfactory to Lender that, after payment of such draw, the funds
remaining in such Reserve shall be sufficient to pay for the remainder of such
Environmental Work. Subject to the foregoing conditions, Borrower shall be
entitled to draw any remaining balance in the Hazardous Materials Remediation
Reserve when all such Environmental Work is complete to Lender's reasonable
satisfaction and is paid for.
Section 6.7 Deferred Maintenance Reserve. At Closing, Borrower shall reserve
----------------------------
from the proceeds of the Loan and shall deposit with Lender (or such agent of
Lender as Lender may designate in writing from time to time), an amount (said
funds, together with any interest thereon and additions thereto, the "Deferred
--------
Maintenance Reserve") equal to one hundred fifteen percent (115%) of the
- -------------------
estimated cost as reasonably determined by Lender of the deferred maintenance
items and required repairs at the Properties as indicated in the property
condition reports for the Property prepared and delivered in connection with the
Closing as more particularly described on Schedule 6.7 (the "Required Repairs").
------------ ----------------
Within six (6) months after the Closing (except as set forth on Schedule 6.7 and
------------
subject to reasonable delays for Force Majeure), Borrower shall complete or
cause Lessee to complete such Required Repairs. The funds contained in the
Deferred Maintenance Reserve shall be utilized by Borrower solely for payment of
the cost of such Required Repairs and shall not be used by Borrower for purposes
for which any other Reserve is established. Within ten (10) days after written
request from Borrower, Lender shall direct the Central Account Bank to disburse
funds from the Deferred Maintenance Reserve to pay for costs that have been
incurred by Borrower or Lessee for such Required Repairs, provided that (i) no
Section 7.3 Master Lease Event of Default has occurred and is continuing, (ii)
Borrower or Lessee shall provide to Lender such documentation and certifications
as Lender may reasonably request to substantiate the requirement for and
entitlement to such disbursement, (iii) Borrower or Lessee shall provide Lender
with all invoices, receipts, lien waivers and other documentation of lawful and
workmanlike progress or completion and lien-free status, all as may be
reasonably requested by Lender and (iv) Borrower or Lessee shall provide Lender
such evidence as may be reasonably satisfactory to Lender that, after payment of
such draw, the funds remaining in such Reserve shall be sufficient to pay for
the remainder of the work for which the Reserve was established. Subject to the
foregoing conditions, Borrower shall be entitled to draw any remaining balance
in the Deferred Maintenance Reserve when all of the applicable Required Repairs
have been completed to Lender's reasonable satisfaction and paid for.
Section 6.8 Letters of Credit. In lieu of depositing all or any portion of the
-----------------
required funds in the Impositions and Insurance Reserve pursuant to Section 6.3,
the Debt Service Reserve pursuant to Section 6.4 or in the Replacement Reserve
pursuant to Section 6.5, Borrower shall have the right to deliver, or cause
Lessee to deliver, a Letter of Credit in the amount of all or a
73
portion of such funds required to be on deposit with Lender from time to time.
Each Letter of Credit delivered under this Loan Agreement shall be additional
security for the payment of the Obligations. Subject to the provisions of
Section 7.3, upon the occurrence and during the continuance of an Event of
Default, Lender shall have the right, at its option, to draw on any Letter of
Credit and to apply all or any part thereof to the payment of the items for
which such Letter of Credit was established or to apply each such Letter of
Credit to payment of the Obligations in such order, proportion or priority as
Lender may determine. Any such application to the Obligations shall be subject
to the Prepayment Consideration (if any). If the Obligations are not paid in
full on the Maturity Date, subject to the provisions of Section 7.3, any such
Letter of Credit may be applied to reduce the Obligations. In addition to any
other right Lender may have to draw upon a Letter of Credit pursuant to the
terms and conditions of this Loan Agreement, Lender shall have the additional
rights to draw in full any Letter of Credit and deposit the proceeds of any such
draw in the applicable Reserve on account of which such Letter of Credit was
held by Lender: (i) if Lender has received a notice from the issuing bank that
the Letter of Credit will not be renewed and a substitute Letter of Credit is
not provided at least thirty (30) days prior to the date on which the
outstanding Letter of Credit is scheduled to expire, (ii) upon receipt of notice
from the issuing bank that the Letter of Credit will be terminated (except if a
substitute Letter of Credit is provided), or (iii) if Lender has received notice
that the bank issuing the Letter of Credit has ceased to be an Eligible Bank
(unless an alternative Eligible Bank issues an equivalent Letter of Credit
within fifteen (15) days of Borrower's and Lessee's receipt of notice of same).
Notwithstanding anything to the contrary contained in the above, Lender is not
obligated to draw any Letter of Credit upon the happening of an event specified
in (i), (ii) or (iii) above and shall not be liable for any losses sustained by
Borrower due to the insolvency of the bank issuing the Letter of Credit if
Lender has not drawn the Letter of Credit.
ARTICLE VII
CENTRAL ACCOUNT; CASH MANAGEMENT
Section 7.1 Establishment of Central Account.
--------------------------------
(A) Central Account. On or before the Closing Date, pursuant to the
---------------
terms of the Cash Management Agreement, Borrower shall establish and maintain,
at the Central Account Bank, an Eligible Account in the name of the Lender, as
secured party hereunder, to serve as the "Central Account" (said account, and
---------------
any account replacing the same in accordance with this Loan Agreement and the
Cash Management Agreement, the "Central Account") The Central Account shall be
under the sole dominion and control of Lender (which dominion and control may be
exercised by Servicer); and except as expressly provided hereunder and/or in the
Cash Management Agreement, Borrower shall have no rights to control or direct
the investment or payment of funds therein. Lender may elect to change the
financial institution in which the Central Account shall be maintained upon at
least five (5) Business Days' notice to Borrower. The Central Account shall be
deemed to contain such sub-accounts as Lender may designate ("Sub-Accounts"),
------------
which may be maintained as separate ledger accounts and need not be separate
Eligible Accounts. The Sub-Accounts shall include the following as more
particularly described in the Cash Management Agreement:
(i) "Debt Service Payment Sub-Account" shall mean the Sub-Account of
--------------------------------
the Central Account established for the purposes of reserving for payments of
principal and
74
interest and other amounts due under the Loan Documents (but without duplication
of amounts covered under item (ii) below); and
(ii) "Reserve Sub-Accounts" shall mean the Sub-Accounts of the
--------------------
Central Account established for the purpose of holding funds in the Reserves
including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Debt
-------------------------------------------- ----
Service Reserve Sub-Account"; (c) the "Replacement Reserve Sub-Account"; (d) the
- --------------------------- -------------------------------
"Hazardous Materials Remediation Reserve Sub-Account"; (e) the "Deferred
--------------------------------------------------- --------
Maintenance Reserve Sub-Account"; and (f) the "Cash Flow Sweep Sub-Account".
- ------------------------------- ---------------------------
Section 7.2 Flow of Funds.
-------------
(A) Deposit of Receipts into the Central Account. (i) Borrower shall
--------------------------------------------
direct Lessee, as tenant under the Master Lease, to pay all Rents that are
payable to Borrower, as lessor thereunder, directly into the Central Account and
(ii) any and all other Receipts (including Rents that are not paid into the
Central Account in accordance with the foregoing) shall be deposited by Borrower
promptly into the Central Account and in no event later than two (2) Business
Days after the same are paid to or for the benefit of Borrower. To the extent
that Borrower or any Person on Borrower's behalf holds any Receipts, whether in
accordance with this Loan Agreement or otherwise, Borrower shall be deemed to
hold the same in trust for Lender for the protection of the interests of Lender
hereunder and under the Loan Documents.
(B) Application of Funds in Central Account. Funds in the Central Account
---------------------------------------
shall be allocated to the Sub-Accounts (or paid, as the case may be) in
accordance with the Cash Management Agreement.
Section 7.3 Application of Funds After Event of Default. If any Event of Default
-------------------------------------------
shall occur and be continuing, then notwithstanding anything to the contrary in
this Section or elsewhere, Lender shall have all rights and remedies available
under applicable law and under the Loan Documents. Without limitation of the
foregoing, for so long as an Event of Default exists, Lender may apply any and
all funds in the Accounts (or the proceeds of any Letter of Credit deposited in
lieu thereof) against all or any portion of any of the Obligations, in any
order. Notwithstanding the foregoing or anything to the contrary contained
herein, in the Cash Management Agreement or in any other Loan Document, provided
that (i) no Master Lease Event of Default with respect to non-payment of Rent
has occurred and is continuing and (ii) no other Master Lease Event of Default
has occurred and is continuing for which Borrower has commenced (or Lender has
requested Borrower to commence) proceedings for termination of the Master Lease,
in whole or in part, or dispossession or eviction of Lessee from one or more
Properties (a Master Lease Event of Default of the type described in clause (i)
or (ii) above is herein referred to as a "Section 7.3 Master Lease Event of
---------------------------------
Default"), upon the occurrence and during the continuance of an Event of
- -------
Default, Lender agrees that funds deposited by Lessee and contained in (or the
proceeds of any Letters of Credit delivered by Lessee in lieu of funds to be
deposited in) (a) the Impositions and Insurance Reserve Sub-Account shall only
be applied toward payment of Impositions and Insurance Premiums in accordance
with Section 6.3, and (b) the Deferred Maintenance Reserve shall only be applied
toward payment of Required Repairs in accordance with Section 6.7; provided,
however, that the foregoing shall not limit or affect
75
Lender's right to apply any funds deposited by Borrower (or the proceeds of any
Letters of Credit delivered by Borrower in lieu thereof) upon the occurrence of
an Event of Default.
ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES
Section 8.1 Event of Default.
----------------
"Event of Default" shall mean the occurrence or existence of any one or
----------------
more of the following:
(A) Scheduled Payments. Failure of Borrower to pay any scheduled payment
------------------
amount when the same is due under this Loan Agreement, the Note, or any other
Loan Documents (whether such amount is interest, principal, Reserves, or
otherwise); or
(B) Other Payments. Failure of Borrower to pay any amount from time to
--------------
time owing under this Loan Agreement, the Note, or any other Loan Documents
(other than amounts subject to the preceding paragraph) within ten (10) days
after written notice to Borrower that same is due; or
(C) Breach of Reporting Provisions. Failure of any Borrower Party to
------------------------------
perform or comply with any term or condition contained in Section 5.1 which
continues for a period of (i) ten (10) days after written notice in the case of
failure to deliver any Financial Statements, documents or information that are
prepared by Borrower, its Affiliates, employees, agents or representatives or
otherwise available to Borrower other than by delivery by Lessee under the
Master Lease or (ii) thirty (30) days after written notice in the case of any
Financial Statements, documents or information which are to be delivered by
Lessee under the Master Lease; provided, however, that if Borrower has at all
times used diligent efforts to obtain any such Financial Statements, documents
or information to be delivered by Lessee and has commenced legal action against
Lessee to enforce its rights under the Master Lease to compel such delivery,
then such thirty (30) day period under the foregoing clause (ii) shall be
extended for up to an additional thirty (30) days; or
(D) Breach of Provisions Regarding Insurance, Transfers, Liens, Single
------------------------------------------------------------------
Purpose. (i) Failure to keep in force the insurance required by Section 5.4
- -------
hereof or (ii) the failure to comply with any other covenant of Section 5.4
which failure under this clause (ii) continues for five (5) Business Days after
notice from Lender. Except as permitted under Section 5.5(A), the demolition or
removal of, or the making of any Material Alterations to, any of the
Improvements by Borrower, or by Lessee with Borrower's approval, without
Lender's consent. Breach or default under any of Sections 5.12(A), 5.13(A),
5.17, 5.18, 5.19 or 5.20, Article IX or Section 11.1 hereof or Section 9(a) of
any Mortgage; or
(E) Breach of Warranty. Any representation, warranty, certification or
------------------
other statement made by any Borrower Party or Affiliate thereof in any Loan
Document or in any statement or certificate at any time given in writing
pursuant to or in connection with any Loan Document is false in any material
respect as of the date made; provided, however, that Borrower shall have the
right to cure an Event of Default arising from a breach of a representation or
warranty relating to any Property under this Section 8.1(E), by consummating a
Defaulted
76
Property Release with respect to the affected Property in accordance with
Section 11.4 within thirty (30) days after notice of such default from Lender;
or
(F) Other Defaults Under Loan Documents. A default shall occur in the
-----------------------------------
performance of or compliance with any term contained in this Loan Agreement or
the other Loan Documents and such default is not fully cured (which cure of any
default affecting an individual Property may be effected by consummation of a
Defaulted Property Release in accordance with Section 11.4) within thirty (30)
days after delivery of notice from Lender of such default (other than
occurrences described in other provisions of this Section 8.1 or in the other
Loan Documents for which a different grace or cure period is specified or which
constitute immediate Events of Default); provided however that if (i) the
default is capable of cure but with diligence cannot be cured within such period
of thirty (30) days (or Borrower, after exercising diligent efforts, is unable
to cause Lessee to cure such default within such thirty (30) day period), (ii)
Borrower (or the applicable Borrower Party) has commenced the cure within such
thirty (30) day period and at all times after such commencement has pursued such
cure diligently (including by diligently seeking to enforce its rights under the
Master Lease to cause Lessee to cure such default or by exercising its own
rights when available thereunder to effect such cure), and (iii) Borrower
delivers to Lender promptly following demand (which demand may be made from time
to time by Lender) evidence satisfactory to Lender of the foregoing, then such
period shall be extended for so long as is reasonably necessary for Borrower in
the exercise of due diligence to cure such default, but in no event beyond one
hundred eighty (180) days after the original notice of default; or
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court
----------------------------------------------------
enters a decree or order for relief with respect to any Borrower Party, in an
Involuntary Borrower Party Bankruptcy, which decree or order is not stayed or
other similar relief is not granted under any applicable federal or state law;
(ii) the occurrence and continuance of any of the following events for sixty
(60) days unless dismissed or discharged within such time: (x) an Involuntary
Borrower Party Bankruptcy is commenced, (y) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over any Borrower Party or over all or a
substantial part of its property, is entered, or (z) an interim receiver,
trustee or other custodian is appointed without the consent of any Borrower
Party, for all or a substantial part of the property of such Person; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (i) An order for
--------------------------------------------------
relief is entered with respect to any Borrower Party, or any such Person
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower Party or for all or a substantial part of the
property of any Borrower Party; (ii) any Borrower Party makes any assignment for
the benefit of creditors; or (iii) the Board of Directors or other governing
body of any Borrower Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or
(I) Bankruptcy Involving Ownership Interests or Property. Other than as
----------------------------------------------------
described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the
Collateral becomes
77
property of the estate or subject to the automatic stay in any case or
proceeding of any Borrower Party under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect (provided
that if the same occurs in the context of an involuntary proceeding, it shall
not constitute an Event of Default if it is dismissed or discharged within sixty
(60) days following its occurrence); or
(J) Solvency. Any Borrower Party ceases to be solvent or admits in writing
--------
its inability to pay its debts as they become due; or
(K) Judgment and Attachments. Any lien, money judgment, writ or warrant of
------------------------
attachment, or similar process is entered or filed against any Borrower Party or
any of its assets, which claim is not fully covered by insurance (other than
with respect to the amount of commercially reasonable deductibles permitted
hereunder), could reasonably be expected to have a Material Adverse Effect and
remains undischarged, unvacated, unbonded or unstayed for a period of thirty
(30) days. unless the same is being contested in accordance with Section 5.3(B)
hereof; or
(L) Injunction. Any Borrower Party is enjoined, restrained or in any way
----------
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business which injunction could
reasonably be expected to have a Property Adverse Effect and such order
continues for more than thirty (30) days; or
(M) Non-Compliance with Legal Requirements; Revocation of Permits. There
-------------------------------------------------------------
shall occur a final unappealable determination by any applicable Governmental
Authority of Borrower's or Lessee's non-compliance with material Legal
Requirements applicable to any Property, or of the revocation of any material
Permit required for the lawful operation of any Property, or any other
circumstances under which Borrower or Lessee is required by a final unappealable
determination of any such Governmental Authority to cease operations of such
Property as a Nursing Facility (provided, however, that before any such
determination becomes final and unappealable, Borrower or Lessee, as the case
may be, shall have the right to contest the same in accordance with Section
5.3(B) hereof; and provided further that no Event of Default shall be deemed to
exist so long as Borrower or Lessee, as the case may be, promptly pays any
amount due under, or complies with, any Legal Requirement upon a final adverse
determination of such contest under Section 5.3(B) and such payment or
compliance by Borrower or Lessee results in the reinstatement or reissuance of
any such material Permit which had been revoked or the rescission or termination
of any such order by the applicable Governmental Authority to cease operations
of such Property as a Nursing Facility);
(N) Reduction of Licensed Beds. A Master Lease Event of Default relating
--------------------------
to the reduction of the number of licensed beds for any Property in violation of
the Master Lease shall occur under Section 16.1(m) of the Master Lease;
(O) Regulatory Sanctions. Borrower or Lessee shall become subject to
--------------------
material regulatory sanctions and fails to cure or satisfy such regulatory
sanctions (including, without limitation, through payment of any such sanctions,
if the same are monetary in nature) within its specified regulatory cure period
in any material respect with respect to any Property (provided, however, that,
prior to the imposition of such sanctions on Borrower or Lessee by final
78
unappealable order of any Governmental Authority, no Event of Default shall be
deemed to have occurred under this subsection (O) so long as Borrower or Lessee
is contesting the imposition of such sanctions in accordance with Section 5.3(B)
hereof; and provided further that no Event of Default shall be deemed to exist
so long as Borrower or Lessee, as the case may be, promptly cures or satisfies
such sanctions upon a final adverse determination of such contest under Section
5.3(B) and such cure by Borrower or Lessee results in the termination of such
sanctions);
(P) Invalidity of Loan Documents. This Loan Agreement, any Mortgage or
----------------------------
any Loan Document for any reason ceases to be in full force and effect or ceases
to be a legally valid, binding and enforceable obligation of Borrower or any
Lien securing the Obligations shall, in whole or in part, cease to be a
perfected first priority Lien, subject to the Permitted Encumbrances (except in
any of the foregoing cases in accordance with the terms hereof or under any
other Loan Document or unless any loss, damage, claim, cost or expense which
Lender may suffer or incur as a result thereof is fully covered by the Title
Policies), or any Person who is a party thereto, other than Lender, denies that
it has any further liability (as distinguished from denial of the existence of a
Default or Event of Default) under any Loan Documents to which it is party, or
gives notice to such effect; or
(Q) Cross-Default with Other Loan Documents. A default by Borrower or
---------------------------------------
Guarantor with respect to performance of any covenant or obligation, or
compliance with any term or condition, under any other Loan Document shall occur
and not be cured within any applicable grace periods provided under such other
Loan Documents (or if no grace period is specified in such other Loan Document,
then the grace period specified in Section 8.1(F) above shall apply).
If more than one of the foregoing paragraphs shall describe the same condition
or event, then Lender shall have the right to select which paragraph or
paragraphs shall apply. In any such case, Lender shall have the right (but not
the obligation) to designate the paragraph or paragraphs which provide for
non-written notice (or for no notice) or for a shorter time to cure (or for no
time to cure).
Section 8.2 Acceleration and Remedies.
-------------------------
(A) Upon the occurrence of any Event of Default described in any of
Subsections 8.1(G), 8.1(H) or 8.1(I), the unpaid principal amount of and accrued
interest and fees on the Loan and all other Obligations shall automatically
become immediately due and payable, without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other requirements of any
kind, all of which are hereby expressly waived by each Borrower Party. Upon and
at any time after the occurrence of any other Event of Default, at the option of
Lender, which may be exercised without notice or demand to anyone, all or any
portion of the Loan and other Obligations shall immediately become due and
payable.
(B) Upon the occurrence of an Event of Default, all or any one or more of
the rights, powers, privileges and other remedies available to Lender against
Borrower under this Loan Agreement or any of the other Loan Documents, or at law
or in equity, may be exercised by Lender at any time and from time to time,
whether or not all or any of the Obligations shall be declared due and payable,
and whether or not Lender shall have commenced any foreclosure
79
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents with respect to any Property. Any such actions taken
by Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its sole discretion, to the fullest extent permitted by
law, without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the
other Loan Documents. Without limiting the generality of the foregoing, if an
Event of Default is continuing (i) to the fullest extent permitted by law,
Lender shall not be subject to any "one action" or "election of remedies" law or
rule, and (ii) all liens and other rights, remedies or privileges provided to
Lender shall remain in full force and effect until Lender has exhausted all of
its remedies against the Properties and the Mortgages have been foreclosed, sold
and/or otherwise realized upon in satisfaction of the Obligations or the
Obligations have been paid in full.
(C) Upon the occurrence of an Event of Default, Lender shall have the
right from time to time to partially foreclose any Mortgage in any manner and
for any amounts secured by such Mortgage then due and payable as determined by
Lender in its sole discretion including, without limitation, the following
circumstances: (i) in the event the Borrower default beyond any applicable grace
period in the payment of one or more scheduled payments of principal and
interest, Lender may foreclose any Mortgage to recover such delinquent payments,
or (ii) in the event Lender elects to accelerate less than the entire
outstanding principal balance of the Loan, Lender may foreclose any Mortgage to
recover so much of the principal balance of the Loan as Lender may accelerate
and such other sums secured by such Mortgage as Lender may elect.
Notwithstanding one or more partial foreclosures, the Properties shall remain
subject to the Mortgages to secure payment of sums secured by the Mortgages and
not previously recovered.
(D) Upon the occurrence of an Event of Default, Lender shall have the
right from time to time to sever the Note and the other Loan Documents into one
or more separate notes, mortgages and other security documents in such
denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided hereunder. Borrower
shall execute and deliver to Lender from time to time, promptly after the
request of Lender, a severance agreement and such other documents as Lender
shall request in order to effect the severance described in the preceding
sentence, all in form and substance reasonably satisfactory to Lender. Borrower
hereby absolutely and irrevocably appoints Lender as its true and lawful
attorney, coupled with an interest, in its name and stead to make and execute
all documents necessary or desirable to effect the aforesaid severance upon the
occurrence and during the continuance of an Event of Default, Borrower ratifying
all that its said attorney shall do by virtue thereof; provided, however, Lender
-------- -------
shall not make or execute any such documents under such power until three (3)
days after notice has been given to Borrower by Lender of Lender's intent to
exercise its rights under such power.
(E) Any amounts recovered from any Property or any other collateral for
the Loan after an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.
80
(F) The rights, powers and remedies of Lender under this Agreement shall
be cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower pursuant to this Loan Agreement or the other Loan
Documents, or existing at law or in equity or otherwise. Lender's rights, powers
and remedies may be pursued singly, concurrently or otherwise, at such time and
in such order as Lender may determine in Lender's sole discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of one Default or
Event of Default with respect to Borrower shall not be construed to be a waiver
of any subsequent Default or Event of Default by Borrower or to impair any
remedy, right or power consequent thereon.
Section 8.3 Performance by Lender.
---------------------
(A) If any Borrower Party shall fail to perform, or cause to be performed,
any covenant, duty or agreement contained in any of the Loan Documents beyond
any applicable notice and cure period, Lender may (but shall have no obligation
to) perform or attempt to perform such covenant, duty or agreement on behalf of
such Borrower Party. In such event, Borrower shall, at the request of Lender,
promptly pay to Lender any amount reasonably expended by Lender in such
performance or attempted performance, together with interest thereon at the
Default Rate, from the date of such expenditure until paid. Any amounts advanced
or expended by Lender to perform or attempt to perform any such matter shall be
added to and included within the indebtedness evidenced by the Note and shall be
secured by all of the Collateral securing the Loan. Notwithstanding the
foregoing, it is expressly agreed that Lender shall not have any liability or
responsibility for the performance of any obligation of Borrower under this Loan
Agreement or any other Loan Document.
(B) Lender may cease or suspend any and all performance required of Lender
under the Loan Documents upon and during the continuance of any Event of
Default.
ARTICLE IX
SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,
WARRANTIES AND COVENANTS
Section 9.1 Applicable to Primary Borrower Parties. Each Primary Borrower Party
--------------------------------------
hereby jointly and severally represents, warrants and covenants as of the
Closing Date and until such time as all Obligations are paid in full, that
absent express advance written waiver from Lender, which may be withheld in
Lender's sole discretion, such Primary Borrower Party:
(A) does not own and will not own any assets other than the Properties
(including incidental personal property necessary for the administration of
Borrower, leasing and operation of the Properties and proceeds therefrom) or
direct or indirect ownership interests in Borrower (the "Ownership Interests");
-------------------
(B) is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the Properties
or the Ownership Interests;
81
(C) will not enter into any contract or agreement with any partner, member,
shareholder, trustee, beneficiary, principal or Affiliate of any Borrower Party
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than such Affiliate;
(D) has not incurred and will not incur any Indebtedness or Contingent
Obligations other than (i) the Obligations, (ii) subject to the terms and
conditions of Section 5.17, unsecured trade payables incurred in the ordinary
course of business of owning or operating the Properties and Indebtedness
relating to financing of equipment and personal property in the ordinary course
of business and (iii) any other Indebtedness or Contingent Obligations expressly
permitted hereunder or under the other Loan Documents;
(E) has not made and will not make any loan or advances to any Person
(including any of its Affiliates and has not acquired and will not acquire
obligations or securities of any of its Affiliates);
(F) is and reasonably expects to remain solvent and pay its own
liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;
(G) has done or caused to be done and will do all things necessary to
preserve its existence, has observed and will observe all partnership,
corporation or limited liability company formalities, as applicable, and will
not, nor will any partner, member, shareholder, trustee, beneficiary or
principal, amend, modify or otherwise change its partnership certificate,
partnership agreement, articles of incorporation, by-laws, articles of
organization, operating agreement, or other organizational documents, as
applicable, in any material manner;
(H) shall continuously maintain its existence and be qualified to do
business in all states necessary to carry on its business including the states
where the Properties are located (in the case of Member, if required by law);
(I) will conduct and operate its business as presently conducted and
operated;
(J) will maintain books and records and bank accounts separate from those
of its partners, members, shareholders, trustees, beneficiaries, principals,
Affiliates, and any other Person and will maintain separate financial statements
except that it may also be included in consolidated financial statements of its
Affiliates; provided, however, that if Borrower is included in the consolidated
financial statements of any of its Affiliates, Borrower's status as a separate
legal entity, its ownership of the Properties and the lien of the Mortgages
thereon as security for the Loan shall be disclosed in the footnotes to such
Affiliate's financial statements;
(K) will be, and at all times will hold itself out to the public as, a
legal entity separate and distinct from any other Person (including any of its
partners, members, shareholders, trustees, beneficiaries, principals and
Affiliates, and any Affiliates of any of the same), and not as a department or
division of any Person and will correct any known misunderstandings regarding
its existence as a separate legal entity;
82
(L) will pay the salaries of its own employees, if any, from its own funds
to the extent available;
(M) will allocate fairly and reasonably any overhead for shared office
space;
(N) will use separate stationery, invoices and checks;
(O) will maintain its status as a disregarded entity for federal income tax
purposes or, if it fails to maintain such status as a disregarded entity, it
will file such tax returns with respect to itself as may be required under
applicable law;
(P) has and reasonably expects to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations;
(Q) will not seek, acquiesce in, or suffer or permit its liquidation,
dissolution or winding up, in whole or in part;
(R) will not acquire by purchase or otherwise all or substantially all of
the business or assets of, or any stock or beneficial ownership of, any Person;
(S) will not commingle or permit to be commingled its funds or other assets
with those of any other Person;
(T) has and will maintain its assets in such a manner that it is not costly
or difficult to segregate, ascertain or identify its individual assets from
those of any other Person;
(U) does not and will not hold itself out to be responsible for the debts
or obligations of any other Person;
(V) has not and will not guarantee or otherwise become liable on or in
connection with any obligation of any other Person;
(W) except for funds deposited into the Accounts in accordance with the
Loan Documents, shall not hold title to its assets other than in its name; and
(X) shall comply and cause its Affiliates to comply with all of the
assumptions, statements, certifications, representations, warranties and
covenants regarding or made by it contained in or appended to the
nonconsolidation opinion delivered pursuant hereto.
Section 9.2 Applicable to Member and Borrower. In addition to their respective
---------------------------------
obligations under Section 9.1, each of Borrower and Member hereby represents,
warrants and covenants as of the Closing Date and until such time as all
Obligations are paid in full, that absent express advance written waiver from
Lender, which may be withheld in Lender's sole discretion:
(A) Member shall at all times act as the sole member of Borrower, with all
of the rights, powers, obligations and liabilities thereof under the operating
agreement of Borrower and
83
shall take any and all actions and do any and all things necessary or
appropriate to the accomplishment of the same and will engage in no other
business;
(B) Borrower shall not, without the prior unanimous written consent of
Member (including the unanimous written consent of its directors including its
two Independent Directors), institute proceedings for itself to be adjudicated
bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency
proceedings against it; file a petition seeking, or consent to, reorganization
or relief under any applicable federal or state law relating to bankruptcy;
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) for itself or a substantial part of its
property; make any assignment for the benefit of creditors; or admit in writing
its inability to pay its debts generally as they become due;
(C) Member shall not, without the unanimous vote of its board of directors
including its Independent Directors, institute proceedings for itself or
Borrower to be adjudicated bankrupt or insolvent; consent to the institution of
a bankruptcy or insolvency proceedings against it or Borrower; file a petition
seeking, or consent to, reorganization or relief under any applicable federal or
state law relating to bankruptcy; consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) for
itself or Borrower or a substantial part of its or Borrower's property; make any
assignment for the benefit of creditors; or admit in writing its or Borrower's
inability to pay its or Borrower's debts generally as they become due;
(D) Member shall not for itself or for Borrower (i) liquidate or dissolve,
in whole or in part; (ii) consolidate, merge or enter into any form of
consolidation with or into any other Person, nor convey, transfer or lease its
or Borrower's assets substantially as an entirety to any Person nor permit any
Person to consolidate, merge or enter into any form of consolidation with or
into itself or Borrower, nor convey, transfer or lease its or Borrower's assets
substantially as an entirety to any Person; and (iii) amend any provisions of
its or Borrower's organizational documents containing provisions similar to
those contained in this Article IX; and
(E) Member shall promptly elect and at all times maintain at least two (2)
Independent Directors on its board of directors who shall be selected by Member,
and shall be satisfactory to Lender.
ARTICLE X
RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS
Section 10.1 Secondary Market Transactions Generally. Each Borrower Party
---------------------------------------
acknowledges that it is the intention of the parties that the Loan will be
included in a Securitization to be rated by one or more Rating Agencies. As used
herein, "Secondary Market Transaction" means any of (i) the sale, assignment, or
----------------------------
other transfer of all or any portion of the Obligations or the Loan Documents or
any interest therein to one or more investors, (ii) the sale, assignment, or
other transfer of one or more participation interests in the Obligations or Loan
Documents to one or more investors, (iii) the transfer or deposit of all or any
portion of the Obligations or Loan Documents to or with one or more trusts or
other entities which may sell certificates or other instruments to investors
evidencing an ownership interest in the assets of such trust or the right to
84
receive income or proceeds therefrom or (iv) any other Securitization backed in
whole or in part by the Loan or any interest therein.
Section 10.2 Cooperation; Limitations. Borrower Parties shall use all reasonable
------------------------
efforts and cooperate reasonably and in good faith with Lender in effecting any
such Secondary Market Transaction. Borrower shall be required to pay on the date
of closing of any Secondary Market Transaction involving the Loan (the
"Secondary Market Closing Date") the fees charged by each of the Rating Agencies
-----------------------------
for the issuance of the ratings assigned to the Securities issued in connection
with such Secondary Market Transaction and thereafter Borrower shall be required
to pay any and all fees of the Rating Agencies for maintaining and/or monitoring
such ratings during the term of the Loan. The Borrower Parties shall also be
required to pay any and all other third-party costs and expenses incurred by
Lender in connection with any such Secondary Market Transaction.
Section 10.3 Information. The Borrower Parties, at their sole cost and expense,
-----------
shall provide (i) such access to personnel and such information and documents
relating to Borrower Parties and their business and operations, (ii) subject to
any applicable confidentiality provisions of the Master Lease, such information
and documents relating to Lessee, the Properties and Collateral and the business
and operations of all of the foregoing and (iii) such opinions of counsel
(including nonconsolidation opinions) as Lender or any purchaser, transferee,
assignee, trustee, servicer or potential investor (the Rating Agencies and all
of the foregoing parties, collectively, "Interested Parties") may reasonably
------------------
request or as any Rating Agency may request in connection with any such
Secondary Market Transaction including, without limitation, updated financial
information, appraisals, market studies, environmental reviews (Phase I's and,
if appropriate, Phase II's), property condition reports and other due diligence
investigations together with appropriate verification of such updated
information and reports through letters of auditors and consultants and, such
additional representations and warranties as any Rating Agency may request or
any other Interested Party may reasonably request. On the Closing Date, Baker &
McKenzie or other counsel for Borrower reasonably satisfactory to Lender, shall
provide an opinion of counsel to the effect that the description of the Loan and
the terms of the Loan Documents contained in the Disclosure Documents
(hereinafter defined) and such other legal matters contained therein as Lender
may reasonably require do not contain any untrue statement of any material fact
or omit to state any material fact necessary to make the statements therein not
misleading. All opinions delivered at Closing shall be addressed to Lender, any
trustee under any Securitization backed in whole or in part by the Loan, any
Rating Agency that assigns a rating to any securities in connection therewith
and any investor purchasing securities therein. Subject to Section 14.24 hereof,
Lender shall be permitted to share all such information with the investment
banking firms, Rating Agencies, accounting firms, law firms, other third party
advisory firms, potential investors, servicers and other service providers and
other parties involved in any proposed Secondary Market Transaction. Borrower
understands that any such information may be incorporated into any offering
circular, prospectus, prospectus supplement, private placement memorandum or
other offering documents for any Secondary Market Transaction. Lender and all of
the aforesaid third-party advisors and professional firms and investors shall be
entitled to rely upon such information. Without limiting the foregoing, Borrower
and Guarantor shall provide in connection with each of (i) a preliminary and a
final private placement memorandum or (ii) a preliminary and final prospectus or
prospectus supplement, as applicable (the documents referred to in the foregoing
clauses (i) and (ii),
85
collectively, the "Disclosure Documents"), an agreement certifying that Borrower
--------------------
and Guarantor have examined such Disclosure Documents specified by Lender and
that each such Disclosure Document, as it relates to Borrower, Guarantor, any
Affiliates, the Properties and all other aspects of the Loan, does not, and as
to information provided in third party reports of engineers and environmental
consultants, to Borrower's and Guarantor's knowledge, does not, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in the light of the circumstances under
which they were made, not materially misleading. Borrower and Guarantor shall
indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), their respective Affiliates,
-------------
directors, employees, agents and each Person, if any, who controls Lender,
Merrill Lynch or any such Affiliate within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and
any other placement agent or underwriter with respect to any Securitization or
Secondary Market Transaction from and against any losses, claims, damages,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) that arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any information or documents furnished by Borrower, Guarantor or their
Affiliates or representative or in any representation or warranty of any
Borrower Party contained herein or in the other Loan Documents or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated in such information or necessary in order to make the
statements in such information not materially misleading. Merrill Lynch may
publicize the existence of the Obligations in connection with Merrill Lynch's
Secondary Market Transaction activities or otherwise.
Section 10.4 Additional Provisions. In any Secondary Market Transaction, Lender
---------------------
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Obligations), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest. Each transferee
investor shall become a "Lender" hereunder.
Section 10.5 Formation of Depositor. Prior to the Closing Date, Borrower, at its
----------------------
sole cost and expense, will form or cause to be formed a corporation, single
member limited liability company or other special purpose entity (the
"Depositor"), the sole purpose of which will be to act as the "depositor" of the
---------
trust to be formed in connection with any Secondary Market Transaction with
respect to the Loan. The Depositor will be a direct or indirect wholly-owned
subsidiary of Guarantor and will, at all times, comply with all of the terms and
conditions of Article IX of this Loan Agreement other than the requirement to
maintain two Independent Directors on its board of directors (or the board of
directors of a member or independent manager of the Depositor, as the case may
be). Borrower will at all times during the term of the Loan preserve and keep in
full force and effect the legal existence of the Depositor, including its
qualification to do business in each state where it is required by law to so
qualify. On or before the Closing Date, Borrower will cause WFG or other legal
counsel for the Depositor acceptable to Lender to deliver legal opinions for the
Depositor in form and substance acceptable to Lender and the Interested Parties
as to such matters as Lender or any Interested Party shall reasonably request,
including, without limitation, opinions with respect to organizational
formalities, due authority, execution and
86
delivery by the Depositor, and enforceability against the Depositor, of all
documents to which it is a party and a bankruptcy non-consolidation opinion with
respect to the Depositor.
ARTICLE XI
RESTRICTIONS ON LIENS, TRANSFERS; RELEASE OF PROPERTIES
Section 11.1 Restrictions on Transfer and Encumbrance. Except as expressly
----------------------------------------
permitted in this Article XI or as otherwise expressly permitted under this Loan
Agreement or in the other Loan Documents, Borrower shall not cause or suffer to
occur or exist, directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or
encumbrance (other than Permitted Encumbrances) of (i) all or any part of any
Property or any interest therein, or (ii) any direct or indirect ownership or
beneficial interest in Borrower, irrespective of the number of tiers of
ownership, without the prior written consent of Lender and without delivery of a
Rating Confirmation.
Section 11.2 Transfers of Beneficial Interests in Borrower. For purposes of this
---------------------------------------------
Section, a sale or transfer of a beneficial interest in Borrower shall be deemed
to include, but is not limited to:
(A) if Borrower or any general partner or managing member of Borrower is a
corporation, (i) the voluntary or involuntary sale, conveyance, transfer or
pledge (any of the foregoing, a "Transfer") of more than 49% of such
--------
corporation's stock (or the stock of any corporation directly or indirectly
controlling such corporation by operation of law or otherwise) or (ii) the
creation or issuance of new stock, in any of the foregoing cases, by which an
aggregate of more than 49% of such corporation's stock shall be vested in a
party or parties who are not now stockholders or which results in a change of
control of such corporation;
(B) if Borrower or any general partner or managing member (or, for a single
member limited liability company, the sole member) of Borrower is a limited
liability company, (i) the change, removal or resignation of a managing member
(or sole member) of Borrower or such general partner or managing member (or sole
member) or (ii) the Transfer of all or any portion of the membership interests
of a managing member (or sole member) of Borrower or such general partner or
managing member or any profits or proceeds relating to such membership interest;
provided, however, that if Borrower or any general partner or managing member
- -------- -------
(or sole member) of Borrower is a single member limited liability company, the
Transfer in the aggregate of not more than 49% of the sole member's interest in
Borrower or such general partner or managing member (or sole member) shall not
constitute a sale or transfer prohibited by this Section 11 provided that such
Transfer does not in the aggregate result in a change of control of Borrower or
such general partner or managing member (or sole member);
(C) if Borrower, or any general partner or managing member (or, for a
single member limited liability company, the sole member) of Borrower, is a
limited or general partnership, (i) the change, removal or resignation of a
managing general partner or managing partner or (ii) the Transfer of all or any
portion of the general partner's interest of any general partner or managing
partner or any profits or proceeds relating to such partnership interest; or
87
(D) if Borrower or any general partner or managing member (or, for a single
member limited liability company, the sole member) of Borrower is a limited
partnership or limited liability company, the Transfer of limited partnership
interests or non-managing membership interests which in the aggregate constitute
more than a 49% interest in Borrower or any general partner or managing member
(or sole member) of Borrower, or any profits or proceeds relating to such
limited partnership interests or non-managing membership interests or any other
Transfer which in the aggregate results in a change of control of such general
partner or managing member (or sole member).
Notwithstanding the foregoing or anything to the contrary contained
herein or in the other Loan Documents, the following shall not be deemed a sale
or transfer of a beneficial interest in Borrower or Member for purposes of this
Section: the sale, transfer, issuance, conveyance, pledge or hypothecation of
any shares of stock in Ventas including in connection with a merger,
consolidation or similar transaction involving Ventas.
For purposes of this Section 11.2, "control" shall have the meaning
given thereto in the definition of "Affiliate" in Section 1.1 and a "change of
control" of any Person shall include the Transfer of legal or equitable
ownership interests in such Person which after giving effect to such Transfer
results in any transferee or pledgee of such interests holding more than a 49%
legal or equitable ownership interest or security interest in such Person.
Section 11.3 Assumability.
------------
(A) In the event Borrower desires to transfer all of the Properties to
another party (the "Transferee Borrower") and have the Transferee Borrower
-------------------
assume all of Borrower's obligations under the Loan Documents, and have
replacement guarantors and indemnitors assume all of the obligations of the
indemnitors and guarantors of the Loan Documents, and have replacement pledgors
pledge all of the ownership interests in the Transferee Borrower (collectively,
a "Transfer and Assumption"), Borrower may make a written application to Lender
-----------------------
for Lender's consent to the Transfer and Assumption, subject to the conditions
set forth in paragraphs (B) and (C) of this Section. Together with such written
application, Borrower will pay to Lender the reasonable review fee then required
by Lender. Borrower also shall pay on demand all of the reasonable costs and
expenses incurred by Lender, including reasonable attorneys' fees and expenses,
and including the fees and expenses of Rating Agencies and other outside
entities, in connection with considering any proposed Transfer and Assumption,
whether or not the same is permitted or occurs.
(B) Lender shall not unreasonably withhold its consent to a Transfer and
Assumption provided and upon the conditions that:
(i) No Event of Default shall have occurred and be continuing;
(ii) Borrower shall have submitted to Lender true, correct and complete
copies of any and all information and documents of any kind reasonably requested
by Lender concerning the Properties, Transferee Borrower, replacement guarantors
and indemnitors and Borrower;
88
(iii) Evidence satisfactory to Lender shall have been provided showing
that the Transferee Borrower and such of its Affiliates as shall be designated
by Lender comply and will comply with Article IX, as those provisions may be
modified by Lender taking into account the ownership structure of Transferee
Borrower and its Affiliates;
(iv) Borrower shall have obtained (and delivered to Lender) a Rating
Confirmation with respect to the Transfer and Assumption and all related
transactions;
(v) Borrower shall have paid (a) Lender a processing fee for such
Transfer and Assumption of $50,000, (b) all of Lender's reasonable costs and
expenses in connection with considering the Transfer and Assumption and (c) the
amount requested by Lender as a deposit against Lender's costs and expenses in
connection with effecting the Transfer and Assumption;
(vi) Borrower, the Transferee Borrower, and the replacement guarantors
and indemnitors shall have indicated in writing in form and substance reasonably
satisfactory to Lender their readiness and ability to satisfy the conditions set
forth in Subsection (C) below; and
(vii) The identity, experience, and financial condition of the
Transferee Borrower and the replacement guarantors and indemnitors shall be
satisfactory to Lender in its sole discretion.
(C) If Lender consents to the Transfer and Assumption, the Transferee
Borrower and/or Borrower, as the case may be, shall immediately deliver the
following to Lender:
(i) Borrower, Transferee Borrower, the original and replacement
guarantors and indemnitors shall execute and deliver any and all documents
reasonably required by Lender, in form and substance reasonably required by
Lender;
(ii) Counsel to the Transferee Borrower and replacement guarantors and
indemnitors shall deliver to Lender opinions in form and substance reasonably
satisfactory to Lender as to such matters as Lender shall reasonably require and
the Rating Agencies shall require, which may include opinions as to
substantially the same matters as were required in connection with the
origination of the Loan including, without limitation, a bankruptcy
non-consolidation opinion;
(iii) Borrower shall cause to be delivered to Lender, an endorsement
(relating to the change in the identity of the vestee and execution and delivery
of the Transfer and Assumption documents) to Lender's policy of title insurance
in form and substance acceptable to Lender, in Lender's reasonable discretion;
and
(iv) Borrower shall deliver to Lender a payment in the amount of all
remaining unpaid costs incurred by Lender in connection with the Transfer and
Assumption, including but not limited to, Lender's attorneys fees and expenses,
all recording fees, and all fees payable to the title company in connection with
the Transfer and Assumption.
(D) Upon satisfaction of the conditions set forth in this Section 11.3 and
consummation of the closing of the Transfer and Assumption, Lender shall release
the Borrower Parties from any liabilities or obligations thereafter accruing
under the Loan Documents other
89
than any liabilities or obligations arising under the Guaranty or Environmental
Indemnity to the extent that (i) the acts, omissions, facts, events or
circumstances giving rise to such liabilities or obligations occurred or existed
prior to the effective date of such Transfer and Assumption and (ii) such
liabilities or obligations have not been assumed by the Transferee Borrower or
replacement guarantor.
Section 11.4 Release of Properties. On one or more occasions, Borrower may
---------------------
obtain the release of one (1) or more of the Properties from the Lien of the
applicable Mortgage(s) (each, a "Property Release") in connection with a partial
----------------
prepayment of the Loan in accordance with the terms and subject to the
conditions of the Note or in order to cure a Default (or Event of Default under
Section 8.1(E)) relating to the Property to be released (a "Defaulted Property
------------------
Release") in any case subject to the satisfaction of the following conditions:
- -------
(A) Lender shall have received from Borrower at least fifteen (15) Business
Days' (or at least five (5) Business Days' in the case of a Defaulted Property
Release) prior written notice of the date proposed for such release (the
"Release Date");
------------
(B) No Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date (except for any Event of Default under
Section 8.1(E) relating to the Property to be released which Borrower is seeking
to cure by effecting a Defaulted Property Release);
(C) Borrower shall prepay a portion of the Loan in the amount of the
Release Price of the Property being released (together with all accrued and
unpaid interest on the principal amount being so prepaid through the end of such
Interest Accrual Period and any Prepayment Consideration then due);
(D) Borrower shall have delivered to Lender an Officer's Certificate, dated
the Release Date, confirming the matters referred to in clause (B) above,
certifying that the provisions of clause (C) above have been complied with and
certifying that all conditions precedent for such release contained in this Loan
Agreement have been complied with;
(E) If required by Lender, Borrower at its sole cost and expense, shall
have delivered to Lender, one or more endorsements to the Title Policies
delivered to Lender on the date hereof in connection with the Mortgages insuring
that, after giving effect to such release, (i) the Liens created hereby and
thereby and insured under the Title Policies are first priority Liens on the
respective remaining Properties subject only to the Permitted Encumbrances
applicable to the remaining Properties and (ii) that the Title Policies remain
in full force and effect and unaffected by such release;
(F) After giving effect to such proposed Property Release, the Debt Service
Coverage Ratio for the remaining Properties (calculated based upon the ratio of
the Pro Forma Net Operating Income of the remaining Properties for the twelve
(12) month period ended as of the date of the most recent quarterly or annual
operating statements for the Properties required to be delivered under Section
5.1(A)(iv) to the debt service which would be due under the Note for the twelve
(12) month period after the Release Date calculated based upon the assumptions
set forth in the definition of "Debt Service Coverage Ratio" and after giving
effect to the partial
90
prepayment of the Note required under Section 11.4(C)) would be not less than
the greater of (a) the Debt Service Coverage Ratio for all of the Properties for
the aforesaid most recent twelve (12) month period prior to giving effect to
such release and (b) 2.40:1.0;
(G) Lender and the Rating Agencies shall have received from Borrower with
respect to the matters referred to in clause (F), (i) statements of the Pro
Forma Net Operating Income and debt service (both on a consolidated basis and
separately for the applicable Property(ies) to be released) for the applicable
measuring period, and (ii) based on the foregoing statements of Pro Forma Net
Operating Income and debt service, calculations of the Debt Service Coverage
Ratio both with and without giving effect to the proposed release, and (iii)
calculations of the ratios referred to in such clause (F), accompanied by an
Officer's Certificate stating that such statements, calculations and information
are true, correct, and complete in all material respects;
(H) Notwithstanding the above, Borrower may not obtain the release under
this Section 11.4 of Properties the aggregate initial Allocated Loan Amount(s)
of which, individually or in the aggregate, exceed $67,500,000;
(I) Notwithstanding the above, Borrower may not obtain the release under
this Section 11.4 of (i) the Sheridan Medical Center, Kenosha, Wisconsin,
without also obtaining the release of the Woodstock Health and Rehabilitation
Center, Kenosha, Wisconsin or (ii) the Lawton Healthcare Center, San Francisco,
California, without also obtaining the release of the Nob Hill Healthcare
Center, San Francisco, California;
(J) Borrower shall pay all reasonable costs and expenses (including,
without limitation, title search costs and endorsement premiums and reasonable
attorney's fees and disbursements) incurred by Lender in connection with the
release;
(K) Borrower shall be required to consummate any Defaulted Property Release
within the cure period provided for the cure of the applicable Default under
Section 8.1 (or within thirty (30) days after notice from Lender in the case of
an Event of Default arising from a breach of a representation or warranty under
Section 8.1(E)); and
(L) If (i) the Allocated Loan Amount for the Property or Properties to be
released in any transaction exceeds five percent (5%) of the Principal Balance
of the Loan or (ii) the sum of the Allocated Loan Amount for the Property
proposed to be released together with the Allocated Loan Amount(s) for all
Properties theretofore released under this Section 11.4 shall exceed ten percent
(10%) of the Principal Balance of the Loan, Borrower shall have obtained and
delivered to Lender a Rating Confirmation with respect to such Property Release.
Upon or after the delivery of the Release Price in accordance with Section
11.4(C) above and satisfaction of the above conditions, Lender shall effectuate
the Property Release by doing the following: the security interest of Lender in
the Mortgage and other Loan Documents relating to the released Property shall be
released and Lender will execute and deliver any agreements reasonably requested
by Borrower to release and terminate or reassign, at Borrower's option, the
Mortgage as to the released Property; provided, that such release and
--------
termination or reassignment shall be without recourse to Lender and without any
representation or warranty except that Lender shall be deemed to have
represented that such release and termination or
91
reassignment has been duly authorized and that it has not assigned or encumbered
the Mortgage or the other Loan Documents relating to the released Property
(except as contemplated hereby); provided, further, that upon the release and
-------- -------
termination or reassignment of Lender's security interest in the Mortgage
relating to the released Property all references herein to the Mortgage relating
to the released Property shall be deemed deleted, except as otherwise provided
herein with respect to indemnities. At Borrower's request and upon satisfaction
of all of the conditions to a Property Release set forth in this Section 11.4
(other than payment of the Release Price by Borrower), Lender will execute and
deliver the documents and agreements required to effect such Property Release as
set forth above, in escrow with counsel selected by Lender or with a reputable
national title insurance company selected by Borrower and reasonably acceptable
to Lender, pursuant to an escrow agreement in form and substance reasonably
acceptable to Lender requiring such escrow agent to hold such documents and
agreements in escrow until Lender has received payment in full of the Release
Price and any and all other amounts due to Lender in connection with such
Property Release. Upon the consummation of the Property Release, Borrower shall
be required to execute, deliver and record in the applicable real estate records
a deed transferring and conveying all of Borrower's right, title and interest in
and to the released Property to an Affiliate of Borrower or a third Person and
execute, deliver and record (as applicable) such additional agreements and
instruments as may be necessary to effect the transfer and assignment to such
transferee of the Property of all of Borrower's right, title and interest in and
to any and all personal property and agreements related to the Property. In
addition, Borrower and Lessee shall enter into an amendment of the Master Lease,
in form and substance reasonably satisfactory to Lender, in order to effectuate
the severance of the Property therefrom.
Section 11.5 Leasehold Mortgages. Notwithstanding the foregoing or anything to
-------------------
the contrary contained in the Loan Documents, Lender acknowledges that Lessee
has granted Leasehold Mortgages encumbering its lessee interest in and to each
of the Properties under the Master Lease to the Leasehold Mortgagees as security
for the Leasehold Financings and Lender consents to the existence of such
Leasehold Financings and such Leasehold Mortgages do not constitute a breach of
Section 11.1. Borrower agrees that it will not grant any request for consent or
approval of any additional Leasehold Mortgage (as defined under the Master
Lease), or, to the extent Borrower has the right to consent to or approve of
same under the Master Lease, any amendment or modification of any existing
Leasehold Financing or Leasehold Mortgage Document or assignment, in whole or in
part, of any existing Leasehold Financing or Leasehold Mortgage Document without
Lender's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed, and without delivery of a Rating Confirmation.
Borrower represents and warrants that it has delivered to Lender true and
complete copies of all Leasehold Mortgage Documents for each of the Leasehold
Financings in its possession which Leasehold Mortgage Documents as of April 20,
2001 constituted and, to Borrower's knowledge, currently constitute all of the
material documents evidencing and/or securing the Leasehold Financings and, to
Borrower's knowledge, (a) same have not been amended or modified except pursuant
to any amendment or modification delivered to Lender, (b) such Leasehold
Mortgage Documents are in full force and effect and (c) no defaults exist
thereunder.
92
ARTICLE XII
RECOURSE; LIMITATIONS ON RECOURSE
Section 12.1 Limitations on Recourse. Subject to the provisions of this Article,
-----------------------
and notwithstanding any provision of the Loan Documents other than this Article,
no personal liability shall be asserted, sought or obtained by Lender or
enforceable against (i) any Borrower Party, (ii) any Affiliate of any Borrower
Party, (iii) any Person owning, directly or indirectly, any legal or beneficial
interest in any Borrower Party or any Affiliate of any Borrower Party or (iv)
any partner, member, principal, officer, controlling person, beneficiary,
trustee, advisor, shareholder, employee, agent, Affiliate or director of any
Persons described in clauses (i) through (iv) above (collectively, the
"Exculpated Parties") by Lender in respect of the Obligations, this Loan
------------------
Agreement, the Mortgages, the Note, the Properties or any other Loan Document,
or the making, issuance or transfer thereof, all such liability, if any, being
expressly waived by Lender and each successive holder of the Note and the
Mortgages shall accept the Note and the Mortgages upon the express condition
that Lender's sole recourse for the Obligations and the performance and
observance of the obligations contained in this Loan Agreement, the Note, the
Mortgages and the other Loan Documents shall be to exercise any or all of its
rights and remedies with respect to the Properties, the Rents and other
Collateral including, without limitation, any or all of the following:
(i) Foreclosure of the Lien of the Mortgages in accordance with
the terms and provisions set forth in the Mortgages;
(ii) Action against any other security at any time given to secure
the payment of the Note and under the other Loan Documents;
(iii) Exercise of any other remedy set forth in this Loan
Agreement, the Mortgages or any other Loan Document.
Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages
or any of the Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations secured by the Mortgages or to require that all collateral shall
continue to secure all of the Obligations owing to Lender in accordance with the
Loan Documents.
Section 12.2 Partial Recourse. Notwithstanding Section 12.1, Borrower and
----------------
Guarantor (with respect to the matters described in clauses (i)-(iv) inclusive,
(vi), (ix) and (x) below only) shall be personally liable in the amount of any
liability, loss, damage, cost or expense (including, without limitation,
attorneys' fees and expenses) suffered or incurred by Lender to the extent
resulting from any and all of the following: (i) fraud; (ii) material and
intentional misrepresentation by any Borrower Party in this Loan Agreement or
any other Loan Document or otherwise in connection with obtaining the Loan;
(iii) insurance proceeds, condemnation awards, or other sums or payments
attributable to any Property which Borrower has received and which are not
applied in accordance with the provisions of the Loan Documents (provided,
however, that Guarantor shall only be personally liable for the amount of such
proceeds, awards or sums actually distributed by Borrower to Member, Guarantor
or any of their Affiliates); (iv) all rents,
93
profits, issues, products and income of any Property received or collected by or
on behalf of Borrower or any Borrower Party and not deposited into the Central
Account in accordance with Article VII and the Cash Management Agreement or
otherwise applied in accordance with the Loan Documents (provided, however, that
Guarantor shall only be personally liable for the amount of such rents, profits,
issues, products or income actually distributed by Borrower to Member, Guarantor
or any of their Affiliates); (v) failure by Borrower or any Borrower Party to
turn over to Lender, after the occurrence and during the continuance of an Event
of Default, or misappropriation of any tenant security deposits or rents
collected in advance (other than by Lender or Servicer); (vi) failure by
Borrower or Guarantor to comply with the covenants, obligations, liabilities,
warranties and representations contained in the Environmental Indemnity or
otherwise pertaining to environmental matters; (vii) waste; (viii) all
reasonable costs and expenses, including attorneys' fees and expenses, incurred
in collecting any amount due under the Loan Documents; (ix) all liabilities and
expenses under the indemnification provisions of Section 10.3; (x) any uncured
default under Section 11.1; and (xi) any material uncured default under Article
IX.
Section 12.3 Miscellaneous. No provision of this Article shall (i) affect the
-------------
enforcement of the Environmental Indemnity, the Guaranty or any guaranty or
similar agreement executed in connection with the Loan, (ii) release or reduce
the debt evidenced by the Note, (iii) impair the lien of any Mortgage or any
other security document, (iv) impair the rights of Lender to enforce any
provisions of the Loan Documents, or (v) limit Lender's ability to obtain a
deficiency judgment or judgment on the Note or otherwise against any Borrower
Party to the extent necessary to obtain any amount for which such Borrower Party
may be personally liable in accordance with this Article or any other Loan
Document.
ARTICLE XIII
WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES
To the extent that any Borrower Party (in this Article, a "Waiving
-------
Party") is deemed for any reason to be a guarantor or surety of or for any other
- -----
Borrower Party or to have rights or obligations in the nature of the rights or
obligations of a guarantor or surety (whether by reason of execution of a
guaranty, provision of security for the obligations of another, or otherwise)
then this Article shall apply. This Article shall not affect the rights of the
Waiving Party other than to waive or limit rights and defenses that Waiving
Party would have (i) in its capacity as a guarantor or surety or (ii) in its
capacity as one having rights or obligations in the nature of a guarantor or
surety. Waiving Party, in the broadest and most comprehensive sense, hereby
waives any and all claims, rights, or defenses that may be asserted by a
guarantor or surety against a creditor. Without limitation of the foregoing:
Except only to the extent provided otherwise in the express
contractual provisions of the Loan Documents, Waiving Party hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of receivership or bankruptcy of any of the other Borrower Parties,
protest or notice with respect to any of the obligations of any of the other
Borrower Parties, setoffs and counterclaims and all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor and notices of acceptance, the benefits of all statutes of limitation,
and all other demands whatsoever (and, except to the extent expressly required
under any of the Loan Documents, shall not require that
94
the same be made on any of the other Borrower Parties as a condition precedent
to the obligations of Waiving Party), and covenants that the Loan Documents will
not be discharged, except by complete payment and performance of the obligations
evidenced and secured thereby, except only as limited by the express contractual
provisions of the Loan Documents. Waiving Party further waives all notices that
the principal amount, or any portion thereof, and/or any interest on any
instrument or document evidencing all or any part of the obligations of any of
the other Borrower Parties to Lender is due, notices of any and all proceedings
to collect from any of the other Borrower Parties or any endorser or any other
guarantor of all or any part of their obligations, or from any other person or
entity, and, to the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to Lender to
secure payment of all or any part of the obligations of any of the other
Borrower Parties.
Except only to the extent provided otherwise in the express contractual
provisions of the Loan Documents, Waiving Party hereby agrees that all of its
obligations under the Loan Documents shall remain in full force and effect,
without defense, offset or counterclaim of any kind, notwithstanding that any
right of Waiving Party against any of the other Borrower Parties or defense of
Waiving Party against Lender may be impaired, destroyed, or otherwise affected
by reason of any action or inaction on the part of Lender. Waiving Party waives
all rights and defenses arising out of an election of remedies by Lender, even
though that election of remedies, may have destroyed the Waiving Party's rights
of subrogation and reimbursement against the other Borrower Parties.
Lender is hereby authorized, without notice or demand, from time to
time, (a) to renew, extend, accelerate or otherwise change the time for payment
of, or other terms relating to, all or any part of the obligations of any of the
other Borrower Parties; (b) to accept partial payments on all or any part of the
obligations of any of the other Borrower Parties; (c) to take and hold security
or collateral for the payment of all or any part of the obligations of any of
the other Borrower Parties; (d) to exchange, enforce, waive and release any such
security or collateral for such obligations; (e) to apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; (f) to settle, release, exchange, enforce, waive, compromise
or collect or otherwise liquidate all or any part of such obligations and any
security or collateral for such obligations. Any of the foregoing may be done in
any manner, and Waiving Party agrees that the same shall not affect or impair
the obligations of Waiving Party under the Loan Documents.
Waiving Party hereby assumes responsibility for keeping itself informed
of the financial condition of all of the other Borrower Parties and any and all
endorsers and/or other guarantors of all or any part of the obligations of the
other Borrower Parties, and of all other circumstances bearing upon the risk of
nonpayment of such obligations, and Waiving Party hereby agrees that Lender
shall have no duty to advise Waiving Party of information known to it regarding
such condition or any such circumstances.
Waiving Party agrees that neither Lender nor any person or entity
acting for or on behalf of Lender shall be under any obligation to marshal any
assets in favor of Waiving Party or against or in payment of any or all of the
obligations secured hereby. Waiving Party further agrees that, to the extent
that any of the other Borrower Parties or any other guarantor of all or any part
of the obligations of the other Borrower Parties makes a payment or payments to
95
Lender, or Lender receives any proceeds of collateral for any of the obligations
of the other Borrower Parties, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid or refunded, then, to the extent of such payment or
repayment, the part of such obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.
Waiving Party, until such time as the Obligations are irrevocably paid
in full, (i) shall have no right of subrogation with respect to the obligations
of the other Borrower Parties; (ii) waives any right to enforce any remedy that
Lender now has or may hereafter have against any of the other Borrower Parties,
any endorser or any guarantor of all or any part of such obligations or any
other person; and (iii) waives any benefit of, and any right to participate in,
any security or collateral given to Lender to secure the payment or performance
of all or any part of such obligations or any other liability of the other
parties to Lender.
Waiving Party agrees that any and all claims that it may have against
any of the other Borrower Parties, any endorser or any other guarantor of all or
any part of the obligations of the other Borrower Parties, or against any of
their respective properties, shall be subordinate and subject in right of
payment to the prior payment in full of all obligations secured hereby.
Notwithstanding any right of any of the Waiving Party to ask, demand, sue for,
take or receive any payment from the other Borrower Parties, all rights, liens
and security interests of Waiving Party, whether now or hereafter arising and
howsoever existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Lender to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Lender in those
assets.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Expenses and Attorneys' Fees. Whether or not the transactions
----------------------------
contemplated hereby shall be consummated, Borrower shall be liable for and
agrees to promptly pay all reasonable fees, costs and expenses incurred by
Lender in connection with any matters contemplated by or arising out of this
Loan Agreement, including the following, and all such fees, costs and expenses
shall be part of the Obligations, payable on demand: (A) reasonable fees, costs
and expenses (including reasonable attorneys' fees, and reasonable fees of other
professionals retained by Lender) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (B) reasonable fees, costs and
expenses (including reasonable attorneys' fees and reasonable fees of other
professionals retained by Lender) incurred in connection with the administration
of the Loan Documents and the Loan and any amendments, modifications and waivers
relating thereto; (C) reasonable fees, costs and expenses (including reasonable
attorneys' fees) incurred in connection with the review, documentation,
negotiation, closing and administration of any subordination or intercreditor
agreements; and (D) reasonable fees, costs and expenses (including attorneys'
fees and fees of other professionals retained by Lender) incurred in any action
to enforce this Loan Agreement or the other Loan Documents or to collect any
payments due from the Borrower under this Loan Agreement, the Note or any other
Loan Document or incurred in connection with any refinancing or restructuring of
the credit
96
arrangements provided under this Loan Agreement, whether in the nature of a
"workout" or in connection with any insolvency or bankruptcy proceedings or
otherwise. Any costs and expenses due and payable to Lender after the Closing
Date may be paid to Lender pursuant to the Cash Management Agreement.
Section 14.2 Indemnity. In addition to the payment of expenses as required
---------
elsewhere herein, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, defend, protect, pay and hold Lender,
its successors and assigns (including, without limitation, the trustee and/or
the trust under any trust agreement executed in connection with any
Securitization backed in whole or in part by the Loan and any other Person which
may hereafter be the holder of the Note or any interest therein), and the
officers, directors, stockholders, partners, members, employees, agents and
Affiliates of Lender and such successors and assigns (collectively called the
"Indemnitees") harmless from and against any and all liabilities, obligations,
-----------
losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities
(subject to the provisions of Section 2.8), broker's or finders fees, reasonable
costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of any of the following (to
the extent that insurance proceeds paid on account of same shall be inadequate)
(A) the enforcement of any of the Loan Documents; (B) any breach by Borrower of
any representation, warranty, covenant, or other agreement contained in any of
the Loan Documents; (C) the presence, release, threatened release, disposal,
removal, or cleanup of any Hazardous Material located on, about, within or
affecting any Property or any violation of any applicable Environmental Law
relating to any Property; (D) any claim brought by any third party arising out
of any condition or occurrence at or pertaining to any Property; (E) any design,
construction, operation, repair, maintenance, use, non-use or condition of any
Property or Improvements, including claims or penalties arising from violation
of any applicable laws or insurance requirements, as well as any claim based on
any patent or latent defect, whether or not discoverable by Lender; (F) any
performance of any labor or services or the furnishing of any materials or other
property in respect of any Property or any part thereof; (G) any contest
referred to in Section 5.3(B) hereof; (H) any obligation or undertaking relating
to the performance or discharge of any of the terms, covenants and conditions of
the landlord contained in, or any liability arising from any breach by Borrower
of the provisions of, the Master Lease or any other Leases to which Borrower is
a party; or (I) the use or intended use of the proceeds of any of the Loan (the
foregoing liabilities herein collectively referred to as the "Indemnified
-----------
Liabilities"); provided, however, that Borrower shall be relieved of its
- ----------- -------- -------
obligations to an Indemnitee under this Section 14.2 with respect to Indemnified
Liabilities arising (i) from the gross negligence or willful misconduct of such
Indemnitee as determined by a court of competent jurisdiction or (ii) from any
of the matters described in clauses (C)-(I) above occurring after the date (the
"Transfer Date") of transfer of title to the Property to any Indemnitee or third
-------------
party by foreclosure, deed-in-lieu thereof, the exercise of power of sale or
otherwise, except for any Indemnified Liabilities arising under clauses (C) or
(E) above as a result of any Hazardous Material located on, about, within or
affecting the Property or any latent defect affecting the Property which existed
prior to the Transfer Date. Any amounts payable to any Indemnitee by reason of
the application of this Section 14.2 shall be payable on demand and shall bear
interest at the Default Rate from the date
97
such loss or damage is sustained by any Indemnitee until paid. The obligations
and liabilities of Borrower under this Section 14.2 shall survive the term of
the Loan and the exercise by Lender of any of its rights or remedies under the
Loan Documents, including the acquisition of any Property by foreclosure or a
conveyance in lieu of foreclosure.
Section 14.3 Amendments and Waivers. Except as otherwise provided herein, no
----------------------
amendment, modification, termination or waiver of any provision of this Loan
Agreement, the Note or any other Loan Document, or consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and any other party to be charged. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on Borrower in any case shall entitle Borrower or other Person to any
other or further notice or demand in similar or other circumstances (except for
any notices as expressly required herein or under the other Loan Documents).
Section 14.4 Retention of Borrower's Documents. Lender may, in accordance with
---------------------------------
Lender's customary practices, destroy or otherwise dispose of all documents,
schedules, invoices or other papers, delivered by Borrower to Lender unless
Borrower requests in writing that same be returned. Upon such request and at the
expense of Borrower, Lender shall return such papers when Lender's actual or
anticipated need for same has terminated.
Section 14.5 Notices. Unless otherwise specifically provided herein, any notice
-------
or other communication required or permitted to be given shall be in writing and
addressed to the respective party as set forth below. Notices shall be effective
(i) three (3) days after the date such notice is mailed, (ii) on the next
Business Day if sent by a nationally recognized overnight courier service, (iii)
on the date of delivery by personal delivery and (iv) on the date of
transmission if sent by telefax during business hours on a Business Day
(otherwise on the next Business Day) (with receipt of confirmation).
Notices shall be addressed as follows:
If to Borrower or any Borrower Party:
c/o Ventas, Inc.
4360 Brownsboro Road
Suite 115
Louisville, Kentucky 40207-1642
Attn: General Counsel
Facsimile: (502) 357-9029
With a copy to:
Barack Ferrazzano Kirschbaum
Perlman & Nagelberg
333 West Wacker Drive
Suite 2700
Chicago, Illinois 60606
98
Attn: Thomas H. Page, Esq.
Facsimile: (312) 984-3150
And with a copy to:
Baker & McKenzie
805 Third Avenue
New York, New York 10022
Attn: David Wolin, Esq.
Facsimile: (212) 759-9133
If to Lender:
c/o Merrill Lynch & Co.
Four World Financial Center
250 Vesey Street
North Tower
New York, New York 10080
Attn: Bruce Ackerman
Facsimile: (201) 671-4119
With a copy to:
Sidley Austin Brown & Wood
875 Third Avenue
New York, New York 10022
Attn: Robert L. Boyd, Esq.
Facsimile: (212) 906-2021
Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness of any notice
(i) given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Lender's interest in the Loan, then the new Lenders may give
notice to the parties in accordance with this Section, specifying the addresses
at which the new Lenders shall receive notice, and they shall be entitled to
notice at such address in accordance with this Section.
Section 14.6 Survival of Warranties and Certain Agreements. All agreements,
---------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Loan Agreement, the making of the Loan hereunder and the
execution and delivery of the Note. Notwithstanding anything in this Loan
Agreement or implied by law to the contrary, the agreements of Borrower Parties
to indemnify or release Lender or Persons related to Lender, or to pay Lender's
costs, expenses, or taxes shall survive the payment of the Loan and the
termination of this Loan Agreement.
99
Section 14.7 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
-----------------------------------------------------
or delay on the part of Lender in the exercise of any power, right or privilege
hereunder or under the Note or any other Loan Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Loan Agreement,
the Note and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
Section 14.8 Marshaling; Payments Set Aside. Lender shall not be under any
------------------------------
obligation to marshal any assets in favor of any Person or against or in payment
of any or all of the Obligations. To the extent that any Person makes a payment
or payments to Lender, or Lender enforces its remedies or exercises its rights
of set off, and such payment or payments or the proceeds of such enforcement or
set off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, and rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.
Section 14.9 Severability. The invalidity, illegality or unenforceability in
------------
any jurisdiction of any provision in or obligation under this Loan Agreement,
the Note or other Loan Documents shall not affect or impair the validity,
legality or enforceability of the remaining provisions or obligations under this
Loan Agreement, the Note or other Loan Documents or of such provision or
obligation in any other jurisdiction.
Section 14.10 Headings. Section and subsection headings in this Loan Agreement
--------
are included herein for convenience of reference only and shall not constitute a
part of this Loan Agreement for any other purpose or be given any substantive
effect.
Section 14.11 Applicable Law. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
--------------
WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE
STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED
PURSUANT TO THE MORTGAGES AND THE
100
ASSIGNMENTS OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATES WHERE THE
RESPECTIVE PROPERTIES ARE LOCATED, EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT
COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE
WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.
Section 14.12 Successors and Assigns. This Loan Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns except that no Borrower Party may assign its rights or obligations
hereunder or under any of the other Loan Documents except as expressly provided
in Article XI.
Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary
-----------------------------------------------------
Relationship. Borrower Parties represent, warrant and acknowledge that (i) they
- ------------
are sophisticated real estate investors, familiar with transactions of this
kind, and (ii) they have entered into this Loan Agreement and the other Loan
Documents after conducting their own assessment of the alternatives available to
them in the market, and after lengthy negotiations in which they have been
represented by competent legal counsel of their choice. Borrower Parties also
acknowledge and agree that the rights of Lender under this Loan Agreement and
the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the quantity of the Loan, the nature of the Properties, and the risks incurred
by Lender in this transaction. No provision in this Loan Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create (i) any partnership or joint venture between Lender and
Borrower or any other Person, or (ii) any fiduciary or similar duty by Lender to
Borrower or any other Person. The relationship between Lender and Borrower is
exclusively the relationship of a creditor and a debtor, and all relationships
between Lender and any other Borrower Party are ancillary to such
creditor/debtor relationship.
Section 14.14 Reasonableness of Determinations. In any instance where any
--------------------------------
consent, approval, determination or other action by Lender is, pursuant to the
Loan Documents or applicable law, required to be done reasonably or required not
to be unreasonably withheld, Borrower shall bear the burden of proof of showing
that the same was not reasonable. In all cases Lender shall conclusively be
deemed to be acting reasonably when implementing any standard or requirement of
any applicable Rating Agency. In the event that a claim or adjudication is made
that Lender or its agents have acted unreasonably or unreasonably delayed acting
in any case where, by law or under this Loan Agreement or the other Loan
Documents, Lender or such agent, as the case may be, has an obligation to act
reasonably or promptly, neither Lender nor its agents shall be liable for any
monetary damages, and Borrower's sole remedy shall be limited to commencing an
action seeking injunctive relief or declaratory judgment, unless Lender is
expressly found by the court in such action to have acted in bad faith. Any
action or proceeding to determine whether Lender has acted reasonably shall be
determined by an action seeking declaratory judgment.
Section 14.15 No Duty. All attorneys, accountants, appraisers, and other
-------
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any Borrower Party or Affiliates thereof, or any other Person.
101
Section 14.16 Entire Agreement. This Loan Agreement, the Note, and the other
----------------
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties to the Loan
Documents.
Section 14.17 Construction; Supremacy of Loan Agreement. Borrower Parties and
-----------------------------------------
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has been afforded an opportunity to review this Loan Agreement
and the other Loan Documents with its legal counsel and that this Loan Agreement
and the other Loan Documents shall be construed as if jointly drafted by
Borrower and Lender. If any term, condition or provision of this Loan Agreement
shall be inconsistent with any term, condition or provision of any other Loan
Document, then this Loan Agreement shall control.
Section 14.18 Consent to Jurisdiction. EACH BORROWER PARTY HEREBY CONSENTS TO
-----------------------
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH ANY PROPERTY IS
LOCATED AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS
OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH BORROWER PARTY ACCEPTS
FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, 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 LOAN AGREEMENT, THE NOTE, SUCH OTHER
LOAN DOCUMENTS OR SUCH OBLIGATION. 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 ANY BORROWER PARTY IN THE COURTS OF ANY
OTHER JURISDICTION.
Section 14.19 Waiver of Jury Trial. EACH OF THE BORROWER PARTIES AND LENDER
--------------------
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN
DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE
SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP
THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER,
BE REQUIRED OF IT. 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. EACH OF THE
102
BORROWER PARTIES AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON
THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWER PARTIES AND LENDER
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT IT 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 (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 14.19 AND EXECUTED BY EACH
OF THE PARTIES HERETO), AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE
EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
Section 14.20 Counterparts; Effectiveness. This Loan Agreement and other Loan
---------------------------
Documents and any amendments or supplements thereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but one and the same
instrument. This Loan Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.
Section 14.21 Servicer. Lender shall have the right from time to time to
--------
designate and appoint one or more Servicers, and to change or replace any
Servicer. All rights of the Lender hereunder may exercised by Servicer. Servicer
shall be entitled to the benefit of all obligations of any of Borrower Party in
favor of Lender.
Section 14.22 Obligations of Borrower Parties. Borrower Parties other than
-------------------------------
Borrower are parties to this Loan Agreement only with regard to the
representations, warranties, and covenants specifically applicable to them.
Section 14.23 Guaranties Unsecured. Anything to the contrary herein or elsewhere
--------------------
notwithstanding, the Guaranty and all obligations arising under same, including
the obligations incorporated therein from this Loan Agreement by reference, are
not and shall not be secured in any manner whatsoever, including by the
Mortgages or by any Lien on any Collateral.
Section 14.24 Confidentiality. Subject to and without limiting Lender's rights
---------------
under Article X hereof, Lender shall use reasonable efforts to hold all
non-public information obtained in connection with the Loan in accordance with
Lender's customary procedures for handling confidential information of this
nature and in accordance with prudent lending or investing practices, it being
understood and agreed by Borrower that in any event Lender may make disclosures
to Lender's employees, officers, agents, representatives, attorneys,
accountants, consultants and advisors in connection with the Loan, Affiliates of
Lender (and to other Persons authorized by Lender to organize, present or
disseminate such information in connection with
103
disclosures otherwise made in accordance with this Section 14.24), to the Rating
Agencies, assignees, participants, investors or prospective assignees,
participants or investors, servicers, trustees or other Persons as Lender, in
its sole discretion, may require in connection with any Secondary Market
Transaction or Securitization, or disclosures required or requested by any
governmental agency or representative thereof pursuant to legal process;
provided, unless specifically prohibited by applicable law or court order,
Lender shall make reasonable efforts to notify Borrower of any request by any
governmental agency or representative thereof (other than any such request in
connection with any examination of the financial condition or other routine
examination of Lender by such governmental agency) for disclosure of any such
non-public information prior to disclosure of such information.
Section 14.25 Indiana Responsible Property Transfer Law. Lender acknowledges
-----------------------------------------
that it is aware of the purpose and intent of the disclosure document required
under the Indiana Responsible Property Transfer Law, Indiana Code 13-25-3, and
hereby waives delivery of such disclosure documents. Lender agrees that no
disclosure document shall be required to be completed by Borrower or any other
party.
[signatures follow on next page]
104
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Loan Agreement as of the date first written above.
BORROWER:
--------
VENTAS FINANCE I, LLC,
a Delaware limited liability company
By: /s/ T. Richard Riney
----------------------------
Name: T. Richard Riney
Title: Executive Vice President
MEMBER:
------
VENTAS FINANCE I, INC.,
a Delaware corporation
By: /s/ T. Richard Riney
---------------------------
Name: T. Richard Riney
Title: Executive Vice President
GUARANTOR:
---------
VENTAS, INC., a Delaware corporation
By: /s/ T. Richard Riney
---------------------------
Name: T. Richard Riney
Title: Executive Vice President
LENDER:
------
MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation
By: /s/ Christopher M. Haynes
---------------------------
Name: Christopher M. Haynes
Title: Vice President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 11th day of December, 2001, before me, the undersigned, a notary public
in and for said state, personally appeared T. Richard Riney, personally known to
me or proved to me on the basis of satisfactory evidence to be the individual(s)
whose name(s) is (are) subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their capacity(ies), and that
by his/her/their signature(s) on the instrument, the individual(s), or the
person upon behalf of which the individual(s) acted, executed the instrument.
/s/ Kourosh Q. Pirouz
-----------------------------------------
Notary Public
[notarial seal]
Kourosh Quincy Pirouz
Notary Public, State of New York
No. 01P16058602
Qualified in New York County
Commission Expires 5/14/03
[BORROWER]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 11th day of December, 2001, before me, the undersigned, a notary public
in and for said state, personally appeared T. Richard Riney, personally known to
me or proved to me on the basis of satisfactory evidence to be the individual(s)
whose name(s) is (are) subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their capacity(ies), and that
by his/her/their signature(s) on the instrument, the individual(s), or the
person upon behalf of which the individual(s) acted, executed the instrument.
/s/ Kourosh Q. Pirouz
-----------------------------------------
Notary Public
[notarial seal]
Kourosh Quincy Pirouz
Notary Public, State of New York
No. 01P16058602
Qualified in New York County
Commission Expires 5/14/03
[MEMBER]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 11th day of December, 2001, before me, the undersigned, a notary public
in and for said state, personally appeared T. Richard Riney, personally known to
me or proved to me on the basis of satisfactory evidence to be the individual(s)
whose name(s) is (are) subscribed to the within instrument and acknowledged to
me that he/she/they executed the same in his/her/their capacity(ies), and that
by his/her/their signature(s) on the instrument, the individual(s), or the
person upon behalf of which the individual(s) acted, executed the instrument.
/s/ Kourosh Q. Pirouz
-----------------------------------------
Notary Public
[notarial seal]
Kourosh Quincy Pirouz
Notary Public, State of New York
No. 01P16058602
Qualified in New York County
Commission Expires 5/14/03
[GUARANTOR]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 11th day of December, 2001, before me, the undersigned, a notary public
in and for said state, personally appeared Christopher M. Haynes personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
/s/ Kourosh Q. Pirouz
-----------------------------------------
Notary Public
[notarial seal]
Kourosh Quincy Pirouz
Notary Public, State of New York
No. 01P16058602
Qualified in New York County
Commission Expires 5/14/03
[LENDER]