1
EXHIBIT 2.6
------------------------------------
LOAN AGREEMENT
Dated as of July 16, 1999
------------------------------------
By and Among
PITA GENERAL CORPORATION,
Borrower
AHC TENANT, INC.,
Lessee
and
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
Noteholder
2
TABLE OF CONTENTS
PAGE
LIST OF SCHEDULES................................................................................................iv
ARTICLE I DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS...........................................................1
ARTICLE II TERMS OF THE LOAN.....................................................................................18
2.1 THE LOAN; ADVANCES.....................................................................................18
2.2 SECURITY FOR THE LOAN..................................................................................18
2.3 USE OF PROCEEDS........................................................................................18
2.4 SURETY BOND............................................................................................18
2.5 TRUST AGREEMENT........................................................................................18
2.6 PREPAYMENT.............................................................................................19
2.7 INTENTIONALLY DELETED..................................................................................19
2.8 INTENTIONALLY DELETED..................................................................................19
2.9 CONDITIONS TO CLOSING..................................................................................19
2.10 CONDITIONS TO ADDITIONAL PROPERTIES CLOSING............................................................25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES...................................................28
3.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS..........................................28
3.2 AUTHORIZATION OF BORROWING, ETC........................................................................29
3.3 PENDING MATTERS........................................................................................30
3.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS................................................................30
3.5 INVESTMENT COMPANY ACT; PUHCA..........................................................................30
3.6 FOREIGN PERSON.........................................................................................30
3.7 BANKRUPTCY.............................................................................................30
3.8 SOLVENCY...............................................................................................31
3.9 PENDING MATTERS........................................................................................31
3.10 FINANCIAL STATEMENTS ACCURATE..........................................................................31
3.11 COMPLIANCE WITH LAWS...................................................................................32
3.12 MAINTAIN BED CAPACITY..................................................................................33
3.13 PAYMENT OF TAXES AND PROPERTY IMPOSITIONS..............................................................33
3.14 TITLE TO COLLATERAL....................................................................................34
3.15 PRIORITY OF MORTGAGES..................................................................................34
3.16 ZONING, OTHER LAWS.....................................................................................34
3.17 CONDITION OF IMPROVEMENTS AND PROPERTIES...............................................................35
3.18 DISCLOSURE.............................................................................................36
3.19 LEGAL NAMES............................................................................................36
3.20 EMPLOYEE BENEFIT PLANS.................................................................................36
3.21 INTELLECTUAL PROPERTY..................................................................................37
3.22 PROCEEDINGS PENDING....................................................................................37
3.23 COMPLIANCE WITH APPLICABLE LAWS........................................................................37
3.24 MANAGEMENT AGREEMENTS..................................................................................37
3.25 1934 ACT...............................................................................................37
3.26 USE OF PROCEEDS AND MARGIN SECURITY....................................................................38
3.27 NO PLAN ASSETS.........................................................................................38
3.28 GOVERNMENTAL PLAN......................................................................................38
3.29 YEAR 2000..............................................................................................38
3.30 LEGAL OPINIONS.........................................................................................39
3.31 LEASES; AGREEMENTS.....................................................................................39
-2-
3
ARTICLE IV AFFIRMATIVE COVENANTS OF BORROWER PARTIES.............................................................40
4.1 PAYMENT OF LOAN/PERFORMANCE OF LOAN OBLIGATIONS........................................................40
4.2 MAINTENANCE OF EXISTENCE...............................................................................40
4.3 ACCRUAL AND PAYMENT OF TAXES...........................................................................40
4.4 INSURANCE; CASUALTY AND CONDEMNATION...................................................................40
4.5 FINANCIAL AND OTHER INFORMATION........................................................................47
4.6 GAAP...................................................................................................50
4.7 ACCOUNTANTS' REPORTS...................................................................................50
4.8 BOOKS AND RECORDS......................................................................................50
4.9 PAYMENT OF INDEBTEDNESS................................................................................51
4.10 BUDGET APPROVAL PROCESS................................................................................51
4.11 ANNUAL OWNERSHIP REPORT................................................................................52
4.12 MATERIAL ADVERSE CHANGE; MATERIAL ADVERSE EFFECT.......................................................52
4.13 EVENTS OF DEFAULT, ETC.................................................................................52
4.14 LITIGATION.............................................................................................53
4.15 INSURANCE..............................................................................................53
4.16 CONDUCT OF BUSINESS....................................................................................53
4.17 PERIODIC SURVEYS.......................................................................................54
4.18 MANAGEMENT AGREEMENT...................................................................................54
4.19 UPDATED APPRAISALS.....................................................................................54
4.20 COMPLY WITH COVENANTS, LAWS AND CONTRACTUAL OBLIGATIONS................................................55
4.21 TAXES AND OTHER CHARGES................................................................................55
4.22 COST REPORTS...........................................................................................55
4.23 VENDOR AGREEMENTS......................................................................................55
4.24 CERTIFICATE............................................................................................55
4.25 TRANSACTION DOCUMENTS..................................................................................56
4.26 NOTICE OF FEES OR PENALTIES............................................................................56
4.27 MAINTENANCE OF ASSUMPTIONS IN LEGAL OPINIONS...........................................................56
4.28 NOTEHOLDER'S EXPENSES..................................................................................56
4.29 MATERIAL AGREEMENTS....................................................................................56
4.30 INSPECTION.............................................................................................57
4.31 ERISA..................................................................................................57
4.32 ASSISTED LIVING FACILITY CONSULTANT....................................................................57
4.33 PLACE OF BUSINESS......................................................................................58
ARTICLE V NEGATIVE COVENANTS OF BORROWER PARTIES.................................................................58
5.1 ASSIGNMENT OF LICENSES AND PERMITS.....................................................................58
5.2 NO LIENS; EXCEPTIONS...................................................................................58
5.3 DISPOSITION OF ASSETS..................................................................................59
5.4 CHANGE OF BUSINESS.....................................................................................59
5.5 CHANGES IN ACCOUNTING..................................................................................59
5.6 INTENTIONALLY OMITTED..................................................................................60
5.7 TRANSFER OF OWNERSHIP INTERESTS........................................................................60
5.8 RESTRICTION ON FUNDAMENTAL CHANGES.....................................................................60
5.9 TRANSACTIONS WITH AFFILIATES...........................................................................60
5.10 CHANGE OF USE..........................................................................................61
5.11 INTENTIONALLY DELETED..................................................................................61
5.12 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS...............................................................61
5.13 INDEBTEDNESS...........................................................................................61
5.14 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.................................................................61
-3-
4
5.15 NO NEGATIVE PLEDGES....................................................................................62
5.16 CHANGES RELATING TO INDEBTEDNESS.......................................................................62
5.17 CONTINGENT OBLIGATIONS.................................................................................62
5.18 ERISA..................................................................................................62
5.19 SINGLE PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS COVENANTS AND WARRANTIES.............................63
5.20 ADDITIONAL SINGLE PURPOSE, BANKRUPTCY REMOTE COVENANTS.................................................66
5.21 APPLICATION OF CERTAIN COVENANTS TO SUBLESSEES.........................................................66
5.22 MANAGEMENT.............................................................................................66
ARTICLE VI ENVIRONMENTAL HAZARDS.................................................................................67
6.1 PROHIBITED ACTIVITIES AND CONDITIONS...................................................................67
6.2 EXCLUSIONS.............................................................................................67
6.3 PREVENTIVE ACTION......................................................................................68
6.4 O & M PROGRAM COMPLIANCE...............................................................................68
6.5 LESSEE'S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES..................................................68
6.6 NOTICE OF CERTAIN EVENTS...............................................................................70
6.7 COSTS OF INSPECTION....................................................................................70
6.8 REMEDIAL WORK..........................................................................................71
6.9 COOPERATION WITH GOVERNMENTAL AUTHORITIES..............................................................71
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES.......................................................................71
7.1 EVENTS OF DEFAULT......................................................................................71
7.2 REMEDIES...............................................................................................75
ARTICLE VIII RESTRICTIONS ON TRANSFER............................................................................76
8.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCES..............................................................76
8.2 ASSUMABILITY...........................................................................................76
ARTICLE IX MISCELLANEOUS.........................................................................................78
9.1 WAIVER.................................................................................................78
9.2 COSTS AND EXPENSES.....................................................................................79
9.3 PERFORMANCE OF NOTEHOLDER..............................................................................80
9.4 INDEMNIFICATION........................................................................................80
9.5 EVIDENCE OF COMPLIANCE.................................................................................86
9.6 HEADINGS...............................................................................................86
9.7 U.S. CURRENCY..........................................................................................86
9.8 SURVIVAL OF COVENANTS..................................................................................86
9.9 NOTICES, ETC...........................................................................................86
9.10 BENEFITS...............................................................................................89
9.11 SECONDARY MARKET TRANSACTIONS GENERALLY................................................................89
9.12 COOPERATION; LIMITATIONS...............................................................................89
9.13 INFORMATION............................................................................................91
9.14 ADDITIONAL PROVISIONS..................................................................................91
9.15 SUPERSEDES PRIOR AGREEMENTS: COUNTERPARTS..............................................................92
9.16 INCONSISTENCIES........................................................................................92
9.17 CONTROLLING LAW........................................................................................92
9.18 WAIVER OF JURY TRIAL...................................................................................92
9.19 SUBROGATION............................................................................................93
9.20 COMPLIANCE WITH LAWS...................................................................................93
9.21 INTERPRETATION.........................................................................................94
9.22 NON-EXCLUSIVITY OF REMEDIES............................................................................94
-4-
5
9.23 SERVICER; TRUSTEE......................................................................................95
9.24 OBLIGATIONS OF THE BORROWER PARTIES....................................................................95
9.25 LIMITATION OF LIABILITY................................................................................95
9.26 NO DUTY................................................................................................95
9.27 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES.........................................................96
9.28 MARSHALING; PAYMENTS SET ASIDE.........................................................................98
9.29 NO FIDUCIARY RELATIONSHIP..............................................................................98
9.30 FURTHER ASSURANCES.....................................................................................98
9.31 SPECIAL CIRCUMSTANCES FURTHER ASSURANCES...............................................................99
9.32 NON-RECOURSE LOAN......................................................................................99
Exhibit A - Master Glossary of Definitions
Exhibit B-1 - List of Initial Properties
Exhibit B-2 - List of Additional Properties
Exhibit C - Disbursement Schedule
Exhibit D - Ground Leases
Exhibit E - Subleases; Sublessees
Exhibit F - Form of Agreed Upon Procedures
LIST OF SCHEDULES
Schedule 2.9(p) - Appraised Value of Individual Properties
Schedule 3.1(c) - Jurisdictions in Which Borrower Parties Qualified
Schedule 3.1(e) - Addresses of Borrower Parties; Offices, Places of Business,
Location of Properties
Schedule 3.2(b) - Required Consents - Contractual Obligations of Borrower
Parties
Schedule 3.9 - Pending Matters Against Lessee or the Properties
Schedule 3.11-1 - Available Beds/Licensed Beds
Schedule 3.11-2 - List of Permits
Schedule 3.19 - Legal Names
Schedule 3.20(a) - Schedule of Plans
Schedule 3.20(b)-1- Non-Exempt Prohibited Transactions
Schedule 3.20(b)-2 - Obligations Arising from Loan
Schedule 3.21 - Intellectual Property
Schedule 3.31(d) - Rent Rolls
Schedule 4.10 - Financial Projections
Schedule 4.29 - Material Agreements
Schedule 6.5 - Environmental Reports
Schedule 6.5(c) - UST's
-5-
6
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT") is made effective as of the 16th
day of July 1999, by and between PITA GENERAL CORPORATION, an Illinois
corporation ("BORROWER"), AHC TENANT, INC., a Delaware corporation ("Lessee")
and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation having an
address at 600 Steamboat Road, Greenwich, Connecticut 06830 (together with its
successors and assigns, "NOTEHOLDER"). Borrower and Lessee are collectively
referred to herein as "BORROWER PARTIES" and individually as a "BORROWER PARTY".
RECITALS:
Borrower has requested that Noteholder make a loan to Borrower in the
principal sum of up to the lesser of (i) TWO HUNDRED ONE MILLION AND NO/100
DOLLARS ($201,000,000) and (ii) the Maximum Loan Amount (hereinafter defined)
(said principal amount so borrowed and Borrower's obligation to repay the same
together with all interest and other amounts required under the Note
(hereinafter defined) may be referred to as the "LOAN") which Loan is to be
secured by, among other items, the Collateral (hereinafter defined) in which
Borrower has granted (or hereafter shall grant) any Lien pursuant to the Loan
Documents including the Property (hereinafter defined). Noteholder has agreed to
make the Loan on the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS
1.1 Terms contained in this Agreement shall, unless otherwise defined
below or elsewhere herein or unless the context otherwise indicates, have the
meanings assigned to them in the Master Glossary of Definitions attached hereto
as EXHIBIT "A". To the extent of any inconsistencies between the defined terms
set forth herein and the Master Glossary of Definitions, this Agreement shall
control. Terms which are not defined herein or in the Master Glossary of
Definitions shall have the meanings, if any, assigned to them by the Uniform
Commercial Code in effect in the State of Illinois. As used in this Agreement,
the following terms shall have the following meanings unless the context hereof
shall otherwise indicate:
"ACCOUNTS" means any right of Borrower, Lessee, Sublessees or Manager
to payment of goods sold or leased or for services rendered at or with respect
to the Properties or the Assisted Living Facilities, including, without
limitation, (i) all accounts arising from the operation of the Assisted Living
Facilities and (ii) all rights to payment from Medicare or Medicaid programs or
similar state or federal programs, boards, bureaus or agencies, and rights to
payment from patients, residents, private insurers, and others arising from the
operation of the Assisted Living Facilities, including rights to payment
pursuant to the Reimbursement Contracts. Accounts shall include the proceeds
thereof (whether cash or noncash, moveable or immoveable, tangible or
7
intangible) received from the sale, exchange, transfer, collection or other
disposition or substitution thereof. Accounts includes Instruments which are
proceeds of Accounts.
"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.
"ADDITIONAL ADVANCE" is defined in Section 2.1(b) hereof.
"ADDITIONAL PROPERTIES" means, collectively, the properties listed on
EXHIBIT "B-2" hereto which Borrower intends to acquire on the Additional
Properties Closing Date; and which Exhibit B-2 shall be amended on the
Additional Properties Closing Date to reflect the Additional Properties actually
acquired by Borrower on the Additional Properties Closing Date.
"ADDITIONAL PROPERTIES CLOSING DATE" means the date upon which Borrower
shall acquire one or more Additional Properties in accordance with the terms and
conditions hereof; but in no event later than the Additional Properties Outside
Date.
"ADDITIONAL PROPERTIES OUTSIDE DATE" means the date which is sixty (60)
days after the Initial Closing Date.
"ADVANCE(S)" is defined in Section 2.1(b).
"AFFILIATE" shall mean, with respect to any Person, (i) each Person
that controls, is controlled by or is under common control with such Person,
(ii) each Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, any of the Stock of
such Person (excluding stockholders of Alterra), and (iii) each of such Person's
officers, directors, members, joint venturers and partners. 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.
"ALLOWED INDEBTEDNESS" means (i) the Loan, (ii) trade payables incurred
in the normal course of business; provided that such trade payable is payable
not more than (90) days after the original invoice date and is not overdue by
more than thirty (30) days, and (iii) and Equipment Leases entered into by
Lessee or any Sublessee (or Manager on their behalf); provided that the
Indebtedness outstanding under such Equipment Leases relating to (A) any
Assisted Living Facility having 60 beds or less shall not, at any time, exceed
$100,000, in the aggregate for such Assisted Living Facility, and (B) any
Assisted Living Facility having more than 60 beds shall not, at any time, exceed
$250,000, in the aggregate for such Assisted Living Facility.
"ALTERATIONS" is defined in Section 5.10 hereof.
"ALTERRA" means Alterra Healthcare Corporation, a Delaware corporation.
-7-
8
"APPRAISAL" is defined in Section 2.9(p).
"APPROVED ACCOUNTANTS" is defined in Section 4.5(a).
"ASSIGNMENTS" mean, collectively, the Assignments of Leases, the
Assignments of Management Agreements and the Assignments of Memoranda of Lease.
"ASSIGNMENTS OF LEASES" mean, collectively, (i) those certain Absolute
Assignments of Leases and Rents, dated of even date herewith, executed by
Borrower and Lessee to Trustee, for the benefit of the Beneficiaries assigning
all of Borrower's and Lessee's respective right, title and interest in and to
the Master Lease, the Subleases and other Leases, (ii) those certain Joint
Assignments of Leases and Rents, dated of even date herewith, executed by
Manager, Lessee and the Sublessees to Trustee, for the benefit of the
Beneficiaries, assigning all of their respective right, title and interest in
and to the Residency Agreements and the Sublessees' right title and interest in
and to the Licensing Subleases and (iii) any other Assignments of Leases and
Rents or other similar agreements hereafter executed by Borrower, Lessee, any
Sublessee and/or Manager in favor of Trustee with respect to the Additional
Properties.
"ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, (i) that
certain Collateral Assignment of Management Agreement, dated of even date
herewith, executed by Lessee to Trustee, for the benefit of the Beneficiaries,
(ii) that certain Collateral Assignment of Management Agreement, dated of even
date herewith executed by the Sublessees to Trustee for the benefit of the
Beneficiaries, and (iii) any Collateral Assignments of Management Agreement,
hereafter executed by Lessee or any Sublessee with respect to the Additional
Properties.
"ASSIGNMENTS OF MEMORANDA OF LEASE" means, collectively, those certain
Collateral Assignments of Memorandum of Lease from Borrower to Trustee for the
benefit of the Beneficiaries.
"ASSISTED LIVING CONSULTANT" is defined in Section 4.32 hereof.
"ASSISTED LIVING FACILITIES" means the assisted living facilities
located on the Properties, as they may now or hereafter exist, together with any
other general or specialized care facilities, if any (including any Alzheimer's
or dementia care unit, skilled nursing facility, 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.
"ASSUMPTION FEE" is defined in Section 8.2 (c)(i) hereof.
"ASSUMPTION FEE PERCENTAGE" is defined in Section 8.2(c)(i) hereof.
"AVAILABLE BED CAPITAL IMPROVEMENT AMOUNT" is defined in Section 4.25
hereof.
"AVAILABLE BEDS" means the beds at each of the Assisted Living
Facilities, as shown on
-8-
9
SCHEDULE 3.11-1 hereto as of the Closing Date, as same may be revised following
Borrower's acquisition of any Additional Properties on the Additional Properties
Closing Date and as hereafter adjusted pursuant to the terms of the Transaction
Documents.
"BENEFICIARY" means any Person for whose benefit the Trustee is holding
a Lien under the Transaction Documents pursuant to the Trust Agreement.
"BENEFIT PLAN" means a pension plan as defined in Section 3(2) of ERISA
(other than a Multiemployer Plan) (i) in respect of which Lessee or any ERISA
Affiliate is, or within the immediately preceding six years was, an "employer"
as defined in Section 3(5) of ERISA, and (ii) that is subject to (A) the funding
requirements of Section 302 of ERISA or Section 412 of the Code or (B) Title IV
of ERISA.
"BORROWER PARTY SECRETARY" is defined in Section 2.9(g) hereof.
"BUDGET" is defined in Section 4.10 hereof.
"BUSINESS DAY" means a day, other than Saturday or Sunday or another
day on which commercial banks in New York City are authorized or required by law
to be closed.
"CASUALTY AMOUNT" is defined in Section 4.4(b) hereof.
"CERCIS" is defined in Section 6.5(h) hereof
"CHARTER DOCUMENTS" are defined in Section 3.1(a) hereof.
"CLAIM" is defined in Section 9.4(c) hereof
"CLOSING DATE" means the initial date on which all or any part of the
Loan is disbursed by the Noteholder to or for the benefit of Borrower.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"COLLATERAL" means, collectively, all of Borrower's, Lessee's,
Sublessees' and Manager's ( in its capacity as Manager or otherwise with respect
to the Properties) respective right, title and interest in and to the
Properties, Improvements, Equipment, Rents, Accounts, Deposit Accounts, General
Intangibles, Instruments, Inventory, Money, Permits (to the full extent
assignable), Reimbursement Contracts, Stock (in and to Borrower, Lessee and/or
the Sublessees), Defeasance Collateral (as defined in the Note) and all Proceeds
of the foregoing, all whether now owned or hereafter acquired, and including
replacements, additions, accessions, substitutions, and products thereof and
thereto, and all other rights, interest and property of every kind, real and
personal which is or hereafter may become subject to a Lien in favor of
Noteholder or the Trustee as security for any of the Loan Obligations, but
excluding the Excluded Collateral and the Excepted Rights.
-9-
10
"CON" means a certificate of need or similar permit or approval from a
Governmental Authority related to the construction, alteration or modification
of services provided at an Assisted Living Facility.
"CONDEMNATION" is defined in Section 4.4(d).
"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. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed or otherwise supported.
"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 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 Transaction Documents.
"DEFAULT" means the occurrence or existence of any event which, but for
the giving of notice or expiration of time or both, would constitute an Event of
Default.
"ENDORSEMENT" is defined in Section 8.2(c)(iv) hereof.
"ENVIRONMENTAL LAW" means any present and future federal, state, or any
of local statute, law, rule, ordinance, regulation, common law, code, provision
of a lease of any of the Properties, order or decree regulating, relating to,
imposing liability or standards of conduct concerning, or otherwise pertaining
to or addressing the protection of the environment,
-10-
11
Hazardous Materials, community or worker health and safety, any chemical
substance or mixture or any other hazardous, toxic, special or dangerous waste,
substance or constituent, whether solid, liquid or gas. Environmental Law
includes, but is not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control
Act, as amended, the Occupational Safety and Health Act, as amended, and any
analogous state Environmental Law.
"ENVIRONMENTAL PERMIT" means any Permit (as defined hereinafter) issued
under any Environmental Law or pertaining to or related to protection of the
environment, worker or community health and safety or to Hazardous Materials
with respect to any activities or businesses conducted on or in relation to any
of the Properties and/or the Improvements.
"ENVIRONMENTAL REPORTS" means, collectively, the environmental reports
listed on SCHEDULE 6.5 attached hereto.
"EQUIPMENT" means all beds, linen, televisions, carpeting, telephones,
cash registers, computers, lamps, glassware, rehabilitation equipment and
medical equipment, restaurant and kitchen equipment, photocopy machines and
other office equipment, automobiles, vans and other motor vehicles and other
furniture, fixtures and equipment, whether now owned or hereafter acquired, and
all renewals and replacements thereof and substitutions therefor, and located on
or in the Assisted Living Facilities or Improvements or used or useful in
connection with the operation thereof; but the term "Equipment" shall exclude
any personal property or equipment relating to the Initial Properties acquired
by the Sublessees after the Closing Date (or in the case of personal property or
equipment relating to the Additional Properties, acquired after the Additional
Property Closing Date) using funds other than the proceeds of the Loan; and
provided that with respect to any items which are leased pursuant to an
assignable lease and not owned, the Equipment shall include the leasehold
interest only together with any options to purchase any of said items and any
additional or greater rights with respect to such items which may hereafter be
acquired, but the foregoing shall not be construed to mean that such leasing
shall be permitted hereunder and under the other Loan Documents.
"EQUIPMENT LEASE" means any lease of Equipment or purchase money
financing incurred with respect to the purchase of Equipment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
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 Lessee, (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 Lessee, (iii) member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as Lessee 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 Lessee
pursuant to Regulations promulgated under Section 414(o) of the Code.
-11-
12
"EVENT OF DEFAULT" means any "Event of Default" as defined in Article
VII.
"EXCEPTED RIGHTS" means the right of Borrower or SELCO to receive and
to demand, collect, sue for or otherwise obtain indemnity payments, expenses and
fees (including interest which may from time to time accrue thereon) under the
Master Lease or any other Transaction Document and the proceeds of any liability
insurance payable to Borrower or SELCO under insurance policies of Lessee or any
Sublessee pursuant to which Borrower or SELCO is entitled to be named as insured
or additional insured and any rights of Borrower relating to the Excluded
Collateral.
"EXCLUDED COLLATERAL" means all right, title and interest of Borrower
(if any) and SELCO in and to that certain $9,975,000 letter of credit issued by
Firstar Bank Milwaukee, N.A., in favor of SELCO, any replacement or substitute
letter of credit or other Acceptable Replacement Collateral or other collateral
therefor, the Excluded Collateral Agreement, all income and proceeds of any of
the foregoing, all rights of Borrower (if any) and /or SELCO with respect
thereto, including without limitation the right to draw thereon and enforce the
obligation of Guarantor with respect thereto, and all Excepted Rights of
Borrower and SELCO.
"EXCLUDED COLLATERAL AGREEMENT" means the Excluded Collateral and
Indemnity Agreement, dated of even date herewith, between Guarantor and SELCO.
"EXHIBIT" means an Exhibit to this Agreement, unless the context refers
to another document, and each such Exhibit shall be deemed a part of this
Agreement to the same extent as if it were set forth in its entirety wherever
reference is made thereto.
"EXISTING LEASES" is defined in Section 2.9(w).
"FINANCING FEE" means the non-refundable financing fee equal to one
percent (1%) of each Advance of the Loan, which shall be due and payable to
Noteholder in two (2) installments upon the Closing Date and the Additional
Closing Date.
"FLOW OF FUNDS AGREEMENT" means that certain Flow of Funds Agreement,
dated of even date herewith, among Borrower, Lessee, Guarantor, Surety,
Noteholder, Trustee and the Sublessees.
"GAAP" means, generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Present Fairly
in Conformity with Generally Accepted Accounting Principles in the Independent
Auditor's Report" issued by the Auditing Standards Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"GCFP" means Greenwich Capital Financial Products, Inc., a Delaware
corporation, and its successors and assigns.
-12-
13
"GENERAL INTANGIBLES" means all intangible personal property of
Borrower, Lessee and/or Manager (in its capacity as Manager or otherwise with
respect to the Properties) and all renewals and replacements thereof and
substitutions therefor (other than Accounts, Rents, Instruments, Inventory,
Money, Permits, Reimbursement Contracts and the "Alterra Systems" and "Alterra
Marks" licensed pursuant to Section 1.3 of the Management Agreements).
"GOVERNMENTAL AUTHORITY" means any board, commission, department or
body of any municipal, county, state or federal governmental unit, or any
subdivision of any of them, that has or acquires jurisdiction over the Assisted
Living Facilities, the Properties and/or the Improvements or the use, operation
or improvement thereof.
"GROUND LEASES" means those certain Ground Leases, entered into on or
before the date hereof, among Affiliates of HCR, covering portions of the
Properties located in Tucson, Arizona, Reno, Nevada, Wayne, New Jersey and West
Orange, New Jersey, the lessor's interests under which Ground Leases will be
assigned to Borrower on the Closing Date and which Ground Leases are more
particularly described on EXHIBIT "D" attached hereto; and which Exhibit "D"
shall be amended on the Additional Properties Closing Date to include the
Additional Properties located in Sarasota, Florida and Lynwood, Washington to
the extent acquired on the Additional Properties Closing Date .
"GUARANTOR" means Alterra in its capacity as guarantor under the
Guaranty.
"GUARANTY" means that certain Guaranty of even date herewith executed
by Alterra pursuant to which Alterra has guaranteed all of Lessee's obligations
under the Master Lease and the other Transaction Documents.
"HAZARDOUS MATERIALS" means any pollutant, hazardous substance,
radioactive substance or waste, restricted hazardous waste, hazardous materials,
hazardous air pollutant, flammable materials, explosives, toxic substance, toxic
air contaminant, asbestos or asbestos-containing materials, urea formaldehyde
foam insulation, underground storage tanks, whether empty or containing any
substance, Radon gas, polychlorinated biphenyls and compounds containing them,
hazardous waste, extremely hazardous waste, special waste, lead and lead-based
paint, petroleum or petroleum-derive substances or wastes (including, without
limitation, hydraulic oil, oil, gasoline or diesel fuel) and includes, but is
not limited to, all of the items above as defined in any Environmental Law or
any hazardous or toxic constituent thereof, as well as any other substance which
is required by any Governmental Authority or under any Environmental Law to be
investigated, cleaned up, removed, treated, monitored, controlled or otherwise
abated or the presence of which requires notice or warnings to be given, in all
cases whether now or in the future.
"HCR" means HCR Manor Care, Inc., a Delaware corporation.
-13-
14
"IMPROVEMENTS" means all buildings, structures and improvements of
every nature whatsoever now or hereafter situated on the Properties, including,
but not limited to, all gas and electric fixtures, radiators, heaters, engines
and machinery, boilers, tanks, ranges, elevators and motors, plumbing and
heating fixtures, carpeting and other floor coverings, water heaters, awnings
and storm sashes, and cleaning apparatus which are or shall be attached to the
Property or said buildings, structures or improvements.
"INDEBTEDNESS" means as to any Person, any (i) obligations for borrowed
money, (ii) obligations, payment for which is being deferred by more than thirty
(30) days, representing the deferred purchase price of property, (iii)
obligations, whether or not assumed, and whether or not recourse, secured by
Liens or payable out of the proceeds or production from accounts and/or property
now or hereafter owned or acquired, (iv) the amount of any other obligation
(including obligations under financing leases) which would be shown as a
liability on a balance sheet prepared in accordance with GAAP, and (v) notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money.
"INDEMNIFIED CLAIMS" is defined in Section 9.4(a) hereof
"INDEMNIFIED PARTIES" is defined in Section 9.4(a) hereof
"INDIVIDUAL PROPERTY" shall mean a portion of the Property on which one
or more Assisted Living Facilities is located which constitutes a single,
separate tax lot and which is a legally subdivided parcel of real property which
may be separated, mortgaged or conveyed.
"INITIAL ADVANCE" is defined in Section 2.1(b) hereof.
"INITIAL PROPERTIES" means, collectively, the parcels of real estate
more particularly listed or described on EXHIBIT "B-1" hereto.
"INSTRUMENTS" means all instruments, chattel paper, documents or other
writings (including, without limitation, all ledger sheets, computer records and
printouts, data bases, programs, books of account and files relating thereto)
relating to the Properties or the Assisted Living Facilities, or the operation
thereof, by Borrower, Lessee, the Sublessees or Manager.
"INVOLUNTARY BORROWER PARTY BANKRUPTCY" is defined in Section 5.14(b)
hereof.
"LEGAL REQUIREMENTS" means any applicable law, statute, treaty,
ordinance, code, governmental rule, regulation or official directive or order of
any Governmental Authority.
"LICENSING SUBLEASES" means those certain Sub-Subleases, dated of even
date herewith, between certain Sublessees and Manager, entered into to comply
with licensing requirements with respect to the Properties located in the States
of Arizona, California, Florida, New Jersey and Virginia and any similar leases,
subleases, sub-subleases, licenses or occupancy agreements entered into for
licensing purposes after the date hereof with respect to the Additional
Properties.
"LIEN" means any voluntary or involuntary mortgage, security deed, deed
of trust, lien,
-14-
15
pledge, assignment, security interest, title retention agreement, financing
lease, levy, execution, seizure, judgment, attachment, garnishment, charge, lien
or other encumbrance of any kind, including those contemplated by or permitted
in this Agreement and the other Transaction Documents.
"LOAN" is defined in the Recitals to this Agreement.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Note and the
Security Documents.
"LOAN OBLIGATIONS" means the aggregate of all principal and interest
(including interest at the Default Rate, as applicable) owing from time to time
under the Note and all expenses, charges and other amounts from time to time
owing to Noteholder under the Note, this Agreement, or any of the other
Transaction Documents and all covenants, agreements and other obligations from
time to time owing to, or for the benefit of, Noteholder pursuant to the
Transaction Documents.
"MANAGEMENT AGREEMENTS" means, collectively, (i) that certain
Management Agreement, dated of even date herewith, between Manager and Lessee,
(ii) those certain Management Agreements, dated of even date herewith, between
Manager and each of the respective Sublessees, with respect to the Initial
Properties, and (iii) any Management Agreements, entered into between Manager or
another manager and any Sublessees relating to the Additional Properties, each
of the foregoing Management Agreements obligating the Manager to operate and
manage the Assisted Living Facilities.
"MANAGER" means Alterra and any successor manager of the Assisted
Living Facilities approved by Noteholder in writing.
"MARGIN STOCK" has the meaning specified in Regulation U.
"MASTER LEASE" means that certain Master Lease Agreement of even date
herewith, between Borrower, as lessor, and Lessee, as lessee, together with all
supplements thereto and all memorandums thereof, and as same may be modified or
amended.
"MATERIAL ADVERSE EFFECT" means (A) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of Borrower or Lessee or (B) the impairment of the ability of Borrower or Lessee
to perform its non-monetary obligations under any Transaction Documents, or (C)
the impairment of the ability of Noteholder to enforce or collect any of the
Loan 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 MODIFICATION" is defined in Section 9.12 hereof.
-15-
16
"MATURITY DATE" means the original maturity date set forth in the Note.
"MAXIMUM LOAN AMOUNT" means, as of the Closing Date or the Additional
Properties Closing Date, as the case may be, an amount equal to the least of the
following: (a) ninety percent (90%) of the projected fair market value, at
stabilization, of the Properties which are then included in the Collateral
(including the Properties to be acquired on such date) as indicated in the
Appraisals for such Properties, (b) ninety-seven percent (97%) of the aggregate
purchase price of all of the Properties then included in the Collateral
(including the Properties to be acquired on such date), together with all
related transaction costs incurred in connection with the acquisition of the
Properties (but excluding any amounts funded into the Operating Reserve Account
as described in Section 2.9(k) and any other Reserves funded in connection with
the consummation of the transactions contemplated hereby), (c) and one hundred
twenty percent (120%) of the real estate value of the Properties (i.e. the value
of the underlying land and Improvements located on each Property, excluding
personal property, working capital and intangibles) and (d) $ 201,000,000.
"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 Assisted Living Facility, certification by HCFA or a state agency
or entity under contract with HCFA that such Person, facility or Assisted Living
Facility, as applicable, fully complies with all the conditions of participation
set forth in Medicaid Regulations.
"MEDICAID REGULATIONS" means, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act (42 U.S.C. ss.ss.
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 HCFA 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, skilled nursing homes, home
-16-
17
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. ss.ss. 1395 et
seq.) and the regulations promulgated thereunder.
"MEDICARE CERTIFICATION" means, with respect to any Person, health care
facility, or Assisted Living Facility, certification by HCFA or a state agency
or entity under contract with HCFA that such Person, facility or Assisted Living
Facility, as applicable, complies with the conditions of participation set forth
in Medicare Regulations.
"MEDICARE REGULATIONS" means, collectively, all federal statutes
(whether set forth in Title XVIII of the Social Security Act (42 U.S.C. ss.ss.
1395 et seq.) or elsewhere) affecting the 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.
"MONEY" means all monies, revenues, cash, rights to deposit or savings
accounts or other items of legal tender obtained from or for use in connection
with the operation of the Assisted Living Facilities.
"MORTGAGES" means, collectively, (i) those certain Mortgages,
Assignments of Rents and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Rents and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Rents and Security Agreements, each of even date
herewith, from Borrower and Lessee in favor of or for the benefit of the Trustee
and encumbering the Initial Properties, or which may hereafter be executed by
Borrower and Lessee in favor of Trustee and encumbering the Additional
Properties, as same may be amended or modified.
"MULTIEMPLOYER PLAN" means a "Multiemployer Plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA which is, or within the immediately
preceding six (6) years was, contributed to by any Lessee or ERISA Affiliate or
under which any Lessee or ERISA Affiliate has any obligation.
"NOTE" means the Promissory Note of even date herewith in the principal
amount of the Loan and executed by Borrower.
"NPL" is defined in Section 6.5(h) hereof.
"NPR" is defined in Section 4.22 hereof.
"O&M PROGRAM" means a written program of operations and maintenance
relating to any Hazardous Materials in, on or under the Property or
Improvements.
"OFFICER'S CERTIFICATE" means, as to any Person which is not a natural
person, a
-17-
18
certificate of the duly authorized and elected officer or signatory for such
Person containing such certifications as the context in which this term is used
shall require.
"OUTSIDE DIRECTOR" is defined in Section 5.20(c) hereof.
"PARTICIPATION AGREEMENT" means that certain Participation Agreement,
dated of even date herewith, among Borrower, Lessee, Alterra, Noteholder,
Surety, Trustee and SELCO.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PERSON" means any natural person, firm, corporation, limited liability
company, partnership, trust, joint venture, association or other or other
organizations, whether or not legal entities, and public bodies, 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).
"PERMITS" means CONs, Accreditations, Medicaid Certifications, Medicare
Certifications, Regulatory Permits, and all other such federal, state and local
approvals, licenses, filings, permits and certificates required, used or useful
in connection with the ownership, operation, use or occupancy of the Properties
or the Assisted Living 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, quasi-governmental or private person or entity whatsoever.
"PERMITTED LIENS" shall have the meaning ascribed to such term in
Section 5.2 of this Agreement.
"PLAN" means an employee benefit plan as defined in Section 3(3) of
ERISA and subject to ERISA in respect of which any Borrower Party or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENTS" means collectively, (i) that certain Pledge
Agreement (SELCO), of even date herewith, executed by SELCO to Trustee, for the
benefit of the Beneficiaries, pursuant to which SELCO has pledged its stock
ownership interest in Borrower, (ii) that certain Stock Pledge Agreement (AHC
Tenant Stock), dated of even date herewith, executed by Alterra to Trustee, for
the benefit of the Beneficiaries, pursuant to which Alterra has pledged its
Stock ownership interest in Lessee and (iii) that certain Pledge Agreement,
dated of even date herewith, executed by Alterra to Trustee, for the benefit of
the Beneficiaries, pursuant to which Alterra has pledged its general partners'
interests in the Sublessees.
"PRE-EXISTING CONDITION" is defined in Section 4.4(c)(ii) hereof.
"PROCEEDS" means all proceeds (including proceeds of insurance and
condemnation) from the sale, exchange, transfer, collection, loss, damage,
disposition, substitution or replacement of
-18-
19
any of the Collateral.
"PROHIBITED ACTIVITIES AND CONDITIONS" and a "PROHIBITED ACTIVITY AND
CONDITION" are defined in Section 6.1 hereof.
"PROPERTIES" means, from the Closing Date until the Additional
Properties Closing Date, the Initial Properties, and upon the closing of the
Additional Advance on the Additional Properties Closing Date, collectively, the
Initial Properties and the Additional Properties.
"RATING AGENCIES" means Standard & Poor's, Moody's Investors Services,
Duff & Phelps Credit Rating Co., Fitch Investors Services L.P., and/or such
other rating agency or agencies selected by the Noteholder in its sole
discretion.
"REGULATION T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REGULATION X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REGULATORY PERMITS" is defined in Section 3.11 hereof.
"REIMBURSEMENT CONTRACTS" means all third party reimbursement contracts
for the Assisted Living Facilities which are now or hereafter in effect with
respect to residents or patients qualifying for coverage under the same,
including, but not limited to, Medicare, Medicaid and private insurance
agreements, and any successor program or other similar reimbursement program
and/or private insurance agreements.
"RELEASE" means the release, spill, emission, leaking, pumping,
injection, presence, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.
"REMEDIAL WORK" is defined in Section 6.8 hereof.
"RENT ROLLS" means the schedules of residents and rents payable under
the Residency Agreements for each of the respective Properties attached hereto
as Schedule 3.31(d).
"RENTS" means all rent and other payments of whatever nature from time
to time payable to Borrower or Lessee pursuant to the Master Lease, the Ground
Leases, the Subleases, the Licensing Subleases or pursuant to any other leases
or subleases of the Properties or the Assisted Living Facilities, or for retail
space or other space at the Properties (including, without limitation, rights to
payment earned under leases for space in the Improvements for the operation of
ongoing
-19-
20
retail businesses such as newsstands, barbershops, beauty shops, physicians'
offices, pharmacies and specialty shops).
"REQUIRED CASUALTY/CONDEMNATION PAYMENT" means an amount equal to the
sum of (i) the product of (A) the outstanding principal amount of the Loan as of
the date of the occurrence of any fire or casualty to any Property or the
effective date of the taking or transfer of all or any portion of any Property
pursuant to a Condemnation and (B) a fraction (1) the numerator of which is the
Net Operating Income of the affected Property for the most recent period prior
to such casualty or condemnation (or prior to June 30, 2002, the stabilized
appraised value for such Property as set forth in the Appraisal for such
Property delivered to Noteholder hereunder) and (2) the denominator of which is
the Net Operating Income for all of the Properties for such period (or prior to
June 30, 2002, the stabilized appraised values for all of the Properties as set
forth in the Appraisals delivered to Noteholder hereunder) and (ii) any other
accrued and unpaid interest and any other sums and amounts then payable
hereunder or under the other Loan Documents.
"RESERVES" means, collectively, the accounts and reserves described in
Article III of the Trust Agreement.
"RESIDENCY AGREEMENTS" shall mean a residential lease or occupancy
agreement between Manager (as agent for Lessee or a Sublessee, as the case may
be), as lessor, and a resident, as lessee, pursuant to which a resident agrees
to lease a room or apartment at an Assisted Living Facility.
"SECONDARY MARKET TRANSACTION" is defined in Section 9.11 hereof.
"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 rated offering of securities representing
direct or indirect interests in one or more loans or the right to receive income
therefrom.
"SECURITY AGREEMENT" means the Security Agreement of even date herewith
executed by Borrower in favor of the Trustee.
"SECURITY DOCUMENTS" means, collectively, the Mortgages, Security
Agreements, Pledge Agreements, Lockbox Agreement, Assignment of Leases and
Rents, Assignment of Management Agreements, Assignment of Purchase Agreements
and any other agreement, document or instrument heretofore, now or at any time
hereafter executed by Borrower, Lessee or any Person evidencing the grant by
Borrower, Lessee or any such Person of a Lien on any property or assets of
Borrower, Lessee or such Person, as applicable, in favor of the Trustee to
secure all or any part of the Secured Obligations, in each case as amended,
restated, supplemented or otherwise
-20-
21
modified from time to time pursuant to the terms thereof or otherwise; provided,
however, the term "Security Documents" shall not include the Excluded Collateral
Agreement.
"SELCO" means SELCO Service Corporation, an Ohio corporation, which is
the sole shareholder of Borrower.
"SINGLE PURPOSE ENTITY" means an entity which meets the requirements
set forth with respect to the Borrower Parties in Sections 5.19 and 5.20 of this
Agreement, together with any other guidelines published from time to time by the
Rating Agency.
"STOCK" shall mean all shares, options, warrants, general or limited
partnership interests, member interests, participations or other equivalents
(regardless of how designated) in a corporation, limited liability company,
partnership or any equivalent entity, whether voting or nonvoting, including,
without limitation, common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"SUBORDINATION OF MANAGEMENT AGREEMENTS" means that certain
Subordination of Management Agreements, dated of even date herewith, by and
between Manager, Lessee, the Sublessees and Noteholder covering each of the
Management Agreements.
"SUBLEASED PROPERTIES" means the Properties which are subject to
Subleases as set forth on Exhibit E attached hereto as of the Closing Date; and
any Additional Properties which are hereafter subject to Subleases.
"SUBLEASES" means those certain Sublease Agreements of even date
herewith, between Lessee and each of the respective Sublessees, covering each of
the Properties, as more particularly described on Exhibit E attached hereto, and
any Sublease Agreements which may hereafter be entered into by Lessee with
respect to the Additional Properties.
"SUBLESSEES" means the entities holding the sublessee's interest under
each of the Subleases as more particularly described on Exhibit E attached
hereto and any entities which may hold the sublessee's interest under any
Subleases hereafter entered into with respect to the Additional Properties.
"SURETY" means ZC Specialty Insurance Company, a Texas corporation.
"SURVEY" is defined in Section 2.9(o) hereof.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of Lessee or any ERISA Affiliate from a
Benefit Plan during a plan year in which or Lessee Party or any ERISA Affiliate
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii)
the imposition of an obligation on Lessee or any ERISA Affiliate under Section
4041 of ERISA to provide affected parties written notice of intent to terminate
a Benefit
-21-
22
Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Benefit Plan; (v) any
event or condition which would constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of Lessee or any ERISA
Affiliate from a Multiemployer Plan.
"TITLE COMPANY" means Chicago Title Insurance Company, or such other
title insurance company as may be designated by Noteholder.
"TITLE POLICIES" means the mortgagee policies of title insurance issued
to Trustee on the Closing Date (or Additional Facilities Closing Date) in
connection with the Mortgages.
"TRANSACTION DOCUMENTS" means, collectively, the Loan Documents, the
Security Documents, the Lease Documents and the Insurance Documents, and any
supplements, amendments, modifications, extensions, restatements or
rearrangements of any or all of such instruments; but excluding in all cases,
the Excluded Collateral Agreement.
"TRANSFER" defined in Section 6.7 hereof.
"TRUST AGREEMENT" means the Trust Agreement dated of even date
herewith, by and among Trustee, Noteholder, Surety, Guarantor, Lessee, Borrower
and SELCO.
"TRUSTEE" means The First National Bank of Chicago, a national banking
association, acting in its capacity as trustee under the Trust Agreement.
"WAIVING PARTY" is defined in Section 9.27 hereof.
1.2 Singular terms shall include the plural forms and vice versa, as
applicable, of the terms defined.
1.3 All accounting terms used in this Agreement shall be construed in
accordance with GAAP, except as otherwise specified.
1.4 All references to other documents or instruments shall be deemed to
refer to such documents or instruments as they may hereafter be extended,
renewed, modified, or amended and all replacements and substitutions therefore.
1.5 All references herein to "Medicaid" and "Medicare" shall be deemed
to any successor program thereto.
ARTICLE II TERMS OF THE LOAN
2.1 THE LOAN; ADVANCES. (a) Borrower has agreed to borrow the Loan
from Noteholder, and Noteholder has agreed to make the Loan to Borrower, subject
to the compliance
-22-
23
with and observance of all the terms, conditions, covenants, and provisions of
this Agreement and the other Transaction Documents. The Borrower Parties have
made the covenants, representations, and warranties herein and therein as a
material inducement to Noteholder to make the Loan.
(b) The Loan shall be funded by Lender in no more than two
(2) advances. The initial advance in the original principal amount of
$130,400,000 (the "Initial Advance") shall be disbursed on the Closing Date
subject to satisfaction of the conditions set forth in Section 2.9; and an
additional advance (the "Additional Advance"; together with the Initial Advance,
collectively, the "Advances", and each, an "Advance") in the principal amount of
up to the lesser of (i) $70,600,000 and (ii) an amount equal to the difference
between (A) the Maximum Loan Amount and (B) the amount of the Initial Advance,
shall be disbursed on the Additional Properties Closing Date subject to
satisfaction of the conditions set forth in Section 2.10 hereof.
2.2 SECURITY FOR THE LOAN. The Loan will be evidenced by, among other
instruments, the Note, and shall be secured by the Security Documents. In
addition, the Loan is the subject of the surety undertaking set forth in the
Surety Bond.
2.3 USE OF PROCEEDS. The proceeds of the Loan shall be disbursed in
accordance with the schedule of sources and uses attached hereto as EXHIBIT "C".
2.4 SURETY BOND. It is a condition of Noteholder's obligation to make
the Loan that the Borrower has arranged for the issuance of the Surety Bond in
form and substance and in a notional amount satisfactory to the Noteholder.
2.5 TRUST AGREEMENT. Borrower has, simultaneously with the closing of
the Loan and its acquisition of Initial Properties and related Assisted Living
Facilities, Improvements, Equipment and other Collateral, obtained credit
accommodations from the Surety which are secured by certain assets of Borrower.
In order to establish the respective rights and priorities of the Noteholder and
the Surety and to facilitate the administration and disposition of the
Collateral and proceeds thereof for the benefit of the Beneficiaries, Borrower,
Noteholder, Surety and certain other parties have entered into the Trust
Agreement pursuant to which the Trustee shall hold and administer the Mortgages
and all security interests, liens or pledges of Collateral granted in favor of
Trustee or any Beneficiary. Borrower has acknowledged and consented to the terms
of the Trust Agreement and agrees that Noteholder may delegate any or all of its
rights hereunder to the Trustee (or any other assignee or successor to
Noteholder or Trustee) to the extent provided herein and in the Trust Agreement.
Further, so long as the Trust Agreement shall be in effect, the Controlling
Party shall be entitled to exercise the rights and remedies, and shall be
responsible for the performance of the obligations of, Noteholder hereunder to
the extent and as provided in the Trust Agreement.
2.6 PREPAYMENT. The Loan may only be prepaid to the extent permitted
under and in accordance with the Note.
2.7 INTENTIONALLY DELETED.
-23-
24
2.8 INTENTIONALLY DELETED.
2.9 CONDITIONS TO CLOSING. In addition to the applicable conditions
set forth elsewhere herein, the obligation of Noteholder to fund the Initial
Advance is subject to the prior or concurrent satisfaction or waiver of the
conditions set forth below. Where in this Section 2.9 any documents, instruments
or information are to be delivered to Noteholder, then the condition shall not
be satisfied unless (i) the same shall be in form and substance satisfactory to
Noteholder, and (ii) if so required by Noteholder, Lessee shall deliver to
Noteholder a certificate duly executed by Lessee 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) TRANSACTION DOCUMENTS. On or prior to the Closing Date,
the Borrower Parties shall execute and deliver or cause to be executed and
delivered to Noteholder or Trustee, as the case may be, all of the Transaction
Documents, each, unless otherwise noted, of even date herewith, duly executed,
in form and substance satisfactory to Noteholder and in quantities designated by
Noteholder (except for the Note, of which only the original thereof shall be
signed), which Transaction Documents shall become effective upon the Closing
Date.
(b) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND
WARRANTIES. Each Borrower Party and all other Persons executing any agreement on
behalf of any Borrower Party shall have performed in all material respects all
agreements which this Agreement provides shall be performed on or before the
Closing Date. The representations and warranties contained herein and in the
other Transaction Document shall be true, correct and complete in all material
respects on and as of the Closing Date.
(c) SEARCHES. Noteholder shall have received certified
copies of UCC, judgment, tax lien, bankruptcy and litigation search reports with
respect to Alterra and such other parties as Noteholder may reasonably request,
all dated not more than thirty (30) days prior to the Closing Date, and
delivered on or prior to the Closing Date.
(d) OPINIONS OF COUNSEL. On or before the Closing Date,
Noteholder shall have received from counsel for Borrower, Lessee, the Sublessees
and Alterra, their written opinions as to such matters as Noteholder shall
reasonably request, including opinions to the effect that (i) the applicable
Borrower Party or Alterra is duly formed, validly existing, and in good
standing, (ii) this Agreement and the other Transaction Documents to which the
applicable Borrower Party or Alterra are a party have been duly authorized,
executed and delivered and are enforceable against Borrower in accordance with
their terms (subject to customary qualifications and exceptions), (iii) the
Trust Agreement, the Flow of Funds Agreement, the Lockbox Agreement, the
Security Agreement and the Pledge Agreements are enforceable against Lessee, the
Sublessees and Alterra in accordance with their terms (subject to customary
qualifications and exceptions) and create valid and perfected security interests
in and to the Accounts, Alterra's ownership interests in Lessee and the
Sublessees and certain other collateral thereunder; and (iv) the Borrower would
not be substantively consolidated with its sole stockholder in a bankruptcy
-24-
25
proceeding of such stockholder. Also on or before the Closing Date, Noteholder
shall have received an opinion of Lessee's local counsel in each state where any
of the Properties is located as to the enforceability of the Mortgages covering
Properties in such state and such other matters as Noteholder may reasonably
request. By execution of this document, Lessee authorizes and directs such
counsel to render such opinions and deliver the same to Noteholder on or before
the Closing Date. In addition, on or before the Closing Date, Noteholder shall
have received such other opinions of counsel as Noteholder shall reasonably
require.
(e) CLOSING CERTIFICATE. On the Closing Date, Noteholder
shall have received certificates of even date herewith executed on behalf of
Lessee by the chief financial officer (or similar officer of Lessee) truly and
correctly stating that: (i) on such date, no Default or Event of Default has
occurred and is continuing; (ii) no material adverse change in the financial
condition or operations of the business of Alterra or to the best of his
knowledge after due inquiry the Properties or the projected cash flow of Alterra
or to the best of his knowledge after due inquiry the Properties has occurred
since March 31, 1999 (or if there has been any change, specifying such change in
detail); (iii) the representations and warranties set forth in this 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); (iv) there has been no material change in any of the
documents, instruments, or information delivered to Noteholder pursuant to this
Article (or if there has been any change, specifying such change in detail); and
(v) Lessee on such date is in compliance with all the terms and provisions set
forth in this Agreement on its part to be observed and performed, and (vi) after
giving effect to the Loan, the fair salable value of the assets of Lessee will
exceed the probable liability on its debts, that Lessee will be able to pay its
debts as they mature and that Lessee will not have unreasonably small capital to
conduct its business. Noteholder shall also have received a certificate executed
by a duly authorized officer of Borrower certifying as to the matters described
in clauses (i) and (iii) (in each case, as to Borrower only) above.
(f) INSURANCE POLICIES AND ENDORSEMENTS. On or prior to the
Closing Date, Noteholder shall have received copies of certificates of insurance
(dated not more than twenty (20) days prior to the Closing Date) regarding
insurance required to be maintained under this Agreement and the other Loan
Documents, together with endorsements satisfactory to Noteholder naming Trustee
as an additional insured and loss payee for the benefit of the Beneficiaries, as
required by Noteholder, under such policies. In addition, as to any
environmental insurance that Lessee or any Sublessee may have as to the
Properties, the same shall be endorsed to Trustee as required by Noteholder.
(g) CERTIFICATES OF FORMATION AND GOOD STANDING. On or prior
to the Closing Date, Noteholder shall have received copies of the organizational
documents and filings of each Borrower Party, Manager and the Sublessees,
together with good standing certificates (or similar documentation) (including
verification of tax status) from the state of its formation, from the state in
which its principal place of business is located, from each state where any of
the Properties is located and from all states in which the laws thereof require
such Person to be qualified and/or licensed to do business. Each such
certificate shall be dated not more than thirty (30) days prior to the Closing
Date, as applicable, and certified by the applicable Secretary of
-25-
26
State or other authorized governmental entity. In addition, on or before the
Closing Date the secretary or corresponding officer of each Borrower Party,
Manager and the Sublessees, or the secretary or corresponding officer of the
partner, member, trustee, or other Person as required by such Borrower Party's,
Manager's or Sublessee's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Noteholder a certificate
stating that the copies of the organizational documents as delivered to
Noteholder 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 Noteholder.
(h) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or prior
to the Closing Date, Noteholder shall have received certificates of incumbency
and resolutions of each Borrower Party and its constituents as requested by
Noteholder, approving and authorizing the Loan and the execution, delivery and
performance of the Loan and Surety Documents, certified as of the Closing Date
by the Borrower Party Secretary as being in full force and effect without
modification or amendment.
(i) FINANCIAL STATEMENTS. On or prior to the Closing Date,
Noteholder shall have received such financial statements and other financial
information as shall be satisfactory to Noteholder for Lessee, Alterra and for
each of the Properties. If any such statements are not available for any of the
Assisted Living Facilities, Lessee shall provide such financial reports as are
available. All such financial statements shall be certified to Noteholder by
Lessee or Alterra (through its chief financial officer or other authorized
officer), which certification shall be in form and substance reasonably
satisfactory to Noteholder.
(j) PROJECTIONS. On or prior to the Closing Date, Noteholder
shall have received and reasonably approved the proforma projections for the
Assisted Living Facilities for the remainder of the current calendar year and
for the immediately succeeding calendar year. Such projections are attached
hereto as SCHEDULE 4.10.
(k) JOINT VENTURE PARTNERS' CONTRIBUTIONS; OPERATING
RESERVE. The constituent partners of each of the Sublessees shall have funded
their total initial capital contributions of at least $9,200,000 due as of the
Closing Date in accordance with the limited partnership agreements of each of
the respective Sublessees; and such sum shall have been deposited with Trustee
into the Operating Reserve Account in accordance with Article III of the Trust
Agreement.
(l) DOCUMENTATION REGARDING EXISTING INDEBTEDNESS. Prior to
the Closing Date, Noteholder shall have received payoff demand letters and
wiring instructions from each lender or other obligee of the existing
indebtedness secured by the Properties which is required to be repaid pursuant
to this Agreement.
(m) MANAGEMENT AGREEMENTS. Prior to the Closing Date,
Noteholder shall have received certified copies of each of the Management
Agreements pertaining to the Assisted Living Facilities; and on the Closing
Date, Noteholder shall have received the Subordination of Management Agreements,
duly executed by the Manager.
-26-
27
(n) TITLE POLICIES. Prior to the Closing Date, Noteholder
shall have received a preliminary title report or title commitment for each of
the Properties. Prior to the Closing Date, Noteholder shall have received and
approved a marked title commitment for issuance of a Title Policy for each of
the Mortgages, and as of the Closing Date the Title Company shall be irrevocably
committed and prepared immediately to issue the Title Policies. The Title
Policies shall be in form and substance satisfactory to Noteholder. Without
limitation, Noteholder may require that the Title Policies be issued on the 1992
ALTA form by the Title Company, together with such reinsurance and direct access
agreements as Noteholder may require, insuring that each Mortgage constitutes a
valid first and prior enforceable lien on Borrower's and Lessee's respective
interests in the applicable Property and the Improvements (including any
easements appurtenant thereto) subject only to such exceptions to coverage as
are acceptable to Noteholder. The Title Policies shall contain such endorsements
as Noteholder may require (and which are available in the applicable state where
a Property is located) in form acceptable to Noteholder, including "tie-in"
endorsements, pending disbursement endorsements, deletion of the creditors'
rights exception and any exception relating to loss or damage resulting from any
recharacterization of the Master Lease as a mortgage or other security
instrument and affirmative insurance or endorsement coverages insuring against
creditors' rights risks.
(o) SURVEY. On or prior to the Closing Date, Noteholder
shall have received surveys of each Property, certified in each case to
Noteholder, Surety and their respective successors, assigns and designees and to
the Title Company by a surveyor reasonably satisfactory to Noteholder (the
"SURVEYS"). All surveys shall contain the minimum detail for land Surveys as
most recently adopted by ALTA/ASCM, shall comply with Noteholder's survey
requirements and shall contain Noteholder's standard form certification. Said
Surveys shall show no state of facts or conditions reasonably objectionable to
Noteholder.
(p) APPRAISAL. Prior to the Closing Date, Noteholder shall
have received an independent appraisal, dated not more than sixty (60) days
prior to the Closing Date, for each of the Properties from a state certified
appraiser engaged by Noteholder, which indicates the fair market value of the
Properties is as set forth in SCHEDULE 2.9(P), and is otherwise reasonably
satisfactory to Noteholder in its sole discretion in all respects (each an
"APPRAISAL"). Each such appraisal shall conform in all respects to the
requirements for appraisals set forth in the Financial Institutions Reform and
Recovery Act of 1989 and the regulations promulgated thereunder (as if
Noteholder were an institution under the jurisdiction thereof) and the Uniform
Standards of Professional Appraisal Practices of the Appraisal Foundation.
(q) LICENSES, PERMITS AND APPROVALS. On or prior to the
Closing Date, Noteholder shall have received copies of final, unconditional
certificates of occupancy issued with respect to each of the Properties and each
Assisted Living Facility, together with all material Permits (other than
Regulatory Permits which Lessee is unable to obtain prior to the Closing Date
which Lessee shall obtain and deliver in accordance with Section 3.11 hereof)
required for Borrower to own and Lessee and any Sublessee to use, occupy,
operate and maintain the Assisted Living Facilities, the Properties and the
Improvements. Notwithstanding the foregoing, it as acknowledged and agreed that,
subject to the terms and conditions of Section 3.2 of the Trust
-27-
28
Agreement, Lessee shall be permitted to deliver to Noteholder a temporary
certificate of occupancy with respect to the Assisted Living Facility located in
West Orange, New Jersey.
(r) AGREEMENTS. On or prior to the Closing Date, Noteholder
shall have received certified copies of all material operating agreements,
service contracts and Equipment Leases, if any, relating to Borrower's ownership
and Lessee's and/or any Sublessee's operation of the Properties and the Assisted
Living Facilities.
(s) ZONING. On or prior to the Closing Date, Noteholder
shall have received evidence reasonably satisfactory to Noteholder as to the
zoning and subdivision compliance of the Property.
(t) PROPERTY CONDITION REPORTS; ENVIRONMENTAL REPORTS. On or
before the Closing Date, Noteholder shall have received property condition
reports for the Assisted Living Facilities, which shall be prepared by an
engineer or other consultant satisfactory to Noteholder and otherwise shall be
in form and substance satisfactory to Noteholder in its sole discretion (such
reports, the "PROPERTY CONDITION REPORTS"). Such Property Condition Reports
shall set forth any items of deferred maintenance at the Assisted Living
Facilities. On or before the Closing Date, Noteholder shall have received
Environmental Reports for each of the Properties and Assisted Living Facilities
which shall be prepared by an environmental engineer or consultant and be in
form and substance satisfactory to Noteholder in its sole discretion, together
with a letter from the preparer thereof entitling Noteholder to rely on such
Environmental Reports.
(u) DEPOSITS. The deposits required herein, including
without limitation, in addition to the deposit into the Operating Reserve
Account referenced in Section 2.9(k) above, any other initial deposits into the
Reserves and Accounts, if any, shall have been made (and at Lessee's option, the
same may be made from the proceeds of the Loan).
(v) MASTER LEASE. On or before the Closing Date, Noteholder
shall have received certified copies of the Master Lease and same shall be in
full force and effect and no defaults shall exist thereunder, and Noteholder
shall have received such estoppel certificates and subordination agreements as
Noteholder may reasonably require, duly executed by the Lessee.
(w) LEASES, ESTOPPELS. Prior to the Closing Date, Noteholder
shall have received certified copies of (i) the Ground Leases, (ii) the
Subleases, (iii) any and all other material leases or subleases of all or any
part of a Property or Improvements (other than the Residency Agreements) (all of
such leases or subleases described in this clause (iii) existing as of the date
hereof, or on the Additional Properties Closing Date relating to the Additional
Properties, collectively, the "EXISTING LEASES"), and (iv) the form of Residency
Agreement, and prior to the Closing Date, Noteholder shall have received such
estoppel certificates and subordination agreements from the parties to the
Ground Leases, the Subleases and the Leases as Noteholder may reasonably
require, duly executed by such parties.
(x) OTHER REVIEW. Noteholder shall have completed all other
review of the Borrower Parties, Alterra, the Properties, the Assisted Living
Facilities and the Improvements and
-28-
29
such other items as it reasonably determines relevant, and shall have determined
based upon such review to fund the Loan.
(y) LEGAL FEES; CLOSING EXPENSES. Lessee shall have paid any
and all reasonable legal fees and expenses of counsel to Noteholder, together
with all recording fees and taxes, title insurance premiums, and other
reasonable costs and expenses related to the closing of the transactions
contemplated by the Transaction Documents.
(z) FINANCING FEE. Lessee shall have paid to Noteholder the
portion of the non-refundable Financing Fee payable with respect to the Initial
Advance, which portion shall be fully-earned, due and payable on the Closing
Date whether or not the Additional Advance of the Loan is disbursed and which
Borrower and Lessee hereby acknowledge constitutes fair and reasonable
compensation to Noteholder for making the Initial Advance.
(aa) MINIMUM EQUITY. Borrower shall have delivered to
Noteholder evidence that Borrower has contributed consideration towards the
purchase of the Properties from sources other than the Loan of not less than
$9,500,000 and that Borrower has spent all of such initial equity in connection
with the acquisition of the Properties (including transaction costs associated
therewith).
(bb) INTEREST RATE HEDGE AGREEMENT. Lessee shall have
reimbursed Noteholder for all costs and expenses incurred by or on behalf of
Noteholder in connection with Noteholder's purchase of an interest rate cap or
hedge agreement covering Noteholder from potential losses which may be suffered
or incurred by Noteholder in connection with the funding of the Additional
Advance as a result of interest rate fluctuations between the date hereof and
the Additional Properties Closing Date (a "HEDGE"), which Hedge shall be in form
and substance issued by a financial institution acceptable to Noteholder in
Noteholder's sole discretion.
(cc) PRE-CLOSING MANAGEMENT FEES. On or prior to the Closing
Date, Noteholder shall have received and approved a schedule setting forth the
amount of the pre-closing fees and costs to be paid to Manager on or before the
Closing Date (from the capital contributions of the limited partners of the
Sublessees) pursuant to Section 4.1(a) of the Management Agreement; which
schedule shall include the amount of such fees payable for each Property and a
reasonably detailed breakdown and description by Property of the services and
costs covered thereby.
(dd) JOINT VENTURE AGREEMENTS. Noteholder shall have
received certified, duly executed copies of the limited partnership agreements
for each of the Sublessees which shall be in form and substance satisfactory to
Noteholder.
2.10 CONDITIONS TO ADDITIONAL PROPERTIES CLOSING . In addition to the
applicable conditions set forth elsewhere herein, the obligation of Noteholder
to fund the Additional Advance of the Loan is subject to the satisfaction or
waiver of the conditions set forth below on or before the Additional Properties
Closing Date. Where in this Section 2.10 any documents, instruments or
information are to be delivered to Noteholder, then the condition shall not be
-29-
30
satisfied unless (i) the same shall be in form and substance satisfactory to
Noteholder, and (ii) if so required by Noteholder, Lessee shall deliver to
Noteholder a certificate duly executed by Lessee 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. In the event that Borrower and/or Lessee shall fail to
satisfy any of the conditions with respect to one or more of the Additional
Properties on or prior to the Additional Properties Closing Date, Noteholder may
elect in its sole discretion (but shall not be obligated) to reduce the amount
of the Additional Advance and close the financing of one or more of such
Additional Properties as to which the conditions of Sections 2.9 and 2.10 have
been satisfied.
(a) PERFORMANCE OF AGREEMENTS; TRUTH OF REPRESENTATIONS AND
WARRANTIES. Each Borrower Party and all other Persons executing any agreement on
behalf of any Borrower Party shall have performed in all material respects all
agreements which this Agreement provides shall be performed on or before the
Additional Properties Closing Date. The representations contained herein and in
the other Transaction Documents shall be true, correct and complete in all
material respects as of the Additional Properties Closing Date.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred hereunder or under any of the other Loan Documents.
(c) ADDITIONAL PROPERTIES TRANSACTION DOCUMENTS. Borrower,
Lessee, the Sublessees and Manager, as applicables shall have executed and
delivered any and all documents and agreements required in connection with the
acquisition of the Additional Properties including, without limitation,
Mortgages, Assignments of Leases, Subleases, Management Agreements and
Assignments of Management Agreement relating to the Additional Properties and
any amendments or modifications to this Agreement, the Master Lease, the
existing Subleases, Lease Supplements or any of the other Transaction Documents
which may be required by Noteholder in connection with the acquisition of the
Additional Properties.
(d) TITLE POLICIES; DATE-DOWN ENDORSEMENTS. Lessee shall
have delivered to Noteholder and Noteholder shall have approved the Title
Policies for the Additional Properties complying with the conditions of Section
2.9(n) and date-down endorsements from the Title Company with respect to the
Title Policies for the Initial Properties, at Lessee's expense, which
endorsements shall (i) bring the effective date of the Title Policies for the
Initial Properties forward to the date of disbursement of the Additional
Advance, (ii) add the amount of the Additional Advance to the aggregate amount
of insurance afforded by the Title Policies, (iii) show no new exceptions to
title, other than those approved in writing by Noteholder and (iv) indicate as a
matter of information any subordinate matters appearing of record since the date
of the Title Policies with respect to the Initial Properties or the most recent
endorsement thereto. Lessee specifically agrees that if any such endorsement
lists any liens or security interest affecting the Initial Properties, other
than the liens and security interests of the Mortgages and the other Loan
Documents and any Permitted Liens, Noteholder shall not be obligated to make the
Additional Advance unless and until such security interests or liens have been
removed or bonded over to Noteholder's satisfaction.
-30-
31
(e) JOINT VENTURE PARTNERS' CONTRIBUTIONS. The constituent
partners of each of the Sublessees entering into Subleases with respect to the
Additional Properties shall have funded their required initial capital
contributions in accordance with their respective limited partnership agreements
and the constituent partners of the other Sublessees shall have funded any
additional capital contributions required to have been funded as of the
Additional Properties Closing Date, and all of such contributions shall have
been deposited with Trustee into the Operating Reserve Account in accordance
with Article III of the Trust Agreement.
(f) PROPERTY CONDITION REPORTS, ENVIRONMENTAL REPORTS AND
APPRAISALS. Lender shall have received Property Condition Reports, Environmental
Reports and Appraisals with respect to the Additional Properties, each prepared
or updated not more than 60 days prior to the Additional Properties Closing
Date. In addition, if any of the original Property Condition Reports.
Environmental Reports or Appraisals for the Initial Properties were dated more
than thirty (30) days prior to the Closing Date, Lessee shall have delivered to
Noteholder updates of such Property Condition Reports, Environmental Reports and
Appraisals dated not more than thirty (30) days prior to the Closing Date (and
disclosing no defects or conditions not disclosed in the original reports and no
adverse change in the appraised value from the original Appraisals). Lessee's
failure to deliver any such updated Property Condition Reports, Environmental
Reports or Appraisals for the Initial Properties required pursuant to the
foregoing sentence on or before the earlier to occur of (i) the date which is
thirty (30) days after the date hereof and (ii) the Additional Properties
Closing Date shall constitute an Event of Default.
(g) CONDITIONS. Each of the conditions set forth in Section
2.9 (other than the conditions of Sections 2.9(c), 2.9(i) (but only to the
extent that financial statements and financial information with respect to the
Additional Properties acceptable to Noteholder have been received by Noteholder
prior to the date hereof), 2.9(k), 2.9(m) (unless any of the Additional
Properties are managed by a separate manager and/or under a separate management
agreement in which case Noteholder shall have received a Subordination of
Management Agreement duly executed by each such manager) and 2.9(aa)), shall
have been satisfied or waived in writing by Noteholder on or before the
Additional Properties Closing Date; provided, however, that any references in
said Section 2.9 to the "Properties" shall for purposes of this Section 2.10
mean the Additional Properties being acquired on the Additional Properties
Closing Date. In addition, Lessee and Alterra shall have delivered to Noteholder
legal opinions from Holleb & Coff, or other Illinois counsel to such parties,
which counsel shall be reasonably acceptable to Noteholder, that this Agreement,
the Loan Documents and each of the other Transaction Documents to which Lessee
and Alterra are a party are enforceable against such parties in accordance with
their terms under Illinois law (subject to customary qualifications and
exceptions). Failure of Alterra and Lessee to deliver such opinions on or before
the earlier to occur of (i) thirty (30) days from the date hereof and (ii)
Additional Properties Closing Date, shall constitute an Event of Default.
(h) AMENDED SURETY BOND. Noteholder shall have received an
amended Surety Bond and Backstop Policy covering the full amount of the Loan as
of the Additional Properties Closing Date.
(i) FINANCING FEE. Lessee shall have paid to Noteholder the
balance of the
-31-
32
Financing Fee payable with respect to the Additional Advance of the Loan.
If Borrower wishes to request that Noteholder disburse the
Additional Advance to Borrower for purposes of the acquisition of the Additional
Properties, Borrower (or Lessee on behalf of Borrower) shall give Noteholder at
least five (5) Business Days' notice of the proposed Additional Properties
Closing Date which notice shall be accompanied by copies of the Appraisals and
the financial statements and information required under Section 2.9(i) for the
Additional Properties to the extent not previously delivered. Promptly after
receipt of such notice and documents (and in any event prior to the Additional
Properties Closing Date), Noteholder shall send notice to Borrower and Lessee of
the amount of the Additional Advance.
-32-
33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES
A. REPRESENTATIONS AND WARRANTIES OF BORROWER PARTIES.
To induce Noteholder to enter into this Agreement, and to make the Loan
to Borrower, each of the Borrower Parties, as to itself and its Affiliates,
represents and warrants to Noteholder that the statements set forth in this
Article III pertaining to such party, are true, correct and complete as of the
date hereof and will be true, correct and complete as of the Closing Date and as
of the Additional Properties Closing Date.
3.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING,
BUSINESS.
(a) ORGANIZATION AND POWERS. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SELCO is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Ohio. SELCO is the sole stockholder of Borrower. Alterra is the sole stockholder
of Lessee. 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 and Surety Document to which it is
a party and to perform the terms thereof. The articles of incorporation and
by-laws (each, as amended, the "CHARTER DOCUMENTS") for each of the Borrower
Parties contain all provisional terms necessary in each case for the Borrower
Parties to comply with Sections 5.19 and 5.20, as applicable, hereof.
(b) CAPITALIZATION; OWNERSHIP. No Borrower Party has any (i)
direct or indirect interest in, including without limitation stock, partnership
interest or other securities of, any other Person except as set forth herein, or
(ii) direct or indirect loan, advance or capital contribution to any other
Person, including all indebtedness and accounts receivable from that other
Person. All issued and outstanding shares of capital stock of each Borrower
Party which is a corporation are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens (other than Permitted Liens), and
such shares were issued in compliance with all applicable state and federal laws
concerning the issuance of securities. There are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition of any shares of capital stock
or other securities of such entities.
(c) QUALIFICATION. Each Borrower Party is duly qualified and
in good standing in the state of its formation. Borrower and Lessee are also
duly qualified and in good standing in the states where the Properties are
located, or in the case of Borrower will be so duly qualified as soon as
reasonably practicable and in any event within thirty (30) days following the
Closing Date. In addition, each Borrower Party is duly qualified and in good
standing in each state where it is 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. All jurisdictions in which each Borrower Party is qualified to do
business are set forth on SCHEDULE 3.1(C).
-33-
34
(d) BUSINESS; ASSETS. Each Borrower Party is and has always
engaged only in the businesses permitted hereunder. The sole assets of Borrower
are the Collateral in which it has granted or shall grant a Lien pursuant to the
Loan Documents, including the Properties, the Assisted Living Facilities and all
Improvements, its interest in the Master Lease and the Ground Leases, Permits,
if any, and personal property appurtenant or related thereto and its interest in
the Excluded Collateral. The sole assets of Lessee are its leasehold interests
in and to the Properties, Improvements and Assisted Living Facilities and
Equipment under the Master Lease, its sublessor's interest in the Subleases and
its right, title and interest, if any, in and to the Permits, if any, and
personal property appurtenant or related thereto and the Excluded Collateral.
(e) ADDRESSES. All offices and places of business of each of
the Borrower Parties, and the location of all properties in which any of them
has any interest are set forth in SCHEDULE 3.1(E). The principal place of
business and the chief executive office of each Borrower Party is so designated
on said Schedule.
3.2 AUTHORIZATION OF BORROWING, ETC .
(a) AUTHORIZATION OF BORROWING. Borrower has the power and
authority to incur the Indebtedness evidenced by the Transaction Documents. The
execution, delivery and performance by each Borrower Party of each of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
corporate action.
(b) NO CONFLICT. The execution, delivery and performance by
each Borrower Party of the Transaction 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 any Borrower Party; (y) the
Charter Documents of any Borrower Party; or (z) any order, judgment or decree of
any court or other agency of government binding on any Borrower Party or any of
their Affiliates; (2) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any material Contractual
Obligation of any Borrower Party or any of their Affiliates; (3) result in or
require the creation or imposition of any material Lien (other than the Lien of
the Transaction Documents and the Lien or other interest of SELCO or its
Affiliates in and to the Excluded Collateral) upon the Property or assets of any
Borrower Party or any of their Affiliates; or (4) except as set forth on
SCHEDULE 3.2(B), require any approval or consent of any Person under any
material Contractual Obligation of any 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 Transaction Documents to which it is a
party, and the consummation of the transactions contemplated thereby, and the
execution, delivery and performance by Borrower of the Master Lease and by
Lessee of the Master Lease and the Subleases 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 Permits required to be
-34-
35
obtained by Borrower, Lessee, the Sublessees or the Manager in connection with
the operation of the Assisted Living Facilities as set forth in Section 3.11 and
except for the recording of the Mortgages, Assignments of Leases, other Security
Documents and/or UCC-1's in the applicable recorders' or filing offices. In
addition to any covenants hereunder relating to Permits, Lessee shall diligently
proceed to obtain or satisfy all consents, approvals, and requirements set forth
in Section 3.11.
(d) BINDING OBLIGATIONS. This Agreement is, and the other
Transaction Documents, including the Note, when executed and delivered will be,
the legally valid and binding obligations of each Borrower Party, as applicable,
each enforceable against 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. No Borrower
Party has any defense or offset to any of its obligations under the Transaction
Documents. No Borrower Party has any claim or right of set off against
Noteholder or any Affiliate of Noteholder.
3.3 PENDING MATTERS. There are no judgments outstanding against any
Borrower Party nor is there any action, charge, claim, demand, suit, petition,
inquiry or investigation pending or, to the best knowledge of such Borrower
Party, after due inquiry, threatened against it.
3.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing Date,
none of the Borrower Parties shall have any Indebtedness or Contingent
Obligations except for the Loan Obligations and the Allowed Indebtedness.
3.5 INVESTMENT COMPANY ACT; PUHCA. No Borrower Party is: (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended; (ii) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (iii) subject to any
other law that purports to restrict or regulate its ability to borrow money.
3.6 FOREIGN PERSON. No Borrower Party is a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
3.7 BANKRUPTCY. No Borrower Party is 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 now or hereafter in effect. No Borrower Party
and no property of any of them is 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.
3.8 SOLVENCY. As of and from and after the Closing Date, the Borrower
Parties (after giving effect to the transactions contemplated by the Transaction
Documents), in the aggregate; (A) own and will own assets the fair saleable
value of which are (1) greater than the
-35-
36
total amount of liabilities (including Contingent Obligations) of the Borrower
Parties and (2) greater than the amount that will be required to pay the
probable liabilities of such Borrower Parties' then existing debts as they
become absolute and matured considering all financing alternatives and potential
asset sales reasonably available to Borrower Parties; (B) has capital that is
not insufficient in relation to their business as presently conducted or any
contemplated or undertaken transaction; and (C) do not intend to incur and do
not believe that they will incur debts beyond their ability to pay such debts as
they become due.
B. REPRESENTATIONS AND WARRANTIES OF LESSEE.
To induce Noteholder to enter into this Agreement, and to make the Loan
to Borrower, Lessee represents and warrants to Noteholder that the following
statements set forth in Sections 3.9 through 3.31 inclusive, are true, correct
and complete as of the date hereof and will be, true, correct and complete as of
the Closing Date and as of the Additional Properties Closing Date.
3.9 PENDING MATTERS . Except as set forth on SCHEDULE 3.9 or as
described in Section 3.22, there are no judgments outstanding against any of the
Properties nor is there any action, charge, claim, demand, suit, petition,
inquiry or investigation pending, or to the best of Lessee's knowledge, after
due inquiry, threatened against any of the Properties. The actions, charges,
claims, demands, suits, proceedings, petitions, investigations and arbitrations
set forth on SCHEDULE 3.9 hereto and described in Section 3.22 will not result,
if adversely determined, and could not reasonably be expected to result, either
individually or in the aggregate, in any Material Adverse Effect and do not
relate to and will not affect the consummation of the transactions contemplated
hereby or under any of the Transaction Documents. Lessee is not in violation,
breach or default of any agreement, the violation of which could have a Material
Adverse Effect, and Lessee is not in violation of any order, judgment, or decree
of any court, or, in any material respect, of any statute or governmental
regulation to which it is subject.
3.10 FINANCIAL STATEMENTS ACCURATE . All financial statements
concerning Lessee, Alterra or any of their respective Affiliates or the
Properties provided by or on behalf of Lessee or Alterra to Noteholder have been
prepared on a basis consistent with the audited financial statements of Alterra
(in the case of Lessee, Alterra, or their respective Affiliates) or HCR (with
respect to the Properties) consistently applied and present (as of the dates
thereof) the respective financial conditions of the Persons covered thereby and
the results of their operations for the periods then ending. All operating
statements, income reports and other financial data regarding Lessee, Alterra
and the Assisted Living Facilities heretofore provided by or on behalf of Lessee
are, to the best knowledge of Lessee after due inquiry, true correct and
complete and present fairly, the financial condition and, results of, such
operations. There has been no material adverse change in the financial
condition, operations, or prospects of Lessee, Alterra or to the best knowledge
of Lessee after due inquiry any Assisted Living Facility since the dates of such
statements except as fully disclosed in writing with the delivery of such
statements.
3.11 COMPLIANCE WITH LAWS . Borrower, Lessee, each Sublessee and/or
Manager (and/or with respect to nursing home beds within the Properties located
in Laguna Palm Terrace, California and Palmer Ranch, Florida, HCR), as the case
may be, is, or will be within sixty (60)
-36-
37
days following the Closing Date or the Additional Properties Closing Date, as
the case may be (or, in the case of the Assisted Living Facilities located in
California and Florida, such longer period as may be reasonably necessary with
the exercise of diligence), the lawful owner of all Permits necessary for the
proper and lawful operation of the Assisted Living Facilities as an assisted
living facility (or, in the case of a portion of the Properties located in
Laguna Palm Terrace in Laguna Hills, California and Palmer Ranch in Sarasota,
Florida as skilled nursing facilities) under applicable Legal Requirements;
during any interim period pending which the Permits shall not be held in the
name of the applicable party, the Assisted Living Facilities can and will be
lawfully operated pursuant to consents, waivers or provisional Permits or under
subleases or management agreements. Lessee has no knowledge of any fact, event
or condition which would cause any of such Permits to not be duly issued or
transferred to Borrower, Lessee, any Sublessee or Manager, as applicable, within
the applicable time period set forth above. To the extent such Permits are not
held in the name of the applicable party as of the Closing Date, or the
Additional Properties Closing Date, as the case may be, Lessee has obtained, or
has caused the applicable party to obtain, all requisite consents necessary to
permit Lessee, the applicable Sublessee or Manager to operate or cause to be
operated the Assisted Living Facilities and, as of the Closing Date, has filed,
or has caused the applicable party to file, all necessary applications to obtain
such Permits. The Permits held in the name of the applicable party as of the
Closing Date or the Additional Properties Closing Date, as the case may be, or
for which applications have been or will be made constitute all of the
Regulatory Permits and all other material permits, licenses and certificates
required for the use and occupancy thereof. The number of licensed and Available
Beds at each Assisted Living Facility is set forth on SCHEDULE 3.11-1 hereto for
the Initial Properties, which Schedule will be amended as of the Additional
Properties Closing Date to include the Additional Properties. As of the Closing
Date with respect to the Initial Properties and as of the Additional Properties
Closing Date with respect to the Additional Properties, Lessee, each Sublessee
and Manager, as well as the operation of the Assisted Living Facility are or
will be in compliance and at all times will remain in compliance in all material
respects with the applicable provisions of skilled nursing facility, residential
care, personal care, adult care, boarding home and/or assisted living facility
laws, rules, regulations and published interpretations to which each Assisted
Living Facility is subject, including, without limitation, the Medicare
Regulations and Medicaid Regulations, as applicable. SCHEDULE 3.11-2 describes
all Permits required under applicable Legal Requirements by any federal or state
health agency or similar agency or body in connection with operation of the
Initial Properties as Assisted Living Facilities which Schedule will be amended
as of the Additional Properties Closing Date to include the Additional
Properties (collectively, "Regulatory Permits"), all of which are, or will, in
no more than sixty (60) days following the Closing Date or the Additional
Properties Closing Date, as the case may be (or, in the case of the Assisted
Living Facilities located in California and Florida, such longer period as may
be reasonably necessary with the exercise of diligence), be held in the name of
Borrower, Lessee, Sublessees and/or Manager, as applicable. No waivers of any
laws, rules, regulations or requirements (including, but not limited to minimum
square foot requirements per bed) are required for the Assisted Living
Facilities to operate at the licensed bed capacities listed on SCHEDULE 3.11-1
and in compliance with applicable Legal Requirements. None of the Assisted
Living Facilities which are Initial Properties participate in Medicare, Medicaid
or any other third party reimbursement program. All Reimbursement Contracts to
the extent applicable to the Assisted Living Facilities which are Additional
Properties will be applied for as of the Additional
-37-
38
Properties Closing Date and will be received within sixty (60) days of the
Additional Properties Closing Date, and payment will be made thereunder
retroactive to the date of application and Borrower, Lessee, each Sublessee and
Manager, as applicable, are as of the Closing Date with respect to the Initial
Properties, and will be as of the Additional Properties Closing Date with
respect to the Additional Properties, in good standing with all the respective
agencies governing such applicable skilled nursing facility and assisted living
facility licenses, and if applicable Medicare Certifications, Medicaid
Certifications and Reimbursement Contracts. Lessee, Sublessee and Manager, as
applicable, will be current as of the Additional Properties Closing Date in the
payment of all so-called provider specific taxes or other assessments with
respect to any Reimbursement Contracts. Each Assisted Living Facility (other
than the Assisted Living Facilities which are not yet operating, as set forth on
SCHEDULE 3.11-1) is currently operated in material compliance with applicable
Regulatory Permits and Legal Requirements as a skilled nursing facility or
assisted living facility and its licensed bed capacity is set forth in SCHEDULE
3.11-1. In the event the Trustee or any Beneficiary acquires any Assisted Living
Facility through foreclosure or otherwise, under current law neither the Trustee
nor any such Beneficiary nor a subsequent manager, 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 Assisted Living 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) that the
Trustee, Beneficiary or subsequent manager, lessee or purchaser submits prior
notification of such change to the applicable regulatory agency.
3.12 MAINTAIN BED CAPACITY . Neither Lessee, any Sublessee nor the
Manager has granted to any third party the right to reduce the number of
licensed beds in any Assisted Living Facility or to apply for approval to
transfer the right to any of the licensed Assisted Living Facility beds to any
other location. Except as expressly permitted otherwise under the Trust
Agreement, Lessee shall maintain, or cause to be maintained, the number of
Available Beds at each Assisted Living Facility set forth in SCHEDULE 3.11-1 and
within a variance of ten percent (10%) shall maintain or cause to be maintained
the number of beds at each Assisted Living Facility at the
licensure/certification levels set forth in SCHEDULE 3.11-1.
3.13 PAYMENT OF TAXES AND PROPERTY IMPOSITIONS . Lessee has timely
filed all federal, state, and local tax returns which it is required to file and
has timely paid, or made adequate provision for the payment of, all taxes,
assessments, fees and other governmental charges upon such Person and upon its
properties, assets, income and franchises, including without limitation,
provider taxes. All such returns and reports are complete and accurate in all
respects and none of the United States income tax returns of Lessee are under
audit. There is not presently pending (and to the best of Lessee's knowledge,
after due inquiry, there is not contemplated) any special assessment against any
Property, the Improvements, any other Collateral, or any part thereof except as
may be set forth in any of the Title Policies. No part of any Property is
included or assessed under or as part of another tax lot or parcel comprising
property other than such Property, and no part of any other property is included
or assessed under or as part of the tax lots or parcels comprising any Property.
No tax liens have been filed and to the best knowledge of Lessee, no claims are
being asserted with respect to any such taxes. The
-38-
39
charges, accruals and reserves on the books of Lessee in respect of any taxes or
other governmental charges are in accordance with GAAP.
3.14 TITLE TO COLLATERAL . Borrower and Lessee, collectively, have good
and marketable fee simple title to all of the Collateral, subject to no lien,
mortgage, pledge, encroachment, zoning violation, or encumbrance, except
Permitted Liens and except as set forth on Schedule 3.9, none of which Liens
materially interfere with the security intended to be provided by the Mortgages
or the current use of the Properties and the Improvements. All Improvements
situated on the Properties are situated wholly within the boundaries of
respective parcels comprising such Property, except as disclosed by the Surveys
of the Properties. Borrower, Lessee or the applicable Sublessees own and will
own at all times all personal property relating to the Properties, the
Improvements and the Assisted Living Facilities (other than personal property
which is owned by residents or tenants of the Properties), subject only to
Permitted Liens. Without limitation of the foregoing, Borrower, Lessee or the
applicable Sublessees own all furnishings, fixtures and equipment located at the
Properties that are used by Lessee or the applicable Sublessees or which are
necessary for or integral to the operation of the Assisted Living Facilities,
free and clear of any lease, lien or encumbrance except the Permitted Liens and
except as set forth on Schedule 3.9. No Person has any option or other right to
purchase all or any portion of the Collateral or any interest therein.
3.15 PRIORITY OF MORTGAGES . The Mortgages constitute a valid first
lien against Borrower's and Lessee's respective interests in the real and
personal property described therein, prior to all other liens or encumbrances,
including those which may hereafter accrue, excepting only Permitted Liens and
except as set forth on Schedule 3.9, none of which Permitted Liens or other
Liens materially interfere with the security intended to be provided by the
Mortgages or the current use of the Property and the Improvements.
3.16 ZONING, OTHER LAWS . Each of the Properties is zoned for its
current uses (including the use identified in the definition of Assisted Living
Facilities) under applicable federal and state laws, which zoning designations
are unconditional, in full force and effect, and are beyond all applicable
appeal periods or is the subject of a valid variance or conditional use permit
permitting such uses. The Properties, the Improvements and the Assisted Living
Facilities and the operations thereon are in material compliance with all
applicable covenants and restrictions of record, zoning, subdivision and land
use laws, regulations and ordinances, all applicable health, fire, and building
codes, and all other laws applicable to the Properties, the Improvements or the
Assisted Living Facilities, including without limitation the Americans with
Disabilities Act. Lessee does not know of any illegal activities relating to
controlled substances on or at the Property or any portion thereof. All permits,
licenses and certificates required for the lawful use and operation of the
Properties and the Improvements, including, but not limited to, all certificates
of occupancy, or the equivalent and all Regulatory Permits have been obtained
and are current and in full force and effect or application therefor has been
made. In the event that all or any part of the Improvements located on the
Properties are destroyed or damaged, said Improvements can be legally
reconstructed to substantially 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
-39-
40
customary demolition, building and other construction related permits. Each
Assisted Living Facility contains enough permanent parking spaces (both regular
spaces and handicap spaces) to satisfy all requirements imposed by applicable
laws with respect to parking or a waiver of such requirements has been obtained.
No legal proceedings are pending or, to the best knowledge of Lessee after due
inquiry, are threatened with respect to the zoning of the Properties or any
portion thereof. 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. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded or permitted to
be recorded, by Lessee with respect to any Property or portion thereof without
Noteholder's prior written consent.
3.17 CONDITION OF IMPROVEMENTS AND PROPERTIES . All Improvements are in
good condition and repair. Lessee is not aware of any latent or patent
structural or other significant defect or deficiency in the Improvements. City
water supply, storm and sanitary sewers, and electrical, gas and telephone
facilities are available to the Properties within the boundary lines of the
Properties or through appurtenant easements, are fully connected to the
Improvements and are fully operational, are sufficient to meet the reasonable
needs of the Properties as now used or presently contemplated to be used, and no
other utility facilities are necessary to meet the reasonable needs of the
Properties as now used or presently contemplated to be used. The design and
as-built conditions of the Properties and Improvements are such that surface and
storm water does not accumulate on the Properties (except in facilities
specifically designed for the same) and does not drain from the Properties
across land of adjacent property owners in any manner which would have a
Material Adverse Effect on any of the Properties or the Improvements. Except as
may be set forth on the Surveys, no part of any Property is within a flood plain
and none of the Improvements create any encroachment over, across or upon such
Property's boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to the Properties for the current
and contemplated uses thereof have been completed and are serviceable and are
physically and legally open for use by the public. Any liquid or solid waste
disposal, septic or sewer system located at the Properties is in good and safe
condition and repair and in compliance with all applicable laws.
3.18 DISCLOSURE . No financial statements, financial document or any
other document, certificate or written statement furnished to Noteholder by or
on behalf of Lessee or Alterra for use in connection with the Loan, including
without limitation all schedules and exhibits to this Agreement, contains any
untrue representation, warranty or statement of a material fact, and none omits
or will omit to state a material fact necessary in order to make the statements
contained herein or therein not materially misleading.
3.19 LEGAL NAMES . To the best knowledge of Lessee, the legal names of
the entities which have owned and operated the Assisted Living Facilities at all
times during the preceding five (5) years are as set forth in SCHEDULE 3.19
hereto.
3.20 EMPLOYEE BENEFIT PLANS .
-40-
41
(a) Except as disclosed on SCHEDULE 3.20(A), neither Lessee
nor any ERISA Affiliate maintains or contributes to or has any obligation
(including a contingent obligation) with respect to any Plan. Except as
disclosed on Schedule 3.20(a), each Plan which is intended to be qualified under
Section 401(a) of the Code as currently in effect has been determined by the
Internal Revenue Service to be so qualified, and each trust related to any such
Plan has been determined to be exempt from federal income tax under Section
501(a) of the Code as currently in effect. Each Plan (i) has been administered
in all material respects in accordance with its terms and (ii) complies in form,
and has been maintained and operated in all material respects in accordance,
with the requirements of ERISA and, where applicable, the Code. There are no
actions, suits or claims (other than routine claims for benefits) pending nor,
to the knowledge of Lessee or any ERISA Affiliate, threatened with respect to
any Plan. Lessee and each ERISA Affiliate has complied in all material respects
with the applicable requirements of Part 6 of Title I of ERISA.
(b) Neither Lessee nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan within the meaning of Section
3(1) of ERISA which provides benefits to employees after termination of
employment other than as specifically required by Part 6 of Title I of ERISA.
Neither Lessee nor any Person that is or was an ERISA Affiliate at any time
during the immediately preceding six years has ever maintained, been required to
contribute to, been required to pay any amount or had any obligation (whether
actual or contingent) with respect to any Benefit Plan or Multiemployer Plan.
Except as disclosed on SCHEDULE 3.20(B)-1, neither Lessee nor any ERISA
Affiliate, nor any fiduciary of any Plan, has engaged in any nonexempt
prohibited transaction described in Section 406 of ERISA or Section 4975 of the
Code. Except as disclosed on SCHEDULE 3.20(B)-2, neither Lessee nor any ERISA
Affiliate has by reason of the transactions contemplated hereby, any obligation
to make any payment to any employee pursuant to any Plan or existing contract or
arrangement. Neither Lessee nor any ERISA Affiliate is the grantor of a grantor
trust established pursuant to Subpart E of Subchapter J of the Code.
3.21 INTELLECTUAL PROPERTY . Set forth on SCHEDULE 3.21 is a complete
listing of all of the material patents, trademarks, tradenames, technology and
other intellectual property rights used in the ownership, operation and
management of the businesses of Lessee.
3.22 PROCEEDINGS PENDING . There are no proceedings pending, or, to the
best of Lessee's knowledge, after due inquiry threatened, to acquire through the
exercise of any power of condemnation, eminent domain, or similar proceeding all
or any part of any Property (except a certain condemnation proceeding affecting
a portion of the Tucson, Arizona Property as disclosed in the title report
therefor), the Equipment, the Improvements or any interest therein, or to enjoin
or similarly prevent or restrict the use of any Property or the operation of the
Assisted Living Facilities in any manner.
3.23 COMPLIANCE WITH APPLICABLE LAWS . Each Assisted Living Facility
and its operations, the Properties and the Improvements comply in all material
respects with all covenants and restrictions of record and applicable laws,
ordinances, rules and regulations, including, without limitation, to the extent
applicable, Title 42 of the United States Code and related
-41-
42
regulations, including the Medicare Regulations, the Medicaid Regulations,
federal and state self-referral and anti-kickback statutes and regulations;
Title 31 of the United States Code, including the False Claims Act; skilled
nursing facility or assisted living facility licensure laws and regulations;
public health statues and regulations; the Americans with Disabilities Act and
the regulations thereunder, and all laws, ordinances, rules and regulations
relating to zoning, setback requirements (except as may be shown on any of the
Surveys for the Properties approved by Noteholder) and building codes and there
are no waivers of any building codes currently in existence for any of the
Assisted Living Facilities, Properties or Improvements. Lessee has filed in a
timely manner all reports, documents and other materials required to be filed
with any governmental bureau, agency or instrumentality (and the information
contained in each of such filings is true, correct and complete in all
respects), except where failure to make such filings would not have a Material
Adverse Effect. Lessee has retained all records and documents required to be
retained pursuant to any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any governmental authority, except where
failure to retain such records would not subject such party or any of its
Affiliates, partners, officers, trustees, or employees to criminal liability and
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
3.24 MANAGEMENT AGREEMENTS . The Management Agreements are each in full
force and effect and there are no defaults (either monetary or non-monetary) by
the parties thereto.
3.25 1934 ACT . The proceeds of the Note will not be used to acquire
any equity security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
3.26 USE OF PROCEEDS AND MARGIN SECURITY . Borrower shall use the
proceeds of the Loan to acquire the Properties and pay transaction costs as
contemplated by the schedule of sources and uses attached hereto as Exhibit G.
No portion of the proceeds of the Loan shall be used by Borrower or Lessee in
any manner that might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X or any other regulation of
the Board of Governors of the Federal Reserve System.
3.27 NO PLAN ASSETS . Lessee 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 Code which is subject to Section
4975 of the Code, 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 Code.
3.28 GOVERNMENTAL PLAN . Lessee is not and will not be a "governmental
plan" within the meaning of Section 3(32) of ERISA and transactions by or with
the Borrower Parties are not and will be not subject to state statutes
applicable to Lessee regulating investments of and fiduciary obligations with
obligations with respect to governmental plans.
3.29 YEAR 2000 . The management information systems (including all
computer
-42-
43
hardware and software), all equipment containing embedded microchips, of Lessee
and Manager, whether owned, licensed, leased or otherwise utilized by Lessee and
Manager, and required in the conduct of their respective businesses and the
performance of all obligations of Lessee and Manager under the Transaction
Documents ("LESSEE AND MANAGER MIS SYSTEMS"), and such systems of those parties
with whom Lessee and Manager MIS Systems must interface, will, no later than
August 30, 1999, be free of any material problem, infirmity or defect (and so
tested and confirmed by Lessee and Manager to be free of any material problem,
infirmity or defect) as respects to the "Year 2000 Problem" and/or any "9/9/99
Problem." To wit, the Lessee and Managers MIS System will be "Y2K COMPLIANT"
such that the management information systems will not: (i) experience any
material malfunctions or other material usage problem or failure in connection
with the year 2000 and subsequent years as distinct from the 1900 years, or
relating to improper expirations, terminations or data loss on or following
September 9, 1999 as a result of the 9/9/99 Problem; or (ii) result in any
material loss or liability sustained in connection with: (x) the conduct of
their business or the performance of any obligations under the Transaction
Documents, including but not limited to the recording, storing, processing,
calculating, comparing, sequencing or presenting by electronic means of calendar
dates or spans of time from, into and between the twentieth and twenty-first
centuries (including leap year calculations); and (y) the generation,
transmission, delivery, receipt of and any use or reliance on information or
calculations dependent on or relating to calendar dates or spans of time from,
into and between the twentieth and twenty-first centuries (including leap year
calculations) (the "Y2K PROBLEM"). The cost to Lessee and Manager of any
reprogramming and testing of Lessee and Manager MIS Systems and of the
reasonably foreseeable consequences of any reprogramming required to assure that
Lessee and Manager MIS Systems are Y2K Complaint, or of systems and equipment
failures to such Lessee and Manager (including reprogramming errors and the
failure of other's systems and equipment) will not result in an Event of Default
or a Material Adverse Effect. To the best knowledge of Lessee, the Lessee and
Manager MIS Systems are at present, and with ordinary upgrading and maintenance,
will continue for the term of this Agreement to be sufficient to permit each of
Lessee and Manager to conduct its business and to perform all of their
respective obligations under the Transaction Documents without Material Adverse
Effect.
3.30 LEGAL OPINIONS . Lessee has reviewed and is familiar with all
opinions of legal counsel designated by Lessee and Alterra to be delivered in
connection with the Loan. None of the assumptions with respect to Alterra,
Lessee or the Properties set forth in such opinions is incorrect.
3.31 LEASES; AGREEMENTS .
(a) AGREEMENTS. Lessee has provided Noteholder with true and
complete copies of all material contracts and agreements affecting the Assisted
Living Facilities, Properties, Improvements and the operation and management
thereof, including, the Master Lease, the Ground Leases, the Subleases, the
Management Agreement, the leasing brokerage agreements, if any, and any and all
other material leases, tenancies or other material contracts or agreements
relating to the use, maintenance, development, operation or management thereof
(other than the Residency Agreements as to which Lessee has delivered the
standard form thereof only). Except for the rights of Manager pursuant to the
Management Agreements, no Person has any right or
-43-
44
obligation to manage any Property or to receive compensation in connection with
such management or any right or obligation to sell, lease, or solicit purchasers
or tenants for any Property, or (except for cooperating outside brokers) to
receive compensation in connection with such sale or leasing.
(b) LEASE ISSUES. There are no legal proceedings commenced
(or, to the best of the knowledge of Lessee, threatened) against Lessee by any
tenant or former tenant. No rental in excess of one month's rent has been
prepaid under any of the Residency Agreements or any material leases. Each of
the Residency Agreements and any material leases is valid and binding on the
parties thereto in accordance with its terms. The execution of this Agreement
and the other Transaction Documents will not constitute an event of default
under any of the Residency Agreements or any Leases.
(c) NO RENT CONTROL. No portion of any Property is subject
to any form of rent control, stabilization or regulation.
(d) NO UNDISCLOSED TENANTS. Except for the Master Lease, the
Subleases, the Ground Leases, the Licensing Subleases, the Residency Agreements
described in the Rent Rolls attached hereto as SCHEDULE 3.31(D) and any other
leases delivered to Noteholder on or before the date hereof, there are no
material Leases affecting all or any portion of any of the Properties. Except
for Lessee, the Sublessees, the Manager under the Licensing Subleases, the
tenants under the Ground Leases and the tenants identified in the Existing
Leases that have been delivered to Noteholder and except for Assisted Living
Facility residents, no Person has any right to occupy any portion of any of the
Properties or the Assisted Living Facilities, and to the knowledge of Lessee
after due inquiry, no Person is so occupying any portion of any of the
Properties or the Assisted Living Facilities.
ARTICLE IV AFFIRMATIVE COVENANTS OF BORROWER PARTIES
A. COVENANTS OF BORROWER PARTIES.
Each Borrower Party, as to itself, agrees with and covenants unto the
Noteholder that such Borrower Party shall perform and comply, or cause the
performance and compliance, with all covenants in Sections 4.1 and 4.2
applicable to such Borrower Party.
4.1 PAYMENT OF LOAN/PERFORMANCE OF LOAN OBLIGATIONS . Borrower shall
duly and punctually pay or cause to be paid the principal and interest of the
Note in accordance with its respective terms and duly and punctually pay and
perform or cause to be paid or performed all Loan Obligations hereunder and
under the other Loan Documents.
4.2 MAINTENANCE OF EXISTENCE . Maintain in full force and effect its
existence as a corporation, and all rights and franchises material to such
Person's business, and, in each jurisdiction in which the character of the
property owned by such Person or in which the transaction of its business makes
qualification necessary, maintain good standing.
-44-
45
B. COVENANTS OF LESSEE.
Lessee agrees with and covenants unto the Noteholder that Lessee shall
perform and comply, or cause the performance and compliance, with all of the
following covenants set forth in Sections 4.3 through 4.33 inclusive.
4.3 ACCRUAL AND PAYMENT OF TAXES . During each fiscal year, Lessee
shall make adequate provision for the payment of and pay before any fine or
penalty is incurred all current tax liabilities of all kinds including, without
limitation, federal and state income taxes, franchise taxes, payroll taxes,
provider taxes (to the extent necessary to participate in and receive maximum
funding pursuant to Reimbursement Contracts), Taxes (as defined in the
Mortgages), all required withholding of income taxes of employees, all required
old age and unemployment contributions, and all required payments to employee
benefit plans, and pay the same when they become due.
4.4 INSURANCE; CASUALTY AND CONDEMNATION ..
(a) At all times while the Loan Obligations are outstanding,
Lessee shall maintain at its sole cost and expense, and provide satisfactory
evidence thereof to Noteholder on an annual basis (or at such other times when
renewed) the following insurance coverages in such amounts and with such
deductibles as follows:
(i) Professional liability insurance in an amount at
least equal to $1,000,000 per occurrence, and $1,000,000 in the aggregate, on an
"occurrence" basis covering each of the Assisted Living Facilities and the
activities conducted therein. The deductible for such coverage shall not exceed
$25,000;
(ii) General liability insurance in an amount at least
equal to $1,000,000 per occurrence, and $1,000,000 in the aggregate, covering
each of the Assisted Living Facilities and the activities conducted therein. The
deductible for such coverage shall not exceed $25,000;
(iii) Umbrella insurance covering professional liability
umbrella coverage attaching at each of the above referenced limits of coverage,
and having a limit each occurrence and in the aggregate of $20,000,000; and
additional excess liability coverage with limits of $30,000,000;
(iv) "All-risk" coverage on the Improvements, Equipment
and Inventory in an amount not less than the replacement cost thereof, insuring
against such potential causes of loss as shall be required by Noteholder,
including but not limited to loss or damage from wind, fire, hail, lightening,
ice, earthquake, subsidence, boiler and machinery and sprinkler leakage. The
permitted deductibles for the foregoing coverages shall be as follows:
earthquake, not to exceed the greater of $100,000 or five percent (5%) of
insured value; windstorm, not to exceed $25,000, except with respect to
Properties located in the State of Florida, as to which the aggregate deductible
applicable to all such Properties, shall not exceed $200,000;
-45-
46
(v) Business interruption insurance (including rental
value if any portion of any Property or any Assisted Living Facility is leased
in whole or part) equal to not less than twelve (12) months estimated lost
profits and continuing Operating Expenses;
(vi) Workers' compensation and employers' liability
insurance as required by the laws of the states where each Property is located;
(vii) If and to the extent that Lessee should engage in
any material modification, alteration or construction on or with respect to any
of the Properties, builder's risk insurance (under an all risk, completed value
form) for the applicable Improvements in an amount acceptable to Noteholder and
including "soft" costs;
(viii) "Ordinance and law" coverage for each of the
Properties and Assisted Living Facilities based on risks related to
reconstruction limitations under governing laws and ordinances, in amounts
acceptable to the Noteholder;
(ix) "Difference in conditions" insurance including,
flood, earthquake and earthquake sprinkler leakage with a limit of $25,000,000
per occurrence and deductibles not to exceed $25,000; and
(x) Automobile liability insurance coverage with a
limit at least equal to $1,000,000, per occurrence, no aggregate limit.
The insurance coverages required under Section 4.4(a)(iv) may be
effected under a blanket policy or policies covering the Properties and other
property and assets not constituting part of the Properties; provided that such
certificates of insurance evidencing the coverage required herein shall specify
any sublimits in such blanket policy applicable to the Properties, which amounts
shall not be less than the amounts required pursuant to Section 4.4(a)(iv) and
which shall in any case comply in all other respects with the requirements of
this Section 4.4.
In connection with Lessee's or Guarantor's annual insurance review
(which shall occur at least one time every 12 calendar months), Lessee shall be
required to engage an Insurance Consultant (defined below) to undertake a review
of Lessee's then existing insurance coverage in light of then current industry
standards for hospital or health care services of the type similar to that in
which Lessee is then currently engaged and based upon such review, Lessee shall
either increase the amount of its coverages to meet such industry standards or
shall be permitted to make reasonable modifications to the amounts and
deductibles under the insurance coverages required to be maintained under this
Section 4.4(a) provided that (A) prior to making any modification to any
insurance coverage, Lessee shall deliver to Noteholder and Trustee a certificate
of an Insurance Consultant or Insurance Consultants (hereinafter defined)
indicating that the insurance coverages as proposed to be maintained are
reasonable based on then prevailing insurance industry market conditions,
customary for corporations engaged in the same or similar activities as Lessee
and adequate to protect the Properties and the operations and (B) Trustee and
Noteholder shall have delivered its prior written approval of such coverages,
amounts and deductibles. In any event, in connection with any such insurance
review by such Insurance Consultant, such Insurance Consultant shall deliver to
Lender and Surety a letter to the effect that
-46-
47
Lessee's insurance coverages meet the requirements of the Transaction Documents
as modified by any modification approved pursuant to this Section 4.4.
"INSURANCE CONSULTANT" means a Person who in the case of an individual is not an
employee or officer of Guarantor, Lessee or any Affiliate thereof and which, in
the case of a corporation or other business entity is not an Affiliate of
Guarantor or Lessee, appointed by Lessee and reasonably satisfactory to
Noteholder and Trustee, qualified to survey risks and to recommend insurance
coverage for hospital or health care facilities and services of the type
involved, and having a favorable reputation for skill and experience in such
surveys and such recommendations, and which may include a broker or agent with
whom Lessee transacts business.
(b) Each of the policies described in Sections 4.4(a)(i),
(ii), (iii), (viii) and (xi) shall name Trustee, Borrower, Lessee, Noteholder
and Surety as additional insured parties, and the policies described in
4.4(a)(iv)-(vii), (ix) and (x) shall name Trustee for the benefit of the
Beneficiaries as loss payee under a standard noncontributory mortgagee and loss
payable clause, and shall provide that Trustee shall receive not less than
thirty (30) days written notice prior to cancellation. The proceeds of any of
the policies described in Sections 4.4(a)(iv)-(x) hereof shall be payable by
check payable to Trustee, delivered to Trustee, and such proceeds shall be
applied by Trustee, at its option in accordance with the Trust Agreement, either
(i) to the full or partial payment or prepayment of the Loan Obligations
(without premium), or (ii) to the repair and/or restoration of the Improvements,
Equipment and Inventory damaged or taken. Provided that no Event of Default or
Springing Lock Box Event has occurred and is continuing, proceeds paid under the
policies described in Section 4.4(a)(vi) shall be made available to Lessee to be
applied in accordance with the Flow of Funds Agreement. Each of the policies
described in Sections 4.4(a)(iii), (iv), (v) and (vii) hereof, as of the Closing
Date, must be written by an insurer or insurers each having a rating of A - or
better from Standard & Poor's (provided, however, that within six (6) months
after the Closing Date, such policies must be written by insurers having ratings
of A or better from Standard & Poor's), and a Best rating of A- or better and
otherwise reasonably acceptable to Noteholder and, the remaining coverages shall
be provided by insurers reasonably acceptable to Noteholder. If Lessee shall
fail to cause the insurance policies described in Sections 4.4(a)(iii), (iv),
(v) and (vii) to be written by insurers having ratings of A or better from
Standard & Poor's within six (6) months after the Closing Date (which condition
may be satisfied by means of reinsurance arrangements acceptable to Noteholder
in its sole discretion), such failure shall constitute an Event of Default
hereunder. Notwithstanding the foregoing, Lessee may collect insurance proceeds
paid under the policies described in Sections 4.4(a)(iv), (v) and (vii)-(x)
above in connection with claims not in excess of Two Hundred Fifty Thousand
Dollars ($250,000) (the "CASUALTY AMOUNT"), or in the event that such proceeds
are collected by Noteholder or Trustee same shall be paid over to Lessee
(without application of the conditions of Section 4.4(c) below), provided that
(i) no Default or Event of Default shall have occurred and be continuing, (ii)
Lessee gives notice to Noteholder and Trustee of the related fire or casualty
within ten (10) Business Days after the occurrence thereof (which notice shall
include Lessee's good faith estimate of the amount of the damage to the affected
Assisted Living Facility) and (iii) Lessee applies such proceeds to the repair
and/or restoration of the Improvements, Equipment and Inventory damaged in
accordance with the terms and conditions hereof.
(c) Noteholder agrees that Trustee shall make the net
proceeds of insurance
-47-
48
(after payment of Noteholder's (and/or Trustee's) reasonable costs and expenses)
available to Lessee for Lessee's repair, restoration and replacement of the
Improvements, Equipment and Inventory damaged on the following terms and subject
to satisfaction in Noteholder's (and/or Trustee's) discretion, of each of the
following conditions:
(i) At the time of such loss or damage and at all times
thereafter while Noteholder (or Trustee) is holding any portion of such
proceeds, there shall exist no Default or Event of Default;
(ii) Noteholder (or Trustee) determines that the
applicable Property, Improvements, Equipment, and Inventory for which loss or
damage has resulted shall be capable of being restored to its preexisting
condition and utility, in all material respects and in compliance with all
applicable zoning, building and other laws and codes with a value equal to or
greater than that which existed prior to such loss or damage ("PRE-EXISTING
CONDITION"), there will be sufficient funds to so restore such Property,
Improvements, Equipment and Inventory and such restoration shall be capable of
being completed prior to the expiration of business interruption insurance as
determined by an independent inspector;
(iii) Noteholder (or Trustee) determines that Operating
Revenues from the Assisted Living Facilities, after restoration and repair of
the affected Property, Improvements, Equipment, and Inventory to the
Pre-existing Condition and expiration of such stabilization period acceptable to
Noteholder (or Trustee), will be sufficient to meet all operating costs and
other expenses, payments for reserves and loan repayment obligations (including
any obligations under any permitted subordinate financing) relating to the
Assisted Living Facilities and maintain an LCR at least equal to (A) that
existing at the origination of the Loan for casualties occurring during the
first eighteen (18) months of the term of the Loan and (B) 1.4 : 1 for
casualties occurring thereafter;
(iv) restoration and repair of the affected Property,
Improvements, Equipment, and Inventory to the Pre-existing Condition will be
completed within one year of the date of the loss or casualty to such Property,
Improvements, Equipment, or Inventory, but in no event later than six months
prior to the Maturity Date;
(v) less than fifty (50%) percent of the total floor
area of the Improvements of the affected Property has been damaged or destroyed
or rendered unusable as a result of such fire or casualty;
(vi) Within thirty (30) days following the date of such
loss or damage, Lessee shall have given Noteholder and Trustee written notice of
its desire to have such proceeds applied for purposes of restoration; and
(vii) Within sixty (60) days following the date of
notice under the preceding subsection 4.4(c)(vi), Lessee shall have provided to
Noteholder and/or Trustee all of the following:
-48-
49
(A) complete plans and specifications,
satisfactory to Noteholder, and/or Trustee
for restoration, repair and replacement of
the Improvements, Equipment and Inventory
damage to their Pre-existing Condition;
(B) if the loss or damage exceeds the
Casualty Amount, a duly executed fixed-price
or guaranteed maximum cost construction
contract together with a performance bond
insuring completion of the work in
accordance with such plans and
specifications;
(C) a certificate of insurance evidencing
builder's risk insurance in such amounts as
are reasonably satisfactory to Noteholder
and/or Trustee and naming Trustee, for the
benefit of the parties to the Trust
Agreement, as loss payee;
(D) Such additional funds as are required
below; and
(E) Copies of all Permits necessary to
complete such work in accordance with the
plans and specifications.
(d) (i) Lessee shall notify Noteholder and Trustee promptly
after it has knowledge of the commencement or threat of any action or proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof, of
all or any part of any Property, whether direct or indirect (a "CONDEMNATION").
Lessee shall appear in and prosecute or defend any proceeding relating to any
Condemnation unless otherwise directed by Noteholder or Trustee in writing.
Borrower and Lessee each hereby authorize and appoint Noteholder and Trustee as
attorneys-in-fact for Borrower and Lessee to commence, appear in and prosecute,
in Noteholder's, Trustee's, Borrower's or Lessee's name, any action or
proceeding relating to any Condemnation and to settle or compromise any claim in
connection with any Condemnation. This power of attorney is coupled with an
interest and therefore is irrevocable. However, nothing contained in this
Section 4.4(d) shall require Noteholder or Trustee to incur any expense or take
any action with respect to any Condemnation. Borrower and Lessee each hereby
transfers and assigns to Noteholder and Trustee all right, title and interest of
Borrower and Lessee in and to any award or payment with respect to (A) any
Condemnation, and (B) any damage to any Property caused by governmental action
that does not result in a Condemnation.
(ii) Noteholder agrees that Trustee shall make the net
amount of such awards or proceeds (after deducting reasonable costs and expenses
incurred by Noteholder and Trustee) from a partial (but not total) Condemnation
of any Property, available to Lessee for the restoration or repair of such
Property and Improvements subject to satisfaction in Noteholder's (and/or
Trustee's) discretion of each of the conditions set forth in Section 4.4(c);
except that for purposes of this Section 4.4(d) all references in Section 4.4(c)
to: (A) "Pre-existing Condition" shall be deemed to mean the restoration and/or
repair of such Property and Improvements to an economically viable whole, in
compliance with all applicable zoning, building and other laws and codes and (B)
damage or destruction of the Improvements shall be deemed to mean the taking of
-49-
50
any portion of such Property or Improvements pursuant to the Condemnation.
Notwithstanding the foregoing, the net proceeds of any award from a Condemnation
affecting all or substantially all of any Property, shall be applied to the
prepayment of the Loan Obligations (without premium). Unless Noteholder or
Trustee otherwise agrees in writing, any application of any awards or proceeds
to the Obligations shall not extend or postpone the due date of any monthly
installments referred to in the Note, including any Imposition Deposits, or
change the amount of such installments. Borrower and Lessee each agree to
execute such further evidence of assignment of any awards or proceeds from any
Condemnation as Noteholder or Trustee may require.
(e) If Trustee elects to make the insurance proceeds or
Condemnation awards available for the restoration and repair of the affected
Property, Improvements, Equipment, and Inventory in accordance with the
foregoing conditions, Lessee agrees that, if at any time during the restoration
and repair, the cost of completing such restoration and repair, as determined
reasonably by Noteholder or Trustee, exceeds the undisbursed insurance proceeds
or Condemnation awards, Lessee shall, immediately upon demand by Noteholder or
Trustee, deposit the amount of such excess with Trustee, and Trustee shall first
disburse such deposit to pay for the costs of such restoration and repair on the
same terms and conditions as the insurance proceeds or Condemnation awards are
disbursed. If Lessee deposits such excess with Trustee and if, after completion
of the restoration or repair, any funds remain from the combination of insurance
proceeds or Condemnation awards and the funds so deposited with Trustee by
Lessee, and if no Default or Event of Default shall have occurred and be
continuing, then Trustee shall disburse to Lessee such remaining funds provided
that Trustee shall not be obligated to disburse any amount in excess of the
amount that Lessee shall have so deposited.
(f) If the insurance proceeds or Condemnation awards are
held by Trustee to reimburse Lessee for the cost of restoration and repair of
the affected Property, Improvements, Equipment, and Inventory, Lessee shall
restore the affected Property, Improvements, Equipment, and Inventory to its
Pre-existing Condition or other condition as Noteholder or Trustee may approve
in writing, and Lessee shall promptly begin such restoration and at all times
thereafter diligently prosecute such restoration to completion. Noteholder or
Trustee may, at Noteholder's or Trustee's option, condition disbursement of said
proceeds or Condemnation awards on Noteholder's or Trustee's approval of such
plans and specifications of an architect satisfactory to Noteholder or Trustee,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and materialmen and such other evidence of costs,
percentage completion of construction, application of payments; and satisfaction
of liens as Noteholder or Trustee may reasonably require. If the insurance
proceeds or Condemnation awards are applied to the payment of the Loan
Obligations, any such application of proceeds to principal shall not extend or
postpone the due dates of the monthly installments due under the Note or
otherwise under the Loan Documents including, without limitation, any Imposition
Deposits under the Mortgages, or change the amounts of such installments. Any
amount of insurance proceeds or Condemnation awards remaining in Trustee's
possession after full and final payment and discharge of all obligations secured
hereby shall be refunded to Lessee or otherwise paid in accordance with
applicable law. If any Property, Improvements, Equipment, and Inventory is sold
at foreclosure or if Noteholder or Trustee acquires title to any Property,
Improvements, Equipment, and
-50-
51
Inventory, Noteholder or Trustee shall have all of the right, title and interest
of Lessee in and to any insurance policies and unearned premiums thereon and in
and to the proceeds resulting from any damage to, or Condemnation awards from
any Condemnation affecting such Property, Improvements, Equipment, and Inventory
prior to such sale or acquisition.
(g) Noteholder and Trustee shall have a first lien and
security interest in all building materials and completed repair and restoration
work and in all fixtures and equipment acquired with such proceeds, and Borrower
and Lessee shall execute and deliver, at Lessee's expense, such mortgage, deed
of trust, security agreements, financing statements and other instruments as
Noteholder shall request to create, evidence, or perfect such lien and security
interest; and
(h) In the event and to the extent such insurance proceeds
or Condemnation awards are not required or used for the repair, restoration and
replacement of the affected Property, Improvements, Equipment and Inventory for
which a loss or damage has occurred or affected by a Condemnation, or in the
event Lessee is not entitled to or does not timely make the election to have
insurance proceeds or Condemnation awards applied to the restoration of such
Property, Improvements, Equipment, or Inventory, or, having made such election,
fail to timely comply with the terms and conditions set forth herein, or, if the
conditions set forth herein for such application are otherwise not satisfied,
then (subject to the terms of the Trust Agreement, if applicable) Noteholder
shall be entitled, without notice to or consent from Borrower or Lessee, to
cause Trustee to apply such proceeds, or the balance thereof, at Noteholder's
option either (i) to the full or partial payment or prepayment of the Loan
Obligations (without premium) in the manner aforesaid in accordance with the
Trust Agreement; provided, however, that if such insurance proceeds or
Condemnation awards are insufficient to pay the Required Casualty/Condemnation
Payment and any other amounts due under the Transaction Documents as a result of
such casualty or Condemnation, Lessee shall be required to pay to Trustee, for
application in accordance with the Trust Agreement, an amount equal to such
shortfall within ten (10) days after demand therefor by Noteholder or Trustee,
or (ii) to the repair, restoration and/or replacement of all or any part of such
Property, Improvements, Equipment and Inventory for which a loss or damage has
occurred. Upon any payment in full of the Required Casualty/Condemnation Payment
with respect to any Property pursuant to the foregoing provisions, provided that
no Default or Event of Default shall have occurred and be continuing, Noteholder
shall release or cause the Trustee to release the Mortgage encumbering the
applicable Property and all other Liens and security interests relating to such
Property. If Noteholder or Trustee has agreed to make insurance proceeds or
Condemnation awards available to reimburse Lessee, as aforesaid, and whether or
not such insurance proceeds are sufficient to pay for the costs of such
restoration, Lessee must rebuild to the Pre-existing Condition or such other
condition as Noteholder may approve in writing.
(i) Lessee hereby appoints each of Noteholder and Trustee as
attorney-in-fact to cause the issuance of or an endorsement of any insurance
policy to bring Lessee into compliance herewith and, as limited above, at
Noteholder's or Trustee's sole option, to make any claim for, receive payment
for, and execute and endorse any documents, checks or other instruments in
payment for loss, theft, or damage covered under any such insurance policy;
-51-
52
however, in no event will Noteholder or Trustee be liable for failure to collect
any amounts payable under any insurance policy.
4.5 FINANCIAL AND OTHER INFORMATION . Lessee shall provide or cause
Manager to provide to Noteholder the following financial statements and
information on a continuing basis during the term of the Loan:
(a) Within one hundred twenty (120) days after the end of
the fiscal year of Lessee and each Sublessee, unaudited financial statements
thereof, prepared by Lessee or Manager, which statements shall be prepared on a
basis consistent with the audited financial statements of Alterra (so long as
Alterra is Manager, and thereafter in accordance with GAAP), consistently
applied, and shall include a balance sheet and a statement of income and
expenses for the year then ended, certified by an authorized officer of the
Lessee, to be true and correct, to the best of his or her knowledge, information
and belief. Together with such annual financial statements, Lessee shall also
provide or cause Manager to provide an agreed upon procedures report with
respect to the operations of the Assisted Living Facilities, on a consolidated
basis, prepared by a Big Five or other nationally recognized accounting firm or
independent certified public accountants acceptable to Noteholder ("APPROVED
ACCOUNTANTS") which report shall verify the accuracy of reported income and
expenses for the year then ended and shall be substantially in the form attached
hereto as Exhibit F and otherwise in form and substance reasonably acceptable to
Noteholder. Within one hundred twenty (120) days following the end of each
fiscal year during the term of the Loan, Lessee will deliver a written statement
by its independent certified public accountants (1) stating that such
examination has included a review of Sections 4.5 and 4.6 of this Agreement as
such terms relate to Lessee and its compliance with accounting matters and also
a review of the Flow of Funds Agreement, (2) stating whether, in connection with
such examination, any failure to comply therewith has come to their attention,
and (3) if such a condition or event has come to their attention, specifying the
nature and period of existence thereof.
(b) Simultaneously with the filing of such reports with the
SEC, copies of Alterra's annual reports on Form 10-K and quarterly reports on
Form 10-Q. In the event that Alterra shall cease to be a publicly-traded entity,
within one hundred twenty (120) days after the end of the fiscal year of the
Alterra, audited financial statements of Alterra prepared by Approved
Accountants, which statements shall be prepared in accordance with GAAP, and
shall include a balance sheet and a statement of income and expenses for the
year then ended, certified by the chief financial officer of Alterra to
accurately represent the financial condition of the Alterra to the best of his
or her knowledge, information and belief.
(c) Within thirty (30) days after the end of each month,
true and complete copies of unaudited monthly statements of operations of the
Assisted Living Facilities, prepared on a basis consistent with the audited
financial statements of Alterra (so long as Alterra is Manager, and thereafter
in accordance with GAAP), consistently applied, which statements shall include
statements of income and expenses for the month then ended, certified in the
case of each Assisted Living Facility, by the authorized officer of Lessee and
by the chief financial officer of Manager to be true, correct and complete to
the best of his or her knowledge, information and
-52-
53
belief after due inquiry. Monthly statements of operations shall show the
separate operations of each of the Assisted Living Facilities.
(d) Within forty-five (45) days of the end of each calendar
quarter, true and complete copies of unaudited statements of operations of
Lessee, each Sublessee and of Alterra, prepared on a basis consistent with the
audited financial statements of Alterra (so long as Alterra is Manager, and
thereafter in accordance with GAAP), which statements shall include a statement
of income and expenses for the quarter then ended, certified by the chief
financial officer of Alterra and an authorized officer of Lessee or such
Sublessee, to the best of his or her knowledge or belief after due inquiry, to
accurately represent the financial condition of the Manager, Lessee or such
Sublessee, respectively. Quarterly financial statements of operations shall show
the separate operations of each of the Assisted Living Facilities.
(e) Within forty-five (45) days of the end of each calendar
quarter, utilization reports including a statement of the number of bed days
available and the actual patient days incurred for the quarter, together with
quarterly census information of each Assisted Living Facility as of the end of
such quarter in sufficient detail to show patient-mix (i.e., private, Medicare,
Medicaid, and V.A.) as of the end of such quarter, certified by the chief
financial officer of Manager to be true and correct, to the best of his or her
knowledge, information and belief after due inquiry.
(f) Within thirty (30) days after the end of each calendar
month, operating statements for each Property prepared on an accrual basis and
in form satisfactory to Noteholder, (i) for such month, (ii) for the year to
date, including a comparison of budgeted to actual income and expenses and on a
quarterly basis an explanation of material variances, and (iii) for the 12-month
period ending in and including the subject month.
(g) As soon as available, but in no event more than thirty
(30) days after the filing deadline, as may be extended from time to time,
copies of all federal, state and local tax returns of Lessee, together with all
supporting documentation and required schedules certified by the authorized
officer of Lessee as true, correct and complete.
(h) Within twenty (20) days of filing or receipt, all copies
of Medicaid cost reports and any amendments thereto filed with respect to the
Assisted Living Facilities, and copies of all responses, audit reports, or other
inquiries with respect to such cost reports, in each case certified by an
authorized officer of Lessee and the chief financial officer of Manager as true,
correct and complete.
(i) Within ten (10) days of receipt, a true, correct and
complete copy of the Medicaid Rate Calculation Worksheet (or the equivalent
thereof) issued by the appropriate Medicaid Agency for each Assisted Living
Facility.
(j) Within five (5) days of receipt, true, correct and
complete copies of any and all notices (regardless of form) from any and all
licensing and/or certifying agencies that the operating license and/or the
Medicare and/or Medicaid certification or other third party
-53-
54
reimbursement program of any Assisted Living Facility is being downgraded to a
substandard category, revoked, or suspended or that any such action is pending
or threatened.
(k) Evidence of payment by Lessee or the Sublessees or by
Manager on behalf of Lessee or the Sublessees of any applicable provider bed
taxes or similar taxes, which taxes Lessee hereby agrees to pay as and when due.
(l) Within thirty (30) days after the end of each calendar
month, an aged accounts receivable report for each Assisted Living Facility
separately, in sufficient detail to show amounts due from each class of
patient-mix (i.e., private, Medicare, Medicaid and V.A.) by the account age
classifications of 30 days, 60 days, 90 days, 120 days, and over 120 days.
(m) Within forty-five (45) days of the end of each calendar
quarter, a certificate of an authorized officer of Lessee and the chief
financial officer of Manager certifying to the best of his or her knowledge
compliance with the covenants and requirements set forth above.
(n) Within forty-five (45) days of the end of each calendar
quarter during the term of the Loan, a certificate duly executed on behalf of
Lessee by its authorized officer, in form and substance satisfactory to
Noteholder, stating that, to the best of Lessee's knowledge after due inquiry,
there does not exist any Default or Event of Default under the Transaction
Documents (or if any exists, specifying the same in detail), and stating the
then-applicable LCR and DSCR, and stating to the best of Lessee's knowledge
after due inquiry that all financial statements, reports, calculations, and
other information theretofore or therewith submitted to Noteholder by or on
behalf of Lessee and Manager are true and materially complete and do not omit to
state any material information without which the same might reasonably be
misleading.
The Noteholder reserves the right to require such other financial information of
Lessee, the Sublessees, Manager and/or any Assisted Living Facility, in such
form and at such other times (including monthly or more frequently) as
Noteholder shall reasonably deem necessary, and Lessee agrees promptly to
provide or to cause to be provided, such information to Noteholder to the extent
the same is reasonably available or obtainable. All financial statements must be
in the form and detail as Noteholder may from time to time reasonably request.
4.6 GAAP . Lessee shall maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of financial statements on a basis consistent
with the audited financial statements of Alterra. All financial statements of
Alterra shall be prepared in accordance with GAAP, consistently applied.
4.7 ACCOUNTANTS' REPORTS . Promptly upon receipt thereof, Lessee shall
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 Alterra made by such accountants,
including the comment letter submitted by such accountants to management in
connection with the annual audit.
-54-
55
4.8 BOOKS AND RECORDS . Lessee shall keep and maintain at all times at
the Manager's principal place of business and/or at the Assisted Living
Facilities, or the principal place of business of Lessee to the extent required
by law, complete and accurate books of account and records (including copies of
supporting bills and invoices) adequate to reflect correctly the results of the
operation of the Assisted Living Facilities, and copies of all written
contracts, leases (if any), and other instruments which affect the Property,
which books, records, contracts, leases (if any) and other instruments shall be
subject to examination and inspection at any reasonable time by Noteholder or
its agents or representatives (upon reasonable advance notice, which for such
purposes only may be given orally, except in the case of an emergency or
following an Event of Default, in which case no advance notice shall be
required, and subject to the residents' rights of privacy and legal requirements
with respect to confidentiality of medical records), provided, however, if an
Event of Default has occurred and is continuing, Lessee shall deliver, or cause
Manager to deliver, to the fullest extent permitted by law, to Noteholder and
Trustee upon written demand all books, records, contracts, leases (if any) and
other instruments relating to the Assisted Living Facilities or their respective
operations and Lessee authorizes Noteholder and/or Trustee to obtain a credit
report on Lessee, Manager or any Borrower Party at any time.
4.9 PAYMENT OF INDEBTEDNESS . Lessee shall duly and punctually pay or
cause to be paid all other Indebtedness now owing or hereafter incurred by
Lessee in accordance with the terms of such Indebtedness, except such
Indebtedness owing to those other than Noteholder which is being contested in
good faith by Lessee in accordance with the Transaction Documents and with
respect to which any execution against properties of Lessee have been
effectively stayed and for which reserves and collateral for the payment and
security thereof have been established as determined by Noteholder in its
reasonable discretion.
4.10 BUDGET APPROVAL PROCESS .
Within sixty (60) days following the Closing Date and,
thereafter, prior to the end of each calendar year during the term of the Loan,
Lessee shall, or shall cause Manager to, submit to Noteholder, a proposed annual
operating and capital expenditures budget for the Assisted Living Facilities for
the following calendar year. Such budget shall provide detail on a
month-by-month basis for all Operating Revenues, Operating Expenses and capital
improvement requirements (and is referred to herein as the "BUDGET"). The
Noteholder shall have the right to reasonably approve or disapprove the Budget
and Lessee shall change or cause such changes to be made to the Budget as are
reasonably necessary to obtain Noteholder's reasonable approval. Once the
Noteholder approves such Budget, it shall become effective for the next calendar
year subject to the provisions below. If the Noteholder has not approved the
Budget on or prior to December 31 of the calendar year which is about to expire,
the projections for the new calendar year as set forth on SCHEDULE 4.10 subject
to such adjustments as are necessary to achieve, in the most economic fashion,
compliance with all applicable Legal Requirements, shall be deemed to be the
Budget during such new calendar year until such time as the Noteholder approves
the new Budget. Lessee shall notify Noteholder of any proposed changes to the
Budget (following final approval thereof as aforesaid) which contemplate or
result in a change in projected Net Operating Income of more than ten percent
(10%), and any such proposed change shall be subject to Noteholder's prior
written approval as provided above. Following the Closing Date and until
-55-
56
approval of the Budget as described above, the projections attached hereto as
SCHEDULE 4.10 shall be deemed to be the Budget.
Pursuant to the Trust Agreement, the Noteholder has delegated
certain rights to the Controlling Party as more fully set forth therein. Lessee
agrees that if, at any time, Noteholder shall become the Controlling Party or if
the Trust Agreement shall cease to be in effect, then as of such event and for
so long thereafter as such event shall continue, Noteholder shall, in addition
to its foregoing rights of approval, be entitled to review the then current
Budget, notwithstanding that the same may already have been approved in
accordance with the above provisions and the Trust Agreement. In connection with
such review, Noteholder shall be entitled to request, and Lessee shall effect,
such changes as Noteholder shall reasonably determine to be necessary or
desirable.
4.11 ANNUAL OWNERSHIP REPORT . Together with its annual financial
statements, Lessee shall deliver to Noteholder a written statement duly executed
on behalf of Lessee or the applicable Sublessee by the chief executive officer
or secretary of the entity, in form and substance satisfactory to Noteholder,
identifying in particularity and detail all direct ownership and beneficial
interests in Lessee or such Sublessee and stating whether any such interest is
encumbered or pledged, in each case as of the date of delivery of such notice.
4.12 MATERIAL ADVERSE CHANGE; MATERIAL ADVERSE EFFECT .
(a) Promptly upon Lessee becoming aware thereof, and in any event
within 10 days of so becoming aware, deliver to Noteholder notice of any
material adverse change in the operation of any of the Properties, Improvements
or the Assisted Living Facilities, to include, but not be limited to: any
statement of material operating and/or physical plant deficiencies; material
violations of applicable law; limitations on license or provider agreements;
bans on admissions; suspension of payments; freeze or reduction in Medicaid
rate; notice of overpayment; or being the subject of any investigation relating
to patient abuse, fraud, kickbacks, or other alleged illegal payment practices.
(b) Promptly upon Lessee or Borrower becoming aware thereof,
deliver to Noteholder notice of the occurrence of any other event which would
reasonably be expected to have a Material Adverse Effect on the business,
operations or financial condition of a Borrower Party or on the ability of such
Borrower Party to perform or comply with any of the terms and conditions of this
Agreement, the Note or any other Loan and Surety Document.
4.13 EVENTS OF DEFAULT, ETC .
(a) Promptly upon Lessee or Borrower obtaining knowledge of any of
the following events or conditions, deliver to Noteholder 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 Lessee
or any Affiliate thereof has taken, is taking and proposes to take with respect
thereto: (1) any condition or event that constitutes an Event of Default or
Default; or (2) any Material Adverse Effect with respect to Lessee.
-56-
57
(b) Promptly upon Lessee or Borrower becoming aware thereof, and
in any event within three Business Days of so becoming aware deliver to
Noteholder, notice of any material default beyond applicable grace periods by a
Borrower Party under any material agreement or instrument to which it is a party
or by which it or any of its properties may be subject or bound, together with a
written statement of Lessee setting forth the details thereof.
4.14 LITIGATION . Promptly upon Lessee obtaining knowledge of (1) the
institution of any action, suit, proceeding, governmental investigation or
arbitration against or affecting a Borrower Party, Sublessee or any Property not
previously disclosed in writing by Lessee to Noteholder or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting a Borrower Party, Sublessee
or any Property of a Borrower Party which, in each case, is reasonably likely to
have a Material Adverse Effect, Lessee will give notice thereof to Noteholder
and provide such other information as may be reasonably available to them to
enable Noteholder and its counsel to evaluate such matter.
4.15 INSURANCE . Within the thirty (30 day) period prior to the end of
each insurance policy year of Lessee, deliver a report in form and substance
reasonably satisfactory to Noteholder outlining all material insurance coverage
maintained as of the date of such report by Lessee, and all material insurance
coverage planned to be maintained by Lessee in the subsequent insurance policy
year.
4.16 CONDUCT OF BUSINESS . Lessee shall conduct or cause to be
conducted, the operations of the Assisted Living Facilities at all times in a
manner at least consistent with Alterra's customary practice as of the date
hereof, including without limitation, the following:
(a) to maintain the standard of care for the residents of the
Assisted Living Facilities at a level in accordance with customary and prudent
industry standards;
(b) to operate the Assisted Living Facilities in a prudent manner
and in compliance at all times in all material respects with applicable laws and
regulations relating thereto, including, without limitation, to the extent
applicable, Title 42 of the United States Code and related regulations,
including the Medicare Regulations, if applicable, the Medicaid Regulations, if
applicable, federal and state self-referral and anti-kickback statutes and
regulations, Title 31 of the United States Code, including the False Claims Act;
applicable skilled nursing facility and assisted living facility licensure laws;
and public health statues and regulations.
(c) to obtain within the time frames required by applicable laws,
rules and regulations and thereafter keep, in Borrower's, Lessee's, Sublessee's
or Manager's name, as applicable, any required Permits and cause all Permits,
Reimbursement Contracts, and any other agreements necessary for the use and
operation of the Assisted Living Facilities or as may be necessary for
participation in Medicaid and/or Medicare, each, as applicable;
(d) to maintain sufficient Inventory and Equipment of types and
quantities at
-57-
58
the Assisted Living Facilities to enable the operations of the Assisted Living
Facilities to be adequately performed;
(e) to maintain or cause to be maintained in good repair, working
order and condition all material properties used in the business of Lessee,
including the Properties, Improvements, and Equipment, and will make or cause to
be made all appropriate repairs, renewals and replacements thereof. Without
limitation of the foregoing, Lessee will operate and maintain, or cause to be
operated and maintained, the Properties, Improvements, and Equipment in a manner
consistent with the Budget. Lessee will repair, or cause to be repaired, the
Properties, Improvements, and Equipment to which any casualty has occurred to at
least the condition existing prior to any such casualty. All work required or
permitted under this Agreement shall be performed in a workmanlike manner and in
compliance with all applicable laws;
(f) to maintain sufficient cash, in order to satisfy the working
capital needs of the Assisted Living Facilities; and
(g) to continuously operate or cause to be continuously operated,
the Properties and Improvements as Assisted Living Facilities.
4.17 PERIODIC SURVEYS . Lessee shall furnish to Noteholder, or cause
Manager to furnish to Noteholder, (a) within twenty (20) days of receipt, a copy
of any Medicare, Medicaid or any licensing agency survey, report, and any
material statement of deficiency and material follow-up surveys, and any plans
of correction related thereto and (b) within a reasonable time, any
correspondence or other documents relating to surveys, licensure, compliance
with Medicare and Medicaid conditions of participation relating to matters which
might have a Material Adverse Effect on any Assisted Living Facility.
4.18 MANAGEMENT AGREEMENT . Lessee shall maintain the Management
Agreements in full force and effect and timely perform, or cause to be timely
performed, all of Lessee's and/or each Sublessee's obligations thereunder and
enforce, or cause to be enforced, performance of all obligations of the Manager
thereunder and not permit the termination, amendment or assignment of the
Management Agreements except on the terms permitted in the Trust Agreement.
Neither Lessee nor any Sublessee will enter into any other management agreement
without Noteholder's prior written consent, which may be withheld in the sole
and absolute discretion of Noteholder.
4.19 UPDATED APPRAISALS . For so long as the Loan remains outstanding,
if any Event of Default shall occur and be continuing hereunder, or if, in
Noteholder's reasonable judgment, a material depreciation in the value of any
Property (or any portion thereof) shall have occurred, then in any such event,
Noteholder or Trustee may cause any or all of the Properties (or any portion
thereof) to be appraised by an appraiser selected by Noteholder, and in
accordance with Noteholder's appraisal guidelines and procedures then in effect,
and Lessee agrees to cooperate in all respects with such appraisals and furnish
to the appraisers all requested information regarding the Properties and
Assisted Living Facilities as applicable. If an Event of Default shall have
occurred and be continuing or if such appraisal discloses that material
-58-
59
depreciation in the value of any Property has occurred, Lessee agrees to pay all
reasonable costs incurred by Noteholder or Trustee in connection with such
appraisal which costs shall be secured by the Mortgages and shall accrue
interest at the Default Rate until paid.
4.20 COMPLY WITH COVENANTS, LAWS AND CONTRACTUAL OBLIGATIONS . Lessee
shall (A) comply, in all material respects, with all covenants and restrictions
of record and applicable laws, ordinances, rules and regulations, including,
without limitation, Title 42 of the United States Code and related regulations,
including the Medicare Regulations, if applicable, the Medicaid Regulations, if
applicable, federal and state self-referral and anti-kickback statutes and
regulations; Title 31 of the United States Code, including the False Claims Act;
applicable skilled nursing facility and assisted living facilities licensure
laws; applicable public health statues and regulations; the Americans with
Disabilities Act and the regulations thereunder, and all laws, ordinances, rules
and regulations relating to zoning, setback requirements and building codes, (B)
maintain in full force and effect and observe and comply with all of the terms
and conditions of all Regulatory Permits now held or hereafter acquired and
comply in all material respects with any and other Permits now held or hereafter
acquired by any of them, and (C) perform, observe, comply and fulfill all of its
respective obligations, covenants and conditions contained in any material
Contractual Obligation, including the Transaction Documents, and not suffer or
permit any default or event of default (giving effect to applicable notice and
cure rights) to exist under any of the foregoing.
4.21 TAXES AND OTHER CHARGES . Subject to Lessee's right to contest the
same as set forth in Section 9(d) of the Mortgages, Lessee shall pay all taxes,
assessments, charges, claims for labor, supplies, rent, and other obligations as
and when due which have given or, may give rise to a Lien against any of the
Properties, except Permitted Liens.
4.22 COST REPORTS . Lessee shall timely file Medicare and Medicaid and
other third party cost reports in an accurate manner and provide to Noteholder,
within a reasonable period of time, copies of all cost reports, as applicable,
and correspondence relating to Medicare and Medicaid and other third party cost
reports, notices of program reimbursement ("NPR") and all other documents
relating to cost reimbursement, each, as applicable.
4.23 VENDOR AGREEMENTS . Lessee shall have and maintain, on behalf of
each Assisted Living Facility, written agreements with vendors in compliance
with the Medicare prospective payment system, and otherwise comply with the
rules, regulations and requirements related to the Medicare prospective payment
system, each, as applicable.
4.24 CERTIFICATE . Upon Noteholder's written request in connection with
a Secondary Market Transaction, Lessee shall furnish Noteholder with a
certificate stating that Lessee has complied with and is in compliance with all
terms, covenants and conditions of the Transaction Documents to which Lessee is
a party and that there exists no Default or Event of Default or, if such is not
the case, that one or more specified events have occurred, and that the
representations and warranties contained herein are true and correct with the
same effect as though made on the date of such certificate and do not omit any
material fact (or if, as of such date, any representation or warranty has become
untrue or then omits to state a material fact, describing same with
-59-
60
reasonable detail). In addition, at Noteholder's request, the Lessee shall
promptly provide evidence satisfactory to Noteholder of compliance with any
representation, warranty or covenant specified in such request.
4.25 TRANSACTION DOCUMENTS . Lessee shall comply with the terms of and
perform all obligations under the Transaction Documents which are to be
performed in favor of Noteholder or Trustee, including without limitation, all
obligations to fund Reserves as and when required as set forth in the Trust
Agreement, the Flow of Funds Agreement and any other Transaction Documents and
to the extent such obligations are by their terms to be performed for the
benefit of the Beneficiaries. Without limitation, each calendar year Lessee
shall cause an amount equal to $300.00 per Available Bed (such aggregate annual
amount, the "AVAILABLE BED CAPITAL IMPROVEMENT AMOUNT") to be deposited into the
Capital Improvements Account (at the rate of $25.00 per Available Bed per
month).
4.26 NOTICE OF FEES OR PENALTIES . Lessee shall immediately notify
Noteholder, upon Lessee's knowledge thereof, of the assessment by any state or
any Medicare, Medicaid, health or licensing agency of any fines or penalties in
excess of $25,000 against Borrower, Lessee, any Sublessee, Manager (in its
capacity as Manager of any Assisted Living Facility) or any Assisted Living
Facility.
4.27 MAINTENANCE OF ASSUMPTIONS IN LEGAL OPINIONS . Lessee shall not
cause or suffer any of the assumptions with respect to Lessee, Alterra or the
Properties set forth in any opinions of its legal counsel delivered in
connection with the Loan to be incorrect.
4.28 NOTEHOLDER'S EXPENSES . Lessee shall pay, on demand by Noteholder,
all reasonable expenses, charges, costs and fees (including reasonable
attorneys' fees and expenses) in connection with the negotiation, documentation,
administration, servicing, and collection of the Loan. On the Closing Date and
the Additional Facilities Closing Date, Noteholder may pay directly from the
proceeds of the Loan each of the foregoing expenses.
4.29 MATERIAL AGREEMENTS . Except for the Management Agreements, the
Master Lease, the Subleases, the Licensing Subleases, the Residency Agreements
(provided same are substantially in the form of the standard residency
agreements delivered to Noteholder hereunder for the respective states in which
the Assisted Living Facilities are located), the Existing Leases identified on
Schedule 4.29 or Permitted Liens, neither Lessee nor any Sublessee shall enter
into or become obligated under any material agreement pertaining to the Assisted
Living Facilities, Properties, Improvements, and Equipment, 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.
4.30 INSPECTION . Lessee shall permit Noteholder and any of its
authorized representatives designated by Noteholder to visit and inspect during
normal business hours, each Assisted Living Facility and its business, including
its financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its affairs, finances and business with its officers
and independent public accountants (with Lessee's representative(s) present), at
such reasonable times during normal business hours and as often as may be
reasonably requested (and
-60-
61
subject to resident's privacy rights and legal requirements with respect to
confidentiality of medical records). Unless an Event of Default has occurred,
Noteholder shall provide advance written notice of at least three (3) Business
Days prior to visiting or inspecting the Assisted Living Facilities, Lessee's or
Manager's offices. Lessee shall reimburse Noteholder for annual site-inspection
costs and expenses equal to not more than One Thousand Dollars ($1,000) per
Assisted Living Facility as and to the extent incurred by Noteholder.
4.31 ERISA . (a) Lessee shall deliver to Noteholder, at Lessee's
expense, the following information and notices as soon as possible, and in any
event within ten (10) Business Days: (i) after Lessee or any ERISA Affiliate
knows or has reason to know that a Termination Event has occurred, written
notice of such Termination Event; (ii) after Lessee or any ERISA Affiliate knows
or has reason to know that a prohibited transaction (as defined in Section 406
of ERISA or Section 4975 of the Code) involving Lessee or ERISA Affiliate or
Plan has occurred, written notice describing such transaction and the proposed
corrective action; (iii) after the filing thereof with the Internal Revenue
Service, a copy of each funding waiver request filed with respect to any Benefit
Plan after the occurrence thereof, (iv) notification of any increases in the
benefits of any Benefit Plan or the contributions required under any
Multiemployer Plan; (v) after receipt by Lessee or any ERISA Affiliate of any
favorable or unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code, copies of each such
letter; (vi) after receipt by Lessee or any ERISA Affiliate of any notice of the
Pension Benefit Guaranty Corporation's intention to terminate a Benefit Plan or
to have a trustee appointed to administer a Benefit Plan, a copy of each such
notice; and (vii) after receipt by Lessee or any ERISA Affiliate of a notice
from a Multiemployer Plan regarding imposition of withdrawal liability, a copy
of such notice. For purposes of this paragraph (a), Lessee shall be deemed to
know all facts known by the administrator of any Plan of which Lessee or any
ERISA Affiliate is the plan sponsor.
(b) Lessee shall establish, maintain and operate, or cause the
ERISA Affiliates to establish, maintain and operate, all Plans to comply in all
material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder and the
respective requirements of the governing documents for such Plans.
4.32 ASSISTED LIVING FACILITY CONSULTANT . Upon the occurrence and
during the continuance of a Springing Lockbox Event or Event of Default,
Noteholder shall be entitled to retain, at Lessee's cost and expense, a
consultant ("ASSISTED LIVING FACILITY CONSULTANT" ) who is experienced in issues
related to health care generally and assisted living facilities specifically,
which consultant may advise Noteholder and Trustee on matters specifically
relating to the maintenance and operation of the Assisted Living Facilities,
including without limitation, matters pertaining to insurance and the Budget. In
addition, upon the occurrence and during the continuance of a Springing Lock Box
Event or Event of Default, Noteholder shall be entitled to retain such Assisted
Living Facility Consultant on an annual basis at Lessee's cost and expense for
the limited purpose of advising Noteholder in its review of the Budget
contemplated by Section 4.10 hereof. The reasonable fees and expenses of such
Assisted Living Facility Consultant shall constitute a part of the Loan
Obligations and shall be secured by the Transaction Documents.
-61-
62
4.33 PLACE OF BUSINESS . Borrower and Lessee shall each provide
Noteholder with not less than thirty (30) days prior written notice of any
change in its chief executive office or principal place of business. In
addition, Borrower shall, at Lessee's expense, provide Noteholder with such
other information and amendatory financing statements as Noteholder may request
in connection therewith.
ARTICLE V NEGATIVE COVENANTS OF BORROWER PARTIES
5.1 ASSIGNMENT OF LICENSES AND PERMITS . Lessee shall not assign or
transfer, or permit any Sublessee to assign or transfer, any of its interest in
any Permits or Reimbursement Contracts (including rights to payment thereunder)
pertaining to the Assisted Living Facilities, or assign, transfer, or remove or
permit any other person to assign, transfer, or remove any records pertaining to
the Assisted Living Facilities including, without limitation, patient records,
medical and clinical records (except for removal of such patient records as
directed by the patients owning such records and the removal or surrender of
patient and/or other records as may be required to comply with applicable laws
or governmental orders), without Noteholder's prior written consent, which
consent may be granted or refused in Noteholder's sole discretion; provided,
however, that Lessee may dispose of records in accordance with applicable
provisions of law and Lessee's policies but not earlier than four (4) years
after final audit of the periods to which such records relate.
5.2 NO LIENS; EXCEPTIONS . Lessee shall not create, incur, assume or
suffer to exist, and Borrower shall not grant or create, any Lien upon or with
respect to any Property, the Assisted Living Facilities or any of such Borrower
Party's properties, rights, income or other assets relating thereto, including,
without limitation, the Collateral whether now owned or hereafter acquired,
other than the following "PERMITTED LIENS":
(a) Liens at any time existing in favor of the Trustee and
securing obligations under the Transaction Documents;
(b) the Master Lease the Ground Leases, the Licensing Subleases
and the Subleases (subject to the terms of the subordination and non-disturbance
agreements, among Lessee, Noteholder and each of the Sublessees and among
Borrower, Noteholder and the lessees under the Ground Leases, all in form and
substance acceptable to Noteholder);
(c) Liens arising by operation of law for the purchase of labor,
services, materials, equipment or supplies, provided payment shall not be
delinquent and, if such Lien is a lien upon any of the Property or Improvements,
such Lien must be fully disclosed by Lessee to Noteholder and discharged by
Lessee by payment, bonding or otherwise, within thirty (30) days after the
filing thereof in a manner satisfactory to Noteholder in Noteholder's sole
discretion;
(d) Liens for current year's taxes, assessments or governmental
charges or levies not delinquent, but in no case any Lien which has arisen under
operation of, or pursuant to, any Environmental Law;
-62-
63
(e) Liens, exceptions and encumbrances described in the Schedule
B-1 to the Title Policies and approved by Noteholder prior to the Closing Date
(or in the case of the Title Policies covering the Additional Properties, prior
to the Additional Properties Closing Date);
(f) Liens evidencing Equipment Leases included within the
definition of Allowed Indebtedness; and
(g) Liens on the Excluded Collateral.
5.3 DISPOSITION OF ASSETS . Except as otherwise expressly permitted
hereunder or under the other Transaction Documents, neither Borrower nor Lessee
shall sell, lease, (except pursuant to Residency Agreements substantially in the
form of the standard residency agreements delivered to Noteholder hereunder for
the respective states in which the Assisted Living Facilities are located)
transfer, assign, pledge, mortgage or otherwise hypothecate or otherwise dispose
of any Property or any portion thereof, without the prior written consent of the
Noteholder, which consent may be granted or refused in Noteholder's sole
discretion; provided, however, that Borrower or SELCO may dispose of the
Excluded Collateral as permitted under the Trust Agreement.
5.4 CHANGE OF BUSINESS . Lessee shall not make any material change in
the nature of business as it is being conducted as of the date hereof without
the express written consent of Noteholder; provided, however, that changes in
the nature or type of services offered at any Assisted Living Facility shall not
violate the foregoing covenant so long as such Assisted Living Facility
continues to be used solely for purposes within the uses described in the
definition of "Assisted Living Facilities" herein.
5.5 CHANGES IN ACCOUNTING . Lessee shall not make any change to the
existing methods of accounting, unless the system of accounting post change
continues to be on a basis of accounting consistent with the audited financial
statements of Alterra and sound business practices and provided such change does
not have the effect of curing or preventing what would otherwise be an Event of
Default or Default had such change not taken place.
5.6 INTENTIONALLY OMITTED .
5.7 TRANSFER OF OWNERSHIP INTERESTS . Except as otherwise expressly
permitted hereunder or under the Participation Agreement, permit any change in
the ownership interests in Borrower, Lessee or any Sublessee (other than the
purchase by Alterra or a wholly-owned subsidiary of Alterra of partnership
interests in the Sublessees in accordance with the limited partnership
agreements of the Sublessees) without the prior written consent of Noteholder
which may be granted or withheld in Noteholder's sole discretion.
5.8 RESTRICTION ON FUNDAMENTAL CHANGES . No Borrower Party shall:
(a) (i) amend, modify or waive (or permit any other Person
to do so) any term
-63-
64
or provision of such Borrower Party's Charter Documents unless required by law;
or (ii) liquidate, wind-up or dissolve (or permit any other Person to do so)
such Borrower Party.
(b) (i) except as provided in Article VIII hereof or as
expressly provided under the Participation Agreement, issue, sell, assign,
pledge, convey, dispose or otherwise encumber (or permit any other Person to do
so) any stock, membership interest, partnership interest, or other equity or
beneficial interest in any Borrower Party or grant any options, warrants,
purchase rights or other similar agreements or understandings with respect
thereto; or (ii) acquire by purchase or otherwise (or permit any other Person to
do so) all or any part of the business or assets of, or stock or other evidence
of beneficial ownership of, any such Borrower Party.
5.9 TRANSACTIONS WITH AFFILIATES . Lessee shall not pay any management,
consulting, director or similar fees to any Affiliate of Lessee or to any
director, officer or employee thereof, nor 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 Affiliate of or with
any director, officer or employee of Lessee, except transactions in the ordinary
course of and pursuant to the reasonable requirements of the business of Lessee
and upon fair and reasonable terms which are fully disclosed to Noteholder prior
to consummation and are no less favorable to Lessee than would be obtained in a
comparable arm's length transaction with a Person that is not an Affiliate of
Lessee. Other than the Management Agreements, the Master Lease, the Subleases
and the Licensing Subleases, each agreement of Lessee with any Affiliate of
Lessee shall be for a term not to exceed one year, and shall provide that the
same may be terminated by Noteholder at its option without penalty or premium
during the continuation of an Event of Default, and shall provide that no
payments may be made thereunder when any Event of Default shall exist or in any
event prior to the payment of debt service on the Loan. Lessee shall not make
any payment or permit any payment to be made to any Affiliate of Lessee when any
Event of Default shall exist.
5.10 CHANGE OF USE . Lessee shall not alter (except in accordance with
the terms of the Trust Agreement or the Mortgages) or change the use of the
Property or Improvements in any material respect or permit any management
agreement for the Property or Improvements other than the Management Agreements
or enter into any operating lease for any Assisted Living Facility (other than
the Master Lease and the Subleases), unless Lessee first notifies Noteholder and
provides Noteholder a copy of the proposed lease agreement or management
agreement, obtains Noteholder's written consent thereto, which consent may be
withheld in Noteholder's sole and absolute discretion, and obtains and provides
Noteholder with a subordination agreement in form satisfactory to Noteholder, as
determined by Noteholder in its sole and absolute discretion, from such manager
or lessee subordinating their respective rights to all rights of Noteholder.
Notwithstanding the foregoing, Lessee may (without obtaining Noteholder's
consent pursuant to the foregoing (but upon at least ten (10) Business Days
prior written notice to Noteholder and Trustee), make alterations or
improvements (collectively, "ALTERATIONS") to any Assisted Living Facility of 60
beds or less provided that the cost of any such Alterations individually, or in
the aggregate for any twelve (12) month period, does not exceed $100,000 and to
any Assisted Living Facility of more than 60 beds provided that the cost of any
such Alterations individually, or
-64-
65
in the aggregate for any twelve (12) month period, does not exceed $250,000.
5.11 INTENTIONALLY DELETED .
5.12 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS . Neither Borrower nor
Lessee shall make any distribution of cash or other assets to any of its
partners or constituents except as permitted by and in accordance with the Flow
of Funds Agreement, and except for a transfer of the Excluded Collateral or any
proceeds thereof to any shareholders of Borrower upon the occurrence of an Event
of Default or a Lease Event of Default.
5.13 INDEBTEDNESS . Neither Borrower nor Lessee shall create, incur,
assume or suffer to exist any Indebtedness, whether secured or unsecured or
subordinate or prior to the Loan Obligations, other than Allowed Indebtedness
and any indebtedness of Borrower to any of its shareholders secured by the
Excluded Collateral.
5.14 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS .
(a) VOLUNTARY CASES. No Borrower Party shall commence a
voluntary case under the Bankruptcy Code or under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect.
(b) INVOLUNTARY CASES, RECEIVERS, ETC. No Borrower Party or
Affiliate of such Borrower Party shall apply for, consent to, or aid, solicit,
support, or otherwise act, cooperate or collude to cause the appointment of or
taking possession by, a receiver, trustee or other custodian for all or a
substantial part of the assets of such Borrower Party. As used in this
Agreement, an "INVOLUNTARY BORROWER PARTY BANKRUPTCY" shall mean any involuntary
case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, in which such Borrower Party is a debtor
or any portion of the Property is property of the estate therein. No Borrower
Party and no Affiliate of such Borrower Party shall file a petition for, consent
to the filing of a petition for, or aid, solicit, support, or otherwise act,
cooperate or collude to cause the filing of a petition for an Involuntary
Borrower Party Bankruptcy. In any Involuntary Borrower Party Bankruptcy, such
Borrower Party or any Affiliate of any Borrower Party shall, without the prior
written consent of Noteholder, consent to the entry of any order, file any
motion, or support any motion (irrespective of the subject of the motion), and
no Borrower Party or any such Affiliate shall file or support any plan of
reorganization. Each Borrower Party having any interest in any Involuntary
Borrower Party Bankruptcy shall do all things reasonably requested by Noteholder
to assist Noteholder in obtaining such relief as Noteholder shall seek, and
shall in all events vote as directed by Noteholder. Without limitation of the
foregoing, each such Borrower Party shall do all things reasonably requested by
Noteholder to support any motion for relief from stay or plan of reorganization
proposed or supported by Noteholder. Nothing in this provision shall obligate
any Borrower Party or Affiliate to act contrary to any order of any court, which
order was not sought or acquiesced in at the direction of Noteholder or by any
Borrower Party or any Affiliate.
5.15 NO NEGATIVE PLEDGES . No Borrower Party shall enter into or assume
any
-65-
66
agreement (other than the Transaction Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
5.16 CHANGES RELATING TO INDEBTEDNESS . Other than accounts payable to
trade creditors, Lessee shall not change or amend (or allow for the change or
amendment to) the terms of any Indebtedness (other than Allowed Indebtedness)
without the prior written consent of Noteholder.
5.17 CONTINGENT OBLIGATIONS . No Borrower Party shall be or become
liable as a guarantor, surety or otherwise for any obligation of any other
Person or for any Contingent Obligation of any kind except for obligations
created by the Allowed Indebtedness.
5.18 ERISA . Lessee shall not and shall not permit any ERISA Affiliate:
(a) Without Noteholder's prior written consent, to
establish, maintain, contribute to or become obligated to contribute to any (i)
Benefit Plan, (ii) Multiemployer Plan or (iii) welfare benefit plan which
provides benefits to employees after termination of employment other than as
required by Part 6 of Title I of ERISA:
(b) To engage in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which a statutory or class
exemption is not applicable or a private exemption has not been previously
obtained from the U.S. Department of Labor and for which a civil penalty
pursuant to Section 502(i) of ERISA or excise tax pursuant to Section 4975 of
the Code in excess of $25,000 is imposed;
(c) To permit any accumulated funding deficiency (within the
meaning of Section 302 of ERISA or Section 412 of the Code) in excess of $25,000
with respect to any Benefit Plan, whether or not waived;
(d) To terminate any Benefit Plan under circumstances which
would result in any liability under Title IV of ERISA;
(e) To fail to make any contribution or payment to any
Multiemployer Plan which any Borrower Party or ERISA Affiliate may be required
to make under any agreement relating to such Multiemployer Plan; or
(f) To fail to maintain any Plan in material compliance with
the applicable provisions of ERISA and the Code.
5.19 SINGLE PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS COVENANTS AND
WARRANTIES . Each Borrower Party, as to itself, hereby represents, warrants and
covenants as of the Closing Date and also until such time as all Loan
Obligations are paid in full, that absent express advance written waiver from
Noteholder, which may be withheld in Noteholder's sole discretion, such Borrower
Party:
-66-
67
(a) does not as to itself own and will not own any assets
other than its respective interests in the Assisted Living Facilities,
Properties (including the Master Lease, the Subleases and the Ground Leases),
Improvements, Equipment and Inventory (including incidental personal property
necessary for the operation thereof and proceeds therefrom) (and in the case of
Borrower its interests in the Excluded Collateral) or;
(b) is not engaged and will not engage in any business,
directly or indirectly, other than the ownership, leasing, management,
subleasing and /or operation of the Assisted Living Facilities, Properties,
Improvements, Equipment and Inventory (including incidental personal property
necessary for the operation thereof and proceeds therefrom);
(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 debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than as expressly permitted under Section 5.13;
(e) has not made and will not make any loan or advances to
any Person (including any of its Affiliates), other than as expressly permitted
under Section 5.13;
(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, and will not, nor will any partner, member,
shareholder, trustee, beneficiary, or principal thereof amend, modify or
otherwise change such Borrower Party's partnership certificate, partnership
agreement, articles of incorporation, by-laws, articles of organization,
operating agreement, or other organizational documents in any manner;
(h) shall continuously maintain its existence and be
qualified to do business in all states necessary to carry on its business,
including without limitation, the states where the Properties are located;
(i) will conduct and operate its business in the manner
permitted under the Transaction Documents subject to the adequacy of cash flow;
(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;
(k) will be, and at all times will hold itself out to the
public as, a legal entity
-67-
68
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 misunderstanding regarding the separate
identity of such Borrower Party;
(l) Borrower will file its own tax returns;
(m) 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;
(n) will not seek, acquiesce in, or suffer or permit its
liquidation, dissolution or winding up, in whole or in part;
(o) will not enter into any transaction of merger or
consolidation, or acquire by purchase or otherwise all or substantially all of
the business or assets of, or any stock or beneficial ownership of, any Person;
(p) Borrower will not commingle or permit to be commingled
its funds or other assets with those of any other Person;
(q) except as expressly provided in the Transaction
Documents, 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;
(r) except as expressly provided for in the Transaction
Documents, does not and will not hold itself out to be responsible for the debts
or obligations of any other Person;
(s) except as expressly provided for in the Transaction
Documents, has not and will not guarantee or otherwise become liable on or in
connection with any obligation of any other Person;
(t) subject to the adequacy of cash flow, shall not do any
act which would make it impossible to carry on its ordinary business;
(u) will not possess or assign any Collateral for other than
a business or company purpose;
(v) will not breach the covenants of Article VIII or
Sections 5.4 or 5.8 applicable to it;
(w) except as expressly provided in the Transaction
Documents, shall not hold title to its assets other than in its name;
(x) shall not institute proceedings to be adjudicated
bankrupt or insolvent;
-68-
69
consent to the institution of 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, sequestration (or
other similar official) of it or a substantial part of its property; or make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;
(y) Borrower shall comply with all of the assumptions,
statements, certifications, representations, warranties and covenants regarding
or made by Borrower contained in or appended to the nonconsolidation opinion of
Borrower's legal counsel delivered to Noteholder concurrently with Closing;
(z) will not agree to enter into or consummate any
transaction which would render the representations set forth in Sections 3.27 or
3.28 untrue at any time;
(aa) will not fail to pay the salaries of its own employees
and maintain a sufficient number of employees in light of its contemplated
business operations;
(bb) fail to allocate any overhead for shared office space
in a fair and reasonable manner.
5.20 ADDITIONAL SINGLE PURPOSE, BANKRUPTCY REMOTE COVENANTS . In
addition to their respective obligations under Section 5.19, each of Borrower
and Lessee, for itself, hereby represents, warrants and covenants as of the
Closing Date and until such time as all Loan Obligations are paid in full, that
without Noteholder's prior written consent, which may be withheld in
Noteholder's sole discretion, Borrower and Lessee:
(a) shall not, without the authorization and direction of
its Outside Director, 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,
sequestration (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; or admit in
writing its ability to pay its debts generally as they become due;
(b) shall not, without the affirmative vote of its Outside
Director, for itself (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 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, nor convey, transfer or lease its
assets substantially as an entirety to any Person; and (iii) amend any
provisions of its charter containing provisions similar to those contained in
this Article V;
(c) shall promptly elect and at all times maintain at least
one independent director (an "OUTSIDE DIRECTOR"), who shall be reasonably
satisfactory to Noteholder and shall
-69-
70
not have been at the time of such individual's appointment as Outside Director,
and may not have been at any time during the preceding five (5) years, (i) a
shareholder of, or an officer, director, partner or employee of, Borrower or
Lessee or their respective shareholders, members, subsidiaries or Affiliates,
(ii) a customer of, or supplier to, Borrower or Lessee or their respective
shareholders, members, subsidiaries or Affiliates, (iii) a Person controlling or
under common control with any such shareholder, director, partner, member,
supplier or customer, or (iv) a member of the immediate family of any such
shareholder, member, officer, director, partner, employee, supplier or customer.
5.21 APPLICATION OF CERTAIN COVENANTS TO SUBLESSEES . Lessee shall not
permit any of the Sublessees to incur any Indebtedness other than Allowed
Indebtedness, nor with respect to any of their assets, incur any Lien other than
Permitted Liens.
5.22 MANAGEMENT . Lessee shall provide competent and responsible
management for the Properties by a professional management company pursuant to
written Management Agreements, in each case satisfying the criteria set forth
herein. Without Noteholder's prior written consent both as to the form of the
Management Agreement and the identity of the Manager, Lessee shall not enter
into, modify or amend, or permit to be entered into, modified or amended, any
Management Agreement, or permit any change in the identity of any Manager, or
otherwise retain the services of any management company. Without limitation of
the foregoing, each Management Agreement or the Subordination of Management
Agreements shall provide that (i) the management fees payable thereunder shall
not exceed the prevailing amount for fees for management of properties of
comparable size, quality, and tenant mix in the market where the Property is
located, (ii) if the Manager is an Affiliate of Lessee, no Management Fee shall
be payable at or with respect to any time when an Event of Default has occurred
and is continuing and (iii) the Management Agreements shall be terminable at
Noteholder's option without penalty or premium upon the occurrence of an Event
of Default (subject to the approval of the Sublessees if and to the extent
required under the Assignments of Management Agreement).
ARTICLE VI ENVIRONMENTAL HAZARDS
6.1 PROHIBITED ACTIVITIES AND CONDITIONS . Except for the matters
described in Section 6.2, Lessee shall not cause or permit any of the following:
(a) The presence, use, generation, Release, treatment,
processing, storage (including storage in above ground and underground storage
tanks), handling, or disposal of any Hazardous Materials in, on or under any
Property or any Improvements;
(b) The transportation and disposal of any Hazardous
Materials to, from, or across any the Property and Improvements;
(c) Any occurrence or condition on any Property or in the
Improvements or any other property of Lessee, which occurrence or condition is
or may be in violation of
-70-
71
Environmental Law or give rise to liabilities under Environmental Laws;
(d) Any violation of or noncompliance with the terms of any
Environmental Law or any Environmental Permit with respect to any Property, the
Improvements the use or operation of any Property or the Improvements or any
property of Lessee; or
(e) The creation of any lien imposed by operation of, or
pursuant to, any Environmental Law.
The matters described in clauses (a) through (e) above are referred to
collectively in this Article VI as "PROHIBITED ACTIVITIES AND CONDITIONS" and
individually as a "PROHIBITED ACTIVITY AND CONDITION."
6.2 EXCLUSIONS . Notwithstanding any other provision of Section 6.1 to
the contrary, "Prohibited Activities and Conditions" shall not include (a) the
safe and lawful use and storage of customary quantities of (1) pre-packaged
supplies, medical waste, cleaning materials, petroleum products or other
Hazardous Materials which are customarily and lawfully used in the operation and
maintenance of comparable assisted living facilities, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
consumer use and used by occupants of the Assisted Living Facilities; (3) the
presence on the Properties and/or Improvements of asbestos or
asbestos-containing materials where the same are not required under
Environmental Law to be removed, encapsulated or otherwise abated and where
Lessee has complied with Environmental Law with respect to any O&M Program,
notices or warnings required under Environmental Law to be performed or given
concerning such asbestos or asbestos-containing materials; (4) petroleum
products used in the operation and maintenance of motor vehicles from time to
time located on any Property's parking areas, so long as all of the foregoing
are used, stored, handled, transported and disposed of in compliance with
Environmental Law, and (b) activities normal, customary and lawful in the
operation of comparable nursing homes.
6.3 PREVENTIVE ACTION . Lessee shall take all appropriate steps
(including the inclusion of appropriate provisions in any Leases approved by
Noteholder which are executed after the date of this Agreement) to prevent its
employees, agents, contractors, tenants and occupants of any of the Assisted
Living Facilities from causing or permitting any Prohibited Activities and
Conditions.
6.4 O & M PROGRAM COMPLIANCE . If an O&M Program or O&M Programs have
been established with respect to Hazardous Materials, Lessee shall comply in a
timely manner with, and cause all employees, agents, and contractors thereof and
any other persons present on the Property to comply with the applicable O&M
Program. All costs of performance of Lessee's obligations under any O&M Program
shall be paid by Lessee, and Noteholder's out-of-pocket costs incurred in
connection with the monitoring and review of any O&M Program and Lessee's
performance shall be paid by Lessee upon demand by Noteholder. Any such
out-of-pocket costs of Noteholder which Lessee fails to pay promptly shall
become an additional part of the Loan Obligations. Noteholder shall have the
right, but not the obligation, to review and, if Noteholder
-71-
72
so elects, to approve any O&M Program proposed to be established by Lessee.
6.5 LESSEE'S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES . Lessee
represents and warrants to Noteholder that, to the best of its knowledge based
on its review of, and except as set forth in, the Environmental Reports
described on SCHEDULE 6.5 hereto:
(a) Lessee has not at any time caused, permitted or suffered
to exist any Prohibited Activities and Conditions.
(b) Lessee or the applicable Sublessee has all Environmental
Permits required to carry on its business with respect to its Assisted Living
Facilities, Properties and Improvements and each of such Environmental Permits
is in full force and effect and each of Lessee and/or the applicable Sublessee
is in compliance with the terms and conditions thereof and the transactions
contemplated by this Agreement shall not cause any of such Environmental Permits
to lapse or become invalid. No event has occurred with respect to any Property
and/or Improvements that constitutes, or with the passing of time or the giving
of notice would constitute, noncompliance with the terms of any Environmental
Permit.
(c) Except as disclosed on SCHEDULE 6.5(C), the Properties
and the Improvements do not now contain any underground storage tanks, and, to
the best of Lessee's knowledge after reasonable and diligent inquiry, the
Properties and the Improvements have not contained any underground storage tanks
in the past. If there is an underground storage tank located on any Property or
the Improvements which has been previously disclosed by Lessee to Noteholder in
writing, that tank strictly complies with all requirements of Environmental Law.
(d) Each of Lessee and/or the applicable Sublessee has
complied and is in compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any Environmental Law applicable to the Properties and/or
Improvements or any property of Lessee.
(e) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint or notice
of violation has been filed or served, no penalty has been assessed, no
investigation or review is pending or threatened by any Governmental Authority
or any other Person with regard or with respect to the Release of Hazardous
Materials, the disposal or arrangement for disposal of Hazardous Materials,
noise emissions, Hazardous Materials, violation or alleged violation of
Environmental Law at, to or from the Property, the Improvements, the use or
operation of either, or any property owned by Lessee.
(f) Neither the Properties nor any Improvements contains any
treatment, storage or disposal facility requiring an Environmental Permit.
(g) No asbestos or asbestos-containing material is or has
been present at the Properties or the Improvements in violation of any
Environmental Law except as disclosed to the Noteholder by Lessee prior to the
Closing Date.
-72-
73
(h) Neither Lessee nor any of its predecessors has
transported or arranged for the transportation of any Hazardous Materials from
the Properties or Improvements to any location that is listed on the National
Priorities List ("NPL") under CERCLA, listed for possible inclusion on the NPL
in the Comprehensive Environmental Response and Liability Information System
("CERCLIS"), or is listed on any similar state or local list or that is the
subject of federal, state or local enforcement actions or other investigations.
(i) No Hazardous Material has been recycled, treated, stored
or Released by Borrower or Lessee except in accordance with applicable
Environmental Law.
(j) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of Lessee with respect to any
portion of the Property and/or Improvements and no portion of the Property
and/or Improvements or other property owned by Lessee is listed or proposed for
listing on the NPL, CERCLIS or any similar state or local list of sites
requiring investigation or remediation.
(k) No liens have arisen under or pursuant to any
Environmental Law on any of the Properties and/or Improvements, and no
governmental action has been taken or is in process that could subject any such
Property or Improvements to such liens and Lessee is not required to place any
notice or restriction relating to the presence of Hazardous Materials at any of
the Properties and/or Improvements.
(l) All environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or that are in the possession of
Lessee, relating to any Property and/or Improvements have been delivered to
Noteholder prior to the Closing Date.
(m) Lessee has no knowledge of any facts, events or
conditions relating to any Properties and/or Improvements which could reasonably
be expected to interfere with or prevent continued compliance with any
Environmental Law, give rise to any liability under Environmental Law, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving Lessee, any Properties and/or Improvements
under any Environmental Law.
The representations and warranties in this Article VI shall be
continuing representations and warranties that shall be deemed to be made by
Lessee as of the Closing Date and throughout the term of the Loan until the Loan
Obligations have been paid in full.
6.6 NOTICE OF CERTAIN EVENTS . Lessee shall promptly notify
Noteholder in writing and in reasonable detail of any and all of the following
that may occur:
(a) Lessee's or Manager's discovery of any Prohibited
Activity and Condition.
(b) Lessee's or Manager's receipt of or knowledge of any
complaint, order, demand, request for information, notice of violation,
investigation, testing, proposed testing or other communication from any
Governmental Authority or other person with regard to present, or future alleged
Prohibited Activities and Conditions or any other environmental, health or
safety
-73-
74
matters affecting any Property, the Improvements or any other property that is
adjacent to any Property.
(c) Any representation or warranty in this Article VI which
becomes untrue at any time after the date of this Agreement.
Any such notice given by Lessee shall not relieve Lessee of,
or result in waiver of, any obligation under this Agreement, the Note, or any of
the other Loan Documents.
6.7 COSTS OF INSPECTION . Lessee shall pay promptly the costs of
any environmental inspections, tests or audits required by Noteholder or Trustee
in connection with any foreclosure or deed in lieu of foreclosure, or, if
required by Noteholder or Trustee, as a condition of Noteholder's or Trustee's
consent to any "TRANSFER" (as defined in the Mortgages), or required by
Noteholder following a reasonable determination by Noteholder that Prohibited
Activities and Conditions may exist. Any such costs incurred by Noteholder or
Trustee (including the fees and out-of-pocket costs of attorneys and technical
consultants whether incurred in connection with any judicial or administrative
process or otherwise) which Lessee fails to pay promptly shall become an
additional part of the Loan Obligations.
6.8 REMEDIAL WORK . If any investigation, site monitoring,
containment, clean-up, removal, restoration or other remedial work ("REMEDIAL
WORK") is necessary to comply with any Environmental Law or order of any
Governmental Authority that has or acquires jurisdiction over the Property, the
Improvements or the use, operation or improvement of the Properties under any
Environmental Law, Lessee shall, by the earlier of (1) the applicable deadline
required by Environmental Law or (2) thirty (30) days after notice from
Noteholder demanding such action, begin performing the Remedial Work, and
thereafter diligently prosecute it to completion, and shall in any event
complete such work by the time required by and in accordance with applicable
Environmental Law. If Lessee fails to begin on a timely basis or diligently
prosecute any required Remedial Work, Noteholder may, at its option, cause the
Remedial Work and any other efforts deemed necessary by Noteholder in its sole
and absolute discretion, to be completed, in which case Lessee shall reimburse
Noteholder on demand for all costs of doing so. Any reimbursement due from
Lessee to Noteholder shall become part of the Loan Obligations.
6.9 COOPERATION WITH GOVERNMENTAL AUTHORITIES . Lessee shall
cooperate with any inquiry by any Governmental Authority and shall comply with
any governmental or judicial order which arises from any alleged Prohibited
Activity and Condition.
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES
7.1 EVENTS OF DEFAULT . The occurrence of any one or more of the
following shall constitute an "EVENT OF DEFAULT" hereunder:
(a) The failure by Borrower or Lessee to make any scheduled
payment amount, due under the Note, this Agreement or any of the Transaction
Documents in respect of the Loan Obligations (whether such amount is interest,
principal, deposits into the Tax and
-74-
75
Insurance Escrow Fund, Capital Improvements Account and any other scheduled
reserve payments required under the Transaction Documents or otherwise) within
three (3) days after the same becomes due; or
(b) Any failure by Borrower or Lessee to pay any Loan
Obligation other than a scheduled payment amount within ten (10) days after the
same shall become due.
(c) Lessee's failure to deliver or cause to be delivered the
financial statements and information set forth in Sections 4.5, 4.7 and 4.8
above within the times required when such failure is not cured within twenty
(20) days following Noteholder's written notice to Lessee thereof; or
(d) Breach or default under Sections 3.27, 3.28, 4.4, 4.12,
4.13, 4.14, 4.31, Article V or Article VIII hereof;
(e) The failure of Borrower, Lessee or Manager properly and
timely to perform or observe any covenant or condition set forth in this
Agreement or the other Transaction Documents and not otherwise described
elsewhere in this Section 7.1 and such failure is not fully cured within thirty
(30) days after receipt by Borrower or Lessee of notice from Noteholder of such
failure; or, if such failure is not capable of being cured within said thirty
(30) day period such failure is not cured within such additional period as may
be reasonably required to cure such failure (but in no event to exceed ninety
(90) days from the date of notice) provided that Borrower or Lessee commences
such cure within the initial thirty (30) day period and diligently prosecutes
same to completion; and provided further that, in the case of a failure by
Borrower, Lessee, any Sublessee or Manager to obtain any Regulatory Permit in
accordance with Section 3.11, such initial thirty (30) day period shall not be
extended for any additional period pursuant to the foregoing if such extension
would have a Material Adverse Effect ; or
(f) The filing by any Borrower Party or the Manager of a
voluntary petition, or the adjudication of any of the aforesaid Persons, or the
filing by any of the aforesaid Persons of any petition or answer seeking or
acquiescing, in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, or if any of the aforesaid
Persons should seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator for itself or of all or any substantial part of
its property or of any or all of the rents, revenues, issues, earnings, profits
or income thereof, or the mailing of any general assignment for the benefit of
creditors or the admission in writing by any of the aforesaid Persons of its
inability to pay its debts generally as they become due; or
(g) The entry by a court of competent jurisdiction of an
order, judgment, or decree approving a petition filed against any Borrower Party
or the Manager which such petition seeks any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency, or other relief for debtors, which order, judgment or
decree remains unvacated and unstayed for an aggregate of sixty (60) days
(whether or not consecutive) from the
-75-
76
date of entry thereof, or the appointment of any trustee, receiver or liquidator
of any of the aforesaid Persons or of all or any substantial part of its
properties or of any or all of the rents, revenues, issues, earnings, profits or
income thereof which appointment shall remain unvacated and unstayed for an
aggregate of sixty (60) days (whether or not consecutive); or
(h) Intentionally Omitted; or
(i) Any certificate, statement, representation, warranty or
audit heretofore or hereafter furnished by or on behalf of Borrower, Lessee or
Manager pursuant to or in connection with this Agreement (including, without
limitation, representations and warranties contained herein or in any of the
Loan and Surety Documents for the benefit of Noteholder) or as an inducement to
Noteholder to make the Loan to Borrower, proves (i) to have been false in any
material respect at the time when the facts therein set forth were stated or
certified, or proves to have omitted any substantial contingent or unliquidated
liability or claim against Borrower, Lessee or Manager, including a Contingent
Obligation or (ii) with respect to financial statements, books and records not
to have been prepared in accordance with GAAP or on the date of execution of
this Agreement there shall have been any materially adverse change in any of the
acts previously disclosed by any such certificate, statement, representation,
warranty or audit, which change shall not have been disclosed to Noteholder in
writing at or prior to the time of such execution; or
(j) The failure of Lessee to correct, within the time
deadlines set by any applicable Medicare, Medicaid or other applicable
reimbursement programs or licensing agency, any deficiency which would result in
the following actions by such agency with respect to any Assisted Living
Facility:
(i) The action by the Medicaid or Medicare programs,
any other governmental agency or actor, or any other third
party payer to suspend or offset an amount of more than
$250,000 to recoup overpayments or recover improper
payments.
(ii) a termination of any Reimbursement Contract
representing more than $2,000,000 in annual Operating
Revenues or any Regulatory Permit; or
(iii) a ban on new admissions generally or any ban of
thirty (30) days or more on admission of patients otherwise
qualifying for Medicaid or Medicare coverage or other
reimbursement; or
(k) Lessee, any Sublessee or Manager (in its capacity as
Manager of any Assisted Living Facility) or any Assisted Living Facility shall
be assessed fines or penalties by any state or any Medicare, Medicaid, health or
licensing agency having jurisdiction over such Persons or the Assisted Living
Facilities in excess of $25,000 for a single Assisted Living Facility or
$150,000 in the aggregate for all Assisted Living Facilities during any calendar
year (which fines are not paid on a timely basis), or Lessee, any Sublessee or
Manager (in its capacity as Manager of any Assisted Living Facility) or any
Assisted Living Facility should agree to pay in lieu of such fines or penalties
an amount in settlement of any action to any state or any Medicare, Medicaid,
-76-
77
health or licensing agency having jurisdiction over such Persons or the Assisted
Living Facilities in excess of $25,000 as related to a single Assisted Living
Facility or $150,000 in the aggregate for all Assisted Living Facilities during
any calendar year (which settlement is not paid on a timely basis).
(l) A final judgment in excess of $100,000 (individually or
in the aggregate) shall be rendered by a court of law or equity against Lessee
or Manager or any of their respective assets, and the same shall remain
undischarged for a period of thirty (30) days, unless such judgment is either
(i) fully covered by collectible insurance and such insurer has within such
period acknowledged such coverage in writing, or (ii) although not fully covered
by insurance, enforcement of such judgment has been effectively stayed, such
judgment is being contested or appealed by appropriate proceedings and Lessee or
Manager, as the case may be, has established reserves adequate for payment in
the event such Person is ultimately unsuccessful in such contest or appeal and
evidence thereof is provided to Noteholder; or
(m) If any provision of any organizational documents
affecting the purpose for which any Borrower Party is formed is amended or
modified in any manner which is reasonably likely to result in a Material
Adverse Effect on the Loan or the security therefor, or if any Borrower Party or
any member of such Borrower Party fails to perform or enforce the provisions of
any organizational documents in a manner that is reasonably likely to result in
a Material Adverse Effect on the Loan or security therefor;
(n) The occurrence of an "EVENT OF DEFAULT" as that term is
defined in the Trust Agreement or the Master Lease, or the failure of any Person
which is a party to the Trust Agreement to pay or perform any obligations to the
Noteholder under the Trust Agreement beyond any grace period provided therein;
or
(o) Any dissolution or attempted dissolution of any Borrower
Party;
(p) The occurrence of a Downgrade Surety Default which
results in the S&P Rating of the Surety or the Backstop Insurer being downgraded
below Investment Grade, being withdrawn or Qualified (any such Downgrade Surety
Default, withdrawal or Qualification, an "Investment Grade Downgrade"):
(i) on or before the second (2nd) anniversary of the
Closing Date, if the Net Operating Income from the
Properties for the preceding twelve (12) calendar months (or
the period from the Closing Date to the last day of the
calendar month preceding the occurrence of such Investment
Grade Downgrade, if less than twelve (12) months), shall be
less than the projected net operating income from the
Properties for such period as set forth in Schedule 4.10,
unless within ten (10) Business Days after Lessee receives
notice of the occurrence of such Investment Grade Downgrade,
Lessee delivers to Trustee for deposit into the Additional
Reserve Account under Article 3 of the Trust Agreement the
sum of $10,000,000; or
-77-
78
(ii) at any time after the second (2nd) anniversary
of the Closing Date, if Lessee has not achieved a DSCR of at
least 1.40:1.00 for the trailing twelve (12) calendar
months;
(q) The existence of any other Surety Default (other than a
Downgrade Surety Default);
(r) Any default (including expiration of any applicable
grace or cure periods) or Event of Default under any of the Transaction
Documents not otherwise described hereinabove; .
(s) Any of the Transaction Documents for any reason ceases
to be in full force and effect or is declared to be null and void, or any Person
who is a party thereto, other than Noteholder, denies that it has any further
liability (as distinguished from denial of the existence of a Default or Event
of Default) under any Transaction Document to which it is party, or gives notice
to such effect;
(t) Any Borrower Party or Sublessee 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 and
such order continues for more than 30 days; or
(u) (i) Lessee or Guarantor shall default in the payment
when due of any payment obligation under any Indebtedness with an outstanding
principal balance in excess of $1 million or under any lease agreement involving
payment of rent in an aggregate amount in excess of $1 million now existing or
hereafter entered into by Lessee or Guarantor (any such Indebtedness or lease
obligations, "MATERIAL INDEBTEDNESS"), which default shall continue after the
expiration of any applicable notice or cure period therein provided or (ii) the
acceleration of any Material Indebtedness (or the termination of any lease
evidencing Material Indebtedness).
Notwithstanding anything in this Section, all requirements of notice
shall be deemed eliminated if Noteholder or Trustee is prevented from declaring
an Event of Default by bankruptcy or other applicable law. The cure period, if
any, shall then run from the occurrence of the event or condition of Default
rather than from the date of notice. The provisions of paragraph (e) above do
not provide a cure for Events of Default under other paragraphs of this Section
7. 1.
7.2 REMEDIES . Subject to the terms of the Trust Agreement, upon
the occurrence of any one or more of the foregoing Events of Default:
(a) Upon the occurrence of any Event of Default described in
the foregoing subsections 7.1(f) or 7.1(g), (excluding any such Event of Default
respecting Manager) the unpaid principal amount of and accrued interest and fees
on the Loan and all other Loan 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 Borrower and Lessee. Upon the
occurrence and during the continuance of any other Event of Default, at the
option of Noteholder, which may be exercised
-78-
79
without notice or demand to anyone, all or any portion of the Loan and the other
Loan Obligations shall immediately become due and payable.
(b) Upon the occurrence and during the continuance of any
Event of Default, (including any Event of Default under Sections 7.1(f) and
7.1(g) respecting Manager) Noteholder shall have the right to exercise all
rights and remedies which are specified in any Loan Document or otherwise
available at law or in equity. Without limitation of the foregoing, Noteholder
may cease or suspend any and all performance required of Noteholder under the
Transaction Documents upon the occurrence of any Event of Default.
(c) If any Event of Default shall occur and be continuing,
then there shall be no requirement of notice and time to cure for any other or
subsequent Default.
ARTICLE VIII RESTRICTIONS ON TRANSFER
8.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCES . Except for a
Transfer and Assumption consented to by Noteholder in accordance with Section
8.2, Permitted Liens or (as to Borrower) as expressly permitted under the
Participation Agreement, neither Borrower nor Lessee shall cause or suffer to
occur any sale, transfer, pledge, or encumbrance of (i) all or any part of any
of its interest in the Properties or Improvements, or any interest therein, or
(ii) any direct ownership or beneficial interest in such Borrower Party.
8.2 ASSUMABILITY .
(a) In the event Borrower and Lessee desire to transfer all
of their respective interests in the Properties (but not less than all) to
another party (the "TRANSFEREE BORROWER") and have (i) the Transferee Borrower
become a party to the Note and assume all of Borrower's and Lessee's obligations
under the Loan Documents and the Lease Documents, (ii) indemnitors acceptable to
Noteholder in its sole discretion execute and deliver to Noteholder indemnities,
in form and substance acceptable to Noteholder, and (iii) replacement pledgors
acceptable to Noteholder in its sole discretion pledge all of the ownership
interests in the Transferee Borrower (collectively, a "TRANSFER AND
ASSUMPTION"), Borrower may make a written application to Noteholder for
Noteholder'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, Lessee will pay to Noteholder the reasonable review fee then
required by Noteholder. Lessee also shall pay on demand all of the reasonable
costs and expenses incurred by Noteholder, 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. No Transfer and
Assumption shall be permitted prior to the Defeasance Lockout Expiration Date
(as defined in the Note).
(b) Noteholder shall not unreasonably withhold its consent
to a one time
-79-
80
Transfer and Assumption after the Defeasance Lockout Expiration Date provided
and upon the conditions that:
(i) No Default or Event of Default has occurred and is
continuing;
(ii) Lessee has submitted to Noteholder true, correct and
complete copies of any and all information and documents of any kind requested
by Noteholder concerning the Property or Properties to be transferred,
Transferee Borrower, the replacement indemnitors, and pledgors, and Borrower;
(iii) Evidence satisfactory to Noteholder has been provided
showing that the Transferee Borrower and such of its Affiliates as shall be
designated by Noteholder comply and will comply with Sections 5.19 and 5.20
hereof, as those provisions may be modified by Noteholder taking into account
the ownership structure of Transferee Borrower and its Affiliates;
(iv) If the Loan, by itself or together with other loans,
has been the subject of a Securitization, then Noteholder shall have received
confirmation from all applicable Rating Agencies that the Transfer and
Assumption will not result in a downgrade, qualification, or withdrawal of any
rating then if effect for the securities issued in connection therewith;
(v) If the Loan has not been the subject of a
Securitization, then Noteholder shall have determined in its reasonable
discretion (taking into consideration such factors as Noteholder may determine,
including the attributes of the loan pool in which the Loan might reasonably be
expected to be securitized) that no rating for any securities that would be
issued in connection with such Securitization will be diminished, qualified or
withheld by reason of the Transfer and Assumption;
(vi) Lessee shall have paid all of Noteholder's reasonable
costs and expenses in connection with considering the Transfer and Assumption,
and shall have paid the amount requested by Noteholder as a deposit against
Noteholder's costs and expenses in connection with the effecting the Transfer
and Assumption;
(vii) Lessee, the Transferee Borrower, and the replacement
guarantors, indemnitors, and pledgors shall have indicated in writing in form
and substance reasonably satisfactory to Noteholder their readiness and ability
to satisfy the conditions set forth in Paragraph (c) below;
(viii) The identity, experience, and financial condition of
the Transferee Borrower and the replacement guarantors, indemnitors, and
pledgors shall be satisfactory to Noteholder; and
(ix) If the Surety Bond is then still in effect, the
Transferee Borrower shall be a corporation, partnership, limited liability
company or other business entity organized in the State of Illinois.
-80-
81
(c) If Noteholder consents to the Transfer and Assumption,
the Transferee Borrower and/or Lessee as the case may be, shall deliver the
following to Noteholder on or before the effective date of such Transfer and
Assumption.
(i) Lessee shall deliver to Noteholder an assumption fee
(the "Assumption Fee") equal to 1.0% (the "Assumption Fee Percentage") of the
then unpaid principal balance of the Loan. Notwithstanding the foregoing, the
Assumption Fee Percentage shall be .5% if the Transferee Borrower is Alterra or
an Affiliate of Alterra;
(ii) Borrower (at Lessee's expense), Lessee, Transferee
Borrower, the original and replacement guarantors and indemnitors, and the
original and replacement pledgors shall execute and deliver to Noteholder any
and all documents required by Noteholder, in form and substance required by
Noteholder, in Noteholder's sole discretion;
(iii) Counsel to the Transferee Borrower and replacement
guarantors, indemnitors, and pledgors shall deliver to Noteholder opinions in
form and substance satisfactory to Noteholder as to such matters as Noteholder
shall require, which may include opinions as to substantially the same matters
as were required in connection with the origination of the Loan;
(iv) Lessee shall cause to be delivered to Noteholder, an
endorsement (relating to the change in the identity of the vestee and execution
and delivery of the Transfer and Assumption documents) to Noteholder's Title
Policies in form and substance acceptable to Noteholder in Noteholder's
reasonable discretion (the "ENDORSEMENT"); and
(v) Lessee shall deliver to Noteholder 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 for
the delivery to Lender of the Endorsement.
ARTICLE IX MISCELLANEOUS
9.1 WAIVER . No remedy conferred upon, or reserved to, the Noteholder
in this Agreement or any of the other Transaction Documents is intended to be
exclusive of any other remedy or remedies, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing in law or in equity. Exercise of or omission to exercise
any right of the Noteholder (whether by Noteholder, Trustee, Surety or
Controlling Party) shall not affect any subsequent right of Noteholder to
exercise the same. No course of dealing among Borrower, Lessee and Noteholder
(or Trustee, Surety or Controlling Party) or any delay on the part of Noteholder
(or Surety, Trustee or Controlling Party) in exercising any of its rights or
remedies shall operate as a waiver of any of the Noteholder's rights. No waiver
(whether by Noteholder, Surety, Trustee or Controlling Party) of any Default
under this Agreement or any of the other Loan Documents shall extend to or shall
affect any subsequent or other then existing Default or shall impair any rights,
remedies or powers of Noteholder.
9.2 COSTS AND EXPENSES . Lessee will bear all taxes, fees and expenses
(including actual attorneys' fees and expenses of counsel for the Noteholder or
Trustee, including consultants
-81-
82
and other parties involved in reviewing and examining the Collateral) in
connection with the Loan, the Note, the preparation of this Agreement and the
other Transaction Documents, the negotiation and preparation of the Transaction
Documents and all documents related thereto (including any amendments hereafter
made), any modifications to the Transaction Documents or any of them required in
connection with Noteholder's efforts to obtain a rating upon the Loan, the
Surety Bond or any security related to the Loan or the Note, and in connection
with any other modifications thereto and the recording or filing of any of the
Transaction Documents. If, at any time, a Default occurs or Noteholder or
Trustee becomes a party to any suit or proceeding in order to protect its
interests or priority in any collateral for any of the Loan Obligations or its
rights under this Agreement or any of the other Transaction Documents, or if
Noteholder is made a party to any suit or proceeding by virtue of the Loan, this
Agreement or any Collateral and as a result of any of the foregoing, the
Noteholder or Trustee employs counsel to advise or provide other representation
with respect to this Agreement, or to collect the balance of the Loan
Obligations, or to take any action in or with respect to any suit or proceeding
relating to this Agreement, any of the other Transaction Documents, any
Collateral, Borrower Party or Manager, or to protect, collect, or liquidate any
of the security for the Loan Obligations, or attempt to enforce any security
interest or lien granted to the Noteholder or Trustee by any of the Transaction
Documents, then in any such events, all of the attorney's fees arising from such
services, including attorneys' and consultant's fees for preparation of
litigation and in any appellate or bankruptcy proceedings, and any expenses,
costs and charges relating thereto shall constitute additional obligations of
Lessee to the Noteholder payable on demand of the Noteholder or Trustee. Lessee
shall pay throughout the term of the Loan, on demand by Noteholder, all
reasonable expenses, charges, costs and fees (including reasonable attorneys'
fees and expenses) in connection with the negotiation, documentation,
administration, servicing, enforcement and collection of the Loan including,
without limitation, customary special servicing fees including work-out fees and
liquidation costs or expenses payable to special servicers in Securitizations.
On the Closing Date and the Additional Properties Closing Date, Noteholder may
pay directly from the proceeds of the Loan the foregoing expenses incurred by
Noteholder as of the Closing Date or Additional Properties Closing Date, as the
case may be. Without limiting the foregoing, Lessee has undertaken the
obligation for payment of, and shall pay, all recording and filing fees, revenue
or documentary stamps or taxes, intangibles taxes, and other taxes, expenses and
charges payable in connection with this Agreement, any of the Transaction
Documents, the Loan Obligations, or the filing of any financing statements or
other instruments required to effectuate the purposes of this Agreement, and
should Lessee fail to do so, Lessee agrees to reimburse Noteholder and Trustee
for the amounts paid by Noteholder or Trustee, together with penalties or
interest, if any, incurred by Noteholder or Trustee as a result of such
underpayment or nonpayment. Such amounts shall constitute a portion of the Loan
Obligations, shall be secured by the Mortgages and shall bear interest at the
greater of (i) the Default Rate (as defined in the Note) and (ii) the prime rate
as then published in the Wall Street Journal, from the date advanced until
repaid.
Lessee shall also reimburse Noteholder, Trustee and Surety for such
parties' respective reasonable costs and expenses, including reasonable
attorney's fees and expenses, incurred in connection with or in anticipation of
any Secondary Market Transaction and all reasonable costs or expenses incurred
in connection with amending, clarifying or restructuring of the Loan and Surety
Documents as necessary to permit a Secondary Market Transaction on terms
satisfactory
-82-
83
to Noteholder; provided, however, in no event shall Lessee be required to pay
costs and expenses in an aggregate amount in excess of $500,000 in respect of
the collective costs and expenses of Noteholder, Trustee and Surety in
connection with all Secondary Market Transactions pursuant to the foregoing and
in connection with all Surety Transactions under Section 10.06 of the
Reimbursement Agreement. Lessee and Guarantor shall each be required to pay its
own and Borrower's costs and expenses (including attorneys' fees and expenses)
incurred in connection with any Secondary Market Transaction or Surety
Transaction and each of Noteholder, Trustee and Surety shall be required to pay
its own and Borrower's costs and expenses, if any, in excess of the amount to be
paid by Lessee under the foregoing sentence.
9.3 PERFORMANCE OF NOTEHOLDER . At its option, upon Lessee's
failure to do so and irrespective of whether notice has been given and whether
any time in which to cure has elapsed, the Noteholder or Trustee may make any
payment or do any act on such Lessee's behalf that such Lessee or others are
required to do to remain in compliance with this Agreement or any of the other
Loan Documents, and Lessee agrees to reimburse the Noteholder or Trustee (as
applicable), on demand, for any payment made or expense incurred by Noteholder
or Trustee pursuant to the foregoing authorization, including, without
limitation, attorneys' fees, and until so repaid any sums advanced by Noteholder
or Trustee shall constitute a portion of the Loan Obligations, shall be secured
by the Mortgages and the other Transaction Documents and shall bear interest at
the Default Rate (as defined in the Note) from the date advanced until repaid.
9.4 INDEMNIFICATION .
(a) LESSEE SHALL, AT ITS SOLE COST AND EXPENSE, PROTECT,
DEFEND, INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED PARTIES (AS DEFINED BELOW)
FROM AND AGAINST ANY AND ALL CLAIMS, SUITS, LIABILITIES (INCLUDING, WITHOUT
LIMITATION, STRICT LIABILITIES), ACTIONS, PROCEEDINGS, OBLIGATIONS, DEBTS,
DAMAGES, REMEDIATION COSTS, LOSSES, COSTS, EXPENSES, DIMINUTIONS IN VALUE,
FINES, PENALTIES, CHARGES, FEES, INVESTIGATORY FEES, EXPENSES, JUDGMENTS,
AWARDS, AMOUNTS PAID IN SETTLEMENT, PUNITIVE DAMAGES, FORESEEABLE AND
UNFORESEEABLE CONSEQUENTIAL DAMAGES, OF WHATEVER KIND OR NATURE (INCLUDING BUT
NOT LIMITED TO REASONABLE ATTORNEYS' FEES, FEES OF EXPERT WITNESSES AND
CONSULTANTS AND OTHER COSTS OF DEFENSE) (COLLECTIVELY, "INDEMNIFIED CLAIMS")
IMPOSED UPON OR INCURRED BY OR ASSERTED AGAINST NOTEHOLDER OR ANY OF THE
INDEMNIFIED PARTIES BY REASON OF OR IN ANY MANNER RELATING TO (A) OWNERSHIP OF
THE LOAN, THE NOTE (INCLUDING AS TRUSTEE UNDER ANY TRUST AGREEMENT EXECUTED IN
CONNECTION WITH ANY SECURITIZATION BACKED IN WHOLE OR IN PART BY THE LOAN OR
OTHERWISE ARISING FROM SUCH TRUSTEE'S EXERCISE OF ITS POWERS AND DUTIES
THEREUNDER), THE MORTGAGES OR ANY OF THE OTHER LOAN DOCUMENTS, THE PROPERTIES OR
ANY INTEREST THEREIN OR RECEIPT OF ANY RENTS (AS DEFINED IN THE MORTGAGES); (B)
SUBJECT TO THE LIMITATIONS OF SECTION 9.2, ANY AMENDMENT TO, OR RESTRUCTURING
OF, THE LOAN OBLIGATIONS, ANY OF THE TRANSACTION DOCUMENTS; (C) THE
-83-
84
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, OWNERSHIP OR ENFORCEMENT OF THE
PROVISIONS OF THE MORTGAGES OR THE NOTE OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, WHETHER OR NOT SUIT IS FILED IN CONNECTION WITH SAME, OR IN
CONNECTION WITH BORROWER, LESSEE, ANY GUARANTOR AND/OR ANY PARTNER, JOINT
VENTURER, MEMBER OR SHAREHOLDER THEREOF BECOMING A PARTY TO A VOLUNTARY OR
INVOLUNTARY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY OR SIMILAR PROCEEDING; (D)
ANY ACCIDENT, INJURY TO OR DEATH OF PERSONS OR LOSS OF OR DAMAGE TO PROPERTY
OCCURRING IN, ON OR ABOUT THE PROPERTY, THE IMPROVEMENTS OR ANY PART THEREOF OR
ON THE ADJOINING SIDEWALKS, CURBS, ADJACENT PROPERTY OR ADJACENT PARKING AREAS,
STREETS OR WAYS; (E) ANY USE, NONUSE OR CONDITION IN, ON OR ABOUT THE PROPERTY,
THE IMPROVEMENTS OR ANY PART THEREOF OR ON THE ADJOINING SIDEWALKS, CURBS,
ADJACENT PROPERTY OR ADJACENT PARKING AREAS, STREETS OR WAYS; (F) ANY FAILURE ON
THE PART OF BORROWER OR LESSEE TO PERFORM OR COMPLY WITH ANY OF THE TERMS OF
THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS; (G) ANY CLAIMS BY ANY
BROKER, PERSON OR ENTITY CLAIMING TO HAVE PARTICIPATED IN ARRANGING THE MAKING
OF THE LOAN; (H) ANY FAILURE OF THE PROPERTIES, THE IMPROVEMENTS OR ANY PART
THEREOF TO BE IN COMPLIANCE WITH ANY APPLICABLE LAWS; (I) ANY AND ALL CLAIMS AND
DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST NOTEHOLDER BY REASON OF ANY
ALLEGED OBLIGATIONS OR UNDERTAKINGS ON ITS PART TO PERFORM OR DISCHARGE ANY OF
THE TERMS, COVENANTS, OR AGREEMENTS CONTAINED IN ANY LEASE AGREEMENT OR ANY
REPLACEMENT OR RENEWAL THEREOF OR SUBSTITUTION THEREFOR; (J) PERFORMANCE OF ANY
LABOR OR SERVICES OR THE FURNISHING OF ANY MATERIALS OR OTHER PROPERTIES WITH
RESPECT TO THE PROPERTIES, THE IMPROVEMENTS OR ANY PART THEREOF, (K) THE FAILURE
OF ANY PERSON TO FILE TIMELY WITH THE INTERNAL REVENUE SERVICE AN ACCURATE FORM
1099-B, STATEMENT FOR RECIPIENTS OF PROCEEDS FROM REAL ESTATE, BROKER AND BARTER
EXCHANGE TRANSACTIONS, WHICH MAY BE REQUIRED IN CONNECTION WITH THE MORTGAGE, OR
TO SUPPLY A COPY THEREOF IN A TIMELY FASHION TO THE RECIPIENT OF THE PROCEEDS OF
THE TRANSACTIONS IN CONNECTION WITH WHICH THE LOAN ARE MADE; (L) ANY
MISREPRESENTATION MADE TO NOTEHOLDER IN THIS AGREEMENT OR IN ANY OF THE OTHER
TRANSACTION DOCUMENTS; (M) ANY TAX ON THE MAKING AND/OR RECORDING OF THE
MORTGAGES, THE NOTE OR ANY OF THE OTHER TRANSACTION DOCUMENTS; (N) THE VIOLATION
OF ANY REQUIREMENTS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED; (O) ANY FINES OR PENALTIES ASSESSED OR ANY CORRECTIVE COSTS INCURRED BY
NOTEHOLDER IF ANY PROPERTY OR IMPROVEMENTS IS DETERMINED TO BE IN VIOLATION OF
ANY COVENANTS, RESTRICTIONS OF RECORD, OR ANY APPLICABLE LAWS, ORDINANCES, RULES
OR REGULATIONS; (P) ANY BREACH OF ANY REPRESENTATION OR WARRANTY OF BORROWER OR
LESSEE IN ARTICLE VI OF THIS AGREEMENT; (Q) ANY FAILURE OF BORROWER OR LESSEE TO
PERFORM
-84-
85
ANY OF ITS OBLIGATIONS UNDER ARTICLE VI OF THIS AGREEMENT; (R) THE EXISTENCE OR
ALLEGED EXISTENCE OF ANY PROHIBITED ACTIVITY AND CONDITION; (S) THE RELEASE OR
ALLEGED OR THREATENED RELEASE OF HAZARDOUS MATERIALS IN, ON, UNDER OR FROM ANY
PROPERTY OR THE IMPROVEMENTS; (T) THE ACTUAL OR ALLEGED VIOLATION OF ANY
ENVIRONMENTAL LAW; OR (U) THE ENFORCEMENT BY ANY OF THE INDEMNIFIED PARTIES OF,
OR THE ASSERTION BY BORROWER OF ANY DEFENSE TO ITS OBLIGATIONS UNDER, THE
PROVISIONS OF THIS SECTION 9.4 OR ANY MATTER PERTAINING TO OR ARISING OUT OF THE
RELATED DOCUMENTS OR THE TRANSACTION DOCUMENTS. ANY AMOUNTS PAYABLE TO
NOTEHOLDER OR TRUSTEE BY REASON OF THE APPLICATION OF THIS SECTION 9.4, SHALL
BECOME IMMEDIATELY DUE AND PAYABLE, SHALL CONSTITUTE A PORTION OF THE LOAN
OBLIGATIONS, SHALL BE SECURED BY THE TRANSACTION DOCUMENTS AND SHALL ACCRUE
INTEREST AT THE DEFAULT RATE (AS DEFINED IN THE NOTE). THE OBLIGATIONS AND
LIABILITIES OF LESSEE UNDER THIS SECTION 9.4 SHALL SURVIVE ANY TERMINATION,
SATISFACTION, ASSIGNMENT, ENTRY OF ANY JUDGMENT OF FORECLOSURE OR EXERCISE OF
ANY POWER OF SALE OR DELIVERY OF ANY DEED IN LIEU OF FORECLOSURE OF ANY
MORTGAGE. FOR PURPOSES OF THIS SECTION 9.4, THE TERM "INDEMNIFIED PARTIES" MEANS
GCFP, NOTEHOLDER, SURETY, TRUSTEE AND ANY PERSON WHO IS OR WILL HAVE BEEN
INVOLVED IN THE ORIGINATION OF THE LOAN, ANY PERSON WHO IS OR WILL HAVE BEEN
INVOLVED IN THE SERVICING OF THE LOAN, ANY PERSON IN WHOSE NAME THE ENCUMBRANCES
CREATED BY THE MORTGAGES ARE OR WILL HAVE BEEN RECORDED, ANY PERSON WHO MAY HOLD
OR ACQUIRE OR WILL HAVE HELD A FULL OR PARTIAL INTEREST IN THE COLLATERAL OR THE
LOAN (INCLUDING, WITHOUT LIMITATION, ANY INVESTOR IN ANY SECURITIES BACKED IN
WHOLE OR IN PART BY THE LOAN AND ANY TRUSTEE UNDER ANY TRUST AGREEMENT EXECUTED
IN CONNECTION WITH ANY SUCH SECURITIES) AS WELL AS THE RESPECTIVE DIRECTORS,
OFFICERS, SHAREHOLDER, PARTNERS, MEMBERS, EMPLOYEES, AGENTS, SERVANTS,
REPRESENTATIVES, CONTRACTORS, SUBCONTRACTORS, AFFILIATES, SUBSIDIARIES,
PARTICIPANTS, SUCCESSORS AND ASSIGNS OF ANY AND ALL OF THE FOREGOING (INCLUDING,
WITHOUT LIMITATION, ANY OTHER PERSON WHO HOLDS OR ACQUIRES OR WILL HAVE HELD A
PARTICIPATION OR OTHER FULL OR PARTIAL INTEREST IN THE LOAN OR THE PROPERTIES,
THE IMPROVEMENTS OR ANY PORTION THEREOF, WHETHER DURING THE TERM OF A MORTGAGE
OR AS A PART OF OR FOLLOWING A FORECLOSURE THEREOF AND INCLUDING, WITHOUT
LIMITATION, ANY SUCCESSORS BY MERGER, CONSOLIDATION, OR ACQUISITION OF ALL OR A
SUBSTANTIAL PORTION OF NOTEHOLDER'S OR TRUSTEE'S ASSETS AND BUSINESS).
(b) COUNSEL SELECTED AND PAID FOR BY LESSEE TO DEFEND
INDEMNIFIED PARTIES SHALL BE SUBJECT TO THE APPROVAL OF THE APPLICABLE
INDEMNIFIED PARTY. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, ANY INDEMNIFIED
PARTY MAY ELECT TO RESIST OR DEFEND AND/OR
-85-
86
SETTLE ANY CLAIM OR LEGAL PROCEEDING AT THE LESSEE'S EXPENSE IF SUCH INDEMNIFIED
PARTY HAS REASON TO BELIEVE THAT ITS INTERESTS DIVERGE FROM OTHER INTERESTS
BEING REPRESENTED BY SUCH COUNSEL AND IN ANY CIRCUMSTANCES IN WHICH THE
INDEMNITY UNDER THIS AGREEMENT APPLIES, NOTEHOLDER MAY EMPLOY ITS OWN LEGAL
COUNSEL AND CONSULTANTS TO PROSECUTE, DEFEND OR NEGOTIATE ANY CLAIM OR LEGAL OR
ADMINISTRATIVE PROCEEDING AND NOTEHOLDER, WITH THE PRIOR WRITTEN CONSENT OF
LESSEE (WHICH SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED) MAY
SETTLE OR COMPROMISE ANY ACTION OR LEGAL OR ADMINISTRATIVE PROCEEDING. LESSEE
SHALL REIMBURSE THE INDEMNIFIED PARTIES UPON DEMAND FOR ALL COSTS AND EXPENSES
INCURRED BY THE INDEMNIFIED PARTIES, INCLUDING ALL COSTS OF SETTLEMENTS ENTERED
INTO IN GOOD FAITH, AND THE FEES AND OUT OF POCKET EXPENSES OF SUCH ATTORNEYS
AND CONSULTANTS (BUT LESSEE SHALL BE OBLIGATED TO BEAR THE EXPENSE OF AT MOST
ONLY ONE SUCH SEPARATE COUNSEL FOR EACH INDEMNIFIED PARTY). NOTHING CONTAINED
HEREIN SHALL PREVENT AN INDEMNIFIED PARTY FROM EMPLOYING SEPARATE COUNSEL IN ANY
SUCH ACTION AT ANY TIME AND PARTICIPATING IN THE DEFENSE THEREOF AT ITS OWN
EXPENSE.
(c) LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
THOSE INDEMNIFIED PARTIES WHO ARE NAMED AS PARTIES TO A CLAIM OR LEGAL OR
ADMINISTRATIVE PROCEEDING (A "CLAIM") SETTLE OR COMPROMISE THE CLAIM IF THE
SETTLEMENT (i) RESULTS IN THE ENTRY OF ANY JUDGMENT THAT DOES NOT INCLUDE AS AN
UNCONDITIONAL TERM THE DELIVERY BY THE CLAIMANT OR PLAINTIFF TO NOTEHOLDER OF A
WRITTEN RELEASE OF THOSE INDEMNIFIED PARTIES, SATISFACTORY IN FORM AND SUBSTANCE
TO NOTEHOLDER; OR (ii) MAY MATERIALLY AND ADVERSELY AFFECT ANY INDEMNIFIED
PARTY, AS DETERMINED BY SUCH INDEMNIFIED PARTY IN ITS SOLE DISCRETION.
(d) THE LIABILITY OF LESSEE TO INDEMNIFY THE INDEMNIFIED
PARTIES SHALL NOT BE LIMITED OR IMPAIRED BY ANY OF THE FOLLOWING, OR BY ANY
FAILURE OF LESSEE OR ANY GUARANTOR TO RECEIVE NOTICE OF OR CONSIDERATION FOR ANY
OF THE FOLLOWING:
(i) THE VALIDITY, REGULARITY OR ENFORCEABILITY OF THE
TRANSACTION DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED
IN CONNECTION THEREWITH.
(ii) ANY ALTERATION, AMENDMENT, MODIFICATION, RELEASE,
TERMINATION OR CANCELLATION OF ANY LOAN AND SURETY DOCUMENT, OR ANY CHANGE IN
THE TIME, MANNER OR PLACE OF PAYMENT OF, OR IN ANY OTHER TERM IN RESPECT OF, ALL
OR ANY OF THE OBLIGATIONS OF BORROWER CONTAINED IN ANY LOAN AND SURETY DOCUMENT.
-86-
87
(iii) ANY EXTENSION OF THE MATURITY OF THE NOTE OR ANY
WAIVER OF, OR CONSENT TO ANY DEPARTURE FROM, ANY PROVISION CONTAINED IN ANY
RELATED DOCUMENT.
(iv) THE ACCURACY OR INACCURACY OF ANY REPRESENTATIONS
AND WARRANTIES MADE BY BORROWER OR LESSEE UNDER THIS AGREEMENT OR ANY OTHER LOAN
AND SURETY DOCUMENT.
(v) ANY NEGLIGENCE BY THE INDEMNIFIED PARTIES IN THE
ADMINISTRATION OR ENFORCEMENT OF BORROWER'S OR LESSEE'S OBLIGATIONS UNDER THE
TRANSACTION DOCUMENTS OR ANY DELAY IN ENFORCING SUCH OBLIGATIONS OR IN REALIZING
ON ANY SECURITY FOR THE LOAN OBLIGATIONS.
(vi) ANY ACTION BY ANY INDEMNIFIED PARTY AT ANY TIME
OR IN ANY MANNER TO PARTICIPATE IN THE MANAGEMENT OR CONTROL OF, TAKE POSSESSION
OF (WHETHER PERSONALLY, BY AGENT OR BY APPOINTMENT OF A RECEIVER), OR TAKING
TITLE TO, THE PROPERTY OR ANY PORTION THEREOF, WHETHER BY FORECLOSURE, DEED IN
LIEU OF FORECLOSURE, SALE UNDER POWER OF SALE PURSUANT TO THE MORTGAGES OR
OTHERWISE.
(vii) ANY CHANGE, BETWEEN THE CLOSING DATE AND THE DATE
ON WHICH ALL OF THE OBLIGATIONS HEREUNDER ARE PAID IN FULL, IN APPLICABLE LAW,
INCLUDING WITHOUT LIMITATION, ANY ENVIRONMENTAL LAW, THE EFFECT OF WHICH MAY BE
TO MAKE A LENDER OR A NOTEHOLDER OR MORTGAGEE LIABLE IN RESPECT OF ANY OF SUCH
OBLIGATIONS.
(viii) THE RELEASE OF BORROWER, LESSEE OR ANY OTHER
PERSON, BY NOTEHOLDER, SURETY, TRUSTEE OR BY OPERATION OF LAW, FROM PERFORMANCE
OF ANY OBLIGATION UNDER ANY OF THE TRANSACTION DOCUMENTS.
(ix) THE RELEASE OR SUBSTITUTION IN WHOLE OR IN PART
OF ANY SECURITY FOR THE LOAN OBLIGATIONS.
(x) ANY FAILURE TO PROPERLY PERFECT ANY LIEN OR
SECURITY INTEREST GIVEN AS SECURITY FOR THE LOAN OBLIGATIONS.
(e) LESSEE SHALL, AT ITS OWN COST AND EXPENSE, DO ALL OF THE
FOLLOWING:
(i) PAY OR SATISFY ANY JUDGMENT OR DECREE THAT MAY BE
ENTERED AGAINST ANY INDEMNIFIED PARTY OR INDEMNIFIED PARTIES
-87-
88
IN ANY LEGAL OR ADMINISTRATIVE PROCEEDING INCIDENT TO ANY MATTERS AGAINST WHICH
INDEMNIFIED PARTIES ARE ENTITLED TO BE INDEMNIFIED UNDER THIS AGREEMENT.
(ii) REIMBURSE INDEMNIFIED PARTIES FOR ANY EXPENSES
PAID OR INCURRED IN CONNECTION WITH ANY MATTERS AGAINST WHICH INDEMNIFIED
PARTIES ARE ENTITLED TO BE INDEMNIFIED UNDER THIS AGREEMENT.
(iii) REIMBURSE INDEMNIFIED PARTIES FOR ANY AND ALL
EXPENSES, INCLUDING FEES AND COSTS OF ATTORNEYS, CONSULTANTS AND EXPERT
WITNESSES, PAID OR INCURRED IN CONNECTION WITH THE ENFORCEMENT BY INDEMNIFIED
PARTIES OF THEIR RIGHTS UNDER THIS AGREEMENT, OR IN MONITORING AND PARTICIPATING
IN ANY LEGAL OR ADMINISTRATIVE PROCEEDING.
(f) THE PROVISIONS OF THIS SECTION 9.4 SHALL BE IN ADDITION
TO ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES THAT BORROWER OR LESSEE MAY
HAVE UNDER THE APPLICABLE LAW OR UNDER THE OTHER RELATED DOCUMENTS, AND EACH
INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION UNDER THIS AGREEMENT
WITHOUT REGARD TO WHETHER NOTEHOLDER OR THAT INDEMNIFIED PARTY HAS EXERCISED ANY
RIGHTS AGAINST THE PROPERTIES AND/OR THE IMPROVEMENTS OR ANY OTHER SECURITY,
PURSUED ANY RIGHTS AGAINST ANY GUARANTOR, OR PURSUED ANY OTHER RIGHTS AVAILABLE
UNDER THE LOAN AND SURETY DOCUMENTS OR APPLICABLE LAW. THE OBLIGATIONS OF LESSEE
TO INDEMNIFY THE INDEMNIFIED PARTIES UNDER THIS AGREEMENT SHALL SURVIVE ANY
REPAYMENT OR DISCHARGE OF THE LOAN OBLIGATIONS, ANY FORECLOSURE PROCEEDING, ANY
FORECLOSURE SALE, ANY DELIVERY OF ANY DEED IN LIEU OF FORECLOSURE, AND ANY
RELEASE OF RECORD OF THE LIEN OF ANY MORTGAGE.
(g) THE PROVISIONS OF THIS SECTION 9.4 SHALL NOT REQUIRE
INDEMNIFICATION OF ANY INDEMNIFIED PARTY FOR CLAIMS (WHICH WOULD OTHERWISE
CONSTITUTE INDEMNIFIED CLAIMS) ARISING SOLELY FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR THE BREACH BY SUCH INDEMNIFIED
PARTY OF ITS OBLIGATION UNDER THE TRANSACTION DOCUMENTS (BUT SUCH BREACH SHALL
NOT AFFECT LESSEE'S INDEMNIFICATION OBLIGATIONS TO ANY OTHER INDEMNIFIED PARTY).
9.5 EVIDENCE OF COMPLIANCE . Promptly following request by Noteholder,
each Borrower Party shall provide such documents and instruments as shall be
reasonably satisfactory to Noteholder to evidence compliance with any provision
of the Loan and Surety Documents applicable to such Borrower Party.
-88-
89
9.6 HEADINGS . The headings of the Sections of this Agreement are for
convenience of reference only, are not to be considered a part hereof, and shall
not limit or otherwise affect any of the terms hereof.
9.7 U.S. CURRENCY . All payments to be made hereunder by Borrower or
any Borrower Party shall be made to Noteholder in lawful currency of the United
States of America at the address of Noteholder set forth above or at such other
address as Noteholder shall designate in writing.
9.8 SURVIVAL OF COVENANTS . All covenants, agreements, representations
and warranties made herein and in certificates or reports delivered pursuant
hereto shall be deemed to have been material and relied on by Noteholder,
notwithstanding any investigation made by or on behalf of Noteholder, and shall
survive the execution and delivery to Noteholder of the Note, this Agreement and
the other Loan and Surety Documents. Further, it is the intention of the parties
hereto, and GCFP shall be entitled, that notwithstanding the occurrence of any
Secondary Market Transaction, to rely on all protections afforded to Noteholder,
including without limitation, the protections afforded under SECTION 9.4 hereof,
as if GCFP were expressly named herein.
9.9 NOTICES, ETC . Unless otherwise specifically provided herein, any
notice or other communication required or permitted to be given shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied, telexed or sent by overnight courier service or
United States mail and shall be deemed to have been given: (A) if delivered in
person, when delivered; (B) if delivered by telecopy, on the date of
transmission if transmitted on a Business Day before 6:00 pm (New York Time) or,
if not, on the next succeeding Business Day; (C) if delivered by nationally
recognized overnight courier, one day after delivery to such courier properly
addressed; or (D) if by U.S. Mail, three (3) Business Days after depositing in
the United States mail, with postage paid and properly addressed.
If to Borrower, notice shall be sent to:
Pita General Corporation
c/o SELCO Services Corporation
129 Public Square
Cleveland, Ohio 44114
Attention: Robert Bowes, Esq.
Telephone: (216) 689-5089
Facsimile: (216) 689-5681
with a copy to:
Keycorp Leasing
54 State Street
Albany, New York 12207
Attn: Donald C. Davis
-89-
90
and with a copy to:
Key Global Finance
30 Federal Street
Boston, Massachusetts 02110
Attn: Mindy Berman
Telephone: (617) 654-2777
Facsimile: (617) 654-2727
If to Lessee, notice shall be sent to:
AHC Tenant, Inc.
c/o Alterra Healthcare Corporation
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attn: Mark Ohlendorf, Senior Vice President Finance
Telephone: (414) 641-7432
Facsimile: (414) 789-6182
with copies to:
Rogers & Hardin
229 Peachtree Street - International Tower
International Tower
Atlanta, Georgia 30303
Attn: Miriam Dent, Esq.
Telephone: (404) 420-4644
Facsimile: (404) 525-2224
If to Noteholder:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road, Level 2
Greenwich, Connecticut 06830
Attn: Paul Nidenberg
Telephone: (203) 618-2347
Facsimile: (203) 618-2052
with copies to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attn: Robert L. Boyd, Esq.
-90-
91
Telephone: (212) 906-2252
Facsimile: (212) 906-2021
And to:
ZC Specialty Insurance Company
One Exchange Place
Suite 100
Jersey City, New Jersey 07302
Attention: General Counsel
Facsimile: (201) 309-3040
Confirmation: (201) 332-1400
with copies to:
Zurich Centre Group, LLC
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: General Counsel
Facsimile: (212) 898-5444
Confirmation: (212) 898-5350
The Zurich Centre
90 Pitt's Bay Road
Pembroke HM 08
P.O. Box HM 1788
Hamilton HM HX, Bermuda
Attention: Manager-ZC Specialty Insurance Company
Facsimile: (441) 295-3705
Confirmation: (441) 295-8501
And to:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attn: Corporate Trust Services Division
Telephone: (312) 407-0192
Facsimile: (312) 407-1708
Either party may change its address to another single address by notice given as
herein provided, except any change of address notice must be actually received
in order to be effective.
Notwithstanding the foregoing, all material communications, including without
limitations, communications pertaining to "Default," "Events of Default" or
events or occurrences which
-91-
92
have, will or could result in a Material Adverse Effect shall be given in
writing and delivered by a nationally recognized overnight courier within one
day after delivery to such courier with receipt thereof to be confirmed
telephonically by the sending party.
9.10 BENEFITS . All of the terms and provisions of this Agreement shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
9.11 SECONDARY MARKET TRANSACTIONS GENERALLY . Noteholder shall have
the right to engage in one or more Secondary Market Transactions, and to
structure and restructure all or any part of the Loan, including without
limitation in multiple tranches, as wraparound loans, or for inclusion in a
REMIC or other Securitization. Without limitation, Lender shall have the right
to cause the Note and the Mortgage to be split into a first and a second
mortgage loan, or into a one or more loans secured by mortgages and by the
equity pledges and other security interests included in the Collateral on the
date hereof, in whatever proportion Lender determines, and thereafter to engage
in Secondary Market Transactions with respect to all or any part of the
indebtedness and loan documentation. Borrower and Lessee acknowledge that it is
the intention of the parties that all or a portion of the Loan will be
securitized and that all or a portion of the Loan will be rated by one or more
Rating Agencies. Subject to the provisions of Section 9.12, Borrower and Lessee
further acknowledge that additional structural modifications may be required to
satisfy issues raised 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 Loan Obligations or the Transaction 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 Loan Obligations or
Transaction Documents to one or more investors, or (iii) the transfer or deposit
of all or any portion of the Loan Obligations or Loan and Surety 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 receive income or proceeds therefrom.
9.12 COOPERATION; LIMITATIONS . (a) Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Noteholder,
at Lessee's expense, in effecting any such restructuring or Secondary Market
Transaction. Such cooperation shall include without limitation, executing and
delivering such reasonable amendments to the Transaction Documents as Noteholder
may request, provided however that no such amendment in connection with any
Secondary Market Transaction shall diminish the rights or materially increase
the obligations of the Borrower Parties or SELCO under the Transaction Documents
modify (i) the interest rate payable under the Note or the Rent payable under
the Master Lease in any material respect; (ii) the stated maturity date of the
Note, (iii) the amortization of the principal amount of the Note, (iv) any other
material economic terms of the Loan Obligations or the Master Lease (including,
without limitation, any modification described in Section 2.10(f) of the Trust
Agreement)(any such modification described in the foregoing clauses (i)-(iv), a
"MATERIAL MODIFICATION"). Such cooperation also shall include Lessee's using
best efforts to obtain such certificates and assurances from governmental
entities and others as Noteholder may request. In addition to their obligations
under Section 9.2 hereof and subject to the limitations thereof, Lessee shall
pay for any item that is requested by Noteholder in connection with a Secondary
Market Transaction that was a
-92-
93
requirement for the closing of Loan, but which was waived in connection with
such closing.
(b) Without limiting the foregoing, in the event that any amendment or
modification of the Transaction Documents in connection with any Secondary
Market Transaction does not constitute a Material Modification but in the
reasonable opinion of an Approved Accountant would result in a loss of
Guarantor's "synthetic lease" treatment of the Master Lease for financial
accounting purposes (a "MATERIAL ACCOUNTING CHANGE"), notwithstanding anything
to the contrary contained herein, in the Note or the other Loan Documents,
Lessee shall have the option (the "NOTE PURCHASE OPTION") to purchase the Note
for a purchase price (the "NOTE PURCHASE PRICE") equal to the Purchase
Percentage (defined below) of the principal outstanding under the Note, together
with all accrued and unpaid interest thereon and any other Loan Obligations then
outstanding (other than any Prepayment Consideration otherwise due under the
Note). Lessee may elect to exercise the Note Purchase Option by delivery of
written notice of such election to Noteholder within five (5) Business Days
after Noteholder's request for the proposed modification of the Transaction
Documents giving rise to such Material Accounting Change (which request is
accompanied by a description of the principal terms of the proposed amendment)
together with (i) the sum of five percent (5%) of the then outstanding principal
amount of the Loan (the "INITIAL Deposit") by wire transfer to Noteholder of
immediately available federal funds in accordance with Noteholder's instructions
and (ii) a letter from an Approved Accountant or other evidence reasonably
acceptable to Noteholder that such proposed modification would result in a
Material Accounting Change. Provided that no Event of Default shall have
occurred and be continuing as of the date of Lessee's exercise of the Note
Purchase Option or as of the date of purchase of the Note and Lessee timely
exercises the Note Purchase Option in accordance with the foregoing conditions,
Lessee shall have the right pursuant to the Note Purchase Option to purchase the
Note upon payment to Noteholder of the Note Purchase Price (net of the Deposit),
by wire transfer in accordance with Noteholder's instructions, on or before the
date (the "NOTE PURCHASE DATE") which is ninety (90) days after the date of
Noteholder's request for the proposed modification of the Transaction Documents.
Lessee may extend the Note Purchase Date for an additional ninety (90) days (the
"OUTSIDE NOTE PURCHASE DATE") by delivery to Noteholder of notice thereof
together with amount equal to an additional five percent (5%) of the then
outstanding principal amount of the Loan (the "ADDITIONAL DEPOSIT"; together
with the Initial Deposit, the "DEPOSIT") before the Note Purchase Date. If
Lessee fails to extend the Note Purchase Option and does not consummate the
purchase of the Note in accordance with the foregoing, on or before the Note
Purchase Date, or having so extended the Note Purchase Option fails to
consummate the purchase of the Note on or before the Outside Note Purchase Date,
the Note Purchase Option shall be void and of no further force or effect
whatsoever, Noteholder shall be entitled to retain the Deposit as liquidated
damages for Lessee's failure to purchase the Note and Lessee shall be required
to execute and deliver the proposed modifications to the Transaction Documents
notwithstanding such Material Accounting Change.
For purposes of the foregoing, the Purchase Percentage shall be equal
to, as of any date of determination, a price, expressed as a percentage of par,
at which Noteholder carries the Loan on its regularly maintained internal
position sheets (and Noteholder shall provide Lessee upon request copies of
relevant excerpts from its position sheets), adjusted to take into account any
hedge profits and losses that would be incurred by Noteholder upon the
simultaneous unwinding
-93-
94
of any hedging arrangements entered into by Noteholder with respect to its
rights under the Loan.
9.13 INFORMATION . The Borrower Parties shall provide such information
and documents relating to the Borrower Parties, Manager, the Sublessees, the
Assisted Living Facilities, Properties, Improvements and the business and
operations of all of the foregoing as Noteholder may reasonably request in
connection with any such Secondary Market Transaction. Noteholder 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, and other parties involved in any proposed Secondary Market
Transaction. Any such information may be incorporated into offering documents
for the Secondary Market Transactions. Noteholder and all of the aforesaid
third-party advisors and professional firms and investors shall be entitled to
rely upon such information, and Lessee shall indemnify, defend, and hold
harmless Noteholder from and against any losses, claims, damages and liabilities
that arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in such information provided by Lessee,
any Sublessee or Alterra 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 provided by Lessee, any Sublessee or Alterra or necessary in order
to make the statements in such information provided by Lessee, any Sublessee or
Alterra not materially misleading. Noteholder may publicize the existence of the
Loan Obligations in connection with Noteholder's Secondary Market Transaction
activities or otherwise.
9.14 ADDITIONAL PROVISIONS . In any Secondary Market Transaction,
Noteholder may transfer its obligations under this Agreement and under the other
Loan Documents (or may transfer the portion thereof corresponding to the
transferred portion of the Loan Obligations), and thereafter Noteholder shall be
relieved of any obligations hereunder and under the other Loan Documents so
transferred arising after the date of said transfer with respect to the
transferred interest. Each transferee investor shall become a "NOTEHOLDER"
hereunder and "LENDER" or other applicable party under the Transaction
Documents. In the event Noteholder transfers any or all of its obligations to
multiple transferee investors and such investors become "Noteholders", one such
Noteholder or Servicer shall act as the representative for all Noteholders, and
shall receive notices, approve or deny requests, and otherwise act on behalf of
all Noteholders.
9.15 SUPERSEDES PRIOR AGREEMENTS: COUNTERPARTS . This Agreement and the
instruments referred to herein supersede and incorporate all representations,
promises, and statements, oral or written, made by Noteholder in connection with
the Loan. This Agreement may not be varied, altered, or amended except by a
written instrument executed by an authorized officer of the Noteholder. This
Agreement may be executed in any number of counterparts, each of which, when
executed and delivered, shall be an original, but such counterparts shall
together constitute one and the same instrument.
9.16 INCONSISTENCIES . The Loan shall be governed by the terms and
provisions set forth in this Agreement and the other Loan Documents and in the
event of any inconsistencies between the terms of the other Loan Documents and
the terms of this Agreement, the terms of this Agreement shall control;
provided, however that so long as the Trust Agreement shall be in effect, the
Controlling Party shall be entitled to exercise the rights and remedies of
Noteholder to
-94-
95
the extent and as provided in the Trust Agreement. In the event of any
inconsistencies between the terms of the Loan Documents and the Transaction
Documents, the terms of the Loan Documents shall control, except in the event of
any inconsistency between the terms of the Loan Documents and the Trust
Agreement, in which event the terms of the Trust Agreement shall prevail.
9.17 CONTROLLING LAW . THE PARTIES HERETO AGREE THAT THE VALIDITY,
INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS AND THE
PARTIES HERETO SUBMIT (AND WAIVE ALL RIGHTS TO OBJECT) TO NON-EXCLUSIVE PERSONAL
JURISDICTION IN THE STATE OF ILLINOIS AND AGREE TO VENUE IN ANY COURT IN SUCH
JURISDICTION, INCLUDING ANY FEDERAL COURTS SITTING IN SUCH JURISDICTION.
9.18 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES ANY RIGHT
THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS
AGREEMENT OR THE LOAN OR OTHER LOAN DOCUMENTS, OR (B) IN ANY WAY CONNECTED WITH
OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF NOTEHOLDER AND/OR
BORROWER WITH RESPECT TO THE LOAN DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT
OR THE EXERCISE OF EITHER PARTY'S RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR
OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF
THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. BORROWER AND LESSEE AGREE THAT
NOTEHOLDER MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF EACH OF BORROWER AND
LESSEE IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF
NOTEHOLDER TO MAKE THE LOAN, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN)
BETWEEN BORROWER, LESSEE AND NOTEHOLDER SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
9.19 SUBROGATION . Borrower and Lessee acknowledge that the Surety may
obtain rights in the Loan Documents, by way of subrogation, as a result of a
payment under the Surety Bond and that such payments by Surety shall not reduce
the Loan Obligations of Borrower and Lessee arising hereunder.
9.20 COMPLIANCE WITH LAWS . It is the intent of the parties that the
execution, delivery, and performance of the Loan Documents, the transactions
provided for therein and
-95-
96
contemplated thereby, and all matters incidental and related thereto or arising
therefrom, shall be in strict compliance with, and that they shall each comply
and, conform strictly with, all laws applicable to and governing the Loan
Documents, as from time to time in effect, including applicable usury laws. This
provision shall not be deemed to alter the choice of governing law in the Loan
Documents. In furtherance thereof, the Noteholder and Borrower stipulate and
agree that none of the terms and provisions contained in, or pertaining to, the
Loan Documents shall ever be construed to create a contract for, or obligating
any Person to pay for the use or forbearance or detention of money, interest at
a rate or in an amount in excess of the maximum rate or maximum amount of
interest lawfully permitted or allowed to be, contracted for, charged, received,
taken, or reserved under such laws. For such purposes as to each of the Loan
Documents, (i) "interest" shall include the aggregate of all amounts which
constitute, or are deemed to constitute, interest under the law applicable to
the Loan Documents and the transactions thereunder, that is, contracted for,
chargeable, receivable (whether received or deemed to have been received ),
taken, or reserved under each such document, and (ii) unless otherwise specified
therein, all computations of the maximum amount of interest permitted or allowed
under such applicable law will be made on the basis of the actual number of days
elapsed over a 360-day year . Neither Borrower nor any other Person shall ever
be required to pay interest on, or with respect to any of, the Loan Documents at
a rate or in an amount in excess of the maximum rate or maximum amount of
interest that may be lawfully contracted for, charged, received, taken, or
reserved under such applicable law, AND THE PROVISIONS OF THIS PARAGRAPH SHALL
CONTROL OVER ALL OTHER PROVISIONS OF THE LOAN DOCUMENTS. If the effective rate
or amount of interest which would otherwise be payable would exceed the maximum
rate or maximum amount of interest, the Noteholder or any other holder of the
Note or other obligation is allowed by such applicable law to change, contract
for, take, reserve, or receive, or in the event the Noteholder or any holder of
the Note or other obligation shall change, contract for, take, reserve, or
receive money that is deemed to constitute interest which would, in the absence
of this provision, increase the effective rate or amount of interest payable
under the Loan Documents to a rate or amount in excess of that permitted or
allowed to be charged, contracted for, taken reserved, or received under such
applicable law then in effect, then the amount of interest which would otherwise
be payable shall be limited to, and the Loan Documents shall in all respects be
construed and applied so as to conform to, the maximum amount allowed pursuant
to then applicable law, and, if no maximum amount or rate is then in effect,
then as may otherwise be authorized and allowed under such laws, as now or
hereafter construed by the courts having jurisdiction. Any amount(s) charged,
contracted for, received, taken or reserved that are deemed to constitute
interest determined to be in excess of the. maximum rate or maximum amount of
interest permitted by applicable law shall be immediately returned or credited
to the account of the Borrower or other Person entitled thereto upon such a
determination, including a determination by a court of competent jurisdiction.
All amounts contracted for, charged, received, reserved, paid, or agreed to be
paid in connection with any note or other obligation which would under
applicable law be deemed "interest" (or if not so deemed, would be deemed an
amount that would be included in the calculation of the maximum rate or maximum
amount of interest allowed pursuant to applicable law), shall, to the maximum
extent not prohibited by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of the Loan Documents and any loans, as the case
may be; provided that, if the Note or other obligation is paid and performed in
full prior to the end of the full existence thereof and the
-96-
97
amount paid thereon exceeds the maximum lawful rate or amount, the Noteholder
shall refund to the Borrower or such Person entitled thereto the amount of such
excess, or credit the amount of such excess against the principal amount of such
note or other obligation (as applicable) and, in such event, it is expressly
agreed that the Noteholder shall not be subject to any penalties provided by any
laws for contracting for, charging, taking, reserving, or receiving interest in
excess of the maximum rate.
9.21 INTERPRETATION . In this Agreement (unless otherwise specified),
the singular includes the plural and the plural includes the singular; words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute referred to; 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"; references to articles, sections (or
subdivisions of sections), recitals, exhibits, annexes or schedules are those of
this Agreement unless otherwise indicated; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments and
other modification to such instruments, but only to the extent such amendments
and other modification are not prohibited by the terms of this Agreement or
specifically excluded therefrom; the phrase "and/or" shall be deemed to mean the
words both preceding and following such phrase, or either of them; references to
the parties and to Persons include their respective permitted successors and
assigns; and, in the case of governmental Persons, Persons succeeding to their
respective functions and capacities; and references to times of day shall be to
Chicago, Illinois time unless specifically provided otherwise.
9.22 NON-EXCLUSIVITY OF REMEDIES . Upon the occurrence and continuance
of an Event of Default, the Noteholder may exercise any right, power or remedy
permitted to it by law (whether by suit in equity, action at law or both), and
whether for specific performance of any agreement contained in this Agreement or
the other Loan Documents or in aid of the exercise of any right or power granted
in this Agreement or the other Loan Documents, or otherwise, it being intended
by the parties hereto that no remedy is to be exclusive and that each remedy is
to be cumulative. No course of dealing on the part of the Noteholder or any
delay or failure on the part of the Noteholder to exercise any right shall
operate as a waiver of such right or otherwise prejudice the Noteholder's
rights, powers and remedies. If Borrower or Lessee fails to pay when due any
amount owed hereunder, Lessee shall be obligated to pay to the Noteholder, to
the extent permitted by law, such further amount as shall be sufficient to cover
the cost and expenses, including, but not limited to, reasonable attorneys'
fees, or collecting any sums due or otherwise enforcing any of tile Noteholder's
rights.
9.23 SERVICER; TRUSTEE . All rights of the Noteholder hereunder may
exercised by the Servicer or Trustee, as applicable. The Servicer or Trustee, as
applicable shall be entitled to the benefit of all obligations of any of the
Borrower Parties in favor of Noteholder.
9.24 OBLIGATIONS OF THE BORROWER PARTIES . Except as expressly
provided, the obligations of Lessee hereunder are not those of the other
Borrower Parties. The Borrower Parties other than Lessee are parties to this
Agreement only with regard to the representations,
-97-
98
warranties, and covenants specifically applicable to them.
9.25 LIMITATION OF LIABILITY . Neither Noteholder, nor any
affiliate, officer, director, employee, attorney, or agent of Noteholder, shall
have any liability with respect to, and Borrower and Lessee each hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by Borrower
or Lessee in connection with, arising out of, or in any way related to, this
Agreement or any of the other Transaction Documents, or any of the transactions
contemplated by this Agreement or any of the other Transaction Documents, other
than the gross negligence or willful misconduct of Noteholder or damages
resulting from Noteholder's liquidation, draw down or other efforts to realize
upon the Excluded Collateral in violation of the terms of this Agreement or the
other Transaction Documents. Borrower and Lessee each hereby waives, releases,
and agrees not to sue Noteholder or any of Noteholder's affiliates, officers,
directors, employees, attorneys, or agents for punitive damages in respect of
any claim in connection with, arising out of, or in any way related to, this
Agreement or any of the other Transaction Documents, or any of the transactions
contemplated hereby or thereby except to the extent same is caused by the gross
negligence or willful misconduct of a Noteholder.
9.26 NO DUTY . All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Noteholder shall have the right
to act exclusively in the interest of Noteholder 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.
9.27 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES .
To the extent that Lessee or any Affiliate thereof (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 to Lessee or such Affiliate
thereof. This Section 9.27 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 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 shall not require that 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 Transaction 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
Transaction Documents. Waiving
-98-
99
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 Noteholder 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 Noteholder 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 Transaction Documents, Waiving Party hereby agrees
that all of its obligations under the Transaction 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 Noteholder may be impaired,
destroyed, or otherwise affected by reason of any action or inaction on the part
of Noteholder. Waiving Party waives all rights and defenses arising out of an
election of remedies by the Noteholder or Trustee, even though that election of
remedies, such as a non- judicial foreclosure with respect to security for a
guaranteed obligation, may have destroyed the Waiving Party's rights of
subrogation and reimbursement against the other Borrower Parties by the
operation of Section 580d of the California Code of Civil Procedure or
otherwise. Waiving Party waives all rights and defenses that it may have because
the obligations of any other Borrower Party is secured by real property. This
means, among other things: (i) the Trustee may collect from Waiving Party
without first foreclosing on any real or personal property collateral pledged by
the other Borrower Party; (ii) if the Trustee forecloses on real property
collateral pledge, by any other Borrower Party, (A) the amount of the debt may
be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price and
(B) the Trustee may collect from the Waiving Party even if the Trustee, by
foreclosing on the real property collateral, has destroyed any right the Waiving
Party may have collect from another Borrower Party. This is an unconditional and
irrevocable waiver of any rights and defenses the Waiving Party may have because
the other Borrower Party's debt is secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based upon
Sections 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
Noteholder 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
Transaction Documents.
-99-
100
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 Noteholder 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 Noteholder nor any person
or entity acting for or on behalf of Noteholder 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 Noteholder, or Noteholder 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 (i) shall have no right of subrogation with
respect to the obligations of the other Borrower Parties and (ii) waives any
right to enforce any remedy that Noteholder 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 Waiving Party waives
any benefit of, and any right to participate in, any security or collateral
given to Noteholder to secure the payment or performance of all or any part of
such obligations or any other liability of the other parties to Noteholder.
Waiving Party agrees that any and all claims of 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 Noteholder 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 Noteholder in
those assets.
9.28 MARSHALING; PAYMENTS SET ASIDE . Noteholder 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 Loan Obligations. To the extent that any Person
makes a payment or payments to Noteholder, or Noteholder 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,
-100-
101
common law or equitable cause, then to the extent of such recovery, the Loan
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, 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.
9.29 NO FIDUCIARY RELATIONSHIP . No provision in this Agreement or in
any of the other Transaction Documents and no course of dealing between the
parties shall be deemed to create any fiduciary duty by Noteholder to Borrower,
Lessee or any other Person.
9.30 FURTHER ASSURANCES . Each of the Borrower Parties shall from time
to time execute, at Lessee's expense, and/or deliver such documents, agreements,
financing statements, and reports, and perform such acts as Noteholder at any
time may reasonably request to carry out the purposes and otherwise implement
the terms and provisions and the rights and benefits intended to be provided to
Noteholder in this Agreement and the Transaction Documents. Without limiting the
generality of the foregoing and in addition to the agreements of Borrower and
Lessee under Sections 9.12 and 9.13 hereof, Borrower and Lessee, in recognition
of the complexity of the transactions contemplated hereby, covenant and agree to
cooperate fully, reasonably and in good faith with Noteholder and its agents and
representatives in taking all reasonable and necessary actions, at Lessee's
expense, to make effective for Noteholder the benefits which the parties hereto
have intended Noteholder to realize. Such actions may include without limitation
amending or restructuring of the Transaction Documents as necessary to correct
inconsistencies or errors provided that no such amendment or restructuring shall
diminish the rights of the Borrower Parties or SELCO under the Transaction
Documents as intended by the parties, result in a Material Modification or
otherwise materially increase the obligations of the Borrower Parties or SELCO
hereunder or under the other Transaction Documents.
9.31 SPECIAL CIRCUMSTANCES FURTHER ASSURANCES . The parties acknowledge
that to accommodate a time-sensitive business opportunity this transaction has
been closed on a highly expedited basis and the economic terms of the Loan would
be less favorable to the Borrower Parties if the Noteholder did not believe that
it could include the Loan in a rated securitization transaction. The Borrower
Parties agree that they shall promptly comply, at Lessee's expense, with any
reasonable request made by Noteholder within a reasonable time after the Closing
Date or Additional Properties Closing Date, provided that Noteholder states in
good faith that such request (i) is to provide to Noteholder or Surety a benefit
that either of them had intended to obtain in this transaction , or (ii) is to
provide a benefit that would customarily or reasonably be provided in a
comparable transaction, or (iii) is to satisfy any request of any Rating Agency
or to conform to customary commercial mortgage loan securitization standards.
Without limitation, such requests may be for any modification of the transaction
structure or for execution and delivery by Borrower Parties or others of
modifications and amendments of any of the Transaction Documents, legal opinions
customarily rendered by counsel to borrowers in rated securitization
transactions (other than a nonconsolidation opinion with respect to Lessee) or
as requested by any Rating Agency, title insurance endorsements, and other
items, or for new or replacement documents and instruments, all of the foregoing
to be at Lessee's expense (subject to the limitations of Section 9.2 with
respect to costs and expenses in connection with Secondary Market Transactions
and Surety Transactions). Lessee shall pay all costs and expenses of
-101-
102
Noteholder and Surety, including their reasonable attorneys' fees, incurred in
connection with post-closing transaction review and in connection with such
post-closing modifications, amendments, and new items. Notwithstanding the
foregoing, absent manifest error, the Borrower Parties shall not be required to
consent to a Material Modification of the Loan. Nothing in this Section shall
diminish any rights of Noteholder or Surety under any other provision of the
Transaction Documents. Nothing in any other such provision of the Transaction
Documents shall diminish any rights of Noteholder or Surety under this Section.
9.32 NON-RECOURSE LOAN
(a) Except as otherwise provided herein, Noteholder shall
not enforce the liability and obligation of Borrower to perform and observe the
obligations contained in this Agreement, the Note or the Transaction Documents
by any action or proceeding wherein a money judgment shall be sought against
Borrower or SELCO, except that Noteholder may bring a foreclosure action, action
for specific performance or other appropriate action or proceeding to enable
Noteholder to enforce and realize upon the Mortgages or other Transaction
Documents, and the Properties or any of them; provided, however, that any
judgment in any action or proceeding shall be enforceable against Borrower only
to the extent of Borrower's interest in the Properties.
(b) Notwithstanding the foregoing, Borrower and SELCO shall
be personally liable in the amount of any loss, damage or cost resulting or
arising from (i) fraud or intentional misrepresentation by Borrower or SELCO in
connection with obtaining the Loan evidenced by the Notes, (ii) Borrower's or
SELCO's misappropriation or misapplication of Rents in violation of the Flow of
Funds Agreement or any other Transaction Document, (iii) Borrower's or SELCO's
violation of the provisions of Section 5.2, 5.3, 5.7 or 5.8 and (iv) upon the
occurrence of any Event of Default with respect to Borrower under Section
7.1(f); provided, however, that SELCO shall only be liable for any loss, damage
or cost resulting or arising from any of the foregoing acts of Borrower or
matters with respect to Borrower occurring or existing during the period that
SELCO is Borrower's controlling shareholder.
(c) No provision of this Section 9.32 shall (i) affect the
enforcement of the Guaranty, or any other guaranty or similar agreement executed
in connection with the debt evidenced by the Note, (ii) release or reduce the
debt evidenced by the Note, (iii) impair the lien of the Mortgages or any other
Transaction Documents, (iv) impair the rights of Noteholder to enforce any
provisions of the Transaction Documents, (v) limit Noteholder'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 liable in accordance with this Section 9.32 or any other
Transaction Documents or (vi) modify or affect the liabilities or obligations of
Lessee, Guarantor, Manager or any Sublessee under any of the Transaction
Documents.
-102-
103
IN WITNESS WHEREOF, the parties have caused this Agreement to be
properly executed as of the date first above written.
BORROWER:
PITA GENERAL CORPORATION,
an Illinois corporation
By: /s/ Mindy Berman
------------------------------------------
Name: Mindy Berman
Its: Vice President
OTHER BORROWER PARTIES:
LESSEE:
AHC TENANT, INC.,
a Delaware corporation
By: /s/ Mark W. Ohlendorf
------------------------------
Name: Mark W. Ohlendorf
Title: Vice President
NOTEHOLDER:
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC, a Delaware corporation
By: /s/ Warren Ashenmil
-------------------------
Name: Warren Ashenmil
Title: Senior Vice President
-103-
104
EXHIBIT A
MASTER GLOSSARY OF DEFINITIONS
This MASTER GLOSSARY OF DEFINITIONS provides a definition for each of
the defined terms contained in the Transaction Documents. To the extent of any
inconsistency between the defined terms set forth herein and any definition set
forth in a particular Transaction Document, the definition provided by the
Transaction Documents shall control. All cross-references to defined terms set
forth in the Loan Agreement and all exhibits thereto shall continue and survive
the termination or expiration of the Loan Agreement and are incorporated by
reference herein.
"ACCEPTABLE LETTER OF CREDIT" is defined in Section 1.5 of the Trust
Agreement.
"ACCEPTABLE REPLACEMENT COLLATERAL" is defined in Section 9.8 of the
Participation Agreement.
"ACCOUNTS" is defined in Section 1.1 of the Loan Agreement and Section
1.01 of the Reimbursement Agreement.
"ACCREDITATION" is defined in Section 1.1 of the Loan Agreement.
"ACQUISITION AGREEMENTS" shall mean those two (2) certain agreements
dated as of December 31, 1998, each as amended, between Alterra and Seller
pursuant to which Alterra is obligated to purchase from, and Seller is obligated
to sell to Alterra, up to twenty-nine (29) assisted living facilities on the
terms and conditions set forth therein, as such agreements have been assigned to
Owner.
"ACQUISITION COSTS" shall mean the costs incurred in connection with
the acquisition of a Leased Property including the Land and any Improvements
existing as of the date of acquisition, including, without limitation, all
Transaction Expenses.
"ACTUAL MONTHLY OPERATING LOSS" is defined in Section 3.15 of the Trust
Agreement.
"ADDITIONAL ADVANCE" is defined in Section 1.1 of the Loan Agreement.
"ADDITIONAL PROPERTIES CLOSING DATE" is defined in Section 1.1 of the
Loan Agreement.
"ADDITIONAL PROPERTIES" is defined in Section 1.1 of the Loan
Agreement.
"ADDITIONAL PROPERTIES OUTSIDE DATE" is defined in Section 1.1 of the
Loan Agreement.
"ADDITIONAL RENTAL" is defined in Section 5(b) of the Master Lease.
105
"ADDITIONAL RESERVE ACCOUNT" shall have the meaning assigned to such
term in Section 3.16 of the Trust Agreement.
"ADVANCE(S)" is defined in Section 2.1 (b) of the Loan Agreement..
"AFFILIATE" is defined in Section 1.1 of the Loan Agreement.
"AGGREGATE EQUITY BALANCE" shall mean, as of any date, the sum of the
Equity Balances on such date for each and every Leased Property.
"AGGREGATE LEASE BALANCE" shall mean, as of any date, the sum of the
Lease Balances on such date for each and every Leased Property.
"AGGREGATE LOAN BALANCE" shall mean, at any date, the sum of the Loan
Balances on such date for each and every Leased Property.
"AHC" means AHC Tenant, Inc., a Delaware corporation.
"ALLOWED INDEBTEDNESS" is defined in Section 1.1 of the Loan Agreement.
"ALTERATIONS" is defined in Section 1.1 of the Loan Agreement.
"ALTERNATE RATE" means the Federal Funds Effective Rate plus 1%.
"ALTERNATE RATE ADVANCE" shall mean any Equity Advance during any
Interest Period with respect to which Yield is based upon the Alternate Rate.
"ALTERRA" means Alterra Healthcare Corporation, a Delaware corporation.
"APPRAISAL" is defined in Section 1.1 of the Loan Agreement.
"APPROVED ACCOUNTANTS" is defined in Section 1.1 of the Loan Agreement.
"APPURTENANT RIGHTS" shall mean all agreements, easements, rights of
way or use, rights of ingress or egress, privileges, appointments, tenements,
hereditaments, and other rights and benefits at any time belonging or pertaining
to any Land, including the use of any streets, ways, alleys, vaults or strips of
land adjoining, abutting, adjacent or contiguous to such Land and all permits,
licenses, and rights, whether or not of record, granted to or conferred upon the
Land.
"ARTICLE 1 EVENT" as defined in Section 1.7 of the Trust Agreement.
"ARTICLE 1 EVENT NOTICE" as defined in Section 1.7 of the Trust
Agreement.
A-105
106
"ASSIGNED VALUE" for any Leased Property means (a) prior to June 30,
2002, the amount set forth on Exhibit B to the Master Lease, and (b) thereafter,
the Net Operating Income of such Leased Property for the immediately preceding
fiscal quarter.
"ASSIGNED VALUE FACTOR" for any Leased Property means a fraction, the
numerator of which is the Assigned Value for such Leased Property and the
denominator of which is the Assigned Value of all Leased Properties then subject
to the Lease.
"ASSIGNEE" is defined in Section 19(b) of the Master Lease.
"ASSIGNMENTS" is defined in Section 1.1 of the Loan Agreement.
"ASSIGNMENTS OF LEASES" is defined in Section 1.1 of the Loan
Agreement.
"ASSIGNMENTS OF MANAGEMENT AGREEMENTS" is defined in Section 1.1 of the
Loan Agreement.
"ASSIGNMENTS OF MEMORANDA OF LEASE" is defined in Section 1.1 of the
Loan Agreement.
"ASSIGNMENTS OF PURCHASE AGREEMENTS" shall mean those certain
Collateral Assignments of Purchase Agreements of even date herewith executed by
Borrower in favor of Trustee for the benefit of the Trustee and the
Beneficiaries.
"ASSISTED LIVING FACILITIES" is defined in Section 1.1 of the Loan
Agreement.
"ASSISTED LIVING FACILITY CONSULTANT" is defined in Section 1.1 of the
Loan Agreement.
"ASSUMPTION FEE" is defined in Section 1.1 of the Loan Agreement.
"ASSUMPTION FEE PERCENTAGE" is defined in Section 1.1 of the Loan
Agreement.
"AUTHORIZED OFFICER" is defined in Section 1 of the Insurance Surety
Bond.
"AVAILABLE BED CAPITAL IMPROVEMENT AMOUNT" is defined in Section 1.1 of
the Loan Agreement.
"AVAILABLE BEDS" is defined in Section 1.1 of the Loan Agreement.
"BACKSTOP INSURER" means Centre Reinsurance (US) Limited, a Bermuda
exempted company, and its successors and assigns.
"BACKSTOP POLICY" means the Backstop Insurance Surety Bond dated as of
even date herewith, from Backstop Insurer in favor of Trustee guaranteeing the
payment when due of all
A-106
107
liabilities of Surety arising under the Surety Bond.
"BALANCED OWED" is defined in paragraph 42 of the Mortgages.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended.
"BANKRUPTCY/INVALIDITY SURETY DEFAULT" is defined in Section 1.2 of the
Trust Agreement.
"BASE RENTAL" shall mean the amounts set forth in Section 5 of the
Master Lease payable on each Rental Payment Date pursuant to Section 5(a) of the
Master Lease.
"BASE SURETY PREMIUM" means a premium payable (a) on the Closing Date
in advance for the period from the Closing Date to and including July 31, 1999
in an amount equal to $59,984.00; and (b) in arrears on the second and each
subsequent Distribution Date and on the date of payment of the Note in full
(without giving effect to any payments thereof which may be made by the Surety
or the Backstop Insurer), equal to the result obtained by multiplying (i) by
(ii) by (iii), where (i) is the percentage set forth below applicable to such
Distribution Date; (ii) is the outstanding principal amount of the Note (but
without giving effect to any payments thereof by the Surety or the Backstop
Insurer), determined as of the immediately proceeding Distribution Date and
(iii) is a fraction where (y) the numerator is the number of days from and
including the immediately preceding Distribution Date to but excluding the
Distribution Date of calculation (except in the case of the calculation
occurring on September 1, 1999, in which case the numerator shall by 31) and (z)
the denominator is 360;
For purposes of clause (i) above, the applicable percentages shall be
as follows:
Closing Date to July 31, 2000 .38%
August 1, 2000 to July 31, 2001 1.65%
August 1, 2001 to July 31, 2002 1.93%
August 1, 2002 to July 31, 2002 2.22%
August 1, 2003 to July 31, 2004 2.51%
August 1, 2004 to July 31, 2005 2.82%
August 1, 2005 to July 31, 2006 2.87%
August 1, 2006 to July 31, 2007 2.92%
August 1, 2007 to July 31, 2008 2.98%
August 1, 2008 to the Maturity Date 3.05%
"BASIC LEASE TERM" for any Leased Property shall have the meaning
specified in the applicable Lease Supplement.
"BASIC LEASE TERM COMMENCEMENT DATE" for any Leased Property shall have
the meaning specified in the applicable Lease Supplement.
A-107
108
"BENEFICIARY OR BENEFICIARIES" shall mean, individually or
collectively, as the context may require, Lender, Surety, Borrower and/or any
Person that subsequently becomes a lawful Holder; in no event shall Lessee,
SELCO or Guarantor ever be deemed to be a "Beneficiary".
"BENEFIT PLAN" is defined in Section 1.1 of the Loan Agreement.
"BENEFITTED ITEM" shall mean each item of indebtedness, obligation or
liability described in the Categories.
"BOND" shall have the meaning contained in the Whereas clauses to the
Reimbursement Agreement.
"BORROWER" shall mean Pita General Corporation, an Illinois
corporation.
"BORROWER PARTY SECRETARY" is defined in Section 1.1 of the Loan
Agreement.
"BORROWER PRIORITY CATEGORY SHORTFALL AMOUNT" is defined in Section 2.1
of the Flow of Funds Agreement.
"BORROWER REQUIRED CASUALTY/CONDEMNATION PAYMENT" shall mean the Equity
Balance relating to the affected Property.
"BUDGET" is defined in Section 1.1 of the Loan Agreement.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City, New York or Chicago, Illinois are
required or authorized by law to close.
"CALL OPTION" is defined in Section 7.3 of the Joint Venture
Agreements.
"CAP EX. REIMBURSEMENT REQUEST" shall have the meaning set forth in
Section 3.2(c) of the Trust Agreement.
"CAPITAL IMPROVEMENTS" shall mean the collective reference to the
Initial Capital Improvements together with any capital improvements made
pursuant to Section 3.2 of the Trust Agreement.
"CAPITAL IMPROVEMENTS ACCOUNT" means the account established pursuant
to Section 3.2(a) of the Trust Agreement.
"CAPITAL IMPROVEMENTS FUNDS" is defined in Section 3.2(a) of the Trust
Agreement.
"CAPITAL LEASE PROPERTY" shall mean a Leased Property designated by
Lessee as a "Capital Lease Property" in the relevant Lease Supplement and
intended by Owner and Lessee to
A-108
109
be treated for financial accounting purposes of Lessee as covered by a "Capital
Lease" under SFAS 13.
"CAPITAL PROCEEDS" shall mean (i) any and all Operating Revenues from
the Properties from and after the occurrence of an Event of Default and the
termination of the Flow of Funds Agreement (provided that, prior to the
occurrence of an Event of Default and termination of the Flow of Funds
Agreement, all Operating Revenues shall be disbursed in accordance with the Flow
of Funds Agreement), (ii) all other income and proceeds realized from the
liquidation of the Collateral through the exercise by any Party of any rights or
remedies under any of the Transaction Documents (but excluding (x) proceeds from
the JV Springing Collateral Account and (y) insurance proceeds or condemnation
awards), and (iii) any proceeds realized from the purchase, return or
disposition of the Properties pursuant to Sections 29 and 31 of the Lease.
"CASUALTY" is defined in paragraph 12 of the Mortgages.
"CASUALTY AMOUNT" is defined in Section 1.1 of the Loan Agreement and
in Section 15(b) of the Master Lease Agreement.
"CATEGORY" means each numbered subparagraph of Section 2.1 of the Flow
of Funds Agreement and shall include all Benefitted Items specified in each such
subparagraph.
"CERCLA" is defined in the definition of Environmental Laws.
"CERCLIS" is defined in Section 1.1 of the Loan Agreement.
"CHANGE OF CONTROL" is defined in Section 9.10 of the Participation
Agreement.
"CHANGE OF CONTROL AND CONSENT" shall mean, upon Surety's failure to
cure certain Surety Defaults in accordance with the time frames set forth in
Article 1 of the Trust Agreement, that the Surety is no longer the Controlling
Party under the Trust Agreement (as limited by the definition of
"Non-Controlling Party"), but is instead the Non-Controlling Party under the
Trust Agreement, and Lender is no longer the Non-Controlling Party hereunder,
but is instead the Controlling Party hereunder; provided that Surety will not be
permitted to assume or continue to exercise the rights of the Non-Controlling
Party (and to the extent that any action or inaction otherwise is not permitted
without consent or approval of the Non-Controlling Party, then such consent
requirement shall no longer apply) contained in the Trust Agreement or the Loan
Documents if Backstop Insurer's S&P Rating is downgraded below Investment Grade
or such S&P Rating is withdrawn, Qualified or upon the occurrence of a "Surety
Event of Default."
"CHARTER DOCUMENTS" is defined in Section 1.1 of the Loan Agreement.
"CLAIM" is defined in Section 1.1 of the Loan Agreement.
"CLOSING DATE" is defined in Section 1.1 of the Loan Agreement.
A-109
110
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means collectively, (i) any and all real and personal
property and any and all tangible and intangible assets or other property
(including, without limitation, the Deposit Accounts) which is or hereafter may
become subject to a Lien in favor of Trustee or any Beneficiary, whether by way
of direct or indirect security or by way of assignment (including, without
limitation, any collateral assignment), in each case, as security for any of the
Secured Obligations, excluding any Posting of Collateral by the Surety and the
Excluded Collateral, and (ii) any and all title insurance proceeds from any loan
policy of title insurance on any of the Properties.
"COLLATERAL COLLECTION EXPENSES" means, without limitation, all costs
and expenses incurred by Trustee or Controlling Party (or by a Servicer on their
behalf) under the Trust Agreement or any of the Security Documents when acting
with a good faith belief that its actions are not contrary to the provisions
thereof, including without limitation in connection with (1) administration of
the Loan following a default thereon, (2) the realization upon, protection,
insuring, management or operation of the Collateral (whether before or after
acquisition thereof by Trustee through foreclosure or deed in lieu thereof), (3)
enforcing or defending any Lien on the Collateral (including UCC filings) or (4)
any other action taken under or in connection with the Trust Agreement or any of
the Security Documents, such costs and expenses to include reasonable fees and
expenses incurred for or by legal counsel for Trustee (including in-house
counsel), Controlling Party or a Servicer in connection with the foregoing,
customary fees paid (for example, "Special Servicing" fees, workout fees and
liquidation fees) paid to a Servicer following a default on the Loan and any
other costs, expenses or liabilities incurred by Trustee or Controlling Party
(or by a Servicer on their behalf) for which such Person is entitled to be
reimbursed or indemnified pursuant to the Trust Agreement or any Collateral
Document.
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not
incorporated, which is under common control with the Guarantor within the
meaning of Section 414(b) or (c) of the Internal Revenue Code of 1986, as
amended and the regulations promulgated or issued thereunder.
"CON" is defined in Section 1.1 of the Loan Agreement.
"CONDEMNATION" is defined in Section 1.1 of the Loan Agreement.
"CONTINGENT SURETY RENTAL" is defined in Section 5(c) of the Master
Lease.
"CONTINGENT OBLIGATION" is defined in Section 1.1 of the Loan
Agreement.
"CONTROLLING PARTY" shall mean Surety and any of its designees;
provided, however, that after a Change of Control and Consent, Lender shall
become the Controlling Party together with any of its designees.
A-110
111
"CONTRACTUAL OBLIGATION" is defined in Section 1.1 of the Loan
Agreement.
"CORRESPONDENT LOCKBOX AGREEMENT" shall mean that certain Correspondent
Wholesale Lockbox Authorization of even date herewith by and among Firstar Bank
Illinois, Firstar Bank Milwaukee, N.A., Lessee, Guarantor and the Joint
Ventures.
"DEBT SERVICE COVERAGE RATIO OR DSCR" means, for any applicable period
of calculation, the ratio of (i) Net Operating Income for such period to (ii)
the sum of interest and principal on payments due on the Note during such
period.
"DEFAULT" is defined in Section 1.1 of the Loan Agreement.
"DEFAULT NOTICE" means a written notice to Trustee from a Holder or
other party to the Trust Agreement that an Event of Default has occurred and is
continuing.
"DEFAULT RATE" shall mean an interest rate per annum equal to four (4%)
percent, plus (A) in the case of a payment of Rent to be used by the Owner to
make a payment in respect of the Loan, the Interest Rate (as defined in the
Note), (B) in the case of a payment of Rent in respect of the Equity Balance,
the applicable Yield, (C) in the case of a payment of the Reimbursement
Obligations, the Interest Rate (as defined in the Note).
"DEFERRED MANAGEMENT FEES" means the Management Fees payable pursuant
to the JV Management Agreements (and not Management Fees payable pursuant to any
other Management Agreement, or payable with respect to any Properties originally
subject to the JV Management Agreements but which have ceased to be subject to
the JV Management Agreements, or to any Management Fees payable after January
31, 2001 [as the JV Management Agreements provide for a reduction in Management
Fees by such date so that the deferral contemplated by this definition will no
longer be necessary]) calculated as of each Distribution Date to be the sum of
the following amounts for each related Distribution Period: (i) 50% of the
Management Fees (but only for Distribution Periods ending after the last day of
January, 2000) relating to the Six Month Properties; and (ii) 50% of the
Management Fees (but only for Distribution Periods ending after the last day of
July, 2000) relating to the Twelve Month Properties.
"DEFICIENCY" is defined in Section 1 of the Surety Bond and the
Backstop Policy, as applicable.
"DEPOSIT ACCOUNTS" shall mean, collectively, the Capital Improvements
Account, the Lease Reserve Account, the Lockbox Account, the I and C Account,
the Tax and Insurance Escrow Fund, the Letter of Credit Proceeds Account, the
Lessee Letter of Credit Proceeds Account, the JV Springing Collateral Account,
the Operating Reserve Account, the Additional Reserve Account and all other
present and future deposit accounts of any of Borrower, Lessee, Guarantor or any
of the Joint Ventures created pursuant to any of the Transaction Documents, and
all funds from time to time on deposit in any of the foregoing deposit accounts.
A-111
112
"DESIGNATED SUM" is defined in Section 1.6(b) of the Trust Agreement.
"DISCOUNTED FUTURE BASE SURETY PREMIUMS" shall mean, as of the date of
any determination the Future Base Surety Premiums discounted to present value as
of such date using a discount rate equal to the Interest Rate.
"DISCOUNTED TERMINATION PREMIUM" shall mean, as of the date of any
determination, the Termination Premium discounted to present value as of such
date using a discount rate equal to the Interest Rate.
"DISPOSITION" shall mean, with respect to any Person, any sale,
assignment, transfer or other disposition by such Person of (i) the stock or
other equity interests in such Person, other than, with respect to Guarantor
only, any sale, assignment, transfer or other disposition of the stock in
Guarantor, (ii) any business, operating entity, division or segment thereof, or
(iii) any other property (whether real or personal, tangible or intangible) of
such Person, other than (x) in the ordinary course of business (it being
understood that the sale of inventory in connection with bulk transfers shall
not be deemed to be in the ordinary course of business), (y) the sale or other
disposition of any property which in the reasonable opinion of such Person is
obsolete or no longer useful in the conduct of its business, or (z) the sale of
investment securities made for fair value.
"DISTRIBUTION DATE" shall mean the first Business Day of each month,
with the first Distribution Date under the Flow of Funds Agreement to occur on
August 1, 1999.
"DISTRIBUTION ESTIMATE SHORTFALL" shall mean on each Distribution Date
the dollar amount by which the Benefitted Items specified in Categories 2.1(i)
to and including 2.1(xv) (for purposes of such calculation utilizing for
Operating Expenses in 2.1(i), the Distribution Operating Expense Estimate) for
such Distribution Date cumulatively exceed the Operating Revenue for such
Distribution Date.
"DISTRIBUTION OPERATING EXPENSE ESTIMATE" is defined in Section 2.1 of
the Flow of Funds Agreement.
"DISTRIBUTION PERIOD" shall mean the period from each Distribution Date
to, but not including, the immediately succeeding Distribution Date, provided
that the first Distribution Period under the Flow of Funds Agreement shall
commence on the Closing Date and end on July 31, 1999.
"DOLLARS" and "$" means lawful money of the United States of America.
"DOWNGRADE NOTICE FROM SURETY" is defined in Section 1.1 of the Trust
Agreement.
"DOWNGRADE SURETY DEFAULT" means when the S&P Rating of Backstop
Insurer is not A+ ("single A plus") or higher or at any time such rating is
withdrawn or Qualified ; provided,
A-112
113
however, if S&P does not provide the relevant rating, the foregoing tests in
this definition shall be established by reference to equivalent ratings by
Moody's (assuming that the Backstop Insurer has a public claims-paying ability
or financial strength rating from Moody's at such time).
"DUE FOR PAYMENT" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"EARLY TERMINATION PREMIUM" shall mean as of any calculation date the
sum of (i) an amount equal to the discounted present value of the Termination
Premium (using a discount rate equal to the Interest Rate), plus (ii) the
aggregate amount of Surety Base Rental that would have been payable under the
Master Lease through the Maturity Date, discounted to present value to the Early
Termination Premium Payment Date using a discount rate equal to the Interest
Rate, plus (iii) the aggregate amount of Contingent Surety Rental that would
have been payable under the Master Lease through the Maturity Date (assuming
that all of the contingencies set forth in Section 5(c) of the Master Lease had
been met), discounted to present value to the Early Termination Premium Payment
Date using the Interest Rate.
"EARLY TERMINATION PREMIUM PAYMENT DATE" means the date on which all or
any portion of the Loan is prepaid or defeased prior to the Maturity Date in
accordance with Section 6 of the Note.
"EBITDAR" means earnings before interest, taxes, depreciation,
amortization, and Guarantor Rent Obligations, plus the dollar amount of the
Guarantor's minority interest in losses of unconsolidated Subsidiaries.
"EFFECTIVE DATE" is defined in Section 1 of the Surety Bond and Section
1 of the Backstop Policy.
"ELIGIBLE ACCOUNT" shall mean any of (i) an account maintained with a
federal or state chartered depository institution or trust company, the
long-term deposit or unsecured debt obligations of which are rated "A2" by
Moody's and "A" by S&P at any time such funds are on deposit therein (if such
funds are to be held for more than 30 days ), or the short-term deposits of
which are rated "P-1" by Moody's and "A-1" by S&P, at any time such funds are on
deposit therein (if such funds are to be held for 30 days or less), or (ii) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity, which, in the case of a state chartered depository institution or
trust company, is subject to regulations regarding fiduciary funds on deposit
therein substantially similar to 12 CFR ss. 9.10(b), having in either case a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authority.
"ELIGIBLE INSTRUMENT" shall have the meaning ascribed to such term in
Section 1.6(g) of the Trust Agreement.
"END OF TERM ADJUSTMENT" shall mean the amounts payable by Lessee
pursuant to
A-113
114
Section 31(a)(iv) of the Master Lease.
"ENDORSEMENT" is defined in Section 1.1 of the Loan Agreement.
"ENVIRONMENTAL LAW" is defined in Section 1.1 of the Loan Agreement.
"ENVIRONMENTAL PERMIT" is defined in Section 1.1 of the Loan Agreement.
"ENVIRONMENTAL REPORTS" is defined in Section 1.1 of the Loan
Agreement.
"EQUIPMENT" is defined in Section 1.1 of the Loan Agreement.
"EQUIPMENT LEASE" is defined in Section 1.1 of the Loan Agreement.
"EQUITY ADVANCES" shall have the meaning specified in Section 2.3 of
the Participation Agreement.
"EQUITY AMOUNT" shall mean the aggregate of the amounts funded by SELCO
on the Initial Closing Date and the Additional Closing Date.
"EQUITY BALANCE" shall mean, with respect to any Leased Property as of
the date of any determination, the aggregate amount of the Equity Advances then
outstanding multiplied by the Assigned Value Factor.
"EQUITY COMMITMENT" shall mean $10,000,000.00.
"EQUITY INVESTOR" shall mean SELCO Service Corporation, an Ohio
corporation.
"ERISA" is defined in Section 1.1 of the Loan Agreement.
"ERISA AFFILIATE" is defined in Section 1.1 of the Loan Agreement.
"EUROCURRENCY RESERVE PERCENTAGE" means as of any date of determination
the aggregate of the then stated maximum reserve percentages (including such
marginal, special, emergency or supplemental reserves) expressly as a decimal,
applicable to such Interest Period (if more than one such percentage is
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) by the
Board of Governors of the Federal Reserve System, any successor thereto, or any
other banking authority, domestic or foreign, to which the Owner or SELCO may be
subject in respect of any other category of liabilities including deposits by
reference to which LIBOR is determined or any category of extension of credit or
other assets that include the Equity Advances. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under Regulation D
of the Federal Reserve Board, and the Equity Advances shall be deemed to
constitute Eurocurrency Liabilities such to such reserve requirements without
benefit of credits
A-114
115
for proration, exceptions or offsets which may be available from time to time to
any bank under said Regulation D.
"EVENT OF BANKRUPTCY" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"EVENT OF DEFAULT" shall mean, as the case may be (i) any "Event of
Default" under the Reimbursement Agreement, (ii) any "Event of Default" under
the Loan Agreement, or (iii) any "Lease Event of Default" under the Lease.
"EXCEPTED RIGHTS" is defined in Section 1.1 of the Loan Agreement.
"EXCLUDED COLLATERAL" shall mean all right, title and interest of
Borrower (if any) and SELCO in and to that certain $9,975,000 letter of credit
issued by Firstar Bank Milwaukee, N.A. in favor of SELCO, and replacement or
substitute letter of credit or other Acceptable Replacement Collateral or other
collateral therefor, the Excluded Collateral Agreement, all income and proceeds
of any of the foregoing, all rights of Borrower (if any) and/or SELCO with
respect thereto, including, without limitation, the right to draw thereon and
enforce obligations of Guarantor with respect thereto, and all Excepted Rights
of Borrower and SELCO.
"EXCLUDED COLLATERAL AGREEMENT" shall mean that certain Excluded
Collateral and Indemnity Agreement dated as of July 16, 1999 by and between
Guarantor and SELCO.
"EXCLUDED TAXES" shall have the meaning set forth in Section 10.2 of
the Participation Agreement.
"EXHIBIT" is defined in Section 1.1 of the Loan Agreement.
"EXISTING LEASES" is defined in Section 1.1 of the Loan Agreement and
Section 3.1(w) of the Participation Agreement.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to (a)
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is
not so published for any day which is a Business Day, the average of the
quotations at approximately 10:00 a.m. (Chicago time) for such day on such
transactions received by the Equity Investor or any Affiliate thereof from three
federal funds brokers of recognized standing selected by it.
"FEE LETTER" means the letter agreement dated July 16, 1999, among
Trustee and the other the parties setting forth Trustee's schedule of fees to
act as Trustee and to perform Trustee's other obligations under the Flow of
Funds Agreement and the other Transaction Documents.
A-115
116
"FINANCING FEE" is defined in Section 1.1 of the Loan Agreement.
"FIRST CHICAGO" shall mean The First National Bank of Chicago, a
national banking association, in its capacity as a depository institution, with
an office located at One First National Plaza, Suite IL1-0126, Chicago, Illinois
60670-0126.
"FIXTURES" means all property which is so attached to the Land or the
Improvements as to constitute a fixture under applicable law and all renewals
and replacements thereof and substitutions therefore, including: machinery,
equipment, engines, boilers, incinerators, installed building materials; systems
and equipment for the purpose of supplying or distributing heating, cooling,
electricity, gas, water, air, or light; antennas, cable, wiring and conduits
used in connection with radio, television, security, fire prevention, or fire
detection or otherwise used to carry electronic signals; telephone systems and
equipment; elevators and related machinery and equipment; fire detection,
prevention and extinguishing systems and apparatus; security and access control
systems and apparatus; plumbing systems; water heaters, ranges, stoves,
microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers
and other appliances; light fixtures, awnings, storm windows and storm doors;
pictures, screen, blinds, shades, curtains and curtain rods; mirrors; cabinets,
paneling, rugs and floor and wall coverings; fences, trees and plants; and
exercise equipment.
"FLOW OF FUNDS AGREEMENT" means that certain Flow of Funds Agreement
dated as of even date herewith by and between Borrower, Lender, Surety, Trustee,
the Lessee, the Joint Ventures and the Guarantor, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"FORCE MAJEURE" shall mean (A) any delay due to strikes, lockouts or
other labor or industrial disturbance, civil disturbance, future order of or
delay caused by any government, court or regulatory body claiming jurisdiction
(including, without limitation delays in processing or release of necessary
permits, licenses and approvals), act of the public enemy, war, riot, sabotage,
blockade, embargo, failure or inability to secure materials, supplies or labor
through ordinary sources by reason of shortages or priority or similar
regulation or order of any government or regulatory body, lightning, earthquake,
fire, storm, hurricane, tornado, flood, washout, explosion, other acts of God,
or other events or delays reasonably beyond the control of Lessee.
"GAAP" shall mean generally accepted accounting principles as set forth
in Statement on Auditing Standards No. 69 entitled "The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"GCFP" is defined in Section 1.1 of the Loan Agreement.
A-116
117
"GENERAL INTANGIBLES" is defined in Section 1.1 of the Loan Agreement.
"GOVERNMENTAL AUTHORITY" is defined in Section 1.1 of the Loan
Agreement.
"GOVERNMENTAL RULE" shall mean any statute, law, treaty, rule, code,
ordinance, regulation or order of any Governmental Authority or any judgment,
decree, injunction, writ, order or like action of any Federal, state or local
court, or other tribunal of competent jurisdiction.
"GREENWICH LOAN AGREEMENT" means the Loan Agreement.
"GROSS REVENUES" shall have the meaning set forth for such term in the
Flow of Funds Agreement.
"GROSS TAXABLE AMOUNT" means the excess, if any, of the following for
the Subleased Properties for any Tax Year (i) the Operating Revenue to the
extent such Operating Revenue is includible in "gross income" for federal income
tax purposes in such Tax Year, over (ii) the sum of (A) Operating Expenses, (B)
Surety Premiums, (C) all interest expenses and (D) depreciation and
amortization, to the extent that each of the foregoing is deductible by Lessee
or the Joint Ventures for federal income tax purposes in such Tax Year and (E)
any other expenses deductible for federal income tax purposes by Lessee or the
Joint Ventures in such Tax Year. In no event, however, shall the calculation of
Gross Taxable Amount include any capital gains or losses for federal income tax
purposes.
"GROUND LEASES" is defined in Section 1.1 of the Loan Agreement.
"GROUND LEASE PROPERTIES" means those certain Leased Properties
identified in Exhibit C to the Master Lease.
"GUARANTEE" means that certain Guaranty of even date herewith executed
by Guarantor pursuant to which Guarantor has guaranteed all of Lessee's
obligations under the Master Lease and the other Transaction Documents.
"GUARANTEED OBLIGATIONS" is defined in Section 1(a) of the Guaranty.
"GUARANTEE REVENUES" means all proceeds of the Guarantee other than
payments made in support of the Lessee's obligation to make payment pursuant to
Sections 29 and 31 of the Lease.
"GUARANTOR" is defined in Section 1.1 of the Loan Agreement.
"GUARANTOR COVENANT DEFAULT" means a breach of the Guarantor Covenants.
"GUARANTOR COVENANTS" means those certain financial covenants of the
Guarantor set
A-117
118
forth in Section 9.5 of the Participation Agreement.
"GUARANTOR INTEREST OBLIGATIONS" means the sum of all interest expense
(as defined by GAAP), net of interest income.
"GUARANTOR RENT OBLIGATIONS" means lease expense as defined by GAAP.
"GUARANTOR SUBROGATION AMOUNT" means any amounts payable to the
Guarantor to reimburse it for payments pursuant to the Guarantee, or arising due
to subrogation to the rights of an entity paid through the Guarantee.
"HAZARDOUS MATERIALS" is defined in Section 1.1 of the Loan Agreement.
"HCR" is defined in Section 1.1 of the Loan Agreement.
"HCR MANAGEMENT AGREEMENTS" means the management agreements to which
Seller or an affiliate of Seller is the Manager with respect to the nursing home
beds at the Laguna Palm Terrace, California Property and the Palmer Ranch,
Florida Property in form and substance satisfactory to the Controlling Party.
"HOLDER OR HOLDERS" means, individually or collectively, as the context
may require, Lender and/or Surety, and/or any Person which subsequently becomes
a lawful holder of any of the Secured Obligations in accordance with the
requirements of Section 7.4 of the Trust Agreement; in no event shall Lessee,
Borrower or Guarantor ever be deemed to be a "Holder" hereunder.
"I AND C ACCOUNT" shall have the meaning assigned to such term in
Section 3.5 of the Trust Agreement.
"IMPOSITION DEPOSITS" is defined in Section 8(a)(1) of the Master
Lease.
"IMPOSITIONS" is defined in Section 8(a)(1) of the Master Lease.
"IMPROVEMENTS" (i) in the case of the Trust Agreement, shall have the
meaning set forth in the Recitals to the Trust Agreement, and (ii) when used in
any of the other Transaction Documents (unless otherwise defined in such
Transaction Documents) shall have the meaning set forth in Section 1.1 of the
Loan Agreement.
"INDEBTEDNESS" is defined in Section 1.1 of the Loan Agreement.
"INDEMNIFIED CLAIMS" is defined in Section 1.1 of the Loan Agreement.
"INDEMNIFIED CLAIMS" is defined in Section 10.3(b) of the Participation
Agreement.
A-118
119
"INDEMNIFIED PARTIES" means Owner, Equity Investor, Trustee,
Noteholder, Surety and their respective Related Parties.
"INDIVIDUAL PROPERTY" is defined in Section 1.1 of the Loan Agreement.
"INITIAL ADVANCE" is defined in Section 1.1 of the Loan Agreement.
"INITIAL CAPITAL IMPROVEMENTS" shall have the meaning assigned to such
term in Section 3.2 of the Trust Agreement.
"INITIAL CAPITAL IMPROVEMENTS AMOUNT" shall have the meaning assigned
to such term in Section 3.2 of the Trust Agreement.
"INITIAL PROPERTIES" is defined in Section 1.1 of the Loan Agreement.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
Borrower or Lessee under any provision of the United States Bankruptcy Code, or
under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extensions
generally with their creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"INSTRUMENTS" is defined in Section 1.1 of the Loan Agreement.
"INSURANCE AMOUNT" means, the "SURETY BOND AMOUNT" as defined in the
Bond.
"INSURANCE DEFAULT" means (i) the failure by Lessee to pay any
insurance premiums for the Properties in accordance with, or any other default
under Sections 4.4(a) or 4.4(b) of the Loan Agreement, or (ii) the occurrence of
any other Event of Default.
"INSURANCE DOCUMENTS" means, collectively, the Surety Bond, the
Backstop Policy, the Reimbursement Agreement, the Trust Agreement and the Flow
of Funds Agreement.
"INSURANCE SURETY BOND" is defined in Section 1 of the Surety Bond.
"INSURED" is defined in Section 1 of the Surety Bond and Section 1 of
the Backstop Policy.
"INSURED OBLIGATIONS" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"INTEREST PAYMENT DATE" shall mean with respect to any Equity Advance
(i) each Rent Payment Date commencing September 1, 1999, and (ii) any other date
on which Equity Advances are required to be repaid.
A-119
120
"INTEREST PERIOD" shall mean (i) for the Equity Advance to be made on
the Closing Date, the period commencing on July 16, 1999 through August 31,
1999, and thereafter the period commencing on the first day of each succeeding
month and ending on the last day of such succeeding month, and (ii) for the
Equity Advance to be made on the Additional Properties Closing Date, the period
commencing on such date and ending on the last day of the month in which such
Additional Properties Closing Date occurs, and thereafter, the period commencing
on the first day of each month and ending on the last day of such succeeding
month; provided, however, that (A) no Interest Period with respect to any Equity
Advance shall end later than the Maturity Date, and (B) Yield shall accrue from
and including the first day of an Interest Period to but excluding the last day
of such Interest Period.
"INTEREST RATE" is defined in the Note.
"INVENTORY" is defined in Section 1.1 of the Loan Agreement.
"INVENTORY" means all inventories of food, beverages and other
comestibles held by Pita, AHC, the Joint Ventures or Alterra (as Manager) for
sale or use at or from the Land or the Assisted Living Facility, and soap, paper
supplies, medical supplies, drugs and all other such goods, wares and
merchandise held by Pita, AHC, the Joint Ventures or Alterra (as Manager) for
sale to or for consumption by residents, guests or patients of the Land or the
Assisted Living Facility and all such other goods returned to or repossessed by
Pita, AHC, the Joint Ventures or Alterra (as Manager).
"INVESTMENT GRADE" means a S&P Rating of BBB ("triple B"), or its
equivalent, or higher.
"INVOICE PAYMENT REQUEST" is defined in Section 3.2(c)(ii) of the Trust
Agreement.
"INVOLUNTARY BORROWER PARTY BANKRUPTCY" is defined in Section 1.1 of
the Loan Agreement.
"JOINDER AGREEMENT" is defined in Section 5.1 of the Flow of Funds
Agreement.
"JOINT VENTURE AGREEMENT" shall mean the partnership or membership
agreement by which a Joint Venture Sublessee is formed or organized.
"JOINT VENTURES" means the Sublessees.
"JOINT VENTURE SUBLEASE" shall mean the Subleases.
"JV INTERESTS" shall mean all of the general and limited partnership
interests in each of the Joint Ventures.
"JV MANAGEMENT AGREEMENTS" means the collective reference to those
certain Assisted Living Consultant and Operations Agreements between the
Guarantor and the Joint Ventures with
A-120
121
respect to the Properties.
"JV SPRINGING COLLATERAL ACCOUNT" is defined in Section 3.14 of the
Trust Agreement.
"JV TRIGGERING EVENT" shall mean (i) shall mean the failure by
Guarantor to comply with the covenants set forth in Section 9.5 of the
Participation Agreement, (ii) the occurrence of a payment Lease Event of Default
under the Lease, which default has continued for a period of three (3) days, or
(iii) the failure of Guarantor to fund the Operating Reserve Account when
required under Section 3.15 of the Trust Agreement, which failure has continued
for a period of three (3) days.
"LAND" shall mean those certain pieces or parcels of real property
described in Exhibit A attached to the applicable Lease Supplement.
"LATE CHARGE" is defined in Section 5(b)(viii) of the Master Lease.
"LCR COMMENCEMENT DATE" shall mean June 30, 2001.
"LEASE BALANCE" shall mean, with respect to each Leased Property, as of
the date of any determination, the sum of the Loan Balance plus the Equity
Balance as of such date.
"LEASE COVERAGE PERIOD" means, as of the date of determination, a
period consisting of (i) for the period from the Closing Date to June 30, 2001,
the immediately preceding calendar quarter, and (ii) on and after July 1, 2001,
the immediately preceding two consecutive calendar quarters.
"LEASE COVERAGE RATIO" or "LCR" shall mean, for any applicable Lease
Coverage Period, a ratio (A) the numerator of which is equal to the Net
Operating Income for such Lease Coverage Period, and (B) the denominator of
which is equal to the sum of all Base Rental and Contingent Surety Rental
payments required to be made by Lessee pursuant to the Master Lease during such
Lease Coverage Period.
"LEASE DEFAULT" shall mean any fact or circumstance which constitutes,
or upon the lapse of time, or giving of notice, or both, could constitute a
Lease Event of Default.
"LEASE DOCUMENTS" means the collective reference to the Master Lease,
the Memorandums of Lease, the Lease Supplements, the Subleases, the
Participation Agreement, the Guaranty and the Sublessee Assignments.
"LEASED PROPERTY" shall have the meaning set forth in Section 2 of the
Master Lease.
"LEASE EVENT OF DEFAULT" shall have the meaning specified in
Section 23 of the Master Lease.
"LEASE RESERVE ACCOUNT" is defined in Section 3.3 of the Trust
Agreement.
A-121
122
"LEASE RESERVE CAP" is defined in Section 3.3 of the Trust Agreement.
"LEASE RESERVE DEFICIENCY" is defined in Section 3.3(c) of the Trust
Agreement.
"LEASES" shall mean (i) the Ground Leases, (ii) the Subleases, (iii)
any and all other material leases or subleases of all or any party of a Leased
Property being acquired on the Closing Date (other than Residency Agreements).
"LEASE SUPPLEMENTS" means the collective reference to each Lease
Supplement (in the form of Exhibit A to the Lease between the Borrower and the
Lessee, which Lease Supplement relates to a particular Leased Property).
"LEASE TERM EXPIRATION DATE" shall have the meaning ascribed to such
term in Section 3 of the Lease.
"LEGAL REQUIREMENTS" is defined in Section 1.1 of the Loan Agreement.
"LENDER" shall mean Greenwich Capital Financial Products, Inc., a
Delaware corporation.
"LENDER-APPOINTED WRAP SURETY" is defined in Section 1.5(c)(ii) of the
Trust Agreement.
"LENDER REQUIRED CASUALTY/CONDEMNATION PAYMENT" shall have the meaning
ascribed to the term "Required Casualty/Condemnation Payment" in the Loan
Agreement.
"LESSEE" shall mean AHC Tenant, Inc., a Delaware corporation.
"LESSEE COLLATERAL ASSIGNMENT" shall mean, with respect to any
Property, the security agreement in respect of contracts, licenses and permits
in form satisfactory to Owner and Trustee, executed by Lessee in favor of
Trustee for the benefit of the Beneficiaries.
"LESSEE LETTER OF CREDIT" is defined in Section 3.3(c) of the Trust
Agreement.
"LESSEE LETTER OF CREDIT PROCEEDS ACCOUNT" is defined in Section 3.13
of the Trust Agreement.
"LESSEE MANAGEMENT AGREEMENT" means the reference to that certain
Assisted Living Consultant and Operations Agreement between the Guarantor and
the Lessee with respect to the Properties.
"LESSEE TRIGGERING EVENT" shall mean the failure by Guarantor to comply
with the covenants set forth in Section 9.5 of the Participation Agreement.
A-122
123
"LESSOR" shall mean Pita General Corporation, an Illinois corporation.
"LETTER OF CREDIT PROCEEDS ACCOUNT" is defined in Section 3.12 of the
Trust Agreement.
"LIABILITIES" shall mean all losses, damages, liabilities, injuries,
claims, suits, demands, actions, proceedings, costs and expenses (including
reasonable fees and expenses of attorneys and experts).
"LIBOR" shall mean, for any Interest Period, the quotient (rounded
upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of
1%) of (x) the per annum rate of interest, determined by Equity Investor in
accordance with its usual procedures (which determination shall be conclusive
absent manifest error) as of approximately 11:00 a.m. (London time) two Business
Days prior to the Closing Date and prior to each Rent Payment Date occurring
thereafter, appearing on Page 3750 of the Telerate Service (or any successor or
substitute page of such service, or any successor to or substitute for such
service providing rate quotations comparable to those currently provided on such
page of such service, as determined by the Equity Investor from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) as the rate in the London interbank market for
dollar deposits in immediately available funds with a maturity comparable to the
Interest Period divided by (y) a number equal to 1.00 minus the Eurocurrency
Reserve Percentage. In the event that such rate quotation is not available for
any reason, then the rate (for purposes of clause (x) hereof) shall be the rate,
determined by the Equity Investor, as applicable, as of approximately 11:00 a.m.
(London time) two (2) Business Days prior to the beginning of such Interest
Period, to be the average (rounded upwards, if necessary, to the nearest one
sixteenth of one percent (1/16th of 1%) of the per annum rates at which dollar
deposits in immediately available funds in an amount comparable to the then
outstanding amount of the Equity Advances and with a maturity of one (1) month
is offered to the prime banks by leading banks in the London interbank market.
LIBOR shall be adjusted automatically on and as of the effective date of any
change in the Eurocurrency Reserve Percentage.
"LIBOR ADVANCE" shall mean any Equity Advance during any Interest
Period with respect to which the Yield is based on LIBOR.
"LICENSING SUBLEASES" is defined in Section 1.1 of the Loan Agreement.
"LIEN" is defined in Section 1.1 of the Loan Agreement.
"LIMITED LESSEE RISK CONDITIONS" shall mean all of the following: (A)
no Tolling Default shall have occurred and no Lease Default or Lease Event of
Default shall have occurred and be continuing; (B) Lessee shall have performed
all obligations and complied with all conditions in connection with a return of
the Leased Properties strictly in accordance with the terms of the Master Lease;
and (C) except as expressly permitted by the Lease, no amendment, modification,
supplement, consent, waiver, approval, settlement, extension,
A-123
124
compromise or accommodation of the Master Lease has been entered into or given
without the prior written consent of the Owner and Trustee.
"LIQUIDATED DAMAGES PAYMENT DATE" is defined in Section 24(c) of the
Master Lease.
"LOAN" is defined in the Recitals to the Loan Agreement.
"LOAN AGREEMENT" shall mean that certain Loan Agreement between
Borrower, Lessee and Lender, dated as of the date hereof.
"LOAN BALANCE" shall mean, with respect to any Leased Property, as of
any date of determination, the aggregate principal balance of the Note then
outstanding multiplied by the Assigned Value Factor.
"LOAN BASE RENTAL" is defined in Section 5(a) to the Master Lease.
"LOAN DEFAULT" shall mean any fact of circumstance which constitutes,
or upon the lapse of time, or giving of notice, or both could constitute a Loan
Event of Default.
"LOAN DOCUMENTS" is defined in Section 1.1 of the Loan Agreement.
"LOAN EVENT OF DEFAULT" shall mean an "Event of Default" under Section
7.1 of the Loan Agreement.
"LOAN OBLIGATIONS" shall mean the "Loan Obligations" as defined in
Section 1.1 of the Loan Agreement.
"LOCKBOX ACCOUNT" shall have the meaning ascribed to such term in
Section 3.4 of the Trust Agreement.
"LOCKBOX AGREEMENT" shall mean that certain Lockbox Agreement of even
date herewith by and among Lessee, Guarantor, the Joint Ventures, Trustee, and
Firstar Bank Illinois.
"LONDON BANKING DAY" shall mean a day on which banks are open for
business in London, England, and quoting deposit rates for dollar deposits.
"LOSSES" means as of any date, amounts that are actually paid or then
currently payable by Surety in payment or settlement of claims covered under the
Surety Bond, subject to and in accordance with the terms and conditions of the
Surety Bond, notwithstanding any increase in the coverage of the Surety Bond as
contemplated by Section 2.07 of the Reimbursement Agreement.
"MANAGEMENT AGREEMENTS" is defined in Section 1.1 of the Loan
Agreement.
"MANAGEMENT FEES" shall mean the fees payable by Lessee and the Joint
Ventures to
A-124
125
Guarantor pursuant to the Management Agreements in connection with the operation
and management of the Properties by the Guarantor.
"MANAGER" means Alterra Healthcare Corporation, a Delaware corporation,
and any successor Manager of the Properties.
"MARGIN STOCK" is defined in Section 1.1 of the Loan Agreement.
"MASTER GLOSSARY OF DEFINITIONS" shall mean this Master Glossary of
Definitions.
"MASTER LEASE" means that certain Master Lease Agreement of even date
herewith between the Borrower and the Lessee, together with all Lease
Supplements thereto.
"MATERIAL ACTION" means, for purposes of any consent, waiver or other
acquiescence by Non-Controlling Party, the taking of, or omitting to take, any
of the following actions by Trustee or Lender pursuant to the Loan Documents:
(a) the disposition of insurance or condemnation proceeds unless the Lessee is
entitled thereto pursuant to Section 4.4 of the Loan Agreement or the
Controlling Party has decided to allow the Borrower or Lessee, as the case may
be, to rebuild the any of the Properties pursuant to Section 4.4 of the Loan
Agreement, (b) a change in the priority of payments set forth in Article II of
the Flow of Funds Agreement, (c) waiver of any provision of Article 3 of the
Trust Agreement, (d) replacement of the "Manager" (as defined in the Management
Agreements) pursuant to any of the Management Agreements, the Loan Agreement, or
the Assignments of Management Agreements, (e) waiver or failure to enforce any
requirements under Sections 5.1, 5.2, 5.3 (except as expressly provided for in
Section 6 of the Note), 5.4, 5.7, 5.8, 5.10, 5.12, 5.13, 5.18, 5.19, 5.20, 5.21
or 5.22 of the Loan Agreement, (f) any modification, waiver or amendment of the
Lockbox Agreement, (g) any defense to be raised by Trustee relating to the
Collateral or the Security Documents, (h) any modification, waiver or amendment
of Section 2.10 of the Loan Agreement, (i) approval of any Budget under Section
4.10 of the Loan Agreement, or approval of a capital expenditure not provided
for in the Budget as contemplated by Section 3.2(c)(ii) of the Trust Agreement,
(j) consenting to any Loan Transfer and Assumption under Section 8.2 of the Loan
Agreement, (k) any modification, waiver or amendment of the Guaranty, and (l)
any modification, waiver or amendment of any provision of any Transaction
Document affecting, or any definition of any Transaction Document referenced in,
this definition of "Material Action" or any other material modification, waiver
or amendment of any of the Transaction Documents (other than the Insurance
Documents) and (m) release from escrow and delivery by Trustee of the original
Note other than in accordance with Section 4.5 of the Trust Agreement.
"MATERIAL ADVERSE EFFECT" is defined in Section 1.1 of the Loan
Agreement.
"MATERIAL LOAN DEFAULT" shall have the meaning set forth in Section
1.4(a) of the Trust Agreement.
A-125
126
"MATERIAL LOAN DEFAULT DATE" shall have the meaning set forth in
Section 1.4(a) of the Trust Agreement.
"MATERIAL MODIFICATION" is defined in Section 1.1 of the Loan
Agreement.
"MATURITY DATE" is defined in Section 1.1 of the Loan Agreement.
"MAXIMUM LESSEE RISK AMOUNT" shall mean, with respect to the Operating
Lease Properties as of any date of determination, the product of the "Maximum
Lessee Risk Percentage" set forth in Exhibit E of the Master Lease, multiplied
by the Lease Balances plus the Property Termination Premiums for all Operating
Lease Properties then subject to the Master Lease.
"MAXIMUM LOAN AMOUNT" is defined in Section 1.1 of the Loan Agreement.
"MEDICAID" is defined in Section 1.1 of the Loan Agreement.
"MEDICAID CERTIFICATION" is defined in Section 1.1 of the Loan
Agreement.
"MEDICAID REGULATIONS" is defined in Section 1.1 of the Loan Agreement.
"MEDICARE" is defined in Section 1.1 of the Loan Agreement.
"MEDICARE CERTIFICATION" is defined in Section 1.1 of the Loan
Agreement.
"MEDICARE REGULATIONS" is defined in Section 1.1 of the Loan Agreement.
"MONEY" is defined in Section 1.1 of the Loan Agreement.
"MOODY'S" shall mean "Moody's Investors Service, Inc.
"MORTGAGED PROPERTY" is defined in Section 1(m) of the Mortgage.
"MORTGAGEE" shall mean the entity identified as "Mortgagee" in the
first section of the Mortgage, together with its successors and assigns.
"MORTGAGE INSTRUMENTS" the Mortgage, as it may be amended, modified or
supplemented from time to time, together with the Other Mortgage Instruments.
"MORTGAGES" is defined in Section 1.1 of the Loan Agreement.
"MORTGAGOR" shall mean the persons or entities identified as
"Mortgagor" in the first section of the Mortgage, together with their respective
successors and assigns.
A-126
127
"MULTIEMPLOYER PLAN" is defined in Section 1.1 of the Loan Agreement.
"NET OPERATING INCOME" shall mean, with respect to the applicable
period of calculation, the remainder of (i) Operating Revenues during such
period, less (ii) the sum of (A) Operating Expenses during such period, plus (B)
the amount of Management Fees payable during such period (including any accrued
and unpaid Deferred Management Fees under the Flow of Funds Agreement as of the
end of such period), net of any Management Fees which were included in Operating
Expenses during such period, (but in no event shall Management Fees be less than
5% of Operating Revenue for purposes of this definition) plus (C) capital
expenditures for such period in an amount which, on an annualized basis, would
be equal to $300 per bed, per annum, plus (D) Impositions (as defined in Section
8(a)(1) of the Master Lease) required to be escrowed for the Properties during
such period, plus (E) all payments of Allowed Indebtedness (other than the Loan)
during such period.
"NET OPERATING LOSS" means the excess, if any, of the following for the
Subleased Properties in any Tax Year: (i) the sum of (A) Operating Expenses, (B)
Surety Premiums, (C) all interest expenses and (D) depreciation and
amortization, to the extent that each of the foregoing is deductible for federal
income tax purposes in such Tax Year, and (E) any other expenses deductible for
federal income taxes by Lessee or the Joint Ventures in such Tax Year over (ii)
the Operating Revenue to the extent that such Operating Revenue is includible in
"gross income" for federal income tax purposes in such Tax Year. In no event,
however, shall the calculation of Net Operating Loss include any capital gains
or losses for federal income tax purposes.
"NET PROCEEDS OF SALE" shall mean with respect to any Leased Property
sold by Owner to a third party pursuant to Section 30(a) or 30(b) of the Master
Lease, the net amount of the proceeds of sale of such Leased Property, after
deducting from the gross proceeds of such sale (i) all sales taxes and other
taxes as may be applicable to the sale or transfer of such Leased Property, (ii)
all fees, costs and expenses of such sale incurred by Owner, (iii) any other
amounts for which, if not paid, Owner would be liable or which, if not paid,
would constitute a Lien on such Leased Property, but in determining Net Proceeds
of Sale, the amounts payable under each Loan shall not be deducted from gross
proceeds of such sale, and (iv) with respect to a sale under Section 30(a) only,
all unreimbursed costs and expenses incurred by Owner after the Termination Date
in connection with the ownership, operation and maintenance of such Leased
Property, including, without limitation, real estate taxes, insurance, utilities
and repairs, plus interest thereon at the Owner Default Rate.
"NET TAXABLE AMOUNT," means, with respect to the Joint Ventures, as of
a Tax Distribution Date the excess, if any, of (i) the Gross Taxable Amount of
the Tax Year, less (ii) the excess, if any, of (a) the sum of each Net Operating
Loss of each of the calendar years prior to the Tax Year, less (b) the sum of
each Net Operating Loss, or portion thereof, which previously offset any Gross
Taxable Amount in the calculation of Net Taxable Amount in any calendar year
prior to the Tax Year.
A-127
128
"NET WORTH" shall mean shareholder's equity as defined by GAAP.
"NON-CONTROLLING PARTY" shall mean the Lender; provided, however, (i)
from and after a Change of Control and Consent of which Trustee has been
notified in writing by Lender and Surety and prior to the existence of a Surety
Event of Default, Surety shall become the Non-Controlling Party, and (ii) during
the continuance of a Surety Event of Default there shall be no Non-Controlling
Party. TRUST AGR
"NON-DOWNGRADE SURETY DEFAULT" shall mean any "Surety Default" as
defined below except for a Downgrade Surety Default. TRUST AGR
"NON-PERFORMANCE PERIOD" is defined in Section 1.2(a) of the Trust
Agreement.
"NOTE" is defined in Section 1.1 of the Loan Agreement.
"NOTEHOLDER" shall mean Greenwich Capital Financial Products, Inc, a
Delaware corporation, together with its successors and permitted assigns.
"NOTE MATURITY DATE" is defined in Section 1 of the Insurance Surety
Bond.
"NOTICE" shall mean all notices, demands and other communications.
"NOTICE OF PREFERENCE CLAIM" is defined in Section 1 of the Surety Bond
and Section 1 of the Backstop Policy
"NPL" is defined in Section 1.1 of the Loan Agreement.
"NPR" is defined in Section 1.1 of the Loan Agreement.
"OBLIGATIONS" is defined in Section 1.1(r) of the Mortgage.
"OFFICER'S CERTIFICATE" is defined in Section 1.1 of the Loan
Agreement.
"O&M PROGRAM" is defined in Section 1.1 of the Loan Agreement.
"OPERATING EXPENSES" shall mean, with respect to any period, all
operating expenses incurred by the Lessee or any Joint Venture, without
duplication, in connection with the operation of the Properties, determined on
an accrual basis, in accordance with GAAP and based upon the most recently
available financial statements or reports required pursuant to the Loan
Agreement and the Reimbursement Agreement including but not limited to the
following expenses:
(i) salaries, wages, benefits and payroll taxes;
A-128
129
(ii) fees and expenses payable to the Trustee (if any);
(iii) insurance premiums (unless paid in escrow to Trustee
in accordance with Section 3.7 of the Trust Agreement);
(iv) fees and expenses of lawyers and accountants and other
professional fees incurred in the ordinary course of business in connection with
the normal day to day operation of the Properties;
(v) fees, costs and expenses in connection with the day to
day repair and maintenance of the Properties;
(vi) all utility bills relating to heating, cooling and
lighting the Properties; and
(vii) all Management Fees other than the Deferred Management
Fees.
This definition of "Operating Expenses" excludes (i) all Surety Premiums, (ii)
all interest expenses, and (iii) depreciation and amortization relating to the
Properties.
"OPERATING LEASE PROPERTY" shall mean a Leased Property designated by
Lessee as an "Operating Lease Property" in the relevant Lease Supplement and
intended by Owner and Lessee to be treated for financial accounting purposes of
Lessee as covered by an "operating lease" under SFAS 13.
"OPERATING LOSS AMOUNT" is defined in Section 3.15 of the Trust
Agreement.
"OPERATING RESERVE ACCOUNT" is defined in Section 3.15 of the Trust
Agreement.
"OPERATING RESERVE ACCOUNT REVENUES" shall mean monies disbursed from
the Operating Reserve Account.
"OPERATING REVENUE" shall mean, for any period, all income received by
the Lessee or any Joint Venture (or the Manager on their behalf), without
duplication, from any person or entity, including, without limitation, all rents
under any Sublease, all rent or income from any Residency Agreement, which, in
accordance with GAAP, is included in the Lessee's or such Joint Venture's
financial statements as revenue determined on an accrual basis for the
applicable period based upon the most recently available financial statements or
reports required pursuant to the Loan Agreement and Reimbursement Agreement,
modified, if necessary, to include, without duplication, all such income arising
from any of the following:
(a) condemnation proceeds under a temporary taking to the extent that
such proceeds are compensation for lost rent;
(b) business interruption insurance proceeds; and
A-129
130
(c) monies disbursed from the Operating Reserve Account pursuant to the
Trust Agreement on the Operating Reserve Termination Date.
Notwithstanding the foregoing, Operating Revenue shall not include (i) any
condemnation or insurance proceeds (other than the types described in clauses
(a) or (b) above), (ii) any proceeds resulting from the sale, exchange,
transfer, financing or refinancing of all or any part of any Property or (iii)
any funds released from any Deposit Account.
"ORIGINAL INSURANCE SURETY BOND" is defined in Section 1 of the
Insurance Surety Bond.
"ORIGINAL INSURED OBLIGATIONS" is defined in Section 1 of the Backstop
Insurance Surety Bond.
"ORIGINAL SURETY" is defined in Section 1 of the Backstop Policy.
"ORIGINAL SURETY BOND PAYMENT DATE" is defined in Section 1 of the
Backstop Policy.
"OUTSIDE DIRECTOR" is defined in Section 1.1 of the Loan Agreement.
"OWNER" shall mean Pita General Corporation, an Illinois corporation.
"OWNER BASE RENTAL" shall have the meaning set forth in Section 5(a)(z)
of the Master Lease Agreement.
"OWNER DEFAULT RATE" is defined in Section 2.6(b) of the Participation
Agreement.
"OWNER LIEN" shall mean any Lien resulting solely from claims arising
against, or from acts or omissions of, the Owner or those acting by, through, or
under Owner (exclusive of Lessee, Guarantor, any Sublessee, Manager, Noteholder,
Surety, Trustee and their respective Related Parties, and Persons acting by,
through or under Lessee, Guarantor, any Sublessee, Manager, Surety, Trustee or
their Related Parties) other than (i) Liens granted by Owner in accordance with
the express terms and conditions of the Transaction Documents; (ii) Liens
arising as a result of Lessee failing to perform its duties under the Lease
Documents, the Participation Agreement or any other Transaction Document; and
(iii) Permitted Liens.
"OWNER'S CONVEYANCE" shall mean any of the following: (i) the transfer
by Owner of its interest in any Leased Property to Lessee pursuant to Sections
15(g) or 29(b) of the Master Lease; or (ii) the transfer by Owner of its
interest in the Leased Property to a third party pursuant to Section 30(b) of
the Master Lease.
A-130
131
"PARTICIPATION AGREEMENT" means that certain Participation Agreement
dated of even date herewith among Lessee, Owner, Guarantor, Equity Investor,
Surety, Trustee and Noteholder.
"PARTIES" shall mean each of the signatories to the Trust Agreement.
"PAYMENT/CROSS-DEFAULT SURETY DEFAULT" is defined in Section 1.2(b) of
the Trust Agreement.
"PAYMENT SURETY DEFAULT" shall have the meaning set forth in the
definition of "Surety Default."
"PBGC" is defined in Section 1.1 of the Loan Agreement.
"PERFORMANCE PERIOD" is defined in Section 1.3(a) of the Trust
Agreement.
"PERMITS" is defined in Section 1.1 of the Loan Agreement.
"PERMITTED INVESTMENTS" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as
to the full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under the laws of
the United States of America or any State thereof and subject to supervision and
examination by Federal or State banking or depository institution authorities;
provided, however, that at the time of the investment or contractual commitment
to invest therein, the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is based on the
credit of a Person other than such depository institution or trust company)
thereof shall be rated "A-1+" by Standard & Poor's and "P-1" by Moody's;
(c) commercial paper of a corporation incorporated under the
laws of the United States or any state thereof that, at the time of the
investment or contractual commitment to invest therein, is rated "A-1+" by
Standard & Poor's and "P-1" by Moody's;
(d) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed as to the full and timely payment
by, the United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into pursuant to a written
A-131
132
agreement with (i) a depository institution or trust company (acting as
principal) described in clause (b) or (ii) a depository institution or trust
company the deposit of which are insured by the Federal Deposit Insurance
Corporation and whose commercial paper or other short-term unsecured debt
obligations are rated "A-1+" by Standard & Poor's and "P-1" by Moody's and whose
long-term unsecured debt obligations are rated "AAA" by Standard & Poor's and
"Aaa" by Moody's;
(f) money market mutual funds registered under the Investment
Company Act of 1940, as amended that maintain a constant net asset value and
that have a rating, at the time of such investment, in the highest investment
category granted by each of Standard & Poor's and Moody's;
(g) common trust funds rated AAAm or AAAm-G by Standard &
Poor's and Aaa by Moody's; and
(h) any other investment as may be acceptable to the Lender
and each Rating Agency;
provided that (A) no investment described hereunder shall evidence either the
right to receive (1) only interest with respect to such investment or (2) a
yield to maturity greater than 120% of the yield to maturity at par of the
underlying obligations, (B) no investment described hereunder may be purchased
at a price greater than par if such investment may be prepaid or called at a
price less than its purchase price prior to stated maturity; and (C) no
investment described hereunder may have a "r" highlighter or other comparable
qualifier attached to its rating; provided, further, that each investment
described hereunder must have (X) a predetermined fixed amount of principal due
at maturity (that cannot vary or change), (Y) an original maturity of not more
than 365 days and a remaining maturity of not more than 30 days and (Z) except
in the case of Permitted Investments described in clauses (f) and (g) above, a
fixed interest rate or an interest rate that is tied to a single interest rate
index plus a single fixed spread.
"PERMITTED LIENS" is defined in Section 1.1 of the Loan Agreement.
"PERMITTED SURETY CURE" is defined in Section 1.5(b) of the Trust
Agreement.
"PERSON" is defined in Section 1.1 of the Loan Agreement.
"PERSONAL PROPERTY CAPITAL PROCEEDS" shall mean all Capital Proceeds
that are not Real Estate Capital Proceeds.
"PITA" shall mean Pita General Corporation, an Illinois corporation.
"PLAN" is defined in Section 1.1 of the Loan Agreement.
"PLEDGE AGREEMENTS" is defined in Section 1.1 of the Loan Agreement.
A-132
133
"POST COLLATERAL" or "POSTED COLLATERAL" or "POSTING OF COLLATERAL"
shall have the meaning set forth in Section 1.6 of the Trust Agreement.
"PRE-EXISTING CONDITION" is defined in Section 1.1 of the Loan
Agreement.
"PREFERENCE AMOUNT" is defined in Section 1 of the Surety Bond and in
Section 1 of the Backstop Policy, as applicable.
"PREMIUM ESCROW" shall mean that the Surety Premiums payable to Surety
from and after the date specified in Article 1 shall be deposited by Trustee
into an interest-bearing Eligible Account in the name of and under the control
of Trustee, to be distributed by Trustee as follows (but always subject to
Section 1.5 of the Trust Agreement): (i) to Surety if the applicable Surety
Default is cured prior to the end of the grace periods applicable to a Surety
Loss of Premium, (ii) in a lump sum to any Substitute Surety or Lender-Appointed
Wrap Surety as directed by the Lender, (iii) to any Surety-Appointed Wrap Surety
in such amount as may be agreed to by Surety and such Wrap Surety, or (iv) to
Lender if all of the following conditions exist: (1) all Premium Forfeiture
Conditions exist; and (2) either a Material Loan Default exists, or any of the
Bankruptcy/Invalidity Surety Defaults then exist.
"PREMIUM FORFEITURE CONDITIONS" means that (i) Backstop Insurer does
not have a S&P Rating of Investment Grade and (ii) no Substitute Surety or a
Lender-Appointed Wrap Surety then exists.
"PREMIUM FUND" is defined in Section 3.6 of the Trust Agreement.
"PREPAYMENT CONSIDERATION" shall have the meaning ascribed to such term
in the Note.
"PRIORITY A DEFERRED MANAGEMENT FEES" means as of any Distribution Date
a dollar amount equal to the lesser of (i) 50% of the Deferred Management Fee,
or (ii) 50% of the Revenue available for distribution at Category 2.1(xiii) of
the Flow of Funds Agreement.
"PRIORITY B DEFERRED MANAGEMENT FEES" means as of any Distribution Date
the remainder obtained (but not less than zero) by subtracting from the Deferred
Management Fees, the Priority (A) Deferred Management Fees, determined on such
Distribution Date.
"PROCEEDS" is defined in Section 1.1 of the Loan Agreement.
"PROHIBITED ACTIVITIES AND CONDITIONS" and a "PROHIBITED ACTIVITY AND
CONDITION" is defined in Section 1.1 of the Loan Agreement.
"PROPERTIES" (i) in the case of the Trust Agreement, shall have the
meaning set forth in the Recitals to the Trust Agreement, and (ii) when used any
of the other Transaction Documents (unless otherwise defined in such Transaction
Document), shall have the meaning set forth in Section 1.1 of the Loan
Agreement.
A-133
134
"PROPERTY" shall mean any one of the Properties.
"PROPERTY CLOSING DATE" shall mean the Closing Date or the Additional
Properties Closing Date, as applicable.
"PROPERTY DISCOUNTED FUTURE BASE SURETY PREMIUMS" shall mean, with
respect to any Leased Property, as of any date of determination, the product
obtained by multiplying the Discounted Future Base Surety Premiums by the
Assigned Value Factor.
"PROPERTY DISCOUNTED TERMINATION PREMIUM" shall mean, with respect to
any Leased Property as of any date of determination, the product obtained by
multiplying the Discounted Termination Premium by the Assigned Value Factor.
"PROPERTY TERMINATION PREMIUM" shall mean, with respect to any Leased
Property, as of any date of determination, the product obtained by multiplying
the Termination Premium by the Assigned Value Factor.
"PROPOSED ACTION PLAN" is defined in Section 2.10(a) of the Trust
Agreement.
"QUALIFIED" shall mean that S&P has publicly announced that the S&P
Rating of the affected Person will, upon the occurrence of a specified event or
events, be withdrawn or dropped below Investment Grade; "Qualified" does not
mean being placed on credit watch with negative implications or being placed
under ratings review.
"RATING AGENCIES" is defined in Section 1.1 of the Loan Agreement.
"REAL ESTATE CAPITAL PROCEEDS" shall mean all Capital Proceeds which
find their source in liquidation, sale or other disposition of the Properties.
"REGULATION T" is defined in Section 1.1 of the Loan Agreement.
"REGULATION U" is defined in Section 1.1 of the Loan Agreement.
"REGULATION X" is defined in Section 1.1 of the Loan Agreement.
"REGULATORY PERMITS" is defined in Section 1.1 of the Loan Agreement.
"REIMBURSABLE AMOUNTS" as defined in the Reimbursement Agreement,
means, (i) Losses, plus (ii) any expenses incurred by or on behalf of Surety in
connection with investigating, challenging or paying any Losses, plus (iii)
interest thereon as provided in Section 2.01(b) of the Reimbursement Agreement,
less (iv) the amount realized by Surety under any Collateral which is applied to
reimburse Surety for the same.
"REIMBURSEMENT AGREEMENT" shall mean that certain Reimbursement
Agreement of even date herewith by and among Surety, Borrower and Lessee.
A-134
135
"REIMBURSEMENT CONTRACTS" is defined in Section 1.1 of the Loan
Agreement.
"REIMBURSEMENT OBLIGATIONS" means the obligation of Lessee and/or
Borrower to reimburse Surety and/or Trustee (as applicable) for Reimbursable
Amounts, all Surety Premiums and all other indebtedness, obligations and
liabilities of Lessee and/or Borrower to Surety and/or the Trustee arising
hereunder, under the Trust Agreement or other Transaction Documents.
"RELATED PARTIES" shall mean, as to any Person, such Person's
Affiliates, officers, directors, legal and beneficial owners, employees, agents,
successors and permitted assigns.
"RELEASE" is defined in Section 1.1 of the Loan Agreement.
"REMARKETING PERIOD" is defined in Section 30 of the Master Lease.
"REMEDIAL WORK" is defined in Section 1.1 of the Loan Agreement,
Section 20.8 of the Master Lease and Section 8.08 of the Reimbursement
Agreement.
"REMEDIES" means, with respect to Trustee and any Beneficiary, any
action available to any of them under the Transaction Documents upon the
occurrence and continuance of an Event of Default, including without limitation,
acceleration of the maturity of the Note, seeking the appointment of a receiver
for any of the Properties, suing any guarantor or indemnitor of any Secured
Obligations, foreclosing on the Collateral pledged pursuant to the Security
Documents, or entering into a Loan modification, workout or rearrangement of any
sort each in accordance with the terms of the Trust Agreement.
"REMIC" shall mean a Real Estate Mortgage Investment Conduit within the
meaning of Section 860G of the Code.
"RENTAL" shall mean Base Rental, Contingent Surety Rental, Additional
Rental, and Termination Rental.
"RENTAL PERIOD" shall mean each period for which a payment of Base
Rental is to be made during the Basic Lease Term.
"RENT PAYMENT DATE" shall mean each date on which a payment of Base
Rental is due and payable pursuant to Section 5(a) of the Master Lease.
"RENT ROLLS" is defined in Section 1.1 of the Loan Agreement.
"RENTS" is defined in Section 1.1 of the Loan Agreement.
"REQUIRED CASUALTY/CONDEMNATION PAYMENT" is defined in Section 1.1 of
the Loan Agreement.
A-135
136
"REQUIRED RATING" shall mean at least "A" by Standard & Poor's Rating
Service or "A1" by Moody's Investors Service.
"RESIDENCY AGREEMENTS" is defined in Section 1.1 of the Loan Agreement
"RESIDENT" means any resident under any Residency Agreement.
"RESIDUAL REIMBURSEMENT OBLIGATION" means the sum of all amounts paid
by Surety to Trustee pursuant to the Surety Bond or by Backstop Insurer to
Trustee pursuant to the Backstop Policy to Lender on the Lease Term Expiration
Date after giving effect to any payments made by Lessee (or by Guarantor on
Lessee's behalf), pursuant to Sections 29 and 31 of the Master Lease.
"REVENUES" shall mean collectively all Operating Revenues, Guarantee
Revenues, and all Operating Reserve Account Revenues.
"SECONDARY MARKET TRANSACTION" is defined in Section 1.1 of the Loan
Agreement.
"SECURED OBLIGATIONS" shall mean and include, collectively, the "Loan
Obligations" described in the Loan Agreement, the "Reimbursement Obligations"
described in the Reimbursement Agreement and all obligations of the Lessee under
the Master Lease, together with all other indebtedness, obligations and
liabilities, whether now existing or hereafter arising, from time to time, owed
to the Beneficiaries or any of them and secured by any of the Security
Documents.
"SECURITIES" is defined in Section 1.1 of the Loan Agreement.
"SECURITIZATION" is defined in Section 1.1 of the Loan Agreement.
"SECURITY AGREEMENTS" shall mean, collectively, (i) that certain
Security Agreement executed by Borrower in favor of Trustee for the benefit of
Trustee and the Beneficiaries and (ii) that certain Security Agreement executed
by Lessee in favor of Trustee for the benefit of the Trustee and the
Beneficiaries.
"SECURITY DOCUMENTS" shall mean, collectively, the Mortgages, Security
Agreements, Pledge Agreements, Lockbox Agreement, Assignments of Leases,
Assignments of Management Agreements, the Assignment of Purchase Agreements and
any other agreement, document or instrument heretofore, now or at any time
hereafter executed by Borrower, Lessee or any Person evidencing the grant by
Borrower, Lessee or any such Person of a Lien on any property or assets of
Borrower, Lessee or such Person, as applicable, in favor of Trustee to secure
all or any part of the Secured Obligations, in each case as amended, restated,
supplemented or otherwise modified from time to time pursuant to the terms
thereof and the Trust Agreement; provided, however, the
A-136
137
term "Security Documents" shall not include the Excluded Collateral Agreement or
any Excluded Collateral.
"SELCO" is defined in Section 1.1 of the Loan Agreement.
"SELLER" shall mean HCR Manor Care, Inc., a Delaware corporation, and
any of its Affiliates party to the Acquisition Agreements as seller(s).
"SERVICER" is defined in Section 2.5 of the Trust Agreement.
"SERVICING AGREEMENT" is defined in Section 2.5 of the Trust Agreement.
"SETTLOR OR SETTLORS" means, individually or collectively, as the
context may require, the Holder and any of them, the Borrower, SELCO, Guarantor
and/or the Lessee.
"SFAS 13" shall mean Statement of Financial Accounting Standards No.
13, as amended, promulgated by the Financial Accounting Standards Board.
"SINGLE PURPOSE ENTITY" is defined in Section 1.1 of the Loan
Agreement.
"SIX MONTH PROPERTIES" mean the Properties located in Boynton Beach,
Florida; Boynton Village, Florida; Brea, California; Dunedin, Florida; Laguna
Palm Terrace, California; Reno, Nevada; Sarasota, Florida; Tucson, Arizona;
Westlake, Ohio; and Whittier, California.
"S&P RATING" means the most current claims-paying ability rating or
financial strength rating for the specified Person, as established by Standard &
Poor's Rating Service, a division of The McGraw-Hill Companies, Inc.
"SPRINGING LOCKBOX EVENT" shall mean the occurrence of any of the
following: (i) an Event of Default; or (ii) Lessee's failure to achieve a LCR of
at least 1.10:1.00 for any six (6) month period commencing on the LCR
Commencement Date and measured on a monthly basis thereafter.
"STANDSTILL PERIOD" shall have the meaning specified in Section 24(b)
of the Master Lease.
"STOCK" is defined in Section 1.1 of the Loan Agreement.
"SUBLEASED PROPERTIES" is defined in Section 1.1 of the Loan Agreement.
"SUBLEASES" is defined in Section 1.1 of the Loan Agreement.
"SUBLESSEES" is defined in Section 1.1 of the Loan Agreement.
"SUBORDINATED DEBT" shall mean any indebtedness of a person incurred at
any time the repayment of which is subordinated to other indebtedness of such
person
A-137
138
pursuant to a written agreement and specifically including (I) the Guarantor's
$143,750,000 aggregate original principal amount of 5.25% convertible
subordinated debentures due December 15, 2002; (ii) the Guarantor's $50,000,000
aggregate original principal amount of 7.00% convertible subordinated debentures
due June 1, 2004; (iii) the Guarantor's $35,000,000 aggregate original principal
amount of 6.75% convertible subordinated debentures due June 20, 2006.
"SUBORDINATION OF MANAGEMENT AGREEMENTS" is defined in Section 1.1 of
the Loan Agreement.
"SUBSIDIARY" shall mean any corporation or other Person of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other individuals performing similar
functions are at the time owned by such Person or by one or more Subsidiaries of
such Person, or by such Person and one or more Subsidiaries of such Person.
"SUBSTITUTE SURETY" is defined in Section 1.5(a)(iv) of the Trust
Agreement.
"SUCCESSOR OWNER" is defined in Section 19(b) of the Master Lease.
"SUPPLEMENTAL TRUST FUNDS" means any monies which the Trustee has been
directed by the Controlling Party to disburse from the Lease Reserve Account to
pay a Benefitted Item.
"SURETY" is defined in Section 1.1 of the Loan Agreement.
"SURETY ACCELERATION EVENT" shall mean the Lender's delivery of written
notice to the Trustee and the Surety that (a) either a Material Loan Default has
occurred and is continuing or that the date of such written notice is within a
Non-Performance Period and (b) a Non-Downgrade Surety Event of Default exists or
the S&P Rating of the Backstop Insurer is below Investment grade, withdrawn or
qualified.
"SURETY-APPOINTED WRAP SURETY" is defined in Section 1.5(a)(ii) of the
Trust Agreement.
"SURETY BASE RENTAL" is defined in Section 5(a)(x) of the Master Lease.
"SURETY BOND" means the Insurance Surety Bond dated as of even date
herewith, issued by Surety to Trustee for the benefit of Lender, together with
all endorsements thereto.
"SURETY BOND AMOUNT" is defined in Section 1 of the Surety Bond, as
reduced from time to time pursuant to the terms of the Surety Bond..
"SURETY BOND PAYMENT CERTIFICATE" is defined in Section 1 of the Surety
Bond and Section 1 of the Backstop Policy.
A-138
139
"SURETY BOND PAYMENT CONDITIONS" is defined in Section 1 of the Surety
Bond and Section 1 of the Backstop Policy.
"SURETY BOND PAYMENT DATE" is defined in Section 1 of the Surety Bond
and Section 1 of the Backstop Policy.
"SURETY CROSS-DEFAULT" shall mean the Surety Default described in
clause (v) of the definition of "Surety Default."
"SURETY DEFAULT" means any one or more of the following events: (i)
failure of Surety to make any payment in accordance with the terms and
conditions of the Surety Bond and failure of Backstop Insurer to make such
payment pursuant to the Backstop Policy (a "PAYMENT SURETY DEFAULT"), (ii)
Surety or Backstop Insurer has been declared insolvent or bankrupt by a court of
competent jurisdiction by an order or judgement of such court, or is a debtor in
a bankruptcy, insolvency, liquidation or rehabilitation proceeding, or an order
or decree has been entered appointing a receiver, receivers, trustee,
liquidator, custodian or custodians for any of its assets or revenues, or a
conservator, rehabilitator, liquidator, trustee or similar Person has been
appointed under applicable insurance laws with respect to Surety, Backstop
Insurer or any material asset of either Surety or Backstop Insurer, or any
proceeding shall be instituted with the consent or acquiescence of Surety or
Backstop Insurer or any plan shall be entered into by Surety or Backstop Insurer
for the purpose of effecting a composition between Surety or Backstop Insurer
and its creditors or for the purpose of adjusting the claims of such creditors,
or Surety or Backstop Insurer makes any assignment for the benefit of its
creditors, or Surety or Backstop Insurer is generally not paying its debts as
such debts become due, or Surety or Backstop Insurer files a petition under the
United States Bankruptcy Code, as amended, or Surety or Backstop Insurer is
subject to a rehabilitation or liquidation proceeding initiated by an insurance
commissioner or other similar government official with appropriate jurisdiction,
(iii) the Surety Bond or Backstop Policy has been determined to be void or
unenforceable by final, unappealable judgment of a court of competent
jurisdiction or (iv) Surety or Backstop Insurer asserts that the Surety Bond or
Backstop Policy is invalid or unenforceable, or any proceedings shall be
instituted by a government agency or authority with appropriate jurisdiction by
or with the consent of Surety or Backstop Insurer seeking to declare the Surety
Bond or Backstop Policy unenforceable, (v) a default (after any notice and grace
periods, if applicable) by Surety has occurred and is continuing under an
unconditional, irrevocable surety bond entered into by Surety which insures
principal and interest on a loan secured by commercial real estate and such
default is not cured by Backstop Insurer in accordance with the terms of any
guaranty of such surety bond, and (vi) a Downgrade Surety Default has occurred.
"SURETY DOCUMENTS" shall mean the Surety Policy and the Surety
Reimbursement Agreement.
SURETY EVENT OF DEFAULT shall mean the occurrence of a Surety Default
and the failure to effect a Permitted Surety Cure within the respective grace
periods applicable to a Surety Loss of Premium, as set forth in Article 1 of the
Trust Agreement.
A-139
140
"SURETY LOSS OF PREMIUM" shall mean, at such time as the applicable
grace periods set forth in Article 1 of the Trust Agreement have expired, then
the irrevocable forfeiture by the Surety of (i) all Base Surety Premiums being
escrowed pursuant to a Premium Escrow, (ii) any Base Surety Premiums which would
otherwise be payable thereafter under the Reimbursement Agreement and (iii) the
Termination Premium; provided, however, Surety shall not lose or forfeit the
Termination Premium unless a Surety Replacement (as opposed to a Wrap Surety or
other Permitted Surety Cure) occurs.
"SURETY PREMIUMS" shall mean all amounts paid by Trustee to Surety as
premiums or fees in consideration for its issuance of the Surety Bond, including
without limitation, Base Surety Premiums, Early Termination Premiums and the
Termination Premium, together with interest accruing on any such due but unpaid
sums, as set forth in the Reimbursement Agreement.
"SURETY REIMBURSEMENT AGREEMENT" shall mean the Reimbursement Agreement
dated the Closing Date between Borrower and Surety with respect to the Surety
Bond.
"SURETY REPLACEMENT" is defined in Section 1.5(a)(iv) of the Trust
Agreement.
"SURETY REQUIRED CASUALTY/CONDEMNATION PAYMENT" shall mean, as of any
calculation date, an amount equal to (i) the discounted present value of the
Termination Premium (using a discount rate equal to the applicable Interest
Rate), multiplied by (ii) a fraction, (A) the numerator of which is the trailing
twelve month Net Operating Income for the affected Property from which the Total
Loss Casualty/Condemnation Proceeds are derived for the most recent period prior
to such casualty (or prior to June 30, 2002, the stabilized appraised value for
such Property as set forth in the Appraisal for such Property delivered pursuant
to the Loan Agreement), and (B) the denominator of which is the trailing twelve
month Net Operating Income for all the Properties for such period (or prior to
June 30, 2002, the stabilized appraised values for such Properties as set forth
in the Appraisals for such Properties delivered pursuant to the Loan Agreement).
"SURETY TRANSACTION" is defined in Section 7.14(a) of the Trust
Agreement.
"SURVEYS" is defined in Section 1.1 of the Loan Agreement.
"TANGIBLE NET WORTH" is defined in Section 9.5 of the Participation
Agreement.
"TAX DISTRIBUTION DATE" means the Distribution Date occurring after the
determination of the Tax Reimbursement Amount relating to the most recently
ended Tax Year.
"TAX AND INSURANCE ESCROW FUND" is defined in Section 3.7 of the Trust
Agreement.
A-140
141
"TAX RATE" means, with respect to any Tax Year, the combined rate of
the highest federal and Wisconsin personal income tax rates of a single
taxpayer, pursuant to Section 1(c) of the Internal Revenue Code of 1986, as
amended, and Section 71.06 of the Wisconsin Statutes Annotated, respectively,
adjusted to take into account the deductibility of Wisconsin personal income
taxes for purposes of determining federal personal income taxes. Initially, the
Tax Rate shall be 43.69%, using the highest federal income tax rate of 39.6% and
the highest Wisconsin personal income tax rate of 6.77%, each of which are in
effect pursuant to federal and state income tax law, respectively, as of the
date hereof.
"TAX REIMBURSEMENT AMOUNT" with respect to the Joint Ventures, means
the product of (i) the Tax Rate and (ii) the Net Taxable Amount as of the Tax
Distribution Date.
"TAX YEAR" means, with respect to a Tax Distribution Date, the most
recently ended calendar year.
"TAXES" shall mean all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are levied,
assessed or imposed by any public authority or quasi-public authority, and
which, if not paid, will become a lien, on the Land or the Improvements.
"TERM" shall mean, as to any Leased Property, the Basic Lease Term.
"TERM OF THIS FLOW OF FUNDS AGREEMENT" means the period from the
Closing Date to but not including the Termination Date.
"TERMINATION DATE" is defined in Section 4.9 of the Flow of Funds
Agreement.
"TERMINATION EVENT" is defined in Section 1.1 of the Loan Agreement.
"TERMINATION PREMIUM" shall mean the sum of the products resulting from
multiplying each Advance by a fraction, the numerator of which is $29,000,000
and the denominator of which is $201,000,000.
"TERMINATION PREMIUM PAYMENT DATE" shall mean the Maturity Date.
"TERMINATION RENTAL" is defined in Section 5(d) of the Master Lease.
"TITLE COMPANY" is defined in Section 1.1 of the Loan Agreement.
"TITLE POLICIES" is defined in Section 1.1 of the Loan Agreement.
"TOLLING DEFAULT" shall mean (a) any failure to repay the Equity Amount
with
A-141
142
respect to a Leased Property which suffers a casualty or condemnation as
provided in Section 15(g) of the Master Lease, (b) any failure of Guarantor to
comply with its obligations under the Excluded Collateral Agreement or Section
9.8 or Article X of the Participation Agreement (c) any other Event of Default
or Lease Event of Default by Lessee or Guarantor which is waived by Controlling
Party without the consent or approval of Equity Investor or which has occurred
and is continuing without any action with respect thereto by Controlling Party
and Equity Investor has not concurred with such non-action, or (d) any amendment
to the Transaction Documents to which Borrower (acting at the direction of
Equity Investor) did not consent to or otherwise approve.
"TOTAL CAPITAL" shall mean the sum of Net Worth, Total Funded Debt and
Subordinated Debt.
"TOTAL FUNDED DEBT" shall mean, at any time, the sum at such time of
(a) indebtedness for borrowed money or for the deferred purchase price of
property or services, (b) any obligations in respect of letters of credit,
banker's or other acceptances or similar obligations issued or created for the
account of the Guarantor, (c) lease obligations which have been or should be, in
accordance with GAAP, capitalized on the books of the Guarantor, (d) all
liabilities secured by any property owned by the Guarantor, as the case may be,
to the extent attached to the Guarantor's interest in such property, even though
the Guarantor has not assumed or become liable for the payment thereof, and in
the case of the Guarantor, and (e) any obligation of the Guarantor or a COMMONLY
CONTROLLED ENTITY to a Multiemployer Plan; but excluding trade and other
accounts payable in the ordinary course of business in accordance with customary
trade terms and which are not overdue (as determined in accordance with
customary trade practices) or which are being disputed in good faith by the
Guarantor and for which adequate reserves are being provided on the books of the
Guarantor in accordance with GAAP.
"TOTAL LOSS CASUALTY/CONDEMNATION PROCEEDS" shall mean, with respect to
each occurrence of a loss of, or damage to, Collateral, insurance proceeds or
Condemnation awards which are not made available for the repair, restoration or
replacement of the Collateral affected by such loss, damage or Condemnation in
accordance with Section 4.4 of the Loan Agreement.
"TRANSACTION DOCUMENTS" is defined in Section 1.1 of the Loan
Agreement.
"TRANSACTION EXPENSES is defined in Section 10.4 of the Participation
Agreement.
"TRANSACTION FEE" shall mean as of the Closing Date, an amount equal to
2% of each Advance.
"TRANSACTIONS" shall mean all transactions described or otherwise
A-142
143
contemplated in the Lease Documents, the Loan Documents and each other
Transaction Document.
"TRANSFER" is defined in Section 1.1 of the Loan Agreement.
"TRANSFER AND ASSUMPTION" is defined in Section 1.1 of the Loan
Agreement.
"TRANSFER DOCUMENTS" is defined in Section 1 of the Surety Bond and
Section 1 of the Backstop Policy.
"TRANSFEREE" shall mean the Person to whom the Equity Investor sells,
conveys, assigns, pledges, mortgages or otherwise transfers any of its interests
in the Owner and the Transaction Documents prior to the expiration or earlier
termination of the Term.
"TRANSFEREE BORROWER" shall have the meaning set forth in Section 9.02
of the Reimbursement Agreement.
"TRIGGER DATE" is defined in Section 1.1 of the Trust Agreement.
"TRUE UP PROVISIONS" means that portion of Section 2.1 of the Flow of
Funds Agreement describing the reconciliation procedures relating to the
Distribution Operating Expense Estimate.
"TRUST AGREEMENT" means that certain Trust Agreement of even date
herewith among the Trustee, Noteholder, Surety, Guarantor, Lessee, Borrower and
SELCO.
"TRUSTEE" shall mean The First National Bank of Chicago, a national
banking association, acting in its capacity as trustee under the Trust
Agreement.
"TRUST ESTATE" shall have the meaning assigned to such term in GRANT OF
TRUST ESTATE of the Trust Agreement.
"TWELVE MONTH PROPERTIES" mean the Properties located in Citrus
Heights, California; Colorado Springs, Colorado, Fulton County, Georgia (Arden
Courts); Lynnwood, Washington; Overland Park, Kansas; Peoria, Arizona; Sun City
West, Arizona; Wayne, New Jersey; and West Orange, New Jersey.
"UCC COLLATERAL" is defined in Section 2 of the Mortgage.
"UCC OR UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code
in effect in the State of Illinois and the jurisdiction where any Leased
Property is situated.
"UNITED STATES BANKRUPTCY CODE" shall mean Title 11 of the United State
Code, as the
A-143
144
same may be amended from time to time.
"WAIVING PARTY" is defined in Section 1.1 of the Loan Agreement.
"WEST ORANGE AMOUNT" is defined in Section 3.2 of the Trust Agreement.
"WEST ORANGE FACILITY" is defined in Section 3.2 of the Trust
Agreement.
"WRAP SURETY" is defined in Section 1.5(a)(ii) of the Trust Agreement.
"WRITTEN DIRECTION" means an instrument or instruments executed by the
Controlling Party (or if regarding a Material Action, executed by the
Controlling Party and the Non-Controlling Party) and delivered to Trustee
directing Trustee to take an action in accordance with the Trust Agreement.
"YIELD" shall mean the periodic return payable to the Owner on account
of Equity Advances as set forth in Section 2.6 of the Participation Agreement.
"ZC SPECIALTY INSURANCE" shall mean ZC Specialty Insurance Company, a
Texas insurance company.
"ZCSI SUBROGATION AMOUNTS" means any amounts payable to ZCSI on account
of Loan Obligations to which ZCSI has been subrogated as contemplated by the
Loan Agreement, the Reimbursement Agreement, the Trust Agreement or pursuant to
applicable law.
A-144
145
EXHIBIT B-1
INITIAL PROPERTIES
1. 6145 East Arbor Avenue
Mesa, Arizona 85206
2. 9296 West Union Hills Drive
Peoria, Arizona 85382
3. 21739 North 151st Street
Sun City West, Arizona 85375
4. 3701 North Swan Road
Tucson, Arizona 85718
5. 285 West Central Avenue
Brea, California 92621
6. 7375 Stock Ranch Road
Citrus Heights, California 95621
7. 8101 South Painter Avenue & 8132 Friends Avenue
Whittier, California 90602
8. 2850 North Academy Boulevard
Colorado Springs, Colorado 80917
9. 1935 South Federal Highway
Boynton Beach, Florida 33435
10. 880 Patricia Avenue
Dunedin, Florida 34698
11. 475 Irvin Court
Decatur, Georgia 30030
12. 4375 Beech Haven Trail, SE
Smyrna (Cobb County), Georgia 30080
13. 11001 Oakmont
Overland Park, Kansas 66210
B-145
146
14. 5326 Park Road
Charlotte, North Carolina 28209
15. 590 Old Hook Road
Emerson, New Jersey 07630
16. 820 Hamburg Turnpike
Wayne, New Jersey 07470
17. 590 Prospect Avenue
West Orange, New Jersey
18. 3105 Plumas Street
Reno, Nevada 89509
19. 27569 Detroit Road
Westlake, Ohio 44145
20. 1127 Persinger Road, SW
Roanoke, Virginia 24015
B-146
147
EXHIBIT B-2
ADDITIONAL PROPERTIES
1. Laguna Palm Terrace, CA
2. Denver, CO
3. Boynton Beach, FL
4. Palmer Ranch, FL
5. Sarasota, FL
6. Fulton County (Arden Courts), GA
7. Fulton County (Spring House), GA
8. Lynnwood, WA
B-147
148
EXHIBIT C
DISBURSEMENT SCHEDULE
(See Attached)
B-148
149
EXHIBIT D
GROUND LEASES
B-149
150
EXHIBIT E
SUBLEASES; SUBLESSEES
B-150
151
EXHIBIT F
TO LOAN AGREEMENT
AGREED UPON PROCEDURES RELATED TO
THE PREPARATION OF THE INCOME
STATEMENTS OF THE ASSISTED LIVING FACILITIES
I. GENERAL
A. For each calendar (or fiscal, if applicable) year during the
term of the Loan, obtain the year end financial results of
the Assisted Living Facilities beginning with the year ended
December 31, 1999.
B. Obtain budget for each property for each calendar year
during the term of the Loan and compare to actual revenue
and expense results during such period.
C. Obtain company prepared statements of operations for each of
the Assisted Living Facilities. Agree to amounts recorded to
the company's general ledger for each of the Assisted Living
Facilities.
D. Reconcile the net operating income to net income per the
general ledger. Assess whether revenue and expense items
included in the general ledger and excluded from net
operating income represent non-operating expenses based on
the described nature of items.
E. Obtain supporting documents for each item excluded greater
than $15,000.
II. REVENUE
A. Obtain rent rolls (or other documents supporting revenue
collections) for each of the Assisted Living Facilities for
each calendar year during the term of the Loan.
B. Reconcile rent rolls to (or other documents supporting
revenue collections) the cash collected as stated in the
general ledger.
C. Obtain copies of leases (or other appropriate supporting
documentation) for 20% of the tenants from each property and
compare terms to current rent rolls.
D. Obtain lists of aged receivables and delinquency history to
identify any tenants with receivable difficulties or other
tenant disputes.
B-151
152
III. EXPENSES
A. Obtain property tax bills, insurance policies, utility bills
and other supporting documentation for each property for
each calendar year during the term of the Loan for
comparison to recurring expenses such as property taxes,
insurance and utilities.
B. For other expenses (excluding individual labor costs and
benefits, which may be verified on a representative sample
basis), select all disbursements greater than $15,000 for
comparison to supporting documentation.
C. Obtain a listing of all capital expenditures during the year
for each of the Assisted Living Facilities. Compare amounts
in excess of $15,000 to supporting documents. Identify any
unusual items.
D. Review disbursement ledgers for large or unusual
disbursements to the Borrower, Lessee, Guarantor or known
related parties.
B-152