LOAN AGREEMENT
BETWEEN
MEDITRUST MORTGAGE INVESTMENTS, INC.
AND
ESC I, L.P.
DATED September 30, 1997
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of September
30, 1997 by and between ESC I, L.P., a Washington
limited partnership (the "Borrower"), and
MEDITRUST MORTGAGE INVESTMENTS, INC. a Delaware
corporation (the "Lender").
1. BACKGROUND
1.1 THE BORROWER.
The Borrower is a limited partnership whose
sole general partner is ESC G.P. I, Inc., a
corporation which is a wholly-owned Subsidiary (as
hereinafter defined) of the Guarantor. The
Guarantor is a corporation.
1.2 THE FACILITY AND THE LAND.
The Borrower is the owner of a 72 unit, 81
bed assisted living facility commonly known as
"Meadowlands Terrace" (the "Facility") situated on
a certain parcel of land located in Waco, Texas
and more particularly described on EXHIBIT A (the
"Land").
1.3 USE OF LOAN PROCEEDS.
In order to refinance the Land and the
Facility, the Borrower has applied to the Lender
for a Four Million Two Hundred Eighty Eight
Thousand DOLLAR ($4,288,000) loan (the "Loan").
1.4 GUARANTIES AND INDEMNITIES.
As an inducement to the Lender to make the
Loan, the Guarantor agrees to furnish certain
guaranties as hereinafter described.
1.5 LOAN.
Subject to all of the terms, conditions and
provisions of this Agreement, and of the
agreements and instruments referred to herein, the
Lender agrees to make the Loan and the Borrower
agrees to accept and repay the Loan.
2. DEFINITIONS
In this Agreement, except as otherwise
expressly provided in the text of this Agreement
or unless the context otherwise requires, all
capitalized terms shall have the meaning ascribed
to them in EXHIBIT B.
3. LOAN PROVISIONS.
3.1 AMOUNT OF LOAN.
The Loan shall be in the amount of Four
Million Two Hundred Eighty Eight Thousand DOLLARS
($4,288,000) (the "Loan Amount") or such lesser
amount as may be advanced under the Note and this
Agreement.
3.2 PROMISSORY NOTE.
The Loan shall be evidenced by a promissory
note of the Borrower dated as of the Closing Date,
made by the Borrower to the order of the Lender,
in a principal amount
equal to the Loan (the "Note"). Interest on so
much as is outstanding from time to time under the
Note shall accrue at the Interest Rate, except as
otherwise specifically provided herein or therein.
3.3 APPLICATION OF PAYMENTS.
All payments made pursuant to the Loan
Documents that are received by the Lender shall be
applied (a) prior to the occurrence of an Event of
Default, first, to the payment of all Additional
Interest, then, to all fees, costs and expenses
due under or in connection with the Loan Documents
then, to the payment of all accrued but unpaid
interest, and the balance, if any, to principal;
and (b) after the occurrence of an Event of
Default, in such order as the Lender may determine
in its sole discretion.
3.4 METHOD OF PAYMENTS.
Except as may otherwise be specifically set
forth herein or in any of the other Loan
Documents, all payments to be made to the Lender
hereunder or under any of the other Loan
Documents, including, without limitation, all
payments of principal, interest (including,
without limitation, Additional Interest),
Prepayment Fee, Late Payment Charges, all other
charges, costs, expenses and other amounts due
hereunder or under any of the other Loan
Documents, shall be made to the Lender at the
Lender's Address, in lawful money of the United
States of America, not later than 12:00 Noon
Eastern Standard Time on the date that such
payment is due. All payments received by the
Lender after such time shall be deemed to have
been received by the Lender, for the purposes of
computing interest and Late Payment Charges, as of
the next Business Day. If any payment to be made
to the Lender under any of the Loan Documents
falls due on a day which is not a Business Day,
the due date therefor shall be extended to the
next succeeding Business Day.
3.5 LOAN FEES.
The Borrower shall pay the Permanent Loan
Commitment Fee to the Lender simultaneously with
the execution of this Agreement; providing,
however, that, at the Lender's option, the
Permanent Loan Commitment Fee shall be held in an
escrow account established with a Person
designated by the Lender pursuant to an escrow
arrangement satisfactory to the Lender, with
interest thereon benefiting the Lender. If the
Lender exercises its option to require that the
Permanent Loan Commitment Fee be held in such an
escrow account (a) the Permanent Loan Commitment
Fee shall be disbursed from said escrow account
only upon the joint instructions of the Borrower
and the Lender (which instructions from the
Borrower shall be immediately given upon the
request of the Lender) and in no event shall the
Permanent Loan Commitment Fee be disbursed
therefrom, in whole or in part, unless and until
so requested by the Lender and (b) the Lender
shall bear the risk of loss of or misappropriation
of the Permanent Loan Commitment Fee by such
escrow agent.
3.6 PREPAYMENT.
Except as otherwise expressly provided herein
(including without limitation Section 3.9 and
Section 14.1 and in the Agreement Regarding
Related Transactions), a prepayment fee (referred
to herein as the "Prepayment Fee") shall be paid
to the Lender in the event that the Loan is
prepaid (or shall become due and payable) prior to
the Maturity Date, whether such prepayment is
voluntary or involuntary, including, without
limitation, any prepayment which results from any
default under any of the Loan
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Documents and an acceleration of the indebtedness
due thereunder. Notwithstanding the foregoing, the
Borrower shall have no right, at any time to
prepay all or any portion of the outstanding
principal balance of the Loan without the prior
written consent of the Lender, which consent may
be withheld in the Lender's sole and absolute
discretion except that Borrower shall have the
right to prepay the Loan, without Lender's consent
(i) upon Lease Conversion as provided in Section 3
9, (ii) upon exercise of the Substitution Rights
as provided in Section 14.1, and (iii) as provided
in Section 6 of the Second Amended and Restated
Agreement regarding Related Transactions. The
Borrower shall pay to the Lender, together with
the entire outstanding principal balance of the
Loan, all accrued and unpaid interest (including,
without limitation, Additional Interest) and any
other costs, charges and sums due under this
Agreement and all of the other Loan Documents, a
"Prepayment Fee" equal to (and defined herein as)
the greater of (a) the then present value
discounted at the Current Rate of the difference
between (i) the product of the Interest Rate then
in effect, multiplied by the then outstanding
principal balance of the Loan, multiplied by the
remaining number of years (or fraction thereof of
the Term and (ii) the product of the annual rate
of interest (as of the date of prepayment) of
actively traded marketable United States treasury
securities bearing a fixed rate of interest
adjusted for a constant maturity equal to the
remaining number of years (rounded to the nearest
whole year) of the Term (the "Current Rate"),
multiplied by the then-outstanding principal
balance of the Loan, multiplied by the remaining
number of years (or fraction thereof of the Term;
or (b) one percent (1%) of the then outstanding
principal balance of the Loan multiplied by the
remaining number of years (or fraction thereof of
the Term. The Prepayment Fee shall be paid without
prejudice to the rights of the Lender to collect
any amounts due to the Lender. The Borrower shall
not be entitled to make any partial prepayments of
principal at any time during the Term.
3.7 LATE CHARGES; INTEREST FOLLOWING CERTAIN
EVENTS.
In the event of any delinquency in the
payment of any installment of principal and
interest (including, without limitation,
Additional Interest) or in the payment of any
other monetary obligation under this Agreement or
any of the other Loan Documents continuing for ten
(10) days (hereinafter referred to as a "Late
Payment"), the Borrower shall pay the Lender a
late payment charge of TWO HUNDRED FIFTY DOLLARS
($250) (referred to herein as a "Late Payment
Charge") for the month during which such
delinquency occurs and for each month (or portion
of the month) thereafter that the Late Payment
remains unpaid, for the purpose of defraying the
expenses incurred by the Lender in handling and
processing such Late Payments. In addition to any
Late Payment Charges which may become due
hereunder, the Borrower shall pay interest on any
Late Payment, calculated at the Advances Rate,
from the date upon which the Late Payment was
originally due until the date that the Lender
actually receives such Late Payment. It is
understood that nothing contained in this Section
shall be deemed to relieve the Borrower of its
obligations to make any and all payments due and
payable to the Lender pursuant to the provisions
of this Agreement or any of the other Loan
Documents upon the dates set forth therein, it
being acknowledged that time is of the essence.
3.8 ADDITIONAL INTEREST.
3.8.01 AMOUNT OF ADDITIONAL INTEREST.
In addition to the monthly payments of
principal and interest set forth in the Note,
the Borrower shall also pay to Lender as
additional interest (the "Additional
Interest") an amount equal to five percent
(5%) of Excess Gross Revenues.
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3.8.02 COMMENCEMENT OF ADDITIONAL INTEREST.
Additional Interest shall commence to
accrue on October 1, 1999 and shall be
payable quarterly in arrears during the Term
with the first such quarterly payment to be
made on January 1, 2000.
3.8.03 BASE REVENUES/EXCESS GROSS REVENUES.
The term "Base Revenues" shall be
defined as the annualized Gross Revenues of
the Facility for the twelve month period
commencing October 1, 1998 and ending
September 30, 1999. The term "Excess Gross
Revenues" shall be defined as the Gross
Revenues less Base Revenues.
3.8.04 REVENUE OF AFFILIATES.
To the extent that the Borrower enters
into (or has entered into) a Lease with any
of its Affiliates, Gross Revenues calculated
for all purposes under this Agreement
(including, without limitation, the
determination of the Additional Interest
payable hereunder) shall-include the Gross
Revenues of such Affiliate with respect to
the property demised under such Lease (i.e.,
the Gross Revenues generated from the
operations conducted on the portion of the
Mortgaged Property demised under such Lease)
and the Rents received or receivable by the
Borrower pursuant to such Leases shall be
excluded from Gross Revenues for all such
purposes. As to any Lease of the Mortgaged
Property to a non-Affiliate of the Borrower
only the rental income actually received by
the Borrower from such non-Affiliate shall be
included in Gross Revenues.
3.8.05 ESTIMATES.
Commencing on January 1, 2000,
Additional Interest to be paid during each
calendar year during the Term shall be
estimated by the Borrower at the beginning of
each calendar year for which it is payable
(and in no event shall such estimate be less
than the Additional Interest payable for the
prior calendar year), and shall be paid
quarterly in arrears (in equal installments
on the first day of April, July, October and
January) based on such estimate, to be
adjusted at the end of each such year based
on the actual increase of Gross Revenues over
Base Revenues achieved by the Facility during
that calendar year. Additional Interest due
for any portion of any calendar year shall be
prorated accordingly. Notwithstanding the
foregoing, on a quarterly basis, with the
consent of the Lender, the Borrower may also
adjust the quarterly payments of Additional
Interest to be made hereunder based upon a
comparison of (a) the actual Gross Revenues
generated by the Facility during the
applicable quarter and (b) the original
estimate of Additional Interest for the
applicable calendar year prepared by the
Borrower and the amount of Additional
Interest already paid by the Borrower
pertaining to the applicable calendar year.
3.8.06 ANNUAL STATEMENT.
In addition, on or before the first day
of April of each year following any calendar
year for which Additional Interest is payable
hereunder, the Borrower shall deliver to the
Lender a statement certified as correct by
the Borrower setting forth the Gross Revenues
for the immediately preceding calendar year.
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3.8.07 ADJUSTMENT.
If the Additional Interest, as finally
determined for any calendar year (or portion
thereof, exceeds the sum of the quarterly
payments of Additional Interest previously
paid by the Borrower with respect to said
calendar year (or portion thereof, within
thirty (30) days after such determination is
required to be made hereunder, the Borrower
shall pay such deficit to the Lender and if
the deficit exceeds five percent (5%) of the
Additional Interest which was previously paid
to the Lender with respect to said calendar
year, then the Borrower shall also pay the
Lender interest, at the Advances Rate, on
such deficit from the applicable quarterly
date that such payment should have originally
been made by the- Borrower to the date that
the Lender receives such payment.
3.8.08 OVERPAYMENT.
If the Additional Interest, as finally
determined for any calendar year (or portion
thereof, is less than the amount previously
paid with respect thereto by the Borrower,
and if no Loan Default exists, the Borrower
shall notify the Lender to either.(a) pay to
the Borrower an amount equal to such
difference or (b) grant a credit to the
Borrower against the payment of Additional
Interest next coming due in the amount of
such difference.
3.8.09 Final Determination.
The obligation to pay Additional
Interest shall survive the expiration or
earlier termination of the Term (as to
Additional Interest payments that are due and
payable with respect to periods prior to the
expiration or earlier termination of the
Term), and a final reconciliation, taking
into account, among other relevant
adjustments, any contractual allowances which
related to Gross Revenues accrued prior to
the expiration or the termination of the Term
but which have been determined to be not
payable after such expiration or termination
date, and the Borrower's good faith best
estimate of the amount of any unresolved
contractual allowances shall be made not
later than two (2) years after said
expiration or termination date. Within sixty
(60) days after the expiration or earlier
termination of the Term, the Borrower shall
advise the Lender of the Borrower's best
estimate at that time of the approximate
amount of such adjustments, which estimate
shall not be binding on the Borrower or have
any legal effect whatsoever.
3.8.10 ACCOUNTING.
The Borrower shall utilize, or cause to
be utilized, an accounting system for the
Mortgaged Property in accordance with usual
and customary practices in the assisted
living industry and in accordance with GAAP
which will accurately record all Gross
Revenues. The Borrower shall retain, for at
least three (3) years after the expiration of
each calendar year for which Additional
Interest shall be payable hereunder (and in
any event until the final reconciliation
described above has been made), adequate
records conforming to such accounting system
showing all Gross Revenues for such calendar
year.
3.8.11 AUDIT.
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The Lender, at its own expense, except
as provided hereinbelow, shall have the right
from time to time to have its accountants or
representatives audit the information set
forth in any certificate required to be
provided by the Borrower to the Lender
pursuant to the provisions of Section 3.8,
and in connection with such audits, to
examine the Borrower's records with respect
thereto (including supporting data and sales
tax returns). If any such audit discloses a
deficiency in the reporting of Gross Revenues
and either the Borrower agrees with the
result of such audit or the matter is
compromised, the Borrower shall forthwith pay
to the Lender the amount of the deficiency in
Additional Interest which would have been
payable by it had such deficiency in
reporting Gross Revenues not occurred, as
finally agreed upon or determined, together
with interest on the Additional Interest
which should have been payable by it,
calculated at the Advances Rate, from the
date when said payment should have been made
by the Borrower to the actual date that the
Lender receives such payment. Notwithstanding
anything to the contrary contained herein,
with respect to any audit that is commenced
more than two (2) years after the date that
Gross Revenues for any calendar year are
reported by the Borrower to the Lender, the
deficiency, if any, with respect to
Additional Interest shall bear interest as
permitted herein only from the date such
determination of deficiency is made, unless
such deficiency is the result of gross
negligence or wilful misconduct on the part
of the Borrower. If any audit conducted for
the Lender pursuant to the provisions of this
Section discloses that (a) the Gross Revenues
actually received by the Borrower for any
calendar year exceed those reported by the
Borrower to the Lender by more than five
percent (5%), the Borrower shall pay the
reasonable cost of such audit and examination
or (b) the Borrower has overpaid Additional
Interest, and if no Loan Default exists, the
Lender shall notify the Borrower and the
Borrower shall direct the Lender either to
(i) refund the overpayment to the Borrower or
(ii) grant a credit against Additional
Interest next coming due in the amount of
such difference.
3.8.12 SURVIVAL.
The obligations of the Borrower and the
Lender contained in this Section shall
survive the expiration or earlier termination
of the Term and any foreclosure of the
Mortgage.
3.8.12 BEST EFFORTS TO MAXIMIZE.
Borrower further covenants that the
operation of the Facility shall be conducted
in a manner consistent with the prevailing
standards and practices recognized in the
assisted living industry as those customarily
utilized by reputable business operations.
Subject to any applicable Legal Requirements,
the members of the Leasing Group shall use
their best efforts to maximize the Facility's
Gross Revenues.
3.9 SPECIAL RIGHTS TO CONVERT TO LEASE
3.9.1 LEASE CONVERSION RIGHT
As long as there exists no Loan Default
or event which, with the giving of notice or
passage of time, or both, would constitute a
Loan Default at the time of exercise and on
the date of the consummation of the Lease
Conversion, Borrower is hereby granted the
option, exercisable within one (1) year from
the
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Closing Date, to cause a Lease Conversion (as
defined in this Section 3.9). Such
opinion shall be exercised by Borrower by
giving written notice to Lender of its
intention-to exercise such option at least
ninety (90) days prior to the intended date
of the Lease Conversion. Borrower shall have
no right to rescind any such notice once
given. The Lease Conversion shall-take place
on the date to be specified by Borrower in
such notice or on such Business Day
thereafter (but not more than thirty (30)
days thereafter) as is convenient to Lender
and its Affiliates.
3.9.2 DEFINITION
As used herein, the term "Lease
Conversion" shall mean that all of the
following shall happen concurrently, pursuant
to documentation reasonably satisfactory to
an Affiliate of Lender but substantially
similar in form and substance to the Group
Four Acquisition Transaction Documents (as
that term is defined in the Agreement
Regarding Related Transactions): (a) Borrower
shall prepay the Loan Obligations in full,
including, without limitation, the Conversion
Closing Costs (as defined in Section 3.9.3.)
without the payment of the Prepayment Fee;
(b) Borrower shall convey the Mortgaged
Property and all tangible personal property
to an Affiliate of Lender in consideration of
the payment by Lender or its Affiliate to
Borrower of an amount equal to the Loan
Amount (and neither Lender nor its Affiliates
shall have any obligation to advance any
other or further amounts); and (c) Borrower
shall lease the Mortgaged Property and such
tangible personal property from Lender's
Affiliate on a triple-net basis and in its
"as is" condition at the time of such lease
for a term which is coterminous with the
Leases for the Group Four Acquisition
Facilities and at a base rent per annum to be
specified by Lender prior to the commencement
of the Lease Conversion, such Base Rent to be
calculated by Lender or its Affiliate based
on the term of such lease, the Loan Amount
and the Interest Rate, as adjusted pursuant
to the provisions of the Note and using the
same form of lease as the other leases for
the Group Four Acquisition Facilities.
3.9.3 EXPENSES.
Whether or not any proposed Lease
Conversion is consummated, the Borrower shall
pay all of the out-of-pocket expenses and
other costs incurred or expended by the
Lender in connection with any proposed Lease
Conversion (collectively referred to herein
as "Conversion Closing Costs"), including,
without limitation, reasonable attorneys'
fees and expenses, engineering costs,
consultants' fees, appraisal costs, audit and
tax review costs, out-of-pocket travel
expenses, inspection fees, title insurance
premiums and other title fees, survey
expenses, transfer, documentary stamp and
other taxes, search charges of any nature,
recording, registration and fling costs, and
any other costs expended or incurred by the
Lender in connection with the preparation for
and the documentation and/or the closing of
the proposed Lease Conversion. The Conversion
Closing Costs shall be a demand obligation of
the Borrower to the Lender and, if not paid
within ten (10) days after demand, shall
thereafter (to the extent permissible under
applicable law) bear interest at the Advances
Rate until the date of payment and, to the
maximum extent permitted by applicable law,
shall be added to the Loan Obligations and
secured by the liens of the Mortgage and the
other Loan Documents, as fully and
effectively and with the same priority as
every other obligation thereunder and
hereunder.
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4. LOAN DOCUMENTS; COLLATERAL SECURITY
4.1 Loan Documents.
The Loan shall be made, evidenced,
administered, secured and governed by all of the
terms, conditions and provisions of each of the
following:
A. this Loan Agreement;
B. the Note;
C. a Deed of Trust and Security Agreement
of even date granted by the Borrower to
the Lender (the "Mortgage") and related
UCC financing statements;
D. an Assignment of Leases and Rents of
even date granted by the Borrower to the
Lender (the "Assignment of Leases");
E. a Collateral Assignment of Permits,
Approvals, Licenses, and Contracts of
even date granted by the Borrower to the
Lender (the "Permits Assignment");
F. a Guaranty of even date executed
by the Guarantor for the benefit of the
Lender (the "Guaranty");
G. an Environmental Indemnity Agreement
of even date by and among the Borrower,
the Guarantor, and the Lender (the
"Environmental Indemnity Agreement");
H. a Deposit Pledge Agreement of even
date by and between the Borrower and the
Lender (the "Deposit Pledge Agreement");
I. a Negative Pledge Agreement of
even date by and among the General
Partner , Guarantor and the Lender with
respect to their general and limited
partnership interests in Borrower and
the issued and outstanding stock of the
General Partner; J. an Affiliated Party
Subordination Agreement of even date by
and among the
Borrower, the Guarantor,
various Affiliates of the Borrower and
the Lender (the "Affiliated Party
Subordination Agreement"); and
K all other documents, instruments, or
agreements now or hereafter evidencing
and/or securing the Loan.
Items (A) through (K) above, as the same from time
to time may be hereinafter amended, modified or
supplemented, are referred to herein as the "Loan
Documents".
4.2 . LOAN OBLIGATIONS.
The Borrower agrees to pay and perform (or
cause to be paid and performed)- all indebtedness,
covenants, liabilities, obligations, agreements
and undertakings (other than the Lender's
obligations) under the Note, this Agreement and
all of the other Loan Documents (collectively, the
"Loan Obligations").
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4.3 COLLATERAL SECURITY.
The Loan Obligations shall be secured by the
following:
A. a perfected first priority security interest
(subject only to the Permitted Encumbrances) in
the Mortgaged Property pursuant to the Mortgage
and the Financing Statements;
B. a perfected first priority security interest
in the Leases pursuant to the Assignment of
Leases;
C. a perfected first priority security interest
in all Permits and Contracts pursuant to the
Permits Assignment;
D. the Guaranty;
E. the Environmental Indemnity Agreement;
F. a perfected first priority interest in the
Cash Collateral pursuant to the Deposit Pledge
Agreement;
G. all other security interests in such other
collateral for which provision is made in the Loan
Documents or at law or in equity; and
H. certain other Related Party Agreements.
All of the property in which security interests
are granted (i) as described in items (A) through
(H) above and (ii) pursuant to any other Loan
Document is collectively referred to herein as the
"Collateral".
4.4 PERMITTED SECURITY INTERESTS.
Notwithstanding any other provisions hereof
regarding the creation of Liens, but subject to
the provisions of Section 6.1, the Borrower may
(a) grant priority purchase money security
interests in newly acquired items of tangible
personal property and (b) lease tangible personal
property from equipment lessors, as long as in
each instance:
(i) the aggregate value of such tangible
personal property shall not exceed TWO HITNDRED
THOUSAND DOLLARS ($200,000) or (ii) (A) the
secured party or equipment lessor enters into an
intercreditor agreement with, and satisfactory to,
Lender, pursuant to which, without limiting-the
foregoing, (1) Lender shall be afforded the option
of curing defaults and the option of succeeding to
the rights of Borrower and (2) Lender's security
interest in tangible personal property shall be
subordinated to the security interest granted to
such secured party, (B) all of the terms,
conditions and provisions of the financing,
security interest or lease are reasonably
acceptable to Lender, (C) Borrower provides a true
and complete copy, as executed, of each such
purchase money security agreement, financing
document and equipment lease and all amendments
thereto and (D) no such security interest,
financing agreement or lease is cross-defaulted or
cross-collateralized with any other obligation.
In addition, notwithstanding any other provision hereof regarding
the creation of Liens, Borrower shall also be permitted to grant a
prior security interest in Receivables (with the
Lender retaining a junior security interest
therein) to an institutional lender
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which is providing a working capital line of
credit (a "Working Capital Loan") for the
exclusive use of Guarantor, Borrower and
Affiliates of Borrower as long as such Lender
enters into an intercreditor agreement with, and
satisfactory to, Lender pursuant to which, without
limiting the foregoing, (1) Lender shall be
provided with notice with respect to defaults
under the Working Capital Loan simultaneously with
the delivery of such notice to Borrower and shall
be afforded the option of curing defaults
thereunder, (2) such lender's use of Instruments,
Documents, General Intangibles and Chattel Paper
shall be limited to a license only for the purpose
of collecting Receivables and (3) the
subordination of Lender's interest in the
Receivables shall be of no force and effect and
Lender's first priority security interest shall be
reinstated from and after the occurrence of an
Event of Default if, upon or following such Event
of Default, Lender either exercises any of its
remedies set forth in Section 11 or Lender
notifies in writing such lender of Lender's
intention to invoke its right to reinstate its
first priority security interest in the
Receivables.
5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE
BORROWER.
In order to induce the Lender to make the
Loan, the Borrower represents and warrants to the
Lender that:
5.1.01 FORMATION AND AUTHORITY OF THE
BORROWER.
A. The Borrower is a limited partnership
duly organized, validly existing and in
good standing under the laws of
Washington. The General Partner is a
corporation duly organized, validly
existing and in good standing under the
laws of Washington. The Borrower and the
General Partner each have all requisite
power to own and operate their respective
properties and to carry on their
respective businesses as presently
conducted and as proposed to be conducted
and each is duly qualified to transact
business and is in good
standing in each jurisdiction where
such qualification is necessary or
desirable in order to carry out its
business as presently conducted and as
proposed to be conducted. As of the date
of this Agreement, the Borrower does not
have any Subsidiaries and the Borrower is
not a member of any partnership or joint
venture and the General Partner is not a
member of any partnership or joint venture
other than as the sole general partner of
the Borrower. Attached hereto as EXHIBIT C
is a true and correct list of all of the
Persons owning any interest in the
Borrower and their respective ownership
interests in the Borrower and - all of the
Persons owning any interest in the General
Partner and their respective ownership
interest in the General Partner;
B. The Borrower is duly authorized to make
and enter into all of the Loan Documents
to which the Borrower is a party and to
carry out the transactions contemplated
therein. All of the Loan Documents to
which the Borrower is a party have been
duly executed and delivered by the
Borrower, and each is a legal, valid and
binding obligation of the Borrower,
enforceable in accordance with its terms;
C. The General Partner is duly authorized
to make and enter into all of the Loan
Documents on behalf of itself and on
behalf of the Borrower to which the
General Partner is a party (whether on its
behalf or on behalf of the
10
Borrower) and to carry out the
transactions contemplated therein. All of
the Loan Documents to which the General
Partner is a party have been duly executed
and delivered by the General Partner and
each is a legal, valid and binding
obligation of the General Partner,
enforceable in accordance with its terms.
5.1.02 BUSINESS OF THE BORROWER AND THE
GENERAL PARTNER.
The Borrower is and, during the entire
time that this Agreement remains in force and
effect, shall be, engaged in no business,
trade or activity other than the operation of
the Facility for its Primary Intended Use and
the development, ownership and/or operation
of any health care facility owned or financed
by any Meditrust Entity. The fiscal year of
the Borrower is January 1st to December 31st.
The General Partner is, and during the entire
time that this Agreement remains in force and
effect shall be, engaged in no business,
trade or activity other than the operation of
the Mortgaged Property (for the Primary
Intended Use) and the development, ownership
and/or operation of any health care facility
owned or financed by any Meditrust Entity in
the General Partner's capacity as the general
partner of the Borrower;
5.1.03 NO VIOLATIONS.
The execution, delivery and performance
of the Loan Documents by the Borrowing Group
and the consummation of the transactions
thereby contemplated shall not result in any
breach of, or constitute a default under, or
result in the acceleration of, or constitute
an event which, with notice and/or passage of
time could reasonably be expected to result
in default or acceleration of, any obligation
of any member of the Borrowing Group under
any of the Permits or Contracts or any other
contract, mortgage, lien, lease, agreement,
instrument, franchise, arbitration award,
judgment, decree, bank loan or credit
agreement, trust indenture or other
instrument to which any member of the
Borrowing Group is a party or by which any
member of the Borrowing Group or the
Mortgaged Property may be bound or affected
and do not violate or contravene any Legal
Requirement;
5.1.04 NO CONSENT OR APPROVAL.
Except as already obtained or filed, as
the case may be, no consent or approval or
other authorization of, or exemption by, or
declaration or filing with, any Person and no
waiver of any right by any Person is required
to authorize or permit, or is otherwise
required as a condition of the execution and
delivery of any of the Loan Documents by any
member of the Borrowing Group and the
performance of such member's obligations
thereunder or as a condition to the validity
(assuming the due authorization, execution
and delivery by the Lender of the Loan
Documents to which it is a party) and/or the
enforceability of any of the Loan Documents
and/or the first priority of any Liens
granted to the Lender under the Loan
Documents except the recording of the
Mortgage and the Assignment of Leases and the
filing of the Financing Statements;
5.1.05 FINANCIAL CONDITION.
11
A. Each member of the Borrowing Group is
financially solvent and there are no
actions, suits, investigations or
proceedings including, without
limitation, outstanding federal or state
tax liens, garnishments or insolvency
and bankruptcy proceedings, pending or,
to the best of the Borrower's knowledge
and belief, threatened:
i. against or affecting any member of
the Borrowing Group, which, if
adversely resolved to such member
of the Borrowing Group, would
materially adversely affect the
ability of any of the foregoing to
perform any of their respective
obligations under the Loan
Documents;
ii. against or affecting the Mortgaged
Property or the ownership,
construction, development,
maintenance, management, repair,
use, occupancy, possession or
operation thereof; or
iii. which may involve or affect the
validity, priority or
enforceability of.. any of the
Loan Documents, at law or in
equity, or before or by any
arbitrator or Governmental
Authority;
B. Intentionally deleted;
C. After giving effect to the consummation
of the Loan, each member of the
Borrowing Group:
i. will be able to pay its debts
as they become due;
ii. will have sufficient funds and
capital to carry on its business as
now conducted or as contemplated to
be conducted (in accordance with
the terms of the Loan Documents);
and
iii. will not be rendered
insolvent as determined by
applicable law;
D. No member of the Borrowing Group is
delinquent or claimed to be delinquent
under any obligation for the payment of
borrowed money;
5.1.06 NO MONEY BORROWED FROM THE GUARANTOR
OR AFFILIATES.
The Borrower has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist
any liability (whether direct or contingent) for
borrowed money from the Guarantor (or any of its
Affiliates) or any Affiliate of the Borrower that
is not fully subordinated to the Loan Obligations
pursuant to the Affiliated Party Subordination
Agreement; 5.1.07 Commercial Acts and Purposes.
The Borrower's performance of, and compliance
with, the obligations and conditions set forth
herein and in the other Loan Documents to which it
is a party will constitute commercial acts done
and performed for commercial purposes;
12
5.1.08 FILING OF TAX RETURNS.
Each member of the Borrowing Group has filed
all federal, state and local tax returns which are
required to be filed as to which extensions are
not currently in effect and has paid all taxes,
assessments, impositions, fees and other
governmental charges (including interest and
penalties) which have become due pursuant to such
returns or pursuant to any assessment or notice of
tax claim or deficiency received by each such
member of the Borrowing Group. No tax liability
has been asserted against any member of the
Borrowing Group by the Internal Revenue Service or
any other federal, state or local taxing authority
for taxes, assessments, impositions, fees -or
other governmental charges (including interest or
penalties thereon) in excess of those already
paid;
5.1.09 ACCURACY OF FINANCIAL STATEMENTS AND
OTHER INFORMATION.
A. The financial statements of each member
of the Borrowing Group and the Facility
given to the Lender in connection with
the execution and delivery of the Loan
Documents were true, complete and
accurate, in all material respects, and
fairly presented the financial condition
of such member of the Borrowing Group as
of the date thereof and for the periods
covered thereby, having been prepared in
accordance with GAAP and such financial
statements disclosed all liabilities
(including, without limitation,
contingent liabilities) of each such
member of the Borrowing Group as of the
date thereof. There has been no material
adverse change since such date with
respect to the Net Worth or liquidity of
any such member of the Borrowing Group
or with respect to any other matters
referred to or contained therein and no
additional material liabilities
(including, without limitation,
contingent liabilities) of any member of
the Borrowing Group have arisen or been
incurred since such date except as
otherwise disclosed to Lender. The most
recent projections heretofore delivered
to the Lender continue to be reasonable.
(with respect to the material
assumptions upon which such projections
are based) and the Borrower reasonably
anticipates based on information
currently available to it after due
inquiry that the results projected
therein will be achieved, there having
been (i) no material adverse change in
the business, assets or condition,
financial or otherwise of any member of
the Borrowing Group or the Mortgaged
Property and (ii) no material depletion
of their cash or decrease in the working
capital of the Borrowing Group;
B. Neither this Agreement, nor any of the
other Loan Documents nor any
certificate, agreement, statement or
other document, including, without
limitation, any financial statements
concerning the financial condition of
any member of the Borrowing Group,
furnished to or to be furnished to the
Lender or its attorneys in connection
with the Loan, contains or will contain
any untrue statement of a material fact
or omits or will omit to state a
material fact necessary in order to
prevent all statements contained herein
and therein from being misleading in any
material respect. There is no fact
within the special knowledge of the
Borrower which has not been disclosed
herein or in writing to the Lender that
materially adversely affects, or in the
future, insofar as the Borrower can
reasonably foresee, based upon the
information currently
13
available to it after due
inquiry, may materially adversely affect
the business, properties, assets or
condition, financial or otherwise, of
any
member of the Borrowing Group or the
Mortgaged Property ;
5.1.1.0 PENDING ACTIONS, NOTICES AND
REPORTS.
A. There is no action or investigation
pending or, to the best knowledge-and
belief of the Borrower, threatened,
anticipated or contemplated (nor, to the
knowledge of the Borrower, is there any
reasonable basis therefor) against or
affecting the Mortgaged Property or any
member of the Borrowing Group (or any
Affiliate thereof before any
Governmental Authority, which could
prevent or hinder the consummation of
the transactions contemplated hereby or
call into question the validity of any
of the Loan Documents or any action
taken or to be taken in connection with
the transactions contemplated thereunder
or which in any single case or in the
aggregate might result in any material
adverse change in the business,
prospects, condition, affairs or
operations of any member of the
Borrowing Group or the Mortgaged
Property (including, without limitation,
any action to revoke, withdraw or
suspend any Permit necessary or
desirable for the operation of the
Mortgaged Property in accordance with
its Primary Intended Use and any action
to transfer or relocate any such Permit
to a location other than the Mortgaged
Property) or any material impairment of
the right or ability of any member of
the Borrowing Group to carry on its
operations as presently conducted or
proposed to be conducted with respect to
the Mortgaged Property or with respect
to its obligations under the Loan
Documents;
B. Neither the Facility nor any member of
the Borrowing Group has received any
notice of any claim, requirement or
demand of any Governmental Authority, or
any insurance body having or claiming
any licensing, certifying, supervising,
evaluating or accrediting authority over
the Mortgaged Property to rework or
redesign the Mortgaged Property, its
professional staff or its professional
services, procedures or practices in any
material respect or to provide
additional furniture, fixtures,
equipment or inventory or to otherwise
take any action so as to make the
Mortgaged Property conform to or comply
with any Legal Requirement;
C. The most recent utilization reviews
relating to the Mortgaged Property by
all applicable Governmental Authorities
and reviews or scrutiny by any managed
care or utilization review companies
have not had a material adverse impact
on the utilization of beds, units or
programs at the Mortgaged Property. No
claims or assertions have been made in
any utilization review that any of the
practices or procedures used at the
Mortgaged Property are improper or
inappropriate other than such claims or
assertions which singly and in the
aggregate will not have a material
adverse impact on the Mortgaged
Property; and
D. The Borrower has delivered or caused to
be delivered to the Lender true and.
correct copies of all licenses,
inspection surveys and accreditation
reviews relating to the Mortgaged
Property, issued by any Governmental
Authority during the most recent
licensing period, together with all
plans of correction relating thereto.
14
5.1.11 COMPLIANCE WITH LEGAL AND OTHER
REQUIREMENTS.
A. The Borrower and the Mortgaged Property
and the ownership, construction,
development, maintenance, management,
repair, use, occupancy, possession and
operation thereof comply with all Legal
Requirements and there is no claim of
any violation thereof known to the
Borrower. Without limiting the
foregoing, the Borrower is the licensed
operator of the Facility, the Borrower
has obtained all Permits that are
necessary or desirable to operate the
Mortgaged Property in accordance with
its Primary Intended Use and all such
Permits are in full force and effect;
B. Except as previously disclosed to the
Lender in materials delivered to the
Lender pursuant to Section 5.1.10D,
there are no outstanding notices of
deficiencies or work orders relating to
the Mortgaged Property issued by any
Governmental Authority, requiring
conformity to any of the Legal
Requirements;
C. The Borrower has no actual knowledge of
any Legal Requirements which have been
enacted, promulgated or issued within
the eighteen (18) months preceding the
date of this Agreement or any proposed
Legal Requirements currently pending in
the state where the Facility is located,
which may materially adversely affect
rates at the Facility (or any program
operated in conjunction with the
Facility) or may result in the
likelihood of increased competition at
the Facility or the imposition of
Medicaid, Medicare, charity, free care,
welfare or other discounted or
government assisted residents at the
Facility or require that the Borrower or
the Facility obtain a certificate of
need, Section 1122 approval or the
equivalent, which the Borrower or the
Facility does not currently possess;
5.1.12 Properly Matters.
A. The Mortgaged Property is free and clear
of all Liens and Leases, except (i)
those Liens to which the Mortgage and
the other Loan Documents are expressly
subject, whether presently existing, as
are listed on EXHIBIT D, or which may
hereafter be created in accordance with
the terms hereof and (ii) the Liens that
were listed on the UCC lien search
results delivered to the Lender at or
prior to the execution and delivery of
this Loan Agreement (and that were not
required to be terminated as a condition
of the execution and delivery of this
Loan Agreement) and (iii) all Leases
which have been expressly subordinated
to the Lien of the Mortgage and all
Resident Agreements (the matters
described in the foregoing clauses (i) -
(iii) are collectively referred to
herein as the "Permitted Encumbrances");
and the Borrower shall warrant and
defend title to the Mortgaged Property
against any and all claims and demands
of every kind and nature whatsoever.
B. There is no Condemnation or similar
proceeding pending with respect to or
affecting the Mortgaged Property and the
Borrower is not aware, to the best of
the Borrower's knowledge and belief,
that any such proceeding is
contemplated;
15
C. No part of the Collateral has been
damaged by fire or other casualty. The
Facility is in good operating condition
and repair, ordinary wear and tear
excepted, free from known defects in
construction or design;
D. None of the Permitted Encumbrances
has or is likely to have a material
adverse impact upon, nor interfere with
or impede, in any material respect, the
operation of the Mortgaged Property in
accordance with its Primary Intended
Use;
E. All buildings and other
improvements necessary, both legally and
practically, for the proper and
efficient operation of the Facility are
located upon the Mortgaged Property and
all real property and personal property
currently utilized by the Borrower in
connection with the ownership and
operation of the Facility is included
within the definition of the Mortgaged
Property and is subject to the Liens
created by the Mortgage;
F. The Borrower has good, marketable
and indefeasible title to the entire
Real Property in fee simple, has
absolute unencumbered title to the
Personal Property, and has good right
and full power to assign, grant,
bargain, sell, mortgage, transfer and
convey the Mortgaged Property;
G. The Mortgaged Property abuts on and
has direct vehicular access to a public
road or has access to a public road via
permanent, irrevocable, appurtenant
easements;
H. The Mortgaged Property constitutes
a separate parcel(s) for real estate tax
purposes and no portion of any real
property that does not constitute a
portion of the Mortgaged Property is
part of the same tax parcel as any part
of the Mortgaged Property;
I. All utilities necessary for the use and
operation of the Facility-are available
to the lot lines of the Mortgaged
Property:
(i) in sufficient supply and capacity;
(ii) through validly created and
existing easements of record
appurtenant to or encumbering the
Mortgaged Property (which
easements shall not impede or
restrict the operation of the
Facility); and
(iii) without need for any Permits
and Contracts required to be
issued by or entered into with any
Governmental Authority, except as
already obtained or executed, as
the case may be, or as otherwise
shown, to the satisfaction of the
Lender, to be readily obtainable;
J. Except for the construction of the
Facility on the Mortgaged Property, the
Borrower has made no structural
alterations or renovations to the
Facility that altered the foot-print of
any Improvement, added an additional
story to any Improvement,
16
decreased the amount of
parking available on the Mortgaged
Property or otherwise involved any
alteration that would be regulated by
applicable zoning or other land use
requirements during the immediately
preceding ten years (10) years and has
no knowledge of any such structural
alteration or renovation made to the
Facility or decrease in parking during
such period;
5.1.13 THIRD PARTY PAYOR AGREEMENTS.
A. Neither the Borrower nor the Facility is
qualified as a provider of services
under or participates in any Third Party
Payor Programs and neither Borrower nor
the Facility is accredited by any
Accreditation Body;
B. No provision of this Loan Agreement
shall be deemed to require the Borrower
to commence participation in any Third
Party Payor Program or any Managed Care
Plan; .
5.1.14 RATE RESTRICTIONS AND LIMITATIONS.
The state where the Facility is located
currently imposes no restrictions or limitations
on rates which may be charged to private pay
residents receiving services at the Facility,
except as set forth on EXHIBIT F;
5.1.15 FREE OR SUBSIDIZED PATIENT CARE.
There are no Contracts, Permits or Legal
Requirements which require that a percentage of
beds or slots in any program at the Facility be
reserved for Medicaid or Medicare eligible
patients or that the Facility provide a certain
amount of welfare free or charity care or
discounted or government assisted patient resident
care;
5.1.16 ERISA.
No employee pension benefit plan maintained
by any member of the Borrowing Group has any
accumulated funding deficiency within the meaning
of the ERISA, nor does any member of the Borrowing
Group have any material liability to the PBGC
established under ERISA (or any successor thereto)
in connection with any employee pension benefit
plan (or other class of benefit which the PBGC has
elected to insure), and there have been no
"reportable events" (not waived) or "prohibited
transactions" with respect to any such plan, as
those terms are defined in Section 4043 of ERISA
and Section 4975 of the Internal Revenue Code of
1986, as amended, respectively;
5.1.17 BROKERAGE.
No member of the Borrowing Group nor any of
their respective Affiliates has dealt with any
broker or agent in connection with the Loan;
5.1.18 GIFTS AND CONTRIBUTIONS.
No member of the Borrowing Group nor any of
their respective Affiliates has:
17
A. made any contributions, payments or
gifts of its funds or property to or for
the private use of any government
official, employee, agent or other
Person where either the payment or the
purpose of such contribution, payment or
gifts is illegal under the laws of the
United States, any state thereof or any
other jurisdiction (foreign or
domestic);
B. established or maintained any
unrecorded fund or asset for any
purpose or has made any false or
artificial entries on any of its books
or records for any reason;
C. made any payments to any Person with the
intention or understanding that any part of such
payment was to be used for any other purpose other
than that described in the documents supporting
the payment; or
D. made any contribution, or has reimbursed
any political gift or contribution made by any
Other Person, to candidates for public office,
whether federal, state or local, where such
contribution would be in violation of applicable
law;
5.1.19 REGULATION U.
The Borrower is not engaged in the business
of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of
Regulation U of the Board-of Governors of the
Federal Reserve System), and no part of the
proceeds of the Loan will be used to purchase or
carry any margin security or to extend credit to
others for the purpose of purchasing or carrying
any margin security or in any other manner which
would involve a violation of any of the
regulations of the Board of Governors of the
Federal Reserve System. The Borrower is not an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended;
5.1.20 DEFAULT UNDER LOAN DOCUMENTS.
No event or state of facts which constitutes,
or which, with notice or lapse of time, or both,
could constitute, a Loan Default has occurred and
is continuing;
5.1.21 PRINCIPAL PLACE OF BUSINESS.
The principal place of business and chief
executive office of the Borrower is located at c/o
Emeritus Corporation, 3131 Elliott Avenue, Suite-
500, Seattle, Washington 98121-2162 (referred to
herein as the "Principal Place of Business");
5.1.22 LABOR MATTERS.
There are no proceedings now pending, nor, to
the best of the Borrower's knowledge, threatened
with respect to the operation of the Facility
before the National Labor Relations Board, State
Commission on Human Rights and Opportunities,
State Department of Labor, U.S. Department of
Labor or any other Governmental Authority having
jurisdiction of employee rights with respect to
hiring, tenure and conditions of employment, and
no member of the Borrowing Group has experienced
any material controversy with any Facility
administrator or other employee of similar stature
or with any labor organization which has or is
likely to have, a materially adverse effect upon
the financial condition and/or operations of the
Facility; and
18
5.1.23 INTELLECTUAL PROPERTY.
The Borrower is duly licensed or authorized
to use all (if any) copyrights, rights of
reproduction, trademarks, trade-names, trademark
applications, service marks, patent applications,
patents and patent license rights, (all whether
registered or unregistered, U.S. or foreign),
inventions, franchises, discoveries, ideas,
research, engineering, methods, practices,
processes, systems, formulae, designs, drawings,
products, projects, improvements; developments,
know-how and trade secrets which are used in or
necessary for the operation of the Facility in
accordance with its Primary Intended Use, without
conflict with or infringement of any, and subject
to no restriction, lien, encumbrance, right, title
or interest in others.
5.1.24 MANAGEMENT AGREEMENTS.
There is no Management Agreement in force and
effect as of the date hereof.
6. COVENANTS
6.1 FINANCIAL COVENANTS.
As long as any of the Loan Documents may
remain in effect:
6.1.01 THE BORROWER'S DEBT COVERAGE RATIO.
From and after the second anniversary of
the date hereof until the fourth anniversary
hereof, the Facility and all of the other
Group Four Acquisition Facilities shall
maintain for each Fiscal Quarter an aggregate
Debt Coverage Ratio equal to or greater than
1.1 to 1 and from and after the fourth
anniversary thereof and for the remainder of
the Term, the Facility and all of the other
Group Four Acquisition Facilities shall
maintain for each Fiscal Quarter an aggregate
Debt Coverage Ratio equal to or greater than
1.2 to 1.
6.1.02 THE BORROWER'S INDEBTEDNESS.
Intentionally deleted;
6.1.03 THE BORROWER'S ASSETS.
Intentionally deleted;
6.1.04 THE BORROWER'S NET WORTH.
Intentionally deleted;
6.1.05 THE GUARANTOR'S INDEBTEDNESS.
Intentionally deleted;
6.1.06 THE GUARANTOR'S ASSETS.
From and after December 31, 1999 and for the
remainder of the Term, the Guarantor shall
maintain a ratio of Consolidated Current Assets to
Consolidated Current Liabilities equal to or
greater than 1 to 1 as of the end of each Fiscal
Year;
19
6.1.07 THE GUARANTOR'S NET WORTH.
Throughout the Term, the Guarantor shall
maintain a Net Worth of not less than Forty
Million Dollars ($40,000,000.00);
6.1.08 EARNINGS.
Intentionally deleted;
6.1.09 LIABILITY FOR BORROWED MONEY.
Neither the Borrower nor the General Partner,
on behalf of the Borrower, shall create, incur,
assume or suffer to exist any liability for
borrowed money except (a) Indebtedness to the
Lender under the Loan Documents, (b) Impositions
allowed pursuant to the provisions of this
Agreement, (c) unsecured normal trade debt
incurred upon customary terms in the ordinary
course of business, (d) other Indebtedness of the
Borrower in the aggregate principal amount not to
exceed TWO HUNDRED THOUSAND DOLLARS ($200,000)
incurred, for the exclusive use of the Facility,
on account of purchase money indebtedness or
finance lease arrangements, each of which shall
not exceed the fair market value of the assets or
property acquired or leased and shall not extend
to any assets or property other than those
purchased or leased and purchase money security
interests in equipment and equipment leases which
comply with the provisions of Section 4.4, (e)
Indebtedness of the Borrower to any Affiliate,
provided, that, such Indebtedness is fully
subordinated to the Loan Obligations pursuant to
the Affiliated Party Subordination Agreement, and
(f) indebtedness specifically permitted by the
Meditrust/Emeritus Transaction Documents;
6.1.10 ASSUMPTION OF LIABILITY.
Neither the Borrower nor the General Partner
on behalf of the Borrower shall assume, guarantee,
endorse, contingently agree to purchase or
otherwise become directly or contingently liable
(including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase,
to provide funds for payment, to supply funds to
or otherwise to invest in any debtor or otherwise
to assure any creditor against loss) in connection
with any Indebtedness of any other Person, except
by the endorsement of negotiable instruments for
deposit or collection or similar transactions in
the ordinary course of business and except for a
guaranty of the Indebtedness of the Guarantor in
connection with the Working Capital Loan which
expressly limits recourse under such guaranty to
the Receivables;
6.2 COLLECTION AND ENFORCEMENT COSTS.
Upon demand, the Borrower shall reimburse the
Lender for all costs and expenses, including,
without limitation, reasonable attorneys' fees and
expenses and court costs, paid or reasonably
incurred by the Lender in connection with the
collection of any sum due hereunder, or in
connection with the enforcement of any of the
Lender's rights or any member of the Borrowing
Group's obligations under this Agreement or any of
the other Loan Documents. Any amount due and
payable to the Lender pursuant to the provisions
of this Section shall be a demand obligation and,
to the extent permitted by law, shall be added to
the Loan Obligations and shall be secured by the
Liens created by the Loan Documents as fully and
effectively and with the same priority as every
other obligation of the Borrower secured thereby
and, if not paid within ten (10) days after
demand, shall thereafter, to the extent permitted
by applicable law, bear interest at the
20
Advances Rate until the date of payment. The
obligation of the Borrower to pay the outstanding
principal balance, interest (including, without
limitation, Additional Interest) and all other
costs, charges and sums due hereunder or under any
of the other Loan Documents shall continue in full
force and effect and in no way shall be impaired,
until the actual payment thereof to the Lender. In
the event of(a) a sale, conveyance, transfer or
other disposition of the Mortgaged Property, (b)
any further agreement given to secure the payment
of the obligations set forth herein or (c) any
agreement or stipulation extending the time or
modifying the terms of payment set forth herein;
the Borrower shall nevertheless remain obligated
to pay the indebtedness evidenced by this
Agreement, as extended or modified by any such
agreement or stipulation, unless the Borrower is
released and discharged from such obligation by a
written agreement executed by the Lender.6.3
Financial Statements and Other Information.
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION
The Borrower shall furnish or shall cause to
be furnished to the Lender the following
statements, information and other materials:
6.3.01 ANNUAL STATEMENTS.
Within ninety (90) days after the end of each
of their respective fiscal years:
A. a copy of the Consolidated Financials
for each of (i) the Borrower and (ii)
the Guarantor for the preceding fiscal
year, certified and, in the case of the
Guarantor, audited by, and with the
unqualified opinion of, independent
certified public accountants acceptable
to the Lender and certified as true and
correct by the Borrower, and the
Guarantor, as the case may be (and,
without limiting anything else contained
herein, the Consolidated Financials for
the Borrower shall contain a detailed
balance sheet for the Mortgaged Property
as of the last day of such fiscal year
and a statement of earnings from the
Mortgaged Property for such fiscal year
showing, among other things, all rents
and other income therefrom and all
expenses paid or incurred in. connection
with the operation of the Mortgaged
Property);
B. statements certified as true and correct
by the Borrower and the Guarantor
stating, to the best of the signer's
knowledge and belief after making due
inquiry, whether the Borrower, and/or
the Guarantor, as the case may be, is in
default in the performance or observance
of any of the terms of this Agreement or
any of the other Loan Documents and, if
so, specifying all such defaults, the
nature thereof and the steps being taken
to immediately remedy the same; and
C. a copy of all letters from the
independent certified accountants
engaged to perform the annual audits
referred to above, directed to the
management of the Guarantor regarding
the existence of any reportable
conditions or material weaknesses;
6.3.02 ANNUAL STATEMENT OF LEASES.
Within ninety (90) days after the end of each
fiscal year of the Borrower, a statement certified
as true and correct by the Borrower, setting forth
all Leases of the Mortgaged Property as of the
last day of such fiscal year, the respective areas
demised
21
thereunder, the names of the Lessees thereunder,
the respective expiration dates of the Leases, the
respective rentals provided for therein, and such
other information pertaining to the Leases as may
be reasonably requested by the Lender;
6.3.03 MONTHLY STATEMENTS.
Within thirty (30) days after the end of each
calendar month:
A. a statement certified as true and
correct by the Borrower setting forth
the Gross Revenues of the Mortgaged
Property for the immediately preceding
month;
B. an unaudited, detailed month and year to
date income and expense statement for
the Mortgaged Property which shall
include a comparison to corresponding
budget figures, occupancy statistics
(including the actual number of
residents, the number of beds and units
available and total resident days for
such month) and resident mix breakdowns
for each resident day during such month
(classifying residents by the type of
care required and source of payment);
and
C. a calculation showing compliance or non-
compliance, as the case may be, with the
financia1 covenants set forth in Section
6.1 hereof for the applicable period,
including, with respect to the
calculation of the Borrower's Debt
Coverage Ratio, a schedule substantially
in the form attached hereto as EXHIBIT
G;
6.3.04 QUARTERLY FINANCIAL STATEMENTS.
Within thirty (30) days after the end of its
respective fiscal quarters, unaudited Consolidated
Financials for the Borrower certified as true and
correct by the Borrower.
6.3.05 QUARTERLY STATEMENT OF ADDITIONAL
INTEREST.
Within thirty (30) days after each calendar
quarter, the Borrower shall provide the Lender
with a calculation of the Additional Interest
payable for such quarter;
6.3.06 QUARTERLY STATEMENTS OF THE GUARANTOR.
Within forty-five (45) days after the end of
each of its fiscal quarters, unaudited
Consolidated Financials for the Guarantor
certified as true and correct by the Guarantor;
6.3.07 ANNUAL BUDGET.
By the end of the fiscal year for the
Facility, the Borrower, any Lessee and any Manager
shall submit a proposed financial and capital
expenditures budget for the Facility for the next
fiscal year and a report detailing the capital
improvements completed in the immediately prior
fiscal year;
6.3.08 PERMITS AND CONTRACTS.
Promptly but in no event more than ten (10)
days after the issuance or execution thereof, as
the case may be, true and complete copies of all
(a) Permits which constitute operating licenses
for the Facility issued by any Governmental
Authority having
22
jurisdiction over assisted living matters and (b)
Contracts (involving payments in the aggregate in
excess of $ 100,000 per annum), including, without
limitation, all Provider Agreements;
6.3.09 CONTRACT NOTICES.
Promptly but in no event more than ten (10)
days after the receipt thereof, true and complete
copies of any notices, consents, terminations or
statements of any kind or nature relating to any
of the Contracts involving payments in the
aggregate in excess of $100,000 per annum (other
than those issued in the ordinary course of
business);
6.3.10 PERMIT OR CONTRACT SURVEYS, NOTICES,
REPORTS AND DEFAULTS.
Promptly but in no event more than ten (10)
days after the receipt thereof, true and complete
copies of all surveys, follow-up surveys,
complaint surveys, examinations, compliance-
certificates, inspection reports, statements
(other than those statements that are furnished in
the ordinary course of business), terminations and
notices of any kind (other than those notices that
are furnished in the ordinary course of business)
issued or provided to the Borrower by any
Governmental Authority, Accreditation Body or
Third Party Payor, including, without limitation,
any notices pertaining to any delinquency in, or
proposed revision of, the Borrower's obligations
under the terms and conditions of any Permits or
Contracts now or hereafter issued by or entered
into with any Governmental Authority,
Accreditation Body or Third Party Payor and the
response(s) thereto made by or on behalf of the
Borrower.
6.3.11 OFFICIAL NOTICES, FILINGS AND REPORTS.
Upon the completion or filing thereof,
complete copies of all Permit applications (other
than those that are furnished in the ordinary
course of business), notices (other than those
that are furnished in the ordinary course of
business), statements (other than those that are
furnished in the ordinary course of business),
annual reports, cost reports and other reports or
filings of any kind (other than those that are
furnished in the ordinary course of business)
provided by the Borrower to any Governmental
Authority, Accreditation Body or Third Party Payor
with respect to the Mortgaged Property;
6.3.12 PUBLIC INFORMATION.
Upon the completion or filing, mailing or
other delivery thereof, complete copies of all
financial statements, reports, notices and proxy
statements, if any, sent by any member of the
Borrowing Group (which is a publicly held
corporation) to its shareholders and of all
reports, if any, filed by any member of the
Borrowing Group (which is a publicly held
corporation) with any securities exchange or with
the Securities Exchange Commission;
6.3.13 OTHER INFORMATION.
With reasonable promptness, such other
information as the Lender may reasonably request
from time to time respecting (i) the financial
condition and affairs of each member of the
Borrowing Group and the Mortgaged Property and
(ii) the licensing and the operation of the
Mortgaged Property; including, without limitation,
financial statements, certificates and consents
from accountants and any other financial and
23
licensing or operational information as may be
required or requested by any Governmental
Authority;
6.3.14 DEFAULT CONDITIONS.
As soon as possible and in any event within
five (5) days after the occurrence of each Loan
Default or each event or state of facts which,
with the giving of notice or lapse of time or
both, could constitute such a Loan Default, a
written statement of the Borrower setting - forth
details of such Loan Default or event and the
action which the Borrower proposes to take with
respect thereto;
6.3.15 OFFICIAL ACTIONS.
Promptly but in no event more than ten (10)
days after the commencement thereof, notice of all
actions, suits and proceedings before any
Governmental Authority or Accreditation Body which
may have a material adverse effect on (i) the
ability of any member of the Borrowing Group to
perform any of its obligations under any of the
Loan Documents or (ii) the Mortgaged Property;
6.3.16 AUDIT REPORTS.
Promptly after receipt, a copy of all audits
or reports submitted to Borrower by an independent
public accountants in connection with any annual,
special or interim audits of the books of Borrower
and, if requested by the Lender, any letter of
comments directed by such accountant to the
management of Borrower;
6.3.17 ADVERSE DEVELOPMENTS.
Promptly but in no event more than ten (10)
days after the Borrower acquires knowledge
thereof, written notice of:
A. the potential termination of any Permit
or Provider Agreement necessary for the
operation or ownership of the Mortgaged
Property;
B. any loss, damage or destruction to or of
the Mortgaged Property in excess of
TWENTY-FIVE THOUSAND DOLLARS ($25,000)
(regardless of whether the same is
covered by insurance);
C. any material controversy involving the
Borrower and (i) any Facility
Administrator or Facility employee of
similar stature or (ii) any labor
organization or (iii) the Manager or any
employee of the Manager which has, or is
reasonably likely to have, a material
adverse effect on the financial
condition and/or operation of the
Facility;
D. any controversy that calls into question
the eligibility of the Borrower or the
Facility for participation in any Third
Party Program in which the Facility is
participating;
E. any refusal of reimbursement by any
Third Party Payor which, singly or
together With all other such refusals by
any Third Party Payors, could reasonably
be expected to have a materially adverse
effect on the financial condition of the
Borrower; and
24
F. any fact within the special knowledge of
any member of the Borrowing Group, or
any other development in the business or
affairs of any member of the Borrowing
Group, which could reasonably be
expected to be materially adverse to the
business, properties, assets or
condition, financial or otherwise, of
any member of the Borrowing Group or the
Mortgaged Property;
6.3.18 WORKING CAPITAL LOAN.
Promptly after receipt thereof, copies of any
notices with respect to default from a lender of a
Working Capital Loan.
6.3.19 RESPONSES TO INSPECTION REPORTS.
Within thirty (30) days after receipt of a
Facility inspection report from the Lender, a
written response describing in detail prepared
plans to address concerns raised by the inspection
report; and
6.3.20 EVIDENCE OF ANNUAL FACILITY UPGRADE
EXPENDITURE.
Within (30) days after the end of each Loan
Year commencing with the third Loan Year, evidence
satisfactory to Lender that the Borrower has
fulfilled its obligation to make the Annual
Facility Upgrade Expenditure in accordance with
the terms of Section 6.24.
Any certificate, instrument, notice or other
document to be provided to the Lender hereunder or
under any of the other Loan Documents by any
member of the Borrowing Group shall be signed by
an executive officer of such member (in the event
that any of the foregoing is not an individual)
having a position of Vice President or higher and
with respect to financial matters, any such
certificate, instrument notice or other document
shall be signed by the chief financial officer or
treasurer of such member.
No certificate, instrument, notice or other
document including, without limitation, any
financial statements, furnished or to be furnished
to the Lender pursuant to the terms hereof or of
any of the other Loan Documents shall contain any
untrue statement of a material fact or shall omit
to state a material fact necessary in order to
prevent all statements contained therein from
being misleading.
The Lender shall afford any information
received pursuant to the provisions of the Loan
Documents the same degree of confidentiality that
the Lender affords similar information proprietary
to the Lender; provided, however, that the Lender
shall have the unconditional right to (a) disclose
any such information as the Lender deems necessary
or appropriate in connection with any sale,
transfer, conveyance, participation, assignment or
foreclosure of any of the Loan Documents and/or
any interest therein and (b) use such information
in any litigation or arbitration proceeding
between the Lender and any member of the Borrowing
Group. Without limiting the foregoing, the Lender
may also disclose any information furnished to it
pursuant to any of the Loan Documents as and to
the extent (i) counsel to the Lender determines
that such disclosure is necessary pursuant to 15
U.S.C. 77a-77aa or 15 U.S.C. 78a-78jj and the
rules and regulations promulgated thereunder, (ii)
the Lender is required or requested by any
Governmental Authority to disclose any such
information and/or (iii) the Lender is required or
requested to disclose any such information by any
of its and/or any of the Meditrust Entities'
lenders. The Lender or potential lender shall not
be liable in any way for any
25
subsequent disclosure of such information by any
Person to whom the Lender provided such
information in accordance with the terms hereof.
Nevertheless, in connection with any such
disclosure, the Lender shall inform all recipients
of any such information of the confidential nature
thereof. The Lender shall observe any prohibitions
or limitations on the disclosure of any such
information under applicable confidentiality law
or regulations to the extent that the same are
applicable to such information.
6.4 MAINTENANCE OF EXISTENCE.
During the entire time that this Agreement
remains in full force and effect; the Borrower
shall keep in effect its existence and rights as a
partnership under the laws of the state of its
formation and its right to own property and
transact business in the state in which the
Mortgaged Property is situated.
6.5 REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained
in this Agreement shall constitute continuing
representations and warranties which shall remain
true, correct and complete throughout the Term.
Notwithstanding the provisions of the foregoing
sentence but without derogation from any other
terms and provisions of this Agreement, including,
without limitation, those terms and provisions
containing covenants to be performed or conditions
to be satisfied on the part of the Borrower, the
representations and warranties contained in
Sections 5.1.05(A), 5.1.05(B), 5.1.OS(D), 5.1.10,
5.1.11, 5:1.12(B), 5.1.12(C), 5.1.13(B),
5.1.13(C), 5.1.14, 5.1.15, 5.1.16, 5.1.20, 5.1.21,
5.1.22, 5.2.05(A), 5.2.05(C), 5.2.05(D), in the
second sentence of Section 5.1.08, in the second
and third sentences of Section 5.1.0 (A), in the
second and third sentences of Section 5.1.13(D),
in the second sentence of Section 5.2.07 and in
the second and third sentences of Section 5.2.08
hereof shall not constitute continuing
representations and warranties throughout the
Term.
6.6 CONDUCT OF THE BORROWER'S BUSINESS.
The Borrower will maintain, and cause any
Lessee and any Manager to maintain, as applicable,
experienced and competent professional management
with respect to its business and with respect to
the Mortgaged Property. The Borrower, any Lessee
and any Manager shall conduct, in the ordinary
course, the operation of the Facility and the
Borrower shall not enter into any other business
or venture other than the development, ownership
and/or operation of any health care facility owned
or financed by any Meditrust Entity.
6.7 PRINCIPAL PLACE OF BUSINESS, LOCATION OF
THE COLLATERAL, BOOKS AND RECORDS.
The Borrower shall provide the Lender thirty
(30) days' prior written notice of any change of
its Principal Place of Business from its current
Principal Place of Business. The Borrower shall
maintain the Collateral, including without
limitation, all books and records relating to the
Borrower's business, at solely its Principal Place
of Business and at the Mortgaged Property. The
Borrower shall not (a) remove the Collateral,
including, without limitation, any books or
records relating to the Collateral and/or the
Borrower's business from either the Mortgaged
Property or its Principal Place of Business or (b)
relocate its Principal Place of Business until
after receipt of a certificate from the Lender,
signed by an officer thereof, stating that the
Lender has, to its satisfaction, obtained all
26
documentation that it deems necessary or desirable
to obtain, maintain, perfect and confirm the first
priority security interests granted in the Loan
Documents.
The Borrower shall cause to be kept and
maintained, and shall permit the Lender and its
representatives to inspect at all reasonable
times, accurate books of account in which complete
entries will be made in accordance with GAAP
reflecting all financial transactions of the
Borrower, as applicable (showing, without
limitation, all materials ordered and received and
all disbursements, accounts payable and accounts
receivable in connection with the operation of the
Mortgaged Property).
6.8 RESTRICTIONS.
6.8.01 RESTRICTIONS RELATING TO THE BORROWER.
Except as may otherwise be expressly provided
herein or in the Mortgage, the Borrower shall not,
without the prior written consent of the Lender,
in each instance, which consent may be withheld in
the sole and absolute discretion of the Lender:
A. convey, assign, hypothecate, transfer,
dispose of or encumber, or permit the conveyance,
assignment, transfer, hypothecation, disposal or
encumbrance of all or
B. any part of any legal or beneficial interest
in the Mortgaged Property; provided, however, that
this restriction shall not apply to (i) the
Permitted Encumbrances that may be created after
the date hereof pursuant to the Loan Documents,
(ii) Liens against Personal Property securing
Indebtedness permitted under Section 6.1.09(d)
relating to equipment leasing or financing for the
exclusive use of the Facility, (iii) Leases to the
Guarantor or any Affiliate of the Guarantor which
are subordinate to the Loan Documents and which
comply with the provisions of Section 6.9; (iv)
the sale, conveyance, assignment, hypothecation,
lease or other transfer of any material asset or
assets (whether now owned or hereafter acquired),
the fair market value of which equals or is less
than TWENTY FIVE THOUSAND DOLLARS ($25,000),
individually, or ONE HUNDRED THOUSAND DOLLARS
($100,000) collectively; (v) without limitation as
to amount, the disposition in the ordinary course
of business of any obsolete, worn out or defective
fixtures, furnishings or equipment used in the
operation of the Facility provided that the same
are replaced with fixtures, furnishings or
equipment of equal or greater utility or value;
(vi) without limitation as to amount, any sale of
inventory by the Borrower in the ordinary course
of business; and (vii) subject to the terms of the
Negative Pledge Agreement and the Affiliated Party
Subordination Agreement, distributions and/or
dividends to the Borrower's partners and (viii)
Residents Agreements;
B. permit the use of the Mortgaged Property
or the Facility for any purpose other
than the Primary Intended Use; or
C. permit any Person other than the
Borrower to be the licensed operator of
the Facility; or
27
D. liquidate, dissolve or merge or
consolidate with or permit the General
Partner to liquidate, dissolve or merge
or consolidate with any other Person
except, subject to Lender's prior
written consent, which consent shall not
be unreasonably withheld, with an
Affiliate of Borrower, the business and
activities of which are limited to those
subject to the Meditrust/Emeritus
Transaction Documents (as that term is
defined in the Agreement Regarding
Related Transactions) to which such
Affiliate is a party.
The occurrence of any of the foregoing shall
be deemed to be an Event of Default.
6.8.02 INTENTIONALLY OMITTED
6.8.03 INTENTIONALLY OMITTED
6.9 AFFILIATE TRANSACTIONS.
6.9.01 Neither Borrower, nor the General
Partner, on behalf of the Borrower,
shall enter into any transaction with
any Affiliate pertaining to the
Mortgaged Property, including, without
limitation, the purchase, sale or
exchange of any property, the rendering
of any service to or with any Affiliate
and the making of any loan or other
extension of credit, except in the
ordinary course of, and pursuant to the
reasonable requirements of such entity's
business and upon fair and reasonable
terms no less favorable to such entity
than would be obtained in a comparable
arms'-length transaction with any Person
that is not an Affiliate. .
6.9.02 Without limiting the provisions of
any other Section of this Agreement or
the. Affiliated Party Subordination
Agreement, any payments to be made by
the Borrower, or the General Partner on
behalf of the Borrower to (a) any member
of the Borrowing Group (or any Affiliate
of any member of the Borrowing Group) or
(b) any Affiliate of the Borrower, in
connection with any transaction between
the Borrower and such Person, including,
without limitation, the purchase, sale
or exchange of any property, the
rendering of any service to or by any
such Person (including, without
limitation, all allocations of any so-
called corporate or central office
costs, expenses and charges of any kind
or nature) or the making of any loan or
other extension of credit or the making
of any equity investment, shall be
subordinate to the complete payment and
performance of all Loan Obligations;
provided, however, that all such
subordinated payments may be paid at any
time unless: (i) after giving effect to
such payment, the Borrower shall be
unable to comply with any of its
respective obligations under any of the
Loan Documents or (ii) a Loan Default
has occurred and is continuing and has
not been expressly waived in writing by
the Lender or an event or state of facts
exists, which, with notice or the
passage of time,. or both, would
constitute a Loan Default.
6.10 NON-COMPETITION.
28
6.10.01 The Borrower and the Guarantor
acknowledge that any competition by any
member of the Borrowing Group with any
Purchaser upon the transfer of title to
such Purchaser by reason of the Lender's
-exercise of any rights and remedies
granted under any of the Loan Documents,
including without limitation, the
exercise of the power of sale under the
Mortgage, any other foreclosure of the
Mortgage or any other proceedings
brought to enforce the rights of the
holder of the Mortgage or by any other
method, would cause irreparable harm to
the Lender and the Purchaser.
6.10.02 From and after the date hereof
until the fifth anniversary of the date
of any such transfer of title to the
Mortgaged Properly to any Purchaser, no
member of the Borrowing Group nor any
Person holding or controlling, directly
or indirectly, any interest in any
member of the Borrowing Group
(collectively, the "Limited Parties"),
shall be involved in any capacity in or
lend any of their names to or engage in
any capacity in any assisted living
facility (or other facility operated for
any use included within the definition
of Primary Intended Use), center, unit
or program (or in any Person engaged in
any such activity or any related
activity competitive therewith), whether
such competitive activity shall be as an
officer, director, owner, employee,
agent, advisor, independent contractor,
developer, lender, sponsor, venture
capitalist, administrator, manager,
investor, partner, joint venturer,
consultant or other participant in any
capacity whatsoever with respect to an
assisted living facility, center, unit
or program located within a five (5)
mile radius of.. the Mortgaged Property.
6.10.03 The Borrower and the Guarantor
hereby acknowledge and agree that none
of the time span, scope or area covered
by the foregoing restrictive covenants
is or are unreasonable and that it is
the specific intent of the Borrower and
the Guarantor that each and all of the
restrictive covenants set forth
hereinabove shall be valid and
enforceable as specifically set forth
herein. The Borrower and the Guarantor
further agree that these restrictions
are special, unique, extraordinary and
reasonably necessary for the protection
of the Lender and any Purchaser and that
the violation of any such covenant by
any of the Limited Parties would cause
irreparable damage to the Lender and any
Purchaser for which a legal remedy alone
would not be sufficient to fully protect
such parties.
6.10.04 Therefore, in addition to and
without limiting any other remedies
available at law or hereunder, in the
event that any of the Limited Parties
breaches any of the restrictive
covenants hereunder or shall threaten
breach of any of such covenants, then
the Lender and any Purchaser shall be
entitled to obtain equitable remedies,
including, without limitation, specific
performance and injunctive relief, to
prevent or otherwise restrain a breach
of this Section 6. 10 (without the
necessity of posting a bond) and to
recover any and all costs and expenses
(including, without limitation,
attorneys' fees and expenses and court
costs) reasonably incurred in enforcing
the provisions of this Section 6.10. The
existence of any claim or cause of
action of any of the Limited Parties or
any member of the Borrowing Group
against the Lender or any Purchaser,
whether predicated on this Agreement or
29
otherwise, shall not constitute
a defense to the enforcement by the
Lender or any Purchaser of the foregoing
restrictive covenants and the Limited
Parties shall not defend on the basis
that there is an adequate remedy at law.
6.10.05 Without limiting any other
provision of this Agreement, the parties
hereto acknowledge that the foregoing
restrictive covenants are severable and
separate. If at any time any of the
foregoing restrictive covenants shall be
deemed invalid or unenforceable by a
court having jurisdiction over this
Agreement, by reason of being vague or
unreasonable as to duration, or
geographic scope or scope of activities
restricted, or for any other reason,
such covenants shall be considered
divisible as to such portion and such
covenants shall be immediately amended
and reformed to include only such
covenants as are deemed reasonable and
enforceable by the court having
jurisdiction over this Agreement to the
full duration, geographic scope and
scope of restrictive activities deemed
reasonable and thus enforceable by said
court; and the parties agree
that such covenants as so amended and
reformed, shall be valid and binding-as
though the invalid or unenforceable
portion has. not been included therein.
6.10.06 The provisions of this Section
6.10 shall survive the early termination
of the Term by reason of a transfer of
title to the Mortgaged Property as
described in the first paragraph of this
Section 6.10 and any satisfaction of the
Loan Obligations in connection therewith
or subsequent thereto. The parties
hereto acknowledge and agree that any
Purchaser may enforce the provisions of
this Section 6.10, as a third party
beneficiary.
6.11 ERISA.
The Borrower shall not establish or permit
any Lessee to establish any new pension or defined
benefit plan or modify any such existing plan for
employees subject to ERISA, which plan provides
any benefits based on past service without the
advance consent of the Lender to the amount of the
aggregate past service liability thereby created,
which consent shall not be unreasonably withheld.
6.12 FORGIVENESS OF INDEBTEDNESS.
The Borrower will not waive, or permit any
Manager or Lessee which is an Affiliate to waive
any debt or claim, except in the ordinary course
of its business.
6.13 VALUE OF ASSETS.
Except as disclosed in the financial
statements provided to the Lender as of the date
hereof, the Borrower will not write up (by
creating an appraisal surplus or otherwise) the
value of any of its assets above their cost to the
Borrower, less the depreciation regularly
allowable thereon.
6.14 CHANGES IN FISCAL YEAR AND ACCOUNTING
PROCEDURES.
30
Upon notice to Lender, Borrower may (a)
change its fiscal year or capital structure or (b)
change, alter, amend or in any manner modify in
accordance with GAAP any of its current accounting
procedures related to the method of revenue
recognition, billing procedures or determinations
of doubtful accounts or bad debt expenses or
permit any of its Subsidiaries to so change its
fiscal year, provided that, in the event of such
change, modification or alteration, Borrower and
Lender shall make such adjustments to the
calculation of Additional Interest and the
financial covenants contained herein as Lender
shall reasonably require to make the same
consistent in result with the calculation thereof
immediately prior to such change, modification or
alteration.
6.15 CHANGES IN EXECUTIVE OFFICERS.
Intentionally Omitted.
6.16 THE BORROWER'S AGREEMENTS TO PERFORM CERTAIN
OBLIGATIONS.
The Borrower agrees faithfully to perform,
pay and observe all agreements, covenants,
indebtedness, obligations and liabilities of the
Borrower to the Lender, whether such agreements,
covenants, indebtedness, obligations and
liabilities are direct or indirect, absolute or
contingent, due or to become due, existing or
hereafter arising, including, without limitation,
all of the Borrower's obligations under all of the
Loan Documents. The payment of all obligations and
the performance of all covenants of and agreements
by the Borrower under the Loan Documents shall be
absolute and unconditional, irrespective of any
defense or any rights of set-off, recoupment or
counterclaim the Borrower might otherwise have
against the Lender, and the Borrower shall pay
absolutely net during the Term all payments to be
made as prescribed in the all of the Loan
Documents, free of any deductions and without
abatement, diminution or set-off.6.17
Participation in Third Party Payor Programs.
If the Borrower shall participate in a Third
Party Payor Program, Borrower shall remain
eligible to participate in such Third Party Payor
Programs, in accordance with all requirements
thereof (including, without limitation, all
applicable Provider Agreements), if and to the
extent remaining eligible shall be necessary for
the prudent operation of the Facility in the good
faith exercise of commercially reasonable business
judgment.
6.18 NO DEFAULT.
Intentionally Omitted
6.19 INTENTIONALLY OMITTED.
6.20 COVENANTS REGARDING MORTGAGED PROPERTY.
6.20.01 IMPOSITIONS.
A. Subject to the provisions of Section 9
hereof, the Borrower shall pay, or cause
to be paid, before any fine, penalty,
interest or cost may be added for non-
payment, all real estate taxes, ground
rents, sewer rents, water charges and
all other municipal and Governmental
assessments, fees (including, without
limitation, license, permit, inspection,
authorization and similar fees), taxes,
rates, charges, impositions, levies,
liabilities, obligations, special
assessments and
31
Liens of every kind and nature
(hereinafter collectively referred to as
the "Impositions") that now or hereafter
may be imposed, suffered, placed,
assessed, levied or filed at any time,
upon (i) the Borrower, (ii) the
Borrower's interest in the Mortgaged
Property, (iii) the Mortgaged Property
or any Rent therefrom or any estate,
right, title or interest therein, (iv)
any occupancy, leasing, operation, use
or possession of, sales from, or
activity conducted on, or in connection
with, the Mortgaged Property and/or (v)
the Lender, but only to the extent that
any Imposition is imposed upon the
Lender as a result of the Loan
transaction, or which by any legal
Requirement may have priority over the
indebtedness secured either in lien or
in distribution out of the proceeds of
any judicial sale of the Mortgaged
Properly (without regard to any law
heretofore or hereafter enacted imposing
payment in whole or in part upon the
Lender). Notwithstanding the foregoing,
nothing contained in this Agreement
shall be construed to require Borrower
to pay (x) any tax based on net income
(whether denominated as a franchise or
capital stock or other tax) imposed on
Lender or any other Person, except
Borrower or its successors, (y) any net
revenue tax of Lender or any other
Person, except Borrower and its
successors, (z) any tax imposed with
respect to the sale, exchange or other
disposition by Lender of the Mortgaged
Property or the proceeds thereof.
Furthermore, if any such Imposition is
of record, the same shall be promptly
satisfied and discharged of record and
evidence of such discharge of record
(satisfactory to the Lender) shall be
forwarded to the Lender on or before the
date required hereunder for payment of
such Imposition. If any Imposition is
not paid within the time hereinabove
specified, the Lender shall have the
right, but not the obligation, to pay
the same, together with any penalty and
interest thereon, and any amount so paid
or advanced by the Lender and all costs
and expenses reasonably incurred in
connection therewith (including, without
limitation, attorneys' fees and expenses
and court costs), shall be a demand
obligation of the Borrower to the
Lender, and to the extent permitted by
applicable law, shall be added to the
Loan Obligations and shall be secured by
the Liens created by the Loan Documents
as fully and effectively and with the
same priority as every other obligation
of the Borrower secured thereby and, if
not paid within ten (10) days after
demand, shall thereafter, to the extent
permitted by applicable law, bear
interest at the Advances Rate until the
date of payment.
B. The Borrower hereby assigns to
the Lender all rights of the Borrower
now or hereafter arising in and to the
refund of any Imposition and any
interest thereon. If, at the time of
receipt of any such refund by the
Lender, a Loan Default or a Related
Party Default has occurred, then the
Lender may apply said refund in
reduction of the Obligations; otherwise,
the Lender shall promptly forward any
such refund to the Borrower.
C. If any such Imposition may, at the
option of the taxpayer, lawfully be paid
in installments (whether or not interest
shall accrue on the unpaid balance of
such Imposition), Borrower may exercise
the option to pay the same (and any
accrued interest on the unpaid balance
of such
32
Imposition) in installments
and, in such event, shall pay such
installments during the term of this
Agreement (subject to Borrower's right
to contest) as the same respectively-
become due and before any fine, penalty,
premium, further interest or cost
may be added thereto.
6.20.02 TAX DEPOSITS.
A. At the option of the Lender, upon the
occurrence of an event or circumstance
which, with the giving of notice or the
passage of time would constitute a Loan
Default, the Borrower shall, upon the
written request of Lender, deposit with
the Lender, on the first day of the
calendar month immediately following
such request and on the first day of
each calendar month thereafter (each of
which dates is hereinafter referred to
as a "Monthly Tax Deposit Date") until
the payment in full of the Loan
Obligations, a sum equal to one twelfth
(1/12) of the Impositions to be levied,
charged, filed, assessed or imposed upon
or against the Mortgaged Property within
one (1) year after said Monthly Tax
Deposit Date. If the amount of the
Impositions to be levied, charged,
assessed or imposed within the ensuing
one (1) year period shall not be fixed
upon any Monthly Tax Deposit Date, such
amount for the purpose of computing the
tax deposit to be made by the Borrower
hereunder shall be estimated by the
Lender, with an appropriate adjustment
to be promptly made between the Borrower
and the Lender as soon as the fixed
amount of such Impositions is
determinable.
B. The sums deposited by the Borrower under
this Section 6.20.02 shall be held by
the Lender and shall be applied toward
the payment of the Impositions when due.
Any such deposits may be commingled with
other assets of the Lender and shall be
invested by the Lender at such bank as
the Lender from time to time may select,
and the Lender shall not be liable to
the Borrower or any other Person based
on the Lender's choice of investment
vehicles, any consequent loss of
principal or interest or any
unavailability of funds based on such
choice of investment; provided, however,
that notwithstanding the foregoing, the
Lender shall only invest any such
deposit in any of the investment
vehicles described on Exhibit A of the
Deposit Pledge Agreement. Furthermore,
the Lender shall bear no responsibility
for the financial condition of, or any
act or omission by, the Lender's
depository bank. The income from such
investment or interest on such deposit
shall accrue for the benefit of the
Borrower. The Borrower shall give not
less than ten (10) days' prior written
notice to the Lender in each instance
when an Imposition is due, specifying
the Imposition to be paid and the amount
thereof, the place of payment and the
last day on which the same may be paid
in order to be within the time limit
specified above.
C. If for any reason the sums on
deposit with the Lender under this
Section. 6.20.02 shall not be sufficient
to pay an Imposition within the time
specified in this Section, then, within
ten (10) days after demand by the Lender
the Borrower shall deposit sufficient
sums so that the Lender may pay such
Imposition in full, together with any
33
penalty and interest thereof. The
Lender may change its estimate of any
Imposition for any period on the basis
of a change in an assessment or tax rate
or on the basis of a prior
miscalculation or for any other good
faith reason; in which event, within ten
(10) days after demand by the Lender,
the Borrower shall deposit with the
Lender the amount in excess of the sums
actually deposited which would
theretofore have been payable under the
revised estimate.
D. If any Imposition shall be levied,
charged, filed, assessed or imposed upon
or against the Mortgaged Property and if
such Imposition shall also be a levy,
charge, assessment or imposition upon or
for any other real or personal property
not covered by the Liens created by the
Loan Documents, then the computation of
the amounts to be deposited under this
Section 6.20.02 shall be based upon the
entire amount of such Imposition and the
Borrower shall not have the right to
apportion any deposit with respect to
such Imposition.
E. Upon an assignment of the Mortgage by
the Lender, the Lender shall transfer
all amounts deposited pursuant to the
provisions of this Section 6.20.02 that
are then in its possession to such
assignee (as the subsequent holder of
the Mortgage) and the original Lender
named herein shall thereupon be
completely released from all liability
with respect to such tax deposits so
transferred and the Borrower shall look
solely to said assignee (as the
subsequent holder of the Mortgage) in
reference thereto. The Lender shall
provide written notice to the Borrower
of any such assignment of the Mortgage
and any such transfer of tax deposits.
F. All amounts deposited with the Lender
pursuant to the provisions of this
Section 6.20.02 shall be held by the
Lender as additional security for the
sums secured by the Liens created by the
Loan Documents and, upon the occurrence
of any Loan Default, the Lender may, in
its sole and absolute discretion, apply
said amounts toward payment of the Loan
Obligations. Upon the complete payment
and performance of the Loan Obligations,
any sums then held by the Lender under
this Section 6.20.02 shall be refunded
to the Borrower; unless a Related Party
Default has occurred, in which event
such sums may be applied toward the
Obligations.
G. The Borrower shall deliver to the Lender
copies of all notices, demands, claims,
bills and receipts in relation to the
Impositions immediately upon the earlier
to occur of (1) ten (10) days following
receipt thereof by Borrower and (2)
prior to the date when such Imposition
is due and payable.
6.20.03 CHANGE IN TAXES.
A. In the event any tax (other than any
income tax or franchise tax assessed
against the Lender, except to the extent
that any such tax is assessed against
the Lender in lieu of any other
Imposition that would have otherwise
been assessed against the Borrower or
the Mortgaged Property) shall be due or
become due and payable to any
Governmental Authority with respect to
the execution and delivery or
recordation of
34
any of the Loan Documents or the
interest of the Lender in the Mortgaged
Property, the Borrower shall pay such
tax at the time and in the manner
required by applicable law (without
regard to whether any such tax is
imposed in whole or in part on the
Lender) and the Borrower shall and
hereby agrees to hold harmless, defend
(with counsel reasonably acceptable to
the Lender) and indemnify the Lender
against any liability of any nature
whatsoever as a result of the imposition
of any such tax. Notwithstanding the
foregoing, the Lender shall have the
option of conducting its own defense
with counsel of its own choice. If
Lender reasonably believes that Borrower
is not performing its obligations to
defend Lender in a manner reasonably
satisfactory to Lender. Furthermore, the
aforesaid indemnification agreement
shall include, without limitation,
reasonable attorneys' fees and expenses
and court costs reasonably incurred by
the Lender in connection with the
imposition of any such taxes and the
enforcement of said indemnification
agreement. The Borrower shall not claim
any credit on, or make any deduction
from, the Obligations by reason of the
payment of any such tax;
B. If any Legal Requirement becomes
effective after the date hereof changing
(in any manner) any of the present Legal
Requirements as to the taxation of notes
or debts secured by mortgages, for
federal, state or local purposes, or the
manner of collection of any Impositions,
so as to affect any of the Loan
Documents, then, upon demand, the
Borrower shall make such payments to the
Lender and take such other steps as may
be necessary or desirable in the
Lender's reasonable discretion, to place
the Lender in the same financial
position as it was in prior to any such
enactment; failing which, at the option
of the Lender and upon demand, the Loan
Obligations shall become due and payable
upon six (6) months' prior written
notice to the Borrower. In the event of
any such acceleration of the Loan
Obligations, provided that a Loan
Default has not occurred, the Borrower
shall not be required to pay the Lender
a Prepayment Fee.
C. The indemnity provisions of this 6.20.03
shall survive the complete payment and
performance of the Obligations and the
foreclosure of the Mortgage.
D. Notwithstanding the foregoing, nothing
contained in this Agreement shall be
construed to require Borrower to pay (x)
any tax based on net income (whether
denominated as a franchise or capital
stock or other tax) imposed on Lender or
any other Person, except Borrower or its
successors, (y) any net revenue tax of
Lender or any other Person, except
Borrower and its successors or (z) any
tax imposed with respect to the sale;
exchange or. other disposition by Lender
of the Mortgaged Property or the
proceeds thereof.
6.20.04 INTENTIONALLY OMITTED.
6.20.05 USE; COMPLIANCE WITH LAW.
A. At all times until the Loan
Obligations are fully paid and performed
and the Mortgage is discharged, the
Mortgaged Property shall be
35
maintained in good order,
repair and condition, and the Borrower
expressly agrees that it will neither
permit nor suffer any waste upon the
Mortgaged Property, nor cause or permit
any nuisance thereon. Subject to the
provisions of Section 8 hereof, no
additional Improvement may be
constructed on the Land, nor may any
Improvement on the Land be materially
altered, removed or demolished without
the prior written consent of the Lender
in each instance, which consent may be
withheld in the Lender's reasonable
discretion. Without limiting any of the
Lender' s other rights of entry pursuant
to the terms of the Mortgage or any of
the other Loan Documents, the Borrower
shall permit the Lender to enter the
Mortgaged Property at any reasonable
time and upon reasonable notice (except
in the case of an emergency) to
determine whether the Borrower and the
Mortgaged Property are in compliance
with the provisions of this Section
6.20.05.
B. Subject to the provisions of
Section 8 hereof, the Borrower covenants
that the Mortgaged Property shall be
continuously operated in accordance with
its Primary Intended Use (unless such
operations are temporarily interrupted
as a result of any Casualty or any
permitted renovations or repairs to the
Facility) and Other Permitted Uses. The
Borrower shall not allow the Mortgaged
property to be used for any use other
than its Primary Intended Use and such
Other Permitted Uses, without the prior
written consent of the Lender in each
instance, which consent may be withheld
in the Lender's sole and absolute
discretion.
C. No use shall be made or
permitted to be made of the Mortgaged
Properly and no acts shall be done which
cause the cancellation of any insurance
policy required pursuant to the terms of
this Agreement, nor shall the Borrower,
any Manager of any other Person sell or
otherwise provide to residents, other
occupants or invitees therein, or permit
to be kept, used or sold in or about the
Mortgaged Property any article which may
be prohibited by any Legal Requirement
or by the standard form of fire
insurance policies, any other insurance
policies required to be carried
hereunder or fire underwriters'
regulations.
D. The Borrower shall not initiate,
join in or consent to any zoning changes
affecting the Mortgaged Property nor
initiate, join in or consent to any
private restrictive covenant or other
public or private restriction upon the
use of the Mortgaged Property without
the Lender's prior written consent, in
each instance, which consent shall not
unreasonably be withheld.
E. Upon the request of the Lender,
at any time and from time to time while
this Agreement remains in full force and
effect, the Borrower shall engage
independent professional consultants,
engineers and inspectors (qualified to
do business in the state where the
Mortgaged Property is located and
acceptable to the Lender) to perform any
environmental and structural
investigations and other inspections of
the Mortgaged Property as the Lender may
request in order to detect (a) any
structural deficiencies in the
Improvements or the utilities servicing
the Mortgaged Property or (b) the
presence of any condition that may be
harmful to the environment or present a
health hazard to the
36
residents and/or the other
occupants of the Facility. In the event
that the Lender determines that the
results of such investigations and
inspections are unsatisfactory, within
thirty (30) days of notice from the
Lender, the Borrower shall undertake
such appropriate remedial actions as may
be reasonably requested by the Lender to
correct any such unsatisfactory
conditions, and shall thereafter
diligently and continuously prosecute
such remedial actions to completion;
provided, however, that in the event
results of any such testing or
inspection reflect the same satisfactory
results as the results of a similar
testing or inspection initiated by
Lender within the prior twelve (12)
month period, the costs and expenses of
such testing or inspection shall be the
responsibility of Lender.
F. Borrower will maintain, and
cause any Lessee and any Manager to
maintain, experienced and competent
professional management with respect to
its business and with respect to the
Mortgaged Property. Borrower, any Lessee
and any Manager shall conduct, in the
ordinary course, the operation of the
Facility, and Borrower and any Lessee
which is an Affiliate of Borrower shall
not enter into any other business or
venture during the Term other than
activities in which Borrower or such
Lessee are permitted to engage by the
provisions of the Meditrust/Emeritus
Transaction Documents.
G. Borrower and the Mortgaged
Properly and all uses thereof shall
comply with (i) all applicable Lega1
Requirements (except to the extent being
duly contested in accordance with the
terms hereof, (ii) all Permits and
Contracts, (iii) all Insurance
Requirements, (iv) the Loan Documents,
and (v) the Permitted Encumbrances.
H. At all times for so long -as the
Loan Obligations remain outstanding, all
utilities necessary for the use and
operation of the Facility shall be
available to the lot lines of the
Mortgaged Property: (i) in sufficient
supply-and capacity; (ii) through
validly created and existing easements
of record appurtenant to or encumbering
the Mortgaged Property (which easements
shall not impede or restrict the
operation of the Facility); and (iii)
without need for any Permits and
Contracts required to be issued by or
entered into with any Governmental
Authority, except as already obtained or
executed, as the case may be, or as
otherwise shown, to the satisfaction of
the Lender, to be readily obtainable.
6.21 MANAGEMENT AGREEMENTS.
From and after the date hereof; neither the
Borrower nor any Lessee shall enter into any
Management Agreement without the prior written
consent of the Lender, in each instance, which
consent will not be unreasonably withheld. There.
shall be no change in the ownership or control
(directly or indirectly) of any Manager under any
Management Agreement without the prior written
consent of the Lender, in each instance, which
consent shall not be unreasonably withheld. The
Borrower and any Lessee, at their sole cost and
expense, promptly and fully perform or cause to be
performed every covenant, condition, promise and
obligation of the owner of the Mortgaged Property
or such Lessee under any Management Agreement.
Neither the Borrower nor any Lessee shall cancel
(other than in connection with the exercise by the
Borrower or the Lessee of any of its
37
remedies under the Management Agreement as a
result of any default by the Manager thereunder),
transfer or assign or amend, in any material
respect, any Management Agreement or consent to
the cancellation (other than in connection with
the exercise by the Borrower or the Lessee of any
of its remedies under the Management Agreement as
a result of any default by the Manager
thereunder), transfer or assignment or material
amendment of any Management Agreement by any party
thereto, without the prior written consent of the
Lender, in each instance, which consent shall not
be unreasonably withheld.
Each Management Agreement shall provide that
the Lender shall be provided notice of any
defaults thereunder and, at the Lender's option,
an opportunity to cure such default. The Borrower
or any Lessee shall furnish to the Lender, within
three (3) days after receipt thereof, or after the
mailing or service thereof by the Borrower or any
Lessee, as the case may be, a copy of each notice
of default which the Borrower or any Lessee shall
give to; or receive from any Person, based upon
the occurrence, or alleged occurrence, of any
default in the performance of any covenant,
condition, promise or obligation under any
Management Agreement.
Whenever and as often as the Borrower or any
Lessee shall. fail to perform, promptly and fully,
at their sole cost and expense, any covenant,
condition, promise or obligation on the part of
the owner of the Mortgaged Property or a Lessee
thereof under and pursuant to any Management
Agreement, the Lender, or a lawfully appointed
receiver of the Mortgaged Property, may, at their
respective Options (and without any obligation to
do so), after five (5) days' prior notice to the
Borrower (except in the case of an emergency)
enter upon the Mortgaged Property and perform, or
cause to be performed, such work, labor, services,
acts or things, and take such other steps and do
such other acts as they may deem advisable, to
cure such defaulted covenant, condition, promise
or obligation, and any amount so paid or advanced
by the Lender or such receiver and all costs and
expenses reasonably incurred in connection
therewith (including, without limitation,
attorneys' fees and expenses and court costs),
shall be a demand obligation of the Borrower to
the Lender or such receiver, and, to the extent
permitted by applicable law, shall be added to the
Loan Obligations and shall be secured by the Liens
created by the Mortgage and the other Loan
Documents as fully and effectively and with the
same priority as every other obligation thereunder
and, if not paid within ten (10) days after
demand, shall thereafter, to the extent permitted
under applicable law, bear interest at the
Advances Rate until the date of payment.
6.22 ACQUISITION OF ADDITIONAL PROPERTY.
In the event that at any time during the Term
the Borrower holds the fee title to or a leasehold
interest in any real property and/or personal
property which is used in any way in connection
with the Facility (but is not subject to the liens
created by the Mortgage), the Borrower shall (a)
provide the Lender with prior notice of such
acquisition and (b) shall take such actions and
enter into such agreements (substantially similar
to the Loan Documents) as the Lender shall
reasonably request in order to grant the Lender a
first priority mortgage or other security interest
in such real property and personal property,
subject only to the Permitted Encumbrances.
Without limiting the foregoing, it is acknowledged
and agreed that all revenues generated from the
operation of such additional real property shall
be included in the determination of Gross Revenues
(subject to such adjustments as agreed upon in
Section 3.8.04).
38
6.23 ACCEPTABLE LICENSED OPERATOR.
Intentionally Omitted.
6.24 ANNUAL FACILITY UPGRADE EXPENDITURES.
Borrower shall spend an amount equal to the
Annual Facility Upgrade Expenditure on Upgrade
Renovations to the Facility each Loan Year
commencing with the third Loan Year. Borrower will-
furnish and shall cause to be furnished to Lender
evidence satisfactory to Lender that Borrower has
fulfilled its obligation to make the Annual
Facility Upgrade Expenditure within ninety (90)
days after the end of Borrower's fiscal year.
6.25 REPAIRS; RESTRICTIONS.
6.25.1 BORROWER'S RESPONSIBLITIY. Borrower,
at its sole cost and expense, shall keep the
Mortgaged Property and all private roadways,
sidewalks and curbs appurtenant thereto which
are under Borrower's control in good order
and repair (whether or not the need for such
repairs occurs as a result of Borrower's use,
any prior use, the elements or the age of the
Mortgaged Property or such private roadways,
sidewalks and curbs or any other cause
whatsoever other than Lender's gross
negligence or willful misconduct) and,
subject to Sections 6.26 and 8.2, Borrower
shall promptly, with the exercise of all
reasonable efforts, undertake and diligently
complete all necessary and appropriate
repairs, replacements, renovations,
restorations, alterations and modifications
thereof of every kind and nature, whether
interior or exterior, structural or non-
structural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason
of a condition (concealed or otherwise)
existing at any time and thereafter until the
Loan Obligations have been fully paid and
performed. In addition, Borrower, at its sole
cost and expense, shall make all repairs,
modifications, replacements, renovations and
alterations of the Mortgaged Property (and
such private roadways, sidewalks and curbs)
that are necessary to comply with all
applicable Legal Requirements and Insurance
Requirements so that the Mortgaged Property
can be legally operated for the Primary
Intended Use and, if applicable, the Other
Permitted Uses. All repairs, replacements,
renovations, alterations, and modifications
required by the terms of this Section 6.25
shall be (a) performed in a good and
workmanlike manner in compliance with all
applicable Legal Requirements, Insurance
Requirements and the requirements of Article
6.26 hereof, using new materials well suited
for their intended purpose and (b) consistent
with the operation of the Facility in a
reputable manner. Borrower will not take or
omit to take any action the taking or
omission of which might materially impair the
value or the usefulness of the Mortgaged
Property for the Primary Intended Use and, if
applicable, the Other Permitted Uses. To the
extent that any of the repairs, replacements,
renovations, alterations or modifications
required by the terms of this Section 6.25
constitute Material Structural Work, Borrower
shall obtain Lender's prior written approval
(which approval shall not be unreasonably
withheld) of the specific repairs,
replacements, renovations, alterations and
modifications to be performed by or on behalf
of Borrower in connection with such Material
Structural Work. Notwithstanding the
foregoing, in the event of a bona fide
emergency during which Borrower is unable to
contact the appropriate representatives of
Lender, Borrower may commence such Material
Structural
39
Work as may be necessary in order to address
such emergency without Lender's prior
approval, provided, however, that Borrower
shall immediately thereafter advise Lender of
such emergency and the nature and scope of
the Material Structural Work commenced and
shall obtain Lender's approval of the
remaining Material Structural Work to be
completed.
6.25.2 NO LENDER OBLIGATION. Lender shall
not, under any circumstances, be required to
build or rebuild any improvements on the
Mortgaged Property (or any private roadways,
sidewalks or curbs appurtenant thereto), or
to make any repairs, replacements,
renovations, alterations, restorations,
modifications, or renewals of any. nature or
description to the Mortgaged Property (or any
private roadways, sidewalks or curbs
appurtenant thereto), whether ordinary or
extraordinary, structural or non-structural,
foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto
in connection with this Loan Agreement, or to
maintain the Mortgaged Property (or any
private roadways, sidewalks or
curbs appurtenant thereto) in any way.
6.25.3 BORROWER MAY NOT OBLIGAE LENDER.
Nothing contained herein nor any action or
inaction by Lender shall be construed as (a)
constituting the consent or request of
Lender, express or implied, to any
contractor, subcontractor, laborer,
materialman or vendor to or for the
performance of any labor or services for any
construction, alteration, addition, repair or
demolition of or to the Mortgaged Property or
(b) except as otherwise provided in this Loan
Agreement, giving Borrower any right, power
or permission to contract for or permit the
performance of any labor or services or the
furnishing of any materials or other property-
in such fashion as would permit the making of
any claim against Lender for the payment
thereof or to make any agreement that may
create, or in any way be the basis for, any
right, title or interest in, or Lien or claim
against, Lender.
6.25.4 ENCROACHMENTS: TITLE RESTRICTIONS. If
any of the Improvements shall, at any time,
encroach upon any property, street or right-
of way adjacent to the Mortgaged Property, or
shall violate the agreements or conditions
contained in any lawful restrictive covenant
or other Lien now or hereafter affecting the
Mortgaged Property, or shall impair the
rights of others under any easement, right-of
way or other Lien to which the Mortgaged
Property is now or hereafter subject, then
promptly upon the request of Lender, Borrower
shall, at its sole cost and expense, subject
to Borrower's right to contest the existence
of any encroachment, violation or impairment
as set forth in Section 9, (a) obtain valid
and effective waivers or settlements of all
claims, liabilities and damages resulting
from each. such encroachment, violation or
impairment or (b) make such alterations to
the Improvements, and take such other
actions, as Borrower in the good faith
exercise of its judgment deems reasonably
practicable, to remove such encroachment, or
to end such violation or impairment,
including, if necessary, the alteration of
any of the Improvements. Notwithstanding the
foregoing, Borrower shall, in any event, take
all such actions as may be reasonably
necessary in order to be able to continue the
operation of the Improvements for the Primary
Intended Use and, if applicable, the Other
Permitted Uses substantially in the manner
and to the extent that the Improvements were
operated prior to the assertion of such
encroachment, violation or impairment and
nothing contained herein shall limit
Borrower's obligations to operate the
Property in accordance with its Primary
40
Intended Use. Any such alteration made
pursuant to the terms of this Section 6.25.4
shall be completed in conformity with the
applicable requirements of Section 6.25.1 and
Section 6.26. Borrower's obligations under
this Section 6.25.4 shall be in addition to
and shall in no way discharge or diminish any
obligation of any insurer under any policy of
title or other insurance. If and to the
extent any obligation of an insurer under any
policy of title or other insurance exists and
Borrower has incurred costs and expenses with
respect to the subject matter of such
obligation and provided Lender is reasonably
satisfied with the resolution of such subject
matter, at the request of Borrower, Lender,
at Lender's option, shall either assign to
Borrower any right it may have to proceed
against such insurer or remit to Borrower any
amount which Lender recovers from such
insurer, minus any amounts needed to
reimburse Lender for its reasonable costs and
expenses, for the costs and expenses incurred
by Borrower in reconstructing the Facility or
taking such other action reasonably required
in order to create a viable and functional
Facility under all of the circumstances.
6.26 MATERIAL STRUCTURAL WORK; CAPITAL ADDITIONS.
6.26.1 LENDER'S APPROVAL. Without the prior
written consent of Lender, which consent may be
withheld by Lender, in its sole and absolute
discretion, Borrower shall make no Capital
Addition or Material Structural Work to the
Mortgaged Property (including, without limitation,
any change in the size or unit capacity of the
Facility), except as may be otherwise expressly
required pursuant to Section 6.25.
6.26.2 GENERAL PROVISIONS AS TO CAPITAL
ADDITIONS AND CERTAIN MATERIAL STRUCTURAL WORK. As
to any Capital Addition or Material Structural
Work (other than such Material Structural Work
that is required to be performed pursuant to the
terms of Section 6.25) for which Lender has
granted its prior written approval, the following
terms and conditions shall apply unless otherwise
expressly set forth in Lender's written approval.
A. NO LIENS. Borrower shall not be
permitted to create any Lien on the Mortgaged
Property in connection with any Capital
Addition or Material Structural Work
(including, without limitation, Liens
relating to the provision of financing for a
Capital Addition) other than Liens expressly
permitted by the terms and provisions of this
Loan Agreement.
B. BORROWER'S PROPOSAL REGARDING CAPITAL
ADDITIONS AND MATERIAL STRUCTURAL WORK. If
Borrower desires to undertake any Capital
Addition or Material Structural Work,
Borrower shall submit to Lender in writing a
proposal setting forth in reasonable detail
any proposed Capital Addition or Material
Structural Work and shall provide to Lender
copies of, or information regarding, the
applicable plans and specifications, Permits,
Contracts and any other materials concerning
the proposed Capital Addition or Material
Structural Work, as the case may be, as
Lender may reasonably request. Without
limiting the generality of the foregoing,
each such proposal pertaining to any Capital
Addition shall indicate the approximate
projected cost of constructing such Capital
Addition, the use or uses to which it will be
put and a good faith estimate of the change,
if any, in the Gross Revenues that Borrower
anticipates will result from the construction
of such Capital Addition.
41
C. LENDER'S OPTIONS REGARDING CAPITAL
ADDITIONS AND MATERIAL STRUCTURAL WORK.
Lender shall have the options of: (a) denying
permission for the construction of the
applicable Capital Addition or Material
Structural Work, (b) offering to finance the
construction of the Capital Addition pursuant
to Section 626.3 on such terms as may be
specified by Lender, including the terms of
any amendment to this Loan Agreement,
including, without limitation, an increase in
Loan Amount based on Lender's then existing
terms and prevailing conditions, (c) allowing
Borrower to separately pay for or finance the
construction of the Capital Addition, subject
to compliance with the terms and conditions
of Section 6.25, Section 6.26, Section
8.2.03, all applicable Legal Requirements,
all other requirements of this Loan Agreement
and to such other terms and conditions as
Lender may in its discretion reasonably
impose or (d) any combination of the
foregoing. Unless Lender notifies Borrower in
writing of a contrary election within thirty
(30) days of Borrower's request or unless
Lender is required to consent thereto
pursuant to this Section 6.26, Lender shall
be deemed to have denied the request for the
Capital Addition or Material Structural Work.
In the event and to the extent Lender has
granted permission for the construction of
the applicable Capital Addition or Material
Structural Work and (x) Lender has not
offered to finance the construction of the
same or (y) Borrower declines to accept the
financing offered by Lender, Borrower may
separately finance such construction,
.subject to the limitation on Liens set forth
in Section 6.26.2A, or pay for such
construction itself. In the event Borrower
declines to accept the financing offered by
Lender or if Lender has not offered such
financing to Borrower and proposes to
obtaining financing from another Person,
Borrower shall inform Lender in writing of
the terms and conditions of such financing
and shall provide Lender with a copy of a
commitment letter evidencing the same and
Lender may, by giving notice thereof to
Borrower within twenty (20) days following
being so informed, elect to provide financing
to Borrower at the effective rate of interest
as such financing. Lender shall not
unreasonably withhold its permission for the
construction of Material Structural Work
which is necessary to protect the safety or
welfare of residents of the Facility.
6.26.3 LENDER MAY ELECT TO FINANCE CAPITAL
ADDITIONS. If Lender elects to- offer financing
for the proposed Capital Addition and Borrower
accepts Lender's financing proposal, the
provisions of Section 6.26 shall apply.
A. ADVANCES. All advances of funds for
any such financing shall be made in
accordance with Lender's then standard
construction loan requirements and
procedures, which may include, without
limitation, the requirements and procedures
applicable to Work under Section 8.2.03.
B. LENDER'S GENERAL REQUIREMENTS. If
Lender agrees to finance the proposed Capital
Addition and Borrower accepts Lender's
proposal therefor, in addition to all other
items which Lender or any applicable
Financing Party may reasonably require,
Borrower shall provide to Lender the
following:
(a) prior to any advance of funds,
(i) any information, opinions,
certificates, Permits or documents
reasonably requested by Lender or any
applicable Financing Party which are
necessary to confirm that Borrower is
reasonably expected to be able to use
the Capital Addition upon completion
thereof in accordance with the
42
Primary Intended Use and/or, if
applicable, the Other Permitted Uses and
(ii) evidence satisfactory to Lender and
any applicable Financing Party that all
Permits required for the construction
and use of the Capital Addition have
been received, are in full force and
effect and are not subject to appeal,
except only for those Permits which
cannot in the normal course be obtained
prior to commencement or completion of
the construction; provided, that, Lender
and any applicable Financing Party are
furnished with reasonable evidence that
the same is reasonably expected to be-
available in the normal course of
business without unusual condition;
(b) prior to any advance of funds,
an Officer's Certificate and, if
requested, a certificate from Borrower's
architect, setting forth in reasonable
detail the projected (or actual, if
available) Capital Addition Cost;
(c) a mortgage, deed of trust or
similar instrument granting Lender a
mortgage lien on the land acquired for
the purpose of construction of Capital
Additions ("Additional Land");
(d) upon completion of the Capital
Addition, a final as-built survey
thereof reasonably satisfactory to
Lender, if required by Lender;
(e) during and following the
advance of funds and the completion of
the Capital Addition, endorsements to
any outstanding policy of title
insurance covering the Mortgaged
Property satisfactory in form and
substance to Lender (i) updating the
same without any additional exception
except as may be reasonably permitted by
Lender and (ii) increasing the coverage
thereof by an amount equal to the Fair
Market Value of the Capital Addition
and/or increasing the coverage thereof
by an amount equal to the fair market
value of the Additional Land and
including the Additional Land in the
premises covered by such title insurance
policy;
(f) simultaneous with the initial
advance of funds, if appropriate, (i)
Lender's policy of title insurance
insuring Borrower's fee simple title to
any Additional Land free and clear of
all Liens except those approved by
Lender and (ii) an owner's policy of
title insurance and a lender's policy of
title insurance reasonably satisfactory
in form and substance to Lender;
(g) following the completion of the
Capital Addition, if reasonably deemed
necessary by Lender, an appraisal of the
Mortgaged Property by an M.A.I.
appraiser acceptable to Lender, which
states that the Fair Market Value of the
Mortgaged Property upon completion of
the Capital Addition exceeds the Fair
Market Value of the Mortgaged Property
prior to the commencement of such
Capital Addition by an amount not less
than one hundred twenty-five percent
(125%) of the Capital Addition Cost; and
(h) during or following the
advancement of funds, prints of
architectural and engineering drawings
relating to the Capital Addition and
such other materials, including, without
limitation, the
43
modifications to outstanding policies of
title insurance contemplated by
subsection (e) above, opinions of
counsel, appraisals, surveys, certified
copies of duly adopted resolutions of
the board of directors of Borrower
authorizing the execution and delivery
of all amendments and any other
documents and instruments as may be
reasonably required by Lender and any
applicable Financing Party.
C. PAYMENT OF COSTS. By virtue of making
a request to finance a Capital Addition,
whether or not such financing is actually
consummated, Borrower shall be deemed to have
agreed to pay, upon demand, all costs and
expenses reasonably incurred by Lender and
any Person participating with Lender in any
way in the financing of the Capital Addition
Cost, including, but not limited to (a) fees
and expenses of their respective attorneys,
(b) all photocopying expenses, if any, (c)
the amount of any filing, registration and
recording taxes and fees, (d) documentary
stamp taxes and intangible taxes (e) title
insurance charges and appraisal fees.
6.26.4 GENERAL LIMITATIONS. Without in any
way limiting Lender's options with respect to
proposed Capital Additions or Material Structural
Work: (a) no Capital Addition or Material
Structural Work shall be completed that could,
upon completion, significantly alter the character
or purpose or detract from the value or operating
efficiency of the Mortgaged Property, or
significantly impair the revenue-producing
capability of the Mortgaged Property, or adversely
affect the ability of Borrower to comply with the
terms of this Loan Agreement; (b) no Capital
Addition or Material Structural Work shall be
completed which would tie in or connect any
Improvements on the Mortgaged Property with any
other improvements on property adjacent to the
Mortgaged Property (and not part of the Mortgaged
Property) including, without limitation, tie-ins
of buildings or other structures or utilities,
unless Borrower shall have obtained the prior
written approval of Lender, which approval may be
withheld in Lender's sole and absolute discretion
and (c) all proposed Capital Additions and
Material Structural Work shall be architecturally
integrated and consistent with the Mortgaged
Property.
6.27. NON-CAPITAL ADDITIONS. Borrower shall
have the obligation and right to make repairs,
replacements and alterations which are not Capital
Additions as required by the other Sections of
this Loan Agreement, but in so doing, Borrower
shall always comply with and satisfy the
conditions of Section 6.26. Borrower shall have
the right, from time to time, to make additions,
modifications or improvements to the Mortgaged
Property which do not constitute Capital Additions
or Material Structural Work as it may deem to be
desirable or necessary for its uses and purposes,
subject to the same limits and conditions imposed
under Sections 6.25 and 6.26. The cost of any such
repair, replacement, alteration, addition,
modification or improvement shall be paid by
Borrower and the results thereof shall be included
under the terms of the Mortgage and become a part
of the Mortgaged Property, without payment
therefor by Lender at any time. Notwithstanding
the foregoing, all such additions, modifications
and improvements which affect the structure of any
of the Improvements, or which involve the
expenditure of more than FIFTY THOUSAND DOLLARS
($50,000.00), shall be undertaken only upon
compliance with the provisions of Section 6.26,
all applicable Legal Requirements and all other
applicable requirements of this Loan Agreement;
provided, however, that in the event of a bona
fide emergency during which Borrower is unable to
contact the appropriate representatives of Lender,
Borrower may commence such additions,
modifications and improvements as may be necessary
in order to address such emergency without
Lender's prior approval, as long as Borrower
immediately thereafter
44
advises Lender of such emergency and the nature
and scope of the additions, modifications and
improvements performed and obtains Lender's
approval of the remaining work to be completed.
Any such addition, modification and improvement
which affects the structure of any of the
Mortgaged Improvements which is not a Capital
Addition or Material Structural Work shall be
exempt from the requirements of Section 6.26
hereof.
7. THE LENDER'S RIGHT TO MAKE PAYMENTS AND TAKE
OTHER ACTION
The Lender may, after ten ( 10) Business
Days' prior notice to the Borrower of its
intention so to do (except in an emergency when
such shorter notice shall be given as is
reasonable under the circumstances), pay any sums
due or claimed to be due for labor or materials
furnished in connection with the ownership,
construction, development, maintenance,
management, repair, use or operation of the
Mortgaged Property, and any other sums which in
the reasonable opinion of the Lender, or its
attorneys, should be paid, and may take such other
and further action which in the reasonable opinion
of the Lender is necessary in order to secure the
protection and priority of the security interests
granted to the Lender pursuant to the Loan
Documents and the performance of all obligations
under the Loan Documents. The Lender, in its sole
and absolute discretion, may charge any such
payments against any advance that may otherwise be
due hereunder to the Borrower or may otherwise
collect such amounts from the Borrower, and the
Borrower agrees to repay to the Lender all such
amounts, notwithstanding that the aggregate
indebtedness of the Borrower to the Lender
hereunder may exceed the Loan Amount. Any amount
which is not so charged against advances due
hereunder and all costs and expenses reasonably
incurred by the Lender in connection therewith
(including, without limitation, attorneys' fees
and expenses and court costs) shall be a demand
obligation of the Borrower and, to the extent
permitted -by applicable law, shall be added to
the Loan Obligations and secured by the Liens
created by the Loan Documents, as fully and
effectively and with the same priority as every
other obligation of the Borrower thereunder and,
if not paid within ten (10) days after demand,
shall thereafter, to the extent permitted under
applicable law, bear interest at the Advances Rate
until the date of payment.
If the Borrower fails to observe or cause to
be observed any of the provisions of this
Agreement and such failure continues beyond any
applicable notice or cure period provided for
under this Agreement, the Lender or a lawfully
appointed receiver of the Mortgaged Property, at
their respective options, from time to time may
perform, or cause to be performed, any and all
repairs and such other work as they deem necessary
to bring the Mortgaged Property into compliance
with the provisions af this Agreement may enter
upon the Mortgaged Property for any of the
foregoing purposes, and the Borrower hereby waives
any claim against the Lender or such receiver
arising out of such entry or out of any other act
carried out pursuant to this Section. All amounts
so expended or incurred by the Lender and by such
receiver and all costs and expenses reasonably
incurred in connection therewith (including,
without limitation, attorneys' fees and expenses
and court costs), shall be a demand obligation of
the Borrower to the Lender or such receiver, and,
to the extent permitted by law, shall be added to
the Obligations and shall be secured by the Liens
created by the Loan Documents as fully and
effectively and with the same priority as every
other obligation of the Borrower secured
thereunder and, if not paid within ten (10) days
after demand, shall thereafter, to the extent
permitted by applicable law, bear interest at the
Advances Rate until the-date of payment.
45
8. INSURANCE; CASUALTY; TAKING
8.1 GENERAL INSURANCE REQUIREMENTS.
The Borrower shall at its sole cost and
expense keep the Mortgaged Property and the
business operations conducted thereon insured as
set forth below.
8.1.01 TYPES AND AMOUNTS OF INSURANCE.
The Borrower's insurance shall include
the following:
A. property loss and physical damage
insurance on an all-risk basis
(with only such exceptions as the
Lender may in its reasonable
discretion approve) covering the
Mortgaged Property (exclusive of
the Land) for its full replacement
cost, which cost shall be reset
once a year at the Lender's option,
with an agreed-amount endorsement
and a deductible not in excess of
TWENTY FIVE THOUSAND DOLLARS
($25,000.00). Such insurance shall
include, without limitation, the
following coverages: (i) increased
cost of construction, (ii) cost of
demolition, (iii) the value of the
undamaged portion of the Facility
and (iv) contingent liability from
the operation of building laws,
less exclusions provided in the
normal "All Risk" insurance policy.
During any period of construction,
such insurance shall be on a
builder's-risk, completed value,
non-reporting form with permission
to occupy;
B. flood insurance (if the Mortgaged
Property or any portion thereof is
situated in an area which is
considered a flood risk area by the
U.S. Department of Housing and
Urban Development or any other
Governmental Authority that may in
the future have jurisdiction over
flood risk analysis) in limits
reasonably acceptable to the Lender
and subject to the availability of
such flood insurance;
C. boiler and machinery insurance
(including related electrical
apparatus and components) under a
standard comprehensive form,
providing coverage against loss or
damage caused by explosion of steam
boilers, pressure vessels or
similar vessels, now or hereafter
installed on the Mortgaged
Property, in limits reasonably
acceptable to the Lender;
earthquake insurance (if reasonably
deemed necessary by the Lender) in
limits and with deductibles
reasonably acceptable to the
Lender;
E. environmental impairment
liability insurance (if available
on commercially reasonable terms
and deemed reasonably necessary by
Lender) in limits and with
deductibles reasonably acceptable
to the Lender;
F. business interruption
insurance in an amount equal to the
aggregate amount of the principal
and interest payments to be made in
one year under the Note plus the
aggregate sum of the
46
Impositions relating to
the Mortgaged Property due and
payable during one (1) year;
G. commercial general public
liability insurance including
coverages commonly found in the
Broad Form Commercial Liability
Endorsements with amounts not less
than FIVE MILLION DOLLARS
($5,000,000) per occurrence with
respect to bodily injury and death
and THREE MILLION DOLLARS
($3,000,000) for property damage;
H. professional liability
insurance in an amount not less
than TEN MILLION DOLLARS
($10,000,000) for each medical
incident;
I. physical damage insurance
on an all-risk basis (with only
such exceptions as the Lender in
its reasonable discretion shall
approve) covering the Borrower's
tangible Personal Property for the
full replacement cost thereof and
with a deductible not in excess of
one percent (1%) of the full
replacement cost thereof;
J. Workers' Compensation and
Employers' Liability Insurance
providing protection against all
claims arising out of injuries to
all employees of the Borrower or of
a sub-contractor (employed on the
Mortgaged Properly or any portion
thereof in amounts equal for
Workers' Compensation, to the
statutory benefits payable to
employees in the state in which the
Mortgaged Property is located and
for Employers' Liability, to limits
of not less than ONE HUNDRED
THOUSAND DOLLARS ($100,000) for
injury by accident, ONE HIINDRED
THOUSAND DOLLARS ($100,000) per
employee for disease and FIVE
HUNDRED THOUSAND DOLLARS ($500,000)
disease policy limit;
K. subsidence insurance (if
deemed necessary by the Lender) in
limits acceptable to the Lender;
and
L. such other insurance as the
Lender from time to time may
reasonably require. and also, as
may from time to time be required
by applicable Legal Requirements.
8.1.02 INSURANCE COMPANY REQUIREMENTS.
All such insurance required by this Agreement
or any of the other Loan Documents shall be issued
and underwritten by insurance companies licensed
to do insurance business by, and in good standing
under the laws of, the state where the Mortgaged
Property is situated and which companies have and
maintain a rating of A-X or better by A.M. Best
Co.
8.1.03 POLICY REQUIREMENTS.
Every policy of insurance from time to time
required under this Agreement or any of the other
Loan Documents (other than worker's compensation)
shall name the
47
Lender as loss payee, mortgagee, secured party and
additional named insured as its interest may
appear. If an insurance policy covers properties
other than the Mortgaged Property, then the Lender
shall be so named with respect only to the
Mortgaged Property. Each such policy, where
applicable or appropriate, shall:
A. include an agreed amount endorsement and
loss payee, additional named insured,
mortgagee and secured patty
endorsements, in forms acceptable to the
Lender in its reasonable discretion;
B. provide that the coverages may not be
canceled or materially modified or
allowed to expire except upon thirty
(30) days' prior written notice to the
Lender;
C. be payable to the Lender notwithstanding
any defense or claim that the insurer
may have to the payment of the same
against any other Person holding any
other interest in the Mortgaged
Property;
D. be endorsed with standard
noncontributory clauses in favor of and
in form reasonably acceptable to the
Lender;
E. expressly waive any right of subrogation
on the part of the insurer against the
Lender or the Borrowing Group; and
F. otherwise be in such forms as shall be
reasonably acceptable to the Lender.
8.1.04 NOTICES; CERTIFICATES AND POLICIES.
The. Borrower shall promptly provide to the
Lender copies of any and all notices (including
notice of non-renewal), claims and demands which
the Borrower receives from insurers of the
Mortgaged Property. At least ten (10) days prior
to the expiration of any insurance policy required
hereunder, the Borrower shall deliver to the
Lender certificates and evidence of insurance
relating to all renewals and replacements thereof,
together with evidence, satisfactory to the
Lender, of payment of the premiums thereon. The
Borrower shall deliver to the Lender original
counterparts or copies certified by the insurance
company to be true and complete copies, of all
insurance policies required hereunder not later
than ten (10) days after receipt thereof by the
Borrower. Borrower shall use its best efforts to
obtain such counterparts or copies within ninety
(90) days after the effective date of each such
policy.
8.1.05 THE LENDER'S RIGHT TO PLACE INSURANCE.
If the Borrower shall fail to obtain any
insurance policy required hereunder, or shall fail
to deliver the certificate and evidence of
insurance relating to any such policy to the
Lender, or if any insurance policy required
hereunder (or any part thereof shall expire or be
canceled or become void or voidable by reason of
any breach of any condition thereof or if the
Lender determines that such insurance coverage is
unsatisfactory by reason of the failure or
impairment of the capital of any insurance company
which wrote any such policy, upon demand by the
Lender, the Borrower shall promptly but in any
event no more than ten (10) days thereafter obtain
new or additional insurance coverage on the
Mortgaged Property, or for those risks required to
be insured by the provisions hereof, satisfactory
to the Lender, and, at its option, the Lender may
obtain such insurance and pay the premium or
premiums therefor; in which event, any amount so
48
paid or advanced by the Lender and all costs and
expenses reasonably incurred by the Lender in
connection therewith (including, without
limitation, attorneys' fees and expenses and court
costs), shall be a demand obligation of the
Borrower to the Lender and, to the extent
permitted by law, shall be added to the Loan
Obligations and shall be secured by the Liens
created by the Loan Documents as fully and
effectively and with the same priority as every
other obligation of the Borrower secured
thereunder and, if not paid within ten (10) days
after demand, shall thereafter, to the extent
permitted under applicable law, bear interest at
the Advances Rate until the date of payment.
8.1.06 PAYMENT OF PROCEEDS.
All insurance policies required hereunder
(except for general public liability, professional
liability and workers' compensation and employers
liability insurance) shall provide that in the
event of loss, injury or damage, all proceeds
shall be paid to the Lender alone (rather than
jointly to the Borrower and the Lender). The
Lender is hereby authorized to adjust and
compromise any such loss with the consent of the
Borrower or, following any Event of Default,
whether or not cured, without the consent of the
Borrower, and to collect and receive such proceeds
in the name of the Lender and the Borrower, and
the Borrower appoints the Lender (or any agent
designated by the Lender) as the Borrower's
attorney-in-fact with full power of substitution,
to endorse the Borrower's name upon any check in
payment thereof. Subject to the provisions of
Section 8.3 hereof, such insurance proceeds shall
be applied first toward reimbursement of all costs
and expenses reasonably incurred by the Lender in
collecting said insurance proceeds, then toward
payment of the Loan Obligations or any portion
thereof, then due and payable, in such order as
the Lender determines, and then in whole or in
part toward restoration, repair or reconstruction
of the Mortgaged Property for which such insurance
proceeds shall have been paid. In the event the
Lender shall apply such proceeds towards the
repayment of the Loan Obligations, provided that
no Loan Default then exists, no Prepayment Fee
shall be due in connection therewith.
8.1.07 IRREVOCABLE POWER OF ATTORNEY.
The power of attorney conferred on the Lender
pursuant to the provisions of Section 8.1, being
coupled with an interest, shall be irrevocable for
as long as this Agreement is in effect or any Loan
Obligations are outstanding, and shall not be
affected by any disability or incapacity which the
Borrower may suffer and shall survive the same.
Such power of attorney, is provided solely to
protect the interests of the Lender and shall not
impose any duty on the Lender to exercise any such
power, and neither the Lender nor such attorney-in-
fact shall be liable for any act, omission, error
in judgment or mistake of law, except as the same
may result from its gross negligence or wilful
misconduct.
8.1.08 BLANKET POLICIES.
Notwithstanding anything to the contrary
contained herein, the Borrower's obligations to
carry the insurance required hereunder may be
brought within the coverage of a so-called blanket
policy or policies of insurance carried and
maintained by the Borrower and its Affiliates;
provided, however, that the coverage afforded to
the Lender shall not be reduced or diminished or
otherwise be different from that which would exist
under a separate policy meeting all other
requirements of this Agreement by reason of the
use of such blanket policy of insurance, and
provided, further, that the requirements of
Section 8.1 are otherwise satisfied.
49
8.1.09 NO SEPARATE INSURANCE.
The Borrower shall not, on the Borrower's own
initiative or pursuant to the request or
requirement of any other Person, take out separate
insurance concurrent in form or contributing in
the event of loss with the insurance required
hereunder to be furnished by the Borrower, or
increase the amounts of any then existing
insurance by securing an additional policy or
additional policies, unless (a) all parties having
an insurable interest in the subject matter of the
insurance, including the Lender, are included
therein as additional insureds and (b) losses are
payable under said insurance in the same manner as
losses are required to be payable under this
Agreement. The Borrower shall immediately notify
the Lender of the taking out of any such separate
insurance or of the increasing of any of the
amounts of the then existing insurance by securing
an additional insurance policy or policies.
8.1.10 ASSIGNMENT OF UNEARNED PREMIUMS.
The Borrower hereby assigns to the Lender all
rights of the Borrower in and to any unearned
premiums on any insurance policy required
hereunder to be furnished by the Borrower which
may become payable or are refundable after the
occurrence of an Event of Default hereunder. In
the event of a foreclosure of the Mortgaged
Property or a conveyance of the Mortgaged Property
in connection with a deed-in-lieu of foreclosure
transaction, the insurance policies required to be
maintained hereunder, including all right, title
and interest of the Borrower thereunder, shall
become the absolute property of the Lender subject
to any limitation on assignment provided for
therein.
8.2 FIRE OR OTHER CASUALTY OR CONDEMNATION.
8.2.01 RESTORATION FOLLOWING FIRE, CASUALTY
OR CONDEMNATION.
In the event of any damage or destruction to
the Mortgaged Property by reason of fire or other
hazard or casualty (a "Casualty") or a taking by
power of eminent domain or conveyance in lieu
thereof of all or any portion of the Mortgaged
Property (a "Condemnation"), the Borrower shall
give immediate written notice thereof to the
Lender and, subject to the terms of Section 8.3
hereof, the Borrower shall proceed with reasonable
diligence, in full compliance with all applicable
Legal Requirements, to perform such repairs,
replacement and reconstruction work (hereinafter
referred to as the "Work") to restore the
Mortgaged Property to the condition it was in
immediately prior to such damage or destruction
and to a condition adequate to operate the
Facility for its Primary Intended Use and in
compliance with Legal Requirements. All Work shall
be performed and completed in accordance with all
Legal Requirements and the other requirements of
this Agreement within one hundred and twenty (120)
days following the occurrence of the damage or
destruction plus a reasonable time to compensate
for Unavoidable Delays (including for the purposes
of this paragraph, delays in obtaining Permits and
in adjusting insurance losses), but in no event
beyond two-hundred and seventy (270) days
following the occurrence of the Casualty or the
Condemnation.
8.2.02 PROCEDURES.
In the event that any Casualty or
Condemnation results in non-structural damage to
the Mortgaged Properly in excess of FIFTY THOUSAND
DOLLARS ($50,000), or in any structural damage to
the Mortgaged Property regardless of the extent of
such
structural damage, or in any event of
Condemnation, prior to commencing the Work, the
50
Borrower - shall comply with the following
requirements:
A. The Borrower shall furnish to the Lender
complete plans and specifications for
the Work (collectively, the "Plans and
Specifications"), for the Lender's
approval, in each instance, which
approval shall not be unreasonably
withheld. The Plans and Specifications
shall bear the signed approval thereof
by an architect, licensed to do business
in the state where the Mortgaged
Property is located, reasonably
satisfactory to the Lender and shall be
accompanied by a written estimate from
the architect, bearing the architect's
seal, of the entire cost of completing
the Work, and to the extent feasible,
the Plans and Specifications shall
provide for Work of such nature, quality
and extent, that, upon the completion
thereof, the Mortgaged Property shall be
at least equal in value and general
utility to its value and general utility
prior to the Casualty or Condemnation
and shall be adequate to operate the
Facility for its Primary Intended Use;
B. The Borrower shall furnish to the Lender
certified or photostatic copies of all
Permits and Contracts required by all
applicable Legal Requirements in
connection with the commencement and
conduct of the Work to the extent the
same can be secured in the ordinary
course prior to the commencement of
construction;
C. The Borrower shall furnish to the Lender
a cash deposit or a payment and
performance bond sufficient to pay for
completion of and payment for the Work
in an amount not less than the
architect's estimate of the entire cost
of completing the Work, less the amount
of properly insurance proceeds, if any,
then held by the Lender and which the
Lender shall be required to apply toward
restoration of the Mortgaged Property as
provided in Section 8.3;
D. The Borrower shall furnish to the Lender
such insurance with respect to the Work
(in addition to the insurance required
under Section 8.1 hereof in such amounts
and in such forms as is reasonably
required by the Lender; and
E. The Borrower shall not commence any of
the Work until the Borrower shall have
complied with the requirements set forth
in clauses A through D immediately
above, as applicable, and thereafter the
Borrower shall perform the Work
diligently, in a good and workmanlike
fashion and in good faith in accordance
with (i) the Plans and Specifications
referred to clause A immediately above,
(ii) the Permits and Contracts referred
to in clause B immediately above and
(iii) all applicable Legal Requirements
and other requirements of this
Agreement; provided, however, that in
the event of a bona fide emergency
during which Borrower is unable to
contact the appropriate representatives
of Lender, Borrower may commence such
Work as may be necessary in order to
address such emergency without Lender's
prior approval, as long as
Borrower immediately thereafter advises
Lender of such emergency and the nature
and scope of the Work performed and
obtains Lender's approval of the
remaining Work to be completed.
51
8.2.03 DISBURSEMENT OF INSURANCE PROCEEDS AND
CONDEMNATION AWARDS. If, as provided in Section
8.3, Lender is required to apply any Condemnation
awards or property insurance proceeds toward
repair or restoration of the Mortgaged Property,
then as long as the Work is being diligently
performed by Borrower in accordance with the terms
and conditions of this Loan Agreement, Lender
shall disburse such insurance proceeds or
Condemnation awards from time to time during the
course of the Work in accordance with and subject
to satisfaction of the following provisions and
conditions. Lender shall not be required to make
disbursements more often than at thirty (30) day
intervals. Borrower shall submit a written request
for each disbursement at least ten (IO) Business
Days in advance and shall comply with the
following requirements in connection with each
disbursement:
(a) Prior to the commencement of
any Work, Borrower shall have received
Lender's written approval of the Plans
and Specifications (which approval shall
not be unreasonably withheld) and the
Work shall be supervised by an
experienced construction manager with
the consultation of an architect or
engineer qualified and licensed to do
business in the state where the
Mortgaged Property is located (in the
event Lender reasonably determines that
the Work is of a nature for which the
involvement of such architect or
engineer is appropriate). Borrower shall
not make any changes in, and shall not
permit any changes in, the quality of
the materials to be used in the Work,
the Plans and Specifications or the
Work, whether by change order or
otherwise, without the prior written
consent of Lender, in each instance
(which consent may be withheld in
Lender's sole and absolute discretion);
provided, however, that such consent
shall not be required for any individual
change which has been approved by the
architect, which does not materially
affect the structure or exterior of the
Facility, and the cost of which does not
exceed TEN THOUSAND DOLLARS ($10,000) or
which changes, in the aggregate, do not
exceed ONE HUNDRED THOUSAND DOLLARS
($100,000) in cost. Notwithstanding the
foregoing, prior to making any change in
Plans and Specifications, copies of all
change orders shall be submitted by
Borrower to Lender and Borrower shall
also deliver to Lender evidence
satisfactory to Lender, in its
reasonable discretion, that all
necessary Permits and/or Contracts
required by any Governmental Authority
in connection therewith have been
obtained or entered into, as the case
may be.
(b) Each request for payment shall
be accompanied by (x) a certificate of
the architect or engineer, bearing the
architect's or engineer's seal, and (y)
a certificate of the general contractor,
qualified and licensed to do business in
the state where the Mortgaged Property
is located, that is performing the Work
(collectively, the "Work -
Certificates"), each dated not more than
ten (10) days prior to the application
for withdrawal of funds, and each
stating:
(i) that all of the Work performed
as of the date of the
certificates has been
completed in compliance with
the approved Plans and
Specifications, applicable
Contracts and all applicable
Legal Requirements; .
52
(ii) that the sum then requested to
be withdrawn has been paid by
Borrower or is justly due to
contractors, subcontractors,
materialmen, engineers,
architects or other Persons,
whose names and addresses
shall be stated therein, who
have rendered or furnished
certain services or materials
for the Work, and the
certificate shall also include
a brief description of such
services and materials and the
principal subdivisions or
categories thereof and the
respective amounts so paid or
due to each of said Persons in
respect thereof and stating
the progress of the Work up to
the date of said certificate;
(iii) that the sum then
requested to be withdrawn,
plus all sums previously
withdrawn, do not exceed the
cost of the Work insofar as
actually accomplished up to
the date of such certificate;
(iv) that the remainder of the
funds held by Lender will be
sufficient to pay for the full
completion of the Work in
accordance with the Plans and
Specifications;
(v) that no part of the cost of
the services and materials
described in the applicable
Work Certificate has been or
is being made the basis of the
withdrawal of any funds in any
previous or then pending
application; and
(vi) that, except for the amounts,
if any, specified in the
applicable Work Certificate to
be due for services and
materials, there is no
outstanding indebtedness
known, after due inquiry,
which is then due and payable
for work, labor, services or
materials in connection with
the Work which, if unpaid,
might become the basis of a
vendor's, mechanic's,
laborer's or materialman's
statutory or other similar
Lien upon the Mortgaged
Property.
(c) Borrower shall deliver to
Lender satisfactory evidence that the
Mortgaged Property and all materials and
all property described in the Work
Certificates are free and clear of
Liens, except (i) Liens, if any,
securing indebtedness due to Persons
(whose names and addresses and the
several amounts due them shall be stated
therein) specified in an applicable Work
Certificate, which Liens shall be
discharged upon disbursement of the
funds then being requested or duly
contested in accordance with the terms
of this Loan Agreement and (ii) the
Permitted Encumbrances. Lender shall
accept as satisfactory evidence of the
foregoing lien waivers in customary form
from the general contractor and all
subcontractors performing the Work,
together with an endorsement of its
title insurance policy (relating to the
Mortgaged Property) in form acceptable
to Lender, dated as of the date of the
making of the then current disbursement,
confirming the foregoing.
53
(d) If the Work involves alteration
or restoration of the exterior of any
Improvement that changes the footprint
of any Improvement, Borrower shall
deliver to Lender, upon the request of
Lender, an "as-built" survey of the
Mortgaged Property dated as of a date
within ten (I 0) days prior to the
making of the first and final advances
(or revised to a date within ten (10)
days prior to each such advance) showing
no encroachments other than such
encroachments, if any, by the
Improvements upon or over the Permitted
Encumbrances as are in existence as of
the date hereof.
(e) Borrower shall deliver to
Lender (i) an opinion of counsel
(satisfactory to Lender both as to
counsel and as to the form of opinion)
prior to the first advance opining that
all necessary Permits for the repair,
replacement and/or restoration of the
Mortgaged Property which can be obtained
in the ordinary course as of said date
have been obtained and that the
Mortgaged Property, if repaired,
replaced or rebuilt in accordance, in
all material respects, with the approved
Plans and Specifications and such
Permits, shall comply with all
applicable Legal Requirements subject to
such limitations as may be imposed on
such opinion under local law and (ii) if
applicable, an architect's certificate
(satisfactory to Lender both as to the
architect and as to the form of the
certificate) prior to the final advance,
certifying that the Mortgaged Property
was repaired, replaced or rebuilt in
accordance, in all material respects,
with the approved Plans and
Specifications and complies with all
applicable Legal Requirements,
including, without limitation, all
Permits referenced in the foregoing
clause (i).
(f) There shall be no Loan Default
or any state of facts or circumstance
existing which, with the giving of
notice and/or the passage of time, would
constitute any Loan Default.
Lender, at its option, may waive any of the
foregoing requirements in whole or in part in any
instance. Upon compliance by Borrower with the
foregoing requirements (except for such
requirements, if any, as Lender may have expressly
elected to waive), and to the extent of (x) the
insurance proceeds, if any, which Lender may be
required to apply to restoration of the Mortgaged
Property pursuant to the provisions of this Loan
Agreement and (y) all other cash deposits made by
Borrower, Lender shall make available for payment
to the Persons named in the Work Certificate the
respective amounts stated in said certificate(s)
to be due, subject to a retention often percent
(l0%) as to all hard costs of the Work (the
"Retainage"). It is understood that the Retainage
is intended to provide a contingency fund to
assure Lender that the Work shall be fully
completed in accordance with the Plans and
Specifications and the requirements of Lender.
Upon the full and final completion of all of the
Work in accordance with the provisions hereof, the
Retainage shall be made available for payment to
those Persons entitled thereto.
Upon completion of the Work, and as a condition
precedent to making any further advance, in
addition to the requirements set forth above,
Borrower shall promptly deliver to Lender:
(i) if applicable, written certificates of
the architect or engineer, bearing the
architect's or engineer's seal, and the
general contractor, certifying that the
Work has been fully completed in a good
and
54
workmanlike manner in material
compliance with the Plans and
Specifications and all applicable Legal
Requirements;
(ii) an endorsement of its title insurance
policy (relating to the Mortgaged
Property) in form reasonably acceptable
to Lender insuring the Mortgaged
Property against all mechanic's and
materialman's liens accompanied by the
final lien waivers from the general
contractor and all subcontractors;
(iii) a certificate by Borrower in form and
substance reasonably satisfactory to
Lender, listing all costs and expenses
in connection with the completion of the
Work and the amount paid by Borrower
with respect to the Work; and
(iv) a temporary certificate of occupancy (if
obtainable) and all other applicable
Permits and Contracts issued by or
entered into with any Governmental
Authority with respect to the Primary
Intended Use not already delivered to
Lender and, to the extent applicable,
the Other Permitted Uses and by the
appropriate Board of Fire Underwriters
or other similar bodies acting in and
for the locality in which the Mortgaged
Property is situated with respect to the
Facility; provided, that within thirty
(30) days after completion of the Work,
Borrower shall obtain and deliver to
Lender a permanent certificate of
occupancy for the Mortgaged Properly,
subject to seasonal delays.
Upon completion of the Work and delivery of
the documents required pursuant to the provisions
of this Section 8.2, Lender shall pay the
Retainage to Borrower or to those Persons entitled
thereto and if there shall be insurance proceeds,
awards or cash deposits, other than the Retainage,
held by Lender in excess of the amounts disbursed
pursuant to the foregoing provisions, then
provided that no Loan Default has occurred and is
continuing, nor any state of facts or
circumstances which, with the giving of notice
and/or the passage of time would constitute a Loan
Default, Lender shall pay over such proceeds,
awards or cash deposits to Borrower.
No inspections or any approvals of the Work
during or after construction shall constitute a
warranty or representation by Lender, or any of
its agents, as to the technical sufficiency,
adequacy or safety of any structure or any of its
component parts, including, without limitation,
any fixtures, equipment or furnishings, or as to
the subsoil conditions or any other physical
condition or feature pertaining to the Mortgaged
Property. All acts, including any failure to act,
relating to Lender are performed solely for the
benefit of Lender to assure the payment and
performance of the Loan Obligations and are not
for the benefit of Borrower or the benefit of any
other Person.
8.3 DISPOSITION OF INSURANCE PROCEEDS AND
CONDEMNATION AWARDS.
8.3.01 PROCEEDS TO BE RELEASED TO PAY FOR
WORK.
In the event of any Casualty or Condemnation,
except as provided in Section 8.3.02, the Lender
agrees to make insurance proceeds or Condemnation
awards available to the Borrower for repair or
restoration of the Mortgaged Property, provided
that:
55
A. The Mortgaged Property has not been
rendered Unsuitable for its Primary
Intended Use or temporarily
Unsuitable For Its Primary Intended
Use for a period that is likely to
or which does, subject to
Unavoidable Delays, exceed two
hundred seventy (270) days.
B. No Loan Default shall then exist,
nor any state of facts or
conditions which, with the giving
of notice or passage of time, or
both, would constitute such a Loan
Default;
C. The Borrower demonstrates to the
Lender's satisfaction that the
Borrower has the financial ability
to satisfy its obligations under
the Loan Documents during such
repair or restoration;
D. No Lease material to operation of
the Facility immediately prior to
such Casualty or Condemnation shall
have been canceled or terminated,
nor contain any still exercisable
right to cancel or terminate, due
to such Casualty or Condemnation if
and to the extent that the income
from such Lease is necessary in
order to avoid the violation of any
of the financial covenants set
forth in this Agreement or
otherwise to avoid the creation of
a Loan Default;
E. The insurance proceeds or
Condemnation awards are released
under the funding arrangements
specified in Section 8.2 hereof;
F. Borrower will be reasonably likely
to obtain within 90 days all
necessary. Permits in order to
perform all Work;
G. If such Casualty or Condemnation
occurs during the last twenty four
(24) months of the Term, the Work
would take less than nine (9)
months to complete; and
H. The Mortgaged Property continues to
comply with all Legal Requirements
after such Casualty or
Condemnation.
8.3.02 PROCEEDS NOT TO BE RELEASED TO PAY FOR
WORK
If the conditions set forth in Section 8.3.01
are not satisfied the Lender will not be required
to make the insurance proceeds or Condemnation
awards available for repair or restoration of the
Mortgaged Property. In such case, such proceeds or
awards shall be applied to reduce Loan
Obligations, in which event the Borrower shall not
be obligated to repair or restore the Mortgaged
Property. Any application of such proceeds or
awards toward payment of the Loan Obligations
shall be at par without any Prepayment Fee and the
monthly payments due under the Note shall be
adjusted accordingly based upon the then
outstanding principal balance of the Loan (after
application of the insurance proceeds to the, Loan
Obligations and in accordance with an amortization
schedule reasonably acceptable to Lender and
Borrower; provided, however, that if there then
exists any Loan Default, the Prepayment Fee shall
also be due.
Furthermore, if the Lender is not required to
and elects not to make the insurance proceeds or
Condemnation awards available for the repair and
restoration of the Mortgaged Property, in addition
to applying such proceeds or awards to the Loan
56
Obligations, as aforesaid, the Lender, at its
option and in its sole and absolute discretion,
may elect to declare the Loan Obligations due and
payable upon sixty (60) days' prior written notice
to the Borrower. Upon such acceleration, provided
that no Loan Default then exists, the Borrower
shall not be required to pay a Prepayment Fee to
the Lender.
8.3.03 THE BORROWER RESPONSIBLE FOR SHORT-
FALL.
If the cost of the Work exceeds the amount of
proceeds received by the Lender from the property
insurance required under this Agreement or the
amount of the Condemnation award received by the
Lender in accordance with the terms hereof(net of
costs and expenses incurred by the Lender in
collecting the same); the Borrower shall be
obligated to contribute any excess amount needed
to repair or restore the Mortgaged Properly and
pay for the Work. Such amount shall be paid by the
Borrower to the Lender together with any other
property insurance proceeds for application to the
cost of the Work. .
8.3.04 SPECIAL RIGHT TO REBUILD
Anything contained in Section 8.3.02 above
notwithstanding, if following any Casualty,
Borrower will be unable, as a result of any
applicable Legal Requirements, to rebuild
and. operate the Facility for the Primary
Intended Use and, if applicable, the (Other
Permitted Uses, but will be able to rebuild
and operate an assisted living facility (the
"New Use Facility") providing substantially
similar services as the Facility immediately
prior to such Casualty and having units equal
in number to at least seventy-five per cent
(75%) of the number of units included in the
Primary Intended Use (the "New Primary
Intended Use"), as in effect immediately
prior to any such Casualty, then, Borrower
may rebuild the New Use Facility in
accordance with the terms and provisions of
Article 8, so long as (a) Borrower is
otherwise able to comply with, and does
comply with, all of the terms and conditions
of Article 8 and (b) the projections for the
New Use Facility, as reasonably approved by
Lender, indicate that Borrower shall be able
to maintain for the New Use Facility, for
each Fiscal Quarter of the Term, including
all Extended Terms (as defined in the Note,
commencing with the first Fiscal Quarter
following the first anniversary of the
earlier of the issuance of a temporary
certificate of occupancy therefor or the
completion of the Work, a Debt Coverage Ratio
equal to or greater than I.1 to 1 (the
"Minimum Coverage Ratio"). In such case, for
purposes of compliance with the terms and
conditions of this Article 8 by Borrower and
for the balance of the Term following such
Casualty, the Primary Intended Use shall be
deemed to be the New Primary Intended Use and
the Facility shall be deemed to be the New
Use Facility. Borrower shall deliver to
Lender the projections referred to in clause
(b) above, together with calculations, based
thereon, showing the Minimum Coverage Ratio,
prior to the commencement of any Work.
8.4 THE BORROWER'S PROPERTY:
All insurance proceeds payable by reason of
any loss of or damage to any of the Borrower's
Personal Property shall be paid to the Lender as
secured party and shall be paid by the Lender to
the Borrower to reimburse the Borrower for the
cost of repairing or replacing the damaged
Personal Property subject to the provisions and
conditions set forth in the other provisions of
this Agreement, mutatis, mutandis.
57
8.5 RESTORATION OF THE BORROWER'S PROPERTY.
If the Borrower is required or elects to
restore the Facility, the Borrower shall either
(a) restore all alterations and improvements made
by the Borrower, and the Borrower's Personal
Property, or (b) replace such alterations and
improvements and the Borrower's Personal Property
with improvements or items of the same or better
quality and utility in the operation of the
Mortgaged Property; provided, however, that
Borrower shall be obligated to restore the
Tangible Personal Property only to the extent
desirable for the prudent operation of the
Facility in the good faith exercise of
commercially reasonable business judgment.
8.6 OBLIGATION TO ACCOUNT.
Upon the Borrower's written request, which
may not be made more than once in any three (3)
month period, the Lender shall provide the
Borrower a written accounting of the application
of all insurance proceeds received by the Lender.
8.7 INTENTIONALLY DELETED
8.8 RENT LOSS AND/OR BUSINESS INTERRUPTION
INSURANCE PROCEEDS.
Provided that no Loan Default then exists and
no state of facts exists which, with the giving of
notice or passage of time, or both, would
constitute a Loan Default, then the Lender shall
direct all rent loss and/or business interruption
insurance proceeds (collectively the "Rent
Insurance Proceeds") to be paid to Borrower. If a
Loan Default or such state of facts exists which,
with the giving of notice or passage of time, or
both, would constitute a Loan Default, then such
Rent Insurance Proceeds may be applied by the
Lender, at the Lender's option, toward payment of
the Loan Obligations and/or to the payment of the
cost of such repair, replacement or restoration of
the Facility, and/or to the payment of any
Imposition required to be paid by the Borrower
(the nonpayment of which is a default under this
Agreement), and/or to the payment of any monthly
tax deposit, any monthly insurance deposit or
other amount required to be paid by the Borrower
under the provisions of this Agreement.
9. PERMITTED CONTESTS
9.1 BORROWER'S RIGHT TO CONTEST.
Unless a Loan Default or any state of facts
which, with the giving of notice or the passage of
time or both would constitute a Loan Default then
exists, upon prior written notice to the Lender,
any member of the Borrowing Group at their sole
cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with
due diligence (until the resolution thereof, the
amount, validity or application, in whole or in
part, of any Imposition, any Legal Requirement,
the decision of any Governmental Authority related
to the operation of the Mortgaged Property for its
Primary Intended Use or any Lien or claim not
otherwise permitted by in this Agreement;
provided, that (a) prior written notice of such
contest is given to the Lender, (b) in the case of
an unpaid Imposition, Lien or claim, the
commencement and continuation of such proceedings
shall suspend the collection thereof from the
Lender and/or any member of the Borrowing Group
and compliance by any applicable member of the
Borrowing Group with the contested Legal
Requirement or other matter may legally be delayed
pending the prosecution of any such proceeding
without the occurrence or creation of any
additional Lien, charge or liability of any kind
against the Mortgaged Property, (c) neither the
58
Mortgaged Property nor any interest of the Lender
therein would be in any immediate danger of being
sold, forfeited, attached or lost as a result of
such proceeding, (d) in the case of a Legal
Requirement, neither the Lender nor any member of
the Borrowing Group would be in any intermediate
danger of civil or criminal liability for failure
to comply therewith pending the. outcome of such
proceedings, (e) in the event that any such
contest shall involve a sum of money or potential
loss in excess of TWENTY FIVE THOUSAND DOLLARS
($25,000), then, in any such event, the Borrower
shall deliver to the Lender an Officer's
Certificate and opinion of counsel, if the Lender
deems the delivery of an opinion to be
appropriate, opinion as to the validity of the
statements set forth in clauses (b), (c) and (d),
to the extent applicable, (f) the Borrower shall
give such cash security (or letter of credit in
form and substance acceptable to the Lender) as
may be demanded in good faith by the Lender to
insure the ultimate payment of any fine, penalty,
interest or cost and to prevent any sale or
forfeiture of the affected portion of the
Mortgaged Property by reason of such non-payment
or non-compliance, (g) if such contest be finally
resolved against the Lender or any member of the
Borrowing Group, the Borrower shall promptly pay
(or cause to be paid) the amount required to be
paid, together with all interest and penalties
accrued thereon and, if applicable, the Borrower,
shall comply with and shall cause any Borrower and
any Manager to comply with the applicable Legal
Requirement and (h) no state of facts or
circumstance exist which constitutes, or with the
passage of time and/or the giving of notice, could
constitute a Loan Default; provided, however, the
provisions of this Section 9 shall not be
construed to permit the Borrower to contest the
payment of any other sums payable by the Borrower
to the Lender under any of the Loan Documents.
9.2 LENDER'S COOPERATION.
Lender, at Borrower's sole cost and expense,
shall execute and deliver to Borrower such
authorizations and other documents as may
reasonably be required in any such contest, so
long as the same does not expose Lender to any
civil or criminal liability, and, if reasonably
requested by Borrower, of if Lender so desires,
Lender shall join as a party therein.
9.3 BORROWER'S INDEMNITY.
Borrower shall indemnify, defend (with
counsel acceptable with Lender) and save Lender
harmless against any liability, cost or expense of
any kind, including, without limitation,
attorneys' fees and expenses that may be imposed
upon Lender in connection with any such contest
and any loss resulting therefrom and in the
enforcement of this indemnification.
10. EVENTS OF DEFAULT
Each of the following shall constitute an
"Event of Default" hereunder and shall entitle the
Lender to exercise its remedies hereunder and
under any of the other Loan Documents:
A. any failure of the Borrower to pay any
amount due hereunder or under any of the
other Loan Documents within ten (10)
days following the date when such
payment was due;
B. any failure in the observance or
performance of any other covenant, term,
condition. or warranty provided in this
Agreement or any of the other Loan
Documents, other than the payment of any
monetary
59
obligation and other than as
specified in subsections (C) through (V)
below (referred to herein as a "Failure
to Perform"), continuing for thirty (30)
days after the giving of notice by the
Lender to the Borrower specifying the
nature of the Failure to Perform; except
as to matters not susceptible to cure
within thirty (30) days, provided that
with respect to such matters, (i) the
Borrower commences the cure thereof
within thirty (30) days after the giving
of such notice by the Lender to the
Borrower, (ii) the Borrower continuously
prosecutes such cure to completion,
(iii) such cure is completed within one
hundred twenty (120) days after the
giving of such notice by the Lender to
the Borrower and (iv) such Failure to
Perform does not impair the Lender's
rights with respect to the Mortgaged
Property or otherwise impair the
Collateral or the Lender's security
interest therein;
C. the occurrence of any default or
breach of condition continuing beyond
the expiration of the applicable notice
and grace periods, if any, under any of
the other Loan Documents;
D. if any representation, warranty or
statement contained herein or in any of
the other Loan Documents proves to be
untrue in any material respect as of the
date when made or at any time during the
Term if such representation or warranty
is a continuing representation or
warranty pursuant to Section 6.5;
E. if any member of the Borrowing Group
shall (i) voluntarily be adjudicated a
bankrupt or insolvent, (ii) seek or
consent to the appointment of a receiver
or trustee for itself or for the
Mortgaged Property, (iii) file a
petition seeking relief under the
bankruptcy or other similar laws of the
United States, any state or any
jurisdiction, (iv) make a general
assignment for the benefit of creditors,
(v) make or offer a composition of its
debts with its creditors or (vi) be
unable to pay its debts as such debts
mature;
F. if any court shall enter an order
judgment or decree appointing, without
the consent of any member of the
Borrowing Group, a receiver or trustee
for such member or for any of the
Mortgaged Property, and such order,
judgment or decree shall remain in
force, undischarged or unstayed; ninety
(90) days after it is entered;
G. if any petition is filed against any
member of the Borrowing Group which
seeks relief under the bankruptcy or
other similar laws of the United States,
any state or any other jurisdiction and
such petition is not dismissed within
ninety (90) days after it is filed;
H. in the event that, without the prior
written consent of the Lender, in each
instance, which consent may be withheld
by the Lender in its sole and absolute
discretion:
i. all or any portion of the interest
of any partner, shareholder or
member in any member of the
Borrowing Group (other than
Guarantor) shall be, on any one or
more occasions, directly or
indirectly, sold, assigned,
hypothecated or otherwise
transferred (whether by operation
of law or
60
otherwise), if such
member of the Borrowing Group
shall be a partnership, joint
venture, syndicate or other group,
without the prior written consent
of Lender, in each instance, which
consent may be withheld by Lender
in its reasonable discretion, with
respect to a sale, assignment,
hypothecation or other transfer to
an Affiliate of Borrower, the
business and activities of which
are limited to those subject to
the Meditrust/Emeritus Transaction
Documents (as defined in the
Agreement Regarding Related
Transactions) to which such
Affiliate is a party, and in all
other cases, in its sole and
absolute discretion;
ii. the shares of the issued and
outstanding capital stock of any
member of the Borrowing Group
(other than Guarantor) shall be, on
any one or more occasions, directly
or indirectly, sold, assigned,
hypothecated or otherwise
transferred (whether by operation
of law or otherwise), if such
member of the Borrowing Group shall
be a corporation; without the prior
written consent of Lender, in each
instance, which consent may be
withheld by Lender in its
reasonable discretion with respect
to a sale, assignment,
hypothecation or other transfer to
a Meditrust/Emeritus Transaction
Affiliate and in all other cases,
in its sole and absolute
discretion; or
iii. all or any portion of the
beneficial interest in any member
of the Borrowing Group (other than
Guarantor) shall be, directly or
indirectly, sold or. otherwise
transferred (whether by operation
of law or otherwise), if such
member of the Borrowing Group shall
be a trust, without the prior
written consent of Lender, in each
instance, which consent may be
withheld by Lender in its
reasonable discretion with respect
to a sale, assignment,
hypothecation or other transfer to
a Meditrust/Emeritus Transaction
Affiliate and in all other cases,
in its sole and absolute
discretion;
Notwithstanding the foregoing, no consent of
Lender to a pledge by Borrower of its stock to a
lender of a Working Capital Loan satisfying the
requirements of Section 4.4 shall be required (a
"Working Capital Stock Pledge").
J. the occurrence of a default or breach of
condition continuing beyond the
expiration of the applicable notice and
grace periods, if any, in connection
with the payment or performance of any
other material obligation of the
Borrower, if the applicable creditor or
obligee elects to declare the
obligations of the Borrower or the
applicable Borrower under the applicable
agreement due and payable or to exercise
any other right or remedy available to
such creditor or obligee, or, whether or
not such creditor or obligee has so
elected or exercised such creditor's or
obligee's rights and remedies
K. may involve or result in the
taking of possession of or the creation
of a lien on the. Mortgaged Property;
provided, however, that in any event,
the election by the applicable creditor
or obligee to declare the obligations of
the Borrower or- the applicable Borrower
under the
61
applicable agreement due and
payable or to exercise any other right
or remedy available to such creditor or
obligee shall be an Event of Default
hereunder only if such obligations,
individually or in the aggregate, are in
excess of TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000);K. the occurrence of
a Related Party Default;
L. the occurrence of any default or
breach of condition which is not cured
within any applicable period under a
Working Capital Loan secured by a
Working Capital Stock Pledge (or any
documents executed in connection
therewith) or the exercise of any
ownership rights by the lender of a
Working Capital Loan secured by a
Working Capital Stock Pledge;
M. except as a result of any
Casualty or a partial or complete
Condemnation, if the Borrower ceases
operation of the Facility for a period
in excess of thirty (30) days (referred
to herein as a "Failure to Operate");
N. if one or more judgments against
the Borrower or attachments against the
Mortgaged Property which in the
aggregate exceed TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000) or which may
materially and adversely interfere with
the ownership and/or the operation of
the Facility remain unpaid, unstayed on
appeal, undischarged, unbonded or
undismissed for a period of thirty (30)
days;
O. if any malpractice award or
judgment exceeding any applicable
professional liability insurance
coverage by more than FIVE HUNDRED
THOUSAND DOLLARS ($500,000) shall be
rendered against any member of the
Borrowing Group and either (i)
enforcement proceedings shall have been
commenced by any creditor upon such
award or judgment or (ii) such award or
judgment shall continue unsatisfied and
in effect for a period of ten (10)
consecutive days without an insurance
company satisfactory to the Lender (in
its sole and absolute discretion) having
agreed to fund such award or judgment in
a manner satisfactory to the Lender (in
its sole and absolute discretion) and in
either case such award or judgment
shall, in the reasonable opinion of the
Lender, have a material adverse affect
on the ability of any member of the
Borrowing Group to operate the Facility;
P. if any Provider Agreement
material to the operation or financial
condition of the Mortgaged Property
shall be terminated prior to the
expiration of the term thereof or,
without the prior written consent of the
Lender, in each instance, which consent
may be withheld in the Lender's
reasonable discretion, shall not be
renewed or extended
upon the expiration of the
stated term thereof;
Q. if, after the Borrower has obtained
approval for participation in the
Medicare and/or. Medicaid programs with
regard to the operation of the Facility,
a final unappealable determination is
made by the applicable Governmental
Authority that the Borrower shall have
failed to comply with applicable
Medicare and/or Medicaid regulations in
the operation of the Facility, as a
result of which failure the Borrower is
62
declared ineligible to continue
its participation in the Medicare and/or
Medicaid programs; and such
determination could reasonably be
expected to have a material adverse
effect on the operation or financial
condition of the Mortgaged Property;
R. if any member of the Borrowing Group
receives notice of a final unappealable
determination by applicable Governmental
Authorities of the revocation of any
Permit required for the lawful
construction or operation of the
Facility in accordance with its Primary
Intended Use or, if applicable, the
Other Permitted Uses; or the loss of any
Permit under any other circumstances
under which any member of the Borrowing
Group is required to cease the operation
of the Facility in accordance with its
Primary Intended Use and the Other
Permitted Uses;
S. any failure to maintain the insurance
required pursuant to Section 8 of this
Agreement in force and effect at all
times until the Loan Obligations are
fully paid and performed and the
Mortgage is discharged;
T. the entry of an order by a Court with
jurisdiction over the Mortgaged Property
to close the Facility, to transfer one
or more residents from the Facility as a
result of an allegation of abuse or
neglect or to take any action to
eliminate an emergency situation then
existing at the Facility, if such order
has not been stayed pending appeal
within ten (10) days following such
entry;
U. the appointment of a temporary
manager (or operator) for the Mortgaged
Property by any Governmental Authority;
V. any failure to replenish the
Cash Collateral in accordance with the
terms of the Deposit Pledge Agreement,
if so required under Section 1 of the
Deposit Pledge Agreement;
W. except as expressly permitted by
the Loan Documents, if, without the
prior written consent of Lender in each
instance, which consent may be withheld
by Lender in its sole and absolute
discretion, Borrower's interest, or any
interest of a Lessee which is an
Affiliate of Borrower, in the Mortgaged
Property shall be, directly or
indirectly, mortgaged, encumbered (by
any voluntary or involuntary Lien other
than the Permitted Encumbrances),
subleased, sold, assigned, hypothecated
or otherwise transferred (whether by
operation of law or otherwise) or upon
the sale, exchange, assignment,
transfer, conveyance or other
disposition of all or any portion of the
Mortgaged Property oz the Leases oz
Rents (or any interest thereon) ;
X. the occurrence of any default or breach
of condition continuing for more than
thirty. (30) days under any credit
agreement, loan agreement or other
agreement establishing a major line of
credit (including, without limitation, a
major line of credit or a Working
Capital Loan which is not secured by a
Working Capital Stock Pledge)(or any
documents executed in connection with
such lines of credit) on behalf of
Guarantor without regard to whether the
applicable creditor has
63
elected to declare the
indebtedness due and payable under such
line of credit or to exercise any other
right or remedy available to it or the
occurrence of any such default or breach
of condition if the applicable creditor
has elected to declare the indebtedness
due and payable under such line of
credit or to exercise any other right or
remedy available to it. For the purpose
of this provision, a major line of
credit shall mean and include any line
of credit established in an amount equal
to or greater than ONE MILLION DOLLARS
($1,000,000) with respect to a line of
credit for which Guarantor is an
obligor, endorser, surety or guarantor;
or
Y. the death, incapacity, liquidation,
dissolution, or termination of existence
of any member of the Borrowing Group or
the merger or consolidation of any
member of the Borrowing Group with any
other Person, except as expressly
permitted by the terms of this
Agreement.
11. REMEDIES IN EVENT OF DEFAULT
Upon the occurrence of an Event of Default,
at the option of the Lender, which may be
exercised at any time after an Event of Default
shall have occurred, the entire outstanding
principal balance of the Loan, together with all
interest (including, without limitation,
Additional Interest), costs, charges and other
amounts due under all of the Loan Documents, shall
immediately become due and payable and upon such
acceleration, all amounts due hereunder shall bear
interest at the Advances Rate. Subject to the
requirements of applicable law, all materials at
that time on or near the Mortgaged Property which
are the property of the Borrower shall be subject
to the Liens created by the Loan Documents. The
Lender is authorized, but not obligated in any
event, to do all such things in connection with
the operation of the Facility as the Lender, in
its sole and absolute discretion, may deem
advisable, including, without limitation, the
right to make any payments with respect to any
obligation of the Borrower to the Lender or to any
other Person in connection with the operation of
the Facility and to take any and all such action,
either in the Lender's own name or in the name of
the Borrower, and the Borrower hereby grants the
Lender an irrevocable power of attorney to act in
its name in connection with the foregoing. This
power of attorney, being coupled with an interest,
shall be irrevocable until all of the Obligations
are fully paid and performed and shall not be
affected by any disability or incapacity which the
Borrower may suffer and shall survive the same.
The power of attorney conferred on the Lender by
the provisions of this Section 11 is provided
solely to protect the interests of the Lender and
shall not impose any duty on the Lender to
exercise any such power and neither the Lender nor
such attorney-in-fact shall be liable for any act,
omission, error in judgment or mistake of law,
except as the same may result from its gross
negligence or wilful misconduct. In the event that
the Lender takes possession of the Mortgaged
Property and assumes control of the Facility as
aforesaid, it shall not be obligated to continue
the operation of the Facility for any period of
time longer than the Lender shall see fit (in its
sole and. absolute discretion), and the Lender may
thereafter, at any time, abandon its efforts and
refuse to make further payments for the account of
the Borrower. For the purposes of determining
Additional Interest upon the occurrence of an
Event of Default for a Failure to Operate, it
shall be deemed that the Additional Interest for
such period where operations of the Facility had
ceased would be equal to the highest annualized
rate that Additional Interest accrued during the
five (5) preceding calendar years or such shorter
period of time as this Agreement is in force and
effect.
64
In addition, at the Lender's option and
without demand, notice or protest, the occurrence
of any such Event of Default shall also constitute
a default under any one or more of the Related
Party Agreements.
12. GENERAL
12.1 Agreement Not Assignable.
The Borrower shall not suffer any attachment,
whether by trustee process or otherwise, to be
made or attempted against the Borrower's interest
in, to or under this Agreement or any of the other
Loan Documents or in or to any payment, advance or
other sums hereunder or thereunder, and shall not,
without the prior written consent of the Lender
(in each instance, which consent may be withheld
in the Lender's sole and absolute discretion), or,
except as may be permitted in connection with a
transfer permitted under Section 6.19 (and even
then, only after the satisfaction of all of the
requirements of the Lender relating to such
transfer), assign or transfer any of the same or
any interest therein. Any such assignment or
transfer made without the Lender's consent shall
be void and of no force or effect.
12.2 JOINT AND SEVERAL.
If any party to this Agreement or any of the
other Loan Documents shall be comprised of more
than one Person, all agreements, conditions,
covenants, provisions, stipulations, powers of
attorney, authorizations, waivers, releases,
options, undertakings, rights and benefits made or
given by such party shall be joint and several,
and shall bind and affect all Persons who are
defined herein or therein as such party as fully
as though all of them were specifically named
herein or therein wherever any term identifying
such party is used.
12.3 REMEDIES CUMULATIVE.
The rights and remedies set forth under this
Agreement are in addition to all other rights and
remedies afforded to the Lender under any of the
other Loan Documents or at law or in equity, all
of which are hereby reserved by the Lender, and
this Agreement is made and accepted without
prejudice to any such rights and remedies. All of
the rights and remedies of the Lender under each
of the Loan Documents shall be separate and
cumulative and may be exercised concurrently or
successively in the Lender's sole and absolute
discretion.
12.4 FURTHER ASSURANCES.
At any time and from time to time, upon the
written request by the Lender, the Borrower and
the Guarantor shall promptly make, execute and
deliver, or cause to be made, executed and
delivered, to the Lender and, where appropriate,
cause to be recorded or filed (and, from time to
time thereafter, to be re-recorded or refiled) at
such time and in such offices and places as shall
be deemed desirable by the Lender (in its sole and
absolute discretion), any such agreements,
amendments, assignments, instruments of further
assurance, certificates and other documents as the
Lender may, in its sole and absolute discretion,
deem desirable to (a) enable the Lender to
negotiate the Note and to assign the Loan
Documents or any portion of its interest; (b)
enable the Lender to enter into participation
agreements with respect to all or any portion of
the Obligations or (c) effectuate, complete,
perfect or continue and preserve the rights,
remedies and
65
obligations under any of the Loan Documents,
including, without limitation, any document
requested in order to perfect or continue the
security interests created under the Loan
Documents as first priority security interests in
the Collateral; provided, however, that, except as
to the costs and expenses reasonably incurred by
the Lender in connection with the items referred
to in the foregoing clause (c), no such additional
document or other instrument requested by the
Lender hereunder shall increase the Obligations.
Any failure by the Borrower or the Guarantor
to comply with any request pursuant to this
Section 12.4 within twenty (20) days after such
written request is made by the Lender shall be an
Event of Default hereunder and upon such Event of
Default, the Lender may make, execute, record,
file, re-record and refile any and all such
amendments, assignments, instruments, certificates
and documents for and in the name of the Borrower
or the Guarantor, and the Borrower and the
Guarantor each hereby appoints the Lender as its
attorney-in-fact, with full power of substitution,
to take such actions (on behalf of and in the name
of the Borrower or the Guarantor as the case may
be) as the Lender, in its sole and absolute
discretion; may deem necessary or desirable to
effectuate the intent of this Section 12.4.
The power of attorney conferred on the Lender
by the provisions of this Section 12.4, being
coupled with an interest, shall be irrevocable
until the Obligations are fully paid and performed
and shall not be affected by any disability or
incapacity which either the Borrower or the
Guarantor may suffer and shall survive the same.
Such power of attorney is provided solely to
protect the interests of the Lender and shall not
impose any duty on the Lender to exercise any such
power and neither the Lender nor such attorney-in-
fact shall be liable for any act, omission, error
in judgment or mistake of law, except as the same
may result from its gross negligence or willful
misconduct.
12.5 INVALIDITY.
If any provision of this Agreement or any of
the other Loan Documents or the application
thereof to any Person or circumstance, for any
reason and to any extent, shall be held to be
invalid or unenforceable, neither the remainder of
this Agreement or other Loan Document nor the
application of such provision to any other Person
or circumstance shall be affected thereby, but
rather the same shall be enforced to the greatest
extent permitted by applicable law.
Notwithstanding the foregoing, it is the
intention of the parties hereto that if any
provision- of any of the Loan Documents is capable
of two (2) constructions, one of which would
render the provision void and the other of which
would render the provision valid, then such
provision-shall be construed in accordance with
the construction which renders such provision
valid.
12.6 MARSHALLING, JURY TRIAL AND OTHER RIGHTS.
To the maximum extent permitted by law, the
Borrower and the Guarantor each hereby waives and
renounces for itself" and its administrators,
legal representatives, successors and assigns, all
rights to the benefits of any statute of
limitations and any moratorium, reinstatement,
marshalling, forbearance, valuation, stay,
extension, redemption, appraisement, and exemption
now provided, or which may hereafter be provided,
by the Constitution and laws of the United States
of America and of any state thereof, both as to
itself and in and to all of its property, real and
personal, against the enforcement and collection
of the Obligations. The Borrower and the Guarantor
each hereby (a) transfers, conveys and assigns to
the Lender a sufficient amount of such
66
exemption as may be set apart in bankruptcy, to
pay the obligations of the Borrower and the
Guarantor under the Loan Documents in full, with
all costs of collection, and (b) directs any
trustee in bankruptcy having possession of such
exemption to deliver to the Lender a sufficient
amount of property or money set apart as exempt to
pay the obligations of the Borrower and the
Guarantor under the Loan Documents.
The power of attorney conferred on the Lender
pursuant to the provisions of this Section 12.6
being coupled with an interest, shall be
irrevocable until all of the Obligations has been
fully paid and performed, shall not be affected by
any disability or incapacity which either the
Borrower or the Guarantor may suffer and shall
survive the same. Such power of attorney, is
provided solely to protect the interests of the
Lender and shall not impose any duty on the Lender
to exercise any such power, and neither the Lender
nor such attorney-in-fact shall be liable for any
act, omission, error in judgment or mistake of
law, except as the same may result from its gross
negligence or wilful misconduct.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE
PARTIES HERETO EACH HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT IT MAY NOW OR
HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE LOAN OR ANY OF THE LOAN DOCUMENTS.
The Borrower and the Guarantor each hereby
certifies that neither the Lender, nor any of the
Lender's representatives, agents or counsel has
represented, expressly or otherwise, that the
Lender would not, in the event of any such suit,
action or proceeding, seek to enforce this waiver
of the right to trial by jury, and acknowledges
that the Lender has been induced by this waiver
(among other things) to enter into the loan
transaction evidenced by the Loan Documents, and
further acknowledges that it (i) has read the
provisions of this Agreement and in particular,
the paragraph containing this waiver; (ii) has
consulted legal counsel; (iii) understands the
rights that it is granting in this Agreement and
the rights that it is waiving in this paragraph in
particular and (iv) makes the waivers set forth
herein knowingly, voluntarily and intentionally.
12.7 NO WAIVERS.
The Lender shall not by any act, delay,
omission or otherwise (including, without
limitation, the exercise of any right or remedy
hereunder) be deemed to have waived any of its
rights -or remedies hereunder or under any of the
other Loan Documents unless such waiver is in
writing and signed by the Lender, and then, only
to the extent specifically set forth therein. No
waiver at any time of any of the terms,
conditions, covenants or warranties of any of the
Loan Documents shall be construed as a waiver of
any other term, condition, covenant or warranty of
any of the Loan Documents, nor shall such a waiver
in any one instance or circumstance be construed
as a waiver of the same term, condition, covenant
or warranty in any subsequent instance or
circumstance. No such failure, delay or waiver
shall be construed as creating a requirement that
the Lender must thereafter, as a result of such
failure, delay or waiver, give notice to any
member of the Borrowing Group or any other Person
that the Lender does not intend to give a further
waiver or to refrain from insisting upon the
strict performance of the terms, conditions,
covenants and warranties set forth in the Loan
Documents before the Lender can exercise any of
its rights or remedies under any of the Loan
Documents or before any Loan Default can occur or
as establishing a course of dealing for
interpreting the conduct of and agreements between
the Lender and any member of the Borrowing Group
or any other Person.
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The acceptance by the Lender of any payment
that is less than payment in full of all amounts
due under any of the Loan Documents at the time of
the making of such payment shall not (a)
constitute a waiver of the right to exercise any
of the Lender's remedies at that time or at any
subsequent time, (6) constitute an accord and
satisfaction or (c) nullify any prior exercise of
any remedy; without the express written consent of
the Lender. Any failure by the Lender to
accelerate the indebtedness due under this
Agreement or any of the other Loan Documents by
reason of a default hereunder or thereunder, any
acceptance by the Lender of a past due
installment, or any indulgence granted by the
Lender from time to time shall not be construed
(i) as a novation of this Agreement or any of the
other Loan Documents or as a reinstatement of the
indebtedness evidenced thereby or as a waiver of
such right of acceleration or of the right of the
Lender thereafter to insist upon strict compliance
with the terms of this Agreement or any of the
other Loan Documents or (ii) to prevent the
exercise of such right of acceleration or any
other right granted hereunder or under applicable
law; and, to the maximum extent permitted by law,
the Borrower and the Guarantor each hereby
expressly waives the benefit of any statute or
rule of law or equity now provided, or which may
hereafter be provided, which would produce a
result contrary to or in conflict with the
foregoing.
Whether or not for consideration paid or
payable to the Lender and, except as may be
otherwise specifically agreed to by the Lender, no
forbearance on the part of the Lender or extension
of the time for the payment of the whole or any
part of the Obligations, or any other indulgence
given by the Lender to the Borrower or any other
Person, shall operate to release or in any manner
affect the original liability of the Borrower or
such other Person, or the priority of the Mortgage
or to limit, prejudice or impair any right of the
Lender, including, without limitation, the right
to realize upon the Collateral; or any part
thereof, for any of the obligations evidenced or
secured by the-Loan Documents; notice of any such
extension, forbearance or indulgence being hereby
waived by the Borrower and the Guarantor and all
those claiming by, through or under the Borrower
or the Guarantor.
12.8 USURY.
In the event that fulfillment of any
provision of any of the Loan Documents, at the
time performance of such provision shall be due
and as a result of any circumstance, shall involve
transcending the limit of validity presently or
hereinafter prescribed by any applicable usury
statute or any other law, with regard to
obligations of like character and amount, then
ipso facto the obligation to be fulfilled shall be
reduced to the limit of such validity, so that in
no event shall any exaction be possible under any
of the Loan Documents that is in excess of the
limit of such validity. In no event shall the
Borrower or the Guarantor be bound to pay for the
use, forbearance or detention of the money loaned
pursuant hereto, interest of more than the maximum
rate, if any, permitted by law to be charged by
the Lender; the right to demand any such excess
being hereby expressly waived by the Lender.
12.9 PARTICIPANTS.
The Lender reserves the right, from time to
time during the Term, to (a) enter into
participation agreements with respect to the Loan
or (b) assign, directly or as collateral, all or
any portion of the Obligations or all of the
Lender's rights therein; and each member of the
Borrowing Group shall cooperate with the Lender in
connection with the execution of any such
participation agreements or the transfer of any
such assignments.
Such cooperation shall include without
limitation:
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A. supplying financial statements of the
Borrower, the Guarantor and the
Facility;
B. providing estoppel certificates (i)
consenting to such participations or
assignments, (ii) confirming the
respective obligations of each member of
the Borrowing Group under the Loan
Documents, (iii) confirming the amount
of the then outstanding principal
balance of the Loan and the amounts of
any tax or insurance escrow deposits
held by the Lender, (iv) stating whether
any member of the Borrowing Group has
any defenses, offsets or credits against
the payment of any amounts due or the
performance of any obligations under the
Loan Documents and (v) stating whether
any default or any state of facts which,
with the passing of time or the giving
of notice or both, could constitute a
default, exists under the Loan
Documents;
C. making such modifications or alterations
to the Loan Documents as the Lender may
reasonably request; provided, however
that such modifications and alterations
shall not increase any of the Borrower's
or the Guarantor's monetary obligations
under the Loan Documents or materially
modify any other obligations of the
Borrower or the
Guarantor under the Loan Documents;
D. providing such other documentation
relating to the Loan and the Mortgaged
Property as the Lender may reasonably
request; and .
E. making the Mortgaged Property available
for inspection, during normal business
hours, upon reasonable notice from the
Lender.
The Lender shall have the right to provide
potential participants and assignees with any and
all financial, licensing and other information
provided to the Lender pursuant to the Loan
Documents upon informing such recipients of the
confidential nature of such information. The terms
and conditions of any participation agreements
with respect to the Loan or any assignment of all
or any of the obligations evidenced or secured by
the Loan Documents and the Lender's rights and
remedies therein shall be determined by the Lender
in its sole and absolute discretion.
12.10 SUCCESSORS AND ASSIGNS.
This Agreement and the other Loan Documents
shall be binding on and inure to the benefit of
(a) the Borrower and the Guarantor and their
respective heirs, executors, administrators, legal
representatives and permitted successors and
assigns and (b) the Lender, any other Person who
may now or hereafter hold any interest in the Loan
and their respective successors and assigns.
Notwithstanding the foregoing, neither the
Borrower nor the Guarantor shall not assign any of
its rights or obligations hereunder or under any
of the Loan Documents without the prior consent of
the Lender, in each instance, which consent may be
withheld in the Lender's sole and absolute
discretion.
12.11 NO THIRD PARTY BENEFICIARIES.
This Agreement and the other Loan Documents
are solely for the benefit of the Lender, its
successors, assigns and participants (if any), the
Meditrust Entities, the Indemnified Parties, the
Borrower and the Guarantor, and, except as
otherwise expressly set forth in any of the Loan
Documents, nothing contained therein shall confer
upon
69
anyone other than such parties any right to insist
upon or to enforce the performance or observance
of any of the obligations contained therein. All
conditions to the obligations of the Lender to
advance or make available the proceeds of the
Loan, insurance proceeds or Condemnation awards,
or to release any deposits held for Impositions or
insurance proceeds are imposed solely and
exclusively for the benefit of the Lender, its
successors, assigns and participants and the
Meditrust Entities. No other Person shall have
standing to require satisfaction of such
conditions in accordance with their terms and no
other Person shall, under any circumstances, be a
beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by
the Lender at any time, if, in the Lender's sole
and absolute discretion. the Lender deems it
advisable or desirable to do so.
12.12 GOVERNING LAW; JURISDICTION.
Except as may be otherwise expressly provided
in this Section 12.12, elsewhere in this Agreement
and in any of the other Loan Documents, all claims
relating, in any way, to the negotiation and/or
consummation of the Loan, the Lender's
relationship with any member of the Borrowing
Group in connection with the Loan and/or the
performance of any obligation under any of the
Loan Documents shall in all respects be governed,
construed, applied and enforced in accordance with
the internal laws of the Commonwealth of
Massachusetts without regard to principles of
conflicts of law. Notwithstanding the foregoing
choice of law:
A. the procedures governing the creation,
perfection and priority of the Liens
pertaining to real property and tangible
personal property created by the
Mortgage and the Assignment of Leases
and the enforcement by the Lender of its
rights and remedies under the Mortgage,
the Assignment of Leases and the other
Loan Documents with respect to the
Mortgaged Property or other Collateral,
including by way of illustration, but
not in limitation, actions for
foreclosure, for injunctive relief or
for the appointment of a receiver shall
be governed by the laws of the state
where such Mortgaged Property or other
Collateral are located;
B. the Lender shall comply with applicable
law in the state where the Mortgaged
Property or other Collateral is located
to the extent required by the law of
such jurisdiction in connection with the
foreclosure of the Liens created under
the Mortgage and the other Loan
Documents with respect to the Mortgaged
Property or other Collateral; and
C. the provisions of Federal law and the
law of the state where the Mortgaged
Property is located shall apply in
defining the terms Hazardous Substances,
Environmental Laws and Legal
Requirements as such terms are used in
Loan Documents, with respect to the
Mortgaged Property and the Borrowing
Group.
Nothing contained herein or in any provisions
of the other Loan Documents shall be construed to
provide that the substantive law of the state
where the Mortgaged Property or any other
Collateral is located shall apply to any parties'
rights and obligations under any of the Loan
Documents, which, except as expressly provided in
clauses (A), (B) and (C) above, are and shall
continue to be governed by the substantive law of
the Commonwealth of Massachusetts. In addition,
the fact that portions of the Loan Documents may
include provisions drafted to conform to the law
of the State where the Mortgaged Property is
located is not intended, nor shall it be deemed,
in any way, to
70
derogate the parties' choice of law as set forth
or referred to in this Loan Agreement or in the
other Loan Documents. The parties further agree
that the Lender may enforce its rights under the
Loan Documents including, but not limited to, its
rights to sue the Borrower or to collect any
outstanding indebtedness in accordance with
applicable law.
Each party-hereto hereby consents to personal
jurisdiction in any state or Federal Court located
within the Commonwealth of Massachusetts, as well
as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for
the purposes of any suit, action or other
proceeding arising out of, or with respect to any
of the Loan Documents, the negotiation and/or
consummation of the Loan, the Lender's
relationship with any member of the Borrowing
Group in connection with the Loan and/or the
performance of any obligation or exercise of any
remedy under any of the Loan Documents and
expressly waives any and all objections it may
have as to venue in any of such courts.
12.13 NOTICES.
Any notice, request, demand, statement or
consent made hereunder or under any of the other
Loan Documents shall be in writing and shall be
deemed duly given if personally delivered, sent by
certified mail, return receipt requested, or sent
by a nationally recognized commercial overnight
delivery service with provisions for a receipt,
postage or delivery charges prepaid, and shall be
deemed given when personally delivered, postmarked
or placed in the possession of such mail or
delivery service and addressed as follows:
If to the Borrower: ESC I, L.P.
c/o Emeritus Corporation
3131 Elliott Avenue,
Suite 500
Seattle, Washington 98121-
2162
Attn: President
With a copy to: The
Nathanson Group
1411 Fourth Avenue, Suite
905
Seattle, Washington 98101
Attn: Randi S. Nathanson,
Esq.
If to the Lender: Meditrust
Mortgage Investments,
Inc.
197 First Avenue
Needham Heights,
Massachusetts 02194 Attn:
President
With copies to: Meditrust
Mortgage Investments, Inc.
197 First Avenue
Needham Heights,
Massachusetts 02194
Attn: General Counsel
Hutchins, Wheeler &
Dittmar
101 Federal Street
Boston, Massachusetts
02110
Attn: Jack H. Fainberg,
Esq.
71
or at such other place as any party hereto may
from time to time hereafter designate to the other
in writing. Any notice given to the Borrower by
the Lender at any time shall not imply that such
notice or any further or similar notice was or is
required.
12.14 LIMITATION OF LIABILITY.
The Declaration of Trust establishing the
sole shareholder of the Lender, Meditrust, a
Massachusetts business trust (referred to herein
as "Meditrust"), dated August 6, I 985 (referred
to herein as the "Declaration"), a copy of which,
together with all amendments thereto, is duly
filed in the office of the Secretary of State of
the Commonwealth of Massachusetts, provides that
the name "Meditrust" refers to the trustees under
the Declaration collectively as trustees, but not
individually or personally; and that no trustee,
officer, shareholder, employee or agent of
Meditrust or any of its Subsidiaries shall be held
to any personal- liability, jointly, or severally,
for any obligation of, or claim against Meditrust
or any of its Subsidiaries. All Persons dealing
with Meditrust or the Lender, in any way, shall
look only to the assets of Meditrust or the
Lender, respectively, for the payment of any sum
or the performance of any obligation. Furthermore,
in no event shall the Lender or Meditrust ever be
liable to the Borrower, the Guarantor or any other
Person for any indirect or consequential damages
incurred by the Borrower, the Guarantor or such
other Person, resulting from any cause whatsoever.
Notwithstanding the foregoing, the Borrower and
the Guarantor hereby acknowledge and agree that
Meditrust is not a party to this Agreement or any
of the other Loan Documents and that the Borrower
and the Guarantor shall look only to the assets of
the Lender for the payment of any sum or
performance of any obligation due by or from the
Lender pursuant to the terms and provisions of the
Loan Documents.
12.15 ESTOPPEL CERTIFICATE.
Within ten (10) days after written request of
any other party hereto, any party to this
Agreement shall furnish a certificate or
affidavit, duly acknowledged, stating the amount
then due or outstanding under the Loan Documents,
whether there are any defaults under any of the
Loan Documents and whether or not any offsets or
defenses exist against the Obligations, and if so,
specifying such offsets and defenses. Within ten
(10) days following the written request of the
Lender, the Borrower shall furnish a certificate
or affidavit, duly acknowledged, stating the
amount then due under any other documents
evidencing any indebtedness of the Borrower
secured by a Lien
relating to the Mortgaged Property, whether there
are any defaults under such documents and whether
or not any offsets or defenses exist against the
amount due thereunder and if so, specifying such
offsets and defenses.
12.16 NO JOINT VENTURE OR PARTNERSHIP.
Neither anything contained in any of the Loan
Documents, nor the acts of the parties hereto
shall be construed to create a partnership or
joint venture between the Borrower or the
Guarantor and the Lender. Neither the Borrower nor
the Guarantor is the agent or representative of
the Lender, and nothing contained herein or in any
of the other Loan Documents shall be construed to
make the Lender liable to any Person for goods
delivered or services performed with respect to
the Mortgaged Property or for debts or claims
accruing against the Borrower or the Guarantor.
12.17 AMENDMENTS, WAIVERS AND MODIFICATIONS.
72
Except as otherwise expressly provided herein
or in any other Loan Document, none of the terms,
covenants, conditions, warranties or
representations contained in this Agreement or in
any of the other Loan Documents may be renewed,
replaced, amended, modified, extended,
substituted, revised, waived, consolidated or
terminated, except by an agreement, in writing,
signed by (a) all parties to this Agreement or the
other applicable Loan Document, as the case may
be, with regard to any such renewal, replacement,
amendment, modification, extension, substitution,
revision, consolidation or termination or (b) the
Person against whom enforcement is sought with
regard to any waiver. The provisions of this
Agreement shall extend and be applicable to all
renewals, replacements, amendments, extensions,
substitutions, revisions, consolidations and
modifications of the Loan Documents, the Leases,
the Management Agreements, the Related Party
Agreements, the Permits and/or the Contracts; and
all references herein and in the other Loan
Documents to any of the Loan Documents, the
Leases, the Management Agreements, the Related
Party Agreements, the Permits and the Contracts
shall be deemed to include any renewals,
replacements, amendments, extensions,
substitutions, revisions, consolidations or
modifications thereof.
Notwithstanding the foregoing, any reference
contained in any of the Loan Documents, whether
express or implied, to any renewal, replacement,
amendment, extension, substitution, revision,
consolidation or modification of any of the Loan
Documents or of any Lease, Management Agreement,
Related Party Agreement, Permit or Contract is not
intended to constitute an agreement or consent by
the Lender to any such renewal, replacement,
amendment, extension, substitution, revision;
consolidation or modification of any of the Loan
Documents or any Lease, Management Agreement,
Related Party Agreement, Permit or Contract; but,
rather as a reference only to those instances
where the Lender may give, agree or consent to any
such renewal, replacement, amendment, extension,
substitution, revision, consolidation or
modification, as the same may be required pursuant
to the terms, covenants and conditions of any of
the Loan Documents.
12.18 WAIVERS.
The Borrower and the Guarantor jointly and
severally, waive presentment for payment, demand,
protest, notice of nonpayment, notice of dishonor,
protest of any dishonor, suretyship defenses,
notice of protest and protest of the Loan
Documents and the Related Party Agreements, and
all other notices in connection with (a) the
delivery or the acceptance of the Loan Documents
and/or the Related Party Agreements and any
reliance thereon and/or (b) the performance,
default. (except notice of default as specifically
elsewhere required under any of the Loan Documents
or any of the Related Party Agreements) or
enforcement of any obligation under any of the
Loan Documents or any of the Related Party
Agreements, and agree that the liability of each
of them shall be unconditional without regard to
the liability of any other party and shall not be
in any manner affected by any indulgence,
extension of time, renewal, waiver or modification
granted or consented to by the Lender (or any of
the other Meditrust Entities); and the Borrower
and the Guarantor consent to any and all
extensions of time, renewals, waivers or
modifications that may be granted or consented to
by the Lender (or any of the other Meditrust
Entities) with respect to the payment or
performance of any obligation under any of the
Loan Documents or the Related Party Agreements and
to the release of the Collateral (or any part
thereof and/or any other collateral securing any
of the Related Party Agreements, with or without
substitution, and agree that additional makers,
endorsers, guarantors or sureties may become
parties to the Loan Documents and/or any of the
Related Party Agreements without notice to them or
affecting the liability of the Borrower and the
Guarantor under the Loan Documents.
73
12.19 CONTRIBUTION.
No Person obligated on account of any of the
Loan Documents may seek contribution from any
other Person also obligated unless and until all
liabilities, obligations and indebtedness to the
Lender of the Person from whom contribution is
sought have been satisfied in full.
12.20 CAPTIONS AND HEADINGS.
The captions and headings set forth in this
Agreement and the other Loan Documents are
included for convenience and reference only and
the words contained therein shall in no way be
held or deemed to define, limit, describe,
explain, modify, amplify or add to the
interpretation, construction or meaning of, or the
scope or intent of, this Agreement, any of the
other Loan Documents or any part hereof or
thereof.
12.21 TIME OF THE ESSENCE.
Time is of the essence of each and every
term, condition, covenant and warranty set forth
in this Agreement and in the other Loan Documents.
12.22 COUNTERPARTS.
This Agreement may be executed in one or more
counterparts, each of which taken together shall
constitute an original and all of which shall
constitute one and the same instrument.
12.23 RULES OF CONSTRUCTION.
References in this Agreement and each of the
other Loan Documents to "herein", "hereof" and
"hereunder" shall be deemed to refer to this
Agreement or each such other Loan Document, as the
case may be, and shall not be limited to the
particular text or Section in which such words
appear. The use in the Loan Documents of any
gender shall include all genders and the singular
number shall include the plural and vice versa as
the context may require. References in the Loan
Documents to the Lender's attorneys shall be
deemed to include, without limitation, special
counsel and local counsel for the Lender.
References in the Loan Documents to attorneys'
fees and expenses shall be deemed to include all
costs for administrative, paralegal and other
support staff.
References in the Loan Documents to the
Mortgaged Property shall be deemed to include
references to all of the Mortgaged Property and
references to any portion thereof. References in
the Loan Documents to the Land shall be deemed to
include references to all of the Land and
references to any portion thereof. References in
the Loan documents to the Real Property shall be
deemed to include references to all of the Real
Property and references to any portion thereof.
References in the Loan Documents to the Loan
Obligations shall be deemed to include references
to all of the Loan Obligations and references to
any portion thereof. References in the Loan
Documents to the Obligations shall be deemed to
include references to all of the Obligations and
references to any portion thereof. The word
"foreclosure" as used in any of the Loan Documents
shall be deemed to include the acquisition of the
Mortgaged Property. by voluntary deed or
assignment in lieu of foreclosure.
All exhibits annexed to any of the Loan
Documents as referenced therein shall be deemed
incorporated in such Loan Document by such
annexation and/or reference.
74
As used in any of the Loan Documents, the
term "including", when following any general
statement, will not be construed to limit such
statement to the specific items or matters as
provided immediately following the term
"including" (whether or not non-limiting language
such as "without limitation" or "but not limited
to" or words of similar import are also used), but
rather will be deemed to refer to all items or
matters that could reasonably fall within the
broader scope of the general statement.
All accounting terms not specifically defined
in the Loan Documents shall be construed in
accordance with GAAP. Any requirement that
financial statements be Consolidated in form shall
apply only to such financial statements as relate
to a period during any portion of which the
relevant Person has one or more Subsidiaries.
While no Provider Agreements presently exist
with respect to the operation of the Mortgaged
Property (and/or any programs or services provided
at the Mortgaged Property) and, accordingly, the
provisions of this Agreement and the other Loan
Documents relating in any way to Provider
Agreements are presently inapplicable; in the
event that, at any time during the Term, the
Borrower or the Facility enters into any Provider
Agreement, then, all such provisions of this
Agreement and the other Loan Documents relating to
Provider Agreements shall apply with full force
and effect. In addition, while neither the
Borrower nor the Mortgaged Property is currently
under the jurisdiction of, or is otherwise subject
to the rules of, any Accreditation Body, and,
accordingly, the provisions of this Agreement and
the other Loan Documents relating in any way to
Accreditation. Bodies are presently inapplicable;
in the event that at any time during the Term, the
Borrower, any Lessee or the Mortgaged Property
falls under the jurisdiction of, or otherwise
becomes subject to the rules of, any Accreditation
Body, then, all such provisions of this Agreement
and the other Loan Documents relating to
Accreditation Bodies shall apply with full force
and effect.
12.24 GENERAL PROVISIONS APPLICABLE TO ALL LOAN
DOCUMENTS.
The provisions of Section 12 hereof shall
apply to all Loan Documents as if set forth in
full therein, except as may be otherwise expressly
provided in any other Loan Document.
12.25 ENTIRE AGREEMENT.
This Agreement and the other Loan Documents
set forth the entire agreement of the parties with
respect to the subject matter hereof and shall
supersede any prior writing regarding the subject
matter hereof in its entirety.
13. INDEMNIFICATIONS
13.1 BROKER'S FEE INDEMNIFICATION.
The Borrower and Lender each shall and hereby
agrees to indemnify, defend (with counsel
acceptable to the other) and hold the other
harmless from and against any and all claims for
any premiums or other charges, finder's fees,
taxes, brokerage fees or commissions and other
similar compensation due in connection with the
Loan. Notwithstanding the foregoing, the
indemnified party shall have the option of
conducting its own defense against any such claims
with counsel of the such party's choice, but at
the expense of the indemnified party, as
aforesaid. This indemnification shall include all
attorneys' fees and expenses and court costs
reasonably incurred by the indemnified party
75
in connection with the defense against any such
claims and the enforcement of this indemnification
and shall survive the complete payment and
performance of the Loan Obligations and the
foreclosure of the Mortgage.
13.2 GENERAL INDEMNIFICATION.
Except with respect to the gross negligence
or wilful misconduct of Lender or any of the other
Indemnified Parties, as to which no indemnity is
provided, Borrower hereby agrees to defend with
counsel reasonably acceptable to Lender, against
all claims and causes of action and to indemnify
and hold harmless Lender and each of the other
Indemnified Parties from and against all damages,
losses, liabilities, obligations, penalties, costs
and expenses (including, without limitation,
reasonable attorneys' fees, court costs and other
expenses of litigation) suffered by, or claimed or
asserted against, Lender or any of the other
Indemnified Parties, directly or indirectly, by
any Person other than a member of the Borrowing
Group who prevails in such claim or action based
on, arising out of or resulting from (a) the use
and occupancy of the Mortgaged Property or any
business conducted therein, (b) any act, fault,
omission to act or misconduct by (i) any member of
the Borrowing Group, (ii) any Affiliate of
Borrower or (iii) any employee, agent, licensee,
business invitee; guest, customer, contractor or
such lessee of any of the foregoing parties,
relating to, directly. or indirectly, the
Mortgaged Properly, (c) any accident, injury or
damage whatsoever caused to any Person, including,
without limitation, any claim of malpractice, or
to the property of any Person in or about the
Mortgaged Property or outside of the Mortgaged
Property where such accident, injury or damage
results or is claimed to have resulted from any
act, fault, omission to act or misconduct by any
member of the Borrowing Group or any Affiliate of
Borrower or any employee, agent, licensee,
contractor or lessee of any of the foregoing
parties, (d) any Loan Default, (e) any claim
brought or threatened against Lender by any member
of the Borrowing Group or by any other Person on
account of (i) Lender's relationship with any
member of the Borrowing Group pertaining in any
way to the Mortgaged Property and/or the
transaction evidenced by the Loan Documents and/or
(ii) Lender's negotiation of, entering into and/or
performing any of its obligations and/or
exercising any of its right and remedies under any
of the Loan Documents, (f) any attempt by any
member of the Borrowing Group or any Affiliate of
Borrower to transfer or relocate any of the
Permits to any location other than the Mortgaged
Property and/or (g) the enforcement of this
indemnity. Any amounts which become payable by
Borrower under this Section 13.2.1 shall be a
demand obligation of Borrower to Lender payable as
Additional Interest. The indemnity provided for in
this Section 12.2.1 shall survive the complete
payment and performance of the Loan Obligations
and the foreclosure of the Mortgage.
14. SUBSTITUTION OF PROPERTY
14.1 SUBSTITUTION OF PROPERTY FOR MORTGAGED
PROPERTY.
Provided that no Loan Default has occurred
under any of the Loan Documents, (excluding any
Loan Default which has been waived in writing by
Lender) nor any event which, with the giving of
notice or the passage of time or both, would
constitute such a Loan Default, the Borrower shall
have the right from time to time (referred to
herein as the "Substitution Right"), exercisable
upon not less than ninety (90) days' prior written
notice to the Lender (referred to herein as a
"Substitution Notice") to substitute, on a date
specified in such Substitution Notice (such date,
as the same may be extended by express written
agreement of the Lender, shall be referred to
herein as a "Substitution Date"), the land,
buildings, fixture, furnishings, equipment and
other personal properly from time to time securing
this Loan (referred to herein as the "Secured
Property") with a Comparable
76
Property. As used herein, the term "Comparable
Property" shall be defined as a health care
facility or facilities which the Lender determines
(A) has an appraised value greater than or equal
to the greater of (i) the appraised value of the
Mortgaged Property as of the date hereof or (ii)
the appraised value of the Secured Property
securing the Loan at the time that the applicable
Substitution Notice is furnished to the Lender
(based on appraisal criteria then in effect), (B)
has a Debt Coverage Ratio greater than or equal to
the greater of (i) the Debt Coverage Ratio of the
Mortgaged Property as of the date hereof or (ii)
the Debt Coverage Ratio of the Secured Property
securing the Loan at the time that the applicable
Substitution Notice is furnished to the Lender,
(C) provides a mix of services reasonably
acceptable to the Lender and (D) is otherwise
reasonably acceptable, in all respects, to the
Lender (based on the Lender's usual and customary
underwriting criteria then in effect). The
Borrower may not exercise its Substitution Right
more than once in any calendar year.
14.2 CONDITIONS TO SUBSTITUTION.
Without limiting the foregoing, as conditions
precedent to the consummation of any proposed
substitution: -
(i) as of the applicable Substitution
Date, no Loan Default shall have occurred
under any of the Loan Documents, nor shall
any event have occurred and be continuing
which with the giving of notice or the
passage of time or both would constitute such
a Loan Default;
(ii) the Lender shall have received,
engineering and inspection reports relating
to the healthcare facility or facilities
identified by the Borrower in the applicable
Substitution Notice (referred to herein as a
"Proposed Property"), reasonably satisfactory
in all respects to the Lender;
(iii) the Borrower shall have delivered
to the Lender (1) an MAI appraisal of the
Proposed Property (prepared by an appraiser
selected by the Borrower and approved by the
Lender), in form and substance reasonably
satisfactory to the Lender and (2) an
instrument survey of the premises upon which
the Proposed Property is located acceptable
to the Lender and the Title Company;
(iv) the Lender shall be satisfied as to
compliance of the Borrower, the Proposed
Property, the owner of the Proposed Property
(to the extent such owner is not the Borrower
as provided in subsection (xi) below) and/or
the proposed substitution, as the case may
be, with (1) all applicable land use, zoning,
subdivision and environmental laws and
regulations, (2) all applicable licensure
laws and regulations and (3) such other
matters as the Lender reasonably deems
relevant (including, without limitation,
whether the security interests granted to the
Lender in connection with the proposed
substitution may be avoided under the
Bankruptcy Code);
(v) the Borrower shall have delivered to
the Lender a mortgagee's title insurance
commitment issued by a title insurer
reasonably acceptable to the Lender (the
"Title Company"), in an amount equal to the
Loan Amount then outstanding, with such
endorsements as the Lender may reasonably
require insuring the first priority of the
Lender's valid mortgage lien on the
Borrower's fee title or leasehold title to
the Proposed Property and arrangements
satisfactory
77
to the Lender shall have been made for the
issuance of a title insurance policy in
accordance with such title insurance
commitment;
(vi). the Borrower shall have delivered
an environmental site assessment report
relating to the Proposed Property, in form
and substance reasonably acceptable to the
Lender and prepared by an environmental
consultant reasonably acceptable to the
Lender;
(vii) the Lender shall have received
opinions of the Borrower's counsel as to (1)
the compliance of the Proposed Property with
land use, zoning, subdivision and
environmental laws and regulations, (2) the
compliance of the Borrower, the owner of the
Proposed Property (to the extent such owner
is not the Borrower as provided in subsection
(xi) below), the proposed substitution and
the Proposed Property with applicable health
care laws and regulations and various
applicable licensure laws and regulations,
(3) the due authorization, execution and
enforceability of the Substitution Documents
and (4) such other matters as are reasonably
requested, in form and substance reasonably
acceptable to the Lender;
(viii) the Borrower and Guarantor shall
have executed and delivered, or caused to be
executed and delivered, such documents as are
reasonably required by the Lender to
effectuate the substitution (collectively,
the "Substitution Documents"), including,
without limitation either lease documentation
such would be used for a Lease Conversion (if
the Proposed Project is to be acquired by
Lender or its Affiliates and leased to
Borrower) or if the Personal Property is
owned by the Borrower, amendments of the Loan
Documents, a mortgage and security agreement,
assignment of leases and rents and collateral
assignment of permits and contracts relating
to the Proposed Property, U.C.C. financing
statements and ratifications of the Loan
Documents. The Substitution Documents shall
be based upon and contain the same terms and
conditions as are set forth in the Loan
Documents in effect prior to the
substitution, except that such changes shall
be made as may be necessary or reasonably
appropriate under the circumstances to
effectuate the substitution and secure the
protection and priority of the security
interests granted to the Lender;
(ix) without limiting any other
provision contained herein, the Borrower
shall have delivered to the Lender such other
information and materials relating to the
Borrower, the owner of the Proposed Property
(to the extent such owner is not the Borrower
as provided in subsection (xi) below) and the
Proposed Property as the Lender may
reasonably request, including, without
limitation, leases, receipted bills,
management agreements, provider agreements,
cost reports, health care surveys, Permits,
evidence of legal and actual access to the
Proposed Property, evidence of the
availability and sufficiency of utilities
servicing the Proposed Property, historical
and current operating statements, detailed
budgets and fmancial statements and the
Lender shall have found the same to be
satisfactory in all respects;
(x) as of the date of the consummation
of the substitution, the Borrower or an
Affiliate of the Borrower shall be the
licensed operator of the Proposed Property;
78
(xi) as of the date of the consummation
of the substitution, the Proposed Property
shall be owned or leased by the Borrower or
an Affiliate of the Borrower or Borrower or
an Affiliate of Borrower shall have the right
to acquire the Proposed Property pursuant to
a valid, binding and enforceable purchase
agreement (and Borrower or such Affiliates
shall have assigned all of such person' s
rights thereunder to Lender or its Affiliate
pursuant to an assignment in form and
substance acceptable to Lender; provided,
however that in the event that the Proposed
Property is owned by any such Affiliate, (i)
said Affiliate shall execute and deliver to
the Lender such Substitution Documents as may
be reasonably required by the Lender,
including, without limitation, an assumption
agreement pursuant to which such Affiliate
shall assume and agree to pay, perform,
satisfy and discharge promptly, punctually,
faithfully and completely all of the
Borrower's debts, liabilities, covenants,
agreements and obligations under all of the
Loan Documents and (ii) the Lender shall be
provided with such evidence as it may require
to determine that the granting by said
Affiliate of a mortgage relating to the
Proposed Property to secure the Loan does rot
constitute a fraudulent conveyance (under
applicable federal or state law);
(xii) the Borrower shall have delivered
to the Lender an insurance certificate
evidencing compliance with all of the
insurance requirements set forth in the Loan
Documents; and .
(xiii) the Lender shall have determined
that the Proposed Property constitutes a
Comparable Property.
14.3 CONVEYANCE TO BORROWER.
After the consummation of a substitution in
accordance with the terms hereof, the Lender shall
deliver to the Borrower releases of liens, in
recordable form and reasonably acceptable to the
Borrower, as well as termination statements, all
relating to the real and personal property which
is then no longer included in the Collateral.
14.4 EXPENSES.
Whether or not any proposed substitution is
consummated, the Borrower shall pay all of the out-
of pocket expenses and other costs incurred or
expended by the Lender in connection with any
proposed substitution (collectively referred to
herein as "Substitution Closing Costs"),
including, without limitation, reasonable
attorneys' fees and expenses, engineering costs,
consultants' fees, appraisal costs, audit and tax
review costs, out-of pocket travel expenses,
inspection fees, title insurance premiums and
other title fees, survey expenses, mortgage taxes,
transfer, documentary stamp and other taxes,
search charges of any nature, recording,
registration and filing costs, and any other costs
expended or incurred by the Lender in connection
with the preparation for and the documentation
and/or the closing of the proposed substitution.
The Substitution Closing Costs shall be a demand
obligation of the Borrower to the Lender and, if
not paid within ten (10) days after demand, shall
thereafter (to the extent permissible under
applicable law) bear interest at the Advances Rate
until the date of payment and, to the maximum
extent permitted by applicable law, shall be added
to the Loan Obligations and secured by the liens
of the Mortgage and the other Loan Documents, as
fully and effectively and with the same priority
as every other obligation thereunder and
hereunder.
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EXECUTED as a sealed instrument as of the day
and year first above mentioned.
WITNESS: LENDER:
MEDITRUST MORTGAGE
INVESTMENTS, INC.,
A Delaware corporation
/s/ Amelia C. Gentry By:/s/ Michael F. Bushee
-------------------------- -----------------------
Name: Amelia C. Gentry Name: Michael F. Bushee
WITNESS: BORROWER:
ESC I, L.P., a Washington
limited partnership
By: ESC G.P.I, Inc. a
Washington corporation,
Its sole General Partner
/s/ Jennifer A. Valenta By: /s/ Kelly J. Price
------------------------- ------------------------
Name. Jennifer Valenta Name: Kelly J. Price
Title: Vice President of Finance
80
EXHIBIT B
DEFINITIONS
ACCREDITATION BODY: Any persons having or claiming
jurisdiction over the accreditation ,
certification, evaluation or operation of the
Facility.
ADDITIONAL INTEREST: As defined in Section 3.8.
ADDITIONAL INTEREST CALCULATION DATE: As defined
in Section 3.8.
ADVANCES RATE: The rate of interest per annum
equal to the greater of (a) eighteen percent (18%)
per annum or (b) a variable rate of interest per
annum equal to one hundred twenty percent (120%)
of the Prime Rate; but in no event in excess of
the maximum rate of interest permitted by
applicable law to be charged by the Lender.
AFFILIATE: With respect to any Person (a) any
other Person which, directly or indirectly,
controls or is controlled by or is under common
control with such Person, (b) any other Person
that owns, beneficially, directly or indirectly,
five percent (5%) or more of the outstanding
capital stock, shares or equity interests of such
Person or (c) any officer, director, employee,
general partner or trustee of such Person or any
other Person controlling, controlled by or under
common control with such Person (excluding
trustees and Persons serving in a fiduciary or
similar capacity who are not otherwise an
Affiliate of such Person). For the purposes of
this definition, the term "control" (including the
correlative meanings of the terms "controlled by"
and "under common control with"), as used with
respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or
cause the direction of the management and policies
of such Person, through the ownership of voting
securities, partnership interests or other equity
interests, provider, however, that (a) for
purposes of determining a Related Party Default,
the percentage of outstanding capital stock,
shares of equity interests referenced in (ii)
above shall be fifty percent (50%), and (b) any
Person who is an Af3filiate by virtue of the
ownership thereof by Daniel R. Baty or his status
therein as an officer or director shall not be
deemed an Affiliate for purposes of determining a
Related Patty Default.
AFFILIATED PARTY SUBORDINATION AGREEMENT: As
defined in Section 4.1.
AGREEMENT REGARDING RELATED TRANSACTIONS: The
Second Amended and Restated Agreement Regarding
Related Transactions (Acquisition) dated of even
date, as amended from time to time, between
Lessee, Lessor and any Related Party that is party
to any Related Lease or Related Party Agreement.
Lessor and Lessee anticipate that the Agreement
Regarding Related Transactions will be amended
from time to time to include Affiliates of Lessor
and Lessee as parties thereto in connection with
future transactions and acknowledge and agree that
for all purposes under this Lease Agreement such
amendments shall be deemed to be included in this
definition.
ANNUAL FACILITY UPGRADE EXPENDITURE: An aggregate
annual amount equal to the product of TWO HUNDRED
DOLLARS ($200) (as increased as of the first day
of each Loan Year in which the Annual Facility
Upgrade Expenditure is to be made by an amount
equal to the product of the CPI Increase
multiplied by TWO HUNDRED DOLLARS ($200)) times
the number of units in the Facility, such amount
to be spent on Upgrade Renovations. The term "CPI
Increase" means a fraction, the numerator of which
is the Price Index in effect as of the first day
of the Loan Year in which the Annual Facility
Upgrade Expenditure is to be made and the
denominator of which is the. Price Index in effect
as of the date hereof. The term "Price Index"
means the Consumer Price
81
Index for Urban Wage Earners and Clerical Workers,
All Items-Series A (1982-84=100), published by the
Bureau of Labor Statistics, U.S. Department of
Labor. If the Bureau of Labor Statistics should
cease to publish such Price Index in its present
form and calculated on the present basis, then the
most similar index published by the same Bureau
shall be used for the same purpose. If there is no
such similar index, a substitute index which is
then generally recognized as being similar to such
Price Index, such substitute index to be
reasonably selected by Lender.
APPROVAL DATE: As defined in Section 8.7.
ASSIGNMENT OF LEASES: As defined in Section 4.1.
BANKRUPTCY CODE: Subsection 365(h) of the United
States Bankruptcy Code, 11 U.S.C. Section 365(h),
as the same may hereafter be amended and including
any successor provision thereto.
BASE REVENUES: As defined in Section 3.8.
BORROWER: As defined in the preamble of this
Agreement and its successors and assigns.
BORROWING GROUP Collectively, the Borrower, the
Guarantor, the General Partner, any Lessee which
is an Affiliate of Borrower, and any Manager which
is an Affiliate of Borrower. .
BUSINESS DAY: Any day which is not a Saturday or a
Sunday or a public holiday under the laws of the
United States of America, the Commonwealth of
Massachusetts or the state in which the Lender's
depository bank is located.
CAPITAL ADDITION: Collectively, all new buildings
and additional structures annexed to any portion
of any of the Improvements and material expansions
of any of the Improvements which are constructed
on any portion of the Mortgaged Property during
the Term, including, without limitation, the
construction of a new wing or new story, the
renovation of any of the Improvements on the
Mortgaged Property and any expansion,
construction, renovation or conversion in
connection therewith (a) in order to provide a
functionally new facility that is needed or used
to provide services not previously offered or (b)
in order to (i) increase the bed capacity of a
Facility, (ii) change the purpose for which such
beds are utilized and/or (iii) change the
utilization of any material portion of any of the
Improvements.
CASH COLLATERAL: As defined in the Deposit Pledge
Agreement.
CASH FLOW: The Consolidated Net Income (or
Consolidated Net Loss), arising solely from the
operation of the Mortgaged Property, before
federal and state income taxes for any period ;
(a) the amount of the provision for depreciation
and amortization actually deducted on the books of
the applicable Person for the purpose of computing
such Consolidated Net Income (or Consolidated Net
Loss) for the period involved, (b) interest on the
Loan and on all payments with respect to all
Indebtedness and/or other obligations (including,
without limitation, management fees) which are
fully subordinated to the Loan, plus (c) any
indebtedness which is fully subordinated to the
Loan Obligations pursuant to the Affiliated Party
Subordination Agreement. .
CASUALTY: As defined in Section 82.
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CLOSING DATE: The date of this Agreement.
COLLATERAL: As defined in Section 4.3.
COMPETITIVE ACTIVITY: As defined in Section 6.10.
CONDEMNATION: As defined in Section 8.2.
CONSOLIDATED AND CONSOLIDATING: The consolidated
and consolidating accounts of the relevant Person
and its Subsidiaries in accordance with GAAP.
CONSOLIDATED FINANCIALS: For any fiscal year or
other accounting period for any Person and its
consolidated Subsidiaries, statements of earnings
and retained earnings and of changes in financial
position for such period and for the period from
the beginning of the respective fiscal year to the
end. of such period and the related balance sheet
as at the end of such period, together with the.
notes thereto, all in reasonable detail and
setting forth in comparative form the
corresponding figures for the corresponding period
in the preceding fiscal year, and prepared in
accordance with GAAP, and disclosing all
liabilities of such Person and its consolidated
subsidiaries, including, without limitation,
contingent liabilities. .
CONSULTANTS: Collectively, the architects,
engineers, inspectors, surveyors and other
consultants that are engaged, from time to time,
by the Lender to perform services for the Lender
in connection with the Loan.
CONTRACTS: As defined in the Mortgage.
CURRENT ASSETS: All assets of any Person which
would, in accordance with GAAP, be classified as
current assets.
CURRENT LIABILITIES: All liabilities of any Person
which would, in accordance with GAAP, be
classified as current liabilities.
CURRENT RATE: As defined in Section 3.6.
DEBT COVERAGE RATIO : The ratio of (a) Cash Flow
for each applicable period to (b) the total of all
interest and principal amortization (excluding
Additional Interest) required under all
Indebtedness paid or payable under the Note during
such period or accrued for such period.
DECLARATION: As defined in Section 12.13.
DEPOSIT PLEDGE AGREEMENT: As defined in Section
4.1.
DOLLARS: Lawful money of the United States of
America.
EARNINGS BEFORE INTEREST AND TAXES: The
Consolidated Net Income (or Consolidated Net Loss)
for any period, plus (a) all federal and state
income taxes (but not taxes in the nature of an ad
valorem property tax or a sales tax or an excise
tax) paid or accrued with respect to such period,
plus (b) all interest on any Indebtedness paid or
payable during such period.
ENVIRONMENTAL INDEMNITY AGREEMENT: As defined in
Section 4.1.
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ENVIRONMENTAL LAWS: As defined in the
Environmental Indemnity Agreement.
ERISA: The Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT: As defined in Section 10.
EXCESS GROSS REVENUES: As defined in Section
3.8.03.
FACILITY: As defined in Section 1.2.
FAILURE TO OPERATE: As defined in Section 10.
FAILURE TO PERFORM: As defined in Section 10.
FINANCING PARTY: Any Person who is or may be
participating with Lender in any way in connection
with the financing of any Capital Addition.
FINANCING STATEMENTS: Uniform Commercial Code
financing statements evidencing the security
interests granted to the Lender in connection with
the Loan.
FLEET: Fleet Bank of Connecticut, N.A.
GAAP: Generally accepted accounting principles,
consistently applied throughout the relevant
period.
GENERAL PARTNER: ESC G.P. I, Inc.
GOVERNMENTAL AUTHORITIES: Collectively, all
agencies, authorities, bodies, boards,
commissions, courts, instrumentalities,
legislatures and offices of any nature whatsoever
for any government unit, quasi-government or
political subdivision, whether federal, state,
county, district, municipal, city or otherwise,
and whether now or hereafter in existence.
GROSS REVENUES: Collectively, all revenues
generated by reason of the operation of the
Mortgaged Property (including Capital Additions),
directly or indirectly received or to be received
by the Borrower or any Affiliates of Borrower,
including, without limitation, all resident
revenues received or receivable for the use of, or
otherwise by reason of all rooms, units and other
facilities provided, meals served, services
performed, space or facilities subleased or goods
sold on or from the Mortgaged Property, including,
without limitation, except as otherwise
specifically provided below,
any consideration received under any subletting,
licensing or other arrangements with any Person
relating to the possession or use of any portion
of the Mortgaged Property and all revenues from
all. ancillary services provided at and/or
relating to the Mortgaged Property; provided,
however, that Gross Revenues shall not include non-
operating revenues such as interest income or gain
from the sale of assets not sold in the ordinary
course of business; and provided, further, that
there shall be excluded or deducted (as the case
may be) from such revenues:
A. all applicable contractual
allowances (relating to any period during the
Term and thereafter until the principal
indebtedness hereunder is paid in full) for
billings not paid by or received from the
appropriate Governmental Authorities or Third
Party Payors,
84
B. all applicable allowances according
to GAAP for uncollectible accounts,
C. all proper resident billing credits
and adjustments according to GAAP relating to
health care accounting,
D. federal, state or local sales, use,
gross receipts and excise taxes and any tax
based upon or measured by said Gross Revenues
which is added to or made a part of the
amount billed to the resident or other
recipient of such services or goods, whether
included in the billing or stated separately,
E. provider discounts for hospital or
other medical facility utilization contracts,
if any,
F. the cost, if any, of any special
federal, state or local governmental program
imposed specially to provide or finance
indigent resident care (other than Medicare,
Medicaid and the like), .
G. deposits refundable to residents of
the Facility, and
H. payments received on behalf of, and
paid to, persons who are not Affiliates of
Borrower.
To the extent that the Mortgaged Property is
leased or occupied by an Affiliate of Borrower,
Gross Revenues calculated for all purposes of this
Agreement (including, without limitation, the
determination of the Additional Interest payable
under this Agreement) shall include the Gross
Revenues of such lessee with respect to the
premises demised under the applicable lease (i.e.,
the Gross Revenues generated from the operations
conducted on such leased portion of the Mortgaged
Property) and the rent received or receivable from
such lessee pursuant to such leases shall be
excluded from Gross Revenues for all such
purposes. As to any lease between Borrower and a
non-Affiliate of Borrower, only the rental
actually received by Borrower from such non-
Affiliate shall be included in Gross Revenues.
GROUP FOUR ACQUISITION FACILITIES: As defined in
the Agreement Regarding Related Transactions.
GUARANTOR: Emeritus Corporation, a Washington
corporation and its successors and assigns.
GUARANTY: As defined in Section 4.1.
HAZARDOUS SUBSTANCES: As defined in the
Environmental Indemnity Agreement.
IMPOSITIONS: As defined in Section 6.20.01.
IMPROVEMENTS: Collectively, all buildings and
other improvements now or hereafter located on the
Land.
INDEBTEDNESS: The total of all obligations of a
Person whether current or long-term, which in
accordance with GAAP would be included as
liabilities upon such Person's balance sheet at
the date as of which Indebtedness is to be
determined, and shall also include (a) all capital
lease obligations and (b) all guaranties,
endorsements (other than
85
for collection of instruments in the ordinary
course of business) or other arrangements whereby
responsibility is assumed for the obligations of
others, whether by agreement to purchase or
otherwise acquire the obligations of others,
including any agreement, contingent or otherwise,
to furnish funds through the purchase of goods,
supplies or services for the purpose of payment of
the obligations of others.
INDEMNIFIED PARTIES: Collectively, the Meditrust
Entities and their respective successors, assigns,
employees, servants, agents, attorneys, officers,
directors, shareholders, partners and owners.
INSURANCE REQUIREMENTS: All terms of any insurance
policy required by this Agreement, all
requirements of the issuer of any such policy with
respect to the Mortgaged Property and the
activities conducted thereon and the requirements
of any insurance board, association or
organization or underwriters' regulations
pertaining to the Mortgaged Property.
INTEREST RATE: As defined in the Note.
LAND: As defined in Section 1.2.
LATE PAYMENT: As defined in Section 3.7.
LATE PAYMENT CHARGES: As defined in the Section
3.7.
LEASES: Collectively, all leases, subleases,
licenses, agreements, concession agreements,
tenancy at will agreements, room rentals and
rentals of other facilities of the Mortgaged
Property and all other occupancy agreements of
every kind and nature (but excluding Resident
Agreements), whether oral or in writing, now in
existence or subsequently entered into by the
Borrower, encumbering or affecting all or any
portion of the Mortgaged Property.
LEGAL REQUIREMENTS: Collectively, all statutes,
ordinances, by-laws, codes, rules, regulations,
restrictions, orders, judgments, decrees, and
injunctions (including, without limitation, all
applicable building, health code, zoning,
subdivision and other land use and assisted living
licensing statutes, ordinances, by-laws, codes,
rules and regulations), whether now or hereafter
enacted, promulgated or issued by any Governmental
Authority, Accreditation Body or Third Party Payor
affecting the Lender, any member of the Borrowing
Group or the Mortgaged Property or the ownership,
construction, development, maintenance,
management, repair, use, occupancy, possession or
operation thereof or the operation of any programs
or services in connection with the Mortgaged
Property, including, without limitation, . any of
the foregoing which may (i) require repairs,
modifications or alterations in or to the
Mortgaged Property, (ii) in any way affect
(adversely or otherwise) the use and enjoyment of
the Mortgaged Property or (iii) require the
assessment, monitoring, clean-up, containment,
removal, remediation or other treatment of any
Hazardous Substances on, under or from the
Mortgaged Property. Without limiting the
foregoing, the term Legal Requirements includes
all Environmental Laws and shall also include
Permitted Encumbrances and all Permits and
Contracts issued by or entered into with any
Governmental Authority, Accreditation Body and/or
Third Party Payor.
LENDER: As defined in the preamble of this
Agreement and its successors and assigns.
LENDER'S ADDRESS: 197 First Avenue, Needham
Heights, MA 02194 or such other address as the
Lender shall designate in writing.
86
LESSEE: Any lessee, sublessee, licensee,
concessionaire, tenant or other occupant under any
of the Leases, but excluding any resident of the
Facility under any Resident Agreement.
LIEN: With respect to any real or personal
property, any mortgage, easement, restriction,
lien, pledge, collateral assignment,
hypothecation, charge, security interest, title
retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of
any kind in respect of such property, whether or
not inchoate, vested or perfected.
LIMITED PARTIES: As defined in Section 6.10;
provided, however, in no event shall the term
Limited Parties include any Person in its capacity
as a shareholder of a public entity, unless such
shareholder is a member of the Borrowing Group or
an Affiliate of any member of the Borrowing Group.
LOAN: As defined in Section 1.8.
LOAN AMOUNT: As specified in Section 3.1.
LOAN DEFAULT: The occurrence of a default or
breach of condition continuing beyond the
expiration of any applicable notice and/or grace
period, if any, under the terms of any of the Loan
Documents.
LOAN DOCUMENTS : As defined in Section 4.1.
LOAN OBLIGATIONS: As defined in Section 4.2.
LOAN YEAR: A twelve-month period ending on
September 30 of each year; provided, however, the
final Loan Year shall end at the end of the Term.
MANAGED CARE PLANS: All health maintenance
organizations, preferred provider organizations,
individual practice associations, competitive
medical plans and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement, whether
written or oral, now existing or hereafter entered
into, between the Borrower or any Lessee and any
other Person pursuant to which the Borrower or
such Lessee provides any payment, fee or other
consideration to any other Person to operate or
manage the Facility.
MANAGER: Any Person who has entered into a
Management Agreement with the Borrower.
MATERIAL STRUCTURAL WORK. Any (i) structural
alteration, (ii) structural repair, or (iii)
structural renovation to the Mortgaged Property,
which would customarily require or which require
the design and/or involvement of a structural
engineer or architect or which would require the
issuance of a Permit.
MATURITY DATE: As defined under the Note.
MEDICAID: The medical assistance program
established by Title XIX of the Social Security
Act (42 USC Section 1396 et seq.) and any statute
succeeding thereto.
87
MEDICARE: The health insurance program for the
aged and disabled established by Title XVIII of
the Social Security Act (42 USC Section 1395 et
seq.) and any statute succeeding thereto.
MEDITRUST: As defined in Section 12.13.
MEDITRUST ENTITIES: Collectively, Meditrust, the
Lender and any other Affiliate of the Lender which
may now or hereafter be a party to any Related
Party Agreement.
MONTHLY TAX DEPOSIT DATE: As defined in Section
6.20.02.
MORTGAGE: As defined in Section 4.1.
MORTGAGED PROPERTY: As defined in the Mortgage.
NET INCOME (OR NET LOSS): The net income (or net
loss, expressed as a negative number) of a Person
for any period, after all taxes actually paid or
accrued and all expenses and other charges
determined in accordance with GAAP.
NET WORTH: An amount determined in accordance with
GAAP equal to the total assets of any Person,
minus the total liabilities of such Person,
provided, however, that for purposes of
calculating the Net Worth of the Guarantor, those
certain Thirty Two Million Dollars ($32,000,000)
of 6.25% convertible, unsecured, subordinated
debentures due in 2006, which were issued by the
Guarantor on February 15, 1996, shall not be
included in total liabilities.
NOTE: As defined in Section 3.2.
OBLIGATIONS: Collectively, the Loan Obligations
and the Related Party Obligations.
OTHER PERMITTED USES: To the extent permitted
under Applicable Legal Requirements and under
Insurance Requirements, and so long as the same do
not detract in any material manner from the
Primary Intended Use and do not occupy any more
than ten percent (l0%) of the usable floor area
of the building comprising the Facility such uses
as Borrower reasonably determines are appropriate
and incidental to the Primary Intended Use.
PBGC: Pension Benefit Guaranty Corporation.
PERMITS: As defined in the Mortgage.
PERMITS ASSIGNMENT: As defined Section 4.1.
PERMITTED ENCUMBRANCES: As defined in Section
5.1.12.
PERSON: Any individual, corporation, general
partnership, limited partnership, stock company or
association, joint venture, company, trust, bank,
trust company, land trust, business trust,
unincorporated association, unincorporated
organization, Governmental Authority or any other
entity of any kind or nature.
PERSONAL PROPERTY: As defined in the Mortgage.
PLANS AND SPECIFICATIONS: As defined in Section
8.2.
88
PLEDGE AGREEMENT: As defined in Section 4.1.
PREPAYMENT FEE: As defined in Section 3.6.
REPAYMENT NOTICE: As defined in Section 3.6.
PRIMARY INTENDED USE: The use of the Facility as
an assisted living facility with 72 units and 81
licensed beds or such additional number of beds as
may hereafter be permitted under this Agreement,
and such ancillary uses as are permitted by
applicable law and may be necessary in connection
therewith or incidental thereto.
PRIME RATE: The variable rate of interest per
annum from time to time announced by
Fleet, as its prime rate of interest and in the
event that Fleet no longer announces a prime rate
of interest, then the Prime Rate shall be deemed
to be the variable rate of interest per annum
which is the prime rate of interest or base rate
of interest from time to time announced by any
other major bank or other financial institution
reasonably selected by the Lender.
PRINCIPAL PLACE OF BUSINESS: As specified in
Section 5.1.20.
PROPOSED PROPERTY: As defined in Section 14.2.
PROVIDER AGREEMENTS: All participation, provider
and reimbursement agreements or arrangements now
or hereafter in effect for the benefit of the
Borrower or any Lessee in connection with the
operation of the Facility relating to any right of
payment or other claim arising out of or in
connection with the Borrower's or such Lessee's
participation in any Third Party Payor Program.
PURCHASER: Any Person to whom title to the
Mortgaged Property is transferred by reason of the
Lender's exercise of rights granted under any of
the Loan Documents, including, without limitation,
the exercise of the power of sale under the
Mortgage, any other foreclosure of the Mortgage or
any other proceeding brought to enforce the rights
of the holder of the Mortgage, by deed in 1-ieu of
foreclosure or by any other method.
REAL PROPERTY: As defined under the Mortgage.
RECEIVABLES: Collectively, (i) all rights to
payment for goods sold or leased or services
rendered by Borrower or any other party, whether
now in existence or arising from time to time
hereafter and whether or not yet earned by
performance, including, without limitation,
obligations evidenced by an account, note,
contract, security agreement, chattel paper, or
other evidence of indebtedness, including Accounts
and Proceeds, and (ii) a license to use such
Instruments, Documents, Accounts, Proceeds,
General Intangible and Chattel Paper as are
reasonably required for purposes of exercising the
rights set forth in (i) above.
RELATED PARTIES : Collectively, each Person that
may now or hereafter be a party to any Related
Party Agreement other than the Meditrust Entities.
RELATED PARTY AGREEMENT: Any agreement, document
or instrument now or hereafter evidencing or
securing any Related Party Obligation.
89
RELATED PARTY DEFAULT: The occurrence of a default
or breach of condition continuing beyond the
expiration of any applicable notice and grace
periods, if any, under the terms of any Related
Party Agreement.
RELATED PARTY OBLIGATIONS: Collectively, all
indebtedness, covenants, liabilities, obligations,
agreements and undertakings due to, or made for
the benefit of, the Lender or any of the other
Meditrust Entities by the Borrower or any other
member of the Borrowing Group or any of their
respective Affiliates in connection with any of
the properties described in Exhibit F to the
Agreement Regarding Related Transactions, as the
same may be modified and amended from time to
time; whether such indebtedness, covenants,
liabilities, obligations, agreements and/or
undertakings are direct or indirect, absolute or
contingent, liquidated or unliquidated, due or to
become due, joint, several or joint and several,
primary or secondary, now existing or hereafter
arising.
RENT INSURANCE PROCEEDS: As defined in Section
8.8.
RENTS: As defined in the Mortgage.
RENOVATION ESCROW AGREEMENT: As defined in Section
4.1:
RESIDENT AGREEMENT: All contracts, agreements and
consents executed by or on behalf of any resident
or other Person seeking services at the Facility,
including, without limitation, assignments of
benefits and guarantees.
RETAINAGE: As defined in Section 8.2.
SECURED PROPERTY: As defined in Section 14.1.
SUBSIDIARY OR SUBSIDIARIES: With respect to any
Person, any corporation or other entity of which
such Person, directly, or indirectly, through
another entity or otherwise, owns, or has the
right to control or direct the voting of, fifty
percent (50%) or more of the outstanding capital
stock or other ownership interest having general
voting power (under ordinary circumstances).
SUBSTITUTION DATE: As defined in Section 14.1.
SUBSTITUTION DOCUMENTS: As defined in Section 14.1
SUBSTITUTION NOTICE: As defined in Section 14.1
SUBSTITUTION RIGHT: As defined in Section 14.1
TAKING: A taking or voluntary conveyance of the
Mortgaged Property, or any interest therein or
right accruing thereto, or use thereof, as the
result of, or in settlement of, any Condemnation
or other eminent domain proceeding affecting the
Mortgaged Property whether or not the same shall
have actually been commenced.
TERM: The period from the Closing Date through the
Maturity Date or any Extended Maturity Date, as
the case may be.
THIRD PARTY PAYOR PROGRAMS: Collectively, all
third party payor programs in which the Borrower
presently or in the future may participate,
including, without
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limitation, Medicare, Medicaid, Blue Cross and/or
Blue Shield, Managed Care Plans, other private
insurance programs and employee assistance
programs.
THIRD PARTY PAYORS: Collectively, Medicare,
Medicaid, Blue Cross and/or Blue Shield, private
insurers and any other Person which presently or
in the future maintains Third Party Payor
Programs.
TITLE COMPANY: As defined in Section 14.2
TITLE POLICY: As defined in Section 13.7.
UCC: Uniform Commercial Code as adopted in the
State of Texas.
UNAVIODABLE DELAYS : Delays due to strikes,
lockouts, inability to procure materials, power
failure, acts of God, Governmental restrictions,
enemy action, civil commotion, fire, unavoidable
casualty or other causes beyond the control of the
party responsible for performing an obligation
hereunder, provided that lack of funds shall not
be deemed a cause beyond the control of any party
hereto.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: By reason
of Casualty or Taking, in the good faith judgment
of Lender, the Facility cannot be operated on a
commercially practicable basis for the Primary
Intended Use, taking into account, among other
relevant factors, the number of usable units or
beds affected by such Casualty or Taking.
UPGRADE RENOVATIONS: Repair and refurbishing other
than normal janitorial, cleaning and maintenance
activities.
WORK: As defined in Section 82.
WORK CERTIFICATES: As defined in Section 8.2.
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