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EXHIBIT 10.19
FORM OF LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of by and
among (the "Borrower"), BALANCED CARE CORPORATION,
a Delaware corporation (the "Guarantor") and MEDITRUST MORTGAGE INVESTMENTS,
INC., a Delaware corporation (the "Lender").
1. BACKGROUND
1.1 THE BORROWER.
The Borrower is a corporation which is a wholly-owned Subsidiary of
the Guarantor.
1.2 THE FACILITY AND THE LAND.
The Borrower is the owner of the community based residential
facilities identified on EXHIBIT K (collectively, the "Facilities" and singly a
"Facility") situated on those certain parcels of land in the locations set
forth on EXHIBIT K, and more particularly described on EXHIBIT A (collectively,
the "Land").
1.3 USE OF LOAN PROCEEDS.
In order to finance the acquisition of the Land and the Facilities and
expenses related thereto, the Borrower has applied to the Lender for a
DOLLAR ($ ) 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.
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3. LOAN PROVISIONS.
3.1 AMOUNT OF LOAN.
The Loan shall be in the amount of __________________________________
________________________DOLLARS ($_________) (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 by the Lender to any obligations of the Borrower
under the Loan Documents 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 2:00 p.m. local time in Boston,
Massachusetts 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; provided, 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
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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.
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 Documents and an acceleration of the
indebtedness due thereunder. The Borrower shall have the right, at any time
during the Term, to prepay the entire outstanding principal balance of the
Loan, provided, that, the Borrower furnishes the Lender with at least ninety
(90) days' prior written notice of its intent to prepay (the "Prepayment
Notice"), and provided, further, that the Borrower pays to the Lender (upon the
specific date for prepayment which shall be identified in the Prepayment
Notice), 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 (as hereinafter defined) 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 without the prior written consent of the Lender, which consent
may be withheld in the Lender's sole and absolute discretion. Once given, the
Prepayment Notice shall be irrevocable and the failure to make prepayment of
the Loan in accordance with the Prepayment Notice shall be an Event of Default
hereunder.
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)
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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 partial 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.
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 Mortgage 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");
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I. a Pledge Agreement of even date by and among the Borrower,
the Lender and the Guarantor, pursuant to which the Guarantor
granted the Lender a security interest in all of the
outstanding capital stock of the Borrower (the "Pledge
Agreement") and related stock powers;
J. an Affiliated Party Subordination Agreement of even date by
and among the Borrower, the Guarantor and the Lender (the
"Affiliated Party Subordination Agreement");
K. Warrant of even date issued by the Guarantor to the Lender to
purchase ______ shares of capital stock of the Guarantor (the
"Warrant"); and
L. all other documents, instruments, or agreements now or
hereafter evidencing and/or securing the Loan.
Items (A) through (L) 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").
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;
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F. a perfected first priority security interest in all of the
outstanding capital stock of the Borrower pursuant to the
Pledge Agreement;
G. a perfected first priority interest in the Cash Collateral
pursuant to the Deposit Pledge Agreement;
H. all other security interests in such other property for which
provision is made in the Loan Documents or at law or in
equity; and
I. certain other Related Party Agreements.
All of the property in which security interests are granted (I) as described in
items (A) through (I) 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, (B) lease tangible personal property from equipment lessors,
and (C) grant a priority security interest in Receivables to an institutional
lender which is providing a working capital line of credit for the exclusive
use of the Facilities, as long as in each instance: (I) the secured party or
equipment lessor enters into an intercreditor agreement with, and satisfactory
to, the Lender, pursuant to which, without limiting the foregoing, (X) the
Lender shall be afforded the option of curing defaults and the option of
succeeding to the rights of the Borrower and (Y) the Lender's security interest
in tangible personal property and/or Receivables as applicable, shall be
subordinated to the security interest granted to such secured party, (II) all
the terms, conditions and provisions of the financing, security interest or
lease are reasonably acceptable to the Lender, (III) the 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 (IV) no such security interest, financing agreement or lease is
cross-defaulted or cross-collateralized with any other obligation.
Notwithstanding the foregoing, the Borrower may lease, or grant purchase money
security interests in, new items of tangible personal property having an
aggregate cost during the Term in an amount not to exceed TWO HUNDRED THOUSAND
DOLLARS ($200,000) without complying with the foregoing requirements, provided
that the Borrower shall provide the Lender with a true and complete copy, as
executed, of each purchase money security agreement, related financing document
and equipment lease, and all amendments thereto. Security interests granted by
the Borrower in full compliance with the provisions of this Section are
referred to as "Permitted Prior Security Interests".
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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 corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware . The Borrower has all requisite corporate power to
own and operate its properties and to carry on its business
as now conducted and as is proposed to be conducted and is
duly qualified to transact business and is in good standing
in each jurisdiction where such qualification is necessary 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. EXHIBIT
C attached hereto contains a true and correct list of all of
the shareholders of the Borrower and their respective
ownership interests in the Borrower;
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;
5.1.02 BUSINESS OF THE BORROWER.
The Borrower is, and during the entire time that this
Agreement remains in force and effect the Borrower and each Lessee
shall be, engaged in no business, trade or activity other than the
operation of each Facility for its Primary Intended Use. The fiscal
year of the Borrower is June 30;
5.1.03 NO VIOLATIONS.
The execution, delivery and performance of the Loan Documents
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 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;
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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 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 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.
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. No member of the Borrowing Group is a party to any
agreement, the terms of which now have or, as far as
can be reasonably foreseen, may have a material
adverse effect on its respective financial condition
or business or on the operation of the Mortgaged
Property;
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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);
iii. will own property having a value both at
fair valuation and at present fair
saleable value greater than the amount
required to pay its debts as they become
due; and
iv. 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 material
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;
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;
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5.1.09 ACCURACY OF FINANCIAL STATEMENTS AND OTHER INFORMATION.
A. The financial statements of each member of the
Borrowing Group and of each Facility that were given
to the Lender in connection with the making of the
Loan were true, complete and accurate, in all
material respects, and fairly presented the
financial condition of each member of the Borrowing
Group as of the date thereof and for the periods
covered thereby, having been prepared in material
accordance with GAAP and such financial statements
disclosed all material liabilities (including,
without limitation, contingent liabilities) of each
such member of the Borrowing Group. There has been
no material adverse change since such date with
respect to the Tangible Net Worth or liquidity of
any 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. The 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 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 any Facility and (II) no material
depletion of their cash or decrease in their working
capital;
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, may
materially adversely affect the business,
properties, assets or condition, financial or
otherwise, of any member of the Borrowing Group or
any Facility;
5.1.10 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)
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against or affecting the Mortgaged Property or any
member of the Borrowing Group (or any Affiliate
thereof) before any Governmental Authority,
Accreditation Body or Third Party Payor 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 or
which may materially adversely impact reimbursement
to any member of the Borrowing Group for services
rendered to beneficiaries of Third Party Payor
Programs;
B. None of the Facilities and no member of the
Borrowing Group has received any notice of any
claim, requirement or demand of any Governmental
Authority, Accreditation Body, Third Party Payor or
any insurance body having or claiming any licensing,
certifying, supervising, evaluating or accrediting
authority over any Facility to rework or redesign
any Facility, 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 such
Facility conform to or comply with any Legal
Requirement;
C. The most recent utilization reviews relating to each
Facility by all applicable Third Party Payors,
Accreditation Bodies and 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 units or
programs at any Facility. No claims or assertions
have been made in any utilization review that any of
the practices or procedures used at any Facility are
improper or inappropriate other than such claims or
assertions which singly and in the aggregate will
not have a material adverse impact on any Facility;
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 or Accreditation Body
during the most recent licensing period, together
with all plans of correction relating thereto;
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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 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, Accreditation Body or Third Party Payor
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 Facilities are located, which may materially
adversely affect rates at any Facility (or any
program operated in conjunction with any Facility)
or may result in the likelihood of increased
competition at any Facility or the imposition of
Medicaid, Medicare, charity, free care, welfare or
other discounted or government assisted residents at
any Facility or require that the Borrower or any
Facility obtain a certificate of need, Section 1122
approval or the equivalent, which the Borrower or
such Facility does not currently possess;
D. The Facilities are licensed by the Wisconsin
Department of Health and Social Services and there
are no deficiencies in either the Mortgaged Property
or any services provided at any Facility that would
prevent the renewal of the licensure of any Facility
by the Wisconsin Department of Health and Social
Services after its next regularly scheduled
inspections;
5.1.12 PROPERTY MATTERS.
A. The Mortgaged Property is free and clear of all
Liens and Leases (other than Residence Agreements),
except (i) those Liens to which the Mortgage and the
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 (collectively referred to herein as
the "Permitted Encumbrances") and (ii) the Liens
that were listed on the UCC
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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 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;
C. To the actual knowledge of the Borrower, no part of
the Collateral has been damaged by fire or other
casualty. Each 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 Facilities 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 Facilities 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; and
G. Each lot comprising a portion of the Mortgaged
Property on which a Facility is located abuts on and
has direct vehicular access to a public road or has
access to a public road via permanent, irrevocable,
appurtenant easements;
H. Each lot comprising a portion of the Mortgaged
Property on which a Facility is located constitutes
a separate parcel for real estate tax purposes and
no portion of any real property that does not
constitute a portion of
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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
each Facility are available to the lot lines of that
portion of the Mortgaged Property on which each such
Facility is located:
(i) in sufficient supply and capacity;
(ii) through validly created and existing
easements of record appurtenant to or
encumbering that portion of the Mortgaged
Property on which such Facility is located
(which easements shall not impede or
restrict the operation of any 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. The Borrower has made no structural alterations or
renovations to any Facility that altered the
foot-print of any Improvement, added an additional
story to any Improvement, 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 any
Facility or decrease in parking during such period.
5.1.13 THIRD PARTY PAYOR AGREEMENTS.
A. The Borrower or each of the Facilities is fully
qualified as a provider of services under and
participate in all Third Party Payor Programs and
referral programs as are necessary for the prudent
operation of the Facilities in the good faith
exercise of commercially reasonable business
judgment;
B. Attached hereto as EXHIBIT E is a list of national
accounts and local discount agreements, which
constitute all of the agreements between the
Borrower or any Facility, on the one hand, and Third
Party Payors on the other hand, pursuant to which
the Borrower or any Facility agrees to provide
services based on a discount factor from the rates
regularly charged for services rendered by the
Borrower or such Facility;
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15
C. No member of the Borrowing Group, nor any Facility
has any rate appeal currently pending before any
Government Authority or any administrator of any
Third Party Payor Program or referral source other
than such appeals which, if determined adversely to
any member of the Borrowing Group or any Facility
would not have a materially adverse effect, either
singly or in the aggregate, on the financial
condition of any member of the Borrowing Group or
any Facility;
D. All cost reports and financial reports submitted to
any Third Party Payor with respect to any Facility
by any member of the Borrowing Group have been
materially accurate and complete and have not been
misleading in any material respect. As a result of
any audits by any Third Party Payor, there are no
related recoupment claims made or contests pending
or threatened other than such recoupment claims or
contests which, if determined adversely to any
member of the Borrowing Group or any Facility, would
not have a materially adverse effect, either singly
or in the aggregate, on the financial condition of
any member of the Borrowing Group or any Facility.
As of the date hereof, no cost reports for any
Facility remain open or unsettled other than those
listed on EXHIBIT F; ---------
5.1.14 RATE RESTRICTIONS AND LIMITATIONS.
The state where the Facilities are located currently imposes
no restrictions or limitations on rates which may be charged to
private pay residents receiving services at the Facilities, except as
set forth on EXHIBIT G;
5.1.15 FREE OR SUBSIDIZED PATIENT CARE.
Except as disclosed on EXHIBIT H attached hereto, there are
no Contracts, Permits or Legal Requirements which require that a
percentage of beds or slots in any program at any Facility be reserved
for Medicaid or Medicare eligible patients or that any Facility
provide a certain amount of welfare, free or charity care or
discounted or government assisted 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;
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16
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:
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;
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5.1.21 PRINCIPAL PLACE OF BUSINESS.
The principal place of business and chief executive office of
the Borrower is located at __________________________________________
__________________ (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 any
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;
and
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 each 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.
5.2 REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
In order to induce the Lender to make the Loan, the Guarantor
represents and warrants to the Lender that:
5.2.01 FORMATION AND AUTHORITY OF THE GUARANTOR.
A. The Guarantor is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Delaware. The Guarantor has all
requisite corporate power to own and operate its
properties and to carry on its business as presently
conducted and as proposed to be
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18
conducted and is duly qualified to do business and
is in good standing in each jurisdiction where such
qualification is necessary or desirable in order to
carry out its business as now conducted and as
proposed to be conducted; and
B. The Guarantor is duly authorized to make and enter
into all of the Loan Documents to which the
Guarantor is a party and to carry out the
transactions contemplated therein. All of the Loan
Documents to which the Guarantor is a party have
each been duly executed and delivered by the
Guarantor, and each is a legal, valid and binding
obligation of the Guarantor, enforceable in
accordance with its terms;
5.2.02 THE BORROWER AS SUBSIDIARY.
The Borrower is a wholly-owned subsidiary of the Guarantor;
5.2.03 NO VIOLATIONS.
The execution, delivery and performance of the Loan Documents
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 result in default or acceleration of, any
obligation of the Guarantor 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 the Guarantor is a party or by which the Guarantor
may be bound or affected and do not violate or contravene any Legal
Requirement;
5.2.04 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 Guarantor's execution, delivery and
performance of its obligations under the Loan Documents to which it is
a party 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
such Loan Documents and/or the first priority of any Liens granted
thereunder;
5.2.05 FINANCIAL CONDITION.
A. The Guarantor 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
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proceedings, pending or, to the best of the
Guarantor's knowledge and belief, threatened:
i. against or affecting the Guarantor which,
if adversely resolved against the
Guarantor would materially adversely
affect the ability of the Guarantor to
perform its obligations under the Loan
Documents to which it is a party;
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. After giving effect to the consummation of the Loan,
the Guarantor:
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);
iii. will own property having a value both at
fair valuation and at present fair
saleable value greater than the amount
required to pay its debts as they become
due; and
iv. will not be rendered insolvent as
determined by applicable law;
C. The Guarantor is not a party to any agreement, the
terms of which now have or, as far as can be
reasonably foreseen, may have a material adverse
effect on its financial condition or business or on
the operation of any Facility;
D. The Guarantor is not delinquent or claimed to be
delinquent under any material obligation for the
payment of borrowed money;
5.2.06 COMMERCIAL ACTS.
The Guarantor's performance of and compliance with the
obligations and conditions set forth herein and the other Loan
Documents to which it is a party will constitute commercial acts done
and performed for commercial purposes;
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5.2.07 FILING OF TAX RETURNS.
The Guarantor 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 the
Guarantor. No tax liability has been asserted by the Internal Revenue
Service against the Guarantor 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;
5.2.08 ACCURACY OF FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements of the Guarantor given to the Lender
in connection with the making of the Loan were true, complete and
accurate and fairly presented the financial condition of the Guarantor
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 the Guarantor. There has been no material adverse
change since such date with respect to the Tangible Net Worth or
liquidity of the Guarantor or with respect to any other matters
referred to or contained therein and no additional material
liabilities (including, without limitation, contingent liabilities) of
the Guarantor have arisen or been incurred since such date. The
projections heretofore delivered to the Lender continue to be
reasonable (with respect to the material assumptions upon which such
projections are based) and the Guarantor reasonably anticipates the
results projected therein will be achieved, there having been (A) no
material adverse change in the business, assets or condition,
financial or otherwise of the Guarantor or (B) no material depletion
of the Guarantor's cash or decrease in working capital;
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.
For each fiscal quarter, the Borrower shall maintain, with
respect to the Mortgaged Property, a Debt Coverage Ratio equal to or
greater than 1.25 to 1;
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21
6.1.02 THE GUARANTOR'S ASSETS.
Throughout the Term, the Guarantor shall maintain a ratio of
Consolidated Current Assets to Consolidated Current Liabilities equal
to or greater than 1 to 1;
6.1.03 THE GUARANTOR'S NET WORTH.
The Guarantor shall maintain a Tangible Net Worth equal to or
greater than (A) FIVE HUNDRED THOUSAND DOLLARS ($500,000) from the
date hereof through June 30, 1997, (B) SEVEN HUNDRED FIFTY THOUSAND
DOLLARS ($750,000) from July 1, 1997 through June 30, 1998 and (C) ONE
MILLION DOLLARS ($1,000,000) from July 1, 1998 through the end of the
Term.
6.1.04 LIABILITY FOR BORROWED MONEY.
The Borrower shall not 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 FIVE HUNDRED THOUSAND DOLLARS ($500,000) incurred, for
the exclusive use of the Facilities, 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 (E) liability arising under a working capital
line of credit in an amount reasonably satisfactory to the Lender;
6.1.05 ASSUMPTION OF LIABILITY.
The Borrower shall not 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.
6.2 COLLECTION AND ENFORCEMENT COSTS.
Upon demand, the Borrower shall reimburse the Lender for all costs and
expenses, including, without limitation, attorneys' fees and expenses and court
costs, reasonably paid or 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
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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 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.
The Borrower shall furnish or shall cause to be furnished to the
Lender the following statements, information and other materials:
6.3.01 Within one hundred (100) days after the end of each of their
respective fiscal years:
A. a copy of the Consolidated Financials for each of
(i) the Guarantor (including the Borrower) and (ii)
any Lessee, for the preceding fiscal year, certified
and 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, the applicable Lessee and the
Guarantor, as the case may be (and, without limiting
anything else contained herein, the Consolidated
Financials for the Borrower and each Lessee 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, each Lessee and the Guarantor stating, to
the best of the signer's knowledge and belief after
making due inquiry, whether the Borrower, such
Lessee and the Guarantor, as the case may be, is in
default in the performance or observance of any of
the terms of any Lease or any of the Loan
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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
Borrower, the Guarantor or the applicable Lessee, as
the case may be, regarding the existence of any
reportable conditions or material weaknesses;
D. evidence satisfactory to Lessor that the Borrower
has fulfilled its obligation to make the Annual
Facility Upgrade Expenditure in accordance with the
terms of Section 6.24.
6.3.02 Within one hundred (100) 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 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 Within thirty (30) days after the end of each calendar month,
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 units available and total patient
days for such month) and resident mix breakdowns for each
patient day during such month (classifying residents by the
type of care required and source of payment).
6.3.04 Within twenty (20) days after the end of each of their
respective fiscal quarters, unaudited Consolidated Financials
for the Borrower and each Lessee certified as true and
correct by the Borrower or such Lessee, as the case may be;
6.3.05 Within thirty (30) days after the end of each of the
Borrower's fiscal quarters, a calculation showing compliance
or non-compliance, as the case may be, with the financial
covenants set forth in Section 6.1 hereof for the applicable
period;
6.3.06 Within fifty (50) days after the end of each of its fiscal
quarters, unaudited Consolidated Financials for the Guarantor
certified as true and correct by the Guarantor;
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6.3.07 At least thirty (30) days prior to the end of the fiscal year
for the Facilities, the Borrower, any Lessee and any Manager
shall submit a proposed financial and capital expenditures
budget for the Facilities for the next fiscal year and a
report detailing the capital improvements completed in the
immediately prior fiscal year;
6.3.08 Upon the issuance or execution thereof, as the case may be,
true and complete copies of all (A) Permits which constitute
operating licenses for the Facilities issued by any
Governmental Authority having jurisdiction over assisted
living or community based residential 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 Upon 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 Upon 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 or any Lessee 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 or such Lessee'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 or any Lessee;
6.3.11 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 or any Lessee to any Governmental
Authority, Accreditation Body or Third Party Payor with
respect to the Mortgaged Property;
6.3.12 Upon the completion or filing, mailing or other delivery
thereof, complete copies of all financial statements,
reports, notices and proxy statements,
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if any, sent by the Borrower to its shareholders and of all
reports, if any, filed by the Borrower with any securities
exchange or with the Securities Exchange Commission;
6.3.13 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, audited financial statements,
certificates and consents from accountants and any other
financial and licensing or operational information as may be
required or requested by any Governmental Authority;
6.3.14 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 Promptly 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 Promptly after receipt, a copy of all audits or reports
submitted to any member of the Borrowing Group independent
public accountants in connection with any annual, special or
interim audits of the books of any such member of the
Borrowing Group and, if requested by the Lender, any letter
of comments directed by such accountants to the management of
any such member of the Borrowing Group;
6.3.17 Within five (5) 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);
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C. any material controversy involving the Borrower or
any Lessee and (I) any Facility Administrator or
Facility employee of similar stature or (II) any
labor organization;
D. any controversy that calls into question the
eligibility of the Borrower, any Lessee or any
Facility for participation in any Third Party
Program;
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 have a
materially adverse effect on the financial condition
of the Borrower or any Lessee; and
F. any other development adversely affecting or which
may adversely affect the condition, financial or
otherwise, of any member of the Borrowing Group or
the Mortgaged Property;
6.3.18 Within ten (10) days after becoming aware of a claim by any
Person that the Borrower is in default of any agreement in
connection with the borrowing of money which may be allowed
hereunder, notice of any such claim or default; and
6.3.19 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.
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 does not in any way warrant or represent that such
information received from any member of the Borrowing Group shall remain
confidential, and, provided, further, that the Lender shall have the
unconditional right to (A) disclose any such information as the Lender deems
necessary or appropriate in connection
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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,
potential lenders and/or any other parties in connection with any capital
raising efforts or arrangements. The Lender shall not be liable in any way for
any subsequent disclosure of such information by any Person to whom the Lender
provided such information in accordance with the terms hereof. Nevertheless,
the Lender shall inform all recipients of any such information of the
confidential nature thereof. The Lender additionally 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, including, without limitation, any duly enacted
"Patients' ▇▇▇▇ of Rights" or similar legislation, including such limitations
as may be necessary to preserve the confidentiality of the facility-patient
relationship and the physician-patient privilege.
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
corporation under the laws of the state of its incorporation 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), 5.1.05(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, 5.1.22, 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 5.1.09(a), in the second and third sentences of
Section 5.1.13(d), in the third sentence of Section 5.2.01 (but only in
connection with the exercise by the Lender under the Warrant of its right to
become a shareholder of the Guarantor), 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.
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6.6 CONDUCT OF THE BORROWER'S BUSINESS.
The Borrower will maintain, and cause any Lessee and Manager to
maintain, 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
Facilities the Borrower and any Lessee shall not enter into any other business
or venture.
6.7 PRINCIPAL PLACE OF BUSINESS, LOCATION OF THE COLLATERAL.
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 documentation that it deems
necessary or desirable to obtain, maintain, perfect and confirm the first
priority security interests granted in the Loan Documents.
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 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 4.4 and Section 6.1.04(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 THIRTY-FIVE THOUSAND DOLLARS ($35,000),
individually, or ONE HUNDRED FIFTY THOUSAND DOLLARS
($150,000) 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
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the operation of the Facilities 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
Pledge Agreement and the Affiliated Party Subordination
Agreement, distributions and/or dividends to the Borrower's
shareholder(s);
B. permit the use of the Mortgaged Property or any Facility for
any purpose other than the Primary Intended Use; or
C. liquidate, dissolve or merge or consolidate with any other
Person.
The occurrence of any of the foregoing shall be deemed to be an Event
of Default.
6.8.02 RESTRICTIONS RELATING TO THE GUARANTOR.
Except as may otherwise be expressly provided herein or in any of the
other Loan Documents, the Guarantor 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, convey, assign, donate, sell,
mortgage or pledge any real or personal property or take any other action which
would have a materially adverse effect upon the Tangible Net Worth or general
financial condition of the Guarantor. Notwithstanding the foregoing, but
subject to the provisions of Section 6.1, the Guarantor may guaranty
obligations of any of its present or future Affiliates.
6.9 AFFILIATE TRANSACTIONS.
6.9.01 No member of the Borrowing Group 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 member's
business and upon fair and reasonable terms no less favorable
to such member 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 any Lessee 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
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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 or any Lessee 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.
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
Property 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, community based
residential facility, 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,
community based residential 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
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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 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 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.
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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.
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.
The Borrower shall not, without the prior written consent of the
Lender, in each instance, which consent may be withheld in the Lender's
reasonable discretion (A) change its fiscal year or capital structure or (B)
change, alter, amend or in any manner modify, except 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 nor will the Borrower permit any of its Subsidiaries to change
its fiscal year or suffer or permit any circumstance to exist in which any
Subsidiary is not wholly-owned, directly or indirectly, by the Borrower.
6.15 [INTENTIONALLY DELETED].
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 or set-off,
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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.
The Borrower shall participate in all Third Party Payor Programs
(which would be participated in by a prudent operator in the good faith
exercise of commercially reasonable judgement), in accordance with all
requirements thereof (including, without limitation, all applicable Provider
Agreements), and shall remain eligible to participate in all other Third Party
Payor Programs as shall be necessary for the prudent operation of the
Facilities in the good faith exercise of commercially reasonable business
judgment.
6.18 NO DEFAULT.
The Borrower shall not commit any default or breach, or permit a
default or breach by any of the Borrowing Group, under any of the Loan
Documents to continue beyond applicable grace periods.
6.19 [INTENTIONALLY DELETED].
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, without
deduction (except such discount as may be permitted
by law), defalcation or abatement, before the last
day on which the same may be paid without penalty or
interest, 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 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
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sale of the Mortgaged Property (without regard to
any law heretofore or hereafter enacted imposing
payment in whole or in part upon the Lender).
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 upon demand.
6.20.02 TAX DEPOSITS.
A. Upon an Event of Default hereunder, or an event
which, with the giving of notice or passage of time,
and/or both, would constitute an Event of Default,
at the option of the Lender at any time thereafter,
the Borrower shall deposit with the Lender, on the
first day of the calendar month immediately
following the Closing Date 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
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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. The Lender may, at its
election from time to time exercised, invest all or
part such deposits in one or more of the investment
vehicles described on Exhibit A to the Deposit
Pledge Agreement. 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. 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 penalty
and interest thereon. 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
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.
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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
and still 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.
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
receipt thereof by the Borrower.
6.20.03 CHANGE IN TAXES.
A. In the event any tax shall be due or become due and
payable to any Governmental Authority with respect
to the execution and delivery or recordation of 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 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. Furthermore, the aforesaid indemnification
agreement shall include, without limitation,
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
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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 Section 6.20.03
shall survive the complete payment and performance
of the Obligations and the foreclosure of the
Mortgage.
6.20.04 INSURANCE DEPOSITS.
A. Upon an Event of Default hereunder, or an event
which, with the giving of notice or passage of time,
and/or both, would constitute an Event of Default,
at the option of the Lender at any time thereafter,
the Borrower shall deposit with the Lender, on the
first day of the calendar month immediately
following the date hereof and on the first day of
each calendar month thereafter (each of which dates
is hereinafter referred to as a "Monthly Insurance
Deposit Date") until the complete payment and
performance of the Loan Obligations, a sum equal to
one-twelfth (1/12) of the premiums of the insurance
policies required hereunder which are payable within
one (1) year after said Monthly Insurance Deposit
Date. If the total amount of the insurance premiums
to be paid within the ensuing one (1) year period
are not fixed upon any Monthly Insurance Deposit
Date, such amount for the purpose of computing the
insurance deposit to be made by the Borrower
pursuant to this Section 6.20.04 shall be estimated
by the Lender, with an appropriate adjustment to be
promptly made between the Borrower and the Lender as
soon as the total amount of the insurance premiums
is determinable.
B. The sums deposited by the Borrower hereunder shall
be held by the Lender and shall be applied in
payment of the insurance premiums when due. Any such
deposits may be commingled with other assets of the
Lender and shall be invested by the Lender in a bank
account in the name of the Lender at such bank as
the Lender from time to time may select. The Lender
may, at its election from time to time exercised,
invest all or part such deposits in one or more of
the investment vehicles described on Exhibit A to
the Deposit Pledge Agreement. The Lender shall not
be
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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. Furthermore, the Lender shall bear no
responsibility for the financial condition of, as
well as 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 insurance policy
premium is due, specifying the premium to be paid
and the amount thereof, the place of payment and the
last day on which the same may be paid.
C. If for any reason the sums on deposit with the
Lender under this Section 6.20.04 shall not be
sufficient to pay any insurance policy premium,
then, within ten (10) days after demand by the
Lender, the Borrower shall deposit sufficient sums
so that the Lender may pay such insurance policy
premium in full, together with any penalty and
interest thereon. The Lender may change its estimate
of any insurance premiums for any period on the
basis of a change in any premium rates, a change in
the type or amount of coverage required hereunder, a
prior miscalculation or for any other 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. Upon an assignment of this Agreement by the Lender,
the Lender shall transfer all amounts deposited
pursuant to the provisions of this Section 6.20.04
and still in its possession to such assignee (as the
subsequent holder of the Loan Documents) and the
original Lender named herein shall thereupon be
completely released from all liability with respect
to such insurance deposits so transferred, and the
Borrower shall look solely to said assignee (as the
subsequent holder of the Loan Documents) in
reference thereto.
E. All amounts deposited with the Lender pursuant to
the provisions of this Section 6.20.04 shall be held
by the Lender as additional security for the Loan
Obligations 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 6.20.04 shall
be refunded to the Borrower; unless a Related Party
Default has occurred, in which event such sums may
be applied toward the Obligations.
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6.20.05 REPAIR; USE; COMPLIANCE WITH LAW; ALTERATIONS; WASTE.
A. At all times until the Loan Obligations are fully
paid and performed and the Mortgage is discharged,
the Mortgaged Property shall be maintained in good
order, repair and condition (damage from any
Casualty expressly not excepted), 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, nor do any act
whereby the Mortgaged Property may become less
valuable or the Liens created by the Loan Documents
may be impaired. 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 any
Facility) and for such other uses as may be
necessary in connection with or incidental to such
Primary Intended Use. The Borrower shall not allow
the Mortgaged Property to be used for any use other
than its Primary Intended Use and such other uses as
may be necessary in connection with or incidental to
such Primary Intended Use, 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. The Borrower further covenants that the operation of
the Mortgaged Property shall be conducted in a
manner consistent with the prevailing standards and
practices recognized in the assisted living industry
as those customarily utilized by first class
business operations. Subject to any applicable Legal
Requirements, the members of the Borrowing Group
shall use their best efforts to maximize the
Facility's gross revenues, and to that end, but
without limiting the foregoing, (I) a full staff of
employees shall be maintained at the Facilities and
(II) a maximum amount of space in the Facilities
shall be devoted to resident uses and only such part
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thereof shall be devoted for storage, office and
other ancillary purposes as shall be reasonably
necessary.
D. No use shall be made or permitted to be made of the
Mortgaged Property and no acts shall be done which
will cause the cancellation of any insurance policy
required pursuant to the terms this Agreement, nor
shall the Borrower, any Lessee, any Manager or 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.
E. The Borrower and any Lessee, at their sole cost and
expense, at all times throughout the term of the
Loan and for so long as the Loan Obligations remain
outstanding, shall (I) fully comply (and shall cause
every Lessee, Manager and other occupant of the
Mortgaged Property, as well as all of their
respective agents and invitees, to fully comply)
with all Legal Requirements and Insurance
Requirements whether or not compliance therewith
shall require any structural change of the Mortgaged
Property or interfere with the use and enjoyment of
the Mortgaged Property and (II) procure, maintain
and comply (and shall cause every Lessee, Manager
and other occupant of the Mortgaged Property, as
well as their respective agents and other invitees,
to procure, maintain and/or comply, as the case may
be) with all Permits, accreditations,
qualifications, Provider Agreements, Contracts and
other authorizations required for the continued use
of the Mortgaged Property for the Primary Intended
Use or other permitted uses then being made, and for
the proper construction, development, operation,
repair and maintenance of the Mortgaged Property.
F. At all times throughout the Term and for so long as
the Loan Obligations remain outstanding, all
utilities necessary for the use and operation of
each Facility shall be available to the lot lines of
that portion of the Mortgaged Property on which each
such Facility is located:
(i) in sufficient supply and capacity;
(ii) through validly created and existing
easements of record appurtenant to or
encumbering the that portion of the
Mortgaged Property on which such Facility
is located (which easements shall not
impede or restrict the operation of any
Facility); and
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(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.
G. 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.
H. Upon the request of the Lender accompanied by an
explanation reasonably establishing a justification
for such request, 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 reasonably
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
residents and/or the other occupants of any
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.
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 shall, 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. The Borrower shall deliver or cause to be
delivered to the Lender a true and correct copy of each Management Agreement
and any amendment of any Management Agreement within ten (10) days after the
execution thereof. 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 remedies under the
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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 any 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.
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6.23 [INTENTIONALLY DELETED].
6.24 ANNUAL FACILITY UPGRADE EXPENDITURES.
The Borrower shall make an Annual Facility Upgrade Expenditure in each
Facility in an amount no less than TWO HUNDRED FIFTY DOLLARS ($250) multiplied
by the number of units in such Facility, such amount to be increased as of the
first day of the second Loan Year, and as of the first day of each subsequent
Loan Year, equal to the product of (I) TWO HUNDRED FIFTY DOLLARS ($250)
multiplied by (II) the Consumer Price Adjustment Factor.
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, it is expedient to pay, 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 Section 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 of 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
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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.
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 TEN THOUSAND DOLLARS ($10,000.00).
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;
▇. ▇▇▇▇▇ 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;
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
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vessels or similar vessels, now or hereafter
installed on the Mortgaged Property, in limits
reasonably acceptable to the Lender;
D. earthquake insurance (if deemed necessary by the
Lender) in limits and with deductibles reasonably
acceptable to the Lender;
E. environmental impairment liability insurance (if
available) 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 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 Property 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 HUNDRED 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
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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 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
party endorsements, in forms acceptable to the
Lender in its sole and absolute discretion;
B. provide that the coverages may not be cancelled 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.
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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 the earlier to occur of (A)
thirty (30) days after the effective date of each such policy and (B)
ten (10) days after receipt thereof by the Borrower.
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 cancelled or become void or voidable by reason of the 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
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 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
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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.
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
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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, which amounts may be utilized by the Lender for any
purposes allowed hereunder or credited against the Loan Obligations.
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.
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 any portion of
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 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 applicable portion of 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
located on said portion of the Mortgaged Property 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
eighty (180) 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 three-hundred and sixty-five (365) days following the
occurrence of the Casualty or the Condemnation.
8.2.02 PROCEDURES.
In the event that any Casualty results in non-structural
damage to any portion of the Mortgaged Property in excess of
TWENTY-FIVE THOUSAND DOLLARS ($25,000), or in any structural damage to
any portion of the Mortgaged Property
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regardless of the extent of such structural damage, or in any event of
Condemnation, prior to commencing the Work, the 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 applicable
portion of 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 located on such portion of the Mortgaged
Property 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;
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 property 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
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clause B immediately above and (III) all applicable
Legal Requirements and other requirements of this
Agreement.
8.2.03 DISBURSEMENT OF INSURANCE PROCEEDS AND CONDEMNATION AWARDS.
If, as provided in Section 8.3, the Lender has elected or is
required to apply any Condemnation awards or insurance proceeds toward
repair or restoration of the Mortgaged Property, then as long as the
Work is being diligently performed by the Borrower in accordance with
the terms and conditions of this Agreement, the Lender shall disburse
such insurance proceeds from time to time during the course of the
Work in accordance with and subject to satisfaction of the following
provisions and conditions. The Lender shall not be required to make
disbursements more often than at thirty (30) day intervals. The
Borrower shall submit a written request for each disbursement at least
ten (10) Business Days in advance and shall comply with the following
requirements in connection with each disbursement:
A. Prior to the commencement of any Work, the Borrower
shall have received the 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;
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 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;
ii. that the sum then requested to be
withdrawn has been paid by the Borrower or
is 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
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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
the 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. The Borrower shall deliver to the Lender
satisfactory evidence that the applicable portion of
the Mortgaged Property and all materials and all
property described in the Work Certificates are free
and clear of all 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, (ii)
the Mortgage and (iii) the Permitted Encumbrances.
The 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
applicable portion of the Mortgaged Property) in
form acceptable to the Lender, dated as of the date
of the making of the then current disbursement,
confirming the foregoing;
D. If the Work involves alteration or restoration of
the exterior of any Improvement that changes the
footprint of any Improvement, the Borrower shall
deliver to the Lender, upon the request of the
Lender, an "as-built" survey of the applicable
portion of the Land upon which the Work is performed
dated of a date within ten (10) days prior to the
making of the
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first and final advances (or revised to a date
within ten (10) days prior to each such advance)
showing no encroachments other than (i) such
encroachments, if any, by any Improvement of any of
the Permitted Encumbrances as are in existence as of
the date hereof and (II) those, if any, acceptable
to the Lender;
E. The Borrower shall deliver to the Lender an opinion
of counsel (satisfactory to the 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
applicable portion of the Mortgaged Property have
been obtained and that such portion of 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
and (ii) an architect's certificate (satisfactory to
the Lender both as to the architect and as to the
form of the certificate) prior to the final advance,
certifying that the applicable portion of 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
existing which, with the giving of notice or passage
of time, or both, would constitute any Loan Default;
G. The Lender, at its option, may waive any of the
foregoing requirements in whole or in part in any
instance.
H. Upon compliance by the Borrower with the foregoing
requirements (except for such requirements, if any,
as the Lender may have expressly elected to waive),
and to the extent of (I) the insurance proceeds, if
any, which the Lender may be required to apply to
restoration of the Mortgaged Property pursuant to
the provisions of this Agreement, and (II) all other
cash deposits made by the Borrower, the Lender shall
make available for payment to the Persons named in
the Work Certificate the respective amounts stated
in said Work Certificate to be due, subject to a
retention of ten percent (10%) 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 the Lender that the Work shall be
fully completed in accordance with the Plans and
Specifications and the requirements of the 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;
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I. Upon completion of the Work, and as a condition
precedent to making any further advance, in addition
to the requirements set forth above, the Borrower
shall promptly deliver to the Lender:
i. 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
workmanlike manner in accordance with the
Plans and Specifications and all Legal
Requirements;
ii. a written report and endorsement of its
title insurance policy (relating to the
applicable portion of the Mortgaged
Property) in form reasonably acceptable to
the 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 the Borrower in form and
substance reasonably satisfactory to the
Lender, listing all costs and expenses in
connection with the completion of the Work
and the amount paid by the Borrower with
respect to the Work; and
iv. a temporary certificate of occupancy (if
obtainable) and all other applicable
Permits and Contracts (that have not
previously been delivered to the Lender)
issued by or entered into with any
Governmental Authority with respect to the
Mortgaged Property and its Primary
Intended Use and by the appropriate Board
of Fire Underwriters or other similar
bodies acting in and for the locality in
which the applicable portion of the
Mortgaged Property is situated; provided
that within thirty (30) days after
completion of the Work, the Borrower shall
obtain and deliver to the Lender a
permanent certificate of occupancy for the
applicable portion of the Mortgaged
Property upon which the Work was
performed;
J. Upon completion of the Work and the delivery of the
documents required pursuant to the provisions of
this Section 8.2, the Lender shall pay the Retainage
to the Borrower or to those Persons entitled thereto
and if there shall be insurance proceeds, awards or
cash deposits, other than the Retainage, held by the
Lender in excess of the amounts withdrawn pursuant
to the foregoing provisions, then the Lender, shall
pay such proceeds, awards or cash deposits to the
Borrower; and
K. No inspections or any approvals of the Work during
or after construction shall constitute a warranty or
representation by the Lender, or any of its
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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 the
Lender are performed solely for the benefit of the
Lender to assure the payment and performance of the
Loan Obligations and are not for the benefit of the
Borrower or the benefit of any other Person.
8.3 DISPOSITION OF INSURANCE PROCEEDS.
8.3.01 PROCEEDS TO BE RELEASED TO PAY FOR WORK.
In the event of any Casualty or Condemnation, the Lender, in
its sole and absolute discretion, may decide whether and to what
extent, if any, proceeds of insurance policies or Condemnation awards
shall be made available to the Borrower for repair or restoration of
the Mortgaged Property. Notwithstanding the foregoing, the Lender
hereby agrees to make insurance proceeds or Condemnation awards
available to the Borrower for repair or restoration of the Mortgaged
Property, provided that:
A. Not more than thirty percent (30%) of the fair
market value of the applicable Facility subject to
the Casualty or Condemnation is damaged or taken;
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 (excluding Residence Agreements) affecting
the Mortgaged Property immediately prior to such
Casualty or Condemnation shall have been cancelled
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; and
E. The insurance proceeds or Condemnation awards are
released under the funding arrangements specified in
Section 8.2 hereof.
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8.3.02 PROCEEDS NOT TO BE RELEASED TO PAY FOR WORK.
If the Lender is not required to and elects not to make the
insurance proceeds or Condemnation awards available for repair or
restoration of the Mortgaged Property, then 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, but
shall not cause any reduction in the monthly payments due under the
Note until the outstanding principal indebtedness due thereunder has
been paid in full; 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 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 Property 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.
8.4 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, subject to the rights of the holders of any Permitted Prior Security
Interests, 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.
8.5 RESTORATION OF THE BORROWER'S PROPERTY.
If the Borrower is required or elects to restore any Facility, the
Borrower shall either (A) restore all alterations and improvements made by the
Borrower, and the Borrower's Personal Property relating to such Facility, or
(B) replace such alterations and improvements and the
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Borrower's Personal Property relating to such Facility with improvements or
items of the same or better quality and utility in the operation thereof.
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 FIRE AND OTHER CASUALTY; SELF-HELP.
If, within one hundred twenty (120) days after the occurrence of any
non-structural damage to any Facility in excess of TWENTY-FIVE THOUSAND DOLLARS
($25,000), any structural damage to any Facility regardless of the extent of
such structural damage, or any Condemnation, the Borrower shall not have
submitted to the Lender and received the Lender's approval of the Plans and
Specifications for the repair, replacement or rebuilding of such Facility or
shall not have obtained approval of such Plans and Specifications from all
Governmental Authorities whose approval is required pursuant to applicable
Legal Requirements, or if, after the date upon which such Plans and
Specifications are approved by the Lender and all such Governmental Authorities
(such date is referred to herein as the "Approval Date"), the Borrower shall
fail to commence promptly such repair, replacement or rebuilding, or if the
Borrower fails to complete such repair, replacement or rebuilding within one
hundred twenty (120) days following the Approval Date or is delinquent in the
payment to mechanics, materialmen or others of the costs incurred in connection
with such work, or, in the case of any non-structural loss or damage not in
excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000), if the Borrower shall fail to
promptly repair, replace or rebuild such Facility, then, in addition to all
other rights herein set forth, the Lender, or any lawfully appointed receiver
of such Facility, may at their respective options, perform or cause to be
performed such repair, replacement or rebuilding, and may take such other steps
as they deem advisable to perform such repair, replacement or rebuilding, and
may enter upon the Mortgaged Property for any of the foregoing purposes, and
the Borrower hereby waives, for the Borrower and all others holding under the
Borrower, any claim against the Lender or such receiver arising out of anything
done by the Lender or such receiver pursuant to this Section 8.7, and the
Lender may apply insurance proceeds (without the need to fulfill the
requirements of Section 8) to reimburse the Lender or such receiver for all
amounts expended or reasonably incurred by them, respectively, in connection
with the performance of such work (including, without limitation, attorneys'
fees and expenses and court costs), and any excess costs and expenses remaining
after any such application of the insurance proceeds 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 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.
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8.8 RENT LOSS AND/OR BUSINESS INTERRUPTION INSURANCE PROCEEDS.
If the Borrower shall promptly and diligently commence to repair,
replace and restore any damage occurring to the Mortgaged Property, and 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 each month pay to the Borrower out of the rent loss and/or
business interruption insurance proceeds actually received the Lender
(collectively the "Rent Insurance Proceeds") a sum equal to that amount, if
any, of the Rent Insurance Proceeds paid by the insurer which is allocable to
the rental loss and/or business interruption for the preceding month minus an
amount equal to the sum of the debt service on the Loan due under the Note for
such month plus any Impositions relating to the applicable portion of the
Mortgaged Property then due and payable. At its option, the Lender may waive
any of the foregoing conditions to the payment of Rent Insurance Proceeds. If
the Borrower does not fulfill the foregoing conditions entitling the Borrower
to monthly disbursements of Rent Insurance Proceeds, 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 applicable 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
Unless a Loan Default then exists or any state of facts which, with
the giving of notice or the passage of time or both would constitute a Loan
Default, 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 Lien, charge or liability
of any kind against the Mortgaged Property, (c) neither the 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 immediate 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 TEN THOUSAND DOLLARS ($10,000), 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
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delivery of an opinion to be appropriate, opinioning 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 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 Lessee
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.
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 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 ninety (90) 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
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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, sixty
(60) 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 sixty
(60) 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. there shall be a change in the Person or Persons
presently in control of any member of the Borrowing
Group (whether by operation of law or otherwise);
ii. all or any portion of the interest of any partner or
member of any member of the Borrowing Group 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 partnership, joint venture, syndicate or
other group;
iii. except in connection with the exercise by the Lender
under the Warrant of its right to become a
shareholder of the Guarantor, any of the shares of
the issued and outstanding capital stock of any
member of the Borrowing Group 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; or
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iv. all or any portion of the beneficial interest in any
member of the Borrowing Group 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;
I. the death, incapacity, liquidation, dissolution or
termination of existence of the any member of the Borrowing
Group or the merger of any member of the Borrowing Group with
any other Person;
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
or any Lessee, whether or not the applicable creditor or
obligee elects to declare the obligations of the Borrower or
the applicable Lessee under the applicable agreement due and
payable or to exercise any other right or remedy available to
such creditor or obligee, if such creditor's or obligee's
rights and remedies may involve or result in (i) the taking
of possession of the Mortgaged Property or (ii) the assertion
of any other right or remedy that, in the Lender's reasonable
opinion, may impair the Borrower's ability punctually to
perform all of its obligations under this Agreement and the
other Loan Documents, may impair such Lessee's ability to
punctually perform all of its obligations under its Lease or
may materially impair the Lender's security for the Loan;
provided, however, that in any event, the election by the
applicable creditor or obligee to declare the obligations of
the Borrower under the 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 FIVE HUNDRED THOUSAND DOLLARS ($500,000);
K. the occurrence of a Related Party Default;
L. the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and
grace periods, if any, under any credit agreement, loan
agreement or other agreement establishing a major line of
credit (or any documents executed in connection with such
lines of credit) on behalf of any member of the Borrowing
Group whether or not 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 purposes 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);
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M. except as a result of any Casualty or a partial or complete
Condemnation, if the Borrower or any Lessee ceases operation
of any Facility for a period in excess of thirty (30) days;
N. if one or more judgments against the Borrower or any Lessee
or attachments against the Mortgaged Property which in the
aggregate exceed ONE HUNDRED THOUSAND DOLLARS ($100,000) or
which may materially and adversely interfere with the
ownership and/or the operation of any 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 any Facility;
P. if any Provider Agreement material to the operation or
financial condition of any member of the Borrowing Group
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 or any Lessee has obtained approval
for participation in the Medicare and/or Medicaid programs
with regard to the operation of any Facility, a final
unappealable determination is made by the applicable
Governmental Authority that the Borrower or any Lessee shall
have failed to comply with applicable Medicare and/or
Medicaid regulations in the operation of such Facility, as a
result of which failure the Borrower or such Lessee is
declared ineligible to continue its participation in the
Medicare and/or Medicaid programs;
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 any Facility in
accordance with its Primary Intended Use or the loss of any
Permit under any other circumstances under which any member
of the Borrowing Group is required
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to cease the operation of any Facility in accordance with its
Primary Intended Use;
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 any Facility, to transfer one or
more residents from any Facility as a result of a finding or
determination of abuse or neglect or to take any action to
eliminate an emergency situation then existing at any
Facility;
U. the appointment of a temporary manager (or operator) for the
Mortgaged Property by any Governmental Authority; and
V. any failure to replenish the Cash Collateral, if required,
pursuant to Section 1 of the Deposit Pledge 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 Facilities 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 Facilities 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 any Facility as aforesaid, it shall
not be obligated to continue the operation of the same for any period of time
longer than the Lender shall see fit (in its sole and absolute
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discretion), and the Lender may thereafter, at any time, abandon its efforts
and refuse to make further payments for the account of the Borrower.
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), 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 therein as such party as fully as though all of them were
specifically named 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
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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 obligations under any of the Loan Documents,
including, without limitation, any document requested in order to 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.
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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, its heirs, executors,
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,
exemption and homestead 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 homestead or 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, (B) directs any
trustee in bankruptcy having possession of such homestead or 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 and (C) appoints the Lender as its attorney-in-fact, with full power
of substitution, to claim any and all homestead exemptions allowed by law.
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.
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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.
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,
(B) 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
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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:
A. supplying financial statements of the Borrower, the
Guarantor, any Lessee, and of 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
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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 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 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 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.
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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
foreclosure and other remedies against the Borrower 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 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 ▇▇▇ the Borrower or to collect any outstanding
indebtedness in accordance with applicable law.
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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 postmarked or placed in the possession of such mail
or delivery service and addressed as follows:
If to the Borrower: ______________________
_____________________________
_____________________________
With copies to: ______________________
_____________________________
_____________________________
and
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: _______________________
If to the Guarantor: Balanced Care Corporation
_____________________________
_____________________________
Attn: President
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With copies to: Balanced Care Corporation
______________________________
_____________________________
Attn: General Counsel
and
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ______________________
If to the Lender: Meditrust Mortgage Investments, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
With copies to: Meditrust Mortgage Investments, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
and
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Fish, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ______________________
or at such other place as either party hereto may from time to time hereafter
designate to the other in writing. Any notice given to the Borrower or the
Guarantor 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, 1985 (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
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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.
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,
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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.
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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 and the other Loan Documents 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 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
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"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.
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.
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 the Letter of Intent in its entirety.
13. INDEMNIFICATIONS
13.1 BROKER'S FEE INDEMNIFICATION.
The Borrower shall and hereby agrees to indemnify, defend (with
counsel acceptable to the Lender) and hold the Lender 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, except such claims by any Person with whom the Lender has dealt
in connection with the Loan without the Borrower's knowledge. Notwithstanding
the foregoing, the Lender shall have the option of conducting its own defense
against any such claims with counsel of the Lender's choice, but at the expense
of the Borrower, as aforesaid. This indemnification shall include all
attorneys' fees and expenses and court costs reasonably incurred by the Lender
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 Borrower's obligations under the Loan Documents.
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13.2 GENERAL INDEMNIFICATION.
With the exception of any claim involving any member of the Borrowing
Group and any of the Indemnified Parties in which a final decision is issued by
a court of competent jurisdiction in favor of such member of the Borrowing
Group and all appeal periods having lapsed or been exhausted, the Borrower and
the Guarantor shall and hereby agree to jointly and severally indemnify, defend
(with counsel acceptable to the Lender), and hold the Indemnified Parties
harmless against (a) any claim brought or threatened against any of the
Indemnified Parties by any member of the Borrowing Group or by any other Person
on account of (i) the Lender's relationship with any member of the Borrowing
Group in connection with the Loan and (ii) the Lender's negotiation of,
entering into and/or performing any of its obligations and/or exercising any of
its rights and remedies under any of the Loan Documents and (b) any and all
losses, damages, claims, liabilities, obligations, causes of action, costs and
expenses arising out of or resulting from (i) the use and occupancy of the
Mortgaged Property or any business conducted therein, (ii) any act, fault,
omission to act or misconduct by (x) any member of the Borrowing Group, (y) any
Affiliate of the Borrower or (z) any employee, agent, licensee, business
invitee, guest, customer, contractor or sublessee of any of the foregoing
parties, relating to, directly or indirectly the Mortgaged Property, (iii) 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,
about, around 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, any Affiliate of the
Borrower or any employee, agent, licensee, contractor or sublessee of any of
the foregoing parties, (iv) any Loan Default and/or (v) any attempt by any
member of the Borrowing Group or any Affiliate of the Borrower to transfer or
relocate any of the Permits to any location other than the Mortgaged Property.
The aforesaid indemnification agreement shall include, without limitation,
attorneys' fees and expenses, court costs and other expenses of litigation
incurred by the Lender in connection with any such matters and with the
enforcement of said indemnification. All matters covered by the aforesaid
indemnification agreement may be defended, compromised, settled or pursued by
the Lender with counsel of the Lender's selection, but at the expense of the
Borrower and the Guarantor. The provisions of this Section 13.2 shall survive
the complete payment and performance of the Loan Obligations and the
foreclosure of the Mortgage.
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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
By:
-------------------------- ----------------------------------
Name: Name:
Title:
WITNESS: BORROWER:
-------------------------
By:
-------------------------- ----------------------------------
Name: Name:
Title:
WITNESS: GUARANTOR:
BALANCED CARE CORPORATION,
a Delaware corporation
By:
-------------------------- ----------------------------------
Name: Name:
Title:
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SCHEDULE TO EXHIBIT 10.19 FILED PURSUANT TO INSTRUCTION 2 TO ITEM 601(a) OF
REGULATION S-K
LOAN AGREEMENT
BORROWER LENDER LOAN AMOUNT DATE
-------- ------ ----------- ----
BCC of Wisconsin, Inc. Meditrust Mortgage $ 5,045,869.00 5/2/96
Investments, Inc.
Hawthorn Health Properties, Inc. and Meditrust Mortgage $41,385,000.00 8/30/96
Hawthorn Properties Investments, Inc.
BCC at Nevada Park Care Center, Inc. and BCC Meditrust Mortgage $3,115,000.00 8/30/96
at Republic Park Center, Inc. Investments, Inc.