EXHIBIT 10.4
19472/8
Agenda No. 1.9
Pledge and Security
Agreement
(Cash, Cash Equivalents and
Investment Property)
PLEDGE AND SECURITY AGREEMENT
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(Cash, Cash Equivalents and Investment Property)
This Pledge and Security Agreement ("Agreement") dated as of May 11, 1998
is made by and among Brookdale Living Communities of California, Inc., a
Delaware corporation ("Debtor") and The Atrium of San Xxxx LLC, a Delaware
limited liability company (the "Owner") and in favor of Key Corporate Capital,
Inc., a Michigan corporation ("KCCI" or the "B Investor") and SELCO Service
Corporation, an Ohio corporation ("SELCO"). Wilmington Trust Company, a
Delaware banking corporation (the "Valuation Agent") and LaSalle National Bank,
a national banking association ("Account Custodian") each joins in this
Agreement for certain purposes.
W I T N E S S E T H:
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WHEREAS, Owner, as landlord, and Debtor, as lessee, have entered into that
certain Lease Agreement dated as of May 11, 1998 (the "Lease") pursuant to which
Owner has leased from the Owner certain land and improvements located in Xxx
Xxxx, Xxxxxx xx Xxxxx Xxxxx, Xxxxxxxxxx; and
WHEREAS, the Lease provides that Debtor will pay Basic Rental for the Basic
Lease Term in an amount specified on Exhibit B thereto and that such Basic
Rental shall consist of four separate components, namely (i) Senior Loan Debt
Service, (ii) A Investor Loan Debt Service, (iii) B Investor Loan Debt Service,
and (iv) SELCO Basic Rent; and
WHEREAS, KCCI is entitled to receive the B Investor Loan Debt Service and
SELCO is entitled to receive SELCO Basic Rent from the Basic Rental payable by
the Debtor under the Lease;
WHEREAS, the Debtor has agreed to collateralize its obligations under the
Lease (including, without limitation, its obligations to make payments of Basic
Rental, the End of Term Adjustment, the Purchase Price, the Termination Value
and any other amounts which are payable by the Debtor under the Lease) and to
collateralize any other obligations of the Debtor under the other Transaction
Documents to the Owner (the "Obligations"); and
WHEREAS, Debtor shall cause Fleet National Bank to issue the Certificates
of Deposit described herein and shall pledge the same to the Owner to
collateralize the Obligations; and
WHEREAS, the Owner has executed and delivered to KCCI and SELCO a Non-
recourse Guaranty Agreement of even date herewith (the "Guaranty") to guarantee
the payment of the B Investor Debt Service and the SELCO Basic Rental to KCCI
and SELCO, respectively, and to
secure its obligations under the Guaranty the Owner has agreed to pledge,
assign, set-over and convey all of the Owner's right title and interest in and
to this Agreement, the Certificates of Deposit and any other Collateral pledged
hereunder by Debtor to B Investor.
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Defined Terms. All capitalized terms which are used herein which are
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not otherwise defined herein shall have the meanings ascribed to such terms in
the Definitions Appendix attached to the Lease. This Agreement is given by
Debtor as security for the Lease and the other Transaction Documents to which
Debtor is a party and all rights, interests, and remedies of the Owner hereunder
are cumulative and in addition to the rights, interests and remedies of the
Owner under the Lease and the other Transaction Documents to which Debtor is a
party, all of which are ratified, confirmed, adopted and approved. The
assignment of this Agreement by Owner to KCCI and SELCO is given to secure the
rights of KCCI and SELCO to receive the B Investor Debt Service and the SELCO
Basic Rent, but shall not limit or otherwise affect the rights of KCCI and SELCO
under the terms of the Participation Agreement. The following terms when used
herein shall have the respective meanings set forth in this Section.
A. "Acceptable CD Issuer" means a bank organized and existing under the
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laws of the United States of America (or any state thereof) and having
a rating on its senior unsecured debt of not less than "A" from S&P
and an equivalent rating from Xxxxx'x.
B. "Account Custodian" means LaSalle National Bank, a national banking
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association.
C. "Account Funds" mean any and all moneys or funds from time to time
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credited to or on deposit in the Collateral Account.
D. "Agreement" means this Pledge and Security Agreement (Cash, Cash
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Equivalents and Investment Property) as it may be amended,
supplemented or otherwise modified, from time to time.
E. "Book-Entry Government Security": a security described in the
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definition of "Cash Equivalents" which is in the form of a book-entry
on the records of the Federal Reserve.
F. "B Investor Certificate of Deposit" means certificate of deposit
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number __________ in the original principal amount not less than the B
Investor Required Amount issued by Fleet National Bank at the request
of Debtor to collateralize the Obligations, and any substitutions or
renewals of the same issued by Fleet National Bank or an Acceptable CD
Issuer.
G. "B Investor Required Amount" means the sum of (i) $_________, plus
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(ii) the Capitalized Interest on the B Investor Loan (as defined in
Exhibit B to the Lease).
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H. "Cash Collateral": collectively, all cash and Cash Equivalents at any
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time and from time to time on deposit in, and otherwise to the credit
of, the Collateral Account or otherwise held by, or in the name of,
KCCI and SELCO or their nominee under this Agreement.
I. "Cash Equivalents": (a) securities issued by the United States
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Government or by any agency or instrumentality thereof, (b) banker's
acceptances and certificates of deposit acceptable to KCCI and SELCO
in their sole reasonable discretion, (c) repurchase obligations
acceptable to KCCI and SELCO in their sole reasonable discretion with
a term of not more than 30 days for underlying securities of the types
described in clauses (a) and (b) entered into with any bank meeting
the qualifications specified in clause (b) above, provided that the
collateral for such repurchase obligations is held by KCCI, SELCO or
the Custodian pursuant to Section 4 hereof, and (d) a Certificate of
Deposit.
J. "Certificated Security": as defined in Section 8-102 of the UCC.
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K. "Certificates of Deposit" means the B Investor Certificate of Deposit
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and the SELCO Certificate of Deposit.
L. "Clearing Corporation": as defined in Section 8-102 of the UCC.
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M. "Clearing Corporation Security" means a Certificated Security that is
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(a) physically located in the State of Ohio in the custody of a
Clearing Corporation or its nominee, which is subject to the control
of such Clearing Corporation and (b) in bearer form or endorsed in
blank by an appropriate person or registered in the name of such
Clearing Corporation or its nominee and is shown in the account of or
on behalf of a Financial Intermediary of the Debtor on the books of
such Clearing Corporation.
N. "Collateral" means all of the following: (a) the Certificates of
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Deposit, (b) all Securities; (c) all Cash Collateral; (d) the
Collateral Account and all Account Funds therein; (e) all Instruments
and Documents and General Intangibles related to, arising out of or
evidencing the Certificates of Deposit, Securities, Cash Collateral,
Collateral Account, now or hereafter arising, including (without
limitation) (i) all moneys, residues and property of any kind due and
to become due under any contract or in any depository account, (ii)
any damages arising out of or for breach or default in respect of such
Instruments and Documents, or General Intangibles and (iii) all other
amounts from time to time paid or payable under or in connection
therewith; (f) all certificates, securities, instruments, documents,
contracts and agreements from time to time evidencing or constituting
any of the foregoing; (g) all cash dividends, stock dividends, cash,
instruments profits, premiums, redemptions, warrants, substitutions,
exchanges, distributions and other property now or hereafter made in
respect of any Certificates of Deposit or Securities or Cash
Collateral or the Collateral Account and all collections, rights and
claims in respect of any of the foregoing; and (h) to the extent not
otherwise included in the foregoing, all
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accessions and additions to, and replacements, Proceeds and products
of any and all of the foregoing.
O. "Collateral Account" means the Collateral Account established with the
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Account Custodian defined in Section 3 hereof.
P. "Custodian" means KeyBank National Association as custodian and
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designee of KCCI and SELCO or any successor designated by KCCI and
SELCO.
Q. "Financial Intermediary": as defined in Section 8-313 of the UCC.
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R. "General Intangibles" means all "general intangibles", as such term is
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defined in Section 9-106 of the UCC, and all intangible personal
property not included in Instruments and Documents, now or hereafter
owned or acquired by Debtor.
S. "Instruments and Documents" means all "instruments," "documents,"
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"deposit accounts," and "chattel paper," as defined in Section 9-105
of the UCC, and includes (without limitation) all warehouse receipts
and other documents of title, policies and certificates of insurance,
checking, savings, and other bank accounts, certificates of deposit,
checks, notes and drafts, now or hereafter acquired.
T. "Negotiable Instrument" means a negotiable instrument as defined in
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Section 3-104 of the UCC.
U. "Obligations" is defined in the preamble.
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V. "Proceeds" has the meaning given such term under the UCC and, in any
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event, includes (but is not limited to) (a) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable from time to
time with respect to any of the Collateral, (b) any and all payments
(in any form whatsoever) made or due and payable from time to time in
connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental
authority), (c) whatever is received upon any collection, exchange,
sale, lease or other disposition of any of the Collateral and any
property into which any of the Collateral is converted, whether cash
or non-cash proceeds, and (d) any and all other products of, or any
rents, profits or other amounts from time to time paid or payable
under, or in connection with, any of the Collateral.
W. "Required Amount" means an amount equal to the sum of the B Investor
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Required Amount and the SELCO Required Amount.
X. "Secured Party" means the Owner, KCCI and SELCO.
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Y. "Securities" means the Certificated Securities, Uncertificated
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Securities and financial instruments transferred by Debtor to the
Owner and held in the Collateral Account and all replacements,
substitutions, exchanges and Proceeds thereof.
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Z. "SELCO Certificate of Deposit" means certificate of deposit number
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__________ in the original principal amount not less than the SELCO
Required Amount issued by Fleet National Bank at the request of Debtor
to collateralize the Obligations and any substitutions or renewals of
the same issued by Fleet National Bank or an Acceptable CD Issuer.
AA. "SELCO Contribution" means $954,000, or so much thereof as may be
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outstanding.
BB. "SELCO Required Amount" means the amount of the SELCO Contribution,
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plus any accrued but unpaid interest or return thereon or any other
amounts which are payable to SELCO as a part of the SELCO Basic Rent.
CC. "UCC" means the Uniform Commercial Code as it may from time to time be
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in effect in the State of Delaware, or any other applicable
jurisdiction.
DD. "Uncertificated Security" means uncertificated security as defined in
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Section 8-102 of the UCC.
2. Grant of Security Interest; Deposit of Certificate of Deposit and
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Other Collateral.
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(a) Debtor agrees that it shall deposit with the Custodian or another
designee of KCCI and SELCO the Certificates of Deposit. The B Investor
Certificate of Deposit shall be issued in a initial principal amount of not less
than the B Investor Required Amount and the interest payable thereon shall be
capitalized and added to the principal amount thereof. The SELCO Certificate of
Deposit shall be issued in a initial principal amount of not less than the SELCO
Required Amount.
(b) The Debtor hereby grants to Owner a continuing security interest in, a
lien upon, and a right of set-off against, and hereby assigns to Owner as
security, the Collateral. The Owner hereby grants to KCCI and SELCO a
continuing security interest in, a lien upon, and a right of set-off against,
and hereby assigns to KCCI and SELCO as security for the obligations of Owner
under the Guaranty all of the Owner's right, title and interest in and to the
Collateral and this Agreement. The Debtor hereby acknowledges, consents and
agrees to the assignment by the Owner of its security interest in the Collateral
to KCCI and SELCO and the assignment by Owner of its right, title and interest
in the Agreement to KCCI and SELCO. KCCI's and SELCO's sole recourse against
Owner with respect to the Guaranty and this Agreement is limited to the
Collateral and the proceeds thereof notwithstanding anything herein or the
Guaranty to the contrary.
(c) (i) The Debtor agrees to cause Fleet National Bank or an Acceptable CD
Issuer (if Fleet National Bank is not then an Acceptable CD Issuer) to issue (i)
a new B Investor Certificate of Deposit in a principal amount of not less the
then current B Investor Required Amount on or prior to the maturity of such
Certificate of Deposit and (ii) a new SELCO Certificate of Deposit in a
principal amount of not less the then current SELCO Required Amount on or prior
to the maturity of such Certificate of Deposit. The failure to cause Fleet
National Bank (or another
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Acceptable CD Issuer) to issue new Certificates of Deposit shall entitle the
Custodian to retain the existing Certificates of Deposit without any obligation
to reinvest the funds payable on the Certificate of Deposit upon maturity and
KCCI and/or SELCO may apply the proceeds thereof to the payment of the B
Investor Loan, the SELCO Contribution and any other amounts payable to either
KCCI and/or SELCO under the terms of the Participation Agreement.
(ii) If (A) the senior unsecured debt rating of Fleet National Bank
or such other issuer of the Certificate of Deposit falls below "A" by S&P (or
its equivalent by Xxxxx'x), (B) Fleet National Bank is unable to continue to
provide the Certificates of Deposit, or (C) the Debtor, the Owner, KCCI and
SELCO agree that it would be advisable to cause the Certificates of Deposit to
be provided by another issuer, then the Debtor shall cause new Certificates of
Deposit to be issued by an Acceptable CD Issuer in the applicable Required
Amounts within five (5) Business Days after notice is given to Debtor of such
event and shall deliver the same to the Custodian or another designee of KCCI
and SELCO.
(iii) At the time of the delivery of any new or replacement
Certificates of Deposit, the Debtor shall provide the Owner, KCCI and SELCO with
a Certificate of its President and Chief Financial Officer certifying that the
Debtor is solvent as of the date of the issuance of the new or replacement
Certificates of Deposit. After the delivery of the new or replacement
Certificates of Deposit and the certificate of the Debtor regarding solvency,
the Owner shall cause the Certificates of Deposit maturing or being replaced to
be returned to Debtor.
(iv) All Certificates of Deposit shall be delivered to the Custodian,
who shall hold the same for the benefit of KCCI and SELCO. KCCI and SELCO hereby
appoint the Custodian as their agent for retaining physical possession of the
Certificates of Deposit in accordance with the terms of this Agreement.
(d) (i) The Valuation Agent shall determine monthly on the 15th day of
each month (or the next succeeding Business Day, if the 15th day is not a
Business Day), commencing June 15, 1998 (each such date of valuation being
referred to herein as a "Valuation Date") (x) the principal amount of the B
Investor Certificate of Deposit (including all interest thereon which has been
earned and capitalized) as of such Valuation Date (the "B Investor Certificate
Value"), and (y) by obtaining values from the issuer of the Certificates of
Deposit and at least one reputable broker of certificates of deposit, the fair
market sales value of both the B Investor Certificate of Deposit and the SELCO
Certificate of Deposit if sold prior to maturity thereof as of the Valuation
Date as the higher of the two values received (the "Sales Value"), and (z) the
ratings of the senior long-term unsecured debt of the issuer of the Certificates
of Deposit issued by both S&P and Xxxxx'x from a source the Valuation Agent
deems appropriate. Each such valuation shall be binding on the Debtor, the
Owner, KCCI and SELCO, absent manifest error. On each Valuation Date, in the
event the aggregate Sales Values of the Certificates of Deposit plus any Account
Funds in the Collateral Account (as shall be reported by the Account Custodian
at the Valuation Agent's request) is less than the sum of the B Investor
Certificate Value plus the SELCO Required Amount (as shall be reported by SELCO
at the Valuation Agent's request) ( a "Deficiency"), then the Valuation Agent
shall give written notice of such Deficiency in such form as the Valuation Agent
deems appropriate within two (2) Business
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Days after the Valuation Date via (xx) overnight mail or hand delivery and (yy)
facsimile transmission, to each of Debtor, KCCI, SELCO and the Account Custodian
(a "Deficiency Notice"). Written notice shall be given by the Valuation Agent to
each of Debtor, KCCI and SELCO in the manner provided by the preceding sentence
if the ratings of the issuer of the Certificates of Deposit would cause such
issuer to be no longer an Acceptable CD Provider.
(ii) The Debtor shall promptly, but in any event with five (5)
Business Days after receipt of a Deficiency Notice (facsimile confirmation
receipt by the Valuation Agent being deemed receipt of notice by the Debtor,
KCCI, SELCO and the Account Custodian), wire transfer additional Account Funds
in United States dollars to the Collateral Account in an amount equal to the
Deficiency. The Debtor's obligations to deposit such Account Funds in the
Collateral Account is hereinafter referred to as the "Collateral Requirement."
The Valuation Agent agrees to promptly confirm with the Account Custodian the
performance by the Debtor of its obligation to satisfy the Collateral
Requirement by the required date and the Account Custodian agrees to promptly
provide the Valuation Agent with such confirmation or notice of Debtor's failure
to satisfy the Collateral Requirement. If Debtor has failed to satisfy the
Collateral Requirement when required, the Valuation Agent shall notify the
Debtor, KCCI and SELCO of such failure by providing notice in the manner
provided in Section 2(d)(i) hereof.
(iii) If, on any Valuation Date, the aggregate Sales Values of the
Certificates of Deposit plus any Account Funds in the Collateral Account equals
or exceeds the sum of the B Investor Certificate Value plus the SELCO Required
Amount (such difference being referred to herein as the "Excess") and no Default
or Event of Default has occurred and is continuing hereunder, the Valuation
Agent shall provide written notice of such Excess in such form as the as the
Valuation Agent deems appropriate (the "Excess Notice") within two (2) Business
Days after the Valuation Date in the manner provided in Section 2(d)(i) hereof
to the Debtor, KCCI, SELCO and the Account Custodian. The Account Custodian
shall remit to the Debtor (by wire transfer or by transfer to an account
maintained with the Account Custodian) within three (3) Business Days after its
receipt of the Excess Notice (facsimile confirmation receipt by the Valuation
Agent being deemed receipt of notice by Debtor, KCCI, SELCO and the Account
Custodian) funds in the Collateral Account equal to the Excess.
(iv) Provided no "Default" or "Event of Default" under and as defined
in the Lease has occurred and is continuing, interest on the SELCO Certificate
of Deposit which is paid by the issuer thereof and received by the Custodian or
any Secured Party shall be paid to the Debtor.
(e) (i) At any time, the Debtor shall have the right to appoint a
successor Valuation Agent to Wilmington Trust Company (or any successor
Valuation Agent), so long as such successor Valuation Agent is approved by KCCI
and SELCO, which approval shall not be unreasonably withheld, delayed or
conditioned. The Debtor shall give the then current Valuation Agent not less
than thirty (30) days' prior written notice of the appointment and approval of a
successor Valuation Agent. At any time, the then current Valuation Agent shall
have the right to resign as Valuation Agent by giving the Debtor, KCCI and SELCO
no less than thirty (30) days' prior written notice of such resignation. Upon
receipt of such notice, Debtor shall appoint a successor Valuation Agent, which
appointment is subject to the approval
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by KCCI and SELCO, which approval shall not be unreasonably withheld, delayed or
conditioned. Upon the appointment (and approval thereof) of a successor
Valuation Agent, Debtor shall notify the resigning Valuation Agent and the
Account Custodian of the identity of the successor Valuation Agent and the date
upon which the appointment of such successor becomes effective. Upon the
effectiveness of such appointment, the successor Valuation Agent shall succeed
to the rights, powers and duties of the Valuation Agent being removed or
resigning, and the term "Valuation Agent" shall mean the successor Valuation
Agent, and the rights, powers and duties of the former Valuation Agent shall be
terminated without any other act or deed on the part of such Valuation Agent or
any parties to this Agreement.
(ii) Notwithstanding anything herein to the contrary, the Valuation
Agent shall have no duties, obligations or responsibilities except as expressly
set forth in this Agreement. Except to the extent expressly set forth herein,
the Valuation Agent shall have no fiduciary duty, obligation or responsibility
in respect of any party hereto or any indirect beneficiary of this Agreement or
the Collateral and shall enjoy all of the rights, protections and benefits
afforded to it under the Administration Agreement.
(iii) The Debtor agrees to pay the Valuation Agent its fees which are
payable pursuant to the terms of the Fee Agreement.
3. Establishment and Maintenance of the Collateral Accounts Upon Delivery
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of Other Collateral.
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(a) The Account Custodian shall establish a trust account at its branch
located at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, in the name of
Debtor for the benefit of KCCI and SELCO. All Account Funds shall be invested
by the Account Custodian in the Account Custodian's Rembrandt Treasury Money
Market Fund or in any other funds or investment with a rating of "A" or better
which is available through the Account Custodian. Upon the occurrence of any
Event of Default hereunder, KCCI and/or SELCO may provide written notice to the
Account Custodian instructing the Account Custodian to release the Account
Custodian to withdraw and release all Account Funds to KCCI and SELCO. Until
the Obligations are indefeasibly paid in full, the Debtor shall have no right to
make withdrawals from the Collateral Account or to otherwise exercise any
control with respect to any property from time to time on deposit in or credited
to the Collateral Account. The Account Custodian agrees to respond to
reasonable inquiries no more frequently than once every two weeks of the Debtor,
the Owner, KCCI, SELCO and the Valuation Agent as to the balance of the
Collateral Account (provided, however, that upon receipt of a notice of an Event
of Default hereunder, the Account Custodian shall inform Owner and KCCI of the
then current balance in the Collateral Account). The Debtor agrees that the
Collateral Account shall be a segregated account, maintained for the exclusive
benefit of and subject to the exclusive dominion and control of KCCI and SELCO.
(b) The Debtor agrees that any and all principal which is not reinvested
in other Securities, stock dividends, instruments, substitutions and exchanges
made in respect of any Collateral shall be deposited to the Collateral Account.
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(c) The Debtor shall cause any and all interest, cash dividends, cash,
profits, premiums and distributions made in respect of any Collateral
(collectively, the "Income") to be deposited into the Collateral Account.
(d) Except as otherwise specifically provided in this Agreement, no amount
(including accrued interest) held in the Collateral Account or any other account
maintained by the Account Custodian shall be paid or released to or for the
account of, or withdrawn by or for the account of, the Debtor.
(e) The Debtor hereby appoints the Account Custodian the Debtor's
attorney-in-fact, with full authority in the place and stead of the Debtor and
in the name of the Debtor or otherwise, from time to time upon the occurrence of
any Event of Default or upon the failure of the Debtor to comply with the
Collateral Requirement in accordance with the terms hereof, to take action and
to execute any instrument as directed by KCCI or SELCO to accomplish the
purposes of this Agreement with respect to the Account Funds, including, without
limitation, (i) to ask, demand, xxx for, recover, compromise, receive and give
acquaintance and receipts for moneys due and to become due under or in respect
of the Account Funds; (ii) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in respect of any Account Funds, and
(iii) to file any claims or take any other action or institute any proceedings
as directed by KCCI and/or SELCO for the collection of any Account Funds or
otherwise to enforce the rights of the Account Custodian with respect to the
Account Funds. Debtor acknowledges and agrees that this power of attorney is
irrevocable and coupled with an interest.
(f) KCCI and SELCO hereby appoint the Account Custodian as their agent for
retaining physical possession of the Account Funds in accordance with the terms
of this Agreement. All Account Funds shall be segregated from all other
property, including, without limitation, that of the Debtor, Owner, KCCI and
SELCO.
(g) If the Debtor fails to perform any agreement contained herein with
respect to the Account Funds, the Account Custodian may itself perform, or cause
to be performed, such agreement, and the expenses incurred by the Account
Custodian in connection therewith shall be payable by Debtor on demand of the
Account Custodian.
(h) The powers conferred on the Account Custodian hereunder are solely to
protect the interests of KCCI and SELCO in the Account Funds, and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of such Account Funds in its possession by the Account Custodian and the
accounting by the Account Custodian for moneys actually received by it
hereunder, the Account Custodian shall not have any responsibility for taking
any necessary steps to preserve rights against prior parties or any other rights
pertaining to Account Funds. Notwithstanding anything herein to the contrary,
the Account Custodian shall have no duties, obligations or responsibilities
except as expressly set forth in this Agreement, and, except as expressly set
forth in this Agreement, the Account Custodian shall have no fiduciary duty,
obligation or responsibility in respect of any party hereto or any indirect
beneficiary of this Agreement or the Account Funds.
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(i) The Account Custodian is required to exercise reasonable care in the
custody and preservation of any of the Account Funds in its possession;
provided, however, the Account Custodian shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Account Funds, if
it takes such action for that purpose as the Debtor reasonably requests in
writing provided that no Event of Default shall have occurred and be continuing,
but the failure (whether intentional or otherwise) of the Account Custodian to
comply with any such request at any time shall not in itself be deemed a failure
to have exercised reasonable care but shall be used as a factor in determining
whether the Account Custodian shall have used reasonable care. The Account
Custodian agrees to exercise the same degree of care as customarily exercised by
the Account Custodian generally when acting in such capacity for similar
property in exercising its duties hereunder.
(j) At any time, the Debtor shall have the right to appoint a successor
Account Custodian to LaSalle National Bank (or any successor Account Custodian),
so long as such successor Account Custodian is approved by KCCI and SELCO, which
approval shall not be unreasonably withheld, delayed or conditioned. The Debtor
shall give the then current Account Custodian not less than thirty (30) days'
prior written notice of the appointment and approval of a successor Account
Custodian. At any time, the then current Account Custodian shall have the right
to resign as Account Custodian by giving the Debtor, KCCI and SELCO no less than
thirty (30) days' prior written notice of such resignation. Upon receipt of such
notice, Debtor shall appoint a successor Account Custodian, which appointment is
subject to the approval by KCCI and SELCO, which approval shall not be
unreasonably withheld, delayed or conditioned. Upon the appointment (and
approval thereof) of a successor Account Custodian, Debtor shall notify the
resigning Account Custodian and the Valuation Agent of the identity of the
successor Account Custodian and the date upon which the appointment of such
successor becomes effective. Upon the effectiveness of such appointment, the
successor Account Custodian shall succeed to the rights, powers and duties of
the Account Custodian being removed or resigning, and the term "Account
Custodian" shall mean the successor Account Custodian, and the rights, powers
and duties of the former Account Custodian shall be terminated without any other
act or deed on the part of such Account Custodian or any parties to this
Agreement. Debtor agrees to provide (at Debtor's expense) KCCI and SELCO any
additional financing statements, certificates, documents or opinions of counsel
reasonably requested by KCCI or SELCO to assure KCCI and SELCO that such parties
continue to hold a valid first lien and security interest in the Collateral
Account and the Account Funds prior to effectiveness of the appointment of the
successor Account Custodian.
(k) The Debtor agrees to pay the Account Custodian a per annum fee of
$2,500 payable in advance commencing on the date of the execution and delivery
of this Agreement.
4. Delivery of the Collateral; Perfection Procedures.
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(a) Each item of Collateral which is a Security or a Cash Equivalent shall
consist of one of the following types of security or instrument:
(i) a Negotiable Instrument;
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(ii) a Certificated Security (including bonds);
(iii) a Book-Entry Government Security;
(iv) a Clearing Corporation Security; or
(v) an Uncertificated Security (other than Book Entry
Government Securities).
(b) Each Negotiable Instrument (which is also not a Certificated Security)
shall be physically delivered to the Custodian or its designee. If the
Negotiable Instrument is payable to order, it shall be endorsed (which
endorsement may not be a separate document) in blank or to the order of KCCI and
SELCO, or their nominee. The delivery and perfection procedure with respect to
any Negotiable Instrument which is also a Certificated Security shall be
governed by paragraph (c) below.
(c) Each Certificated Security (other than a Clearing Corporation
Security) shall be physically delivered to the Custodian or, at KCCI's election,
deposited into the Collateral Account. If the Certificated Security is in bearer
form, such Certificated Security shall be endorsed in blank or to the name of
KCCI, SELCO or their designee. If the Certificated Security is in registered
form, such Certificated Security shall be accompanied by duly executed undated
instruments of transfer or assignment in blank or shall be registered in the
name of KCCI and SELCO or their nominee, all in form and substance satisfactory
to KCCI and SELCO. Upon an occurrence of a Default or an Event of Default which
has occurred and is continuing, KCCI and SELCO may at any time effect the
transfer of any Certificated Securities into the name of KCCI and SELCO. In
addition, the KCCI and SELCO shall have the right at any time to exchange
Certificated Securities for Certificated Securities of smaller or larger
denomination.
(d) Each Book-Entry Government Security shall be transferred to KCCI and
SELCO by the transferor thereof to the KCCI and SELCO (or their nominee) on
their books and records and having the same held by the Custodian in a
segregated account.
(e) Each Clearing Corporation Security shall be transferred to KCCI and
SELCO by the making of appropriate entries on the books of the Clearing
Corporation reducing the account at such Clearing Corporation of the transferor
of such security, as the case may be, and increasing KCCI's and/or SELCO's
account maintained with such Clearing Corporation by the amount of such Clearing
Corporation Security to be transferred to KCCI and SELCO and held by the
Custodian in a segregated account.
(f) Each Uncertificated Security (other than any Book-Entry Government
Security) shall be transferred to KCCI and SELCO.
(g) Each time an Uncertificated Security is to be transferred to KCCI and
SELCO as Collateral, at the sole discretion of KCCI and SELCO, the Debtor shall
(i) be required to obtain an opinion from counsel acceptable to KCCI or SELCO
that shall contain the following information:
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(1) a statement of the laws by which the perfection of a
security interest in such Uncertificated Security is
governed;
(2) a statement that such counsel is licensed to practice law
in, or render an opinion on, the laws of the jurisdiction
referred to paragraph (1) above;
(3) a statement of the steps which are the steps required to
create a valid perfected first priority security interest in
favor of KCCI and SELCO in such Uncertificated Security; and
(4) a statement that, if such steps are taken, KCCI and SELCO
shall have a valid perfected first priority security
interest in such Uncertificated Security;
and (ii) comply with the steps described in clause (4) above. Each opinion
required to be obtained by the Debtor hereunder shall be in form and substance
acceptable to KCCI or SELCO and may contain only such exceptions and limitations
as are acceptable to KCCI or SELCO.
(h) Any item of Collateral consisting of a Cash Equivalent (other than
Account Funds required to be delivered to the Account Custodian hereunder) shall
be delivered to the Custodian or any other Person designated by KCCI and SELCO,
and the security interest in such Collateral may be perfected by, any other
procedure which is acceptable to KCCI and SELCO in their sole discretion in lieu
of the procedures set forth above.
5. Representations and Warranties. Debtor represents and warrants to
------------------------------
Owner, KCCI and SELCO as follows:
(a) Debtor is and shall be the owner of the Collateral free and clear of
all pledges, liens, security interests and other encumbrances of every nature
whatsoever (except in favor of the Owner);
(b) Debtor has the full right, power and authority to pledge the
Collateral and to grant the security interest in the Collateral as herein
provided;
(c) the execution, delivery and performance of this Agreement by Debtor
will not conflict with or contravene any contractual provision or judgment,
decree, order, statute, rule or regulation to which the Debtor is subject or by
which it or any of its property is bound;
(d) Debtor shall not suffer or permit any lien or encumbrance to exist on
or with respect to the Collateral except in favor of the Owner, KCCI and SELCO;
(e) this Agreement constitutes the legal, valid and binding obligation of
the Debtor in accordance with the terms hereof and has been duly authorized,
executed and delivered;
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(f) the Debtor is a duly-organized validly existing entity in good
standing under the laws of the State of Delaware and has all requisite power and
authority to conduct its business and to own its properties as now conducted or
owned;
(g) all of the Collateral is and shall be maintained by Debtor with the
Custodian and/or the Account Custodian; and
(h) None of the Collateral constitutes or will constitute "margin stock"
as such term is defined in Regulation U of the Board of Governors of the Federal
Reserve System.
6. Events Of Default And Remedies.
------------------------------
6.1. Events of Default. The occurrence or existence of any of the following
-----------------
shall constitute an Event of Default hereunder: (i) Debtor's default in the due
performance or observance of any covenant, condition or provision to be
performed or observed by it hereunder or (ii) the occurrence of any Event of
Default under (and as defined in) the Lease.
6.2. Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, KCCI and SELCO (as assignee of Owner) shall have all rights and
remedies provided in this Agreement, the other Transaction Documents, the UCC
and other applicable law, all of which rights and remedies may be exercised
without notice to or consent by Debtor or any guarantor or other indemnitor,
except as such notice or consent is expressly provided for hereunder or required
by applicable law. All rights, remedies and powers granted to Owner, KCCI and
SELCO hereunder, under any of the other Transaction Documents, the UCC or other
applicable law, are cumulative, not exclusive and enforceable, in KCCI's and
SELCO's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Debtor of this Agreement or any of the other Transaction Documents. Nothing
herein shall affect or impair Owner's rights to proceed after an Event of
Default against the Debtor or any guarantor or indemnitor under the Lease or the
other Transaction Documents regardless of the exercise or nonexercise of any
rights in favor of KCCI and/or SELCO.
(b) KCCI and SELCO shall each have the right to (i) notify any securities
intermediary or depository institution to transfer any Collateral into the name
of KCCI and/or SELCO, or their nominee, (ii) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, and (iii) sell,
redeem or otherwise dispose of any and all Collateral (including, without
limitation, entering into contracts with respect thereto, public or private
sales at any exchange, broker's board, at any office of Owner or elsewhere) at
such prices or terms as either KCCI and SELCO may deem reasonable, for cash,
upon credit or for future delivery, with KCCI and SELCO each having the right to
purchase the whole or any part of the Collateral at any such public sale, all of
the foregoing being free from any right or equity of redemption of Debtor, which
right or equity of redemption is hereby expressly waived and released by Debtor.
If any of the Collateral is sold by KCCI and/or SELCO upon credit terms or for
future delivery, amounts due and owing from the Debtor shall not be reduced as a
result thereof until payment therefor is
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finally collected by KCCI and SELCO. KCCI and/or SELCO shall give five (5) days'
prior notice to Debtor designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, and such notice shall be deemed to be reasonable notice thereof and
Debtor waives any other notice. In the event KCCI and/or SELCO institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Debtor waives the posting of any bond which might otherwise
be required.
(c) KCCI and/or SELCO shall apply the cash proceeds of Collateral actually
received by either of them from any sale, redemption or other disposition of the
Collateral to payment of the obligations represented by the B Investor Loan and
the SELCO Contribution, together with any other amounts payable to KCCI and/or
SELCO under the terms of the Lease, the Participation Agreement and the other
Transaction Documents, in whole or in part and in such order as KCCI and/or
SELCO may elect, whether or not then due. Debtor shall remain liable to Owner
(and to the extent that the B Investor Loan and SELCO Contribution are not fully
repaid, Owner shall remain liable to KCCI and SELCO) for the payment of any Base
Rental, Additional Rental, Termination Value or Purchase Price or End of Term
Adjustment as provided under the terms of the Lease (after giving full credit to
the net proceeds realized on the sale, redemption or other disposition of the
Collateral) and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
7. Power of Attorney. Debtor hereby irrevocably designates and appoints
-----------------
KCCI and SELCO (and all persons designated by either KCCI or SELCO) as Debtor's
true and lawful attorney-in-fact, and authorizes KCCI and SELCO, in Debtor's or
KCCI's and/or SELCO's name, to: (a) at any time an Event of Default or event
which with notice or passage of time or both would constitute an Event of
Default exists or has occurred and is continuing (i) demand and enforce payment
on Collateral or the proceeds of Collateral, (ii) change the name of the holder
of all Collateral to KCCI and/or SELCO or their designee, (iii) exercise all of
Debtor's or Owner's rights and remedies with respect to any Collateral, (iv)
sell or assign any Collateral upon such terms, for such amount and at such time
or times as KCCI and/or SELCO deem advisable, and (v) do all acts and things
which are necessary, in KCCI's and/or SELCO's determination, to fulfill Debtor's
obligations under this Agreement and the other Transaction Documents and (b) at
any time following an Event of Default to (i) endorse Debtor's name upon any
chattel paper, document, instrument, certificate, stock power, or similar
document or agreement relating to any Collateral, (ii) sign Debtor's name on
any verification of Collateral and notices thereof to securities intermediaries
or depository institutions and (iii) execute in Debtor's name and file any UCC
financing statements or amendments thereto. Debtor hereby releases KCCI and
SELCO and their officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of KCCI's and/or SELCO's
own gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
8. Jury Trial Waiver; Other Waivers And Consents; Governing Law.
------------------------------------------------------------
8.1. Governing Law; Choice of Forum; Service of Process; Jury Trial
--------------------------------------------------------------
Waiver.
------
-14-
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE. FOR PURPOSES OF THE CREATION
AND PERFECTION OF THE SECURITY INTEREST GRANTED UNDER THIS PLEDGE AGREEMENT WITH
RESPECT TO THE COLLATERAL AND ACCOUNT FUNDS, SUCH MATTERS SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO AND THE
STATE OF ILLINOIS, RESPECTIVELY.
(b) [omitted]
(c) Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at KCCI's
and/or SELCO's option, by service upon Debtor in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service, Debtor
shall appear in answer to such process, failing which Debtor shall be deemed in
default and judgment may be entered by KCCI and SELCO against Debtor for the
amount of the claim and other relief requested.
(d) DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF OWNER, KCCI AND/OR SELCO IN RESPECT OF THIS AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. DEBTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT DEBTOR, OWNER, KCCI OR SELCO MAY FILE AN ORIGINAL COUNTERPART OF
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
DEBTOR, KCCI AND SELCO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) None of Owner, KCCI nor SELCO shall have any liability to Debtor
(whether in tort, contract, equity or otherwise) for losses suffered by Debtor
in connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Owner, KCCI and SELCO that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, each of the Owner, KCCI and SELCO
shall be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it of
the terms of this Agreement and the other Transaction Documents.
-15-
8.2. Waiver of Notices. Debtor hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the obligations of Debtor under the Transaction Documents or the Collateral,
and any and all other demands and notices of any kind or nature whatsoever with
respect to the obligations of Debtor under the Transaction Documents, the
Collateral and this Agreement, except such as are expressly provided for herein.
No notice to or demand on Debtor which Owner, KCCI and/or SELCO may elect to
give shall entitle Debtor to any other or further notice or demand in the same,
similar or other circumstances.
8.3. Amendments and Waivers. Neither this Agreement nor any provision
----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Owner, KCCI, SELCO, and, with respect to any provision altering the rights,
obligations and duties of the Valuation Agent, Valuation Agent, and, with
respect to any provision altering the rights, obligations and duties of the
Account Custodian, the Account Custodian. Owner, KCCI and SELCO shall not, by
any act, delay, omission or otherwise be deemed to have expressly or impliedly
waived any of its rights, powers and/or remedies unless such waiver shall be in
writing and signed by an authorized officer of Owner, KCCI and SELCO. Any such
waiver shall be enforceable only to the extent specifically set forth therein. A
waiver by Owner, KCCI or SELCO of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Owner, KCCI or SELCO would otherwise have on any future
occasion, whether similar in kind or otherwise.
8.4. Waiver of Counterclaims. Debtor waives all rights to interpose any
-----------------------
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Collateral or any matter arising therefrom or relating hereto or
thereto.
8.5. Indemnification. Debtor shall indemnify and hold Owner, KCCI, SELCO,
---------------
the Custodian, the Valuation Agent and the Account Custodian, and their
respective directors, agents, employees and counsel (each an "Indemnified Party"
and collectively, the "Indemnified Parties"), harmless from and against any and
all losses, claims, damages, liabilities, reasonable costs or expenses
(collectively, the "Losses") imposed on, incurred by or asserted against any of
them in connection with (i) any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, (ii) the custody, preservation, use, operation or
sale of, collection from or other realization upon any of the Collateral, and
(iii) the failure of the Debtor to perform or observe any of its obligations
hereunder or under the other Transaction Documents. The Debtor shall not have
any obligation to indemnify an Indemnified Party under this Section 8.5 to the
extent that any Losses resulted from such Indemnified Party's gross negligence
or willful misconduct. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Debtor shall pay the maximum portion which it is
permitted to pay under applicable law to the Indemnified
-16-
Parties SELCO, in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the obligations of Debtor under
the Transaction Documents, the termination of this Agreement and the termination
or non- renewal of the Lease. All of the foregoing costs and expenses shall be
part of the obligations of Debtor under the Transaction Documents and secured by
the Collateral.
9. Miscellaneous.
-------------
9.1. Notices. All notices, requests and demands hereunder shall be in
-------
writing and made to the following:
Owner: The Atrium of San Xxxx LLC
c/o The Atrium of San Xxxx, Inc.
c/o Keycorp Leasing
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. State, General Counsel
KCCI: Key Corporate Capital Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx Xxxxxx-Xxxxxx
Telecopy: (000) 000-0000
SELCO SELCO Service Corporation
c/o Keycorp Leasing
00 Xxxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attn: Key Global Lease Administration
Telecopy: (000) 000-0000
Debtor: Brookdale Living Communities of California, Inc.
00 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Xx. and
Xxxxxx X. Xxxxxx, Esquire
Telecopy: (000) 000-0000
Valuation Agent: Wilmington Trust Company
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Custody Department
Telecopy (000) 000-0000
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Account Custodian LaSalle National Bank
000 X. XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention Xxxx Xxxxxx, Corporate Trust Officer
Telecopy: (000) 000-0000
or to such other address as either party may designate by written notice to the
other in accordance with this provision, and (b) deemed to have been given or
made: if delivered in person, immediately upon delivery; if by facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
9.2. Partial Invalidity. If any provision of this Agreement is held to be
------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
9.3. Successors. This Agreement and any other document referred to herein
----------
or therein shall be binding upon Debtor and its successors and assigns and inure
to the benefit of and be enforceable by KCCI and SELCO and their respective
successors and assigns, except that Debtor may not assign its rights under this
Agreement, the other Transaction Documents and any other document referred to
herein or therein without the prior written consent of KCCI and SELCO.
9.4. Costs and Expenses. Debtor shall pay to Owner, KCCI and SELCO on
------------------
demand any and all costs and expenses, fees and expenses paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
obligations of Debtor hereunder, KCCI's and SELCO's rights and remedies in the
Collateral including, without limitation, reasonable fees and disbursements of
counsel to Owner, KCCI and SELCO.
9.5. Entire Agreement. This Agreement, the other Transaction Documents,
----------------
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
[SIGNATURE ON FOLLOWING PAGE]
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[SIGNATURE PAGE FOR PLEDGE AND SECURITY AGREEMENT]
(CASH, CASH EQUIVALENTS AND INVESTMENT PROPERTY)
IN WITNESS WHEREOF, Debtor, Owner, Valuation Agent and Account Custodian
have caused these presents to be duly executed as an instrument under seal as of
the day and year first above written.
DEBTOR: BROOKDALE LIVING COMMUNITIES OF
CALIFORNIA, INC.
By:__________________________________
Name:___________________________
Title:__________________________
OWNER: THE ATRIUM OF SAN XXXX, LLC
By: The Atrium of San Xxxx, Inc.,
its managing member
By:_____________________________
Title:__________________________
VALUATION AGENT: WILMINGTON TRUST COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
ACCOUNT CUSTODIAN: LASALLE NATIONAL BANK
By:__________________________________
Name:___________________________
Title:__________________________
-19-
