GERMAN AMERICAN CAPITAL CORPORATION
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
December 10, 1997
Re: Financing for ElderTrust
Gentlemen:
This letter will serve as a commitment (the "Commitment") from German American
Capital Corporation or its affiliates ("GACC") to provide a secured credit line
in the form of a first mortgage financing (the "Credit Facility") and each draw,
a mortgage loan (the "Mortgage Loan"), as described herein, to ElderTrust. The
terms and Commitment are subject to due diligence and the negotiation,
execution, and delivery of definitive documentation with respect to the
facilities, satisfactory to GACC and its counsel in their sole discretion and
the other conditions set forth herein.
Commitment Terms:
Borrower: ElderTrust Operating Limited
Partnership, a subsidiary of
ElderTrust, its subsidiaries or
ElderTrust, a to-be-formed real
estate investment trust listed on
the New York Stock Exchange, formed
exclusively for the purpose of
investing in healthcare-related real
estate and mortgages, acquiring,
owning and operating senior living
properties and prohibited from
engaging in any other business
activities.
Lender: GACC or its assignee.
Commitment Amount: Up to $140,000,000 (the "Commitment
Amount") subject to a 60% (based on
the market value of the financed
property) advance rate or a 80%
advance rate (based on the market
value of the financed property)
subject to a Genesis or Multicare
guarantee. The Commitment Amount
shall be made available in
immediately available funds for
draw-down by Borrower on the Closing
Date (defined below); provided that
all conditions to funding (customary
to transactions of this nature) to
be set forth in the Mortgage Loan
documents are satisfied. GACC shall
have the right to mark-to market on
a daily basis all assets which are
financed in this credit facility and
require additional collateral or a
capital call as necessary.
Commitment Date: December 10, 1997.
Closing Date: The closing date (the "Closing
Date") agreed to prior to the
Commitment Maturity Date by
ElderTrust and GACC for draw-down of
the Mortgage Loan which shall be a
date on which the conditions
precedent to the making of the
Mortgage Loan have been met.
Collateral: (i) A first mortgage granted by
Xxxxxxxx, or its subsidiaries, on
fee interest Properties; (ii) a
perfected first lien upon mortgages
upon real estate properties held by
Xxxxxxxx; (iii) a security agreement
covering the personal property at
each Property; (iv) an assignment of
the Management Agreement (defined
below) for the Properties, and (v)
such other collateral as may be
specified in the Loan Documents
(defined below). The Properties and
related collateral will be
cross-collateralized.
Sale of Participations: GACC shall have the right to sell,
assign or participate the Mortgage
Loan, in whole or in part, without
the consent of the Borrower or
ElderTrust. GACC will consult with
and notify Borrower of its intent to
sell, assign or participate the
Mortgage Loan.
Credit Facility Terms:
Maximum Borrowing Amount: Up to $140,000,000.
Term: 364 days; Extension options may be
granted by Lender with 60 day
notice.
Interest Rate: A floating rate equal to the sum of
(i) one-month LIBOR and (ii) the
applicable spread based on the
following LTV grid:
-2-
Spread LTV
------ ---
+180bp 70%
+165bp 60%
+150bp 50% or less
Loan to Value: Loan to Value shall be calculated as
the ratio of the outstanding loan
amount to Value. Value shall be
determined as the lesser of purchase
price and appraised value determined
by an appraiser acceptable to GACC.
Amortization: None.
Certain Covenants: At all times, ElderTrust must
maintain the following covenants and
ratios: (i) Minimum Equity Value
(tangible net worth) of $[ ]
million, (ii) Total Leverage/ Book
Value not to exceed 70%, (iii) a
ratio of Combined EBITDA/Interest
Expense, for the prior four
quarters, not less than 2.0 to 1.00,
and (iv) Borrower prohibited from
pledging ownership (equity) interest
in any investment as security for
indebtedness.
Events of Default: The following events constitute
default on behalf of the Borrower
and or ElderTrust: (i) failure to
pay principle and interest when due,
(ii) violation of covenants,
subject, where appropriate, to cure
or grace periods to be negotiated,
(iii) material inaccuracy of any
representation or warranty, (iv)
cross-defaulted obligations in
excess of $10 million, (v)
insolvency or bankruptcy of the
Borrower or a subsidiary to which
more than $25 million of
Capitalization Value is
attributable, (vi) judgment defaults
in excess of $10 million that remain
unremedied, and (vii) failure to
remain a publicly traded, stock
exchange listed company and to
qualify as a real estate investment
trust.
Voluntary Prepayment: Prepayments are permitted in whole
or in part during the term of the
Facility. If a mortgage loan is
refinanced prior to maturity and the
replacement financing is provided by
an entity other than GACC or an
affiliate, a 1 % Exit Fee on the
amount refinanced will be payable to
GACC.
-3-
Amounts prepaid may be reborrowed
provided that; (i) no Event of
Default exists; (ii) Borrower is in
compliance with all Loan Covenants;
and (iii) all due diligence
requirements are met.
Mandatory Prepayment: Prepayment will be mandatory: (i)
if there is a merger, unless the
Borrower is the surviving entity;
(ii) if there is the sale of any
asset that secures the credit
facility, the Allocated Loan Amount
attributable to such asset must be
repaid; or (iii) a sale of any
assets totaling more than 25% of the
Borrower's Capitalization Value.
Release of Individual Property: Permitted prior to payment of the
Mortgage Loan in full; provided,
that Borrower prepays the Mortgage
Loan in part in an amount equal to
the Allocated Loan Amount of the
individual Property that is the
subject of the release. Each
property will be assigned an
Allocated Loan Amount on each
Closing Date.
Recourse: Recourse to Borrower.
Payment Date: Payments of interest will be due, in
arrears, on the first day of each
month. A grace period of 5 days
shall be permitted. A late fee of
5% is payable on past due amounts.
Interest Payment: Interest will accrue from (and
including) the preceding Payment
Date (or in the case of the first
Payment Date from the Closing Date),
to and including the day preceding
such Payment Date (each such period,
an "Interest Period.). Interest will
accrue on the basis of a 365-day
year and the actual number of days
in the related Interest Period.
Origination Fee: A 10 basis point fee (the
"Origination Fee") applied to the
Commitment Amount shall be due and
payable to GACC upon ElderTrust's
entry into this letter agreement. A
40 basis point fee, calculated
against each draw amount, shall be
payable to GACC by ElderTrust upon
each draw down of the facility. The
maximum fees paid during the term of
this Facility shall not exceed
$700,000.
-4-
Expenses: Borrower will be obligated to
reimburse GACC for its
out-of-pocket expenses connected
with this financing, including
without limitation, the cost of due
diligence, any third party reports
which GACC may require and the legal
fees and expenses GACC may incur. In
connection with the Mortgage Loan,
Borrower shall pay the costs of all
third party reports, including
without limitation, Appraisals
(defined below), Phase One
environmental reports, any
architectural and engineering
reports, the cost of title insurance
and surveys, and all closing costs,
legal fees and expenses, including
taxes and recording fees and
expenses. All such expenses (i)
shall be payable whether or not the
financing of the Mortgage Loan
closes, and (ii) shall be reimbursed
or paid directly by Borrower
promptly upon demand by GACC.
Additional Indebtedness: No additional secured indebtedness
or liens are permitted without the
prior approval of GACC. Other
indebtedness is allowed in
accordance with the loan covenants.
Debt in place at the time of the
ElderTrust Initial Public Offering
is permitted subject to the leverage
covenants outlined in the Certain
Covenants section.
Net Lease: Certain Properties will be triple
net leased to Genesis, (the
"Operator") subject to a Lease
acceptable to GACC.
Manager: For Properties that are managed by
an independent property manager, the
manager and applicable Management
Agreement must be acceptable to
GACC.
Management Agreement: Manager shall manage the Properties
pursuant to a management agreement
(the "Management Agreement")
acceptable to GACC. Any successor or
other Manager selected by Xxxxxxxx
shall be acceptable to GACC in its
sole discretion.
Financial Reports: Borrower shall provide to GACC, in a
form and in detail reasonably
acceptable to GACC, (i) monthly
financial statements with respect to
each Property certified by the
Borrower, each report covering such
month and year to date, contrasted
against budget and the prior year,
(ii) audited financial statements
with respect to ElderTrust each
quarter or ElderTrust's 10Q and 10K
reports within 5 days of
availability, and (iii) such other
financial information as GACC may
reasonably request from time to
time.
-5-
Right of Inspection: Borrower, and Manager shall grant to
GACC and its agents and
representatives access to the
Properties and to management from
time to time as GACC may reasonably
deem appropriate.
Due Diligence: GACC shall satisfy itself in its
sole discretion with respect to (i)
the financial condition and
reputation of Borrower's capital and
corporate structure of each; (ii)
the feasibility, viability and
quality of each Property, including
but not limited to a satisfactory
review of the relevant budgets and
plans, lease agreements, appraisals
(defined below), Phase One
environmental reports, architectural
and engineering reports and/or other
engineering reports, the Management
Agreement, the title report, the
survey, the title insurance policy,
and all other insurance policies;
(iii) the ability of the Properties
to generate the stabilized
cashflows, net operating income and
net operating cashflow; (iv) such
financial information and references
with respect to ElderTrust's,
Operator's, Manager's and Xxxxxxxx's
operations and its principals, as
GACC deems necessary; GACC shall
have the right to require a
satisfactory appraisal for each
property (an "Appraisal"), to be
conducted by an independent
appraiser acceptable to GACC in its
sole discretion; and (v) other
matters including credit approval as
GACC deems necessary. If the results
of the Due Diligence are not
satisfactory to GACC in its sole
discretion, GACC may elect not to
fund the Mortgage Loan. In such
event, after payment of its costs
and expenses, including, without
limitation, any costs and expenses
incurred in connection with the Due
Diligence and any attorney fees,
GACC shall refund the Commitment Fee
to Borrower.
-6-
Documentation: Borrower and GACC shall execute
documents with respect to the
Mortgage Loan acceptable to Borrower
and GACC and their respective
counsel ("Mortgage Loan Documents"),
which shall include, without
limitation, (i) a promissory note
(ii) first mortgages with respect to
the fee interest Properties securing
the Mortgage Loan; (iii) an
assignment of leases for each
leasehold Property; (iv) a security
agreement covering personal
property; (v) an assignment of the
Management Agreement; (vi) a loan
agreement including the provisions
specified herein and other
provisions customary for a facility
of this type including conditions
precedent, representations and
warranties, covenants and events of
default; and (vii) such other
documentation (including without
limitation, legal opinions), as GACC
and its counsel may deem
appropriate.
You agree to indemnify and hold harmless us and each of the Lenders and each
director, officer, employee and affiliate thereof (each an "indemnified person")
in connection with any losses, claims, damage, liabilities or other expenses to
which a Lender or such indemnified persons may become subject, insofar as such
losses, claims, damages, liabilities (or actions or other proceedings commenced
or threatened in respect thereof) or other expenses arise out of or in any way
relate to or result from the financing contemplated by this letter, or in anyway
arise from any use or intended use of this letter. You agree to reimburse each
Lender and each indemnified person for any legal or other expenses incurred in
connection with investigating, defending or participating in any such loss,
claim, damage, liability or action or other proceeding (whether or not such
Lender or any such person is a party to any action or proceeding out of which
any such expenses arise), provided that you shall have no obligation hereunder
to indemnify any Lender or indemnified person for any loss, claim, damage,
liability or expense which resulted from the gross negligence or willful
misconduct of such Lender or indemnified person. This letter is furnished for
your benefit, and may not be relied upon by any other person or entity. Neither
us nor any Lender shall be responsible or liable to you or any other person for
consequential damages which may be alleged as a result of this letter.
You agree that until after the Commitment Maturity Date you will not, directly
or indirectly, engage in any discussions or negotiations with any person with
respect to the financing of this transaction. You are not authorized to show or
circulate this letter to any other person or entity (other than your legal and
financial advisors in connection with your evaluation hereof) until such time as
you have accepted this letter as provided in the immediately preceding
paragraph. If this letter is not accepted by you as provided in the immediately
preceding paragraph, you are directed to immediately return this letter (and any
copies hereof) to the undersigned.
-7-
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof by returning to us executed counterparts of this
letter not later than 5:00 p.m., New York City time, on December 31, 1997. The
Commitment and GACC's undertakings hereunder will expire at such time in the
event GACC has not received such executed counterparts and the Commitment Fee in
accordance with the immediately preceding sentence. The compensation,
reimbursement, and indemnification provisions contained herein shall remain in
full force and effect regardless of whether definitive financing documentation
shall be executed and delivered and notwithstanding the termination of the
Commitments.
The Commitment shall not be assignable by you without the prior written consent
of GACC (and any purported assignment without such consent shall be null and
void) and may not be amended or waived except by an instrument in writing signed
by you and GACC. This letter may be executed in any number of counterparts, each
of which shall be an original and all of which, when taken together, shall
constitute one agreement. This letter agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without regard to any conflict of law provisions thereof.
We are delighted to be able to extend the Commitment to you and look forward to
working with you on this transaction.
Very truly yours,
GERMAN AMERICAN CAPITAL CORPORATION
By: /s/ By: /s/
-------------------------- -----------------------------
Name: Name:
------------------------ ---------------------------
Title: Title:
----------------------- --------------------------
Accepted and Agreed:
By: /s/ By: /s/
-------------------------- -----------------------------
Name: Name:
------------------------ ---------------------------
Title: Title:
----------------------- --------------------------
-8-
