EXHIBIT 10.104
OPERATING DEFICIT LOAN AGREEMENT
(SUNRISE OF STUDIO CITY, CALIFORNIA)
THIS OPERATING DEFICIT LOAN AGREEMENT (the "Agreement") is made as of
the 23rd day of December, 2002, by SUNRISE ASSISTED LIVING MANAGEMENT, INC., a
Virginia corporation ("XXXXX") to and for the benefit of AL U.S./STUDIO CITY
SENIOR HOUSING, L.P., a California limited partnership ("Beneficiary").
RECITALS
A. Beneficiary desires to construct a certain assisted living facility
(the "Facility") in Studio City, California, to be known as "Sunrise of Studio
City."
B. The costs of construction of the Facility will be paid in part from
the proceeds of a loan in the maximum principal amount of $14,250,000.00 (the
"Construction Loan") made to Beneficiary by GMAC Commercial Mortgage
("Construction Lender"). The Construction Loan is being made pursuant to a Loan
Agreement of even date herewith by and between Beneficiary and Construction
Lender (the "Loan Agreement"), is evidenced by a certain Promissory Note of even
date herewith (the "Note") and secured by a certain Construction Deed of Trust
and Security Agreement of even date herewith (the "Deed of Trust") encumbering
the property on which the Facility is to be constructed, as each may be amended
from time to time.
C. Pursuant to the terms of a certain Pre-Opening Services and
Management Agreement by and between XXXXX and Beneficiary (the "Management
Agreement"), XXXXX will provide Beneficiary with certain pre-opening services
and will be the manager of the Facility once the Facility is completed.
X. XXXXX will derive substantial direct and indirect benefits from the
Management Agreement.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound, XXXXX and Beneficiary hereby agree as follows:
1. DEFINITIONS.
1.1 Certain Definitions.
(a) "Operating Deficit" shall mean the excess, if any, of (i)
"Adjusted Facility Expenses" (defined below), over (ii) Gross Revenues generated
by the operation of the Facility, determined monthly on a cash basis, commencing
as of the Commencement Date.
(b) "Operating Surplus" shall mean the excess, if any, of (i)
Gross Revenues generated by the operation of the Facility, over (ii) Adjusted
Facility Expenses, determined monthly on a cash basis commencing as of the
Commencement Date.
(c) "Adjusted Facility Expenses" shall mean (i) all Facility
Expenses (excluding amortization, depreciation and similar non-cash items) with
respect to the Facility; except that such term shall not include real estate
taxes, utilities and insurance premiums to the extent such items are greater
than 103% of the amounts projected for such items on the pro forma budget for
the Facility attached as Exhibit A; PLUS (ii) the Monthly Payment, excluding
therefrom any portion thereof resulting from the calculation of interest at a
rate in excess of seven percent (7%) per annum (except to the extent that such
excess is due to any default by SALII or any of its Related Parties under any
Facility Development Agreement or Facility Management Agreement).
(d) "Commencement Date" shall be the date by which all funds
budgeted in the interest reserve working capital reserve established for the
Facility pursuant to the pro forma budget attached hereto as Exhibit A
("Budget") have been expended. The working capital reserve may be increased (or
decreased) after the date hereof due to savings (or cost overruns) in other
Budget categories, and Beneficiary and XXXXX agree to be bound by any and all
subsequent changes in such working capital reserve.
(e) "Collection Costs" shall mean the reasonable costs and
expenses (including reasonable attorney's fees) incurred by Beneficiary if
Beneficiary is required to pursue its remedies in order to enforce XXXXX'x
obligations hereunder.
(f) "Monthly Payment" shall mean the regular monthly payment of
interest to be paid by Beneficiary to Construction Lender pursuant to the terms
of the Note under its terms as they exist as of the date hereof. In no event
shall the Monthly Payment include any principal sum due on maturity of the
Construction Loan nor by reason of the acceleration of the Construction Loan.
(g) "Operating Default Loan" shall mean any loan advance made by
XXXXX to Beneficiary pursuant to the terms hereof.
(h) "Termination Date" shall mean the earlier of (i) two (2)
years from the Commencement of Management Services, or (ii) the effective date
of the termination of the Management Agreement for any reason other than a
default by XXXXX thereunder, except that this date shall be extended so that in
no case may this Agreement terminate prior to the repayment of the Construction
Loan.
1.2 Other Definitions. Initially capitalized terms used and not
otherwise defined herein shall have the meaning given thereto in the Management
Agreement if defined in the Management Agreement, or if not defined in the
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Management Agreement, then the meaning given thereto in the LLC Agreement if
defined in the LLC Agreement.
2. AGREEMENT TO LEND.
(a) XXXXX hereby unconditionally guarantees and agrees that XXXXX
will lend to Beneficiary the amount of any Operating Deficit, pursuant to the
terms set forth herein, from the Commencement Date through the Termination Date.
(b) Commencing as of the first (1st) day of the first (1st)
calendar month following the Commencement Date, and continuing as of the first
(1st) day of each calendar month thereafter until the Termination Date, the
Operating Deficit, if any, for the calendar month just ended will be determined
by Beneficiary. XXXXX shall provide to Beneficiary funds in an amount equal to
the Operating Deficit within five (5) business days after receipt of notice of
such determination if such determination is accompanied by a directive from
Beneficiary that it desires that the funds be advanced by XXXXX at such time.
(c) XXXXX hereby further agrees to pay any and all Collection
Costs which may be incurred by Beneficiary. The repayment of Collection Costs
shall not affect the "Borrowing Account" or the "Loan Account" (defined below).
The obligation to pay Collection Costs is separate and apart from the obligation
to lend.
3. OBLIGATION TO LEND AND REPAYMENT TERMS.
(a) Beneficiary shall establish two (2) separate accounts
hereunder with respect to XXXXX'x obligation to lend and XXXXX'x right to
repayment. The first account (the "Borrowing Account") shall be the amount which
Beneficiary is entitled to borrow from XXXXX and which XXXXX is obligated to
loan to Beneficiary, but which has not yet been advanced by XXXXX to
Beneficiary. The second account (the "Loan Account") shall be the actual amount
owed to XXXXX by Beneficiary in connection with advances actually made by XXXXX
to Beneficiary.
(b) The Borrowing Account shall be established as of the end of
the first calendar month following the Commencement Date with respect to which
there is an Operating Deficit. There shall be added to the Borrowing Account the
amount of any Operating Deficit for any month from and after the first month in
which there is an Operating Deficit. There shall be subtracted from the
Borrowing Account any sums actually loaned by XXXXX to Beneficiary after the
establishment of the Borrowing Account, provided, however, that the Borrowing
Account shall never be less than zero. Beneficiary shall have the right, at any
time or from time to time, to direct that XXXXX lend to Beneficiary all or any
portion of the balance in the Borrowing Account. Such election by Beneficiary
may be made by written notice from Beneficiary to
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XXXXX. XXXXX shall be obligated to advance funds to satisfy its obligation
hereunder within five (5) business days of receipt of such notice from
Beneficiary.
(c) The Loan Account shall be established upon the first advance
of any Operating Deficit Loan by XXXXX to Beneficiary. Interest on any Operating
Deficit Loan shall be computed at the rate of ten percent (10%) per annum.
Interest shall be computed at such rate based upon the outstanding Operating
Deficit Loan balance from time to time. The Loan Account shall be increased, as
of the date of advance, by advances of funds by XXXXX to Beneficiary, and shall
be decreased by payments to XXXXX by Beneficiary on account thereof. The Loan
Account may be prepaid at any time or from time to time without penalty.
Principal and interest on the Loan Account shall be paid by AL US on behalf of
Beneficiary as set forth in Article 5.3 of the Limited Liability Company
Operating Agreement of AL US Development, LLC effective as of December 23, 2002
(the "LLC Agreement") and Section 8 below.
(d) Notwithstanding anything to the contrary contained in this
Agreement, XXXXX shall have no obligation to make any advance hereunder with
respect to any Operating Deficit accruing from and after the Termination Date.
At any time on or after the Commencement Date and on or prior to the Termination
Date, XXXXX shall remain obligated to lend to Beneficiary the outstanding amount
in the Borrowing Account.
(e) Any obligation or debt of Beneficiary or ALUS now or
hereafter held by XXXXX is hereby subordinated to the obligations of Beneficiary
to Construction Lender under the Loan Agreement (the "Obligations") and XXXXX
shall not enforce or collect any such indebtedness from Beneficiary of ALUS.
Nevertheless, upon request by Construction Lender, XXXXX shall collect, enforce
and receive such indebtedness of Beneficiary or ALUS to XXXXX. Any sums
collected at Construction Lender's request or collected in contravention of the
prohibition set forth herein shall be held by XXXXX as trustee for Construction
Lender and shall be paid over to Construction Lender on account of the
Obligations; provided, however, that such payments shall not impair, reduce or
affect in any manner the liability of XXXXX under the other provisions of this
Agreement. XXXXX hereby agrees to indemnify and hold Construction Lender
harmless from and against any and all loss, cost, damage, liability or expense
(including without limitation attorneys' fees and costs) incurred by
Construction Lender incident to or in connection with any allegation or finding
that the delivery of this Agreement is a "preference" under 11 U.S.C. Section
547.
(f) In no event shall XXXXX'x obligations hereunder be construed
as a guarantee of repayment of the Construction Loan.
(g) Notwithstanding the foregoing or any other provision of this
Agreement not the contrary, payments of interest and principal shall be required
to be made only if and to the extent that Borrower has sufficient Proceeds from
Capital Transactions available to pay such interest and/or principal in
accordance with terms of the Venture Agreement. To the extent that such Proceeds
from Capital Transactions are insufficient to pay interest under the loan on a
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current basis, any such interest shall accrue. Payments of principal under the
Loan shall be made only from available Proceeds of Capital Transactions in
accordance with the Venture Agreement.
4. [INTENTIONALLY OMITTED].
5. REPRESENTATIONS AND WARRANTIES. XXXXX hereby makes the following
representations and warranties to Beneficiary:
(a) Power and Authority. XXXXX has the requisite power,
authority, capacity and legal right to execute, deliver and perform this
Agreement.
(b) Binding Obligations of XXXXX. This Agreement and all other
documents required to be executed and delivered hereunder, when executed and
delivered, will constitute legal, valid and binding obligations of XXXXX
enforceable against XXXXX in accordance with their terms.
(c) No Legal Bar. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will,
with or without notice and/or lapse of time:
(i) constitute a breach of any of the terms and provisions
of, or constitute a default under, any notice, contract, document, instrument,
agreement or undertaking, whether written or oral, to which XXXXX is a party or
to which XXXXX is subject;
(ii) accelerate or constitute an event entitling the
holder of any indebtedness of XXXXX to accelerate the maturity of any such
indebtedness;
(iii) conflict with or result in a breach of any writ,
order, injunction or decree against XXXXX of any court or governmental agency or
instrumentality, whether national, state, local or other; or
(iv) conflict with or be prohibited by any federal, state,
local or other governmental law, statute, rule or regulation.
(d) No Consent. No consent of any other person not heretofore
obtained and no consent, approval or authorization of, or registration,
declaration or filing with any court, governmental body, governmental authority
or other person or entity whatsoever is required in connection with the valid
execution, delivery or performance by XXXXX of this Agreement or any other
documents required to be executed and delivered hereunder, or in connection with
any other transaction contemplated by this Agreement.
(e) Truth and Completeness. Neither this Agreement nor any other
statement furnished by XXXXX to Beneficiary in connection with the transactions
contemplated hereby
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contains any untrue statement of material fact or omits any statement material
fact necessary in order to make the statements contained herein or therein true
and not misleading.
6. NO IMPLIED WAIVER. No delay or failure of Beneficiary in exercising
any right or remedy under this Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right or remedy preclude any
other or further exercise thereof or the exercise of any other right or remedy.
7. ASSIGNMENT. Beneficiary's rights under this Agreement may be assigned
by Beneficiary to a third party, including, without limitation, Construction
Lender as additional security for the Construction Loan, in the sole and
absolute discretion of Beneficiary, in which event such assignee shall have the
right to enforce all of Beneficiary's rights against XXXXX in the same manner as
if such assignee were originally named as the Beneficiary hereunder. No assignee
shall be personally liable to repay any outstanding amount in the Loan Account,
XXXXX'x recourse being limited to any Operating Surplus arising after such
assignee assumes control of the Facility from Beneficiary, subject to the
provisions of Section 3(h) above. No such assignment shall, however, relieve
Beneficiary of Beneficiary's obligation to repay the Loan Account, which shall
remain a recourse obligation of Beneficiary to XXXXX, subject to the provisions
of Section 3(h) above.
8. JOINDER BY PARENT COMPANY.
(a) Subject to the provisions of Section 8(b) below, AL U.S.
Development Venture, LLC, a Delaware limited liability company ("ALUS"), the
sole member of AL U.S. Pool One, LLC, a Delaware limited liability company, the
sole member of AL California GP, LLC, a Delaware limited liability company, the
general partner of Beneficiary, hereby guarantees to XXXXX, its successors and
assigns, as if ALUS were the primary obligor under this Agreement, (a) the
prompt satisfaction and discharge of all sums due by Beneficiary under the terms
of this Agreement and (b) the prompt and faithful performance by Beneficiary of
all of the terms, covenants and conditions of this Agreement. It is expressly
understood and agreed that this is a continuing guaranty and that the
obligations of ALUS hereunder shall be identical to those of Beneficiary.
Subject to the provisions of Section 8(b) below, in addition, ALUS guarantees
the full payment of and agrees to reimburse XXXXX for all costs of collection
incurred by XXXXX in enforcing this Agreement and pursuing any remedies set
forth in this Agreement, including court costs and reasonable attorneys' fees
(including, but not limited to, fees in any bankruptcy or appellate proceeding).
(b) Notwithstanding the provisions of the foregoing Section 8(a)
or any other provision of this Agreement to the contrary, payments of interest
and principal shall be required to be made only if and to the extent that ALUS
has sufficient Proceeds from Capital Transactions available to pay such interest
and/or principal in accordance with terms of Section 5.3 of the Venture
Agreement. To the extent that such Proceeds from Capital Transactions are
insufficient to pay interest under any Operating Deficit Loan on a current
basis, any such interest shall
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accrue. Payments of principal under the Loan shall be made only from available
Proceeds of Capital Transactions in accordance with the provisions of Section
5.3 of the Venture Agreement.
(c) Subject to the foregoing provisions of the foregoing Section
8(b), obligation to repay any Operating Deficit Loan hereunder to XXXXX shall
survive the Termination Date.
9. MISCELLANEOUS.
(a) Modifications. This Agreement may not be modified or amended
except by a written agreement duly executed by the parties hereto and approved
in writing by Construction Lender, and shall be binding upon, and inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns.
(b) Severability. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.
(c) Integration. Except as provided in any written agreement now
or at any time hereafter in force between Beneficiary and XXXXX, this Agreement
shall constitute the entire agreement of XXXXX with Beneficiary with respect to
the Operating Deficit, and no representation, understanding, promise or
condition concerning the subject matter hereof shall be binding upon XXXXX or
Beneficiary unless expressed herein or therein.
(d) Construction. Wherever in this Agreement the context so
requires, reference to the neuter, masculine or feminine shall be deemed to
include each of the other, and reference to either the singular or the plural
shall be deemed to include the other.
(e) Notices. All notices of other communications required or
permitted to be given pursuant to the provisions of this Agreement shall be in
writing and shall be delivered in person or sent by registered or certified
United States mail, postage prepaid, return receipt requested, or by express
courier to the addresses of the parties as set forth below:
XXXXX: Sunrise Assisted Living Management, Inc.
0000 Xxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Legal Department
with a copy to: Watt, Tieder, Hoffar & Xxxxxxxxxx, L.L.P.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esquire
Beneficiary: AL U.S./Studio City Senior Housing, L.P.
c/o Sunrise Assisted Living Investments, Inc.
0000 Xxxxxxxx Xxxxx
0
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Vice President
with a copy to: AEW Capital Management LP
World Trade Center
Two Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxxxxx Xxxxxxxx
and to: Xxxx and Xxxx, LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esquire
or to such other addresses as are specified by no less than fifteen (15) days
prior written notice delivered in accordance herewith. All such notices, demands
and requests shall be deemed effectively given and delivered three (3) business
days after the postmark date of mailing, or if delivered personally, when
received. Rejection or other refusal to accept or the inability to deliver
because of a changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request sent.
(f) Captions. The captions appearing herein are used for
reference only and shall not be construed as limiting anything set forth herein.
(g) Governing Law. This Agreement shall be construed and
interpreted in accordance with and shall be governed by, the laws of the
Commonwealth of Virginia without regard to the principles of conflicts of laws,
except to the extent preempted by United States federal law.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.
XXXXX:
SUNRISE ASSISTED LIVING MANAGEMENT, INC., a
Virginia corporation
By: /s/Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx, Vice President
BENEFICIARY
-----------
AL U.S./STUDIO CITY SENIOR HOUSING, L.P., a California limited
partnership
By: AL California GP, LLC, a Delaware limited liability
company, its General Partner
By: AL U.S. POOL ONE, LLC, a Delaware limited liability
company, its Sole Member
By: AL U.S. DEVELOPMENT VENTURE, LLC, a Delaware
limited liability company, its Sole Member
By: SUNRISE ASSISTED LIVING INVESTMENTS, INC.,
a Virginia corporation, its Managing Member
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Xxxxxx X. Xxxxxx, Vice President
By: AEW SENIOR HOUSING COMPANY, LLC, a
Delaware limited liability company, Member
By: SEAPORT SENIOR HOUSING MANAGEMENT,
LLC, a Delaware limited liability
company, its Managing Member
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
----------------------------
Xxxxxxxxxxx X. Xxxxxxxx
Vice President
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JOINDER:
The undersigned AL US Development, LLC hereby joins this Agreement
solely for the purposes set forth in Section 8 hereof.
AL U.S. DEVELOPMENT VENTURE, LLC, a
Delaware limited liability company
By: SUNRISE ASSISTED LIVING
INVESTMENTS, INC., a
Virginia corporation, its Managing Member
By:/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
Vice President
By: AEW SENIOR HOUSING
COMPANY, LLC, a Delaware limited
liability company, Member
By: SEAPORT SENIOR HOUSING MANAGEMENT,
LLC, a Delaware limited liability
company, its Managing Member
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
----------------------------
Xxxxxxxxxxx X. Xxxxxxxx
Vice President
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EXHIBIT LIST
Exhibit A -- Budget
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