MORTGAGE NOTE
$14,000,000.00 August 11, 1998
New York, New York
FOR VALUE RECEIVED SIERRA HEALTH-STYLES,INC.,an Arizona corporation
("HealthStyles"), and SIERRA TUCSON, L.L.C., a Delaware limited liability
company ("Sierra"), each with an address at 00000 Xxxxx Xxxx Xxx Xxx Xxxxxxx,
Xxxxxx, Xxxxxxx 00000(Health-Styles and Sierra, collectively, ("Maker"),
promise to pay to the order of XXXXXX BROTHERS HOLDINGS INC., a
Delaware corporation ("Payee"), at its principal place of
business at 0 Xxxxx Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 10285,
or at such place as the holder hereof may from time to time
designate in writing, the principal sum of Fourteen Million and
00/100 Dollars (the "Loan"), in lawful money of the United States
of America, with interest thereon to be computed on the unpaid
principal balance from time to time outstanding at the Applicable
Interest Rate (as such term is defined in Section 2 hereof), and
to be paid in installments as follows:
(a) A payment of interest only on the first day of
the first full calendar month after the date hereof; and
(b) Monthly payments of interest only calculated from
time to time in accordance with Section 3 hereof, on the first
day of each calendar month beginning with the second full
calendar month after the date hereof.
The entire outstanding principal balance, together
with accrued and unpaid interest and any other amounts due
under this Note, shall be due and payable on the maturity date
of the Loan, as determined in accordance with Section 1 hereof.
1. LOAN TERM.
(a) The Loan shall be for a term of three years, and shall
mature on the third anniversary of the first day of the first
full calendar month following the date hereof (the "Initial
Maturity Date").
(b) A portion of the Loan, in the amount of $12,000,000.00, is
being advanced as of the date hereof. A portion of the Loan, in
the amount of $2,000,000.00, will be advanced as necessary to pay
capital improvement costs, tenant improvements costs, moving
costs and working capital needs relating to the Mortgaged
Property (as such term is defined in Section 5 hereof), as more
particularly set forth in that certain Repair Escrow Agreement
between Maker and Payee dated as of the date hereof.
(c) Maker shall have the option to extend the term of
the Loan for an additional 12-month period beginning on the first
day following the Initial Maturity Date (the "Extension Period")
and, if so extended, the Loan shall mature on the fourth
anniversary of the first day of the first full calendar month
following the date hereof (the "Extended Maturity Date"; the
Initial Maturity Date or the Extended Maturity Date, as
applicable, the "Applicable Maturity Date"),subject to
satisfaction of the following conditions:
(i) Not less than 45 days prior to the
Initial Maturity Date, Maker shall give Payee written notice
of its election to extend the term of the Loan (the "Election
Notice");
(ii) The Election Notice shall be accompanied by the
payment of an extension fee in the amount of two (2.0%)
percent of the then outstanding principal balance of the Loan;
and
(iii) At the time the Election Notice is
given, no Event of Default (as such term is defined in Section 7
hereof) shall have occurred, and no event which, with the passage
of time or the giving of notice, or both, would constitute an
Event of Default, shall have occurred and be continuing.
2. APPLICABLE INTEREST RATE.
(a) Interest on the Loan shall accrue and be payable
at LIBOR (as such term is defined in subsection (b) of this
Section) plus the applicable Spread (as such term is defined in
subsection (c) of this Section) as calculated from time to time
(the "LIBOR Rate").
(b) As used herein, the term "LIBOR", with
respect to the relevant Interest Period (as such term is
defined in this subsection), shall mean the rate per annum
(rounded upwards, if necessary, to the nearest onesixteenth
(1/16) of one (1%) percent) reported on the date two "Eurodollar
Business Days" (as such term is defined in this subsection) prior
to the first day of such Interest Period, as reported in The Wall Street
Journal as the London Interbank Offered Rate for U.S. dollar
deposits having a term comparable to such Interest Period
and in an amount of $1,000,000.00 or more (or if The Wall
Street Journal shall cease to be publicly available or if the
information contained in The Wall Street Journal, in Xxxxx's
judgment, shall cease to accurately reflect such London Interbank
Offered Rate, then LIBOR shall be as reported by any publicly
available source of similar market data selected by Payee that,
in Xxxxx's sole judgment, accurately reflects such London
Interbank Offered Rate). The term "Interest Period" shall mean
the respective 30-day term of a particular LIBOR contract. The
term "Eurodollar Business Day" shall mean any day that is not a
Saturday, a Sunday or a day on which banks in the City of London
are required or permitted to be closed for interbank or foreign
exchange transactions. LIBOR shall be adjusted for reserves.
(c) As used in this Note, the term "Spread" shall
mean the number of basis points added to LIBOR to determine the
LIBOR Rate from time to time. During the term of the Loan, the
Spread shall be 400 basis points (4.0%).
(d) As used in this Note the term "Applicable
Interest Rate" shall mean the greater of: (i) the LIBOR Rate as
applicable from time to time; and (ii) seven (7.0%) percent.
3. CALCULATION OF INTEREST; APPLICATION OF PAYMENTS.
(a) Interest on the outstanding principal
balance of this Note shall be calculated by
multiplying the actual number of days elapsed in any given
payment period by a daily rate based on a 360-day year.
(b) The LIBOR Rate, and the amount of interest
payable monthly, shall be recalculated at each LIBOR reset
date.
(c) Payments under this Note shall be applied in accordance
with that certain Loan Agreement dated as of the date hereof
between Maker and Payee (the "Loan Agreement"). All amounts due under
this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
4. DEFERRED FINANCING FEE.
Maker shall pay to Payee, in addition to any other
amounts due hereunder, a deferred financing fee of $140,000.00
(the "Deferred Financing Fee"). The Deferred Financing Fee
shall accrue and be fully earned on the date of closing and
funding of the Loan, and shall be payable on the Applicable
Maturity Date, or upon the earlier repayment of the Loan, at
maturity, by acceleration or otherwise.
5. SECURITY FOR THE LOAN.
(a) This Note is secured by: (i) mortgage instruments
(collectively, the "Mortgages") affecting the real property and
improvements located at 0000 Xxxx Xxx Xxxxxxxx Xxxxxxx, Xxxxxx,
Xxxxxxx (also known as 00000 Xxxxx Xxxx xxx Xxx Xxxxxxx, Xxxxxx,
Xxxxxxx and/or 00000 Xxxxx Xxxx xxx Xxx Xxxxxxx, Xxxxxx,
Xxxxxxx), and real property on which is or will be located the
psychiatric hospital and behavioral health center operated by or
on behalf of Sierra, Borrower or their respective affiliates, as
the case may be, and the improvements on such real property
(collectively, the "Mortgaged Property"); (ii) an Assignment of
Leases and Rents dated as of the date hereof from Maker to Payee
(the "Assignment"); (iii) an Environmental Indemnity Agreement
dated as of the date hereof among Payee, Maker and NextHealth,
Inc. (the "Environmental Agreement"); and (iv) such other
documents now or hereafter executed by Maker and/or others and by
or in favor of Payee, which wholly or partially secure or
guarantee payment of this Note including, without limitation, any
collateral assignments and reserve and/or escrow accounts (such
other documents, collectively, the "Other Security Documents").
(b) As used herein, the term "Loan Documents" means,
collectively, this Note, the Mortgages, the Loan Agreement, the
Assignment, the Environmental Agreement, the Other Security
Documents and any and all other documents executed in
connection with the Loan.
6. LATE CHARGE. If any sum payable under this Note
is not paid prior to the tenth (10th) day after the date such
payment is due or if the entire Debt (as such term is defined
in Section 7 hereof) is not paid on or before the Applicable
Maturity Date, Maker shall pay to Payee on demand an additional
amount equal to five (5%) percent of such unpaid sum to defray
the expenses incurred by Payee in handling and processing such
delinquent payment and to compensate Payee for the loss of the
use of such delinquent payment, and such additional amount
shall be secured by the Mortgages, the Assignment and the Other
Security Documents.
7. EVENTS OF DEFAULT. The entire outstanding principal balance
of this Note, together with all accrued and unpaid interest thereon and
all other sums due under the Loan Documents including, without limitation,
the Deferred Financing Fee (all such sums, collectively, the
"Debt"), or any portion thereof, shall without notice become
immediately due and payable at the option of Payee: (a) if any
payment required in this Note is not paid prior to the tenth
(10th) day after the date when due or on the Applicable Maturity
Date; (b) upon the occurrence of any other default under this
Note; or (c) upon the happening of any other Event of
Default under and as defined in the Loan Agreement (each of
the foregoing, an "Event of Default"). In the event that Xxxxx
retains counsel to collect the Debt or to protect or
foreclose the security provided in connection herewith, Maker
also agrees to pay on demand all costs of collection
incurred by Xxxxx, including reasonable attorneys' fees for the
services of counsel whether or not suit be brought.
8. DEFAULT RATE INTEREST. Maker does hereby agree
that upon the occurrence of an Event of Default, including
Maker's failure to pay the Debt in full on the Applicable
Maturity Date, Payee shall be entitled to receive, and Maker
shall pay, interest on the entire outstanding principal balance
and any other amounts due at the rate equal to the lesser of
(a) the maximum rate permitted by applicable law; and (b) the
greater of (i) the Applicable Interest Rate plus three (3%)
percent or (ii) the Prime Rate (as hereinafter defined) plus
four (4%) percent (the lesser of such rates in (a) or (b), the
"Default Rate"); provided, however, that with
respect to an Event of Default of the type described in Section
24(a) of the Loan Agreement, such rate of interest shall apply
from and after the date on which any such payment is due,
without any period of grace or cure. The "Prime Rate" shall
mean the annual rate of interest publicly announced by Citibank,
N.A. in New York, New York, as its base rate, as such rate shall
change from time to time. If Citibank, N.A. ceases to announce a
base rate, Prime Rate shall mean the rate of interest published
in The Wall Street Journal from time to time as the Prime
Rate. If more than one Prime Rate is published in The Wall
Street Journal for a day, the average of the Prime Rates shall
be used, and such average shall be rounded up to the nearest one-quarter
of one (3%) percent. Interest shall accrue and be payable at the
Default Rate from the occurrence of the Event of Default until
all such Events of Default have been fully cured. Interest at
the Default Rate shall be added to the Debt, and shall be
deemed secured by the Mortgages, the Assignment and the Other Security
Documents. This provision, however, shall not be construed as an agreement
or privilege to extend the date of the payment of the Debt, nor as a
waiver of any other right or remedy accruing to Payee by reason of the
occurrence of any Event of Default.
9. PREPAYMENT. The principal balance of this Note
may be prepaid, in whole or, in connection with a release of
collateral under Section 61 of the Loan Agreement, in part,
upon: (a) not less than 60 days prior written notice to Payee
specifying the date on which prepayment is to be made, which
date shall in all events be the first business day
of a calendar month (the "Prepayment Date"); (b) payment of
accrued interest to and including the Prepayment Date; and (c)
payment of all other sums then due under this Note, the Loan
Agreement, the Mortgages, the Assignment and the Other Security
Documents including, without limitation, the Deferred Financing
Fee. If any such notice of prepayment is given, the principal
amount set forth in such notice and the other sums required under
this Section shall be due and payable on the Prepayment Date.
10. LIMITATIONS ON RECOURSE. (a) Subject to the
qualifications set forth in this Section, Payee shall not
enforce the liability and obligation of Maker to perform and
observe the obligations contained in this Note, the Loan
Agreement, the Mortgages, the Assignment or the Other Security
Documents by an action or proceeding wherein a money judgment
shall be sought against Maker, except that Payee may bring a
foreclosure action, an action for specific performance or any
other appropriate action or proceeding to enable Payee to
enforce and realize upon this Note, the Mortgages, the
Assignment, the Other Security Documents, and the interests in
the Mortgaged Property and any other collateral given to Payee
pursuant to the Mortgages, the Assignment and the Other
Security Documents; provided, however, that, except as
specifically provided in this Section, any judgment in any such
action or proceeding shall be enforceable against Maker only to
the extent of Maker's interest in the Mortgaged Property and in
any other collateral given to Payee. Payee, by accepting this
Note, the Loan Agreement, the Assignment, the Mortgages and the
Other Security Documents, agrees that it shall not sue for,
seek or demand any deficiency judgment against Maker in any
such action or proceeding, under, by reason of or in connection
with the Mortgages, the Loan Agreement, the Assignment, the
Other Security Documents or this Note. The provisions of this
Section shall not, however: (i) constitute a waiver, release or
impairment of any obligation evidenced or secured by the
Mortgages, the Loan Agreement, the Assignment, the
Environmental Agreement or the Other Security Documents or this
Note; (ii) impair the right of Payee to name Maker as a party
defendant in any action or suit for foreclosure and sale under
the Mortgages; (iii) affect the validity or enforceability of
any guaranty or indemnity made in connection with the Mortgages, the Loan
Agreement, this Note, the Assignment or the Other Security
Documents; (iv) impair the right of Payee to obtain the
appointment of a receiver; (v) impair the enforcement of
the Assignment; (vi) impair the right of Payee to bring suit with
respect to fraud or intentional misrepresentation by Maker or
any other person or entity in connection with the Mortgages,
the Loan Agreement, this Note, the Assignment, the
Environmental Agreement or the Other Security Documents; or
(vii)affect the validity or enforceability of the
Environmental Agreement or limit the liability of Maker or any
other party thereunder.
(b) Nothing herein shall be deemed to be a waiver of
any right which Payee may have under Section 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to
file a claim for the full amount of the Debt secured by
the Mortgages or to require that all collateral shall continue
to secure all of the debt owing to Payee in accordance with
this Note, the Loan Agreement, the Mortgages, the Assignment,
the Environmental Agreement and the Other Security Documents.
(c) Notwithstanding the foregoing provisions of this
Section or any other provision in the Loan Documents, Maker
shall be fully liable for and shall indemnify Payee for any and
all loss, cost, liability, judgment, claim, damage or expense
sustained, suffered or incurred by Xxxxx (including, without
limitation, Xxxxx's attorneys' fees) arising out of or
attributable or relating to:
(i) fraud or misrepresentation by Maker in
connection with the Loan;
(ii) the gross negligence or willful misconduct of Maker, its
agents or employees, or physical waste of the Mortgaged Property;
(iii) the breach of provisions in the Loan Agreement
concerning environmental laws, hazardous substances and
asbestos, and any indemnification of Payee therein with respect
to such environmental laws, hazardous substances and asbestos;
(iv) the removal or disposal of any portion of the
Mortgaged Property after default under this Note, the
Mortgages, the Loan Agreement, the Assignment, the
Environmental Agreement or any Other Security Document;
(v) the misapplication or conversion by Maker of:
(A) any insurance proceeds paid by reason of any loss, damage
or destruction to the Mortgaged Property; (B) any awards or
other amounts received in connection with the condemnation of
all or a portion of the Mortgaged Property; or (C) rents,
issues, profits, proceeds, accounts, or other amounts received
by Maker (in the case of clause (C) following an Event of
Default);
(vi) Maker's failure to pay taxes, assessments, charges
for labor or materials or other charges that can result in liens on
any portion of the Mortgaged Property;
(vii) the deductible amount in respect of any earthquake
hazard insurance maintained in respect of the Mortgaged Property;
(viii) the costs incurred by Xxxxx (including attorneys'
fees) in connection with the collection or enforcement of the
Debt; and
(ix) any security deposits or advance deposits
collected with respect to the Mortgaged Property which are not
delivered to Payee upon a foreclosure of the Mortgaged Property
or action in lieu thereof.
(d) Notwithstanding the foregoing, the agreement of
Payee not to pursue recourse liability as set forth in
subsection (a) above SHALL BECOME NULL AND VOID and shall be of no
further force or effect in the event of: (i) Maker's failure
to permit on-site inspections of the Mortgaged Property or to
provide financial reports and information pertaining to the
Mortgaged Property as required by the Loan Agreement; (ii) any
financial information concerning Maker or any guarantor of the
Loan proving to be fraudulent in any respect, containing any
fraudulent information or misrepresenting in any material
respect the financial condition of Maker or any guarantor of
the Loan; (iii) Maker's failure to obtain Xxxxx's written
consent to any subordinate financing; (iv) Maker's failure to
obtain Xxxxx's prior written consent to any transfer of the
Mortgaged Property or of any ownership interest in Maker, where
such consent is required; (v) the Mortgaged Property or any
part thereof becoming an asset in (A) a voluntary bankruptcy or
insolvency proceeding in which Maker or NextHealth, Inc. is the
debtor, or (B) an involuntary bankruptcy or insolvency proceeding
in which Maker is the debtor and which is not dismissed
within 90 days of filing (except if such involuntary proceeding
is brought by Payee); (vi) the failure of Maker to comply with
the provisions of Section 11 (SINGLE PURPOSE ENTITY) of the
Loan Agreement; or (vii) Maker's contest of the validity or
enforceability of the Loan Documents or asserts defenses for
the sole purpose of delaying, hindering or impairing Xxxxx's
rights under the Loan Documents.
11. NO USURY. Maker agrees to an effective rate of
interest that is the rate stated above plus any additional rate
of interest resulting from any other charges in the nature of
interest paid by or on behalf of Maker, or any benefit received
or to be received by Xxxxx, in connection with this Note. It is
expressly stipulated and agreed to be the intent of Maker and
Payee at all times to comply with applicable state law or
applicable United States federal law (to the extent that it
permits Payee to contract for, charge, take, reserve, or
receive a greater amount of interest than under state law) and
that this Section shall control every other covenant and
agreement in this Note and the other Loan Documents. If the
applicable law (state or federal)is ever judicially interpreted
so as to render usurious any amount called for under
this Note or under any of the other Loan Documents, or
contracted for, charged, taken, reserved, or received with
respect to the Debt, or if Xxxxx's exercise of the option to
accelerate the maturity of this Note, or if any prepayment by
Maker results in Maker having paid any interest in excess of
that permitted by applicable law, then it is Maker's and
Xxxxx's express intent that all excess amounts theretofore collected
by Xxxxx shall be credited on the principal balance of this Note and all
other Debt (or, if this Note and all other Debt have been or would thereby
be paid in full, refunded to Maker), and the provisions of this Note and
the other Loan Documents immediately be deemed reformed and
the amounts thereafter collectible hereunder and thereunder reduced,
without the necessity of the execution of any new documents, so as to
comply with the applicable law and so as to permit the recovery
of the fullest amount otherwise called for hereunder or
thereunder. All sums paid or agreed to be paid to Payee for the
use, forbearance, or detention of the Debt shall, to the extent
permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the
Debt until payment in full so that the rate or amount of
interest on account of the Debt does not exceed
the maximum lawful rate from time to time in effect and
applicable to the Debt for so long as the Debt is outstanding.
Notwithstanding anything to the contrary contained herein or in
any of the other Loan Documents, it is not the intention of
Payee to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
12. TRANSFERS NOT PERMITTED. Without the
prior written consent of Payee, Maker shall not sell,
convey, alienate, mortgage, encumber, pledge or otherwise
transfer, or permit the transfer of, directly or indirectly,
the Mortgaged Property or ownership interests of Maker, except
as permitted in the Loan Agreement.
13. AUTHORITY. Maker represents that Maker has full power,
authority and legal right to
execute, deliver and perform its obligations pursuant to this
Note, the Mortgages and the other Loan Documents and that this
Note, the Mortgages and the other Loan Documents constitute
valid and binding obligations of Maker.
14. NOTICES. All notices or other communications required or permitted
to be given pursuant hereto shall be given in the manner specified in
the Loan Agreement directed to the parties at their respective addresses
as provided therein.
15. WAIVER OF JURY TRIAL. MAKER XXXXXX AGREES NOT TO ELECT A TRIAL
BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THIS NOTE, THE LOAN AGREEMENT, THE MORTGAGES, OR THE
OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY MAKER, AND IS INTENDED
TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT
TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. XXXXX IS HEREBY AUTHORIZED TO
FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY MAKER.
16. GOVERNING LAW. This Note shall be governed by
and construed in accordance with the laws of the State in which
the real property encumbered by the Mortgages is located and
the applicable laws of the United States of America.
17. MISCELLANEOUS.
(a) No release of any security for the Debt or any
person liable for payment of the Debt, no extension of time for
payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of the Loan
Documents made by agreement between Payee and any other person
or party shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Maker, and any
other person or party who might be or become liable for the
payment of all or any part of the Debt, under the Loan
Documents.
(b) Maker and all others who may become liable for
the payment of all or any part of the Debt do hereby severally
waive presentment and demand for payment, notice of dishonor,
protest, notice of protest, notice of non-payment, notice of
intent to accelerate the maturity hereof and of acceleration.
(c) This Note may not be modified,
amended, waived, extended, changed, discharged or terminated
orally or by any act or failure to act on the part of Maker or
Payee, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
(d) Whenever used, the singular number shall include the
plural, the plural the singular, and the words "Payee" and
"Maker" shall include their respective successors, assigns,
heirs, executors and administrators.
(e) If Maker consists of more than one person or
party, the obligations and liabilities of each such person or
party shall be joint and several.
IN WITNESS WHEREOF, Xxxxx has duly executed this Note on the
day and year first above written.
MAKER:
SIERRA HEALTH-STYLES, INC.
By: /s/ Xxxxxxx X. X'Xxxxxxx, Xx.
-----------------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President
SIERRA TUCSON, L.L.C.
By: NextHealth, Inc.
Managing Member
By:/s/Xxxxxxx X. X'Xxxxxxx,Xx.
------------------------------
Name: Xxxxxxx X. X'Xxxxxxx,Xx.
Title: President
ACKNOWLEDGMENTS
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me
this 5th day of August, 1998, by XXXXXXX X. X'XXXXXXX, XX., the
PRESIDENT of Sierra Health-Styles, Inc., a Delaware
corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and
official seal.
/s/ Xxxxxxx X. Xxxxx
---------------------
Notary Public
My commission expires:
6/5/99
----------------------
[Seal]
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me
the 5th day of August, 1998, by XXXXXXX X. X'XXXXXXX, XX., the
PRESIDENT of NextHealth, Inc. a Delaware corporation, the
Managing Member of Sierra Tucson, L.L.C., a Delaware limited
liability company, on behalf of that limited liability company.
IN WITNESS WHEREOF, I hereunto set my hand and
official seal.
/s/ Xxxxxxx X. Xxxxx
--------------------
Notary Public
My commission expires:
6/5/99
----------------------
[Seal]
