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Exhibit 99.3
LOAN NO. 21-139
FORM OF LOAN AGREEMENT
BETWEEN
XXXXXX HEALTHCARE FINANCE, INC.,
A DELAWARE CORPORATION
AS LENDER
AND
ASSISTED LIVING CONCEPTS, INC.,
A NEVADA CORPORATION AND
CHAPTER 11 DEBTOR-IN-POSSESSION, AND
CARRIAGE HOUSE ASSISTED LIVING, INC.,
A DELAWARE CORPORATION AND
CHAPTER 11 DEBTOR-IN-POSSESSION
COLLECTIVELY, AS BORROWER
$4,400,000 LOAN
PORTFOLIO OF 8
ASSISTED LIVING FACILITIES
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TABLE OF CONTENTS
RECITALS.....................................................................................1
ARTICLE I The Loan...........................................................................2
ARTICLE II Security..........................................................................4
ARTICLE III Conditions.......................................................................4
ARTICLE IV Representations and Warranties....................................................7
ARTICLE V Affirmative Covenants.............................................................11
ARTICLE VI Negative Covenants...............................................................13
ARTICLE VII Events of Default; Acceleration of Indebtedness; Remedies.......................14
ARTICLE VIII Miscellaneous..................................................................17
LIST OF EXHIBITS, SCHEDULES AND RIDERS
EXHIBIT A - Property Descriptions
EXHIBIT B - Subsidiary Indebtedness
EXHIBIT C - Interim Financing Order
EXHIBIT D - Litigation
EXHIBIT E - Approved Pre-Bankruptcy Expenses
SCHEDULE I - Calculation of Net Operating Income
SCHEDULE II - Index of Defined Terms
RIDER - Senior Housing Rider
EXHIBIT R-1 - Units and Beds at Each Facility
EXHIBIT R-2 - Licenses
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LOAN NO. 21-139
FORM OF LOAN AGREEMENT
This LOAN AGREEMENT (this "AGREEMENT") is made this ____ day of
October, 2001 between ASSISTED LIVING CONCEPTS, INC., a Nevada corporation and
Chapter 11 debtor-in-possession ("ALC") and CARRIAGE HOUSE ASSISTED LIVING,
INC., a Delaware corporation and Chapter 11 debtor-in-possession ("CARRIAGE
HOUSE"; ALC and Carriage House are hereinafter collectively referred to as
"BORROWER") and XXXXXX HEALTHCARE FINANCE, INC., a Delaware corporation
("LENDER").
RECITALS
A. Lender has agreed to make a loan (the "LOAN") to Borrower in
the aggregate principal amount of up to Four Million Four Hundred Thousand and
No/100 Dollars ($4,400,000.00), subject to the terms and conditions contained
herein. The Loan is evidenced on the Closing Date by that certain Promissory
Note A of even date herewith made by Borrower in the original principal amount
of Two Million Eight Hundred Sixty Thousand and No/100 Dollars ($2,860,000.00)
("NOTE A"), and by that certain Subordinated Promissory Note B of even date
herewith made by Borrower in the original principal amount of One Million Five
Hundred Forty Thousand and No/100 Dollars ($1,540,000.00) ("NOTE B") (Note A and
Note B and all amendments thereto and substitutions therefor are hereinafter
collectively referred to as the "NOTES"). The terms and provisions of the Notes
are hereby incorporated herein by reference in this Agreement.
B. Each Borrower is the owner of certain real property more
particularly described on Exhibit A hereto (collectively, the "PROPERTIES" and
individually, a "Property") including the assisted living facilities and other
improvements located thereon. The assisted living facilities and other
improvements located at the Properties are collectively called the
"IMPROVEMENTS". The Properties including the Improvements are collectively
called the "PROJECT".
C. Each Borrower is a "debtor-in-possession" pursuant to Chapter
11 of the Bankruptcy Code (defined in Section 1.2 below).
D. Subject to the provisions of the Interim Financing Order and,
if issued, the Final Financing Order (each defined in Article III below),
Borrower will use the proceeds of the Loan for working capital and certain other
uses set forth in Section 1.5 below.
E. Borrower's obligations under the Loan will be secured by,
among other things, (a) first priority Deeds of Trust/Mortgages, Assignments of
Rents and Security Agreements (or documents of similar title) (individually, a
"MORTGAGE" and collectively, the "MORTGAGES") encumbering each Property
including the Improvements located thereon, (b) Assignments of Leases and Rents
(collectively, the "ASSIGNMENTS OF LEASES") encumbering each Property including
the Improvements located thereon, (c) the Subsidiary Note Assignment (defined in
Section 3.12 below), and (d) a Stock Pledge Agreement (the "PLEDGE") by ALC of
100% of the stock of the Subsidiaries (defined in Section 3.12 below).
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This Agreement, the Notes, the Mortgages, the Assignments of Leases, the
Environmental Indemnity, the Subsidiary Note Assignment, the Pledge, the
Financing Orders (defined in Section 3.13 below) and any other documents
evidencing or securing the Loan or executed in connection therewith, and any
modifications, renewals and extensions thereof, are referred to herein
collectively as the "LOAN DOCUMENTS." The definition of Loan Documents herein
shall not include the Subsidiary Loan Documents (defined in Section 3.12 below).
F. An index of defined terms appears on the attached Schedule II.
NOW, THEREFORE, in consideration of the foregoing and the mutual
conditions and agreements contained herein, the parties agree as follows:
ARTICLE I
THE LOAN
1.1. DISBURSEMENTS. Subject to the other provisions of this Agreement,
and so long as no default under any of the Loan Documents is then continuing,
Lender shall disburse the Loan to Borrower for the uses set forth in Section 1.5
hereof.
1.2. LOAN TERM. The Loan shall mature upon the earliest of (i) the date
which is one (1) year after the Closing Date and (ii) the occurrence of any of
the following: (A) Lender demands payment of Borrower's obligations to it
following the occurrence of an Event of Default, (B) the appointment of a
Chapter 11 trustee (or appointment of an examiner with expanded powers to
operate a Borrower's business) in the Bankruptcy Case of any Borrower, (C) the
effective date of a plan of reorganization for any Borrower as confirmed in its
Bankruptcy Case, (D) the conversion of the Bankruptcy Case of any Borrower to a
case under chapter 7 of the Bankruptcy Code, and (E) the dismissal of the
Bankruptcy Case of any Borrower (such earliest date being referred to as the
"MATURITY DATE").
"CLOSING DATE" means the date on which the Interim Financing
Order is entered.
"BANKRUPTCY CASE" means any case under Chapter 11 of the
Bankruptcy Code in which any Borrower is the debtor and debtor-in-possession,
pending before the Bankruptcy Court.
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for
the District of Delaware or any other court of competent jurisdiction acceptable
to ALC having jurisdiction over the Bankruptcy Case.
1.3. INTEREST RATE. Borrower shall pay interest on the outstanding
principal balance of the Loan at a floating rate per annum equal to the Base
Rate plus five percent (5.00%) (the aggregate rate referred to as the "INTEREST
RATE"). "BASE RATE" shall mean the
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rate published each day in The Wall Street Journal for notes maturing three (3)
months after issuance under the caption "Money Rates, London Interbank Offered
Rates (LIBOR)". The Interest Rate for each calendar month shall be fixed based
upon the Base Rate published prior to and in effect on the first (1st) business
day of such month; provided, however, the Interest Rate for the month in which
the Closing Date occurs shall be fixed based upon the Base Rate published prior
to and in effect on the first (1st) business day prior to the Closing Date.
Interest shall be calculated based on a 360 day year and charged for the actual
number of days elapsed.
1.4. PAYMENTS. Borrower shall make interest payments monthly in arrears
on the first (1st) day of each month, commencing on November 1, 2001, computed
on the outstanding principal balance of the Loan at the Interest Rate.
1.5. SOURCES AND USES. The sources and uses of funds for the
contemplated transaction are as follows:
SOURCES USES
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Loan: $4,400,000 Working Capital: $2,400,000
Carve-Out Payments
(as defined in the
Financing Orders) : $2,000,000
Total: $4,400,000 Total: $4,400,000
Provided Borrower is not in default under the terms of any Loan
Document and there is no ongoing default under the Subsidiary Loan Documents,
Lender shall disburse all or any portion of the amounts allocated to Working
Capital and Carve-Out Payments within two (2) business days after Borrower
provides written notice to Lender together with such information and
documentation as Lender shall reasonably request regarding the uses of such
funds. Lender shall have no obligation to disburse any portion of the Loan for
Working Capital unless and until Lender approves of a budget with respect to
proposed expenditures on Working Capital. A reduction in the amounts necessary
for any of the uses shall result in an equal reduction in the amount of the
Loan; provided, however, the amount of any reduction in the Carve-Out Payments
specified above may be applied towards Working Capital.
1.6. PREPAYMENTS OF LOAN. Borrower may prepay the outstanding principal
balance of the Loan in full (but not in part) at any time together with all
other amounts owing hereunder, provided Borrower gives Lender at least ten (10)
business days prior written notice.
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ARTICLE II
SECURITY
2.1. COLLATERAL. The Loan and all other indebtedness and obligations
under the Loan Documents, as well as all of the indebtedness and obligations of
certain of the Subsidiaries under the Subsidiary Loan Documents (as such terms
are defined in Section 3.12 below), shall be secured by liens on Borrowers'
property as set forth in the following instruments (collectively, the
"COLLATERAL"): (a) the Mortgages, (b) the Assignments of Leases, (c) the
Subsidiary Note Assignment, (d) the Pledge and (e) any other collateral or
security described in this Agreement or the other Loan Documents. The liens in
favor of Lender as described above will be subject to a lien in favor of the
service providers to pay the Carve-Out.
ARTICLE III
CONDITIONS
Lender's obligation to disburse the Loan is subject to Borrower's
satisfaction of (i) the conditions contained in Sections 3.1, 3.4, 3.7, 3.8,
3.10, 3.12, 3.13 and 3.14 on or before the Closing Date, and (ii) the conditions
subsequent contained in the remainder of this Article III within sixty (60) days
after written request by Lender.
3.1. LOAN DOCUMENTS. Lender shall have received the following Loan
Documents, all in form and substance reasonably satisfactory to Lender, each
signed by the Borrower:
(a) this Agreement;
(b) the Notes;
(c) the Mortgages;
(d) the Assignments of Leases;
(e) such Uniform Commercial Code financing statements as Lender
may reasonably require, with respect to the Borrower (but only with
respect to property of Borrower used in connection with the Properties
or as contemplated by the Mortgages or Assignments of Leases) or the
Properties;
(f) a hazardous wastes indemnity agreement ("ENVIRONMENTAL
INDEMNITY");
(g) the Subsidiary Note Assignment; and
(h) the Pledge.
In addition, Lender shall have received such Subsidiary Loan
Documents executed by Borrower as Lender may reasonably require, including an
acknowledgement and
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consent to the Subsidiary Loan Documents and a ratification of the existing
Guaranty given by ALC with respect thereto.
3.2. INTENTIONALLY OMITTED.
3.3. APPRAISAL. Lender shall obtain an appraisal report for each
Property, in form and content acceptable to Lender, prepared by an independent
MAI appraiser in accordance with the Financial Institutions Reform, Recovery and
Enforcement Act ("FIRREA") and the regulations promulgated pursuant to such act.
3.4. TITLE POLICY AND ENDORSEMENTS. With respect to each Property,
Lender shall have received a commitment for title insurance in an amount and
issued by a title insurance company satisfactory to Lender (collectively, the
"TITLE COMMITMENT"), in a form and amount acceptable to Lender, insuring
marketability of title and insuring that the lien of each of the Mortgages is a
valid first lien on the respective Property, as applicable, subject only to
exceptions to title approved by Lender and as to each Property, the Permitted
Liens, if any set forth in an exhibit to the Mortgage encumbering such Property.
Within thirty (30) days after the Closing Date, Borrower shall, at its sole
cost, cause the title company which issued the Title Commitment to issue to
Lender a lender's form of title insurance policy with respect to each Property
in the form of the Title Commitment (collectively, the "TITLE POLICY"). The
Title Policy shall also contain any reinsurance and endorsements required by
Lender including without limitation negative amortization, survey, access, tax
parcel, subdivision, contiguity, non-imputation, variable rate, usury, last
dollar, first loss, tie-in, subsequent disbursements and extended coverage
endorsements (Comprehensive Form 1), to the extent available in the state where
the respective Property is located.
3.5. SURVEY. With respect to each Property, Lender shall have received
and approved a survey of such Property and the Improvements thereon, dated no
more than ninety (90) days prior to the date of the applicable Title Policy,
prepared by a registered land surveyor in accordance with the 1999 American Land
Title Association/ American Congress on Surveying and Mapping Standards and
certified in favor of Lender and the title insurer. The surveyor shall certify
that each Property is not in a flood hazard area as identified by the Secretary
of Housing and Urban Development. The surveys shall be sufficient for the title
insurer to remove the general survey exception in the applicable Title Policy,
to the extent possible in the applicable state.
3.6. ENVIRONMENTAL REPORT. Lender shall have received a Phase I
Environmental audit of each Property. The audit shall (i) be addressed to
Lender; (ii) state that Lender may rely thereon; and (iii) be acceptable to
Lender in its reasonable discretion.
3.7. LEASES. All leases, licenses and other agreements with regard to
the occupancy of each Property, including patient and resident care agreements
and service agreements which include an occupancy agreement (collectively,
"LEASES"), shall be in form and substance reasonably acceptable to Lender.
Borrower shall submit for Lender's approval a copy of the form of residential
Lease Borrower proposes to utilize at each such Property, and all residential
Leases entered into after the Closing Date shall be on forms reasonably
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approved by Lender (it being understood that Lender has already approved of the
form of residential Lease used by certain of the Subsidiaries, which form has
previously been delivered to Lender, and such form is acceptable for use by
Borrower) without material modifications, other than modifications made in
accordance with statutory, regulatory or other legal requirements. Lender must
approve all non-residential Leases of space greater than 500 square feet or
which provide for monthly rent payments greater than $1,000. On the Closing
Date: all existing Leases shall be in full force and effect and within thirty
(30) days of written request by Lender, Borrower shall submit a certified rent
roll for each Property, certifying that all existing Leases are listed therein.
If any non-residential Leases exist or are hereafter entered into with respect
to any such Property, each tenant thereunder shall execute and deliver to Lender
a subordination and attornment agreement in a form reasonably acceptable to
Lender. The Property owned by Carriage House is leased to ALC. Upon written
request by Lender, Carriage House and ALC will enter into a Subordination
Agreement (in substantially the form used in the Subsidiary Loan Documents) in
favor of Lender with respect to such lease.
3.8. INSURANCE. With respect to each Property, Borrower shall have
provided Lender with and Lender shall have approved copies of certificates
evidencing the insurance policies required to be delivered pursuant to the
Mortgages.
3.9. COMPLIANCE WITH LAWS. Borrower shall have submitted and Lender
shall have approved (a) a final certificate of occupancy (or the equivalent) for
each Property and the Improvements thereon, and (b) evidence satisfactory to
Lender that each Property and the Improvements thereon comply in all material
respects with all applicable laws (including, without limitation, all building,
zoning, density, land use, ordinances, regulations and planning requirements),
covenants, conditions and restrictions, subdivision requirements (including,
without limitation, parcel maps), and environmental impact and other
environmental requirements.
3.10. LOAN FEE AND CLOSING COSTS. Borrower and certain of the
Subsidiaries have previously deposited with Lender a good faith deposit in the
amount of $300,000 relating to proposed future financing by Lender. A portion of
such deposit in the amount of $75,000.00 shall be used towards the loan fee in
connection with the Loan, which loan fee shall be nonrefundable and shall be
deemed fully earned upon receipt. An additional portion of such deposit in the
amount of $127,500 shall be used towards closing costs incurred by Borrower in
connection with the Loan. In the event that actual closing costs in connection
with the Loan exceed $127,500, Borrower shall promptly pay such excess to Lender
upon demand therefor by Lender.
3.11. LICENSES. Borrower shall obtain, and deliver to Lender evidence
satisfactory to Lender of, all licenses and permits necessary to operate each
Property as an assisted living facility. All such licenses and permits shall be
issued to and in the name of Borrower.
3.12. SUBSIDIARY INDEBTEDNESS. ALC owns all of the issued and
outstanding stock of ALC Ohio, Inc., ALC Pennsylvania, Inc., ALC Iowa, Inc., ALC
Nebraska, Inc., ALC New Jersey, Inc., ALC Indiana, Inc., Nevada ALC, Inc., Texas
ALC, Inc. and Carriage House
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(collectively, the "SUBSIDIARIES"). As of October 1, 2001, the outstanding
principal balance of the indebtedness owed by each of the Subsidiaries to ALC
was as shown on Exhibit B attached hereto (such balance, together with any
future indebtedness of any Subsidiary to ALC approved in writing by Lender is
hereinafter referred to as the "SUBSIDIARY INDEBTEDNESS"). On or before the
Closing Date, ALC shall have caused a portion of the Subsidiary Indebtedness as
indicated on Exhibit B to be capitalized by either canceling such indebtedness
or contributing such indebtedness to the respective Subsidiary; and ALC shall
deliver to Lender on the Closing Date written evidence thereof in form and
substance reasonably acceptable to Lender. The promissory notes evidencing the
remaining principal balance of the Subsidiary Indebtedness after the
capitalization (and any Subsidiary Indebtedness hereinafter approved by Lender),
as indicated on Exhibit B, shall be assigned by ALC to Lender on the Closing
Date pursuant to a "SUBSIDIARY NOTE ASSIGNMENT". The assignment of such notes
shall secure the indebtedness and obligations of Borrower hereunder and the
indebtedness and obligations of certain of the Subsidiaries to Lender pursuant
to that certain Loan Agreement dated February 20, 2001, as amended by that
certain First Amendment to Loan Documents dated June 29, 2001 and as amended by
that certain Second Amendment to Loan Documents dated of even date herewith
among certain of the Subsidiaries, ALC and Lender (as an agent and a lender)
(collectively, the "SUBSIDIARY LOAN AGREEMENT") and all of the loan documents
(the "SUBSIDIARY LOAN DOCUMENTS") executed in connection with the Subsidiary
Loan Agreement.
3.13. INTERIM FINANCING ORDER. Borrower shall have obtained the entry of
a Financing Order in the form of Exhibit C attached hereto (the "INTERIM
FINANCING ORDER"). "FINANCING ORDER" and "FINANCING ORDERS" means any order or
orders entered in the Bankruptcy Cases of Borrower authorizing Borrower to
obtain the financing described in this Agreement.
3.14. BANKRUPTCY COURT FINDINGS. The Bankruptcy Court shall have found
that (a) Lender's making of the Loan contemplated by this Agreement is in "good
faith" within the meaning of Section 364(e) of the Bankruptcy Code, and (b) the
amount of the Loan is not in excess of the amount necessary to avoid immediate
and irreparable harm to Borrower.
3.15. ADDITIONAL ITEMS. Lender shall have received such other items as
Lender may reasonably require, including without limitation, a physical
condition report and UCC, tax, judgment, bankruptcy and lien searches on the
Borrower.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
As an inducement to Lender to disburse the Loan, Borrower hereby
represents and warrants to Lender as follows, which representations and
warranties shall be true as of the date hereof, and shall remain true throughout
the term of the Loan:
4.1. BORROWER EXISTENCE. Each Borrower is a corporation duly formed,
validly existing and in good standing under the laws of its jurisdiction of
incorporation with its principal place of business at 00000 XX Xxxx Xxxxxx
Xxxxx, Xxxxxxxx X, Xxxxxxxx, Xxxxxx
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97220. ALC is in good standing and authorized to transact business in the states
of Oregon, Nevada, Arizona and Nebraska. Carriage House is in good standing and
authorized to transact business in the states of Nebraska and Delaware. Each
Borrower is a debtor-in-possession pursuant to Chapter 11 of the Bankruptcy
Code. Upon the effectiveness of the Interim Financing Order or Final Financing
Order (defined in Section 5.10 below), the Loan Documents have each been duly
authorized, executed and delivered and each constitutes the duly authorized,
valid and legally binding obligation of each Borrower, enforceable against each
Borrower in accordance with their respective terms and the terms of the
Financing Orders.
4.2. AUTHORITY. Subject to any required approval of the Bankruptcy
Court, the Board of Directors of ALC has the authority to make all material
business decisions (including a sale or refinance) for each Borrower during the
term of the Loan. ALC owns 100% of the issued and outstanding stock in Carriage
House free and clear of all liens, claims and encumbrances other than the
Pledge.
4.3. CORPORATE DOCUMENTS. A true and complete copy of the articles of
incorporation and by-laws of each Borrower and all other documents creating and
governing each Borrower (collectively, the "INCORPORATION DOCUMENTS"), have been
furnished to Lender. There are no other agreements, oral or written, among any
of the owners of any ownership interests in each Borrower relating to any of
them. There are no other agreements to which any Borrower is a party which would
affect, modify or supersede the Incorporation Documents. The Incorporation
Documents were duly executed and delivered, are in full force and effect, and
binding upon and enforceable in accordance with their terms. The Incorporation
Documents constitute the entire understanding among the shareholders of each
Borrower. No breach exists under the Incorporation Documents and no act has
occurred and no condition exists which, with the giving of notice or the passage
of time would constitute a breach under the Incorporation Documents.
4.4. OTHER AGREEMENTS. No Borrower is in default under any contract,
agreement or commitment to which it is a party, which default could reasonably
be expected to have a material adverse effect on any Borrower, except as a
result of the Bankruptcy Case filing. Subject to the entry of the Interim
Financing Order and the Final Financing Order, the execution, delivery and
compliance with the terms and provisions of this Agreement and the Loan
Documents will not (i) to the best of Borrower's knowledge, violate any
provisions of law or any applicable regulation, order or other decree of any
court or governmental entity, or (ii) conflict or be inconsistent with, or
result in any default under, any material contract, agreement or commitment to
which any Borrower is bound. Borrower has delivered to Lender copies of any
agreements (including leases) between each Borrower and any Affiliate related in
any way to the Project and any other agreements or documents materially
affecting the use and operation of the Project (excluding residential rental
agreements and non-residential Leases of space less than 500 square feet or
which provide for monthly rent payments less than $1,000).
4.5. PROPERTIES. Fee simple title to each Property is owned by the
Borrower indicated on Exhibit A free and clear of all liens, claims,
encumbrances, covenants,
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conditions and restrictions, security interests and claims of others, except
only such exceptions as have been approved in writing by Lender and except for
the liens, if any, listed on Exhibit A (the "PERMITTED LIENS"). To the best of
Borrower's knowledge, each Property and the Improvements thereon is in
compliance in all material respects with all zoning requirements, building
codes, subdivision improvement agreements, and all covenants, conditions and
restrictions of record. The zoning and subdivision approval of each Property and
the right and ability to, use or operate the Improvements are not in any way
dependent on or related to any real estate other than such Property. To the best
of Borrower's knowledge, there are no, nor are there any alleged or asserted,
violations of law, regulations, ordinances, codes, permits, licenses,
declarations, covenants, conditions, or restrictions of record, or other
agreements relating to the Project, or any part thereof, except to the extent
compliance is excused by the Bankruptcy Code or the Orders.
4.6. PROPERTY ACCESS. Subject to such items as may be disclosed in a
Schedule (approved by Lender) to this Agreement, to Borrower's knowledge, each
Property is accessible through fully improved and dedicated roads accepted for
maintenance and public use by the public authority having jurisdiction.
4.7. UTILITIES. All utility services reasonably necessary and sufficient
for the use or operation of each Property and the Improvements thereon are
available including water, storm, sanitary sewer, gas, electric and telephone
facilities.
4.8. FLOOD HAZARDS/WETLANDS. Subject to such items as may be disclosed
in a Schedule (approved by Lender) to this Agreement, to Borrower's knowledge,
no Property is situated in an area designated as having special flood hazards as
defined by the Flood Disaster Protection Act of 1973, as amended, or as a
wetlands by any governmental entity having jurisdiction over any Property.
4.9. TAXES/ASSESSMENTS. There are no unpaid or outstanding real estate
or other taxes or assessments on or against any Property or Improvements or any
part thereof, except general real estate taxes not yet due or payable or taxes
for which payment is stayed by the Bankruptcy Court. Copies of the current
general real estate tax bills with respect to each Property and the Improvements
thereon have been delivered to Lender. Each such xxxx covers the entire
applicable Property and does not cover or apply to any other property. There is
no pending or contemplated action pursuant to which any special assessment may
be levied against any portion of the Project.
4.10. EMINENT DOMAIN. There is no eminent domain or condemnation
proceeding pending or, to the best of Borrower's knowledge threatened, relating
to any Property or Improvements.
4.11. LITIGATION. Except as set forth in Exhibit D attached hereto and
except for the Bankruptcy Cases, there is no unstayed litigation, arbitration or
other proceeding or governmental investigation pending or, to the best of
Borrower's knowledge, threatened against or relating to any Borrower or any of
their respective property, assets, or business, including the Project, which if
decided adversely would materially and adversely affect the
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business, affairs, assets or financial condition of any Borrower, any Property
or the Improvements located thereon, or the prospects for repayment of the Loan.
4.12. ACCURACY. Neither this Agreement nor any document, financial
statement, credit information, certificate or written statement furnished to
Lender by any Borrower contains any untrue statement of a material fact or omits
to state a material fact which would affect Lender's decision to make the Loan
and all projections contained in such documents and statements are based on
reasonable assumptions.
4.13. FOREIGN OWNERSHIP. No Borrower is or will be held, directly or
indirectly, by a "FOREIGN CORPORATION", "FOREIGN PARTNERSHIP", "FOREIGN TRUST",
"FOREIGN ESTATE", "FOREIGN PERSON", "AFFILIATE" of a "FOREIGN PERSON" or a
"UNITED STATES INTERMEDIARY" of a "FOREIGN PERSON" within the meaning of IRC
Sections 897 and 1445, the Foreign Investments in Real Property Tax Act of 1980,
the International Foreign Investment Survey Act of 1976, the Agricultural
Foreign Investment Disclosure Act of 1978, or the regulations promulgated
pursuant to such Acts or any amendments to such Acts.
4.14. FINANCIAL STATEMENT/NO CHANGE. Borrower has heretofore delivered
to Lender copies of the financial statements of ALC dated August 31, 2001. Said
financial statements were prepared on a basis consistent with that of preceding
years, and all of such financial statements present fairly the financial
condition of ALC as of the dates in question and the results of operations for
the periods indicated. Since the dates of such statements, other than the filing
of the Bankruptcy Cases by Borrower, there has been no material adverse change
in the business or financial condition of Borrower. Borrower has no material
contingent liabilities not provided for or disclosed in said financial
statements or arising as a result of the Bankruptcy Case or incurred in the
ordinary course of business.
4.15. NO BROKER. No brokerage commission or finder's fee is owing to any
broker or finder arising out of any actions or activity of Borrower in
connection with the Loan.
4.16. SUBSIDIARY INDEBTEDNESS. The outstanding principal balance of the
Subsidiary Indebtedness indicated on Exhibit B is true and correct in all
material respects as of the date specified therein.
4.17. SPECIAL PURPOSE ENTITY. Carriage House: (i) does not hold,
directly or indirectly, any ownership interest (legal or equitable) in any real
or personal property other than the interest which it owns in its Property and
other assisted living facilities and land, any personal property used in
connection therewith, any Leases thereof and any contract rights with respect
thereto; (ii) is not a shareholder or partner or member of any other entity; and
(iii) does not conduct any business other than the ownership, management and
operation of its Property and other assisted living facilities and land.
4.18. EMPLOYEES. Carriage House does not have any employees and shall
not have any employees until after the date on which the entire principal
balance of the Loan and all interest thereon and all other sums due pursuant to
the Loan Documents have been repaid in full.
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ARTICLE V
AFFIRMATIVE COVENANTS
5.1. INSPECTION. Subject to the rights of tenants under Leases, Lender
and its authorized agents may enter upon and inspect the Project at all
reasonable times upon reasonable advance notice given orally or in writing to
Borrower. Lender, at Borrower's expense, shall retain one or more independent
consultants to periodically inspect the Project and all documents, drawings,
plans, and consultants' reports relating thereto; provided, however, that such
inspections shall not occur more frequently than annually unless an Event of
Default has occurred and is continuing or Lender has a good faith reason to do
so. On the first (1st) day of each month during the term of the Loan, each
Borrower shall pay to Lender, in addition to all other amounts due under the
Loan Documents, the sum of Two Hundred Fifty and No/100 Dollars ($250.00), which
Lender shall apply against the cost of the aforesaid inspections.
5.2. BOOKS AND RECORDS/AUDITS. Borrower shall keep and maintain at all
times at Borrower's address stated below, or such other place as Lender may
approve in writing, complete and accurate books of accounts and records adequate
to reflect the results of the operation of the Project on a Property-by-Property
basis and to provide the financial statements required to be provided to Lender
pursuant to Section 5.3 below and copies of all written contracts,
correspondence, reports of Lender's independent consultant, if any, and other
documents affecting the Project. Lender and its designated agents shall have the
right to inspect and copy any of the foregoing at all reasonable times upon
reasonable advance notice. Additionally, Lender may audit and determine, in
Lender's sole and absolute discretion, the accuracy of Borrower's records and
computations; provided, however, that such audits shall not occur more
frequently than annually unless an Event of Default has occurred and is
continuing or Lender has a good faith reason to do so. The costs and expenses of
the audit shall be paid by Borrower if the audit discloses a monetary variance
in any financial information or computation equal to or greater than the greater
of: (i) five percent (5%); or (ii) Five Thousand and No/100 Dollars ($5,000.00)
more than any computation submitted by Borrower.
5.3. FINANCIAL STATEMENTS; BALANCE SHEETS. Borrower shall furnish to
Lender such financial statements and other financial information as Lender may
from time to time reasonably request. All such financial statements shall show
all material contingent liabilities and shall accurately and fairly present the
results of operations and the financial condition of Borrower at the dates and
for the period indicated. Without limitation of the foregoing, Borrower shall
furnish to Lender the following statements:
5.3.1. MONTHLY AND ANNUAL OPERATING STATEMENTS. Statements of the
operation of the Project on a Property-by-Property basis (including a current
rent roll, monthly operating statements, monthly delinquency reports and monthly
schedules of receivables) as of the last day of each month, to be delivered
within twenty (20) days after the end of each month and certified by Borrower as
true, correct, and complete, and yearly statements of the operation of the
Project on a Property-by-Property basis, to be delivered
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within ninety (90) days after the end of each fiscal year and certified by
Borrower as true, correct, and complete.
5.3.2. ANNUAL BALANCE SHEETS AND FINANCIAL STATEMENTS. Annual
audited and quarterly unaudited consolidated balance sheets and financial
statements from Borrower, within ninety (90) days of the end of each fiscal year
which are true and correct in all respects, have been prepared in accordance
with generally accepted accounting principles, and fairly present in all
material respects the financial condition(s) of the person(s) referred to
therein as of the date(s) indicated.
5.3.3. AUDITS. If Borrower fails to furnish or cause to be
furnished promptly any report required by this Section 5.3, or if Lender
reasonably deems such reports to be unacceptable, Lender may elect (in addition
to exercising any other right and remedy) to conduct an audit of all books and
records of Borrower which in any way pertain to the Project and to prepare the
statement or statements which Borrower failed to procure and deliver. Such audit
shall be made and such statement or statements shall be prepared at Lender's
option, either internally by Lender or by an independent firm of certified
public accountants to be selected by Lender. Borrower shall pay all reasonable
costs and expenses of the audit and other services, whether performed internally
or by an independent firm, which costs and expenses shall be immediately due and
payable with interest thereon at the default rate contained in the Notes.
5.4. USE OF PROCEEDS. Borrower shall use the proceeds of the Loan for
proper business purposes. No portion of the proceeds of the Loan shall be used
by Borrower in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation U, Regulation T or Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Securities Act of 1933 or the Securities Exchange Act of 1934.
5.5. NOTICE OF LITIGATION OR DEFAULT. Borrower shall within a reasonable
period of time provide Lender with:
(a) written notice of any litigation, arbitration, or other
proceeding or governmental investigation pending or, to Borrower's
knowledge, threatened against or relating to any Borrower or any
Property, which if decided adversely, could reasonably be expected to
have a material adverse effect on any Borrower or any Property; and
(b) a copy of all notices of material default and violations of
laws, regulations, codes, ordinances and the like received by any
Borrower relating to any Borrower, the Collateral or any Property (other
than any defaults caused by the filing of the Bankruptcy Cases).
5.6. AFFILIATE TRANSACTIONS. Any agreement by a Borrower with an
Affiliate pertaining to the Project shall be on terms no less favorable to such
Borrower than would be obtained from a non-Affiliate. Borrower shall deliver to
Lender a copy of each such
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agreement. If requested by Lender, such agreement shall provide Lender the right
to terminate it upon Lender's (or its designee's) acquisition of the Project
through foreclosure, a deed-in-lieu of foreclosure, UCC sale or otherwise.
"AFFILIATE" means with respect to any individual, trust, estate,
partnership, limited liability company, corporation or any other incorporated or
unincorporated organization (each a "PERSON"), a Person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with any Borrower; any officer, director, partner or
shareholder of such Borrower; any relative of any of the foregoing. The term
"CONTROL" means possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
5.7. ADVERTISEMENT. Borrower agrees to allow Lender to advertise in the
various news or financial media that Lender has provided financing to Borrower.
5.8. REPLACEMENT RESERVE. At the time of and in addition to the monthly
installments of interest due under the Notes, Borrower shall pay to Lender, an
amount equal to the product of Twenty-Five and No/100 Dollars ($25.00)
multiplied by the number of units in the Project (the "REPLACEMENT RESERVE").
The Replacement Reserve funds shall be placed in an interest bearing account,
with all interest earned to be credited to Borrower. On the Maturity Date, the
monies then remaining on deposit with Lender shall be applied against the
Indebtedness or if all Indebtedness has been indefeasibly paid in full, returned
to Borrower. So long as no Event of Default is then continuing, Borrower may
request Lender to disburse funds from the Replacement Reserve (which request
will include a reasonably detailed description of the capital expenditures at
the Property which Borrower intends to pay for with such funds), which request
shall not be unreasonably denied by Lender. If requested by Lender, each
disbursement request will be accompanied by copies of invoices, lien waivers and
other evidence reasonably required by Lender.
5.9. NO PROPERTY MANAGER. Borrower is and shall remain the sole manager
and operator of each of the Properties, and Borrower shall not permit or
contract with any other Person to manage or operate any of the Properties.
5.10. FINAL FINANCING ORDER. Borrower shall obtain the entry of a
Financing Order (the "FINAL FINANCING ORDER") on or before October 31, 2001,
which Final Financing Order shall contain the same terms as the Interim
Financing Order with such changes as Lender may approve in its sole discretion.
ARTICLE VI
NEGATIVE COVENANTS
6.1. NO AMENDMENTS. Borrower shall not amend, modify or terminate, or
permit the amendment, modification or termination of the Incorporation
Documents.
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6.2. NO ADDITIONAL INDEBTEDNESS. Carriage House shall not, without
Lender's prior written consent, incur additional indebtedness, except for (a)
trade payables in the ordinary course of business, (b) up to $50,000 in the
aggregate for purchase money debt to purchase and, capital leases of, vehicles,
equipment and other capital items to be used solely in connection with the
operation of its Property and which are reasonably related to the operation of
assisted living facilities, and (c) the Subsidiary Indebtedness indicated on
Exhibit B with respect to Carriage House.
6.3. INTENTIONALLY OMITTED.
6.4. LIENABLE WORK. No excavation, construction, earth work, site work
or any other mechanic's lienable work shall be done to or for the benefit of any
Property, without Lender's approval, which shall not be unreasonably withheld,
except for normal repair and maintenance in the ordinary course of business and
up to $25,000 of work annually at each Property which does not decrease the
value of such Property.
6.5. CONVERSION. Borrower shall not, and shall not permit, the Project
or any portion thereof to be converted or take any preliminary actions which
could lead to a conversion to condominium or cooperative form or ownership.
6.6. USE OF PROPERTY. Unless required by applicable law, Borrower shall
not permit changes in the use of any Property from the use existing at the
Closing Date. Borrower shall not initiate or acquiesce in a change in the plat
of subdivision, or zoning classification of any Property without Lender's prior
written consent.
ARTICLE VII
EVENTS OF DEFAULT; ACCELERATION OF INDEBTEDNESS; REMEDIES
7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT" under this Agreement:
(a) Failure of Borrower to pay, within five (5) days of the due
date, any interest or principal payment required to be made under the
Notes or this Agreement, and within five (5) days after notice, any of
the other payment obligations of Borrower to Lender, including any other
payment due under the Notes or this Agreement or the other Loan
Documents (all interest, principal and all other amounts coming due
under any of the Loan Documents is referred to collectively as the
"INDEBTEDNESS"); or
(b) A breach of the representations contained in Section 4.17
(special purpose entity), or failure of Borrower to strictly comply with
the provisions of Sections 5.1 (inspection; provided, however,
Borrower's obligation to pay for the cost of inspections pursuant to
Section 5.1 shall be treated as a payment obligation pursuant to
subsection 7.1(a) above.) or 5.10 (final financing order); or
(c) Breach of any covenant, representation or warranty, whether
in this Agreement or in any other Loan Document, other than as set forth
in subsections (a)
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and (b) above, which is not cured within thirty (30) days after notice;
provided, however, if such breach cannot by its nature be cured within
thirty (30) days, and Borrower diligently pursues the curing thereof
(and then in all events cures such failure within sixty (60) days after
the original notice thereof), Borrower shall not be in default
hereunder; provided, further that if such breach results from the
commencement of any administrative or other proceeding seeking license
revocation or suspension or limitation on admission of residents to any
of the Properties (collectively, "REGULATORY ACTION") by any federal or
state regulatory agency, and Borrower is unable to cure such breach
within the cure period set forth in the immediately preceding proviso,
then Borrower shall not be in default hereunder as a result of such
Regulatory Action unless (a) Borrower fails to promptly, in any event,
within thirty (30) days following such Regulatory Action, commence
resolution of the matter and thereafter diligently and continuously
prosecute in good faith a settlement, dismissal or resolution of such
Regulatory Action; (b) the Property in question fails to be continuously
operated by Borrower as an assisted living facility; or (c) the license
to operate the Property in question has terminated and Borrower has no
appeal rights; or
(d) Without prior approval of the Bankruptcy Court and the prior
written consent of Lender, Borrower makes any payment of any proceeds
constituting part of the Loan or other cash to any unsecured creditor of
Borrower on account of claims arising prior to the commencement of the
Bankruptcy Case (including without limitation payments in respect of
reclamation claims of unpaid suppliers of goods delivered to Borrower
prior to the commencement of the Bankruptcy Case (regardless of whether
such claims have been granted administrative expense priority status
pursuant to Section 546(c) of the Bankruptcy Code) prior to confirmation
of a plan of reorganization, but excluding any payments necessary to
cure defaults under any executory contracts or unexpired leases assumed
by Borrower with the approval of the Bankruptcy Court and ALC employee
wages, ALC payroll taxes, ALC employee benefits, utility bills and other
amounts payable prior to the commencement of the Bankruptcy Case which
are described on Exhibit E attached hereto; or
(e) A petition under any Chapter of Title 11 of the United States
Code or any similar law or regulation is filed by or against any
Subsidiary (excluding Carriage House) (and in the case of an involuntary
petition in bankruptcy, such petition is not discharged within sixty
(60) days of its filing), or a custodian, receiver or trustee for any
property owned by any Subsidiary (excluding Carriage House) is
appointed, or any Subsidiary (excluding Carriage House) makes an
assignment for the benefit of creditors, or any of them are adjudged
insolvent by any state or federal court of competent jurisdiction, or
any of them admit their insolvency or inability to pay their debts as
they become due or an attachment or execution is levied against any of
their respective properties. Upon the occurrence of an Event of Default
specified in this subsection 7.1(e) which is caused by (A) any Borrower,
any Subsidiary or any party to the Plan Support Agreement among Borrower
and others dated ______________, 2001, (the "PLAN AGREEMENT"), or (B)
any entity or person which is not a party to the
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Plan Agreement and which causes Lender to suffer a loss, then in
addition to all other remedies which Lender may have as a result of such
event, Borrower shall also pay Lender an exit fee in the amount of
$1,000,000; or
(f) Borrower fails to perform any of the terms, covenants,
conditions or provisions contained in any of the Financing Orders or any
of the Financing Orders is vacated; or
(g) The occurrence of a default and the expiration of any cure
period applicable thereto under any Loan Document; or
(h) Any Event of Default under (and as defined in) any of the
Subsidiary Loan Documents; or
(i) Except to the extent that such default, or the exercise of
remedies with respect to such default, is excused or prevented by the
Bankruptcy Court or applicable bankruptcy law, Borrower shall default in
the payment of any indebtedness in an aggregate outstanding principal
amount greater than $500,000 (other than the Indebtedness), and such
default is declared and is not cured within the time, if any, specified
therefor in any agreement governing the same; or
(j) Any written statement, report or certificate made or
delivered to Lender by any Borrower is not materially true and complete
when made; or
(k) If at any time the Debt Coverage Ratio for the Project for
the immediately preceding three (3) months shall fall below 1.50:1.00.;
or
(l) If at any time the Project Yield for the immediately
preceding three (3) months shall fall below twenty-five percent (25%);
or
(m) If Borrower fails to fulfill a condition subsequent described
in Article III above within sixty (60) days after such item is requested
in writing by Lender.
"DEBT COVERAGE RATIO" means the ratio of (i) Net Operating Income from
the Project for a particular period, as determined by Lender's audit, at
Borrower's expense (or at Lender's option, as reasonably determined by
Lender), to (ii) payments of interest due on the Loan for the same
period.
"PROJECT YIELD" means the quotient (expressed as a percentage) as
reasonably determined by Lender of (x) the annualized Net Operating
Income from the Project, as determined by Lender's audit, at Borrower's
expense (or at Lender's option, as reasonably estimated by Lender),
divided by (y) the then-current outstanding principal balance of the
Loan plus all accrued but unpaid interest thereon.
For purposes of subsections 7.1(k) and (l) above only, the term
"PROJECT" shall also include all of the Included Properties as defined
in the Subsidiary Loan Agreement
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and the term "LOAN" shall also include the Loan as defined in the
Subsidiary Loan Agreement.
7.2. ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default,
at the option of Lender, the Indebtedness shall become immediately due and
payable without notice to Borrower and Lender shall be entitled to all of the
rights and remedies provided in the Loan Documents or at law or in equity. Each
remedy provided in the Loan Documents is distinct and cumulative to all other
rights or remedies under the Loan Documents or afforded by law or equity, and
may be exercised concurrently, independently, or successively, in any order
whatsoever.
ARTICLE VIII
MISCELLANEOUS
8.1. EXPENDITURES AND EXPENSES. Borrower shall promptly pay all
reasonable Costs (defined below) incurred by Lender in connection with the
documentation, closing, making disbursements, modification, workout, collection
or enforcement of the Loan or any of the Loan Documents (as applicable); the
documentation, negotiation or preparation of any loan documents in connection
with a possible financing to be extended to Borrower or any of its subsidiaries
by Lender upon the effective date of a confirmed plan or reorganization in any
Bankruptcy Case, whether or not such financing closes; and in connection with
the Bankruptcy Cases (including, without limitation, reasonable attorneys fees
and expenses incurred in connection with any action to lift the automatic stay
of Section 362 of the Bankruptcy Code, any other action or participation by
Lender in the Bankruptcy Cases or any defense or participation by Lender in any
lender liability or other actions involving Lender or the validity, priority,
extent of liens or otherwise affecting the Collateral); and all such Costs shall
be included as additional Indebtedness bearing interest at the interest rate
then applicable to the Indebtedness until paid. For the purposes hereof "COSTS"
means all expenditures and expenses which may be paid or incurred by or on
behalf of Lender including repair costs, payments to remove or protect against
liens, attorneys' fees (including fees of Lender's inside counsel), receivers'
fees, engineers' fees, accountants' fees, independent consultants' fees
(including environmental consultants), all costs and expenses incurred in
connection with any of the foregoing, Lender's out-of-pocket costs and expenses
related to any audit or inspection of the Project, outlays for documentary and
expert evidence, stenographers' charges, stamp taxes, publication costs, and
costs (which may be estimates as to items to be expended after entry of an order
or judgment) for procuring all such abstracts of title, title and UCC searches,
and examination, title insurance policies, Torrens' Certificates and similar
data and assurances with respect to title as Lender may deem reasonably
necessary either to prosecute any action or to evidence to bidders at any
foreclosure sale of the Project the true condition of the title to, or the value
of, the Project or any part thereof.
8.2. DISCLOSURE OF INFORMATION. Lender shall have the right (but shall
be under no obligation) to make available to any party for the purpose of
granting participations in or selling, transferring, assigning or conveying all
or any part of the Loan (including any governmental agency or authority and any
prospective bidder at any foreclosure sale of the
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Project or any part thereof) any and all information which Lender may have with
respect to the Project and Borrower, whether provided by Borrower or any third
party or obtained as a result of any environmental assessments. Lender agrees to
exercise reasonable efforts to keep any confidential information delivered in
connection with the Loan Documents, confidential from Persons other than those
employed by or engaged by Lender and those employed by or engaged by Lender's
assignees or participants, or potential assignees or participants; provided,
however, this sentence shall not apply to disclosures required to be made by
Lender to any regulatory or governmental agency or pursuant to legal process or
in connection with any dispute with Borrower or arising out of the Loan
Documents in any way. Borrower agrees that Lender shall have no liability
whatsoever as a result of delivering any such information to any third party,
and Borrower, on behalf of itself and its successors and assigns, hereby release
and discharge Lender from any and all liability, claims, damages, or causes of
action, arising out of, connected with or incidental to the delivery of any such
information to any third party.
8.3. SALE OF LOAN. Notwithstanding anything to the contrary contained
herein but subject to the exceptions listed below, so long as no Event of
Default is then continuing, Lender shall not sell or assign its interest in the
Loan without the prior written consent of ALC, which consent shall not be
unreasonably withheld, conditioned or delayed. The immediately preceding
sentence shall not apply to the following situations: (i) the sale (or
repurchase) by Lender of any participation(s) in all or any part of its interest
in the Loan, (ii) the sale or assignment of Lender's interest in the Loan (or
any portion thereof) to any Person with assets of one billion dollars or more on
a consolidated basis at the time of such transaction, (iii) the sale or
assignment of Lender's interest in the Loan (or any portion thereof) to an
affiliate of Lender, or (iv) the sale or assignment of Lender's interest in the
Loan (or any portion thereof) if done in connection with the sale, assignment or
other disposition of all or any substantial portion of Lender's portfolio of
real estate or healthcare loans of a similar nature.
8.4. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in
exercising any right or remedy under any of the Loan Documents, or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise of
any right or remedy. Lender's acceptance of payment of any sum secured by any of
the Loan Documents after the due date of such payment shall not be a waiver of
Lender's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens or charges by
Lender shall not be a waiver of Lender's right to accelerate the maturity of the
Loan, nor shall Lender's receipt of any awards, proceeds, or damages under
Section 4 of the Mortgage operate to cure or waive Borrower's default in payment
of sums secured by any of the Loan Documents. With respect to all Loan
Documents, only waivers made in writing by Lender shall be effective against
Lender. Lender may, in its sole discretion, waive, temporarily or permanently,
any condition to the making of the Loan or any other term in any of the Loan
Documents, by delivering a written confirmation thereof to Borrower.
8.5. GOVERNING LAW; SEVERABILITY. The Loan Documents shall be governed
by and construed in accordance with the internal laws of the State of Illinois,
except that the
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provisions of the laws of the state in which each Mortgage is recorded shall be
applicable to the creation, perfection and enforcement of the lien created by
that Mortgage. The invalidity, illegality or unenforceability of any provision
of this Agreement shall not affect or impair the validity, legality or
enforceability of the remainder of this Agreement, and to this end, the
provisions of this Agreement are declared to be severable.
8.6. RELATIONSHIP. The relationship between Lender and Borrower shall be
that of creditor-debtor only. No term in this Agreement or in the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any relationship of agency, partnership or joint venture or any fiduciary duty
by Lender to any other party.
8.7. INDEMNITY. Borrower shall indemnify, protect, hold harmless and
defend Lender, its successors, assigns, shareholders, directors, officers,
employees, and agents from and against any and all loss, damage, cost, expense
(including reasonable attorneys' fees), and claims arising out of or in
connection with (a) the Project, (b) the Collateral, (c) the Bankruptcy Case,
(d) any act or omission of any Borrower or its employees or agents, whether
actual or alleged, and (e) any and all brokers' commissions or other costs of
similar type by any party in connection with the Loan, in each case except to
the extent arising from the indemnitee's gross negligence or willful misconduct.
Upon written request by an indemnitee, Borrower will undertake, at its own costs
and expense, on behalf of such indemnitee, using counsel reasonably satisfactory
to the indemnitee, the defense of any legal action or proceeding whether or not
such indemnitee shall be a party and for which such indemnitee is entitled to be
indemnified pursuant to this section. At Lender's option, Lender may, at
Borrower's expense, prosecute or defend any action involving the priority,
validity or enforceability of any of the Loan Documents.
8.8. NOTICE. Any notice or other communication required or permitted to
be given shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied or sent by overnight courier or
U.S. Mail and shall be deemed given: (a) if served in person, when served; (b)
if telecopied, on the date of transmission if before 3:00 p.m. (Chicago time) on
a business day; provided that a hard copy of such notice is also sent pursuant
to (c) or (d) below; (c) if by overnight courier, on the first business day
after delivery to the courier; or (d) if by U.S. Mail, certified or registered
mail, return receipt requested on the fourth (4th) day after deposit in the mail
postage prepaid.
Notices to Borrower: Assisted Living Concepts, Inc.,
00000 XX Xxxxx Xxxxxx Xxxxx
Xxxxxxxx X
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxx Xxxxxx and Xxxxxx Xxxxxxxx
Telecopy: (000) 000-0000
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with a copy to: Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxx
Telecopy: (000) 000-0000
Notices to Lender: Xxxxxx Healthcare Finance, Inc.
Loan No. 21-139
0 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxx 00000
Attn: Manager, Portfolio Administration Group
Telecopy: (000) 000-0000
With a copy to: Xxxxxx Healthcare Finance, Inc.
Loan No. 21-139
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx XxXxxx, Senior Vice President
Telecopy: (000) 000-0000
And a copy to: Xxxxxx Healthcare Finance, Inc.
Loan No. 21-139
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxxxxxx, Vice President
and Chief
Counsel, Senior Living Group
Telecopy: (000) 000-0000
8.9. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS;
AND CAPTIONS. The covenants and agreements contained in the Loan Documents shall
bind, and the rights thereunder shall inure to, the respective successors and
assigns of Lender and Borrower, subject to the provisions of this Agreement. All
covenants and agreements of Borrower shall be joint and several. In exercising
any rights under the Loan Documents or taking any actions provided for therein,
Lender may act through its employees, agents or independent contractors as
authorized by Lender. The captions and headings of the paragraphs and sections
of this Agreement are for convenience only and are not to be used to interpret
or define the provisions hereof.
8.10. TERMS AND USAGE. As used in the Loan Documents "BUSINESS DAY"
means any day, other than a Saturday or a Sunday, when banks in Chicago,
Illinois are not required or authorized to be closed.
8.11. INTENTIONALLY OMITTED.
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8.12. TIME OF ESSENCE. Time is of the essence of this Agreement and the
other Loan Documents and the performance of each of the covenants and agreements
contained herein and therein.
8.13. VENUE. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF THE
BANKRUPTCY COURT AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE
LITIGATED IN SUCH COURT. BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF THE AFORESAID COURT AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS. IF (A) THE BANKRUPTCY CASE IS DISMISSED, (B) THE BANKRUPTCY COURT
ABSTAINS FROM HEARING ANY ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS ("FINANCING AGREEMENT PROCEEDINGS"), OR
(C) THE BANKRUPTCY COURT REFUSES TO EXERCISE JURISDICTION OVER A FINANCING
AGREEMENT PROCEEDING OR OTHERWISE REFUSES TO HEAR ANY FINANCING AGREEMENT
PROCEEDING, THEN ALL SUCH FINANCING AGREEMENT PROCEEDINGS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF XXXX,
STATE OF ILLINOIS OR, AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN WHICH
LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS
BEEN POSTED.
8.14. JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND
BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF
LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY
JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. BORROWER AND LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN
-21-
24
REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL.
8.15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, and together shall
constitute the Agreement.
8.16. FINAL AGREEMENT. This Agreement (including the Senior Housing
Rider attached hereto and hereby made a part hereof), together with the other
Loan Documents, represents the entire agreement among Borrower and Lender and
supersedes all prior agreements among the parties with respect to the Loan.
8.17. AMENDMENTS. Except as otherwise provided herein, no amendment,
modification, termination or waiver of any provision of this Agreement, the
Notes or any of the other Loan Documents, or consent to any departure by any
party therefrom, shall in any event be effective unless the same shall be in
writing and signed by Lender.
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25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
has caused the same to be executed by their duly authorized representatives as
of the date first above written.
BORROWER:
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation and Chapter 11
debtor-in-possession
By:______________________________________
Xxxx X. Xxxxxx, Senior Vice President,
Chief Financial Officer and Treasurer
CARRIAGE HOUSE ASSISTED LIVING, INC.,
a Delaware corporation and Chapter 11
debtor-in-possession
By:______________________________________
Name:____________________________________
Its:_____________________________________
LENDER:
XXXXXX HEALTHCARE FINANCE, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Its:_____________________________________
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26
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 1
Name of Borrower: Carriage House Assisted Living, Inc.
Name and Address of Property: Cottonwood House
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
27
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 2
Name of Borrower: Assisted Living Concepts, Inc.
Name and Address of Property: Xxxxxxx House
00000 Xxxxx 00xx Xxxxxx
Xxxxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
28
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 3
Name of Borrower: Assisted Living Concepts, Inc.
Name and Address of Property: Xxxxxxx House
00000 Xxxx Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
29
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 4
Name of Borrower: Assisted Living Concepts, Inc.
Name and Address of Property: Xxxxxx House
000 Xxxx Xxxxxxxx Xxxx
Xxxxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
30
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 5
Name of Borrower: Assisted Living Concepts, Inc.
Name and Address of Property: Xxxxxxx House
0000 Xxxx Xxxx Xxxx Xxxxx
Xxxxxxxx Xxxxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
31
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 6
Name of Borrower: Assisted Living Concepts, Inc.
Name and Address of Property: Aurora House
000 Xxxx Xxxxxxxx
Xxxxxx Xxxxxxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
32
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 7
Name of Borrower: Assisted Living Concepts, Inc.
Name and Address of Property: Copper Hills House
00000 X. Xxxxx Xxxxxxxx Xxxx
Xxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
33
EXHIBIT A
PROPERTY DESCRIPTIONS
PROPERTY 8
Name of Borrower: Assisted Living Concepts, Inc.
Name and Address of Property: Cameron House
000 Xxxxx Xxxxxxxxx Xxxx
Xxxx, XX 00000
Legal Description: See following page
Permitted Liens: None
34
EXHIBIT B
SUBSIDIARY INDEBTEDNESS
------------------------------ --------------------- ---------------------- ---------------------
Outstanding
Principal Balance Remaining Principal
of Subsidiary Amount of Subsidiary Balance of
Indebtedness as of Indebtedness To Be Subsidiary
Subsidiary October 1, 2001 Capitalized by ALC Indebtedness
------------------------------ --------------------- ---------------------- ---------------------
ALC Ohio, Inc.
------------------------------ --------------------- ---------------------- ---------------------
ALC Pennsylvania, Inc.
------------------------------ --------------------- ---------------------- ---------------------
ALC, Iowa, Inc.
------------------------------ --------------------- ---------------------- ---------------------
ALC Nebraska, Inc.
------------------------------ --------------------- ---------------------- ---------------------
ALC New Jersey, Inc.
------------------------------ --------------------- ---------------------- ---------------------
ALC Indiana, Inc.
------------------------------ --------------------- ---------------------- ---------------------
Carriage House
------------------------------ --------------------- ---------------------- ---------------------
Nevada ALC, Inc.
------------------------------ --------------------- ---------------------- ---------------------
Texas ALC, Inc.
------------------------------ --------------------- ---------------------- ---------------------
35
EXHIBIT C
INTERIM FINANCING ORDER
36
EXHIBIT D
LITIGATION
1. Confidential Preliminary Inquiry of the Securities and Exchange
Commission (the "SEC"). After the inception of the class action
securities litigation against ALC in February, 1999, the enforcement
division of the SEC informed ALC that the SEC had begun a confidential
preliminary inquiry. The SEC requested that ALC voluntarily participate
in the inquiry by providing documents the SEC had requested. ALC
voluntarily participated by providing those documents. The SEC has not
commenced any formal investigation to ALC's knowledge.
2. Assisted Living Concepts, Inc. v. National Union Fire Insurance Company
of Pittsburgh, Pennsylvania ("NUFI"). This arbitration proceeding arises
out of the coverage dispute involving the Policy that NUFI issued
effective October 21, 1997, insuring ALC and its officers and directors
during the three-year policy period against claims of wrongful acts,
including securities claims. When the class action securities litigation
commenced, ALC tendered the claim to NUFI, which accepted it with a
reservation of rights. NUFI never issued any notice of rescission. In
fact, on September 1, 2000, NUFI consented to settlement of the class
action litigation, including payment of its full policy limits to
plaintiffs. However, at the same time and despite having consented to
the settlement of the class action and payment of its policy limits,
NUFI continues to assert a claim to rescission based on fraud in certain
of ALC's financial statements, later restated. NUFI alternatively
asserts the right to reimbursement from ALC, asserting that coverage is
excluded because the insureds "improperly profited." With regard to
NUFI's claims, in the settlement agreement NUFI agreed to cap its
potential recovery in an amount not to exceed $4 million. Under the
settlement agreement, even if NUFI were to prevail, any amount awarded
NUFI would not be due until 90 days after ALC satisfied its obligations
to the class action plaintiffs, with any such awarded amount
subordinated to new or refinancing of existing obligations. Because
mediation between the parties failed, ALC filed a Demand for Arbitration
on or about September 19, 2000. The parties have selected the
arbitrators, and no hearing is currently scheduled ; however, it is
anticipated that if there is a hearing, it will occur in the first
quarter of 2002.
3. Complaint Investigations at Xxxxxxx House, Xxxxxxxxx House and Xxxxxxxx
House. Between August 8, 2001 and August 16, 2001, the Department of
Health for the State of Indiana investigated complaints at the above
referenced facilities located in New Albany, Franklin and
Crawfordsville, Indiana, respectively. These investigations were to
ensure ALC's compliance with the Program Description agreed to with the
Department in early 2001 regarding services the Houses are authorized to
provide under Indiana law. To the best of ALC's knowledge, the
Department has taken no action as a result of the investigations.
37
EXHIBIT E
APPROVED PRE-BANKRUPTCY EXPENSES
1. Ordinary Course Professionals $158,480
2. Wages and Benefits $4,500,000
3. Sales and Use Taxes $6,400
4. Utilities $1,300,000
5. Worker's Compensation Policies $500,000
6. Goods Ordered Prepetition $1,500,000
7. Common Carriers and Warehouse Fees $38,000
8. Critical Trade Vendors $1,000,000
9. Prepetition Refunds to Residents $2,500,000
10. Regulatory Agency Fees $125,000
11. TOTAL $11,660,000
38
SCHEDULE I
CALCULATION OF NET OPERATING INCOME
"NET OPERATING INCOME" means annualized Revenue less Expenses, all as determined
by Lender in its reasonable discretion.
"REVENUE" means the lesser of (i) annualized Adjusted Actual Rent or (ii)
annualized Monthly Effective Rent. In determining Revenue, the occupancy factor
utilized shall be the lesser of (a) actual occupancy or (b) an assumed
ninety-five percent (95%) occupancy rate.
"ADJUSTED ACTUAL RENT" means (a) all amounts collected from tenants of the
Property (excluding ALC) for the most current month three (3) months, excluding
nonrecurring income and non-property related income (as determined by Lender in
its reasonable discretion) and income from tenants (i) that are thirty (30) or
more days delinquent, (ii) that are in bankruptcy (even if current), (iii)
non-residential tenants whose leases terminate within six (6) months (as
adjusted for space re-leased upon terms acceptable to Lender in its reasonable
discretion) or (iv) that have been delinquent four (4) or more times during the
past twelve (12) months, and (b) other revenue not to exceed ten percent (10%)
of the amounts included in clause (a) above for laundry, vending, parking and
other occupancy payments (but excluding late fees and interest income) based
upon collections for the previous three (3) months annualized.
"MONTHLY EFFECTIVE RENT" means an amount equal to (x) total rent due over the
term of the leases less any payments or concessions which Lender, in its sole
discretion, deems to be a rent concession, divided by (y) the total number of
months in the leases.
"EXPENSES" means actual and customary operating expenses on a stabilized accrual
basis for the previous three (3) month period (as reasonably adjusted and
annualized by Lender), incurred by any Borrower, including: (i) recurring
expenses (e.g., tenant improvements, leasing commissions, carpeting replacement,
appliance and drapery replacement and such others as reasonably determined by
Lender), (ii) real estate taxes, (iii) management fees (whether paid or not) in
an amount not less than four percent (4%) of effective gross income, and (iv) a
replacement reserve (whether drawn and whether reserved or not) of not less than
Three Hundred and No/100 Dollars ($300.00) per unit.
39
SCHEDULE II
INDEX OF DEFINED TERMS
DEFINED TERM PAGE
------------ ----
Adjusted Actual Rent -- Schedule I.........1
Affiliate.................................13
Agreement..................................1
ALC........................................1
Assignments of Leases......................1
Bankruptcy Case............................2
Bankruptcy Code............................2
Bankruptcy Court...........................2
Base Rate..................................3
Borrower...................................1
business day..............................21
Carriage House.............................1
Closing Date...............................2
Collateral.................................4
control...................................13
Costs.....................................17
Debt Coverage Ratio.......................16
Environmental Indemnity....................4
Event of Default..........................14
Expenses -- Schedule I.....................1
Final Financing Order.....................13
FINANCING AGREEMENT PROCEEDINGS...........21
Financing Order............................7
FIRREA.....................................5
Improvements...............................1
Incorporation Documents....................8
Indebtedness..............................14
Interest Rate..............................3
Interim Financing Order....................7
Leases.....................................5
Lender.....................................1
Loan.......................................1
Loan Documents.............................2
Management and Operating Agreement.........4
Maturity Date..............................2
Monthly Effective Rent -- Schedule I.......1
Mortgage...................................1
Mortgages..................................1
Net Operating Income -- Schedule I.........1
Note A.....................................1
Note B.....................................1
Notes......................................1
Permitted Liens............................9
Person....................................13
Plan Agreement............................16
Pledge.....................................2
Project....................................1
Project Yield.............................16
Properties.................................1
Property...................................1
Regulatory Action.........................15
Replacement Reserve.......................13
Revenue -- Schedule I......................1
Subsidiaries...............................7
Subsidiary Indebtedness....................7
Subsidiary Loan Agreement..................7
Subsidiary Loan Documents..................7
Subsidiary Note Assignment.................7
Title Commitment...........................5
Title Policy...............................5
40
SENIOR HOUSING RIDER
THIS SENIOR HOUSING RIDER is attached to and made a part of that
certain Loan Agreement dated as of the ____ day of October, 2001, among ASSISTED
LIVING CONCEPTS, INC., a Nevada corporation and Chapter 11 debtor-in-possession
("ALC"), CARRIAGE HOUSE ASSISTED LIVING, INC., a Delaware corporation and
Chapter 11 debtor-in-possession ("CARRIAGE HOUSE"; ALC and Carriage House are
hereafter collectively referred to as "BORROWER") and XXXXXX HEALTHCARE FINANCE,
INC., a Delaware corporation ("LENDER"). To the extent of any conflict between
the terms and provisions of this Rider and the terms and provisions of the Loan
Agreement, the terms and provisions of this Rider shall govern and control the
rights and obligations of the parties.
R-1. All terms not defined in this Rider shall have the meanings
ascribed to such terms as set forth in the Loan Agreement.
R-2. The following representations, warranties and covenants are
hereby added to the representations, warranties and covenants contained in the
Loan Agreement
Borrower represents, covenants, and warrants, as of the date
hereof and through the term of Loan, as follows:
(a) Borrower is using and operating or upon completion of the
Improvements will use and operate the Properties and Improvements
(collectively, the "FACILITIES") as independent and assisted living
facilities, with the number of units specified on Exhibit R-1 hereto (as
modified from time to time with Lender's consent, which consent Lender
may grant or withhold in its reasonable discretion, the "LICENSED Use").
Borrower complies and throughout the term of the Loan will comply in all
material respects with all federal, state and local laws, regulations,
quality and safety standards, accreditation standards and requirements
applicable to use and operation of the Facilities of the applicable
state regulatory authority (each a "DOH") and all other federal, state
or local governmental authorities including those relating to the
quality and adequacy of medical care, distribution of pharmaceuticals,
rate setting, equipment, personnel, operating policies, additions to
facilities and services and fee splitting. The Facilities which are
owned, leased or operated by Borrower shall be operated at all times in
compliance with such laws and requirements.
(b) All governmental licenses, permits, regulatory agreements or
other approvals or agreements necessary or desirable for the Licensed
Use of the Facilities are held or upon completion of the Improvements
will be held by Borrower in the name of the Borrower as required under
applicable law and are or upon completion of the Improvements will be in
full force and effect, including a valid certificate of need ("CON"), if
applicable or similar certificate, license, or approval issued by the
DOH for the requisite number of units and beds in the Facilities, and a
provider agreement or other required documentation of approved provider
status for each provider payment or reimbursement program listed on
Exhibit R-2 hereto (collectively, the "LICENSES"). So long as the Loan
remains outstanding, Borrower shall operate the
41
Facilities in a manner such that the Licenses shall remain in full force
and effect. True and complete copies of the Licenses have been delivered
to Lender.
(c) The Licenses, including without limitation, the CON, if
applicable:
(i) May not be, and have not been, and will not be
transferred to any location other than the Facilities;
(ii) Are not and will not be pledged as collateral
security for any other loan or indebtedness; and
(iii) Are held or upon completion of construction of the
Facility will be held free and will remain free from restrictions
or known conflicts which would materially impair the use or
operation of the Facilities for the Licensed Use, and shall not
be provisional, probationary or restricted in any way.
(d) Borrower shall not:
(i) Rescind, withdraw or revoke the Licenses for the
Facilities, or amend, modify, supplement, or otherwise alter the
nature, tenor or scope of the Licenses for the Facilities;
(ii) Amend or otherwise change the Facilities' authorized
units or beds capacity and/or the number of units or beds
approved by the DOH;
(iii) Replace or transfer all or any part of the
Facilities' units or beds to another site or location; or
(iv) Voluntarily transfer or encourage the transfer of any
resident of the Facilities to any other Facilities unless such
transfer is for reasons relating to the health or safety of the
resident to be transferred, employees, guests and other persons.
(e) In the event Borrower elects in its sole discretion to
participate in Medicare or Medicaid, each Facility so participating will
be and thereafter will remain, in compliance with all requirements for
participation in Medicare and Medicaid, as applicable, including the
Medicare and Medicaid Patient Protection Act of 1987 for so long as
Borrower elects to participate in such program. Such Facilities will be
and will thereafter remain for so long as Borrower elects to participate
in Medicare or Medicaid or third party provider programs, in conformance
in all material respects with all insurance, reimbursement and cost
reporting requirements, and will have a provider agreement in full force
and effect under Medicare and Medicaid, as applicable.
(f) There is no and during the term of the Loan shall be no
existing, pending or to Borrower's knowledge, threatened revocation,
suspension, termination, probation, restriction, limitation, or
nonrenewal affecting Borrower or the Facilities of
-2-
42
any participation or provider agreement with any third-party payor,
including Medicare, Medicaid, Blue Cross and/or Blue Shield, and any
other private commercial insurance managed care and employee assistance
program (such programs, the "THIRD-PARTY PAYORS' PROGRAMS") to which
Borrower presently or at any time hereafter is subject. All Medicaid,
Medicare, and private insurance cost reports and financial reports
submitted by Borrower are and will be materially accurate and complete
and have not been and will not be misleading in any material respects.
No cost reports for the Facilities remain open or unsettled, except as
otherwise disclosed in Exhibit R-2 hereto.
(g) Except as otherwise disclosed to Lender before the Closing
Date, none of Borrower or the Facilities is or will be the subject of
any proceeding by any governmental agency, and no notice of any
violation has been or will be issued by a governmental agency that
would, directly or indirectly, or with the passage of time:
(i) Materially impact Borrower's ability to accept and/or
retain patients at a Facility; or
(ii) Have a material adverse effect on Borrower's ability
to accept and/or retain patients or operate the Facilities for
the Licensed Use or result in the imposition of a fine or
sanction or a lower rate certification or a lower reimbursement
rate for services rendered to eligible patients;
(iii) Modify, limit or annul or result in the transfer,
suspension, or revocation or imposition of probationary use of
any of the Licenses; or
(iv) Affect Borrower's continued participation in the
Medicaid or Medicare programs or any other of the Third-Party
Payors' Programs, or any successor programs thereto, at then
current rate certifications.
(h) The Facilities and the use thereof complies, or upon
completion will comply and thereafter will continue to comply, in all
material respects with all applicable local, state and federal building
codes, fire codes, health care, senior housing and other regulatory
requirements (the "PHYSICAL PLANT STANDARDS") and no waivers of Physical
Plant Standards exist at the Facilities.
(i) No Facility has received a "Level A" (or equivalent)
violation under Medicare or Medicaid, as applicable, and no statement of
charges or deficiencies has been made or penalty enforcement action has
been undertaken against the Facilities, or Borrower, or against any
officer or director of Borrower by any governmental agency during the
last three calendar years, and there have been no violations over the
past three years which would threaten the Facilities' or Borrower's
certification for participation in Medicare or Medicaid or the other
Third-Party Payors' Programs.
-3-
43
(j) There are no current, pending or outstanding Medicaid,
Medicare or Third-Party Payors' Programs reimbursement audits or appeals
pending at the Facilities, and there are no years that are subject to
audit.
(k) There are no current or pending Medicaid or Medicare or
Third-Party Payors' Programs recoupment efforts at the Facilities.
Borrower is not a participant in any federal program whereby any
governmental agency may have the right to recover funds by reason of the
advance of federal funds, including those authorized under the
Xxxx-Xxxxxx Act (42 U.S.C. 291, et seq.).
(l) Borrower will not pledge its receivables related to the
Facilities as collateral security for any other loan or indebtedness.
(m) There are no and there will remain no patient or resident
care agreements with patients or residents or with any other persons
which deviate in any material adverse respect from the standard form
customarily used at the Facilities as of the date hereof, a copy of
which standard form agreement has been delivered to Lender.
(n) All patient or resident records at the Facilities, including
patient or resident trust fund accounts, are true and correct in all
material respects, and will remain true and correct in all material
respects.
(o) Any agreement relating to the management or operation of the
Facilities (each a "MANAGEMENT AND OPERATING AGREEMENT") and the manager
or operator thereunder shall be subject to Lender's reasonable approval
and no Management and Operating Agreement shall be modified, amended or
terminated without Lender's prior consent, which consent shall not be
unreasonably withheld. ALC will manage and operate each of the
Facilities at all times. In the event of foreclosure or other
acquisition of the Facilities by Lender or its designee or any purchaser
at a foreclosure sale, Borrower, Lender, any subsequent operator or any
subsequent purchaser need not obtain a CON prior to applying for and
receiving Medicare or Medicaid payments, as applicable.
(p) None of Borrower or the Facilities shall, other than in the
normal course of business, change the terms of any of the Third-Party
Payors' Programs now or hereinafter in effect or their normal billing
payment or reimbursement policies and procedures with respect thereto
(including the amount and timing of finance charges, fees and
write-offs).
(q) On or before the Closing Date and from time to time
thereafter, upon the request of Lender, and during the continuance of an
Event of Default, Borrower shall complete, execute and deliver to Lender
any applications, notices, documentation, and other information
necessary or desirable, in Lender's sole judgment, to permit Lender or
its designee (including a receiver) to obtain, maintain or renew any one
or more of the Licenses for the Facilities (or to become the owner of
the existing Licenses for the
-4-
44
Facilities) and to obtain any other provider agreements, licenses or
governmental authorizations then necessary or desirable for the
operation of the Facilities by Lender or its designee for the Licensed
Use (including, without limitation, any applications for change of
ownership of the existing Licenses or change of control of the owner of
the existing Licenses). Upon an occurrence of an Event of Default but
subject to the Financing Orders, (i) Lender is hereby authorized
(without the consent of Borrower) to submit any such applications,
notices, documentation or other information which Borrower caused to be
delivered to Lender in accordance with the above provisions to the
applicable governmental authorities, or to take such other steps as
Lender may deem advisable to obtain, maintain or renew any License or
other license or governmental authorization in connection with the
operation of the Facilities for the Licensed Use, and Borrower agrees to
cooperate with Lender in connection with the same and (ii) Borrower,
upon demand by Lender, shall take any action necessary or desirable, in
Lender's sole judgment, to permit Lender or its designee (including a
receiver) to use, operate and maintain the Facilities for the Licensed
Use. If Borrower fails to comply with the provisions of this subsection
(q) for any reason whatsoever, but subject to the Financing Orders
Borrower hereby irrevocably appoints Lender and its designee as
Borrower's attorney-in-fact, with full power of substitution, to take
any action and execute any documents and instruments necessary or
desirable in Lender's sole judgment to permit Lender or its designee to
undertake Borrower's obligations under this subsection (q), including
without limitation, obtaining any licenses or governmental
authorizations then required for the operation of the Facilities by
Lender or its designee for the Licensed Use. The foregoing power of
attorney is coupled with an interest and is irrevocable and Lender may
exercise its rights thereunder in addition to any other remedies which
Lender may have against Borrower as a result of Borrower's breach of the
obligations contained in this subsection (q).
(r) Borrower shall at all times fully comply in all material
respects with all obligations under the contracts and leases with
residents of the Facilities, and Borrower shall not commit or permit any
default by Borrower thereunder. Borrower hereby indemnifies and holds
harmless Lender and agrees to defend Lender (with counsel acceptable to
Lender) from and against any (i) claims, proceedings or causes of action
brought by any resident of the Facilities, and (ii) loss, damage, cost
or expense, including reasonable attorneys' fees, incurred or suffered
by Lender as a result of any (x) breach by Borrower of any contract or
lease with a resident of the Facilities or (y) violation of any license
or any federal, state or local law governing the Facilities or the use,
operation or maintenance thereof for the Licensed Use, in each case
except to the extent arising from such indemnitee's gross negligence or
willful misconduct.
-5-
45
EXHIBIT R-1
UNITS AT EACH FACILITY
PROPERTIES UNITS
---------- -----
1. Columbus, NE 39
2. Peoria, AZ 50
3. Surprise, AZ 50
4. Payson, AZ 39
5. Prescott Valley, AZ 39
6. Apache Junction, AZ 48
7. Yuma, AZ 48
8. Mesa, AZ 50
46
EXHIBIT R-2
LICENSES
1. License to operate an Assisted Living Center between Arizona Department of
Health Services and Aurora House dated May 11, 2001.
2. License to operate an Assisted Living Center between Arizona Department of
Health Services and Cameron House dated April 11, 2001.
3. License to operate an Assisted Living Center between Arizona Department of
Health Services and Xxxxxx House dated January 24, 2001.
4. License to operate an Assisted Living Center between Arizona Department of
Health Services and Xxxxxxx House dated November 27, 2000.
5. License to operate an Assisted Living Center between Arizona Department of
Health Services and Xxxxxxx House dated November 24, 1999.
6. License to operate an Assisted Living Center between Arizona Department of
Health Services and Xxxxxxx House dated February 15, 2001.
7. License to operate an Assisted Living Home between Arizona Department of
Health Services and Copper Hills House dated May 9, 2001.
8. License to operate an Assisted Living Facility between State of Nebraska
Department of Health and Human Services Regulation and Licensure and Cottonwood
House dated April 6, 2001.
