SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is entered into as of the
25th day of January, 1999 by FBR ASSET INVESTMENT CORPORATION, a Virginia
corporation (referred to herein as the "Subordinator"), in favor of LaSALLE
NATIONAL BANK ("Bank").
W I T N E S S E T H:
WHEREAS, Brookdale Living Communities, Inc., a Delaware corporation
(the "Borrower"), and Bank have entered into that certain Loan Agreement, dated
April 27, 1998, which Loan Agreement has been amended by that certain First
Amendment to Loan Agreement and Documents dated July 16, 1998, that certain
Second Amendment to Loan Agreement and Documents dated October 14, 1998, that
certain Third Amendment to Loan Agreement and Documents dated October 20, 1998,
that certain Fourth Amendment to Loan Agreement and Documents dated November 3,
1998, that certain Fifth Amendment to Loan Agreement and Documents dated
December 21, 1998, and that certain Sixth Amendment to Loan Agreement and
Documents dated January 15, 1999, and that certain Seventh Amendment to Loan
Agreement and Documents dated January 25, 1999 (as amended to date and as
hereafter supplemented, modified or amended, and including any promissory notes
executed in connection therewith, including that certain Fourth Amended and
Restated Note dated January 15, 1999, the "Loan Agreement"; capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Loan Agreement). A true, correct and complete copy of the Loan Agreement
is attached hereto as Exhibit A;
WHEREAS, the Subordinator and the Borrower have entered into that
certain Loan Agreement, dated January 25, 1999 (as hereafter supplemented,
modified or amended, the "Subordinated Loan Agreement"), a true, correct and
complete copy of which is attached hereto as Exhibit B;
WHEREAS, the provisions of the Loan Agreement prohibit the Borrower
from entering into the transactions contemplated by the Subordinated Loan
Agreement without the consent of Bank;
WHEREAS, Bank has required, as a condition precedent to consenting to
the arrangements contemplated by the Subordinated Loan Agreement, that the
Subordinator deliver this Agreement to Bank; and
WHEREAS, the Subordinator is willing to deliver this Agreement to Bank
in order to induce Bank to consent to the arrangements contemplated by the
Subordinated Loan Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and of other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Subordinator hereby agrees with Bank as follows:
1. Reliance. The Subordinator acknowledges that Bank is consenting to
the arrangements contemplated by the Subordinated Loan Agreement in reliance
upon the Subordinator's agreement to subordinate all amounts that are now or
hereinafter become owing by the Borrower to the Subordinator (including
principal, interest, fees, and expenses) in connection with the Subordinated
Loan Agreement and that certain Promissory Note, dated January 25, 1999 in the
original principal amount of $5,000,000.00 (the "Subordinated Note"), a true,
correct and complete copy of which is attached hereto as Exhibit C. The
Subordinator represents and warrants to Bank that the Borrower currently has no
obligations to the Subordinator other than the principal amount of (and interest
on) the Subordinated Note.
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2. Subordination. The Subordinator covenants and agrees that the
payment of all amounts which are due or payable from the Borrower to the
Subordinator in connection with the Subordinated Loan Agreement and/or the
Subordinated Note (including principal, interest, fees, and expenses) and all
extensions, modifications, refinancings and renewals thereof (collectively, the
"Subordinated Debt"), together with all rights to receive proceeds of collateral
or other security therefor, are hereby expressly subordinated, to the extent and
in the manner hereinafter set forth, to the performance and payment of the
Obligations (as defined in the Loan Agreement) of the Borrower, including,
without limitation, all amounts (including principal, interest, fees and
expenses) owing pursuant to the Loan Agreement (collectively, the "Senior
Obligations"). The Subordinator further agrees and acknowledges that, subject to
the terms set forth herein, the Subordinated Loan Agreement, the Subordinated
Note, and the Subordinator's rights under each shall in all cases be subordinate
to the Loan Agreement and the rights of Bank thereunder.
3. Payment Restrictions. Notwithstanding anything to the contrary set
forth in the Subordinated Loan Agreement and the Subordinated Note, the Borrower
shall not make and the Subordinator shall not receive any payments of principal
(including without limitation proceeds of collateral or any other security) with
respect to the Subordinated Debt unless and until Bank has notified Subordinator
that the outstanding principal balance of the Senior Obligations and the Maximum
Revolving Loan Commitment (as defined in the Loan Agreement) have been
permanently reduced to an amount not in excess of $15,000,000.00 as a result of
the Mandatory Permanent Reduction or the Voluntary Permanent Reduction (as
defined in the Seventh Amendment) [in either case, the "Permanent Reduction"],
and the Subordinator further agrees that, if any such payment is received by the
Subordinator prior to the aforestated notice from Bank to the Subordinator, the
Subordinator will forthwith pay the same to Bank to be applied to the Senior
Obligations in such manner as Bank may elect; provided, however, that Borrower
shall not make and Subordinator shall not receive any payments of principal or
interest with respect to the Subordinated Debt if an Event of Default under the
Loan Agreement then exists or if such payment shall cause the occurrence of such
Event of Default, or if payment of the Subordinated Debt has been accelerated by
the Subordinator. Bank shall promptly notify the Subordinator in writing of the
Permanent Reduction, if any, and of any Event of Default declared by Bank under
the Loan Agreement. With respect to payments of interest on the Subordinated
Debt prior to the expiration of any Standstill Period (as defined herein), the
Borrower may make and the Subordinator may receive and retain payments of
interest on the Subordinated Debt so long as (i) the same are made only on or
after the dates when due under the Subordinated Note and (ii) at the time of
such payment, and after giving effect thereto, Subordinator has not been
notified by Bank that an Event of Default has been declared by Bank under the
Loan Agreement. Subordinator agrees to provide Bank with prompt written notice
of all events of default under the Subordinated Loan Agreement and the
Subordinated Note.
4. Standstill. Except as specifically permitted in this paragraph,
until the Senior Obligations are paid in full, Subordinator shall not, without
the prior written consent of Bank, (i) demand, xxx for, take or receive from or
on behalf of the Borrower or any guarantor of the Subordinated Debt, by setoff
or in any other manner, in the whole or any part of any moneys which may now or
hereafter be owing by the Borrower with respect to the Subordinated Debt; (ii)
initiate or participate with others in any suit, action or proceeding against
the Borrower to (A) enforce payment of or to collect the whole or any part of
the Subordinated Debt, or (B) commence or intervene or join in any judicial
enforcement of any of the rights and remedies under the Subordinated Loan
Agreement or applicable law with respect to the Subordinated Debt or the
Subordinated Loan Agreement (including the filing of any proof of claim in a
bankruptcy proceeding); or (iii) accelerate any Subordinated Debt (the foregoing
referred to herein as "Collection Action"); provided, however, upon the passage
of 90 days from the occurrence of any Event of Default under the Subordinated
Loan Agreement or Subordinated Note (the "Standstill Period"), Subordinator may,
upon 5 business days prior written notice to Bank, accelerate the Subordinated
Debt or take any other Collection Action, further
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provided that (x) upon receipt of Subordinator's notice that it intends to
pursue Collection Action against the Borrower, Bank will promptly thereupon and
from time to time thereafter notify Subordinator of the amount of the Senior
Obligations, and (y) any amounts collected by the Subordinator directly or
indirectly through such Collection Action shall be promptly paid over to Bank
and applied to the payment of the Senior Obligations until the Senior
Obligations have been paid in full, and only thereafter may such amounts be
applied to the Subordinated Debt.
5. Bankruptcy. In the event of any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization (whether or
not pursuant to bankruptcy laws), sale of all or substantially all of the
assets, dissolution, liquidation or any other marshaling of the assets and
liabilities of the Borrower (any one or more of the foregoing referred to as a
"Proceeding"):
a. All Senior Obligations first shall be paid in full before any
payment of or with respect to the Subordinated Debt is made.
b. Until all Senior Obligations have been paid in full, any payment
or distribution, whether in cash, property or securities which, but for
the terms hereof, otherwise would be payable or deliverable in respect
of the Subordinated Debt, shall be paid or delivered directly to Bank,
to be held or applied by Bank in accordance with the terms of the Loan
Agreement. Subordinator irrevocably authorizes, empowers and directs
all receivers, trustees, liquidators, custodians, conservators and
other Persons (as defined in the Loan Agreement) having authority to
effect all such payments and distributions, and further irrevocably
authorizes, empowers and directs Bank to demand, xxx for, collect and
receive, every such payment or distribution.
c. Subordinator agrees not to initiate or prosecute or encourage
any other Person to initiate or prosecute any claim, action or other
proceeding challenging the enforceability of the Senior Obligations or
any liens and security interests securing the Senior Obligations.
d. Subordinator agrees to execute, verify, deliver and file any
proofs of claim in respect of the Subordinated Debt reasonably
requested by Bank in connection with any such Proceeding and hereby
irrevocably authorizes, empowers and appoints Bank their agent and
attorney-in-fact to (i) execute, verify, deliver and file such proofs
of claim upon the failure of Subordinator promptly to do so (and, in
any event, prior to 30 days before the expiration of the time to file
any such proof); and (ii) vote such claims in any such Proceeding upon
the failure of Subordinator to do so prior to 10 days before the
expiration of the time to vote any such claims; provided, however, that
Bank shall have no obligation to execute, verify, deliver or file any
such proof of claim or to vote any such claim. In the event that Bank
votes any such claim in accordance with the authority granted hereby,
Subordinator shall not be entitled to change or withdraw such vote.
e. The Senior Obligations shall continue to be treated as Senior
Obligations and the provisions of this Agreement shall continue to
govern the relative rights and priorities of Bank and Subordinator even
if all or part of the Senior Obligations or the security interests, if
any, securing the Senior Obligations are subordinated, set aside,
avoided or disallowed in connection with any such Proceeding and this
Agreement shall be reinstated if at any time any payment of any of the
Senior Obligations is rescinded or must otherwise be returned by any
holder of the Senior Obligations or any representative of such holder.
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6. No Modification of Subordinated Debt. The Subordinator covenants
and agrees that the Subordinator will not amend the terms of any of the
Subordinated Debt, and will not sell, assign or otherwise transfer or encumber
any right to any Subordinated Debt, any interest therein, or any collateral or
other security therefor, without the prior written consent of Bank, which shall
not be unreasonably withheld.
7. No Security. The Subordinator represents and warrants to Bank, as
a material inducement to Bank to consent to the transactions contemplated by the
Subordinated Loan Agreement and Subordinated Note, that all amounts owing from
the Borrower to the Subordinator are unsecured and that no collateral has been
pledged by the Borrower in any fashion as security for said amounts owing from
the Borrower to the Subordinator. Notwithstanding the foregoing and
notwithstanding the order of filing of financing statements or any other matter,
Bank's liens and security interests in assets of the Borrower, if any, shall at
all times be prior and senior to each and every lien and security interest held
by the Subordinator, if any, and the Subordinator hereby expressly subordinates
all of its liens and security interests in assets of the Borrower, if any, to
each and every lien and security interest now or hereafter held by Bank, if any.
8. Modifications of Senior Obligations. Bank covenants and agrees
that it will not amend the terms of any of the Senior Obligations without the
prior consent of Subordinator, which consent shall not be unreasonably withheld,
conditioned or delayed. The Subordinator hereby waives and agrees not to assert
against Bank any rights which a guarantor or surety with respect to any
indebtedness of the Borrower could exercise.
9. Legend. So long as this Agreement is in effect, the Subordinator
Agrees to insert on the Subordinated Note in a conspicuous manner the following
legend:
This Note and the indebtedness evidenced hereby are subordinate in
the manner and to the extent set forth in that certain Subordination
Agreement (the "Subordination Agreement") dated January 25, 1999,
among FBR Asset Investment Corporation, Brookdale Living
Communities, Inc. (the "Borrower"), and LaSalle National Bank
("Bank"), to the indebtedness owed by the Borrower to the holders of
all of the notes issued pursuant to that certain Loan Agreement,
dated April 27, 1998 as amended through the date hereof, between the
Borrower and Bank, as such Loan Agreement may be amended,
supplemented, or otherwise modified from time to time; and each
holder of this Note, by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement.
Further, the Subordinator covenants and agrees that it will upon request by Bank
execute and deliver such documents and take all such other actions, as Bank may
require to more fully effectuate the subordination intended by this Agreement
and to carry out the transactions intended hereby.
10. Further Assurances. Subordinator at any time, and from time to
time, after the execution and delivery of this Agreement, shall promptly execute
and deliver such further documents and do such further acts and things as Bank
reasonably may request that may be necessary in order to effect fully the
purposes of this Agreement.
11. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and may be personally served,
telecopied or sent by overnight courier service or United States certified or
registered mail and shall be deemed to have been given (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a business day before 4:00 p.m., Chicago Time,
or, if not, on the next succeeding business day; (c) if delivered by overnight
courier, two business days after delivery to such courier properly addressed; or
(d) if by United States mail,
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four business days after deposit in the United States mail, postage prepaid and
properly addressed. Notices shall be addressed to the parties at the addresses
set forth on the signature page or to such other address as the party addressed
shall have previously designated by written notice to the serving party given in
accordance with this paragraph.
12. Severability. In the event that any provision of this Agreement is
deemed to be invalid, illegal or unenforceable by reason of the operation of any
law or by reason of the interpretation placed thereon by any court or
governmental authority, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby, and the affected provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Agreement.
13. Relative Rights. The provisions of this Agreement are solely for
the purpose of defining the relative rights of Subordinator and Bank and shall
not be deemed to create any rights or priorities in favor of any other Person,
including, without limitation, the Borrower.
14. Conflict. In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any of the
Subordinated Note or Subordinated Loan Agreement, the provisions of this
Agreement shall control and govern. For purposes of this paragraph, to the
extent that any provisions of the Subordinated Note or Subordinated Loan
Agreement provide rights, remedies and benefits to Bank that exceed the rights,
remedies and benefits provided to Bank under this Agreement, such provisions of
the Subordinated Note and/or Subordinated Loan Agreement shall be deemed to
supplement, and not to conflict with, the provisions hereof.
15. Term of Agreement. This Agreement shall constitute a continuing
agreement of subordination and shall continue in effect until all Senior
Obligations of the Borrower shall be paid and satisfied in full and Bank's
obligations under the Loan Agreement shall have been terminated.
16. Governing Law. This Agreement shall be deemed to be a contract
made under and shall be construed in accordance with and governed by the laws of
the State of Illinois.
17. Jurisdiction and Venue. For the purposes of any action or
proceeding involving this Agreement or the subject matter of the transactions
contemplated by this Agreement, the Subordinator hereby expressly submits to the
jurisdiction of all federal and state courts located in the State of Illinois
and consents that any order, process, notice of motion or other application to
or by any of said courts or a judge thereof may be served within or without such
court's jurisdiction by registered mail or by personal service, provided a
reasonable time for appearance is allowed. To the extent permitted by applicable
law, the Subordinator hereby irrevocably waives any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement brought in any federal or state court
sitting in Xxxx County, State of Illinois, and, to the extent permitted by law,
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
18. Waiver of Jury. THE SUBORDINATOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS
AGREEMENT OR THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.
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19. Successors; Assigns. This Agreement shall be binding upon and
inure to the benefit of each party hereto, its successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
FBR ASSET INVESTMENT CORPORATION
Address: Potomac Tower
0000 Xxxxxxxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxx
By: /s/ Xxxxxx X. Xxxxxx
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Its: Chief Financial Officer
LASALLE NATIONAL BANK
Address: 000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
By: /s/ Xxxxx X. Xxxxx
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Its: Commercial Banking Officer
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ACKNOWLEDGMENT AND AGREEMENT
The undersigned hereby acknowledges the matters set forth in the
foregoing Subordination Agreement, and agrees for the benefit of Bank (i) that
it will make no payment which is prohibited by the terms of such Subordination
Agreement and (ii) that, to the extent permitted by applicable law, it will on
request by Bank execute and deliver all documents which may reasonably be deemed
necessary or desirable by Bank to evidence and protect Bank's rights under such
Subordination Agreement.
Dated: January 25, 1999.
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
-------------------------------------------
Its: Executive Vice President
EXHIBIT A
LOAN AGREEMENT
EXHIBIT B
SUBORDINATED LOAN AGREEMENT
EXHIBIT C
SUBORDINATED NOTE
