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Exhibit 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this
"Agreement") is made effective as of the 7 th day of August, 2006, by and
between DIVERSICARE AFTON OAKS, LLC , a Delaware limited
liability company (the "Afton Oaks Borrower"), DIVERSICARE
ASSISTED LIVING SERVICES NC I, LLC , a Delaware limited
liability company (the "NC I Borrower"), DIVERSICARE ASSISTED
LIVING SERVICES NC II, LLC , a Delaware limited liability
company, (the "NC II Borrower"), DIVERSICARE BRIARCLIFF, LLC
, a Delaware limited liability company (the "Briarcliff Borrower"),
DIVERSICARE CHISOLM, LLC , a Delaware limited liability
company (the "Chisolm Borrower"), DIVERSICARE HARTFORD, LLC
, a Delaware limited liability company (the "Hartford Borrower"),
DIVERSICARE HILLCREST, LLC , a Delaware limited liability
company (the "Hillcrest Borrower"), DIVERSICARE LAMPASAS,
LLC , a Delaware limited liability company (the "Lampasas
Borrower"), DIVERSICARE PINEDALE, LLC , a Delaware limited
liability company (the "Newport Borrower"), DIVERSICARE WINDSOR
HOUSE, LLC , a Delaware limited liability company (the "Windsor
Borrower"), and DIVERSICARE YORKTOWN, LLC , a Delaware
limited liability company (the "Yorktown Borrower"; the Afton Oaks
Borrower, the NC I Borrower, the NC II Borrower, the Briarcliff
Borrower, the Chisolm Borrower, the Hartford Borrower, the
Hillcrest Borrower, the Lampasas Borrower, the Newport Borrower,
the Windsor Borrower and the Yorktown Borrower, together with their
successors and/or assigns, may be referred to collectively herein
as the "Borrowers" or individually as a "Borrower"), and CAPMARK
FINANCE INC. , a California corporation, formerly known as GMAC
Commercial Mortgage Corporation (together with its successors and
assigns, "Lender").
R E C I T A L S:
A. Borrowers have requested
that Lender make a loan to Borrower in the principal sum of
$30,625,000.00.
B. Lender has agreed to make
such loan on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE , it is
hereby agreed as follows:
ARTICLE I
DEFINITIONS, ACCOUNTING PRINCIPLES, UCC TERMS.
1.1 As used in this Agreement, the
following terms shall have the following meanings unless the
context hereof shall otherwise indicate:
"Accounts" has the meaning given to that term in the
Mortgage.
"Actual Cost of Professional and General Liability" means
the total out of pocket expense associated with professional and
general liability related settlements, legal fees, or
administration for all facilities owned and/or operated by entities
related to Guarantor for the comparable period divided by the total
number of licensed beds for all facilities owned and/or operated by
entities related to Guarantor then multiplied by the number of
licensed beds for the Facilities (excluding Carolina Beach
Facility, Lampasas Facility and Yorktown Facility).
"Actual Management Fees" means actual management fees paid
or incurred in connection with operation of the Facility.
"Affiliate" means, with respect to any Person, (a) each
Person that controls, is controlled by or is under common control
with such Person, (b) each Person that, directly or
indirectly, owns or controls, whether beneficially or as a trustee,
guardian or other fiduciary, any of the Stock of such Person, and
(c) each of such Person’s officers, directors, members,
joint venturers and partners.
"Afton Oaks Facility" means the nursing home facility known
as "Afton Oaks Nursing and Rehabilitation Center" presently a
169-bed licensed skilled nursing facility located on the Land
located in Houston, Harris County, Texas, as it may now or
hereafter exist, together with any other general or specialized
care facilities, if any (including any Alzheimer’s care unit,
subacute nursing and/or assisted living facility), now or hereafter
operated on the Land.
"Allocated Loan Amount" means that portion of the Loan
allocated to an individual Borrower for purposes of mortgage or
deed recording tax. The Allocated Loan Amount for each Borrower is
more particularly described in Exhibit "G" herein.
"A/R Lender" means (i) AmSouth Bank, an Alabama state
banking corporation, its successors and assigns ("AmSouth") or
(ii) any subsequent lender of an A/R Loan, its successors and
assigns.
"A/R Loan" means (i) that certain indebtedness and
obligations of Guarantor, Borrowers and their Affiliates, to
AmSouth evidenced by and described in that certain Master Amendment
to Loan Documents and Agreement dated as of November 8, 2000,
effective as of October 1, 2000, and the documents and
instruments executed in connection therewith, together with any
amendments thereto, and any modifications, renewals and extensions
thereof, which indebtedness and obligations are secured, in part,
by a first priority lien in the Accounts of the Facilities or
(ii) the indebtedness and obligations of Guarantor, Borrowers
and their Affiliates to any subsequent lender of a credit facility
for a working capital loan which is secured, in whole or in part,
by a first priority lien in the Accounts of the Facilities, subject
to an Intercreditor Agreement acceptable to Lender and subject to
Lender’s review and approval of the loan documents evidencing
the credit facility, as approved by Lender in its reasonable
discretion.
"Assignment of Leases and Rents" means that certain
Assignment of Leases and Rents of even date herewith by and between
Borrowers and Lender.
"Assignment of Licenses" means that certain Assignment of
Licenses, Permits and Contracts of even date herewith by Borrowers
to and for the benefit of Lender.
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"Assumed Management Fees" means assumed management fees of
five percent (5%) of net patient revenues of the Facilities (after
Medicaid and Medicare contractual adjustments).
"Briarcliff Facility" means the nursing home facility known
as "Briarcliff Health Care Center" presently an 120-bed licensed
skilled nursing facility located on the Land located in Oak Ridge,
Anderson County, Tennessee, as it may now or hereafter exist,
together with any other general or specialized care facilities, if
any (including any Alzheimer’s care unit, subacute nursing
and/or assisted living facility), now or hereafter operated on the
Land.
"Business Day" means a day, other than Saturday or Sunday
and legal holidays, when Lender is open for business.
"Capital Improvements Fund Escrow and Security Agreement"
means that certain Capital Improvements Fund Escrow and Security
Agreement of even date herewith by and between the Newport Borrower
and Lender.
"Carolina Beach Facility" means the assisted living facility
known as "Diversicare Assisted Living of Carolina Beach" (formerly
Nielsens Rest Home) presently a 61-bed licensed assisted living
facility located on the Land located in Carolina Beach, New Hanover
County, North Carolina, as it may now or hereafter exist, together
with any other general or specialized care facilities, if any
(including any Alzheimer’s care unit and/or subacute nursing
facility), now or hereafter operated on the Land.
"Chisolm Facility" means the nursing home facility known as
"Chisolm Trail Nursing and Rehabilitation Center" presently a
100-bed licensed skilled nursing facility located on the Land
located in Lockhart, Caldwell County, Texas, as it may now or
hereafter exist, together with any other general or specialized
care facilities, if any (including any Alzheimer’s care unit,
subacute nursing and/or assisted living facility), now or hereafter
operated on the Land.
"Closing Date" means the date on which all or any part of
the Loan is disbursed by Lender to or for the benefit of
Borrowers.
"Combined Debt Service Coverage Ratio" means the Debt
Service Coverage Ratio for the Facilities, when combined.
"Commitment Letter" means the commitment letter issued by
Lender to Borrower dated June 30, 2006.
"Cross-Collateralization Agreement" means, the
Cross-Collateralization, Cross-Default and Mortgage Modification
Agreement of even date herewith by and between Borrowers and
Lender.
"DCMS Note Receivable" means the note executed by DCMS
Holdings, Inc. to the order of Diversicare Leasing Corp. associated
with the sale of the Guarantor’s Canadian subsidiary, which
occurred May, 2004.
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"Debt Service Coverage Ratio" means a ratio in which the
first number is the sum of "net pre-tax income" of a Borrower from
usual operations of its Facility as set forth in the financial
statements provided to Lender (without deduction for Actual
Management Fees or management expenses paid or incurred in
connection with the operation of the Facility), calculated based
upon the preceding twelve (12) months, plus Loan interest
expense to the extent deducted in determining net income and
non-cash expenses or allowances for depreciation and amortization
of the Facility for such period, less Assumed Management
Fees for such period and the second number is the sum of the
principal amounts due (even if not paid) on the Loan (but which
shall not include that portion associated with any balloon payment
of the Loan) for the applicable period plus the interest due
on the Loan for the applicable period. In calculating "net pre-tax
income", any Extraordinary Income, Extraordinary Expense, and
non-cash Facility-related impairment charges expensed in accordance
with GAAP shall be excluded. Note: Commencing on (i) the ninth
(9 th ) day of the
month immediately following the Closing Date if the Closing Date
occurs prior to the fifteenth (15 th ) day of a calendar month or
(ii) the ninth (9 th
) day of the second month following the Closing Date
and continuing on the ninth (9 th ) day of each successive month
thereafter, principal and interest for the purposes of the
denominator above shall be annualized until such time as twelve
(12) months of principal and interest has been accrued
(whether or not paid) under the Loan. Notwithstanding the
foregoing, any expenses associated with the deferred debt cost
related to the Briarcliff Facility and/or the Hartford Facility
shall be treated as an Extraordinary Expense for the purpose of the
Debt Service Coverage Ratio.
"Debt Service Reserve Fund Agreement" means that certain
Debt Service Reserve Fund Escrow and Security Agreement of even
date herewith between Lender and Borrowers.
"Default" means the occurrence or existence of any event
which, but for the giving of notice or expiration of time or both,
would constitute an Event of Default.
"Default Rate" has the meaning given to that term in the
Note.
"Environmental Permit" means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect
to any activities or businesses conducted on or in relation to the
Land and/or the Improvements.
"Equipment" has the meaning given to that term in the
Mortgage.
"Event of Default" means any "Event of Default" as defined
in Article VII hereof.
"Extraordinary Income and Extraordinary Expenses" means
material items of a character significantly different from the
typical or customary business activities of Borrowers which would
not be expected to recur frequently and which would not be
considered as recurring factors in any evaluation of the ordinary
operating processes of Borrower’s business, and which would
be treated as extraordinary income or extraordinary expenses under
GAAP.
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"Exhibit" means an Exhibit to this Agreement, unless the
context refers to another document, and each such Exhibit shall be
deemed a part of this Agreement to the same extent as if it were
set forth in its entirety wherever reference is made thereto.
"Facilities" means, collectively, the Afton Oaks Facility,
the Briarcliff Facility, the Carolina Beach Facility, the Chisolm
Facility, the Hartford Facility, the Hillcrest Facility, the
Lampasas Facility, the Newport Facility, the Windsor Facility and
the Yorktown Facility. Any of the Facilities may be referred to
individually herein as a "Facility".
"GAAP" means, as in effect from time to time, generally
accepted accounting principles consistently applied as promulgated
by the Financial Accounting Standards Board ("FASB") and enforced
by the American Institute of Certified Public Accountants
("AICPA").
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any Person
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to such government.
"Guarantor" means Advocat Inc., a Delaware corporation,
which shall guarantee the Loan.
"Guaranty Agreement" means that certain Guaranty of even
date herewith from Guarantor to and for the benefit of Lender,
whereby Guarantor guarantees the Loan.
"Hartford Facility" means the nursing home facility known as
"Hartford Health Care" presently an 86-bed licensed skilled nursing
facility located on the Land located in Hartford, Geneva County,
Alabama, as it may now or hereafter exist, together with any other
general or specialized care facilities, if any (including any
Alzheimer’s care unit, subacute nursing and/or assisted
living facility), now or hereafter operated on the Land.
"Hazardous Materials" means petroleum and petroleum products
and compounds containing them, including gasoline, diesel fuel and
oil; explosives; flammable materials; radioactive materials;
polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing
materials in any form that is or could become friable; underground
storage tanks, whether empty or containing any substance; any
substance the presence of which on the Land and/or the Improvements
is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or
substance now or in the future defined as a "hazardous substance,"
"hazardous material," "hazardous waste," "toxic substance," "toxic
pollutant," "contaminant," or "pollutant" within the meaning of any
Hazardous Materials Law.
"Hazardous Materials Laws" means all federal, state, and
local laws, ordinances and regulations and standards, rules,
policies and other governmental requirements, administrative
rulings and court judgments and decrees in effect now or in the
future and including all amendments, that relate to Hazardous
Materials and apply to Borrower or to the Land and/or the
Improvements. Hazardous Materials Laws include, but are not limited
to, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601,
et seq., the Clean Water Act, 33 U.S.C.
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Section 1251, et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, and their state
analogs.
"Hillcrest Facility" means the nursing home facility known
as "Hillcrest Manor Nursing and Rehabilitation Center" presently a
60-bed licensed skilled nursing facility located on the Land
located in Luling, Caldwell County, Texas, as it may now or
hereafter exist, together with any other general or specialized
care facilities, if any (including any Alzheimer’s care unit,
subacute nursing and/or assisted living facility), now or hereafter
operated on the Land.
"Improvements" means all buildings, structures and
improvements of every nature whatsoever now or hereafter situated
on the Land, including but not limited to, all gas and electric
fixtures, radiators, heaters, engines and machinery, boilers,
ranges, elevators and motors, plumbing and heating fixtures,
carpeting and other floor coverings, water heaters, awnings and
storm sashes, and cleaning apparatuses which are or shall be
attached to the Land or said buildings, structures or
improvements.
"Indebtedness" means any (a) obligations for borrowed
money, (b) obligations, payment for which is being deferred by
more than ninety (90) days, representing the deferred purchase
price of property other than accounts payable arising in connection
with the purchase of inventory customary in the trade and in the
ordinary course of Borrowers’ business, (c) obligations,
whether or not assumed, secured by Liens or payable out of the
proceeds or production from the Accounts and/or property now or
hereafter owned or acquired, and (d) the amount of any other
obligation (including obligations under financing leases) which
would be shown as a liability on a balance sheet prepared in
accordance with GAAP.
"Intercreditor Agreement" means (i) that certain
Intercreditor Agreement dated August 6, 2006, by and between
AmSouth and Lender or (ii) any Intercreditor Agreement between
Lender and any subsequent A/R Lender.
"Inventory" has the meaning given to that term in the
Mortgage.
"Lampasas Facility" means the nursing home facility known as
"Lampasas Nursing and Rehabilitation Center" presently a 68-bed
licensed skilled nursing facility located on the Land located in
Lampasas, Lampasas County, Texas, as it may now or hereafter exist,
together with any other general or specialized care facilities, if
any (including any Alzheimer’s care unit, subacute nursing
and/or assisted living facility), now or hereafter operated on the
Land.
"Land" means the land described in Exhibit "A"
attached hereto and made a part hereof.
"Leases" has the meaning given to that term in the
Mortgage.
"Lien" means any voluntary or involuntary mortgage, security
deed, deed of trust, lien, pledge, assignment, security interest,
title retention agreement, financing lease, levy, execution,
seizure, judgment, attachment, garnishment, charge, lien or other
encumbrance of any kind, including those contemplated by or
permitted in this Agreement and the other Loan Documents.
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"Loan" means, collectively, the Note I Loan and the Note II
Loan, in the combined principal sum of $30,625,000.00 made by
Lender to Borrowers as of the date hereof.
"Loan Documents" means, collectively, the Commitment Letter,
this Agreement, the Note, the Mortgage, the Assignment of Leases
and Rents, the Assignment of Licenses, the Guaranty Agreement, the
Debt Service Reserve Fund Agreement, the Subordination Agreement,
the Cross-Collateralization Agreement, the Capital Improvements
Fund Escrow and Security Agreement together with any and all other
documents executed by Borrowers or others, evidencing, securing or
otherwise relating to the Loan.
"Loan Obligations" means the aggregate of all principal and
interest owing from time to time under the Note and all expenses,
charges and other amounts from time to time owing under the Note,
this Agreement or the other Loan Documents and all covenants,
agreements and other obligations from time to time owing to, or for
the benefit of, Lender pursuant to the Loan Documents.
"Managed Care Plans" means any health maintenance
organization, preferred provider organization, individual practice
association, competitive medical plan, or similar arrangement,
entity, organization, or Person.
"Management Agreement" means, collectively, those certain
Management Agreements between Manager and each Borrower, obligating
Manager to operate and manage the Facilities.
"Manager" means Diversicare Management Services, Co., a
Tennessee corporation, and any successor manager of a Facility
approved by Lender in writing.
"Maturity Date" means, for the portion of the Loan evidenced
by Note I, August 9, 2011, and for the portion of the Loan
evidenced by Note II, August 9, 2010.
"Medicaid" means that certain program of medical assistance,
funded jointly by the federal government and the States, for
impoverished individuals who are aged, blind and/or disabled,
and/or members of families with dependent children, which program
is more fully described in Title XIX of the Social Security Act (42
U.S.C. §§ 1396 et seq .) and the regulations
promulgated thereunder.
"Medicare" means that certain federal program providing
health insurance for eligible elderly and other individuals, under
which physicians, hospitals, skilled nursing homes, home health
care and other providers are reimbursed for certain covered
services they provide to the beneficiaries of such program, which
program is more fully described in Title XVIII of the Social
Security Act (42 U.S.C. §§ 1395 et seq .) and the
regulations promulgated thereunder.
"Mortgage" means those certain Deed of Trust and Security
Agreements or Mortgage and Security Agreements of even date
herewith from Borrowers in favor of or for the benefit of Lender,
encumbering the real estate which is more particularly described in
Exhibit "A" hereto, and upon which each Facility is located,
as modified by the Cross-Collateralization Agreement.
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"Mortgaged Property" has the meaning given to that term in
the Mortgage.
"Newport Facility" means the nursing home facility known as
"Newport Healthcare and Rehabilitation Center" presently a 130-bed
licensed skilled nursing facility located on the Land located in
Newport, Jackson County, Arkansas, as it may now or hereafter
exist, together with any other general or specialized care
facilities, if any (including any Alzheimer’s care unit,
subacute nursing and/or assisted living facility), now or hereafter
operated on the Land.
"Note" means, collectively, Note I (hereinafter defined) and
Note II (hereinafter defined).
"Note I" means the Promissory Note of even date herewith in
the principal amount of $22,500,000.00, payable by Borrowers to the
order of Lender.
"Note I Loan" means the loan in the principal sum of
$22,500,000.00 made by Lender to the Borrowers, as evidenced by
Note I.
"Note I Security" means the collateral, security and
property more specifically described in Section 2.2(a)
herein.
"Note II" means the Promissory Note of even date herewith in
the principal amount of $8,125,000.00, payable by Borrowers to the
order of Lender.
"Note II Loan" means the loan in the principal amount of
$8,125,000.00 made by Lender to Borrowers, as evidenced by Note
II.
"Note II Security" means the collateral, security and
property more particularly described in Section 2.2(b)
herein.
"O&M Program" means a written program of operations and
maintenance established or approved in writing by Lender relating
to any Hazardous Materials in, on or under the Land and/or the
Improvements.
"OFAC List" means the list of specially designated nationals
and blocked Persons subject to financial sanctions that is
maintained by the U.S. Treasury Department, Office of Foreign
Assets Control and any other similar list maintained by the U.S.
Treasury Department, Office of Foreign Assets Control pursuant to
any Requirements of Law, including, without limitation, trade
embargo, economic sanctions, or other prohibitions imposed by
Executive Order of the President of the United States. The OFAC
List currently is accessible through the internet website
www.treas.gov/ofac/t11sdn.pdf .
"Patient Agreements" means collectively any and all
contracts, authorizations, agreements or consents made by or on
behalf of any patient or resident of the Facilities, or any other
person seeking or obtaining services or Goods from a Borrower,
pursuant to which a Borrower provides skilled nursing care,
intermediate care and/or assisted living facility, or any form of
patient or residential care, as well as related services at the
Facilities (as such contracts, authorizations, agreements or
consents may be amended, supplemented, renewed, replaced,
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extended or modified from time to time). The Patient Agreements
include consents to treatment and assignments of payment of
benefits.
"Permits" means all licenses, permits and certificates used
or necessary in connection with the construction, ownership,
operation, use or occupancy of the Mortgaged Property and/or the
Facilities, including, without limitation, business licenses, state
health department licenses, food service licenses, licenses to
conduct business, certificates of need and all such other permits,
licenses and rights, obtained from any governmental,
quasi-governmental or private person or entity whatsoever
concerning ownership, operation, use or occupancy including
certifications and eligibility for participation by any Borrower,
with respect to its operation of the Facilities and any related
businesses or operations, in programs or arrangements with, or
reimbursement from Third Party Payors including Medicare and
Medicaid.
"Permitted Encumbrances" has the meaning given to that term
in Section 5.2 hereof.
"Person" means any individual, partnership, limited
partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other form of legal entity
of whatever nature.
"Proceeds" has the meaning given to that term in the
Mortgage.
"Reimbursement Contracts" means all third-party
reimbursement contracts relating to the Facilities which are now or
hereafter in effect with respect to residents or patients
qualifying for coverage under the same, including Medicare and
Medicaid, Managed Care Plans and private insurance agreements, and
any successor program or other similar reimbursement program and/or
private insurance agreements, now or hereafter existing.
"Rents" has the meaning given to that term in the
Mortgage.
"Requirements of Law" means (a) the organizational
documents of an entity, and (b) any law, regulation,
ordinance, code, decree, treaty, ruling or determination of an
arbitrator, court or other Governmental Authority, or any Executive
Order issued by the President of the United States, in each case
applicable to or binding upon such Person or to which such Person,
any of its property or the conduct of its business is subject
including, without limitation, laws, ordinances and regulations
pertaining to the zoning, occupancy and subdivision of real
property.
"Single Purpose Entity" means a Person which complies with
the requirements of Section 5.4.
"Stock" means all shares, options, warrants, general or
limited partnership interests, membership interests, participations
or other equivalents (regardless of how designated) in a
corporation, limited liability company, partnership or any
equivalent entity, whether voting or nonvoting, including, without
limitation, common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended).
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"Subordination Agreement" means that certain Subordination
of Management Agreement of even date herewith by and among
Borrower, Manager, and Lender.
"Windsor Facility" means the nursing home facility known as
"Windsor House of Huntsville" presently a 117-bed licensed skilled
nursing facility and a 17-bed licensed assisted living facility
located on the Land located in Huntsville, Madison County, Alabama,
as it may now or hereafter exist, together with any other general
or specialized care facilities, if any (including any
Alzheimer’s care unit, subacute nursing and/or assisted
living facility), now or hereafter operated on the Land.
"Worker’s Comp Retro Premiums" means any and all
current or future premium adjustments and/or refunds and/or credits
associated with Guarantor’s worker’s compensation
policies.
"Yorktown Facility" means the nursing home facility known as
"Yorktown Nursing and Rehabilitation Center" presently a 92-bed
licensed skilled nursing facility located on the Land in Yorktown,
Dewitt County, Texas, as it may now or hereafter exist, together
with any other general or specialized care facilities, if any
(including any Alzheimer’s care unit, subacute nursing and/or
assisted living facility), now or hereafter operated on the
Land.
The
following terms shall have the same respective meanings as are
given to those terms in the Uniform Commercial Code of the State of
Alabama, as amended: " Chattel Paper ", " Contracts
", " Contract Rights ", " Documents ", " General
Intangibles ", " Goods ", " Instruments ."
Without limiting the foregoing, the following kinds and types of
property to the extent related to the Facilities shall be included
within the definition of " General Intangibles ":
(a) Permits,
Patient Agreements, provider agreements and all other agreements
(whether now existing or hereafter made) between any Borrower and
any Third Party Payor relating to any rights of any Borrower or to
payment and/or reimbursement from, or claims of Borrower against,
any Third Party Payor;
(b) All
franchises, sub franchises, rights to distribute, sales agencies,
licenses, permits, leases, rights to indemnification, rights as
insured, including the right to be provided a defense, warranty
rights, concessions and concession rights, customer lists, yellow
page or trade journal listing, telephone numbers, and any and all
other property or rights necessary, convenient, or proper with
respect to the continued operation of the business of Borrower as
now or hereafter conducted by any of the Borrowers with respect to
the operation or use of the Facilities;
(c) All
patents and patent applications, together with the right to sue for
past, present, and future infringements, all rights corresponding
thereto throughout the world and all reissues, divisions,
continuations, renewals, extensions, and continuations-in-part
thereof and all improvements thereon;
(d) All
trademarks, trade names, and trade secrets, together with the right
to sue for past, present, and future violations corresponding
thereto, and all good will associated therewith; and
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(e) All
copyrights, together with the right to sue for past, present, or
future violations or infringements of rights of the copyrights, and
all renewals, extension and continuations thereof.
1.2 Singular terms shall include
the plural forms and vice versa, as applicable, of the terms
defined.
1.3 Each term contained in this
Agreement and defined in the Uniform Commercial Code (the "UCC") in
effect from time to time in the state in which the Land is located
shall have the meaning given to such term in the UCC, unless the
context otherwise indicates, and shall include, without limitation,
the meaning set forth in this Agreement.
1.4 All accounting terms used in
this Agreement shall be construed in accordance with GAAP, except
as otherwise specified.
1.5 All references to other
documents or instruments shall be deemed to refer to such documents
or instruments as they may hereafter be extended, renewed,
modified, or amended and all replacements and substitutions
therefor.
1.6 All references herein to
"Medicaid" and "Medicare" shall be deemed to include any successor
program thereto.
ARTICLE II
TERMS OF THE LOAN
2.1 The Loan .
Borrowers have agreed to borrow the Loan from Lender, and Lender
has agreed to make the Loan to Borrowers, subject to
Borrowers’ compliance with and observance of the terms,
conditions, covenants, and provisions of this Agreement and the
other Loan Documents, and Borrowers have made the covenants,
representations, and warranties herein and therein as a material
inducement to Lender to make the Loan. The Loan shall be disbursed
as follows:
(a) On
the Closing Date, $7,744,199.33 of the Loan shall be disbursed to
Lender and applied to the outstanding debts of the NC I Borrower
and/or the NC II Borrower.
(b) A
portion of the Loan in the amount of $1,295,014.52 shall be used to
pay off a term loan made to the Borrowers and Guarantor by the A/R
Lender. Such payoff shall not affect the A/R Loan;
(c) A
portion of the Loan in the amount of $1,107,620.00 for certain
renovations at the Newport Facility shall be disbursed in
accordance with the Capital Improvements Fund Escrow and Security
Agreement; and
(d) The
remainder of the Loan shall refinance certain existing debt of the
Borrowers to the Lender.
2.2 Security for the
Loan .
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(a) Note
I Loan: The portion of the Loan evidenced by Note I will be
evidenced, secured and guaranteed by the Loan Documents and will
include, but not be limited to the following (collectively, the
"Note I Security"):
(i) a
first lien deed of trust with respect to the Borrowers’
right, title, interest in and to the Facilities (excluding the
Carolina Beach Facility, the Lampasas Facility and the Yorktown
Facility);
(ii) a
second priority lien security interest in accounts receivable
issuing from the Facilities (excluding the Carolina Beach Facility,
the Lampasas Facility and the Yorktown Facility);
(iii) the
Cross-Collateralization Agreement; and
(iv) any
and all other collateral securing the Note I Loan.
(b) Note
II Loan: The portion of the Loan evidenced by Note II will be
evidenced, secured and guaranteed by the Loan Documents and will
include, but not be limited to the following (collectively, the
"Note II Security"):
(i) an
assignment of the DCMS Note Receivable and the Workers’ Comp
Retro Premiums;
(ii) a
first lien deed of trust with respect to the Borrowers’
right, title, interest in and to the Carolina Beach Facility;
(iii) a
first lien deed of trust with respect to the Lampasas
Borrower’s right, title, and interest in and to the Lampasas
Facility;
(iv) a
first lien deed of trust with respect to the Yorktown
Borrower’s right, title, and interest in and to the Yorktown
Facility;
(v) a
second priority lien security interest in accounts receivable
issuing from the Carolina Beach Facility, the Lampasas Facility and
the Yorktown Facility;
(vi) a
second lien deed of trust or mortgage with respect to the
Borrowers’ right, title, and interest in and to the
Facilities (excluding the Carolina Beach Facility, the Lampasas
Facility and the Yorktown Facility), including the Land; and
(vii) any
and all other collateral securing the Note II Loan.
2.3 Limitation on
Interest . All agreements between Borrowers and Lender,
whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by
reason of acceleration of the maturity of any indebtedness governed
hereby or otherwise, shall the interest contracted for, charged or
received by Lender exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Lender in excess of the maximum
lawful amount, the interest payable to Lender shall be reduced to
the maximum amount permitted under applicable
12
law; and, if from any circumstance the Lender shall ever receive
anything of value deemed interest by applicable law in excess of
the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal of the
Loan and not to the payment of interest, or, if such excessive
interest exceeds the unpaid balance of principal of the Loan, such
excess shall be refunded to Borrowers. All interest paid or agreed
to be paid to Lender shall, to the extent permitted by applicable
law, be amortized, prorated, allocated, and spread throughout the
full period until payment in full of the principal of the Loan
(including the period of any renewal or extension thereof) so that
interest thereon for such full period shall not exceed the maximum
amount permitted by applicable law. This paragraph shall control
all agreements between the Borrowers and Lender.
ARTICLE III
BORROWERS’ REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into
this Agreement, and to make the Loan to Borrowers, each Borrower
represents and warrants to Lender as follows:
3.1 Existence, Power and
Qualification . Borrower is a duly organized and validly
existing Delaware limited liability company, has the power to own
its properties and to carry on its business as is now being
conducted, and is duly qualified to do business and is in good
standing in every jurisdiction in which the character of the
properties owned by it or in which the transaction of its business
makes its qualification necessary.
3.2 Power and
Authority . Borrower has full power and authority to borrow
the indebtedness evidenced by the Note and to incur the Loan
Obligations provided for herein, all of which have been authorized
by all proper and necessary limited liability company action on the
part of Borrower. All consents, approvals authorizations, orders or
filings of or with any court or governmental agency or body, if
any, required for the execution, delivery and performance of the
Loan Documents by Borrower have been obtained or made.
3.3 Single Purpose
Entity . Borrower is a Single Purpose Entity.
3.4 Pending Matters
.
(a)
Operations; Financial Condition . Except as shown on
Schedule 3.4, no action or investigation is pending or, to the
best of Borrower’s knowledge, threatened against Borrower
before or by any court or administrative agency which might result
in any material adverse change in the financial condition,
operations or prospects of Borrower or any lower reimbursement rate
under the Reimbursement Contracts. Borrower is not in violation of
any agreement, the violation of which might reasonably be expected
to have a material adverse effect on its business or assets, and
Borrower is not in violation of any order, judgment, or decree of
any court, or any statute or governmental regulation to which
Borrower is subject.
(b)
Land and Improvements . There are no proceedings pending,
or, to the best of Borrower’s knowledge, threatened, to
acquire through the exercise of any power of condemnation, eminent
domain or similar proceeding any part of the Land, the Improvements
or any interest therein, or to enjoin or similarly prevent or
restrict the use of the Land or the
13
operation of the Facility in any manner. Except for unrepaired
flood damage at the Afton Oaks Facility, none of the Improvements
is subject to any unrepaired casualty or other damage.
3.5 Financial Statements
Accurate . All financial statements heretofore or hereafter
provided by Borrower are and will be true and complete in all
material respects as of their respective dates and fairly present
the financial condition of Borrower, and there are no material
liabilities, direct or indirect, fixed or contingent, as of the
respective dates of such statements which are not reflected therein
or in the notes thereto or in a written certificate delivered with
such statements. The financial statements of Borrower have been
prepared in accordance with GAAP. There has been no material
adverse change in the financial condition, operations, or prospects
of Borrower since the dates of such statements except as fully
disclosed in writing with the delivery of such statements. All
financial statements of the operations of the Facility heretofore
or hereafter provided to Lender are and will be true and complete
in all material respects as of their respective dates.
3.6 Compliance with Facility
Laws . Its Facility is duly licensed as a skilled nursing
facility and/or an assisted living facility with the number of beds
shown in the Facility’s definition in Article I herein
under the applicable laws of the state where the Land is located,
and except for the Carolina Beach Facility, is currently operated
as a skilled nursing facility and/or an assisted living facility.
Borrower is the lawful owner of all Permits for the Facility,
including, without limitation, the Certificate of Need and/or the
Nursing Home License issued by the applicable State Department of
Health, Health Care Facilities, if applicable, which (a) are
in full force and effect, (b) constitute all of the permits,
licenses and certificates required for the use, operation and
occupancy thereof, (c) have not been pledged as collateral for
any other loan or Indebtedness, (d) are held free from any
restriction or any encumbrance which would materially adversely
affect the use or operation of the Facility and (e) are not
provisional, probationary or restricted in any way. Borrower and
Manager as well as the operation of the Facility are in compliance
in all material respects with the applicable provisions of all
laws, rules, regulations and published interpretations to which the
Facility is subject. No waivers of any laws, rules, regulations, or
requirements (including, but not limited to, minimum foot
requirements per bed) are required for the Facility to operate at
the foregoing licensed bed capacity. All Reimbursement Contracts
are in full force and effect with respect to the Facility, and
Borrower and Manager are in good standing with all the respective
agencies governing such applicable Facility licenses, program
certification and Reimbursement Contracts. Borrower and Manager are
current in the payment of all so-called provider specific taxes or
other assessments with respect to such Reimbursement Contracts.
Except for the Carolina Beach Facility, Borrower will maintain the
Certificate of Need, if applicable, and/or any required Permits in
full force and effect. In the event Lender acquires the Facility
through foreclosure or otherwise, neither Lender nor a subsequent
manager, a subsequent lessee or any subsequent purchaser (through
foreclosure or otherwise) must obtain a Certificate of Need prior
to applying for and receiving a license to operate the Facility and
certification to receive Medicare and Medicaid payments (and its
successor programs) for patients having coverage thereunder
provided that no service or bed complement is changed.
Notwithstanding the foregoing, Lender acknowledges that the
Carolina Beach Facility is closed. NC I Borrower retains the
associated license/Certificate of Need for the Carolina Beach
Facility; provided, however, Lender acknowledges that the
license/Certificate of Need for the beds at the Carolina Beach
Facility is subject to a purchase and sale agreement with a third
party purchaser for the relocation of the beds to a facility of
such purchaser (the "Carolina
14
Beach Transfer"). NCI Borrower will maintain the Certificate of
Need, if applicable, and/or any required Permits so long as
necessary and NC I Borrower is able, until the Certificate of Need
application for the relocation of the beds by such purchaser is
resolved; provided, however, that NC I Borrower shall use its best
efforts to extend the Permits and facilitate said sale. NC I
Borrower agrees that it shall provide Lender with the net sales
proceeds from such sale.
3.7 Maintain Bed
Capacity . Except for the Carolina Beach Transfer, neither
Borrower nor Manager has granted to any third party the right to
reduce the number of licensed beds in the Facility or to apply for
approval to transfer the right to any or all of the licensed
Facility beds to any other location.
3.8 Medicare and Medicaid
Compliance . The Facility is in compliance with all
requirements for participation in Medicare and Medicaid, including
without limitation, the Medicare and Medicaid Patient Protection
Act of 1987. The Facility is in conformance in all material
respects with all insurance, reimbursement and cost reporting
requirements and has a current provider agreement which is in full
force and effect under Medicare and Medicaid.
3.9 Third Party
Payors . There is no threatened or pending revocation,
suspension, termination, probation, restriction, limitation, or
nonrenewal affecting Borrower, Manager or the Facility or 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 or Manager presently is subject. All
Medicare (if any), Medicaid (if any) and private insurance cost
reports and financial reports submitted by Borrower or Manager with
respect to the Facility are and will be materially accurate and
complete and have not been and will not be misleading in any
material respects. No cost reports which have been filed for the
Facility remain "open" or unsettled except as otherwise
disclosed.
3.10 Governmental
Proceedings and Notices . Neither Borrower nor Guarantor
nor Manager nor the Facility is currently the subject of any
proceeding by any governmental agency, and no notice of any
violation has been received from any federal, state or local
government or quasi-governmental body or agency or any
administrative or investigative body that would, directly or
indirectly, or with the passage of time:
(a) have
a material adverse impact on Borrower’s or Manager’s
ability to accept and/or retain residents at the Facility or result
in the imposition of a fine, a sanction, a lower rate certification
or a lower reimbursement rate for services rendered to eligible
residents against or in respect of the Facility;
(b) modify,
limit or annul or result in the transfer, suspension, revocation or
imposition of probationary use of any of the Permits; or
(c) affect
Borrower’s continued participation in the Medicare or
Medicaid programs or any other Third-Party Payors’ Programs,
or any successor programs thereto, at current rate
certifications.
3.11 Physical Plant
Standards . To the best of Borrower’s knowledge,
except for the repairs indicated in the Property Condition Reports
prepared for the benefit of Lender in
15
connection with the Loan as set forth on Exhibit A to the
Commitment, the Facility and the use thereof comply in all material
respects with all applicable local, state and federal building
codes, fire codes, health care, nursing/assisted living/senior
housing facility (as applicable) and other similar regulatory
requirements (the "Physical Plant Standards"), and except as set
forth on Schedule 3.11 attached hereto, no waivers of Physical
Plant Standards exist at the Facility.
3.12 Pledge of
Receivables . With the exception of the A/R Loan, Borrower
has not pledged its Accounts as collateral security for any loan or
Indebtedness other than, if applicable, the Loan.
3.13 Payment of Taxes and
Property Impositions . Borrower has filed all federal,
state, and local tax returns which it is required to file and has
paid, or made adequate provision for the payment of, all taxes and
assessments which are shown pursuant to such returns or are
required to be shown thereon, including, without limitation,
provider taxes which are due and owing as of the date hereof. All
such returns are complete and accurate in all respects. Borrower
has paid or made adequate provision for the payment of all
applicable water and sewer charges, ground rents (if applicable)
and Taxes (as defined in the Mortgage) with respect to the Land
and/or the Improvements which are due and owing as of the date
hereof.
3.14 Title to Mortgaged
Property . Borrower has good and marketable title to all of
the Mortgaged Property, subject to no lien, mortgage, pledge,
encroachment, zoning violation, or encumbrance, except Permitted
Encumbrances which do not materially interfere with the security
intended to be provided by the Mortgage or the current use or
operation of the Land and the Improvements or the current ability
of the Facility to generate net operating income sufficient to
service the Loan. All Improvements situated on the Land are
situated wholly within the boundaries of the Land.
3.15 Priority of
Mortgage . The Mortgage constitutes a valid first lien
against the real and personal property described therein, prior to
all other liens or encumbrances, including those which may
hereafter accrue, excepting only Permitted Encumbrances which do
not and will not materially and adversely affect (a) the
ability of Borrower to pay in full the principal of and interest on
the Note when due, (b) the security (and its value) intended
to be provided by the Mortgage or (c) the current use of the
Land and the Improvements.
3.16 Location of Chief
Executive Offices . The location of Borrower’s chief
executive office(s) are set forth on Exhibit "B" hereto.
Borrower has no place(s) of business other than the locations of
the Facility(ies) listed on Exhibit "B" .
3.17 Disclosure .
All information furnished or to be furnished by Borrower to Lender
in connection with the Loan or any of the Loan Documents is, or
will be at the time the same is furnished, accurate and correct in
all material respects and complete insofar as completeness may be
necessary to provide Lender with true and accurate knowledge of the
subject matter.
3.18 Trade Names .
Except as shown on Schedule 3.18, neither Borrower nor the
Facility, which operates under the trade name stated in the
Facility definition in Article I herein, has changed its name,
been known by any other name, or been a party to a merger,
reorganization or similar transaction within the last three
(3) years.
16
3.19 ERISA . As of
the date hereof and throughout the term of this Agreement,
(a) Borrower
is not an "employee benefit plan," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), subject to Title I of ERISA, and none of the assets of
Borrower constitute "plan assets" (within the meaning of Department
of Labor Regulation Section 2510.3-101) of one or more
such plans, and
(b) Borrower
is not a "governmental plan" within the meaning of
Section 3(32) of ERISA, and transactions by or with Borrower
are not be subject to state statutes regulating investments of, and
fiduciary obligations with respect to, governmental plans.
The
execution and delivery of the Loan Documents and the borrowing of
indebtedness hereunder do not constitute a non-exempt prohibited
transaction under Section 406 of ERISA or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code").
3.20 Ownership . The
ownership interests of the Persons comprising Borrower and each of
the respective interests in Borrower are correctly and accurately
set forth on Exhibit "C" hereto.
3.21 Compliance With
Applicable Laws . Except for the repairs described in
Section 3.11 above, the Facility and its operations and the Land
and Improvements comply in all material respects with, or are
permitted non-conforming uses under all covenants and restrictions
of record and applicable laws, ordinances, rules and regulations,
including, without limitation, the Americans with Disabilities Act
and the regulations thereunder, and all laws, ordinances, rules and
regulations relating to zoning, setback requirements and building
codes and there are no waivers of any building codes currently in
existence for the Facility.
3.22 Solvency .
Borrower is solvent for purposes of 11 U.S.C. § 548, and the
borrowing of the Loan will not render Borrower insolvent for
purposes of 11 U.S.C. § 548.
3.23 Management
Agreement . The Management Agreement is in full force and
effect, and there are no defaults (either monetarily or
non-monetarily) by Manager or Borrower thereunder.
3.24 Other
Indebtedness . With the exception of the A/R Loan, which
shall be subject to the terms of the Intercreditor Agreement,
Borrower has no outstanding Indebtedness, secured or unsecured,
direct or contingent (including any guaranties), other than
indebtedness which represents trade payables or accrued expenses
incurred in the ordinary course of business of owning and operating
the Mortgaged Property; no other debt incurred by Borrower after
the date hereof will be secured (senior, subordinate or pari
passu ) by the Mortgaged Property.
3.25 Other
Obligations . Borrower has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which Borrower is a party or by
which Borrower or the Mortgaged Property is otherwise bound, other
than obligations incurred in the ordinary course of the operation
of the Mortgaged Property and other than obligations under the
Mortgage, the other Loan Documents and the A/R Loan.
17
3.26 Fraudulent
Conveyances . Borrower (a) has not entered into this
Agreement or any of the other Loan Documents with the actual intent
to hinder, delay, or defraud any creditor and (b) has received
reasonably equivalent value in exchange for its obligations under
the Loan Documents. Giving effect to the transactions contemplated
by the Loan Documents to the best of Borrower’s knowledge,
the fair saleable value of Borrower’s assets exceeds and
will, immediately following the execution and delivery of the Loan
Documents, be greater than Borrower’s probable liabilities,
including the maximum amount of its contingent liabilities or its
debts as such debts become absolute and mature. Borrower’s
assets do not and, immediately following the execution and delivery
of the Loan Documents will not, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be
conducted. Borrower does not intend to, and does not believe that
it will, incur debts and liabilities (including, without
limitation, contingent liabilities and other commitments) beyond
its ability to pay such debts as they mature (taking into account
the timing and amounts to be payable on or in respect of
obligations of Borrower).
3.27 No Change in Facts or
Circumstances . All information in any application for the
Loan submitted to Lender (the "Loan Application") and in all
financial statements, rent rolls, reports, certificates and other
documents submitted in connection with the Loan Application are
complete and accurate in all material respects. There has been no
material adverse change in any fact or circumstance that would make
any such information incomplete or inaccurate.
3.28 No Illegal Activity as
Source of Funds . No portion of the Mortgaged Property has
been or will be purchased, improved, equipped or furnished with
proceeds of any illegal activity.
3.29 Compliance with
Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws . Borrower, and to the best of Borrower’s
knowledge, after having made diligent inquiry, (a) each Person
owning an interest in Borrower, (b) each Guarantor,
(c) Manager, and (d) each tenant at the Property:
(i) is not currently identified on OFAC List, and (ii) is
not a Person with whom a citizen of the United States is prohibited
to engage in transactions by any trade embargo, economic sanction,
or other prohibition of United States law, regulation, or Executive
Order of the President of the United States. Borrower has
implemented procedures, and will consistently apply those
procedures throughout the term of the Loan, to ensure the foregoing
representations and warranties remain true and correct during the
term of the Loan.
3.30 Fraud and Abuse
.
(a)
Anti-Kickback Law . After consultation with counsel
concerning the federal anti-kickback law (42 U.S.C.A. SEC.
1320a-7b(b)), neither Borrower nor its agent have offered or given
any remuneration or thing of value to any person to encourage
referral to the facility nor has Borrower or its agent solicited or
received any remuneration or thing of value in exchange for
Borrower’s agreement to make referrals or to purchase goods
or services for the Facility.
18
(b)
Relationships . No physician or other healthcare
practitioner has an ownership interest in, or financial
relationship with (other than for rendering services to patient
residents), the Borrower, Manager or the Facility.
(c)
Required Adjustments . With the exception of those
cost reports shown on Schedule 3.30, all cost report periods for
all Facility payors have been closed and settled, and all required
adjustments have been fully paid and/or implemented.
3.31 Compliance
Program . Borrower has adopted and is adhering to a
compliance program meeting the guidelines published by the Office
of the Inspector General on March 16, 2000, at 65 Fed. Reg.
14289. Borrower’s designated compliance officer is Bob
Rice.
ARTICLE IV
AFFIRMATIVE COVENANTS OF BORROWER
Each Borrower agrees with and
covenants unto Lender that until the Loan Obligations have been
paid in full, each Borrower shall:
4.1 Payment of
Loan/Performance of Loan Obligations . Duly and punctually
pay or cause to be paid the principal and interest of the Note in
accordance with its terms and duly and punctually pay and perform
or cause to be paid or performed all Loan Obligations hereunder and
under the other Loan Documents.
4.2 Maintenance of
Existence . Maintain its existence as a Delaware limited
liability company in good standing under the laws of the
jurisdiction of its organization or formation, and, in each
jurisdiction in which the character of the property owned by it or
in which the transaction of its business makes qualification
necessary, maintain good standing and qualification to do
business.
4.3 Maintenance of Single
Purpose Status . Maintain its existence as a Single Purpose
Entity.
4.4 Accrual and Payment of
Taxes . During each fiscal year, make accurate provision
for the payment in full of all current tax liabilities of all kinds
including, without limitation, federal and state income taxes,
franchise taxes, payroll taxes, provider taxes (to the extent
necessary to participate in and receive maximum funding pursuant to
Reimbursement Contracts), Taxes (as defined in the Mortgage), all
required withholding of income taxes of employees, all required old
age and unemployment contributions, and all required payments to
employee benefit plans, and pay the same when they become due.
4.5 Insurance .
Maintain, at its expense, the following insurance coverages and
policies with respect to the Mortgaged Property and the Facility,
which coverages and policies must be acceptable to Lender’s
insurance consultant in its reasonable discretion:
(a) Comprehensive
"all risk" insurance, including coverage for windstorms and hail,
in an amount equal to 100% of the full replacement cost of the
Facility, which
19
replacement cost shall be determined by the "Insurable Value" or
"Cost Approach to Value" reflected in the most recent Lender
approved appraisal for the Facility, without deduction for
depreciation. Such insurance shall also include (i) agreed
insurance amount endorsement waiving all co-insurance provisions,
and (ii) an "Ordinance or Law Coverage" endorsement if the
Facility or the use thereof shall constitute a legal non-conforming
structure or use.
(b) Commercial
general liability insurance against claims for sexual harassment
abuse of residents and/or patients, personal injury, bodily injury,
death or property damage, in or about the Facility to be on a
so-called "occurrence" basis for at least $1,000,000.00 per
occurrence and $3,000,000.00 in the aggregate with a $5,000,000.00
umbrella coverage.
(c) Professional
liability insurance against claims for personal injury, bodily
injury or death, in or about the Facility to be on a so-called
"occurrence" basis for at least $1,000,000.00 per occurrence and
$3,000,000.00 in the aggregate.
(d) Business
interruption income insurance for the Facility in an amount equal
to 100% of the net income plus carrying costs and extraordinary
expenses of the Facility for a period of twelve (12) months as
projected based on Borrower’s reasonable estimate thereof as
approved by Lender, containing a 90-day extended period of
indemnity endorsement, provided that any covered loss thereunder
shall be payable to Lender.
(e) Flood
Hazard insurance if any portion of the Improvements is located in a
"flood zone area," as identified in the Federal Register by the
Federal Emergency Management Agency as a 100-year flood zone or
"special flood hazard area" and in which flood insurance is
available. In lieu thereof, Lender will accept proof, satisfactory
to it in its sole discretion, that the Improvements are not within
the boundaries of a designated area.
(f) Workers’
compensation insurance, if applicable and required by state law,
subject to applicable state statutory limits, and employer’s
liability insurance with a limit of $1,000,000.00 per accident and
per disease per employee with respect to the Facility.
(g) Comprehensive
boiler and machinery insurance, including property damage coverage
and time element coverage in an amount equal to 100% of the full
replacement cost, without deduction for depreciation, of the
Facility housing the machinery, if steam boilers, pipes, turbines,
engines or any other pressure vessels are in operation with respect
to the Facility. Such insurance coverage shall include a "joint
loss" clause if such coverage is provided by an insurance carrier
other than that which provides the comprehensive "all risk"
insurance described above.
(h) During
the period of any construction and/or renovation of capital
improvements with respect to the Facility or any new construction
at the Facility, builder’s risk insurance for any
improvements under construction and/or renovation, including,
without limitation, costs of demolition and increased cost of
construction or renovation, in an amount equal the amount of the
general contract plus the value of any existing purchase money
financing for improvements and materials stored on or off the
Property, including "soft cost" coverage.
(i) If
the Facility is located in a seismically active area or an area
prone to geologic instability and mine subsidence, Lender may
require an inspection by a qualified
20
structural or geological engineer satisfactory to Lender, and at
Borrower’s expense. The Facility must be structurally and
geologically sound and capable of withstanding normal seismic
activity or geological movement. Lender reserves the right to
require earthquake insurance or Maximum Probable Loss insurance on
a case by case basis in amounts determined by Lender.
(j) Such
other insurance coverages as may be deemed necessary at any time
during the term of the Loan and as shall be provided within such
time periods as Lender may determine, in each case, in its
commercially reasonable discretion.
All insurance policies shall have
a term of not less than one year and shall be in the form and
amount and with deductibles as, from time to time, shall be
acceptable to Lender in its reasonable discretion. All such
policies shall provide for loss payable solely to Lender and shall
contain a standard "non-contributory mortgagee" endorsement or its
equivalent relating, among other things, to recovery by Lender
notwithstanding the negligent or willful acts or omissions of
Borrower and notwithstanding (i) occupancy or use of the
Facility for purposes more hazardous than those permitted by the
terms of such policy, (ii) any foreclosure or other action
taken by Lender pursuant to the Mortgage upon the occurrence of an
Event of Default thereunder, or (iii) any change in title or
ownership of the Facility.
All insurance policies must be
written by a licensed insurance carrier in the State in which the
Facility is located and such insurance carrier must have a
long-term senior debt rating of at least "A" by Standard and
Poor’s Rating Service; provided, that if the initial
principal balance of the Loan is in excess of $25,000,000.00, such
insurance carrier must have a long-term senior debt rating of at
least "AA" by Standard & Poor’s Rating Service.
All liability insurance policies
must name "Capmark Finance Inc., and its successors and/or assigns
as their interests may appear" as additional insureds, and all
property insurance policies must name "Capmark Finance Inc., and
its successors and/or assigns" as the named mortgage holder
entitled to all insurance proceeds. Lender shall have the right,
without Borrower’s consent, by notice to the insurance
company, to change the additional insured and named mortgagee
endorsements in connection with any sale of the Loan.
Notwithstanding anything contained herein, Borrower shall be
entitled to all insurance proceeds covered by and disbursed under
the above-referenced comprehensive all risk insurance policy
provided such proceeds do not exceed $25,000.00 per occurrence.
All insurance policies for the
above-required insurance must provide for thirty (30) days
prior written notice of cancellation to Lender.
Policies or binders, together with
evidence of the above required insurance on ACORD Form 27 or
its equivalent, must be submitted to Lender prior to setting the
interest rate on the Loan.
With respect to insurance policies
which require payment of premiums annually, not less than thirty
(30) days prior to the expiration dates of the insurance
policies obtained pursuant to this Agreement, Borrower shall pay
such amount, except to the extent Lender is escrowing sums therefor
pursuant to the Loan Documents. Not less than thirty (30) days
prior to the expiration dates of the insurance policies obtained
pursuant to this Agreement, originals or certified copies
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of renewals of such policies (or certificates evidencing such
renewals) bearing notations evidencing the payment of premiums or
accompanied by other evidence satisfactory to Lender of such
payment, which premiums shall not be paid by Borrower through or by
any financing arrangement, shall be delivered by Borrower to Lender
at the address set forth in Section 8.7 hereof and in
Exhibit "B" hereto. Borrower shall not carry separate
insurance, concurrent in kind or form or contributing in the event
of loss, with any insurance required under this Section 4.5.
If the limits of any policy required hereunder are reduced or
eliminated due to a covered loss, Borrower shall pay the additional
premium, if any, in order to have the original limits of insurance
reinstated, or Borrower shall purchase new insurance in the same
type and amount that existed immediately prior to the loss.
If Borrower fails to maintain and
deliver to Lender the original policies or certificates of
insurance required by this Agreement, Lender may, at its option,
procure such insurance and Borrower shall pay or, as the case may
be, reimburse Lender for, all premiums thereon promptly, upon
demand by Lender, with interest thereon at the Default Rate from
the date paid by Lender to the date of repayment and such sum shall
constitute a part of the Loan Obligations.
The insurance required by this
Agreement m
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