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Exhibit 10.67.09
LOAN AGREEMENT
THIS LOAN AGREEMENT (this “Agreement”) is made
as of August 15, 2007 , by and among the four
(4) Delaware limited liability companies or limited partnerships
listed on Schedule A attached hereto and made a part hereof
(together with their respective successors and assigns, the
“Borrowers”, and individually, a
“Borrower”), and CAPMARK BANK, a Utah industrial bank
(together with its successors and assigns,
“Lender”).
RECITALS
A. Borrowers
have requested a loan in the principal amount of
$26,200,000.00.
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” means any rights of Borrowers, if
any, arising from the operation of a Facility to payment for goods
sold or leased or for services rendered, not evidenced by an
Instrument, including, without limitation, (i) all accounts arising
from the operation of a Facility, (ii) all moneys and accounts
held by or for the benefit of Lender of this Agreement and under
the Mortgage, and (iii) all rights to payment from Medicare or
Medicaid programs, or similar state or federal programs, boards,
bureaus or agencies and rights to payment from residents, private
insurers, and others arising from the operation of the Facility,
including rights to payment pursuant to Reimbursement
Contracts. Accounts shall include the proceeds thereof
(whether cash or noncash, moveable or immoveable, tangible or
intangible) received from the sale, exchange, transfer, collection
or other disposition or substitution thereof.
“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.
“Allocated Loan Amount” shall mean the amounts
allocated to each Borrower and its respective Facility as set forth
on Exhibit F .
“Assignment of Leases and Rents” means that
certain Assignment of Leases and Rents by each Borrower in favor of
Lender.
1
“Assignment of Licenses” means, collectively,
those certain Assignment of Licenses, Permits and Contracts to and
for the benefit of Lender.
“Assumed Management Fees” means assumed
management fees of five percent (5%) of net patient revenues of the
Facility (after Medicaid and Medicare contractual
adjustments).
“Business Day” means a day, other than
Saturday or Sunday and legal holidays, when Lender is open for
business.
“Closing Date” means the date on which all or
any part of the Loan is disbursed by Lender to or for the benefit
of Borrower.
“Collateral” means, collectively, the
Borrowers’ interest in the Mortgaged Property, Improvements,
Equipment, Rents, Accounts, General Intangibles, Instruments,
Inventory, Money, Permits (to the full extent assignable),
Reimbursement Contracts, and all Proceeds, all whether now owned or
hereafter acquired, and including replacements, additions,
accessions, substitutions, and products thereof and thereto, and
all other property which is or hereafter may become subject to a
Lien in favor of Lender as security for any of the Loan
Obligations.
“Commitment Letter” means the commitment
letter issued by Lender to Borrowers dated of even date
herewith.
“Debt Service Coverage Ratio” means a ratio in
which the first number is the sum of “net pre-tax
income” of Borrowers from usual operations of the Facilities
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
(or such lesser period of time as shall have elapsed following the
closing of the Loan), plus Loan interest expense and non-cash
expenses or allowances for depreciation and amortization of the
Facilities for such period, to the extent the foregoing are
deducted in determining “net pre-tax income”,
less Assumed Management Fees for such period and the second
number is the interest due on the Loan for the applicable
period. In calculating “net pre-tax income,”
Extraordinary Income and Extraordinary Expenses shall be
excluded.
“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.
“Emeritus” means Emeritus Corporation, a
publicly-traded company organized under the laws of the State of
Washington.
“
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.
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“Equipment” means all beds, linens,
televisions, carpeting, telephones, cash registers, computers,
lamps, glassware, rehabilitation equipment, restaurant and kitchen
equipment, and other fixtures and equipment, if any, owned by
Borrowers located on, attached to or used or useful in connection
with any of the Property or the Facilities and all renewals and
replacements thereof and substitutions therefor; provided, however,
that with respect to any items which are leased for the benefit of
a Facility and not owned by a Borrower, the Equipment shall include
the leasehold interest only of such Borrower together with any
options to purchase any of said items and any additional or greater
rights with respect to such items which such Borrower may hereafter
acquire, but the foregoing shall not be construed to mean that such
leasing shall be permitted hereunder and under the other Loan
Documents.
“Event of Default” means any “Event of
Default” as defined in Article VII hereof.
“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.
“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
Borrowers’ business, and which would be treated as
extraordinary income or extraordinary expenses under
GAAP.
“Facilities” means the four (4) facilities
listed on Schedule B attached hereto and
made a part hereof located on the Land, as they may now or
hereafter exist, together with any other general or specialized
care facilities, if any (including any Alzheimer’s care unit,
subacute, and any other healthcare related facility), now or
hereafter operated on the Land, and, individually, a
“Facility”.
“GAAP” means, as in effect from time to time,
generally accepted accounting principles consistently applied as
promulgated by the American Institute of Certified Public
Accountants.
“General Intangibles” means all intangible
personal property of Borrowers arising out of or connected with the
Mortgaged Property or the Facilities and all renewals and
replacements thereof and substitutions therefor (other than
Accounts, Rents, Instruments, Inventory, Money, Permits, and
Reimbursement Contracts), including, without limitation, things in
action, contract rights and other rights to payment of
money.
“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 Emeritus.
“Guaranty Agreement” means that certain
Payment and Performance Guaranty Agreement of even date herewith
executed by Emeritus in favor of Lender.
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“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. Section 1251, et seq., and
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
and their state analogs.
“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 Borrower’s 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.
“Instruments” means all instruments, chattel
paper, documents or other writings obtained from or in connection
with the operation of the Mortgaged Property or the Facilities
(including, without limitation, all ledger sheets, computer records
and printouts, data bases, programs, books of account and files
relating thereto).
“Inventory” means all inventories of food,
beverages and other comestibles held by Borrowers for sale or use
at or from the Mortgaged Property or the Facilities, and soap,
paper supplies, medical supplies, drugs and all other such goods,
wares and merchandise held by Borrowers for sale to or for
consumption by guests, or residents of the Mortgaged Property or
the Facilities and all such other goods returned to or repossessed
by Borrowers.
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“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.
“Licensees” means those entities listed on
Schedule C attached hereto and made a part
hereof.
“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.
“Loan” means the loan in the principal sum of
$26,200,000.00 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, and the Subordination Agreement, together with
any and all other documents executed by Borrowers, Guarantor 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 those certain
Management Agreements or, as applicable, Master Lease and
Management Agreements between Manager and either a Borrower or, if
applicable, a Licensee, obligating Manager to operate and manage
the Facilities.
“Manager” means Emeritus for the Facilities
which are not located in Texas and ESC IV, L.P., a Washington
limited partnership, for the Facilities which are located in Texas,
and any successor manager of the Facilities approved by Lender in
writing.
“Master Lease” means collectively those
certain master leases captioned “Lease” by and between
Borrowers and Licensees, and entered into as of August 15, 2007, or
to be entered into upon the consummation of the merger between
Guarantor and Summerville Senior Living.
“Maturity Date” means September 1, 2009,
unless extended pursuant to the terms of the Note.
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“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.
“Money” means all monies, cash, rights to
deposit or savings accounts or other items of legal tender obtained
from or for use in connection with the operation of a
Facility.
“Mortgage” means collectively those certain
four (4) Mortgages or Deeds of Trust and Security Agreements
executed by Borrowers in favor of or for the benefit of Lender and
covering each Borrower’s respective Mortgaged
Property.
“Mortgaged Property” has the meaning given to
that term in the Mortgage.
“Note” means that certain Promissory Note of
even date herewith in the principal amount of the Loan payable by
Borrower to the order of Lender.
“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.
“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.
“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 Facility, 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.
“Permitted Encumbrances” has the meaning given
to that term in Section 5.2 hereof.
6
“Person” means an individual, partnership,
limited partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity
of whatever nature.
“Proceeds” means all proceeds (including
proceeds of insurance and condemnation) from the sale, exchange,
transfer, collection, loss, damage, disposition, substitution or
replacement of any of the Collateral.
“Reimbursement Contracts” means all
third-party reimbursement contracts relating to the Facility 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” means all rent and other payments of
whatever nature from time to time payable pursuant to leases of the
Mortgaged Property or the Facilities, or for retail space or other
space at the Mortgaged Property (including, without limitation,
rights to payment earned under leases for space in the Improvements
for the operation of ongoing retail businesses such as newsstands,
barbershops, beauty shops, physicians’ offices, pharmacies
and specialty shops).
“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).
“Subordination Agreement” means that
certain Subordination of Management Agreement of even date herewith
by and among Borrower, Manager, Licensee and Lender.
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.
7
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 . Each Borrower has
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 each
Borrower has made the covenants, representations, and warranties
herein and therein as a material inducement to Lender to make the
Loan.
2.2
Security for the Loan . The Loan will be
evidenced, secured and guaranteed by the Loan Documents and the
Collateral.
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 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.
2.4
Sale of Facility
. Lender has agreed that Borrowers may
enter purchase contracts for the sale of any of the Facilities
(each sale, a "Facility Sale" and collectively, the "Facility
Sales"). Contemporaneously with the closing of any
Facility Sale, Borrowers may obtain the release from the Mortgage
of the Facility which is being sold upon the satisfaction of all of
the following conditions:
8
(i) payment
to Lender of a release price equal to the lesser of (a) 100%
of the net Facility Sale proceeds attributable to the
to-be-released Facility after deduction of closing costs and
brokerage fees or (b) 110% of the outstanding balance,
including principal and all accrued and unpaid interest, of
the Allocated Loan Amount attributed to the to-be-released
Facility, but in no event less than the Allocated Loan Amount,
together with all accrued interest thereon;
(ii) the
release occurs in connection with the sale or other
disposition of such Facility in a bona fide arms-length
transaction with a Person other than a Borrower or an
Affiliate of a Borrower;
(iii) delivery
by Borrowers to Lender of a release of lien and related loan
documentation in a form appropriate and satisfactory to
Lender, which Lender shall execute and deliver to Borrower for
recordation which the parties agree may occur after the
applicable closing to the extent permitted by applicable
law.
(iv) no
Event of Default hereunder shall exist;
(v) Borrower
shall pay or cause to be paid all reasonable costs and
expenses incurred by Lender in connection with the release
transaction;
(vi) such
release shall be in compliance with all applicable legal
requirements, and will not impair or otherwise adversely
affect the liens, security interest and other rights of Lender
relating to the Facilities which will continue to be security
for the Loan after such sale; and
(vii) any
other customary conditions as may be reasonably requested by
Lender.
2.5
Extension of Maturity Date . The
Maturity Date may be extended pursuant to the terms and conditions
of the Note, including, without limitation, compliance with the
Debt Service Coverage Ratio as set forth therein, and as defined
herein.
ARTICLE III
BORROWER’S REPRESENTATIONS AND
WARRANTIES
To
induce Lender to enter into this Agreement, and to make the
Loan to Borrowers, each Borrower with respect to itself and
its Facility, 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 or Delaware limited partnership,
as the case may be, 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, specifically including, without limitation, the State in
which its applicable Facility is located.
9
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
action. 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
Due Execution and Enforcement
. Each of the Loan Documents to which Borrower is a
party constitutes a valid and legally binding obligation of
Borrower, enforceable in accordance with its respective terms
(except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium, or other laws
relating to the rights of creditors generally and by general
principles of equity) and does not violate, conflict with, or
constitute any default under any law, government regulation,
decree, judgment, Borrower’s articles of organization,
partnership agreement or operating agreement, as applicable, or any
other agreement or instrument binding upon Borrower.
3.5
Pending Matters .
(a)
Operations; Financial Condition . No action
or investigation is pending or, to the best of
Borrower’s knowledge, threatened 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 it 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 operation of the Facility in any
manner. None of the Improvements is subject to any
unrepaired casualty or other damage.
3.6
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.
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3.7
Compliance with Facility Laws
. Each Facility is duly licensed as an assisted living
facility and is currently operated at the licensed unit/bed
capacity set forth on Schedule B attached
hereto and made a part hereof under the applicable laws of the
state where the Facility is located. To Borrower’s
actual knowledge, Borrower or Manager has obtained all Permits for
the Facility, including, without limitation, the Certificate of
Need, 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 loan or
Indebtedness other than the Loan, (d) are held free from
restrictions or any encumbrance which would materially adversely
affect the use or operation of the Facility, and (e) except as
set forth on Schedule 3.7 attached hereto
and made a part hereof, are not provisional, probationary or
restricted in any way. Borrower, the Facility and, to
Borrower's actual knowledge, Manager are in compliance in all
material respects with the applicable provisions of assisted living
facility 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 current licensed unit and/or bed
capacity. To the extent required, Borrower is and, to
Borrower’s actual knowledge, Manager is in good standing with
all the respective agencies governing such applicable licenses and
program certification. Borrower and/or the Facility is
current in the payment of all so-called provider specific taxes or
other assessments, if applicable. Borrower will maintain
or cause to be maintained by Manager (without allowing to lapse)
the Certificate of Need, if applicable, and any required
Permits.
3.8
Maintain Unit Capacity . Neither
Borrower nor Manager has granted to any third party the right to
reduce the number of licensed beds or units in the Facility or to
apply for approval to transfer the right to any or all of the
licensed Facility units to any other location.
3.9
Medicare and Medicaid Compliance
. The Facilities described in Schedule
3.9 are certified to participate in
Medicaid. Except as set forth in Schedule
3.9 , none of the Facilities participates in any other
Third-Party Payors’ Programs (as defined in Section
3.10 below).
3.10
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 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 Facility remain “open” or unsettled
except as otherwise disclosed.
3.11
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:
11
(a) have
a material adverse impact on Borrower’s or
Manager’s ability to accept and/or retain residents 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;
(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.
3.12
Physical Plant Standards . 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 no waivers of Physical
Plant Standards exist at the Facility.
3.13
Pledge of Receivables . Borrower
has not pledged its Accounts as collateral security for any loan or
Indebtedness other than, if applicable, the Loan.
3.14
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.
3.15
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 (specifically including special exceptions reflected
in Lender’s title insurance policies insuring the Mortgage)
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.
3.16
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.
3.17
Location of Chief Executive Offices
. The location of Borrower’s chief executive
office is set forth on Exhibit “B”
hereto. Borrower has no place of business other than the
locations of the Facilities listed on Schedule
“B” .
12
3.18
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.
3.19
Trade Names . Borrower has not
changed its name, been known by any other name, or been a party to
a merger, reorganization or similar transaction within the last
five (5) years.
3.20
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”).
3.21
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.
3.22
Compliance with Applicable Laws
. The Facility and its operations and the Land and
Improvements comply in all material respects with 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.
!
3.23
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.
3.24
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.
3.25
Other Indebtedness . 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.
13
3.26
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 and the other Loan
Documents.
3.27
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) Borrowers together have
received reasonably equivalent value in exchange for their
collective obligations under the Loan Documents. Giving
effect to the transactions contemplated by the Loan Documents, 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).
3.28
Representations and Warranties
. Borrower agrees that its representations and
warranties and covenants contained herein are true and correct as
of the date hereof and shall survive the making of the Loan and the
assignment and delivery of the Loan to any participant of the
Loan.
3.29
Use of Loan Proceeds . The Loan
is primarily for commercial or business purposes and are not
primarily for personal, family or household purposes.
3.30
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.
3.31
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.
(b)
Relationships . No physician or other
healthcare practitioner has an ownership interest in, or
financial relationship with, Borrower, Manager or the
Facility.
14
(c)
Required Adjustments. All cost report
periods for all Facility payors have been closed and settled,
and all required adjustments have been fully paid and/or
implemented, if applicable.
3.32
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.
3.33
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 of 20% or more in Borrower and in the Single
Purpose Entity that is the managing member or general partner of
Borrower, (b) Guarantor, and (c) Manager:
(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.
ARTICLE IV
AFFIRMATIVE COVENANTS OF BORROWER
Each
Borrower agrees with and covenants unto Lender that until the
Loan Obligations have been paid in full, Borrower shall, or
shall cause the applicable Licensee to, with respect to such
Borrower’s Facility:
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 Borrower’s existence as a Delaware
limited liability company or Delaware limited partnership, as
applicable, 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.
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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 sole discretion:
(a) Comprehensive
“all risk” or “special” cause of loss
insurance, including coverage for windstorms and hail, in an
amount equal to 100% of the full replacement cost of the
Facility, which 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 $10,000,000.00 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 $5,000,000.00 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
eighteen (18) months as projected by Lender, containing a
180-day extended period of indemnity endorsement.
(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.
16
(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 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 sole
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 an admitted carrier
licensed 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 (including, but not limited to,
general liability, professional liability and any applicable
blanket and/or umbrella policies) must name “Capmark
Bank and its successors and/or assigns” as additional
insureds, and all property insurance policies must name
“Capmark Bank 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.
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 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. 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.
17
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 may, at the option of
Borrower, be effected by blanket and/or umbrella policies
issued to Borrower or to an Affiliate of Borrower covering the
Facility and the properties of such Affiliate; provided that,
in each case, the policies otherwise comply with the
provisions of this Agreement and allocate to the Facility,
from time to time, the coverage specified by this Agreement,
without possibility of reduction or coinsurance by reason of,
or damage to, any other property (real or personal) named
therein. If the insurance required by this
Agreement shall be effected by any such blanket or umbrella
policies, Borrower shall furnish to Lender original policies
or certified copies thereof, with schedules attached thereto
showing the amount of the insurance provided under such
policies which is applicable to the Facility.
Neither
Lender nor its agents or employees shall be liable for any
loss or damage insured by the insurance policies required to
be maintained under this Agreement; it being understood that
(a) Borrower shall look solely to its insurance company
for the recovery of such loss or damage, (b) such
insurance company shall have no rights of subrogation against
Lender, its agents or employees, and (c) Borrower shall
use its best efforts to procure from such insurance company a
waiver of subrogation rights against Lender. If,
however, such insurance policies do not provide for a waiver
of subrogation rights against Lender (whether because such a
waiver is unavailable or otherwise), then Borrower hereby
agrees, to the extent permitted by law and to the extent not
prohibited by such insurance policies, to waive its rights of
recovery, if any, against Lender, its agents and employees,
whether resulting from any damage to the Facility, any
liability claim in connection with the Facility or
otherwise. If any such insurance policy shall
prohibit Borrower from waiving such claims, then Borrower must
obtain from such insurance company a waiver of subrogation
rights against Lender.
Borrower
appoints Lender as Borrower’s attorney-in-fact, which
appointment shall be deemed irrevocable and coupled with an
interest, to cause the issuance of an endorsement of any
insurance policy to bring Borrower into compliance herewith
and, as limited above, at Lender’s sole option, to make
any claim for, receive payment for, and execute and endorse
any documents, checks or other instruments in payment for
loss, theft, or damage covered under any such insurance
policy; provided, however, that in no event will Lender be
liab
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