-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VxfLFB3jdf2SLbIIZJfHxgHIkxlutvqUzz05hMox9mRwFK9z3TOI4Uhg+pvCNdgt a1qZXx0LlrQsYhxPnP31eA== 0000950152-97-002699.txt : 19970409 0000950152-97-002699.hdr.sgml : 19970409 ACCESSION NUMBER: 0000950152-97-002699 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970328 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970408 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH CARE REIT INC /DE/ CENTRAL INDEX KEY: 0000766704 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 341096634 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08923 FILM NUMBER: 97576352 BUSINESS ADDRESS: STREET 1: ONE SEAGATE STE 1950 STREET 2: P O BOX 1475 CITY: TOLEDO STATE: OH ZIP: 43604 BUSINESS PHONE: 4192472800 8-K 1 HEALTH CARE REIT, INC. /8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): March 28, 1997 HEALTH CARE REIT, INC. (Exact name of registrant as specified in its charter) Delaware 1-8923 34-1096634 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) One SeaGate, Suite 1500, P.O. Box 1475, Toledo, Ohio 43603-1475 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area Code): 419-247-2800 The Exhibit Index is located on page 3. ITEM 5. OTHER EVENTS. On March 28, 1997, the Registrant and its subsidiaries entered into an unsecured Loan Agreement with twelve (12) banks, for which KeyBank National Association will act as administrative agent. Under the terms of the unsecured Loan Agreement, $175,000,000 will be made available to the Registrant and its subsidiaries on a revolving credit basis. Also on March 28, 1997, the collateral that secured the Registrant's $52,000,000 Senior Notes and $30,000,000 Senior Notes was released pursuant to Amended and Restated Note Purchase Agreements. 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired. None. (b) Pro Forma Financial Information. None. (c) Exhibits.
(10.1) Loan Agreement dated as of March 28, 1997 by and among Health Care REIT, Inc., its subsidiaries, the banks which are signatory thereto and KeyBank National Association, as Agent. (10.2) Amended and Restated Note Purchase Agreement - $52,000,000 Senior Notes (10.3) Amended and Restated Note Purchase Agreement - $30,000,000 Senior Notes
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. HEALTH CARE REIT, INC. /s/ George L. Chapman ---------------------------------- George L. Chapman Its: Chairman of the Board, Chief Executive Officer and President Dated: April 8, 1997 -2- 3
EXHIBIT INDEX ------------- Designation Number Under Item 601 Exhibit of Reg. Number S-K Description - ------- -------- ----------- 10.1 10 Loan Agreement dated as of March 28, 1997 by and among Health Care REIT, Inc., its subsidiaries, the banks which are signatory thereto and KeyBank National Association, as Agent. 10.2 10 Amended and Restated Note Purchase Agreement - $52,000,000 Senior Notes 10.3 10 Amended and Restated Note Purchase Agreement - $30,000,000 Senior Notes
EX-10.1 2 EXHIBIT 10.1 1 Exhibit 10.1 ================================================================================ LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT FOR SUCH BANKS AND FLEET BANK, N.A., AS SYNDICATION AGENT MARCH 28, 1997 ================================================================================ 2
TABLE OF CONTENTS ----------------- PAGE ---- ARTICLE 1. DEFINITIONS Section 1.1 Defined Terms............................................................... 1 Section 1.2 GAAP........................................................................ 20 ARTICLE 2. REVOLVING CREDIT COMMITMENTS; LOANS Section 2.1 Loans....................................................................... 21 Section 2.2 Notices Relating to Loans................................................... 21 Section 2.3 Disbursement of Loan Proceeds............................................... 22 Section 2.4 Notes....................................................................... 22 Section 2.5 Repayment of Loans; Voluntary Changes in Commitment; Mandatory Repayments........................................ 22 Section 2.6 Interest.................................................................... 23 Section 2.7 Fees........................................................................ 25 Section 2.8 Use of Proceeds of Loans.................................................... 26 Section 2.9 Computations................................................................ 26 Section 2.10 Minimum Amounts of Borrowings, Conversions and Repayments................................................ 26 Section 2.11 Time and Method of Payments..................................................27 Section 2.12 Lending Offices............................................................. 27 Section 2.13 Several Obligations......................................................... 27 Section 2.14 Pro Rata Treatment Among Banks.............................................. 27 Section 2.15 Non-Receipt of Funds by the Agent........................................... 28 Section 2.16 Sharing of Payments and Set-Off Among Banks................................................... 28 Section 2.17 Conversions of Loans........................................................ 29 Section 2.18 Additional Costs; Capital Requirements...................................... 29 Section 2.19 Limitation on Types of Loans................................................ 31 Section 2.20 Illegality.................................................................. 32 Section 2.21 Certain Conversions pursuant to Sections 2.18 and 2.20................................................. 32 Section 2.22 Indemnification............................................................. 33 ARTICLE 3. REPRESENTATIONS AND WARRANTIES Section 3.1 Organization................................................................ 34 Section 3.2 Power, Authority, Consents.................................................. 34 Section 3.3 No Violation of Law or Agreements........................................... 35 Section 3.4 Due Execution, Validity, Enforceability............................................................. 35 Section 3.5 Title to Properties......................................................... 35 Section 3.6 Judgments, Actions, Proceedings............................................. 35 Section 3.7 No Defaults, Compliance With Laws........................................... 36 Section 3.8 Burdensome Documents........................................................ 36 Section 3.9 Financial Statements; Projections........................................... 36 Section 3.10 Tax Returns................................................................. 37 Section 3.11 Intangible Assets........................................................... 37 Section 3.12 Regulation U................................................................ 37 Section 3.13 Name Changes, Mergers, Acquisitions......................................... 38 Section 3.14 Full Disclosure............................................................. 38 Section 3.15 Licenses and Approvals...................................................... 38 Section 3.16 ERISA....................................................................... 38 Section 3.17 REIT Status................................................................. 39
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PAGE ---- ARTICLE 4. CONDITIONS TO THE LOANS Section 4.1 Conditions to Initial Loans................................................. 40 Section 4.2 Conditions to Subsequent Loans.............................................. 41 ARTICLE 5. DELIVERY OF FINANCIAL REPORTS DOCUMENTS AND OTHER INFORMATION Section 5.1 Annual Financial Statements................................................. 43 Section 5.2 Quarterly Financial Statements.............................................. 43 Section 5.3 Compliance Information...................................................... 44 Section 5.4 No Default Certificate...................................................... 44 Section 5.5 Certificate of Accountants'................................................. 44 Section 5.6 Borrowing Base Certificate.................................................. 44 Section 5.7 Business Plans and Projections.............................................. 45 Section 5.8 Quarterly Facility Reports.................................................. 45 Section 5.9 Accountants' Reports........................................................ 45 Section 5.10 Copies of Documents......................................................... 45 Section 5.11 Notices of Defaults......................................................... 46 Section 5.12 ERISA Notices and Requests.................................................. 46 Section 5.13 Additional Information...................................................... 46 ARTICLE 6. AFFIRMATIVE COVENANTS Section 6.1 Books and Records........................................................... 47 Section 6.2 Inspections and Audits...................................................... 47 Section 6.3 Maintenance and Repairs..................................................... 47 Section 6.4 Continuance of Business..................................................... 47 Section 6.5 Copies of Corporate Documents............................................... 48 Section 6.6 Perform Obligations......................................................... 48 Section 6.7 Notice of Litigation........................................................ 48 Section 6.8 Insurance................................................................... 48 Section 6.9 Financial Covenants......................................................... 49 Section 6.10 Notice of Certain Events.................................................... 49 Section 6.11 Comply with ERISA........................................................... 50 Section 6.12 Environmental Compliance.................................................... 50 Section 6.13 Maintenance of REIT Status.................................................. 50 Section 6.14 Long-Term Care Facilities................................................... 50 Section 6.15 Behavioral Care Facilities.................................................. 50 Section 6.16 Operator Concentration...................................................... 50 ARTICLE 7. NEGATIVE COVENANTS Section 7.1 Indebtedness................................................................ 51 Section 7.2 Liens....................................................................... 51 Section 7.3 Guaranties.................................................................. 52 Section 7.4 Mergers, Acquisitions....................................................... 52 Section 7.5 Distributions............................................................... 53 Section 7.6 Changes in Structure........................................................ 53 Section 7.7 Disposition of Assets....................................................... 53 Section 7.8 Investments................................................................. 53 Section 7.9 Fiscal Year................................................................. 55 Section 7.10 ERISA Obligations........................................................... 55
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PAGE ---- Section 7.11 Capital Expenditures........................................................ 55 Section 7.12 Rental Obligations.......................................................... 55 Section 7.13 Use of Cash................................................................. 56 Section 7.14 Transactions with Affiliates................................................ 56 Section 7.15 Hazardous Material.......................................................... 56 Section 7.16 Construction Investments.................................................... 57 ARTICLE 8. EVENTS OF DEFAULT Section 8.1 Payments.................................................................... 58 Section 8.2 Certain Covenants........................................................... 58 Section 8.3 Other Covenants............................................................. 58 Section 8.4 Other Defaults.............................................................. 58 Section 8.5 Representations and Warranties.............................................. 59 Section 8.6 Bankruptcy. . ............................................................. 59 Section 8.7 Judgments................................................................... 60 Section 8.8 ERISA....................................................................... 60 Section 8.9 Material Adverse Effect..................................................... 60 Section 8.10 Ownership................................................................... 60 Section 8.11 REIT Status, Etc............................................................ 61 Section 8.12 Management.................................................................. 61 Section 8.13 Environmental............................................................... 61 Section 8.14 Default by Operator......................................................... 61 ARTICLE 9. THE AGENT Section 9.1 Appointment, Powers and Immunities.......................................... 62 Section 9.2 Reliance by Agent........................................................... 63 Section 9.3 Events of Default........................................................... 63 Section 9.4 Rights as a Bank............................................................ 63 Section 9.5 Indemnification............................................................. 63 Section 9.6 Non-Reliance on Agent and other Banks....................................... 64 Section 9.7 Failure to Act.............................................................. 64 Section 9.8 Resignation or Removal of Agent............................................. 64 Section 9.9 Sharing of Payments......................................................... 65 ARTICLE 10. MISCELLANEOUS PROVISIONS Section 10.1 Fees and Expenses; Indemnity................................................ 67 Section 10.2 Taxes....................................................................... 68 Section 10.3 Payments.................................................................... 69 Section 10.4 Survival of Agreements and Representations; Construction............................................. 69 Section 10.5 Lien on and Set-off of Deposits............................................. 70 Section 10.6 Modifications, Consents and Waivers; Entire Agreement ................................................ 70 Section 10.7 Remedies Cumulative; Counterclaims.......................................... 71 Section 10.8 Further Assurances.......................................................... 71 Section 10.9 Notices..................................................................... 72 Section 10.10 Counterparts................................................................ 73 Section 10.11 Severability................................................................ 73
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PAGE Section 10.12 Binding Effect; No Assignment or Delegation by Borrowers................................................73 Section 10.13 Assignments and Participations by Banks..................................................................74 Section 10.14 Delivery of Tax Forms.......................................................76 Section 10.15 Governing Law; Consent to Juris- diction; Waiver of Trial by Jury..........................................77 Section 10.16 Syndication Agent...........................................................78
EXHIBITS - -------- 1 List of Borrowers A Form of Note B Form of Assignment and Acceptance C Form of Borrowing Base Certificate D Form of Compliance Certificate SCHEDULES - --------- 3.1 States of Incorporation and Qualification, and Capitalization of Borrowers and Subsidiaries 3.2 Consents, Waivers, Approvals; Violation of Agreements 3.6 Judgments, Actions, Proceedings 3.7 Defaults; Compliance with Laws, Regulations, Agreements 3.8 Burdensome Documents 3.13 Name Changes, Mergers, Acquisitions 3.16 Employee Benefit Plans 5.8 Form of Quarterly Facility Report 7.1 Permitted Indebtedness and Guarantees 7.2 Permitted Security Interests, Liens and Encumbrances 7.11 Permitted Capital Expenditures -iv- 6 LOAN AGREEMENT AGREEMENT, made this 28th day of March, 1997, by and among: HEALTH CARE REIT, INC., a Delaware corporation and each of the other corporations listed on Exhibit 1 annexed hereto (individually, a "BORROWER" and collectively, the "BORROWERS"); The Banks that have executed the signature pages hereto (individually, a "BANK" and collectively, the "BANKS"); and KEYBANK NATIONAL ASSOCIATION, a national banking association, as Agent for the Banks (in such capacity, together with its successors in such capacity, the "AGENT"); W I T N E S S E T H: WHEREAS, the Borrowers wish to obtain a joint and several revolving credit facility from the Banks in the aggregate principal amount of up to One Hundred Seventy-Five Million ($175,000,000) Dollars, and the Banks are willing to provide such revolving credit facility to the Borrowers in an aggregate principal amount of up to such sum on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS. SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings: "ADDITIONAL COSTS" - as defined in subsection 2.18(b) hereof. "AFFECTED LOANS" - as defined in Section 2.21 hereof. "AFFECTED TYPE" - as defined in Section 2.21 hereof. "AFFILIATE" - as to any Person, any other Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), PROVIDED THAT, in any event: (a) any Person that owns directly or indirectly ten (10%) percent or more of the securities having ordinary voting power for the election of -1- 7 directors or other governing body of a corporation or ten (10%) percent or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person; and (b) each ten (10%) percent or more shareholder, each director and executive officer of any Borrower shall be deemed to be an Affiliate of such Borrower. "AGENCY FEE" - as defined in subsection 2.7(c) hereof. "ALTERNATE BASE RATE" - for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16th of 1%) equal to the greater of (a) the Base Rate in effect on such day, and (b) 0.5% plus the Federal Funds Rate in effect on such day. "ALTERNATE APPLICABLE MARGIN" - as at any date of determination, with respect to LIBOR Loans, the applicable percentage set forth below based upon the Ratings in effect on such date:
Any two of the following Ratings: BBB+ or higher by S&P Baa1 or higher by Moody's BBB+ or higher by D&P .75% Any two of the following Ratings: BBB by S&P Baa2 by Moody's BBB by D&P 1.0% Any two of the following Ratings: BBB- by S&P Baa3 by Moody's BBB- by D&P 1.125%
If any Rating shall be changed (other than as a result of a change in the rating system of the applicable Rating Agency), such change shall be effective as of the date on which it is first announced by the Rating Agency making such change. If the rating system of any Rating Agency shall change, the parties hereto shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system. "APPLICABLE MARGIN" - as at the last date of any fiscal quarter, with respect to LIBOR Loans, the applicable percentage set forth below opposite the ratio of Funded Indebtedness to Tangible Net Worth as at such date, with respect to HCRI on a consolidated basis: -2- 8
RATIO OF FUNDED INDEBTEDNESS APPLICABLE MARGIN TO TANGIBLE NET WORTH FOR LIBOR LOANS ---------------------------- ------------------ Greater than 1.0:1.0 1.5% Less than or equal to 1.0:1.0 but greater than 0.8:1.0 1.375% Less than or equal to 0.8:1.0 but greater than 0.6:1.0 1.25% Less than or equal to 0.6:1.0 but greater than or equal to 0.4:1.0 1.125% Less than 0.4:1.0 1.0%
The determination of the applicable percentage pursuant to the table set forth above shall be made on a quarterly basis based on an examination of the financial statements delivered pursuant to and in compliance with Section 5.1 or Section 5.2 hereof, which financial statements, whether annual or quarterly, shall indicate that there exists no Default or Event of Default hereunder. Each determination of the Applicable Margin shall be effective as of the first day of the calendar month following the date on which the financial statements on which such determination was based were received by the Agent. In the event that financial statements for the full fiscal quarter ending on such date of determination either: (i) have not been delivered to the Agent in compliance with Section 5.1 or 5.2 hereof, or (ii) if delivered, do not comply in form or substance with Section 5.1 or 5.2 hereof (in the reasonable judgment of the Agent), then the Agent may determine, in its reasonable judgment, the ratio referred to above that would have been in effect as at such date, and, consequently, the Applicable Margin in effect for the period commencing on such date. "APPRAISAL" - an appraisal providing an assessment of the fair market value of a Property (whether appraised on a stand-alone basis or "in bulk" together with similar Properties) which is independently and impartially prepared by an MAI appraiser having substantial experience in the appraisal of health care facilities and conforming to Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation. -3- 9 "APPRAISED VALUE" - with respect to any Facility, the value of such Facility reflected in the most recent Appraisal prepared with respect to such Facility. "ARRANGEMENT FEE" - as defined in subsection 2.7(c) hereof. "ASSESSMENT RATE" - at any time, the rate (rounded upwards, if necessary, to the nearest 1/100 of one (1%) percent) then charged by the Federal Deposit Insurance Corporation (or any successor) to the Reference Bank for deposit insurance for Dollar time deposits with the Reference Bank at the Principal Office as determined by the Reference Bank. "ASSIGNMENT AND ACCEPTANCE" - an agreement in the form of Exhibit B hereto. "BALLOON PAYMENTS" - as of any date as of which the amount thereof shall be determined, with respect to HCRI on a consolidated basis, an amount equal to (x) its aggregate obligation to make payments of principal in respect of Indebtedness having a maturity during the immediately succeeding six (6) month period, less (y) the sum of Cash and the total unused availability under this Agreement; provided, however, any Indebtedness with respect to which HCRI (or any of its Subsidiaries) has received a commitment for the renewal or other refinancing of such Indebtedness shall not be included in the computation of Balloon Payments and provided, further, if the calculation of the amount of Balloon Payments results in a negative number, then the amount thereof shall be deemed to be zero (0). "BASE RATE" - the interest rate established from time to time by Key as its base rate at the Principal Office. Notwithstanding the foregoing, the Borrowers acknowledge that Key may regularly make domestic commercial loans at rates of interest less than the rate of interest referred to in the preceding sentence. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. "BASE RATE LOANS" - Loans that bear interest at a rate based upon the Alternate Base Rate. "BORROWING BASE" - with respect to the Borrowers on a combined basis, as of any date as of which the amount thereof shall be determined, an amount equal to (x) the sum of (i) 66-2/3% of Eligible Healthcare Assets plus (ii) Cash on hand as of such date, MINUS, without duplication (y) the sum of: (i) unsecured Indebtedness as of such date, (ii) current maturities of secured Indebtedness as of such date, and (iii) Funded Indebtedness as of such date which is supported by a "guarantee(s)" (as permitted by subsection 7.3(ii) hereof) but only if the Facility with respect to which such guarantee is issued has a Fixed Charge Coverage of less than 1.25 to 1.00. -4- 10 "BORROWING BASE CERTIFICATE" - a certificate certified and executed by the chief executive officer or chief financial officer of HCRI substantially in the form annexed hereto as Exhibit C. "BORROWING NOTICE" - as defined in Section 2.2 hereof. "BUSINESS DAY" - any day other than Saturday, Sunday or any other day on which commercial banks in the States of Ohio or New York are authorized or required to close under the laws of such States. "CAPITAL EXPENDITURES" - for any period, the aggregate amount of all payments made or to be made during such period by any Person directly or indirectly for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment that, in accordance with GAAP, would be added as a debit to the fixed asset account of such Person, including, without limitation, all amounts paid or payable during such period with respect to Capitalized Lease Obligations and interest that are required to be capitalized in accordance with GAAP. "CAPITALIZED LEASE" - any lease, the obligations to pay rent or other amounts under which constitute Capitalized Lease Obligations. "CAPITALIZED LEASE OBLIGATIONS" - as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "CASH" - as to any Person, such Person's cash and cash equivalents, as defined in accordance with GAAP consistently applied. "CERCLA" - the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. ss.9601, et seq. "CODE" - the Internal Revenue Code of 1986, as it may be amended from time to time, and the regulations promulgated thereunder. "COMMITMENT FEE" - as defined in subsection 2.7(b) hereof. -5- 11 "COMMITMENT FEE PERCENTAGE" - as at the last day of any fiscal quarter, the applicable percentage set forth below opposite the ratio of Funded Indebtedness to Tangible Net Worth as at such date of determination, with respect to HCRI on a consolidated basis:
RATIO OF FUNDED INDEBTEDNESS APPLICABLE COMMITMENT TO TANGIBLE NET WORTH FEE PERCENTAGE ---------------------------- --------------------- Greater than 0.8:1.0 .375% Less than or equal to 0.8:1.0 but greater than or equal to 0.4:1.0 .25% Less than 0.4:1.0 .20%
The determination of the applicable percentage pursuant to the table set forth above shall be made on a quarterly basis based on an examination of the financial statements delivered pursuant to and in compliance with Section 5.1 or Section 5.2 hereof, which financial statements, whether annual or quarterly, shall indicate that there exists no Default or Event of Default hereunder. Each determination of the Commitment Fee Percentage shall be effective as of the first day of the calendar month following the date on which the financial statements on which such determination was based were received by the Agent. In the event that financial statements for the full fiscal quarter ending on such date of determination either: (i) have not been delivered to the Agent in compliance with Section 5.1 or 5.2 hereof, or (ii) if delivered, do not comply in form or substance with Section 5.1 or 5.2 hereof (in the reasonable judgement of the Agent), then the Agent may determine, in its reasonable judgment, the ratio referred to above that would have been in effect as at such date, and, consequently, the Commitment Fee Percentage in effect for the period commencing on such date. Notwithstanding the foregoing, in the event the Borrowers elect the pricing grid based on the Alternate Applicable Margin as set forth in subsection 2.6(a)(ii) hereof, commencing on the day the Alternate Applicable Margin becomes effective and continuing at all times thereafter so long as the Alternate Applicable Margin is in effect, the Commitment Fee Percentage shall be equal to .20%. In the event that HCRI either loses its investment grade Rating or any two Rating Agencies determine that its Rating falls below BBB- or its equivalent, then the Commitment Fee Percentage shall immediately be determined in accordance with the table set forth above for the duration of the Credit Period. -6- 12 "COMPLIANCE CERTIFICATE" - a certificate in the form of Exhibit D annexed hereto, executed by the chief executive officer or chief financial officer of HCRI to the effect that: (a) as of the effective date of the certificate, no Default or Event of Default under this Agreement exists or would exist after giving effect to the action intended to be taken by the Borrowers as described in such certificate, including, without limitation, that the covenants set forth in Section 6.9 hereof would not be breached after giving effect to such action, together with a calculation in reasonable detail, and in form and substance satisfactory to the Agent, of such compliance, and (b) the representations and warranties contained in Article 3 hereof are true and with the same effect as though such representations and warranties were made on the date of such certificate, except for changes in the ordinary course of business none of which, either singly or in the aggregate, have had a Material Adverse Effect. "CONSTRUCTION INVESTMENTS" - financing extended by HCRI with respect to a Facility which is under construction i.e., has not received a certificate of occupancy and the Borrower(s) conditions for conversion to permanent financing for the Facility have not been satisfied. "CONTROLLED GROUP" - all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with HCRI, are treated as a single employer under Section 414(b), 414(c) or 414(m) of the Code and Section 4001(a)(2) of ERISA. "CREDIT PERIOD" - the period commencing on the date of this Agreement and ending on the Revolving Credit Commitment Termination Date. "D&P" - Duff & Phelps. "DEBT INSTRUMENT" - as defined in subsection 8.4(a) hereof. "DEFAULT" - an event which with notice or lapse of time, or both, would constitute an Event of Default. "DISPOSITION" - the sale, lease, conveyance, transfer or other disposition of any Facility (whether in one or a series of transactions), including accounts and notes receivable (with or without recourse) and sale-leaseback transactions. "DOLLARS" and "$" - lawful money of the United States of America. -7- 13 "EBITDA" - for any period, with respect to HCRI on a consolidated basis, determined in accordance with GAAP, the sum of net income (or net loss) for such period plus, the sum of all amounts treated as expenses for: (a) interest, (b) depreciation, (c) amortization, and (d) all accrued taxes on or measured by income to the extent included in the determination of such net income (or net loss); provided, however, that net income (or net loss) shall be computed without giving effect to extraordinary losses or gains. "EBITDAR" - for any period, with respect to any Facility, pre-tax net income PLUS Operator Interest Expense, Mortgage Expense (but excluding therefrom any amounts relating to principal), Lease Rental Expense, depreciation, amortization and management fees as reported by the Operator less an imputed management fee equal to five (5%) percent of the Facility's net revenues; provided, however, that net income (or net loss) shall be computed without giving effect to extraordinary losses or gains. "ELIGIBLE ASSIGNEE" - a commercial bank or other financial institution having a combined capital and surplus of at least One Hundred Million ($100,000,000) Dollars. "ELIGIBLE HEALTHCARE ASSETS" - as of any date as of which the amount thereof is to be determined, an amount equal to the sum of: (i) the lesser of the Appraised Value or purchase price of each Facility owned entirely by a Borrower and leased to an Operator; plus (ii) the lesser of the Appraised Value of any Facility encumbered by a Mortgage or the outstanding principal amount of the Mortgage which encumbers any such Facility; provided, however, there shall be EXCLUDED from the calculation of Eligible Healthcare Assets: (a) any Facility which has a Fixed Charge Coverage of less than 1.10 to 1.00; (b) any Investment which is delinquent for thirty (30) days or more in payments to the Borrowers; (c) any Facility which is under construction (i.e. has not received a certificate of occupancy); and (d) any Facility which is subject to any Lien other than a Permitted Lien or a Mortgage referred to in clause (ii) above. -8- 14 Notwithstanding clause (a) above: (x) with respect to Pooled Facilities comprised of three (3) or more properties, any individual Facility which has a Fixed Charge Coverage of less than 1.10 to 1.00 may be included in the computation of Eligible Healthcare Assets if (1) the combined Fixed Charge Coverage of the Pooled Facilities of which such Facility is a part is greater than or equal to 1.00 to 1.00, and (2) each individual Facility which is a part of such Pooled Facilities has a Fixed Charge Coverage of not less than .70 to 1.00; (y) with respect to Pooled Facilities comprised of two (2) properties, any individual Facility which has a Fixed Charge Coverage of less than 1.10 to 1.00 may be included in the computation of Eligible Healthcare Assets if (1) the combined Fixed Charge Coverage of the Pooled Facilities of which such Facility is a part is greater than or equal to 1.10 to 1.00, and (2) each individual Facility which is a part of such Pooled Facilities has a Fixed Charge Coverage of not less than .70 to 1.00; and (z) any individual Facility which is part of an Operator's Pooled Facilities (regardless of the number of Facilities comprising such Pooled Facilities) that is in a stage of development or "fill-up" may be included as part of such Operator's Pooled Facilities if (1) such Facility has received its certificate of occupancy, and (2) such Facility has a Fixed Charge Coverage of not less than .70 to 1.00 (and for purposes of this clause (z)(2) only, in computing such Fixed Charge Coverage, EBITDAR shall be determined based on the immediately preceding fiscal quarter, multiplied by four (4)); provided, however, to remain an Eligible Healthcare Asset included in such Operator's Pooled Facilities, within fifteen (15) months of receiving its certificate of occupancy, such Facility must have a Fixed Charge Coverage of greater than or equal to 1.00 to 1.00. "EMPLOYEE BENEFIT PLAN" - any employee benefit plan within the meaning of Section 3(3) of ERISA which is subject to ERISA and (a) is maintained for employees of HCRI, or (b) with respect to which any Loan Party has any liability. "ENVIRONMENTAL LAWS AND REGULATIONS" - all federal, state and local environmental laws, regulations, ordinances, orders, judgments and decrees applicable to the Borrowers or any other Loan Party, or any of their respective assets or properties. -9- 15 "ENVIRONMENTAL LIABILITY" - any liability under any applicable Environmental Laws and Regulations for any disposal, release or threatened release of a hazardous substance pollutant or contaminant as those terms are defined under CERCLA, and any liability which would require a removal, remedial or response action, as those terms are defined under CERCLA, by any person or by any environmental regulatory body having jurisdiction over HCRI and its Subsidiaries and/or any liability arising under any Environmental Laws and Regulations for HCRI's or any Subsidiary's failure to comply with such laws and regulations, including without limitation, the failure to comply with or obtain any applicable environmental permit. "ENVIRONMENTAL PROCEEDING" - any judgment, action, proceeding or investigation pending before any court or governmental authority, with respect to HCRI or any Subsidiary and arising under or relating to any Environmental Laws and Regulations. "ERISA" - the Employee Retirement Income Security Act of 1974, as it may be amended from time to time, and the regulations promulgated thereunder. "ERISA AFFILIATE" - as applied to any Loan Party, any corporation, person or trade or business which is a member of a group which is under common control with any Loan Party, who together with any Loan Party, is treated as a single employer within the meaning of Section 414(b) - (o) of the Code and, if applicable, Section 4001(a)(14) and (b) of ERISA. "EVENT OF DEFAULT" - as defined in Article 8 hereof. "FACILITY" - a health care facility offering health care-related products and services, including but not limited to any acute care hospital, rehabilitation hospital, nursing facility, assisted living facility, retirement center, long-term care facility, or medical office building, and facilities and services directly related thereto. "FEDERAL FUNDS RATE" - for any day, the weighted average of the rates on overnight federal funds transactions with member banks of the Federal Reserve System arranged by federal funds brokers as published by the Federal Reserve Bank of New York for such day, or if such day is not a Business Day, for the next preceding Business Day (or, if such rate is not so published for any such day, the average rate charged to the Agent on such day on such transactions as reasonably determined by the Agent). "FEE(S)" - as defined in subsection 2.7(d) hereof. -10- 16 "FINANCIAL STATEMENTS" - with respect to HCRI, its audited Consolidated Balance Sheet as at December 31, 1995, together with the related audited Consolidated Income Statement and Statement of Changes in Cash Flow for the fiscal year then ended. "FIXED CHARGE COVERAGE" - with respect to any Facility, the ratio of: (x) EBITDAR, to (y) the sum of Operator Interest Expense (but excluding therefrom Operator Interest Expense, the payment of which is subordinated to the payment of Indebtedness owing to a Borrower(s)), Lease Rental Expense, Mortgage Expense and principal paid with respect to Indebtedness of Operators (other than Indebtedness relating to a Mortgage) which is not subordinated to the Borrower(s); all of the foregoing calculated as at any date of determination thereof by reference to the immediately preceding four (4) fiscal quarters and based upon the financial statements provided to HCRI by each Operator for the immediately preceding four (4) fiscal quarters of each Operator. "FLEET" - Fleet Bank, N.A., a national banking association, in its capacity as a Bank hereunder. "FUNDED INDEBTEDNESS" - as of any date of determination thereof, all Indebtedness of any Person, determined in accordance with GAAP, which by its terms matures more than one year after the date of calculation, and any such Indebtedness maturing within one year from such date which is renewable or extendable at the option of the obligor to a date more than one year from such date, including, in any event, the Revolving Credit Loans. "GAAP" - generally accepted accounting principles in the United States in effect from time to time. "HAZARDOUS MATERIALS" - any toxic chemical, hazardous substances, contaminants or pollutants, medical wastes, infectious wastes, or hazardous wastes. "HCRI" - Health Care REIT, Inc., a Delaware corporation. "HCRI'S FIXED COVERAGE RATIO" - as at the last day of any fiscal quarter, with respect to the immediately preceding four (4) fiscal quarters of the Borrowers ending on such date, the ratio of (x) EBITDA, to the sum of (y) Interest Expense, cash dividends and Balloon Payments. "HEALTHCARE ASSETS" - as of any date as of which the amount thereof is to be determined, the aggregate amount equal to the sum of: -11- 17 (i) the lesser of the Appraised Value or purchase price of each Facility owned entirely by a Borrower and leased to an Operator; plus (ii) the lesser of the Appraised Value of any Facility encumbered by a Mortgage or the outstanding principal amount of the Mortgage which encumbers any such Facility. "INDEBTEDNESS" - with respect to any Person, all: (a) liabilities or obligations, direct and contingent, which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person at the date as of which Indebtedness is to be determined, including, without limitation, contingent liabilities that in accordance with such principles, would be set forth in a specific Dollar amount on the liability side of such balance sheet, and Capitalized Lease Obligations of such Person; (b) liabilities or obligations of others for which such Person is directly or indirectly liable, by way of guaranty (whether by direct guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to purchase or advance or keep in funds or other agreement having the effect of a guaranty) or otherwise; (c) liabilities or obligations secured by Liens on any assets of such Person, whether or not such liabilities or obligations shall have been assumed by it; and (d) liabilities or obligations of such Person, direct or contingent, with respect to letters of credit issued for the account of such Person and bankers acceptances created for such Person. "INTEREST COVERAGE" - as at the last day of any fiscal quarter, the quotient, expressed as a percentage (which may be in excess of 100%), determined by dividing EBITDA by Interest Expense; all of the foregoing calculated by reference to the immediately preceding four (4) fiscal quarters of the Borrowers ending on such date of determination. "INTEREST EXPENSE" - for any period, on a combined basis, the sum of all interest paid or payable (excluding unamortized debt issuance costs) on all items of Indebtedness of the Borrowers outstanding at any time during such period. "INTEREST PERIOD" - with respect to any LIBOR Loan, each period commencing on the date such Loan is made or converted from a Loan or Loans of another Type into a LIBOR Loan, or the last day of the next preceding Interest Period with respect to such Loan, and ending on the same day 1, 2, 3 or 6 months thereafter, as the Borrowers may select as provided in Section 2.2 hereof, except that each such Interest Period which commences on the last LIBOR Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last LIBOR Business Day of the appropriate subsequent calendar month. -12- 18 Notwithstanding the foregoing: (a) each Interest Period that would otherwise end on a day which is not a LIBOR Business Day shall end on the next succeeding LIBOR Business Day (or, if such next succeeding LIBOR Business Day falls in the next succeeding calendar month, on the next preceding LIBOR Business Day); (b) no more than seven (7) Interest Periods for LIBOR Loans shall be in effect at the same time; (c) any Interest Period that commences before the Revolving Credit Commitment Termination Date shall end no later than the Revolving Credit Commitment Termination Date; and (d) notwithstanding clause (c) above, no Interest Period shall have a duration of less than one month. In the event that the Borrowers fail to select the duration of any Interest Period for any LIBOR Loan within the time period and otherwise as provided in Section 2.2 hereof, such LIBOR Loans will be automatically converted into a Base Rate Loan on the last day of the preceding Interest Period for such LIBOR Loan. "INTEREST RATE CONTRACTS" - interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance and other agreements or arrangements designed to provide protection against fluctuation in interest rates, in each case, in form and substance satisfactory to the Agent and, in each case, with counter-parties satisfactory to the Agent. "INVESTMENT" - a Facility or a Mortgage, individually or collectively, as the case may be. "KEY" - KeyBank National Association, a national banking association, in its capacity as a Bank hereunder. "LATEST BALANCE SHEET" - as defined in subsection 3.9(a) hereof. "LEASE RENTAL EXPENSE" - for any period and with respect to any Facility, the total amount payable during such period by the lessee of such Facility to any Borrower, including, without limitation, (a) base rent (as adjusted from time to time), plus (b) all incremental charges to which the Facility is subject under the lease relating thereto. "LENDING OFFICE" - with respect to each Bank, with respect to each Type of Loan, the Lending Office as designated for such Type of Loan below its name on the signature pages hereof or such other office of such Bank or of an affiliate of such Bank as it may from time to time specify to the Agent and the Borrowers as the office at which its Loans of such Type are to be made and maintained. "LEVERAGE RATIO" - as defined in subsection 6.9(a) hereof. -13- 19 "LEVERAGE TEST PERIOD" - as defined in subsection 6.9(a) hereof. "LIBOR BASE RATE" - with respect to any LIBOR Loan, for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of one (1%) percent) quoted by the Reference Bank at approximately 11:00 a.m. London time (or as soon thereafter as practicable) two (2) LIBOR Business Days prior to the first day of such Interest Period as the rate at which the Reference Bank is offered Dollar deposits in the London interbank market where the LIBOR and foreign currency and exchange operations of the Reference Bank are customarily conducted, having terms of one (1), two (2), three (3) or six (6) months and in an amount comparable to the principal amount of the LIBOR Loan to be made by the Banks to which such Interest Period relates. "LIBOR BUSINESS DAY" - a Business Day on which dealings in Dollar deposits are carried out in the London interbank market. "LIBOR LOAN(S)" - any Loan the interest on which is determined on the basis of rates referred to in the definition of "LIBOR Base Rate" in this Article 1. "LIBOR RATE" - for any LIBOR Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of one (1%) percent) determined by the Agent to be equal to: (a) the LIBOR Base Rate for such Loan for such Interest Period; DIVIDED By (b) one (1) MINUS the Reserve Requirement for such Loan for such Interest Period. The Agent shall use its best efforts to advise the Borrowers of the LIBOR Rate as soon as practicable after each change in the LIBOR Rate; PROVIDED, HOWEVER, that the failure of the Agent to so advise the Borrowers on any one or more occasions shall not affect the rights of the Banks or the Agent or the obligations of the Borrowers hereunder. "LIEN" - any mortgage, deed of trust, pledge, security interest, encumbrance, lien, claim or charge of any kind (including any agreement to give any of the foregoing), any conditional sale or other title retention agreement, any lease in the nature of any of the foregoing, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction. "LOAN(S)" - as defined in Section 2.1 hereof. Loans of different Types made or converted from Loans of other Types on the same day (or of the same Type but having different Interest Periods) shall be deemed to be separate Loans for all purposes of this Agreement. -14- 20 "LOAN DOCUMENTS" - this Agreement, the Notes, Interest Rate Contracts and all other documents executed and delivered in connection herewith or therewith, including all amendments, modifications and supplements of or to all such documents. "LOAN PARTY" - each Borrower and any other Person (other than the Banks and the Agent) which now or hereafter executes and delivers to any Bank or the Agent any Loan Document. "LONG-TERM CARE FACILITIES" - health care facilities comprised of nursing facilities, assisted living facilities and retirement facilities or combinations thereof. "MATERIAL ADVERSE EFFECT" - any fact or circumstance which (a) materially and adversely affects the business, operation, property or financial condition of the Borrowers taken as a whole, or (b) has a material adverse effect on the ability of the Borrowers to perform their respective obligations under this Agreement, the Notes or the other Loan Documents. "MOODY'S" - Moody's Investors Service, Inc. "MORTGAGE(S)" - mortgages of real property constituting a Facility for which any Borrower is the sole mortgagee. "MORTGAGE EXPENSE" - for any period and with respect to any Facility, the total amount payable during such period by the mortgagor of such Facility to any Borrower, including, without limitation, (a) interest and principal (as adjusted from time to time) plus (b) all incremental charges to which the Facility is subject under the mortgage. "MULTIEMPLOYER PLAN" - a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which any Loan Party or any ERISA Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years. "NET ISSUANCE PROCEEDS" - in respect of any issuance of Indebtedness or equity, the proceeds in Cash received by HCRI or any of its Subsidiaries upon or simultaneously with such issuance, net of direct costs of such issuance and any taxes paid or payable by the recipient of such proceeds. "NET PROCEEDS" - in respect of any Disposition, the proceeds in Cash received by any of the Borrowers upon or simultaneously with such Disposition, net of (i) direct costs of such Disposition, (ii) any taxes paid or payable by the recipient of such proceeds, and (iii) amounts required to be applied to repay any Indebtedness secured by a lien on the asset which is the subject of the Disposition. -15- 21 "NEW TYPE LOANS" - as defined in Section 2.21 hereof. "NOTE(S)" - as defined in subsection 2.4(a) hereof. "OBLIGATIONS" - collectively, all of the Indebtedness, of the Borrowers to the Banks and the Agent, whether now existing or hereafter arising, whether or not currently contemplated, including, without limitation, those arising under the Loan Documents. "OPERATOR" - (a) the lessee of any Facility owned or leased by a Borrower, and (b) the mortgagor of a Facility which is subject to a Mortgage to the extent that such entity controls the operation of the Facility. "OPERATOR INTEREST EXPENSE" - for any period, the sum of all interest on, and all amortization of debt discount and expenses on, all Indebtedness of an Operator outstanding at any time during such period but excluding any amounts which constitute Mortgage Expense. "ORIGINATION FEE" - as defined in subsection 2.7(a) hereof. "PAYOR" - as defined in Section 2.15 hereof. "PBGC" - Pension Benefit Guaranty Corporation. "PERMITTED LIENS" - as to any Person: (a) pledges or deposits by such Person under workers' compensation laws, unemployment insurance laws, social security laws, or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness of such Person), or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of Cash or United States Government Bonds to secure surety, appeal, performance or other similar bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent; (b) Liens imposed by law, such as carriers', warehousemen's, materialmen's and mechanics' liens, or Liens arising out of judgments or awards against such Person with respect to which such Person at the time shall currently be prosecuting an appeal or proceedings for review; (c) Liens for taxes not yet subject to penalties for non-payment and Liens for taxes the payment of which is being contested as permitted by Section 6.6 hereof; (d) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of, others for rights of way, highways and railroad crossings, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties; and (e) Liens incidental to the conduct of the business of such Person or to the ownership of such -16- 22 Person's property that were not incurred in connection with Indebtedness of such Person, all of which Liens referred to in this clause (e) do not in the aggregate materially impair the value of the properties to which they relate or materially impair their use in the operation of the business taken as a whole of such Person, and as to all the foregoing only to the extent arising and continuing in the ordinary course of business. "PERSON" - an individual, a corporation, a limited liability company, a partnership, a joint venture, a trust or unincorporated organization, a joint stock company or other similar organization, a government or any political subdivision thereof, a court, or any other legal entity, whether acting in an individual, fiduciary or other capacity. "PLAN" - at any time an employee pension benefit plan that is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either: (a) maintained by HCRI or any member of the Controlled Group for employees of HCRI, or by HCRI for any other member of such Controlled Group, or (b) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which HCRI or any member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "POOLED FACILITIES" - Facilities which are commonly owned or operated by one Operator or an Affiliate thereof (as selected by the Borrowers), and the debt financings or leases of which are cross-defaulted and, with respect to Mortgages, are cross-collateralized. "POST-DEFAULT RATE" - (a) in respect of any Loans, a rate per annum equal to: (i) if such Loans are Base Rate Loans, two (2%) percent above the Alternate Base Rate as in effect from time to time for Base Rate Loans, or (ii) if such Loans are LIBOR Loans, two (2%) percent above the rate of interest in effect thereon at the time of the Event of Default that resulted in the Post-Default Rate being instituted until the end of the then current Interest Period therefor and, thereafter, two (2%) above the Alternate Base Rate as in effect from time to time; and (b) in respect of other amounts payable by the Borrowers hereunder (other than interest), equal to two (2%) above the Alternate Base Rate as in effect from time to time. "PRINCIPAL OFFICE" - the principal office of Key presently located at 127 Public Square, Cleveland, Ohio 44114-1306. -17- 23 "PROJECTIONS" - the projections relating to HCRI and its Subsidiaries for the three (3) year period 1997-1999, including balance sheets, statements of operations and cash flows (together with related assumptions) as furnished by HCRI to the Agent. "PROPERTY" - any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "QUARTERLY DATES" - the first day of each June, September, December and March, the first of which shall be the first such day after the date of this Agreement, PROVIDED THAT, if any such date is not a LIBOR Business Day, the relevant Quarterly Date shall be the next succeeding LIBOR Business Day (or, if the next succeeding LIBOR Business Day falls in the next succeeding calendar month, then on the next preceding LIBOR Business Day). "RATINGS" - shall mean the ratings from time to time established by the Rating Agencies for senior, unsecured, noncredit enhanced long-term debt of HCRI. "RATINGS AGENCIES" - Moody's, S&P and D&P. "REFERENCE BANK" - a bank appearing on the display designated as page "LIBOR" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBOR page on that service for the purpose of displaying London interbank offered rates of major banks); provided, that, if no such offered rate shall appear on such display, "Reference Bank" shall mean a bank in the London interbank market as selected by the Agent. "REGULATION D" - Regulation D of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time. "REGULATORY CHANGE" - as to any Bank, any change after the date of this Agreement in United States federal, or state, or foreign, laws or regulations (including Regulation D and the laws or regulations that designate any assessment rate relating to certificates of deposit or otherwise (including the "Assessment Rate" if applicable to any Loan)) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks, including such Bank, of or under any United States federal, or state, or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. -18- 24 "REIT STATUS" - with respect to any Person, (a) the qualification of such Person as a real estate investment trust under Sections 856 through 860 of the Code, and (b) the applicability to such Person and its shareholders of the method of taxation provided for in Sections 857 et seq. of the Code. "REQUIRED BANKS" - at any time, any combination of Banks having at least 75% of the Total Revolving Credit Commitment hereunder, or if the Total Revolving Credit Commitment has been terminated at such time, any combination of Banks having at least 75% of the aggregate principal amount of Loans then outstanding; provided, however, regardless of the foregoing percentage, other than with respect to Section 9.8 hereof, Required Banks shall not be deemed constituted unless both Key and Fleet are part of the Required Banks. "REQUIRED PAYMENT" - as defined in Section 2.15 hereof. "RESERVE REQUIREMENT" - for any LIBOR Loans for any quarterly period (or, as the case may be, shorter period) as to which interest is payable hereunder, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding One Billion ($1,000,000,000) Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against: (a) any category of liabilities which includes deposits by references to which the LIBOR Rate for LIBOR Loans is to be determined as provided in the definition of "LIBOR Base Rate" in this Article 1, or (b) any category of extensions of credit or other assets which include LIBOR Loans. "REVOLVING CREDIT COMMITMENT" - as to each Bank, the obligation of such Bank to make Loans in the aggregate amount set forth opposite such Bank's name on the signature pages hereof under the caption "Revolving Credit Commitment" as such amount is subject to reduction in accordance with the terms hereof. "REVOLVING CREDIT COMMITMENT TERMINATION DATE" - March 28, 2000. "S&P" - Standard and Poor's Corporation. "SUBSIDIARY" - with respect to any Person, any corporation, partnership, joint venture or other entity, whether now existing or hereafter organized or acquired: (a) in the case of a corporation, of which a majority of the securities having ordinary voting power for the election of directors (other than -19- 25 securities having such power only by reason of the happening of a contingency) are at the time owned by such Person and/or one or more Subsidiaries of such Person, (b) in the case of a partnership or other entity, in which such Person is a general partner or of which a majority of the partnership or other equity interests are at the time owned by such Person and/or one or more of its Subsidiaries, or (c) in the case of a joint venture, in which such Person is a joint venturer and of which a majority of the ownership interests are at the time owned by such Person and/or one or more of its Subsidiaries. Unless the context otherwise requires, references in this Agreement to "Subsidiary" or "Subsidiaries" shall be deemed to be references to a Subsidiary or Subsidiaries of HCRI. "TANGIBLE NET WORTH" - the sum of capital surplus, earned surplus and capital stock, minus deferred charges, intangibles and treasury stock, all as determined in accordance with GAAP consistently applied. "TEST PERIOD" - as defined in subsection 2.6(d) hereof. "TOTAL REVOLVING CREDIT COMMITMENT" - the aggregate obligation of the Banks to make Loans hereunder up to the aggregate amount of One Hundred Seventy-Five Million ($175,000,000) Dollars. "TYPE" - refers to the characteristics of a Loan as a Base Rate Loan or a LIBOR Loan for a particular Interest Period. All Base Rate Loans are of the same Type. All LIBOR Loans with identical interest rates and Interest Periods are of the same Type. All other Loans are of different Types. Interest Periods are identical if they begin and end on the same days. "UNUSED COMMITMENT" - as at any date, for each Bank, the difference, if any, between: (a) the amount of such Bank's Revolving Credit Commitment as in effect on such date, and (b) the then aggregate outstanding principal amount of all Loans made by such Bank. SECTION 1.2 GAAP. Any accounting terms used in this Agreement that are not specifically defined herein shall have the meanings customarily given to them in accordance with GAAP as in effect on the date of this Agreement, except that references in Article 5 to such principles shall be deemed to refer to such principles as in effect on the date of the financial statements delivered pursuant thereto. -20- 26 ARTICLE 2. REVOLVING CREDIT COMMITMENTS; LOANS. SECTION 2.1 LOANS. Each Bank hereby severally agrees, on the terms and subject to the conditions of this Agreement, to make joint and several loans (individually a "LOAN" and, collectively, the "LOANS") to the Borrowers during the Credit Period to and including the Revolving Credit Commitment Termination Date in an aggregate principal amount at any one time outstanding up to, but not exceeding, the Revolving Credit Commitment of such Bank as then in effect; PROVIDED, HOWEVER, that the aggregate principal amount of Loans at any one time outstanding shall not exceed the lesser of (i) the Borrowing Base, or (ii) the Total Revolving Credit Commitment, as each is then in effect. Subject to the terms of this Agreement, including the borrowing limitation referred to above, during the Credit Period the Borrowers may borrow, repay and reborrow Loans. SECTION 2.2 NOTICES RELATING TO LOANS. The Borrowers shall give the Agent written notice of each termination or reduction of the Revolving Credit Commitments, each borrowing, conversion, repayment and prepayment of each Loan and of the duration of each Interest Period applicable to each LIBOR Loan (in each case, a "BORROWING NOTICE"). Each such written notice shall be irrevocable and shall be effective only if received by the Agent not later than 1:00 p.m.(Cleveland, Ohio time) on the date that is: (a) In the case of each notice of termination or reduction of the Revolving Credit Commitments, five (5) Business Days prior to the date of the related termination or reduction; (b) In the case of each notice of borrowing and repayment of, or conversion into, Base Rate Loans, one (1) Business Day prior to the date of the related borrowing or repayment or conversion; and (c) In the case of each notice of borrowing or repayment of, or conversion into, LIBOR Loans, or the duration of an Interest Period for LIBOR Loans, three (3) LIBOR Business Days prior to the date of the related borrowing, repayment or conversion or the first day of such Interest Period. Each such notice of termination or reduction shall specify the amount thereof. Each such notice of borrowing, conversion, repayment or prepayment shall specify the amount (subject to Section 2.1 hereof) and Type of Loans to be borrowed, converted, repaid or prepaid (and, in the case of a conversion, the Type of Loans to result from such conversion), the date of -21- 27 borrowing, conversion, repayment or prepayment (which shall be: (i) a Business Day in the case of each borrowing or repayment of Base Rate Loans, and (ii) a LIBOR Business Day in the case of each borrowing, prepayment, or repayment of LIBOR Loans and each conversion of or into a LIBOR Loan). Each such notice of the duration of an Interest Period shall specify the Loans to which such Interest Period is to relate. The Agent shall notify the Banks of the content of each such Borrowing Notice promptly after its receipt thereof. SECTION 2.3 DISBURSEMENT OF LOAN PROCEEDS. The Borrowers shall give the Agent notice of each borrowing hereunder as provided in Section 2.2 hereof and the Agent shall promptly notify the Banks thereof. Not later than 1:00 p.m.(Cleveland, Ohio time) on the date specified for each borrowing hereunder, each Bank shall transfer to the Agent, by wire transfer or otherwise, but in any event in immediately available funds, the amount of the Loan to be made by it on such date, and the Agent, upon its receipt thereof, upon compliance with the requirements of Section 4.1 and 4.2, as applicable, shall disburse such sum to the Borrowers by depositing the amount thereof in an account of the Borrowers, or any of them, designated by the Borrowers maintained with the Agent. SECTION 2.4 NOTES. (a) The Loans made by each Bank shall be evidenced by a single joint and several promissory note of the Borrowers in substantially the form of Exhibit A hereto (each, a "NOTE" and collectively, the "NOTES"). Each Note shall be dated the date hereof, shall be payable to the order of such Bank in a principal amount equal to such Bank's Revolving Credit Commitment as originally in effect, and shall otherwise be duly completed. The Notes shall be payable as provided in Sections 2.1 and 2.5 hereof. (b) Each Bank shall enter on a schedule with respect to its Note a notation with respect to each Loan made hereunder of: (i) the date and principal amount thereof and (ii) each payment and repayment of principal thereof. The failure of any Bank to make a notation on any such schedule as aforesaid shall not limit or otherwise affect the joint and several obligation of the Borrowers to repay the Loans in accordance with their respective terms as set forth herein. SECTION 2.5 PAYMENT OF LOANS; VOLUNTARY CHANGES IN COMMITMENT; MANDATORY REPAYMENTS. (a) All outstanding Loans shall be paid in full not later than the Revolving Credit Commitment Termination Date. -22- 28 (b) The Borrowers shall be entitled to terminate or reduce the Total Revolving Credit Commitment or repay the principal amount of the Loans provided that the Borrowers shall give notice of such termination, reduction or repayment to the Agent as provided in Section 2.2 hereof and that any repayment or partial reduction of the Total Revolving Credit Commitment shall be in the minimum aggregate amount of Three Million ($3,000,000) Dollars and multiples of One Million ($1,000,000) Dollars in excess thereof. Any such termination or reduction in the Total Revolving Credit Commitment shall be permanent and irrevocable. (c) Repayment of a LIBOR Loan on a day other than the last day of the relevant Interest Period relating thereto shall be subject to the provisions of Section 2.22 hereof; and all repayments of principal (whether mandatory or voluntary) shall be applied first to Base Rate Loans, then to the fewest number of Types of LIBOR Loans as possible. (d) Notwithstanding any other provision of this Agreement, the Loans shall be repaid as and when necessary to cause the aggregate principal amount of Loans outstanding not to exceed the Borrowing Base, as at any date of determination thereof. (e) If any of the Borrowers shall at any time agree to a Disposition, the Borrowers shall promptly notify the Agent of such Disposition and repay the Loans in an amount equal to the aggregate Net Proceeds of such Disposition immediately upon receipt thereof. (f) If HCRI (or any of its Subsidiaries) shall make any public or private issuance of Indebtedness or equity (other than in connection with any dividend reinvestment program(s)), HCRI shall promptly notify the Agent of such issuance and repay the Loans in an amount equal to the aggregate Net Issuance Proceeds of such issuance immediately upon receipt thereof. SECTION 2.6 INTEREST. (a) The Borrowers shall pay to the Agent for the account of each Bank interest on the unpaid principal amount of each Loan made by such Bank for the period commencing on the date of such Loan until such Loan shall be paid in full, at the following rates per annum: (i) During such periods that such Loan is a Base Rate Loan, the Alternate Base Rate; (ii) During such periods that such Loan is a LIBOR Loan, for each Interest Period relating thereto, the LIBOR Rate for such Loan for such Interest Period plus the Applicable Margin. -23- 29 Notwithstanding subsection 2.6(a)(ii) above, upon receipt of a Rating of at least BBB- or its equivalent from two Rating Agencies, the Borrowers may elect to change to the "Alternative Applicable Margin", i.e. the pricing grid based on such Rating as set forth in the definition of Alternate Applicable Margin in Article 1 hereof with respect to LIBOR Loans. In order to elect the Alternate Applicable Margin, the Borrowers shall give prior written notice to the Agent of the receipt of the Ratings (together with written evidence thereof), which election may be made only one time during the Credit Period. The Alternate Applicable Margin shall become effective upon receipt of such notice by the Agent and shall continue in effect at all times thereafter so long as the Ratings are in effect. In the event that HCRI either loses its investment grade Rating or any two Rating Agencies determine that its Rating falls below BBB- or its equivalent, then the pricing grid with respect to LIBOR Loans shall immediately revert back to and be determined in accordance with the table set forth in the definition of "Applicable Margin" in Article 1 hereof for the duration of the Credit Period. (b) Notwithstanding the foregoing, the Borrowers shall pay interest on any Loan or any installment thereof, and on any other amount payable by the Borrowers hereunder (to the extent permitted by law) which are not paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period commencing on the due date thereof until the same is paid in full at the applicable Post-Default Rate. (c) Except as provided in the next sentence, accrued interest on each Loan shall be payable: (i) in the case of each Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a LIBOR Loan, on the last day of each Interest Period for such Loan (and, if such Interest Period exceeds three months' duration, quarterly, commencing on the first quarterly anniversary of the first day of such Interest Period), and (iii) in the case of any Loan, upon the payment or repayment thereof or the conversion thereof into a Loan of another Type (but only on the principal so paid, repaid or converted); provided, however, this clause (iii) shall not apply in the case of a conversion of a Base Rate Loan into a LIBOR Loan. Interest that is payable at the Post-Default Rate shall be payable from time to time on demand of the Agent. Promptly after the establishment of any interest rate provided for herein or any change therein, the Agent will notify the Banks and the Borrowers thereof, PROVIDED THAT the failure of the Agent to so notify the Banks and the Borrowers shall not affect the obligations of the Borrowers hereunder or under any of the Notes in any respect. -24- 30 (d) In addition to the interest accruing under subsection (a) above, in the event the daily average amount of outstanding Loans exceeds 50% of the Total Revolving Credit Commitment for any period in excess of nine (9) consecutive months (each, a "TEST PERIOD"), the Borrowers shall pay additional interest on the daily average amount of the Loans outstanding during such Test Period at a rate per annum equal to one-eighth of one (.125%) percent. Such additional interest shall be payable to the Agent for the account of each Bank on the first Quarterly Date immediately succeeding the last day of each Test Period and if any such Quarterly Date would otherwise end after the Revolving Credit Commitment Termination Date, on the Revolving Credit Commitment Termination Date. (e) Anything in this Agreement or any of the Notes to the contrary notwithstanding, the obligation of the Borrowers to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to any Bank to the extent that such Bank's receipt thereof would not be permissible under the law or laws applicable to such Bank limiting rates of interest that may be charged or collected by such Bank. Any such payments of interest that are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrowers to such Bank on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to such Bank limiting rates of interest that may be charged or collected by such Bank. Such deferred interest shall not bear interest. SECTION 2.7 FEES. (a) Simultaneously with the execution and delivery of this Agreement, the Borrowers shall pay to the Agent, for the benefit of the Banks according to their respective Revolving Credit Commitments, a non-refundable origination fee (the "ORIGINATION FEE"), as set forth in a separate written agreement among the Borrowers and Fleet. (b) The Borrowers shall pay to the Agent for the account of the Banks, PRO RATA according to their respective Commitments, a commitment fee (the "COMMITMENT FEE") on the daily average amount of such Bank's Unused Commitment, for the period from the date hereof to and including the earlier of (i) the date such Bank's Revolving Credit Commitment is terminated, and (ii) the Revolving Credit Commitment Termination Date, at the rate per annum equal to the Commitment Fee Percentage from time to time in effect on the amount of the Total Revolving Credit Commitment. The accrued Commitment Fee shall be payable on the Quarterly Dates, and on the earlier of (i) the date the Total Revolving Credit Commitment is terminated, or (ii) the Revolving Credit Commitment Termination Date, and in the event the Borrowers reduce the Total Revolving Credit Commitment as provided in subsection 2.5(b) hereof, on the effective date of such reduction. -25- 31 (c) The Borrowers shall (i) pay to Key, for its own account, an annual agency fee (the "AGENCY FEE"), and (ii) pay to Fleet, for its own account, an arrangement fee (the "ARRANGEMENT FEE"), as set forth in a separate written agreement among the Borrowers and Fleet. (d) The Origination Fee, the Commitment Fee, the Agency Fee and the Arrangement Fee are hereinafter sometimes referred to individually as a "FEE" and collectively as the "FEES". SECTION 2.8 USE OF PROCEEDS OF LOANS. The proceeds of the Loans hereunder may be used by the Borrowers solely as follows: (a) up to $87,288,125.00 for the repayment in full of the outstanding principal amount of, and all accrued interest on, certain indebtedness of HCRI existing pursuant to the Amended and Restated Credit Agreement dated as of September 8, 1994 among HCRI, the bank's signatory thereto and National City Bank, as Agent, (b) to acquire Facilities, (c) to extend or acquire loans secured by Mortgages, (d) to finance Construction Investments, (e) for investments that are not prohibited under Section 7.8 hereof, and (f) for general working capital purposes. SECTION 2.9 COMPUTATIONS. Interest on all Loans and each Fee shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last) occurring in the period for which payable. SECTION 2.10 MINIMUM AMOUNTS OF BORROWINGS, CONVERSIONS AND REPAYMENTS. Except for borrowings, conversions and repayments that exhaust the full remaining amount of the Revolving Credit Commitments (in the case of borrowings) or result in the conversion or repayment of all Loans of a particular Type (in the case of conversions or repayments) or conversions made pursuant to Section 2.17, subsection 2.18(b) or Section 2.20 hereof, each borrowing from each Bank, each conversion of Loans of one Type into Loans of another Type and each repayment of principal of Loans hereunder shall be in a minimum amount of One Million ($1,000,000) Dollars, in the case of Base Rate Loans, and Three Million ($3,000,000) Dollars, in the case of LIBOR Loans, and in either case if in excess thereof, in integral multiples of One Hundred Thousand ($100,000) Dollars (borrowings, conversions and repayments of different Types of Loans at the same time hereunder to be deemed separate borrowings, conversions and repayments for purposes of the foregoing, one for each Type). The Agent and the Borrowers may make immaterial mutually convenient adjustments to the thresholds and multiples set forth above in respect of LIBOR Loans. -26- 32 SECTION 2.11 TIME AND METHOD OF PAYMENTS. --------------------------- All payments of principal, interest, Fees and other amounts (including indemnities) payable by the Borrowers hereunder shall be made in Dollars, in immediately available funds, to the Agent at the Principal Office not later than 11:00 a.m., Cleveland, Ohio time, on the date on which such payment shall become due (and the Agent or any Bank for whose account any such payment is to be made may, but shall not be obligated to, debit the amount of any such payment that is not made by such time to any ordinary deposit account of the Borrowers, or any of them, with the Agent or such Bank, as the case may be). Additional provisions relating to payments are set forth in Section 10.3 hereof. Each payment received by the Agent hereunder for the account of a Bank shall be paid promptly to such Bank, in like funds, for the account of such Bank's Lending Office for the Loan in respect of which such payment is made. SECTION 2.12 LENDING OFFICES. The Loans of each Type made by each Bank shall be made and maintained at such Bank's applicable Lending Office for Loans of such Type. SECTION 2.13 SEVERAL OBLIGATIONS. The failure of any Bank to make any Loan to be made by it on the date specified therefor shall not relieve the other Banks of their respective obligations to make their Loans on such date, but no Bank shall be responsible for the failure of the other Banks to make Loans to be made by such other Banks. SECTION 2.14 PRO RATA TREATMENT AMONG BANKS. Except as otherwise provided herein: (a) each borrowing from the Banks under Section 2.1 hereof will be made from the Banks and each payment of each Fee (other than the Agency Fee, the Arrangement Fee and the Origination Fee) shall be made for the account of the Banks PRO RATA according to the amount of their respective Unused Commitments; (b) each partial reduction of the Total Revolving Credit Commitment shall be applied to the Revolving Credit Commitments of the Banks PRO RATA according to each Bank's respective Revolving Credit Commitment; (c) each payment and repayment of principal of or interest on Loans will be made to the Agent for the account of the Banks PRO RATA in accordance with the respective unpaid principal amounts of the Loans held by such Banks; and (d) each conversion of Loans of a particular Type under Section 2.17 hereof (other than conversions provided for by Section 2.20 or 2.21 hereof) shall be made PRO RATA among the Banks holding Loans of such Type according to the respective principal amounts of such Loans held by such Banks. -27- 33 SECTION 2.15 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have been notified by a Bank or the Borrowers (the "PAYOR") prior to the date on which such Bank is to make payment to the Agent of the proceeds of a Loan to be made by it hereunder or the Borrowers are to make a payment to the Agent for the account of one or more of the Banks, as the case may be (such payment being herein called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Agent, the Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to the Agent, the recipient of such payment shall, on demand, repay to the Agent the amount made available to it together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal (i) when the recipient is a Bank, the Federal Funds Rate for such day, or (ii) the rate of interest applicable to such Loan (when the recipient is the Borrowers). SECTION 2.16 SHARING OF PAYMENTS AND SET-OFF AMONG BANKS. The Borrowers hereby agree that, in addition to (and without limitation of) any right of setoff, banker's lien or counterclaim a Bank may otherwise have, each Bank shall be entitled, at its option, to offset balances held by it at any of its offices against any principal of or interest on any of its Loans hereunder or any Fee payable to it, that is not paid when due (regardless of whether such balances are then due to the Borrowers), in which case it shall promptly notify the Borrowers and the Agent thereof, provided that its failure to give such notice shall not affect the validity thereof. If a Bank shall effect payment of any principal of or interest or Fee on Loans held by it under this Agreement through the exercise of any right of set-off, banker's lien, counterclaim or similar right, it shall promptly purchase from the other Banks participations in the Loans held by the other Banks in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Banks shall share the benefit of such payment pro rata in accordance with the unpaid amount of principal and interest or Fee on the Loans held by each of them. To such end all the Banks shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Borrowers agree that any Bank so purchasing a participation in the Loans held by the other Banks may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect -28- 34 to such participation as fully as if such Bank were a direct holder of Loans in the amount of such participation. Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrowers. SECTION 2.17 CONVERSION OF LOANS. The Borrowers shall have the right to convert Loans of one Type into Loans of another Type from time to time, PROVIDED THAT: (i) the Borrowers shall give the Agent notice of each such conversion as provided in Section 2.2 hereof; (ii) LIBOR Loans may be converted only on the last day of an Interest Period for such Loans; and (iii) no Base Rate Loan may be converted into a LIBOR Loan or LIBOR Loan continued as or converted into another LIBOR Loan if on the proposed date of conversion a Default or an Event of Default exists. The Agent shall use its best efforts to notify the Borrowers of the effectiveness of such conversion, and the new interest rate to which the converted Loans are subject, as soon as practicable after the conversion; provided, however, that any failure to give such notice shall not affect the Borrowers' obligations, or the Agent's or the Banks' rights and remedies, hereunder in any way whatsoever. SECTION 2.18 ADDITIONAL COSTS; CAPITAL REQUIREMENTS. (a) In the event that any existing or future law or regulation, guideline or interpretation thereof, by any court or administrative or governmental authority (foreign or domestic) charged with the administration thereof, or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority shall impose, modify or deem applicable or result in the application of, any capital maintenance, capital ratio or similar requirement against loan commitments made by any Bank hereunder, and the result of any event referred to above is to impose upon any Bank or increase any capital requirement applicable as a result of the making or maintenance of such Bank's Revolving Credit Commitment or the obligation of the Borrowers hereunder with respect to such Revolving Credit Commitment (which imposition of capital requirements may be determined by each Bank's reasonable allocation of the aggregate of such capital increases or impositions), then, within ten (10) Business Days' of demand made by such Bank as promptly as practicable after it obtains knowledge that such law, regulation, guideline, interpretation, request or directive exists and determines to make such demand, the Borrowers shall pay to such Bank from time to time as specified by such Bank additional amounts which shall be sufficient to compensate such Bank for such imposition of or increase in capital requirements together with interest on each -29- 35 such amount from the date demanded until payment in full thereof at the Post-Default Rate. A certificate setting forth in reasonable detail the amount necessary to compensate such Bank as a result of an imposition of or increase in capital requirements submitted by such Bank to the Borrowers shall be conclusive, absent manifest error, as to the amount thereof. All references to any "Bank" shall be deemed to include any participant in such Bank's Revolving Credit Commitment. (b) In the event that any Regulatory Change shall: (i) change the basis of taxation of any amounts payable to any Bank under this Agreement or the Notes in respect of any Loans including, without limitation, LIBOR Loans (other than taxes imposed on the overall net income of such Bank for any such Loans by the United States of America or the jurisdiction in which such Bank has its principal office); or (ii) impose or modify any reserve, Federal Deposit Insurance Corporation premium or assessment, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank (including any of such Loans or any deposits referred to in the definition of "LIBOR Base Rate" in Article 1 hereof); or (iii) impose any other conditions affecting this Agreement in respect of Loans, including, without limitation, LIBOR Loans (or any of such extensions of credit, assets, deposits or liabilities); and the result of any event referred to in clause (i), (ii) or (iii) above shall be to increase such Bank's costs of making or maintaining any Loans including, without limitation, LIBOR Loans, or its Revolving Credit Commitment, or to reduce any amount receivable by such Bank hereunder in respect of its Commitment (such increases in costs and reductions in amounts receivable are hereinafter referred to as "ADDITIONAL COSTS") in each case, only to the extent, with respect to LIBOR Loans, that such Additional Costs are not included in the LIBOR Base Rate applicable to LIBOR Loans, then, within ten (10) Business Days' of demand made by such Bank as promptly as practicable after it obtains knowledge that such a Regulatory Change exists and determines to make such demand (a copy of which demand shall be delivered to the Agent), the Borrowers shall pay to such Bank from time to time as specified by such Bank, additional amounts which shall be sufficient to compensate such Bank for such increased cost or reduction in amounts receivable by such Bank from the date of such change, together with interest on each such amount from the date demanded until payment in full thereof at the Post-Default Rate. All references to any "Bank" shall be deemed to include any participant in such Bank's Revolving Credit Commitment. (c) Without limiting the effect of the foregoing provisions of this Section 2.18, in the event that, by reason of any Regulatory Change, any Bank either: (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Bank which includes deposits by reference to which the interest rate on LIBOR Loans is determined as provided in this -30- 36 Agreement or a category of extensions of credit or other assets of such Bank which includes LIBOR Loans, or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets that it may hold, then, if such Bank so elects by notice to the Borrowers (with a copy to the Agent), the obligation of such Bank to make, and to convert Loans of any other Type into, Loans of such Type hereunder shall be suspended until the date such Regulatory Change ceases to be in effect (and all Loans of such Type then outstanding shall be converted into Base Rate Loans or into LIBOR Loans of another duration as the case may be, in accordance with Sections 2.17 and 2.21). (d) Determinations by any Bank for purposes of this Section 2.18 of the effect of any Regulatory Change on its costs of making or maintaining Loans or on amounts receivable by it in respect of Loans, and of the additional amounts required to compensate such Bank in respect of any Additional Costs, shall be set forth in writing in reasonable detail describing the Additional Costs together with a calculation demonstrating the allocation to the Borrowers of such Additional Costs which shall be conclusive, absent manifest error. SECTION 2.19 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary notwithstanding, if, on or prior to the determination of an interest rate for any LIBOR Loans for any Interest Period therefor, the Required Banks determine (which determination shall be conclusive): (a) by reason of any event affecting the money markets in the United States of America or the London interbank market, quotations of interest rates for the relevant deposits are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans under this Agreement; or (b) the rates of interest referred to in the definition of "LIBOR Base Rate" in Article 1 hereof upon the basis of which the rate of interest on any LIBOR Loans for such period is determined, do not accurately reflect the cost to the Banks of making or maintaining such Loans for such period; then the Agent shall give the Borrowers and each Bank prompt notice thereof (and shall thereafter give the Borrowers and each Bank prompt notice of the cessation, if any, of such condition), and so long as such condition remains in effect, the Banks shall be under no obligation to make Loans of such Type or to convert Loans of any other Type into Loans of such Type and the Borrowers shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected Type either repay such Loans in accordance with Section 2.5 hereof or convert such Loan into Loans of another Type in accordance with Section 2.17 hereof. -31- 37 SECTION 2.20 ILLEGALITY. Notwithstanding any other provision in this Agreement, in the event that it becomes unlawful for any Bank or its applicable Lending Office to: (a) honor its obligation to make LIBOR Loans hereunder, or (b) maintain LIBOR Loans hereunder, then such Bank shall promptly notify the Borrowers thereof (with a copy to the Agent), describing such illegality in reasonable detail (and shall thereafter promptly notify the Borrowers and the Agent of the cessation, if any, of such illegality), and such Bank's obligation to make LIBOR Loans and to convert Base Rate Loans into LIBOR Loans hereunder shall, upon written notice given by such Bank to the Borrowers, be suspended until such time as such Bank may again make and maintain LIBOR Loans and such Bank's outstanding LIBOR Loans shall be converted into Base Rate Loans, in accordance with Sections 2.17 and 2.21 hereof. SECTION 2.21 CERTAIN CONVERSIONS PURSUANT TO SECTIONS 2.18 AND 2.20. If the Loans of any Bank of a particular Type (Loans of such Type are hereinafter referred to as "AFFECTED LOANS" and such Type is hereinafter referred to as the "AFFECTED TYPE") are to be converted pursuant to Section 2.18 or 2.20 hereof, such Bank's Affected Loans shall be converted into Base Rate Loans, or LIBOR Loans of another Type, as the case may be (the "NEW TYPE LOANS"), on the last day(s) of the then current Interest Period(s) for the Affected Loans (or, in the case of a conversion required by subsection 2.18(b) or Section 2.20 hereof, on such earlier date as such Bank may specify to the Borrowers with a copy to the Agent) and, until such Bank gives notice as provided below that the circumstances specified in Section 2.18 or 2.20 hereof which gave rise to such conversion no longer exist: (a) to the extent that such Bank's Affected Loans have been so converted, all repayments of principal which would otherwise be applied to such Affected Loans shall be applied instead to its New Type Loans; (b) all Loans which would otherwise be made by such Bank as Loans of the Affected Type shall be made instead as New Type Loans and all Loans of such Bank which would otherwise be converted into Loans of the Affected Type shall be converted instead into (or shall remain as) New Type Loans. -32- 38 SECTION 2.22 INDEMNIFICATION. The Borrowers shall pay to the Agent for the account of each Bank, upon the request of such Bank through the Agent, such amount or amounts as shall compensate such Bank for any loss (including loss of profit), cost or expense incurred by such Bank (as reasonably determined by such Bank) as a result of: (a) any payment or repayment or conversion of a LIBOR Loan held by such Bank on a date other than the last day of an Interest Period for such LIBOR Loan except pursuant to Sections 2.18 or 2.20 hereof; or (b) any failure by the Borrowers to borrow a LIBOR Loan held by such Bank on the date for such borrowing specified in the relevant Borrowing Notice under Section 2.2 hereof, such compensation to include, without limitation, an amount equal to: (i) any loss or expense suffered by such Bank during the period from the date of receipt of such early payment or repayment or the date of such conversion to the last day of such Interest Period if the rate of interest obtainable by such Bank upon the redeployment of an amount of funds equal to such Bank's PRO RATA share of such payment, repayment or conversion or failure to borrow or convert is less than the rate of interest applicable to such LIBOR Loan for such Interest Period, or (ii) any loss or expense suffered by such Bank in liquidating LIBOR deposits prior to maturity which correspond to such Bank's PRO RATA share of such payment, repayment, conversion, failure to borrow or failure to convert. The determination by each such Bank of the amount of any such loss or expense, when set forth in a written notice to the Borrowers, containing such Bank's calculation thereof in reasonable detail, shall be presumed correct, in the absence of manifest error. -33- 39 ARTICLE 3. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby represents and warrants to the Banks and the Agent that: SECTION 3.1 ORGANIZATION. (a) Each Borrower is duly organized and validly existing under the laws of its state of organization and has the power to own its assets and to transact the business in which it is presently engaged and in which it proposes to be engaged. Schedule 3.1 hereto accurately and completely lists, as to each Borrower: (i) the state of incorporation or organization of each such entity, (ii) as to each of them that is a corporation, the classes and number of authorized and outstanding shares of capital stock of each such corporation, and (iii) the business in which each of such entities is engaged. All of the foregoing shares or other equity interests that are issued and outstanding have been duly and validly issued and are fully paid and non-assessable. Except as set forth on Schedule 3.1, none of the Borrowers has any Subsidiary. (b) Each Borrower is in good standing in its state of organization and in each state in which it is qualified to do business. There are no jurisdictions other than as set forth on Schedule 3.1 hereto in which the character of the properties owned or proposed to be owned by each Borrower or in which the transaction of the business of each Borrower as now conducted or as proposed to be conducted requires or will require such Borrower to qualify to do business and as to which failure so to qualify could have a Material Adverse Effect on such Borrower. SECTION 3.2 POWER, AUTHORITY, CONSENTS. Each Borrower has the power to execute, deliver and perform the Loan Documents to be executed by it. Each Borrower has the power to borrow hereunder and has taken all necessary corporate action to authorize the borrowing hereunder on the terms and conditions of this Agreement. Each Borrower has taken all necessary action, corporate or otherwise, to authorize the execution, delivery and performance of the Loan Documents to be executed by it. No consent or approval of any Person (including, without limitation, any stockholder of any Borrower), no consent or approval of any landlord or mortgagee, no waiver of any Lien or right of distraint or other similar right and no consent, license, certificate of need, approval, authorization or declaration of any governmental authority, bureau or agency, is or will be required in connection with the execution, delivery or performance by each Borrower, or the validity or enforcement of -34- 40 the Loan Documents, except as set forth on Schedule 3.2 hereto, each of which either has been duly and validly obtained on or prior to the date hereof and is now in full force and effect, or is designated on Schedule 3.2 as waived by the Required Banks. SECTION 3.3 NO VIOLATION OF LAW OR AGREEMENTS. The execution and delivery by each Borrower of each Loan Document to which it is a party and performance by it hereunder and thereunder, will not violate any provision of law and will not conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or any certificate of incorporation or by-laws of each Borrower, or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any agreement, bond, note or indenture to which any Borrower is a party, or by which any Borrower is bound or any of their respective properties or assets is affected, except for such defaults and breaches which in the aggregate could not have a Material Adverse Effect on the Borrowers, or result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of each Borrower. SECTION 3.4 DUE EXECUTION, VALIDITY, ENFORCEABILITY. This Agreement and each other Loan Document to which each Borrower is a party has been duly executed and delivered by each Borrower that is a party thereto and each constitutes the valid and legally binding obligation of each Borrower, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally and except that the remedy of specific performance and other equitable remedies are subject to judicial discretion. SECTION 3.5 TITLE TO PROPERTIES. Each of the Borrowers has good and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary course of its business, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.6 JUDGMENTS, ACTIONS, PROCEEDINGS. Except as set forth on Schedule 3.6 hereto, there are no outstanding judgments, investigations, actions or proceedings, including, without limitation, any Environmental Proceeding, pending before any court or governmental authority, bureau or agency, with respect to or, to the best of each -35- 41 Borrower's knowledge, threatened against or affecting such Borrower or any of its assets involving, in the case of any court proceeding, a claim in excess of Two Hundred Fifty Thousand ($250,000) Dollars, nor, to the best of each Borrower's knowledge, is there any reasonable basis for the institution of any such action or proceeding that is probable of assertion, nor are there any such actions or proceedings in which any Borrower is a plaintiff or complainant. SECTION 3.7 NO DEFAULTS, COMPLIANCE WITH LAWS. Except as set forth on Schedule 3.7 hereto, none of the Borrowers is in default under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it or used in the conduct of its business is affected, which default could have a Material Adverse Effect on such Borrower. Each Borrower has complied and is in compliance in all respects with all applicable laws, ordinances and regulations, resolutions, ordinances, decrees and other similar documents and instruments of all courts and governmental authorities, bureaus and agencies, domestic and foreign, including, without limitation, all applicable provisions of the Americans with Disabilities Act (42 U.S.C. ss.12101-12213) and the regulations issued thereunder and all applicable Environmental Laws and Regulations, non-compliance with which could have a Material Adverse Effect on such Borrower. SECTION 3.8 BURDENSOME DOCUMENTS. Except as set forth on Schedule 3.8 hereto, none of the Borrowers is a party to or bound by, nor are any of the properties or assets owned by any of the Borrowers used in the conduct of their respective businesses affected by, any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment, including, without limitation, any of the foregoing relating to any Environmental Liability, that materially and adversely affects their respective businesses, assets or conditions, financial or otherwise. SECTION 3.9 FINANCIAL STATEMENTS; PROJECTIONS. (a) Each of the Financial Statements is complete and presents fairly the consolidated financial position of HCRI and its Subsidiaries as at its date, and has been prepared in accordance with GAAP. None of the Borrowers to which any of the Financial Statements relates, has any material obligation, liability or commitment, direct or contingent (including, without limitation, any Environmental Liability), that is not reflected in the Financial Statements. There has been no material adverse -36- 42 change in the financial position or operations of any of the Borrowers since the date of the latest balance sheet included in the Financial Statements (the "LATEST BALANCE SHEET"). Each Borrower's fiscal year is the twelve-month period ending on December 31 in each year. (b) The Projections have been prepared on the basis of the assumptions accompanying them and reflect as of the date thereof HCRI's good faith projections, after reasonable analysis, of the matters set forth therein, based on such assumptions. SECTION 3.10 TAX RETURNS. Each Borrower has filed all federal, state and local tax returns required to be filed by it and has not failed to pay any taxes, or interest and penalties relating thereto, on or before the due dates thereof. Except to the extent that reserves therefor are reflected in the Financial Statements: (i) there are no material federal, state or local tax liabilities of any of the Borrowers, due or to become due for any tax year ended on or prior to the date of the Latest Balance Sheet relating to such entity, whether incurred in respect of or measured by the income of such entity, that are not properly reflected in the Latest Balance Sheet relating to such entity, and (ii) there are no material claims pending or, to the knowledge of each of the Borrowers, proposed or threatened against such Borrower for past federal, state or local taxes, except those, if any, as to which proper reserves are reflected in the Financial Statements. SECTION 3.11 INTANGIBLE ASSETS. Each Borrower possesses all patents, trademarks, service marks, trade names, and copyrights, and rights with respect to the foregoing, necessary to conduct its business as now conducted and as proposed to be conducted, without any conflict with the patents, trademarks, service marks, trade names, and copyrights and rights with respect to the foregoing, of any other Person. SECTION 3.12 REGULATION U. No part of the proceeds received by any of the Borrowers from the Loans will be used directly or indirectly for: (a) any purpose other than as set forth in Section 2.8 hereof, or (b) the purpose of purchasing or carrying, or for payment in full or in part of Indebtedness that was incurred for the purposes of purchasing or carrying, any "margin stock", as such term is defined in ss.221.3 of Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II, Part 221. -37- 43 SECTION 3.13 NAME CHANGES, MERGERS, ACQUISITIONS. Except as set forth on Schedule 3.13 hereto, none of the Borrowers has within the six-year period immediately preceding the date of this Agreement changed its name, been the surviving entity of a merger or consolidation, or acquired all or substantially all of the assets of any Person. SECTION 3.14 FULL DISCLOSURE. Neither the Financial Statements nor any certificate, opinion, or any other statement made or furnished in writing to the Agent or any Bank by or on behalf of the Borrowers in connection with this Agreement or the transactions contemplated herein, contains any untrue statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading, as of the date such statement was made. There is no fact known to any Borrower that has, or would in the now foreseeable future have, a Material Adverse Effect on such Borrower, which fact has not been set forth herein, in the Financial Statements or any certificate, opinion or other written statement so made or furnished to the Agent or the Banks. SECTION 3.15 LICENSES AND APPROVALS. (a) Each Borrower has all necessary licenses, permits and governmental authorizations, including, without limitation, licenses, permits and authorizations arising under or relating to Environmental Laws and Regulations, to own and operate its properties and to carry on its business as now conducted, the absence of which would have a Material Adverse Effect on the Borrowers. (b) To the best of HCRI's knowledge, no violation exists of any applicable law pertaining to the ownership or operation of any Facility or any Operator that would have a reasonable likelihood of leading to revocation of any license necessary for the operation of such Facility. SECTION 3.16 ERISA. (a) Except as set forth on Schedule 3.16 hereto, no Employee Benefit Plan is maintained or has ever been maintained by any Loan Party or any ERISA Affiliate, nor has any Loan Party or any ERISA Affiliate ever contributed to a Multiemployer Plan. -38- 44 (b) There are no agreements which will provide payments to any officer, employee, shareholder or highly compensated individual which will be "parachute payments" under 280G of the Code that are nondeductible to any Loan Party and which will be subject to tax under Section 4999 of the Code for which any Loan Party will have a material withholding liability. SECTION 3.17 REIT STATUS. HCRI currently has REIT Status and has maintained REIT Status on a continuous basis since its formation. None of the Subsidiaries of HCRI currently has REIT Status. -39- 45 ARTICLE 4. CONDITIONS TO THE LOANS. SECTION 4.1 CONDITIONS TO INITIAL LOAN(S). The obligation of each Bank to execute and deliver this Agreement shall be subject to the fulfillment (to the satisfaction of the Agent) of the following conditions precedent: (a) Each Borrower shall have executed and delivered to each Bank its Note. (b) (i) The Borrowers shall have paid to the Agent, for the benefit of the Banks, the Origination Fee. (ii) The Borrowers shall have paid to Key and Fleet, as the case may be, the Agency Fee and the Arrangement Fee. (c) Counsel to the Borrowers shall have delivered its opinion to, and in form and substance satisfactory to, the Agent. (d) The Agent shall have received complete copies of the Financial Statements and the Projections, each certified as such in a certificate executed by an executive officer of HCRI. (e) The Agent shall have received copies of the following: (i) All of the consents, approvals and waivers referred to on Schedule 3.2 hereto (except only those which, as stated on Schedule 3.2, shall not be delivered); (ii) The certificates of incorporation of each of the Borrowers, certified by the Secretary of State of their respective states of incorporation; (iii) The by-laws of each of the Borrowers, certified by their respective secretaries; (iv) All corporate action taken by each of the Borrowers to authorize the execution, delivery and performance of each of the Loan Documents to which it is a party and the transactions contemplated thereby, certified by their respective secretaries; (v) Good standing certificates as of a recent date, with respect to each of the Borrowers from the Secretary of State of their respective states of incorporation and each state in which each of them is qualified to do business; and -40- 46 (vi) An incumbency certificate (with specimen signatures) with respect to each of the Borrowers. (f) The Borrowers shall have delivered to the Agent a Borrowing Base Certificate. (g) The Agent shall have received evidence satisfactory to it that all liens covering the collateral securing HCRI's $52,000,000 Senior Notes and $30,000,000 Senior Notes held by Fifth Third Bank of Northwestern Ohio, N.A., as Collateral Agent shall have been released or terminated. (h) (i) Each of the Borrowers shall have complied and shall then be in compliance with all of the terms, covenants and conditions of this Agreement; (ii) After giving effect to the initial Loan, there shall exist no Default or Event of Default hereunder; and (iii) The representations and warranties contained in Article 3 hereof shall be true and correct on the date hereof; and the borrowing by the Borrowers of the initial Loan hereunder shall constitute a representation and warranty by the Borrowers as of the date hereof that the conditions set forth in this subsection 4.1(h) have been satisfied. (i) All legal matters incident to the initial Loans shall be satisfactory to counsel to the Agent. SECTION 4.2 CONDITIONS TO SUBSEQUENT LOANS. The obligation of the Banks to make each Loan subsequent to the date hereof shall be subject to the fulfillment (to the satisfaction of the Agent) of the following conditions precedent: (a) The Agent shall have received a Borrowing Notice in accordance with Section 2.2 hereof, together with a Borrowing Base Certificate. (b) Each of the Borrowers shall have complied and shall then be in compliance with all of the terms, covenants and conditions of this Agreement; (i) After giving effect to the requested Loan, there shall exist no Default or Event of Default hereunder; and -41- 47 (ii) The representations and warranties contained in Article 3 hereof shall be true and correct on and as of such date as if made on and as of such date (provided Section 3.6 shall relate only to claims in excess of $1,500,000 as of the date of such requested Loan); and the borrowing by the Borrowers of the requested Loan hereunder shall constitute a representation and warranty by the Borrowers as of the date of such Loan that the conditions set forth in this subsection 4.2(b) have been satisfied. (c) All legal matters incident to such Loan shall be satisfactory to counsel for the Agent. -42- 48 ARTICLE 5. DELIVERY OF FINANCIAL REPORTS, DOCUMENTS AND OTHER INFORMATION. While the Commitments are outstanding, and, in the event any Loan remains outstanding, so long as any of the Borrowers are indebted to the Banks or the Agent and until payment in full of the Notes and full and complete performance of all of its other obligations arising hereunder, HCRI shall deliver to each Bank: SECTION 5.1 ANNUAL FINANCIAL STATEMENTS. Annually, as soon as available, but in any event within ninety (90) days after the last day of each of its fiscal years, a consolidated balance sheet of HCRI and its Subsidiaries as at such last day of the fiscal year, and consolidated statements of income and retained earnings and statements of cash flow, for such fiscal year, each prepared in accordance with generally accepted accounting principles consistently applied, in reasonable detail, and certified without qualification by a nationally recognized independent public accounting firm or by any other certified public accounting firm satisfactory to the Agent as fairly presenting the financial position and results of operations of HCRI and its Subsidiaries as at and for the year ending on its date and as having been prepared in accordance with GAAP; PROVIDED, HOWEVER, HCRI may satisfy its obligations to deliver the financial statements described in this Section 5.1 by furnishing to the Banks a copy of its annual report on Form 10-K in respect of such fiscal year together with the financial statements required to be attached thereto, provided HCRI is required to file such annual report on Form 10-K with the Securities and Exchange Commission and such filing is actually made. SECTION 5.2 QUARTERLY FINANCIAL STATEMENTS. As soon as available, but in any event within forty-five (45) days after the end of each of HCRI's fiscal quarters, a consolidated balance sheet of HCRI and the Subsidiaries as of the last day of such quarter and consolidated statements of income and retained earnings and statements of cash flow, for such quarter, and on a comparative basis figures for the corresponding period of the immediately preceding fiscal year, all in reasonable detail, each such statement to be certified in a certificate of the chief financial officer of HCRI as accurately presenting the financial position and the results of operations of HCRI and its Subsidiaries as at its date and for such quarter and as having been prepared in accordance with GAAP (subject to year-end audit adjustments); PROVIDED, HOWEVER, HCRI may satisfy its obligations to deliver the financial statements described in this Section 5.2 by furnishing to the Banks a copy -43- 49 of its quarterly report on Form 10-Q in respect of such fiscal quarter together with the financial statements required to be attached thereto, provided HCRI is required to file such quarterly report on Form 10-Q with the Securities and Exchange Commission and such filing is actually made. SECTION 5.3 COMPLIANCE INFORMATION. Promptly after a written request therefor, such other financial data or information evidencing compliance with the requirements of this Agreement, the Notes and the other Loan Documents, as any Bank may reasonably request from time to time. SECTION 5.4 NO DEFAULT CERTIFICATE. At the same time as it delivers the financial statements required under the provisions of Sections 5.1 and 5.2 hereof, a certificate of the chief executive officer or chief financial officer of HCRI to the effect that no Event of Default hereunder and that no default under any other agreement to which any Borrower is a party or by which it is bound, or by which, to the best knowledge of HCRI or any other Borrower, any of its properties or assets, taken as a whole, may be materially affected, and no event which, with the giving of notice or the lapse of time, or both, would constitute such an Event of Default or default, exists, or, if such cannot be so certified, specifying in reasonable detail the exceptions, if any, to such statement. Such certificate shall be accompanied by a detailed calculation indicating compliance with the covenants contained in Section 6.9 hereof in the form annexed hereto as Exhibit D. SECTION 5.5 CERTIFICATE OF ACCOUNTANTS. At the same time as it delivers the financial statements required under the provisions of Section 5.1 hereof, a certificate of the independent certified public accountants of HCRI addressed specifically to both HCRI and the Agent to the effect that during the course of their audit of the operations of HCRI and its Subsidiaries and its condition as of the end of the fiscal year, nothing has come to their attention which would indicate that a Default or an Event of Default hereunder has occurred or that there was any violation of the covenants of HCRI and its Subsidiaries contained in Section 6.9 or Article 7 of this Agreement, or, if such cannot be so certified, specifying in reasonable detail the exceptions, if any, to such statement. SECTION 5.6 BORROWING BASE CERTIFICATES. As soon as available but in any event not less than forty-five (45) days after the end of each fiscal quarter of HCRI, a Borrowing Base Certificate prepared as of the close of business on the last day of such fiscal quarter. -44- 50 SECTION 5.7 BUSINESS PLAN AND PROJECTIONS. Not later than January 31st in each year, copies of HCRI's business plan and financial projections for the upcoming three (3) fiscal years (together with a copy in writing of the assumptions on which such business plan and projections were based), each certified by HCRI's chief financial officer and illustrating the projected income statements, balance sheets and statements of changes in cash flow on a consolidated basis. SECTION 5.8 QUARTERLY FACILITY REPORTS. (a) As soon as available but in any event not less than forty-five (45) days after the end of each fiscal quarter of HCRI, a report with respect to the Facilities and the Operators, the form of which is set forth on Schedule 5.8 annexed hereto and which report shall contain information for the quarterly period immediately prior to the fiscal quarter for which the report is submitted. (b) Within thirty (30) days after the receipt thereof, a copy of the annual audited financial statements of each publicly-held Operator delivered to HCRI by each such Operator. (c) Such other information regarding the financial condition of the Operators as Key or Fleet may from time to time reasonably request, subject to each of their agreement that all such information shall be and remain confidential and none of such information may be distributed to any other Person without HCRI's prior consent. SECTION 5.9 ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of all material reports submitted to HCRI by its independent accountants in connection with any annual or interim audit of the books of HCRI or its Subsidiaries made by such accountants which material reports are a necessary part of such annual or interim audit. SECTION 5.10 COPIES OF DOCUMENTS. Promptly upon their becoming available, copies of any: (i) financial statements, non-routine reports and notices (other than routine correspondence), any of which are of a material nature, requests for waivers and proxy statements, in each case, delivered by HCRI or any of its Subsidiaries to any of their respective existing lending institutions or creditors; (ii) correspondence or notices received by HCRI from any federal, state or local governmental authority that regulates the operations of HCRI or any of its Subsidiaries, relating to an actual or threatened change or development that would be -45- 51 materially adverse to HCRI or any Subsidiary; (iii) registration statements and any amendments and supplements thereto, and any regular and periodic reports, if any, filed by HCRI or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental authority succeeding to any or all of the functions of the said Commission; and (iv) at the request of the Agent, any appraisals received by HCRI or any of its Subsidiaries with respect to the properties or assets of HCRI or its Subsidiaries during the term of this Agreement. SECTION 5.11 NOTICES OF DEFAULTS. Promptly, notice of the occurrence of any Default or Event of Default, or any event that would constitute or cause a Material Adverse Effect in the condition, financial or otherwise, or the operations of HCRI or any of the Subsidiaries. SECTION 5.12 ERISA NOTICES AND REQUESTS. (a) Concurrently with such filing, a copy of each Form 5500 that is filed with respect to each Plan with the IRS; and (b) Promptly, upon their becoming available, copies of: (i) all correspondence with the PBGC, the Secretary of Labor or any representative of the IRS with respect to any Plan, relating to an actual or threatened change or development that would be materially adverse to the Borrower(s); (ii) all actuarial valuations received by the Borrower(s) with respect to any Plan; and (iii) any notices of Plan termination filed by any Plan Administrator (as those terms are used in ERISA) with the PBGC and of any notices from the PBGC to the Borrower(s) with respect to the intent of the PBGC to institute involuntary termination proceedings. SECTION 5.13 ADDITIONAL INFORMATION. Such other material additional information regarding the business, affairs and condition of the Borrowers as Key or Fleet may from time to time request, including, without limitation, quarterly schedules, in form and substance satisfactory to the Agent, with respect to HCRI on a consolidated basis, of recorded liabilities, unfunded commitments, contingent liabilities and other similar material items. -46- 52 ARTICLE 6. AFFIRMATIVE COVENANTS. While the Commitments are outstanding, and, in the event any Loan remains outstanding, so long as any Borrower is indebted to the Banks or the Agent, and until payment in full of the Notes and full and complete performance of all of its other obligations arising hereunder, each Borrower shall: SECTION 6.1 BOOKS AND RECORDS. Keep proper books of record and account in a manner reasonably satisfactory to the Agent in which full and true entries shall be made of all dealings or transactions in relation to its business and activities. SECTION 6.2 INSPECTIONS AND AUDITS. Permit the Agent to make or cause to be made (prior to an Event of Default, at the Banks' expense and after the occurrence of and during the continuance of an Event of Default, at the Borrowers' expense), inspections and audits of any books, records and papers of HCRI or any Subsidiary and to make extracts therefrom and copies thereof, or to make appraisals, inspections and examinations of any properties and facilities of HCRI or any Subsidiary, on reasonable notice, at all such reasonable times and as often as any Bank may reasonably require, in order to assure that the Borrowers are and will be in compliance with their obligations under the Loan Documents or to evaluate the investment in the then outstanding Notes. SECTION 6.3 MAINTENANCE AND REPAIRS. Cause to be maintained in good repair, working order and condition, subject to normal wear and tear, all material properties and assets from time to time owned by HCRI or any Subsidiary and used in or necessary for the operation of its businesses, and make or cause to be made all reasonable repairs, replacements, additions and improvements thereto. SECTION 6.4 CONTINUANCE OF BUSINESS. Do, or cause to be done, all things reasonably necessary to preserve and keep in full force and effect the corporate existence of HCRI or any Subsidiary and all permits, rights and privileges necessary for the proper conduct of its business, and continue to engage in the same line of business and comply in all material respects with all applicable laws, regulations and orders. -47- 53 SECTION 6.5 COPIES OF CORPORATE DOCUMENTS. Subject to the prohibitions set forth in Section 7.6 hereof, promptly deliver to the Agent copies of any amendments or modifications to the certificate of incorporation and by-laws of HCRI or any Subsidiary, certified with respect to the certificate of incorporation by the Secretary of State of its state of incorporation and, with respect to the by-laws, by the secretary or assistant secretary of such corporation. SECTION 6.6 PERFORM OBLIGATIONS. Pay and discharge all of the obligations and liabilities of HCRI or any Subsidiary, including, without limitation, all taxes, assessments and governmental charges upon its income and properties when due, unless and to the extent only that such obligations, liabilities, taxes, assessments and governmental charges shall be contested in good faith and by appropriate proceedings and that, to the extent required by GAAP, proper and adequate book reserves relating thereto are established by HCRI or any Subsidiary, and then only to the extent that a bond is filed in cases where the filing of a bond is necessary to avoid the creation of a Lien against any of its properties. SECTION 6.7 NOTICE OF LITIGATION. Promptly notify the Agent in writing of any litigation, legal proceeding or dispute, other than disputes in the ordinary course of business or, whether or not in the ordi nary course of business, involving amounts in excess of Two Million Five Hundred Thousand ($2,500,000) Dollars, affecting HCRI or any Subsidiary whether or not fully covered by insurance, and regardless of the subject matter thereof (excluding, however, any actions relating to workers' compensation claims or negligence claims relating to use of motor vehicles, if fully covered by insurance, subject to deductibles). SECTION 6.8 INSURANCE. (a) (i) Maintain or cause to maintain with responsible insurance companies reasonably acceptable to the Agent such insurance on the properties of HCRI or any Subsidiary, in such amounts and against such risks as is customarily maintained by similar businesses and cause each Operator to do so; (ii) file with the Agent upon its request a detailed list of the insurance then in effect, stating the names of the insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby; and (iii) within ten (10) days after notice in writing from the Agent, obtain such additional insurance as the Agent may reasonably request; and -48- 54 (b) Carry all insurance available through the PBGC or any private insurance companies covering its obligations to the PBGC. SECTION 6.9 FINANCIAL COVENANTS. Have or maintain, with respect to HCRI, on a consolidated basis, as at the last day of each fiscal quarter of HCRI: (a) A ratio of Funded Indebtedness to Tangible Net Worth (the "LEVERAGE RATIO") of not more than 1.10:1.00; provided, so long as the Leverage Ratio for any two consecutive fiscal quarters does not exceed 1.10:1.00 (each, a "LEVERAGE TEST PERIOD"), then the Leverage Ratio for the two consecutive fiscal quarters immediately succeeding such Leverage Test Period may increase to a maximum of 1.20:1.00. (b) Tangible Net Worth of not less than $300,000,000, plus 100% of the Net Issuance Proceeds received by HCRI (or any of its Subsidiaries) in connection with the issuance of any equity interest in HCRI (or any of its Subsidiaries) other than any such equity interests issued in connection with any dividend reinvestment program(s). (c) Interest Coverage of not less than 200%. (d) HCRI's Fixed Coverage Ratio of not less than 1.05 to 1.00. SECTION 6.10 NOTICE OF CERTAIN EVENTS. (a) Promptly notify the Agent in writing of the occurrence of any Reportable Event, as defined in Section 4043 of ERISA, if a notice of such Reportable Event is required under ERISA to be delivered to the PBGC within 30 days after the occurrence thereof, together with a description of such Report able Event and a statement of the action the Borrower(s) or the ERISA Affiliate intends to take with respect thereto, together with a copy of the notice thereof given to the PBGC. (b) Promptly notify the Agent in writing if the Borrower(s) or ERISA Affiliate receives an assessment of withdrawal liability in connection with a complete or partial withdrawal with respect to any Multiemployer Plan, together with a statement of the action that such Borrower(s) or ERISA Affiliate intends to take with respect thereto. -49- 55 (c) Promptly notify the Agent in writing if any Borrower receives: (i) any notice of any violation or administrative or judicial complaint or order having been filed or about to be filed against such Borrower alleging violations of any Environmental Law and Regulation, or (ii) any notice from any governmental body or any other Person alleging that such Borrower is or may be subject to any Environmental Liability; and promptly upon receipt thereof, provide the Agent with a copy of such notice together with a statement of the action such Borrower intends to take with respect thereto. SECTION 6.11 COMPLY WITH ERISA. Materially comply with all applicable provisions of ERISA and the Code now or hereafter in effect. SECTION 6.12 ENVIRONMENTAL COMPLIANCE. Operate or cause to operate all property owned, operated or leased by it in compliance with all Environmental Laws and Regulations, such that no Environmental Liability arises under any Environmental Laws and Regulations, which would result in a Lien on any property of any Borrower. SECTION 6.13 MAINTENANCE OF REIT STATUS. Maintain its REIT Status. SECTION 6.14 LONG-TERM CARE FACILITIES. Ensure that not less than seventy (70%) percent of its Investments in Healthcare Assets are in Long-Term Care Facilities. SECTION 6.15 BEHAVIORAL CARE FACILITIES. Ensure that not more than ten (10%) percent of its Investments in Healthcare Assets are in Facilities classified as "Behavioral Care". SECTION 6.16 OPERATOR CONCENTRATION. Ensure that not more than twenty (20%) percent of the Borrowers' Investments are maintained with a single Operator (including any Affiliates of such Operator). -50- 56 ARTICLE 7. NEGATIVE COVENANTS. While the Commitments are outstanding, and, in the event any Loan remains outstanding, so long as any Borrower is indebted to the Banks or the Agent and until payment in full of the Notes and full and complete performance of all of its other obligations arising hereunder, HCRI shall not and shall not permit any of its Subsidiaries to do, agree to do, or permit to be done, any of the following: SECTION 7.1 INDEBTEDNESS. Create, incur, permit to exist or have outstanding any Indebtedness, except: (a) Indebtedness of the Borrowers to the Banks and the Agent and under this Agreement and the Notes; (b) Taxes, assessments and governmental charges, non-interest bearing accounts payable and accrued liabilities, in any case not more than 90 days past due from the original due date thereof (unless the failure to satisfy such obligations is pursuant to the good faith contest by appropriate dispute or other proceedings as set forth in Section 6.6 hereof), and non-interest bearing deferred liabilities other than for borrowed money (e.g., deferred compensation and deferred taxes), in each case incurred and continuing in the ordinary course of business; (c) Indebtedness secured by the security interests referred to in subsection 7.2(b) hereof; (d) Indebtedness consisting of contingent obligations permitted by Section 7.3 hereof; (e) Unsecured Indebtedness; (f) In addition to the Indebtedness otherwise permitted under this Section 7.1, Indebtedness secured by Liens provided that immediately after giving effect to the incurrence of such Indebtedness, the total outstanding amount of such Indebtedness of HCRI, on a consolidated basis, does not exceed fifteen (15%) percent of HCRI's consolidated Tangible Net Worth as of the end of the most recently completed fiscal quarter of HCRI; and (g) As set forth on Schedule 7.1 hereto. SECTION 7.2 LIENS. Create, or assume or permit to exist, any Lien on any of the properties or assets of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, except: -51- 57 (a) Permitted Liens; (b) Purchase money Liens on property acquired or held by HCRI or its Subsidiaries in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided, that (i) any such Lien attaches to such property concurrently with or within twenty (20) days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property, and (iv) the aggregate amount of all such Indebtedness on a consolidated basis for HCRI and its Subsidiaries shall not at any time exceed $1,000,000.00; (c) Liens securing Indebtedness permitted under subsection 7.1(f) hereof; and (d) As set forth on Schedule 7.2 hereto. SECTION 7.3 GUARANTIES. Assume, endorse, be or become liable for, or guarantee, the obligations of any Person, except (i) by the endorsement of negotiable instruments for deposit or collection in the ordinary course of business, (ii) guarantees in support of Facilities if, after giving effect to the proposed guarantee, the aggregate amount of all such obligations guaranteed by the Borrowers, or any of them (exclusive of the guarantees referred to in subsection 7.3(iii) hereof), would not exceed Thirty Million ($30,000,000) Dollars, and (iii) as set forth on Schedule 7.1 hereof. For the purposes hereof, the term "guarantee" shall include any agreement, whether such agreement is on a contingency or otherwise, to purchase, repurchase or otherwise acquire Indebtedness of any other Person, or to purchase, sell or lease, as lessee or lessor, property or services, in any such case primarily for the purpose of enabling another person to make payment of Indebtedness, or to make any payment (whether as an advance, capital contribution, purchase of an equity interest or otherwise) to assure a minimum equity, asset base, working capital or other balance sheet or financial condition, in connection with the Indebtedness of another Person, or to supply funds to or in any manner invest in another Person in connection with such Person's Indebtedness. SECTION 7.4 MERGERS, ACQUISITIONS. Merge or consolidate with any Person, or, acquire all or substantially all of the assets or any of the capital stock of any Person unless (a) a Borrower is the surviving entity, (b) no Default or Event of Default exists or will occur after giving effect thereto, and (c) the consideration paid in onnection with any such merger or acquisition does not exceed an amount equal to ten (10%) percent of Healthcare Assets as at the date of the consummation of such transaction, prior to giving effect to such transaction. -52- 58 SECTION 7.5 DISTRIBUTIONS. Declare or pay any dividends or make any distribution of any kind on HCRI's outstanding stock, or set aside any sum for any such purpose, except that: (a) HCRI may declare and make dividend payments or other distributions payable solely in its common stock; (b) HCRI may declare and pay cash dividends if, and only if: (x) at the time of such payment and after giving effect thereto, no Event of Default shall exist hereunder, and (y) after giving effect to such dividend payment, the aggregate amount of all dividends declared and paid during the fiscal year of HCRI in which such payment is proposed to be made would not exceed an amount equal to ninety-five (95%) percent of EBITDA (as shown on the audited consolidated income statement of HCRI for such fiscal year furnished to the Agent in accordance with Section 5.1 hereof; and (c) if a Default or an Event of Default exists or will occur as a result of the dividend payment, HCRI may declare and pay dividends to the minimum extent necessary (taking into account any dividends or distributions otherwise made) to generate the minimum deduction for dividends paid during each year that would be required to satisfy Code Section 857(a)(1). SECTION 7.6 CHANGES IN STRUCTURE. Amend, supplement or modify the certificate of incorporation or by-laws of any Borrower in a manner which would be reasonably likely to cause a Material Adverse Effect. SECTION 7.7 DISPOSITION OF ASSETS. Make any Disposition of Property, or enter into any agreement to do so, unless (a) the Disposition is at fair market value, (b) at the time of the Disposition no Event of Default exists, and (c) any mandatory prepayment required in connection therewith under subsection 2.5(e) is made as provided therein. SECTION 7.8 INVESTMENTS. Make, or suffer to exist, any Investment in any Person, including, without limitation, any shareholder, director, officer or employee of HCRI or any of its Subsidiaries, except: (a) Investments in: (i) obligations issued or guaranteed by the United States of America; -53- 59 (ii) certificates of deposit, bankers acceptances and other "money market instruments" issued by any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000; (iii) open market commercial paper bearing the highest credit rating issued by Standard & Poor's Corporation or by another nationally recognized credit rating agency; (iv) repurchase agreements entered into with any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000 relating to United States of America government obligations; and (v) shares of "money market funds", each having net assets of not less than $100,000,000; in each case maturing or being due or payable in full not more than 180 days after the Borrowers' acquisition thereof. (b) Investments by HCRI in any Subsidiary, and by any Subsidiary in HCRI or another Subsidiary, provided, HCRI shall cause each newly-created Subsidiary, if any, within thirty (30) days after its organization thereof, to become a party to this Agreement and a signatory to the Notes, with the effect that each such new Subsidiary shall be deemed to become a "Borrower" for the purposes of this Agreement and in connection therewith, there shall be delivered to the Agent with respect to such Subsidiary those certificates and documents described in subsection 4.1(e) hereof and all legal matters incident to the addition of such Subsidiary as a "Borrower" hereunder shall be satisfactory to counsel to the Agent. (c) The acquisition by HCRI and its Subsidiaries, on a consolidated basis, of healthcare assets consisting of Facilities and Mortgages and, subject to subsection 7.8(d) below, Investments in Operators in the ordinary course of business. (d) Investments in any Person provided that the aggregate Cash portion of all such Investments does not exceed an amount equal to ten (10%) percent of Healthcare Assets as at any date of determination thereof, prior to giving effect to any such Investment. For purposes of subsection 7.8(a)-(d) and Section 7.14 hereof, "Investments" shall mean, by any Person: -54- 60 (i) the amount paid or committed to be paid, or the value of property or services contributed or committed to be contributed, by such Person for or in connection with the acquisition by such Person of any stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person; and (ii) the amount of any advance, loan or extension of credit by such Person, to any other Person, or guaranty or other similar obligation of such Person with respect to any Indebtedness of such other Person, and (without duplication) any amount committed to be advanced, loaned, or extended by such Person to any other Person, or any amount the payment of which is committed to be assured by a guaranty or similar obligation by such Person for the benefit of, such other Person. SECTION 7.9 FISCAL YEAR. Change its fiscal year. SECTION 7.10 ERISA OBLIGATIONS. Permit the establishment of any Employee Benefit Plan or amend any Employee Benefit Plan which establishment or amendment could result in liability to any Loan Party or increase the obligation for post-retirement welfare benefits of any Loan Party which liability or increase, individually or together with all similar liabilities and increases, has a Material Adverse Effect on any Loan Party. SECTION 7.11 CAPITAL EXPENDITURES. Except as set forth on Schedule 7.11 hereof, make or be or become obligated to make Capital Expenditures in the aggregate for HCRI and its Subsidiaries on a consolidated basis, during each fiscal year of HCRI and its Subsidiaries, in excess of Three Hundred Fifty Thousand ($350,000.00) Dollars (exclusive of Investments permitted under Section 7.8 hereof). SECTION 7.12 RENTAL OBLIGATIONS. Enter into, or permit to remain in effect, any lease (other than Capitalized Leases that are governed by Section 7.11 hereof), if, after giving effect thereto, the aggregate amount of all rentals and other obligations, including, without limitation, all percentage rents and additional rent, due from HCRI and its Subsidiaries thereunder would exceed Three Hundred Fifty Thousand ($350,000.00) Dollars during any fiscal year. -55- 61 SECTION 7.13 USE OF CASH. Use, or permit to be used, in any manner or to any extent, each Borrower's Cash from operations for the benefit of any Person, except: (a) in connection with the payment or prepayment of expenses (other than Capital Expenditures) directly incurred for the benefit of each Borrower in the maintenance and operation of its business, in each case only in the ordinary course of its business, (b) for the payment of required payments of principal and interest on Indebtedness of each Borrower permitted to exist hereunder, and (c) for uses that are otherwise specifically permitted by this Agreement. SECTION 7.14 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this Agreement, directly or indirectly: (a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate; (c) merge into or consolidate with or purchase or acquire assets from an Affiliate; or (d) enter into any other transaction directly or indirectly with or for the benefit of any Affiliate (including, without limitation, guarantees and assumptions of obligations of an Affiliate); PROVIDED, HOWEVER, that: (i) payments on Investments expressly permitted by Section 7.8 hereof may be made, (ii) any Affiliate who is a natural person may serve as an employee or director of HCRI or any Subsidiary and receive reasonable compensation for his services in such capacity, and (iii) HCRI or any Subsidiary may enter into any transaction with an Affiliate providing for the leasing of property, the rendering or receipt of services or the purchase or sale of product, inventory and other assets in the ordinary course of business if the monetary or business consideration arising therefrom would be substantially as advantageous to HCRI or a Subsidiary as the monetary or business consideration that would obtain in a comparable arm's length transaction with a Person not an Affiliate. SECTION 7.15 HAZARDOUS MATERIAL. Cause or permit: (i) any Hazardous Material to be placed, held, located or disposed of, on, under or at any Facility or any part thereof, except for such Hazardous Materials that are necessary for HCRI's or any Subsidiary's or any Operator's operation of its business thereon and which shall be used, stored, treated and disposed of in compliance with all applicable Environmental Laws and Regulations or (ii) such Facility or any part thereof to be used as a collection, storage, treatment or disposal site for any Hazardous Material. HCRI and each Subsidiary acknowledges and agrees that the Agent and the Banks shall have no liability or responsibility for either: -56- 62 (i) damage, loss or injury to human health, the environment or natural resources caused by the presence, disposal, release or threatened release of Hazardous Materials on any part of such Facility; or (ii) abatement and/or clean-up required under any applicable Environmental Laws and Regulations for a release, threatened release or disposal of any Hazardous Materials located at any Facility or used by or in connection with the HCRI's or any Subsidiary's or any Operator's business. SECTION 7.15 CONSTRUCTION INVESTMENTS. Permit the outstanding principal amount, accrued interest on and related fees in connection with its Construction Investments to exceed (i) an amount equal to twenty (20%) percent of the Borrowers' consolidated Investments in Healthcare Assets during the first twelve (12) months of the Credit Period, and (ii) an amount equal to seventeen and one-half (17.5%) percent of the Borrowers' consolidated Investments in Healthcare Assets at any time thereafter; provided, the Borrowers shall not make a Construction Investment for a Facility unless (i) there is included in the terms thereof an agreement for the conversion of the Borrower(s) interests in the Facility upon the completion thereof into full ownership or a mortgage interest, and (ii) if a mortgage interest, the Borrower(s) shall retain a first Lien on such Facility. -57- 63 ARTICLE 8. EVENTS OF DEFAULT. If any one or more of the following events ("EVENTS OF DEFAULT") shall occur and be continuing, the Revolving Credit Commitments shall terminate and the entire unpaid balance of the principal of and interest on the Notes outstanding and all other obligations and Indebtedness of each of the Borrowers to the Banks and the Agent arising hereunder and under the other Loan Documents shall immediately become due and payable upon written notice to that effect given to the Borrowers by the Agent (except that in the case of the occurrence of any Event of Default described in Section 8.6 no such notice shall be required), without presentment or demand for payment, notice of non-payment, protest or further notice or demand of any kind, all of which are expressly waived by each Borrower: SECTION 8.1 PAYMENTS. Failure by any Borrower to make any payment or mandatory repayment of principal or interest upon any Note or to make any payment of any Fee when due; or SECTION 8.2 CERTAIN COVENANTS. Failure by any Borrower to perform or observe any of the agreements of a Borrower contained in Section 6.9 or Article 7 hereof; or SECTION 8.3 OTHER COVENANTS. Failure by any Borrower to perform or observe any other term, condition or covenant of this Agreement or of any of the other Loan Documents to which it is a party, which shall remain unremedied for a period of thirty (30) days after notice thereof shall have been given to such Borrower by the Agent; or SECTION 8.4 OTHER DEFAULTS. (a) Failure by any Borrower to perform or observe any term, condition or covenant of any bond, note, debenture, loan agreement, indenture, guaranty, trust agreement, mortgage or similar instrument to which it is a party or by which it is bound, or by which any of its properties or assets may be affected (a "DEBT INSTRUMENT"), so that, as a result of any such failure to perform, the Indebtedness included therein or secured or covered thereby may be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable; or -58- 64 (b) Any event or condition referred to in any Debt Instrument shall occur or fail to occur, so that, as a result thereof, the Indebtedness included therein or secured or covered thereby may be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable; or (c) Failure to pay any Indebtedness for borrowed money due at final maturity or pursuant to demand under any Debt Instrument; PROVIDED, HOWEVER, that the provisions of this Section 8.4 shall not be applicable to any Debt Instrument that on the date this Section 8.4 would otherwise be applicable thereto, relates to or evidences Indebtedness in a principal amount of less than $1,500,000; or SECTION 8.5 REPRESENTATIONS AND WARRANTIES. Any representation or warranty made in writing to the Banks or the Agent in any of the Loan Documents or in connection with the making of the Loans, or any certificate, statement or report made or delivered in compliance with this Agreement, shall have been false or misleading in any material respect when made or delivered; or SECTION 8.6 BANKRUPTCY. (a) Any Borrower shall make an assignment for the benefit of creditors, file a petition in bankruptcy, be adjudicated insolvent, petition or apply to any tribunal for the appointment of a receiver, custodian, or any trustee for it or a substantial part of its assets, or shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, or any Borrower shall take any corporate action to authorize any of the foregoing actions; or there shall have been filed any such petition or application, or any such proceeding shall have been commenced against it, that remains undismissed for a period of sixty (60) days or more; or any order for relief shall be entered in any such proceeding; or any Borrower by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or the appointment of a custodian, receiver or any trustee for it or any substantial part of its properties, or shall suffer any custodianship, receivership or trusteeship to continue undischarged for a period of thirty (30) days or more; or (b) Any Borrower shall generally not pay its debts as such debts become due; or -59- 65 (c) Any Borrower shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property that may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint that is not vacated within thirty (30) days from the date thereof; or SECTION 8.7 JUDGMENTS. Any judgment against any Borrower or any attachment, levy or execution against any of its properties for any amount in excess of One Million Five Hundred Thousand ($1,500,000) Dollars shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty (30) days or more; or SECTION 8.8 ERISA. (a) The termination of any Plan or the institution by the PBGC of proceedings for the involuntary termination of any Plan, in either case, by reason of, or that results or could result in, a "material accumulated funding deficiency" under Section 412 of the Code; or (b) Failure by any Borrower to make required contributions, in accordance with the applicable provisions of ERISA, to each of the Plans hereafter established or assumed by it; or SECTION 8.9 MATERIAL ADVERSE EFFECT. There shall occur a Material Adverse Effect; or SECTION 8.10 OWNERSHIP. (i) Any Person, or a group of related Persons, shall acquire (a) beneficial ownership in excess of 25% of the outstanding stock of HCRI or other voting interest having ordinary voting powers to elect a majority of the directors, managers or trustees of HCRI (irrespective of whether at such time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency), or (b) all or substantially all of the Investments of HCRI, or (ii) a majority of the Board of Directors of HCRI, at any time, shall be composed of Persons other than (a) Persons who were members of the Board of Directors on the date of this Agreement, or (b) Persons who subsequently become members of the Board of Directors and who either (x) are appointed or recommended for election with -60- 66 the affirmative vote of a majority of the directors in office as of the date of this Agreement, or (y) are appointed or recommended for election with the affirmative vote of a majority of the Board of Directors of HCRI then in office; or SECTION 8.11 REIT STATUS, ETC. HCRI shall at any time fail to maintain its REIT Status, or HCRI or any Subsidiary shall lose, through suspension, termination, impoundment, revocation, failure to renew or otherwise, any material license or permit; or SECTION 8.12 MANAGEMENT. George L. Chapman shall cease for any reason whatsoever, including, without limitation, death or disability (as such disability shall be determined in the reasonable judgment of the Agent) to be and continuously perform the duties of an executive officer of HCRI and to be a member of its Board of Directors or, if such cessation shall occur as a result of the death or such disability, no successor satisfactory to the Agent, in its sole discretion, shall have become and shall have commenced to perform the duties of such executive officer of HCRI and serve as a member of HCRI's Board of Directors within thirty (30) days after such cessation; provided, however, that if any satisfactory successor shall have been so elected and shall have commenced performance of such duties within such period, the name of such successor or successors shall be deemed to have been inserted in place of George L. Chapman in this Section 8.12; or SECTION 8.13 ENVIRONMENTAL. Any of the Borrowers or any of their respective Facilities shall become subject to one or more Liens for costs or damages in excess of One Million ($1,000,000) Dollars individually or in the aggregate under any Environmental Laws and Regulations, such Liens shall remain in place for thirty (30) days after the creation thereof and such Liens are reasonably likely to cause a Material Adverse Effect; or SECTION 8.14 DEFAULT BY OPERATOR. Thirty (30) days after the acceleration by any Borrower of the obligations of an Operator as a result of any default in the payment of amounts which are due and owing under any lease, note, mortgage or related security documents in connection with any Facility of such Operator (such Facility, herein referred to as the "DEFAULTED FACILITY"), in the event the sum of Lease Rental Expense and/or Mortgage Expense arising from (i) the Defaulted Facility, and (ii) all Pooled Facilities, if any, of which the Defaulted Facility is a part, which have a Fixed Charge Coverage of less than 1.0 to 1.0, account for 12.5% or more of the aggregate amount of all Lease Rental Expense and/or Mortgage Expense owing to the Borrowers from all Operators during the immediately preceding four (4) calendar quarters. -61- 67 ARTICLE 9. THE AGENT. SECTION 9.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Bank hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and the other Loan Documents with such powers as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents together with such other powers as are reasonably incidental thereto. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents and shall not be a trustee for any Bank. The Agent shall not be responsible to the Banks for any recitals, statements, representations or warranties contained in this Agreement or the other Loan Documents in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or the other Loan Documents, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents or any other document referred to or provided for herein or therein or for the collectibility of the Loans or for any failure by any Borrower to perform any of its obligations hereunder or under the other Loan Documents. The Agent may employ agents and attorneys-in-fact and shall not be answerable, except as to money or securities received by it or its authorized agents, for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither the Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder or the other Loan Documents or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct. SECTION 9.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person or persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. As to any matters not expressly provided for by this Agreement or the other Loan Documents, the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or the other Loan Documents in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. -62- 68 SECTION 9.3 EVENTS OF DEFAULT. The Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on Loans) unless the Agent has received notice from a Bank or the Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default, the Agent shall give notice thereof to the Banks (and shall give each Bank notice of each such non-payment). The Agent shall (subject to Section 9.7 hereof) take such action with respect to such Default as shall be directed by the Required Banks. SECTION 9.4 RIGHTS AS A BANK. With respect to its Revolving Credit Commitment and the Loans made by it, the Agent in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as the Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with each Borrower or its Affiliates, as if it were not acting as the Agent, and the Agent may accept fees and other consideration from each Borrower or its Affiliates, for services in connection with this Agreement or any of the other Loan Documents or otherwise without having to account for the same to the Banks. SECTION 9.5 INDEMNIFICATION. The Banks shall indemnify the Agent (to the extent not reimbursed by each Borrower under Sections 10.1 and 10.2 hereof), ratably in accordance with the aggregate principal amount of the Loans made by the Banks (or, if no Loans are at the time outstanding, ratably in accordance with their respective Revolving Credit Commitments), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any of the other Loan Documents or any other documents contemplated by or referred to herein or therein or the transactions contemplated by or referred to herein or therein or the transactions contemplated hereby and thereby (including, without limitation, the costs and expenses that each Borrower is obligated to pay under Sections 10.1 and 10.2 hereof, but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of -63- 69 its agency duties hereunder) or the enforcement of any of the terms hereof or of any such other documents, PROVIDED THAT no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. SECTION 9.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank agrees that it has, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of each Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or the other Loan Documents. The Agent shall not be required to keep itself informed as to the performance or observance by each Borrower of this Agreement or the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of each Borrower. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent hereunder or the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of each Borrower, that may come into the possession of the Agent or any of its Affiliates. SECTION 9.7 FAILURE TO ACT. Except for action expressly required of the Agent hereunder, the Agent shall in all cases be fully justified in failing or refusing to act hereunder or thereunder unless it shall be indemnified to its satisfaction by the Banks against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. SECTION 9.8 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving not less than 10 days' prior written notice thereof to the Banks and each Borrower and the Agent may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or the Required Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, after consultation with the Borrowers, appoint a successor Agent which shall be a bank with a -64- 70 combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article 9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. SECTION 9.9 SHARING OF PAYMENTS. (a) Prior to any acceleration by the Agent and the Banks of the Obligations: (i) in the event that any Bank shall obtain payment in respect of a Note, or interest thereon, whether voluntarily or involuntarily, and whether through the exercise of a right of banker's lien, set-off or counterclaim against each Borrower or otherwise, in a greater proportion than any such payment obtained by any other Bank in respect of the corresponding Note held by it, then the Bank so receiving such greater proportionate payment shall purchase for cash from the other Bank or Banks such portion of each such other Bank's or Banks' Loan as shall be necessary to cause such Bank receiving the proportionate overpayment to share the excess payment with each Bank; and (ii) in the event that any Bank shall obtain payment in respect of any Interest Rate Contract to which such Bank is a party, whether voluntarily or involuntarily, and whether through the exercise of a right of banker's lien, set-off or counterclaim against each Borrower or otherwise, such Bank shall be permitted to retain the full amount of such payment and shall not be required to share such payment with any other Bank. (b) Upon or following any acceleration by the Agent and the Banks of the Obligations, in the event that any Bank shall obtain payment in respect of a Note, or interest or Fees thereon, or in respect of an Interest Rate Contract to which such Bank is a party, whether voluntarily or involuntarily, and whether through the exercise of a right of banker's lien, set-off or counterclaim against each Borrower or otherwise, in a greater proportion than any such payment obtained by any other Bank in respect of the aggregate amount of the corresponding Note held by such Bank and any Interest Rate Contract to which such Bank is a party, then the Bank so receiving such greater proportionate payment shall purchase for cash from the other Bank or Banks such portion of each such other Bank's or Banks' Loan as shall be necessary to cause such Bank receiving the proportionate overpayment to share the excess payment with each Bank. For the purposes of this subsection 9.9(b), payments on Notes received by each Bank shall be in the same proportion as the proportion of: -65- 71 (A) the sum of: (x) the Obligations owing to such Bank in respect of the Note held by such Bank, plus (y) the Obligations owing to such Bank in respect of Interest Rate Contracts to which such Bank is party, if any, to (B) the sum of: (x) the Obligations owing to all of the Banks in respect of all of the Notes, plus (y) the Obligations owing to all of the Banks in respect of all Interest Rate Contracts to which any Bank is a party; PROVIDED, HOWEVER, that, with respect to subsections 9.9(a)(i) and (b) above, if all or any portion of such excess payment or benefits is thereafter recovered from the Bank that received the proportionate overpayment, such purchase of Loans or payment of benefits, as the case may be, shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. -66- 72 ARTICLE 10. MISCELLANEOUS PROVISIONS. SECTION 10.1 FEES AND EXPENSES; INDEMNITY. (a) The Borrowers will promptly pay all costs of the Agent in preparing the Loan Documents and all costs and expenses of the issue of the Notes and of each Borrower's performance of and compliance with all agreements and conditions contained herein on its part to be performed or complied with and the reasonable fees and expenses and disbursements of counsel to the Agent in connection with the preparation, execution and delivery, administration, interpretation and enforcement of this Agreement, the other Loan Documents and all other agreements, instruments and documents relating to this transaction, the consummation of the transactions contemplated by all such documents, the preservation of all rights of the Banks and the Agent, the negotiation, preparation, execution and delivery of any amendment, modification or supplement of or to, or any consent or waiver under, any such document (or any such instrument that is proposed but not executed and delivered) and with any claim or action threatened, made or brought against any of the Banks or the Agent arising out of or relating to any extent to this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby (other than a claim or action resulting from the gross negligence, willful misconduct, or intentional violation of law by the Agent and or the Banks). (b) In addition, the Borrowers will promptly pay all costs and expenses (including, without limitation, reasonable fees and disbursements of counsel) suffered or incurred by each Bank in connection with its enforcement of the payment of the Notes held by it or any other sum due to it under this Agreement or any of the other Loan Documents or any of its other rights hereunder or thereunder. In addition to the foregoing, the Borrowers shall indemnify each Bank and the Agent and each of their respective directors, officers, employees, attorneys, agents and Affiliates against, and hold each of them harmless from, any loss, liabilities, damages, claims, costs and expenses (including reasonable attorneys' fees and disbursements) suffered or incurred by any of them arising out of, resulting from or in any manner connected with, the execution, delivery and performance of each of the Loan Documents, the Loans and any and all transactions related to or consummated in connection with the Loans (other than as a result of the gross negligence, willful misconduct or intentional violation of law by the party seeking indemnification), including, without limitation, losses, liabilities, damages, claims, costs and expenses suffered or incurred by any Bank or the Agent or any of their respective directors, officers, employees, attorneys, agents or Affiliates arising out of or related to any Environmental Liability or -67- 73 Environmental Proceeding, or in investigating, preparing for, defending against, or providing evidence, producing documents or taking any other action in respect of any commenced or threatened litigation, administrative proceeding or investigation under any federal securities law or any other statute of any jurisdiction, or any regulation, or at common law or otherwise against the Agent, the Banks or any of their officers, directors, affiliates, agents or Affiliates, that is alleged to arise out of or is based upon: (i) any untrue statement or alleged untrue statement of any material fact of any Borrower and its affiliates in any document or schedule filed with the Securities and Exchange Commission or any other governmental body; (ii) any omission or alleged omission to state any material fact required to be stated in such document or schedule, or necessary to make the statements made therein, in light of the circumstances under which made, not misleading; (iii) any acts, practices or omission or alleged acts, practices or omissions of any Borrower or its agents related to the making of any acquisition, purchase of shares or assets pursuant thereto, financing of such purchases or the consummation of any other transactions contemplated by any such acquisitions that are alleged to be in violation of any federal securities law or of any other statute, regulation or other law of any jurisdiction applicable to the making of any such acquisition, the purchase of shares or assets pursuant thereto, the financing of such purchases or the consummation of the other transactions contemplated by any such acquisition; or (iv) any withdrawals, termination or cancellation of any such proposed acquisition for any reason whatsoever. The indemnity set forth herein shall be in addition to any other obligations or liabilities of any Borrower to the Agent and the Banks hereunder, at common law or otherwise. The provisions of this Section 10.1 shall survive the payment of the Notes and the termination of this Agreement. SECTION 10.2 TAXES. If, under any law in effect on the date of the closing of any Loan hereunder, or under any retroactive provision of any law subsequently enacted, it shall be determined that any Federal, state or local tax is payable in respect of the issuance of any Note, or in connection with the filing or recording of any assignments, mortgages, financing statements, or other documents (whether measured by the amount of Indebtedness secured or otherwise) as contemplated by this Agreement, then each Borrower will pay any such tax and all interest and penalties, if any, and will indemnify the Banks and the Agent against and save each of them harmless from any loss or damage resulting from or arising out of the nonpayment or delay in payment of any such tax. If any such tax or taxes shall be assessed or levied against any Bank or any other holder of a Note, such Bank, or such other holder, as the case may be, may notify each Borrower and make -68- 74 immediate payment thereof, together with interest or penalties in connection therewith, and shall thereupon be entitled to and shall receive immediate reimbursement therefor from each Borrower. Notwithstanding any other provision contained in this Agreement, the covenants and agreements of the Borrowers in this Section 10.2 shall survive payment of the Notes and the termination of this Agreement. SECTION 10.3 PAYMENTS. As set forth in Article 2 hereof, all payments by each Borrower on account of principal, interest, fees and other charges (including any indemnities) shall be made to the Agent at the Principal Office of the Agent, in lawful money of the United States of America in immediately available funds, by wire transfer or otherwise, not later than 11:00 A.M. Cleveland, Ohio time on the date such payment is due. Any such payment made on such date but after such time shall, if the amount paid bears interest, be deemed to have been made on, and interest shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be made on the next succeeding Business Day and such extension shall be included in computing interest in connection with such payment. All payments hereunder and under the Notes shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes (after withholding for or on account of: (i) any present or future taxes, levies, imposts, duties or other similar charges of whatever nature imposed by any government or any political subdivision or taxing authority thereof, other than any tax (except those referred to in clause (ii) below) on or measured by the net income of the Bank to which any such payment is due pursuant to applicable federal, state and local income tax laws, and (ii) deduction of amounts equal to the taxes on or measured by the net income of such Bank payable by such Bank with respect to the amount by which the payments required to be made under this sentence exceed the amounts otherwise specified to be paid in this Agreement and the Notes). Upon payment in full of any Note, the Bank holding such Note shall mark the Note "Paid" and return it to the Borrowers. SECTION 10.4 SURVIVAL OF AGREEMENTS AND REPRESENTATIONS; CONSTRUCTION. All agreements, representations and warranties made herein shall survive the delivery of this Agreement and the Notes. The headings used in this Agreement and the table of contents are for convenience only and shall not be deemed to constitute a part hereof. All uses herein of the masculine -69- 75 gender or of singular or plural terms shall be deemed to include uses of the feminine or neuter gender, or plural or singular terms, as the context may require. SECTION 10.5 LIEN ON AND SET-OFF OF DEPOSITS. As security for the due payment and performance of all the Obligations, each Borrower hereby grants to Agent for the ratable benefit of the Banks a Lien on any and all deposits or other sums at any time credited by or due from the Agent or any Bank to the Borrower, whether in regular or special depository accounts or otherwise, and any and all monies, securities and other property of the Borrower, and the proceeds thereof, now or hereafter held or received by or in transit to any Bank or the Agent from or for such Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and any such deposits, sums, monies, securities and other property, may at any time after the occurrence and during the continuance of any Event of Default be set-off, appropriated and applied by any Bank or the Agent against any of the Obligations, whether or not any of such Obligations is then due or is secured by any collateral. SECTION 10.6 MODIFICATIONS, CONSENTS AND WAIVERS; ENTIRE AGREEMENT. No modification, amendment or waiver of or with respect to any provision of this Agreement, any Notes, or any of the other Loan Documents and all other agreements, instruments and documents delivered pursuant hereto or thereto, nor consent to any departure by any Borrower from any of the terms or conditions thereof, shall in any event be effective unless it shall be in writing and signed by the Agent and each Bank except that: (i) any modification or amendment of, or waiver or consent with respect to, Article 4 shall be required to be signed only by the Agent and the Required Banks (PROVIDED, HOWEVER, that the consummation of a Loan by a Bank shall be deemed, with respect to such Loan only, to have the effect of the execution by such Bank of a waiver of, or consent to a departure from, any term or provision of Article 4 that has not been satisfied as of the date of the consummation of such Loan); and (ii) any modification or amendment of, or waiver or consent with respect to, Articles 1 (other than the definition of "Required Banks" or any other defined term which is used in the application of any of the provisions of Article 2), 5, 6, 7, 8 (other than Section 8.1 hereof) and 10 (other than this Section 10.6) may be signed only by the Agent and the Required Banks. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on any Borrower in any case shall, of itself, entitle it to any other or further -70- 76 notice or demand in similar or other circumstances. This Agreement and the other Loan Documents embody the entire agreement and understanding among the Banks, the Agent and the Borrowers and supersede all prior agreements and understandings relating to the subject matter hereof. SECTION 10.7 REMEDIES CUMULATIVE; COUNTERCLAIMS. Each and every right granted to the Agent and the Banks hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Agent or any Bank or the holder of any Note to exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof or the exercise of any other right. The due payment and performance of the Obligations shall be without regard to any counterclaim, right of offset or any other claim whatsoever that any Borrower may have against any Bank or the Agent and without regard to any other obligation of any nature whatsoever that any Bank or the Agent may have to any Borrower, and no such counterclaim or offset shall be asserted by any Borrower (unless such counterclaim or offset would, under applicable law, be permanently and irrevocably lost if not brought in such action) in any action, suit or proceeding instituted by any Bank or the Agent for payment or performance of the Obligations. SECTION 10.8 FURTHER ASSURANCES. At any time and from time to time, upon the request of the Agent, each Borrower shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Agent may reasonably request in order to fully effect the purposes of this Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto or in connection with the Loans. SECTION 10.9 NOTICES. All notices, requests, reports and other communications pursuant to this Agreement shall be in writing, either by letter (delivered by hand or commercial messenger service or sent by certified mail, return receipt requested, except for routine reports delivered in compliance with Article 5 hereof which may be sent by ordinary first-class mail) or telecopy, addressed as follows: -71- 77 (a) If to the Borrowers: Health Care REIT, Inc. One SeaGate/Suite 1500 Toledo, Ohio 43603-1475 Attention: Mr. George L. Chapman Chairman of the Board, Chief Executive Officer and President Telecopier No: (419) 247-2826 with a copy to: Shumaker, Loop & Kendrick, LLP North Courthouse Square 1000 Jackson Toledo, Ohio 43624-1573 Attention: Mary Ellen Pisanelli, Esq. Telecopier No.: (419) 241-6894 (b) If to any Bank: To its address set forth below its name on the signature pages hereof, with a copy to the Agent; and (c) If to the Agent: KeyBank National Association, as Agent 127 Public Square Cleveland, Ohio 44114-1306 Attention: Mr. Joseph T. Resor, III Senior Vice President Telecopier No.: (216) 689-5970 with a copy (other than in the case of Borrowing Notices and reports and other documents delivered in compliance with Article 5 hereof) to: Winston & Strawn 200 Park Avenue New York, New York 10166 Attention: Richard S. Talesnick, Esq. Telecopier No.: (212) 294-4700 Any notice, request, demand or other communication hereunder shall be deemed to have been given on: (x) the day on which it is telecopied to such party at its telecopier number specified above (provided such notice shall be effective only if followed -72- 78 by one of the other methods of delivery set forth herein) or delivered by receipted hand or such commercial messenger service to such party at its address specified above, or (y) on the third Business Day after the day deposited in the mail, postage prepaid, if sent by mail. Any party hereto may change the Person, address or telecopier number to whom or which notices are to be given hereunder, by notice duly given hereunder; PROVIDED, HOWEVER, that any such notice shall be deemed to have been given hereunder only when actually received by the party to which it is addressed. SECTION 10.10 COUNTERPARTS. This Agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 10.11 SEVERABILITY. The provisions of this Agreement are severable, and if any clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Agreement in any jurisdiction. Each of the covenants, agreements and conditions contained in this Agreement is independent and compliance by the Borrower with any of them shall not excuse non-compliance by the Borrower with any other. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. SECTION 10.12 BINDING EFFECT; NO ASSIGNMENT OR DELEGATION BY BORROWERS. This Agreement shall be binding upon and inure to the benefit of each of the Borrowers and their respective successors and to the benefit of the Banks and the Agent and their respective successors and assigns. The rights and obligations of each Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Agent and the Required Banks, and any purported assignment or delegation without such consent shall be void. -73- 79 SECTION 10.13 ASSIGNMENTS AND PARTICIPATIONS BY BANKS. (a) Each Bank may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Revolving Credit Commitment, the Loans owing to it, and the Note held by it); PROVIDED, HOWEVER, that: (i) the Borrowers and the Agent must give prior written consent to such assignment (unless such assignment is to an Affiliate of such Bank), which consent shall not be unreasonably withheld, (ii) the parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance, and a processing fee of $3,500.00, (iii) each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Bank's rights and obligations under this Agreement, (iv) the amount of the Revolving Credit Commitment of the assigning Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 and shall be an integral multiple of $1,000,000, and (v) each such assignment shall be to an Eligible Assignee. Upon such execution, delivery and acceptance, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof: (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank hereunder, and (y) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of each Borrower or the performance or observance by each Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant -74- 80 hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of such financial statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (c) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee representing that it is an Eligible Assignee, together with any Note subject to such assignment, the Agent shall: (i) accept such Assignment and Acceptance, and (ii) give prompt notice thereof to the Borrowers. Within five (5) Business Days after its receipt of such notice, the Borrowers, at their own expense, shall execute and deliver to the Agent in exchange for the surrendered Note a new Note to the order of such Eligible Assignee in an amount equal to the Revolving Credit Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Bank has retained a Revolving Credit Commitment hereunder, a new Note to the order of the assigning Bank in an amount equal to the Revolving Credit Commitment retained by it hereunder. Such new Note shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (d) Each Bank may, without the prior consent of the Agent, the other Banks or the Borrowers, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Revolving Credit Commitment, the Loans owing to it, and the Note held by it); PROVIDED, HOWEVER, that: (i) such Bank's obligations under this Agreement (including, without limitation, its Revolving Credit Commitment hereunder) shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Bank shall remain the holder of any such Note for all purposes of this Agreement, and the Borrowers, the Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. -75- 81 (e) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.13, disclose to the assignee or participant or proposed assignee or participant, any information relating to any Borrower furnished to such Bank by or on behalf of such Borrower; PROVIDED THAT, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to such Borrower received by it from such Bank. (f) Anything in this Section 10.13 to the contrary notwithstanding, any Bank may assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Bank from its obligations hereunder. SECTION 10.14 DELIVERY OF TAX FORMS. Each Bank that is not organized under the laws of the United States or a state thereof shall: (a) deliver to the Borrowers and Fleet, on or prior to the date of the execution and delivery of this Agreement or the date on which it becomes a Bank hereunder, (i) two accurate and duly completed executed copies of United States IRS Form 1001 or 4224, or successor applicable form, as the case may be, and (ii) an accurate and complete IRS Form W-8 or W-9, or successor applicable form, as the case may be; (b) deliver to the Borrowers and Fleet two further accurate and complete executed copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrowers; and (c) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the Borrowers or Fleet; unless in any such case under clause (b) above an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank so advises the Borrower and Fleet. Such Bank shall -76- 82 certify (i) in the case of a Form 1001 or 4224 that is provided pursuant to Section 10.14(a), that it is entitled to receive payments under this Agreement without deduction or withholding of any United States Federal income taxes; (ii) in the case of an IRS Form 1001 or 4224 that is provided pursuant to Section 10.14(b), to the extent legally entitled to do so, that it is entitled to receive payments under this Agreement without, or at a reduced rate of, deduction or withholding of any United States Federal income taxes; and (iii) and in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person not organized under the laws of the United States or a state thereof that is an assignee hereunder shall, prior to the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section 10.14. SECTION 10.15 GOVERNING LAW; CONSENT TO JURIS- DICTION; WAIVER OF TRIAL BY JURY. (A) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH AND THEREWITH, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS RULES PERTAINING TO CONFLICTS OF LAWS. (B) EACH BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT, AND EACH OTHER LOAN DOCUMENT MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. EACH BORROWER, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING. EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO ANY SUCH ACTION OR PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED FOR IN SECTION 10.9 HEREOF. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS. EACH BORROWER SHALL NOT BE ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE OTHER THAN THE STATE OF NEW YORK UNLESS SUCH DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF NEW YORK. NOTHING IN THIS SECTION 10.15 SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF THE AGENT OR ANY BANK TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION OR THE RIGHT, IN CONNECTION WITH ANY LEGAL ACTION OR PROCEEDING WHATSOEVER, TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. -77- 83 (C) EACH BORROWER, THE BANKS AND THE AGENT WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF. SECTION 10.16 SYNDICATION AGENT. The parties hereto acknowledge that Fleet Bank, N.A. has acted as "syndication agent" in connection with the consummation of the transactions contemplated by this Loan Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date first above written. HEALTH CARE REIT, INC. HCRI PENNSYLVANIA PROPERTIES, INC. HCRI OVERLOOK GREEN, INC. HCRI TEXAS PROPERTIES, INC. HCRI TEXAS PROPERTIES, LTD. BY HEALTH CARE REIT, INC., ITS GENERAL PARTNER BY_______________________________ TITLE GEORGE L. CHAPMAN, as Chief Executive Officer of all of the aforementioned corporations, has executed this Loan Agreement and intending that all entities above named are bound and are to be bound by the one signature as if he had executed this Loan Agreement separately for each of the above named entities. -78- 84 REVOLVING CREDIT COMMITMENT: - ---------------------------- $20,000,000 KEYBANK NATIONAL ASSOCIATION, AS AGENT AND AS A BANK BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: KeyBank National Association 127 Public Square, MC:OH-01-27-0605 Cleveland, Ohio 44114 Attention: Ms. Judi Trapp Address for Notices: KeyBank National Association 127 Public Square, MC:OH-01-27-0605 Cleveland, Ohio 44114 Attention: Ms. Carolyn Briner Telecopier: (216) 689-5970 -79- 85 REVOLVING CREDIT COMMITMENT: - ---------------------------- $20,000,000 FLEET BANK, N.A. BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: Fleet Bank, N.A. 1133 Avenue of the Americas New York, New York 10036 Attention: Mr. Robert A. Isaksen Address for Notices: Fleet Bank, N.A. 1133 Avenue of the Americas New York, New York 10036 Attention: Mr. Robert A. Isaksen Telecopier: (212) 703-1724 -80- 86 REVOLVING CREDIT COMMITMENT: $15,000,000 HARRIS TRUST AND SAVINGS BANK BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: Harris Trust and Savings Bank 111 West Monroe Chicago, Illinois 60603 Attention: Arlett Hall Address for Notices: Harris Trust and Savings Bank 111 West Monroe Chicago, Illinois 60603 Attention: Arlett Hall Telecopier: (312) 461-2591 -81- 87 REVOLVING CREDIT COMMITMENT: - ---------------------------- $15,000,000 THE SUMITOMO BANK, LIMITED BY_______________________________ TITLE BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: The Sumitomo Bank, Limited U.S. Commercial Banking Department 233 S. Wacker Drive, 54th Floor Chicago, Illinois 60606 Attention: Vice President of Administration Address for Notices: The Sumitomo Bank, Limited U.S. Commercial Banking Department 233 S. Wacker Drive, 54th Floor Chicago, Illinois 60606 Attention: Vice President of Administration Telecopier: (312) 876-1995 with a copy to: The Sumitomo Bank, Limited 2450 CNG Tower 625 Liberty Avenue Pittsburgh, Pennsylvania 15222 Attention: Manager Telecopier: (412) 288-1819 -82- 88 REVOLVING CREDIT COMMITMENT: - ---------------------------- $15,000,000 COMERICA BANK BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: Comerica Bank P.O. Box 75000 Detroit, Michigan 48275-3266 Attention: Craig F. Durno Address for Notices: Comerica Bank P.O. Box 75000 Detroit, Michigan 48275-3266 Attention: Craig F. Durno Telecopier: (313) 222-3420 -83- 89 REVOLVING CREDIT COMMITMENT: - ---------------------------- $15,000,000 BHF-BANK, AKTIENGESELLSCHAFT GRAND CAYMAN BRANCH BY_______________________________ TITLE BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: BHF-Bank, Aktiengesellschaft 590 Madison Avenue New York, New York 10022-2540 Attention: Ms. Renate Boston Address for Notices: BHF-Bank, Aktiengesellschaft 590 Madison Avenue New York, New York 10022-2540 Attention: Ms. Renate Boston Telecopier: (212) 756-5536 -84- 90 REVOLVING CREDIT COMMITMENT: - ---------------------------- $15,000,000 NATIONSBANK OF TEXAS, N.A. BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: NationsBank of Texas, N.A. 901 Main Street Dallas, Texas 75202 Attention: Barbara Harris Address for Notices: NationsBank of Texas, N.A. 901 Main Street Dallas, Texas 75202 Attention: Barbara Harris Telecopier: (214) 508-0944 -85- 91 REVOLVING CREDIT COMMITMENT: - ---------------------------- $15,000,000 BANK ONE, DAYTON, NATIONAL ASSOCIATION BY_____________________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: Bank One, Dayton, NA 40 N. Main Street Dayton, Ohio 45423 Attention: Commercial Loan Operations Address for Notices: Bank One, Dayton, NA Commercial Banking 40 N. Main Street Dayton, Ohio 45423 Attention: Ms. Karen St. Arnaud Telecopier: (937) 449-4885 -86- 92 REVOLVING CREDIT COMMITMENT: - ---------------------------- $15,000,000 NATIONAL CITY BANK BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: National City Bank 1900 East Ninth Street, Loc 3032 Cleveland, Ohio 44114 Attention: Ms. Wendy Pollarine Address for Notices: National City Bank 1900 East Ninth Street, Loc 2104 Cleveland, Ohio 44114 Attention: Ms. Lisa Gargas Telecopier: (216) 575-9396 -87- 93 REVOLVING CREDIT COMMITMENT: - ---------------------------- $10,000,000 MANUFACTURERS AND TRADERS TRUST COMPANY BY_____________________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: M & T Center One Fountain Plaza, 12th Floor Buffalo, New York 14203-1495 Attention: Mr. C. Gregory Vogelsang Address for Notices: M & T Center One Fountain Plaza, 12th Floor Buffalo, New York 14203-1495 Attention: Ms. Patricia Gustina Telecopier: (716) 848-7318 -88- 94 REVOLVING CREDIT COMMITMENT: - ---------------------------- $10,000,000 KREDIETBANK N.V. BY_______________________________ TITLE BY_______________________________ TITLE Lending Office for Base Rate Loans: Kredietbank N.V., New York Branch 125 West 55th Street New York, New York 10019 Attention: Lynda Resuma Lending Office for Base Rate Loans: Kredietbank N.V., Grand Cayman Branch 125 West 55th Street New York, New York 10019 Attention: Lynda Resuma Address for Notices: Kredietbank N.V. 125 West 55th Street New York, New York 10019 Attention: John Thierfelder Telecopier: (212) 541-0793 -89- 95 REVOLVING CREDIT COMMITMENT: - ---------------------------- $10,000,000 NBD BANK BY_______________________________ TITLE Lending Office for Base Rate Loans and LIBOR Loans: NBD Bank 611 Woodward Avenue Detroit, Michigan 48226 Attention: C. Allen Address for Notices: NBD Bank 611 Woodward Avenue Detroit, Michigan 48226 Attention: C. Allen Telecopier: (313) 225-1212 -90- 96 EXHIBITS AND SCHEDULES TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- EXHIBITS - -------- 1 List of Borrowers A Form of Note B Form of Assignment and Acceptance C Form of Borrowing Base Certificate D Form of Compliance Certificate SCHEDULES - --------- 3.1 States of Incorporation and Qualification, and Capitalization of Borrowers and Subsidiaries 3.2 Consents, Waivers, Approvals; Violation of Agreements 3.6 Judgments, Actions, Proceedings 3.7 Defaults; Compliance with Laws, Regulations, Agreements 3.8 Burdensome Documents 3.13 Name Changes, Mergers, Acquisitions 3.16 Employee Benefit Plans 5.8 Form of Quarterly Facility Report 7.1 Permitted Indebtedness and Guarantees 7.2 Permitted Security Interests, Liens and Encumbrances 7.11 Permitted Capital Expenditures 97 EXHIBIT 1 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- LIST OF BORROWERS ----------------- NAME OF BORROWER STATE OF ORGANIZATION - ---------------- --------------------- Health Care REIT, Inc. Delaware HCRI Pennsylvania Properties, Inc. Pennsylvania HCRI Overlook Green, Inc. Pennsylvania HCRI Texas Properties, Inc. Delaware HCRI Texas Properties, Ltd. Texas 98 EXHIBIT A TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- FORM OF NOTE ------------ $ Dated: March 28, 1997 - ---------------------- FOR VALUE RECEIVED, each of the undersigned (collectively, the "BORROWERS"), hereby jointly and severally promises to pay to the order of _________________________ (the "BANK") on the Revolving Credit Commitment Termination Date, the principal sum of _____________________ ($________) Dollars, or such lesser amount as shall be equal to the aggregate unpaid principal amount of the Loans outstanding on the close of business on the Revolving Credit Commitment Termination Date made by the Bank to the Borrowers; and to pay interest on the unpaid principal amount of each Loan from the date thereof at the rates per annum and for the periods set forth in or established by the Agreement and calculated as provided therein. All indebtedness outstanding under this Note shall bear interest (computed in the same manner as interest on this Note prior to the relevant due date) at the applicable Post-Default Rate for all periods when an Event of Default has occurred and is continuing, commencing on the occurrence of such Event of Default until such Event of Default has been cured or waived as acknowledged in writing by the Agent, and all of such interest shall be payable on demand. Anything herein to the contrary notwithstanding, the obligation of the Borrowers to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Bank to the extent that the Bank's receipt thereof would not be permissible under the law or laws applicable to the Bank limiting rates of interest which may be charged or collected by the Bank, Any such payments of interest which are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrowers to the Bank on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Bank limiting rates of interest which may be charged or collected by the Bank. Payments of both principal and interest on this Note are to be made to the office of KeyBank National Association, as Agent, at 127 Public Square, Cleveland, Ohio 44114-1306 or such other place as the holder hereof shall designate to the Borrowers in writing, in lawful money of the United States of America in immediately available funds. 99 This Note is one of the Notes referred to in, AND is entitled to the benefits of, the Loan Agreement dated of even date herewith by and among the Borrowers, the Banks signatory thereto (including the Bank) and the Agent (as amended, modified or supplemented from time to time, the "Agreement") . Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Agreement. The Bank is hereby authorized by the Borrowers to record on the schedule to this Note (or on a supplemental schedule thereto) the amount of each Loan made by the Bank to the Borrowers and the amount of each payment or repayment of principal of such Loans received by the Bank, it being understood, however, that failure to make any such notation shall not affect the rights of the Bank or the obligations of the Borrowers hereunder in respect of this Note. The Bank may, at its option, record such matters in its internal records rather than on such schedule. Upon the occurrence of any Event of Default, the principal amount and accrued interest on this Note may be declared due and payable in the manner and with the effect provided in the Loan Agreement. The Borrowers shall pay costs and expenses of collection, including, without limitation, attorneys' fees and disbursements in the event that any action, suit or proceeding is brought by the holder hereof to collect this Note. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS RULES PERTAINING TO CONFLICTS OF LAWS. HEALTH CARE REIT, INC. HCRI PENNSYLVANIA PROPERTIES, INC. HCRI OVERLOOK GREEN, INC. HCRI TEXAS PROPERTIES, INC. HCRI TEXAS PROPERTIES, LTD. By Health Care REIT, Inc., Its General Partner By ------------------------------- Title GEORGE L. CHAPMAN, as Chief Executive Officer of all of the aforementioned corporations, has executed this Note intending that all entities above named are bound and are to be bound by the one signature as if he had executed this Note separately for each of the above named entities. -2- 100 Schedule A ---------- - -------------------------------------------------------------------------------- PRINCIPAL PAYMENTS - --------------------------------------------------------------------------------
Note dated March __, 1997 payable to the order of [Bank] ----------------------- Interest Period (if other than a Amount Unpaid Principal Base Rate Loan) of Principal Principal Notation Date Amount of Loan and Interest Rate Repaid Balance Made By - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ---------- - ---- -------------- ----------------- ------------ --------- ----------
101 EXHIBIT B TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- FORM OF ASSIGNMENT AND ACCEPTANCE --------------------------------- Dated --------------- Reference is hereby made to the Loan Agreement dated March 28, 1997 (the "Loan Agreement") by and among Health Care REIT, Inc. and its Subsidiaries (collectively, the "Borrowers"), the Banks signatory thereto (collectively, the "Banks") and KeyBank National Association in its capacity as agent for the Banks (in such capacity, the "Agent") . Capitalized terms used herein that are defined in the Loan Agreement that are not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement. __________________________, a _______________________ (the "Assignor") and ____________________________________________________, a ___________________, (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse, representation or warranty of any kind except as expressly stated herein, and the Assignee hereby purchases and assumes from the Assignor, a % interest in and to all of the Assignor's rights and obligations under the Loan Agreement as of the Effective Date (as defined below) (including, without limitation, such percentage interest in the Assignor's Revolving Credit Commitment as in effect on the Effective Date, and the Loans owing to the Assignor on the Effective Date, and the Note(s) held by the Assignor). 2. The Assignor: (i) represents and warrants that as of the date hereof its Revolving Commitment (without giving effect to assignments thereof that have not yet become effective) is $ and the aggregate outstanding principal amount of Loans owing to it (without giving effect to assignments thereof that have not yet become effective) is $ ; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder, and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any other instrument or document furnished pursuant thereto; and (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or any other Loan Party or the performance or observance by the Borrowers or any other Loan Party of any of their respective obligations under 102 the Loan Agreement or any other instrument or document furnished pursuant thereto; and (v) attaches the Note(s) referred to in paragraph 1 above and requests that the Agent exchange such Note(s) for new Note(s) as follows: a Note dated the Effective Date (as such term is defined below) in the principal amount of $ payable to the order of the Assignee and a Note dated the Effective Date in the principal amount of $ payable to the order of the Assignor. 3. The Assignee: (i) confirms that it has received a copy of the Loan Agreement, together with copies of such financial statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as its agent on its behalf and to exercise such powers under the Loan Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Bank; and (vi) specifies as its addresses for Base Rate Loans and LIBOR Loans (and address for notices) the offices set forth beneath its name on the signature pages hereof. 4. The effective date for this Assignment and Acceptance shall be (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance by the Agent, together with a processing fee of $3,500. 5. Upon such acceptance, as of the Effective Date: (i) the Assignee shall be a party to the Loan Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Agreement. 6. Upon such acceptance, from and after the Effective Date, the Agent shall make all payments under the Loan Agreement and the Note(s) in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Loan Agreement and the Note(s) for periods prior to the Effective Date directly between themselves. -2- 103 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. [NAME OF ASSIGNOR] By ------------------------------------ Title [NAME OF ASSIGNEE] By ------------------------------------- Title Lending Office for Base Rate Loans: Lending Office for LIBOR Loans: Attention: Address for Notices: Attention: Telephone No.: Telecopier No.: Accepted this ___ day of ----------------, ----- KEYBANK NATIONAL ASSOCIATION, as Agent By - -------------------------------------- Title -3- 104 EXHIBIT C TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- FORM OF BORROWING BASE CERTIFICATE ---------------------------------- Eligible Investments as of most recent quarter ended: Unencumbered Real Estate -------------- Mortgages -------------- Total Eligible Investments as of most recent quarter ended: ============== Additions of Eligible investments Acquired/To Be Acquired with this Borrowing Request After The End of the Most Recent Quarter Ended -------------- Deductions of Eligible Assets Sold -------------- After The End of the Most Recent Quarter Ended ============== X 66 2/3% TOTAL ELIGIBLE INVESTMENTS --------------------- -------------- Advance Rate Available Collateral at ------------------- -------------- PLUS: CASH as of ------------- -------------- LESS: Unsecured Debt as of ---------------------- -------------- Current Maturities of Secured indebtedness -------------- Funded Indebtedness as of ----------------- -------------- (per clause (III) of "Borrowing Base", definition) -------------- TOTAL BORROWING BASE AT 0 -------------------- -------------- Outstanding Under Loan Agreement -------------- Availability as of 0 ------------------ ============== 105 EXHIBIT D TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- FORM OF COMPLIANCE CERTIFICATE ------------------------------ Section 6.9 (Financial Covenants): Health Care REIT, Inc. Loan Agreement Compliance Certificate: Quarter Ended (date) a) Maximum Funded Indebtedness to Tangible Net Worth of Not Greater Than 1.10:1.00: As of (date) in thousands Funded Indebtedness $ ================ Shareholders' Equity $ ---------------- less: Goodwill and Noncompete Agreements ---------------- Unamortized Deferred Costs ---------------- Treasury Stock ---------------- Tangible Net Worth ---------------- Ratio COMPLIANCE ---------- ******************************************************************************** b) Minimum Tangible Net Worth of Not Less Than $300,000,000 plus 100% of Net Issuance Proceeds: As of: (date) in thousands Tangible Net Worth $ ---------------- plus: Net Equity Proceeds (excluding DRIP) ---------------- Total Tangible Net Worth ================ COMPLIANCE ---------- ******************************************************************************** c) Minimum EBITDA/Interest Expense of Not Less than 200% (rolling four quarters basis): HCRI: Last Four Quarters EBITDA: March 31, 1997 $ ------------------ December, 1996 $ ------------------ September, 1996 $ ------------------ June, 1996 $ ------------------ Rolling Four Quarter EBITDA $ =============== Last Four Quarter Interest Expense on All Indebtedness: March 31, 1997 $ ------------------ December, 1996 $ ------------------ September, 1996 $ ------------------ June, 1996 $ ------------------ Rolling Four Quarter Interest $ =============== Ratio (%) COMPLIANCE ------- ---------- ******************************************************************************** d) Minimum HCRI's Fixed Charge Coverage of Not Less Than 1.05:1.00 (rolling four quarters) HCRI: Rolling Four Quarter EBITDA (Above) $ --------------- Rolling Four Quarter Interest (Above) $ --------------- Cash Dividend Paid for Quarter Ended: March 31, 1997 $ ------------------ December, 1996 $ ------------------ September, 1996 $ ------------------ June, 1996 $ ------------------ Rolling Four Quarter Cash Dividends Paid $ --------------- Balloon Payments $ --------------- Sub-Total $ --------------- Ratio COMPLIANCE ---------- ******************************************************************************** 106 SCHEDULE 3.1 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- STATES OF INCORPORATION AND QUALIFICATION, AND CAPITALIZATION OF BORROWERS ------------------------------- HEALTH CARE REIT, INC. - ---------------------- (i) State of Incorporation: Delaware (ii) Capitalization: $448,847,129.00 (12/31/96) (iii) Business: Investments in health care facilities (iv) States of Qualification: Alabama, Arizona, Colorado, Connecticut, Florida, Illinois, Indiana, Kentucky, Massachusetts, Missouri, Oklahoma, New Mexico, North Carolina, Ohio, Pennsylvania, Texas, Virginia and West Virginia (v) Subsidiaries: HCRI Pennsylvania Properties, Inc. HCRI Overlook Green, Inc. HCRI Texas Properties, Inc. HCRI Texas Properties, Ltd. HCRI PENNSYLVANIA PROPERTIES, INC. - ---------------------------------- (i) State of Incorporation: Pennsylvania (ii) Capitalization: $1,000.00 (initial) (iii) Business: Investments in health care facilities (iv) States of Qualification: None (v) Subsidiaries: None 107 HCRI OVERLOOK GREEN, INC. - ------------------------- (i) State of Incorporation: Pennsylvania (ii) Capitalization: $1,000.00 (initial) (iii) Business: Investments in health care facilities (iv) States of Qualification: None (v) Subsidiaries: None HCRI TEXAS PROPERTIES, INC. - --------------------------- (i) State of Incorporation: Delaware (ii) Capitalization: $1,000.00 (initial) (iii) Business: Investments in health care facilities (iv) States of Qualification: None (v) Subsidiaries: None HCRI TEXAS PROPERTIES, LTD. - --------------------------- (i) State of Incorporation: Texas (ii) Capitalization: $1,000.00 (initial) (iii) Business: Investments in health care facilities (iv) States of Qualification: None (v) Subsidiaries: None 108 SCHEDULE 3.2 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- CONSENTS, WAIVERS, APPROVALS; VIOLATION OF AGREEMENTS ----------------------- None 109 SCHEDULE 3.6 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- JUDGMENTS, ACTIONS, PROCEEDINGS ------------------------------- See Attached 110 On March 14, 1995, the Company commenced an action in the Circuit Court for Pinellas County, Florida, against Psychiatric Hospitals of America, Inc. ("PHA") and PHA's wholly owned subsidiary, Psychiatric Hospitals of Florida, INC. ("PHFI") to, INTER ALIA, collect on a loan made to PHA (the "PHA Note") and a promissory note in the amount of $10,000,000 made in favor of PHA (the "PHFI Note") and to foreclose the first mortgage on a 200-bed psychiatric hospital known as "Horizon Hospital" owned and operated by PHFI (the "PHFI Mortgage"). The foregoing action is styled: HEALTH CARE REIT, INC.'S V. PSYCHIATRIC HOSPITALS OF AMERICA, INC. ("PHA"), ET AL., and is numbered 95-1535-CI, Division 21, on the docket of said court. On March 14, 1995, the Company also commenced an action in the Circuit Court for Dade County, Florida, against New Dodge Management Company ("New Dodge") to, INTER ALIA, to collect on a promissory note in the amount of $3,700,000 (the "New Dodge Note") and to foreclose on a second mortgage on a 94-bed psychiatric hospital known as "Harbor View Hospital" owned and operated by New Dodge (the "New Dodge Mortgage") of which the Company is the assignee. The foregoing action is styled: HEALTH CARE REIT, INC.'S NEW DODGE MANAGEMENT CORPORATION, ET AL., and is numbered 95-05035, Division 10, on the docket of said court. Finally, on April 6, 1995, the Company commenced an action in the Circuit Court for Dade County, Florida, against Robert Cohen ("Cohen") to enforce the terms of a $500,000 personal guaranty on the loan executed by Cohen. The foregoing action is styled: HEALTH CARE REIT, INC. V. ROBERT COHEN and is numbered 95-6750 on the docket of said court. On September 28, 1995, a Judgment in the sum of Five Hundred Thousand Dollars ($500,000.00) in favor of the Company was obtained against Cohen (hereinafter the "Cohen Judgment"). The Cohen Judgment was assigned to J.I.T., Inc., a company controlled by Cohen, pursuant to a certain Settlement Agreement described below. Following the service of the before-described actions in State Court, PHA, PHFI, New Dodge, and Psychiatric Hospitals of Hernando, Inc. ("PHHI) filed Chapter 11 Bankruptcy Petitions in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division. The foregoing bankruptcy matters are styled as follows; IN RE: NEW DODGE MANAGEMENT CORPORATION, Case No. 95-2532-BP1; IN RE: PSYCHIATRIC HOSPITALS OF AMERICA, INC., Case No. 95-2552-8P1; IN RE: PSYCHIATRIC HOSPITALS OF FLORIDA, INC., Case No. 95-2531-8P1; IN RE, PSYCHIATRIC HOSPITALS OF HERNANDO, INC., Case No. 95-2531-8P1, Each of the foregoing bankruptcy proceedings are progressing in an orderly fashion. As of this writing, however, no Plans of Reorganization have been approved in any of the 111 proceedings. On December 15, 1995, the Greenbriar Mortgage, the Cohen Judgment, and all of the Company's claims in the PHHI bankruptcy proceedings described above were assigned to J.I.T., Inc. for cash payment of Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00). 112 SCHEDULE 3.7 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- DEFAULTS; COMPLIANCE WITH LAWS, REGULATIONS, AGREEMENTS ----------------------- None 113 SCHEDULE 3.8 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- BURDENSOME DOCUMENTS -------------------- None 114 SCHEDULE 3.13 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- NAME CHANGES, MERGERS, ACQUISITIONS ----------------------------------- In 1995, the former manager of HCRI, First Toledo Advisory Company, was the merged with and into HCRI. 115 SCHEDULE 3.16 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- EMPLOYEE BENEFIT PLANS ---------------------- Health Care REIT, Inc. Retirement Plan and Trust (401-K) 116 SCHEDULE 5.8 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- FORM OF QUARTERLY FACILITY REPORT --------------------------------- ON FILE WITH EACH OF THE BANKS AND THE BORROWERS 117
SCHEDULE 7.1 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- PERMITTED INDEBTEDNESS ---------------------- I. LINES OF CREDIT - ------------------ Total Available ------------ Key/Fleet Revolving Line of Credit $175,000,000 Capital Bank, N.A. 10,000,000 ------------ $185,000,000 II. EXISTING SECURED DEBT - ------------------------- Investment Amount of Operator Facility Balance Liens/Indebtedness - -------- -------- ----------- ------------------- Gordon Health Ventures Pittsburgh, PA $10,481,950 $6,527,045 Horizon Healthcare Corp. San Antonio, TX 1,415,224 1,415,224 ---------- $7,942,269 ========== III. EXISTING OTHER UNSECURED DEBT - ----------------------------------- 1993 Series Senior Notes $52,000,000 1996 Series Senior Notes 30,000,000 ----------- $82,000,000 =========== IV. EXISTING CONTINGENT OBLIGATIONS: - ------------------------------------- Amount of Operator Facility Guaranty - --------- -------- --------- Kingston Health Care Ashland, OH $ 1,625,000 Kingston Health Care Vermilion, OH 1,625,000 Kingston Health Care Naperville, IL 4,715,000 Kingston Health Care Santa Fe, NM 5,795,000 Village Management Rockford, IL 5,055,000 ----------- Total $18,815,000 ===========
118
SCHEDULE 7.2 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- PERMITTED SECURITY INTERESTS, LIENS AND ENCUMBRANCES ----------------------------- EXISTING LIENS - -------------- Investment Amount of Operator Facility Balance Liens/Indebtedness - -------- -------- ----------- ------------------- Gordon Health Ventures Pittsburgh, PA $10,481,950 $6,527,045 Horizon Healthcare Corp. San Antonio, TX 1,415,224 1,415,224 ---------- $7,942,269 ==========
119 SCHEDULE 7.11 TO LOAN AGREEMENT BY AND AMONG HEALTH CARE REIT, INC. AND ITS SUBSIDIARIES, THE BANKS SIGNATORY HERETO AND KEYBANK NATIONAL ASSOCIATION, AS AGENT -------------------------------------- PERMITTED CAPITAL EXPENDITURES ------------------------------ $2,500,000 in Capital Expenditures in connection with the following Facilities: Facility Name Location ------------- -------- Harborview Hospital Miami, FL Horizon Hospital Clearwater, FL EX-10.2 3 EXHIBIT 10.2 1 Exhibit 10.2 ---------------------------------------------------------------- [Execution Copy] AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO Dated as of March 28, 1997 $52,000,000 Senior Notes ---------------------------------------------------------------- 2
TABLE OF CONTENTS PAGE SECTION 1. DESCRIPTION OF NOTES AND COMMITMENTS................................2 1.1. DESCRIPTION OF NOTES...............................................2 1.2. ORIGINAL ISSUANCE DATE; REPLACEMENT OF NOTES; COMMITMENT FEES......2 SECTION 2. PREPAYMENT OF NOTES.................................................3 2.1. OPTIONAL PREPAYMENT................................................3 2.2. NOTICE OF PREPAYMENTS..............................................3 2.3. ALLOCATION OF PREPAYMENTS..........................................3 2.4. NO PURCHASE OF NOTES...............................................3 2.5. PREPAYMENT IN THE EVENT OF A RATING DOWNGRADE......................3 SECTION 3. REPRESENTATIONS....................................................4 3.1. REPRESENTATIONS OF THE COMPANY.....................................4 3.2. REPRESENTATIONS OF EACH PURCHASER..................................8 SECTION 4. CLOSING CONDITIONS.................................................9 SECTION 5. COMPANY COVENANTS..................................................9 5.1. FINANCIAL REPORTS..................................................9 5.2. BOOKS AND RECORDS.................................................12 5.3. PAYMENTS..........................................................12 5.4. PAYING AGENCY.....................................................13 5.5. CORPORATE EXISTENCE...............................................13 5.6. OBLIGATIONS.......................................................13 5.7. INSURANCE.........................................................13 5.8. LIMITATION ON CONSOLIDATION AND MERGER, SALES OF ASSETS...........14 5.9. RATINGS...........................................................14 5.10. DIRECT PAYMENTS..................................................15 5.11. MAINTENANCE OF PROPERTIES; PROPERTIES LEASED TO OTHERS...........15 5.12. INDEBTEDNESS.....................................................15 5.13. LIENS............................................................16 5.14. TANGIBLE NET WORTH; LEVERAGE RATIO...............................17 5.15. INTEREST COVERAGE RATIO; FIXED COVERAGE RATIO....................17 5.16. RESTRICTED PAYMENTS..............................................17
-i 3 5.17. CONSTRUCTION FINANCING...........................................18 5.18. INCONSISTENT AGREEMENTS..........................................18 5.19. CREDIT ENHANCEMENTS..............................................18 5.20. LONG-TERM CARE FACILITIES........................................18 5.21. BEHAVIORAL CARE FACILITIES.......................................18 5.22. OPERATOR CONCENTRATION; DIVERSIFICATION OF ASSETS AND REVENUES...18 5.23. MAINTENANCE OF REIT STATUS.......................................19 5.24. NOTICE...........................................................19 5.25. ENVIRONMENTAL LAWS...............................................20 5.26. MODIFICATION OF CERTAIN AGREEMENTS...............................20 5.27. TRANSACTIONS WITH AFFILIATES.....................................21 5.28. LIMITATION ON INVESTMENTS........................................21 5.29. ERISA, ETC.......................................................22 5.30. CHANGES IN STRUCTURE; FISCAL YEAR................................22 5.31. CAPITAL EXPENDITURES.............................................22 5.32. RENTAL OBLIGATIONS...............................................23 5.33. USE OF CASH......................................................23 SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR...........................23 6.1. EVENTS OF DEFAULT.................................................23 6.2. NOTICE TO PURCHASERS..............................................26 6.3. ACCELERATION OF MATURITIES; OTHER REMEDIES........................26 6.4. RESCISSION OF ACCELERATION........................................27 SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS...................................27 7.1. CONSENT REQUIRED..................................................27 7.2. SOLICITATION OF PURCHASERS........................................28 7.3. EFFECT OF AMENDMENT OR WAIVER.....................................28 SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS...........................28 8.1. DEFINITIONS.......................................................28 8.2. ACCOUNTING PRINCIPLES; TIME PERIODS...............................39 SECTION 9. MISCELLANEOUS......................................................39 9.1. REGISTERED NOTES..................................................39 9.2. EXCHANGE OF NOTES.................................................39 9.3. LOSS, THEFT OR MUTILATION OF NOTES................................40 9.4. EXPENSES, STAMP TAX, INDEMNITY....................................40 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE; COUNTERCLAIMS..42 9.6. NOTICES...........................................................42
-ii 4 9.7. SUCCESSORS AND ASSIGNS...........................................42 9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS........................42 9.9. SEVERABILITY.....................................................43 9.10. GOVERNING LAW...................................................43 9.11. SUBMISSION TO JURISDICTION......................................43 9.12. WAIVER OF JURY TRIAL............................................44 9.13. CAPTIONS........................................................44 9.14. COUNTERPARTS; INTEGRATION.......................................44 9.15. INTEREST RATE LIMITATION........................................44 SECTION 10. MISCELLANEOUS....................................................44 10.1. CONDITIONS TO EFFECTIVENESS.....................................44 10.2. RELEASE OF COLLATERAL...........................................46 SCHEDULES - --------- 1.1(a) Purchasers; Commitments 3.1(q) Environmental Reports 5.12 Ongoing Indebtedness 5.19 Credit Enhancements 5.31 Capital Expenditures EXHIBITS - -------- A Form of Series A Note B Form of Series B Note C Form of Series C Note D Form of Facilities and Operators Report -iii 5 HEALTH CARE REIT, INC. One SeaGate Suite 1500 Toledo, Ohio 43604 AMENDED AND RESTATED NOTE PURCHASE AGREEMENT $52,000,000 Senior Notes AMENDED AND RESTATED NOTE PURCHASE AGREEMENT, dated as of March 28, 1997, among HEALTH CARE REIT, INC., a Delaware corporation, and each of the purchasers identified on Schedule 1.1(a) hereto (each, a "PURCHASER," including its respective nominees, successors and assigns, and each successive holder or holders of any Notes or portions thereof purchased by such Purchaser, and collectively, the "PURCHASERS"). Certain capitalized terms used herein are defined in Section 8.1. WHEREAS, the Company and the Purchasers are parties to the Note Purchase Agreement, dated as of April 8, 1993, as amended (the "ORIGINAL NOTE PURCHASE AGREEMENT"); WHEREAS, pursuant to the Original Note Purchase Agreement, the Company issued and sold to the Purchasers $22,000,000 aggregate principal amount of its 7.16% Series A Notes due 1998 (the "ORIGINAL SERIES A NOTES"), $15,000,000 aggregate principal amount of its 7.71% Series B Senior Notes due 2000 (the "ORIGINAL SERIES B NOTES") and $15,000,000 aggregate principal amount of its 8.24% Series C Notes due 2003 (the "ORIGINAL SERIES C NOTES," and together with the Original Series A Notes and the Original Series B Notes, the "ORIGINAL NOTES"); WHEREAS, the parties hereto desire to amend the Original Note Purchase Agreement, and to restate the Original Note Purchase Agreement in full as hereinafter set forth; WHEREAS, the parties hereto desire to amend the Original Notes and restate the Original Notes in full as hereinafter set forth; WHEREAS, simultaneously herewith, the Company, each of the Subsidiaries of the Company and the Purchasers are entering into the Subsidiary Guaranty (as defined below); NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to amend and restate the Original Note Purchase Agreement in full as follows: 6 SECTION 1. DESCRIPTION OF NOTES AND COMMITMENTS. 1.1. DESCRIPTION OF NOTES. As of the Effective Date (as defined herein), the Original Notes are hereby amended and restated in accordance with the terms of this Agreement (such Original Series A Notes, as so amended and restated, the "SERIES A NOTES", such Original Series B Notes, as so amended and restated, the "SERIES B NOTES, and such Original Series C Notes, as so amended and restated, the "SERIES C NOTES" and, together with the Series A Notes and the Series B Notes, the "NOTES"). As a result, each of the Series A Notes, Series B Notes and Series C Notes is (i) to be dated as of the date hereof, (ii) to bear interest from (and including) the Original Issuance Date (as defined herein) to (but excluding) the date of repayment in full of all amounts due thereunder, at the rates of 7.16%, 7.71% and 8.24% per annum, respectively, payable on the 8th day of the months of April and October each year (commencing October 8, 1993) and at maturity; PROVIDED, HOWEVER, that if, at any time on or after the date hereof any of the Notes shall not be rated at least BBB by Duff & Phelps (it being understood and agreed that (x) a rating of BBB- is lower than a rating of BBB and (y) the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a rating that is lower than BBB), the rates of interest shall instead be 7.26%, 7.81% and 8.34% per annum, respectively, for the period during which the Notes shall not be rated at least BBB by Duff & Phelps, (iii) to bear interest on overdue principal (whether by acceleration or otherwise and including any overdue prepayment of principal), premium, if any, and installments of interest at the Overdue Rate until paid, (iv) to mature on April 8, 1998, April 8, 2000 and April 8, 2003, respectively, and (v) to be substantially in the forms attached hereto as Exhibit A, Exhibit B and Exhibit C, respectively. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are subject to prepayment at the option of the Company prior to their stated maturity date on the terms and conditions set forth in Section 2 and in the Notes. The Notes are also subject to prepayment at each holder's option prior to their stated maturity date on the terms and conditions set forth in Section 2 and in the Notes. 1.2. ORIGINAL ISSUANCE DATE; REPLACEMENT OF NOTES; COMMITMENT FEES. (a) The Company issued and sold to each Purchaser, and each Purchaser purchased from the Company, the principal amount and Series of Original Notes set forth beside such Purchaser's name on Schedule 1.1(a) at a price of 100% of the principal amount thereof (the "PURCHASE PRICE"), on April 8, 1993 (the "ORIGINAL ISSUANCE DATE"). The aggregate principal amount of Original Notes issued and sold on the Original Issuance Date by the Company was $52,000,000, of which $22,000,000 aggregate principal amount was designated as Original Series A Notes $15,000,000 aggregate principal amount was designated as Original Series B Notes and $15,000,000 aggregate principal amount was designated as Original Series C Notes. (b) On the Effective Date, each Purchaser will surrender all Original Notes of each Series held by such Purchaser to the Company and the Company will deliver in exchange therefor, without expense to the Holder, Notes of each Series in the same aggregate principal amount as the then aggregate unpaid principal amount of the Original Notes of such Series so surrendered, in such denominations of U.S. $100,000 or any amount in excess thereof, and registered in such names, as such Purchaser shall have specified. (c) On the Effective Date, the Company shall pay to each Purchaser a commitment fee equal to 0.05% of the aggregate unpaid principal amount of the Original Notes of such Purchaser that are being -2- 7 exchanged pursuant to Section 1.2(b). Such commitment fees shall be paid in the manner specified in Section 5.10. SECTION 2. PREPAYMENT OF NOTES. 2.1. OPTIONAL PREPAYMENT. Upon compliance with Section 2.2 and subject to Section 2.3, the Company shall have the option at any time and from time to time to prepay the outstanding Notes, either in whole or in part (but if in part, then in units of $1,000,000 or an integral multiple of $100,000 in excess thereof) by payment of the principal amount of the Notes, or portion thereof to be prepaid, together with accrued interest thereon to but not including the date of such prepayment and a premium (determined three Business Days prior to the date of such prepayment) equal to the Make-Whole Premium, if any (collectively, the "REDEMPTION PRICE"). 2.2. NOTICE OF PREPAYMENTS. The Company shall give written notice of any prepayment of the Notes pursuant to Section 2.1 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such prepayment of the Notes. Notices required by this Section 2.2 shall specify (a) the date of prepayment, (b) the principal amount of such holder's Notes to be prepaid on such date, and (c) the estimated Make-Whole Premium and the accrued interest applicable to the prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with accrued interest thereon and the Make-Whole Premium, shall become due and payable on the prepayment date set forth in such notice. The Company shall give a second written notice to each holder of the Notes, by telecopy or other same day written communication, setting forth the computation and amount of the Make-Whole Premium payable in connection with a prepayment pursuant to Section 2.1, at least three Business Days prior to the date of such prepayment. 2.3. ALLOCATION OF PREPAYMENTS. All partial prepayments shall be applied on all outstanding Notes (without regard to Series) ratably in accordance with the unpaid principal amounts thereof. 2.4. NO PURCHASE OF NOTES. The Company will not, and will not permit any Affiliate to, purchase, redeem, prepay or otherwise acquire any of the Notes, except for payments or prepayments of the Notes expressly provided for in accordance with Sections 1, 2 and 6 of this Agreement and the terms of the Notes. 2.5. PREPAYMENT IN THE EVENT OF A RATING DOWNGRADE. If at any time Duff & Phelps places its ratings of any of the Notes under review, the Company will promptly and in any event within one Business Day of the occurrence thereof, give each Purchaser written notice thereof. If at any time the Duff & Phelps rating of any of the Notes is decreased to a rating below BBB- (it being understood and agreed that the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a decrease in the rating of the Notes to a rating below BBB-), the Company will, promptly and in any event within one Business Day after the occurrence thereof, give each Purchaser written notice thereof. At any time after any such decrease, the holder of any Note may, by three Business Days' written notice to the Company, declare such Note to be, and such Note shall thereby become, due and payable (without presentment, demand, protest or other notice of any kind, all of which are waived by the Company) at the Redemption Price. It is specifically understood and agreed that no course of dealing on the part of any holder of any Note nor any delay or failure on the part of any holder of any Note to exercise any right specified in this Section 2.5 shall operate as a waiver of such right or otherwise prejudice such -3- 8 holder's rights, powers and remedies under this Section 2.5. If the rating system of Duff & Phelps shall change, the parties hereto shall negotiate in good faith to amend the references to specific ratings in Sections 1.1 and 2.5 and in the Notes to reflect the changed rating system. SECTION 3. REPRESENTATIONS. 3.1. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and warrants for the benefit of each Purchaser that the representations set forth as follows are true and correct as of the date hereof and shall be true and correct as of the Effective Date: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Subsidiary of the Company is duly incorporated or formed, validly existing and in good standing under the laws of its state of incorporation. As of the date of this Agreement, the Company has no Subsidiaries except for (i) HCRI Pennsylvania Properties, Inc., a Pennsylvania corporation, (ii) HCRI Overlook Green, Inc., a Pennsylvania corporation, (iii) HCRI Texas Properties, Inc., a Delaware corporation and (iv) HCRI Texas Properties, Ltd., a Texas limited partnership. The Company is the sole general partner of HCRI Texas Properties, Ltd. and is the sole shareholder of the other such Subsidiaries. (b) The Company and each Subsidiary of the Company is duly qualified to do business as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties would require such qualification, except where the failure to so qualify could not have a Material Adverse Effect. (c) The execution, delivery and performance of this Agreement, the Notes and the other Note Documents are within the corporate powers of the Company and have been duly authorized by all necessary corporate action on the part of the Company. This Agreement, the Notes and the other Note Documents have been duly executed by and are the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditors' rights generally and by general principles of equity. (d) The Company currently has REIT Status and has maintained REIT Status on a continuous basis since its formation. None of the Subsidiaries of the Company currently has REIT Status. (e) No consent, approval or authorization of, or declaration, registration or filing with, or payment to, any governmental body or any non-governmental Person is required to be obtained or made in connection with the execution, delivery and performance by the Company of this Agreement, the Notes and the other Note Documents or the transactions contemplated hereby or thereby or as a condition to the legality, validity or enforceability of the Company's obligations under this Agreement, the Notes or the other Note Documents, or the offer, issue, sale and delivery of the Notes to the Purchasers or the fulfillment of or compliance with the terms and provisions of the Notes, this Agreement or the other Note Documents. (f) Neither the execution and delivery of this Agreement, the Notes or the other Note Documents by the Company, nor the performance of the terms and provisions hereof and thereof, will (i) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or -4- 9 result in any violation of, the certificate of incorporation or by-laws of the Company, any contract, agreement, mortgage, indenture, credit agreement (including the Credit Agreement and the Amended 1996 Note Documents), lease or other instrument to which the Company or any Subsidiary of the Company is a party or by which the Company or any such Subsidiary or any of their respective assets is bound, or of any statute, law, rule, regulation or order of the United States of America or of any State thereof, or any agency, court or other instrumentality of any thereof, to which the Company is subject, (ii) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries, or (iii) result in the disqualification of the Company as a REIT under the Code. (g) The Company's annual report on Form 10-K for the fiscal year ending December 31, 1996 (the "1996 10-K"), this Agreement and all documents, instruments, certificates and other writings delivered to any Purchaser by or on behalf of the Company in connection with the transactions contemplated hereby, taken together, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances in which they were made, not misleading, on or as of the dates on which such statements were made. The Company has disclosed to the Purchasers in writing any and all facts which may (to the extent the Company can reasonably foresee) have a Material Adverse Effect. (h) (i) The audited consolidated financial statements of the Company and its Subsidiaries at and for the fiscal years ended December 31, 1993, 1994, 1995 and 1996 (the "AUDITED FINANCIALS") are true and complete and have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"), consistent with the principles and practices used in the preparation of the Company's audited consolidated financial statements for the immediately preceding fiscal year (except as otherwise indicated in the Audited Financials, including the notes thereto), and present fairly the consolidated financial condition of the Company at the end of each such fiscal year and the consolidated results of operations and cash flows of the Company for each of such periods. Neither the Company nor any of its Subsidiaries has any material obligation, liability or commitment, direct or contingent, that is not reflected in the Audited Financials for the fiscal year ended December 31, 1996. (ii) The Company and each Subsidiary of the Company have good and marketable title to all assets reflected in the consolidated balance sheet included in the Audited Financials for the fiscal year ended December 31, 1996, except for changes resulting from transactions in the ordinary course of business occurring after such date, free and clear of any Lien other than any Lien permitted by Section 5.13. (iii) The projections relating to the Company and its Subsidiaries for the three year period 1997-1999 including balance sheets, statements of operations and cash flows (together with related assumptions) furnished by the Company to the Purchasers have been prepared on the basis of the assumptions accompanying them and reflect, as of the date thereof, the Company's good faith projections, after reasonable analysis, of the matters set forth therein, based on such assumptions. (i) Since December 31, 1996, there has not been any material adverse change in the business, value or condition (financial or otherwise), results of operations or prospects of the Company and its Subsidiaries, considered as a whole. -5- 10 (j) The net proceeds from the issuance and sale of the Notes have been used to fund the acquisition or financing of Facilities either directly or through a refinancing or repayment of revolving credit borrowings under various borrowing arrangements. No part of the proceeds of the sale of the Notes have been or will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. The assets of the Company and its Subsidiaries do not and will not include an amount of "margin stock" that would cause the provisions of Rule 207.2(f)(2)(i) of Regulation G or the provisions of Rule 221.2(g)(2)(i) of Regulation U to be inapplicable and the Company and its Subsidiaries have no present intention of purchasing such an amount of "margin stock." (k) Neither the Company nor any Subsidiary of the Company nor, to the Company's knowledge, anyone acting on its behalf has offered the Notes or any similar securities to, or solicited any offer to purchase the same from, any Person, or has taken any other action, which would require the registration of the Notes under Section 5 of the Act. (l) (i) The consummation of the transactions contemplated by this Agreement and compliance by the Company and each Subsidiary of the Company with the provisions hereof and the Notes issued hereunder and the other Note Documents will not constitute a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. (ii) Each Plan complies in all material respects with all applicable statutes and governmental rules and regulations, and (A) no Reportable Event has occurred and is continuing with respect to any Plan subject to Title IV of ERISA, (B) neither the Company nor any Subsidiary of the Company nor any ERISA Affiliate has withdrawn from any Plan subject to Title IV of ERISA or any Multiemployer Plan or instituted steps to do so, and (C) no steps have been instituted to terminate in a distress termination any Plan subject to Title IV of ERISA. (iii) Neither the Company nor any Subsidiary of the Company nor any ERISA Affiliate has received notice that any Multiemployer Plan is in Reorganization or Insolvent where such Reorganization or Insolvency has resulted, or would be reasonably likely to result in an unpaid liability that would be reasonably likely to have a Material Adverse Effect nor, to the best knowledge of the Company, is any such Reorganization or Insolvency reasonably likely to occur. (iv) No condition exists or event or transaction has occurred in connection with any Plan that could result in the incurrence by the Company or any Subsidiary of the Company or any ERISA Affiliate of any material liability, fine or penalty. (v) No Plan maintained by the Company or any Subsidiary of the Company or any ERISA Affiliate and no trust created thereunder has incurred any "ACCUMULATED FUNDING DEFICIENCY" as defined in Section 302 of ERISA, and the present value of all benefits vested under all Plans subject to Title IV of ERISA does not exceed the value of the assets of such Plans allocable to such vested benefits (such present value to be determined as of, and based on, the most recent valuation of such Plan for funding purposes). (vi) Neither the Company nor any Subsidiary of the Company has any material contingent liability with respect to any post-retirement "welfare plan" (as such term is defined in Section 3(1) of ERISA), other than as required by Section 4980B of the Code. (vii) No Plan is a multiple employer plan (within the meaning of Section 413(c) of the Code). (m) The Company and each Subsidiary of the Company has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges (including interest and penalties) which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books. The charges, accruals and reserves on the books of the Company and each Subsidiary of the Company in respect of taxes or other governmental charges, if any, are -6- 11 adequate. No tax Liens have been filed with respect to the Company or any Subsidiary of the Company or any of their assets and no claims material to the Company or any Subsidiary of the Company are being asserted against the Company or any Subsidiary of the Company with respect to any taxes or governmental charges, except for Liens for taxes, assessments and governmental charges which are not yet due and payable or which individually or in the aggregate could not have a Material Adverse Effect. With respect to each federal income tax return of the Company and each Subsidiary of the Company, the statute of limitations for the assessment of such Taxes has expired through the taxable year ended December 31, 1993 and no audit is in progress and no extension of time is in force with respect to any date on which any such return was or is to be filed and no waiver or agreement is in force for the extension of time for the assessment or payment of any tax. (n) Neither the Company nor any Subsidiary of the Company is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Neither the Company nor any Subsidiary of the Company is a "holding company" or a "subsidiary" or an "affiliate" of a "holding company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (o) There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary of the Company in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would have a Material Adverse Effect. (p) (i) The Company and each Subsidiary of the Company has good and marketable fee or leasehold title to all of the material real property owned or leased by the Company or such Subsidiary; and has good and marketable title to all of their other respective material properties and assets of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights) free and clear, in each case, of all Liens (including infringement claims with respect to patents, trademarks, trade names, service marks and copyrights), except Liens that are expressly permitted by this Agreement. (ii) The Company and each Subsidiary owns or holds all licenses, permits and governmental authorizations as are necessary or desirable in the conduct of its business, except to the extent that the failure to own or hold the same would not have a Material Adverse Effect. (iii) To the best of the Company's knowledge, no violation exists of any applicable law pertaining to the ownership or operation of any Facility or any Operator that would have a reasonable likelihood of leading to revocation of any license, permit or governmental authorization necessary for the operation of such Facility. (q) All facilities and property (including underlying groundwater), directly or indirectly, owned, operated or leased by the Company or any Subsidiary of the Company are owned, operated or leased by the Company or such Subsidiary in material compliance with all Environmental Laws. All properties with respect to which the Company or any Subsidiary of the Company holds a mortgage interest is being operated by the owners, lessees or operators thereof in material compliance with all Environmental Laws. Except as disclosed in the environmental reports given to the Purchasers and identified on Schedule 3.1(q) (the "ENVIRONMENTAL REPORTS"), there have been no past, and there are no pending or threatened (i) claims, complaints, notices or requests for information received by the Company or any Subsidiary of the Company -7- 12 with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to the Company or any Subsidiary of the Company regarding potential liability under any Environmental Law. Except as disclosed in the Environmental Reports, there have been no Releases of Hazardous Materials at, on or under any property now owned, operated or leased, directly or indirectly, by the Company or any Subsidiary of the Company, that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect. Except as disclosed in the Environmental Reports, the Company and each Subsidiary of the Company has been issued and is in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their respective businesses, the failure of which to have or be in compliance with, singly or in the aggregate, has or may reasonably be expected to have a Material Adverse Effect. No property now owned, operated, or leased, directly or indirectly by the Company or any Subsidiary of the Company is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or state list of sites requiring investigation or clean-up. Except as disclosed in the Environmental Reports, there are no underground storage tanks, active or abandoned, including petroleum storage tanks, landfills, lagoons, surface impoundments, disposal areas or disposal ponds, on or under any property now owned, operated or leased, directly or indirectly, by the Company or any Subsidiary of the Company, that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect. Neither the Company nor any Subsidiary of the Company has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or state list or which is the subject of any federal, state or local enforcement actions or other investigations which may lead to material claims against the Company or any Subsidiary of the Company for any remedial work, damage to natural resources or personal injury, including claims under CERCLA. Except as disclosed in the Environmental Reports, there are no polychlorinated biphenyls or friable asbestos present at any property now owned, operated or leased, directly or indirectly, by the Company or any Subsidiary of the Company, that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect. Except as disclosed in the Environmental Reports, no conditions exist at, on or under any property now owned, operated, or leased, directly or indirectly, by the Company or any Subsidiary of the Company, which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law which singly or in the aggregate have or may reasonably be expected to have a Material Adverse Effect. Except as disclosed in the Environmental Reports, no generation, manufacture, storage, treatment, transportation or disposal of Hazardous Material has occurred or is occurring on or from any property owned, operated, or leased by the Company or any Subsidiary of the Company, that, singly or in the aggregate, has, or may reasonably be expected to have, a Material Adverse Effect. 3.2. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser hereby represents and warrants, for itself only, as follows: (a) Such Purchaser is acquiring the Notes for its own account (or as trustee for the account of one or more pension or trust funds), and not with a view to distribution (as such term is used under Section 2(11) of the Act) thereof; provided that the disposition of each Purchaser's (or such account's) property shall at all times be and remain within its control. (b) Such Purchaser acknowledges that (i) the Notes have not been registered under the Act by reason of their issuance in a transaction exempt from the registration requirements of the Act pursuant to Section -8- 13 4(2) thereof nor have the Notes been registered or qualified under any state securities laws; (ii) the Notes may be sold in the absence of such registration only pursuant to an exemption from such registration or qualification; and (iii) the Notes may bear a legend to such effect. SECTION 4. CLOSING CONDITIONS. All conditions to each Purchaser's several obligation to purchase the Original Notes were satisfied on the Original Issuance Date. SECTION 5. COMPANY COVENANTS. Without limiting the obligations of the Company set forth in the Note Documents, for so long as any amount remains unpaid on any Note: 5.1. FINANCIAL REPORTS. The Company will furnish to each holder of outstanding Notes: (a) As soon as available and in any event within 90 days after the end of each fiscal year of the Company, a copy of the annual audited report for such fiscal year for the Company (a copy of which shall also be furnished to the Securities Valuation Office of the National Association of Insurance Commissioners, New York, New York), including therein a balance sheet of the Company as at the end of such fiscal year and statements of income, cash flow and shareholders' equity of the Company for such fiscal year, each prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the corresponding figures of the preceding fiscal year and in each case certified without qualification by either Ernst & Young, another nationally recognized independent auditing firm, or a firm of independent certified public accountants reasonably acceptable to the Purchasers, as fairly presenting the financial position, results of operations, cash flows and shareholders' equity of the Company and its Subsidiaries as at and for the year ending on its date and as having been prepared in accordance with GAAP; and a certificate from such accountants (i) to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default or Event of Default that has occurred and is continuing, or, if they have become aware of such Default or Event of Default, describing such Default or Event of Default and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to Section 5.1(d) below and relating to the time period set forth in this Section 5.1(a); (b) As soon as available and in any event within 45 days after the end of each of the fiscal quarters of each fiscal year of the Company, a balance sheet of the Company as at the end of such fiscal quarter and statements of income, cash flow and shareholders' equity of the Company for such fiscal quarter and for the period commencing at the end of the previous fiscal year and ending at the end of such fiscal quarter, prepared in accordance with GAAP (subject to normal year-end adjustments), and setting forth in comparative form the figures for the corresponding period of the immediately preceding fiscal year, together with a certificate of the chief financial officer of the Company to the effect that such balance sheet and related financial statements fairly present the financial position, results of operations, cash flows and shareholders' equity as of such date and for such period; (c) Promptly upon their becoming available, and notwithstanding the provisions of Sections 5.1(a) and (b), copies of each financial statement, report, notice or proxy statement filed by the -9- 14 Company with the Securities and Exchange Commission under the Exchange Act and sent by the Company to its security holders generally; (d) Within the periods provided in Sections 5.1(a) and (b), a certificate of the chief financial officer of the Company stating that such officer has reviewed the provisions of this Agreement and the other Note Documents and stating whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists at the time of the certificate or existed at any time during the period covered by such financial statements, (i) any Default or Event of Default, together with a detailed calculation which demonstrates the Company's compliance with Section 5.8(b), Sections 5.12 through 5.17, Sections 5.19 through 5.22, and Sections 5.28, 5.31 and 5.32, or (ii) any default under any other agreement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound, or by which, to the best knowledge of the Company, any of their respective properties or assets may be materially affected (including the Credit Agreement and the Amended 1996 Note Documents); and, if any such condition or event does exist on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and/or proposes to take with respect thereto; (e) As soon as available and in any event within 45 days after the end of each of the Company's fiscal quarters, a schedule showing the aging of delinquent lease and mortgage receivables, if any, for all of the Company's Facilities and in each case where a receivable is past due over 60 days, a report on the status of the receivable; (f) As soon as available and in any event within 45 days after the end of each of the Company's fiscal quarters, a schedule showing the Company's recorded liabilities, unfunded commitments, contingent liabilities and other material items; (g) Promptly after the Company's receipt thereof, (i) a copy of any special audits of the Company's properties, assets or operations conducted by the Company's auditors, (ii) a copy of any letters to the Company from the Company's auditors in connection with the preparation and presentation of the Company's annual audited report, and (iii) a copy of any other material reports submitted to the Company or any of its Subsidiaries by its independent auditors, or submitted by the Company or any of its Subsidiaries to its independent auditors, in connection with any annual or interim audit of the books of the Company or its Subsidiaries made by such auditors which material reports are a necessary part of such annual or interim audit; (h) In respect of each Plan: (1) a copy of each annual report (and related schedules) of such Plan within 10 days after filing the same with any ERISA regulator; (2) a copy of each application for a determination of the qualified status of any such Plan, in each case within 10 days after the filing thereof; and (3) Promptly, upon their becoming available, copies of: (i) all correspondence with the PBGC, the Secretary of Labor or any representative of the IRS with respect to any Plan, relating to an actual or threatened change or development that would be materially adverse to the Company; (ii) all actuarial valuations received by the Company with respect to any Plan; and (iii) any notices of Plan termination filed by any Plan Administrator (as those -10- 15 terms are used in ERISA) with the PBGC and of any notices from the PBGC to the Company with respect to the intent of the PBGC to institute involuntary termination proceedings. (i) Not later than January 31st in each year, a copy of the Company's business plan and financial projections for the upcoming three fiscal years (together with a copy in writing of the assumptions on which such business plan and projections were based), each certified by the Company's chief financial officer and illustrating the projected income statements, balance sheets and statements of cash flows on a consolidated basis; (j) (1) As soon as available but in any event not less than 45 days after the end of each fiscal quarter of the Company, a report with respect to the Facilities and the Operators, the form of which is set forth in Exhibit D hereto, which report shall contain information for the quarterly period immediately prior to the fiscal quarter for which the report is submitted; (2) Within 30 days after the receipt thereof, a copy of the annual audited financial statements of each publicly-held Operator delivered to the Company by each such Operator; and (3) Such other information regarding the financial condition of the Operators as any Purchaser may from time to time reasonably request, subject to such Purchaser's agreement that all such information shall be and remain confidential and that none of such information may be distributed to any other Person without the Company's prior consent; (k) Promptly upon their becoming available, copies of any: (i) financial statements, non-routine reports and notices (other than routine correspondence), any of which are of a material nature, requests for waivers and proxy statements, in each case, delivered by the Company or any of its Subsidiaries to any of their respective existing lending institutions or creditors; and (ii) correspondence or notices received by the Company from any federal, state or local governmental authority that regulates the operations of the Company or any of its Subsidiaries, relating to an actual or threatened change or development that would be materially adverse to the Company or any Subsidiary; and (l) Promptly upon any Purchaser's written request, such other information in writing about the Company's financial condition, properties and operations as such Purchaser may from time to time reasonably request. The balance sheets and financial statements referred to in Sections 5.1(a) and (b) shall be deemed to refer to both the consolidated balance sheets and financial statements of the Company and its consolidated Subsidiaries. It is also understood and agreed that the Company may satisfy its obligations to deliver the financial statements described in Sections 5.1(a) and (b) by furnishing to each Purchaser a copy of its annual report on Form 10-K or its quarterly report on Form 10-Q in respect of the relevant fiscal year or the relevant fiscal quarter, as the case may be, together with the financial statements required to be attached thereto; PROVIDED that the Company is required to file, and has actually filed, such annual report on Form 10-K or such quarterly report on Form 10-Q, as the case may be, with the Securities and Exchange Commission. 5.2. BOOKS AND RECORDS -11- 16 (a) The Company will, and will cause each Subsidiary to, keep proper books of record and account in accordance with GAAP in a manner reasonably satisfactory to the Purchasers in which full and true entries shall be made of all dealings or transactions in relation to its business and activities. (b) (i) Each Purchaser shall have the right, at all reasonable times, at the expense of the Company, subject to reasonable notice and as often as may be reasonably requested, to examine the corporate books and records of the Company and its Subsidiaries and to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the officers, directors, independent public accountants, actuaries, Plan administrators and trustees of or for the Company and its Subsidiaries, each of which is authorized to make such information available to each Purchaser to the same extent as it would be to the Company or to its Subsidiaries; PROVIDED, HOWEVER, that any transferee of a Note (other than an Affiliate of an original Purchaser) in a principal amount of less than $2,000,000 shall be entitled to exercise the foregoing rights only once every 12 months. (ii) The Company shall also permit, and cause each of its Subsidiaries to permit, upon receipt of not less than two Business Days' prior written notice, the Purchasers (and their agents and representatives) (at the expense of the Company after the occurrence of a Default), during normal business hours, to examine the Company's or such Subsidiary's properties, as the case may be. 5.3. PAYMENTS. (a) All payments hereunder and under the Notes shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes. Without limiting the generality of the foregoing, the Company will duly and punctually pay the principal of, premium (if any) and interest on the Notes in accordance with their terms and this Agreement and all other Obligations in accordance with this Agreement and the other Note Documents, free and clear of, and without reduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholding, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority, excluding, in the case of any Purchaser, net income and franchise taxes imposed on such Purchaser by the jurisdiction under the laws of which such Purchaser is organized or any political subdivision or taxing authority thereof or therein (such non-excluded taxes, "TAXES"). If any Taxes are required to be withheld from any amounts payable to any Purchaser hereunder, under any Note or under any other Note Document, the amounts so payable to such Purchaser shall be increased to the extent necessary to yield to such Purchaser (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, the applicable Note or such other Note Document. If the Company fails to pay any Taxes when due to the appropriate taxing authority, the Company shall indemnify each Purchaser for any incremental taxes, interest or penalties that may become payable by such Purchaser as a result of any such failure. (b) Any amount that is due and payable by the Company under any Note Document that is not paid when due shall bear interest, for each day from (and including) the date such amount was due and payable to (but excluding) the date of payment thereof, at a rate per annum equal to the Overdue Rate. 5.4. PAYING AGENCY. The Company will maintain an office in the United States of America where notices, presentations and demands to or upon the Company in respect of this Agreement, the Notes -12- 17 and the other Note Documents may be given or made. As of the date of this Agreement, such office is located at the Company's address set forth in Section 9.6. The Company will give written notice to the holders of the Notes of any change of location of such office no later than five Business Days prior to the date of any such change. Notwithstanding the foregoing, in lieu of, or in addition to, maintaining an office as herein contemplated, the Company may appoint and maintain an agent for receiving notices, presentations or demands and/or making payments on the Notes which shall be a state or national bank or trust company organized under the laws of the United States of America or any State thereof or the District of Columbia, having capital, surplus and undivided profits aggregating at least U.S. $250,000,000, and having an office in the Borough of Manhattan in the City of New York from which it can perform the functions it is so appointed to perform (the "PAYING AGENT"). 5.5. CORPORATE EXISTENCE. The Company will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to (a) preserve and keep in full force and effect its corporate existence, (b) maintain the Company's REIT Status, (c) comply in all material respects with all applicable laws, statutes, regulations, rules, orders, and all applicable restrictions imposed by any governmental or regulatory body except those being contested in good faith by appropriate proceedings, (d) maintain all licenses and permits necessary to conduct its business and own its properties and (e) continue to engage in the same line of business. 5.6. OBLIGATIONS. The Company will, and will cause each of its Subsidiaries to, pay and discharge all of the obligations and liabilities of the Company or any of its Subsidiaries, including all taxes, assessments and governmental charges, when due, except for taxes, assessments and governmental charges for which fair and adequate reserves have been established in accordance with GAAP and the payment of which is being contested by the Company or such Subsidiary in good faith and by appropriate proceedings, and then only to the extent that a bond is filed in cases where the filing of a bond is necessary to avoid the creation of a Lien against any of the Properties of the Company and its Subsidiaries. 5.7. INSURANCE. (a) The Company will, and will cause each of its Subsidiaries and Operators to, carry and maintain in full force and effect at all times with fiscally sound and reputable insurers accorded a rating of "A VIII" or better by A.M. Best Company, Inc. (or a comparable rating by any comparable rating agency) insurance against such risks and in such amounts (i) as is reasonable and prudent in the circumstances, (ii) as is customarily maintained by similar businesses and (iii) in any event as may be required by applicable laws, statutes, regulations, rules or orders. Upon written request from any Purchaser, the Company shall cause an appropriate officer to furnish to such Purchaser such information about the Company's insurance as such Purchaser may from time to time reasonably request, which information shall be prepared in form and detail reasonably satisfactory to such Purchaser and be certified by an Executive Officer of the Company. Within 10 days after written notice from the Required Holders, the Company will, and will cause each of its Subsidiaries and Operators to, obtain such additional insurance as the Required Holders may reasonably request. (b) The Company will, and will cause each of its Subsidiaries to, carry all insurance available through the PBGC or any private insurance companies covering its obligations to the PBGC. 5.8. LIMITATION ON CONSOLIDATION AND MERGER, SALES OF ASSETS. -13- 18 (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, consolidate or merge with or into, any Person (whether or not the Company or such Subsidiary is the surviving entity) or acquire all or substantially all of the assets or any of the capital stock of any Person unless (i) the Company or any of its Subsidiaries is the surviving entity, (ii) no Default or Event of Default exists or will occur after giving effect thereto, and (iii) the consideration paid in connection with any such merger or acquisition does not exceed an amount equal to 10% of Healthcare Assets as at the date of the consummation of such transaction, prior to giving effect to such transaction. (b) Other than Leases of Health Care Facilities in the ordinary course of the Company's business ("ORDINARY LEASES"), the Company and its Subsidiaries will not, directly or indirectly, during any four consecutive fiscal quarters of the Company, sell, lease or otherwise dispose of any assets or shares of capital stock of a Subsidiary which, individually or when combined with all other assets (other than Ordinary Leases) sold, leased or otherwise disposed of by the Company and its Subsidiaries during such four fiscal quarters, including the assets attributable to a Subsidiary the capital stock of which was sold during such period, (i) represented 15% or more of the Company's total assets shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recently completed fiscal quarter of the Company, or (ii) generated 15% or more of the Company's total gross revenues shown on the income statement of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, for the most recently completed four consecutive fiscal quarters of the Company, unless the net proceeds from any such sale, lease or other disposition are reinvested in the business of the Company within 180 days following the date of each such sale, lease or other disposition and, prior to such investment, invested in Investments of the type described in Section 5.28(a). The provisions of this Section 5.8(b) shall not restrict the sale by the Company or its Subsidiaries of owned real property and the improvements thereon pursuant to and in accordance with the terms of Ordinary Leases which grant the lessee thereunder an option to purchase such owned real property and improvements thereon. 5.9. RATINGS. The Company (a) will use its commercially reasonable best efforts to enable a Recognized Rating Agency to have in effect a rating for its unsubordinated, senior, unsecured indebtedness, and (b) shall cause Duff & Phelps to have in effect at all times a rating for the Notes. 5.10. DIRECT PAYMENTS. Notwithstanding anything to the contrary in this Agreement or the Notes, if any Purchaser has given written notice to the Company and the Paying Agent requesting that the provisions of this Section 5.10 shall apply, the Company will cause the Paying Agent promptly and punctually to pay when due the principal of the Notes and premium, if any, and interest thereon, without any presentment thereof directly to such Purchaser at the address of such Purchaser set forth on Schedule 1.1(a) or at such other address as such Purchaser may from time to time designate in writing to the Company and the Paying Agent or, if a bank account is designated for such Purchaser in any written notice to the Company and the Paying Agent from such Purchaser, the Company will cause the Paying Agent to make such payments in current and immediately available federal funds which at the time of payment shall be legal tender in the United States of America for the payment of public and private debts to such bank account, marked for attention as indicated, or in such other manner or to such other account of such Purchaser in any bank in the United States as such Purchaser may from time to time direct in writing. With respect to Notes to which this Section 5.10 applies, the Company and the Paying Agent shall be entitled to presume conclusively that any Purchaser as shall have requested the provisions hereof to apply to its Notes remains the holder of such Notes until such Notes shall have been presented to the Company as evidence of the transfer thereof. -14- 19 5.11. MAINTENANCE OF PROPERTIES; PROPERTIES LEASED TO OTHERS. (a) The Company will cause to be maintained in good repair, working order and condition, subject to normal wear and tear, all material properties and assets from time to time owned by the Company or any of its Subsidiaries and used in or necessary for the operation of their respective businesses, and make or cause to be made all reasonable repairs, replacements, additions and improvements thereto. (b) The Company and its Subsidiaries will provide in each of its Leases entered into after the Original Issuance Date that the lessee thereunder will maintain the assets leased thereunder in good working order and condition, ordinary wear and tear excepted. 5.12. INDEBTEDNESS. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist or guaranty or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness of the Company in respect of the Notes and other obligations hereunder and under the Note Documents; (b) Indebtedness of the Company which is identified on Schedule 5.12 ("ONGOING INDEBTEDNESS"); (c) Indebtedness of a Subsidiary which is owed to or held by the Company or a Wholly Owned Subsidiary of the Company; and (d) Credit Enhancements by the Company permitted by Section 5.19; unless (i) such Indebtedness (other than the Indebtedness described in clause (c) above) is Indebtedness of the Company and (ii) immediately after giving effect to the incurrence of such Indebtedness, the total outstanding Indebtedness of the Company and its Subsidiaries (including the Indebtedness described in clauses (a) through (d) above) does not exceed 150% of the Company's Tangible Net Worth as of the end of the most recently completed fiscal quarter of the Company. 5.13. LIENS. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (i) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (ii) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or, if overdue, being diligently contested in good faith by -15- 20 appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (iii) Liens incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for Debt) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (iv) judgment Liens in existence for less than 15 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; (v) the Liens of the lessee created or permitted by Ordinary Leases; (vi) any purchase money Liens on property acquired or held by the Company or any Subsidiary in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided, that (i) any such Lien attaches to such property concurrently with or within twenty (20) days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, (iii) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such property, and (iv) the aggregate amount of all such Indebtedness on a consolidated basis for the Company and its Subsidiaries shall not at any time exceed $1,000,000.00; and (vii) Liens securing the payment of Debt permitted under Section 5.12 (other than Section 5.12(b)), PROVIDED that (x) no such Debt is incurred pursuant to a Secured Credit Agreement and (y) such Liens shall be permitted only if the aggregate amount of all Debt secured by such Liens does not exceed 15% of the Company's Tangible Net Worth as of the end of the most recently completed fiscal quarter of the Company. 5.14. TANGIBLE NET WORTH; LEVERAGE RATIO. (a) Tangible Net Worth will at no time be less than the sum of (i) $300,000,000 plus (ii) 100% of the aggregate Net Issuance Proceeds received by the Company (or any of its Subsidiaries) in connection with the issuance of any equity interest in the Company (or any of its Subsidiaries) on or after the date hereof other than any such equity interests issued in connection with any dividend reinvestment program(s). (b) The Company shall have or maintain on a consolidated basis, as at the last day of each fiscal quarter, a ratio of Funded Indebtedness to Tangible Net Worth (the "LEVERAGE RATIO") of not greater than 1.10:1.00; PROVIDED, so long as the Leverage Ratio for any two consecutive fiscal quarters does not exceed 1.10:1.00 (each, a "LEVERAGE TEST PERIOD"), then the Leverage Ratio for the two consecutive fiscal quarters immediately succeeding such Leverage Test Period may increase to a maximum of 1.20:1.00. 5.15. INTEREST COVERAGE RATIO; FIXED COVERAGE RATIO. The Company shall have or maintain on a consolidated basis, as at the last day of each fiscal quarter: -16- 21 (a) Interest Coverage of not less than 200%; and (b) A Fixed Coverage Ratio of not less than 1.05:1.00. 5.16. RESTRICTED PAYMENTS. (a) The Company will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of capital stock (now or hereafter outstanding) of the Company, or on any warrants, options or other rights with respect to any class of capital stock (now or hereafter outstanding) of the Company, or apply or permit any Subsidiary to apply, any of its funds, property or assets to the purchase, redemption, sinking fund, or other retirement of, or agree, or permit any Subsidiary of the Company to agree, to purchase or redeem (or set aside funds to purchase or redeem) any shares of any class of capital stock (now or hereafter outstanding) of the Company, or warrants, options or other rights with respect to any class of capital stock (now or hereafter outstanding) of the Company (all or any of the foregoing, "RESTRICTED PAYMENTS"); PROVIDED, HOWEVER, that so long as the Company remains qualified as a REIT under the Code, the Company may make Restricted Payments if and to the extent (but only to the extent) that: (i) no Default or Event of Default shall have occurred and be continuing at the time of declaration of such Restricted Payment, and (ii) immediately after giving effect to the making of such Restricted Payment, the sum of all Restricted Payments made subsequent to December 31, 1995 would not exceed the sum of (1) $10,000,000, (2) 100% of Cash Flow accumulated subsequent to December 31, 1995, and (3) the net proceeds to the Company since December 31, 1995 from the issuance of any shares of its capital stock or any warrants, options or other rights with respect thereto; PROVIDED FURTHER that the Company may make a Restricted Payment if a Default (but not an Event of Default) shall have occurred and be continuing if such Restricted Payment was declared but not yet paid prior to the occurrence of such Default and the making of such Restricted Payment would be permitted under clause (ii) of this Section 5.16(a). (b) The provisions of Section 5.16(a) to the contrary notwithstanding, the Company may declare and make a Restricted Payment if a Default or Event of Default shall have occurred and be continuing at the time that such Restricted Payment was declared, if (i) the declaration and payment of such Restricted Payment is required in order for the Company to continue to qualify as a REIT under the Code, and (ii) the Default or Event of Default existing at the time of such declaration did not result from (1) a breach of this Section 5.16, (2) a failure to make any payment or prepayment of principal or interest on the Notes (including failure to pay the Make-Whole Premium pursuant to Section 2, when due), or (3) the occurrence of any event specified in Section 6.1(a) or (g). 5.17. CONSTRUCTION FINANCING. The Company will not permit the aggregate outstanding principal, accrued interest (estimated in good faith to the extent not known) and fees, in connection with Construction Investments made by it and its Subsidiaries to exceed (i) an amount equal to 20% of the Company's consolidated Investments in Healthcare Assets during the 12 month period following the date hereof, and (ii) an amount equal to 17.5% percent of the Company's consolidated Investments in Healthcare Assets at any time thereafter; provided that neither the Company nor any Subsidiary of the Company shall make a Construction Investment for a Facility unless (x) there is included in the terms thereof an agreement for the conversion of the interests of the Company or such Subsidiary in the Facility upon the completion thereof into full ownership or a mortgage interest, and (y) if a mortgage interest, the Company or such Subsidiary shall retain a first Lien on such Facility. -17- 22 5.18. INCONSISTENT AGREEMENTS. The Company will not, and will not permit any of its Subsidiaries to, enter into any agreement containing any provision which would be violated or breached by the performance by the Company of its obligations hereunder, under the Notes or under any other Note Document. 5.19. CREDIT ENHANCEMENTS. Neither the Company nor any Subsidiary of the Company will provide any Credit Enhancement, except (a) by the endorsement of negotiable instruments for deposit or collection in the ordinary course of business, (b) Credit Enhancements in support of Facilities, if, immediately after giving effect thereto, the aggregate outstanding amount, including principal, accrued interest (estimated in good faith to the extent not known) and fees, of all issued Credit Enhancements (exclusive of the Credit Enhancements referred to in subsection 5.19(c)) will not exceed $30,000,000 and (c) as set forth on Schedule 5.19 hereof. 5.20. LONG-TERM CARE FACILITIES. The Company will ensure that not less than 70% of the Investments in Healthcare Assets made by the Company and its Subsidiaries are in Long-Term Care Facilities. 5.21. BEHAVIORAL CARE FACILITIES. The Company will ensure that not more than 10% of the Investments in Healthcare Assets made by the Company and its Subsidiaries are in Facilities classified as "Behavioral Care". 5.22. OPERATOR CONCENTRATION; DIVERSIFICATION OF ASSETS AND REVENUES. The Company will ensure that not more than 20% of the Investments made by the Company and its Subsidiaries are maintained with a single Operator (including Affiliates of such Operator). 5.23. MAINTENANCE OF REIT STATUS. The Company will maintain its REIT Status. The Company will not create, acquire or permit to exist any Subsidiary unless such Subsidiary is a "qualified REIT subsidiary" within the meaning of Section 856(j)(i)(2) of the Code. The Company may not and will not permit any of its Subsidiaries to, directly or indirectly, engage in any business which would substantially change the general nature of the business of the Company and its Subsidiaries, considered as a whole, from the nature of the Company's business as it exists on the date of this Agreement. 5.24. NOTICE. The Company will give each Purchaser written notice whenever any of the following events occurs, promptly, and in any event, within five days, after the Company knows or has reason to know thereof: (a) (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan; or (ii) the institution of proceedings or the taking or expected taking of any other action by PBGC or the Company, any Subsidiary of the Company or any ERISA Affiliate to terminate, withdraw or partially withdraw from any Plan and with respect to a Multiemployer Plan, the Reorganization or Insolvency of such Plan; (b) the Internal Revenue Service or any other federal, state or local taxing authority shall allege any material default by the Company or any Subsidiary in the payment of any tax material in amount or make any assessment in respect thereof; -18- 23 (c) (i) any litigation or proceeding shall be brought against the Company or any Subsidiary of the Company before any court or administrative agency which, if successful, may reasonably be expected to have a Material Adverse Effect, or (ii) without limiting the generality of clause (i), any litigation, proceeding or dispute, other than disputes in the ordinary course of business, or, whether or not in the ordinary course of business, involving amounts in excess of $2,500,000 affecting the Company or any of its Subsidiaries, whether or not fully covered by insurance, and regardless of the subject matter thereof (excluding, however, any actions relating to worker's compensation claims or negligence claims relating to use of motor vehicles, if fully covered by insurance, subject to deductibles); (d) there shall be filed any application for a determination of the qualified status of any Plan; (e) the Company receives (i) any written claims, complaints, notices or inquiries relating to the condition of its facilities and properties, or compliance with Environmental Laws which, if adversely determined, individually or in the aggregate may reasonably be expected to have a Material Adverse Effect, (ii) any notice of violation or of any administrative or judicial complaint or order having been filed or about to be filed against the Company or any of its Subsidiaries alleging violations of any Environmental Law, or (iii) any notice from any governmental body or any other Person alleging that the Company or any of its Subsidiaries is or may be subject to any environmental liability; (f) any officer of the Company reasonably believes that any Default has occurred or that any representation or warranty made in Section 3.1 shall for any reason have ceased in any material respect to be true and correct; or (g) the occurrence or expected occurrence of any event that would constitute or cause a Material Adverse Effect. 5.25. ENVIRONMENTAL LAWS. (a) The Company will, and will cause each of its Subsidiaries and lessees under Leases to, use and operate all of its respective facilities and properties in material compliance with all Environmental Laws, and keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith. The Company shall promptly resolve any non-compliance with Environmental Laws and keep its property free of any Lien imposed by any Environmental Law. (b) The Company will, and will cause each of its Subsidiaries and lessees under the Leases to handle all Hazardous Materials in material compliance with all applicable Environmental Laws. The Company will not, and will cause each of its Subsidiaries and lessees under the Leases not to cause or permit: (i) any Hazardous Material to be placed, held, located or disposed of, on, under or at any Facility or any part thereof, except for such Hazardous Materials that are necessary for the Company's or any Subsidiary's or any Operator's operation of its business thereon and which shall be used, stored, treated and disposed of in compliance with all applicable Environmental Laws or (ii) such Facility or any part thereof to be used as a collection, storage, treatment or disposal site for any Hazardous Material. The Company and each Subsidiary acknowledges and agrees that the Purchasers shall have no liability or responsibility for either: -19- 24 (i) damage, loss or injury to human health, the environment or natural resources caused by the presence, disposal, release or threatened release of Hazardous Materials on any part of such Facility; or (ii) abatement and/or clean-up required under any applicable Environmental Laws for a release, threatened release or disposal of any Hazardous Materials located at any Facility or used by or in connection with the Company's or any Subsidiary's or any Operator's business. 5.26. MODIFICATION OF CERTAIN AGREEMENTS. (a) The Company will not consent to any amendment, supplement or other modification to any of the terms or provisions contained in, or applicable to the Credit Agreement, the Amended 1996 Note Documents, or other agreement evidencing Indebtedness of the Company or any of its Subsidiaries that would require the lenders thereunder to consent to any amendment or modification of the Note Documents. The Company shall deliver to each Purchaser, promptly upon their becoming available, all amendments, supplements or modifications to the Credit Agreement or the Amended 1996 Note Documents. (b) Subject to the prohibitions set forth in Section 5.30, the Company will promptly deliver to each of the Purchasers copies of any amendments or modifications to the certificate of incorporation or by-laws of the Company or any of its Subsidiaries, certified with respect to the certificate of incorporation by the Secretary of State of its state of incorporation and, with respect to the by-laws, by the secretary or assistant secretary of such corporation. 5.27. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate; (c) merge into or consolidate with or purchase or acquire assets from an Affiliate; or (d) enter into any other transaction directly or indirectly with or for the benefit of any Affiliate (including, without limitation, guaranties and assumptions of obligations of an Affiliate); PROVIDED, HOWEVER, that: (i) payments on Investments expressly permitted by Section 5.28 hereof may be made, (ii) any Affiliate who is a natural person may serve as an employee or director of the Company or any Subsidiary and receive reasonable compensation for his services in such capacity, and (iii) the Company or any Subsidiary of the Company may enter into any transaction with an Affiliate providing for the leasing of property, the rendering or receipt of services or the purchase or sale of product, inventory and other assets in the ordinary course of business if the monetary or business consideration arising therefrom would be substantially as advantageous to the Company or such Subsidiary as the monetary or business consideration that would obtain in a comparable arm's length transaction with a Person not an Affiliate. 5.28. LIMITATION ON INVESTMENTS.5.28. The Company will not, and will not permit any of its Subsidiaries to, make or permit to remain outstanding any Investment in any Person, including any shareholder, director, officer or employee of the Company or any of its Subsidiaries, except: (a) Investments in: (i) obligations issued or guaranteed by the United States of America; -20- 25 (ii) certificates of deposit, bankers acceptances and other "money market instruments" issued by any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000; (iii) open market commercial paper bearing the highest credit rating issued by Standard & Poor's Corporation or by another nationally recognized credit rating agency; (iv) repurchase agreements entered into with any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000 relating to United States of America government obligations; and (v) shares of "money market funds", each having net assets of not less than $100,000,000; in each case maturing or being due or payable in full not more than 180 days after the acquisition thereof by the Company or any of its Subsidiaries. (b) Investments by the Company in any Subsidiary, and by any Subsidiary in the Company or another Subsidiary, provided that (i) the Company shall cause each newly-created Subsidiary, if any, within thirty (30) days after its organization thereof, to become a party to the Subsidiary Guaranty, (ii) the Company shall cause each such newly-created Subsidiary to deliver to each Purchaser those certificates and documents described in subsection 10.1(a), as applicable, and (iii) all legal matters incident to the execution by such Subsidiary of the Subsidiary Guaranty shall be satisfactory to counsel for each Purchaser. (c) The acquisition by the Company and its Subsidiaries, on a consolidated basis, of healthcare assets consisting of Facilities and Mortgages. (d) Investments in any Person (including any Operators) provided that the aggregate Cash portion of all such Investments does not exceed an amount equal to 10% of Healthcare Assets as at any date of determination thereof, prior to giving effect to any such Investment. For purposes of Sections 5.8(b), 5.27 and 5.28, "Investments" shall mean, by any Person: (i) any amount paid or committed to be paid, or the value of property of services contributed or committed to be contributed, by such Person for or in connection with the acquisition by such Person of any stock, bonds, notes, debentures, partnership, membership or other ownership interests or other securities of, or other investment in, any other Person; and (ii) any amount of any advance, loan or extension of credit by such Person to any other Person, or any guaranty or other similar obligation of such Person with respect to any Indebtedness of such other Person, and (without duplication) any amount committed to be advanced, loaned, or extended by such Person to any other Person, or any amount the payment of which is committed to be assured by a guaranty or similar obligation by such Person for the benefit of such other Person. -21- 26 5.29. ERISA, ETC. The Company will materially comply with all applicable provisions of ERISA and the Code now or hereinafter in effect. The Company will not permit the establishment of any Plan or amendment of any Plan, which establishment or amendment could result in liability to the Company or any of its Subsidiaries or increase the obligation for post-retirement welfare benefits of the Company or any of its Subsidiaries which liability or increase, individually or together with all similar liabilities and increases, may reasonably be expected to have a Material Adverse Effect. 5.30. CHANGES IN STRUCTURE; FISCAL YEAR. The Company will not amend, supplement or modify the certificate of incorporation or by-laws of the Company or any of its Subsidiaries in a manner which would be reasonably likely to cause a Material Adverse Effect. The Company will not change its fiscal year. 5.31. CAPITAL EXPENDITURES. Except as set forth on Schedule 5.31, the Company will not, and will not permit any of its Subsidiaries to, make or be or become obligated to make Capital Expenditures in the aggregate for the Company and its Subsidiaries on a consolidated basis, during each fiscal year of the Company and its Subsidiaries, in excess of $350,000 (exclusive of Investments permitted under Section 5.28). 5.32. RENTAL OBLIGATIONS. The Company will not, and will not permit any of its Subsidiaries to, enter into, or permit to remain in effect, any lease (other than Capitalized Leases that are governed by Section 5.31), if, after giving effect thereto, the aggregate amount of all rentals and other obligations, including, without limitation, all percentage rents and additional rent, due from the Company and its Subsidiaries thereunder would exceed $350,000 during any fiscal year. 5.33. USE OF CASH. The Company will not, and will not permit any of its Subsidiaries to, use, or permit to be used, in any manner or to any extent, the Company's, or such Subsidiary's, Cash from operations for the benefit of any Person, except: (a) in connection with the payment or prepayment of expenses (other than Capital Expenditures) directly incurred for the benefit of the Company or such Subsidiary in the maintenance and operation of its business, in each case only in the ordinary course of its business, (b) for the payment of required payments of principal and interest on Indebtedness of the Company and its Subsidiaries permitted to exist hereunder, and (c) for uses that are otherwise specifically permitted by this Agreement. SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR. 6.1. EVENTS OF DEFAULT. Any one or more of the following shall constitute an "EVENT OF DEFAULT" as the term is used herein or in the other Note Documents: (a) (i) the Company shall fail to pay when due any payment (including any mandatory prepayment) of the principal of any Note or of any premium or interest thereon; or (ii) the Company shall fail to pay when due any other amount payable hereunder or under any other Note Document and such payment default with respect to such other amount shall continue for more than five Business Days; or -22- 27 (b) the Company shall fail to observe or perform any of its obligations under Section 2.5, 5.8, 5.12, 5.13, 5.14, 5.15, 5.16, 5.17, 5.18, 5.19, 5.20, 5.21, 5.22, 5.23, 5.24, 5.25, 5.26, 5.27, 5.28, 5.29, 5.30, 5.31, 5.32, 5.33 or 6.2 of this Agreement or Article IV of the Subsidiary Guaranty; or any Subsidiary of the Company shall fail to observe or perform any of its obligations under Article II of the Subsidiary Guaranty; or (c) the Company, or any Subsidiary of the Company, shall fail to observe or perform any other obligation, covenant, undertaking, condition or provision in respect of the Notes or contained in this Agreement or the other Note Documents that is not remedied within 30 days after the earliest of (i) the furnishing of notice thereof by the Company to the Purchasers, (ii) the Company's willful failure to provide any notice required under Section 6.2 or (iii) receipt of written notice thereof from any Purchaser to the Company requiring the same to be remedied; or (d) any representation or warranty made by the Company herein, or made by the Company or any Subsidiary of the Company in any other Note Document, shall be untrue or inaccurate in any material respect; or (e) any of the Note Documents or any provision thereof shall cease to be a legal, valid and binding agreement enforceable against the Company (or, in the case of the Subsidiary Guaranty, the Company or any of the Subsidiaries) in accordance with the respective terms thereof or shall in any way be terminated or become or be declared ineffective or inoperative or shall in any way whatsoever cease to give or provide the respective rights, titles, interests, remedies, priorities, powers or privileges intended to be created thereby; or (f) a judgment shall be rendered against the Company or any Subsidiary of the Company, or any attachment, levy or execution against any of their respective properties shall occur, for any amount in excess of $1,500,000 and shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 30 days or more; or (g) (i) the Company or any of its Subsidiaries shall have made an assignment for the benefit of creditors, filed a petition in bankruptcy, shall be adjudicated insolvent, shall have petitioned or applied to any tribunal for the appointment of a receiver, custodian, or any trustee for it or a substantial part of its assets, or shall have commenced any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether nor or hereafter in effect, or the Company or any of its Subsidiaries shall have taken any corporate action to authorize any of the foregoing actions; or there shall have been filed any such petition or application, or any such proceeding shall have been commenced against the Company or any of its Subsidiaries, that remains undismissed for a period of 60 days or more; or any order for relief shall be entered in any such proceeding; or the Company or any of its Subsidiaries by any act or omission shall have indicated its consent to, approval of, or acquiescence in any such petition, application or proceeding or the appointment of a custodian, receiver or any trustee for it or any substantial part of its properties, or shall have suffered any custodianship, receivership or trusteeship to continue undischarged for a period of 30 days or more; or (ii) the Company or any of its Subsidiaries shall have generally failed to pay its debts as such debts become due; or -23- 28 (iii) the Company or any of its Subsidiaries shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property that may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint that is not vacated within 30 days from the date thereof; or (h) a default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than the Obligations) of the Company with an aggregate principal amount in excess of $1,000,000 or any Subsidiary with an aggregate principal amount in excess of $200,000, or a default shall occur in the performance or observance of any obligation or condition with respect to any such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders (immediately or after the giving of notice or passage of time or both), to cause such Indebtedness to become due and payable prior to its stated maturity, or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (i) any of the following events shall occur with respect to any Plan: (x) the institution of any steps by the Company, any Subsidiary of the Company, any ERISA Affiliate or any other Person to terminate a Plan if, as a result of such termination, the Company, any Subsidiary of the Company or any such ERISA Affiliate could be required to make a contribution to such Plan, or could reasonably expect to incur a liability or obligation to the PBGC or any other Person under Title IV of ERISA or to such Plan, in excess of $100,000; or (y) a contribution failure occurs with respect to any Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; or (j) a Material Adverse Effect shall have occurred; or (k) (i) any Person, or a group of Persons (within the meaning of Section 13 or 14 of the Exchange Act), shall have acquired (A) beneficial ownership in excess of 25% of the outstanding stock of the Company or other voting interest having ordinary voting powers to elect a majority of the directors, managers or trustees of the Company (irrespective of whether at such time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency), or (B) all or substantially all of the Investments of the Company; or (ii) a majority of the Board of Directors of the Company, at any time, shall be composed of Persons other than (A) Persons who were members of the Board of Directors on the date of this Agreement, or (B) Persons who subsequently become members of the Board of Directors and who either (x) are appointed or recommended for election with the affirmative vote of a majority of the directors in office as of the date of the Agreement, or (y) are appointed or recommended for election with the affirmative vote of a majority of the Board of Directors of the Company then in office; or -24- 29 (l) The Company shall at any time fail to maintain its REIT Status, or the Company or any Subsidiary shall lose, through suspension, termination, impoundment, revocation, failure to renew or otherwise, any material license, permit or governmental authorization; or (m) George L. Chapman shall cease for any reason whatsoever, including, without limitation, death or disability (as such disability shall be determined in the reasonable judgment of the Required Holders) to be and continuously perform the duties of an executive officer of the Company and to be a member of its Board of Directors or, if such cessation shall occur as a result of the death or such disability, no successor satisfactory to the Required Holders, in their sole discretion, shall have become and shall have commenced to perform the duties of such executive officer of the Company and serve as a member of the Company's Board of Directors within 30 days after such cessation; PROVIDED, HOWEVER, that if any satisfactory successor shall have been so elected and shall have commenced performance of such duties within such period, the name of such successor or successors shall be deemed to have been inserted in place of George L. Chapman in this Section 6.1(m); or (n) The Company or any of its Subsidiaries, or any of their respective Facilities, shall be subject to one or more Liens for costs or damages in excess of $1,000,000 individually or in the aggregate under any Environmental Law, such Liens shall remain in place for 30 days after the creation thereof and such Liens are reasonably likely to cause a Material Adverse Effect; or (o) 30 days after the acceleration by the Company or any of its Subsidiaries of the obligations of an Operator as a result of any default in the payment of amounts which are due and owing under any lease, note, mortgage or related security documents in connection with any Facility of such Operator (such Facility, herein referred to as the "DEFAULTED FACILITY"), in the event the sum of Lease Rental Expense and/or Mortgage Expense arising from (i) the Defaulted Facility, and (ii) all Pooled Facilities, if any, of which the Defaulted Facility is a part, which have a Fixed Charge Coverage of less than 1.0 to 1.0, account for 12.5% or more of the aggregate amount of all Lease Rental Expense and/or Mortgage Expense owing to the Company or any of its Subsidiaries from all Operators during the immediately preceding four calendar quarters. 6.2. NOTICE TO PURCHASERS. Whenever the Company becomes aware that any Default or Event of Default has occurred, or if a Purchaser has either given any notice to the Company or taken any other action of which the Company is aware with respect to a Default or Event of Default, or the Company receives written notice from a third party concerning an event which constitutes a Default or Event of Default, the Company will ensure that notice is given (or such third party notice is forwarded) to all holders of the Notes then outstanding, no later than the fifth day (or second day in the case of an Event of Default or Default under Section 6.1(a)) after it becomes aware that such Event of Default or Default has occurred, or that such notice has been given or such other action has been taken with respect to such Default or Event of Default, such notice to be in writing and sent in the manner provided in Section 9.6. 6.3. ACCELERATION OF MATURITIES; OTHER REMEDIES. (a) Upon the occurrence of an Event of Default under Section 6.1(a), the holder of any Note may, by written notice to the Company, declare such Note to be, and such Note shall thereby become, due and payable (without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company) at the Redemption Price. Upon the occurrence of an Event of Default under Section -25- 30 6.1(g), all Notes shall immediately become due and payable (without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company) at the Redemption Price. Upon the occurrence of any Event of Default, other than under Section 6.1(g) and other than under Section 6.1(a) (which are governed by the preceding two sentences), the holders of Notes representing a majority of the principal amount of the Notes outstanding excluding in each case any Notes held by the Company or any Subsidiary or Affiliate of the Company, may, by written notice to the Company, declare all Notes to be, and such Notes shall thereby become, due and payable (without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company) at the Redemption Price. No course of dealing on the part of any holder of any Note nor any delay or failure on the part of any holder of any Note to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company further agrees to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any Note upon any default hereunder or thereon, including the fees, disbursements and other charges of such holder's or holders' attorneys for all services rendered in connection therewith. (b) The rights and remedies expressly provided for in this Agreement and the other Note Documents are cumulative and not exclusive of any rights or remedies which the Purchaser or any holder of a Note would otherwise have including, without limitation, the rights and remedies provided for in the Subsidiary Guaranty. 6.4. RESCISSION OF ACCELERATION. The provisions of Section 6.3 are subject to the condition that if any outstanding Notes have been declared or have become immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (a) through (f), inclusive, of Section 6.1, or an Event of Default described in paragraphs (h) through (o), inclusive, of Section 6.1, then the holders of Notes representing a majority of the principal amount of the Notes outstanding excluding in each case any Notes held by the Company or any Subsidiary or Affiliate of the Company, may, by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof; PROVIDED that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under Section 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been cured or waived pursuant to Section 7.1 and the Company shall have paid all of Purchaser's costs and expenses as provided for in Section 9.4; and PROVIDED further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. 7.1. CONSENT REQUIRED. Any term, covenant, agreement or condition of this Agreement or the Notes or the other Note Documents may, with the consent of the Company, be amended or compliance -26- 31 therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the Required Holders, provided that no such waiver, modification, alteration or amendment shall (a) change the time of payment of the principal of or the interest on any Note or reduce the principal amount thereof or change the rate of interest thereon, (b) change any of the provisions with respect to Section 2 including, without limitation, the calculation of the Redemption Price, or (c) change the percentage of holders of the Notes, or the number of holders of Notes, required to take any action under this Section 7 or any other provision of this Agreement, without the consent of each holder of the Notes affected thereby. Executed or true and correct copies of any waiver, modification, alteration or amendment to this Agreement shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed and delivered by the holder or holders of the requisite percentage of outstanding Notes. Whenever in this Agreement it is provided that an action may be taken or a condition may exist with the consent of all or any percentage of the Purchasers or the outstanding Notes, such consent must be the consent of all or such percentage of the Purchasers or such outstanding Notes without regard to any Notes held or agreed to be purchased by the Company, any Subsidiary of the Company or any Affiliate of the Company or any such Subsidiary. 7.2. SOLICITATION OF PURCHASERS. So long as there are any Notes outstanding, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes or the other Note Documents unless each holder of Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder as consideration for or as an inducement to entering into by any holder of any waiver or amendment of any of the terms and provisions of the Agreements or the Notes or the other Note Documents unless such remuneration is concurrently paid, on the same terms, ratably to the holders of all Notes then outstanding, whether or not such holders agreed to such waiver or amendment. 7.3. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS 8.1. DEFINITIONS. (a) Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the other Note Documents. "ACT" means the Securities Act of 1933, as amended. "AFFILIATE" means any Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (b) which beneficially owns or holds with power to vote 5% or more of any class of the voting stock of the Company, (c) 5% or more of the -27- 32 voting stock of which is beneficially owned or held by the Company, or (d) which is an officer or director of the Company. The term "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" shall mean this Amended and Restated Note Purchase Agreement, as amended, modified or supplemented from time to time. "AMENDED 1996 NOTE DOCUMENTS" means, collectively, the Amended and Restated Note Purchase Agreement between the Company and the Purchasers party thereto, dated as of the date hereof, for $30,000,000 of Senior Notes, the notes issued pursuant thereto and all other documents and instruments executed or delivered by the Company in connection therewith or pursuant thereto. "APPRAISAL" means an appraisal providing an assessment of the fair market value of a Property (whether appraised on a stand-alone basis or "in bulk" together with similar Properties) which is independently and impartially prepared by an MAI appraiser having substantial experience in the appraisal of health care facilities and conforming to Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation. "APPRAISED VALUE" means with respect to any Facility, the value of such Facility reflected in the most recent Appraisal prepared with respect to such Facility. "BALLOON PAYMENTS" means as of any date as of which the amount thereof shall be determined, with respect to the Company on a consolidated basis, an amount equal to (x) its aggregate obligation to make payments of principal in respect of Indebtedness having a maturity during the immediately succeeding six month period, less (y) the sum of Cash and the total unused availability under the Credit Agreement; PROVIDED, HOWEVER, any Indebtedness with respect to which the Company (or any of its Subsidiaries) has received a commitment for the renewal or other refinancing of such Indebtedness shall not be included in the computation of Balloon Payments and provided, further, if the calculation of the amount of Balloon Payments results in a negative number, then the amount thereof shall be deemed to be zero. "BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. Section 101 ET SEQ., as amended. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which banks in New York are required by law to close or are customarily closed. "CALLED PRINCIPAL" shall mean, with respect to any Note, the principal amount of such Note that is to be paid or prepaid pursuant to any paragraph of Section 2 or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. "CAPITAL EXPENDITURES" means, for any period, the aggregate amount of all payments made or to be made during such period by any Person directly or indirectly for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment that, in accordance with GAAP, would be added as a debit to the fixed asset account of such Person, including, without limitation, all amounts paid or payable -28- 33 during such period with respect to Capitalized Lease Obligations and interest that are required to be capitalized in accordance with GAAP. "CAPITALIZED LEASE" means any lease, the obligations to pay rent or other amounts under which constitute Capitalized Lease Obligations. "CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "CASH" means, as to any Person, such Person's cash and cash equivalents, as defined in accordance with GAAP consistently applied. "CASH FLOW" means, for any period, the Company's consolidated net income (loss) for such period, excluding extraordinary items net of tax effect, plus depreciation, plus amortization of loan expenses, plus (minus) any change in provision for losses, plus (minus) each of the following: (i) non-refundable loan and commitment fees received in cash in excess of (less than) amounts earned; (ii) non-refundable lease income received in cash in excess of (less than) amounts earned; and (iii) non-refundable interest income received in cash in excess of (less than) amounts earned. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "CODE" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "COMPANY" means Health Care REIT, Inc., a Delaware corporation, together with its successors. "CONSTRUCTION INVESTMENTS" means any financing extended by the Company or any Subsidiary of the Company with respect to a Facility which is under construction, i.e., has not received a certificate of occupancy and the Company's or such Subsidiary's conditions for conversion to permanent financing for the Facility have not been satisfied. "CREDIT AGREEMENT" means the Company's loan agreement, dated as of the date hereof, by and among the Company and the banks signatory thereto and KeyBank National Association, as Administrative Agent, and Fleet Bank, N.A., as Syndication Agent, and as hereafter amended from time to time (provided that no such amendment results in a breach of Section 5.26), providing for a $175,000,000 revolving credit facility. "CREDIT ENHANCEMENT" means any obligation, contingent or otherwise, of the Company or any of its Subsidiaries directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of the Company or any of its Subsidiaries (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreement to keep -29- 34 well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). The term "Credit Enhanced" used as a verb has a corresponding meaning. "DEBT" means at any date, without duplication, (i) all obligations of the Company or any of its Subsidiaries for borrowed money, (ii) all obligations of the Company or any of its Subsidiaries evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of the Company or any of its Subsidiaries to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of the Company or any of its Subsidiaries as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all obligations of the Company or any of its Subsidiaries to purchase securities (or other property) which arise out of or in connection with the sale of the same or substantially similar securities or property, (vi) all obligations of the Company or any of its Subsidiaries to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vii) all obligations of the Company or any of its Subsidiaries to mandatorily redeem any capital stock of the Company or any of its Subsidiaries or any other Person, (viii) all Debt of others secured by a Lien on any asset of the Company or any of its Subsidiaries, whether or not such Debt is assumed by the Company or any of its Subsidiaries, and (ix) all Debt of others Credit Enhanced by the Company or any of its Subsidiaries. "DEFAULT" means any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default as defined in Section 6.1. "DISCOUNTED PREPAYMENT VALUE" shall mean, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on a semiannual basis) equal to the sum of the Reinvestment Yield plus 50 basis points. "EBITDA" means, for any period, with respect to the Company on a consolidated basis, determined in accordance with GAAP, the sum of net income (or net loss) for such period PLUS, the sum of all amounts treated as expenses for: (a) interest, (b) depreciation, (c) amortization, and (d) all accrued taxes on or measured by income to the extent included in the determination of such net income (or net loss); provided, however, that net income (or net loss) shall be computed without giving effect to extraordinary losses or gains. "EBITDAR" means, for any period, with respect to any Facility, pre-tax net income plus Operator Interest Expense, Mortgage Expense (but excluding therefrom any amounts relating to principal), Lease Rental Expense, depreciation, amortization and management fees as reported by the Operator less an imputed management fee equal to five percent of the Facility's net revenues; PROVIDED, HOWEVER, that net income (or net loss) shall be computed without giving effect to extraordinary losses or gains. "ENVIRONMENTAL LAWS" means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and the protection of the environment. -30- 35 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. "ERISA AFFILIATE" means any corporation, trade or business that is treated as a single employer with the Company or any Subsidiary of the Company under Section 414(b), (c), (m) or (o) of the Code. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXECUTIVE OFFICER" means the Chairman of the Board, President, a Vice President, chief financial officer or Treasurer of the Company. "FACILITY" means a health care facility offering health care-related products and services, including, but not limited to, any acute care hospital, rehabilitation hospital, nursing facility, assisted living facility, retirement center, long-term care facility, or medical office building, and facilities and services directly related thereto. "FIXED CHARGE COVERAGE" means, with respect to any Facility, the ratio of: (x) EBITDAR, to (y) the sum of Operator Interest Expense (but excluding therefrom Operator Interest Expense, the payment of which is subordinated to the payment of Indebtedness owing to the Company or any of its Subsidiaries), Lease Rental Expense, Mortgage Expense and principal paid with respect to Indebtedness of Operators (other than Indebtedness relating to a Mortgage) which is not subordinated to the Company or any of its Subsidiaries; all of the foregoing calculated as at any date of determination thereof by reference to the immediately preceding four fiscal quarters and based upon the financial statements provided to the Company by each Operator for the immediately preceding four fiscal quarters of each Operator. "FIXED COVERAGE RATIO" means as of the last day of any fiscal quarter with respect to the immediately preceding four fiscal quarters of the Company ending on such date, the ratio of (x) EBITDA to (y) the sum of Interest Expense, cash dividends and Balloon Payments. "FUNDED INDEBTEDNESS" means, as of any date of determination thereof, all Indebtedness of any Person, determined in accordance with GAAP, which by its terms matures more than one year after the date of calculation, and any such Indebtedness maturing within one year from such date which is renewable or extendable at the option of the obligor to a date more than one year from such date, including, in any event, the revolving credit loans borrowed pursuant to the Credit Agreement. "HAZARDOUS MATERIALS" means (a) any "hazardous substance" as defined by CERCLA; (b) any "hazardous waste" or "petroleum," as defined by the Resource Conservation and Recovery Act, as amended; (c) any petroleum product; (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law, as amended or hereafter amended; (e) any radioactive material, including any source, special nuclear or by-product material as defined at 42 U.S.C. 2011 et seq., as amended or hereafter amended; or (f) any other toxic chemical, hazardous substance, contaminant or pollutant, medical waste, infectious waste or hazardous waste. "HEALTHCARE ASSETS" means, as of any date as of which the amount thereof is to be determined, the aggregate amount equal to the sum (without duplication) of: -31- 36 (i) the lesser of the Appraised Value or purchase price of each Facility owned entirely by the Company or any of its Subsidiaries and leased to an Operator; plus (ii) the lesser of the Appraised Value of any Facility encumbered by a Mortgage or the outstanding principal amount of the Mortgage which encumbers any such Facility. "INCLUDING" means including without limitation. "INDEBTEDNESS" means, with respect to any Person, all: (a) liabilities or obligations, direct and contingent, which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person at the date as of which Indebtedness is to be determined, including, without limitation, contingent liabilities that in accordance with such principles, would be set forth in a specific dollar amount on the liability side of such balance sheet, and Capitalized Lease Obligations of such Person; (b) liabilities or obligations of others for which such Person is directly or indirectly liable, by way of guaranty (whether by direct guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to purchase or advance or keep in funds or other agreement having the effect of a guaranty) or otherwise; (c) liabilities or obligations secured by Liens on any assets of such Person, whether or not such liabilities or obligations shall have been assumed by it; and (d) liabilities or obligations of such Person, direct or contingent, with respect to letters of credit issued for the account of such Person and bankers acceptances created for such Person. "INSOLVENCY" means with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of such term as used in section 4245 of ERISA. "INSOLVENT" shall pertain to a condition of Insolvency. "INTEREST COVERAGE" means, as at the last day of any fiscal quarter, the quotient, expressed as a percentage (which may be in excess of 100%), determined by dividing EBITDA by Interest Expense; all of the foregoing calculated by reference to the immediately preceding four fiscal quarters of the Company ending on such date of determination. "INTEREST EXPENSE" means, for any period, on a combined basis, the sum of all interest paid or payable (excluding unamortized debt issuance cost) on all items of Indebtedness of the Company and its Subsidiaries outstanding at any time during such period. "INVESTMENT" means (except as otherwise provided in Section 5.28 in respect of Sections 5.8(b), 5.27 and 5.28) a Facility or a Mortgage, individually or collectively, as the case may be. "LEASE" means any Operating Lease or a Lease that creates a Capitalized Lease Obligation, in either case in which the Company or a Subsidiary of the Company is the lessor. "LEASE RENTAL EXPENSE" means, for any period and with respect to any Facility, the total amount payable during such period by the lessee of such Facility to the Company or any Subsidiary, including, without limitation, (a) base rent (as adjusted from time to time), plus (b) all incremental charges to which the Facility is subject under the lease relating thereto. -32- 37 "LIEN" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), encroachment, charge or claim against or interest in property, to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. "LONG-TERM CARE FACILITIES" means healthcare facilities comprised of nursing facilities, assisted living facilities and retirement facilities or combinations thereof. "MAKE-WHOLE PREMIUM" means, with respect to any Note, a premium equal to the excess, if any, of the Discounted Prepayment Value of the Called Principal of such Note over such Called Principal. The Make-Whole Premium shall in no event be less than zero. "MATERIAL ADVERSE EFFECT" means: (a) a material adverse effect on the business, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole, or on the ability of the Company or any Subsidiary of the Company to perform its obligations under this Agreement, the Notes or any other Note Document; or (b) a material adverse effect on the legality, validity or enforceability of the obligations of the Company or any Subsidiary of the Company under this Agreement or the Notes or the other Note Documents. "MORTGAGE(S)" means mortgages of real property constituting a Facility for which the Company or a Subsidiary of the Company is the sole mortgagee. "MORTGAGE EXPENSE" means, for any period and with respect to any Facility, the total amount payable during such period by the mortgagor of such Facility to the Company or any Subsidiary, including, without limitation, (a) interest and principal (as adjusted from time to time) plus (b) all incremental charges to which the Facility is subject under the Mortgage. "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NET ISSUANCE PROCEEDS" means in respect of any issuance of Indebtedness or equity, the proceeds in Cash received by the Company or any of its Subsidiaries upon or simultaneously with such issuance, net of direct costs of such issuance and any taxes paid or payable by the recipient of such proceeds. "NET WORTH" means, at any date, the aggregate amount of capital stock (less any treasury stock), surplus and retained earnings of the Company, all determined as of such date in accordance with GAAP consistently applied. "NOTE DOCUMENTS" means this Agreement, the Notes, the Subsidiary Guaranty and any other agreements, documents and writings now or hereafter executed by, on behalf of or for the benefit of the Company, any Subsidiary of the Company or the Purchasers pursuant to or in connection with this Agreement, the Notes, the Subsidiary Guaranty or the transactions contemplated hereby and thereby, together with all amendments, modifications (including through the waiver of any provision hereof or thereof), supplements and/or restatements hereto or thereto. -33- 38 "NOTES" means the Notes described in Section 1.1, and any Notes issued in exchange or replacement therefor, in each case as the same may be amended, modified or supplemented from time to time. "OBLIGATIONS" means the payment and performance of all present and future obligations and liabilities of the Company or any Subsidiary of the Company (whether actual or contingent or whether owed jointly or severally or in any other capacity whatsoever) to the Purchasers (or any of them) under the Note Documents (or any of them), together with all costs, charges and expenses incurred by the Purchasers (or any of them) in connection with the protection, preservation or enforcement of their respective rights under the Note Documents, including, without limitation, all principal of, premium (including the Make-Whole Premium), if any, and interest on, any Note and all other amounts payable by the Company or any Subsidiary of the Company under any Note Document (including, without limitation, amounts owed in respect of interest that accrues on all or any portion of the Obligations after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company or any Subsidiary of the Company), and all renewals or extensions of any of the foregoing. "OPERATING LEASE" means any lease (other than a lease constituting a Capitalized Lease Obligation) of real or personal property having a lease term (as defined in Financial Accounting Standards Board Statement No. 13, as in effect on the Original Issuance Date) of more than one year. "OPERATOR" means (a) the lessee of any Facility owned or leased by the Company or any of its Subsidiaries, and (b) the mortgagor of a Facility which is subject to a Mortgage to the extent that such entity controls the operation of the Facility. "OPERATOR INTEREST EXPENSE" means, for any period, the sum of all interest on, and all amortization of debt discount and expenses on, all Indebtedness of an Operator outstanding at any time during such period but excluding any amounts which constitute Mortgage Expense. "OVERDUE RATE" means, for each day, a rate per annum equal to the higher of (a) 10.24% and (b) the sum of (i) 2% PLUS (ii) the Prime Rate for such day. Nothing contained in this definition shall require the Company or any Subsidiary of the Company to pay interest at a rate exceeding the maximum rate permitted by applicable law. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "PERSON" means a corporation, an association, a partnership, a limited liability company or partnership, an organization, a business, a trust or any other entity, an individual, a government or political subdivision thereof or a governmental agency or instrumentality. "PLAN" means at any particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company, any Subsidiary of the Company or an ERISA Affiliate is (or, if such plan was terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in section 3(5) of ERISA. -34- 39 "POOLED FACILITIES" means Facilities which are commonly owned or operated by one Operator or an Affiliate thereof (as selected by the Company or any of its Subsidiaries), and the debt financings or leases of which are cross-defaulted and, with respect to Mortgages, are cross-collateralized. "PRIME RATE" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "PROPERTY" means any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "PURCHASER'S ENVIRONMENTAL LIABILITY" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against any Purchaser or any of its respective affiliates, shareholders, directors, officers, employees or agents in connection with or arising from: (a) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment to which the Company or any of its Subsidiaries may be subject; (b) the Release by the Company or any of its Subsidiaries of any Hazardous Material on, in, under or affecting all or any portion of any property of the Company or any such Subsidiary, the groundwater, or any of the surrounding areas; (c) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Company or any of its Subsidiaries of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law); (d) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in Section 3.1(q); or (e) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Material by the Company or any of its Subsidiaries, or in connection with any property owned or formerly owned by the Company or any of its Subsidiaries. "RECOGNIZED RATING AGENCY" shall mean a nationally recognized rating agency or organization, including Moody's, Standard & Poor's and Duff & Phelps, and any other rating agency or organization approved by the Purchasers holding a majority of the principal amount of the Notes. "REINVESTMENT YIELD" shall mean, with respect to the Called Principal of any Note, the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the third Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively -35- 40 traded U.S. Treasury securities having a maturity equal to the weighted average remaining life of the Called Principal being paid or prepaid as of such Settlement Date, or (ii) if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, the Treasury Constant Maturity Series yields reported, for the latest day for which such yields shall have been so reported as of the third Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15(519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the weighted average remaining life of the Called Principal being paid or prepaid as of such Settlement Date. Such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between reported yields. "REIT STATUS" means, with respect to any Person, (a) the qualification of such Person as a real estate investment trust under Sections 856 through 860 of the Code, and (b) the applicability to such Person and its shareholders of the method of taxation provided for in Section 857 et seq. of the Code. "RELEASE" means a "release," as such term is defined in CERCLA. "REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon (other than interest accrued to the Settlement Date) that would be due on or after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its expressed maturity date. "REORGANIZATION" means with respect to any Multiemployer Plan, the condition that such Plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "REPORTABLE EVENT" means any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the 30-day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. ' 2615, and the event described in Section 4062(e) of ERISA. "REQUIRED HOLDERS" means, at any time, the holders of at least 66 2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Subsidiaries or any Affiliates). "SECURED CREDIT AGREEMENT" means any credit agreement, note purchase agreement or other documentation evidencing Debt borrowed from institutional investors or banks which is secured by Liens on assets or properties of the Company or any Subsidiary of the Company; provided that if the only security for such Debt is a mortgage creating a Lien on a single real estate property of the Company or any Subsidiary of the Company, then such credit agreement, note purchase agreement or other documentation shall not be deemed to be a Secured Credit Agreement. "SERIES" when referring to the Notes shall mean either the Series A Notes, Series B Notes or the Series C Notes issued hereunder. "SETTLEMENT DATE" shall mean, with respect to the Called Principal of any Note, the date on which such Called Principal is to be paid or prepaid pursuant to any paragraph of Section 2 or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. -36- 41 "SUBSIDIARY" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (assuming exercise or conversion solely of the securities held by such Person) is at the time beneficially owned by such Person directly or indirectly through Subsidiaries, and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than a 50% equity interest at the time or the power to elect a majority of the Board of Directors or similar governing body. "SUBSIDIARY GUARANTY" means the Subsidiary Guaranty Agreement, dated as of the date hereof, among the Purchasers, the Company and each of the Subsidiaries of the Company, as amended, modified or supplemented from time to time. "TANGIBLE NET WORTH" means, at any date, the aggregate amount of Net Worth of the Company, after subtracting deferred charges and intangible assets, all as determined as of such date in accordance with GAAP consistently applied. "WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, any corporation, partnership, association, joint venture or other entity of which all of the equity securities or ownership interests (other than, in the case of a corporation, directors' qualifying shares) are owned or controlled by such Person or one or more Wholly Owned Subsidiaries of such Person. (b) In addition, each of the following terms is defined in the Section set forth opposite such term:
Term Section ---- ------- Audited Financials 3.1(h) Defaulted Facility 6.1(o) Effective Date 10.1 Environmental Reports 3.1(q) Event of Default 6.1 GAAP 3.1(h) Indemnified Liabilities 9.4(b) Indemnified Parties 9.4(b) 1996 10-K 3.1(g) Leverage Ratio 5.14(b) Leverage Test Period 5.14(b) Note Register 9.1(a) Notes 1.1 Ongoing Indebtedness 5.12(b) Ordinary Leases 5.8(b) Original Issuance Date 1.2(a) Original Note Purchase Agreement Preamble Original Notes Preamble Original Series A Notes Preamble -37- 42 Original Series B Notes Preamble Original Series C Notes Preamble Paying Agent 5.4 Purchase Price 1.2(a) Purchaser Preamble Redemption Price 2.1 Release 10.2 Release Documents 10.2 Restricted Payments 5.16(a) Series A Notes 1.1 Series B Notes 1.1 Series C Notes 1.1 Taxes 5.3
8.2. ACCOUNTING PRINCIPLES; TIME PERIODS. (a) Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP. (b) In the Note Documents, in connection with the computation of periods of time, each such period shall run from (and including) the beginning of such period to (but excluding) the end of such period. SECTION 9. MISCELLANEOUS 9.1. REGISTERED NOTES. (a) Company shall cause to be kept a register for the registration and transfer of the Notes (the "NOTE REGISTER") at the office of the Company or the Paying Agent, and the Company will cause to be registered or transferred on the Note Register as hereinafter provided and under such reasonable regulations as it may prescribe, any Note issued pursuant to this Agreement. (b) At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may, subject to compliance with applicable securities laws, transfer such Note upon surrender thereof at the Company or the principal office of the Paying Agent (if one shall have been appointed) duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing; provided that the Company or the Paying Agent may decline to exchange or register the transfer of any Note during the period of five Business Days preceding the due date for any payment of principal or interest on the Notes. (c) The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. -38- 43 9.2. EXCHANGE OF NOTES. At any time and from time to time, upon not less than three Business Days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to Section 9.1, this Section 9.2, or Section 9.3 (except in the case of a lost, stolen, or mutilated certificate sought to be exchanged pursuant to Section 9.3, as soon as practicable), and, upon surrender of such Note at the office of the Paying Agent, the Company will cause the Paying Agent to deliver in exchange therefor, without expense to the holder, except as set forth below, Notes for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, in the denomination of U.S. $100,000 or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered, or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, payable to such Person or Persons, or registered assigns, as may be designated by such holder and otherwise permitted hereunder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Company may require the payment of a sum sufficient to cover any stamp tax or governmental charges imposed upon such exchange or transfer. 9.3. LOSS, THEFT OR MUTILATION OF NOTES. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Notes, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the Note, the Company will cause the Paying Agent to deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If any Purchaser is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer, of such owner, setting forth the fact of loss, theft or destruction and of its ownership of the Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Company. 9.4. EXPENSES, STAMP TAX, INDEMNITY. (a) Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay directly all of its and the Purchasers' out-of-pocket expenses in connection with the preparation, execution and delivery, administration, interpretation and enforcement of this Agreement and each of the other Note Documents and the transactions contemplated or permitted hereby and thereby, including the reasonable fees, disbursements and other charges of Purchasers' special counsel, and all duplicating and printing costs and charges for shipping the Notes, adequately insured to each Purchaser at such Purchaser's home office or at such other place as such Purchaser may designate. The Company agrees to pay all of its out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated or permitted hereby, including the fees and expenses of its counsel and of Everen Securities, Inc. (if any). The Company also agrees to pay all expenses relating to the performance of any transactions contemplated or permitted hereby, any filing or recording fees or taxes, all expenses of the Purchasers in connection with any Default or Event of Default or any alleged Default or Event of Default hereunder or in connection with any action for the enforcement or collection of the Notes or this Agreement or any other Note Document and all expenses associated with any amendments, waivers or consents pursuant to the provisions hereof or thereof (whether or not the same are actually executed and delivered), including any amendments, waivers or consents resulting from any work-out, restructuring or similar proceedings relating to the performance by the Company of the Obligations. The Company also agrees to pay all expenses relating to any claim or action threatened, made or brought against any of the Purchasers arising out of or relating to any extent to this Agreement, the Notes, or the other Note Documents -39- 44 or the transactions contemplated hereby or thereby. The Company also agrees that it will pay any fees and related expenses incurred or to be incurred in connection with its cooperation with a Recognized Rating Agency and Duff & Phelps as provided in Section 5.9 and all initial and ongoing fees and all out-of-pocket expenses of the Paying Agent, if any, and will pay and save the Purchasers harmless against any and all liability with respect to stamp and other similar taxes, if any, which may be payable or which may be determined to be payable in connection with the execution, delivery or enforcement of this Agreement or the Notes or any other Note Documents, whether or not any Notes are then outstanding. Without limiting the foregoing, the Company agrees to pay the cost of obtaining a private placement number for the Notes and authorizes the submission of such information as may be required by Standard & Poor's for the purpose of obtaining such number. (b) In consideration of the execution and delivery of this Agreement by each Purchaser, the Company hereby indemnifies, exonerates and holds each Purchaser and each of its respective affiliates, shareholders, officers, directors, employees, attorneys and agents (collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any and all actions, causes of action, suits, losses, costs, claims, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to: (i) any and all brokerage fees and commissions payable or claimed to be payable by the Company to any Person in connection with the transactions contemplated by this Agreement or any of the other Note Documents; (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds from the sale of the Notes; (iii) the execution, delivery and performance of this Agreement and any other Note Document by any of the Indemnified Parties; or (iv) any Purchaser's Environmental Liability; except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of such Indemnified Party's gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. This indemnity shall survive repayment or transfer of the Notes, the release of any collateral, or a transfer of the Company's property by foreclosure or by a deed in lieu of foreclosure, regardless of whether caused by, or within the control of, the Company or any Subsidiary of the Company. The Company, its successors and assigns, hereby waive, release and agree not to make any claim or bring any cost recovery action against any Indemnified Party under CERCLA or any state equivalent, or any other similar law now existing or hereafter enacted. It is expressly understood and agreed that the Company's obligation to any Indemnified Party under this indemnity shall be without regard to fault on the part of the Company with respect to the violation or condition which results in liability of any Indemnified Party. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. -40- 45 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE; COUNTERCLAIMS. (a) No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to and are not exclusive of any rights or remedies any such holder would otherwise have, and no waiver or consent, given or extended pursuant to Section 7, shall extend to or affect any obligation or right not expressly waived or consented to. The indemnities set forth in Section 9.4 shall be in addition to any other obligations or liabilities of the Company or any of its Subsidiaries to the Purchasers hereunder or under any other Note Documents, at common law or otherwise. (b) The due payment and performance of the Obligations shall be without regard to any counterclaim, right of offset or any other claim whatsoever that the Company or any of its Subsidiaries may have against any Purchaser and without regard to any other obligation of any nature whatsoever that any Purchaser may have to the Company or any of its Subsidiaries, and no such counterclaim or offset shall be asserted by the Company or any of its Subsidiaries (unless such counterclaim or offset would, under applicable law, be permanently and irrevocably lost if not brought in such action) in any action, suit or proceeding instituted by any Purchaser for payment or performance of the Obligations. 9.6. NOTICES. All communications provided for hereunder shall be in writing and delivered or mailed by registered or certified mail, return receipt requested, or by overnight courier, or by facsimile communication transmitted on a Business Day (confirmed in writing by registered or certified mail, return receipt requested, or by overnight courier), and shall be deemed given if mailed, five Business Days after deposited in the mail, if sent by overnight courier, one Business Day after delivered to the courier or, if sent by facsimile transmission when appropriate record of transmission is obtained, in each case prepaid and addressed, if to the Company, to Health Care REIT, Inc., One Sea Gate, Suite 1500, Toledo, Ohio 43604, Attention: Chairman, Telecopier No. 419-247-2826 or to such other address as the Company or the Paying Agent, if any, may in writing designate to the Purchasers or to a subsequent holder of the Note initially issued to Purchaser, and, if to an original Purchaser, addressed to such Purchaser at the address set forth on Schedule 1.1(a) hereto, and if to any transferee of such Purchaser, to the address set forth on the Note Register, or to such other address as such original Purchaser or transferee of such Purchaser shall designate in writing to the Company and the Paying Agent, if any. 9.7. SUCCESSORS AND ASSIGNS. This Agreement and the Notes shall be binding upon the Company and its respective successors and permitted assigns and shall be binding upon and inure to each Purchaser's benefit and to the benefit of each Purchaser's successors and assigns, including each successive holder or holders of any Notes, except that the Company may not assign or otherwise transfer any of its rights or obligations under this Agreement and the Notes without the prior written consent of all the Purchasers. Each such successive holder or holders of any Notes, including each Purchaser, shall have all rights and privileges of a "Purchaser" hereunder. Each successive holder or holders of a Note shall, at the Company's request, restate in writing for the Company's benefit as to such holder, the representations set forth in Section 3.2. 9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants, representations and warranties made by the Company or any of its Subsidiaries herein and in any other Note Documents and in any certificates delivered pursuant hereto or thereto, shall survive the execution and the delivery of this Agreement and the Notes. The obligations of the Company under Section 5.3 and Section 9.4 shall in each -41- 46 case survive any termination of this Agreement, the payment in full of all Obligations, or the invalidity or unenforceability of any term or provision of this Agreement or any other Note Document. 9.9. SEVERABILITY. If any provision of this Agreement or any of the other Note Documents for any reason is declared unenforceable by a court of competent jurisdiction (sustained on appeal, if any), such unenforceability shall not affect the enforceability of any other provision hereof or thereof, all of which shall remain in force and effect; provided that, if any provision of this Agreement or any of the other Note Documents shall be unenforceable by reason of a final judgment of a court of competent jurisdiction based upon a court's ruling (sustained on appeal, if any) that such provision is unenforceable because of the excessive degree or magnitude of the obligation imposed thereby on any Person, that unenforceable obligation shall be reduced in magnitude or degree by the minimum degree or magnitude necessary in order to permit the provision to be enforceable by the Purchasers. In the event the provisions of the immediately preceding sentence applies, the parties shall make appropriate adjustment to the provisions of this Agreement and the other Note Documents to give effect to the benefits intended to be conferred upon the parties hereby. 9.10. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 9.11. SUBMISSION TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE NOTES AND OTHER NOTE DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED) OR MESSENGER DIRECTED TO IT AT ITS ADDRESS SET FORTH IN SECTION 9.6 OR TO ITS AGENT REFERRED TO BELOW AT SUCH AGENT'S ADDRESS SET FORTH BELOW AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED IN ACCORDANCE WITH SECTION 9.6. THE COMPANY HEREBY IRREVOCABLY APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., WITH AN OFFICE ON THE DATE HEREOF AT 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF ANY PROCESS WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY HOLDER OF NOTES TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY JURISDICTION AGAINST THE COMPANY OR TO ENFORCE A JUDGMENT OBTAINED IN THE COURTS OF ANY OTHER JURISDICTION. 9.12. WAIVER OF JURY TRIAL. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL -42- 47 BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY OTHER NOTE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PURCHASERS, OR THE COMPANY IN CONNECTION HEREWITH OR THEREWITH. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH NOTE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER ENTERING INTO THIS AGREEMENT. 9.13. CAPTIONS. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 9.14. COUNTERPARTS; INTEGRATION. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original hereof but all together constituting only one agreement. This Agreement, the Notes and the other Note Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof and thereof. 9.15. INTEREST RATE LIMITATION. Nothing contained in the definition of Overdue Rate or in any Note Document shall require the Company or any of its Subsidiaries to pay interest at a rate exceeding the maximum rate permitted by applicable law. SECTION 10. MISCELLANEOUS 10.1. CONDITIONS TO EFFECTIVENESS. This Agreement will become effective on the date (the "EFFECTIVE DATE") on which each of the following conditions precedent shall be satisfied: (a) CORPORATE DOCUMENTS. Each Purchaser shall have received (i) a certified copy of the charter of the Company and of each of its Subsidiaries; (ii) certified copies of the by-laws of the Company and of each of its Subsidiaries and of all corporate action taken by the Company and of each of its Subsidiaries authorizing the execution, delivery and performance of this Agreement, the Notes and the other Note Documents; (iii) a certificate in respect of the name, signature and incumbency of each of the Company's and of each of its Subsidiary's officers who is authorized to sign on its behalf this Agreement, the Notes and the other Note Documents to be delivered by it hereunder; and (iv) counterparts of each of this Agreement, the Notes and the other Note Documents, signed by each of the parties thereto. (b) COMPANY'S CLOSING CERTIFICATE. Each Purchaser shall have received a certificate of the Company signed by an Executive Officer of the Company and of each of its Subsidiaries to the effect that (i) the representations and warranties contained in Section 3.1 and the other Note Documents are true and correct on and as of the Effective Date, and (ii) no Default or Event of Default exists on and as of the Effective Date. (c) LEGAL OPINIONS. Each Purchaser shall have received an opinion dated the Effective Date, in each case in form and substance satisfactory to each Purchaser, covering such matters relating to the transactions contemplated by this Agreement and the other Note Documents as each Purchaser may -43- 48 reasonably request, from (i) Shumaker, Loop & Kendrick, counsel to the Company and (ii) Dorsey & Whitney, special New York counsel to the Company. (d) RATINGS. The Notes shall have a Duff & Phelps rating of at least BBB-, and each Purchaser shall have received written evidence thereof. (e) NO DEFAULT OR EVENT OF DEFAULT; ACCURACY OF REPRESENTATIONS AND WARRANTIES. On the Effective Date, no Default or Event of Default shall exist. The representations and warranties contained in this Agreement (including Section 3.1) and in the other Note Documents shall be true and correct on and as of the Effective Date. (f) OTHER AGREEMENTS. Each Purchaser shall have received a copy of the Credit Agreement and the Amended 1996 Note Documents and each material document referred to therein, in each case as in effect on the Effective Date, together with a certificate of an Executive Officer of the Company certifying that each such copy is a true, complete and correct copy of each such document and agreement as then in effect. Such certificate shall state that each such document and agreement is in full force and effect and that no default or event of default exists thereunder or will result from the consummation of the transactions contemplated by this Agreement and the other Note Documents. (g) OPINION OF COUNSEL TO THE PURCHASERS. Each Purchaser shall have received from its special counsel an opinion dated the Effective Date in form and substance satisfactory to such Purchaser covering such matters relating to the transactions contemplated by this Agreement as such Purchaser may reasonably request. (h) SATISFACTORY PROCEEDINGS. All proceedings taken in connection with the transactions contemplated by this Agreement and the other Note Documents, and all documents necessary for the consummation thereof, shall be satisfactory in form and substance to each Purchaser and its special counsel, and such Purchaser shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of such transactions. (i) COSTS AND EXPENSES. The Company shall have paid or provided for the payment of all expenses that the Company is obligated to pay pursuant to Section 9.4 and all of the commitment fees the Company is obligated to pay pursuant to Section 1.2. In addition, each Purchaser shall have received reasonable assurance in writing that all other fees and expenses incurred by any other Person in connection with the transactions contemplated hereunder has been paid on or prior to the date hereof. (j) RELEASE OF COLLATERAL. Each Purchaser shall have received evidence satisfactory to it that all liens covering the collateral securing certain indebtedness of the Company existing pursuant to (i) the $150,000,000 Credit Agreement, dated as of September 8, 1994, among the Company, the banks signatory thereto and National City Bank, as Agent, as amended, and (ii) the Amended 1996 Note Documents have been released or terminated. (k) SUBSIDIARY GUARANTY. The Company, each of the Company's Subsidiaries and each Purchaser shall have executed and delivered the Subsidiary Guaranty, and the Subsidiary Guaranty shall be in full force and effect. 10.2. RELEASE OF COLLATERAL. Each Purchaser hereby agrees to release and to cause to be released (the "Release"), as of the Effective Date, all Liens granted to it or to the Collateral Agent (as such term is defined in the Original Note Purchase Agreement) for its benefit in and to the Collateral (as such term is defined in the Original Note Purchase Agreement). Each Purchaser agrees to use all reasonable efforts to take or cause to be taken all actions and to do all things reasonably necessary to effectuate the Release (in -44- 49 each case at the expense of the Company), including instructing the Collateral Agent to (a) execute and deliver to the Company or its agent all instruments reasonably requested by the Company in order to evidence the Release of record ("Release Documents"), including, without limitation, (i) releases of all Direct Mortgages, Assignments of Lease, Assignments of Loan Documents and related documents, (ii) termination statements for all UCC-1 financings statements that name the Company as debtor and the Collateral Agent as secured party, and (iii) assignments to the Company of all UCC-1 financing statements that name the Company's borrower or tenant as debtor and the Company as secured party and that were assigned to the Collateral Agent; and (b) endorse (where applicable) and deliver to the Company all original promissory notes, letters of credit and all other original documents held by the Collateral Agent in connection with any assigned loan or fee property. -45- 50 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. HEALTH CARE REIT, INC. By: ----------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS TRUSTEE OF A COMMINGLED PENSION TRUST By: ----------------------------------- Name: Title: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: ----------------------------------- Name: Title: Authorized Signatory -46- 51 ALLSTATE LIFE INSURANCE COMPANY By: -------------------------------------- Name: Title: Authorized Signatory By: --------------------------------------- Name: Title: Authorized Signatory THE LIFE INSURANCE COMPANY OF VIRGINIA By: --------------------------------------- Name: Title: -47- 52 SCHEDULE 3.1(q) TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- ENVIRONMENTAL REPORTS --------------------- None 53 SCHEDULE 5.12 TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- ONGOING INDEBTEDNESS -------------------- I. LINES OF CREDIT - ------------------
Total Available --------- Key/Fleet Revolving Line of Credit $175,000,000 Capital Bank, NA 10,000,000 - ---------------- ------------ $185,000.000 ============
II. EXISTING SECURED DEBT
Investment Amount of Liens/ Operator Facility Balance Indebtedness - -------- -------- ------- ---------------- Gordon Health Pittsburgh, PA $10,481,950 $ 6,527,045 Ventures Horizon Healthcare San Antonio, TX 1,415,224 1,415,224 ------------ $ 7,942,269 ============
III. EXISTING OTHER UNSECURED DEBT
1993 Series Senior Notes $ 52,000,000 1996 Series Senior Notes 30,000,000 ------------ $ 82,000,000 ============
IV. EXISTING CONTINGENT OBLIGATIONS
Amount of Operator Facility Guaranty - -------- -------- -------- Kingston Health Care Ashland, OH $ 1,625,000 Kingston Health Care Vermilion, OH 1,625,000 Kingston Health Care Naperville, IL 4,715,000 Kingston Health Care Santa Fe, NM 5,795,000 Village Management Rockford, IL 5,055,000 ------------ Total $ 18,815,000 ============
54 SCHEDULE 5.19 TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- CREDIT ENHANCEMENTS ------------------- EXISTING CONTINGENT OBLIGATIONS - --------------------------------
Amount of Operator Facility Guaranty - -------- -------- -------- Kingston Health Care Ashland, OH $ 1,625,000 Kingston Health Care Vermilion, OH 1,625,000 Kingston Health Care Naperville, IL 4,715,000 Kingston Health Care Santa Fe, NM 5,795,000 Village Management Rockford, IL 5,055,000 ------------ Total $ 18,815,000 ============
55 SCHEDULE 5.31 TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- PERMITTED CAPITAL EXPENDITURES ------------------------------ $2,500,000 in Capital Expenditures in connection with the following Facilities: Facility Name Location ------------- -------- Harborview Hospital Miami, FL Horizon Hospital Clearwater, FL 56 Exhibit A Form of HEALTH CARE REIT, INC. Amended and Restated 7.16% Series A Senior Note Due 1998 Private Placement No. 42217K C@3 No. __ March 28, 1997 U.S. $________________ HEALTH CARE REIT, INC., a Delaware corporation (the "Company"), for value received, hereby unconditionally promises to pay to the order of ____________ (the "Purchaser") or its registered assigns, on April 8, 1998 the principal amount of ______________________ DOLLARS (U.S. $________________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.16% per annum from (and including) April 8, 1993 to (but excluding) the date of repayment of such principal amount, payable on the 8th day of each April and October in each year (commencing October 8, 1993), and at maturity; PROVIDED, HOWEVER, that if, at any time on or after March 28, 1997, any of the Notes shall not be rated at least BBB by Duff & Phelps (it being understood and agreed that (x) a rating of BBB- is lower than a rating of BBB and (y) the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a rating that is lower than BBB), the rate of interest shall instead be 7.26% per annum for the period during which the Notes shall not be rated at least BBB by Duff & Phelps. The Company agrees to pay interest on overdue principal (whether by acceleration or otherwise, and including any overdue prepayment of principal) and premium, if any, and on any overdue installment of interest, at the Overdue Rate until paid. Unless otherwise set forth herein, capitalized terms used herein but not defined herein have the respective meanings assigned to them in the Note Purchase Agreement (as such term is hereafter defined). 1. Except as may be otherwise provided pursuant to Section 5.4 or 5.10 of the Note Purchase Agreement, both the principal hereof, premium, if any, and interest hereon are payable at the principal office of the Company, in immediately available funds, in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. Such payments shall be applied first to accrued interest, then to premium, if any, and then to principal. If any amount of principal, premium, -1- 57 if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, such amount shall be payable on the immediately preceding Business Day. Payment of any amount on or in respect of this Note shall be made not later than 12:00 Noon New York Time on the date on which such payment shall become due (each such payment made after such time on such date to be deemed to have been made on the next succeeding Business Day). 2. This Note is one of the Series A Senior Notes due 1998 issued pursuant to the terms and provisions of that certain Amended and Restated Note Purchase Agreement, dated as of March 28, 1997 (the "Note Purchase Agreement"), entered into by the Company and each of the Purchasers party thereto, and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes (as defined in the Note Purchase Agreement) outstanding under the Note Purchase Agreement to all benefits provided for in the Note Documents or referred to therein, and may be accelerated, or redeemed at the option of the holder hereof, prior to maturity, all as provided in the Note Purchase Agreement, to which Note Purchase Agreement reference is hereby made for the statement thereof. A copy of the Note Purchase Agreement may be obtained from the Company. 3. The Notes are not subject to prepayment, purchase or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the Make-Whole Premium, if any, all as set forth in Section 2 of the Note Purchase Agreement. 4. This Note is registered on the books of the Company and is transferable only by surrender hereof at the offices of the Company (or of such Paying Agent as may be appointed by the Company pursuant to Section 5.4 of the Note Purchase Agreement from time to time), duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. 5. Pursuant to the Subsidiary Guaranty, payment of all amounts owed under this Note is absolutely and unconditionally guaranteed by each Subsidiary of the Company. The Company and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable upon this Note jointly and severally waive presentment, demand, protest, notice of protest and nonpayment or other notice of default, notice of acceleration and intention to accelerate or other notice of any kind, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes hereto or any other Note Document, regardless of the number of such renewals, extensions, indulgences, releases or changes. 6. No waiver by Purchaser of any of its rights or remedies hereunder or under any other Note Document or otherwise, shall be considered a waiver of any other subsequent right or remedy of Purchaser; no delay or omission in the exercise or enforcement by Purchaser of any rights or remedies shall ever be construed as a waiver of any right or remedy of Purchaser; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Purchaser. -2- 58 7. This Note and the Note Purchase Agreement shall be governed by and shall be construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State. HEALTH CARE REIT, INC. By:_____________________ Name: Title: -3- 59 Exhibit B Form of HEALTH CARE REIT, INC. Amended and Restated 7.71% Series B Senior Note Due 2000 Private Placement No. 42217K C#1 No. __ March 28, 1997 U.S. $________________ HEALTH CARE REIT, INC., a Delaware corporation (the "Company"), for value received, hereby unconditionally promises to pay to the order of ____________. (the "Purchaser") or its registered assigns, on April 8, 2000 the principal amount of ______________________ DOLLARS (U.S. $________________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.71% per annum from (and including) April 8, 1993 to (but excluding) the date of repayment of such principal amount, payable on the 8th day of each April and October in each year (commencing October 8, 1993), and at maturity; PROVIDED, HOWEVER, that if, at any time on or after March 28, 1997, any of the Notes shall not be rated at least BBB by Duff & Phelps (it being understood and agreed that (x) a rating of BBB- is lower than a rating of BBB and (y) the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a rating that is lower than BBB), the rate of interest shall instead be 7.81% per annum for the period during which the Notes shall not be rated at least BBB by Duff & Phelps. The Company agrees to pay interest on overdue principal (whether by acceleration or otherwise, and including any overdue prepayment of principal) and premium, if any, and on any overdue installment of interest, at the Overdue Rate until paid. Unless otherwise set forth herein, capitalized terms used herein but not defined herein have the respective meanings assigned to them in the Note Purchase Agreement (as such term is hereafter defined). 1. Except as may be otherwise provided pursuant to Section 5.4 or 5.10 of the Note Purchase Agreement, both the principal hereof, premium, if any, and interest hereon are payable at the principal office of the Company, in immediately available funds, in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. Such payments shall be applied first to accrued interest, then to premium, if any, and then to principal. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, -1- 60 such amount shall be payable on the immediately preceding Business Day. Payment of any amount on or in respect of this Note shall be made not later than 12:00 Noon New York Time on the date on which such payment shall become due (each such payment made after such time on such date to be deemed to have been made on the next succeeding Business Day). 2. This Note is one of the Series B Senior Notes due 2000 issued pursuant to the terms and provisions of that certain Amended and Restated Note Purchase Agreement, dated as of March 28, 1997 (the "Note Purchase Agreement"), entered into by the Company and each of the Purchasers party thereto, and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes (as defined in the Note Purchase Agreement) outstanding under the Note Purchase Agreement to all benefits provided for in the Note Documents or referred to therein, and may be accelerated, or redeemed at the option of the holder hereof, prior to maturity, all as provided in the Note Purchase Agreement, to which Note Purchase Agreement reference is hereby made for the statement thereof. A copy of the Note Purchase Agreement may be obtained from the Company. 3. The Notes are not subject to prepayment, purchase or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the Make-Whole Premium, if any, all as set forth in Section 2 of the Note Purchase Agreement. 4. This Note is registered on the books of the Company and is transferable only by surrender hereof at the offices of the Company (or of such Paying Agent as may be appointed by the Company pursuant to Section 5.4 of the Note Purchase Agreement from time to time), duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. 5. Pursuant to the Subsidiary Guaranty, payment of all amounts owed under this Note is absolutely and unconditionally guaranteed by each Subsidiary of the Company. The Company and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable upon this Note jointly and severally waive presentment, demand, protest, notice of protest and nonpayment or other notice of default, notice of acceleration and intention to accelerate or other notice of any kind, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes hereto or any other Note Document, regardless of the number of such renewals, extensions, indulgences, releases or changes. 6. No waiver by Purchaser of any of its rights or remedies hereunder or under any other Note Document or otherwise, shall be considered a waiver of any other subsequent right or remedy of Purchaser; no delay or omission in the exercise or enforcement by Purchaser of any rights or remedies shall ever be construed as a waiver of any right or remedy of Purchaser; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Purchaser. 7. This Note and the Note Purchase Agreement shall be governed by and shall be construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State. -2- 61 HEALTH CARE REIT, INC. By:_____________________ Name: Title: -3- 62 Exhibit C Form of HEALTH CARE REIT, INC. Amended and Restated 8.24% Series C Senior Note Due 2003 Private Placement No. 42217K D*4 No. __ March 28, 1997 U.S. $________________ HEALTH CARE REIT, INC., a Delaware corporation (the "Company"), for value received, hereby unconditionally promises to pay to the order of ____________. (the "Purchaser") or its registered assigns, on April 8, 2003 the principal amount of ______________________ DOLLARS (U.S. $________________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 8.24% per annum from (and including) April 8, 1993 to (but excluding) the date of repayment of such principal amount, payable on the 8th day of each April and October in each year (commencing October 8, 1993), and at maturity; PROVIDED, HOWEVER, that if, at any time on or after March 28, 1997, any of the Notes shall not be rated at least BBB by Duff & Phelps (it being understood and agreed that (x) a rating of BBB- is lower than a rating of BBB and (y) the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a rating that is lower than BBB), the rate of interest shall instead be 8.34% per annum for the period during which the Notes shall not be rated at least BBB by Duff & Phelps. The Company agrees to pay interest on overdue principal (whether by acceleration or otherwise, and including any overdue prepayment of principal) and premium, if any, and on any overdue installment of interest, at the Overdue Rate until paid. Unless otherwise set forth herein, capitalized terms used herein but not defined herein have the respective meanings assigned to them in the Note Purchase Agreement (as such term is hereafter defined). 1. Except as may be otherwise provided pursuant to Section 5.4 or 5.10 of the Note Purchase Agreement, both the principal hereof, premium, if any, and interest hereon are payable at the principal office of the Company, in immediately available funds, in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. Such payments shall be applied first to accrued interest, then to premium, if any, and then to principal. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, -1- 63 such amount shall be payable on the immediately preceding Business Day. Payment of any amount on or in respect of this Note shall be made not later than 12:00 Noon New York Time on the date on which such payment shall become due (each such payment made after such time on such date to be deemed to have been made on the next succeeding Business Day). 2. This Note is one of the Series C Senior Notes due 2003 issued pursuant to the terms and provisions of that certain Amended and Restated Note Purchase Agreement, dated as of March 28, 1997 (the "Note Purchase Agreement"), entered into by the Company and each of the Purchasers party thereto, and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes (as defined in the Note Purchase Agreement) outstanding under the Note Purchase Agreement to all benefits provided for in the Note Documents or referred to therein, and may be accelerated, or redeemed at the option of the holder hereof, prior to maturity, all as provided in the Note Purchase Agreement, to which Note Purchase Agreement reference is hereby made for the statement thereof. A copy of the Note Purchase Agreement may be obtained from the Company. 3. The Notes are not subject to prepayment, purchase or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the Make-Whole Premium, if any, all as set forth in Section 2 of the Note Purchase Agreement. 4. This Note is registered on the books of the Company and is transferable only by surrender hereof at the offices of the Company (or of such Paying Agent as may be appointed by the Company pursuant to Section 5.4 of the Note Purchase Agreement from time to time), duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. 5. Pursuant to the Subsidiary Guaranty, payment of all amounts owed under this Note is absolutely and unconditionally guaranteed by each Subsidiary of the Company. The Company and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable upon this Note jointly and severally waive presentment, demand, protest, notice of protest and nonpayment or other notice of default, notice of acceleration and intention to accelerate or other notice of any kind, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes hereto or any other Note Document, regardless of the number of such renewals, extensions, indulgences, releases or changes. 6. No waiver by Purchaser of any of its rights or remedies hereunder or under any other Note Document or otherwise, shall be considered a waiver of any other subsequent right or remedy of Purchaser; no delay or omission in the exercise or enforcement by Purchaser of any rights or remedies shall ever be construed as a waiver of any right or remedy of Purchaser; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Purchaser. -2- 64 7. This Note and the Note Purchase Agreement shall be governed by and shall be construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State. HEALTH CARE REIT, INC. By:_____________________ Name: Title: -3- 65 EXHIBIT D TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- FORM OF FACILITIES AND OPERATORS REPORT --------------------------------------- ON FILE WITH EACH OF THE BANKS AND THE BORROWERS EX-10.3 4 EXHIBIT 10.3 1 Exhibit 10.3 - -------------------------------------------------------------------------------- [Execution Copy] AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO Dated as of March 28, 1997 $30,000,000 Senior Notes - -------------------------------------------------------------------------------- 2 Table of Contents Page
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENTS..........................................................................2 1.1. Description of Notes.........................................................................................2 1.2. Original Issuance Date; Replacement of Notes; Commitment Fees................................................2 SECTION 2. PREPAYMENT OF NOTES...........................................................................................3 2.1. Optional Prepayment..........................................................................................3 2.2. Notice of Prepayments........................................................................................3 2.3. Allocation of Prepayments....................................................................................3 2.4. No Purchase of Notes.........................................................................................3 2.5. Prepayment in the Event of a Rating Downgrade................................................................3 SECTION 3. REPRESENTATIONS..............................................................................................4 3.1. Representations of the Company...............................................................................4 3.2. Representations of Each Purchaser............................................................................8 SECTION 4. CLOSING CONDITIONS...........................................................................................9 SECTION 5. COMPANY COVENANTS............................................................................................9 5.1. Financial Reports............................................................................................9 5.2. Books and Records...........................................................................................12 5.3. Payments....................................................................................................12 5.4. Paying Agency...............................................................................................13 5.5. Corporate Existence.........................................................................................13 5.6. Obligations.................................................................................................13 5.7. Insurance...................................................................................................13 5.8. Limitation on Consolidation and Merger, Sales of Assets.....................................................14 5.9. Ratings.....................................................................................................14 5.10. Direct Payments............................................................................................15 5.11. Maintenance of Properties; Properties Leased to Others.....................................................15 5.12. Indebtedness...............................................................................................15 5.13. Liens......................................................................................................16 5.14. Tangible Net Worth; Leverage Ratio.........................................................................17 5.15. Interest Coverage Ratio; Fixed Coverage Ratio..............................................................17 5.16. Restricted Payments........................................................................................17
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5.17. Construction Financing.....................................................................................18 5.18. Inconsistent Agreements....................................................................................18 5.19. Credit Enhancements........................................................................................18 5.20. Long-Term Care Facilities..................................................................................18 5.21. Behavioral Care Facilities.................................................................................18 5.22. Operator Concentration; Diversification of Assets and Revenues.............................................18 5.23. Maintenance of REIT Status.................................................................................19 5.24. Notice.....................................................................................................19 5.25. Environmental Laws.........................................................................................20 5.26. Modification of Certain Agreements.........................................................................20 5.27. Transactions with Affiliates...............................................................................21 5.28. Limitation on Investments..................................................................................21 5.29. ERISA, etc.................................................................................................22 5.30. Changes in Structure; Fiscal Year..........................................................................22 5.31. Capital Expenditures.......................................................................................22 5.32. Rental Obligations.........................................................................................23 5.33. Use of Cash................................................................................................23 SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.....................................................................23 6.1. Events of Default...........................................................................................23 6.2. Notice to Purchasers........................................................................................26 6.3. Acceleration of Maturities; Other Remedies..................................................................26 6.4. Rescission of Acceleration..................................................................................27 SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.............................................................................27 7.1. Consent Required............................................................................................27 7.2. Solicitation of Purchasers..................................................................................28 7.3. Effect of Amendment or Waiver...............................................................................28 SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.....................................................................28 8.1. Definitions.................................................................................................28 8.2. Accounting Principles; Time Periods.........................................................................39 SECTION 9. MISCELLANEOUS................................................................................................39 9.1. Registered Notes............................................................................................39 9.2. Exchange of Notes...........................................................................................39 9.3. Loss, Theft or Mutilation of Notes..........................................................................40 9.4. Expenses, Stamp Tax, Indemnity..............................................................................40 9.5. Powers and Rights Not Waived; Remedies Cumulative; Counterclaims............................................41 9.6. Notices.....................................................................................................42
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9.7. Successors and Assigns......................................................................................42 9.8. Survival of Covenants and Representations...................................................................42 9.9. Severability................................................................................................43 9.10. GOVERNING LAW..............................................................................................43 9.11. SUBMISSION TO JURISDICTION.................................................................................43 9.12. WAIVER OF JURY TRIAL.......................................................................................43 9.13. Captions...................................................................................................44 9.14. Counterparts; Integration..................................................................................44 9.15. Interest Rate Limitation...................................................................................44 SECTION 10. MISCELLANEOUS...............................................................................................44 10.1. Conditions to Effectiveness................................................................................44 10.2. Release of Collateral.....................................................................................45 SCHEDULES - --------- 1.1(a) Purchasers; Commitments 3.1(q) Environmental Reports 5.12 Ongoing Indebtedness 5.19 Credit Enhancements 5.31 Capital Expenditures EXHIBITS - -------- A Form of Series A Note B Form of Series B Note C Form of Facilities and Operators Report
-iii 5 HEALTH CARE REIT, INC. One SeaGate Suite 1500 Toledo, Ohio 43604 AMENDED AND RESTATED NOTE PURCHASE AGREEMENT $30,000,000 Senior Notes AMENDED AND RESTATED NOTE PURCHASE AGREEMENT, dated as of March 28, 1997, among HEALTH CARE REIT, INC., a Delaware corporation, and each of the purchasers identified on Schedule 1.1(a) hereto (each, a "PURCHASER," including its respective nominees, successors and assigns, and each successive holder or holders of any Notes or portions thereof purchased by such Purchaser, and collectively, the "PURCHASERS"). Certain capitalized terms used herein are defined in Section 8.1. WHEREAS, the Company and the Purchasers are parties to the Note Purchase Agreement, dated as of April 15, 1996 (the "ORIGINAL NOTE PURCHASE AGREEMENT"); WHEREAS, pursuant to the Original Note Purchase Agreement, the Company issued and sold to the Purchasers $10,000,000 aggregate principal amount of its 6.96% Series A Notes due 2001 (the "ORIGINAL SERIES A NOTES") and $20,000,000 aggregate principal amount of its 7.29% Series B Notes due 2003 (the "ORIGINAL SERIES B NOTES," and together with the Original Series A Notes, the "ORIGINAL NOTES"); WHEREAS, the parties hereto desire to amend the Original Note Purchase Agreement, and to restate the Original Note Purchase Agreement in full as hereinafter set forth; WHEREAS, the parties hereto desire to amend the Original Notes and restate the Original Notes in full as hereinafter set forth; WHEREAS, simultaneously herewith, the Company, each of the Subsidiaries of the Company and the Purchasers are entering into the Subsidiary Guaranty (as defined below); NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to amend and restate the Original Note Purchase Agreement in full as follows: 6 SECTION 1. DESCRIPTION OF NOTES AND COMMITMENTS 1.1. DESCRIPTION OF NOTES. As of the Effective Date (as defined herein), the Original Notes are hereby amended and restated in accordance with the terms of this Agreement (such Original Series A Notes, as so amended and restated, the "SERIES A NOTES" and such Original Series B Notes, as so amended and restated, the "SERIES B NOTES, and together with the Series A Notes, the "NOTES"). As a result, each of the Series A Notes and Series B Notes is (i) to be dated as of the date hereof, (ii) to bear interest from (and including) the Original Issuance Date (as defined herein) to (but excluding) the date of repayment in full of all amounts due thereunder, at the rates of 6.96% and 7.29% per annum, respectively, payable on the 15th day of the months of April and October each year (commencing October 15, 1996) and at maturity; PROVIDED, HOWEVER, that if, at any time on or after the date hereof any of the Notes shall not be rated at least BBB by Duff & Phelps (it being understood and agreed that (x) a rating of BBB- is lower than a rating of BBB and (y) the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a rating that is lower than BBB), the rates of interest shall instead be 7.06% and 7.39% per annum, respectively, for the period during which the Notes shall not be rated at least BBB by Duff & Phelps, (iii) to bear interest on overdue principal (whether by acceleration or otherwise and including any overdue prepayment of principal), premium, if any, and installments of interest at the Overdue Rate until paid, (iv) to mature on April 15, 2001, and April 15, 2003, respectively, and (v) to be substantially in the forms attached hereto as Exhibit A and Exhibit B, respectively. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are subject to prepayment at the option of the Company prior to their stated maturity date on the terms and conditions set forth in Section 2 and in the Notes. The Notes are also subject to prepayment at each holder's option prior to their stated maturity date on the terms and conditions set forth in Section 2 and in the Notes. 1.2. ORIGINAL ISSUANCE DATE; REPLACEMENT OF NOTES; COMMITMENT FEES. (a) The Company issued and sold to each Purchaser, and each Purchaser purchased from the Company, the principal amount and Series of Original Notes set forth beside such Purchaser's name on Schedule 1.1(a) at a price of 100% of the principal amount thereof (the "PURCHASE PRICE"), on April 23, 1996 (the "ORIGINAL ISSUANCE DATE"). The aggregate principal amount of Original Notes issued and sold on the Original Issuance Date by the Company was $30,000,000, of which $10,000,000 aggregate principal amount was designated as Original Series A Notes and $20,000,000 aggregate principal amount was designated as Original Series B Notes. (b) On the Effective Date, each Purchaser will surrender all Original Notes of each Series held by such Purchaser to the Company and the Company will deliver in exchange therefor, without expense to the Holder, Notes of each Series in the same aggregate principal amount as the then aggregate unpaid principal amount of the Original Notes of such Series so surrendered, in such denominations of U.S. $100,000 or any amount in excess thereof, and registered in such names, as such Purchaser shall have specified. (c) On the Effective Date, the Company shall pay to each Purchaser a commitment fee equal to 0.05% of the aggregate unpaid principal amount of the Original Notes of such Purchaser that are being exchanged pursuant to Section 1.2(b). Such commitment fees shall be paid in the manner specified in Section 5.10. -2- 7 SECTION 2. PREPAYMENT OF NOTES. 2.1. OPTIONAL PREPAYMENT. Upon compliance with Section 2.2 and subject to Section 2.3, the Company shall have the option at any time and from time to time to prepay the outstanding Notes, either in whole or in part (but if in part, then in units of $1,000,000 or an integral multiple of $100,000 in excess thereof) by payment of the principal amount of the Notes, or portion thereof to be prepaid, together with accrued interest thereon to but not including the date of such prepayment and a premium (determined three Business Days prior to the date of such prepayment) equal to the Make-Whole Premium, if any (collectively, the "REDEMPTION PRICE"). 2.2. NOTICE OF PREPAYMENTS. The Company shall give written notice of any prepayment of the Notes pursuant to Section 2.1 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such prepayment of the Notes. Notices required by this Section 2.2 shall specify (a) the date of prepayment, (b) the principal amount of such holder's Notes to be prepaid on such date, and (c) the estimated Make-Whole Premium and the accrued interest applicable to the prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with accrued interest thereon and the Make-Whole Premium, shall become due and payable on the prepayment date set forth in such notice. The Company shall give a second written notice to each holder of the Notes, by telecopy or other same day written communication, setting forth the computation and amount of the Make-Whole Premium payable in connection with a prepayment pursuant to Section 2.1, at least three Business Days prior to the date of such prepayment. 2.3. ALLOCATION OF PREPAYMENTS. All partial prepayments shall be applied on all outstanding Notes (without regard to Series) ratably in accordance with the unpaid principal amounts thereof. 2.4. NO PURCHASE OF NOTES. The Company will not, and will not permit any Affiliate to, purchase, redeem, prepay or otherwise acquire any of the Notes, except for payments or prepayments of the Notes expressly provided for in accordance with Sections 1, 2 and 6 of this Agreement and the terms of the Notes. 2.5. PREPAYMENT IN THE EVENT OF A RATING DOWNGRADE . If at any time Duff & Phelps places its ratings of any of the Notes under review, the Company will promptly and in any event within one Business Day of the occurrence thereof, give each Purchaser written notice thereof. If at any time the Duff & Phelps rating of any of the Notes is decreased to a rating below BBB- (it being understood and agreed that the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a decrease in the rating of the Notes to a rating below BBB-), the Company will, promptly and in any event within one Business Day after the occurrence thereof, give each Purchaser written notice thereof. At any time after any such decrease, the holder of any Note may, by three Business Days' written notice to the Company, declare such Note to be, and such Note shall thereby become, due and payable (without presentment, demand, protest or other notice of any kind, all of which are waived by the Company) at the Redemption Price. It is specifically understood and agreed that no course of dealing on the part of any holder of any Note nor any delay or failure on the part of any holder of any Note to exercise any right specified in this Section 2.5 shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies under this Section 2.5. If the rating system of Duff & Phelps shall change, the parties hereto shall negotiate in good faith to amend the references to specific ratings in Sections 1.1 and 2.5 and in the Notes to reflect the changed rating system. -3- 8 SECTION 3. REPRESENTATIONS. 3.1. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and warrants for the benefit of each Purchaser that the representations set forth as follows are true and correct as of the date hereof and shall be true and correct as of the Effective Date: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Subsidiary of the Company is duly incorporated or formed, validly existing and in good standing under the laws of its state of incorporation. As of the date of this Agreement, the Company has no Subsidiaries except for (i) HCRI Pennsylvania Properties, Inc., a Pennsylvania corporation, (ii) HCRI Overlook Green, Inc., a Pennsylvania corporation, (iii) HCRI Texas Properties, Inc., a Delaware corporation and (iv) HCRI Texas Properties, Ltd., a Texas limited partnership. The Company is the sole general partner of HCRI Texas Properties, Ltd. and is the sole shareholder of the other such Subsidiaries. (b) The Company and each Subsidiary of the Company is duly qualified to do business as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties would require such qualification, except where the failure to so qualify could not have a Material Adverse Effect. (c) The execution, delivery and performance of this Agreement, the Notes and the other Note Documents are within the corporate powers of the Company and have been duly authorized by all necessary corporate action on the part of the Company. This Agreement, the Notes and the other Note Documents have been duly executed by and are the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditors' rights generally and by general principles of equity. (d) The Company currently has REIT Status and has maintained REIT Status on a continuous basis since its formation. None of the Subsidiaries of the Company currently has REIT Status. (e) No consent, approval or authorization of, or declaration, registration or filing with, or payment to, any governmental body or any non-governmental Person is required to be obtained or made in connection with the execution, delivery and performance by the Company of this Agreement, the Notes and the other Note Documents or the transactions contemplated hereby or thereby or as a condition to the legality, validity or enforceability of the Company's obligations under this Agreement, the Notes or the other Note Documents, or the offer, issue, sale and delivery of the Notes to the Purchasers or the fulfillment of or compliance with the terms and provisions of the Notes, this Agreement or the other Note Documents. (f) Neither the execution and delivery of this Agreement, the Notes or the other Note Documents by the Company, nor the performance of the terms and provisions hereof and thereof, will (i) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, the certificate of incorporation or by-laws of the Company, any contract, agreement, mortgage, indenture, credit agreement (including the Credit Agreement and the Amended 1993 Note Documents), lease or other instrument to which the Company or any Subsidiary of the Company is a party or -4- 9 by which the Company or any such Subsidiary or any of their respective assets is bound, or of any statute, law, rule, regulation or order of the United States of America or of any State thereof, or any agency, court or other instrumentality of any thereof, to which the Company is subject, (ii) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries, or (iii) result in the disqualification of the Company as a REIT under the Code. (g) The Company's annual report on Form 10-K for the fiscal year ending December 31, 1996 (the "1996 10-K"), this Agreement and all documents, instruments, certificates and other writings delivered to any Purchaser by or on behalf of the Company in connection with the transactions contemplated hereby, taken together, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances in which they were made, not misleading, on or as of the dates on which such statements were made. The Company has disclosed to the Purchasers in writing any and all facts which may (to the extent the Company can reasonably foresee) have a Material Adverse Effect. (h) (i) The audited consolidated financial statements of the Company and its Subsidiaries at and for the fiscal years ended December 31, 1993, 1994, 1995 and 1996 (the "AUDITED FINANCIALS") are true and complete and have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"), consistent with the principles and practices used in the preparation of the Company's audited consolidated financial statements for the immediately preceding fiscal year (except as otherwise indicated in the Audited Financials, including the notes thereto), and present fairly the consolidated financial condition of the Company at the end of each such fiscal year and the consolidated results of operations and cash flows of the Company for each of such periods. Neither the Company nor any of its Subsidiaries has any material obligation, liability or commitment, direct or contingent, that is not reflected in the Audited Financials for the fiscal year ended December 31, 1996. (ii) The Company and each Subsidiary of the Company have good and marketable title to all assets reflected in the consolidated balance sheet included in the Audited Financials for the fiscal year ended December 31, 1996, except for changes resulting from transactions in the ordinary course of business occurring after such date, free and clear of any Lien other than any Lien permitted by Section 5.13. (iii) The projections relating to the Company and its Subsidiaries for the three year period 1997-1999 including balance sheets, statements of operations and cash flows (together with related assumptions) furnished by the Company to the Purchasers have been prepared on the basis of the assumptions accompanying them and reflect, as of the date thereof, the Company's good faith projections, after reasonable analysis, of the matters set forth therein, based on such assumptions. (i) Since December 31, 1996, there has not been any material adverse change in the business, value or condition (financial or otherwise), results of operations or prospects of the Company and its Subsidiaries, considered as a whole. (j) The net proceeds from the issuance and sale of the Notes have been used to fund the acquisition or financing of Facilities either directly or through a refinancing or repayment of revolving credit borrowings under the Credit Agreement referred to in Section 10.1(j)(i) or other borrowing arrangements. -5- 10 No part of the proceeds of the sale of the Notes have been or will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. The assets of the Company and its Subsidiaries do not and will not include an amount of "margin stock" that would cause the provisions of Rule 207.2(f)(2)(i) of Regulation G or the provisions of Rule 221.2(g)(2)(i) of Regulation U to be inapplicable and the Company and its Subsidiaries have no present intention of purchasing such an amount of "margin stock." (k) Neither the Company nor any Subsidiary of the Company nor, to the Company's knowledge, anyone acting on its behalf has offered the Notes or any similar securities to, or solicited any offer to purchase the same from, any Person, or has taken any other action, which would require the registration of the Notes under Section 5 of the Act. (l) (i) The consummation of the transactions contemplated by this Agreement and compliance by the Company and each Subsidiary of the Company with the provisions hereof and the Notes issued hereunder and the other Note Documents will not constitute a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. (ii) Each Plan complies in all material respects with all applicable statutes and governmental rules and regulations, and (A) no Reportable Event has occurred and is continuing with respect to any Plan subject to Title IV of ERISA, (B) neither the Company nor any Subsidiary of the Company nor any ERISA Affiliate has withdrawn from any Plan subject to Title IV of ERISA or any Multiemployer Plan or instituted steps to do so, and (C) no steps have been instituted to terminate in a distress termination any Plan subject to Title IV of ERISA. (iii) Neither the Company nor any Subsidiary of the Company nor any ERISA Affiliate has received notice that any Multiemployer Plan is in Reorganization or Insolvent where such Reorganization or Insolvency has resulted, or would be reasonably likely to result in an unpaid liability that would be reasonably likely to have a Material Adverse Effect nor, to the best knowledge of the Company, is any such Reorganization or Insolvency reasonably likely to occur. (iv) No condition exists or event or transaction has occurred in connection with any Plan that could result in the incurrence by the Company or any Subsidiary of the Company or any ERISA Affiliate of any material liability, fine or penalty. (v) No Plan maintained by the Company or any Subsidiary of the Company or any ERISA Affiliate and no trust created thereunder has incurred any "ACCUMULATED FUNDING DEFICIENCY" as defined in Section 302 of ERISA, and the present value of all benefits vested under all Plans subject to Title IV of ERISA does not exceed the value of the assets of such Plans allocable to such vested benefits (such present value to be determined as of, and based on, the most recent valuation of such Plan for funding purposes). (vi) Neither the Company nor any Subsidiary of the Company has any material contingent liability with respect to any post-retirement "welfare plan" (as such term is defined in Section 3(1) of ERISA), other than as required by Section 4980B of the Code. (vii) No Plan is a multiple employer plan (within the meaning of Section 413(c) of the Code). (m) The Company and each Subsidiary of the Company has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges (including interest and penalties) which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books. The charges, accruals and reserves on the books of the Company and each Subsidiary of the Company in respect of taxes or other governmental charges, if any, are adequate. No tax Liens have been filed with respect to the Company or any Subsidiary of the Company or any of their assets and no claims material to the Company or any Subsidiary of the Company are being asserted against the Company or any Subsidiary of the Company with respect to any taxes or governmental -6- 11 charges, except for Liens for taxes, assessments and governmental charges which are not yet due and payable or which individually or in the aggregate could not have a Material Adverse Effect. With respect to each federal income tax return of the Company and each Subsidiary of the Company, the statute of limitations for the assessment of such Taxes has expired through the taxable year ended December 31, 1993 and no audit is in progress and no extension of time is in force with respect to any date on which any such return was or is to be filed and no waiver or agreement is in force for the extension of time for the assessment or payment of any tax. (n) Neither the Company nor any Subsidiary of the Company is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Neither the Company nor any Subsidiary of the Company is a "holding company" or a "subsidiary" or an "affiliate" of a "holding company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (o) There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary of the Company in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, would have a Material Adverse Effect. (p) (i) The Company and each Subsidiary of the Company has good and marketable fee or leasehold title to all of the material real property owned or leased by the Company or such Subsidiary; and has good and marketable title to all of their other respective material properties and assets of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights) free and clear, in each case, of all Liens (including infringement claims with respect to patents, trademarks, trade names, service marks and copyrights), except Liens that are expressly permitted by this Agreement. (ii) The Company and each Subsidiary owns or holds all licenses, permits and governmental authorizations as are necessary or desirable in the conduct of its business, except to the extent that the failure to own or hold the same would not have a Material Adverse Effect. (iii) To the best of the Company's knowledge, no violation exists of any applicable law pertaining to the ownership or operation of any Facility or any Operator that would have a reasonable likelihood of leading to revocation of any license, permit or governmental authorization necessary for the operation of such Facility. (q) All facilities and property (including underlying groundwater), directly or indirectly, owned, operated or leased by the Company or any Subsidiary of the Company are owned, operated or leased by the Company or such Subsidiary in material compliance with all Environmental Laws. All properties with respect to which the Company or any Subsidiary of the Company holds a mortgage interest is being operated by the owners, lessees or operators thereof in material compliance with all Environmental Laws. Except as disclosed in the environmental reports given to the Purchasers and identified on Schedule 3.1(q) (the "ENVIRONMENTAL REPORTS"), there have been no past, and there are no pending or threatened (i) claims, complaints, notices or requests for information received by the Company or any Subsidiary of the Company with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to the Company or any Subsidiary of the Company regarding potential liability under any Environmental Law. Except as disclosed in the Environmental Reports, there have been no Releases of Hazardous Materials at, on -7- 12 or under any property now owned, operated or leased, directly or indirectly, by the Company or any Subsidiary of the Company, that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect. Except as disclosed in the Environmental Reports, the Company and each Subsidiary of the Company has been issued and is in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their respective businesses, the failure of which to have or be in compliance with, singly or in the aggregate, has or may reasonably be expected to have a Material Adverse Effect. No property now owned, operated, or leased, directly or indirectly by the Company or any Subsidiary of the Company is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or state list of sites requiring investigation or clean-up. Except as disclosed in the Environmental Reports, there are no underground storage tanks, active or abandoned, including petroleum storage tanks, landfills, lagoons, surface impoundments, disposal areas or disposal ponds, on or under any property now owned, operated or leased, directly or indirectly, by the Company or any Subsidiary of the Company, that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect. Neither the Company nor any Subsidiary of the Company has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or state list or which is the subject of any federal, state or local enforcement actions or other investigations which may lead to material claims against the Company or any Subsidiary of the Company for any remedial work, damage to natural resources or personal injury, including claims under CERCLA. Except as disclosed in the Environmental Reports, there are no polychlorinated biphenyls or friable asbestos present at any property now owned, operated or leased, directly or indirectly, by the Company or any Subsidiary of the Company, that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect. Except as disclosed in the Environmental Reports, no conditions exist at, on or under any property now owned, operated, or leased, directly or indirectly, by the Company or any Subsidiary of the Company, which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law which singly or in the aggregate have or may reasonably be expected to have a Material Adverse Effect. Except as disclosed in the Environmental Reports, no generation, manufacture, storage, treatment, transportation or disposal of Hazardous Material has occurred or is occurring on or from any property owned, operated, or leased by the Company or any Subsidiary of the Company, that, singly or in the aggregate, has, or may reasonably be expected to have, a Material Adverse Effect. 3.2. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser hereby represents and warrants, for itself only, as follows: (a) Such Purchaser is acquiring the Notes for its own account (or as trustee for the account of one or more pension or trust funds), and not with a view to distribution (as such term is used under Section 2(11) of the Act) thereof; provided that the disposition of each Purchaser's (or such account's) property shall at all times be and remain within its control. (b) Such Purchaser acknowledges that (i) the Notes have not been registered under the Act by reason of their issuance in a transaction exempt from the registration requirements of the Act pursuant to Section 4(2) thereof nor have the Notes been registered or qualified under any state securities laws; (ii) the Notes may be sold in the absence of such registration only pursuant to an exemption from such registration or qualification; and (iii) the Notes may bear a legend to such effect. -8- 13 SECTION 4. CLOSING CONDITIONS. All conditions to each Purchaser's several obligation to purchase the Original Notes were satisfied on the Original Issuance Date. SECTION 5. COMPANY COVENANTS. Without limiting the obligations of the Company set forth in the Note Documents, for so long as any amount remains unpaid on any Note: 5.1. FINANCIAL REPORTS. The Company will furnish to each holder of outstanding Notes: (a) As soon as available and in any event within 90 days after the end of each fiscal year of the Company, a copy of the annual audited report for such fiscal year for the Company (a copy of which shall also be furnished to the Securities Valuation Office of the National Association of Insurance Commissioners, New York, New York), including therein a balance sheet of the Company as at the end of such fiscal year and statements of income, cash flow and shareholders' equity of the Company for such fiscal year, each prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the corresponding figures of the preceding fiscal year and in each case certified without qualification by either Ernst & Young, another nationally recognized independent auditing firm, or a firm of independent certified public accountants reasonably acceptable to the Purchasers, as fairly presenting the financial position, results of operations, cash flows and shareholders' equity of the Company and its Subsidiaries as at and for the year ending on its date and as having been prepared in accordance with GAAP; and a certificate from such accountants (i) to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default or Event of Default that has occurred and is continuing, or, if they have become aware of such Default or Event of Default, describing such Default or Event of Default and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to Section 5.1(d) below and relating to the time period set forth in this Section 5.1(a); (b) As soon as available and in any event within 45 days after the end of each of the fiscal quarters of each fiscal year of the Company, a balance sheet of the Company as at the end of such fiscal quarter and statements of income, cash flow and shareholders' equity of the Company for such fiscal quarter and for the period commencing at the end of the previous fiscal year and ending at the end of such fiscal quarter, prepared in accordance with GAAP (subject to normal year-end adjustments), and setting forth in comparative form the figures for the corresponding period of the immediately preceding fiscal year, together with a certificate of the chief financial officer of the Company to the effect that such balance sheet and related financial statements fairly present the financial position, results of operations, cash flows and shareholders' equity as of such date and for such period; (c) Promptly upon their becoming available, and notwithstanding the provisions of Sections 5.1(a) and (b), copies of each financial statement, report, notice or proxy statement filed by the Company with the Securities and Exchange Commission under the Exchange Act and sent by the Company to its security holders generally; -9- 14 (d) Within the periods provided in Sections 5.1(a) and (b), a certificate of the chief financial officer of the Company stating that such officer has reviewed the provisions of this Agreement and the other Note Documents and stating whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists at the time of the certificate or existed at any time during the period covered by such financial statements, (i) any Default or Event of Default, together with a detailed calculation which demonstrates the Company's compliance with Section 5.8(b), Sections 5.12 through 5.17, Sections 5.19 through 5.22, and Sections 5.28, 5.31 and 5.32, or (ii) any default under any other agreement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound, or by which, to the best knowledge of the Company, any of their respective properties or assets may be materially affected (including the Credit Agreement and the Amended 1993 Note Documents); and, if any such condition or event does exist on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and/or proposes to take with respect thereto; (e) As soon as available and in any event within 45 days after the end of each of the Company's fiscal quarters, a schedule showing the aging of delinquent lease and mortgage receivables, if any, for all of the Company's Facilities and in each case where a receivable is past due over 60 days, a report on the status of the receivable; (f) As soon as available and in any event within 45 days after the end of each of the Company's fiscal quarters, a schedule showing the Company's recorded liabilities, unfunded commitments, contingent liabilities and other material items; (g) Promptly after the Company's receipt thereof, (i) a copy of any special audits of the Company's properties, assets or operations conducted by the Company's auditors, (ii) a copy of any letters to the Company from the Company's auditors in connection with the preparation and presentation of the Company's annual audited report, and (iii) a copy of any other material reports submitted to the Company or any of its Subsidiaries by its independent auditors, or submitted by the Company or any of its Subsidiaries to its independent auditors, in connection with any annual or interim audit of the books of the Company or its Subsidiaries made by such auditors which material reports are a necessary part of such annual or interim audit; (h) In respect of each Plan: (1) a copy of each annual report (and related schedules) of such Plan within 10 days after filing the same with any ERISA regulator; (2) a copy of each application for a determination of the qualified status of any such Plan, in each case within 10 days after the filing thereof; and (3) Promptly, upon their becoming available, copies of: (i) all correspondence with the PBGC, the Secretary of Labor or any representative of the IRS with respect to any Plan, relating to an actual or threatened change or development that would be materially adverse to the Company; (ii) all actuarial valuations received by the Company with respect to any Plan; and (iii) any notices of Plan termination filed by any Plan Administrator (as those terms are used in ERISA) with the PBGC and of any notices from the PBGC to the Company with respect to the intent of the PBGC to institute involuntary termination proceedings. -10- 15 (i) Not later than January 31st in each year, a copy of the Company's business plan and financial projections for the upcoming three fiscal years (together with a copy in writing of the assumptions on which such business plan and projections were based), each certified by the Company's chief financial officer and illustrating the projected income statements, balance sheets and statements of cash flows on a consolidated basis; (j) (1) As soon as available but in any event not less than 45 days after the end of each fiscal quarter of the Company, a report with respect to the Facilities and the Operators, the form of which is set forth in Exhibit C hereto, which report shall contain information for the quarterly period immediately prior to the fiscal quarter for which the report is submitted; (2) Within 30 days after the receipt thereof, a copy of the annual audited financial statements of each publicly-held Operator delivered to the Company by each such Operator; and (3) Such other information regarding the financial condition of the Operators as any Purchaser may from time to time reasonably request, subject to such Purchaser's agreement that all such information shall be and remain confidential and that none of such information may be distributed to any other Person without the Company's prior consent; (k) Promptly upon their becoming available, copies of any: (i) financial statements, non-routine reports and notices (other than routine correspondence), any of which are of a material nature, requests for waivers and proxy statements, in each case, delivered by the Company or any of its Subsidiaries to any of their respective existing lending institutions or creditors; and (ii) correspondence or notices received by the Company from any federal, state or local governmental authority that regulates the operations of the Company or any of its Subsidiaries, relating to an actual or threatened change or development that would be materially adverse to the Company or any Subsidiary; and (l) Promptly upon any Purchaser's written request, such other information in writing about the Company's financial condition, properties and operations as such Purchaser may from time to time reasonably request. The balance sheets and financial statements referred to in Sections 5.1(a) and (b) shall be deemed to refer to both the consolidated balance sheets and financial statements of the Company and its consolidated Subsidiaries. It is also understood and agreed that the Company may satisfy its obligations to deliver the financial statements described in Sections 5.1(a) and (b) by furnishing to each Purchaser a copy of its annual report on Form 10-K or its quarterly report on Form 10-Q in respect of the relevant fiscal year or the relevant fiscal quarter, as the case may be, together with the financial statements required to be attached thereto; PROVIDED that the Company is required to file, and has actually filed, such annual report on Form 10-K or such quarterly report on Form 10-Q, as the case may be, with the Securities and Exchange Commission. 5.2. BOOKS AND RECORDS. (a) The Company will, and will cause each Subsidiary to, keep proper books of record and account in accordance with GAAP in a manner reasonably satisfactory to the Purchasers in which full and true entries shall be made of all dealings or transactions in relation to its business and activities. -11- 16 (b) (i) Each Purchaser shall have the right, at all reasonable times, at the expense of the Company, subject to reasonable notice and as often as may be reasonably requested, to examine the corporate books and records of the Company and its Subsidiaries and to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the officers, directors, independent public accountants, actuaries, Plan administrators and trustees of or for the Company and its Subsidiaries, each of which is authorized to make such information available to each Purchaser to the same extent as it would be to the Company or to its Subsidiaries; PROVIDED, HOWEVER, that any transferee of a Note (other than an Affiliate of an original Purchaser) in a principal amount of less than $2,000,000 shall be entitled to exercise the foregoing rights only once every 12 months. (ii) The Company shall also permit, and cause each of its Subsidiaries to permit, upon receipt of not less than two Business Days' prior written notice, the Purchasers (and their agents and representatives) (at the expense of the Company after the occurrence of a Default), during normal business hours, to examine the Company's or such Subsidiary's properties, as the case may be. 5.3. PAYMENTS. (a) All payments hereunder and under the Notes shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes. Without limiting the generality of the foregoing, the Company will duly and punctually pay the principal of, premium (if any) and interest on the Notes in accordance with their terms and this Agreement and all other Obligations in accordance with this Agreement and the other Note Documents, free and clear of, and without reduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholding, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority, excluding, in the case of any Purchaser, net income and franchise taxes imposed on such Purchaser by the jurisdiction under the laws of which such Purchaser is organized or any political subdivision or taxing authority thereof or therein (such non-excluded taxes, "TAXES"). If any Taxes are required to be withheld from any amounts payable to any Purchaser hereunder, under any Note or under any other Note Document, the amounts so payable to such Purchaser shall be increased to the extent necessary to yield to such Purchaser (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, the applicable Note or such other Note Document. If the Company fails to pay any Taxes when due to the appropriate taxing authority, the Company shall indemnify each Purchaser for any incremental taxes, interest or penalties that may become payable by such Purchaser as a result of any such failure. (b) Any amount that is due and payable by the Company under any Note Document that is not paid when due shall bear interest, for each day from (and including) the date such amount was due and payable to (but excluding) the date of payment thereof, at a rate per annum equal to the Overdue Rate. 5.4. PAYING AGENCY. The Company will maintain an office in the United States of America where notices, presentations and demands to or upon the Company in respect of this Agreement, the Notes and the other Note Documents may be given or made. As of the date of this Agreement, such office is located at the Company's address set forth in Section 9.6. The Company will give written notice to the holders of the Notes of any change of location of such office no later than five Business Days prior to the date of any such change. Notwithstanding the foregoing, in lieu of, or in addition to, maintaining an office as -12- 17 herein contemplated, the Company may appoint and maintain an agent for receiving notices, presentations or demands and/or making payments on the Notes which shall be a state or national bank or trust company organized under the laws of the United States of America or any State thereof or the District of Columbia, having capital, surplus and undivided profits aggregating at least U.S. $250,000,000, and having an office in the Borough of Manhattan in the City of New York from which it can perform the functions it is so appointed to perform (the "PAYING AGENT"). 5.5. CORPORATE EXISTENCE. The Company will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to (a) preserve and keep in full force and effect its corporate existence, (b) maintain the Company's REIT Status, (c) comply in all material respects with all applicable laws, statutes, regulations, rules, orders, and all applicable restrictions imposed by any governmental or regulatory body except those being contested in good faith by appropriate proceedings, (d) maintain all licenses and permits necessary to conduct its business and own its properties and (e) continue to engage in the same line of business. 5.6. OBLIGATIONS. The Company will, and will cause each of its Subsidiaries to, pay and discharge all of the obligations and liabilities of the Company or any of its Subsidiaries, including all taxes, assessments and governmental charges, when due, except for taxes, assessments and governmental charges for which fair and adequate reserves have been established in accordance with GAAP and the payment of which is being contested by the Company or such Subsidiary in good faith and by appropriate proceedings, and then only to the extent that a bond is filed in cases where the filing of a bond is necessary to avoid the creation of a Lien against any of the Properties of the Company and its Subsidiaries. 5.7. INSURANCE. (a) The Company will, and will cause each of its Subsidiaries and Operators to, carry and maintain in full force and effect at all times with fiscally sound and reputable insurers accorded a rating of "A VIII" or better by A.M. Best Company, Inc. (or a comparable rating by any comparable rating agency) insurance against such risks and in such amounts (i) as is reasonable and prudent in the circumstances, (ii) as is customarily maintained by similar businesses and (iii) in any event as may be required by applicable laws, statutes, regulations, rules or orders. Upon written request from any Purchaser, the Company shall cause an appropriate officer to furnish to such Purchaser such information about the Company's insurance as such Purchaser may from time to time reasonably request, which information shall be prepared in form and detail reasonably satisfactory to such Purchaser and be certified by an Executive Officer of the Company. Within 10 days after written notice from the Required Holders, the Company will, and will cause each of its Subsidiaries and Operators to, obtain such additional insurance as the Required Holders may reasonably request. (b) The Company will, and will cause each of its Subsidiaries to, carry all insurance available through the PBGC or any private insurance companies covering its obligations to the PBGC. 5.8. LIMITATION ON CONSOLIDATION AND MERGER, SALES OF ASSETS (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, consolidate or merge with or into, any Person (whether or not the Company or such Subsidiary is the surviving entity) or acquire all or substantially all of the assets or any of the capital stock of any Person unless (i) the Company or any of its Subsidiaries is the surviving entity, (ii) no Default or Event of Default -13- 18 exists or will occur after giving effect thereto, and (iii) the consideration paid in connection with any such merger or acquisition does not exceed an amount equal to 10% of Healthcare Assets as at the date of the consummation of such transaction, prior to giving effect to such transaction. (b) Other than Leases of Health Care Facilities in the ordinary course of the Company's business ("ORDINARY LEASES"), the Company and its Subsidiaries will not, directly or indirectly, during any four consecutive fiscal quarters of the Company, sell, lease or otherwise dispose of any assets or shares of capital stock of a Subsidiary which, individually or when combined with all other assets (other than Ordinary Leases) sold, leased or otherwise disposed of by the Company and its Subsidiaries during such four fiscal quarters, including the assets attributable to a Subsidiary the capital stock of which was sold during such period, (i) represented 15% or more of the Company's total assets shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recently completed fiscal quarter of the Company, or (ii) generated 15% or more of the Company's total gross revenues shown on the income statement of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, for the most recently completed four consecutive fiscal quarters of the Company, UNLESS the net proceeds from any such sale, lease or other disposition are reinvested in the business of the Company within 180 days following the date of each such sale, lease or other disposition and, prior to such investment, invested in Investments of the type described in Section 5.28(a). The provisions of this Section 5.8(b) shall not restrict the sale by the Company or its Subsidiaries of owned real property and the improvements thereon pursuant to and in accordance with the terms of Ordinary Leases which grant the lessee thereunder an option to purchase such owned real property and improvements thereon. 5.9. RATINGS. The Company (a) will use its commercially reasonable best efforts to enable a Recognized Rating Agency to have in effect a rating for its unsubordinated, senior, unsecured indebtedness, and (b) shall cause Duff & Phelps to have in effect at all times a rating for the Notes. 5.10. DIRECT PAYMENTS. Notwithstanding anything to the contrary in this Agreement or the Notes, if any Purchaser has given written notice to the Company and the Paying Agent requesting that the provisions of this Section 5.10 shall apply, the Company will cause the Paying Agent promptly and punctually to pay when due the principal of the Notes and premium, if any, and interest thereon, without any presentment thereof directly to such Purchaser at the address of such Purchaser set forth on Schedule 1.1(a) or at such other address as such Purchaser may from time to time designate in writing to the Company and the Paying Agent or, if a bank account is designated for such Purchaser in any written notice to the Company and the Paying Agent from such Purchaser, the Company will cause the Paying Agent to make such payments in current and immediately available federal funds which at the time of payment shall be legal tender in the United States of America for the payment of public and private debts to such bank account, marked for attention as indicated, or in such other manner or to such other account of such Purchaser in any bank in the United States as such Purchaser may from time to time direct in writing. With respect to Notes to which this Section 5.10 applies, the Company and the Paying Agent shall be entitled to presume conclusively that any Purchaser as shall have requested the provisions hereof to apply to its Notes remains the holder of such Notes until such Notes shall have been presented to the Company as evidence of the transfer thereof. -14- 19 5.11. MAINTENANCE OF PROPERTIES; PROPERTIES LEASED TO OTHERS. (a) The Company will cause to be maintained in good repair, working order and condition, subject to normal wear and tear, all material properties and assets from time to time owned by the Company or any of its Subsidiaries and used in or necessary for the operation of their respective businesses, and make or cause to be made all reasonable repairs, replacements, additions and improvements thereto. (b) The Company and its Subsidiaries will provide in each of its Leases entered into after the Original Issuance Date that the lessee thereunder will maintain the assets leased thereunder in good working order and condition, ordinary wear and tear excepted. 5.12. INDEBTEDNESS. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist or guaranty or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness of the Company in respect of the Notes and other obligations hereunder and under the Note Documents; (b) Indebtedness of the Company which is identified on Schedule 5.12 ("ONGOING INDEBTEDNESS"); (c) Indebtedness of a Subsidiary which is owed to or held by the Company or a Wholly Owned Subsidiary of the Company; and (d) Credit Enhancements by the Company permitted by Section 5.19; unless (i) such Indebtedness (other than the Indebtedness described in clause (c) above) is Indebtedness of the Company and (ii) immediately after giving effect to the incurrence of such Indebtedness, the total outstanding Indebtedness of the Company and its Subsidiaries (including the Indebtedness described in clauses (a) through (d) above) does not exceed 150% of the Company's Tangible Net Worth as of the end of the most recently completed fiscal quarter of the Company. 5.13. LIENS. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (i) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (ii) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or, if overdue, being diligently contested in good faith by -15- 20 appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (iii) Liens incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for Debt) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (iv) judgment Liens in existence for less than 15 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; (v) the Liens of the lessee created or permitted by Ordinary Leases; (vi) any purchase money Liens on property acquired or held by the Company or any Subsidiary in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided, that (i) any such Lien attaches to such property concurrently with or within twenty (20) days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, (iii) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such property, and (iv) the aggregate amount of all such Indebtedness on a consolidated basis for the Company and its Subsidiaries shall not at any time exceed $1,000,000.00; and (vii) Liens securing the payment of Debt permitted under Section 5.12 (other than Section 5.12(b)), PROVIDED that (x) no such Debt is incurred pursuant to a Secured Credit Agreement and (y) such Liens shall be permitted only if the aggregate amount of all Debt secured by such Liens does not exceed 15% of the Company's Tangible Net Worth as of the end of the most recently completed fiscal quarter of the Company. 5.14. TANGIBLE NET WORTH; LEVERAGE RATIO. (a) Tangible Net Worth will at no time be less than the sum of (i) $300,000,000 plus (ii) 100% of the aggregate Net Issuance Proceeds received by the Company (or any of its Subsidiaries) in connection with the issuance of any equity interest in the Company (or any of its Subsidiaries) on or after the date hereof other than any such equity interests issued in connection with any dividend reinvestment program(s). (b) The Company shall have or maintain on a consolidated basis, as at the last day of each fiscal quarter, a ratio of Funded Indebtedness to Tangible Net Worth (the "LEVERAGE RATIO") of not greater than 1.10:1.00; PROVIDED, so long as the Leverage Ratio for any two consecutive fiscal quarters does not exceed 1.10:1.00 (each, a "LEVERAGE TEST PERIOD"), then the Leverage Ratio for the two consecutive fiscal quarters immediately succeeding such Leverage Test Period may increase to a maximum of 1.20:1.00. 5.15. INTEREST COVERAGE RATIO; FIXED COVERAGE RATIO. The Company shall have or maintain on a consolidated basis, as at the last day of each fiscal quarter: -16- 21 (a) Interest Coverage of not less than 200%; and (b) A Fixed Coverage Ratio of not less than 1.05:1.00. 5.16. RESTRICTED PAYMENTS. (a) The Company will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of capital stock (now or hereafter outstanding) of the Company, or on any warrants, options or other rights with respect to any class of capital stock (now or hereafter outstanding) of the Company, or apply or permit any Subsidiary to apply, any of its funds, property or assets to the purchase, redemption, sinking fund, or other retirement of, or agree, or permit any Subsidiary of the Company to agree, to purchase or redeem (or set aside funds to purchase or redeem) any shares of any class of capital stock (now or hereafter outstanding) of the Company, or warrants, options or other rights with respect to any class of capital stock (now or hereafter outstanding) of the Company (all or any of the foregoing, "RESTRICTED PAYMENTS"); PROVIDED, HOWEVER, that so long as the Company remains qualified as a REIT under the Code, the Company may make Restricted Payments if and to the extent (but only to the extent) that: (i) no Default or Event of Default shall have occurred and be continuing at the time of declaration of such Restricted Payment, and (ii) immediately after giving effect to the making of such Restricted Payment, the sum of all Restricted Payments made subsequent to December 31, 1995 would not exceed the sum of (1) $10,000,000, (2) 100% of Cash Flow accumulated subsequent to December 31, 1995, and (3) the net proceeds to the Company since December 31, 1995 from the issuance of any shares of its capital stock or any warrants, options or other rights with respect thereto; PROVIDED FURTHER that the Company may make a Restricted Payment if a Default (but not an Event of Default) shall have occurred and be continuing if such Restricted Payment was declared but not yet paid prior to the occurrence of such Default and the making of such Restricted Payment would be permitted under clause (ii) of this Section 5.16(a). (b) The provisions of Section 5.16(a) to the contrary notwithstanding, the Company may declare and make a Restricted Payment if a Default or Event of Default shall have occurred and be continuing at the time that such Restricted Payment was declared, if (i) the declaration and payment of such Restricted Payment is required in order for the Company to continue to qualify as a REIT under the Code, and (ii) the Default or Event of Default existing at the time of such declaration did not result from (1) a breach of this Section 5.16, (2) a failure to make any payment or prepayment of principal or interest on the Notes (including failure to pay the Make-Whole Premium pursuant to Section 2, when due), or (3) the occurrence of any event specified in Section 6.1(a) or (g). 5.17. CONSTRUCTION FINANCING. The Company will not permit the aggregate outstanding principal, accrued interest (estimated in good faith to the extent not known) and fees, in connection with Construction Investments made by it and its Subsidiaries to exceed (i) an amount equal to 20% of the Company's consolidated Investments in Healthcare Assets during the 12 month period following the date hereof, and (ii) an amount equal to 17.5% percent of the Company's consolidated Investments in Healthcare Assets at any time thereafter; PROVIDED that neither the Company nor any Subsidiary of the Company shall make a Construction Investment for a Facility unless (x) there is included in the terms thereof an agreement for the conversion of the interests of the Company or such Subsidiary in the Facility upon the completion thereof into full ownership or a mortgage interest, and (y) if a mortgage interest, the Company or such Subsidiary shall retain a first Lien on such Facility. -17- 22 5.18. INCONSISTENT AGREEMENTS. The Company will not, and will not permit any of its Subsidiaries to, enter into any agreement containing any provision which would be violated or breached by the performance by the Company of its obligations hereunder, under the Notes or under any other Note Document. 5.19. CREDIT ENHANCEMENTS. Neither the Company nor any Subsidiary of the Company will provide any Credit Enhancement, except (a) by the endorsement of negotiable instruments for deposit or collection in the ordinary course of business, (b) Credit Enhancements in support of Facilities, if, immediately after giving effect thereto, the aggregate outstanding amount, including principal, accrued interest (estimated in good faith to the extent not known) and fees, of all issued Credit Enhancements (exclusive of the Credit Enhancements referred to in subsection 5.19(c)) will not exceed $30,000,000 and (c) as set forth on Schedule 5.19 hereof. 5.20. LONG-TERM CARE FACILITIES. The Company will ensure that not less than 70% of the Investments in Healthcare Assets made by the Company and its Subsidiaries are in Long-Term Care Facilities. 5.21. BEHAVIORAL CARE FACILITIES. The Company will ensure that not more than 10% of the Investments in Healthcare Assets made by the Company and its Subsidiaries are in Facilities classified as "Behavioral Care". 5.22. OPERATOR CONCENTRATION; DIVERSIFICATION OF ASSETS AND REVENUES. The Company will ensure that not more than 20% of the Investments made by the Company and its Subsidiaries are maintained with a single Operator (including Affiliates of such Operator). 5.23. MAINTENANCE OF REIT STATUS. The Company will maintain its REIT Status. The Company will not create, acquire or permit to exist any Subsidiary unless such Subsidiary is a "qualified REIT subsidiary" within the meaning of Section 856(j)(i)(2) of the Code. The Company may not and will not permit any of its Subsidiaries to, directly or indirectly, engage in any business which would substantially change the general nature of the business of the Company and its Subsidiaries, considered as a whole, from the nature of the Company's business as it exists on the date of this Agreement. 5.24. NOTICE. The Company will give each Purchaser written notice whenever any of the following events occurs, promptly, and in any event, within five days, after the Company knows or has reason to know thereof: (a) (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan; or (ii) the institution of proceedings or the taking or expected taking of any other action by PBGC or the Company, any Subsidiary of the Company or any ERISA Affiliate to terminate, withdraw or partially withdraw from any Plan and with respect to a Multiemployer Plan, the Reorganization or Insolvency of such Plan; (b) the Internal Revenue Service or any other federal, state or local taxing authority shall allege any material default by the Company or any Subsidiary in the payment of any tax material in amount or make any assessment in respect thereof; -18- 23 (c) (i) any litigation or proceeding shall be brought against the Company or any Subsidiary of the Company before any court or administrative agency which, if successful, may reasonably be expected to have a Material Adverse Effect, or (ii) without limiting the generality of clause (i), any litigation, proceeding or dispute, other than disputes in the ordinary course of business, or, whether or not in the ordinary course of business, involving amounts in excess of $2,500,000 affecting the Company or any of its Subsidiaries, whether or not fully covered by insurance, and regardless of the subject matter thereof (excluding, however, any actions relating to worker's compensation claims or negligence claims relating to use of motor vehicles, if fully covered by insurance, subject to deductibles); (d) there shall be filed any application for a determination of the qualified status of any Plan; (e) the Company receives (i) any written claims, complaints, notices or inquiries relating to the condition of its facilities and properties, or compliance with Environmental Laws which, if adversely determined, individually or in the aggregate may reasonably be expected to have a Material Adverse Effect, (ii) any notice of violation or of any administrative or judicial complaint or order having been filed or about to be filed against the Company or any of its Subsidiaries alleging violations of any Environmental Law, or (iii) any notice from any governmental body or any other Person alleging that the Company or any of its Subsidiaries is or may be subject to any environmental liability; (f) any officer of the Company reasonably believes that any Default has occurred or that any representation or warranty made in Section 3.1 shall for any reason have ceased in any material respect to be true and correct; or (g) the occurrence or expected occurrence of any event that would constitute or cause a Material Adverse Effect. 5.25. ENVIRONMENTAL LAWS. (a) The Company will, and will cause each of its Subsidiaries and lessees under Leases to, use and operate all of its respective facilities and properties in material compliance with all Environmental Laws, and keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith. The Company shall promptly resolve any non-compliance with Environmental Laws and keep its property free of any Lien imposed by any Environmental Law. (b) The Company will, and will cause each of its Subsidiaries and lessees under the Leases to handle all Hazardous Materials in material compliance with all applicable Environmental Laws. The Company will not, and will cause each of its Subsidiaries and lessees under the Leases not to cause or permit: (i) any Hazardous Material to be placed, held, located or disposed of, on, under or at any Facility or any part thereof, except for such Hazardous Materials that are necessary for the Company's or any Subsidiary's or any Operator's operation of its business thereon and which shall be used, stored, treated and disposed of in compliance with all applicable Environmental Laws or (ii) such Facility or any part thereof to be used as a collection, storage, treatment or disposal site for any Hazardous Material. The Company and each Subsidiary acknowledges and agrees that the Purchasers shall have no liability or responsibility for either: -19- 24 (i) damage, loss or injury to human health, the environment or natural resources caused by the presence, disposal, release or threatened release of Hazardous Materials on any part of such Facility; or (ii) abatement and/or clean-up required under any applicable Environmental Laws for a release, threatened release or disposal of any Hazardous Materials located at any Facility or used by or in connection with the Company's or any Subsidiary's or any Operator's business. 5.26. MODIFICATION OF CERTAIN AGREEMENTS. (a) The Company will not consent to any amendment, supplement or other modification to any of the terms or provisions contained in, or applicable to the Credit Agreement, the Amended 1993 Note Documents, or other agreement evidencing Indebtedness of the Company or any of its Subsidiaries that would require the lenders thereunder to consent to any amendment or modification of the Note Documents. The Company shall deliver to each Purchaser, promptly upon their becoming available, all amendments, supplements or modifications to the Credit Agreement or the Amended 1993 Note Documents. (b) Subject to the prohibitions set forth in Section 5.30, the Company will promptly deliver to each of the Purchasers copies of any amendments or modifications to the certificate of incorporation or by-laws of the Company or any of its Subsidiaries, certified with respect to the certificate of incorporation by the Secretary of State of its state of incorporation and, with respect to the by-laws, by the secretary or assistant secretary of such corporation. 5.27. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, (a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate; (c) merge into or consolidate with or purchase or acquire assets from an Affiliate; or (d) enter into any other transaction directly or indirectly with or for the benefit of any Affiliate (including, without limitation, guaranties and assumptions of obligations of an Affiliate); PROVIDED, HOWEVER, that: (i) payments on Investments expressly permitted by Section 5.28 hereof may be made, (ii) any Affiliate who is a natural person may serve as an employee or director of the Company or any Subsidiary and receive reasonable compensation for his services in such capacity, and (iii) the Company or any Subsidiary of the Company may enter into any transaction with an Affiliate providing for the leasing of property, the rendering or receipt of services or the purchase or sale of product, inventory and other assets in the ordinary course of business if the monetary or business consideration arising therefrom would be substantially as advantageous to the Company or such Subsidiary as the monetary or business consideration that would obtain in a comparable arm's length transaction with a Person not an Affiliate. 5.28. LIMITATION ON INVESTMENTS. The Company will not, and will not permit any of its Subsidiaries to, make or permit to remain outstanding any Investment in any Person, including any shareholder, director, officer or employee of the Company or any of its Subsidiaries, except: (a) Investments in: (i) obligations issued or guaranteed by the United States of America; -20- 25 (ii) certificates of deposit, bankers acceptances and other "money market instruments" issued by any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000; (iii) open market commercial paper bearing the highest credit rating issued by Standard & Poor's Corporation or by another nationally recognized credit rating agency; (iv) repurchase agreements entered into with any bank or trust company organized under the laws of the United States of America or any State thereof and having capital and surplus in an aggregate amount of not less than $100,000,000 relating to United States of America government obligations; and (v) shares of "money market funds", each having net assets of not less than $100,000,000; in each case maturing or being due or payable in full not more than 180 days after the acquisition thereof by the Company or any of its Subsidiaries. (b) Investments by the Company in any Subsidiary, and by any Subsidiary in the Company or another Subsidiary, provided that (i) the Company shall cause each newly-created Subsidiary, if any, within thirty (30) days after its organization thereof, to become a party to the Subsidiary Guaranty, (ii) the Company shall cause each such newly-created Subsidiary to deliver to each Purchaser those certificates and documents described in subsection 10.1(a), as applicable, and (iii) all legal matters incident to the execution by such Subsidiary of the Subsidiary Guaranty shall be satisfactory to counsel for each Purchaser. (c) The acquisition by the Company and its Subsidiaries, on a consolidated basis, of healthcare assets consisting of Facilities and Mortgages. (d) Investments in any Person (including any Operators) provided that the aggregate Cash portion of all such Investments does not exceed an amount equal to 10% of Healthcare Assets as at any date of determination thereof, prior to giving effect to any such Investment. For purposes of Sections 5.8(b), 5.27 and 5.28, "Investments" shall mean, by any Person: (i) any amount paid or committed to be paid, or the value of property of services contributed or committed to be contributed, by such Person for or in connection with the acquisition by such Person of any stock, bonds, notes, debentures, partnership, membership or other ownership interests or other securities of, or other investment in, any other Person; and (ii) any amount of any advance, loan or extension of credit by such Person to any other Person, or any guaranty or other similar obligation of such Person with respect to any Indebtedness of such other Person, and (without duplication) any amount committed to be advanced, loaned, or extended by such Person to any other Person, or any amount the payment of which is committed to be assured by a guaranty or similar obligation by such Person for the benefit of such other Person. -21- 26 5.29. ERISA, ETC. The Company will materially comply with all applicable provisions of ERISA and the Code now or hereinafter in effect. The Company will not permit the establishment of any Plan or amendment of any Plan, which establishment or amendment could result in liability to the Company or any of its Subsidiaries or increase the obligation for post-retirement welfare benefits of the Company or any of its Subsidiaries which liability or increase, individually or together with all similar liabilities and increases, may reasonably be expected to have a Material Adverse Effect. 5.30. CHANGES IN STRUCTURE; FISCAL YEAR. The Company will not amend, supplement or modify the certificate of incorporation or by-laws of the Company or any of its Subsidiaries in a manner which would be reasonably likely to cause a Material Adverse Effect. The Company will not change its fiscal year. 5.31. CAPITAL EXPENDITURES. Except as set forth on Schedule 5.31, the Company will not, and will not permit any of its Subsidiaries to, make or be or become obligated to make Capital Expenditures in the aggregate for the Company and its Subsidiaries on a consolidated basis, during each fiscal year of the Company and its Subsidiaries, in excess of $350,000 (exclusive of Investments permitted under Section 5.28). 5.32. RENTAL OBLIGATIONS. The Company will not, and will not permit any of its Subsidiaries to, enter into, or permit to remain in effect, any lease (other than Capitalized Leases that are governed by Section 5.31), if, after giving effect thereto, the aggregate amount of all rentals and other obligations, including, without limitation, all percentage rents and additional rent, due from the Company and its Subsidiaries thereunder would exceed $350,000 during any fiscal year. 5.33. USE OF CASH. The Company will not, and will not permit any of its Subsidiaries to, use, or permit to be used, in any manner or to any extent, the Company's, or such Subsidiary's, Cash from operations for the benefit of any Person, except: (a) in connection with the payment or prepayment of expenses (other than Capital Expenditures) directly incurred for the benefit of the Company or such Subsidiary in the maintenance and operation of its business, in each case only in the ordinary course of its business, (b) for the payment of required payments of principal and interest on Indebtedness of the Company and its Subsidiaries permitted to exist hereunder, and (c) for uses that are otherwise specifically permitted by this Agreement. SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR. 6.1. EVENTS OF DEFAULT. Any one or more of the following shall constitute an "EVENT OF DEFAULT" as the term is used herein or in the other Note Documents: (a) (i) the Company shall fail to pay when due any payment (including any mandatory prepayment) of the principal of any Note or of any premium or interest thereon; or (ii) the Company shall fail to pay when due any other amount payable hereunder or under any other Note Document and such payment default with respect to such other amount shall continue for more than five Business Days; or -22- 27 (b) the Company shall fail to observe or perform any of its obligations under Section 2.5, 5.8, 5.12, 5.13, 5.14, 5.15, 5.16, 5.17, 5.18, 5.19, 5.20, 5.21, 5.22, 5.23, 5.24, 5.25, 5.26, 5.27, 5.28, 5.29, 5.30, 5.31, 5.32, 5.33 or 6.2 of this Agreement or Article IV of the Subsidiary Guaranty; or any Subsidiary of the Company shall fail to observe or perform any of its obligations under Article II of the Subsidiary Guaranty; or (c) the Company, or any Subsidiary of the Company, shall fail to observe or perform any other obligation, covenant, undertaking, condition or provision in respect of the Notes or contained in this Agreement or the other Note Documents that is not remedied within 30 days after the earliest of (i) the furnishing of notice thereof by the Company to the Purchasers, (ii) the Company's willful failure to provide any notice required under Section 6.2 or (iii) receipt of written notice thereof from any Purchaser to the Company requiring the same to be remedied; or (d) any representation or warranty made by the Company herein, or made by the Company or any Subsidiary of the Company in any other Note Document, shall be untrue or inaccurate in any material respect; or (e) any of the Note Documents or any provision thereof shall cease to be a legal, valid and binding agreement enforceable against the Company (or, in the case of the Subsidiary Guaranty, the Company or any of the Subsidiaries) in accordance with the respective terms thereof or shall in any way be terminated or become or be declared ineffective or inoperative or shall in any way whatsoever cease to give or provide the respective rights, titles, interests, remedies, priorities, powers or privileges intended to be created thereby; or (f) a judgment shall be rendered against the Company or any Subsidiary of the Company, or any attachment, levy or execution against any of their respective properties shall occur, for any amount in excess of $1,500,000 and shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of 30 days or more; or (g) (i) the Company or any of its Subsidiaries shall have made an assignment for the benefit of creditors, filed a petition in bankruptcy, shall be adjudicated insolvent, shall have petitioned or applied to any tribunal for the appointment of a receiver, custodian, or any trustee for it or a substantial part of its assets, or shall have commenced any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether nor or hereafter in effect, or the Company or any of its Subsidiaries shall have taken any corporate action to authorize any of the foregoing actions; or there shall have been filed any such petition or application, or any such proceeding shall have been commenced against the Company or any of its Subsidiaries, that remains undismissed for a period of 60 days or more; or any order for relief shall be entered in any such proceeding; or the Company or any of its Subsidiaries by any act or omission shall have indicated its consent to, approval of, or acquiescence in any such petition, application or proceeding or the appointment of a custodian, receiver or any trustee for it or any substantial part of its properties, or shall have suffered any custodianship, receivership or trusteeship to continue undischarged for a period of 30 days or more; or (ii) the Company or any of its Subsidiaries shall have generally failed to pay its debts as such debts become due; or -23- 28 (iii) the Company or any of its Subsidiaries shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property that may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint that is not vacated within 30 days from the date thereof; or (h) a default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than the Obligations) of the Company with an aggregate principal amount in excess of $1,000,000 or any Subsidiary with an aggregate principal amount in excess of $200,000, or a default shall occur in the performance or observance of any obligation or condition with respect to any such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders (immediately or after the giving of notice or passage of time or both), to cause such Indebtedness to become due and payable prior to its stated maturity, or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (i) any of the following events shall occur with respect to any Plan: (x) the institution of any steps by the Company, any Subsidiary of the Company, any ERISA Affiliate or any other Person to terminate a Plan if, as a result of such termination, the Company, any Subsidiary of the Company or any such ERISA Affiliate could be required to make a contribution to such Plan, or could reasonably expect to incur a liability or obligation to the PBGC or any other Person under Title IV of ERISA or to such Plan, in excess of $100,000; or (y) a contribution failure occurs with respect to any Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; or (j) a Material Adverse Effect shall have occurred; or (k) (i) any Person, or a group of Persons (within the meaning of Section 13 or 14 of the Exchange Act), shall have acquired (A) beneficial ownership in excess of 25% of the outstanding stock of the Company or other voting interest having ordinary voting powers to elect a majority of the directors, managers or trustees of the Company (irrespective of whether at such time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency), or (B) all or substantially all of the Investments of the Company; or (ii) a majority of the Board of Directors of the Company, at any time, shall be composed of Persons other than (A) Persons who were members of the Board of Directors on the date of this Agreement, or (B) Persons who subsequently become members of the Board of Directors and who either (x) are appointed or recommended for election with the affirmative vote of a majority of the directors in office as of the date of the Agreement, or (y) are appointed or recommended for election with the affirmative vote of a majority of the Board of Directors of the Company then in office; or -24- 29 (l) The Company shall at any time fail to maintain its REIT Status, or the Company or any Subsidiary shall lose, through suspension, termination, impoundment, revocation, failure to renew or otherwise, any material license, permit or governmental authorization; or (m) George L. Chapman shall cease for any reason whatsoever, including, without limitation, death or disability (as such disability shall be determined in the reasonable judgment of the Required Holders) to be and continuously perform the duties of an executive officer of the Company and to be a member of its Board of Directors or, if such cessation shall occur as a result of the death or such disability, no successor satisfactory to the Required Holders, in their sole discretion, shall have become and shall have commenced to perform the duties of such executive officer of the Company and serve as a member of the Company's Board of Directors within 30 days after such cessation; PROVIDED, HOWEVER, that if any satisfactory successor shall have been so elected and shall have commenced performance of such duties within such period, the name of such successor or successors shall be deemed to have been inserted in place of George L. Chapman in this Section 6.1(m); or (n) The Company or any of its Subsidiaries, or any of their respective Facilities, shall be subject to one or more Liens for costs or damages in excess of $1,000,000 individually or in the aggregate under any Environmental Law, such Liens shall remain in place for 30 days after the creation thereof and such Liens are reasonably likely to cause a Material Adverse Effect; or (o) 30 days after the acceleration by the Company or any of its Subsidiaries of the obligations of an Operator as a result of any default in the payment of amounts which are due and owing under any lease, note, mortgage or related security documents in connection with any Facility of such Operator (such Facility, herein referred to as the "DEFAULTED FACILITY"), in the event the sum of Lease Rental Expense and/or Mortgage Expense arising from (i) the Defaulted Facility, and (ii) all Pooled Facilities, if any, of which the Defaulted Facility is a part, which have a Fixed Charge Coverage of less than 1.0 to 1.0, account for 12.5% or more of the aggregate amount of all Lease Rental Expense and/or Mortgage Expense owing to the Company or any of its Subsidiaries from all Operators during the immediately preceding four calendar quarters. 6.2. NOTICE TO PURCHASERS. Whenever the Company becomes aware that any Default or Event of Default has occurred, or if a Purchaser has either given any notice to the Company or taken any other action of which the Company is aware with respect to a Default or Event of Default, or the Company receives written notice from a third party concerning an event which constitutes a Default or Event of Default, the Company will ensure that notice is given (or such third party notice is forwarded) to all holders of the Notes then outstanding, no later than the fifth day (or second day in the case of an Event of Default or Default under Section 6.1(a)) after it becomes aware that such Event of Default or Default has occurred, or that such notice has been given or such other action has been taken with respect to such Default or Event of Default, such notice to be in writing and sent in the manner provided in Section 9.6. 6.3. ACCELERATION OF MATURITIES; OTHER REMEDIES. (a) Upon the occurrence of an Event of Default under Section 6.1(a), the holder of any Note may, by written notice to the Company, declare such Note to be, and such Note shall thereby become, due and payable (without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company) at the Redemption Price. Upon the occurrence of an Event of Default under Section -25- 30 6.1(g), all Notes shall immediately become due and payable (without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company) at the Redemption Price. Upon the occurrence of any Event of Default, other than under Section 6.1(g) and other than under Section 6.1(a) (which are governed by the preceding two sentences), the Required Holders may, by written notice to the Company, declare all Notes to be, and such Notes shall thereby become, due and payable (without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company) at the Redemption Price. No course of dealing on the part of any holder of any Note nor any delay or failure on the part of any holder of any Note to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company further agrees to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any Note upon any default hereunder or thereon, including the fees, disbursements and other charges of such holder's or holders' attorneys for all services rendered in connection therewith. (b) The rights and remedies expressly provided for in this Agreement and the other Note Documents are cumulative and not exclusive of any rights or remedies which the Purchaser or any holder of a Note would otherwise have including, without limitation, the rights and remedies provided for in the Subsidiary Guaranty. 6.4. RESCISSION OF ACCELERATION. The provisions of Section 6.3 are subject to the condition that if any outstanding Notes have been declared or have become immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (a) through (f), inclusive, of Section 6.1, or an Event of Default described in paragraphs (h) through (o), inclusive, of Section 6.1, then the Required Holders may by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof; PROVIDED that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under Section 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been cured or waived pursuant to Section 7.1 and the Company shall have paid all of Purchaser's costs and expenses as provided for in Section 9.4; and PROVIDED further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. 7.1. CONSENT REQUIRED. Any term, covenant, agreement or condition of this Agreement or the Notes or the other Note Documents may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the Required Holders, provided that no such waiver, modification, alteration or amendment shall (a) change the time of payment of the principal of or the -26- 31 interest on any Note or reduce the principal amount thereof or change the rate of interest thereon, (b) change any of the provisions with respect to Section 2 including, without limitation, the calculation of the Redemption Price, or (c) change the percentage of holders of the Notes, or the number of holders of Notes, required to take any action under this Section 7 or any other provision of this Agreement, without the consent of each holder of the Notes affected thereby. Executed or true and correct copies of any waiver, modification, alteration or amendment to this Agreement shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed and delivered by the holder or holders of the requisite percentage of outstanding Notes. Whenever in this Agreement it is provided that an action may be taken or a condition may exist with the consent of all or any percentage of the Purchasers or the outstanding Notes, such consent must be the consent of all or such percentage of the Purchasers or such outstanding Notes without regard to any Notes held or agreed to be purchased by the Company, any Subsidiary of the Company or any Affiliate of the Company or any such Subsidiary. 7.2. SOLICITATION OF PURCHASERS. So long as there are any Notes outstanding, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes or the other Note Documents unless each holder of Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder as consideration for or as an inducement to entering into by any holder of any waiver or amendment of any of the terms and provisions of the Agreements or the Notes or the other Note Documents unless such remuneration is concurrently paid, on the same terms, ratably to the holders of all Notes then outstanding, whether or not such holders agreed to such waiver or amendment. 7.3. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS 8.1. DEFINITIONS. (a) Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the other Note Documents. "ACT" means the Securities Act of 1933, as amended. "AFFILIATE" means any Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (b) which beneficially owns or holds with power to vote 5% or more of any class of the voting stock of the Company, (c) 5% or more of the voting stock of which is beneficially owned or held by the Company, or (d) which is an officer or director of the Company. The term "CONTROL" means the possession, directly or indirectly, of the power to direct or cause -27- 32 the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "AGREEMENT" shall mean this Amended and Restated Note Purchase Agreement, as amended, modified or supplemented from time to time. "AMENDED 1993 NOTE DOCUMENTS" means, collectively, the Amended and Restated Note Purchase Agreement between the Company and the Purchasers party thereto, dated as of the date hereof, for $52,000,000 of Senior Notes, the notes issued pursuant thereto and all other documents and instruments executed or delivered by the Company in connection therewith or pursuant thereto. "APPRAISAL" means an appraisal providing an assessment of the fair market value of a Property (whether appraised on a stand-alone basis or "in bulk" together with similar Properties) which is independently and impartially prepared by an MAI appraiser having substantial experience in the appraisal of health care facilities and conforming to Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation. "APPRAISED VALUE" means with respect to any Facility, the value of such Facility reflected in the most recent Appraisal prepared with respect to such Facility. "BALLOON PAYMENTS" means as of any date as of which the amount thereof shall be determined, with respect to the Company on a consolidated basis, an amount equal to (x) its aggregate obligation to make payments of principal in respect of Indebtedness having a maturity during the immediately succeeding six month period, less (y) the sum of Cash and the total unused availability under the Credit Agreement; PROVIDED, HOWEVER, any Indebtedness with respect to which the Company (or any of its Subsidiaries) has received a commitment for the renewal or other refinancing of such Indebtedness shall not be included in the computation of Balloon Payments and PROVIDED, FURTHER, if the calculation of the amount of Balloon Payments results in a negative number, then the amount thereof shall be deemed to be zero. "BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. Section 101 ET SEQ., as amended. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which banks in New York are required by law to close or are customarily closed. "CALLED PRINCIPAL" shall mean, with respect to any Note, the principal amount of such Note that is to be paid or prepaid pursuant to any paragraph of Section 2 or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. "CAPITAL EXPENDITURES" means, for any period, the aggregate amount of all payments made or to be made during such period by any Person directly or indirectly for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment that, in accordance with GAAP, would be added as a debit to the fixed asset account of such Person, including, without limitation, all amounts paid or payable during such period with respect to Capitalized Lease Obligations and interest that are required to be capitalized in accordance with GAAP. -28- 33 "CAPITALIZED LEASE" means any lease, the obligations to pay rent or other amounts under which constitute Capitalized Lease Obligations. "CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "CASH" means, as to any Person, such Person's cash and cash equivalents, as defined in accordance with GAAP consistently applied. "CASH FLOW" means, for any period, the Company's consolidated net income (loss) for such period, excluding extraordinary items net of tax effect, plus depreciation, plus amortization of loan expenses, plus (minus) any change in provision for losses, plus (minus) each of the following: (i) non-refundable loan and commitment fees received in cash in excess of (less than) amounts earned; (ii) non-refundable lease income received in cash in excess of (less than) amounts earned; and (iii) non-refundable interest income received in cash in excess of (less than) amounts earned. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "CODE" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "COMPANY" means Health Care REIT, Inc., a Delaware corporation, together with its successors. "CONSTRUCTION INVESTMENTS" means any financing extended by the Company or any Subsidiary of the Company with respect to a Facility which is under construction, i.e., has not received a certificate of occupancy and the Company's or such Subsidiary's conditions for conversion to permanent financing for the Facility have not been satisfied. "CREDIT AGREEMENT" means the Company's loan agreement, dated as of the date hereof, by and among the Company and the banks signatory thereto and as KeyBank National Association, as Administrative Agent, and Fleet Bank, N.A., as Syndication Agent, and as hereafter amended from time to time (provided that no such amendment results in a breach of Section 5.26), providing for a $175,000,000 revolving credit facility. "CREDIT ENHANCEMENT" means any obligation, contingent or otherwise, of the Company or any of its Subsidiaries directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of the Company or any of its Subsidiaries (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such -29- 34 Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). The term "Credit Enhanced" used as a verb has a corresponding meaning. "DEBT" means at any date, without duplication, (i) all obligations of the Company or any of its Subsidiaries for borrowed money, (ii) all obligations of the Company or any of its Subsidiaries evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of the Company or any of its Subsidiaries to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of the Company or any of its Subsidiaries as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all obligations of the Company or any of its Subsidiaries to purchase securities (or other property) which arise out of or in connection with the sale of the same or substantially similar securities or property, (vi) all obligations of the Company or any of its Subsidiaries to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vii) all obligations of the Company or any of its Subsidiaries to mandatorily redeem any capital stock of the Company or any of its Subsidiaries or any other Person, (viii) all Debt of others secured by a Lien on any asset of the Company or any of its Subsidiaries, whether or not such Debt is assumed by the Company or any of its Subsidiaries, and (ix) all Debt of others Credit Enhanced by the Company or any of its Subsidiaries. "DEFAULT" means any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default as defined in Section 6.1. "DISCOUNTED PREPAYMENT VALUE" shall mean, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on a semiannual basis) equal to the sum of the Reinvestment Yield plus 50 basis points. "EBITDA" means, for any period, with respect to the Company on a consolidated basis, determined in accordance with GAAP, the sum of net income (or net loss) for such period PLUS, the sum of all amounts treated as expenses for: (a) interest, (b) depreciation, (c) amortization, and (d) all accrued taxes on or measured by income to the extent included in the determination of such net income (or net loss); provided, however, that net income (or net loss) shall be computed without giving effect to extraordinary losses or gains. "EBITDAR" means, for any period, with respect to any Facility, pre-tax net income plus Operator Interest Expense, Mortgage Expense (but excluding therefrom any amounts relating to principal), Lease Rental Expense, depreciation, amortization and management fees as reported by the Operator less an imputed management fee equal to five percent of the Facility's net revenues; PROVIDED, HOWEVER, that net income (or net loss) shall be computed without giving effect to extraordinary losses or gains. "ENVIRONMENTAL LAWS" means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and the protection of the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. -30- 35 "ERISA AFFILIATE" means any corporation, trade or business that is treated as a single employer with the Company or any Subsidiary of the Company under Section 414(b), (c), (m) or (o) of the Code. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXECUTIVE OFFICER" means the Chairman of the Board, President, a Vice President, chief financial officer or Treasurer of the Company. "FACILITY" means a health care facility offering health care-related products and services, including, but not limited to, any acute care hospital, rehabilitation hospital, nursing facility, assisted living facility, retirement center, long-term care facility, or medical office building, and facilities and services directly related thereto. "FIXED CHARGE COVERAGE" means, with respect to any Facility, the ratio of: (x) EBITDAR, to (y) the sum of Operator Interest Expense (but excluding therefrom Operator Interest Expense, the payment of which is subordinated to the payment of Indebtedness owing to the Company or any of its Subsidiaries), Lease Rental Expense, Mortgage Expense and principal paid with respect to Indebtedness of Operators (other than Indebtedness relating to a Mortgage) which is not subordinated to the Company or any of its Subsidiaries; all of the foregoing calculated as at any date of determination thereof by reference to the immediately preceding four fiscal quarters and based upon the financial statements provided to the Company by each Operator for the immediately preceding four fiscal quarters of each Operator. "FIXED COVERAGE RATIO" means as of the last day of any fiscal quarter with respect to the immediately preceding four fiscal quarters of the Company ending on such date, the ratio of (x) EBITDA to (y) the sum of Interest Expense, cash dividends and Balloon Payments. "FUNDED INDEBTEDNESS" means, as of any date of determination thereof, all Indebtedness of any Person, determined in accordance with GAAP, which by its terms matures more than one year after the date of calculation, and any such Indebtedness maturing within one year from such date which is renewable or extendable at the option of the obligor to a date more than one year from such date, including, in any event, the revolving credit loans borrowed pursuant to the Credit Agreement. "HAZARDOUS MATERIALS" means (a) any "hazardous substance" as defined by CERCLA; (b) any "hazardous waste" or "petroleum," as defined by the Resource Conservation and Recovery Act, as amended; (c) any petroleum product; (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law, as amended or hereafter amended; (e) any radioactive material, including any source, special nuclear or by-product material as defined at 42 U.S.C. 2011 ET SEQ., as amended or hereafter amended; or (f) any other toxic chemical, hazardous substance, contaminant or pollutant, medical waste, infectious waste or hazardous waste. "HEALTHCARE ASSETS" means, as of any date as of which the amount thereof is to be determined, the aggregate amount equal to the sum (without duplication) of: (i) the lesser of the Appraised Value or purchase price of each Facility owned entirely by the Company or any of its Subsidiaries and leased to an Operator; plus -31- 36 (ii) the lesser of the Appraised Value of any Facility encumbered by a Mortgage or the outstanding principal amount of the Mortgage which encumbers any such Facility. "INCLUDING" means including without limitation. "INDEBTEDNESS" means, with respect to any Person, all: (a) liabilities or obligations, direct and contingent, which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person at the date as of which Indebtedness is to be determined, including, without limitation, contingent liabilities that in accordance with such principles, would be set forth in a specific dollar amount on the liability side of such balance sheet, and Capitalized Lease Obligations of such Person; (b) liabilities or obligations of others for which such Person is directly or indirectly liable, by way of guaranty (whether by direct guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to purchase or advance or keep in funds or other agreement having the effect of a guaranty) or otherwise; (c) liabilities or obligations secured by Liens on any assets of such Person, whether or not such liabilities or obligations shall have been assumed by it; and (d) liabilities or obligations of such Person, direct or contingent, with respect to letters of credit issued for the account of such Person and bankers acceptances created for such Person. "INSOLVENCY" means with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of such term as used in section 4245 of ERISA. "INSOLVENT" shall pertain to a condition of Insolvency. "INTEREST COVERAGE" means, as at the last day of any fiscal quarter, the quotient, expressed as a percentage (which may be in excess of 100%), determined by dividing EBITDA by Interest Expense; all of the foregoing calculated by reference to the immediately preceding four fiscal quarters of the Company ending on such date of determination. "INTEREST EXPENSE" means, for any period, on a combined basis, the sum of all interest paid or payable (excluding unamortized debt issuance cost) on all items of Indebtedness of the Company and its Subsidiaries outstanding at any time during such period. "INVESTMENT" means (except as otherwise provided in Section 5.28 in respect of Sections 5.8(b), 5.27 and 5.28) a Facility or a Mortgage, individually or collectively, as the case may be. "LEASE" means any Operating Lease or a Lease that creates a Capitalized Lease Obligation, in either case in which the Company or a Subsidiary of the Company is the lessor. "LEASE RENTAL EXPENSE" means, for any period and with respect to any Facility, the total amount payable during such period by the lessee of such Facility to the Company or any Subsidiary, including, without limitation, (a) base rent (as adjusted from time to time), plus (b) all incremental charges to which the Facility is subject under the lease relating thereto. "LIEN" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), encroachment, charge or claim against or interest in -32- 37 property, to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. "LONG-TERM CARE FACILITIES" means healthcare facilities comprised of nursing facilities, assisted living facilities and retirement facilities or combinations thereof. "MAKE-WHOLE PREMIUM" means, with respect to any Note, a premium equal to the excess, if any, of the Discounted Prepayment Value of the Called Principal of such Note over such Called Principal. The Make-Whole Premium shall in no event be less than zero. "MATERIAL ADVERSE EFFECT" means: (a) a material adverse effect on the business, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole, or on the ability of the Company or any Subsidiary of the Company to perform its obligations under this Agreement, the Notes or any other Note Document; or (b) a material adverse effect on the legality, validity or enforceability of the obligations of the Company or any Subsidiary of the Company under this Agreement or the Notes or the other Note Documents. "MORTGAGE(S)" means mortgages of real property constituting a Facility for which the Company or a Subsidiary of the Company is the sole mortgagee. "MORTGAGE EXPENSE" means, for any period and with respect to any Facility, the total amount payable during such period by the mortgagor of such Facility to the Company or any Subsidiary, including, without limitation, (a) interest and principal (as adjusted from time to time) plus (b) all incremental charges to which the Facility is subject under the Mortgage. "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NET ISSUANCE PROCEEDS" means in respect of any issuance of Indebtedness or equity, the proceeds in Cash received by the Company or any of its Subsidiaries upon or simultaneously with such issuance, net of direct costs of such issuance and any taxes paid or payable by the recipient of such proceeds. "NET WORTH" means, at any date, the aggregate amount of capital stock (less any treasury stock), surplus and retained earnings of the Company, all determined as of such date in accordance with GAAP consistently applied. "NOTE DOCUMENTS" means this Agreement, the Notes, the Subsidiary Guaranty and any other agreements, documents and writings now or hereafter executed by, on behalf of or for the benefit of the Company, any Subsidiary of the Company or the Purchasers pursuant to or in connection with this Agreement, the Notes, the Subsidiary Guaranty, or the transactions contemplated hereby and thereby, together with all amendments, modifications (including through the waiver of any provision hereof or thereof), supplements and/or restatements hereto or thereto. -33- 38 "NOTES" means the Notes described in Section 1.1, and any Notes issued in exchange or replacement therefor, in each case as the same may be amended, modified or supplemented from time to time. "OBLIGATIONS" means the payment and performance of all present and future obligations and liabilities of the Company or any Subsidiary of the Company (whether actual or contingent or whether owed jointly or severally or in any other capacity whatsoever) to the Purchasers (or any of them) under the Note Documents (or any of them), together with all costs, charges and expenses incurred by the Purchasers (or any of them) in connection with the protection, preservation or enforcement of their respective rights under the Note Documents, including, without limitation, all principal of, premium (including the Make-Whole Premium), if any, and interest on, any Note and all other amounts payable by the Company or any Subsidiary of the Company under any Note Document (including, without limitation, amounts owed in respect of interest that accrues on all or any portion of the Obligations after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company or any Subsidiary of the Company), and all renewals or extensions of any of the foregoing. "OPERATING LEASE" means any lease (other than a lease constituting a Capitalized Lease Obligation) of real or personal property having a lease term (as defined in Financial Accounting Standards Board Statement No. 13, as in effect on the Original Issuance Date) of more than one year. "OPERATOR" means (a) the lessee of any Facility owned or leased by the Company or any of its Subsidiaries, and (b) the mortgagor of a Facility which is subject to a Mortgage to the extent that such entity controls the operation of the Facility. "OPERATOR INTEREST EXPENSE" means, for any period, the sum of all interest on, and all amortization of debt discount and expenses on, all Indebtedness of an Operator outstanding at any time during such period but excluding any amounts which constitute Mortgage Expense. "OVERDUE RATE" means, for each day, a rate per annum equal to the higher of (a) 9.29% and (b) the sum of (i) 2% PLUS (ii) the Prime Rate for such day. Nothing contained in this definition shall require the Company or any Subsidiary of the Company to pay interest at a rate exceeding the maximum rate permitted by applicable law. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "PERSON" means a corporation, an association, a partnership, a limited liability company or partnership, an organization, a business, a trust or any other entity, an individual, a government or political subdivision thereof or a governmental agency or instrumentality. "PLAN" means at any particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company, any Subsidiary of the Company or an ERISA Affiliate is (or, if such plan was terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in section 3(5) of ERISA. "POOLED FACILITIES" means Facilities which are commonly owned or operated by one Operator or an Affiliate thereof (as selected by the Company or any of its Subsidiaries), and the debt financings or leases of which are cross-defaulted and, with respect to Mortgages, are cross-collateralized. -34- 39 "PRIME RATE" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "PROPERTY" means any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "PURCHASER'S ENVIRONMENTAL LIABILITY" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against any Purchaser or any of its respective affiliates, shareholders, directors, officers, employees or agents in connection with or arising from: (a) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment to which the Company or any of its Subsidiaries may be subject; (b) the Release by the Company or any of its Subsidiaries of any Hazardous Material on, in, under or affecting all or any portion of any property of the Company or any such Subsidiary, the groundwater, or any of the surrounding areas; (c) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Company or any of its Subsidiaries of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law); (d) any misrepresentation, inaccuracy or breach of any warranty, contained or referred to in Section 3.1(q); or (e) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Material by the Company or any of its Subsidiaries, or in connection with any property owned or formerly owned by the Company or any of its Subsidiaries. "RECOGNIZED RATING AGENCY" shall mean a nationally recognized rating agency or organization, including Moody's, Standard & Poor's and Duff & Phelps, and any other rating agency or organization approved by the Required Holders. "REINVESTMENT YIELD" shall mean, with respect to the Called Principal of any Note, the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the third Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity equal to the weighted average remaining life of the Called Principal being paid or prepaid as of such Settlement Date, or (ii) if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, the Treasury Constant Maturity -35- 40 Series yields reported, for the latest day for which such yields shall have been so reported as of the third Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15(519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the weighted average remaining life of the Called Principal being paid or prepaid as of such Settlement Date. Such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between reported yields. "REIT STATUS" means, with respect to any Person, (a) the qualification of such Person as a real estate investment trust under Sections 856 through 860 of the Code, and (b) the applicability to such Person and its shareholders of the method of taxation provided for in Section 857 ET SEQ. of the Code. "RELEASE" means a "release," as such term is defined in CERCLA. "REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon (other than interest accrued to the Settlement Date) that would be due on or after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its expressed maturity date. "REORGANIZATION" means with respect to any Multiemployer Plan, the condition that such Plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "REPORTABLE EVENT" means any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the 30-day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. ' 2615, and the event described in Section 4062(e) of ERISA. "REQUIRED HOLDERS" means, at any time, the holders of at least 67% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Subsidiaries or any Affiliates). "SECURED CREDIT AGREEMENT" means any credit agreement, note purchase agreement or other documentation evidencing Debt borrowed from institutional investors or banks which is secured by Liens on assets or properties of the Company or any Subsidiary of the Company; PROVIDED that if the only security for such Debt is a mortgage creating a Lien on a single real estate property of the Company or any Subsidiary of the Company, then such credit agreement, note purchase agreement or other documentation shall not be deemed to be a Secured Credit Agreement. "SERIES" when referring to the Notes shall mean either the Series A Notes or the Series B Notes issued hereunder. "SETTLEMENT DATE" shall mean, with respect to the Called Principal of any Note, the date on which such Called Principal is to be paid or prepaid pursuant to any paragraph of Section 2 or is declared to be immediately due and payable pursuant to Section 6.3, as the context requires. "SUBSIDIARY" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of -36- 41 such corporation (assuming exercise or conversion solely of the securities held by such Person) is at the time beneficially owned by such Person directly or indirectly through Subsidiaries, and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than a 50% equity interest at the time or the power to elect a majority of the Board of Directors or similar governing body. "SUBSIDIARY GUARANTY" means the Subsidiary Guaranty Agreement, dated as of the date hereof, among the Purchasers, the Company and each of the Subsidiaries of the Company, as amended, modified or supplemented from time to time. "TANGIBLE NET WORTH" means, at any date, the aggregate amount of Net Worth of the Company, after subtracting deferred charges and intangible assets, all as determined as of such date in accordance with GAAP consistently applied. "WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, any corporation, partnership, association, joint venture or other entity of which all of the equity securities or ownership interests (other than, in the case of a corporation, directors' qualifying shares) are owned or controlled by such Person or one or more Wholly Owned Subsidiaries of such Person. (b) In addition, each of the following terms is defined in the Section set forth opposite such term:
Term Section ---- ------- Audited Financials 3.1(h) Defaulted Facility 6.1(o) Effective Date 10.1 Environmental Reports 3.1(q) Event of Default 6.1 GAAP 3.1(h) Indemnified Liabilities 9.4(b) Indemnified Parties 9.4(b) 1996 10-K 3.1(g) Leverage Ratio 5.14(b) Leverage Test Period 5.14(b) Note Register 9.1(a) Notes 1.1 Ongoing Indebtedness 5.12(b) Ordinary Leases 5.8(b) Original Issuance Date 1.2(a) Original Note Purchase Agreement Preamble Original Notes Preamble Original Series A Notes Preamble Original Series B Notes Preamble Paying Agent 5.4 Purchase Price 1.2(a)
-37- 42 Purchaser Preamble Redemption Price 2.1 Release 10.2 Release Documents 10.2 Restricted Payments 5.16(a) Series A Notes 1.1 Series B Notes 1.1 Taxes 5.3
8.2. ACCOUNTING PRINCIPLES; TIME PERIODS. (a) Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP. (b) In the Note Documents, in connection with the computation of periods of time, each such period shall run from (and including) the beginning of such period to (but excluding) the end of such period. SECTION 9. MISCELLANEOUS 9.1. REGISTERED NOTES. (a) Company shall cause to be kept a register for the registration and transfer of the Notes (the "NOTE REGISTER") at the office of the Company or the Paying Agent, and the Company will cause to be registered or transferred on the Note Register as hereinafter provided and under such reasonable regulations as it may prescribe, any Note issued pursuant to this Agreement. (b) At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may, subject to compliance with applicable securities laws, transfer such Note upon surrender thereof at the Company or the principal office of the Paying Agent (if one shall have been appointed) duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing; provided that the Company or the Paying Agent may decline to exchange or register the transfer of any Note during the period of five Business Days preceding the due date for any payment of principal or interest on the Notes. (c) The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. 9.2. EXCHANGE OF NOTES. At any time and from time to time, upon not less than three Business Days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to Section 9.1, this Section 9.2, or Section 9.3 (except in the case of a lost, stolen, or mutilated certificate sought to be exchanged pursuant to Section 9.3, as soon as practicable), and, upon surrender of such Note at the office of the Paying Agent, the Company will cause the Paying Agent to deliver in exchange therefor, without expense to the holder, except as set forth below, Notes for the same aggregate -38- 43 principal amount as the then unpaid principal amount of the Note so surrendered, in the denomination of U.S. $100,000 or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered, or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, payable to such Person or Persons, or registered assigns, as may be designated by such holder and otherwise permitted hereunder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Company may require the payment of a sum sufficient to cover any stamp tax or governmental charges imposed upon such exchange or transfer. 9.3. LOSS, THEFT OR MUTILATION OF NOTES. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Notes, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the Note, the Company will cause the Paying Agent to deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If any Purchaser is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer, of such owner, setting forth the fact of loss, theft or destruction and of its ownership of the Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Company. 9.4. EXPENSES, STAMP TAX, INDEMNITY. (a) Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay directly all of its and the Purchasers' out-of-pocket expenses in connection with the preparation, execution and delivery, administration, interpretation and enforcement of this Agreement and each of the other Note Documents and the transactions contemplated or permitted hereby and thereby, including the reasonable fees, disbursements and other charges of Purchasers' special counsel, and all duplicating and printing costs and charges for shipping the Notes, adequately insured to each Purchaser at such Purchaser's home office or at such other place as such Purchaser may designate. The Company agrees to pay all of its out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated or permitted hereby, including the fees and expenses of its counsel and of Everen Securities, Inc. (if any). The Company also agrees to pay all expenses relating to the performance of any transactions contemplated or permitted hereby, any filing or recording fees or taxes, all expenses of the Purchasers in connection with any Default or Event of Default or any alleged Default or Event of Default hereunder or in connection with any action for the enforcement or collection of the Notes or this Agreement or any other Note Document and all expenses associated with any amendments, waivers or consents pursuant to the provisions hereof or thereof (whether or not the same are actually executed and delivered), including any amendments, waivers or consents resulting from any work-out, restructuring or similar proceedings relating to the performance by the Company of the Obligations. The Company also agrees to pay all expenses relating to any claim or action threatened, made or brought against any of the Purchasers arising out of or relating to any extent to this Agreement, the Notes, or the other Note Documents or the transactions contemplated hereby or thereby. The Company also agrees that it will pay any fees and related expenses incurred or to be incurred in connection with its cooperation with a Recognized Rating Agency and Duff & Phelps as provided in Section 5.9 and all initial and ongoing fees and all out-of-pocket expenses of the Paying Agent, if any, and will pay and save the Purchasers harmless against any and all liability with respect to stamp and other similar taxes, if any, which may be payable or which may be determined to be payable in connection with the execution, delivery or enforcement of this Agreement or the -39- 44 Notes or any other Note Documents, whether or not any Notes are then outstanding. Without limiting the foregoing, the Company agrees to pay the cost of obtaining a private placement number for the Notes and authorizes the submission of such information as may be required by Standard & Poor's for the purpose of obtaining such number. (b) In consideration of the execution and delivery of this Agreement by each Purchaser, the Company hereby indemnifies, exonerates and holds each Purchaser and each of its respective affiliates, shareholders, officers, directors, employees, attorneys and agents (collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any and all actions, causes of action, suits, losses, costs, claims, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to: (i) any and all brokerage fees and commissions payable or claimed to be payable by the Company to any Person in connection with the transactions contemplated by this Agreement or any of the other Note Documents; (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds from the sale of the Notes; (iii) the execution, delivery and performance of this Agreement and any other Note Document by any of the Indemnified Parties; or (iv) any Purchaser's Environmental Liability; except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of such Indemnified Party's gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. This indemnity shall survive repayment or transfer of the Notes, the release of any collateral, or a transfer of the Company's property by foreclosure or by a deed in lieu of foreclosure, regardless of whether caused by, or within the control of, the Company or any Subsidiary of the Company. The Company, its successors and assigns, hereby waive, release and agree not to make any claim or bring any cost recovery action against any Indemnified Party under CERCLA or any state equivalent, or any other similar law now existing or hereafter enacted. It is expressly understood and agreed that the Company's obligation to any Indemnified Party under this indemnity shall be without regard to fault on the part of the Company with respect to the violation or condition which results in liability of any Indemnified Party. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 9.5. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE; COUNTERCLAIMS. (a) No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to and are not exclusive of any rights or remedies any such holder would otherwise have, and no waiver or consent, given or extended pursuant to Section 7, shall extend to or affect any obligation or right not -40- 45 expressly waived or consented to. The indemnities set forth in Section 9.4 shall be in addition to any other obligations or liabilities of the Company or any of its Subsidiaries to the Purchasers hereunder or under any other Note Documents, at common law or otherwise. (b) The due payment and performance of the Obligations shall be without regard to any counterclaim, right of offset or any other claim whatsoever that the Company or any of its Subsidiaries may have against any Purchaser and without regard to any other obligation of any nature whatsoever that any Purchaser may have to the Company or any of its Subsidiaries, and no such counterclaim or offset shall be asserted by the Company or any of its Subsidiaries (unless such counterclaim or offset would, under applicable law, be permanently and irrevocably lost if not brought in such action) in any action, suit or proceeding instituted by any Purchaser for payment or performance of the Obligations. 9.6. NOTICES. All communications provided for hereunder shall be in writing and delivered or mailed by registered or certified mail, return receipt requested, or by overnight courier, or by facsimile communication transmitted on a Business Day (confirmed in writing by registered or certified mail, return receipt requested, or by overnight courier), and shall be deemed given if mailed, five Business Days after deposited in the mail, if sent by overnight courier, one Business Day after delivered to the courier or, if sent by facsimile transmission when appropriate record of transmission is obtained, in each case prepaid and addressed, if to the Company, to Health Care REIT, Inc., One Sea Gate, Suite 1500, Toledo, Ohio 43604, Attention: Chairman, Telecopier No. 419-247-2826 or to such other address as the Company or the Paying Agent, if any, may in writing designate to the Purchasers or to a subsequent holder of the Note initially issued to Purchaser, and, if to an original Purchaser, addressed to such Purchaser at the address set forth on Schedule 1.1(a) hereto, and if to any transferee of such Purchaser, to the address set forth on the Note Register, or to such other address as such original Purchaser or transferee of such Purchaser shall designate in writing to the Company and the Paying Agent, if any. 9.7. SUCCESSORS AND ASSIGNS. This Agreement and the Notes shall be binding upon the Company and its respective successors and permitted assigns and shall be binding upon and inure to each Purchaser's benefit and to the benefit of each Purchaser's successors and assigns, including each successive holder or holders of any Notes, except that the Company may not assign or otherwise transfer any of its rights or obligations under this Agreement and the Notes without the prior written consent of all the Purchasers. Each such successive holder or holders of any Notes, including each Purchaser, shall have all rights and privileges of a "Purchaser" hereunder. Each successive holder or holders of a Note shall, at the Company's request, restate in writing for the Company's benefit as to such holder, the representations set forth in Section 3.2. 9.8. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants, representations and warranties made by the Company or any of its Subsidiaries herein and in any other Note Documents and in any certificates delivered pursuant hereto or thereto, shall survive the execution and the delivery of this Agreement and the Notes. The obligations of the Company under Section 5.3 and Section 9.4 shall in each case survive any termination of this Agreement, the payment in full of all Obligations, or the invalidity or unenforceability of any term or provision of this Agreement or any other Note Document. 9.9. SEVERABILITY. If any provision of this Agreement or any of the other Note Documents for any reason is declared unenforceable by a court of competent jurisdiction (sustained on appeal, if any), such unenforceability shall not affect the enforceability of any other provision hereof or thereof, all of which shall remain in force and effect; PROVIDED that, if any provision of this Agreement or any of the other Note -41- 46 Documents shall be unenforceable by reason of a final judgment of a court of competent jurisdiction based upon a court's ruling (sustained on appeal, if any) that such provision is unenforceable because of the excessive degree or magnitude of the obligation imposed thereby on any Person, that unenforceable obligation shall be reduced in magnitude or degree by the minimum degree or magnitude necessary in order to permit the provision to be enforceable by the Purchasers. In the event the provisions of the immediately preceding sentence applies, the parties shall make appropriate adjustment to the provisions of this Agreement and the other Note Documents to give effect to the benefits intended to be conferred upon the parties hereby. 9.10. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 9.11. SUBMISSION TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE NOTES AND OTHER NOTE DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED) OR MESSENGER DIRECTED TO IT AT ITS ADDRESS SET FORTH IN SECTION 9.6 OR TO ITS AGENT REFERRED TO BELOW AT SUCH AGENT'S ADDRESS SET FORTH BELOW AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED IN ACCORDANCE WITH SECTION 9.6. THE COMPANY HEREBY IRREVOCABLY APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., WITH AN OFFICE ON THE DATE HEREOF AT 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF ANY PROCESS WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY HOLDER OF NOTES TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY JURISDICTION AGAINST THE COMPANY OR TO ENFORCE A JUDGMENT OBTAINED IN THE COURTS OF ANY OTHER JURISDICTION. 9.12. WAIVER OF JURY TRIAL. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY OTHER NOTE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PURCHASERS, OR THE COMPANY IN CONNECTION HEREWITH OR THEREWITH. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH NOTE -42- 47 DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER ENTERING INTO THIS AGREEMENT. 9.13. CAPTIONS. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 9.14. COUNTERPARTS; INTEGRATION. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original hereof but all together constituting only one agreement. This Agreement, the Notes and the other Note Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof and thereof. 9.15. INTEREST RATE LIMITATION. Nothing contained in the definition of Overdue Rate or in any Note Document shall require the Company or any of its Subsidiaries to pay interest at a rate exceeding the maximum rate permitted by applicable law. SECTION 10. MISCELLANEOUS 10.1. CONDITIONS TO EFFECTIVENESS. This Agreement will become effective on the date (the "EFFECTIVE DATE") on which each of the following conditions precedent shall be satisfied: (a) CORPORATE DOCUMENTS. Each Purchaser shall have received (i) a certified copy of the charter of the Company and of each of its Subsidiaries; (ii) certified copies of the by-laws of the Company and of each of its Subsidiaries and of all corporate action taken by the Company and of each of its Subsidiaries authorizing the execution, delivery and performance of this Agreement, the Notes and the other Note Documents; (iii) a certificate in respect of the name, signature and incumbency of each of the Company's and of each of its Subsidiary's officers who is authorized to sign on its behalf this Agreement, the Notes and the other Note Documents to be delivered by it hereunder; and (iv) counterparts of each of this Agreement, the Notes and the other Note Documents, signed by each of the parties thereto. (b) COMPANY'S CLOSING CERTIFICATE. Each Purchaser shall have received a certificate of the Company signed by an Executive Officer of the Company and of each of its Subsidiaries to the effect that (i) the representations and warranties contained in Section 3.1 and the other Note Documents are true and correct on and as of the Effective Date, and (ii) no Default or Event of Default exists on and as of the Effective Date. (c) LEGAL OPINIONS. Each Purchaser shall have received an opinion dated the Effective Date, in each case in form and substance satisfactory to each Purchaser, covering such matters relating to the transactions contemplated by this Agreement and the other Note Documents as each Purchaser may reasonably request, from (i) Shumaker, Loop & Kendrick, counsel to the Company and (ii) Dorsey & Whitney, special New York counsel to the Company. (d) RATINGS. The Notes shall have a Duff & Phelps rating of at least BBB-, and each Purchaser shall have received written evidence thereof. (e) NO DEFAULT OR EVENT OF DEFAULT; ACCURACY OF REPRESENTATIONS AND WARRANTIES. On the Effective Date, no Default or Event of Default shall exist. The representations and warranties -43- 48 contained in this Agreement (including Section 3.1) and in the other Note Documents shall be true and correct on and as of the Effective Date. (f) OTHER AGREEMENTS. Each Purchaser shall have received a copy of the Credit Agreement and the Amended 1993 Note Documents and each material document referred to therein, in each case as in effect on the Effective Date, together with a certificate of an Executive Officer of the Company certifying that each such copy is a true, complete and correct copy of each such document and agreement as then in effect. Such certificate shall state that each such document and agreement is in full force and effect and that no default or event of default exists thereunder or will result from the consummation of the transactions contemplated by this Agreement and the other Note Documents. (g) OPINION OF COUNSEL TO THE PURCHASERS. Each Purchaser shall have received from its special counsel an opinion dated the Effective Date in form and substance satisfactory to such Purchaser covering such matters relating to the transactions contemplated by this Agreement as such Purchaser may reasonably request. (h) SATISFACTORY PROCEEDINGS. All proceedings taken in connection with the transactions contemplated by this Agreement and the other Note Documents, and all documents necessary for the consummation thereof, shall be satisfactory in form and substance to each Purchaser and its special counsel, and such Purchaser shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of such transactions. (i) COSTS AND EXPENSES. The Company shall have paid or provided for the payment of all expenses that the Company is obligated to pay pursuant to Section 9.4 and all of the commitment fees the Company is obligated to pay pursuant to Section 1.2. In addition, each Purchaser shall have received reasonable assurance in writing that all other fees and expenses incurred by any other Person in connection with the transactions contemplated hereunder has been paid on or prior to the date hereof. (j) RELEASE OF COLLATERAL. Each Purchaser shall have received evidence satisfactory to it that all liens covering the collateral securing certain indebtedness of the Company existing pursuant to (i) the $150,000,000 Credit Agreement, dated as of September 8, 1994, among the Company, the banks signatory thereto and National City Bank, as Agent, as amended, and (ii) the Amended 1993 Note Documents have been released or terminated. (k) SUBSIDIARY GUARANTY. The Company, each of the Company's Subsidiaries and each Purchaser shall have executed and delivered the Subsidiary Guaranty, and the Subsidiary Guaranty shall be in full force and effect. 10.2. RELEASE OF COLLATERAL. Each Purchaser hereby agrees to release and to cause to be released (the "Release"), as of the Effective Date, all Liens granted to it or to the Collateral Agent (as such term is defined in the Original Note Purchase Agreement) for its benefit in and to the Collateral (as such term is defined in the Original Note Purchase Agreement). Each Purchaser agrees to use all reasonable efforts to take or cause to be taken all actions and to do all things reasonably necessary to effectuate the Release (in each case at the expense of the Company), including instructing the Collateral Agent to (a) execute and deliver to the Company or its agent all instruments reasonably requested by the Company in order to evidence the Release of record ("Release Documents"), including, without limitation, (i) releases of all Direct Mortgages, Assignments of Lease, Assignments of Loan Documents and related documents, (ii) termination statements for all UCC-1 financings statements that name the Company as debtor and the Collateral Agent as secured party, and (iii) assignments to the Company of all UCC-1 financing statements that name the Company's borrower or tenant as debtor and the Company as secured party and that were assigned to the -44- 49 Collateral Agent; and (b) endorse (where applicable) and deliver to the Company all original promissory notes, letters of credit and all other original documents held by the Collateral Agent in connection with any assigned loan or fee property. -45- 50 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. HEALTH CARE REIT, INC. By: ----------------------------------------------- Name: Title: PURCHASERS: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS TRUSTEE OF A COMMINGLED PENSION TRUST By: ---------------------------------------------- Name: Title: ALLSTATE LIFE INSURANCE COMPANY By: ---------------------------------------------- Name: Title: Authorized Signatory By: Name: ------------------------------------------- Title: Authorized Signatory -46- 51 SCHEDULE 3.1(q) TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- ENVIRONMENTAL REPORTS --------------------- None 52 SCHEDULE 5.12 TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- ONGOING INDEBTEDNESS -------------------- I. LINES OF CREDIT - ------------------
Total Available --------- Key/Fleet Revolving Line of Credit $175,000,000 Capital Bank, NA 10,000,000 ------------ $185,000.000 ============
II. EXISTING SECURED DEBT
Investment Amount of Liens/ Operator Facility Balance Indebtedness - -------- -------- ------- ---------------- Gordon Health Pittsburgh, PA $10,481,950 $ 6,527,045 Ventures Horizon Healthcare San Antonio, TX 1,415,224 1,415,224 ------------ $ 7,942,269 ============
III. EXISTING OTHER UNSECURED DEBT
1993 Series Senior Notes $ 52,000,000 1996 Series Senior Notes 30,000,000 ------------ $ 82,000,000 ============
IV. EXISTING CONTINGENT OBLIGATIONS
Amount of Operator Facility Guaranty - -------- -------- -------- Kingston Health Care Ashland, OH $ 1,625,000 Kingston Health Care Vermilion, OH 1,625,000 Kingston Health Care Naperville, IL 4,715,000 Kingston Health Care Santa Fe, NM 5,795,000 Village Management Rockford, IL 5,055,000 ------------ Total $ 18,815,000 ============
53 SCHEDULE 5.19 TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- CREDIT ENHANCEMENTS ------------------- EXISTING CONTINGENT OBLIGATIONS - --------------------------------
Amount of Operator Facility Guaranty - -------- -------- -------- Kingston Health Care Ashland, OH $ 1,625,000 Kingston Health Care Vermilion, OH 1,625,000 Kingston Health Care Naperville, IL 4,715,000 Kingston Health Care Santa Fe, NM 5,795,000 Village Management Rockford, IL 5,055,000 ------------ Total $ 18,815,000 ============
54 SCHEDULE 5.31 TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- PERMITTED CAPITAL EXPENDITURES ------------------------------ $2,500,000 in Capital Expenditures in connection with the following Facilities: Facility Name Location ------------- -------- Harborview Hospital Miami, FL Horizon Hospital Clearwater, FL 55 Exhibit A Form of HEALTH CARE REIT, INC. Amended and Restated 6.96% Series A Senior Note Due 2001 Private Placement No. 42217K B#2 No. __ March 28, 1997 U.S. $________________ HEALTH CARE REIT, INC., a Delaware corporation (the "Company"), for value received, hereby unconditionally promises to pay to the order of ____________. (the "Purchaser") or its registered assigns, on April 15, 2001 the principal amount of ______________________ DOLLARS (U.S. $________________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 6.96% per annum from (and including) April 23, 1996 to (but excluding) the date of repayment of such principal amount, payable on the 15th day of each April and October in each year (commencing October 15, 1996), and at maturity; provided, however, that if, at any time on or after March 28, 1997, any of the Notes shall not be rated at least BBB by Duff & Phelps (it being understood and agreed that (x) a rating of BBB- is lower than a rating of BBB and (y) the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a rating that is lower than BBB), the rate of interest shall instead be 7.06% per annum for the period during which the Notes shall not be rated at least BBB by Duff & Phelps. The Company agrees to pay interest on overdue principal (whether by acceleration or otherwise, and including any overdue prepayment of principal) and premium, if any, and on any overdue installment of interest, at the Overdue Rate until paid. Unless otherwise set forth herein, capitalized terms used herein but not defined herein have the respective meanings assigned to them in the Note Purchase Agreement (as such term is hereafter defined). 1. Except as may be otherwise provided pursuant to Section 5.4 or 5.10 of the Note Purchase Agreement, both the principal hereof, premium, if any, and interest hereon are payable at the principal office of the Company, in immediately available funds, in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. Such payments shall be applied first to accrued interest, then to premium, if any, and then to principal. If any amount of principal, premium, -i- 56 if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, such amount shall be payable on the immediately preceding Business Day. Payment of any amount on or in respect of this Note shall be made not later than 12:00 Noon New York Time on the date on which such payment shall become due (each such payment made after such time on such date to be deemed to have been made on the next succeeding Business Day). 2. This Note is one of the Series A Senior Notes due 2001 issued pursuant to the terms and provisions of that certain Amended and Restated Note Purchase Agreement, dated as of March 28, 1997 (the "Note Purchase Agreement"), entered into by the Company and each of the Purchasers party thereto, and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes (as defined in the Note Purchase Agreement) outstanding under the Note Purchase Agreement to all benefits provided for in the Note Documents or referred to therein, and may be accelerated, or redeemed at the option of the holder hereof, prior to maturity, all as provided in the Note Purchase Agreement, to which Note Purchase Agreement reference is hereby made for the statement thereof. A copy of the Note Purchase Agreement may be obtained from the Company. 3. The Notes are not subject to prepayment, purchase or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the Make-Whole Premium, if any, all as set forth in Section 2 of the Note Purchase Agreement. 4. This Note is registered on the books of the Company and is transferable only by surrender hereof at the offices of the Company (or of such Paying Agent as may be appointed by the Company pursuant to Section 5.4 of the Note Purchase Agreement from time to time), duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. 5. Pursuant to the Subsidiary Guaranty, payment of all amounts owed under this Note is absolutely and unconditionally guaranteed by each Subsidiary of the Company. The Company and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable upon this Note jointly and severally waive presentment, demand, protest, notice of protest and nonpayment or other notice of default, notice of acceleration and intention to accelerate or other notice of any kind, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes hereto or any other Note Document, regardless of the number of such renewals, extensions, indulgences, releases or changes. 6. No waiver by Purchaser of any of its rights or remedies hereunder or under any other Note Document or otherwise, shall be considered a waiver of any other subsequent right or remedy of Purchaser; no delay or omission in the exercise or enforcement by Purchaser of any rights or remedies shall ever be construed as a waiver of any right or remedy of Purchaser; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Purchaser. -2- 57 7. This Note and the Note Purchase Agreement shall be governed by and shall be construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State. HEALTH CARE REIT, INC. By: ------------------------------- Name: Title: -3- 58 Exhibit B Form of HEALTH CARE REIT, INC. Amended and Restated 7.29% Series B Senior Note Due 2003 Private Placement No. 42217K C*5 No. __ March 28, 1997 U.S. $________________ HEALTH CARE REIT, INC., a Delaware corporation (the "Company"), for value received, hereby unconditionally promises to pay to the order of ____________. (the "Purchaser") or its registered assigns, on April 15, 2003 the principal amount of ______________________ DOLLARS (U.S. $________________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.29% per annum from (and including) April 23, 1996 to (but excluding) the date of repayment of such principal amount, payable on the 15th day of each April and October in each year (commencing October 15, 1996), and at maturity; provided, however, that if, at any time on or after March 28, 1997, any of the Notes shall not be rated at least BBB by Duff & Phelps (it being understood and agreed that (x) a rating of BBB- is lower than a rating of BBB and (y) the withdrawal, discontinuance or absence of a rating of any of the Notes by Duff & Phelps shall be deemed, for these purposes, to be the equivalent of a rating that is lower than BBB), the rate of interest shall instead be 7.39% per annum for the period during which the Notes shall not be rated at least BBB by Duff & Phelps. The Company agrees to pay interest on overdue principal (whether by acceleration or otherwise, and including any overdue prepayment of principal) and premium, if any, and on any overdue installment of interest, at the Overdue Rate until paid. Unless otherwise set forth herein, capitalized terms used herein but not defined herein have the respective meanings assigned to them in the Note Purchase Agreement (as such term is hereafter defined). 1. Except as may be otherwise provided pursuant to Section 5.4 or 5.10 of the Note Purchase Agreement, both the principal hereof, premium, if any, and interest hereon are payable at the principal office of the Company, in immediately available funds, in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. Such payments shall be applied first to accrued interest, then to premium, if any, and then to principal. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, -1- 59 such amount shall be payable on the immediately preceding Business Day. Payment of any amount on or in respect of this Note shall be made not later than 12:00 Noon New York Time on the date on which such payment shall become due (each such payment made after such time on such date to be deemed to have been made on the next succeeding Business Day). 2. This Note is one of the Series B Senior Notes due 2003 issued pursuant to the terms and provisions of that certain Amended and Restated Note Purchase Agreement, dated as of March 28, 1997 (the "Note Purchase Agreement"), entered into by the Company and each of the Purchasers party thereto, and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes (as defined in the Note Purchase Agreement) outstanding under the Note Purchase Agreement to all benefits provided for in the Note Documents or referred to therein, and may be accelerated, or redeemed at the option of the holder hereof, prior to maturity, all as provided in the Note Purchase Agreement, to which Note Purchase Agreement reference is hereby made for the statement thereof. A copy of the Note Purchase Agreement may be obtained from the Company. 3. The Notes are not subject to prepayment, purchase or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the Make-Whole Premium, if any, all as set forth in Section 2 of the Note Purchase Agreement. 4. This Note is registered on the books of the Company and is transferable only by surrender hereof at the offices of the Company (or of such Paying Agent as may be appointed by the Company pursuant to Section 5.4 of the Note Purchase Agreement from time to time), duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. 5. Pursuant to the Subsidiary Guaranty, payment of all amounts owed under this Note is absolutely and unconditionally guaranteed by each Subsidiary of the Company. The Company and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable upon this Note jointly and severally waive presentment, demand, protest, notice of protest and nonpayment or other notice of default, notice of acceleration and intention to accelerate or other notice of any kind, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Note, and hereby consent to any and all renewals, extensions, indulgences, releases or changes hereto or any other Note Document, regardless of the number of such renewals, extensions, indulgences, releases or changes. 6. No waiver by Purchaser of any of its rights or remedies hereunder or under any other Note Document or otherwise, shall be considered a waiver of any other subsequent right or remedy of Purchaser; no delay or omission in the exercise or enforcement by Purchaser of any rights or remedies shall ever be construed as a waiver of any right or remedy of Purchaser; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Purchaser. 7. This Note and the Note Purchase Agreement shall be governed by and shall be construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State. -2- 60 HEALTH CARE REIT, INC. By: -------------------------------- Name: Title: -3- 61 EXHIBIT C TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT AMONG HEALTH CARE REIT, INC. AND EACH OF THE PURCHASERS PARTY HERETO --------------------------------------- FORM OF FACILITIES AND OPERATORS REPORT --------------------------------------- ON FILE WITH EACH OF THE BANKS AND THE BORROWERS -----END PRIVACY-ENHANCED MESSAGE-----