Master Construction Line of Credit

THIS MASTER CONSTRUCTION LINE OF CREDIT AGREEMENT, dated as of August 31, 1999, among the following:


(I) THIRD PARTY INVESTORS I, LLC, a Delaware limited liability
company (herein, together with its successors and assigns, the
"BORROWER");


(II) the lending institutions listed in Annex I hereto (each,
together with their respective successors and assigns, individually a
"LENDER" and collectively, the "LENDERS");


(III) FLEET NATIONAL BANK, a national banking association, and
THE HUNTINGTON NATIONAL BANK, a national banking association, as
Co-Agents hereunder (each a "CO-AGENT"); and


(IV) KEY CORPORATE CAPITAL INC., a Michigan corporation, as
administrative agent (the "ADMINISTRATIVE AGENT"):


PRELIMINARY STATEMENTS:


(1) Unless otherwise defined herein, all capitalized terms used herein and defined in section 1 are used herein as so defined.


(2) The Borrower has applied to the Lenders for credit facilities to be made available to the Borrower to finance the construction by the Borrower of up to 19 separate Projects which are described in the Confidential Information Memorandum.


(3) The Borrower contemplates that each of its Projects will be developed under the supervision and direction of, and managed by, or leased to, Alterra Healthcare Corporation, a Delaware corporation (herein, together with its successors and assigns, the "GUARANTOR"), or one or more of its Subsidiaries or Affiliates.


(4) For the avoidance of doubt, it is noted that effective May 19, 1999, the Guarantor adopted its present name, having formerly been known as Alternative Living Services, Inc.


(5) The Total Commitment provided in this Agreement at the date hereof is $65,000,000. As provided in section 2.1(f) hereof, the Total Commitment may be increased by the addition of a single additional Lender providing the Incremental Commitment of up to $10,000,000.


(6) The Lenders are willing to make Loans to the Borrower, all subject to and upon the terms and conditions set forth herein and in the other Credit Documents.


NOW, THEREFORE, it is agreed:


SECTION 1. DEFINITIONS AND TERMS.


1.1. CERTAIN DEFINED TERMS. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires:


"ACQUISITION" shall mean and include (i) any acquisition on a going concern basis (whether by purchase, lease or otherwise) of any facility and/or business operated by any person, and (ii) acquisitions of a majority of


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the outstanding equity or other similar interests in any such person (whether by merger, stock purchase or otherwise).


"ADJUSTED LIBOR RATE" shall mean with respect to each Interest Period for a LIBOR Loan, (i) the rate per annum which appears on page 3750 of the Telerate Screen (or on any successor or substitute page, or on any electronic publication of a recognized service organization providing comparable rate quotations, in any case as determined from time to time by the Administrative Agent) for Dollar deposits of $1,000,000 in same day funds for a maturity corresponding to such Interest Period as of 11:00 A.M. (London time) on the date which is two Business Days prior to the commencement of such Interest Period, divided (and rounded upward to the nearest 1/100ths of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves and without benefit of credits for proration, exceptions or offsets which may be available from time to time) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). In the event that such rate is not available at such time for any reason, the rate referred to in clause (i) above shall be the interest rate per annum equal to the average (rounded upward to the nearest 1/100ths of 1% per annum), of the rate per annum at which Dollar deposits of $1,000,000 for a maturity corresponding to the Interest Period are offered to each of the Reference Banks by prime banks in the London interbank Eurodollar market, determined as of 11:00 A.M. (London time) on the date which is two Business Days prior to the commencement of such Interest Period.


"ADMINISTRATIVE AGENT" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to section 11.9.


"AFFILIATE" shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by, or under direct or indirect common control with such person. A person shall be deemed to control a second person if such first person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors or managers of such second person or (ii) to direct or cause the direction of the management and policies of such second person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, (x) a director, officer or employee of a person shall not, solely by reason of such status, be considered an Affiliate of such person; and (y) neither the Administrative Agent nor any Lender shall in any event be considered an Affiliate of the Borrower or any other Credit Party or any of their respective Subsidiaries.


"AGREEMENT" shall mean this Master Construction Line of Credit Agreement, as the same may be from time to time further modified, amended and/or supplemented.


"ALTERRA GUARANTY" shall have the meaning provided in section 6.1(b).


"APPLICABLE LENDING OFFICE" shall mean, with respect to each Lender, (i) such Lender's Domestic Lending Office in the case of Borrowings consisting of Prime Rate Loans and (ii) such Lender's LIBOR Lending Office in the case of Borrowings consisting of LIBOR Loans.


"APPRAISAL REPORT" shall have the meaning provided in section 2.2(b).


"APPRAISED STABILIZED VALUE" shall mean, when used with reference to a Project, the estimated fair market value thereof on a going concern basis upon completion and achievement of at least 95% occupancy (or such lesser percentage as may be acceptable to the Required Lenders, in the exercise of their reasonable discretion). The Appraised Stabilized Value of a Project shall be determined without any reduction on account of any (i) special, extraordinary or other non-recurring charges or expenses associated with a new opening or lease- up, or (ii) operating deficits prior to full occupancy.


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"ARCHITECT CONTRACT" shall have the meaning provided in section 2.2(b).


"ASSIGNMENT AGREEMENT" shall mean an Assignment Agreement substantially in the form of Exhibit F hereto.


"ASSIGNMENT OF LEASES" shall have the meaning provided in section 6.2(e).


"AUTHORIZED OFFICER" shall mean with respect to any Credit Party any officer, manager or employee of such Credit Party designated by such Credit Party as such in writing to the Administrative Agent.


"BANKRUPTCY CODE" shall have the meaning provided in section 10.1(h).


"BORROWER" shall have the meaning provided in the introductory paragraph of this Agreement.


"BORROWING" shall mean the incurrence of Loans for a particular Project by the Borrower from all of the Lenders on a PRO RATA basis on a given date (or resulting from conversions on a given date), all of which Loans shall be the same Type of Loan, and in the case of LIBOR Loans, all of which Loans shall have the same Interest Period.


"BUSINESS DAY" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the city in which the Payment Office is located a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, LIBOR Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in London, England, in U.S. dollar deposits in the interbank Eurodollar market.


"CAPITAL LEASE" as applied to any person shall mean any lease of any property (whether real, personal or mixed) by that person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that person.


"CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations under Capital Leases of the Borrower or the Manager on the Borrower's behalf in each case taken at the amount thereof accounted for as liabilities identified as "capital lease obligations" (or any similar words) on a consolidated balance sheet of the Borrower prepared in accordance with GAAP.


"CASH EQUIVALENTS" shall mean any of the following: (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition; (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (x) any Lender or (y) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank, an "APPROVED BANK"), in each case with maturities of not more than one year from the date of acquisition; and (iii) investments in money market funds access to which is provided as part of "sweep" accounts maintained with a Lender or an Approved Bank.


"CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. ss. 9601 ET SEQ.


"CERTIFICATE OF OCCUPANCY" shall mean when used with reference to a Project a final certificate of occupancy issued by a state or local governmental authority allowing for the occupancy of all of the units of such Project.


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"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the Effective Date and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.


"COLLATERAL" shall mean any collateral covered by any Security Document.


"COLLATERAL AGENT" shall mean the Administrative Agent acting as Collateral Agent for the Lenders pursuant to the Security Documents.


"COLLATERAL ASSIGNMENT OF CAPITALIZATION DOCUMENTS" shall have the meaning provided in section 6.1(b).


"COLLATERAL ASSIGNMENT OF CONTRACTS AND PLANS" shall have the meaning provided in section 6.2(d).


"COLLATERAL ASSIGNMENT OF LICENSES AND PERMITS" shall have the meaning provided in section 6.2(d).


"COMMITMENT" shall mean, with respect to each Lender, the amount set forth opposite such Lender's name in Annex I as its "Commitment" as the same may be reduced from time to time pursuant to section 4.1, 4.2 and/or 10.2 or adjusted from time to time as a result of assignments to or from such Lender pursuant to section 12.4.


"COMMITMENT PERIOD TERMINATION DATE" shall mean the date which is the 12th monthly anniversary of the date hereof, unless such date is extended in accordance with section 4.3, or in any case such earlier date when the Total Commitment is terminated in accordance with the terms of this Agreement.


"COMPANY CAPITALIZATION DOCUMENTS" shall have the meaning provided in section 6.1(c).


"COMPANY EQUITY DOCUMENTS" shall have the meaning provided in section 6.1(c).


"COMPANY ORGANIZATIONAL DOCUMENTS" shall have the meaning provided in section 6.1(c).


"CONFIDENTIAL INFORMATION MEMORANDUM" shall have the meaning provided in the Alterra Guaranty as originally certified and delivered.


"CONSOLIDATED NET WORTH" shall mean at any time for the determination thereof all amounts which, in conformity with GAAP, would be included under the caption "total members' equity" (or any like caption) on a balance sheet of the Borrower as at such date, PROVIDED that in no event shall Consolidated Net Worth include any amounts in respect of Redeemable Stock.


"CONSTRUCTION PERIOD" shall mean, for any Project, the period from (i) the date of the Notes issued by the Borrower to the Lenders for such Project to (ii) the earlier of (x) the maturity date for the Loans for such Project, as extended, if applicable, pursuant to section 2.7(a), or (y) the commencement date of the Mini-Perm Period for such Project.


"CREDIT DOCUMENTS" shall mean this Agreement, the Notes, each Environmental Indemnity Agreement, each Management Subordination Agreement, the Security Documents, the Alterra Guaranty and any Designated Hedge Agreement. When used with reference to a Credit Party, the term Credit Documents refers only to those Credit Documents to which such Credit Party is a party.


"CREDIT PARTY" shall mean the Borrower, the Guarantor and each of their Subsidiaries and Affiliates which is a party to any Credit Document.


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"DEFAULT" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.


"DEFAULTING LENDER" shall mean any Lender with respect to which a Lender Default is in effect.


"DESIGNATED HEDGE AGREEMENT" shall mean any Hedge Agreement to which the Borrower is a party which is made with reference to some or all of the Obligations and, pursuant to a written instrument signed by the Administrative Agent, has been designated as a Designated Hedge Agreement so that the Borrower's counterparty's credit exposure thereunder will be entitled to share in the benefits of the Collateral, the Security Documents and the Alterra Guaranty to the extent the Credit Documents provide guarantees or security for creditors of the Borrower under Designated Hedge Agreements. The Administrative Agent may, without the approval or consent of the Lenders, designate a Hedge Agreement as a Designated Hedge Agreement if (i) the Hedge Agreement is made with reference to all or any portion of the Obligations, and (ii) the counterparty is a Lender or an Affiliate of a Lender; PROVIDED, HOWEVER, that if (x) the counterparty is not a Lender or an Affiliate of a Lender, or (y) the Administrative Agent reasonably determines that after giving effect to such designation the aggregate credit exposure of all counterparties under all Designated Hedge Agreements, determined in accordance with standard industry practice, would exceed $10,350,000, the Administrative Agent shall not designate the Hedge Agreement involving such counterparty as a Designated Hedge Agreement unless such designation is approved by the Required Lenders, and PROVIDED, FURTHER, that in no event shall the Administrative Agent designate any Hedge Agreement which is unrelated to the Obligations as a Designated Hedge Agreement unless all of the Lenders consent to such designation. The Administrative Agent may impose as a condition to any designation of a Hedge Agreement as a Designated Hedge Agreement a requirement that the counterparty (x) enter into an intercreditor or similar agreement with the Administrative Agent to the effect that, or (y) otherwise expressly agree with the Administrative Agent that, recoveries from the Borrower or other Credit Parties with respect to such Designated Hedge Agreement will be shared in accordance with, or otherwise in a manner consistent with, the provisions of section 10.3 hereof.


"DEVELOPER" shall mean, with respect to a Project, the Guarantor (or one of its Wholly-Owned Subsidiaries) which is acting as the developer under the Development Contract for such Project.


"DEVELOPER FEES" shall have the meaning provided in section 2.2(b).


"DEVELOPMENT CONTRACT" shall have the meaning provided in section 6.2(c).


"DOLLARS", "U.S. DOLLARS" and the sign "$" each means lawful money of the United States.


"DOMESTIC LENDING OFFICE" shall mean, with respect to any Lender, the office of such Lender specified as its Domestic Lending Office in Annex I or in the Assignment Agreement pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.


"DRAW REQUEST" shall have the meaning provided in section 2.3(c).


"DSCR" shall mean, with respect to a Project and for any period, the ratio of (i) the net income before taxes of such Project for such period, all as determined in accordance with GAAP, PLUS, to the extent deducted in determining such net income, the sum of (1) interest, (2) depreciation, (3) amortization, and (4) management fees, LESS, (A) an assumed management fee equal to 5% of revenues, and (B) to the extent not deducted as an expense in determining such net income, a $250 per unit annual repair and replacement reserve, TO (ii) assumed level debt service obligations (consisting of both principal and interest) for such Project for such period, based on the weighted average aggregate principal amount of the Loans for such Project, a 25 year level monthly payment


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amortization schedule and an assumed interest rate equal to 250 basis points over the then current yield to maturity on U.S. treasury securities with a maturity closest to 10 years, as quoted by the Administrative Agent.


"EFFECTIVE DATE" shall have the meaning provided in section 12.11.


"ELIGIBLE TRANSFEREE" shall mean and include a commercial bank, financial institution or other "accredited investor" (as defined in SEC Regulation D), in each case which:


(i) is not disapproved in writing by the Borrower in a notice
given to a requesting Lender and the Administrative Agent, specifying
the reasons for such disapproval, within five Business Days following
the giving of notice to the Borrower of the identity of any proposed
transferee (any such disapproval by the Borrower must be reasonable),
PROVIDED that the Borrower shall not be entitled to exercise the
foregoing right of disapproval if and so long as any Event of Default
shall have occurred and be continuing;


(ii) is not a direct competitor of the Borrower or the
Guarantor or engaged in the same or similar business as the Borrower or
the Guarantor; and


(iii) has total assets of at least $10 billion and combined
capital and surplus of at least $1 billion, as reflected on its most
recent financial statements.


"ENVIRONMENTAL CLAIMS" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued under any such law (hereafter "CLAIMS"), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the storage, treatment or Release (as defined in CERCLA) of any Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.


"ENVIRONMENTAL INDEMNITY AGREEMENT" shall have the meaning provided in section 6.2.


"ENVIRONMENTAL LAW" shall mean any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy and rule of common law now or hereafter in effect and in each case as amended, and any binding and enforceable judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment issued to or rendered against the Borrower relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. ss. 2601 ET SEQ.; the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. ss. 3803 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 ET SEQ.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. ss. 11001 ET SEQ., the Hazardous Material Transportation Act, 49 U.S.C. ss. 1801 ET SEQ. and the Occupational Safety and Health Act, 29 U.S.C. ss. 651 ET SEQ. (to the extent it regulates occupational exposure to Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each case as amended from time to time.


"ENVIRONMENTAL REPORT" shall have the meaning provided in section 2.2(b).


"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the Effective Date and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.


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"ERISA AFFILIATE" shall mean each person (as defined in section 3(9) of ERISA) which together with the Borrower would be deemed to be a "single employer" (i) within the meaning of section 414(b),(c), (m) or (o) of the Code or (ii) as a result of the Borrower being or having been a general partner of such person.


"EVENT OF DEFAULT" shall have the meaning provided in section 10.1.


"EVENT OF LOSS" shall mean, with respect to any Project, (i) the actual or constructive total loss of such Project or the use thereof, resulting from destruction, damage beyond repair, or the rendition of such Project permanently unfit for normal use from any casualty or similar occurrence whatsoever, (ii) the destruction or damage of a portion of such Project from any casualty or similar occurrence whatsoever under circumstances in which such damage cannot reasonably be expected to be repaired, or such Project cannot reasonably be expected to be restored to its condition immediately prior to such destruction or damage, within 180 days after the occurrence of such destruction or damage, (iii) the condemnation, confiscation or seizure of, or requisition of title to or use of, any substantial portion of such Project, or the Real Property upon which such Project is located, or (iv) in the case of any Project of the Borrower which is located on Real Property which is leased by the Borrower, the termination or expiration of the Borrower's leasehold rights to such Real Property.


"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent.


"FEES" shall mean all amounts payable pursuant to, or referred to in, section 3.


"GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of section 9, including defined terms as used therein, are subject to sections 1.3 and 12.7(a).


"GOVERNMENTAL AUTHORITY" shall mean the United States of America, or any state or political subdivision thereof, and any agency, authority, body, division, department or instrumentality of any thereof.


"GUARANTY OBLIGATIONS" shall mean as to any person (without duplication) any obligation of such person guaranteeing any Indebtedness ("PRIMARY INDEBTEDNESS") of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, any obligation of such person, whether or not contingent, (a) to purchase any such primary Indebtedness or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary Indebtedness or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary Indebtedness of the ability of the primary obligor to make payment of such primary Indebtedness, or (d) otherwise to assure or hold harmless the owner of such primary Indebtedness against loss in respect thereof, PROVIDED, HOWEVER, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary Indebtedness in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith.


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"HEDGE AGREEMENT" shall mean (i) any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement, any interest rate "lock" agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates, and (ii) any currency swap agreement, forward currency purchase agreement or similar agreement or arrangement designed to protect against fluctuations in currency exchange rates.


"HAZARDOUS MATERIALS" shall mean (i) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (ii) any chemicals, materials or substances defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "restricted hazardous materials", "extremely hazardous wastes", "restrictive hazardous wastes", "toxic substances", "toxic pollutants", "contaminants" or "pollutants", or words of similar meaning and regulatory effect, under any applicable Environmental Law.


"HIGHEST LAWFUL RATE" shall mean as to any Lender and with reference to the Loans made by such Lender to finance a particular Project of the Borrower, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received by such Lender with respect to such Lo ...