`NYSCEF DOC. NO. 2
`
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`
`
`SUPREME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK: COMMERCIAL DIVISION
`WHITE OAK HEALTHCARE FINANCE, LLC,
`
`
`
` v.
`
`ARIEL FEIN, SAMUEL GOLDNER, and
`IRVING LANGER,
`
`Plaintiff,
`
`Index No.: _________
`
`
`
`
`
`
`
`Defendants.
`
`Plaintiff White Oak Healthcare Finance, LLC (“Plaintiff” or “White Oak”), by and
`
`through its attorneys, as and for its complaint against Defendants Ariel Fein, Samuel Goldner, and
`
`Irving Langer (“Defendants or “Guarantors”), alleges as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`This is an action by White Oak, as administrative agent and lender, to recover
`
`indebtedness from Defendants as guarantors to borrowers for loans with a present balance in
`
`excess of $155,018,413.55.
`
`2.
`
`The borrower Companies (defined below) are the operators of seventeen nursing
`
`homes. The Defendants hold material equity interests in the Companies. The Companies are
`
`indebted to White Oak pursuant to a Term Loan (defined below) in the initial principal amount
`
`$138,000,000 and a Revolving Loan (defined below) with an initial commitment of $20,000,000
`
`(collectively, the “Loans”).
`
`3.
`
`In connection with the Loan Documents (defined below), Defendants individually
`
`and unconditionally guaranteed a substantial portion, and if certain events occur the full amount,
`
`of the Companies’ debts to White Oak pursuant to a Term Loan Guaranty (defined below) and a
`
`1
`
`1 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`Revolving Loan Guaranty (defined below) (collectively, the “Guaranties”). The Loans are cross-
`
`guaranteed, cross-defaulted, and cross-collateralized.
`
`4.
`
`Since receiving the Loans, the Companies have incurred numerous and material
`
`events of default under their Loan Documents with White Oak, and certain amounts thereunder
`
`have been declared due and payable and remain unpaid. As a result, Defendants are liable to White
`
`Oak pursuant to the Guaranties for the amounts described below. Despite being provided notice
`
`and demand for payment under the Guaranties, to date, Defendants have failed to comply with
`
`their obligations pursuant to the Guaranties.
`
`THE PARTIES
`
`5.
`
`Plaintiff White Oak Healthcare Finance, LLC is a limited liability company formed
`
`under the laws of Delaware. White Oak’s principal place of business is New York.
`
`6.
`
`7.
`
`8.
`
`9.
`
`Defendant Ariel Fein is a resident of the State of New York.
`
`Defendant Samuel Goldner is a resident of the State of New York.
`
`Defendant Irving Langer is a resident of the State of New York.
`
`Each Defendant has contractually consented to venue and jurisdiction in this court
`
`pursuant to the Guaranties.
`
`BACKGROUND
`
`10.
`
`In December 2018, White Oak agreed to provide financing in connection with the
`
`acquisition of 17 nursing home facilities in the State of Ohio. Each facility is held pursuant to a
`
`two-company structure: a property owning entity that owns and leases the facility’s underlying
`
`land, buildings and improvements (each a “Property Company” and collectively, the “Property
`
`Companies”), and an operating entity that is the lessee under the Property Company and manages
`
`the nursing home facility (each, an “Operating Company”, and collectively, the “Operating
`
`
`
`2
`
`2 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`Companies”). The Property Companies and Operating Companies are collectively referred to as
`
`the “Companies.”
`
`11.
`
`The Property Companies are owned by Boulder Property Holdings, LP (“Boulder
`
`Property”), in which Defendants Fein, Goldner and Langer hold, either directly or indirectly, all
`
`or virtually all of the equity interests. The Operating Companies are owned by Boulder Operations
`
`Holdings, LLC (“Boulder Operations”), a company owned by Boulder FG Holdings LLC
`
`(“Boulder FG”), which is solely owned by Defendant Fein.
`
`12. White Oak funded the Companies’ acquisition and operation of these nursing
`
`homes by providing a Term Loan and Revolving Loan under loan agreements (the “Loan
`
`Agreements”), executed through the transactions described below.
`
`TERM LOAN TRANSACTION
`
`13. White Oak entered into a Term Loan Agreement dated December 21, 2018 (the
`
`“Term Loan Agreement”) with, among other parties, Boulder Property and each of its 17
`
`Property Companies as borrowers (collectively, the “Term Loan Borrowers”). A true and correct
`
`copy of the Term Loan Agreement is attached hereto as Exhibit 1.
`
`14.
`
`Pursuant to the Term Loan Agreement, White Oak agreed to provide a loan to the
`
`Term Loan Borrowers in the initial principal amount of $138,000,000.00 (the “Term Loan”).
`
`15.
`
`In connection with the Term Loan Agreement, the Term Loan Borrowers executed
`
`and delivered a Promissory Note dated December 21, 2018 (the “Term Loan Promissory Note”),
`
`pursuant to which White Oak provided the Term Loan. A true and correct copy of the Term Loan
`
`Promissory Note is attached hereto as Exhibit 2.
`
`16.
`
`The Term Loan Borrowers executed additional, related documents in connection
`
`with the Term Loan (the “Term Loan Documents”), including (a) a Pledge Agreement dated
`
`December 21, 2018 (the “Term Loan Pledge Agreement”), and (b) a Security Agreement dated
`
`
`
`3
`
`3 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`December 21, 2018 (the “Term Loan Security Agreement”), each of which secures the Term
`
`Loan. A true and correct copy of the Term Loan Pledge Agreement is attached hereto as Exhibit
`
`3, and a true and correct copy of the Term Loan Security Agreement is attached hereto as Exhibit
`
`4.
`
`17.
`
`The Term Loan is additionally secured by mortgages executed by the Property
`
`Companies, dated December 21, 2018 (the “Term Loan Mortgages”), granting White Oak,
`
`among other things, security interests in all Property as defined therein.
`
`18.
`
`The Revolving Loan Borrowers (defined below) guaranteed the Term Loan
`
`Borrowers’ obligations due to White Oak under the Term Loan. The Term Loan is also secured
`
`by the collateral that secures the Revolving Loan (defined below).
`
`REVOLVING LOAN TRANSACTION
`
`19.
`
`In addition to the Term Loan Agreement, White Oak entered into a Loan
`
`Agreement dated December 21, 2018 (the “Revolving Loan Agreement”) with, among other
`
`parties, Boulder Operations and each of its 17 Operating Companies as borrowers (collectively,
`
`the “Revolving Loan Borrowers”). A true and correct copy of the Revolving Loan Agreement
`
`is attached hereto as Exhibit 5.
`
`20.
`
`Pursuant to the Revolving Loan Agreement, White Oak agreed to provide a
`
`revolving loan to the Revolving Loan Borrowers with a lending commitment, subject to the terms
`
`and conditions set forth therein, of up to the principal amount of $20,000,000.00 (the “Revolving
`
`Loan”).
`
`21.
`
`In connection with the Revolving Loan Agreement, the Revolving Loan Borrowers
`
`executed and delivered a Promissory Note dated December 21, 2018 (the “Revolving Loan
`
`Promissory Note”), pursuant to which White Oak provided the Term Loan. A true and correct
`
`copy of the Revolving Loan Promissory Note is attached hereto as Exhibit 6.
`
`
`
`4
`
`4 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`22.
`
`The Revolving Loan Borrowers executed additional, related documents in
`
`connection with the Revolving Loan (the “Revolving Loan Documents”), including (a) a Pledge
`
`Agreement dated December 21, 2018 (the “Revolving Loan Pledge Agreement”), and (b) a
`
`Security Agreement dated December 21, 2018 (the “Revolving Loan Security Agreement”), each
`
`of which secures the Revolving Loan. A true and correct copy of the Revolving Loan Pledge
`
`Agreement is attached hereto as Exhibit 7, and a true and correct copy of the Revolving Loan
`
`Security Agreement is attached hereto as Exhibit 8. The Revolving Loan Documents and the
`
`Term Loan Documents are collectively referred to herein as the “Loan Documents.”
`
`23.
`
`The Revolving Loan is additionally secured by mortgages executed by the Property
`
`Companies, dated December 21, 2018 (the “Revolving Loan Mortgages”), granting White Oak,
`
`among other things, security interests in all Property as defined therein.
`
`24.
`
`The Term Loan Borrowers guaranteed the Revolving Loan Borrowers’ obligations
`
`due to White Oak under the Revolving Loan Agreement. The Revolving Loan is also secured by
`
`the collateral that secures the Term Loan.
`
`DEFENDANTS’ GUARANTY OF THE LOAN DOCUMENTS
`
`25.
`
`In connection with the Term Loan Agreement, Defendants entered into a Recourse
`
`Carve-out and Limited Repayment Guaranty dated December 21, 2018 (the “Term Loan
`
`Guaranty”). A true and correct copy of the Term Loan Guaranty is attached hereto as Exhibit 9.
`
`26.
`
`Defendants, in addition to their guaranties of the Term Loan, entered into a
`
`Recourse Carve-out and Limited Repayment Guaranty dated December 21, 2018 in connection
`
`with the Revolving Loan (the “Revolving Loan Guaranty”). A true and correct copy of the
`
`
`
`5
`
`5 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`Revolving Loan Guaranty is attached hereto as Exhibit 10. The Term Loan Guaranty and
`
`Revolving Loan Guaranty are collectively referred to as the “Guaranties.”1
`
`27.
`
`The Guaranties contain identical provisions that impose three types of guarantor
`
`liability on Defendants.
`
`28.
`
`First, under § 2 of the Guaranties, each Defendant “unconditionally and absolutely
`
`guarantees … the full and prompt performance when due, whether at maturity or earlier, by reason
`
`of acceleration or otherwise, and at all times thereafter, of the Loan and all other indebtedness”
`
`arising under the Loans. See Term Loan Guaranty, Exhibit 9, § 2; Revolving Loan Guaranty,
`
`Exhibit 10, § 2. Pursuant to this provision, Defendants are obligated to repay the full outstanding
`
`balance of the Loans, subject to the limitations of § 23 of the Guaranties. Section 23 of the
`
`Guaranties provides that Defendants’ combined maximum liability arising under § 2 in connection
`
`with both the Term Loan and the Revolving Loan is $20,000,000. See Term Loan Guaranty,
`
`Exhibit 9, § 2(b) Revolving Loan Guaranty, Exhibit 10, § 23(b). In addition, § 23 further provides
`
`that White Oak is additionally entitled to recover from Defendants “all reasonable costs, fees and
`
`expenses … that are actually incurred in connection with enforcing” the Guaranties. See Term
`
`Loan Guaranty, Exhibit 9, § 23(a); Revolving Loan Guaranty, Exhibit 10, § 23(a). White Oak’s
`
`right to recover its enforcement expenses against Defendants incurred in this action is in addition
`
`to the $20,000,000 monetary limit under § 2 and is not subject to any monetary cap under the
`
`Guaranties or the Loan Documents.
`
`
`
`1 The Guaranties and Loan Documents alternatively refer to the Revolving Loan as the “ABL” or
`Asset-Based Loan. As used herein in connection with the Guaranties and Loan Documents, the
`terms “Revolving” and “ABL” are synonymous.
`
`
`
`6
`
`6 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`29.
`
`Second, under § 1(a) of the Guaranties, Defendants are subject to additional
`
`recourse liability upon the occurrence of certain specifically enumerated events and acts
`
`(commonly referred to as “bad acts”). Pursuant to §1(a), each Defendant “absolutely,
`
`unconditionally, and irrevocably guarantees payment of, and agrees to indemnify, defend and hold
`
`harmless [White Oak] for, from, and against any loss, damage, cost, expense, liability, claim or
`
`other obligations suffered or incurred by [White Oak] (including reasonable attorneys’ fees and
`
`costs) arising out of, resulting from or in connection with” certain actions or events specified in
`
`the subsections that immediately follow. See Term Loan Guaranty, Exhibit 9, § 1(a); Revolving
`
`Loan Guaranty, Exhibit 10, § 1(a). These “bad acts” triggering recourse liability include, among
`
`other things:
`
`a. Any failure by any borrower after an event of default to apply gross income to
`amounts due under the loans, § 1(a)(i);
`b. Any loan parties’ failure to permit inspections or provide financial reports or
`other financial information required under the Guaranties or Loan Documents,
`§ 1(a)(iii);
`c. Any material misrepresentation by any borrower or loan party made in
`connection with the Loan Documents or the Loans, § 1(a)(v);
`d. Any damage or destruction to any facility caused by gross negligence or
`intentional acts or omissions by any borrower or loan party, § 1(a)(ix);
`e. Any intentional physical waste of any facility § 1(a)(xii);
`f. Removal or disposal of personal property from any facility in violation of the
`Loan Documents, § 1(a)(xiii);
`g. Payment of any distributions to any borrower or guarantor upon an event of
`default except as permitted in the Loan Agreements, § 1(a)(xiv);
`h. Fees paid by any borrower to guarantors or any of its affiliates in violation of
`the Loan Documents upon an event of default, § 1(a)(xv); and
`i. All costs and expenses incurred by White Oak in collecting any amount due
`under the Guaranties, § 1(a)(xvi).
`
`
`
`7
`
`7 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`30.
`
`Unlike Defendants’ liability arising under § 2, Defendants’ liability arising under §
`
`1(a) is not subject to the $20,000,000 monetary limit under § 2, or any other monetary cap. See
`
`Term Loan Guaranty, Exhibit 9, § 23(d); Revolving Loan Guaranty, Exhibit 10, § 23(d).
`
`31. White Oak understands that the Companies made a distribution in 2019 in the
`
`amount of approximately $2.8 million while an event of default had occurred under the Loan
`
`Documents, in violation of, among other things, § 1(a)(xiv) of the Term Loan Guaranty.
`
`32. White Oak believes that Companies’ actions or failure to act caused one of its
`
`nursing home facilities in Westerville, Ohio to lose its eligibility of Medicare and Medicaid in
`
`violation of, among other things, § 1(a)(ix) of the Term Loan Guaranty.
`
`33. White Oak believes that the Companies made expenditures after one or more event
`
`of default that were not customary operating expenses in violation of, among other things, § 1(a)(i)
`
`of the Term Loan Guaranty.
`
`34.
`
`Upon information and belief, other violations of Section 1(a) of the Guaranties have
`
`occurred that will be revealed through discovery.
`
`35.
`
`Third, under § 1(b) of the Guaranties, Defendants are subject to recourse liability
`
`upon the occurrence of certain “Trigger Events.” Pursuant to §1(b), each Defendant, “upon the
`
`occurrence of a Trigger Event (defined below) absolutely, unconditionally and irrevocably
`
`guarantees to [White Oak] the punctual payment when due, whether at maturity, by acceleration
`
`or otherwise, of the Obligations, including all principal, interest, … indemnification indebtedness,
`
`and all other sums due to [White Oak]” arising under the Loan Documents. See Term Loan
`
`Guaranty, Exhibit 9, § 1(b); Revolving Loan Guaranty, Exhibit 10, § 1(b). The Trigger Events for
`
`which Defendants are subject to recourse liability are defined as:
`
`a. Fraud by Borrower or Guarantor in connection with the Loan, § 1(b)(i);
`
`
`
`8
`
`8 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`b. Any Loan Party fails to obtain Administrative Agent’s prior written consent to
`any subordinate financing or other voluntary Lien encumbering the Facility (it
`being agreed that mechanics’ and materialman’s liens, tax liens and other
`similar liens are not “voluntary Liens” hereunder), § 1(b)(ii);
`c. A Change of Control occurs, § 1(b)(iii);
`d. Any Loan Party files a voluntary petition under the Bankruptcy Code or any
`other federal or state bankruptcy or insolvency law § 1(b)(iv);
`e. Guarantor or an Affiliate, officer, director, or representative which Controls any
`Loan Party files, or joins in the filing of, an involuntary petition against any
`Loan Party under the Bankruptcy Code or any other federal or state bankruptcy
`or insolvency law, or solicits or causes to be solicited petitioning creditors for
`any involuntary petition against any Loan Party from any Person, § 1(b)(v);
`f. Any Loan Party files an answer consenting to or otherwise acquiescing in or
`joining in any involuntary petition filed against it, by any other Person under
`the Bankruptcy Code or any other federal or state bankruptcy or insolvency law,
`or solicits or causes to be solicited petitioning creditors for any involuntary
`petition against any Loan Party from any Person, § 1(b)(vi);
`g. Guarantor or any Affiliate, officer, director, or representative which Controls
`any Loan Party consents to or acquiesces in or joins in an application for the
`appointment of a custodian, receiver, trustee, or examiner for any Loan Party
`or any portion of the Property, § 1(b)(vii); or
`h. Borrower makes an assignment for the benefit of creditors, or admits, in writing
`or in any legal proceeding, its insolvency or inability to pay its debts as they
`become due, § 1(b)(viii).
`
`36. White Oak is not aware that any Trigger Events have occurred to date, but discovery
`
`in this matter may reveal, or subsequent events after the date hereof may ultimately result in,
`
`Trigger Events having occurred, whereupon Defendants would be liable for the full amounts owing
`
`under the Loan Documents.
`
`THE COMPANIES’ DEFAULTS UNDER THE LOAN DOCUMENTS
`
`37.
`
`Starting in early 2019, the Companies defaulted under the Loan Documents,
`
`including numerous defaults under both the Term Loan and Revolving Loan. The Term Loan
`
`Documents and Revolving Loan Documents are related documents containing extensive cross-
`
`default provisions. For example, the Term Loan Agreement § 7.01(r) provides that any default
`
`under the Revolving Loan Agreement constitutes a default under the Term Loan Agreement. See
`
`
`
`9
`
`9 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`Term Loan Agreement, Exhibit 9, § 7.01(r). Similarly, any default under the Term Loan
`
`Agreement constitutes a default under the Revolving Loan Agreement. See Revolving Loan
`
`Agreement, Exhibit 10, § 7.01(v).
`
`38.
`
`The Companies’ defaults under the Loan Documents include, but are not limited
`
`to:
`
`
`
`• Failure to pay $6,533,237.17 in rent, escrows and reserves due under the Operating
`Companies’ operating leases with the Property Companies from June 2019 through
`September 2020. This failure to pay rent violates Term Loan Agreement § 5.18(b)
`(borrowers shall cause Operating Companies to comply with leases), Revolving Loan
`§ 5.17(b) (Operating Companies must comply with all leases pertaining to the Property
`Companies’ real estate), Term Loan Agreement and Revolving Loan Agreement §§
`7.01(b) (Events of Default include failure to comply with section), 7.01(n) (event of
`default includes any material default under any operating lease)). This failure to pay
`rent is also a breach of the Revolving Loan Agreement, which becomes a cross-default
`under the Term Loan Agreement pursuant to §§ 7.01(e) (default by Operating
`Companies or Boulder Operations in respect to debt constitutes breach of Term Loan
`Agreement) and 7.01(r) (default under the Revolving Loan Agreement is a default
`under the Term Loan Agreement);
`
`• The payment of equity distributions totaling $2,799,999.95 between March 1, 2019 and
`June 30, 2019, which is a violation of the Term Loan Agreement and Revolving Loan
`Agreement because the distributions were made after an Event of Default in February
`2019 stemming from Boulder Operations’ failure to notify White Oak that its facility
`in Westerville, failed to comply with government requirements (which ultimately
`resulted in the Westerville facility losing its Medicare and Medicaid privileges). See
`Term Loan Agreement and Revolving Loan Agreement § 5.03(k) (requiring
`notification of White Oak within 3 days of coming under government Healthcare
`Investigation), Term Loan Agreement § 6.06(ii) (prohibiting Restricted Payments
`when borrowers are in default) and 7.01(b)(i)(B) (Events of Default include violation
`of any covenant of the Term Loan Agreement); and Revolving Loan Agreement §§
`6.06(i) (prohibiting Restricted Payments when borrowers are in default) and
`7.01(b)(i)(B) (Events of Default include violation of any covenant of the Revolving
`Loan Agreement);
`
`• Failure to timely provide accurate, final, and reliable financial information including:
`(i) monthly financial statements from April 2019 through March 2021; (ii) quarterly
`financial information from June 2019 through December 2020; (iii) signed monthly
`certificates of compliance with loan covenants from January 2019 through March 2021,
`and quarterly certificates of compliance from March 2019 through December 2020;
`(iv) all required Guarantor tax returns for 2018 and 2019; (v) federal income tax returns
`for each Borrower and Guarantor for years 2018 and 2019; and (vi) annual consolidated
`financial statements for the Companies. In most cases, the information was several
`
`10
`
`10 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`months late, impairing White Oak’s ability to monitor the Companies’ performance
`(i.e., April-June 2020 monthly financials were not received until mid-September, and
`October 2019 was not received until January of 2020). These failures violated Term
`Loan Agreement and Revolving Loan Agreement §§ 5.01(a) (requiring annual
`consolidated financial statements), 5.01(b) (requiring quarterly financial statements),
`5.01(c) (requiring fiscal month statements), 5.02(b) (requiring certificates of
`compliance with 5.01), 5.02(h) (requiring annual tax returns), 7.01(b) (Events of
`Default include failure to comply with 5.01 or 5.02)), and Guaranty Agreement § 8(e)
`(requiring financial disclosures including tax returns and compliance certificates); and
`Term Loan Agreement § 7.01(b)(ii) (violation of the Guaranty Agreement is an Event
`of Default);
`
`• Failure to meet project yield and debt service coverage requirements for the quarters
`ending June 30, 2019 to December 31, 2020 under Term Loan Agreement §§ 5.10(a)
`(requiring minimum project yields), 5.10(b) (requiring minimum debt service covenant
`ratios), and 7.01(b) (violation of § 5.10 is an Event of Default);
`
`• Failure to timely deliver notice of the imposition by the Department of Health and
`Human Services of a “Denial of Payment for New Admissions” effective February 9,
`2019 and May 21, 2019 relating to the Westerville facility—one of the largest of
`Companies’ 17 facilities—as well as the loss of Medicare and Medicaid eligibility at
`the Westerville facility and the loss of permit to admit new patients. This chain of
`failures resulted in multiple Events of Default under Term Loan Agreement § 4.31(c),
`Revolving Loan Agreement § 4.30(c), and Term Loan and Revolving Loan Agreement
`§§ 5.05(c) (each requiring preservation of all governmental approvals), 5.05(d)
`(requiring each Operating Company to participate in third-party payor programs),
`7.01(b) (Events of Default include failure to comply with § 5.05), and 7.01(q) (failure
`to maintain authority to admit new residents);
`
`• Unauthorized firing of the former operations management company (Boulder
`Operations) and hiring a new management company (Boulder FG, owned by Fein)
`without the express written consent of White Oak, and without the execution of a
`management fee subordination agreement by the hired company, all in violation of
`Term Loan Agreement §§ 5.20(a) and Revolving Loan Agreement 5.23(a) (each
`prohibiting change of management company without consent of White Oak) and
`7.01(b)(i)(B) (any breach of any term of the Term Loan Agreement constitutes an Event
`of Default);
`
`• Failure to timely deliver notice of adverse complaint surveys dated January 8, 2019,
`January 23, 2019, February 4, 2019, March 6, 2019, April 9, 2019 and April 22, 2019,
`in violation of Term Loan Agreement and Revolving Loan Agreement § 5.01(i)
`(requiring notice to White Oak within 3 days) and Term Loan Agreement and
`Revolving Loan Agreement § 7.01(b) (Events of Default include failure to comply with
`§ 5.01);
`
`• Failure to timely satisfy the post-closing facility repair requirements, including funding
`a Required Repair Fund for completion of required repairs set forth on Term Loan
`
`
`
`11
`
`11 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`Schedule 2.15(b), in violation of Term Loan Agreement §§ 2.15(b) (requiring an
`$810,500 repair fund), 7.01(b)(i)(B) (any breach of any term of the Term Loan
`Agreement constitutes an Event of Default), and Term Loan Agreement Schedule
`2.15(b));
`
`• Failure to timely satisfy the post-closing requirement relating to (i) environmental
`remediation for the Woodbridge Ohio facility, (ii) delivery of evidence of transfer of
`Equity Interests of the 1031 Borrower to the Parent, and (iii) delivery of endorsements
`required under § 5.06(a) of the Term Loan Agreement, in violation of Term Loan
`Agreement §§ 5.06(a) (requiring delivery of endorsements), 5.25 (requiring
`compliance with Schedule 5.25 (requiring certain environmental remediation plans
`completed)), Revolving Loan Agreement 5.27 (requiring compliance with Schedule
`5.27 (requiring delivery of evidence of transfer of Equity Interests) and 7.01(b) (breach
`of § 5.25 is an Event of Default);
`
`• An Event of Default under § 7.01(t) of the Revolving Loan Agreement and § 7.01(q)
`of the Term Loan Agreement as a result of a Governmental Authority ceasing to permit
`new residents or tenants to be admitted to any of the Facilities;
`
`• Breaches under § 5.02(g) of the Revolving Loan Agreement as a result of unauthorized
`changes of officers and directors, which breaches resulted in Events of Default under
`§ 7.01(b) of the Revolving Loan Agreement;
`
`• A breach under § 5.03(o) of the Revolving Loan Agreement due to a change in
`Beneficial Ownership Certificate, which breaches resulted in Events of Default under
`§ 7.01(b) of the Revolving Loan Agreement; and
`
`• A breach under § 2.10(h) of the Revolving Loan Agreement as a result of ongoing
`delivery of misdirected payments to Boulder Operations in the form of checks, which
`breach resulted in an Event of Default under § 7.01(b) of the Revolving Loan
`Agreement.
`
`39.
`
`Accordingly, the Companies defaulted under the Loan Documents and remain in
`
`default under those documents.
`
`WHITE OAK’S NOTICES OF DEFAULT TO THE COMPANIES
`AND DEMANDS FOR PAYMENT
`
`40. White Oak delivered to the Companies written notices of Events of Default under
`
`the Loan Agreements as further described below.
`
`
`
`12
`
`12 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`41.
`
`Pursuant to § 2.02(a) of the Loan Agreements, the Loans bear interest from the
`
`dates on which they are advanced until the dates on which they are repaid, accruing at the “Base
`
`Rate” as defined in the Loan Agreements.
`
`42.
`
`Pursuant to Section 1.01 of the Loan Agreements, the Base Rate is defined as “(a)
`
`the greater of (i) two and fifteen one hundredths percent (2.15%) per annum and (ii) the LIBOR
`
`Index Rate, as adjusted as of each LIBOR Index Adjustment Date, plus (b) the Applicable Margin
`
`[of 5.50% per annum].”
`
`43.
`
`Section § 2.02(c), however, provides that at any time that an Event of Default is
`
`continuing and not waived under the Loan Documents, the Loans bear interest at the “Default
`
`Rate” as defined in the Loan Agreements.
`
`44.
`
`Pursuant to Section 1.01 of the Loan Agreements, the Default Rate is defined as
`
`“equal to the sum of: (a) the Base Rate; plus (b) 5.00% per annum.”
`
`45.
`
`Events of Default have existed and have been continuing under the Loan
`
`Documents since on or about February 1, 2019, at which time interest commenced accruing on the
`
`Loans at the Default Rate.
`
`46.
`
`Since February 1, 2019, default interest has accrued at the Default Rate of
`
`$18,776.69 per day with respect to the Term Loan and $694.44 per day with respect to the
`
`Revolving Loan.
`
`47.
`
`On or about June 21, 2019, White Oak notified Boulder Operations and Boulder
`
`Property of the Companies’ known Events of Default in existence at that time. A true and correct
`
`copy of the June 21, 2019 Notice of Default is attached hereto as Exhibit 11.
`
`48.
`
`The June 21, 2019 Notice of Events of Default advised the Companies that, due to
`
`the Events of Default enumerated therein, White Oak was entitled to exercise any and all rights
`
`
`
`13
`
`13 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`and remedies set forth in the Loan Documents, including declaring that interest on the Loans will
`
`accrue at the Default Rate.
`
`49.
`
`On or about October 9, 2019, White Oak served Boulder Operations and Bolder
`
`Property with a second Notice of Default. A true and correct copy of the October 9, 2019 Notice
`
`of Events of Default is attached hereto as Exhibit 12.
`
`50.
`
`The October 9, 2019 Notice of Events Default notified the Companies of the Events
`
`of Default set forth in the October 9, 2019 Notice of Events Default, as well as multiple additional
`
`known and potential Events of Default in existence at that time.
`
`51.
`
`The October 9, 2019 Notice of Events Default advised the Companies that as of
`
`September 24, 2019, accrued default interest on the Term Loan at the Default Rate was
`
`$4,523,333.33.
`
`52.
`
`On or about January 5, 2021, White Oak served the Companies with Notices of
`
`Additional Events of Default and Demand for Payment of Default Interest under the Term Loan
`
`and the Revolving Loan (the “January 5, 2021 Notices of Additional Defaults”). True and
`
`correct copy of the January 5, 2021 Notices of Additional Defaults are attached hereto as Exhibits
`
`13 and 14.
`
`53.
`
`The January 5, 2021 Notices of Additional Defaults notified the Companies of
`
`multiple additional known Events of Default in existence at that time. White Oak further notified
`
`the Companies that the accrued and unpaid interest due and payable on the Term Loan was
`
`$13,336,586.20 as of December 28, 2020. In accordance with § 2.02 of the Loan Documents,
`
`White Oak demanded immediate payment of the $13,336,586.20 in unpaid interest from the
`
`Companies (the “Demand Amount”).
`
`
`
`14
`
`14 of 22
`
`
`
`FILED: NEW YORK COUNTY CLERK 04/23/2021 04:12 PM
`NYSCEF DOC. NO. 2
`
`INDEX NO. 652748/2021
`
`RECEIVED NYSCEF: 04/23/2021
`
`54.
`
`Despite their obligation to make immediate payment of the $13,336,586.20
`
`demanded in White Oak’s January 5, 2021 Notices of Additional Events of Default, the Companies
`
`failed to pay any portion of the Demand Amount.
`
`WHITE OAK’S NOTICE OF ACCELERATION OF THE
`PROPERTY COMPANIES’ TERM LOAN DEBT
`
`55.
`
`On April 22, 2021, White Oak served the Property Companies with a Notice of
`
`Acceleration declaring all Obligations (including the Prepayment Premium), as defined in the
`
`Term Loan Agreement, immediately due and payable pursuant to § 7.02(a) of the Term Loan
`
`Agreement. A true and correct copy of the April 22, 2021 Notice of Acceleration is attached hereto
`
`as Exhibit 15.
`
`56.
`
`Despite the Property Companies’ obligation pursuant to § 7.02(a) of the Term Loan
`
`Agreement to make immediate payment of the full amount of the Obligations, they have failed to
`
`pay any amount of the Obligations to date.
`
`DEFENDANTS’ GUARANTY LIABILITY
`
`57.
`
`Defendants have unconditionally and absolutely guaranteed the full and prompt
`
`payment of all “Payment Obligations” as defined in § 2 of the Guaranties, which includes all
`
`principal, interest, fees, costs and expenses under or in connection with the Loans, when such
`
`amounts become due, subject to the $20,000,000 cap set forth in § 23 of the Guaranties.
`
`58.
`
`O