<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------------------------
FORM 8-K/A
-------------------------------------------------------------
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 1, 1997
(Date of earliest event reported)
EMERITUS CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 1-14012 91-1605464
(State or other (Commission file (I.R.S Employer
jurisdiction of number) Identification No.)
incorporation or
organization)
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
(Address of principal executive offices)
(206) 298-2909
(Registrant's telephone number, including area code)
<PAGE>
Item 1. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
On May 1, 1997, Emeritus Corporation (the "Company")
completed the acquisition of three assisted-living
communities (the "La Casa Communities") located in
Florida, containing an aggregate of approximately 473
units for a purchase price of $33.0 million. The La Casa
Communities were acquired from Englewood Retirement
Center, Inc., Stanford Center, Inc. and NPR Retirement
Center, Inc.
The $33.0 million acquisition was financed through a first
mortgage and subordinated debt. Fleet National Bank
("Fleet") financed $26.0 million through a two year first
mortgage, interest at LIBOR plus 2.50%, payable interest
only during the first year. Hanseatic Corporation
("Hanseatic") financed $7.0 million through 18% three year
subordinated debt, 10% payable monthly and 8% accrued and
due at maturity. The subordinated debt is secured by a
pledge of the stock of Emeritus Properties V, Inc., a
wholly owned subsidiary of the Company and is fully
subordinated to the Fleet mortgage.
The La Casa Communities are comprised of three communities
under common ownership, La Casa Grande in New Port Richey,
Florida, Stanford Centre in Altamonte Spring, Florida and
River Oaks in Englewood, Florida, which operate
residential-style congregate care, assisted-living and
Alzheimer care communities for seniors. The Company's
growth strategy has focused, and will continue to focus,
on the acquisition of existing long-term-care facilities
that either are currently operated as assisted-living
communities or can be efficiently repositioned by the
Company as assisted-living communities, and the
development of assisted-living facilities.
The Company reported the acquisition on its Current Report
on Form 8-K dated May 1, 1997 (the "Form 8-K"). Item 7 of
the Form 8-K is hereby revised and supplemented to include
Financial Statements of Business Acquired, certain pro
forma financial information and additional exhibits with
respect to the La Casa Communities.
Items 3-6. Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The La Casa Communities combined balance sheet as of
December 31, 1996, and the combined statements of
income, shareholders' deficit and cash flows for the
year ended December 31, 1996, along with the notes
thereto and the report of KPMG Peat Marwick LLP dated
May 9, 1997 relating to such financial statements.
(b) Pro Forma Financial Information
(1) Emeritus Corporation Pro Forma Consolidated
Balance Sheet (unaudited) December 31, 1996.
(2) Emeritus Corporation Pro Forma Consolidated
Statements of Operations (unaudited) For the
Year Ended December 31, 1996 and the Three
Months Ended March 31, 1997.
(3) Notes to Pro Forma Consolidated Financial
Statements (unaudited).
(c) Exhibits
1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Emeritus Corporation
We have audited the accompanying combined balance sheet of the La Casa
Communities as of December 31, 1996, and the related combined
statements of income, shareholders' deficit and cash flows for the year
then ended. These combined financial statements are the responsibility
of the La Casa Communities' management. Our responsibility is to
express an opinion on the combined financial statements based on our
audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the combined financial statements. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of the
La Casa Communities as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick
Seattle, Washington
May 9, 1997
2
<PAGE>
(a) Financial Statements of Business Acquired.
LA CASA COMMUNITIES
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
December 31, 1997
1996 (unaudited)
------------ ------------
<S> <C> <C>
Current assets:
Cash ............................................. $ 24,228 $ 26,097
Trade accounts receivable......................... 22,132 89,008
Prepaid expenses and other current assets......... 65,761 112,763
------------ ------------
Total current assets...................... 112,121 227,868
Property and equipment, net......................... 17,676,480 17,496,649
Other assets, net................................... 179,220 171,994
------------ ------------
Total assets.............................. $17,967,821 $17,896,511
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Short-term borrowings............................. $ 236,409 $ 187,500
Related party notes payable....................... 305,000 305,000
Current portion of long-term debt................. 399,339 401,338
Accounts payable.................................. 213,252 174,210
Accrued expenses.................................. 285,241 252,321
Deferred revenue.................................. 88,903 56,175
------------ ------------
Total current liabilities................. 1,528,144 1,376,544
------------ ------------
Related party note payable.......................... 557,539 553,126
Long-term debt, less current portion................ 16,476,627 16,408,221
------------ ------------
Total liabilities......................... 18,562,310 18,337,891
------------ ------------
Shareholders' deficit:
Common stock, $1 par value. Authorized 20,000
shares; issued and outstanding 2,200 shares... 2,200 2,200
Common stock, $10 par value. Authorized 4,500
shares; issued and outstanding 4,400 shares... 44,000 44,000
Additional paid-in capital......................... 1,138,421 1,138,421
Accumulated deficit................................ (1,779,110) (1,626,001)
------------ ------------
Total shareholders' deficit............... (594,489) (441,380)
Commitments and contingencies.......................
------------ ------------
Total liabilities and shareholders'
deficit............................... $17,967,821 $17,896,511
============ ============
</TABLE>
See accompanying Notes to Combined Financial Statements.
3
<PAGE>
LA CASA COMMUNITIES
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended
Year ended March 31,
December 31, 1997
1996 (unaudited)
------------ ------------------
<S> <C> <C>
Revenues:
Rent........................................ $ 9,173,146 $2,380,933
Service fees................................ 452,195 113,109
------------ ------------------
Total revenues...................... 9,625,341 2,494,042
------------ ------------------
Expenses:
Community operations........................ 6,112,858 1,471,516
General and administrative.................. 1,128,153 292,945
Depreciation and amortization............... 790,685 196,100
------------ ------------------
Total operating expenses............ 8,031,696 1,960,561
------------ ------------------
Income from operations............. 1,593,645 533,481
------------ ------------------
Other income (expense):
Interest expense on notes payable to related
parties.................................. (76,950) (20,280)
Other interest expense...................... (1,491,189) (359,903)
Other, net.................................. 14,964 (189)
------------ ------------------
Net other expense................... (1,553,175) (380,372)
------------ ------------------
Net income.......................... $ 40,470 $ 153,109
============ ==================
</TABLE>
See accompanying Notes to Combined Financial Statements.
4
<PAGE>
LA CASA COMMUNITIES
COMBINED STATEMENT OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common stock
---------------------------------------- Additional Total
Number of Number of paid-in Partners' Accumulated shareholders'
shares(1) Amount shares(2) Amount capital deficit deficit equity/(deficit)
--------- ------ --------- ------- ---------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1995.......... 2,000 $2,000 4,000 $43,600 $1,460,821 $(1,074,424) $ (632,834) $(200,837)
Partnership buyout... 200 200 400 400 (322,400) 1,074,424 (752,624) -
Distributions........ - - - - - - (434,122) (434,122)
Net income for the
year ended
December 31,
1996.............. - - - - - - 40,470 40,470
--------- ------ --------- ------- ---------- ------------ ------------ ----------------
Balances at December
31, 1996.......... 2,200 2,200 4,400 44,000 1,138,421 - (1,779,110) (594,489)
Net income for the
three months ended
March 31, 1997.... - - - - - - 153,109 153,109
--------- ------ --------- ------- ---------- ------------ ------------ ----------------
Balances at March 31,
1997............ 2,200 $2,200 4,400 $44,000 $1,138,421 $ - $(1,626,001) $(441,380)
========= ====== ========= ======= =========== ============ ============ ================
</TABLE>
(1) NPR Retirement Center, Inc.
(2) Stanford Center, Inc.
See accompanying Notes to Combined Financial Statements.
5
<PAGE>
LA CASA COMMUNITIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
Year ended March 31,
December 31, 1997
1996 (unaudited)
------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 40,470 $153,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............... 790,685 196,100
Changes in operating assets and liabilities:
Trade accounts receivable.............. 10,642 (66,876)
Prepaid expenses and other current
assets.............................. (13,189) (47,002)
Other assets........................... 595 (3,483)
Accounts payable....................... (6,428) (39,042)
Accrued expenses....................... 48,452 (32,920)
Deferred revenue....................... 61,818 (32,728)
------------ ------------------
Net cash provided by operating
activities................... 933,045 127,158
------------ ------------------
Cash flows from investing activities:
Cash transferred in from partnership........... 136 -
Notes with related parties..................... (57,675) (4,413)
Construction of building and purchase of
equipment.................................... (185,955) (5,560)
------------ ------------------
Net cash used in investing
activities........................ (243,494) (9,973)
------------ ------------------
Cash flows from financing activities:
Repayment of short-term borrowings............. - (48,909)
Proceeds from long-term borrowings............. 280,000 -
Repayment of long-term borrowings.............. (533,764) (66,407)
Distributions to stockholders.................. (434,122) -
------------ ------------------
Net cash used in financing
activities........................ (687,886) (115,316)
------------ ------------------
Net increase in cash................ 1,665 1,869
Cash at beginning of period...................... 22,563 24,228
------------ ------------------
Cash at end of period............................ $ 24,228 $ 26,097
============ ==================
Supplemental disclosure of cash flow information
- cash paid during the period for interest..... $1,568,139 $380,183
============ ==================
</TABLE>
See accompanying Notes to Combined Financial Statements.
6
<PAGE>
LA CASA COMMUNITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Las Casa Communities are comprised of three
communities (the "Communities") which operate residential-
style congregate care, assisted-living and Alzheimer care
communities for seniors. The related organizations which
make up the Communities are as follows:
<TABLE>
<CAPTION>
Owner Community Location
------- ----------- ----------
<S> <C> <C>
Englewood Retirement Center, Inc. (S-Corporation) Englewood Retirement Center Englewood, FL
Stanford Center, Inc. (S-Corporation) Stanford Center Altamonte Spring, FL
NPR Retirement Center, Inc. (S-Corporation) New Port Richey Retirement Center New Port Richey, FL
</TABLE>
On May 1, 1997 Emeritus Corporation acquired the
Communities.
(B) REVENUE RECOGNITION
Resident units are rented on a month-to-month basis and
rent is recognized in the month the unit is occupied.
Service fees paid by residents for assisted-living and other
related services are recognized in the period services are
rendered.
(C) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method.
Depreciation is computed over the following estimated useful
lives: buildings and improvements, 5 to 40 years and
furniture and equipment, 5 to 15 years.
For long-lived assets, including property and equipment,
the Communities evaluate the carrying value of the assets by
comparing the estimated future cash flows generated from the
use of the assets and their eventual disposition with the
assets' reported net book values. The carrying values of
assets are evaluated for impairment when events or changes in
circumstances occur which may indicate the carrying amount of
the assets may not be recoverable.
(D) DEFERRED REVENUE
Deferred revenue consists of revenue received prior to
the end of a reporting period for resident rental and service
payments that relate to subsequent periods.
(E) INCOME TAXES
The Communities have elected, by consent of its
shareholders, to be taxed under the provisions of Subchapter
S of the Internal Revenue code. Under those provisions, the
Communities do not pay federal or state corporate income
taxes on their taxable income nor receive benefits from their
operating losses. Instead, the stockholders are liable for
individual federal and state income taxes on their share of
the Communities taxable income or receive benefit of their
losses. Accordingly, no federal and state provision has been
recorded in the accompanying financial statements. Pro forma
income taxes have not been presented as the Communities have
net operating losses which have full valuation allowances
that are available to be recognized as needed to reduce pro
forma tax expense to zero.
7
<PAGE>
LA CASA COMMUNITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(F) COMMUNITY OPERATIONS
Community operations represent direct costs incurred to
operate the communities and include costs such as activities
for the residents, marketing, housekeeping, food service,
payroll and benefits, facility maintenance, utilities, taxes
and licenses.
(G) USE OF ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at
December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Land............................ $ 1,504,816
Building and improvements....... 20,311,356
Furniture and equipment......... 1,578,181
------------
23,394,353
Less accumulated depreciation... (5,717,873)
------------
$17,676,480
============
</TABLE>
Depreciation expense was $763,550 for the year ended December
31, 1996.
(3) DEFERRED FINANCING COSTS
Deferred financing costs totaling $157,242, which are
included in other assets, net, are amortized using the
straight-line method over the term of the related debt which
approximates the level yield method. Accumulated
amortization at December 31, 1996 totaled $24,552.
(4) FINANCIAL INSTRUMENTS
The Communities have financial instruments consisting of
cash, receivables, accounts payable, short-term borrowings,
related party note payable and long-term debt. The
Communities have determined the fair value of their financial
instruments using available market information such as
prevailing interest rates and appropriate valuation
methodologies. The fair value of the Communities financial
instruments approximate their carrying amounts.
8
<PAGE>
LA CASA COMMUNITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(5) NOTES PAYABLE
Short-term borrowings consist of the following at
December 31, 1996:
Unsecured note payable, interest
only at 10% payable monthly, due
upon ninety days written demand.... $ 160,000
Note payable, interest at 8.5% due
August 1997........................ 20,000
Unsecured note payable, interest at
9%, principal and interest due
at the time the facility is sold... 15,000
Unsecured note payable, interest
only at 9% payable monthly,
balance due at the time the
facility is sold................... 12,500
Other notes payable.................. 28,909
-----------
Total short-term borrowings...... $ 236,409
===========
Related party notes payable consist of the following at
December 31, 1996:
Unsecured note payable to a
relative of a shareholder,
interest only at 9% payable
monthly, due on demand............. $ 250,000
Unsecured notes payable to
shareholder, interest only at 9%
payable monthly, due on demand..... 45,000
Unsecured note payable to
shareholder, interest at 9%,
principal and interest due on
demand............................. 10,000
-----------
Total related party notes
payable........................ $ 305,000
===========
Long-term debt consists of the following at December 31,
1996:
Mortgage notes payable, interest at
9% payable monthly, due January
2020............................... $10,363,591
Mortgage payable, interest at 7.9%
payable monthly, due October
2020............................... 6,102,771
Unsecured notes payable to
shareholder, interest at 9%
payable monthly, due September
2005............................... 557,539
Note payable, interest at 8.6%
payable monthly, balance due
December 1998...................... 209,654
Unsecured note payable, interest at
9.8%, payable monthly, balance
due November 1998.................. 175,930
Other notes payable..................
24,020
-----------
17,433,505
Less current portion................. 399,339
-----------
Total long-term debt............. $17,034,166
===========
Secured notes are secured primarily by the Communities'
property and equipment.
9
<PAGE>
LA CASA COMMUNITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Maturities of long-term debt follow:
1997.............. $ 399,339
1998.............. 632,899
1999.............. 324,653
2000.............. 350,885
2001.............. 382,404
Thereafter........ 15,343,325
-----------
$17,433,505
===========
(6) LEASE COMMITMENTS
Effective July 28, 1991, the Communities entered into
employee leasing agreements with an unrelated third party.
The employee leasing agreements call for the Communities to
pay a leasing fee equal to 2.9% of gross payroll, the leased
employees' gross payroll, and all related federal and state
payroll taxes. The Communities are also responsible for
providing workers' compensation insurance on all leased
employees and reasonable time off for vacation and sick
leave. The agreements are to remain in effect until either
party, in writing, terminates the agreements with such
termination being effective thirty days after receipt of the
termination notice.
(7) PARTNERSHIP BUY-OUT
Effective January 1, 1996, the assets and related
liabilities of the New Port Richey ACLC partnership, previous
owner of the building operated by NPR Retirement Center, Inc.
("NPR") and under common ownership with the Communities, were
transferred into NPR. The transaction was accounted for in a
manner similar to the pooling-of-interests method of
accounting, and accordingly, the net assets were recorded at
their historical cost as required by generally accepted
accounting principles. The effect of this business
combination was to increase assets by $5,501,701, increase
liabilities by $6,576,143, increase common stock by $600,
reduce additional paid-in capital by $322,400, which
represented the total additional paid-in capital of NPR, and
increase accumulated deficit by $752,624 to record the excess
of liabilities assumed over the basis of assets acquired.
10
<PAGE>
(b) Pro Forma Financial Information.
The following unaudited pro forma consolidated balance
sheet as of December 31, 1996 assumes that the La Casa
Acquisition had occurred on December 31, 1996.
The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1996 and three
months ended March 31, 1997 assumes that the La Casa
Acquisition had occurred on January 1, 1996.
The unaudited pro forma combined financial information
set forth below is not necessarily indicative of the
Company's combined financial position or the results of
operations that actually would have occurred if the
transactions had been consummated on such dates. In
addition, they are not intended to be a projection of results
of operations that may be obtained in the Company's future.
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
La Casa Pro Forma Emeritus
Emeritus Communities Adjustments Combined
--------- ----------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents..... $ 23,039 $ - $ - $ 23,039
Current portion of restricted
cash........................ 934 - - 934
Trade accounts receivable..... 1,713 - - 1,713
Other receivables............. 1,292 - - 1,292
Inventory..................... 292 - - 292
Prepaid expense and other
current assets.............. 2,977 - - 2,977
Investment securities
available for sale.......... 2,152 - - 2,152
--------- ----------- ------------ ------------
Total current assets... 32,399 - - 32,399
--------- ----------- ------------ ------------
Property and equipment, net...... 97,150 17,676 14,934 (a) 129,760
Property held for development.... 8,796 - - 8,796
Note receivable from and
investment in affiliate, net... 2,464 - - 2,464
Restricted deposits, less
current portion................ 6,875 - - 6,875
Lease acquisition costs, net..... 8,127 - - 8,127
Other assets, net................ 2,227 - 390 (a) 2,617
--------- ----------- ------------ ------------
Total assets........... $158,038 $17,676 $15,324 $191,038
========= =========== ============ =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
11
<PAGE>
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 - (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Short-term borrowings......... $ - $ - $ - $ -
Current portion of long-term
debt........................ 5,816 - - 5,816
Trade accounts payable........ 4,707 - - 4,707
Construction advances - leased
communities................. 6,387 - - 6,387
Employee compensation and
benefits.................... 3,071 - - 3,071
Accrued interest.............. 1,120 - - 1,120
Other accrued expenses........ 778 - - 778
Other current liabilities..... 763 - - 763
--------- ----------- ----------- ------------
Total current
liabilities.......... 22,642 - - 22,642
--------- ----------- ----------- ------------
Security deposits................ 1,014 - - 1,014
Other long-term liabilities...... 3,740 - - 3,740
Deferred gain on sale of
communities.................... 9,433 - - 9,433
Deferred income.................. 843 - - 843
Convertible debentures........... 32,000 - - 32,000
Long-term debt, less current
portion........................ 60,260 - 33,000 (a) 93,260
Liabilities retained by
stockholders, net.............. - 18,271 (18,271)(a) -
--------- ----------- ----------- ------------
Total liabilities...... 129,932 18,271 14,729 162,932
--------- ----------- ----------- ------------
Minority interests............... 1,918 - - 1,918
Shareholders' equity (deficit):
Preferred stock, $.0001 par
value. Authorized
5,000,000 shares; no
shares issued and
outstanding................. - - - -
Common stock, $.0001 par
value. Authorized
40,000,000 shares; issued
and outstanding 11,000,000
shares...................... 1 - - 1
Common stock, $1 par value.
Authorized 20,000 shares;
issued and outstanding
2,200 shares................ - 2 (2) (a) -
Common stock, $10 par value.
Authorized 4,500 shares;
issued and outstanding
4,400 shares................ - 44 (44) (a) -
Additional paid-in capital.... 44,787 1,138 (1,138) (a) 44,787
Unrealized gain on investment
securities.................. 18 - - 18
Accumulated deficit........... (18,618) (1,779) 1,779 (a) (18,618)
--------- ----------- ----------- -----------
Total shareholders'
equity (deficit)..... 26,188 (595) 595 26,188
--------- ----------- ----------- -----------
Total liabilities and
shareholders' equity
(deficit)............ $158,038 $17,676 $15,324 $191,038
========= =========== =========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
12
<PAGE>
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
La Casa Pro Forma Emeritus
Emeritus Communities Adjustments Combined
-------- ----------- ----------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Rent.......................... $64,143 $ 9,173 $ - $ 73,316
Service fees.................. 4,783 452 - 5,235
-------- ----------- ----------- ---------
Total operating revenues... 68,926 9,625 - 78,551
-------- ----------- ----------- ---------
Expenses:
Community operations.......... 48,900 6,113 - 55,013
General and administrative.... 6,158 1,128 - 7,286
Depreciation and amortization. 3,122 791 (791) (b)
1,233 (b) 4,355
Rent.......................... 16,114 - - 16,114
-------- ----------- ----------- ---------
Total operating expenses... 74,294 8,032 442 82,768
-------- ----------- ----------- ---------
Income (loss) from
operations............... (5,368) 1,593 (442) (4,217)
-------- ----------- ----------- ---------
Other income (expense):
Interest income............... 1,236 - - 1,236
Interest expense on notes
payable to related parties.. - (77) 77 (c) -
Interest expense, net......... (4,018) (1,491) 1,491 (c)
(3,512) (c) (7,530)
Other, net.................... (52) 15 - (37)
-------- ----------- ----------- ---------
Net other expense.......... (2,834) (1,553) (1,944) (6,331)
-------- ----------- ----------- ---------
Net income (loss) ......... $(8,202) $ 40 $(2,386) $(10,548)
======== =========== =========== =========
Net loss per share............... $ (0.75) $ (0.96)
======== =========
Weighted average number of common
shares outstanding............. 11,000 11,000
======== =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
13
<PAGE>
EMERITUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
La Casa Pro Forma Emeritus
Emeritus Communities Adjustments Combined
--------- ----------- ----------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Rent.......................... $20,731 $2,381 $ - $23,112
Service fees.................. 3,771 113 - 3,884
--------- ----------- ----------- ---------
Total operating revenues... 24,502 2,494 - 26,996
--------- ----------- ----------- ---------
Expenses:
Community operations.......... 16,947 1,472 - 18,419
General and administrative.... 2,207 293 - 2,500
Depreciation and amortization. 1,169 196 (196) (d)
308 (d) 1,477
Rent.......................... 6,843 - - 6,843
--------- ----------- ----------- ---------
Total operating expenses... 27,166 1,961 112 29,239
--------- ----------- ----------- ---------
Income (loss) from
operations............... (2,664) 533 (112) (2,243)
--------- ----------- ----------- ---------
Other income (expense):
Interest expense, related
party....................... - (20) 20 (e) -
Interest expense, net......... (728) (360) 360 (e)
(871) (e) (1,599)
Other, net.................... (180) - - (180)
--------- ----------- ----------- ---------
Net other expense...... (908) (380) (491) (1,779)
--------- ----------- ----------- ---------
Net income (loss)...... $(3,572) $ 153 $ (603) $(4,022)
========= =========== =========== =========
Net loss per share............ $ (0.32) $ (0.37)
========= =========
Weighted average number of
common shares outstanding... 11,000 11,000
========= =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated
Financial Statements
14
<PAGE>
EMERITUS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated
balance sheet as of December 31, 1996 assumes that the La
Casa Acquisition occurred on December 31, 1996.
The accompanying unaudited pro forma consolidated
statements of operations for the year ended December 31, 1996
and three months ended March 31, 1997 gives effect to the La
Casa Acquisition as if such transaction had occurred on
January 1, 1996.
(2) PRO FORMA ADJUSTMENTS
(a) To record the La Casa Acquisition pursuant to which
Emeritus acquired all the common stock of the La Casa
Communities, excluding all of the Communities liabilities and
assets other than property and equipment which were retained
by the previous stockholders, for a purchase price of $33.0
million financed through borrowings with deferred financing
costs of $390,000. The transaction was accounted for under
the purchase method of accounting and accordingly, the
purchase price was allocated to the net assets acquired based
upon their relative fair market values. Purchase accounting
adjustments include; (i) an increase in property and
equipment of $14,934,000 and (ii) the retention of net
liabilities by stockholders in the amount of $18,271,000; and
(iii) the elimination of La Casa equity prior to the
acquisition, including common stock and additional paid-in
capital of $1,184,000 and accumulated deficit of $1,779,000.
(b) To record depreciation for the La Casa Communities
in the amount of $1,233,000 for the year ended December 31,
1996 as if they had been acquired on January 1, 1996, and the
elimination of historical depreciation and amortization in
the amount of $791,000 for the year ended December 31, 1996.
(c) To record interest expense and amortization of
deferred financing costs for the La Casa Communities in the
amount of $3,512,000 for the year ended December 31, 1996
relating to acquisition debt of $26.0 million bearing
interest at LIBOR plus 2.50% and $7.0 million bearing
interest at 18% as if they had been incurred on January 1,
1996, and the elimination of historical interest expense in
the amount of $1,568,000 for the year ended December 31,
1996, related to the debt retained by previous stockholders.
(d) To record depreciation for the La Casa Communities
in the amount of $308,000 for the three months ended March
31, 1997 as if they had been acquired on January 1, 1996, and
the elimination of historical depreciation and amortization
in the amount of $196,000 for the three months ended March
31, 1997.
(e) To record interest expense and amortization of
deferred financing costs for the La Casa Communities in the
amount of $871,000 for the three months ended March 31, 1996
relating to acquisition debt of $26.0 million bearing
interest at LIBOR plus 2.50% and $7.0 million bearing
interest at 18% as if they had been incurred on January 1,
1997, and the elimination of historical interest expense in
the amount of $380,000 for the three months ended March 31,
1997, related to the debt retained by previous stockholders.
15
<PAGE>
(c) Exhibits.
10.1 * Stock Purchase Agreement dated September 30, 1996
between Wayne Voegele, Jerome Lang, Ronald Carlson,
Thomas Stanford, Frank McMillan, Lonnie Carlson, and
Carla Holweger ("Seller") and the registrant
("Purchaser") with respect to La Casa Grande.
10.2 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to La Case Grande.
10.3 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to River Oaks.
10.4 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to River Oaks.
10.5 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to Stanford Centre.
10.6 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to Stanford Centre.
10.7 Term Loan Agreement dated May 1, 1997 in the amount
of $26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.8 Promissory note dated May 1, 1997 in the amount of
$26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.9 Promissory Note dated May 1, 1997 in the amount of
$7,000,000 between Emeritus Properties V, Inc.,
("Borrower") and High Yield Partners LLC, ("Lender").
10.10 Credit Agreement dated May 1, 1997 between Emeritus
Properties V, Inc. and High Yield Partners LLC.
10.11 Guaranty dated May 1, 1997 between the registrant
("Guarantor") Emeritus Properties V, Inc., ("Debtor")
and High Yield Partners LLC ("Lender")
23.1 Consent of KPMG Peat Marwick LLP.
* Previously filed.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated: July 14, 1997
EMERITUS CORPORATION
(Registrant)
/s/ Kelly J. Price
--------------------------
Kelly J. Price, Chief Financial Officer and
Vice President, Finance
/s/ James S. Keller
--------------------------
James S. Keller, Controller
(Principal Accounting Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10.1 * Stock Purchase Agreement dated September 30, 1996
between Wayne Voegele, Jerome Lang, Ronald Carlson,
Thomas Stanford, Frank McMillan, Lonnie Carlson, and
Carla Holweger ("Seller") and the registrant
("Purchaser") with respect to La Casa Grande.
10.2 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to La Case Grande.
10.3 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to River Oaks.
10.4 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to River Oaks.
10.5 * Stock Purchase Agreement dated September 30, 1996
between the Seller and the registrant with respect
to Stanford Centre.
10.6 * First Amendment to Stock Purchase Agreement dated
January 31, 1997 between the Seller and the
registrant with respect to Stanford Centre.
10.7 Term Loan Agreement dated May 1, 1997 in the amount
of $26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.8 Promissory note dated May 1, 1997 in the amount of
$26,000,000 between Emeritus Properties V, Inc.,
("Borrower") and Fleet National Bank ("Lender").
10.9 Promissory Note dated May 1, 1997 in the amount of
$7,000,000 between Emeritus Properties V, Inc.,
("Borrower") and High Yield Partners LLC, ("Lender").
10.10 Credit Agreement dated May 1, 1997 between Emeritus
Properties V, Inc. and High Yield Partners LLC.
10.11 Guaranty dated May 1, 1997 between the registrant
("Guarantor") Emeritus Properties V, Inc., ("Debtor")
and High Yield Partners LLC ("Lender")
23.1 Consent of KPMG Peat Marwick LLP.
* Previously filed.
18
<PAGE>
TERM LOAN AGREEMENT
Dated: As of May 1, 1997
Between
EMERITUS PROPERTIES V, INC.
("Borrower")
and
FLEET NATIONAL BANK ("Lender")
$26,000,000 TERM LOAN
SECURED BY PROPERTY
LOCATED IN NEW PORT RICHEY,
ENGLEWOOD AND
ALTAMONTE SPRINGS, FLORIDA
<PAGE>
LOAN AGREEMENT
This is an agreement (this "Loan
Agreement" or "Agreement") made and entered
into as of the 1st day of May, 1997, by and
between EMERITUS PROPERTIES V, INC., having
an address at c/o Emeritus Corporation, 3131
Elliott Avenue, Suite 500, Seattle,
Washington 98121 ("Borrower") and FLEET
NATIONAL BANK, a national banking association
having an address at 75 State Street, Boston,
Massachusetts 02109 ("Lender").
WITNESSETH:
1. BACKGROUND.
1.1 DEFINED TERMS.
Capitalized terms used in this Agreement
are defined either in Exhibit A, or in
specific sections of this Agreement, or in
another Loan Document, as referenced in
Exhibit A.
1.2 BORROWER.
Borrower is a corporation organized under
the laws of the State of Washington.
1.3 LAND AND IMPROVEMENTS; PROPERTY.
Simultaneously with the closing of this
Loan Borrower will acquire the following
three assisted living communities:
(i) The 242 bed, 200 unit assisted
living facility commonly known as La Casa
Grande at New Port Richey located at 6400
Trouble Creek Road in New Port Richey, Pasco
County, Florida (the "New Port Richey
Facility") on the real property described as
Parcel 1 in Exhibit B (the "New Port Richey
Land");
(ii) The 216 bed, 155 unit assisted
living facility commonly known as Englewood
Retirement Center located at 925 South River
Road in Englewood, Sarasota County, Florida
(the "Englewood Facility") on the real
property described as Parcel 2 in Exhibit B
(the "Englewood Land"); and
(iii) The 180 bed, 118 unit assisted
living facility commonly known as Stanford
Centre and located at 433 Orange Drive in
Altamonte Springs, Seminole County, Florida
(the "Stanford Facility" and together with
the New Port Richey Facility and the
Englewood Facility, the "Facilities") on the
real property described in Exhibit B (the
"Stanford Land" and together with the New
Port Richey Land and the Englewood Land, the
"Land").
The Land and the Facilities are individually
and collectively called the "Property".
<PAGE>
1.4 USE OF LOAN PROCEEDS.
Borrower has applied to Lender for a loan
of $26,000,000 ("Loan") the proceeds of which
are to be used to finance the acquisition of
Property and to pay costs and expenses
incident to closing the Loan.
1.5 GUARANTIES AND INDEMNITIES.
As an inducement to Lender to make the
Loan, Emeritus Corporation (the "Guarantor")
has agreed to furnish certain guaranties and
indemnities.
1.6 LOAN.
Subject to all of the terms, conditions
and provisions of this Agreement, and of the
agreements and instruments referred to
herein, Lender agrees to make the Loan and
Borrower agrees to accept and repay the Loan.
2. LOAN PROVISIONS.
2.1 AMOUNT OF LOAN.
The Loan shall be in the amount of
$26,000,000.
2.2 TERM OF LOAN; EXTENSION RIGHT.
The Loan shall be for a term ("Initial
Term") commencing on the date hereof and
ending on April 30, 1999 ("Maturity Date").
The Initial Term may be extended for one
"Extended Term" until April 30, 2000
("Extended Maturity Date") upon satisfaction
of the conditions set forth in Section 2.6.
2.3 INTEREST RATE AND PAYMENT TERMS.
The Loan shall be payable as to interest
and principal in accordance with the
provisions of the Note. The Note also
provides for interest at a Default Rate, Late
Charges and prepayment rights and fees.
2.4 LOAN FEES.
Borrower shall pay a loan fee in
accordance with the terms of a letter
agreement dated as of the date hereof between
the Borrower and Lender, as the same may be
amended, restated, modified or supplemented
from time to time.
2.5 ACCELERATION.
The Loan may be accelerated, at the option
of Lender, following an Event of Default.
Upon such an acceleration, all principal,
accrued interest and costs and expenses
shall be due and payable together with
interest on such principal at the Default
Rate and any applicable Yield Maintenance
Prepayment Fee.
2
<PAGE>
2.6 CONDITIONS TO EXTENDING LOAN.
Upon satisfaction of each of the following
conditions, Borrower may extend the Loan
until the Extended Maturity Date:
2.6.1NO DEFAULT.
No Default shall exist;
2.6.2NOTICE FROM BORROWER.
Borrower shall have given Lender
written notice of Borrower's request to
exercise its extension right at least
thirty (30) days, but not more than
sixty (60) days, before the Maturity
Date;
2.6.3CONDITIONS SATISFIED.
All of the conditions set forth in 7
of this Agreement, to the extent
applicable, shall continue to be
satisfied;
2.6.4EXTENSION FEE.
The extension fee referred to in
Section 2.4 shall have been paid at
least ten (10) Business Days prior to
the Maturity Date;
2.6.5ADDITIONAL DOCUMENTS.
Borrower and Guarantor shall have
executed and delivered to Lender such
agreements and documents as Lender may
reasonably require incident to the
extension;
2.6.6BEFORE END OF TERM.
Each of the following conditions are
satisfied not later than, and on, the
Maturity Date:
2.6.6.1LTV REQUIREMENT.
The Loan to Value Ratio based on the
Value of the Property (as defined in
Section 9.17.1) shall not be in excess
of 75%; and
2.6.6.2DEBT SERVICE COVERAGE.
The Debt Service Coverage for the
preceding quarter ending March 31, 1999
shall be not less than 1.40:1, where
Debt Service on the Loan is calculated
based on a twenty-five year amortization
schedule and an interest rate equal to
the then current rate of interest of
United States Treasury Bills having a
maturity of ten (10) years plus 225
basis points (2.25%). For the purposes
of this calculation Net
3
<PAGE>
Operating Income shall be based on
Borrower's Net Operating Income for the
three month period prior to the
commencement of the Extended Term or
such other evidence as Lender in its
sole and absolute discretion may accept.
With reasonable promptness following
receipt by Lender of Borrower's written
notice under clause 2.6.2 above requesting
the extension, Lender shall notify Borrower
in writing if all of the conditions precedent
to the extension, other than payment of the
extension fee, have been satisfied, or if
further information or certificates are
required. If Lender determines that the
conditions to extension have been satisfied,
other than payment of the extension fee,
Lender shall so notify Borrower and upon
Lender's receipt of the extension fee not
later than ten (10) Business Days prior to
the Maturity Date, so long as no Default
exists, the Loan Term shall be extended until
the Extended Maturity Date.
3. SECURITY FOR THE LOAN; LOAN AND SECURITY
DOCUMENTS.
3.1 SECURITY.
The Loan together with interest thereon
and all other charges and amounts payable by,
and all other obligations of, Borrower and
Guarantor to Lender, with respect to the
Property, whenever incurred, direct or
indirect, absolute or contingent
("Obligations") shall be secured by the
following "Security" which Borrower, and
Guarantor where applicable, agree to provide
and maintain:
3.1.1MORTGAGE DEED AND SECURITY
AGREEMENT.
A first priority mortgage deed and
security agreement ("Mortgage") on (i)
the Property, (ii) all land,
improvements, furniture, fixtures,
goods, equipment, and other assets
(including, without limitation,
accounts, contracts, contract rights,
Licenses and Permits, general
intangibles, documents and instruments),
including all after-acquired property,
owned, or in which Borrower has or
obtains any interest, in connection with
the Property; (iii) all insurance
proceeds and other proceeds therefrom,
and (iv) all other assets of Borrower
whether now owned or hereafter acquired
and related to the Property.
3.1.2COLLATERAL ASSIGNMENT OF LEASES
AND RENTS.
A first priority collateral
assignment of leases and rents
("Assignment of Leases and Rents") with
respect to all leases, subleases and
occupancy rights of the Property and all
income and profits to be derived from
the operation and leasing of the
Property.
4
<PAGE>
3.1.3COLLATERAL ASSIGNMENT OF
CONTRACTS, LICENSES AND PERMITS.
A first priority collateral
assignment and security agreement
("Assignment of Contracts") with respect
to all Licenses and Permits and all
contracts, agreements and warranties now
owned or hereafter acquired by Borrower
and related in any manner to the
Property if and to the extent such an
assignment and security interest can be
granted under applicable law.
3.1.4GUARANTY.
The unconditional, continuing
guaranty ("Guaranty") from Guarantor
guaranteeing payment of the Loan, and
performance of all Borrower's
Obligations under the Loan Documents.
3.1.5ENVIRONMENTAL COMPLIANCE AND
INDEMNIFICATION AGREEMENT.
A compliance and indemnification
agreement with respect to environmental
matters ("Environmental Indemnity") from
Borrower and Guarantor (collectively,
"Indemnitors").
3.2 LOAN DOCUMENTS AND SECURITY DOCUMENTS.
The Loan shall be made, evidenced,
administered, secured and governed by all of
the terms, conditions and provisions of the
"Loan Documents", each as the same may be
hereafter modified or amended, consisting of:
(i) this Loan Agreement; (ii) the $26,000,000
promissory note ("Note"); (iii) the Mortgage
and related UCC financing statements; (iv)
the Assignment of Leases and Rents; (v) the
Assignment of Contracts, Licenses and Permits
and related UCC financing statements; (vi)
the Guaranty from Guarantor; (vii) the
Environmental Indemnity from the Indemnitors;
and (viii) any other documents, instruments,
or agreements executed to further evidence or
secure the Loan, not including any
intercreditor or subordination agreement with
any other lender.
Each of the Loan Documents listed in items
(i) through (viii), inclusive is dated of
even date herewith. The Mortgage, Assignment
of Leases and Rents, Assignment of Contracts,
Licenses and Permits, Environmental Indemnity
and Guaranty are sometimes collectively
referred to as the "Security Documents".
4. CONTINUING AUTHORITY OF AUTHORIZED
REPRESENTATIVES.
Lender is authorized to rely upon the
continuing authority of the persons,
officers, signatories or agents hereafter
designated ("Authorized Representatives") to
bind Borrower with respect to all matters
pertaining to the Loan and the Loan Documents
including, but not limited to, the selection
of interest rates. Such authorization may be
changed only upon written notice to Lender
accompanied by evidence, reasonably
satisfactory to Lender, of the
5
<PAGE>
authority of the person giving such notice
and such notice shall be effective not sooner
than five (5) Business Days following receipt
thereof by Lender. The present Authorized
Representatives are listed on Exhibit D.
Lender shall have a right of approval, not to
be unreasonably withheld or delayed, over
the identity of the Authorized
Representatives so as to assure Lender that
each Authorized Representative is a
responsible and senior official of Borrower.
5. LENDER'S CONSULTANTS.
5.1 RIGHT TO EMPLOY.
Lender shall have the right to employ its
own personnel, or one or more engineers,
architects, builders or other construction
specialists, environmental advisors,
scientists, accountants, and attorneys to act
as an advisor to Lender in connection with
the Loan (each of which shall be a "Lender's
Consultant").
5.2 FUNCTIONS.
The functions of a Lender's Consultant
shall include, without limitation: (i)
inspection and physical review of the
Property; (ii) review and analysis of any
work to be done in connection with the
Property; (iii) review and analysis of
environmental matters; and (iv) review and
analysis of financial and legal matters, all
as Lender shall reasonably determine.
5.3 PAYMENT.
The reasonable costs and fees of Lender's
Consultants shall be paid by Borrower upon
billing therefor.
5.4 ACCESS.
Borrower shall provide Lender's
Consultants with continuing reasonable access
to all aspects of the Property and books and
records related thereto at reasonable times
during the day and upon at least two (2)
Business Days' prior written notice to
Borrower.
5.5 NO LIABILITY.
Neither Lender nor any of its Consultants
shall have liability to Borrower, Guarantor,
or any third party, on account of: (i)
services performed by Lender's Consultants;
(ii) any failure or neglect by Lender's
Consultants to properly perform services; or
(iii) any approval or disapproval of work,
plans or other matters. Neither Lender nor
Lender's Consultants shall have any
obligation regarding proper performance of
work related to the Property. Borrower shall
have no rights under or relating to any
agreement, report, or similar document
prepared by any of Lender's Consultants for
Lender.
6.LOAN DISBURSEMENT AND BORROWER'S REQUIRED
EQUITY CONTRIBUTIONS.
6
<PAGE>
6.1 ADVANCE OF LOAN PROCEEDS.
Lender shall, subject to compliance with
all of the other terms, conditions and
provisions of this Agreement, make
disbursement of the Loan proceeds entirely at
closing.
6.2 REQUIRED EQUITY CONTRIBUTION;
ADDITIONAL FUNDS FROM BORROWER.
Borrower agrees to make and maintain
Borrower's "Required Equity Contribution"
which shall consist of: (i) on or before
closing an initial contribution of $7,000,000
in cash, subject to verification by Lender,
which cash may be the proceeds of the
Mezzanine Loan.
7. CONDITIONS PRECEDENT.
It shall be a condition precedent of
Lender's obligation to close and fund the
Loan that each of the following conditions
precedent be satisfied in full (as determined
by Lender in its discretion which discretion
shall be exercised in good faith having due
regard for the advice of Lender's Consultants
unless otherwise provided below), unless
specifically waived in writing by Lender at
or prior to closing and funding the Loan:
7.1 SATISFACTORY LOAN DOCUMENTS.
Each of the Loan Documents and Security
Documents shall be satisfactory in form,
content and manner of execution and delivery
to Lender and its counsel.
7.2 NO MATERIAL CHANGE.
No material adverse change shall have
occurred in the financial condition,
business, affairs, operations or control of
Borrower or Guarantor since the date of their
respective financial statements most recently
delivered to Lender.
7.3 WARRANTIES AND REPRESENTATIONS
ACCURATE.
All warranties and representations made by
or on behalf of any of Borrower or Guarantor
to Lender shall be true, accurate and
complete in all material respects and shall
not omit any material fact necessary to make
the same not misleading.
7.4 FINANCIALS AND APPRAISALS.
Lender shall have received and approved:
(i) financial statements from Borrower and
Guarantor complying with the standards set
forth in Section 9.2. and (ii) an appraisal
of the Property from an appraiser acceptable
to Lender setting forth an appraised value of
the Property which results in a Loan to Value
Ratio not in excess of 75%.
7
<PAGE>
7.5 VALIDITY AND SUFFICIENCY OF SECURITY
DOCUMENTS.
The Mortgage and the other Security
Documents shall create a valid and perfected
lien on the property described therein
("Collateral") and each of the Security
Documents and related UCC filings shall have
been duly recorded and filed to the
satisfaction of Lender and its counsel.
7.6 NO OTHER LIENS; TAXES AND MUNICIPAL
CHARGES CURRENT.
The Collateral shall not be subject to any
liens or encumbrances, whether inferior or
superior to the Loan Documents or the
Security Documents, except in respect of: (i)
real estate taxes and personal property taxes
not yet due and payable; and (ii) Permitted
Title Exceptions, if any. All real estate
taxes, personal property taxes and other
municipal charges relating to any of the
Collateral shall be current.
7.7 PROPERTY MATTERS.
Lender shall have received and
independently approved each of the following:
(i) evidence of Licenses and Permits for the
Property sufficient to allow the Property to
be operated in the ordinary course of
business and as licensed assisted living
facilities; (ii) a report from a Lender's
Consultant to the effect that the Property is
in good repair and safe condition with no
structural deficiencies and no material need
for repairs or replacements except in the
ordinary course of business; (iii) a
detailed, current rent roll; and (iv) the
Form Lease.
7.8 COMPLIANCE WITH LAW.
Lender shall have received and
independently approved evidence that:
(i)PRESENT COMPLIANCE. All real
estate and tangible personal property
constituting or intended to constitute
Collateral for the Loan complies with
all applicable Legal Requirements and
the provisions of all applicable
Licenses and Permits.
(ii) NO PROHIBITIONS OR VIOLATIONS.
There are no applicable Legal
Requirements which prohibit or adversely
limit the use of the Property for the
purposes the same are intended for, nor
is there any outstanding and uncured
violation of any applicable Legal
Requirements.
(iii) LICENSES AND PERMITS. All
Licenses and Permits and private
approvals of every nature whatsoever, if
any, which are reasonably necessary in
order to allow the operation of the
Property as contemplated by this
Agreement and as needed under applicable
Legal Requirements have been duly and
finally received with all appeal
8
<PAGE>
periods therefrom having elapsed, with
no appeal having been taken therefrom,
and with no violations existing under
the terms thereof.
7.9 TITLE INSURANCE; OTHER EVIDENCE OF
PERFECTION.
Lender shall have received: (i)(a) at
closing a mortgagee's pro forma title
insurance policy dated as of the date of the
Loan closing and (b) within twenty (20) days
thereafter a mortgagee's title insurance
policy, each of which meets Lender's title
insurance requirements previously furnished
to Borrower to the reasonable satisfaction of
Lender and its counsel; and (ii) such other
evidence of the perfection of its security
interests as Lender and its counsel may
reasonably require.
7.10SURVEY.
Lender shall have received and approved a
current, on-site instrument survey of the
Land containing a certification thereon, or
on a separate surveyor's certificate, of a
Registered Land Surveyor acceptable to Lender
which meets Lender's survey requirements
previously furnished to Borrower.
7.11CONDITION OF PROPERTY.
There shall have been no material
unrepaired or unrestored damage or
destruction by fire or otherwise to any of
the real or tangible personal property
comprising or intended to comprise the
Collateral.
7.12NO TAKINGS.
Neither the Property nor any material
portion thereof shall have been taken by
eminent domain nor shall there be any threat
of such a taking.
7.13INSURANCE.
Borrower shall have provided to Lender
with respect to the Property and the
Collateral evidence of: insurance coverages
which meet the property, hazard and other
insurance requirements set forth on Exhibit D
of this Loan Agreement to the satisfaction of
Lender and Lender's Consultants.
7.14UTILITIES; WATER; DRAINAGE.
Lender shall have received letters
addressed to Lender from the applicable
municipality that sanitary drinking water,
sanitary sewer disposal systems, utility and
power connections and storm drainage adequate
for the Property are available as a matter of
right.
7.15HAZARDOUS WASTE, HAZARDOUS MATERIALS
AND TOXIC SUBSTANCES.
Lender shall have received, and in its
sole discretion approved, satisfactory
reports addressed to Lender from acceptable,
qualified professionals prepared in
9
<PAGE>
accordance with Lender's protocols indicating
the acceptability of the environmental risk
associated with the Property, addressing the
existence of any Hazardous Materials at, or
which may affect, the Property and the
Property's compliance with Environmental
Legal Requirements.
7.16ORGANIZATIONAL DOCUMENTS AND ENTITY
AGREEMENTS.
Lender shall have received and approved
the Articles of Incorporation and by-laws of
Borrower and Guarantor.
7.17VOTES, CONSENTS AND AUTHORIZATIONS.
Lender shall have received and approved
certified copies of all corporate votes,
consents and authorizations as may be
reasonably required to evidence authority
for: (i) closing the Loan and the
transactions contemplated hereby; (ii)
providing continuing authorization to
designated persons to deal in all respects on
behalf of Borrower; and (iii) the execution
of all Loan Documents.
7.18LEGAL AND OTHER OPINIONS.
Lender shall have received and approved
legal opinion letters from counsel
representing Borrower and Guarantor which
meet Lender's legal opinion requirements
previously furnished to Borrower.
Lender shall also have received from
qualified attorneys, engineers, surveyors and
architects, such other certificates,
opinions, surveys, and other evidence of
compliance with each of the conditions herein
set forth as Lender may reasonably require.
7.19NO DEFAULT.
There shall not be any Default under any
of the Loan Documents.
8. WARRANTIES AND REPRESENTATIONS.
Borrower warrants and represents to Lender
for the express purpose of inducing Lender to
enter into this Agreement, to make the Loan,
and to otherwise complete all of the
transactions contemplated hereby, that as of
the date of this Agreement, upon the date the
Loan is funded (if other than the date of
this Agreement) and at all times thereafter
until the Loan has been repaid and all
Obligations to Lender have been satisfied as
follows:
8.1 FINANCIAL INFORMATION.
True, accurate and complete financial
statements of Borrower and Guarantor have
been delivered to Lender and the same fairly
present the financial condition of Borrower
and Guarantor as of the dates thereof and no
material and adverse change has occurred in
such financial condition since the dates
thereof. All financial statements of
Borrower and Guarantor hereafter
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furnished to Lender shall be true, accurate
and complete and shall fairly present the
financial condition of Borrower and Guarantor
as of the dates thereof.
8.2 NO VIOLATIONS.
The consummation of the Loan and the
subsequent payment and performance of the
Obligations evidenced and secured by the Loan
Documents do not constitute a violation of,
or conflict with, any law, order, regulation,
contract, agreement or organizational
document to which Borrower or Guarantor is a
party or by which Borrower or Guarantor, or
the property thereof, is bound.
8.3 NO LITIGATION.
There is no material litigation now
pending, or to the best of Borrower's
knowledge threatened, against Borrower or
Guarantor which if adversely decided would
reasonably be expected to materially impair
the ability of Borrower or Guarantor to pay
and perform its obligations hereunder or
under the other Loan Documents. There is no
litigation, whether or not material, pending,
or to the best of Borrower's knowledge
threatened, against Borrower in which the
amount in controversy exceeds $25,000.00
which either: (i) is not covered by
insurance, or (ii) has not been previously
disclosed to Lender.
8.4 LEASES.
True and complete copies of all leases of
each Property which are now in effect (and
all guaranties thereof) have been delivered
to Lender. To Borrower's knowledge, such
leases have not been further amended or
changed in any respect and are in full force
and effect, enforceable in accordance with
the terms thereof, subject, however, to the
terms of the Loan Documents.
8.5 COMPLIANCE WITH LEGAL REQUIREMENTS.
To Borrower's knowledge, after due and
diligent inquiry, the Property complies with
all material Legal Requirements and any and
all covenants, conditions, restrictions or
other matters which materially affect the
Property. The Borrower is not in violation
of any law, ordinance, license or regulation
of the United States of America, the State of
Florida and any political subdivisions
thereof, and any agency, department,
commission, board, bureau or instrumentality
of any of them, including without limitation
the Florida Agency on Healthcare
Administration (collectively "Governmental
Authorities") now in effect applicable to the
conduct of its businesses, including without
limitation, the General Statutes of the State
of Florida and the rules and regulations
promulgated thereunder, except for violations
which will not singly nor in the aggregate
have a material adverse effect on the
business, operations, properties, prospects,
assets or financial condition of the
Borrower. The Borrower has duly filed all
applications and reports required to be filed
by it with any Governmental Authority in
order to purchase the Property and lawfully
operate the Property after closing the Loan.
There is not now pending, issued nor
outstanding by or before any Governmental
Authority, or to the knowledge of
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the Borrower threatened, any order to show
cause, notice of violation, notice of
apparent liability or notice of forfeiture
or, to the knowledge of the Borrower, any
investigation or material complaint against
the Borrower. To Borrower's knowledge, after
due and diligent inquiry, the Facilities and
the equipment located thereon, along with the
staffing and operation of each, satisfy,
without material exception, the applicable
licensing requirements of the State of
Florida.
8.6 REQUIRED LICENSES AND PERMITS.
As of the Closing of the Loan, the
Borrower will be the holder of all Licenses
and Permits and Certificates of Need ("CONs")
issued by any state agency or authority
necessary to operate the Facilities. The
Licenses and Permits and CONs constitute all
of the Licenses, CONs and authorizations
required by any Governmental Authority for
the existing and proposed operation of the
Facilities by Borrower as of the Closing of
the Loan, and the Licenses and Permits and
CONs will be in full force and effect and
unimpaired by any act or omission of the
Borrower or of its officers, directors,
employees, representatives or agents. No
waivers of any laws, rules, regulations or
requirements (including, but not limited to,
minimum square footage requirements per bed)
are required for the Facilities to operate at
their current licensed bed capacity.
Borrower is in good standing with the
respective governmental, quasi-governmental
and other third party payors and regulatory
agencies under such applicable licenses and
any applicable Reimbursement Contracts. To
Borrower's knowledge, after due and diligent
inquiry, there is not now pending nor
threatened, any action or investigation by or
before any Governmental Authority or any
state or federal grand jury to revoke,
cancel, rescind, modify or refuse to renew
any of the Licenses and Permits or CONs held
by the current operator of the Facilities.
To Borrower's knowledge, after due and
diligent inquiry, each required application
for renewal of any of the Licenses and
Permits has been or will be timely filed with
the appropriate state agency or authority.
The Borrower has provided to the Lender the
most recent state licensure report and list
of deficiencies, if any, related to the
Facilities. The Borrower is not currently
the subject of any Governmental Authority
Office of Inspector General investigation,
recoupment, audit or review nor are any of
the reimbursement, operational or other
practices of the Borrower currently being
investigated by a state or federal grand jury
or by any other governmental entity or agency
empowered to review Medicare or Medicaid,
particularly any fraud and/or abuse, issues.
8.7 PERMITS, ROADS, CURB CUTS AND UTILITY
CONNECTIONS.
All Licenses and Permits and regulatory
approvals have been obtained by Borrower to
permit its lawful occupancy and operation of
the Facilities; all public utility and public
sanitary sewage services necessary for the
use of the Facilities are in existence to the
Property; and dedicated and publicly
maintained roads and curbcuts necessary for
the full use of the Property for their
intended purposes have been completed. There
are no unsatisfied conditions and no
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offsite roads, sewage systems, water systems
or other improvements which must be
completed.
8.8 GOOD TITLE AND NO LIENS.
As of the Closing of the Loan, the
Borrower will be the lawful owner of the
Property and will be the lawful owner of or
have the legal right to use the areas over,
under or on which utility or passage
easements are required to make use of the
Property and parking, and is and will be the
lawful owner of the Property, free and clear
of all liens and encumbrances of any nature
whatsoever, except for the Permitted Title
Exceptions.
8.9 USE OF PROCEEDS.
The proceeds of the Loan shall be used
solely and exclusively for the acquisition of
the Property and payment of costs and
expenses incurred in connection with the
financing provided by the Loan. No portion
of the proceeds of the Loan shall be used
directly or indirectly, and whether
immediately, incidentally or ultimately (i)
to purchase or carry any margin stock, or to
extend credit to others for the purpose
thereof, or to repay or refund indebtedness
previously incurred for such purpose, or (ii)
for any purpose which would violate or is
inconsistent with the provisions of
regulations of the Board of Governors of the
Federal Reserve System including, without
limitation, Regulations G, T, U AND X
THEREOF.
8.10ENTITY MATTERS.
8.10.1 ORGANIZATION.
Borrower is a duly organized validly
existing corporation in good standing
under the laws of the State of
Washington and is duly qualified in the
jurisdiction where the Property is
situated and in each jurisdiction where
the nature of its business is such that
qualification is required and has all
requisite power and authority to conduct
its business and to own its property, as
now conducted or owned, and as
contemplated by this Loan Agreement.
8.10.2 OWNERSHIP AND TAXPAYER
IDENTIFICATION NUMBERS.
The Borrower is a 100% owned
subsidiary of the Guarantor, and no
additional ownership interests, or
rights or instruments convertible into
such ownership interests, shall be
issued, nor shall any ownership change,
except for Permitted Transfers and
except in connection with the present
terms of the Mezzanine Loan. The
taxpayer identification numbers of
Borrower and the Guarantor are
accurately stated in Exhibit C.
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8.10.3 AUTHORIZATION.
All required corporate actions and
proceedings have been duly taken so as
to authorize the execution and delivery
by Borrower and Guarantor of the Loan
Documents.
8.11VALID AND BINDING.
Each of the Loan Documents constitute
legal, valid and binding obligations of
Borrower and, where applicable, Guarantor in
accordance with the respective terms thereof,
subject to bankruptcy, insolvency and similar
laws of general application affecting the
rights and remedies of creditors and, with
respect to the availability of the remedies
of specific enforcement, subject to the
discretion of the court before which any
proceeding therefor may be brought.
8.12DEFERRED COMPENSATION AND ERISA.
Borrower does not have any pension, profit
sharing, stock option, insurance or other
arrangement or plan for employees covered by
Title IV of the Employment Retirement
Security Act of 1974 ("ERISA") ("ERISA Plan")
and no "Reportable Event" as defined in ERISA
has occurred and is now continuing with
respect to any such ERISA Plan. The granting
of the Loan, the performance by Borrower of
its obligations under the Loan Documents and
Borrower's conducting of its operations do
not and will not violate any provisions of
ERISA.
8.13CONDITIONS SATISFIED.
Assuming that Lender and Lender's
Consultants have approved all matters
requiring their approval, all of the
conditions precedent to closing and funding
the Loan set forth in Section 7 have been
satisfied.
8.14NO MATERIAL CHANGE; NO DEFAULT.
There has been no material adverse change
in the financial condition, business, affairs
or control of Borrower or Guarantor since the
date of their respective last financial
statements most recently delivered to the
Lender in accordance with the requirements of
Section 9.2. hereof. There is no Default on
the part of Borrower or Guarantor under this
Agreement or any of the other Loan Documents
and no event has occurred and is continuing
which could constitute a Default under any
Loan Document.
8.15NO BROKER OR FINDER.
Neither Borrower, nor Guarantor, nor
anyone on behalf thereof, has dealt with any
broker, finder or other person or entity who
or which may be entitled to a broker's or
finder's fee, or other compensation, payable
by Lender in connection with this Loan.
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8.16BACKGROUND INFORMATION AND
CERTIFICATES.
All of the factual information contained
or referred to in Section 1 of this Agreement
and in the Exhibits to this Agreement or the
other Loan Documents, and in the certificates
and opinions furnished to Lender by or on
behalf of Borrower in connection with the
Property or the Loan, is true, accurate and
complete in all material respects, and omits
no material fact necessary to make the same
not misleading.
8.17GUARANTOR'S WARRANTIES AND
REPRESENTATIONS.
Borrower has no reason to believe that any
warranties or representations made in writing
by Guarantor to Lender are untrue, incomplete
or misleading in any respect.
8.18TRANSFER OF LICENSE OR BED CAPACITY.
The Borrower has not granted to any third
party the right to reduce the number of
licensed beds in any Facility or to apply for
approval to move the right to any or all of
the licensed beds to any other location.
8.19MEDICARE AND MEDICAID CERTIFICATION.
None of the Facilities is certified for
participation in the Medicare or Medicaid
Programs.
9. COVENANTS.
Borrower covenants and agrees that from
the date hereof and so long as any of the
Loan or other Obligations remains
outstanding, as follows:
9.1 NOTICES.
Borrower shall, with reasonable promptness,
but in all events within ten (10) days after
it has actual knowledge thereof, notify
Lender in writing of the occurrence of any
act, event or condition which constitutes a
Default under any of the Loan Documents.
Such notification shall include a written
statement of any remedial or curative actions
which Borrower proposes to undertake to cure
or remedy such Default. Borrower will
specifically report to the Lender promptly
the receipt by the Borrower of any material
correspondence from the Florida Agency on
Healthcare Administration or other state and
federal agencies regarding the "quality of
care" at the Facilities, other than
correspondence received in the ordinary
course of its business of a positive or
neutral nature.
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<PAGE>
9.2 FINANCIAL STATEMENTS AND REPORTS.
Borrower shall furnish or cause to be
furnished to Lender from time to time, the
following financial statements and reports
and other information, all in form, manner of
presentation and substance acceptable to
Lender:
9.2.1ANNUAL STATEMENTS.
By April 30 in each calendar year,
(i) unaudited financial statements of
Borrower prepared in accordance with
generally accepted accounting
principles, or other recognized method
of accounting acceptable to Lender,
consistently applied, in form and manner
of presentation acceptable to Lender by
an independent, certified public
accountant acceptable to Lender, such
financial statements to include and to
be supplemented by such detail and
supporting data and schedules as Lender
may from time to time reasonably
determine, but such data and schedules
shall not be required to be certified by
anyone other than the Borrower and (ii)
separate financial statements on the
operations of each of the Facilities
certified by the Borrower to be true and
correct;
9.2.2PERIODIC STATEMENTS.
Within forty five (45) days following
the end of each calendar quarter the
following, internally prepared by
Borrower and certified by Borrower to
be true, accurate and complete: (i) an
operating statement showing the results
of operation for the prior quarter and
on a year-to-date basis for the period
just ended; (ii) a detailed, current
rent roll and leasing status reports
(which shall include existing and
prospective tenants) for the Property,
containing such details as Lender may
reasonably request, (iii) cash flows for
the quarter just ended and (iv) a
certificate of compliance with regard to
Debt Service Coverage from and after the
date on which the first such calculation
is to be made pursuant to Section 9.19;
9.2.3DATA REQUESTED.
Within a reasonable period of time
and from time to time such other
financial data or information as Lender
may reasonably request with respect to
the Property or Borrower, including, but
not limited to, rent rolls, aged
receivables, aged payables, leases,
budgets, forecasts, reserves, cash flow
projections, physical condition of the
Property and pending lease proposals;
9.2.4OPERATING BUDGET.
Prior to the end of each calendar
year, an annual operating budget for the
Property for the next year, in form
acceptable to Lender.
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<PAGE>
9.2.5GUARANTOR'S STATEMENTS.
The financial statements and reports
required to be furnished in the
Guaranty.
9.3 PAYMENT OF TAXES AND OTHER
OBLIGATIONS.
Subject to the right to contest set forth
in Section 10.1, Borrower shall duly pay and
discharge, or cause to be paid and
discharged, before the same shall become
overdue, all taxes, assessments and other
governmental charges payable by it, or with
respect to the Property, as well as all
claims or obligations for labor, materials,
supplies or services (involving an amount in
excess of $25,000.00 in any instance or
$100,000.00 in the aggregate) or for borrowed
funds in any amount. Lender shall be
provided with evidence of the payment of all
real estate taxes (or payments in lieu
thereof) within twenty (20) days after
payment of same. After a Default or Event of
Default during the Initial Term and at any
time during the Extension Term, at Lender's
option, Borrower shall be required to deposit
with Lender each month 1/12th of the annual
real estate taxes and insurance premiums for
the Property.
9.4 CONDUCT OF BUSINESS; COMPLIANCE WITH
LAW.
Borrower shall cause the operation of
Facilities to be conducted at all times in a
manner consistent with the level of operation
of Facilities as of the date hereof. Without
limiting the foregoing, Borrower shall:
(i) maintain the standard of care
for the residents of the Facilities at
all times at a level necessary to
insure quality care for the residents
of the Facilities;
(ii) operate the Facilities in
compliance with applicable licenses,
laws and regulations relating thereto
and cause all licenses, permits,
certificates of need (if any),
Reimbursement Contracts (if any are
from time to time in effect), and any
other agreements necessary for the use
and operation of the Facilities or as
may be necessary for participation in
the Medicaid, Medicare, or other
applicable reimbursement programs (to
the extent the Facilities elect to
participate in any such programs) to
remain in effect without reduction in
the number of licenses beds or beds
authorized for use in Medicaid,
Medicare, or other applicable
reimbursement programs;
(iii) maintain sufficient inventory
and equipment of types and quantities
at each Facility to enable Borrower to
adequately operate each Facility; and
(iv) keep all improvements and
equipment located on our used or
useful in connection with each
Facility in good repair, working order
and condition, reasonably wear and
tear excepted, and from time to time
make all needed and proper repairs,
renewals, replacements, additions, and
improvements thereto to keep the same
17
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in good operating condition.
In addition, Borrower shall engage solely
in the ownership and operation of the
Property, and will not enter into any new
ventures, or undertake any Investments,
except as permitted in Section 9.8, or any
new business dealings, without Lender's
express prior written consent in each
instance. As an express inducement to Lender
to make and maintain the Loan, the Borrower
agrees at all times prior to payment and
satisfaction of all Obligations to be and
remain a single purpose entity. Borrower
shall operate the Property and conduct its
affairs in a lawful manner and in compliance
with all Legal Requirements applicable
thereto and all provisions of ERISA.
9.5 INSURANCE.
Borrower shall at all times maintain in
full force and effect the insurance coverages
set forth in Exhibit E of this Loan Agreement
and shall cause Lender to be designated as
mortgagee/loss payee/additional insured in
accordance with the requirements of Exhibit
E. All insurance premiums shall be paid as
and when due, and Lender shall be provided
with evidence of such payment of insurance
premiums prior to closing and thereafter
prior to each date on which the coverage may
lapse for non-payment. Such insurance may,
at Borrower's option, be provided in blanket
coverage, insured along with other properties
owned by affiliates of Borrower provided the
coverage provided under such policy meets the
requirements of Exhibit E for the Property.
9.6 RESTRICTIONS ON LIENS, TRANSFERS AND
ADDITIONAL DEBT.
9.6.1PROHIBITED TRANSACTIONS.
Except for Permitted Transactions,
Borrower shall not:
(i) create or incur, or
suffer to be created or
incurred, or to exist, any
encumbrance, mortgage, pledge,
lien, charge or other security
interest of any kind upon any
of its assets of any character
related to the Property, or
any portion thereof, whether
now owned or hereafter
acquired or upon the proceeds
or products thereof;
(ii) create or incur any
indebtedness for borrowed
funds with respect to the
Property whether secured or
unsecured either directly or
as a guarantor except for the
Loan and the Mezzanine Loan;
(iii) directly or
indirectly permit any sale,
transfer, exchange, assignment
or pledge of or grant of any
security interest in any
ownership interests in
Borrower except to Mezzanine
Lender
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and so long as the transferor
maintains voting control over
such ownership interest in a
manner reasonably acceptable
to Lender; or
(iv) sell, convey,
transfer or exchange any of
its assets of any character
related to the Property, or
any portion thereof, whether
now owned or hereafter
acquired.
9.6.2PERMITTED TRANSACTIONS.
The term "Permitted Transactions"
shall mean Permitted Transfers,
Permitted Additional Debt, Permitted
Title Exceptions and Approved Leases.
9.6.3PERMITTED TRANSFERS.
The term "Permitted Transfers" shall
mean:
(i) the Security
Documents and other agreements
in favor of Lender;
(ii) transactions,
whether outright or as
security, for which Lender's
prior written consent has been
obtained, which consent may be
withheld, granted or granted
conditionally, subject to such
protective and other
conditions as Lender may
require in its sole and
absolute discretion;
(iii) sales or
dispositions in the ordinary
course of business of worn,
obsolete or damaged items of
personal property or fixtures
which are suitably REPLACED;
AND
9.6.4PERMITTED ADDITIONAL DEBT.
The term "Permitted Additional Debt"
shall mean:
(i) transactions,
whether secured or unsecured,
for which Lender's prior
written consent has been
obtained, which consent may be
withheld, granted or granted
conditionally subject to such
protective and other
conditions as Lender may
require in its sole and
absolute discretion;
(ii) indebtedness
incurred in the ordinary
course of business for the
purchase of goods or services;
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<PAGE>
(iii) fully subordinated
unsecured loans from Guarantor
the proceeds of which are used
solely to pay costs related to
the Property and the repayment
of which is subject to the
limitations set forth in the
Guaranty; and
(iv) indebtedness for
leased or financed furniture,
fixtures or equipment used in
connection with the operation
of the Property where the
aggregate payments due
thereunder do not exceed
$200,000 during any fiscal
year.
9.6.5ADDITIONAL FUNDS.
All funds required for the operation
of the Property in excess of those
available from ordinary cash flow of the
Property shall be provided by Borrower
or Guarantor as additional equity
contributions or as Permitted Additional
Debt.
9.6.6RIGHT TO ACCELERATE LOAN.
The Loan shall become due and payable
in full, and the Lender shall have the
right to accelerate the Loan and declare
an Event of Default, at the option of
Lender, upon any breach or violation of
the provisions of Section 9.6.,
provided, however, except for a
voluntary conveyance, mortgage or lien
(as to which no notice or grace periods
shall be applicable), a Default under
Section 9.6 shall be subject to the
grace or notice periods provided in
11.2.4.
9.6.7LENDER'S OPTIONS.
Lender may, at its option, in lieu of
accelerating the Loan, and in its sole
and absolute discretion, agree to waive
compliance with the provisions of this
Section 9.6. in any instance upon
compliance with such terms and
conditions as Lender may impose,
including, without limitation, the
payment of a material fee and a change
in the interest rate and other terms.
Except for Permitted Transfers, Lender
may grant or withhold, or conditionally
grant, its consent to any proposed
transfer in its sole and absolute
discretion. In the case of a sale or
transfer with Lender's prior written
consent, or any such Permitted Transfer,
the seller or transferor shall remain
jointly and severally liable with the
purchaser or transferee for all
liabilities of Borrower hereunder.
9.7 LIMITS ON GUARANTIES AND
DISTRIBUTIONS.
9.7.1LIMITS.
Borrower shall not guarantee to
anyone other than Lender the obligations
of any person or entity. Borrower shall
not pay any money or distribute any
property (in any form) out of proceeds
of the Loan or
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proceeds of the Property to Guarantor,
or to any affiliated entity or related
party, except for Permitted
Distributions.
9.7.2PERMITTED DISTRIBUTIONS.
The term "Permitted Distributions"
shall mean so long as no Default or
Event of Default has occurred
distributions made out of Available
Excess Cash Flow as set forth in Section
10.2.
9.8 RESTRICTIONS ON INVESTMENTS.
Borrower will not make or permit to exist
or to remain outstanding any Investment out
of proceeds of the Loan or the proceeds of
the Property except an Investment in assets
which constitute the Property or investments
of the proceeds of the Property and which are
in:
(i)marketable direct or guaranteed
general obligations of the United States
of America which mature within one year
from the date of purchase by Borrower;
(ii) bank deposits, certificates of
deposit and banker's acceptances, or
other obligations in or of Lender or
other banks located within and chartered
by the United States of America or a
state and having assets of over
$500,000,000.00; and
(iii) personal property and real
estate acquired in the normal and
ordinary course of Borrower's present
business and in connection with the
Property.
All such Investments shall be made in a
manner which assures that Lender shall have
and maintain a perfected first lien security
interest therein.
9.9 INDEMNIFICATION AGAINST PAYMENT OF
BROKERS' FEES.
Borrower agrees to defend, indemnify and
save harmless Lender from and against any and
all liabilities, damages, penalties, costs,
and expenses, relating in any manner to any
brokerage or finder's fees in respect of the
Loan for any broker utilized by Borrower.
Lender agrees to defend, indemnify and save
Borrower from and against any and all
liabilities, damages, penalties, costs, and
expenses, relating in any manner to any
brokerage or finder's fee in respect of the
Loan for any broker utilized by Lender.
9.10LIMITATIONS ON CERTAIN TRANSACTIONS.
Borrower agrees to the following
limitations:
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9.10.1 NO MERGER, ACQUISITION OR
AMENDMENT.
Borrower shall not, nor shall
Borrower enter into any agreement to,
dissolve or liquidate, nor merge or
consolidate with or otherwise acquire
all or substantially all of the assets
of any other entity or make any material
amendment or modification of its
organizational documents.
9.11APPROVAL AND SUBORDINATION OF
MANAGEMENT AND MANAGEMENT CONTRACT.
Lender shall have the continuing right to
reasonably approve the identity of any
management company (other than Guarantor or
another wholly owned subsidiary of Guarantor,
as to which no such consent is required)
operating the Property and the terms and
conditions of the contract for such
management. Lender's approval shall not be
unreasonably withheld or delayed. If
required by Lender, Borrower shall obtain a
subordination agreement with respect to all
management fees due or to become due to any
affiliate of Borrower, as manager of the
Property (the "Manager"), which shall be in
form and content reasonably satisfactory to
Lender and shall provide that so long as no
Event of Default under any of the Loan
Documents has occurred, the Borrower shall be
entitled to pay said management fees in an
amount to be approved by Lender but which
shall not in the aggregate exceed five (5%)
percent of the gross operating income of the
Property. Manager shall acknowledge that if
Lender exercises its remedies upon an Event
of Default, the management agreement may be
canceled without recourse to Lender.
Borrower shall deliver to Lender, for its
review and approval, the current and any
future management agreement with respect to
the Property.
9.12PLACE FOR RECORDS; INSPECTION.
Borrower shall maintain all of its
business records related to the Property and
the operation thereof at the Facilities or at
address specified at the beginning of this
Agreement. Upon two (2) Business Days' prior
notice and at reasonable times during normal
business hours Lender shall have the right
(through such agents or Lender's Consultants
as Lender may designate) to examine
Borrower's property and make copies of and
abstracts from Borrower's books of account,
correspondence and other records and to
discuss its financial and other affairs with
any of its officers and any accountants hired
by Borrower, it being agreed that Lender
shall use reasonable efforts to not divulge
information obtained from such examination to
others except in connection with Legal
Requirements and in connection with
administering the Loan, enforcing its rights
and remedies under the Loan Documents and in
the conduct, operation and regulation of its
banking and lending business (which may
include, without limitation, the transfer of
the Loan or of participation interests
therein). Any transferee of the Loan or any
holder of a participation interest in the
Loan shall be entitled to deal with such
information in the same manner and in
connection with any subsequent transfer of
its interest in the Loan or of further
participation interests therein.
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9.13COSTS AND EXPENSES.
Borrower shall pay all costs and expenses
(excluding salaries or wages of full time
employees of Lender) reasonably incurred by
Lender in connection with the enforcement of
Lender's rights under the Loan Documents,
including, without limitation, reasonable
legal fees and disbursements, appraisal fees,
inspection fees, plan review fees, travel
costs, fees and out-of-pocket costs of
independent engineers and consultants.
Borrower's obligations to pay such costs and
expenses shall include, without limitation,
all reasonable attorneys' fees and other
costs and expenses reasonably incurred for
preparing and conducting litigation or
dispute resolution arising from any breach by
Borrower or Guarantor of any covenant,
warranty, representation or agreement under
any one or more of the Loan Documents.
9.14COMPLIANCE WITH LEGAL REQUIREMENTS.
Borrower shall comply with all Legal
Requirements applicable to the Property,
Borrower, or both except to the extent the
same are being duly contested by Borrower in
accordance with the provisions of Section
10.1.2 hereof.
9.15INDEMNIFICATION.
Borrower shall at all times, both before
and after repayment of the Loan, at its sole
cost and expense defend, indemnify, exonerate
and save harmless Lender and all those
claiming by, through or under Lender
("Indemnified Party") against and from all
damages, losses, liabilities, obligations,
penalties, claims, litigation, demands,
defenses, judgments, suits, proceedings,
costs, disbursements or expenses of any kind
whatsoever, including, without limitation,
reasonable attorneys' fees and experts' fees
and disbursements, which may at any time
(including, without limitation, before or
after discharge or foreclosure of the
Mortgage) be imposed upon, incurred by or
asserted or awarded against the Indemnified
Party and arising from or out of:
(i)any Hazardous Materials or any
violation of, or failure to comply with,
any Environmental Legal Requirements all
as more particularly provided for in the
Environmental Indemnity with respect to
the Property or any other Collateral;
(ii) any liability for damage to
person or property arising out of any
violation of any Legal Requirement
applicable to the Property, Borrower, or
both, or
(iii) any act, omission, negligence
or conduct at the Property, or arising
or claimed to have arisen, out of any
act, omission, negligence or conduct of
Borrower or any contractor, sub-
contractor, tenant, occupant or invitee
thereof, which is in any way related to
the Property.
Notwithstanding the foregoing, an
Indemnified Party shall not be entitled to
indemnification in respect of claims arising
from acts of its own gross
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negligence or willful misconduct to the
extent that such gross negligence or willful
misconduct is determined by the final
judgment of a court of competent
jurisdiction, not subject to further appeal,
in proceedings to which such Indemnified
Party is a proper party or arising from the
acts or omissions of any Indemnified Party or
any third party after Borrower has been
dispossessed of the Property.
9.16LEASING MATTERS.
9.16.1 [intentionally omitted]
9.16.2 LENDER'S FURTHER APPROVAL
REQUIRED.
Borrower shall be at liberty to
modify, amend or terminate existing
leases, or enter into new leases, of
premises within the Property on
commercially reasonable terms and
conditions, except that without Lender's
prior written consent in each instance:
(i) no lease or leases involving more
than five percent (5%) of the rentable
space at the Property in the aggregate
shall be terminated except for material
breach of a tenant's monetary
obligation, and (ii) no existing lease
shall be modified or amended, and no new
lease shall be entered into, on terms
and conditions which are materially less
favorable than those set forth in the
approved Leasing Pro-Forma or the Form
Lease. Lender shall not unreasonably
withhold, delay or condition its consent
to any such requested termination or
deviation so long as the request is
consistent with then existing market
conditions. Lender shall be provided,
within ten (10) Business Days following
execution thereof with a full and
complete copy of each permitted lease
and any amendment or modification
thereof. Lender shall not withhold its
approval of the economic terms of any
lease which are not less favorable than
the economic terms established by the
Leasing Pro-Forma. Any lease, or
modification or amendment of lease,
which has been so approved by Lender,
and any lease, or modification or
amendment of lease which does not
require Lender's approval, shall be an
"Approved Lease".
9.16.3 BORROWER'S REQUESTS.
Any request by Borrower for an
approval from Lender with respect to
leasing matters shall be accompanied, at
a minimum, by the following: (i) the
proposed lease or amendment or
modification thereof complete with all
applicable schedules and exhibits; (ii)
a complete copy of any proposed
guaranty; (iii) comprehensive financial
information with respect to the proposed
tenant, sub-tenant or assignee and, if
applicable, the proposed guarantor (as
to new leases or amendments or
modifications to existing leases
involving material economic changes, and
as to proposed sub-lets or assignments);
(iv) a brief written summary of the
proposed permitted uses and a discussion
of how such uses relate to other
tenancies then existing at the Property;
(v) an executive summary of the terms
and conditions of the proposed lease,
sub-lease or assignment, and, if
applicable, the proposed
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guaranty; and (vi) an executive summary
of the facts and conditions relating to
any proposed termination of lease.
9.16.4 LENDER RESPONSE.
Lender shall act on requests from
Borrower for any approval under Section
9.17 in a commercially reasonable manner
and shall use commercially reasonable
efforts to respond to any such request
within five (5) Business Days following
Lender's receipt thereof. Lender's
response may consist of an approval or
disapproval of the request, or a
conditional approval thereof subject to
specified conditions, or a request for
further data or information, or any
combination thereof. If a proposed
lease which otherwise meets the Leasing
Pro Forma is not disapproved or
conditionally approved within such
five (5) Business Days following Lenders
receipt thereof, such proposed lease
shall be deemed approved by Lender, and
Borrower may proceed on that basis. In
order to expedite the processing of
requests for such approvals, Borrower
agrees to provide Lender with as much
advance information as is possible in a
commercially reasonable manner in
advance of Borrower's formal request for
an approval. Borrower agrees to prepare
and submit to Lender for Lender's prior
approval, which approval shall not be
unreasonably withheld or delayed a
standard lease form ("Form Lease").
Whenever reasonably possible all
Borrower's requests for lease approvals
shall be accompanied by an express
description of any deviations from the
Form Lease and the Leasing Pro-Forma.
9.16.5 SNDAS AND ESTOPPELS.
Lender shall have the right to
require each tenant to execute and
deliver to Lender a subordination, non-
disturbance of possession and attornment
agreement ("SNDA Agreement") in form,
content and manner of execution
reasonably acceptable to Lender and,
from time to time, an estoppel
certificate in form and manner of
execution reasonably acceptable to
Lender for any commercial tenant. Upon
Borrower's request, Lender shall execute
an SNDA Agreement with each tenant under
an Approved Lease occupying more than
five percent (5%) of the rentable square
feet of the Property upon: (i)
satisfaction of all landlord obligations
under the applicable Approved Lease such
that the tenant has taken full
possession of the leases premises and is
obligated to pay rent, and (ii) receipt
by Lender of a satisfactory estoppel
certificate confirming the full
performance of landlord obligations to
date including, but not limited to,
landlord obligations relating to the
construction of Tenant Improvements, and
the absence of any fact or circumstance
which constitutes, or with the passage
of time or giving of notice, or both,
would constitute, a default under such
lease.
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9.16.6 EXCEPTIONS FOR APPROVALS.
Notwithstanding the foregoing,
Lender's prior written approval under
Section 9.17.2 above shall not be
required with respect to any lease,
tenant, guarantor, sublet, assignment,
modification, amendment, termination,
cancellation or surrender, if (i) the
same relates in any single instance, to
not more than 7,500 rentable square feet
at the Property or, when aggregated with
all other circumstances for which
Lender's such approval has not been
obtained, do not involve more than
25,000 rentable square feet at the
Property or (ii) relate solely to leases
with the residents of the Facilities
which provide for tenancy on a month to
month basis.
9.17LOAN TO VALUE RATIO COVENANT.
9.17.1 LTV.
At all times the ratio ("Loan To
Value Ratio" or "LTV") obtained by
dividing: (i) the outstanding principal
balance of the Loan, by (ii) the Value
of the Property, expressed as a
percentage, shall not be greater than
seventy five percent (75%). For the
purposes of this Loan Agreement, the
"Value of the Property" shall mean
$34,900,000 as established pursuant to
appraisal of each Facility, each dated
as of April 16, 1997 prepared by Gulf
Atlantic Valuation Services, Inc. (the
"Original Appraisals") which have been
accepted by Lender, as such Value of the
Property may hereafter be changed either
by an update to the Original Appraisal
or by a new appraisal ordered by and
acceptable to Lender.
9.17.2 UPDATED APPRAISALS.
Lender shall have the right at its
option from time to time, if Lender
reasonably believes in good faith that
the LTV is not then in compliance with
this Agreement, to order an update to
the Original Appraisal or a new
appraisal (collectively, an "Updated
Appraisal"). Each Updated Appraisal
shall be prepared by the original or
more recent appraiser unless Lender
makes a good faith determination not to
have such appraiser prepare the same in
which event the Updated Appraisal shall
be prepared at Lender's direction by an
appraiser selected by Lender. Any
appraiser selected by Lender shall be:
(i) an MAI member with experience
appraising properties of a similar type
to the Property in the general area and,
(ii) otherwise qualified pursuant to
provisions of applicable laws and
regulations under and pursuant to which
Lender operates.
9.17.3 COSTS OF APPRAISAL.
Borrower shall pay for the costs of
the Original Appraisal and each Updated
Appraisal; provided that Borrower shall
not be required to pay for more than one
(1) Updated Appraisal in any twelve (12)
month
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period unless either: (i) a Default has
occurred and is then continuing, or (ii)
Lender has determined in good faith that
there is a material likelihood that an
updated Appraisal would reflect that the
LTV is not then in compliance with this
Agreement.
9.17.4 PRINCIPAL REDUCTION.
If at any time the Loan To Value
Ratio is not satisfied, Borrower shall
within ten (10) Business Days following
Lender's notice thereof (i) make a
principal payment or (ii) pledge
additional cash, cash equivalents or a
letter of credit reasonably acceptable
to the Lender in an amount sufficient to
reduce the Loan To Value Ratio to not
more than seventy five percent (75%).
It shall be an Event of Default if such
payment is not so made. Any cash, cash
equivalents or letters of credit
delivered to Lender pursuant hereto
shall be returned to Borrower in whole
or in part to the extent it is
subsequently determined by means of
future Updated Appraisals that such
collateral is not required in order to
comply with the Loan to Value Ratio set
forth herein.
9.18DEBT SERVICE COVERAGE RATIO.
9.18.1 CERTAIN DEFINITIONS.
(i) "Calculation Date"
shall mean the last day of
each calendar quarter
commencing with the calendar
quarter ending June 30, 1998.
(ii) "Calculation Period"
shall mean each preceding
calendar quarter ending on a
Calculation Date.
(iii) "Debt Service
Coverage" shall mean the ratio
for the Calculation Period of:
(A) Net Operating Income to
(B) Debt Service on the Loan.
(iv) "Net Operating
Income" shall mean revenues
accrued in connection with
Reimbursement Contracts and
actual cash collected by
Borrower from revenues and the
ownership and operation of the
Property and the interim
investment of accumulated
funds minus all Operating
Expenses.
(v) "Operating Expenses"
shall mean expenditures of all
kinds made or accrued with
respect to the operation of
the Property in the normal
course of business including,
but not limited to,
expenditures for taxes,
insurance, repairs,
replacements, maintenance,
management
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fees, salaries, advertising
expenses, professional fees,
wages and utility costs,
amounts payable with respect
to the Property under or with
respect to any Permitted Title
Exceptions and reasonable
additions to, or creations of,
reserves for repairs and
replacements and for capital
expenditures required to
comply with Legal Requirements
or Approved Leases or
amendments thereto, but
expressly excluding: (a) any
Debt Service on the Loan, and
(b) expenditures made out of
reserves previously created.
Any expenditures which in
accordance with the accrual
basis income tax accounting
are depreciated or amortized
over a period which exceeds
one (1) year shall be treated
as an expenditure, for the
purposes of the foregoing
calculations, ratably over the
period of depreciation or
amortization.
(vi) "Debt Service on the
Loan" shall mean the higher
of: (i) the actual principal
and interest paid or payable
under the Loan during the
Calculation Period, or (ii)
the payments of principal and
interest that would have been
payable under an assumed loan
during the Calculation Period
in an amount equal to the
outstanding principal balance
of the Loan at the inception
of the relevant Calculation
Period bearing interest at the
Deemed Rate of Interest
payable on a conventional
mortgage amortization schedule
over twenty-five (25) years.
(vii) "Deemed Rate of
Interest" shall mean an issued
rate of interest equal to the
rate of interest on United
States Treasury Securities
with a 10 year maturity plus
2.25%.
9.18.2 DSC COVENANT.
The Debt Service Coverage for each
Calculation Period shall be not less
than 1.25:1 during the Initial Term of
the Loan and 1.40:1 during the Extended
Term. If such Debt Service Coverage
covenant shall not be satisfied on any
Calculation Date, Borrower shall (i)
prepay a sufficient amount of principal
outstanding on the Loan or (ii) provide
the Lender with cash, cash equivalents
or a letter of credit reasonably
acceptable to Lender as additional
collateral. Such additional collateral
shall be in an amount which is
sufficient if offset against the
outstanding principal amount such that
if such principal reduction had been
made or additional collateral offset
against the principal amount of the Loan
on the first day of the Calculation
Period the Debt Service Coverage
covenant would have been satisfied. Any
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cash, cash equivalents or letters of
credit delivered to Lender pursuant
hereto shall be returned to Borrower in
whole or in part to the extent it is
subsequently determined by means of
future updated appraisals that such
collateral is not required in order to
comply with the Loan to Value Ratio set
forth herein. It shall be an Event of
Default if Borrower fails to make such a
prepayment or provide such additional
collateral not later than the first to
occur of: (i) ten (10) Business Days
after notice from Lender to Borrower
properly requesting the payment, or (ii)
if Borrower has failed to give Lender
sufficient reports to enable Lender to
make the necessary calculations, forty-
five (45) days following the applicable
Calculation Date.
9.19DELIVERY OF TITLE INSURANCE POLICY.
The Borrower shall deliver the mortgagee's
title insurance policy within the period set
forth in Section 7.9.
9.20MEDICAL WASTE.
The Borrower shall comply with all
applicable state and federal laws now or
hereafter enacted by any Governmental
Authority with respect to the management and
disposal of infectious and/or medical waste
(herein "Medical Waste Laws"). The Borrower
agrees to provide the Lender with copies of
any correspondence from any Governmental
Authority which indicates that the Borrower
is not in compliance with any medical waste
laws.
9.21MEZZANINE FINANCING.
The Borrower shall comply with all
obligations, covenants, terms and conditions
set forth in the Mezzanine Loan. Borrower
agrees not to amend any documents evidencing
the Mezzanine Loan in such a manner as would
improve the rights of the holder thereof vis-
a-vis the rights of Lender hereunder or under
the other Loan Documents or to make any
payments thereunder prior to making the
monthly payments of principal or interest due
under the Note other than on the terms set
forth in the Mezzanine Loan as of the date
hereof.
10. SPECIAL PROVISIONS.
10.1RIGHT TO CONTEST.
10.1.1 TAXES AND CLAIMS BY THIRD
PARTIES.
Notwithstanding the provisions of
Section 9.3 which obligate Borrower to
pay taxes and other obligations to third
parties when due, it is agreed that any
tax, assessment, charge, levy, claim or
obligation to a third party (expressly
excluding an obligation created under
the Loan Documents) need not be paid
while the validity or amount thereof
shall be contested currently, diligently
and in good faith by appropriate
proceedings and if Borrower shall have
adequate unencumbered (except in favor
of Lender) cash reserves with respect
thereto, and
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provided that such contest does not
create a default by landlord under any
lease assigned to Lender; and provided,
further, that Borrower shall pay all
taxes, assessments, charges, levies or
obligations: (i) immediately upon the
commencement of proceedings to enforce
any lien which may have attached as
security therefor, unless such
proceeding is stayed by proper court
order pending the outcome of such
contest; and (ii) as to claims for
labor, materials or supplies, prior to
the imposition of any lien on the
Property unless the lien is discharged
or bonded as set forth in
Section 11.1.8.
10.1.2 LEGAL REQUIREMENTS.
Borrower may contest any claim,
demand, levy or assessment under any
Legal Requirements by any person or
entity if: (i) the contest is based
upon a material question of law or fact
raised by Borrower in good faith; (ii)
Borrower properly commences and
thereafter diligently pursues the
contest; (iii) the contest will not
materially impair the ability to
ultimately comply with the contested
Legal Requirement should the contest not
be successful and the conduct of the
contest will not materially interfere
with the ability to obligate all tenants
under Approved Leases to pay rent
without offset; (iv) Borrower
demonstrates to Lender's reasonable
satisfaction that Borrower has the
financial capability to undertake and
pay for such contest and any corrective
or remedial action then or thereafter
reasonably likely to be necessary; (v)
no Event of Default exists; and (vi) the
contest relates to an Environmental
Legal Requirement, the conditions set
forth in the Environmental Indemnity
relating to such contests shall be
satisfied.
10.2PERMITTED DISTRIBUTION OF AVAILABLE
EXCESS CASH FLOW.
10.2.1 RIGHT TO DISTRIBUTE.
Lender agrees that at any time when
the Property has achieved and is
maintaining a Debt Service Coverage at
not less than 1.25:1 and no other
Default or Event of Default exists
Borrower may make distributions to its
shareholder to the extent Borrower has
Available Excess Cash Flow (as
hereinafter defined).
10.2.2 AVAILABLE EXCESS CASH FLOW.
"Available Excess Cash Flow" shall
mean cash accumulated by Borrower from
the operations of the Property in excess
of reasonable reserves, which reserves
shall be determined reasonably by
Borrower.
11. EVENTS OF DEFAULT.
The following provisions deal with
Default, Events of Default, notice, grace and
cure periods, and certain rights of Lender
following an Event of Default.
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11.1DEFAULT AND EVENTS OF DEFAULT.
The term "Default" as used herein or in
any of the other Loan Documents shall mean an
Event of Default, or any fact or circumstance
which constitutes, or upon the lapse of time,
or giving of notice, or both, would
constitute, an Event of Default. Each of the
following events, unless cured within any
applicable grace period set forth or referred
to below in this Section 11.1., or in Section
11.2., shall constitute an "Event of
Default":
11.1.1 GENERALLY.
A Default by Borrower in the
performance of any term, provision or
condition of this Agreement to be
performed by Borrower, or a breach, or
other failure to satisfy, any other
term, provision, condition, covenant or
warranty under this Agreement and such
Default remains uncured beyond any
applicable specific grace period
provided for in this Agreement, or as
set forth in Section 11.2. below;
11.1.2 NOTE, MORTGAGE AND OTHER LOAN
DOCUMENTS.
A Default by Borrower in the
performance of any term or provision of
the Note, or of the Mortgage, or of any
of the other Loan Documents, or a
breach, or other failure to satisfy, any
other term, provision, condition or
warranty under the Note, the Mortgage or
any other Loan Document, regardless of
whether any undisbursed portion of the
Loan is sufficient to cover any payment
of money required thereby, and the
specific grace period, if any, allowed
for the default in question shall have
expired without such default having been
cured;
11.1.3 FINANCIAL STATUS AND
INSOLVENCY.
A. Borrower shall: (i) admit in
writing its inability to pay its debts
generally as they become due; (ii) file
a petition in bankruptcy or a petition
to take advantage of any insolvency act;
(iii) make an assignment for the benefit
of creditors; (iv) consent to, or
acquiesce in, the appointment of a
receiver, liquidator or trustee of
itself or of the whole or any
substantial part of its properties or
assets; (v) file a petition or answer
seeking reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under the
Federal Bankruptcy laws or any other
applicable law; (vi) have a court of
competent jurisdiction enter an order,
judgment or decree appointing a
receiver, liquidator or trustee of
Borrower, or of the whole or any
substantial part of the property or
assets of Borrower, and such order,
judgment or decree shall remain
unvacated or not set aside or unstayed
for ninety (90) days; (vii) have a
petition filed against it seeking
reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under the
Federal Bankruptcy laws or any other
applicable law and such petition shall
remain undismissed for ninety (90) days;
(viii) have, under the provisions of any
other law for
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the relief or aid of debtors, any court
of competent jurisdiction assume custody
or control of Borrower or of the whole
or any substantial part of its property
or assets and such custody or control
shall remain unterminated or unstayed
for ninety (90) days; (ix) have an
attachment or execution levied against
any substantial portion of the property
of Borrower or against any portion of
the Collateral which is not discharged
or dissolved by a bond within thirty
(30) days; or (x) have any materially
adverse change in its financial
condition since the date of this
Agreement; or
B. any such event shall occur with
respect to any Guarantor; or
11.1.4 LIENS.
A lien for the performance of work,
or the supply of materials, or a notice
of contract, or an attachment, judgment,
execution or levy is filed against the
Land or the Facilities and remains
unsatisfied or is not discharged or
dissolved by a bond (or by cash
collateral acceptable to Lender) for a
period of thirty (30) days after the
filing thereof and is not otherwise
being duly contested in accordance with
the provisions of Section 10.1.1;
11.1.5 BREACH OF REPRESENTATION OR
WARRANTY.
Any material representation or
warranty made by Borrower or Guarantor
herein or in any other instrument or
document relating to the Loan or the
Property shall at any time be materially
false or misleading, or any warranty
shall be materially breached;
11.1.6 GUARANTOR DEFAULT.
A default by Guarantor in the
performance of any term or provision of
the Guaranty.
11.1.7 MALPRACTICE AWARDS.
Any malpractice award or judgment
exceeding $200,000 shall be rendered
against the Borrower and either (i)
enforcement proceedings shall have been
commenced by any creditor upon such
award or judgment (unless such
proceedings have been stayed pending
appeal thereof) or (ii) such award or
judgment shall continue unsatisfied and
in effect for a period of 15 consecutive
days without Borrower's insurer having
agreed to fund such award or judgment in
a manner satisfactory to the Lender in
its sole discretion.
11.1.8 REVOCATION OF LICENSES OR
PERMITS.
The Borrower receives written notice
of a final determination by applicable
state authorities of the revocation of
any License or Permit or CON required
for the lawful operation of any of the
Improvements
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or any part thereof or the loss of any
such license under any other
circumstances under which the Borrower
is required to cease its operations of
the Improvements; provided, however, the
occurrence of the foregoing shall not
constitute an Event of Default if any
such action is being duly appealed by
Borrower and such action is stayed
pending a final resolution of such
appeal.
11.1.9 DEFAULT UNDER MEZZANINE LOAN.
An Event of Default (as defined in
the Mezzanine Loan) occurs under the
Mezzanine Loan.
11.2GRACE PERIODS AND NOTICE.
As to each of the foregoing events the
following provisions relating to grace
periods and notice shall apply:
11.2.1 NO NOTICE OR GRACE PERIOD.
There shall be no grace period and no
notice provision with respect to the
payment of principal at maturity and no
grace period and no notice provision
with respect to defaults related to the
voluntary filing of bankruptcy or
reorganization proceedings or an
assignment for the benefit which are not
reasonably capable of being cured, or
with respect to a breach of warranty or
representation under Sections 8.1
(regarding Financial Information), or
with respect to breaches under Sections
9.6 (Restrictions on Liens, Transfers
and Additional Debt) except as provided
in Section 8.8, and 9.7 (Limits on
Guaranties and Distributions).
11.2.2 NONPAYMENT OF INTEREST AND
PRINCIPAL.
As to the nonpayment of interest, and
installments of principal prior to
maturity, there shall be a ten (10) day
grace period without any requirement of
notice from Lender, except that as to a
required principal reduction to comply
with the Loan To Value Ratio Covenant in
Section 9.22 or the Debt Service
Coverage Ratio Covenant in Section 9.23,
THERE SHALL BE NO GRACE PERIOD EXCEPT AS
STATED THEREIN.
11.2.3 OTHER MONETARY DEFAULTS.
All other monetary defaults shall
have a five (5) day grace period
following notice from Lender, or, if
shorter, a grace period without notice
until five (5) Business Days before the
last day on which payment is required to
be made in order to avoid: (i) the
cancellation or lapse of required
insurance, or (ii) a tax sale or the
imposition of late charges or penalties
in respect of taxes or other municipal
charges.
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11.2.4 NONMONETARY DEFAULTS CAPABLE
OF CURE.
As to nonmonetary defaults which are
reasonably capable of being cured or
remedied, unless there is a specific
shorter or longer grace period provided
for in this Loan Agreement or in another
Loan Document, there shall be a thirty
(30) day grace period following notice
from Lender or, if such default would
reasonably require more than thirty (30)
days to cure or remedy, such longer
period of time not to exceed a total of
ninety (90) days from Lender's notice as
may be reasonably required so long as
Borrower shall commence reasonable
actions to remedy or cure the default
within thirty (30) days following such
notice and shall diligently prosecute
such curative action to completion
within such ninety (90) day period.
However, where there is an emergency
situation in which there is danger to
person or property such curative action
shall be commenced as promptly as
possible. As to breaches of warranties
and representations (other than those
related to financial information or
construction documents) there shall be a
thirty (30) day grace period following
notice from Lender.
11.3CERTAIN LENDER REMEDIES.
If an Event of Default shall occur,
Lender:
11.3.1 ACCELERATE DEBT.
May declare the indebtedness
evidenced by the Note and secured by the
Mortgage immediately due and payable
(provided that in the case of a
voluntary petition in bankruptcy filed
by Borrower or (after the expiration of
the grace period if any set forth in
Section 11.1.3 above) an involuntary
petition in bankruptcy filed against
Borrower, such acceleration shall be
automatic); and
11.3.2 PURSUE REMEDIES.
May pursue any and all remedies
provided for hereunder, or under any one
or more of the other Loan Documents.
12. ADDITIONAL REMEDIES OF LENDER.
12.1REMEDIES.
Upon the occurrence of an Event of
Default, whether or not the indebtedness
evidenced by the Note and secured by the
Mortgage shall be due and payable or Lender
shall have instituted any foreclosure or
other action for the enforcement of the
Mortgage or the Note, Lender may, in addition
to any other remedies which Lender may have
hereunder or under the other Loan Documents,
and not in limitation thereof, and in
Lender's sole and absolute discretion.
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12.1.1 ENTER AND PERFORM.
Enter upon the Property to perform
obligations under leases, or to operate,
maintain, repair and improve the
Property and employ watchmen to protect
the Property, all at the risk, cost and
expense of Borrower, consent to such
entry being hereby given by Borrower;
12.1.2 DISCONTINUE WORK.
At any time discontinue any work
commenced in respect of the Property or
change any course of action undertaken
by it and not be bound by any
limitations or requirements of time
whether set forth herein or otherwise;
12.1.3 EXERCISE RIGHTS.
Exercise the rights of Borrower under
any contract or other agreement in any
way relating to the Property and take
over and use all or any part of the
labor, materials, supplies and equipment
contracted for by Borrower, whether or
not previously incorporated into the
realty; and
12.1.4 OTHER ACTIONS.
In connection with any work or action
undertaken by Lender pursuant to the
provisions of the Loan Documents,
(i) engage builders,
contractors, architects,
engineers and others for the
purpose of furnishing labor,
materials and equipment,
(ii) pay, settle or
compromise all bills or claims
which may become liens against
the property constituting the
Collateral, or which have been
or may be incurred in any
manner in connection with the
Property or for the discharge
of liens, encumbrances or
defects in the title of the
Property or the Collateral,
(iii) take or refrain from
taking such action hereunder
as Lender may from time to
time determine, and
(iv) engage marketing and
leasing agents and real estate
brokers to advertise, lease or
sell portions or all of the
Property or other Collateral
upon such terms and conditions
as Lender may in good faith
determine.
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12.2REIMBURSEMENT.
Borrower shall be liable to Lender for all
sums reasonably paid or incurred pursuant to
any of the Loan Documents whether the same
shall be paid or incurred pursuant to this
section or otherwise, and all payments made
or liabilities incurred by Lender hereunder
of any kind whatsoever shall be paid by
Borrower to Lender upon demand with interest
at the Default Rate as provided in this
Agreement or the Note from the date of
payment by Lender to the date of payment to
Lender and repayment of such sums with such
interest shall be secured by the applicable
Security Documents.
12.3POWER OF ATTORNEY.
For the purpose of exercising the rights
granted by this Section 12., as well as any
and all other rights and remedies available
to Lender from and after the occurrence of an
Event of Default, Borrower hereby irrevocably
constitutes and appoints Lender (or any agent
designated by Lender) its true and lawful
attorney-in-fact, upon and following any
Event of Default, to execute, acknowledge and
deliver any instruments and to do and perform
any acts permitted hereunder or by law in the
name and on behalf of Borrower.
13. SECURITY INTEREST AND SET-OFF.
13.1SECURITY INTEREST.
Borrower grants to Lender a direct and
continuing lien and security interest, as
security for all of Borrower's Obligations in
and upon all deposits, balances and other
sums credited by or due Lender, or from any
affiliate of Lender, to Borrower including,
but not limited to, any Cash Collateral
pledged to Lender pursuant to any provision
of the Loan Documents.
13.2 SET-OFF AND DEBIT.
(i) If any payment is not made when due
under any of the Loan Documents, after giving
regard to applicable grace periods, if any,
or (ii) if any Event of Default or other
event which would entitle Lender to
accelerate the Loan occurs, or (iii) at any
time, whether or not any Default or Event of
Default exists in the event any attachment,
trustee process, garnishment, or other levy
or lien is, or is sought to be, imposed on
any property of Borrower; then, in any such
event, any such deposits, balances or other
sums credited by or due from Lender, or from
any such affiliate of Lender, to Borrower may
to the fullest extent not prohibited by
applicable law at any time or from time to
time, without regard to the existence,
sufficiency or adequacy of any other
collateral, and without notice or compliance
with any other condition precedent now or
hereafter imposed by statute, rule of law or
otherwise, all of which are hereby waived, be
set off, debited and appropriated, and
applied by Lender against any or all of
Borrower's Obligations irrespective of
whether demand shall have been made and
although such Obligations may be unmatured,
in such manner as Lender in its sole and
absolute discretion may determine. Within
five (5) Business Days of making any such set
off, debit or appropriation and
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application, Lender agrees to notify Borrower
thereof, provided the failure to give such
notice shall not affect the validity of such
set off, debit or appropriation and
application.
13.3RIGHT TO FREEZE.
Lender shall also have the right, at its
option, upon the occurrence of any event
which would entitle Lender to set off or
debit as set forth in Section 13.2 and in
order to effectuate its rights thereunder, to
freeze, block or segregate any such deposits,
balances and other sums so that Borrower may
not access, control or draw upon the same.
13.4ADDITIONAL RIGHTS.
The rights of Lender and each affiliate of
Lender under this Section 13, are in addition
to, and not in limitation of, other rights
and remedies, including other rights of set
off, which Lender may have.
14. CASUALTY AND TAKING.
14.1CASUALTY AND OBLIGATION TO REPAIR.
In the event of any damage or destruction
to the Property or the other Collateral by
reason of fire or other hazard or casualty
(collectively, a "Casualty"), Borrower shall
give immediate written notice thereof to
Lender and proceed with reasonable diligence,
in full compliance with and subject to any
limitations of all Legal Requirements and the
other requirements of the Loan Documents, to
repair, restore, rebuild or replace the
affected property (collectively, the "Repair
Work").
14.2ADJUSTMENT OF CLAIMS.
All insurance claims shall be adjusted by
Borrower, at Borrower's sole cost and
expense, but subject to Lender's prior
written approval which approval shall not be
unreasonably withheld; provided that if any
Default or Event of Default exists under any
of the Loan Documents, Lender shall have the
right to adjust and compromise such claims
without the approval of Borrower.
14.3PAYMENT AND APPLICATION OF INSURANCE
PROCEEDS.
All proceeds of insurance shall be
paid to Lender and, at Lender's option,
be applied to Borrower's Obligations or
released, in whole or in part, to pay
for the actual cost of repair,
restoration, rebuilding or replacement
(collectively, "Cost To Repair");
[provided, however, that so long as no
Default or Event of Default is
outstanding hereunder,] Lender shall
release so much of the insurance
proceeds as may be
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<PAGE>
required to pay for the actual Cost to
Repair in accordance with the provisions
of Section 14.4.
14.4CONDITIONS TO RELEASE OF INSURANCE
PROCEEDS.
If Lender elects or is required to release
insurance proceeds, Lender may impose
reasonable conditions on such release which
shall include, but not be limited to, the
following:
(i)Prior written approval by Lender,
which approval shall not be unreasonably
withheld or delayed of plans,
specifications, cost estimates,
contracts and bonds for the restoration
or repair of the loss or damage;
(ii) Waivers of lien, architect's
certificates, contractor's sworn
statements and other evidence of costs,
payments and completion as Lender may
reasonably require;
(iii) If the Cost to Repair does not
exceed $100,000.00, the funds to pay
therefor shall be released to Borrower.
Otherwise, partial monthly disbursements
equal to 90% of the value of the work
completed, or, if the applicable
contract is on a cost plus basis, then
90% of the costs of the work completed
if such cost is less than the value
thereof, shall be made prior to final
completion of the repair, restoration or
replacement and the balance of the
disbursements shall be made upon full
completion and the receipt by Lender of
satisfactory evidence of payment and
release/waivers of all liens;
(iv) Determination by Lender that
the undisbursed balance of such proceeds
on deposit with Lender, together with
additional funds deposited for the
purpose, shall be at least sufficient to
pay for the remaining Cost To Repair,
free and clear of all liens and claims
for lien; and
(v)All work to comply with the
standards, quality of construction and
Legal Requirements applicable to the
original construction of the Property.
14.5 TAKING.
If there is any complete condemnation for
public use of the Property or of any
Collateral, the awards on account thereof
shall be paid to Lender and shall be applied
to Borrower's Obligations, or at Lender's
discretion released to Borrower. If, in the
case of a partial taking or a temporary
taking, in the reasonable judgment of Lender
the effect of such taking is such that there
has not been a material and adverse
impairment of the viability of the Property
or the value of the Collateral, so long as no
Default exists Lender shall release awards on
account of such taking to Borrower if such
awards are sufficient (or amounts sufficient
are otherwise made available) to repair or
restore the Property to a condition
reasonably satisfactory to Lender and such
partial or
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temporary taking shall not be deemed to
violate the provisions of Section 9.6.
15. GENERAL PROVISIONS.
15.1NOTICES.
Any notice or other communication in
connection with this Loan Agreement, the
Note, the Mortgage, or any of the other Loan
Documents, shall be in writing, and (i)
deposited in the United States Mail, postage
prepaid, by registered or certified mail, or
(ii) hand delivered by any commercially
recognized courier service or overnight
delivery service such as Federal Express or
(ii) sent by facsimile transmission if a Fax
is designated below, addressed as follows:
If to Borrower or Guarantor to:
c/o Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
FAX Number: (206) 301-4500
with copies by regular mail or such hand
delivery to or facsimile transmission to:
The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, Washington 98101
Attn: Randi S. Nathanson, Esq.
FAX Number: (206) 623-1738
If to Lender to:
Fleet National Bank
75 State Street
Boston, Massachusetts 02109
Attention: Commercial Real Estate
Loan
Administration Manager
FAX Number: (617) 346-3200
with copies by regular mail or such hand
delivery to or facsimile transmission to:
Edwards & Angell
101 Federal Street, 23rd Floor
Boston, Massachusetts 02110
Attention: Lorne W. McDougall
FAX Number: (617) 439-4170
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<PAGE>
Any such addressee may change its address for
such notices to such other address in the
United States as such addressee shall have
specified by written notice given as set
forth above. All periods of notice shall be
measured from the deemed date of delivery.
A notice shall be deemed to have been
given, delivered and received for the
purposes of all Loan Documents upon the
earliest of: (i) if sent by such certified
or registered mail, on the third Business Day
following the date of postmark, or (ii) if
hand delivered at the specified address by
such courier or overnight delivery service,
when so delivered or tendered for delivery
during customary business hours on a Business
Day at the specified address, or (iii) if so
mailed, on the date of actual receipt as
evidenced by the return receipt, or (iv) if
facsimile transmission is a permitted means
of giving notices, upon receipt as evidenced
by confirmation.
15.2LIMITATIONS ON ASSIGNMENT.
Borrower may not assign this Agreement or
the monies due thereunder or convey or,
except for a Permitted Transaction, encumber
the Property or other Collateral or any
interest without the prior written consent of
Lender in each instance.
15.3FURTHER ASSURANCES.
Borrower shall upon request from Lender
from time to time execute, seal, acknowledge
and deliver such further instruments or
documents which Lender may reasonably require
to better perfect and confirm its rights and
remedies hereunder, under the Note, under the
Mortgage and under each of the other Loan
Documents.
15.4PARTIES BOUND.
The provisions of this Agreement and of
each of the other Loan Documents shall be
binding upon and inure to the benefit of
Borrower and Lender and their respective
successors and assigns, except as otherwise
prohibited by this Agreement or any of the
other Loan Documents.
This Agreement is a contract by and
between Borrower and Lender for their mutual
benefit, and no third person shall have any
right, claim or interest against either
Lender or Borrower by virtue of any provision
hereof.
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<PAGE>
15.5WAIVERS, EXTENSIONS AND RELEASES.
Lender may at any time and from time to
time waive any one or more of the conditions
contained herein or in any of the other Loan
Documents, or extend the time of payment of
the Loan, or release portions of the
Collateral from the provisions of this
Agreement and from the Mortgage or any other
Security Document, but any such waiver,
extension or release shall be deemed to be
made in pursuance and not in modification
hereof, and any such waiver in any instance,
or under any particular circumstance, shall
not be considered a waiver of such condition
in any other instance or any other
circumstance.
15.6GOVERNING LAW; CONSENT TO
JURISDICTION; MUTUAL WAIVER OF JURY TRIAL.
15.6.1 SUBSTANTIAL RELATIONSHIP.
It is understood and agreed that all
of the Loan Documents were negotiated
and delivered in the Commonwealth of
Massachusetts, which State the parties
agree has a substantial relationship to
the parties and to the underlying
transactions embodied by the Loan
Documents.
15.6.2 PLACE OF DELIVERY.
Borrower agrees to furnish to Lender
at the Lender's office in Boston,
Massachusetts all further instruments,
certifications and documents to be
furnished hereunder.
15.6.3 GOVERNING LAW.
This Agreement, except as otherwise
provided in Section 15.6.4, and each of
the other Loan Documents shall in all
respects be governed, construed, applied
and enforced in accordance with the
internal laws of the Commonwealth of
Massachusetts without regard to
principles of conflicts of law.
15.6.4 EXCEPTION.
Notwithstanding the foregoing choice
of law:
(i) matters relating to
the creation, perfection,
priority and enforcement of
the liens on a security
interests in the Property or
other assets situated in
Florida, including by way of
illustration, but not in
limitation, actions for
foreclosure, for injunctive
relief, or for the appointment
of a receiver, shall be
governed by the laws of the
State of Florida;
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<PAGE>
(ii) Lender shall comply
with applicable law in the
State of Florida to the extent
required by the law of such
jurisdiction in connection
with the foreclosure of the
security interests and liens
created under the Mortgage and
the other Loan Documents with
respect to the Property or
other assets situated in
Florida and
(iii) provisions of
Federal law and the law of
Florida shall apply in
defining the terms Hazardous
Materials, Environmental Legal
Requirements and Legal
Requirements applicable to the
Property as such terms are
used in this Loan Agreement,
the Environmental Indemnity
and the other Loan Documents.
Nothing contained herein or any other
provisions of the Loan Documents shall
be construed to provide that the
substantive laws of the State of Florida
shall apply to any parties' rights and
obligations under any of the Loan
Documents, which, except as expressly
provided in clauses (i), (ii) and (iii)
of this Section 15.6.5., are and shall
continue to be governed by the
substantive law of Commonwealth of
Massachusetts, except as set forth in
clauses (i), (ii) and (iii) of this
Section 15.7.5. In addition, the fact
that portions of the Loan Documents may
include provisions drafted to conform to
the law of the State of Florida is not
intended, nor shall it be deemed, in any
way, to derogate the parties' choice of
law as set forth or referred to in this
Loan Agreement or in the other Loan
Documents. The parties further agree
that the Lender may enforce its rights
under the Loan Documents including, but
not limited to, its rights to sue the
Borrower or to collect any outstanding
indebtedness in accordance with
applicable law.
15.6. 5CONSENT TO JURISDICTION.
Borrower hereby consents to personal
jurisdiction in any state or Federal
court located within the Commonwealth of
Massachusetts and State of Florida.
15.6.6 JURY TRIAL WAIVER
BORROWER AND LENDER MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED ON THIS
LOAN AGREEMENT, ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS LOAN AGREEMENT
OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED
TO BE EXECUTED IN CONNECTION HEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS
WAIVER CONSTITUTES A
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<PAGE>
MATERIAL INDUCEMENT FOR BORROWER AND
LENDER TO ENTER INTO THE TRANSACTIONS
CONTEMPLATED HEREBY.
15.7SURVIVAL.
All representations, warranties, covenants
and agreements of Borrower, or Guarantor,
herein or in any other Loan Document, or in
any notice, certificate, or other paper
delivered by or on behalf of Borrower or
Guarantor pursuant hereto are significant and
shall be deemed to have been relied upon by
Lender notwithstanding any investigation made
by Lender or on its behalf and shall survive
the delivery of the Loan Documents and the
making of the Loan and each advance pursuant
thereto. No review or approval by Lender, or
by its Consultants or representatives, of any
plans and specifications, opinion letters,
certificates by professionals or other item
of any nature shall relieve Borrower or
anyone else of any of the obligations,
warranties or representations made by or on
behalf of Borrower or Guarantor, or any one
or more of them, under any one or more of the
Loan Documents.
15.8CUMULATIVE RIGHTS.
All of the rights of Lender hereunder and
under each of the other Loan Documents and
any other agreement now or hereafter executed
in connection herewith or therewith, shall be
cumulative and may be exercised singly,
together, or in such combination as Lender
may determine in its sole good faith
judgment.
15.9CLAIMS AGAINST LENDER.
15.9.1 BORROWER MUST NOTIFY.
Lender shall not be in default under
this Agreement, or under any other Loan
Document, unless a written notice
specifically setting forth the claim of
Borrower shall have been given to Lender
within thirty (30) days after Borrower
first had actual knowledge or actual
notice of the occurrence of the event
which Borrower alleges gave rise to such
claim and Lender does not remedy or cure
the default, if any there be, with
reasonable promptness thereafter. Such
actual knowledge or actual notice shall
refer to what was actually known by, or
expressed in written notification
furnished to, any of the persons or
officials referred to in Schedule D as
Authorized Representatives or of the
Property manager.
15.9.2 REMEDIES.
If it is determined by the final
order of a court of competent
jurisdiction, which is not subject to
further appeal, that Lender has breached
any of its obligations under the Loan
Documents and has not remedied or cured
the same with reasonable promptness
following notice thereof, Lender's
responsibilities shall be limited to:
(i) where the breach consists of the
failure to grant consent or give
approval in
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<PAGE>
violation of the terms and requirements
of a Loan Document, the obligation to
grant such consent or give such approval
and to pay Borrower's reasonable costs
and expenses including, without
limitation, reasonable attorneys' fees
and disbursements in connection with
such court proceedings; and (ii) the
case of any such failure to grant such
consent or give such approval, or in the
case of any other such default by
Lender, where it is also so determined
that Lender acted in bad faith, or that
Lender's default constituted gross
negligence or willful misconduct, the
payment of any actual, direct,
compensatory damages sustained by
Borrower as a result thereof plus
Borrower's reasonable costs and
expenses, including, without limitation,
reasonable attorneys' fees and
disbursements in connection with such
court proceedings.
15.9.3 LIMITATIONS.
In no event, however, shall Lender be
liable to Borrower or to Guarantor or
anyone else for other damages such as,
but not limited to, indirect,
speculative or punitive damages whatever
the nature of the breach by Lender of
its obligations under this Loan
Agreement or under any of the other Loan
Documents. In no event shall Lender be
liable to Borrower or to Guarantor or
anyone else unless a written notice
specifically setting forth the claim of
Borrower shall have been given to Lender
within the time period specified above.
15.10 OBLIGATIONS ABSOLUTE.
Except to the extent prohibited by
applicable law which cannot be waived, the
Obligations of Borrower and the obligations
of the Guarantor under the Guaranty shall be
joint and several, absolute, unconditional
and irrevocable and shall be paid strictly in
accordance with the terms of the Loan
Documents under all circumstances whatsoever,
including, without limitation, the existence
of any claim, set off, defense or other right
which Borrower or Guarantor may have at any
time against Lender whether in connection
with the Loan or any unrelated transaction,
except for any such claim, setoff, defense or
other right, if any, as to which a written
notice shall have been given to Lender in
accordance with the provisions of Section
15.9.
15.11 TABLE OF CONTENTS, TITLE AND
HEADINGS.
Any Table of Contents, the titles and the
headings of sections are not parts of this
Loan Agreement or any other Loan Document and
shall not be deemed to affect the meaning or
construction of any of their provisions.
15.12 COUNTERPARTS.
This Loan Agreement may be executed in
several counterparts, each of which when
executed and delivered is an original, but
all of which together shall constitute one
instrument. In making proof of this
agreement, it shall not be
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<PAGE>
necessary to produce or account for more than
one such counterpart is executed by the
party against whom enforcement of such loan
agreement is sought.
15.13 SATISFACTION OF COMMITMENT.
The Loan being made pursuant to the terms
hereof and of the other Loan Documents is
being made in satisfaction of Lender's
obligations under the Commitment dated April
22, 1997. The terms, provisions and
conditions of this Agreement and the other
Loan Documents supersede the provisions of
the Commitment.
15.14 RIGHT TO ASSIGN, PARTICIPATE OR
ENTER INTO CO-LENDING AGREEMENTS.
Lender reserves the right upon notice to
Borrower which identifies the proposed
assignee or participant to transfer and
assign the Loan, or portions thereof, or
grant participation interests therein to one
or more lenders. In the event of a transfer
and assignment of all or any portion of the
Loan, each transferee will be severally
liable for the portion of the Loan assigned
it and Lender will have no further obligation
with respect to that portion of the Loan.
Lender may act as agent for itself and any
lender which has been assigned a portion of
the Loan. Borrower acknowledges and agrees
that to the extent there is more than one
lender who is responsible for the Loan, the
rights, privileges, consents and discretions
contained in the Loan Agreement shall be
subject to the terms and provisions of a co-
lending agreement. Lender may disclose to,
or share with, any actual or prospective
transferee or participant all information,
including, but not limited to, financial
information, in Lender's possession regarding
the Loan, Borrower, the Guarantor, or the
Property.
15.15 TIME OF THE ESSENCE.
Time is of the essence of each provision
of this Agreement and each other Loan
Document, subject to any cure or grace
periods provided for herein.
15.16 NO ORAL CHANGE.
This Loan Agreement and each of the other
Loan Documents may only be amended,
terminated, extended or otherwise modified by
a writing signed by the party against which
enforcement is sought (except no such writing
shall be required for any party which,
pursuant to a specific provision of any Loan
Document, is required to be bound by changes
without such party's assent). In no event
shall any oral agreements, promises, actions,
inactions, knowledge, course of conduct,
course of dealings or the like be effective
to amend, terminate, extend or otherwise
modify this Loan Agreement or any of the
other Loan Documents.
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<PAGE>
15.17 MONTHLY STATEMENTS.
While Lender may issue invoices or other
statements on a monthly or periodic basis
(a "Statement"), it is expressly acknowledged
and agreed that: (i) the failure of Lender
to issue any Statement on one or more
occasions shall not affect Borrower's
obligations to make payments under the Loan
Documents as and when due; (ii) the
inaccuracy of any Statement shall not be
binding upon Lender and so Borrower shall
always remain obligated to pay the full
amount(s) required under the Loan Documents
as and when due notwithstanding any provision
to the contrary contained in any Statement;
(iii) all Statements are issued for
information purposes only and shall never
constitute any type of offer, acceptance,
modification, or waiver of the Loan Documents
or any of Lender's rights or remedies
thereunder; and (iv) in no event shall any
Statement serve as the basis for, or a
component of, any course of dealing, course
of conduct, or trade practice which would
modify, alter, or otherwise affect the
express written terms of the Loan Documents.
NEXT PAGE IS SIGNATURE PAGE
46
<PAGE>
IN WITNESS WHEREOF this Agreement has
been duly executed as of the date first above-
written.
BORROWER: EMERITUS PROPERTIES
V, INC.
By: /s/ Raymond R. Brandstrom
--------------------
Raymond R. Brandstrom
Its President
LENDER: FLEET NATIONAL BANK
By: /s/ Peter A. Tondreault
---------------------
Peter A. Tondreault
Vice President
47
<PAGE>
PROMISSORY NOTE
$26,000,000
May 1, 1997
1. PROMISE TO PAY.
FOR VALUE RECEIVED, EMERITUS PROPERTIES V,
INC., a Washington corporation having an
address at c/o Emeritus Corporation, 3131
Elliott Avenue, Suite 500, Seattle,
Washington 98121, ("Borrower") promises to
pay to the order of FLEET NATIONAL BANK, a
national banking association, having an
address at 75 State Street, Boston,
Massachusetts 02109, ("Lender"), the
principal sum of TWENTY-SIX MILLION
($26,000,000.00) DOLLARS, with interest
thereon, or on the amount thereof from time
to time outstanding, to be computed, as
hereinafter provided, on each advance from
the date of its disbursement until such
principal sum shall be fully paid. Interest
and principal shall be payable in
installments as set forth in Section 4 below.
The total principal sum, or the amount
thereof outstanding, together with any
accrued but unpaid interest, shall be due and
payable in full on May 1, 1999 ("Maturity
Date"), which term is further defined in, and
is subject to acceleration, or extension
until May 1, 2000 ("Extended Maturity Date"),
in accordance with, the Loan Agreement
pursuant to which this Note has been issued.
2. LOAN AGREEMENT.
This Note is issued pursuant to the terms,
provisions and conditions of an agreement
captioned "Term Loan Agreement" dated as of
even date between Borrower and Lender and
evidences the Loan and Loan Advances made
pursuant thereto. Capitalized terms used
herein which are not otherwise specifically
defined shall have the same meaning herein as
in the Loan Agreement.
3. INTEREST RATES.
3.1. BORROWER'S OPTIONS. Principal amounts
outstanding under the Loan shall bear
interest at the following rates, at
Borrower's selection, subject to the
conditions and limitations provided for in
this Note: (i) Variable Rate or (ii)
Eurodollar Rate.
3.1.1 SELECTION TO BE MADE. Prior to
maturity, Borrower shall select, and
thereafter may change the selection of, the
applicable interest rate, from the
alternatives otherwise provided for in this
Note, by giving Lender a Notice of Rate
Selection: (i) prior to the Closing and
funding of the Loan, (ii) prior to the end of
each Interest Period applicable to a
Eurodollar Advance or (iii) on any Business
Day on which Borrower desires to convert an
outstanding Variable Rate Advance to a
Eurodollar Rate Advance. If no interest rate
is selected, the Variable Rate shall be the
applicable interest rate until such time as
Borrower makes an effective selection. After
maturity, the Variable Rate shall be the
applicable interest rate, plus any additional
interest at the Default Rate.
<PAGE>
3.1.2 NOTICE. A "Notice of Rate
Selection" shall be a written notice, given
by cable, tested telex, telecopier (with
authorized signature), or by telephone if
immediately confirmed by such a written
notice, from an Authorized Representative of
Borrower which: (i) is irrevocable; (ii) is
received by Lender not later than 10:00
o'clock A.M. Eastern Time: (a) if a
Eurodollar Rate is selected, at least three
(3) Business Days prior to the first day of
the Interest Period to which such selection
is to apply, (b) if a Variable Rate is
selected, on the first day of the Interest
Period to which it applies; and (iii) as to
each selected interest rate option, sets
forth the aggregate principal amount(s) to
which such interest rate option(s) shall
apply and the Interest Period(s) applicable
to each Eurodollar Advance.
3.1.3 IF NO NOTICE. If Borrower fails to
select an interest rate option in accordance
with the foregoing prior to a Loan Advance,
or prior to the last day of the applicable
Interest Period of an outstanding Eurodollar
Advance or if a Eurodollar Advance is not
available, any new Loan Advance made shall be
deemed to be a Variable Rate Advance, and on
the last day of the applicable Interest
Period all outstanding principal amounts
shall be deemed converted to a Variable Rate
Advance.
3.3. TELEPHONIC NOTICE. Without any way
limiting Borrower's obligation to confirm in
writing any telephonic notice, Lender may act
without liability upon the basis of
telephonic notice believed by Lender in good
faith to be from Borrower prior to receipt
of written confirmation. In each case
Borrower hereby waives the right to dispute
Lender's record of the terms of such
telephonic Notice of Rate Selection in the
absence of manifest error.
3.4. LIMITS ON OPTIONS; ONE SELECTION PER
MONTH. Each Eurodollar Advance shall be in a
minimum amount of $1,000,000. At no time
shall there be outstanding a total of more
than four (4) Variable Rate and/or Eurodollar
Rate Advances combined at any time. If
Borrower shall make more than one (1)
interest rate selection in any thirty (30)
day period, excluding conversions of
outstanding advances made at the end of an
applicable Interest Period of any previously
outstanding Eurodollar Advance, Lender may
impose and Borrower shall pay a reasonable
processing fee for each such additional
selection.
4. PAYMENT OF INTEREST AND PRINCIPAL.
4.1. PAYMENT AND CALCULATION OF INTEREST.
All interest shall be: (a) payable in
arrears commencing June 1, 1997 and on the
same day of each month thereafter until the
principal together with all interest and
other charges payable with respect to the
Loan shall be fully paid; and (b) calculated
on the basis of a 360 day year and the actual
number of days elapsed. Each change in the
Prime Rate shall simultaneously change the
Variable Rate payable under this Note.
Interest at the Eurodollar Rate shall be
computed from and including the first day of
the applicable Interest Period to, but
excluding, the last day thereof.
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4.2. PRINCIPAL. Commencing on June 1, 1998
principal shall be payable in monthly
installments based on a twenty-five (25) year
amortization schedule and an assumed interest
rate equal to the ten (10) year Treasury Rate
plus two hundred twenty-five basis points
(2.25%). The entire principal balance shall
be due and payable in full upon Maturity.
4.3. PREPAYMENT. The Loan or any portion
thereof may be prepaid in full or in part at
any time upon five (5) days' prior written
notice to the holder of this Note without
premium or penalty with respect to Variable
Rate Advances and, with respect to Eurodollar
Advances subject to a make-whole provision
and upon payment of a Yield-Maintenance Fee.
Any partial prepayment shall first be applied
to any installment of interest then due and
then be applied to the principal, and no such
partial prepayment shall relieve Borrower of
the obligation to pay each subsequent
installment of principal or interest when due
but the amount of such payments shall be
recalculated using the formula set forth in
Section 4.2 as applied to the then
outstanding principal balance of the Loan.
4.4. MATURITY. Upon the Maturity Date or
Extended Maturity Date (if applicable)
(collectively, "Maturity") all accrued
interest, principal and other charges due
with respect to the Loan shall be due and
payable in full and the principal balance and
such other charges, but not unpaid interest,
shall bear interest at the Default Rate until
so paid.
4.5. METHOD OF PAYMENT; DATE OF CREDIT. All
payments of interest, principal and fees
shall be made in immediately available funds:
(a) by wire transfer to Lender or (b) by
check payable to Lender and delivered to
Lender at its office at 75 State Street,
Boston, Massachusetts 02109 or (c) to such
other bank or address as the holder of the
Loan may designate in a written notice to
Borrower. Payments shall be credited on the
Business Day on which immediately available
funds are received prior to one o'clock P.M.
Eastern Time; payments received after
one o'clock P.M. Eastern Time shall be
credited to the Loan on the next Business
Day. Payments which are by check, which
Lender may at its option accept or reject, or
which are not in the form of immediately
available funds shall not be credited to the
Loan until such funds become immediately
available to Lender, and, with respect to
payments by check,
such credit shall be provisional until the
item is finally paid by the payor bank.
4.6. BILLINGS. Lender may submit monthly
billings reflecting payments due; however,
any changes in the interest rate which occur
between the date of billing and the due date
may be reflected in the billing for a
subsequent month. Neither the failure of
Lender to submit a billing nor any error in
any such billing shall excuse Borrower from
the obligation to make full payment of all
Borrower's payment obligations when due.
4.7. DEFAULT RATE. Lender shall have the
option of imposing, and Borrower shall pay
upon billing therefor, an interest rate which
is five percent (5%) per annum above the
interest rate otherwise payable
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("Default Rate"): (a) while any monetary
Default exists and is continuing beyond any
applicable cure period, during that period
between the due date and the date of payment;
(b) following any Event of Default, unless
and until the Event of Default is waived by
Lender; and (c) after Maturity.
4.8. LATE CHARGES. Borrower shall pay, upon
billing therefor, a "Late Charge" equal to
five percent (5%) of the amount of any
payment of principal, other than principal
due at Maturity, interest, or both, which is
not paid within ten (10) days of the due date
thereof. Late charges are: (a) payable in
addition to, and not in limitation of, the
Default Rate, (b) intended to compensate
Lender for administrative and processing
costs incident to late payments, (c) are not
interest, and (d) shall not be subject to
refund or rebate or credited against any
other amount due.
4.9. CALCULATION OF YIELD MAINTENANCE. In
the event that Borrower is paying interest
hereunder at the Eurodollar Rate, Borrower
shall have the right at any time and from
time to time to prepay this Note in whole
(but not in part) provided Borrower pays to
Lender a prepayment fee (the "Yield
Maintenance Fee") in an amount computed as
follows: The current Treasury Rate with a
maturity date closest to the last day of
applicable Interest Period to which the
prepayment is made shall be subtracted from
the Adjusted LIBOR Rate in effect at the time
of prepayment. If the result is zero or a
negative number, there shall be no Yield
Maintenance Fee. If the result is a positive
number, then the resulting percentage shall
be multiplied by the amount of the principal
balance being prepaid. The resulting amount
shall be divided by 360 and multiplied by the
number of days remaining in the Interest
Period as to which the prepayment is made.
Said amount shall be reduced to present value
calculated by using the number of days
remaining in the Interest Period and using
the Treasury Rate. The resulting amount
shall be the Yield Maintenance Fee due to
Lender upon prepayment of the Eurodollar
Advance. If at any time Lender makes demand
under this Note for payment in full while a
Eurodollar Advance is in effect, then any
Yield Maintenance Fee with respect to this
Note shall become due and payable in the same
manner as though Borrower had exercised such
right of prepayment.
4.10. MAKE WHOLE PROVISION. Borrower
shall pay to Lender, immediately upon request
and notwithstanding contrary provisions
contained in any of the Loan Documents, such
amounts as shall, in the conclusive judgment
of Lender (in the absence of manifest error),
compensate Lender for the loss, cost or
expense which it may reasonably incur as a
result of (i) any payment or prepayment,
under any circumstances whatsoever, whether
voluntary or involuntary, of all or any
portion of a Eurodollar Advance on a date
other than the last day of the applicable
Interest Period of a Eurodollar Advance, or
(ii) the conversion, for any reason
whatsoever, whether voluntary or involuntary,
of any Eurodollar Advance, to a Variable Rate
Advance on a date other than the last day of
the applicable Interest Period. Such amounts
payable by Borrower shall be equal to any
administrative costs actually incurred, plus
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<PAGE>
any amounts required to compensate for any
loss, cost or expense incurred by reason of
the liquidation or re-employment of deposits
or other funds acquired by Lender to fund or
maintain a Eurodollar Advance plus, in any
event, but without duplication, a Yield
Maintenance Fee.
5. CERTAIN DEFINITIONS AND PROVISIONS
RELATING TO INTEREST RATE.
5.1. ADJUSTED LIBOR RATE. The Term "Adjusted
LIBOR Rate" means for each Interest Period
the rate per annum obtained by dividing (i)
the LIBOR Rate for such Interest Period, by
(ii) a percentage equal to one hundred
percent (100%) minus the maximum reserve
percentage applicable during such Interest
Period under regulations issued from time to
time by the Board of Governors of the Federal
Reserve System for determining the maximum
reserve requirements (including, without
limitation, any basic, supplemental, marginal
and emergency reserve requirements) for
Lender (or of any subsequent holder of this
Note which is subject to such reserve
requirements) in respect of liabilities or
assets consisting of or including
Eurocurrency liabilities (as such term is
defined in Regulation D of the Board of
Governors of the Federal Reserve System)
having a term equal to the Interest Period.
5.2. BANKING DAY. The term "Banking Day"
means a day on which banks are not required
or authorized by law to close in the city in
which Lender's principal office is situated.
5.3. BUSINESS DAY; SAME CALENDAR MONTH. The
term "Business Day" means any Banking Day
and, if the applicable Business Day relates
to the selection or determination of any
Eurodollar Rate, any London Banking Day. If
any day on which a payment is due is not a
Business Day, then the payment shall be due
on the next day following which is a Business
Day, unless, with respect to Eurodollar
Advances, the effect would be to make the
payment due in the next calendar month, in
which event such payment shall be due on the
next preceding day which is a Business Day.
Further, if there is no corresponding day for
a payment in the given calendar month (i.e.,
there is no "February 30th"), the payment
shall be due on the last Business Day of the
calendar month.
5.4. DOLLARS. The term "Dollars" or "$"
means lawful money of the United States.
5.5. EURODOLLAR ADVANCE. The term
"Eurodollar Advance" means any principal
outstanding under this Note which pursuant to
this Note bears interest at the Eurodollar
Rate.
5.6. EURODOLLAR RATE. The term "Eurodollar
Rate" means the per annum rate equal to the
Adjusted LIBOR Rate plus 250 basis points
(2.5%).
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<PAGE>
5.7. INTEREST PERIOD.
(a) The term "Interest Period" means with
respect to each Eurodollar Advance: a period
of thirty (30), sixty (60) or one hundred
twenty (120) consecutive days, subject to
availability, as selected or deemed selected
by Borrower at least three (3) Business Days
prior to a Loan Advance, or if an advance is
already outstanding, at least three (3)
Business Days prior to the end of the current
Interest Period. Each such Interest Period
shall commence on the Business Day so
selected, or deemed selected, by Borrower and
shall end on the numerically corresponding
day in the first, second, or third, month
thereafter, as applicable. Provided,
however: (i) if there is no such numerically
corresponding day, such Interest Period shall
end on the last Business Day of the
applicable month, (ii) if the last day of
such an Interest Period would otherwise occur
on a day which is not a Business Day, such
Interest Period shall be extended to the next
succeeding Business Day; but (iii) if such
extension would otherwise cause such last day
to occur in a new calendar month, then such
last day shall occur on the next preceding
Business Day.
(b) The term "Interest Period" shall mean
with respect to each Variable Rate Advance
consecutive periods of one (1) day each.
(c) No Interest Period may be selected which
would end beyond the then Maturity Date of
the Loan (as actually extended). If the last
day of an Interest Period would otherwise
occur on a day which is not a Business Day,
such last day shall be extended to the next
succeeding Business Day, except as provided
above in clause (a) relative to a Eurodollar
Advance.
5.8. LIBOR RATE. The term "LIBOR Rate"
means, with respect to each Interest Period,
the rate of interest, expressed as an annual
rate, equal to the simple average, rounded up
to the nearest 1/16 of 1%, of the rates shown
on the display referred to as the "Telerate
Page 3750" (or any display substituted
therefor) of the Dow Jones Telerate Service
as being the respective rates at which
deposits in Dollars would be offered by the
principal London offices of each of the banks
named thereon to major banks in the London
interbank market at approximately 11:00 A.M.
(London time) on the second London Banking
Day before the first day of such Interest
Period for a period substantially coextensive
with such Interest Period.
5.9. LONDON BANKING DAY. The term "London
Banking Day" means any day on which dealings
in deposits in Dollars are transacted in the
London interbank market.
5.10. MATURITY. The term "Maturity"
means the Maturity Date, or, if the Maturity
Date has been extended pursuant to the
provisions of the Loan Agreement, the
Extended Maturity Date, or in any instance,
upon acceleration of the Loan, if the Loan
has been accelerated by Lender upon an Event
of Default.
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<PAGE>
5.11. PRESENT VALUE. The term "Present
Value" means the value at the applicable
maturity discounted to the date of prepayment
using the Treasury Rate.
5.12. PRIME RATE. The term "Prime Rate"
means the per annum rate of interest so
designated from time to time by Lender as its
prime rate. The Prime Rate is a reference
rate and does not necessarily represent the
lowest or best rate being charged to any
customer.
5.13. TREASURY RATE. The term "Treasury
Rate" means, as of the date of any
calculation or determination, the latest
published rate for United States Treasury
Notes or Bills (but the rate on Bills issued
on a discounted basis shall be converted to a
bond equivalent) as published weekly in the
Federal Reserve Statistical Release H.15(519)
of Selected Interest Rates in an amount which
approximates (as determined by Lender) the
amount (i) approximately comparable to the
portion of the Loan to which the Treasury
Rate applies for the Interest Period, or (ii)
in the case of a prepayment, the amount
prepaid and with a maturity closest to the
original maturity of the installment which is
prepaid in whole or in part.
5.14. VARIABLE RATE. The term "Variable
Rate" means a per annum rate equal at all
times to the Prime Rate plus 100 basis points
(1%), with changes therein to be effective
simultaneously with any change in the Prime
Rate.
5.15. VARIABLE RATE ADVANCE. The term
"Variable Rate Advance" means any principal
amount outstanding under this Note which
pursuant to this Note bears interest at the
Variable Rate.
6. ADDITIONAL PROVISIONS RELATED TO
INTEREST RATE SELECTION.
6.1 INCREASED COSTS. If, due to any one or
more of: (i) the introduction of any
applicable law or regulation or any change
(other than any change by way of imposition
or increase of reserve requirements already
referred to in the definition of Eurodollar
Rate or Fixed Rate above) in the
interpretation or application by any
authority charged with the interpretation or
application thereof of any law or regulation;
or (ii) the compliance with any guideline or
request from any governmental central bank or
other governmental authority (whether or not
having the force of
law), there shall be an increase in the cost
to Lender of agreeing to make or making,
funding or maintaining Eurodollar Advances or
Fixed Rate Advances, including without
limitation changes which affect or would
affect the amount of capital or reserves
required or expected to be maintained by
Lender, with respect to all or any portion of
the Loan, or any corporation controlling
Lender, on account thereof, then Borrower
from time to time shall, upon written demand
by Lender accompanied by a reasonably
detailed calculation of such costs, pay
Lender additional amounts sufficient to
indemnify Lender against the increased cost.
A certificate as to the amount of the
increased cost and the reason therefor
submitted to
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<PAGE>
Borrower by Lender, in the absence of
manifest error, shall be conclusive and
binding for all purposes.
6.2 ILLEGALITY. Notwithstanding any other
provision of this Note, if the introduction
of or change in or in the interpretation of
any law, treaty, statute, regulation or
interpretation thereof shall make it
unlawful, or any central bank or government
authority shall assert by directive,
guideline or otherwise, that it is unlawful,
for Lender to make or maintain Eurodollar
Advances or to continue to fund or maintain
Eurodollar Advances then, on written notice
thereof and demand by Lender to Borrower, (a)
the obligation of Lender to make Eurodollar
Advances and to convert or continue any Loan
Advances as Eurodollar Advances shall
terminate and (b) Borrower shall convert all
principal outstanding under this Note into
Variable Rate Advances.
6.3 ADDITIONAL EURODOLLAR CONDITIONS. The
selection by Borrower of a Eurodollar Rate
and the maintenance of Loan Advances at such
rate shall be subject to the following
additional terms and conditions:
(a) AVAILABILITY. If, before or after
Borrower has selected to take or maintain a
Eurodollar Advance, Lender notifies Borrower
that:
(i) dollar deposits in the amount and for
the maturity requested are not available to
Lender in the London interbank market at the
rate specified in the definition of LIBOR
Rate set forth above, or
(ii) reasonable means do not exist for Lender
to determine the Eurodollar Rate for the
amounts and maturity requested,
then the principal which would have been a
Eurodollar Advance shall be a Variable Rate
Advance until Lender notifies Borrower that
such Eurodollar Advances are once again
available.
(b) PAYMENTS NET OF TAXES. All payments and
prepayments of principal and interest under
this Note shall be made net of any taxes and
costs resulting from having principal
outstanding at or computed with reference to
a Eurodollar Rate. Without limiting the
generality of the preceding obligation,
illustrations of such taxes and costs are
taxes, or the withholding of amounts for
taxes, of any nature whatsoever including
income, excise, interest equalization taxes
(other than United States or state income
taxes) as well as all levies, imposts, duties
or fees whether now in existence or as the
result of a change in or promulgation of any
treaty, statute, regulation, or
interpretation thereof or any directive
guideline or otherwise by a central bank or
fiscal authority (whether or not having the
force of law) or a change in the basis of, or
the time of payment of, such taxes and other
amounts resulting therefrom.
6.4. VARIABLE RATE ADVANCES. Each Variable
Rate Advance shall continue as a Variable
Rate Advance until Maturity of the Loan,
unless sooner converted, in whole or in part,
to a Eurodollar Rate Advance, subject to the
limitations and conditions set forth in this
Note.
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<PAGE>
6.5. CONVERSION OF OTHER ADVANCES. At the
end of each applicable Interest Period, the
applicable Eurodollar Rate Advance shall be
converted to a Variable Rate Advance unless
Borrower selects another option in accordance
with the provisions of this Note.
7. ACCELERATION; EVENT OF DEFAULT.
At the option of the holder, this Note and
the indebtedness evidenced hereby shall
become immediately due and payable without
further notice or demand, and notwithstanding
any prior waiver of any breach or default, or
other indulgence, upon the occurrence at any
time of any one or more of the following
events, each of which shall be an "Event of
Default" hereunder and under the Loan
Agreement and each other Loan Document: (i)
default continuing uncured beyond the
applicable grace period, if any, set forth in
the Loan Agreement, in making any payment of
interest, principal, other charges or
payments due hereunder; (ii) default
continuing uncured beyond the applicable
grace period, if any, set forth therein under
the Mortgage, or the Assignment of Leases and
Rents or any other Loan Document, each as the
same may from time to time hereafter be
amended; (iii) an Event of Default as defined
in or as set forth in the Loan Agreement or
any other Loan Document, each as the same may
from time to time hereafter be amended; or
(iv) an event which pursuant to any express
provision of the Loan Agreement, or of any
other Loan Document, gives Lender the right
to accelerate the Loan.
8. CERTAIN WAIVERS, CONSENTS AND
AGREEMENTS.
Each and every party liable hereon or for the
indebtedness evidenced hereby whether as
maker, endorser, guarantor, surety or
otherwise hereby: (a) waives presentment,
demand, protest, suretyship defenses and
defenses in the nature thereof; (b) waives
any defenses based upon and specifically
assents to any and all extensions and
postponements of the time for payment,
changes in terms and conditions and all other
indulgences and forbearances which may be
granted by the holder to any party now or
hereafter liable hereunder or for the
indebtedness evidenced hereby; (c) agrees to
any substitution, exchange, release,
surrender or other delivery of any security
or collateral now or hereafter held hereunder
or in connection with the Loan Agreement, or
any of the other Loan Documents, and to the
addition or release of any other party or
person primarily or secondarily liable; (d)
agrees that if any security or collateral
given to secure this Note or the indebtedness
evidenced hereby or to secure any of the
obligations set forth or referred to in the
Loan Agreement, or any of the other Loan
Documents, shall be found to be unenforceable
in full or to any extent, or if Lender or any
other party shall fail to duly perfect or
protect such collateral, the same shall not
relieve or release any party liable hereon or
thereon nor vitiate any other security or
collateral given for any obligations
evidenced hereby or thereby; (e) agrees to
pay all costs and expenses incurred by Lender
or any other holder of this Note in
connection with the indebtedness evidenced
hereby, including, without limitation, all
reasonable attorneys' fees and costs, for the
implementation of the Loan, the collection of
the indebtedness evidenced hereby and the
enforcement of rights and remedies hereunder
or under the other Loan Documents, whether or
not
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<PAGE>
suit is instituted; and (f) consents to all
of the terms and conditions contained in this
Note, the Loan Agreement, the Mortgage, the
Assignment of Leases and Rents, and all other
instruments now or hereafter executed
evidencing or governing all or any portion of
the security or collateral for this Note and
for such Loan Agreement, or any one or more
of the other Loan Documents.
9. DELAY NOT A BAR.
No delay or omission on the part of the
holder in exercising any right hereunder or
any right under any instrument or agreement
now or hereafter executed in connection
herewith, or any agreement or instrument
which is given or may be given to secure the
indebtedness evidenced hereby or by the Loan
Agreement, or any other agreement now or
hereafter executed in connection herewith or
therewith shall operate as a waiver of any
such right or of any other right of such
holder, nor shall any delay, omission or
waiver on any one occasion be deemed to be a
bar to or waiver of the same or of any other
right on any future occasion.
10. PARTIAL INVALIDITY.
The invalidity or unenforceability of any
provision hereof, of the Loan Agreement, of
the other Loan Documents, or of any other
instrument, agreement or document now or
hereafter executed in connection with the
Loan made pursuant hereto and thereto shall
not impair or vitiate any other provision of
any of such instruments, agreements and
documents, all of which provisions shall be
enforceable to the fullest extent now or
hereafter permitted by law.
11. COMPLIANCE WITH USURY LAWS.
All agreements between Borrower, each
Guarantor and Lender are hereby expressly
limited so that in no contingency or event
whatsoever, whether by reason of acceleration
of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or
agreed to be paid to Lender for the use or
the forbearance of the indebtedness evidenced
hereby exceed the maximum permissible under
applicable law. As used herein, the term
"applicable law" shall mean the law in effect
as of the date hereof, provided, however,
that in the event there is a change in the
law which results in a higher permissible
rate of interest, then this Note shall be
governed by such new law as of its effective
date. In this regard, it is expressly agreed
that it is the intent of Borrower and Lender
in the execution, delivery and acceptance of
this Note to contract in strict compliance
with the laws of the State of Rhode Island
from time to time in effect. If, under or
from any circumstances whatsoever,
fulfillment of any provision hereof or of any
of the Loan Documents or the Security
Documents at the time performance of such
provision shall be due, shall involve
transcending the limit of validity prescribed
by applicable law, then the obligation to be
fulfilled shall automatically be reduced to
the limit of such validity, and if under or
from any circumstances whatsoever Lender
should ever receive as interest an amount
which would exceed the highest lawful rate,
such amount which would be excessive interest
shall be applied to the reduction of the
principal balance evidenced hereby and not to
the
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payment of interest. This provision shall
control every other provision of all
agreements between Borrower, the Guarantor
and Lender.
12. USE OF PROCEEDS.
All proceeds of the Loan shall be used solely
for the purposes more particularly provided
for and limited by the Loan Agreement.
13. SECURITY.
This Note is secured by a Mortgage Deed and
Security Agreement, a Collateral Assignment
of Leases and Rents to be recorded at the
Pasco County Circuit Court Clerk's Office,
State of Florida; the Sarasota County Circuit
Court Clerk's Office, State of Florida and
the Seminole County Circuit Court Clerk's
Office, State of Florida and are more
particularly described in the Mortgage and is
further secured by other collateral as set
forth in the Loan Agreement.
14. NOTICES.
Any notices given with respect to this Note
shall be given in the manner provided for in
the Loan Agreement.
15. GOVERNING LAW AND CONSENT TO
JURISDICTION.
15.1. SUBSTANTIAL RELATIONSHIP. It is
understood and agreed that all of the Loan
Documents were negotiated and delivered in
the Commonwealth of Massachusetts, which
State the parties agree has a substantial
relationship to the parties and to the
underlying transactions embodied by the Loan
Documents.
15.2. PLACE OF DELIVERY. Borrower agrees
to furnish to Lender at Lender's office in
Boston, Massachusetts all further
instruments, certifications and documents to
be furnished hereunder.
15.3. GOVERNING LAW. This Note, except
as otherwise provided in Section 15.4, and
each of the other Loan Documents shall in all
respects be governed, construed, applied and
enforced in accordance with the internal laws
of the Commonwealth of Massachusetts without
regard to principles of conflicts of law.
15.4. EXCEPTIONS. Notwithstanding the
foregoing choice of law:
(a) the procedures governing the enforcement
by Lender of its foreclosure and other
remedies against Borrower under the Mortgage
and under the other Loan Documents with
respect to the Facilities or other assets
situated in Florida, including by way of
illustration, but not in limitation, actions
for foreclosure, for injunctive relief, or
for the appointment of a receiver, shall be
governed by the laws of the State of Florida;
11
<PAGE>
(b) Lender shall comply with applicable law
in the State of Florida to the extent
required in connection with the foreclosure
of the security interests and liens created
under the Mortgage and the other Loan
Documents with respect to the Facilities or
other assets situated in Florida; and
(c) provisions of Federal law and the law of
Florida shall apply in defining the terms
Hazardous Materials, Hazardous Materials
Legal Requirements, Environmental Legal
Requirements and Legal Requirements
applicable to the Facilities as such terms
are used in the Loan Agreement, the
Environmental Indemnity and the other Loan
Documents.
Nothing contained herein or any other
provisions of the Loan Documents shall be
construed to provide that the substantive
laws of the State of Florida shall apply to
any parties' rights and obligations under any
of the Loan Documents, which are and shall
continue to be governed by the substantive
law of the Commonwealth of Massachusetts,
except as expressly set forth in clauses (a),
(b) and (c) of this Section 15.4. In
addition, the fact that portions of the Loan
Documents may include provisions drafted to
conform to the law of the State of Florida is
not intended, nor shall it be deemed, in any
way, to derogate the parties' choice of law
as set forth or referred to in this Note, the
Loan Agreement or in the other Loan
Documents. The parties further agree that
Lender may enforce its rights under the Loan
Documents including, but not limited to, its
rights to sue Borrower or to collect any
outstanding indebtedness in accordance with
applicable law.
15.5. CONSENT TO JURISDICTION. Borrower
hereby consents to personal jurisdiction in
any state or Federal court located within the
State of Florida or the Commonwealth of
Massachusetts.
16. WAIVER OF JURY TRIAL.
BORROWER AND LENDER MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS
WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR
LENDER TO ACCEPT THIS NOTE AND MAKE THE LOAN.
17. NO ORAL CHANGE.
This Note and the other Loan Documents may
only be amended, terminated, extended or
otherwise modified by a writing signed by the
party against which enforcement is sought.
In no event shall any oral agreements,
promises, actions, inactions, knowledge,
course of conduct, course of dealing, or the
like be effective to amend, terminate, extend
or otherwise modify this Note or any of the
other Loan Documents.
12
<PAGE>
18. RIGHTS OF THE HOLDER.
This Note and the rights and remedies
provided for herein may be enforced by Lender
or any subsequent holder hereof. Wherever
the context permits each reference to the
term "holder" herein shall mean and refer to
Lender or the then subsequent holder of this
Note.
NEXT PAGE IS SIGNATURE PAGE
13
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this
Note to be duly executed as of the date set
forth above.
BORROWER:
EMERITUS PROPERTIES V, INC.
By: /s/ Raymond R. Brandstrom
-----------------------------
Raymond R. Brandstrom
Its President
14
<PAGE>
THIS NOTE IS SUBJECT TO A SUBORDINATION AND
STANDSTILL AGREEMENT DATED AS OF MAY 1, 1997,
AMONG
EMERITUS PROPERTIES V, INC., HIGH YIELD
PARTNERS,
LLC, AND FLEET NATIONAL BANK. BY ITS
ACCEPTANCE
OF THIS NOTE, THE HOLDER HEREOF AGREES TO BE
BOUND BY
THE PROVISIONS OF SUCH SUBORDINATION AND
STANDSTILL
AGREEMENT TO THE SAME EXTENT THAT THE
SUBORDINATED
LENDER (AS DEFINED THEREIN) IS BOUND
PROMISSORY NOTE
$7,000,000.00 May
1, 1997
FOR VALUE RECEIVED, the undersigned
EMERITUS PROPERTIES V, INC., a Washington
corporation (the "Borrower"), hereby promises
to pay to HIGH YIELD PARTNERS LLC, a Delaware
limited liability company (the "Lender"), or
registered assigns, at the Lender's office
c/o Hanseatic Corporation, 450 Park Avenue -
Suite 2302, New York, New York 10022:
(a) prior to or on the third anniversary of
the date hereof, the principal amount of
Seven Million Dollars ($7,000,000.00),
evidencing the Loan (as defined in the Credit
Agreement dated as of May 1, 1997 [as amended
and in effect from time to time, the "Credit
Agreement"] by and between the Borrower and
the Lender) made by the Lender to the
Borrower;
(b) the principal outstanding hereunder from
time to time at the times provided in the
Credit Agreement; and
(c) interest from the date hereof on the
principal amount from time to time
outstanding to and including the maturity
hereof at the rates and terms and in all
cases in accordance with the terms of the
Credit Agreement.
This Note evidences borrowings under and has
been issued by the Borrower in accordance
with the terms of the Credit Agreement. The
Lender and any holder hereof is entitled to
the benefits of the Credit Agreement, the
Security Documents and the other Loan
Documents, and may enforce the agreements of
the Borrower contained therein, and any
holder hereof may exercise the respective
remedies provided for thereby or otherwise
available in respect thereof, all in
accordance with the respective terms thereof.
All capitalized terms used in this Note and
not otherwise defined herein shall have the
same meanings herein as in the Credit
Agreement.
The Borrower irrevocably authorizes the
Lender to make or cause to be made, at the
time of receipt of any payment of principal
of this Note, an appropriate notation on the
grid attached to this Note, or the
continuation of such grid, or any other
similar record, including computer records,
reflecting the receipt of such payment. The
outstanding amount of the Loan set forth on
the grid attached to this Note, or the
continuation of such grid, or any other
similar record, including computer records,
maintained by the Lender with respect to the
Loan shall be prima facie evidence of the
principal amount of the Loan owing and unpaid
to the Lender, but the failure to record, or
any error in so recording, any such amount on
any such grid, continuation or other record
shall not limit or otherwise affect the
obligation of the Borrower hereunder or under
the Credit Agreement to make
<PAGE>
payments of principal of and interest on this
Note when due.
The Borrower has the right in certain
circumstances and the obligation under
certain other circumstances to prepay the
whole or part of the principal of this Note
on the terms and conditions specified in the
Credit Agreement.
If any one or more of the Events of Default
shall occur, the entire unpaid principal
amount of this Note, all of the unpaid
interest accrued thereon and all other
amounts payable under the Loan Documents
shall automatically become forthwith due and
payable in the manner and with the effect
provided in the Credit Agreement.
No delay or omission on the part of the
Lender or any holder hereof in exercising any
right hereunder shall operate as a waiver of
such right or of any other rights of the
Lender or such holder, nor shall any delay,
omission or waiver on any one occasion be
deemed a bar or waiver of the same or any
other right on any future occasion.
In the event that one or more of the
provisions of this Note shall for any reason
be held to be invalid, illegal or
unenforceable in any respect, such
invalidity, illegality or unenforceability
shall not affect any other provisions of this
Note, but this Note shall be construed as if
such invalid, illegal or unenforceable pro
vision had never been contained herein.
This Note is a registered Note and, as
provided in the Credit Agreement, upon
surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed
by the registered holder hereof or such
holder's attorney duly authorized in writing,
a new Note for a like principal amount will
be issued to, and registered in the name of,
the transferee. Prior to due presentment for
registration of transfer, the Borrower may
deem and treat the person in whose name this
Note is registered as the absolute owner of
this Note for the purpose of receiving
payment hereon or on account hereof and for
all other purposes, and the Borrower shall
not be affected by any notice to the
contrary.
The Borrower and every endorser and guarantor
of this Note or the obligation represented
hereby waives presentment, demand, notice,
protest and all other demands and notices in
connection with the delivery, acceptance,
performance, default or enforcement of this
Note, in each case subject to the specific
provisions of the Credit Agreement, and
assents to any extension or postponement of
the time of payment or any other indulgence,
to any substitution, exchange or release of
collateral and to the addition or release of
any other party or person primarily or
secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER
HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK (EXCLUDING THE LAWS
APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
THE BORROWER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR ANY
FEDERAL COURT SITTING THEREIN AND THE CONSENT
TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND THE SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWER BY MAIL AT
THE ADDRESS
2
SPECIFIED IN SECTION 10.3 OF THE CREDIT
AGREEMENT. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH
COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
IN WITNESS WHEREOF, the undersigned has
caused this Note to be signed in its name by
its duly authorized representatives as of the
day and year first above written.
EMERITUS PROPERTIES V,
INC.
By: /s/ Raymond R.
Brandstrom
- ------------------------------------------
Name: Raymond R.
Brandstrom
Title: President
3
<PAGE>
CREDIT AGREEMENT
DATED as of May 1, 1997
between
HIGH YIELD PARTNERS LLC,
and
EMERITUS PROPERTIES V, INC.
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT (hereinafter
referred to as this "Agreement") is made as
of May 1, 1997, by and between HIGH YIELD
PARTNERS LLC (hereinafter referred to as the
"Lender"), a Delaware limited liability
company, c/o Hanseatic Corporation, Suite
2302, 450 Park Avenue, New York, New York
10022, and EMERITUS PROPERTIES V, INC.
(hereinafter referred to as the "Borrower"),
a Washington corporation, 3131 Elliott
Avenue, Suite 500, Seattle, Washington 98121.
1. DEFINITIONS
Certain capitalized terms are defined
below:
ACQUISITION COSTS: The purchase price to
be paid by the Borrower for the stock of the
corporations which own the Facilities (such
corporations to be merged into the Borrower
contemporaneously with the advance of the
Loan).
AFFILIATE: Any person or entity directly
or indirectly through one or more
intermediaries controlling, controlled by or
under common control with the subject
referenced or any successor thereto; and any
person or entity owning or controlling 10% or
more of the outstanding voting securities of
the subject referenced; and any officer,
director or member of the subject referenced.
For purposes of the Agreement, the term
"control" shall mean the possession, directly
or indirectly, of the power to direct or
cause direction of the management and
policies of such person or entity, whether
through the ownership of voting securities or
by contract or otherwise.
AGREEMENT: See preamble, which term
shall include this Agreement and the Exhibits
and Schedules hereto, all as amended and in
effect from time to time.
BENEFIT PLANS: All pension,
profit-sharing, bonus, incentive, welfare or
other employee benefit plans within the
meaning of Section 3(3) of ERISA, and related
trusts, insurance and annuity contracts,
funding media and related agreements and
arrangements, other than Multiemployer Plans.
BORROWER: See preamble.
BUDGET: See Section 7.1.3.
BUSINESS DAY: Any day on which banks in
New York, New York, are open for business
generally.
CAPITAL EVENT: The sale, exchange,
transfer, assignment or other disposition of
all or a portion of the Facilities, or any of
them, the refinancing of any mortgage loan in
the case of the Facilities, or any of them,
condemnation of all or a portion of the
Facilities, or any of them, the liquidation
of any Facility following the dissolution of
the Borrower, the receipt of proceeds of
hazard or casualty insurance in excess of
amounts expended in restoration or repair of
the Facilities, or any of them, the recovery
of condemnation or taking awards for the
condemnation or taking of all or a portion of
the Facilities, or any of them, and the
recovery from other voluntary or involuntary
conversions of the Facilities, or any of
them.
1
<PAGE>
CODE: The Internal Revenue Code of 1986,
as amended from time to time.
COLLATERAL: All of the interests in the
Borrower that are or are intended to be
subject to the security interest created by
the Security Documents, respectively.
COMMITMENT: The obligation of the Lender
to make to the Borrower the Loan evidenced by
the Note in an outstanding principal amount
equal to $7,000,000.00.
CONSENT: In respect of any person or
entity, any permit, license or exemption
from, approval, consent of, registration or
filing with any local, state or federal
governmental or regulatory agency or
authority, required under applicable law.
CONTRACT RATE: A rate of interest equal
to eighteen percent (18%) per annum.
DEFAULT: An event or act which with the
giving of notice and/or the lapse of time,
would become an Event of Default.
DEFINED BENEFIT PLAN: Any Benefit Plan
which is a "defined benefit plan" within the
meaning of Section 3(35) of ERISA.
DRAWDOWN DATE: May 1, 1997.
EC: Emeritus Corporation, a Washington
corporation.
ENVIRONMENTAL LAWS: All federal, state
or local laws, statutes, ordinances, rules,
regulations, orders or determinations of any
Governmental Authority pertaining to health
or environmental matters, including without
limitation, the Resource Conservation and
Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act of
1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal
Clean Water Act, the Federal Clean Air Act,
the Toxic Substances Control Act, in each
case as amended, and all other environmental,
conservation or protection laws.
ERISA: The Employee Retirement Income
Security Act of 1974, as amended from time to
time, and all rules, regulations, judgments,
decrees, and orders arising thereunder, and
any successor statute of similar import,
together with the regulations promulgated
thereunder by the United States Treasury
Department, the United States Department of
Labor and/or the Pension Benefit Guaranty
Corporation and any Person succeeding to any
or all of its functions and duties under
ERISA.
EVENT OF DEFAULT: Any of the events
listed in Section 10 hereof.
FACILITIES: Those certain assisted
living facilities described on Schedule A
hereto, to be acquired by the Borrower
contemporaneously with the advance of the
Loan hereunder and operated by EC pursuant to
a Management Agreement covering all of the
Facilities.
2
<PAGE>
FINANCIALS: In respect of any period,
the balance sheet of the Borrower at the end
of such period, and the related statement of
income and statement of cash flow for such
period, each setting forth in comparative
form the figures for the previous comparable
fiscal period, all in reasonable detail with
all notes and supporting schedules and
prepared in accordance with GAAP.
FINANCING STATEMENTS: The financing
statements on Uniform Commercial Code Form
UCC-1 to be filed with the applicable
Governmental Authorities of each relevant
jurisdiction with respect to the security
interests under the Security Documents,
respectively.
GAAP: Generally accepted accounting
principles consistent with those adopted by
the Financial Accounting Standards Board and
its predecessor, (i) generally, as in effect
from time to time, and (ii) for purposes of
determining compliance by the Borrower with
its financial covenants set forth herein, as
in effect for the fiscal year therein
reported in the most recent Financials
submitted to the Lender.
GOVERNMENTAL AUTHORITY: Any federal,
state, county or municipal, or foreign,
governmental agency, board, commission,
court, tribunal, officer, official or entity
exercising executive, legislative, judicial,
regulatory or administrative functions of or
pertaining to government whose Consent is
required as a prerequisite to (i) the
continued uninterrupted operation of the
business of the Borrower, or (ii) the
performance of any act or obligation or the
observance of any agreement or condition of
the Borrower under this Agreement or the
other Loan Documents.
GUARANTY: That certain Guaranty, in the
form attached hereto as Exhibit A (together
with any amendments, extensions, supplements
or joinders as shall be satisfactory to the
Lender), pursuant to which the Guarantor
shall unconditionally guaranty the full
prompt and complete payment and performance
of the Obligations and shall subordinate to
the Obligations all Indebtedness permitted
under clause (vi) of Section 7.2.1 hereof,
duly executed by the Guarantor in favor of
the Lender, all as more fully and accurately
described therein.
GUARANTOR: Collectively, EC, any
successor to or assignee of any stock or
other interest of the Borrower held by EC and
any other entity holding any stock or other
interest in Borrower, jointly and severally.
INDEBTEDNESS: In respect of any entity,
all obligations, contingent and otherwise,
that in accordance with GAAP should be
classified as liabilities, including without
limitation:
(i) all indebtedness of such
entity with respect to money borrowed
(including, without limitation, all
notes payable and drafts accepted
representing extensions of credit, all
obligations evidenced by bonds,
debentures, notes or other similar
instruments and all obligations under
which interest charges are customarily
paid);
(ii) all indebtedness guaranteed,
directly or indirectly, in any manner by
such entity, or in effect guaranteed
directly or indirectly by such entity
through an agreement, contingent or
otherwise, to supply
3
<PAGE>
funds to or in any other manner invest
in the debtor, to purchase indebtedness,
or to purchase goods, supplies or
services for the purpose of enabling the
debtor to make payment of the
indebtedness or to assure the owner of
the indebtedness against loss, or
otherwise;
(iii) all indebtedness secured by
any Lien;
(iv) all indebtedness of such
entity created or arising under any
conditional sale or other title
retention agreement with respect to
property acquired by such person or
entity,
even though the rights and remedies of
the seller or lender under such
agreement in the event of default are
limited to repossession of such
property; and
(v) all obligations under leases
that are or should be, in accordance
with GAAP, recorded as capital leases.
INITIAL BUDGET: The Budget submitted
prior to the Drawdown Date with respect to
the Loan, pursuant to Section 6.6 hereof.
JUDICIAL PROCEEDINGS: With respect to a
Senior Payment Event of Default or a Senior
Non-Payment Event of Default, any proceedings
by one or more holders of Senior Indebtedness
of the Borrower aggregating not less than
$1,000,000 before a state or federal court
(having jurisdiction with respect thereto) to
collect the entire amount of such Senior
Indebtedness following an acceleration of the
maturity thereof as a result of such default.
LENDER: See preamble.
LIENS: Any encumbrance, mortgage,
pledge, hypothecation, charge, restriction or
other security interest of any kind securing
any obligation of any entity or person.
LOAN: The Loan made or to be made to the
Borrower pursuant to Section 2 hereof in
order to finance a portion of the Acquisition
Costs with respect to the Facilities.
LOAN DOCUMENTS: Any and all agreements,
documents, certificates and instruments
executed by the Borrower and/or delivered by
the Borrower to the Lender pursuant to and in
connection with the Loan and this Agreement
including, without limitation the Note, the
Guaranty, the Security Documents and the
Financing Statements, in each case as
amended, supplemented, restated or otherwise
modified from time to time in accordance with
the provisions thereof.
LOAN REQUEST: See Section 2.1(c).
MANAGEMENT AGREEMENT: Any lease,
management agreement, joint venture agreement
or other contract, agreement or arrangement,
whether written or oral, pursuant to which
the Borrower directly or indirectly provides
management with respect to the Facilities or
any of them.
4
<PAGE>
MATERIALLY ADVERSE EFFECT: Any
materially adverse effect on the condition,
financial or otherwise, assets, properties,
results of operations or business of the
Borrower or any impairment of the ability of
the Borrower to perform its obligations
hereunder or under any of the other Loan
Documents or of the Lender to enforce any
such obligations.
MATURITY DATE: May 1, 2000, or such
earlier date on which the Loan may become due
and payable pursuant to the terms hereof.
MULTIEMPLOYER PLAN: Any "multiemployer
plan" within the meaning of Section 3(37) of
ERISA.
NET AVAILABLE CASH: For any period, the
amount by which gross cash receipts during
such period for the Facilities, or any of
them, howsoever derived (without limitation,
including the proceeds of any Capital Event),
exceed the sum of (i) reasonable operating
expenses for the Facilities incurred and paid
by the Borrower during such period and
contained in the Budget for the Facilities,
including, without limitation, fees under the
Management Agreement in an amount not in the
aggregate exceeding five percent of the gross
operating income of the Facilities; plus (ii)
reasonable net additions to reserves for
payment of real estate taxes, insurance,
capital improvements and other periodic
liabilities with respect to the Facilities
which are attributable to such period
contained in the Budget for the Facilities;
plus (iii) payment by the Borrower of any
scheduled amounts of principal, interest or
fees due during such period with respect to
Senior Indebtedness secured by a Lien on the
Facilities, to the extent that the Loan is
subordinate to such Indebtedness; plus (iv)
payment of any scheduled amounts of interest
on the Loan at the Pay Rate; plus (v) in the
case such receipts are generated by the sale
of any of the Facilities, reasonable
brokerage fees and other reasonable closing
costs in connection therewith, and payment of
all Senior Indebtedness secured by a Lien
upon the Facilities, as the case may be, or,
in connection with the refinancing of such
Indebtedness, after payment of any such
Indebtedness and reasonable out-of-pocket
costs and fees incurred by the Borrower.
Notwithstanding the foregoing, in calculating
Net Available Cash with respect to any
period, no deduction shall be made from gross
cash receipts for non-cash charges against
income such as depreciation and amortization
of intangibles.
NOTE: See Section 2.1.
OBLIGATIONS: All indebtedness,
obligations and liabilities of the Borrower
to the Lender, existing on the date of this
Agreement or arising thereafter, direct or
indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated
or unliquidated, secured or unsecured,
arising by contract, operation of law or
otherwise, arising or incurred under this
Agreement or any other Loan Document or in
respect of the Loan or the Note or other
instruments at any time evidencing any
thereof.
ORGANIZATION DOCUMENTS: The certificate
of incorporation and by-laws of the Borrower
and all amendments thereto, or other
constitutive documents of the Borrower.
PAY RATE: A rate of interest equal to
ten percent (10%) per annum.
5
<PAGE>
PREPAYMENT DATE: See Section 2.3.3.
REQUIREMENT OF LAW: In respect of any
person or entity, any law, treaty, rule,
regulation or determination of an arbitrator,
court, or other Governmental Authority, in
each case applicable to or binding upon such
person or entity or affecting any of its
property.
SECURITY DOCUMENTS: The collateral
assignment of interests, in the form attached
hereto as Exhibit B (together with any
amendments, extensions, supplements or
joinders as shall be satisfactory to the
Lender), pursuant to which the Guarantor
shall pledge and assign to the Lender all of
the capital stock of the Borrower to secure
the Guaranty in accordance with Section 3.1
hereof.
SENIOR INDEBTEDNESS: All Indebtedness
outstanding for money borrowed by the
Borrower from any bank or other institutional
lender not an Affiliate of the Borrower
created or evidenced by notes, bonds,
debentures or other similar instruments or by
a loan agreement or agreements under which
the indebtedness is reflected in a loan
account and which Indebtedness arises from
the Senior Loan (other than any such
indebtedness which by the terms of the
instrument creating or evidencing the same is
expressly subordinated to or made pari passu
with the Obligations).
SENIOR LENDER: See Section 6.5.
SENIOR LOAN: See Section 6.5.
SENIOR NON-PAYMENT EVENT OF DEFAULT: A
default beyond any grace period provided with
respect thereto under any Senior
Indebtedness, other than a Senior Payment
Event of Default.
SENIOR PAYMENT EVENT OF DEFAULT: A
default beyond any grace period provided with
respect thereto in the payment of principal
or interest under any Senior Indebtedness.
SUBORDINATED INDEBTEDNESS: The principal
of and interest on all Indebtedness of the
Borrower, now or hereafter issued or
outstanding, which is expressly subordinated
in right of payment to the Obligations by
terms substantially identical in effect to
the provisions contemplated under Section
2.4.
SUBSIDIARY: (i) any present or future
entity at least a majority of the outstanding
voting securities or other interest of which
shall, at the time, be owned by the Borrower,
by the Borrower and one or more Subsidiaries
of the Borrower or by one or more
Subsidiaries of the Borrower, or (ii) any
other entity which is otherwise controlled by
the Borrower and one or more Subsidiaries of
the Borrower, directly or indirectly. For
purposes hereof, outstanding voting
securities or other interest shall be deemed
to be equity of any class or classes, however
designated, having ordinary voting power for
the election of the members of the board of
directors or other governing body of such
entity.
6
<PAGE>
2. CREDIT FACILITY
2.1. COMMITMENT TO LEND.
(a) Upon the terms and subject to the
conditions of this Agreement, and provided
that no Default or Event of Default shall
have occurred and be continuing, the Lender
agrees to make to the Borrower, a Loan in the
amount of the Commitment, provided, however,
that the outstanding principal amount of the
Loan shall not exceed twenty-two percent
(22%) of the aggregate amount of the
Acquisition Costs.
(b) The Borrower shall notify the Lender
in writing, not later than 11:00 a.m. New
York time, on the Drawdown Date of the amount
of the Loan being requested (a "Loan
Request"), which Loan Request shall include:
(i) the principal amount of the Loan
requested, and (ii) all instructions
necessary to allow the deposit on the
Drawdown Date of the Loan proceeds to the
Borrower's account or to such account as the
Borrower may direct. Subject to the
Borrower's compliance with this Section 2.1,
so long as the applicable conditions set
forth in this Agreement under Section 6
hereof have been met, the Lender shall
advance the amount specified in the Loan
Request to the account specified in the Loan
Request, in immediately available funds, not
later than the close of business on the
Drawdown Date.
(c) The obligation of the Borrower to
repay to the Lender the principal amount of
the Loan so requested, plus interest accrued
thereon, shall be evidenced by a promissory
note in the form of Exhibit C hereto
(hereinafter referred to as the "Note"),
dated the Drawdown Date by the Borrower, in
an original principal amount equal to the
amount of the Commitment, such Note to be
executed and delivered by the Borrower to the
Lender or its registered assigns, in form and
substance satisfactory to the Lender. Upon
execution and delivery thereof, the Borrower
shall inscribe in the Note the principal
amount of the Note, where contemplated. The
Note shall be delivered by the Borrower to
the Lender at the time of and with the Loan
Request of the Borrower. The Borrower shall
deliver therewith all fully-executed Security
Documents required pursuant to Section 3. The
Borrower hereby authorizes the Lender, or its
duly authorized agent, to endorse on the grid
attached as Schedule A to the Note an
appropriate notation evidencing the amount of
each advance to the Borrower, which, in the
absence of manifest error, shall be
conclusive as to the outstanding principal
amount of the Loan; provided, however, that
the failure to make such notation shall not
limit or otherwise affect the obligation of
the Borrower to the Lender under this
Agreement or the Note.
(d) Upon receipt by the Borrower of
evidence satisfactory to it of the loss,
theft, destruction or mutilation of the Note,
and (in case of loss, theft or destruction)
of indemnity reasonably satisfactory to it,
and upon surrender and cancellation of such
Note, if mutilated, the Borrower, upon
reimbursement to it of all reasonable
expenses incidental thereto, shall make and
deliver to the Lender a new Note, of like
tenor, in lieu of such Note. Any Note made
and delivered in accordance with the
provisions of this Section 2.1 shall be dated
as of the date to which interest has been
paid on the Note so replaced.
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2.2. INTEREST.
2.2.1. ACCRUAL OF INTEREST. So long
as no Event of Default has occurred and is
continuing, interest on the Loan shall accrue
at a rate per annum which is equal to the
Contract Rate, from the respective dates of
borrowing thereof until final repayment in
full of the Loan.
2.2.2. SCHEDULED PAYMENTS. So long
as no Event of Default has occurred and is
continuing, the Borrower shall pay interest
accrued as aforesaid on the Loan at a rate
per annum equal to the Pay Rate, such
interest to be payable in arrears on the
first day of each calendar quarter for the
immediately preceding calendar quarter or
such portion thereof during which the Loan is
outstanding, commencing with the first such
day following the Drawdown Date, or pursuant
to the provisions of Section 2.3.1, if
earlier.
2.2.3. PAYMENT OF CONTRACT RATE
INTEREST. To the extent that interest on the
Loan accrues at the Contract Rate and is not
payable pursuant to Section 2.2.2 hereof,
such interest shall be payable in arrears
with respect to each calendar quarter or such
portion thereof during which the Loan is
outstanding (unless payable earlier pursuant
to the provisions of Section 2.3.1) on the
30th day of the immediately succeeding
calendar quarter, commencing with the first
such day following the date hereof, in an
amount calculated as one hundred percent
(100%) of Net Available Cash during such
calendar quarter; provided, that any interest
not paid as aforesaid shall cumulate and
subsequently be payable together with all
other interest payable under this Section
2.2.3. Notwithstanding the foregoing,
payments with respect to net proceeds of any
Capital Event in all cases shall be applied,
when received, to accrued interest on the
Loan pursuant to this Section 2.2.3.
2.2.4. DEFAULT INTEREST. While an
Event of Default is continuing with respect
to the Loan, the Borrower shall pay interest
on the Loan at a rate per annum which is
equal to twenty percent (20%), such interest
to be payable in arrears on the first day of
each calendar quarter for the immediately
preceding calendar quarter, commencing with
the first such day following the date of the
Event of Default, or pursuant to the
provisions of Section 2.3.1, if earlier
(compounded monthly and payable on demand in
respect of overdue amounts of such interest)
until the principal amount of the Loan is
paid in full or (as the case may be) such
Event of Default has been cured or waived in
writing by the Lender (after as well as
before judgment).
2.2.5. PAYMENTS AND COMPUTATIONS.
All computations of interest under this
Agreement and the Note shall be made on the
basis of a year of 360 days consisting of
twelve months of 30 days each. Whenever any
payment under the Note shall be due on a day
other than a Business Day, such payment shall
be made on the next succeeding Business Day,
and such extension of time shall in such case
be included in the computation of payment of
interest.
2.3. REPAYMENTS AND PREPAYMENTS.
2.3.1. REPAYMENT OF LOAN. The
Borrower hereby agrees to pay to the Lender,
upon the earlier to occur of (i) the Maturity
Date, and (ii) such date arising as a result
of the operation of Section 9 of this
Agreement, the entire outstanding principal
amount of the Loan made to the Borrower,
including
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all interest accrued thereon and any unpaid
fees and expenses due to Lender from the
Borrower in respect of the Loan. Amounts
repaid prior to the Maturity Date pursuant to
any provision of this Agreement may not be
reborrowed. All payments made by the Borrower
under this Agreement or the Note shall be
made irrespective of, and without any
reduction for, any set-off or counterclaims.
2.3.2. MANDATORY PREPAYMENT OF
LOANS. The Borrower shall further pay to the
Lender, in arrears with respect to each
calendar quarter (unless payable earlier
pursuant to the provisions of Section 2.3.1)
on the 30th day of the immediately succeeding
calendar quarter, commencing with the first
calendar quarter after the date hereof, for
application to the outstanding principal
amount of the Loan made to the Borrower, all
Net Available Cash (in each case after
payment of all accrued interest payable
hereunder at the Contract Rate), provided,
that proceeds generated pursuant to any
Capital Event shall be applied when received.
2.3.3. VOLUNTARY PREPAYMENTS. The
Borrower may elect to prepay the outstanding
principal of all or any part of the Loan in
an aggregate minimum amount of $25,000 or a
greater integral multiple of $25,000, in all
cases without premium or penalty, upon
written notice to the Lender given by 10:00
a.m. New York time at least five Business
Days prior to the date (the "Prepayment
Date"), to be specified therein, of such
prepayment, of the amount to be prepaid and
provided that each repayment or prepayment of
principal of the Loan is accompanied by
payment of the unpaid interest accrued to the
Prepayment Date on the principal being repaid
or prepaid and any unpaid fees and expenses
due to Lender from the Borrower pursuant to
this Agreement. Upon giving of notice of
prepayment as aforesaid, such Loan or portion
thereof so specified for prepayment, and all
interest accrued to the Prepayment Date, and
all unpaid fees and expenses due to Lender,
shall, on the Prepayment Date, become due and
payable, and the principal of the Loan or
portion thereof so specified for prepayment
shall be paid by the Borrower as aforesaid.
Amounts prepaid pursuant to this Section
2.3.3 may not be reborrowed.
2.3.4. ADDITIONAL MANDATORY
PREPAYMENTS. If at any time the outstanding
principal amount of the Loan shall exceed the
lesser of (i) the Commitment, and (ii) twenty-
two percent (22%) of the aggregate amount of
the Acquisition Costs, the Borrower shall
immediately pay the amount of such excess to
the Lender for application to the Loan.
2.3.5. LATE CHARGES. In the event
that any payment, including, without
limitation, interest and/or principal,
required to be made by the Borrower under
this Agreement or the Note shall not be
received by the Lender within ten days after
the same shall become due and payable, the
Lender may charge, and if so charged, such
Borrower shall pay, a late charge equal to
five cents for each dollar of such delinquent
payment for the purpose of defraying the
expense incident to the handling of such
delinquent payment.
3. COLLATERAL
3.1. COLLATERAL SECURING LOANS. The
Loan shall be guaranteed by the Guarantor
pursuant to the Guaranty, which, in turn,
shall be secured by a first priority security
interest in all of the capital stock of the
Borrower (which interests shall be pledged
and assigned pursuant to the Security
Documents).
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<PAGE>
3.2. SUBSEQUENT LOAN DOCUMENTS,
GUARANTORS AND COLLATERAL. The parties
acknowledge and agree that each reference
under this Agreement to the Guarantor shall
refer to all stockholders of the Borrower
both at the time of the Drawdown Date and at
any time thereafter; and that each
description of Collateral pledged by the
Guarantor shall refer to all of the capital
stock of the Borrower both at the time of
delivery of the Guaranty and at any time
thereafter. In the event that, subsequent to
the Drawdown Date, any additional stockholder
shall hold any interest in the capital stock
of the Borrower, whether as a result of the
assignment of interests or otherwise, the
Borrower shall ensure that it shall within
ten business days following such event join
in the Guaranty, jointly and severally with
all other parties obligated thereunder, as
contemplated hereunder, secured as herein set
forth; and in the event that, subsequent to
delivery of the Guaranty, any additional
interests shall meet the criteria of
Collateral required to be pledged, whether
through acquisition of such interests or
otherwise, the Borrower shall ensure that
within ten days the Guaranty shall be
secured by such additional interest. Each
joinder to the Guaranty or Security
Documents, or amendment to the Guaranty or
any Security Documents, pursuant to this
Section 3.2 shall be in form and substance
satisfactory to the Lender and be accompanied
by such legal opinions, in form and substance
reasonably satisfactory to the Lender, to the
effect contemplated under Section 6.1 hereof,
and such other documentation as shall be
reasonably requested by the Lender.
3.3. DELIVERY AND RECOGNITION OF
COLLATERAL. Upon each pledge of Collateral
required hereunder, the Guarantor shall
deliver to the Lender all share certificates
representing the Collateral, duly endorsed in
blank. The Borrower shall evidence its
acknowledgment of any pledge of Collateral in
the manner set forth in Annex 1 to the
Security Documents, an original copy of which
in each case shall be delivered by the
Borrower to the Lender together with delivery
of such Security Documents and an original
copy of which shall be retained by the
Borrower.
4. REPRESENTATIONS AND WARRANTIES.
4.1. REPRESENTATIONS AND WARRANTIES OF
THE BORROWER. The Borrower represents and
warrants to the Lender on the date hereof,
that:
4.1.1. ORGANIZATION; AUTHORIZATION. It
is a corporation duly organized, validly
existing, and in good standing under the laws
of the State of Washington and is duly
qualified and in good standing in every other
jurisdiction where it is doing business, and
has full corporate power and authority to own
or hold under lease the assets and properties
material to the operation of its business as
now conducted and proposed to be conducted
and to perform all its obligations under the
agreements material to the operation of its
business to which it is a party, including,
without limitation, the Loan Documents. The
copies of the Organization Documents of the
Borrower which have been delivered to the
Lender by the Borrower are complete and
correct; and the Borrower does not have any
Subsidiaries.
4.1.2. LEGAL, VALID, BINDING
OBLIGATIONS. The execution and delivery by it
of the Loan Documents to which it is a party,
and each of them, the performance by it of
its covenants and agreements under the Loan
Documents to which it is a party, and each of
them, and the consummation by it of the
10
<PAGE>
transactions contemplated by the Loan
Documents to which it is a party, and each of
them, have been duly authorized by all
necessary corporate action. Upon execution
and delivery thereof, each Loan Document,
shall constitute its legal, valid and binding
obligation, enforceable against it in
accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or similar
laws affecting the enforcement of creditor's
rights generally as at the time in effect.
4.1.3. CONFLICTS; CONSENTS. Neither the
execution and delivery of the Loan Documents
to which it is a party, nor any of them, by
it, nor the consummation by it of the
transactions contemplated in the Loan
Documents to which it is a party, nor any of
them, nor the performance by it of its
obligations and exercise of its rights under
the Loan Documents to which it is a party,
nor any of them, by it, will violate, be in
conflict with or be prohibited or prevented
by any provision of its Organization
Documents, or any Requirement of Law or any
other law, rule, regulation, writ, judgment,
injunction, decree, determination, award or
other order of any Governmental Authority
binding upon it, or conflict with or result
in any breach of or event of termination
under any of the terms of, or the creation or
imposition of any mortgage, deed of trust,
pledge, lien, security interest or other
charge or encumbrance of any nature pursuant
to, the terms of any contract or agreement to
which it or by which it or any of its
properties or assets is bound. Without
limiting the generality of the foregoing,
none of the transactions contemplated in this
Agreement (including, without limitation, the
use of the proceeds of the Loan) violates,
shall violate or shall result in a violation
of Section 7 of the Securities Exchange Act
of 1934, as amended, or any regulations
issued pursuant thereto, including, without
limitation, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve
System. Without limiting the generality of
the foregoing, all Consents required for the
execution, delivery, performance of its
obligations, and exercise of its rights under
the Loan Documents to which it is a party,
including borrowing under this Agreement,
have been obtained and copies thereof have
been furnished to the Lender.
4.1.4. TITLE TO PROPERTIES; INSURANCE.
It has good, valid and marketable title to
all its material properties and possesses all
assets, including intellectual properties,
franchises and Consents, adequate for the
conduct of its business as now conducted or
proposed to be conducted, subject only to
Liens permitted hereunder, without known
conflict with any rights of others. Without
limiting the generality of the foregoing,
contemporaneously with the advance of the
Loan hereunder the Borrower will acquire all
right, title and interest in and to the
Facilities, in each case free and clear of
all Liens, subject only to Liens permitted
hereunder. No event has occurred, or, is
alleged to have occurred, which constitutes
or with lapse of time or giving of notice or
both, would constitute a default under any
contract, agreement, mortgage, or arrangement
(written or oral) to which the Borrower is a
party or by which the Borrower or its assets
or properties may be bound, which could,
individually or in the aggregate, have a
Materially Adverse Effect. The Borrower
maintains insurance with financially
responsible insurers covering: (i) all of its
assets and properties, which, individually,
or in the aggregate, are material to the
Borrower's business or condition, and (ii) in
each case the various material occurrences
which may arise in connection with the
operation of its business and operations.
Such policies are in full force and effect,
all premiums due thereon have been paid, and
the Borrower has complied in all material
aspects with the provisions of such policies.
Such insurance is of such amounts and
coverage and with such deductibles as should
be
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<PAGE>
maintained in accordance with good business
practice, is adequate and does not materially
differ from insurance customarily maintained
by companies in the same or similar
businesses.
4.1.5. LITIGATION. There is no
action, suit, proceeding, or claim, pending
or, to the best of the knowledge of the
Borrower, threatened, and no investigation by
any Governmental Authority, pending or, to
the best of the knowledge of the Borrower,
threatened, against the Borrower, before any
Governmental Authority, nor is there any
outstanding order, writ, judgment,
stipulation, injunction, decree,
determination, award, or other order of any
Governmental Authority against the Borrower,
in each case, which would, if adversely
determined, alone or together, have a
Materially Adverse Effect.
4.1.6. COMPLIANCE WITH AUTHORITY
DOCUMENTS; LAW; INFRINGEMENT. The Borrower is
not in violation of (i) any Organization
Document, corporate minute or resolution, or
(ii) in a manner which, individually or in
the aggregate, could have a Materially
Adverse Effect, any Requirement of Law,
including, without limitation, all applicable
federal and state tax laws, ERISA and
Environmental Laws. The Borrower is not
directly or indirectly controlled by or
acting on behalf of any party which is, an
"investment company" within the meaning of
Section 3 of the Investment Company Act of
1940, as amended. The Borrower: (i) has not
filed any notice under any Environmental Law
or any other federal, state or local law, or
regulation, indicating past or present
treatment, storage or disposal of a hazardous
waste or reporting a spill or release of a
hazardous or toxic waste, substance or
constituent, or other substance into the
environment, nor (ii) has any liability,
contingent or otherwise, under any such law
or regulation in connection with any release
of any hazardous or toxic waste, substance or
constituent, or other substance into the
environment, or the placement of any
hazardous or toxic waste, substance or
constituent, or other substance on property,
now or formerly owned (in whole or in part)
or leased by the Borrower or, except where
such liability could not, individually, or in
the aggregate, with respect to the Borrower,
have a Materially Adverse Effect. The
Borrower has not generated, treated, stored
or disposed of or placed any hazardous waste
or substance in violation of any applicable
law or regulation on any property owned (in
whole or in part) or leased by the Borrower
or on or into any waste disposal site owned
or operated by a third party. All underground
tanks on the properties owned or leased (in
whole or in part) by the Borrower have been
properly registered with or reported to the
appropriate governmental agency or agencies,
if required to be so registered or reported,
and none of such tanks leak. The use by the
Borrower of its assets and the conduct of its
business does not, to the best of the
knowledge of the Borrower, involve
infringement or claimed infringement of any
patent, trademark, servicemark, tradename,
copyright, license or similar right.
4.1.7. GUARANTY; PRIORITY OF LIENS.
The Guaranty and all Security Documents
required by this Agreement have been duly
executed and delivered to the Lender,
together with all documentation related
thereto required under Articles III or VI.
Upon execution and delivery of the Security
Documents and the filing of the documents
thereby required, the Lender shall, with
respect to the Obligations, have
first-priority perfected Liens on the
Collateral and there are no financing
statements, chattel mortgages, real estate
mortgages or similar filings on record
anywhere, or other arrangements, which
conflict with such first-priority Liens of
the Lender.
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4.1.8. FINANCIAL STATEMENTS.
4.1.8.1 The Borrower is a
newly-formed entity and, except for
activities related to its organization, has
not had any material operations and has not
in any material respect conducted any
business prior to the date hereof; and,
except for its obligations pursuant to this
Agreement and the Senior Indebtedness, the
Borrower has no liabilities, whether accrued,
absolute, contingent, or otherwise, whether
due or to become due and whether the amount
thereof is readily ascertainable or not,
which, individually or in the aggregate,
could have a Materially Adverse Effect.
4.1.8.2 Without limiting the
generality of the foregoing, the Borrower has
not: (i) declared, set aside or made any
payment or distribution upon any Collateral,
(ii) directly or indirectly, purchased,
redeemed or otherwise acquired or disposed of
any Collateral; (iii) incurred any liability
or obligation under agreements or otherwise,
except current liabilities entered into or
incurred in the ordinary course of business
consistent with past practice, and except for
liabilities which, individually or in the
aggregate, would not have a Materially
Adverse Effect; issued any notes or other
debt securities or paid or discharged any
outstanding indebtedness, or mortgaged,
pledged or subjected to any Lien any of its
material assets or properties, except as
permitted under this Agreement in favor of
the holders of the Senior Indebtedness; (iv)
entered into any material transaction other
than in the ordinary course of business
consistent with general business practices of
entities engaged in similar businesses,
except in connection with the execution and
performance of this Agreement and the
transactions contemplated hereby (without
limitation including the occurrence of a
Capital Event); (v) suffered any damage,
destruction, or loss to any of its assets or
properties (whether or not covered by
insurance), which damage, destruction or loss
would have a Materially Adverse Effect; or
(vi) suffered any change which, individually
or in the aggregate, could have a Materially
Adverse Effect.
4.1.9. TAXES. The Borrower has
filed or caused to be filed all federal,
state, municipal, foreign and other tax
returns, reports and declarations, or
extensions therefor, required to be filed by
it, so as to prevent any valid Lien on its
assets or properties and has paid or shall
pay all taxes which have been or shall become
due with respect to the periods covered by
said returns or pursuant to any assessment
received by it in connection therewith. All
assessments and charges (including penalties
and interest, if any) related to periods,
ended on or before the end of the Borrower's
most recent fiscal year have been or will be
paid by the Borrower, including any necessary
adjustments with state and local tax
authorities, and no deficiency in payment of
any taxes for any period has been asserted by
any taxing authority which remains unsettled
at the date hereof. Adequate provision has
been made in the Financials heretofore or
herewith delivered to the Lender for the
payment of all then accrued and unpaid
federal and other taxes of the Borrower,
whether or not yet due and payable and
whether or not disputed by the Borrower.
4.1.10. EMPLOYEE BENEFIT PLANS. All
Benefit Plans and all Multiemployer Plans in
which the employees of the Borrower
participate comply in all material respects
with all requirements of the Department of
Labor and the Internal Revenue Service
promulgated under ERISA and with all other
applicable law. The Borrower has not taken or
failed to take any action with respect to the
Benefit Plans which might create any
liability on the part of the
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Borrower which, individually or in the
aggregate, could have a Materially Adverse
Effect. Each "fiduciary" (within the meaning
of section 3(21)(A) of ERISA) as to each
Benefit Plan and, to the best of the
knowledge of the Borrower, as to each
Multiemployer Plan, has complied in all
material respects with the requirements of
ERISA and all other applicable law in respect
of each such Plan. In addition, as of the
date hereof: (i) no Defined Benefit Plan or,
to the best of the knowledge of the Borrower,
any Multiemployer Plan, has incurred an
"accumulated funding deficiency" (within the
meaning of section 412(a) of the Code),
whether or not waived; (ii) no "reportable
event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any
Benefit Plan or, to the best of the knowledge
of the Borrower, any Multiemployer Plan,
there have been no terminations of any
Defined Benefit Plan or, to the best of the
knowledge of the Borrower, any Multiemployer
Plan, or any related trust, and no such
termination of any of the foregoing
reasonably can be expected to occur; (iii) no
"prohibited transaction" (within the meaning
of section 406 of ERISA or section 4975(c) of
the Code) has occurred with respect to any
Benefit Plan, or to the best of the knowledge
of the Borrower, any Multiemployer Plan; (iv)
the aggregate present value of accrued
benefits of the Defined Benefit Plans is not
more than the aggregate value of the assets
of such plans, there has been no withdrawal
liability incurred by the Borrower or any
such Land Owner with respect to any
Multiemployer Plans, and neither the Borrower
nor any such Land Owner has withdrawn
(partially or totally within the meaning of
ERISA) from any Multiemployer Plan; and (v)
other than claims in the ordinary course for
benefits with respect to any Benefit Plan,
or, to the best of the knowledge of the
Borrower, any Multiemployer Plan, there are
no actions, suits, or claims pending with
respect to any such plan or any circumstances
known to the Borrower which might give rise
to any such action, suit, or claims.
4.1.11. SENIOR LOANS. Each and
every representation and warranty of the
Borrower made to the Senior Lender in
connection with the Senior Loan, as amended
from time to time as permitted hereunder (all
of which are hereby incorporated by this
reference herein), are true and correct.
5. SUBORDINATION.
5.1. SENIOR SUBORDINATION. The
Obligations of the Borrower shall be senior
Subordinated Indebtedness, ranking pari passu
with all other Indebtedness of the Borrower
now or hereafter outstanding which is
expressly subordinated in respect of payment
to the Senior Indebtedness of the Borrower by
terms substantially identical in effect to
the provisions of Section 5.2 hereof and to
which all Subordinated Indebtedness of the
Borrower, now or hereafter outstanding, is
subordinated in right of payment.
5.2. SUBORDINATION. (a) The Obligations
of Borrower are hereby expressly made
subordinate in right of payment, to the
extent set forth in the following
sub-paragraphs (i) and (ii), to the prior
payment in full of the Senior Indebtedness of
the Borrower:
(i) In the event of insolvency or
bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar
proceedings in connection therewith, relative
to the Borrower or to any of the property of
the Borrower, or in the event of any
proceedings for voluntary liquidation,
dissolution, or other winding-up of the
Borrower, whether or not involving insolvency
or
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bankruptcy, then the holders of the Senior
Indebtedness of the Borrower shall be
entitled to receive payment in full of all
principal of, and premium, if any, and
interest on such Senior Indebtedness before
the Lender shall be entitled to receive any
payment on account of principal or interest
on the Note issued by the Borrower, and to
that end the holders of the Senior
Indebtedness of the Borrower shall be
entitled to receive for application in
payment thereof any payment or distribution
of any kind or character, whether in cash or
property or securities, which may be payable
or deliverable in any such proceedings in
respect of such Obligations.
(ii) In the event that the Lender
shall have received written notice that any
Senior Indebtedness of the Borrower has been
declared due and payable prior to its stated
maturity, by reason of the occurrence of an
event of default thereunder (under
circumstances in which the provisions of the
foregoing sub-paragraph (i) are not
applicable), then all principal of and
premium, if any, and interest on the Senior
Indebtedness of the Borrower outstanding at
the time of such declaration shall first be
paid in full, before any payment on account
of principal or interest is made upon the
Note.
(b) Upon the happening of a Senior
Payment Event of Default (other than in
circumstances when the provisions of
Paragraph (a) immediately preceding are
applicable), then, unless and until such
Senior Payment Event of Default shall have
been remedied or waived or shall have ceased
to exist, or the Senior Indebtedness shall
have been paid in full, no direct or indirect
payment (in cash, property or securities or
by set-off or otherwise) shall be made or
agreed to be made on account of the Note, or
as a sinking fund for the Note, or in respect
of any redemption, retirement, purchase or
other acquisition of the Note, during any
period commencing on the date that any one or
more of the holders of the Senior
Indebtedness shall have given written notice
of such Senior Payment Event of Default to
the Borrower and ending on the date 180 days
after such notice shall have been given or,
if later, the date on which any Judicial
Proceedings theretofore commenced shall no
longer be pending in respect of such Senior
Payment Event of Default or are no longer
pursued in good faith by the holder or
holders of the Senior Indebtedness of the
Borrower; provided, however, that, upon the
expiration of any such period a subsequent
such period shall not commence with respect
to a Senior Payment Event of Default
attributable to the same facts and
circumstances that gave rise to such expired
period until the 365th day after the last day
of such expired period.
(c) During the continuance of any
Senior Non-Payment Event of Default (other
than in circumstances in which the provisions
of Paragraph (a) immediately preceding are
applicable), unless and until such Senior
Non-Payment Event of Default shall have been
remedied or waived or shall have ceased to
exist, or the Senior Indebtedness shall have
been paid in full, no direct or indirect
payment (in cash, property or securities or
by set-off or otherwise) shall be made or
agreed to be made on account of the Note, or
as a sinking fund for such Note, or in
respect of any redemption, retirement,
purchase or other acquisition of the Note,
during any period commencing on the date that
any one or more of the holders of the Senior
Indebtedness shall have given written notice
of such Senior Non-Payment Event of Default
to the Borrower and ending on the date 90
days after such notice shall have been given,
or, if later, the date on which any Judicial
Proceedings theretofore commenced shall no
longer be pending in respect of such Senior
Non-Payment Event of Default or are no longer
pursued in good faith by
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the holder or holders of the Senior
Indebtedness; provided, however, that upon
the expiration of any such period a
subsequent such period shall not commence
with respect to a Senior Non-Payment Event of
Default attributable to the same facts and
circumstances that gave rise to such expired
period until the 365th day after the last day
of such expired period.
(d) If any payment or distribution of
any character, whether in cash, securities or
other property, shall be received by the
Lender in contravention of any of the terms
of this Section 5.2 and before all the Senior
Indebtedness shall have been paid in full,
such payment or distribution or security
shall be received in trust for the benefit
of, and shall be paid over or delivered and
transferred to, the holders of the Senior
Indebtedness at the time outstanding in
accordance with the priorities then existing
among such holders for application to the
payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all
such Senior Indebtedness in full. The Lender
shall not take action inconsistent with the
rights of the holders of any Senior
Indebtedness hereunder.
5.3. SUBROGATION. Subject to the prior
payment in full of the Senior Indebtedness,
the Lender shall be subrogated to the rights
of the holders of the Senior Indebtedness to
receive payments or distributions of any kind
or character, whether in cash or property or
securities of the Borrower, applicable to the
Senior Indebtedness, until the Obligations of
the Borrower shall be paid in full, and no
such payments or distributions to the Lender
otherwise distributable in respect of the
Senior Indebtedness shall, as between the
Borrower, its creditors other than the
holders of the Senior Indebtedness, and the
Lender, be deemed to be a payment by such
Borrower on account of the Note.
5.4. UNCONDITIONAL OBLIGATION;
SUBORDINATION AGREEMENT .
(a) The provisions of this Section 5
are for the purpose of defining the relative
rights of the holders of Senior Indebtedness
on the one hand and the Lender on the other
hand, against Borrower, and its property; and
nothing herein shall impair, as between the
Borrower and the Lender, the obligation of
the Borrower, which is unconditional and
absolute, to pay to the Lender all
Obligations of the Borrower in accordance
with the terms and the provisions hereof; nor
shall anything herein prevent the Lender from
exercising all remedies otherwise permitted
by applicable law or hereunder upon default
under this Agreement, subject to the rights,
if any, under this Section 5 of the holders
of the Senior Indebtedness to receive cash,
property, stock or obligations otherwise
payable or deliverable to the Lender.
(b) The parties acknowledge that,
contemporaneously with the advance of the
Loan, the Lender shall enter into a
Subordination and Standstill Agreement with
the holder of the Senior Indebtedness, and
that the provisions of such Agreement shall
not be limited in any manner by the
provisions of this Article V.
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6. CONDITIONS PRECEDENT.
In addition to the making of the
foregoing representations and warranties and
the delivery of the Loan Documents and such
other documents and the taking of such
actions as the Lender may reasonably require
at or prior to the time of executing this
Agreement, the obligations of the Lender
hereunder including the obligation of Lender
to advance the Loan contemplated by Article
II hereof, are subject to the satisfaction of
the following conditions precedent prior to
such advance to the Borrower hereunder, any
or all of which may be waived by the Lender
in its sole discretion, and each of which the
Borrower hereby agrees to use its best
efforts to satisfy:
6.1. OPINION OF COUNSEL. The Lender
shall, prior to the Drawdown Date, have
received an opinion of counsel to the
Borrower, and to the Guarantor, in form and
substance satisfactory to the Lender and its
counsel, to the effect set forth in,
respectively, Exhibits D-1 and D-2 annexed
hereto.
6.2. SATISFACTORY PROCEEDINGS. All
proceedings in connection with the
transactions contemplated hereby (including,
without limitation, the Loan) shall be in
form and substance satisfactory to the
Lender, and the Lender shall have received
from the Borrower its fully-executed Note,
and the required Guaranty (completed to
inscribe the name of the Guarantor and the
Guarantor's notice information, where
contemplated) and Security Documents
(completed to inscribe the name of the
Assignor [as defined in Exhibit B hereto] and
such Assignor's notice information, where
contemplated), each dated no later than the
Drawdown Date, and the related Financing
Statements, together with any other Loan
Documents and all other information and
documents as the Lender may have reasonably
requested.
6.3. NO CHANGE OF LAWS. No change shall
have occurred in any law or regulation or in
the interpretation thereof that in the
reasonable opinion of the Lender would make
it unlawful for the Lender to make the Loan.
6.4. REPRESENTATIONS TRUE. Each of the
representations and warranties of the
Borrower to the Lender herein, in any of the
other Loan Documents or any documents,
certificate or other paper or notice in
connection herewith shall be true and correct
as of the time made or claimed to have been
made and as of the time of the advance of the
Loan with the same effect as though all such
representations and warranties were made at
and as of the time of such advance, and the
Borrower shall have complied with all of its
covenants contained in the Loan Documents;
there shall not exist any fact or
circumstance which constitutes a Default or
Event of Default under the Loan Documents, or
any of them, with respect to the Borrower;
and the Borrower shall have delivered to the
Lender its certificate in form and substance
satisfactory to the Lender with respect to
the foregoing matters.
6.5. SENIOR LOAN. An institutional
lender reasonably satisfactory to the Lender
(the "Senior Lender") shall have entered into
final acquisition loan documents, reasonably
satisfactory to the Lender, with respect to
the Facilities, and each of them, and all
conditions to the funding of loans thereunder
shall have been satisfied. The loans to be
provided pursuant to such acquisition loan
facility shall be in a principal amount not
less than seventy-eight percent (78%) of the
amount of the Acquisition Costs (such
acquisition loan facility is hereinafter
referred to as
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the ["Senior Loan"]). On the Drawdown Date,
the Senior Loan shall be in full force and
effect and there shall not exist any fact or
circumstance which constitutes, or, with
notice or passage of time or otherwise would
constitute, a default or breach under the
Senior Loan.
6.6. INITIAL BUDGET. The Lender shall
have confirmed the Initial Budget with
respect to the Loan.
6.7. CERTIFIED AUTHORIZATION. The
Lender shall have received a certificate from
the Secretary of the Borrower in form and
substance satisfactory to the Lender, with
respect to the authorization by the Borrower
of this Agreement and the other Loan
Documents and the consummation of the
transactions contemplated hereby and thereby,
and stating that attached thereto is a true
and complete copy of the Organization
Documents of the Borrower in the form
approved by the Lender (which approval shall
not unreasonably have been withheld), and the
documents evidencing the Senior Loan and the
Management Agreement, and that none of the
same have been modified and all are in full
force and effect.
6.8. LITIGATION. No action, suit or
proceeding against the Borrower relating to
the consummation of any of the transactions
contemplated by this Agreement or the other
Loan Documents nor any action of any
Governmental Authority seeking to delay or
enjoin any such transactions shall be pending
or, to the best of the Borrower's knowledge,
threatened.
7. COVENANTS.
7.1. AFFIRMATIVE COVENANTS. The Borrower
agrees that, from and after the date hereof
until the payment and satisfaction in full of
all the Obligations, the Borrower will comply
with its obligations as set forth throughout
this Agreement and covenants and agrees that:
7.1.1. PAYMENTS. The Borrower shall
punctually pay or cause to be paid the
principal of and interest on the Loan and any
other fees and expenses due according to the
terms hereof, of the Note and any other Loan
Documents.
7.1.2. REPORTING REQUIREMENTS. The
Borrower shall furnish the Lender:
(i) as soon as available but in
any event within one hundred twenty (120)
days after the close of each fiscal year, its
unaudited Financials, for such fiscal year,
consisting of an internally-generated balance
sheet of the Borrower as of the end of such
year and internally-generated statements of
operations, cash flows and changes in
stockholders' equity for such year (all in
reasonable detail and with all appropriate
notes and supporting schedules), certified by
a senior officer of the Borrower as
presenting fairly the financial condition of
the Borrower, as of the dates and for the
periods indicated and as having been prepared
in accordance with GAAP consistently applied;
(ii) as soon as available but in
any event within forty-five (45) days after
the end of each fiscal quarter its unaudited
Financials, for such quarter, consisting of
an internally-generated balance sheet of the
Borrower as of
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<PAGE>
the end of such quarter and
internally-generated statements of
operations, cash flows and changes in
stockholders' equity for such quarter and for
the period commencing at the end of the
previous fiscal year and ending with the end
of such quarter (all in reasonable detail and
with all notes and supporting schedules),
certified by a senior officer of the Borrower
as presenting fairly the financial condition
of the Borrower as of the dates and for the
periods indicated and as having been prepared
in accordance with GAAP consistently applied;
(iii) together with the Borrower's
annual unaudited Financials, a certificate
executed by a senior officer of the Borrower
stating that no Default or Event of Default
then exists hereunder (or identifying any
such Default or Event of Default, the
circumstances thereof and the steps being
taken to remedy the same);
(iv) together with each payment of
interest under Section 2.2.3, and with each
prepayment of principal under Section 2.3.2,
a statement setting forth in reasonable
detail the basis for such payment (without
limitation, specifying the amount of Net
Available Cash during the relevant period),
accompanied by the certificate of a senior
officer of the Borrower with respect to the
accuracy and completeness thereof; and
(v) promptly upon their becoming
available, copies of all financial
statements, reports, notices, proxy
statements and other communications sent by
the Borrower to security holders or to the
holder of any Senior Indebtedness, and such
other information relevant to the financial
condition, properties and operations of the
Borrower as the Lender may from time to time
reasonably request.
7.1.3. BUDGETS. Prior to the
Drawdown Date, the Borrower shall prepare and
submit to the Lender the Initial Budget,
which for purposes hereof shall be comprised
of its five-year operating budget setting
forth the Borrower's projection of its cash
receipts, together with a detailed summary of
its operating expenses in connection with the
operation and ownership of the Facilities,
including costs under or by virtue of any
Management Agreement. The Borrower shall not
incur any expenses other than those projected
in such budget submitted by the Borrower to
the Lender pursuant to this Section 7.1.3, as
the same may be amended from time to time in
accordance with the terms hereof, if such
expenses would result in a material variance
in Net Available Cash from the amounts set
forth in the Initial Budget, unless the
Lender's consent (which shall not
unreasonably be withheld or delayed) to such
variance shall have first been obtained. From
time to time, the Borrower may submit to the
Lender one or more supplements to or
revisions of the Initial Budget which shall
be deemed to amend the Initial Budget,
subject to the consent of the Lender (which
shall not unreasonably be withheld or
delayed) if such supplement or revision would
result in a material variance in Net
Available Cash from the amounts theretofore
set forth.. Such budget, as may be
supplemented or revised as aforesaid, is
called herein the "Budget". The Borrower
shall operate the Facilities in accordance
with such Budget and the Senior Loan.
7.1.4. BOOKS AND RECORDS. The
Borrower shall keep true and accurate books
of account in accordance with GAAP, maintain
its current fiscal year and shall permit the
Lender or its designated representatives,
upon reasonable prior notice, to inspect the
Borrower's premises during normal business
hours, to examine and be advised by the
Borrower as to such or other business
19
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records upon the request of the Lender, to
make copies thereof and take extracts
therefrom and to permit the Lender's finance
examiners to conduct periodic finance
examinations, in each case subject to
applicable confidentiality laws with respect
to resident records.
7.1.5. MAINTENANCE OF BUSINESS;
COMPLIANCE WITH LAW. The Borrower shall:
(i) do or cause to be done all things
necessary or appropriate to preserve and keep
in full force and effect its legal existence,
rights and franchises, and use its best
efforts to qualify as a foreign corporation
entitled to do business in every jurisdiction
wherein it is required to be so qualified,
and maintain its business, its properties and
its assets in good working order and
condition so as to avoid any Materially
Adverse Effect, (ii) keep its business,
properties and assets adequately insured with
sound and reputable insurers to the extent
and against such risks (including fire and
other risks commonly insured against by
extended coverage) as should be maintained in
accordance with good business practice, so as
not materially to differ from insurance
customarily maintained by companies in the
same or similar businesses and maintain in
full force and effect public liability
insurance against claims for personal injury
or death or property damage occurring upon,
in, about or in connection with the use of
any properties owned, occupied or controlled
by the Borrower, (iii) maintain its chief
executive office in the United States, (iv)
continue to engage in the same lines of
business, and (v) comply with all
Requirements of Law, including all
Environmental Laws and ERISA, and take all
action with respect to each pension,
profit-sharing, bonus incentive, welfare or
other employee benefit plan within the
meaning of Section 3(3) of ERISA in which its
employees participate required by the
Department of Labor and the Internal Revenue
Service under said act and by all other
applicable law, in each case under this
clause (v) unless duly contested in good
faith by appropriate proceedings in
accordance with the provisions of the Senior
Loan.
7.1.6. TAXES. The Borrower shall
pay and discharge promptly, or cause to be
paid and discharged promptly all taxes,
assessments and governmental charges or
levies imposed upon it or upon its income or
upon any of its property, real, personal or
mixed, or upon any part thereof, as well as
all claims of any kind (including claims for
labor, materials and supplies which, if
unpaid, might by law become a lien or charge
upon its property), provided, however, that
the Borrower shall not be required to pay any
such tax, assessment, charge, levy or claim
if the amount, applicability or validity
thereof shall currently be contested in good
faith by appropriate proceedings, and, if
required under GAAP, if the Borrower shall
have set aside on its books reserves
(segregated to the extent required by sound
accounting practice) reasonably deemed by it
adequate with respect thereto.
7.1.7. NOTICES. The Borrower shall
notify the Lender promptly in writing of (i)
the occurrence of any Default or Event of
Default hereunder, (ii) the occurrence of any
default (including, without limitation, any
default which is subject to cure under the
terms thereof) under any Senior Indebtedness,
(iii) any noncompliance with ERISA or any
Environmental Law or proceeding in respect
thereof which could have a Materially Adverse
Effect with respect to it, (iv) any change of
address, (v) any pending litigation or, to
the extent the Borrower has knowledge of any
threatened litigation, such threatened
litigation, or similar proceeding affecting
the Borrower, or any material change in any
such litigation or proceeding previously
reported, in each case which would
20
<PAGE>
reasonably be expected to have a Materially
Adverse Effect with respect to it, (vi)
claims against any assets or properties of
the Borrower which could have a Materially
Adverse Effect with respect to it or any
other circumstances or event which has had or
is reasonably likely to have a Materially
Adverse Effect with respect to it, together
with a specification of each of the foregoing
under clauses (i) through (vi) immediately
preceding and the steps if any being taken to
remedy the same.
7.1.8. USE OF PROCEEDS. The
Borrower shall use the proceeds of the Loan
made to the Borrower solely to finance up to
twenty-two percent (22%) of the Acquisition
Costs of the Facilities.
7.1.9. COOPERATION. The Borrower
shall cooperate with the Lender, take such
action, execute such documents, and provide
such information as the Lender may from time
to time reasonably request in order further
to effect the transactions contemplated by
and the purposes of the Loan Documents.
7.1.10. COMPLIANCE WITH OTHER
AGREEMENTS. The Borrower shall: (i) do or
cause to be done all things necessary or
appropriate to comply in all material
respects with all of the terms and conditions
of the Senior Loan or any Management
Agreement to which it is a party; and (ii)
not amend, modify or alter any documents
evidencing such Senior Loan, or waive any
rights thereunder, in any manner which would,
directly or indirectly, adversely affect the
interests of the Lender; and (iii) not enter
into any Management Agreement other than a
Management Agreement with the Guarantor which
provides for a management fee of no more than
5% of the gross operating income of the
Facilities, or amend, modify or alter any
Management Agreement or waive any rights
thereunder, in any material respect or in any
manner which would adversely affect the
interests of the Lender; and (iv) not assign,
subcontract, transfer, hypothecate or
otherwise dispose of or encumber any interest
in any of the agreements identified under
this Section 7.1.10, in each case without the
prior written approval of the Lender (which
approval shall not unreasonably be withheld).
7.2. NEGATIVE COVENANTS. The Borrower
agrees that, from and after the date hereof
until the payment and satisfaction in full of
all the Obligations:
7.2.1. RESTRICTIONS ON
INDEBTEDNESS. The Borrower will not create,
incur or assume or become obligated for any
Indebtedness other than (i) Indebtedness to
the Lender, (ii) the Senior Loan, (iii)
unsecured Indebtedness to trade creditors,
carriers, warehousemen, mechanics and
materialmen (or Indebtedness to trade
creditors secured by purchase money Liens or
Indebtedness to carriers, warehousemen,
mechanics and materialmen secured by Liens
permitted by Section 7.2.2(iv)) constituting
current liabilities of the Borrower incurred
in the ordinary course of business, and not
incurred through the borrowing of money or
the obtaining of credit except credit on an
open account customarily extended in the
ordinary course of business, (iv)
Indebtedness in respect of taxes or other
governmental charges contested in good faith
and by appropriate proceedings and for which
adequate reserves have been taken and set
aside on the Borrower's books (segregated to
the extent required by sound accounting
practice); (v) Subordinated Indebtedness not
included above with respect to which the
Lender gives its written consent; (vi)
unsecured loans from
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the Guarantor, fully subordinated pursuant to
the Guaranty, the proceeds of which
are used solely to pay costs related to the
Facilities; and (vii) Indebtedness for leased
or financed furniture, fixtures or equipment
used in connection with the operation of the
Facilities where the aggregate payments due
thereunder do not exceed $200,000 during any
fiscal year.
7.2.2. PERMITTED LIENS. The
Borrower will not create, incur or allow any
Liens on any of its property or assets except
(i) Liens securing taxes or other
governmental charges not yet due; (ii)
necessary deposits or pledges made in
connection with social security obligations;
(iii) Liens of carriers, warehousemen,
mechanics and materialmen as to obligations
not yet due which, individually and in the
aggregate, could not have a Materially
Adverse Effect; (iv) easements,
rights-of-way, zoning restrictions and
similar minor Liens which, individually and
in the aggregate, do not have a Materially
Adverse Effect; (v) Liens on the Facilities
securing the Senior Loan; and (vi) Liens on
assets described under clause (vii) of
Section 7.2.1 hereof incurred in connection
with the Indebtedness described thereunder.
7.2.3. PERMITTED INVESTMENTS. The
Borrower will not make any investments other
than investments in (i) marketable
obligations of the United States maturing
within one (1) year, (ii) certificates of
deposit, bankers' acceptances and time and
demand deposits at United States banks having
total assets in excess of $1,000,000,000 or
(iii) such other investments as the Lender
may from time to time approve in writing
(such approval not to be unreasonably
withheld or delayed).
7.2.4. DISTRIBUTIONS. The Borrower
will not: (i) make any distributions to its
stockholders or on or in respect of its
capital or otherwise of any nature
whatsoever; or (ii) exchange or expend in
redemption or purchase of any of its capital
or any interest in the Borrower, any cash or
property; or (iii) make any loans, advances
or extensions of credit to any Affiliate (or
to any other person or entity except in the
ordinary course of business); or (iv)
guaranty, endorse or otherwise be or become
contingently liable in connection with any
amounts incurred by any Affiliate; or (v)
enter into any transaction with any Affiliate
except upon fair and reasonable terms no less
favorable to the Borrower than the Borrower
would obtain in a comparable arms-length
transaction with a person not an Affiliate;
provided, however, that any transaction with
any Affiliate entailing any management or
similar fee with respect to the Facilities or
the Borrower shall be subject to compliance
with such standards regarding the effect
thereof on Net Available Cash as shall have
been agreed to by the Lender prior to
effectuation of any such arrangement.
7.2.5. MERGERS; DISPOSITION OF
ASSETS. The Borrower will not: (i) consummate
any merger or sale-leaseback transaction
unless the proceeds of any such sale and
leaseback transaction are applied
concurrently with such consummation to the
satisfaction in full of the Obligations; or
(ii) effect any disposition of assets,
whether by sale, assignment, lease, transfer
or otherwise, other than in the ordinary
course; or (iii) purchase, lease or otherwise
acquire assets other than in the ordinary
course or as specifically permitted by
Sections 7.2.1 or 7.2.2 hereof.
7.2.6. SUBSIDIARIES. The Borrower
shall not create or hold any interest in any
Subsidiary.
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7.2.7. CHANGE IN CIRCUMSTANCES;
CONFLICTS. The Borrower will not cause or
permit a change in the nature of its
business, or, in any material respect (except
as may be required by GAAP) in its accounting
principles or practices. The Borrower will
not enter into any agreement containing any
provisions that would be violated by the
performance by the Borrower of its
obligations under this Agreement, the
Borrower's Note or any other Loan Document.
The Borrower will not amend its Organization
Documents in any manner that is adverse to
the interests of the Lender.
7.2.8. TRANSFER OF INTERESTS. The
Borrower shall not recognize or permit or
suffer the assignment of any shares of its
capital stock or other interest therein, by
operation of law or otherwise, except
pursuant to the Security Documents, nor shall
the Borrower create or permit or suffer the
creation of any additional interest therein,
or issue any shares of its capital stock,
unless the intended assignee or holder
thereof, as the case may be, shall have
joined in the Guaranty and executed to the
Lender the Security Documents in accordance
with the provisions of Section 3.2 hereof.
8. LIMITATIONS ON RECOURSE.
Anything contained in this Agreement or
the Loan Documents, or in any governmental
regulation, constitution, statute or rule of
law, or by the enforcement of any assessment
or penalty, or otherwise notwithstanding, the
Borrower hereby agrees that none of the
members or managers past, present or future,
of the Lender, nor any incorporator, manager,
member, stockholder, officer or director of
any predecessor or successor entity, shall be
personally liable for any agreement or
obligation of the Lender hereunder, all such
liability being hereby waived and released.
9. EVENTS OF DEFAULT; ACCELERATION.
If any of the following events ("Events
of Default") shall occur:
(a) the Borrower shall fail to pay when
due and payable any principal of the Loan
when the same becomes due;
(b) the Borrower shall fail to pay
interest on the Loan or any other sum due
under any of the Loan Documents within five
(5) Business Days after the date on which the
same shall have first become due and payable;
(c) the Borrower shall fail to perform
any other term, covenant or agreement
contained in the Loan Documents within
fifteen (15) days after the Lender has given
written notice of such failure to the
Borrower or, if such failure is not
reasonably capable of cure within such
period, within 45 days after such notice
(provided the Borrower shall have initiated
and is diligently pursuing action to cure
such failure during and after such 15-day
period);
(d) any representation or warranty of
the Borrower or the Guarantor in the Loan
Documents or in any certificate or notice
given in connection therewith shall have been
false, incorrect or misleading in any
material respect at the time made or deemed
to have been made;
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(e) the Borrower shall be in default
(and shall not have cured such default within
any applicable period of grace or cure): (x)
under any agreement or agreements creating,
securing or evidencing Indebtedness owing to
the Lender or any Affiliates of the Lender,
or (y) under any agreement or agreements
evidencing any Senior Indebtedness, or
evidencing any Indebtedness in excess of
$200,000.00 in aggregate principal amount
(provided, however, that it shall not be an
Event of Default hereunder in the event (I)
such default under this clause (y) does not
involve any payment under any Indebtedness
described under this clause (y) and (II) the
holder of such Indebtedness shall promptly
have waived such default or breach and (III)
the default or breach so waived is not
reasonably likely to have a Materially
Adverse Effect;
(f) any of the Loan Documents shall
cease to be in full force and effect, or the
Guarantor shall purport that the Guaranty or
Security Documents shall no longer relate to
the Loan hereunder made;
(g) the Borrower, or any stockholder of
the Borrower (i) shall make an assignment for
the benefit of creditors, (ii) shall be
adjudicated bankrupt or insolvent, (iii)
shall seek the appointment of, consent to or
be the subject of an order appointing, a
trustee, liquidator or receiver of itself as
to all or part of its assets, or assuming
custody or control of such Borrower, (iv)
shall commence, answer, approve or consent
to, any case or proceeding under any
bankruptcy, insolvency, reorganization or
similar law and, in the case of an
involuntary case or proceeding, such case or
proceeding is not dismissed within 90 days
following the commencement thereof, or (vi)
shall be the subject of an order for relief
in an involuntary case under Federal
bankruptcy law if not stayed or dismissed
within 90 days following the commencement
thereof;
(h) the Borrower shall be unable to pay
its debts as they mature;
(i) there shall remain undischarged for
more than sixty (60) days any final judgment
or execution action against the Borrower
that, together with other outstanding claims
and execution actions against the Borrower
exceeds $200,000.00 in the aggregate;
(j) if the Borrower shall be indicted
for any crime; or
(k) if any change, as a result of any
transaction or series of transactions, in the
possession, directly or indirectly, of the
power to direct or cause the direction of the
management or policies of the Borrower,
whether by contract or otherwise, shall
occur;
THEN, or at any time thereafter:
(1) In the case of any Event of Default
under clause (g) or (h) (for any reason
whatsoever and whether such Event of Default
shall be voluntary or involuntary or come
about or be effected by operation of law or
pursuant to or in compliance with any
judgment, decree or order of any court or any
order, rule or regulation of any admini
strative or governmental body), the entire
unpaid principal amount of the Loan, all
interest accrued and unpaid thereon, and all
other amounts payable thereunder and under
the other Loan Documents shall automatically
become forthwith due and payable, without
presentment, demand, protest or notice of any
kind, all of which are hereby expressly
waived by the Borrower; and
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(2) In the case of any Event of Default
other than under clauses (g) or (h) (for any
reason whatsoever and whether such Event of
Default shall be voluntary or involuntary or
come about or be effected by operation of law
or pursuant to or in compliance with any
judgment, decree or order of any court or any
order, rule or regulation of any admini
strative or governmental body), the Lender
may, by written notice to the Borrower,
declare the unpaid principal amount of the
Loan, all interest accrued and unpaid
thereon, and all other amounts payable
hereunder and under the other Loan Documents
to be forthwith due and payable, without
presentment, demand, protest or further
notice of any kind, all of which are hereby
expressly waived by the Borrowers, and each
of them.
No remedy herein conferred upon the
Lender is intended to be exclusive of any
other remedy and each and every remedy shall
be cumulative and in addition to every other
remedy hereunder, now or hereafter existing
at law or in equity or otherwise. In the case
any one or more of the Events of Default
shall have occurred and be continuing, the
Lender may proceed to protect and enforce its
rights either by suit in equity and/or by
action at law, whether for the specific
performance of any covenant or agreement
contained in this Agreement, any Note or any
other Loan Document, or the Lender may
proceed to enforce the payment of all
Obligations or to enforce any other legal or
equitable right of the Lender. In the event
an Event of Default shall have occurred and
the Lender shall employ attorneys, or incur
other costs and expenses for the collection
of payments due or to become due, or for the
enforcement or performance or observance of
any obligation or agreement of any Borrower,
such Borrower agrees that it will pay to the
Lender, on demand, the reasonable fees of
such attorney together with all other costs
and expenses incurred by the Lender.
10. MISCELLANEOUS.
10.1. INDEMNIFICATION. The Borrower
agrees to indemnify and hold harmless the
Lender and its officers, employees,
affiliates, agents, and controlling persons
from and against, and shall promptly
reimburse such parties for, all claims,
damages, liabilities and losses of every kind
(including, without limitation, reasonable
counsel's fees) relating to or arising out of
or in connection with the Loan Documents or
the transactions contemplated thereby,
including without limitation, against those
in respect of the application of
Environmental Laws to the Borrower, absent
the gross negligence or willful misconduct of
the Lender, not including liabilities of
Lender for taxes based upon net income
arising out of or in connection with the Loan
Documents.
10.2. EXPENSES. The Borrower shall from
time to time pay to the Lender promptly on
demand all reasonable out-of-pocket costs and
expenses (including any taxes and reasonable
legal and other professional fees and
expenses and fees and expenses of its finance
examiner) incurred by the Lender in
connection with the preparation, negotiation,
execution, amendment, administration or
enforcement of any of the Loan Documents.
10.3. NOTICES. All notices, requests or
instructions hereunder shall be in writing
and delivered personally or sent by
registered or certified mail, postage
prepaid, or by telecopy (or like
transmission), as follows:
25
<PAGE>
(1) if to the Borrower:
3131 Elliott Avenue
Suite 500
Seattle, Washington 98121
Attention: Raymond R.
Brandstrom
Telecopy Number: (206) 301-
4500
with a copy to:
Randi Nathanson, Esq.
The Nathanson Group
1411 Fourth Avenue
Suite 905
Seattle, Washington 98101
Telecopy Number: (206) 623-
1738
(2) if to the Lender:
450 Park Avenue - Suite 2302
New York, New York 10022
Attention: Paul A. Biddelman
Telecopy Number: (212) 223-
2425
with a copy to:
Howard Kailes, Esq.
Krugman Chapnick &
Grimshaw LLP
Park 80 West - Plaza
Two
Saddle Brook, New
Jersey 07663
Telecopy Number: (201) 845-
9627
Any notice so addressed and mailed shall be
deemed to be given five Business Days after
deposit in the mails. Any notices addressed
and otherwise delivered shall be deemed to be
given when actually received by the
addressee. Any of the above addresses or
telecopy numbers may be changed at any time
by notice given as provided above; provided,
however, that any such notice of change of
address shall be effective only upon receipt.
10.4. REGISTRATION OF NOTES. The
Borrower shall keep at its principal
executive office a register for the
registration and registration of transfers of
the Note. The name and address of each holder
of the Note, each transfer thereof and the
name and address of each transferee of the
Note shall be registered in such register.
Upon surrender of any Note at the principal
executive office of the Borrower for
registration of transfer (duly endorsed or
accompanied by a written instrument of
transfer duly executed by the registered
holder of the Note or its attorney duly
authorized in writing and accompanied by the
address for notices of each transferee of the
Note), the Borrower shall execute and
deliver, at its expense,
26
<PAGE>
a new Note in exchange therefor, in an
aggregate principal amount equal to the
unpaid principal amount of the surrendered
Note, registered in the name of the
transferee.
10.5. SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon and inure to
the benefit of each party hereto and its
successors and assigns, but the Borrower may
not assign its rights or obligations
hereunder or under the other Loan Documents.
10.6. AMENDMENTS. No modification,
amendment or waiver of any provision of, nor
any consent required by, this Agreement, nor
any consent to any departure by the Borrower
therefrom, shall in any event be effective
unless the same shall be in writing and
signed by the Lender and the Borrower and
then such modification, amendment, waiver or
consent shall be effective only in the
specific instance and for the purpose which
given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any
other or further notice or demand in the
same, similar or other circumstances, except
to the extent specifically required by the
terms hereof.
10.7. NO WAIVER. No failure or delay by
the Lender to insist upon the strict
performance of any term, condition, covenant
or agreement of this Agreement or the other
Loan Documents, or to exercise any right,
power or remedy hereunder or thereunder or
consequent upon a breach hereof or thereof,
shall constitute a waiver of any such term,
condition covenant, agreement, right, power
or remedy or of any such breach, or preclude
the Lender from exercising any such right,
power or remedy at any later time or times,
nor shall any single or partial exercise of
any right, power or remedy preclude any other
right, power or remedy.
10.8. SEVERABILITY; ENTIRE AGREEMENT.
(a) The provisions of this Agreement are
severable and if any one provision hereof
shall be held invalid, illegal or
unenforceable in whole or in part in any
jurisdiction, such invalidity, illegality or
unenforceability shall affect only such
provision in such jurisdiction, and this
Agreement shall be construed as if such
invalid, illegal or unenforceable provision
had never been contained herein. This
Agreement and the other Loan Documents,
together with all exhibits hereto and
thereto, expresses the entire understanding
of the parties with respect to the
transactions contemplated hereby and thereby.
This Agreement and any amendment hereto may
be executed in several counterparts, each of
which shall be deemed an original, and all of
which shall constitute one agreement. In
proving this Agreement, it shall not be
necessary to produce more than one such
counterpart executed by the party to be
charged.
(b) Without limiting the generality of
the foregoing and notwithstanding anything to
the contrary contained in this Agreement or
any other Loan Document, the Borrower shall
not be obligated to pay, and the Lender shall
not charge, reserve, collect or receive
interest (which shall be calculated as the
aggregate of all charges which constitute
interest under applicable law) in excess of
the maximum non-usurious interest rate, as in
effect from time to time, which may be
charged, reserved, received or collected by
the Lender in connection with this Agreement
or any Loan Document. During any period of
time in which the interest rates specified
herein exceed the maximum rate as aforesaid,
interest shall accrue and be payable at such
maximum rate; provided, however, that if the
interest rate payable hereunder declines
below the maximum rate as aforesaid, interest
shall continue to
27
<PAGE>
accrue and be payable at such maximum rate
until the interest that has been paid by the
Borrower hereunder and under the other Loan
Documents equals the amount of interest that
would have been paid if interest had at all
times accrued and been payable at the
applicable interest rate specified in this
Agreement and the other Loan Documents. In
the event that the Lender shall collect from
the Borrower any amount which is deemed to
constitute interest at a rate in excess of
the maximum rate as aforesaid, all such
excess amounts shall be credited to the
payment of outstanding principal advanced to
the Borrower pursuant to this Agreement and
the other Loan Documents.
10.9. REMEDIES CUMULATIVE, ETC. No
right, power or remedy herein conferred upon
or reserved to the Lender is intended to be
exclusive of any other right, power or remedy
or remedies, and each and every right, power
and remedy of the Lender pursuant to this
Agreement, or the other Loan Documents, now
or hereafter existing at law or in equity or
by statute or otherwise shall, to the extent
permitted by law, be cumulative and
concurrent and shall be in addition to every
other right, power or remedy pursuant to this
Agreement, or the other Loan Documents, or
now or hereafter existing at law or in equity
or by statute or otherwise, and the exercise
or beginning of the exercise by the Lender of
any one or more of such rights, powers or
remedies shall not preclude the simultaneous
or later exercise by the Lender of any or all
such other rights, powers or remedies.
10.10. GOVERNING LAW; WAIVER OF JURY
TRIAL. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED AS CONTRACTS
MADE AND TO BE PERFORMED UNDER THE LAWS OF
THE STATE OF NEW YORK AND SHALL BE
INTERPRETED IN ACCORDANCE THEREWITH AND
GOVERNED THEREBY. THE BORROWER AGREES THAT
ANY SUIT FOR THE ENFORCEMENT OF ANY OF THE
LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR ANY FEDERAL COURT
SITTING THEREIN. THE BORROWER AND THE LENDER
EACH HEREBY WAIVE ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION ARISING DIRECTLY
OR INDIRECTLY IN CONNECTION WITH ANY LOAN
DOCUMENT. IT IS INTENDED THAT SAID WAIVER
SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS,
AND/OR COUNTERCLAIMS IN ANY ACTION OR
PROCEEDING.
10.11. SURVIVAL OF REPRESENTATIONS.
Each representation, warranty, covenant and
agreement of the parties hereto herein
contained shall survive the execution hereof
and the Loan, notwithstanding any
investigation at any time made by or on
behalf of any party hereto.
10.12. ACCOUNTING PRINCIPLES. 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 or the
Note, it shall be done in accordance with
GAAP at the time in effect, to the extent
applicable, except where such principles are
inconsistent with the requirements of this
Agreement or the Note.
10.13. CAPTIONS. The captions appearing
herein are for the convenience of the parties
only and shall not be construed to affect the
meaning of the provisions of this Agreement.
28
<PAGE>
10.14. COUNTERPARTS. This Agreement may
be executed in counterparts, each of which
shall be deemed an original, but all of which
taken together shall constitute one and the
same instrument.
* * * * *
29
<PAGE>
IN WITNESS WHEREOF, the undersigned have
duly executed this Credit Agreement as a
sealed instrument as of the date first above
written.
HIGH YIELD PARTNERS LLC
By: Hanseatic
Corporation,
Managing Member
By: /s/ Paul A.
Biddelman
- -------------------------------------
Name: Paul A.
Biddelman
Title: Treasurer
c/o Hanseatic
Corporation
450 Park Avenue -
Suite 2302
New York, New York
10022
Tel: (212) 832-3038
Fax: (212) 223-2425
EMERITUS PROPERTIES
V, INC.
By: /s/ Raymond R.
Brandstrom
--------------
- -------------------------
Name: Raymond R.
Brandstrom
Title: President
Address:
3131 Elliott Avenue
Suite 500
Seattle, Washington
98121
Tel: (206) 298-2909
Fax: (206) 301-4500
30
<PAGE>
GUARANTY
FOR VALUE RECEIVED, and in consideration
of any loan or other financial accommodation
heretofore or hereafter at any time made or
granted to Emeritus Properties V, Inc., a
Washington corporation, 3131 Elliott Avenue,
Suite 500, Seattle, Washington 98121
(hereinafter referred to as the "Debtor"),
pursuant to that certain Credit Agreement
dated as of May 1, 1997 (as amended and in
effect from time to time, the "Credit
Agreement"), by and between the Debtor and
High Yield Partners LLC (hereinafter referred
to as the "Lender"), a Delaware limited
liability company, c/o Hanseatic Corporation,
450 Park Avenue - Suite 2302, New York, New
York 10022 (hereinafter, together with its
successors and assigns, called the "Lender"),
by the Lender, the undersigned hereby
absolutely and unconditionally guarantees the
full and prompt payment when due, whether by
acceleration or otherwise, and at all times
thereafter, of all obligations of the Debtor
to the Lender howsoever created, arising or
evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter
existing, or due or to become due and the
performance and observance of all terms,
covenants, conditions, obligations and
provisions to be performed, paid or observed
by the Debtor to the Lender, in each case,
under the Credit Agreement and the other Loan
Documents (all such obligations being
hereinafter collectively called the
"Liabilities"). To the fullest extent
permitted by law, the undersigned further
agrees that the Liabilities may be increased,
modified, amended, extended or renewed, in
whole or in part, without notice or further
assent from it, and that it will remain bound
upon this guaranty notwithstanding any
increase, modification, amendment, extension
or renewal of any Liability. Capitalized
terms used herein and not otherwise defined
shall have the meanings assigned to such
terms in the Credit Agreement.
This guaranty shall in all respects be a
continuing, absolute and unconditional
guaranty, and shall remain in full force and
effect (notwithstanding, without limitation,
the dissolution of the undersigned), subject
to discontinuance as to the undersigned only
upon actual receipt by the Lender of written
notice from such undersigned or any person
duly authorized and acting on behalf of such
undersigned of the discontinuance hereof as
to such under-signed; provided, however, that
no such notice of discontinuance shall affect
or impair, any of the agreements and
obligations of such undersigned hereunder
with respect to any and all Liabilities
existing prior to the time of actual receipt
of such notice by the Lender, any and all
Liabilities created or acquired thereafter
pursuant to any commitments to the Debtor
made by the Lender prior to the time of
actual receipt of such notice by the Lender
(including, without limitation, all
commitments to lend any sums pursuant to the
Credit Agreement), and any and all extensions
or renewals of any of the foregoing, and any
and all interest on any of the foregoing; and
all of the agreements and obligations of such
undersigned under this guaranty shall,
notwithstanding any such notice of
discontinuance, remain fully in effect until
all such Liabilities (including any
extensions or renewals of any thereof) and
all such interest and expenses shall have
been paid in full. Any such notice of
discontinuance by or on behalf of any of the
undersigned shall not affect or impair the
obligations hereunder of any other of the
undersigned.
The undersigned further agree(s) that,
if at any time all or any part of any payment
theretofore applied by the Lender to any of
the Liabilities is or must be rescinded or
returned by the Lender for any reason
whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization
of the Debtor), such
<PAGE>
Liabilities shall, for the purposes of this
guaranty, to the extent that such payment is
or must be rescinded or returned, be deemed
to have continued in existence,
notwithstanding such application by the
Lender, and this guaranty shall continue to
be effective or be reinstated, as the case
may be, as to such Liabilities, all as though
such application by the Lender had not been
made.
The Lender, may, from time to time
whether before or after any discontinuance of
this guaranty, at its sole discretion and
without notice to the undersigned, take any
or all of the following actions: (a) retain
or obtain a security interest in any property
to secure any of the Liabilities or any
obligation hereunder, (b) retain or obtain
the primary or secondary obligation of any
obligor or obligors, in addition to the
undersigned, with respect to any of the
Liabilities, (c) extend or renew for one or
more periods (whether or not longer than the
original period), alter, increase or
exchange, any of the Liabilities, or release
or compromise any obligation of the
undersigned hereunder or any obligation of
any nature of any other obligor with respect
to any of the Liabilities, (d) release or sub
ordinate its security interest in, or
surrender, release or permit any substitution
or exchange for, all or any part of any
property securing any of the Liabilities or
any obligation hereunder, or extend or renew
for one or more periods (whether or not
longer than the original period), or release,
compromise, alter or exchange, any
obligations of any nature of any obligor with
respect to any such property, and (e) resort
to the undersigned for payment of any of the
Liabilities, whether or not the Lender shall
have resorted to any property securing any of
the Liabilities or any obligation hereunder
or shall have proceeded against any other of
the undersigned or any other obligor
primarily or secondarily obligated with
respect to any of the Liabilities, and the
undersigned will remain bound upon this
guaranty notwithstanding any of the foregoing
actions of the Lender.
Any amount received by the Lender from
whatsoever source on account of the
Liabilities may be applied by it toward the
payment of such of the Liabilities, and,
subject to the terms of the Credit Agreement,
in such order of application, as the Lender
may from time to time elect; and,
notwithstanding any payments made by or for
the account of the undersigned pursuant to
this guaranty, the undersigned shall not be
subrogated to any rights of the Lender until
such time as this guaranty shall have been
discontinued as to the undersigned and the
Lender shall have received payment of the
full amount of all Liabilities and of all
obligations of the undersigned hereunder.
The undersigned for itself hereby
expressly waive(s): (a) acceptance and notice
of the acceptance by the Lender of this
guaranty, (b) notice of the existence or
creation or non-payment or demand for payment
of all or any of the Liabilities, (c)
presentment, demand, notice of dishonor,
protest and all other notices whatsoever, (d)
all diligence in collection or protection of
or realization upon the Liabilities or any
thereof, any obligation hereunder, or any
security for or guaranty of any of the
foregoing, (e) any present or future duty of
the Lender to disclose material information
regarding the Debtor and/or the Liabilities,
and (f) trial by jury and the right thereto
in any action or proceeding of any kind or
nature, arising on, under or by reason of or
relating in any way to this guaranty.
2
<PAGE>
The creation or existence from time to
time of Liabilities in excess of the amount
to which the right of recovery under this
guaranty is limited is hereby authorized
without notice to the undersigned and shall
in no way affect or impair the rights of the
Lender and the obligation of the undersigned
under this guaranty.
The Lender may, from time to time,
whether before or after any discontinuance of
this guaranty, upon notice to the
undersigned, assign or transfer any or all of
the Liabilities; and, notwithstanding any
assignment or transfer or any subsequent
assignment or transfer thereof, such
Liabilities shall be and remain Liabilities
for the purposes of this guaranty, and each
and every immediate and successive assignee
or transferee of any of the Liabilities or of
any interest therein shall, to the extent of
the interest of such assignee or transferee
in the Liabilities, be entitled to the
benefits of this guaranty to the same extent
as if such assignee or transferee were the
Lender; provided, however, that, unless the
Lender shall otherwise consent in writing
(which consent shall not impair this guaranty
as to any and all of the undersigned), the
Lender shall have an unimpaired right, prior
and superior to that of any such assignee or
transferee, to enforce this guaranty, for the
benefit of the Lender, as to those of the
Liabilities which the Lender has not assigned
or transferred.
The obligations of the undersigned
hereunder shall not be affected by (i) the
failure of the Lender to assert any claim or
demand or to enforce any right or remedy
against the Debtor under the provisions of
the Credit Agreement or any other agreement
or otherwise; (ii) any extension or renewal
of any thereof; (iii) any rescission, waiver,
amendment or modification of any of the terms
or provisions of the Credit Agreement or any
other agreement; (iv) the creation, release
of, or failure to perfect any security held
by the Lender for the Liabilities or any of
them; (v) the failure of the Lender to
exercise any right or remedy against any
other guarantor of the Liabilities; (vi) the
exercise of rights by the Lender which
prevent the undersigned from exercising its
right of subrogation against the Debtor;
(vii) the failure of the Lender to file a
claim in any bankruptcy or reorganization
proceedings with respect to the Debtor or any
other failure to collect the Liabilities or
any of them from the Debtor; (viii) the
running of any applicable statute of
limitations with respect to the Liabilities
or any portion thereof; or (ix) any other
action or failure to take action by the
Lender which under applicable law would act
to release the Debtor regarding the
Liabilities.
The undersigned further agrees that this
guaranty constitutes a guarantee of payment
when due and not of collection, and, to the
fullest extent permitted by law, waives any
right to require that any resort be had by
the Lender to any security held for payment
of the Liabilities or to any balance or any
deposit account or credit on the books of the
Lender in favor of the Debtor or any other
person.
To the fullest extent permitted by law,
the obligations of the undersigned hereunder
shall not be subject to any reduction,
limitation, impairment or termination for any
reason, including, without limitation, any
claim of waiver, release, surrender,
alteration or compromise, and shall not be
subject to any defense of setoff,
counterclaim, recoupment or termination
whatsoever by reason of the invalidity,
illegality or unenforceability of the
Liabilities or otherwise.
3
<PAGE>
Without limiting the generality of the
foregoing, the obligations of the undersigned
hereunder, to the fullest extent permitted by
law, shall not be discharged or impaired or
otherwise affected by the failure of the
Lender to assert any claim or demand or to
enforce any remedy under the Credit Agreement
or any other agreement, by any waiver or
modification of any thereof, by any default,
failure or delay, wilful or otherwise, in the
performance of the Liabilities, or by any
other act or thing or omission or delay to do
any other act or thing which may or might in
any manner or to any extent vary the risk of
the undersigned or would otherwise operate as
a discharge of the undersigned as a matter of
law or equity.
In furtherance of the foregoing and not
in limitation of any other right which the
Lender may have at law or in equity against
the undersigned by virtue hereof, upon the
failure of the Debtor to pay any of the
Liabilities when and as the same shall become
due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, the
undersigned hereby promises to and will, upon
receipt of written demand by the Lender,
forthwith pay, or cause to be paid, to the
Lender in cash the amount of such unpaid
Liabilities.
Any and all rights and claims of the
undersigned against the Debtor or any of its
property, arising by reason of any payment by
the undersigned to the Lender pursuant to the
provisions of this guaranty, shall be
subordinate and subject in right of payment
to the prior payment in full of all
Liabilities to the Lender.
The undersigned hereby represents,
warrants and covenants to the Lender that:
(a) It is a corporation duly organized,
validly existing, and in good standing under
the laws of the State of Washington and is
duly qualified and in good standing in every
other jurisdiction where it is doing
business, and has full corporate power and
authority to perform all its obligations
under the Loan Documents to which it is a
party.
(b) The execution and delivery by it of
the Loan Documents to which it is a party,
the performance by it of its covenants and
agreements under the Loan Documents to which
it is a party, and the consummation by it of
the transactions contemplated by the Loan
Documents to which it is a party, have been
duly authorized by all necessary corporate
action. Upon execution and delivery thereof,
the Loan Documents to which it is a party
shall constitute its legal, valid and binding
obligation, enforceable against it in
accordance with their respective terms,
except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of
creditors' rights generally as at the time in
effect.
(c) Neither the execution and delivery
of the Loan Documents to which it is a party,
nor the consummation by it of the
transactions contemplated in the Loan
Documents to which it is a party, nor the
performance by it of its obligations and
exercise of its rights under the Loan
Documents to which it is a party, will
violate, be in conflict with or be prohibited
or prevented by any provision of its
certificate of incorporation or by-laws, any
Requirement of Law or any other law, rule,
regulation, writ, judgment, injunction,
decree, determination,
4
<PAGE>
award or other order of any Governmental
Authority binding upon it, or conflict with
or result in any breach of or event of
termination under any of the terms of, or the
creation or imposition of any mortgage, deed
of trust, pledge, lien, security interest or
other charge or encumbrance of any nature
pursuant to, the terms of any contract or
agreement to which it is a party or by which
it or any of its properties or assets is
bound. Without limiting the generality of the
foregoing, all Consents required for the
execution, delivery, performance of its
obligations, and exercise of its rights under
the Loan Documents to which it is a party,
have been obtained and copies thereof have
been furnished to the Lender.
(d) The obligations of the undersigned
to pay the obligations payable by the
undersigned hereunder, will, upon demand for
payment by the Lender, constitute direct,
unconditional and general obligations of the
undersigned and rank in right of payment pari
passu with all unsecured indebtedness and
liabilities for borrowed money, or other
obligations arising out of the extension of
credit, of the undersigned, unless such other
indebtedness is expressly subordinated to the
obligations under the Loan Documents. The
undersigned has not issued any such
indebtedness or incurred any such liability
or obligation which is subordinated to any
other such indebtedness, liability or
obligation but which will not be subordinated
to the payment in full of any and all
obligations under the Loan Documents.
Any and all Indebtedness of the Debtor
to the undersigned, or to any Affiliate of
the Debtor (not including the Lender), now or
hereafter existing, together with any
interest thereon, shall be, and such
Indebtedness is, hereby deferred, postponed
and subordinated to the prior, full and Non-
Contestable Payment and satisfaction of all
Obligations of the Borrower to the Lender
under the Credit Agreement, the Note, and the
other Loan Documents. Payment and
satisfaction of the Obligations shall be
deemed "Non-Contestable Payment" only upon
such payment and satisfaction and the
expiration of all periods of time within
which a claim for the recovery of a
preferential payment, or fraudulent
conveyance, or fraudulent transfer, in
respect of payments received by the Lender as
to the Obligations could be filed or asserted
with: (A) no such claim having been filed
or asserted, or (B) if so filed or asserted,
the final, non-appealable decision of a court
of competent jurisdiction denying the claim
or assertion.
At all times until the full and Non-
Contestable Payment and satisfaction of the
Obligations of the Debtor to the Lender,
neither the undersigned, nor any Affiliate
thereof shall accept any payment or
satisfaction for any kind of any Indebtedness
of the Debtor to the undersigned, or any
Affiliate thereof (not including the Lender),
and hereby assigns such Indebtedness to the
Lender, including, but not limited to, the
right to file proofs of claim and to vote
thereon in connection with any such case
under the Bankruptcy Code, as now or
hereafter in effect, and the right to vote on
any plan of reorganization. In furtherance of
the foregoing, the undersigned, and each
Affiliate thereof, will immediately pay over
to the Lender all amounts received by it in
payment of any Indebtedness owed to it by the
Debtor, in the precise form in which such
amounts are received (with any endorsements
thereon or assignments thereof as may be
required by the Lender), for application to
the Obligations in such order and relative
amounts as the Lender determines in its sole
discretion. In the event the undersigned, or
any Affiliate
5
<PAGE>
thereof, fails to make any such endorsement
or assignment to the Lender, the Lender or
any of its officers or employees is hereby
irrevocably authorized to do so on behalf of
the undersigned, or any Affiliate thereof, as
its attorney-in-fact and, until so paid over,
such amounts shall be held in trust for the
Lender.
No delay on the part of the Lender in
the exercise of any right or remedy shall
operate as a waiver thereof, and no single or
partial exercise by the Lender of any right
or remedy shall preclude any other or further
exercise thereof or the exercise of any other
right or remedy; nor shall any modification,
amendment or waiver of any of the provisions
of, nor any consent required by, this
guaranty, nor any consent to any departure by
the undersigned therefrom, be binding upon
the Lender except as expressly set forth in a
writing duly signed and delivered by a duly
authorized representative of the Lender and
then such modification, amendment, waiver or
consent shall be effective only in the
specific instance and for the purpose for
which given. No notice to or demand on the
undersigned in any case shall entitle the
undersigned to any other or further notice or
demand in the same, similar or other
circumstances. No action of the Lender
permitted hereunder shall in any way affect
or impair the rights of the Lender or impair
the obligation of the undersigned under this
guaranty. For the purposes of this guaranty,
Liabilities shall include, without
limitation, all obligations of the Debtor to
the Lender under the Credit Agreement and the
other Loan Documents, notwithstanding any
right or power of the Debtor or anyone else
to assert any claim or defense as to the
invalidity or unenforceability of any such
obligation, and no such claim or defense
shall affect or impair the obligations of the
undersigned hereunder.
This guaranty shall be binding upon the
undersigned, and upon the successors and
assigns of the undersigned; and to the extent
that the Debtor or any of the undersigned is
either a partnership, joint venture, limited
liability company or a corporation, all
references herein to the Debtor and to the
undersigned, respectively, shall be deemed to
include any successor or successors, whether
immediate or remote, to such partnership,
joint venture, limited liability company or
corporation.
Without limiting any other provision
herein, in the event there is more than one
guarantor with respect to the Liabilities,
the obligations of the undersigned and each
such other guarantor shall be joint and
several; and the granting of a release of
liability to any one such guarantor shall be
effective solely with respect to the
guarantor so released and shall not in any
manner affect the liability of any other such
guarantor. Any prior or subsequent guaranty
to the Lender shall not be deemed to be in
lieu of or to supersede or terminate this
Guaranty but shall be construed as an
additional or supplementary guaranty.
No right, power or remedy herein
conferred upon or reserved to the Lender is
intended to be exclusive of any other right,
power or remedy or remedies, and each and
every right, power and remedy of the Lender
pursuant to this guaranty, the Credit
Agreement, or the Note or now or hereafter
existing at law or in equity or by statute or
otherwise shall, to the extent permitted by
law, be cumulative and concurrent and shall
be in addition to every other right, power or
remedy pursuant to this guaranty, or any
note, or now or hereafter existing at law
6
<PAGE>
or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by
the Lender of any one or more of such rights,
powers or remedies shall not preclude the
simultaneous or later exercise by the Lender
of any or all such other rights, powers or
remedies.
All notices, requests or instructions
hereunder shall be in writing and delivered
personally or sent by registered or certified
mail, postage prepaid, or by telecopy (or
like transmission), as follows:
(1) if to the undersigned:
3131 Elliot Avenue
Suite 500
Seattle, Washington 98121
Attention: Raymond R.
Brandstrom
Telecopy Number: (206) 301-
4500
with a copy to:
Randi Nathanson, Esq.
The Nathanson Group
1411 Fourth Avenue
Suite 905
Seattle, Washington 98101
Telecopy Number: (206) 623-
1738
(2) if to the Lender:
450 Park Avenue - Suite 2302
New York, New York 10022
Attention: Paul A. Biddelman
Telecopy Number: (212) 223-
2425
with a copy to:
Howard Kailes, Esq.
Krugman
Chapnick & Grimshaw LLP
Park 80
West - Plaza Two
Saddle
Brook, New Jersey 07663
Telecopy Number: (201) 845-
9627
Any notice so addressed and mailed shall be
deemed to be given five Business Days after
deposit in the mails. Any notices addressed
and otherwise delivered shall be deemed to be
given when actually received by the
addressee. Any of the above addresses or
telecopy numbers may be changed at any time
by notice given
7
<PAGE>
as provided above; provided, however, that
any such notice of change of address shall be
effective only upon receipt.
Each representation, warranty, covenant
and agreement herein contained, or contained
in any certificate delivered pursuant hereto,
shall survive the making by the Lender of all
loans and advances under the Credit Agreement
and the execution and delivery to the Lender
of any note, notwithstanding any
investigation at any time made by or on
behalf of any party, and shall continue in
full force and effect so long as any of the
Liabilities are outstanding and unpaid.
This guaranty shall be construed in
accordance with and governed by the laws of
the State of New York. Wherever possible each
provision of this guaranty shall be
interpreted in such manner as to be effective
and valid under applicable law, but if any
provision of this guaranty shall be
prohibited by or invalid under such law, such
provision shall be ineffective only to the
extent of such prohibition or invalidity,
without invalidating the remainder of such
provision or the remaining provisions of this
guaranty.
SIGNED AND DELIVERED AT Seattle, Washington,
this 1st day of April, 1997.
GUARANTOR:
EMERITUS CORPORATION
By: /s/ Raymond R.
Brandstrom
- -----------------------------------------
Name: Raymond R. Brandstrom
Title: President
3131 Elliott
Avenue
Suite 500
Seattle,
Washington 98121
8
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Emeritus Corporation
We consent to the incorporation by reference in the
registration statement (No. 333-05965) on Form S-8 of
Emeritus Corporation of our report dated May 9, 1997
relating to the combined balance sheet of the La Casa
Communities as of December 31, 1996 and the related combined
statements of income, shareholders' deficit and cash flows
for the year then ended, which report appears in the report
on Form 8-K of Emeritus Corporation dated July 14, 1997.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
July 14, 1997
