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EXHIBIT 10.2
PROMISSORY NOTE
$3,500,000.00 Los Angeles, California
September 30, 1999
FOR VALUE RECEIVED, the undersigned ARV ASSISTED LIVING, INC., a
Delaware corporation ("MAKER"), promise(s) to pay to the order of EMERITUS
CORPORATION, a Washington corporation ("HOLDER"), at 3131 Elliott Avenue,
Seattle, Washington 98121, Attention: Mr. Ray Brandstrom, or at such other place
as may be designated in writing by Holder, the principal sum of THREE MILLION
FIVE HUNDRED THOUSAND DOLLARS ($3,500,000.00) or so much thereof as may from
time to time be owing hereunder, with interest thereon, as hereinafter provided.
All sums owing hereunder are payable in lawful money of the United States of
America, in immediately available funds.
The outstanding principal balance of this note (this "NOTE"), together
with all accrued and unpaid interest, shall be due and payable in full on May 1,
2001 (the "MATURITY DATE").
For so long as Holder has not accelerated payment of amounts due under
this Note and no such event has occurred which (with or without the passage of
time or notice) would entitle Holder to so accelerate, Maker may prepay the Note
in its entirety during the Prepayment Period and for the Prepayment Amount set
forth in the schedule below (the "SCHEDULE") opposite the Prepayment Period
during which Maker makes and Holder receives such prepayment, and if Maker makes
and Holder receives such prepayment during a Prepayment Period set forth in the
Schedule in the Prepayment Amount set forth in the Schedule opposite the
applicable Prepayment Period, then the remaining principal amount of the Note
shall be forgiven.
PREPAYMENT PERIOD PREPAYMENT AMOUNT
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1 November 1999 $2,750,000
2 December 1999 $2,750,000
3 January 2000 $2,750,000
4 February 2000 $2,800,000
5 March 2000 $2,850,000
6 April 2000 $2,900,000
7 May 2000 $2,950,000
8 June 2000 $3,000,000
9 July 2000 $3,050,000
10 August 2000 $3,100,000
11 September 2000 $3,150,000
12 October 2000 $3,200,000
13 November 2000 $3,250,000
14 December 2000 $3,300,000
15 January 2001 $3,350,000
16 February 2001 $3,400,000
17 March 2001 $3,450,000
18 April 2001 $3,500,000
If there is a Default (as defined below) or if Maker has not prepaid the
principal amount of this Note as set forth above on or before April 30, 2001,
then on the Maturity Date, Maker shall pay the $3,500,000.00 principal amount of
this Note, together with interest thereon at the rate of ten percent (10%) per
annum (based on a 360-day year and charged on the basis of actual days elapsed).
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If: (a) Maker shall fail to pay when due any sums payable hereunder; or
(b) Maker shall fail to perform any non-monetary obligation hereunder and the
continuance of such failure for fifteen (15) days after notice, provided that
such 15-day period shall be extended to ninety (90) days if (a) it is possible
for Maker to observe or perform such covenant or agreement, (b) the Maker is
proceeding with due diligence to observe or perform such covenant or agreement,
and (c) the failure of Maker to observe or perform such covenant or agreement
has no adverse impact on this Note; or (c) any representation, warranty or
certification of Maker hereunder or any certificate or other document delivered
in connection herewith shall fail to be true; or (d) there shall occur any event
or condition which results in the acceleration of the maturity of any Material
Debt (as defined below) of Maker or enables (or, with the giving of notice or
lapse of time on both, would enable) the holder of such Material Debt to
accelerate the maturity thereof; or (e) there shall exist any judgment, lien or
order for the payment of money against Maker which continues unsatisfied or
unstayed for a period of more than ten (10) days; or (f) any person or group of
persons (within the meaning of Section 13 or 14 of the Securities Exchange Act
of 1934, as amended from time to time) (other than Prometheus Assisted Living
LLC, LF Strategic Realty Investors II L.P., LFSRI II Alternative Partnership
L.P., LFSRI II-CADIM Alternative Partnership L.P. or Lazard Freres Real Estate
Investors L.L.C., each a Delaware limited partnership or limited liability
company or any group consisting solely of one of more of the foregoing) shall
have acquired beneficial ownership of 30% or more of the outstanding shares of
common stock of Maker whether directly or indirectly or voluntarily or
involuntarily or otherwise or if Maker shall merge with or into any person,
unless Maker is the surviving entity in the event of such merger, or if a
majority of the board of directors of Maker consists of persons other than
current directors, persons nominated by them or successor directors who are so
nominated; or (g) a Default (as defined in that certain Guaranty Agreement dated
as of the date hereof by Rossmore Renovation, LLC, as guarantor, in favor of
Holder, as beneficiary (the "GUARANTY")) occurs under the Guaranty (each of the
events described in clauses (a) through (g) above and clauses (a) and (b) of the
following paragraph being herein referred to as a "DEFAULT"); THEN Holder may,
at its sole option, declare all sums owing under this Note immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by Maker; provided, however, that if this Note or any
document related to this Note provides for automatic acceleration of payment of
sums owing hereunder, all sums owing hereunder shall be automatically due and
payable in accordance with the terms of that document.
Furthermore, if (a) Maker shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or (b) an involuntary case or other proceeding shall be commenced
against Maker seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against Maker under the federal bankruptcy
laws as now or hereafter in effect; THEN, without any notice to Maker or any
other act by Holder, all sums owing under this Note shall become
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immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by Maker.
For the purposes hereof, "MATERIAL DEBT" means any Debt of Maker having
an aggregate principal or face amount exceeding $500,000; "DEBT" of any Person
means, at any date, without duplication, (i) all obligations of such person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debenture, notes or other similar instruments, (iii) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which may or may not be capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a lien on any asset of such Person whether or not such Debt is
otherwise an obligation of such Person, and (vii) all guarantees by such Person
of Debt of another Person; and "PERSON" means an individual, a corporation, a
limited liability company, a partnership, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Maker hereby represents and warrants that: (i) Maker is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all corporate powers and all material
governmental licenses, consents, authorizations and approvals required to carry
on its business as now conducted and, if it is not organized in California, is
duly qualified and in good standing under the laws of California; (ii) the
execution, delivery and performance by Maker of this Note, and the certificates
and documents executed by Maker delivered in connection with this Note (the
"RELATED DOCUMENTS") are within Maker's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of Maker's organization documents or by-laws or of any agreement,
judgment, injunction, order, decree or other instrument binding upon Maker or
result in the creation or imposition of any lien or encumbrance on any asset of
Maker; (iii) this Note and the Related Documents executed by Maker constitute
valid and binding obligations of Maker, enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally and general principles of
equity; (iv) the consolidated audited balance sheet of Maker and its
consolidated subsidiaries as of December 31, 1998 and the related consolidated
statements of income, cash flows and changes in stockholders' equity for the
fiscal year then ended, set forth in Maker's 1998 Form 10-K and delivered by
Maker to Holder, fairly present, in conformity with generally accepted
accounting principles, the consolidated financial position of Maker and its
consolidated subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year; (v) the unaudited consolidated
balance sheet of Maker and its consolidated subsidiaries as of June 30, 1999 and
the related consolidated statements of income, cash flows and changes in
stockholders' equity for the six months then ended, set forth in Maker's latest
form 10-Q and delivered by Maker to Holder, fairly present, on a basis
consistent with the financial statements referred to in clause (iv) above, the
consolidated financial position of Maker and its consolidated subsidiaries as of
such date and their consolidated results of operations and cash flows for such
six-month period (subject to normal year-end adjustments); (vi) since June 30,
1999 there has been no material adverse change in the business, financial
position, results of operations or prospects of Maker and its consolidated
subsidiaries, considered as a whole; (vii) there is no action, suit or
proceeding pending against, or to Maker's knowledge threatened against or
affecting, Maker or
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any of its subsidiaries before any court or arbitrator or any governmental body,
agency or official which could have a material adverse effect on the business of
Maker or which in any manner draws into question the validity or enforceability
of this Note or the Related Documents, except for the Lazard Freres Real Estate
Investors, LLC litigation and the General Electric Credit Corporation loan
defaults, as disclosed to Holder in writing; (viii) all information heretofore
furnished by Maker to Holder for purposes of or in connection with this Note or
the Related Documents or any transaction contemplated hereby or thereby is true
and accurate in all material respects on the date as of which such information
is certified or dated, and Maker is not aware of any changes, drafts or
circumstances that would make such information untrue or inaccurate in any
material respect; and (ix) Maker has disclosed to Holder in writing any and all
facts which materially and adversely affect, or may affect (to the extent Maker
can now reasonably foresee), the business, operations or condition of Maker or
Maker's ability to perform its obligations under this Note and the Related
Documents.
If any attorney is engaged by Holder to enforce or defend any provision
of this Note, or as a consequence of any Default, with or without the filing of
any legal action or proceeding, then Maker shall pay to Holder immediately upon
demand all attorneys' fees and all costs incurred by Holder in connection
therewith, together with interest thereon from the date of such demand until
paid at the rate of interest applicable to the principal balance owning
hereunder as if such unpaid attorney's fees and costs had been added to the
principal.
No previous waiver and no failure or delay by Holder in acting with
respect to the terms of this Note shall constitute a waiver of any breach,
default, or failure of condition under this Note. A waiver of any term of this
Note shall be limited to the express written terms of such waiver. In the event
of any inconsistencies between the terms of this Note and the terms of any other
document related to the loan evidenced by this Note, the terms of this Note
shall prevail.
If this Note is executed by more than one person or entity as Maker, the
obligations of each such person or entity shall be joint and several. No person
or entity shall be a mere accommodation maker, but each shall be primarily and
directly liable hereunder. Except as otherwise provided in any agreement
executed in connection with this Note, Maker waives: presentment; demand; notice
of dishonor; notice of default or delinquency; notice of acceleration; notice of
protest and nonpayment; notice of costs, expenses or losses and interest
thereon; notice of late charges; and diligence in taking any action to collect
any sums owing under this Note or in proceeding against any of the rights or
interests in or to properties securing payment of this Note.
Time is of the essence with respect to every provision hereof. This Note
shall be construed and enforced in accordance with the laws of the State of
California, except to the extent that federal laws preempt the laws of the State
of California, and all persons and entities in any manner obligated under this
Note consent to the jurisdiction of any federal or state court within the State
of California having proper venue and also consent to service of process by any
means authorized by California or federal law.
All notices or other communications required or permitted to be given
pursuant to this Note shall be given to the Maker or Holder in writing and shall
be considered as properly given if delivered personally or sent by first class
United States Postal Service mail, postage prepaid, except that notice of
Default may be sent by certified mail, return receipt requested, or by Overnight
Express Mail or by overnight commercial courier service, charges prepaid.
Notices so sent shall be effective three (3) days after mailing, if mailed by
first class mail, and otherwise
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upon receipt at the address set forth below; provided, however, that non-receipt
of any communication as the result of any change of address of which the sending
party was not notified or as the result of a refusal to accept delivery shall be
deemed receipt of such communication. For purposes of notice, the address of the
parties shall be:
Maker: ARV Assisted Living, Inc.
Rossmore Renovation, LLC, 245 Fischer Avenue, D-1,
Costa Mesa, California 92626; Attention: Douglas
Armstrong, Esq.; facsimile no. (714) 435-7102.
Holder: Emeritus Corporation, 3131 Elliott Avenue, Suite 500,
Seattle, Washington 98121; Attention: Ray Brandstrom;
facsimile no. (206) 301-4500.
With a copy to: Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York 10017; Attention: Phillip R. Mills, Esq.;
facsimile no. (212) 450-4800.
Any party shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of thirty (30) days notice to the other party in the manner set forth
hereinabove.
This Note contains or expressly incorporates by reference the entire
agreement of the parties with respect to the matters contemplated herein and
supersede all prior negotiations or agreements, written or oral. This Note shall
not be modified except by written instrument executed by all parties. Any
reference to the Note includes any amendments, renewals or extensions now or
hereafter approved by Holder in writing.
"Maker"
ARV ASSISTED LIVING, INC.,
a Delaware corporation
By: _____________________________
Name:
Title:
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