EXHIBIT 10.14
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REIMBURSEMENT AGREEMENT
between
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation
and
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION
dated as of November 1, 1996
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WASHINGTON STATE HOUSING FINANCE COMMISSION
VARIABLE RATE DEMAND MULTIFAMILY REVENUE BONDS
(ASSISTED LIVING CONCEPTS, INC. PROJECT), SERIES 1996
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions............................................... 1
ARTICLE II
ISSUANCE OF LETTER OF CREDIT
SECTION 2.01. Issuance of the Letter of Credit.......................... 9
SECTION 2.02. Termination of Letter of Credit; Alternate Credit;
Extension................................................. 10
SECTION 2.03. Increase or Reduction of Stated Amount and Reinstatement.. 11
ARTICLE III
REIMBURSEMENT OBLIGATION AND INTEREST
SECTION 3.01. Reimbursement Obligations................................. 11
SECTION 3.02. Reimbursement and Loans................................... 11
SECTION 3.03. Manner, Method, Place and Time of Payment................. 13
SECTION 3.04. Obligation to Pay Unconditional........................... 13
SECTION 3.05. Evidence of Debt.......................................... 14
ARTICLE IV
OTHER PAYMENTS
SECTION 4.01. Letter of Credit Issuance Fee............................. 14
SECTION 4.02. Letter of Credit Annual Fee............................... 15
SECTION 4.03. Other Fees................................................ 15
SECTION 4.04. Increased Costs........................................... 16
SECTION 4.05. Payment of Expenses and Fees; Applicability............... 16
SECTION 4.06. Calculations; Default Interest; Compounded Interest....... 17
ARTICLE V
CONDITIONS
SECTION 5.01. Conditions Precedent to Issuance of Letter of Credit...... 17
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.01. Representations, Warranties and Covenants of the
Borrower.................................................. 19
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ARTICLE VII
FURTHER COVENANTS
SECTION 7.01. Covenants................................................. 25
SECTION 7.02. Conditions Precedent to Disbursements of Bond Proceeds.... 34
SECTION 7.03. Assignment/Miscellaneous.................................. 36
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default; Acceleration and Remedies.............. 37
ARTICLE IX
SECURITY
SECTION 9.01. Funds, Accounts and Security Agreement.................... 40
SECTION 9.02. Funding and Maintaining the Funds......................... 40
SECTION 9.03. Interest of Bank and Owners of Bonds...................... 40
SECTION 9.04. Transfers and Other Liens................................. 41
SECTION 9.05. Priority Of Payment; Application of Sums Upon Notice of
Default................................................... 41
SECTION 9.06. Acknowledgment Regarding Funds and Accounts............... 41
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc........................................... 41
SECTION 10.02. Notices, Etc.............................................. 42
SECTION 10.03. No Waiver; Remedies....................................... 42
SECTION 10.04. Accounting Terms.......................................... 43
SECTION 10.05. Partial Reconveyance...................................... 43
SECTION 10.06. Security Costs, Expenses and Taxes........................ 44
SECTION 10.07. Binding Effect; Assignment................................ 44
SECTION 10.08. Governing Law............................................. 44
SECTION 10.09. Entire Agreement.......................................... 45
SECTION 10.10. JURY WAIVER............................................... 45
SECTION 10.11. Securities Law............................................ 45
SECTION 10.12. Subrogation............................................... 46
SECTION 10.13. Survival of Representations and Warranties................ 46
SECTION 10.14. Washington State Notice................................... 46
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Exhibits
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Exhibit A Letter of Credit
Exhibits B-1 Legal Descriptions
through B-5
Exhibit C Permitted Liens
Exhibit D-1 Mandatory Debt Service Payment Schedule
Exhibit D-2 Notice to Trustee Re Optional Redemption of Bonds
Exhibit E Pending Litigation
Exhibit F Project Budget
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REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT, dated as of November 1, 1996, between Assisted
Living Concepts, Inc., a Nevada corporation (the "Borrower") and U.S. Bank of
Washington, National Association (the "Bank").
WHEREAS, the Washington State Housing Finance Commission ("Commission")
intends to issue and sell its Variable Rate Demand Multifamily Revenue Bonds
(Assisted Living Concepts, Inc. Project), Series 1996 in the aggregate principal
amount of $8,500,000 (the "Bonds") issued pursuant to that certain Indenture of
Trust ("Indenture") dated as of November 1, 1996 between the Commission and
Norwest Bank Minnesota, National Association, as Trustee; and
WHEREAS, in order to secure payment when due of the principal of and
interest on the Bonds, the Borrower has requested the Bank to issue an
unconditional irrevocable letter of credit substantially in the form of Exhibit
A, which exhibit (with Annexes A through G) is attached and incorporated herein
by this reference (the "Letter of Credit"), in the principal amount of EIGHT
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($8,500,000) plus ONE HUNDRED
SIXTY SEVEN THOUSAND SIX HUNDRED SEVENTY ONE AND 20/100 DOLLARS ($167,671.20).
The sum of the principal and interest components of the Letter of Credit, as
reduced and reinstated pursuant to the terms thereof, is hereafter referenced as
the "Stated Amount".
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, receipt of which is hereby
acknowledged, and in order to induce the Bank to issue the Letter of Credit, the
Borrower and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Terms defined above shall have the meanings
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set forth above and the following terms shall have the following meanings. Any
term capitalized but not defined herein shall have the same meaning as ascribed
to it in the Indenture.
"Affiliate" means any person or entity related to, owned by, in common
ownership with, or affiliated with, a person or entity that is a parent company
or constituting a shareholder or member of Borrower or in which Borrower has or
holds an equity or other interest.
"Agency Agreement" means the agreement entitled "Agency Agreement" dated as
of November 1, 1996, among the Bank and its Collateral Agents (as defined
therein).
"Agreement" means this Reimbursement Agreement, as the same may from time
to time be amended, supplemented or modified.
"Alternate Letter of Credit" means any substitute letter of credit meeting
the requirements of Section 310 of the Indenture.
"Assignment of Leases" means individually and collectively the Assignments
of Leases and Cash Collateral dated as of November 1, 1996 whereunder the
Borrower is the assignor and the Bank is assignee with respect to each Project.
"Bank" means U.S. Bank of Washington, National Association and each
Participant, whether now or hereafter existing.
"Bond" or "Bonds" means any one or more of the Bonds authorized,
authenticated and delivered pursuant to the Indenture.
"Borrower" means Assisted Living Concepts, Inc., a Nevada corporation.
"Business Day" means any day other than (i) a Saturday, Sunday or legal
holiday, (ii) a day on which commercial banks in New York, New York, are
authorized or obligated by law or executive order to close (but only prior to
the Fixed Rate Conversion Date); (iii) a day on which commercial banks in the
city or cities in which are located the principal corporate trust office of the
Trustee and the office of the Bank at which demands for payment under the Letter
of Credit are to be presented are authorized or required by law or executive
order to close; (iv) a day on which the New York Stock Exchange is closed; or
(v) a day on which the commercial banks in Seattle, Washington are closed.
"Capital Lease Obligations" means, for any Person, all obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP (including Statement of Financial Accounting Standards No. 13
of the Financial Accounting Standards Board), and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount of
such obligation, determined in accordance with GAAP (including such Statement
No. 13).
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax statute or code. Any reference to a provision of
the Code shall include the applicable Department of Treasury regulations.
"Contingent Obligation" means, with respect to any Person, any guarantee of
Indebtedness or any other obligation of any other Person or any assurance with
respect to the financial condition of any other Person, whether direct, indirect
or contingent, including, without limitation, any purchase or repurchase
agreement or keep-well, take-or-pay, through-put or other arrangement of
whatever nature having the effect of assuring or holding harmless any Person
against loss with respect to any obligation of such other Person; provided,
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however, that the term "Contingent Obligation" shall not include endorsements of
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instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of
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which such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined in
good faith by the Person subject to such obligation.
"Contractual Obligation" means, with respect to any Person, any provision
of any security interest of any nature issued, granted or transferred by such
Person or of any agreement, instrument or undertaking to which such Person is a
party or by which it or any of its property is or purports to be bound.
"Convertible Subordinated Debentures" means $20,000,000 aggregate principal
amount of the Borrower's 7% Convertible Subordinated Debentures dated August 15,
1995 and due August 15, 2005, which debentures are convertible at or prior to
maturity, unless previously redeemed, at a conversion price of $15.00 per share,
subject to adjustments therein set forth.
"Date of Issuance" means November 21, 1996, the date the Letter of Credit
is issued by the Bank.
"Deed of Trust" means individually and collectively, the Variable Rate Deed
of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing
dated as of November 1, 1996 whereunder the Borrower is grantor and Bank and
Trustee are co-beneficiaries, as amended from time to time encumbering each
Project.
"Default" or "Event of Default" has the meaning set forth in Section 8.01
hereof.
"Drawings" include:
"A Drawing (Interest)" or "A Drawing" means a drawing under the Letter of
Credit to make an interest payment on Bonds (except Pledged Bonds) due on an
Interest Payment Date, other than on Bonds being paid or purchased on such date.
"B Drawing (Redemption)" or "B Drawing" means a drawing on the Letter of
Credit to pay the principal amount of any Bonds being redeemed pursuant to
Section 602 of the Indenture together with accrued but unpaid interest thereon.
"C Drawing (Purchase)" or "C Drawing" means a drawing on the Letter of
Credit to pay all or any portion of the purchase price of the Bonds (except
Pledged Bonds) purchased pursuant to Section 404 of the Indenture or upon the
Fixed Rate Conversion Date corresponding to the principal amount of Bonds being
purchased and accrued and unpaid interest thereon.
"Environmental Law" means any federal, state or local law, statute,
ordinance or regulations pertaining to health, Medical Products, Hazardous
Substances, industrial hygiene or the environmental conditions on, under or
about any of the real properties constituting the Project, including, without
limitation, the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901 et seq., Comprehensive Environmental Response, Compensation, and
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Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended by the
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Superfund
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Amendments and Reauthorization Act of 1986, Hazardous Materials Transportation
Control Act, 49 U.S.C. Section 1801 et seq., Federal Water Pollution Control
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Act, Federal Water Act of 1977, 93 U.S.C. Section 1251 et seq., Federal
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Insecticide, Fungicide and Rodenticide Act, Federal Pesticide Act of 1978, 7
U.S.C. Section 2601 et seq., Federal Safe Drinking Water Act, 42 U.S.C. Section
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300f et seq., Washington Water Pollution Control Act, RCW Chapter 90.48,
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Washington Clean Air Act, RCW Chapter 70.94, Washington Solid Waste Management
Recovery and Recycling Act, RCW Chapter 70.95, Washington Hazardous Waste
Management Act, RCW Chapter 70.105, Washington Hazardous Waste Fees Act, RCW
Chapter 70.95E, Washington Model Toxics Control Act, RCW Chapter 70.105D,
Washington Nuclear Energy and Radiation Act, RCW Chapter 70.98, Washington
Radioactive Waste Storage and Transportation Act of 1980, RCW Chapter 70.99,
Washington Underground Petroleum Storage Tanks Act, RCW Chapter 70.148.
"Environmental Indemnity Agreement" means individually and collectively
those certain agreements dated as of November 1, 1996 executed by the Borrower
in favor of the Bank with respect to each Project.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Fixed Rate" means the interest rate per annum borne by the Bonds from and
after the Fixed Rate Conversion Date, determined by the Remarketing Agent in
accordance with Section 202(g) of the Indenture.
"Fixed Rate Conversion Date" means the effective date of a change in the
interest rate borne by the Bonds to the Fixed Rate from a Daily Rate or a Weekly
Rate as defined in the Indenture.
"FLSA" means the Fair Labor Standards Act of 1938, as amended from time to
time, and the regulations promulgated pursuant thereto.
"Funds" means any one or more of the separate special trust funds created
under Article III of the Indenture and any other fund or account created
thereunder, any supplemental indenture or any Related Document which is or
hereafter becomes available for the payment of principal or interest on Bonds or
to pay any sum due or to become due from the Borrower to the Bank.
"GAAP" or "Generally Accepted Accounting Principles" means generally
accepted accounting principles as in effect from time to time in the United
States and as consistently applied by the Borrower.
"Governmental Body" means any foreign or domestic government, any court or
any foreign, federal, state, municipal or other department, commission, board,
bureau, agency, public authority or instrumentality or any arbitrator or
government regulator with jurisdiction over the Borrower and/or any Project.
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"Guarantee" means a guarantee, an endorsement, a contingent agreement to
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or to become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interest of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, including causing
a bank or other financial institution to issue a letter of credit or other
similar instrument for the benefit of another Person, but excluding endorsements
for collection of deposit in the ordinary course of business. The terms
"Guarantee" and "Guaranteed" used as verbs shall have correlative meanings.
"Hazardous Substances" has the meaning set forth in the Deed of Trust which
definition is by this reference incorporated herein.
"Indebtedness" means, for any Person (without duplication) (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for the account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.
"Interest Payment Date" shall have the meaning set forth in Article I of
the Indenture, which definition is by this reference incorporated herein.
"Issuer" means Washington State Housing Finance Commission, a public body
corporate and politic and an instrumentality of the State of Washington created
by Chapter 161, Laws of 1983 and codified at RCW 43.180, as amended.
"Lien" means, with respect to any Person, any security interest, pledge,
mortgage, charge, option, assignment, hypothecation, encumbrance, attachment,
garnishment, sequestration, forfeiture, execution or other voluntary or
involuntary lien upon or affecting the revenues of such Person or any real or
personal property in which such Person has or hereafter acquires any interest,
except (i) Liens for Taxes which are not delinquent or which remain payable
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without penalty or the validity or amount of which is being contested in good
faith by appropriate proceedings and with reserves satisfactory to Bank; (ii)
liens imposed by law (such as construction liens) incurred in good faith in the
ordinary course of business which are not
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delinquent or which remain payable without penalty or the validity or amount of
which is being contested in good faith by appropriate proceedings and reserves
consented to by Bank; and (iii) deposits or pledges under workmen's
compensation, unemployment insurance, social security, bids, tenders, contracts
(except for repayment of borrowed money), or leases, or to secure statutory
obligations or surety or appeal bonds or to secure indemnity, performance or
other similar bonds given in the ordinary course of business.
"Loan Agreement" means that certain Mortgage Loan Origination and Financing
Agreement dated as of November 1, 1996 by and among the Issuer, the Trustee, the
Borrower and the Bank.
"Material Adverse Effect" means a material adverse effect on (a) the
Projects, business, operations, financial condition, liabilities or
capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform its obligations under this Agreement or any
of the Related Documents, (c) the validity or enforceability of this Agreement
or any of the Related Documents, (d) the rights, remedies, powers and privileges
of the Bank under this Agreement or any of the Related Documents or (e) the
timely payment of the Reimbursement Obligations.
"Medical Products" means all chemicals, drugs, blood, tissue, serums, waste
and other materials and equipment and supplies related thereto in connection
with the treatment, research and laboratory analysis of human medical
phenomenon, which Medical Products may include, without limitation regulated
substances and Hazardous Substances (as defined in the Deed of Trust).
"Mortgage Loan" means the mortgage loan made to the Borrower pursuant to
the Loan Agreement in the principal amount of $8,500,000 plus interest thereon,
in order to provide permanent financing for part of the Project Costs and
Issuance Costs.
"Mortgage Loan Documents" means the Loan Agreement, the Regulatory
Agreement, the Tax Agreement and the Mortgage Note.
"Mortgage Loan Fund" means such Fund created by Section 302 of the
Indenture.
"Mortgage Note" means the promissory note executed by the Borrower to
evidence the Mortgage Loan.
"Participant" means any entity to whom the Bank transfers an interest in
this Agreement or any Related Document. The Bank and not any Participant shall
be the sole party authorized or obligated to provide any consent or approval
required, contemplated or authorized by this Agreement or any Related Document
to be given by the Bank.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a state, government or political subdivision or an agency or
instrumentality thereof.
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"Plan" means (i) any "employee welfare benefit plan" (as such term is
defined in Section 3(1) of ERISA); (ii) any employee pension benefit plan" (as
such term is defined in Section 3(2) of ERISA) or a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA); (iii) any employee benefit
plan maintained in connection with any trust described in Section 501(c)(9) of
the Code; or (iv) a combination of such plans; if such plan or plans is
maintained or contributed to, or at any time during the five calendar years
preceding the date of this Agreement was maintained or contributed to, by the
Borrower or under which the Borrower has or, during the term of this Agreement,
will have any liability. For purposes of this paragraph, the term "Borrower"
shall include the Borrower and any corporation, partnership, sole proprietorship
or other entity if the Borrower and such other entity or entities are (i)
corporations which are members of a controlled group of corporations as defined
in Section 414(b) of the Code, (ii) trades or businesses (whether or not
incorporated) which are under common control as defined in Section 414(c) of the
Code, (iii) members of an affiliated service group as defined in Section 414(m)
or 414(o) of the Code, or (iv) any combination of the foregoing.
"Pledge and Security Agreement" means the agreement entitled "Pledge and
Security Agreement" dated as of November 1, 1996, between Bank and the Borrower,
as amended from time to time.
"Pledge and Security Agreement (Bond Proceeds") means the agreement
entitled "Pledge and Security Agreement (Bond Proceeds)" dated as of November 1,
1996 between Bank and Borrower, as amended from time to time.
"Pledged Bonds" means those Bonds or portions of Bonds on which a principal
payment is made or deemed made or the purchase price is paid or deemed paid with
proceeds of a drawing under the Letter of Credit, which Bonds are pledged to the
Bank pursuant to the Pledge and Security Agreement.
"Prime Rate" means the rate of per annum interest which the Bank announces
publicly or otherwise makes available to the public from time to time as its
"prime rate" (currently calculated on the basis of the actual number of days
elapsed over a year of 360 days) with any change in the "prime rate" to be
effective on and as of the date of any change in said "prime rate." The Prime
Rate and the calculation thereof may be established by the Bank in its sole
discretion. The Prime Rate is not necessarily the lowest rate of interest
offered by the Bank to its most creditworthy customers. The Prime Rate is a
variable or fluctuating rate which increases or decreases from time to time.
"Project" or "Projects" means individually or collectively the acquisition
and permanent financing of five assisted living unit projects located on real
property in Port Townsend, Enumclaw, Bremerton, Port Orchard and Spokane,
Washington and more particularly described in Exhibits B-1 through B-5 attached
hereto and by this reference incorporated herein.
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
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"Regulatory Agreement" means individually and collectively the Regulatory
Agreements dated as of November 1, 1996, by and among the Commission, the
Borrower and the Tenant with respect to each Project.
"Related Documents" means (individually and collectively) any promissory
note executed to further evidence the obligations of the Borrower hereunder
("Bank Note"), the Letter of Credit, the Deed of Trust, the Assignment of
Leases, the Pledge and Security Agreement, Pledge and Security Agreement (Bond
Proceeds), the Agency Agreement, the Indenture, the Mortgage Loan Documents, the
Remarketing Agreement, the preliminary and final official statements regarding
the Bonds, the Environmental Indemnity Agreement, and all other certificates,
documents or agreements arising from or related to the Bonds or executed in
connection herewith or therewith.
"Remarketing Agent" means initially, U.S. Bank of Washington, National
Association, and its successors under the Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement dated as of
November 1, 1996 among the Borrower, the Trustee and the Remarketing Agent
providing for the remarketing of the Bonds as supplemented or amended from time
to time.
"Requirement of Law" means, with respect to any Person, the articles or
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule, guideline, standard
(including but not limited to accounting standards and GAAP), order,
restriction, directive, judgment, decree, injunction, writ, or regulation, or a
final and binding determination of an arbitrator or a determination of an
arbitrator, mediator, or a determination of any Governmental Body, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject. With respect to Bank, Requirement
of Law shall include a Requirement of Law now or hereafter existing, a request
of a central bank or financial, monetary or other supervisory authority (whether
or not having the force of law).
"Subsidiary" or "Subsidiaries" means any corporation of which at least 50%
of the outstanding stock having ordinary voting powers to elect a majority of
the board of directors of such corporation (irrespective of whether or not at
the time stock of any other class of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by the Borrower and/or one or more of
its Subsidiaries.
"Supplemental Indenture" means indentures now or hereafter supplementing
the Indenture.
"Tangible Net Worth" means the difference between total assets and total
liabilities (including in liabilities accrued and deferred income Taxes, and
subordinated Indebtedness), excluding, however, from the determination of total
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assets (a) all assets which should be classified as intangible assets (such as
goodwill, patents, trademarks, copyrights, franchises, and
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deferred charges, including unamortized debt discount and research and
development costs, deferred charges and other like intangibles), (b) treasury
stock, (c) cash held in a sinking or other similar fund established for the
purpose of redemption or other retirement of capital stock, (d) to the extent
not already deducted from total assets, reserves for depreciation, depletion,
obsolescence, or amortization of properties and other reserves or appropriations
of retained earnings which have been or should be established in connection with
the Borrower's business, and (e) any revaluation or other write-up in book value
of assets subsequent to the fiscal year of Borrower last ended at the date
Tangible Net Worth is being measured.
"Taxes" means for any Person any federal or state tax, assessment, duty,
levy, withholding liability, impost and other charges of every nature whatsoever
imposed by any Governmental Body on such Person or on any of its property or
because of any revenue, income, sales, use, product, employee or franchise, and
any interest or penalty with respect to any of the foregoing.
"Termination Date" means the date on which the Letter of Credit expires
according to its terms.
"Total Funded Debt" means all obligations created, issued or incurred by
Borrower for borrowed money (whether by loan, the issuance and sale of debt
securities or the sale of Property to another Person subject to an understanding
or agreement, contingent or otherwise, to repurchase such Property from such
Person) excluding any amounts or obligations which are non-recourse debt.
"Trustee" means Norwest Bank Minnesota, National Association or any duly
authorized successor thereto appointed pursuant to the Indenture.
ARTICLE II
ISSUANCE OF LETTER OF CREDIT
SECTION 2.01. Issuance of the Letter of Credit. The Bank agrees, on
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the terms and subject to the conditions set forth in this Agreement, to issue to
Trustee on the Date of Issuance and upon the request of the Borrower, a Letter
of Credit in substantially the form of Exhibit A to this Agreement, which
exhibit and Annexes A through G thereto are incorporated herein by this
reference. The Stated Amount of the Letter of Credit shall never exceed
$8,667,671.20, a portion of which Stated Amount shall be available to support
the payment of principal due on Bonds ("Principal Component") and a portion of
which shall be available to support the payment of not more than sixty (60) days
of interest on the Bonds, which calculation shall utilize an interest rate of
twelve percent (12%) per annum all as calculated on the basis of a year of
365/366 days on the Bonds ("Interest Component"). Upon the Date of Issuance, the
Principal Component shall be, and shall thereafter never exceed, $8,500,000.
Upon the Date of Issuance, the Interest Component shall be, and shall thereafter
never exceed $167,671.20.
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The Borrower hereby agrees to all terms and conditions set forth in the
Letter of Credit, including Annexes A through G thereto, all of which terms and
conditions are incorporated herein by this reference.
The Borrower acknowledges:
(a) that upon any drawing under the Letter of Credit for payment of all or
a portion of Bonds outstanding under the Indenture at maturity or earlier
redemption, the Trustee is required to deliver to the Bank Annex B to the Letter
of Credit and, upon a drawing for all remaining Bonds, must also deliver Annex B
and surrender the Letter of Credit therewith; and
(b) that upon any replacement of the Letter of Credit with an Alternate
Letter of Credit, the Trustee must promptly deliver Annex G to the Letter of
Credit to the Bank and surrender the Letter of Credit therewith.
If the Trustee does not take these actions when required, the Borrower
agrees to direct and to use its best efforts to cause the Trustee to take said
actions.
SECTION 2.02. Termination of Letter of Credit; Alternate Credit; Extension.
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Notwithstanding the fact that the Bonds will not mature until a later date, the
Letter of Credit shall terminate on November 21, 2003, unless earlier terminated
or unless it is extended. The Borrower shall not have the right to replace or
otherwise terminate the Letter of Credit unless (i) there are no Pledged Bonds
outstanding or (ii) the Alternate Letter of Credit provides to the satisfaction
of the Bank that, on the issuance thereof, all Pledged Bonds may be put for
purchase from moneys drawn under the Alternate Letter of Credit at a price equal
to the then aggregate principal amount of such Pledged Bonds plus accrued but
unpaid interest thereon.
Upon the written request of the Borrower after the fifth anniversary of the
Date of Issuance, and provided Borrower is not in default under this Agreement
or any of the Related Documents, the Bank shall extend the Termination Date of
the Letter of Credit for a period of three (3) additional years, either by
amendment of the Letter of Credit or replacement of the Letter of Credit. The
Bank will notify the Trustee and the Borrower within thirty (30) days following
receipt of such notice whether the conditions set forth in this Reimbursement
Agreement have been met for renewal of the Letter of Credit for an additional
three (3) year period. The Bank shall, within 15 days of payment by the Borrower
to the Bank of all fees payable pursuant to Article IV hereof (if such payment
be made no later than 30 days before the Termination Date), deliver to the
Trustee an amendment to the Letter of Credit, which amendment shall extend the
Termination Date for the three (3) year period or deliver a replacement Letter
of Credit, which replacement shall be for a term equal to the three (3) year
period. The amended or replacement Letter of Credit shall not be effective until
the Termination Date of the Letter of Credit being amended or replaced.
The Borrower agrees and acknowledges that this agreement of the Bank to
consider extending or renewing the term of the Letter of Credit (as set forth in
this Section 2.02), does not and shall not constitute an express or implied
commitment or other promise of any nature
-10-
whatsoever by the Bank to extend credit at any future date, even if, for
example, the then financial condition of the Borrower equals or exceeds its
current financial condition or even though the Letter of Credit will expire
before the Bonds mature if the Bank determines not to renew or extend the Letter
of Credit.
If the Letter of Credit is extended for an additional three (3) year period
pursuant to this Section 2.02, this Agreement and each Related Document (or such
substitute documents to which the Bank may in its sole discretion, accept in
writing) shall continue and be effective for said extension or renewal period(s)
until all sums of every nature whatsoever due or to become due the Bank have
been paid in full.
SECTION 2.03. Increase or Reduction of Stated Amount and Reinstatement.
--------------------------------------------------------
The Stated Amount of the Letter of Credit shall be decreased and reinstated
according to the terms of the Letter of Credit.
ARTICLE III
REIMBURSEMENT OBLIGATION AND INTEREST
SECTION 3.01. Reimbursement Obligations. Any sums drawn under the
-------------------------
Letter of Credit and paid by the Bank shall constitute value requested by and
given to or for the benefit of the Borrower and shall be an unconditional,
absolute and irrevocable obligation hereunder of the Borrower to the Bank. The
Borrower hereby promises to pay the principal and interest on the Bonds by
reimbursing the Bank for the full amount of any drawings under the Letter of
Credit notwithstanding any cancellation or payment of Bonds. The Borrower
further promises to repay to Bank the full amount of any drawing under the
Letter of Credit, and to pay all sums due or to become due hereunder, in the
manner and at the times provided in this Agreement (collectively, "Reimbursement
Obligations").
SECTION 3.02. Reimbursement and Loans.
-----------------------
(a) Reimbursement of A and B Drawings. The Borrower agrees to
---------------------------------
reimburse the Bank in immediately available funds for the amount of any A or B
Drawing made under the Letter of Credit by 2:00 p.m. Pacific Daylight Time on or
before the date any such drawing is honored by the Bank. The Borrower's
reimbursement obligation with respect to such A or B drawing shall be
immediately due and payable without notice, presentment, demand, protest, or
other notice of any kind, all of which are hereby waived by the Borrower.
(b) Reimbursement of C Drawings. The Borrower agrees to reimburse
---------------------------
the Bank in immediately available funds, an amount equal to all C Drawings under
the Letter of Credit as follows: On the first day of the first month following
each C Drawing, interest shall be payable on the outstanding unreimbursed amount
of such C Drawing from the date such drawing was honored by Bank until the end
of the first month following such C Drawing at the Prime Rate, together with the
amount of any Debt Service payments required under Section 7.01(Y) of this
Agreement, if any. Commencing with the first day of the second month following
each such C Drawing and on the first day of each and every month thereafter,
interest shall be payable on
-11-
the outstanding unreimbursed amount of such C Drawing from the first day of the
second month following such C Drawing until payment (including prepayment) in
full thereof, at the Prime Rate plus one percent (1%) per annum, together with
the amount of the Debt Service payments required under Section 7.01(Y) of this
Agreement, if any; provided, however, that the full amount of all C Drawings
shall be paid upon the earlier of (i) the first day of the 13th month following
the date of such C Drawing or (ii) the Termination Date. The Borrower may prepay
any Reimbursement Obligations under this Section 3.02 in full or in part at any
time without premium or penalty.
(c) Acceleration. If at any time that a loan is outstanding under
------------
Section 3.02(b), a drawing on the Letter of Credit is made because of or in
connection with: a default under the Indenture; notice is received by the
Trustee from the Bank in the form of Annex D to the Letter of Credit as a result
of the occurrence of an Event of Default under the Reimbursement Agreement and
the period stated therein regarding expiration of the Letter of Credit has
expired; the Letter of Credit expires for any other reason; or there is an Event
of Default hereunder, then the full amount of principal due or to become due
under Section 3.02(b), the full amount of all interest accrued thereon, and any
other sum due or to become due under this Agreement shall be immediately due and
payable without notice to the Borrower, presentment, protest or other notice of
any kind, all of which are hereby waived by the Borrower, and the Borrower shall
repay all of the aforesaid amounts in full on the date of such acceleration. If
at any time a loan is outstanding under Section 3.02(b), any Bonds which were
the subject of the drawing creating the loan are redeemed or otherwise paid or
defeased, then the full amount of principal, interest and premium due or to
become due under Sections 3.02(a) and (b) with respect to the portion of the
loan which corresponds to such Bonds, shall be immediately due and payable
without notice to the Borrower, presentment, protest or other notice of any
kind, all of which are hereby waived by the Borrower, and the Borrower shall
repay such amounts in full on the date of such redemption, payment or
defeasance.
(d) Prepayment. The obligation to pay any amount due under Section
----------
3.02(b) may be prepaid in full or in part at any time without premium or
penalty. Any partial prepayment, or any interest paid to the Bank on the
Pledged Bonds, shall be applied to the Borrower's obligations to the Bank in the
inverse order of maturity and shall first be applied to fees or other charges,
then to interest and then to principal, in the sole discretion of the Bank.
(e) Prior Deposit for Optional or Extraordinary Redemption or
---------------------------------------------------------
Purchase. If the Borrower determines to exercise its option to cause the
- --------
redemption of any or all of the Bonds pursuant to Section 6.02(b)(i) of the
Indenture, the Borrower shall deposit with the Bank all sums necessary to effect
any such redemption or purchase and to pay any premium in connection therewith,
at least 125 days before the date of any drawing for the proposed redemption or
purchase; provided,however, that no such deposit shall be required with respect
to optional redemption of Bonds made from Mandatory Sinking Fund payments
required under Section 7.01(Y) of this Agreement. No drawing shall be allowed
under the Letter of Credit for such redemption unless such deposit is timely
made. Such sums shall include the principal amount of all Bonds to be redeemed
(including, but not limited to all amounts necessary to purchase any Pledged
Bonds), the full amount of any premium due or to be come due thereon, and all
interest
-12-
accrued thereon at the assumed rate of twelve percent (12%) per annum based on a
year of 365/366 days.
The Borrower agrees that so long as no Event of Default has occurred and is
continuing, it will redeem or purchase all Pledged Bonds before any other Bonds
and before defeasance of any Bonds pursuant to Article XII of the Indenture, and
that such redemption or purchase, together with the full amount of any premium
due upon optional or extraordinary redemption or purchase of Pledged Bonds shall
be made from funds of the Borrower and not from drawings on the Letter of
Credit.
So long as no Event of Default has occurred and is continuing under this
Agreement or any Related Document, any monies held by the Bank pursuant to the
first paragraph of this Section 3.02(e) shall be invested by the Bank in such
interest bearing investment obligations which qualify as Permitted Investments
under the Indenture as may be directed by the Borrower from time to time;
failing such direction, the Bank shall have sole discretion to determine all
investments, if any; provided, however, that all such investments shall be
Permitted Investments as defined in the Indenture. The Borrower agrees to
indemnify and hold the Bank harmless from and against any responsibility or
liability for any loss incurred in the making of any investment at the express
direction of the Borrower as provided herein or upon written directions received
from the Borrower, other than as a result of the Bank's negligence or willful
misconduct. All interest received on said investments shall be credited by the
Bank to any sums due or to become due Bank by Borrower.
SECTION 3.03. Manner, Method, Place and Time of Payment. All payments
-----------------------------------------
made or caused to be made by the Borrower to the Bank shall be made in lawful
currency of the United States and in immediately available funds to Bank at
Seattle, Washington. Any payment received after 2:00 p.m. (Pacific time) shall
be deemed to have been received on the next Business Day, and the date for
payment thereof shall be extended to the next succeeding Business Day. However,
the Borrower shall pay to Bank, on demand, default interest on said payment for
such extended time at the interest rate set forth in Section 4.06 hereof, and
the extended time shall be included in the computation of fees and other
charges. All payments under this Agreement shall be made without counterclaim,
set-off, condition or qualification and free and clear of and without deduction
for any Taxes, levies, imposts, deductions or charges of any nature whatsoever.
SECTION 3.04. Obligation to Pay Unconditional. The Borrower's obligation
-------------------------------
to reimburse or pay the Bank hereunder is absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including without limitation the
following circumstances:
(i) any lack of validity or enforceability of this Agreement, the Bonds
or any of the Related Documents;
(ii) any amendment, waiver, release or termination of or any consent to
or departure from the terms of the Bonds or any of the Related Documents which
is not consented to by Bank;
-13-
(iii) the existence of any claim, set-off, defense or other right which
the Borrower may have at any time against any Person, whether in connection with
said documents or any related or unrelated transaction;
(iv) any demand, statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or not in compliance with the terms of the Letter of Credit or any
Related Document or any statement therein being untrue or inaccurate in any
respect whatsoever;
(v) any determination of invalidity or unenforceability of the Letter
of Credit after payment by the Bank thereunder;
(vi) any failure to reduce or reinstate the Stated Amount; or
(vii) any other circumstance, happening or omission, whether or not
similar to any of the foregoing.
The liability of the Borrower hereunder and under any Related Document shall be
reinstated and revived and the rights of Bank shall continue, with respect to
any amount at any time paid by or on behalf of the Borrower which amount shall
thereafter be required to be restored, returned or forfeited by the Bank
pursuant to any law, and the Borrower's liability therefor shall continue as if
such amount had not been paid.
SECTION 3.05. Evidence of Debt. The books and records of the Bank shall
----------------
be conclusive evidence, absent manifest error, of all amounts of principal,
interest, fees and other charges advanced, outstanding or repaid pursuant to
this Agreement or any Related Document to which the Bank is a party. The Bank
agrees to provide Borrower periodic statements of amounts advanced, outstanding
or repaid under this Agreement or any Related Documents and shall also provide
statements to the Borrower upon its written request.
ARTICLE IV
OTHER PAYMENTS
SECTION 4.01. Letter of Credit Issuance Fee. The Borrower shall pay
-----------------------------
to the Bank on or prior to the Date of Issuance, an issuance fee equal to one
and one-half percent (1.50%) of EIGHT MILLION SIX HUNDRED SIXTY SEVEN THOUSAND
SIX HUNDRED SEVENTY ONE AND 20/100 DOLLARS ($8,667,671.20) or $130,015.07. The
issuance fee and all other fees of any letter of credit amended, extended,
replaced or renewed pursuant to Section 2.02 hereof shall be established by the
Bank in its sole discretion at the time of such amendment, extension,
replacement or renewal. In the event Borrower requests an extension of the
Letter of Credit pursuant to Section 2.02 which the Bank is willing to grant,
but Borrower objects to such fees, Borrower shall have the right to withdraw,
without cost or penalty the request for such amendment, extension, replacement
or renewal. Such fees shall at least include the category of fees referenced in
this Article IV (in amounts which may be less than, equal to or exceed the
-14-
amounts referenced herein) and such additional fees as the Bank then deems
appropriate in its sole discretion. The foregoing fee and all other fees in this
Article IV are or are deemed to be fully earned and nonrefundable.
SECTION 4.02. Letter of Credit Annual Fee. The Borrower hereby agrees
---------------------------
to pay the Bank an annual fee which shall equal one and one-fifth percent
(1.20%) of the Stated Amount as of each anniversary date following the Date of
Issuance times 365/360 or 1.0139% (which amount shall be calculated by the Bank)
until the Termination Date. The annual fee for the first year shall be payable
in advance commencing on the Date of Issuance. Thereafter the annual fee shall
be payable in advance on the first day of each December commencing December 1,
1997 and each December 1st thereafter until the Termination Date.
SECTION 4.03. Other Fees.
----------
(a) Transfer Fee and Amendments. The Bank agrees to issue a substitute
---------------------------
Letter of Credit to any successor Trustee duly appointed pursuant to the
Indenture and applicable law upon surrender to the Bank of the original Letter
of Credit together with payment to the Bank of the fee then established by the
Bank's Letter of Credit Department together with any attorneys' fees or other
expenses incurred by the Bank in connection therewith. The Bank's current
transfer fee is $500.00. The Borrower agrees to pay the fees and expenses to
the Bank on the day of any amendment or replacement to the Letter of Credit if
to effectuate said amendment, a written change is made to the Letter of Credit
or an amended, substitute, replacement or additional Letter of Credit is issued.
As used herein, "amendment" shall not include any documents the Bank determines
to issue to reflect a reduction of the Stated Amount but shall include each
reinstatement (other than an automatic reinstatement) of any portion of the
Stated Amount. In the event the Bank elects to extend the Letter of Credit
pursuant to the provisions of Section 2.02 hereof the Borrower shall pay Bank an
extension fee in an amount determined by Bank.
(b) Draw Fee. Upon each draw under the Letter of Credit, the Borrower
--------
agrees to pay the Bank on demand, a draw fee in the amount then established by
the Bank's Letter of Credit Department. The initial draw fee for draws made
under the Letter of Credit during 1996 is $100.
(c) Cancellation Fee. If the Letter of Credit is canceled, or if the
----------------
Letter of Credit is substituted with an Alternate Letter of Credit prior to the
Expiration Date, the Borrower agrees to pay the Bank a cancellation fee of one-
tenth of one percent (.10%) of the then Stated Amount of the Letter of Credit,
and shall cause the Trustee to tender to the Bank the fee with the original
Letter of Credit then outstanding; provided, however, that no such cancellation
fee is payable from and after the fourth anniversary of the Date of Issuance or
if the Letter of Credit is cancelled or is substituted with an Alternate Letter
of Credit because the Bank has defaulted under the Letter of Credit, the Letter
of Credit is unenforceable or the short-term deposit rating of the Bank is
reduced below A-2 by Standard & Poor's. No cancellation shall be effective to
discharge or reduce the liability of the Borrower to pay the annual fee payable
pursuant to Section 4.02 hereof for the year in which such cancellation occurs
or to pay all other sums due the Bank under this Agreement or any Related
Document. Until such sums are fully paid to the Bank, no such
-15-
cancellation shall diminish or affect any security or other interest granted to
or for the benefit of the Bank.
SECTION 4.04. Increased Costs. If any law or regulation or if the
---------------
adoption of or any change in any law, regulation, guideline or request from any
central bank or financial, monetary or other supervisory or governmental
authority (whether or not having the force of law), or in the interpretation
thereof by any court or administrative or governmental body charged with the
administration thereof, shall impose on the Bank any condition affecting or
relating to this Agreement, to any Related Document evidencing an obligation of
the Borrower to the Bank, or to the Letter of Credit, the result of which shall
be to reduce the rate of return on the Letter of Credit or this Agreement to a
level below which the Bank could have achieved but for such law or regulation or
shall increase the cost to the Bank of issuing or maintaining the Letter of
Credit (or any substitute, additional, renewed or amended Letter of Credit) or
of funding amounts drawn thereunder, including but not limited to any law,
regulation or change which shall (a) impose, modify or deem applicable any
capital adequacy requirement, reserve, special deposit or similar requirement or
impose any insurance premium or assessment against letters of credit issued by,
or assets held by the Bank, or (b) require or make advisable (in the opinion of
legal counsel to the Bank), qualification, registration, filing or any other act
by the Bank to avoid violation of or to effect compliance with any law or
regulation (or judicial, administrative or regulatory decision, interpretation,
opinion, order, agreement, directive or request regarding same) relating to
underwriting, selling, distribution of, marketing or dealing in securities; or
(c) subject the Bank to any Tax, charge, fee, deduction or withholding of any
kind whatsoever, then, upon demand therefor, the Borrower shall pay to the Bank
additional amounts which shall be sufficient to compensate the Bank for such
reduction in the rate of return or increased cost, together with interest on
each such amount from the date said amount is due until payment in full thereof
at the Prime Rate. The amount of any reduction in the rate of return or
increase in cost shall be the result of the Bank's good faith discretionary
allocation of the aggregate of such reduction or cost increases resulting from
such events; the Bank shall in connection with its demand for such additional
amounts furnish to the Borrower a certificate setting forth with reasonable
explanation such increased cost incurred by the Bank; absent manifest error,
said certificate shall be conclusive as to the amount thereof. The Bank shall
use its best efforts to promptly demand payment pursuant to this Section 4.04.
Notwithstanding anything in this Section 4.04 to the contrary, the Borrower is
not obligated to pay the Bank any additional amounts resulting from an increase
in federal income tax rates or state business and occupation tax rates of
general application to all taxpayers.
SECTION 4.05. Payment of Expenses and Fees; Applicability.
-------------------------------------------
(a) Upon demand therefor, the Borrower agrees to pay to the Bank all
of its out-of-pocket or incurred costs, reasonable attorneys' fees, fees of
collection or other agents, and other fees and expenses of every nature
whatsoever (hereinafter, collectively "Costs and Fees") directly or indirectly
incurred in connection with the development, review, execution, amendment,
renewal, extension, forbearance (if any), refinance, renegotiation or
restructure of this Agreement or any Related Document and any other document
prepared or service performed in connection herewith or therewith; the Borrower
shall also pay the fees charged from time to
-16-
time by rating agencies for any rating or "preference opinion," if any,
regarding the Bonds (but not regarding any general rating of the Bank not
related to the Bonds). Upon demand therefor, the Borrower further agrees to pay
to the Bank all Costs and Fees (whether or not a lawsuit is brought) incurred in
collecting any sums due the Bank by the Borrower or incurred by Bank in
protecting, enforcing or preserving its rights under this Agreement or any of
the Related Documents, all whether or not suit is brought and including but not
limited to all Costs and Fees incurred in any court action, arbitration,
mediation, on appeal, in any bankruptcy or state receivership or other
insolvency or similar proceedings or circumstances, in any forfeiture or other
proceeding that could affect the Bank's rights under this Agreement or in any
security therefor.
(b) The obligations of the Borrower under Section 4.04 and Section
4.05 of this Agreement shall (i) survive until all sums due Bank under this
Agreement or any Related Document have been paid in full, notwithstanding any
termination of the Letter of Credit or payment of the Bonds; and (ii) include
any reduction in the rate of return, increased costs, and Costs and Fees
incurred by any Participant.
SECTION 4.06. Calculations; Default Interest; Compounded Interest.
---------------------------------------------------
Except as otherwise expressly set forth in this Agreement, all computations of
interest and fees under this Agreement shall be made on the basis of a 360 day
year and actual days elapsed. Interest shall accrue during each period from but
excluding the first day thereof to and including the last day thereof. In the
event that any payment due hereunder shall not be made within fifteen (15) days
of the date when due, a late charge of five cents ($.05) for each dollar ($1.00)
so overdue (the "Late Charge Fee") may be charged by Bank for the purpose of
defraying the expense incident to handling such delinquent payments. Such Late
Charge Fee represents the reasonable estimate of Bank and Borrower of a fair
average compensation for the loss that will be sustained by Bank due to the
failure of Borrower to make timely payments. Such Late Charge Fee shall be paid
without prejudice to the right of Bank to collect any other amounts provided to
be paid or to declare an Event of Default hereunder or under the Deed of Trust.
If an Event of Default occurs, then the interest rate applicable in calculating
any defaulted payments from the due date of the defaulted payment shall be the
Default Rate and the Late Charge Fee shall apply to any such payments. All
amounts that are not paid when due under this Agreement shall bear interest at
the Prime Rate plus two percent (2%) per annum (the "Default Rate"), from the
time due until paid. All interest not paid when due shall be added to principal
and interest shall thereafter accrue on said increased principal amount. All
amounts due hereunder shall be paid in United States dollars.
ARTICLE V
CONDITIONS
SECTION 5.01. Conditions Precedent to Issuance of Letter of Credit.
----------------------------------------------------
(a) The Bank will issue the Letter of Credit upon the request of the
Borrower in accordance with Section 2.01 and subject to fulfillment of the
conditions set forth in subsections (b), (c) and (d) below.
-17-
(b) The Bank shall have received on or before the Date of Issuance
the following, each addressed to the Bank and dated on or as of such date, in
form and substance satisfactory to the Bank:
(i) copies of (a) the current Articles of Incorporation of the
Borrower certified by the Secretary of State of the state of Nevada, (b) bylaws
of the Borrower certified by the Borrower as true and correct; and (c)
Certificate of Registration of Borrower as a foreign corporation authorized to
transact business in the state of Washington, certified by the Secretary of
State of Washington, copies of each document as amended to the date of
certification, which copies shall have been delivered to Bank's counsel at least
one week prior to Closing;
(ii) evidence satisfactory to the Bank of the adoption by the
Borrower and the Issuer of each Related Document to which either is a party and
of this Agreement;
(iii) an opinion of bond counsel in form and substance
satisfactory to the Bank and covering such matters relating to the transactions
contemplated by this Agreement and the Related Documents as the Bank may
reasonably request;
(iv) an opinion of independent counsel selected by the Borrower
(subject to Bank's reasonable approval) in form and substance satisfactory to
the Bank and covering such matters relating to the transactions contemplated by
this Agreement and the Related Documents as the Bank may reasonably request.
The Borrower hereby requests and instructs its independent counsel to issue such
an opinion;
(v) a certificate of the Secretary of the Borrower, certifying
(a) the name and true signature of the officers of the Borrower authorized to
enter into and execute this Agreement and the Related Documents on behalf of the
Borrower; (b) that the documents delivered pursuant to Section 5.01(b)(i) have
not been amended or canceled since the date of certification thereunder; and (c)
the certificate described in paragraph (c) below;
(vi) the amounts specified to be paid on the Date of Issuance
pursuant to Section 4.01, establishment of the account contemplated by Section
7.01(Y) and proof of insurance required hereunder or under any Related
Documents;
(vii) application for the Letter of Credit;
(viii) copies of all agreements (including but not limited to
each Related Document) and documents, including records of corporate
proceedings, governmental approvals and incumbency certificates executed in
connection with the transactions contemplated by this Agreement and the Related
Documents, all certified to the extent requested by the Bank;
(ix) Environmental Questionnaire and environmental reports for
each of the real properties constituting the Project satisfactory to Bank;
-18-
(x) ADA Questionnaire and Disclosure Statement and ADA
Certificate of Compliance for each of the real properties constituting the
Project satisfactory to Bank;
(xi) A copy of Borrower's most recent Form 10-K and 10-Q as
filed with the Securities and Exchange Commission;
(xii) Budgets for each Project (including certified final cost
breakdown) satisfactory to Bank;
(xiii) each of the documents required to be delivered to the
underwriters pursuant to the Bond Purchase Agreement between the Commission and
the underwriters regarding the Bonds;
(xiv) such other documents, interpretations, instruments,
approvals or opinions as the Bank or its counsel may reasonably request.
(c) The representations and warranties of Borrower contained in
Section 6.01 hereof and in each Related Document shall be correct, accurate and
complete on and as of the Date of Issuance as though made on and as of such date
and no Event of Default and no condition or event which, with the giving of
notice or lapse of time or both, would become such an Event of Default, shall
have occurred and be continuing on the Date of Issuance and the Bank shall have
received a certificate signed by an authorized official of the Borrower, dated
the Date of Issuance, to that effect. As used in this paragraph, "Date of
Issuance" shall include any date the Letter of Credit is amended, extended or a
Substitute Letter of Credit is issued.
(d) On or before the Date of Issuance:
(i) all conditions precedent to the issuance of the Bonds
shall have occurred; and
(ii) the Borrower (and all other parties, as appropriate) shall
have duly executed, issued and delivered the Bonds, this Agreement, the Related
Documents and all other documents or instruments referred to, required by or
related to the aforesaid.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.01. Representations, Warranties and Covenants of Borrower.
-----------------------------------------------------
The warranties, representations, and covenants of Borrower contained in this
Agreement or in any Related Document shall be deemed to have been relied upon by
Bank regardless of any investigation made by Bank or on its behalf and shall be
true and correct on the Date of Issuance and on the date of each disbursement of
Bond proceeds out of the Mortgage Loan Fund held by the Trustee. The Borrower
hereby represents, warrants, covenants and agrees with the Bank that:
-19-
6.01(A) Organization and Standing. Borrower is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the state of
Nevada and has the power to own and operate each of the real properties
constituting the Project and carry on its business as now being conducted; is
authorized to do business in every state, county, city or other jurisdiction in
which the nature of the Project, its business or property makes such
qualification necessary including, but not limited to, the state of Washington;
the name "Assisted Living Concepts, Inc." is the exact, true and correct name of
Borrower as set forth in its Articles of Incorporation, as amended from time to
time; Borrower has filed with the Washington Department of Licensing a
Certificate of Trade Name for all business or assumed trade names under which
Borrower has done, does or may do business, except to the extent no such filing
is required by law. The Borrower is the successor by merger to CCL Sub, Inc., a
wholly owned subsidiary of Concepts in Community Living, Inc. Certain of the
facilities presently owned by the Borrower were purchased by the Borrower from
Madras Elder Care, Lincoln Community Partners and Assisted Living Concepts
Group, entities which are or were Affiliates of the Borrower or its president
and chief executive officer, Keren Brown Wilson. The Borrower's chief executive
office and principal place of business is Portland, Oregon. Except as set forth
above, the Borrower has not changed its name or changed its principal place of
business and chief executive officer within five years and one month prior to
the date hereof.
6.01(B) Corporate Authorization. All corporate action on the part of
-----------------------
Borrower, its officers, directors or shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and each
Related Document to which it is a party has been duly taken. Borrower has full
power and authority (corporate or otherwise) to execute, deliver and perform
this Agreement and each Related Document to which Borrower is a party, and to
perform and observe the terms and conditions hereof and thereof.
6.01(C) Enforceability. This Agreement and the Related Documents,
--------------
when executed and delivered by the Borrower, will be the legal, valid and
binding agreements of the Borrower, enforceable in accordance with their
respective terms, except to the extent that the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, or other similar laws
affecting the rights of creditors generally.
6.01(D) Consents or Approvals. No consent, approval, permission,
---------------------
authorization, or license of any Person with a ownership interest in Borrower or
with a Lien on any asset of Borrower, or of any trustee, issuer or holder of any
Indebtedness or Contractual Obligation of Borrower, and no consent, approval,
permission, authorization, order or license of any Governmental Body is
necessary in connection with the execution, delivery and performance of any
Related Documents to which Borrower is a party or any transaction contemplated
hereby or thereby to be performed by Borrower, except as may have already been
obtained by Borrower and copies certified as to accuracy by Borrower which have
been delivered to Bank on or prior to the Date of Issuance.
6.01(E) Restrictions. There is no provision in the articles of
------------
incorporation or bylaws of Borrower or any Requirement of Law binding on
Borrower which would be contravened by the execution and delivery of this
Agreement or any Related Documents to which
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Borrower is a party or by the performance of any provision, condition, covenant,
or other terms hereof or thereof.
6.01(F) Litigation. Other than as disclosed in Exhibit E hereto or
----------
in the financial statements referenced in Section 6.02(H), there is no pending
or threatened litigation, Tax claim, action or other proceeding or dispute of
any nature whatsoever affecting the Borrower before any Governmental Body, which
could have a Material Adverse Effect on the legal existence or powers of the
Borrower or its financial condition or operations or have a Material Adverse
Effect on the ability of Borrower to perform its obligations under the
Reimbursement Agreement and any Related Documents, and Borrower is not in
default with respect to any Requirement of Law that might result in any such
effect.
6.01(G) No Violation. To the best of Borrower's knowledge, the
------------
Borrower is in compliance with all Requirements of Law with respect to which any
failure to comply could have a Material Adverse Effect. The execution, delivery
or performance of this Agreement and each Related Document, the consummation of
the transactions contemplated herein and therein and compliance with the terms
and provisions hereof or thereof to be performed by the Borrower does not and
will not conflict with or result in a breach of any of the terms, conditions or
provisions of the articles of incorporation or bylaws of the Borrower or, to the
best of Borrower's knowledge, of any Requirement of Law or of any Contractual
Obligation or constitute a default thereunder or result in the creation or
imposition of any Lien (except in favor of Bank) upon any of the property of the
Borrower pursuant to the terms of any such Contractual Obligation or Requirement
of Law. Borrower is not in default under any existing Indebtedness.
6.01(H) Financial Information. All financial statements and other
---------------------
information and data furnished by the Borrower to Bank are complete and correct;
have been prepared in accordance with GAAP, except as noted therein; and
accurately and fairly represent the financial condition of Borrower and the
results of operations of the Borrower as of such dates. There has been no change
in the financial condition of Borrower or results of operation of any of the
real properties constituting the Project since the date of the audited financial
statements of Borrower dated December 31, 1995 and Form 10-Q of Borrower dated
June 30, 1996, of such a character as to materially impair the ability of the
Borrower to reimburse the Bank for any drawing made under the Letter of Credit
in accordance with the terms hereof or thereof; and the Borrower has no
Contingent Obligations except as may be disclosed from time to time in
Borrower's most recent Form 10-K and Form 10-Q filed by the Borrower with the
Securities and Exchange Commission, except for the obligations hereunder and
under any Related Document of the Borrower.
6.01(I) Liens and Encumbrances. Borrower represents and warrants that
----------------------
at the time of the delivery of each Deed of Trust or amendment thereto (i)
Borrower is lawfully possessed and is the lawful owner of fee simple title to
the applicable Project; (ii) such Project is free and clear of any deed of
trust, mortgage, lien, charge or encumbrance thereon or affecting the title
thereto, except (i) Liens regarding such Project which are shown on Schedule B
to the policy of title insurance Bank agrees in writing to accept, and (ii)
property tax liens for Taxes not yet delinquent by nonpayment.
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6.01(J) Business Authorizations. To the best of Borrower's
-----------------------
knowledge, the Borrower possess all patents, patent rights or licenses,
trademarks, trademark rights, trade names or trade name rights and copyrights
required to conduct its business as now conducted without conflict with the
rights or privileges of others.
6.01(K) Taxes. The Borrower has filed or caused to be filed and will
-----
continue to file or timely cause to be filed, all Tax returns that are required
to be filed (except for extensions applied for and disclosed to the Bank), has
paid (or will cause to be paid) all Taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other Taxes, fees or other charges imposed on it or any of its property by any
Governmental Body (other than those the amount of which is currently being
contested in good faith and by appropriate proceedings and with respect to which
reserves in conformity with GAAP to which Bank has consented have been provided
on the books of the Borrower), and has fully satisfied or provided for all of
its sales and use tax, withholding tax and unemployment tax liabilities; and no
Tax liens have been filed and, to the knowledge of the Borrower, no claims are
being asserted with respect to any such taxes, fees or other charges.
6.01(L) Investment Company Act. The Borrower is not an "investment
----------------------
company" or a partnership "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
6.01(M) Federal Reserve Board ("FRB") Regulations. The Borrower is
-----------------------------------------
not engaged and will not engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of such terms
under FRB Regulation U. No part of the proceeds of the Bonds will be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose that
violates, or would be inconsistent with, the provisions of the regulations of
the Federal Reserve Board. If requested by Bank, Borrower will furnish to the
Bank a statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U to the foregoing effect. Further, the Borrower is
and shall remain in compliance with FRB Regulation B (12 C.F.R. Part 202) in
connection with any credit extended now or hereafter by the Borrower.
6.01(N) Incorporated Representations, Warranties and Covenants. The
------------------------------------------------------
Borrower hereby specifically makes to the Bank each and every representation,
warranty, and covenant made by the Borrower in the Mortgage Loan Documents, and
the Regulatory Agreement each of which representations, warranties and covenants
are incorporated herein by this reference (except to the extent any of the
aforesaid would contradict adversely to the Bank any representation, warranty or
covenant contained herein other than by incorporation). All warranties,
representations, and covenants made by the Borrower herein or in any certificate
or other document delivered by it or on its behalf pursuant to this Agreement
and each Related Document shall be deemed to have been relied upon by the Bank
and shall be true and correct on the Date of Issuance and on the date of each
disbursement of Bond proceeds out of the Mortgage Loan Fund held by Trustee.
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6.01(O) Information Correct. No information, exhibit, or report
-------------------
furnished by Borrower to the Bank or any other Person in connection with this
Agreement or any of the Related Documents contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the
statements contained therein not misleading. The Borrower has disclosed to the
Bank all information about the Borrower which would be of material interest to a
reasonably prudent lender. There is, to the best of the Borrower's knowledge, no
fact which would have a Material Adverse Effect on its business, prospects,
condition, affairs or operations of Borrower or any of its properties or assets
which has not been disclosed to the Bank in writing.
6.01(P) Compliance with ERISA. Borrower is in substantial compliance
---------------------
with ERISA and the Code as to each "Plan" as defined in Section 1.01 of this
Agreement.
As to each Plan maintained by Borrower:
(i) Such Plan has been maintained in substantial compliance
with all statutes, orders, rules and regulations, including but not limited to
ERISA and the Code, applicable to such Plan.
(ii) No "reportable event," as such term is used in Section
4043 of ERISA, or "prohibited transaction," as such term is used in Section 406
of ERISA or Section 4975 of the Code, or "accumulated funding deficiency," as
such term is used in Section 412 or Section 4971 of the Code (whether or not
such accumulated funding deficiency has been waived), has heretofore occurred
with respect thereto.
(iii) Each such Plan designed to be a qualified plan since
its adoption and to date qualifies and has qualified under Section 401(a) of the
Code, and each trust, if any, established under each such Plan is exempt from
taxation pursuant to Section 501(a) of the Code.
(iv) Each such Plan has been administered and enforced
substantially in accordance with its terms, no dispute is pending or threatened
with respect thereto, and substantially all contributions due from employees
thereunder, if any, have been made.
(v) No condition exists that could constitute grounds for
termination of any such Plan.
Borrower has not incurred any material liability under Title IV of ERISA
(which remains unsatisfied as of the date hereof) arising in connection with the
complete or partial termination of, or complete or partial withdrawal from, any
Plan covered or previously covered by Title IV of ERISA; and no condition exists
or event has occurred which would be reasonably likely to result in the
imposition of any such liability upon Borrower nor has Borrower been notified
that any such Plan is in reorganization or is insolvent within the meaning of
sections 4241 and 4245 of ERISA, respectively.
For purposes of this Section 6.01(P) and as referenced in Sections 7.01(E)
and (I) and 8.01(h), the term "Borrower" shall include Borrower and any
corporation, partnership, sole
-23-
proprietorship or other entity if Borrower and such other entity or entities are
(i) corporations which are members of a controlled group of corporations as
defined in Section 414(b) of the Code, (ii) trades or businesses (whether or not
incorporated) which are under common control as defined in Section 414(c) of the
Code, (iii) members of an affiliated service group as defined in Section 414(m)
or 414(o) of the Code, or (iv) any combination of the foregoing.
6.01(Q) Americans with Disabilities Act. Each of the real properties
-------------------------------
constituting the Project is and shall at all times be in compliance with all
applicable requirements of the Fair Housing Act of 1968 (as amended) and the
Americans with Disabilities Act of 1990, (as amended) (collectively, "Acts") and
the Borrower shall cause the Project to be continuously in compliance with such
Acts (as the same may be amended from time to time). Borrower agrees to protect,
defend, indemnify and hold Bank harmless from and against any and all liability
threatened against or suffered by Bank by reason of a breach by Borrower of the
foregoing representations and warranties. The foregoing indemnity shall include
the cost of all alterations to the Project (including architectural,
engineering, legal and accounting costs), all fines, fees and penalties, and all
legal and other expenses (including attorneys' fees), incurred in connection
with the Project being in violation of such Acts and for the cost of collection
of the sums due under the indemnity. The obligations of Borrower under this
Section 6.01(Q) shall survive payment in full of Borrower's obligations under
this Agreement, all Related Documents and termination of the Letter of Credit,
and in the event that the Bank shall become the owner of the Project by
foreclosure or deed in lieu of the foreclosure of any deed of trust the
obligations of the Borrower under this Section 6.01(Q) shall survive such
foreclosure or deed in lieu of foreclosure.
6.01(R) No Commissions. Borrower has not made any agreement or taken
--------------
any action that may have caused any Person to become entitled to a commission or
finder's fee as a result of or in connection with the issuance of the Letter of
Credit or any extension of credit by Bank, and in connection therewith, Borrower
agrees to indemnify the Bank and hold the Bank harmless from any and all fees,
costs (including attorney fees), and expenses arising out of any claims by
Persons relating to any such commission or fee.
6.01(S) Land Use and Zoning Compliance. Each of the real properties
------------------------------
constituting the Project is a legal use permitted outright under applicable
provisions of the applicable city or county zoning code. To the best of
Borrower's knowledge, each Project complies with all applicable subdivision and
platting requirements and constitutes one or more legal lots. To the best of
Borrower's knowledge, each of the real properties constituting the Project and
their intended uses comply fully with all environmental, air quality, zoning,
planning, building, health, safety, labor, discrimination, fire, traffic safety
or other governmental rules, laws, ordinances, statutes, codes and regulations
applicable to the ownership, use, occupancy and operation of the Project.
6.01(T) Permits. Any and all permits, licenses, certificates and
-------
approvals necessary to construct, own and operate each of the real properties
constituting the Project as an assisted living facility in compliance with all
Requirements of Law will be obtained prior to any disbursement of Bond proceeds
with respect to such Project. Each of the real properties constituting the
Project has been or will be constructed in compliance with the Plans and
-24-
Specifications, and complies in full with all Requirements of Law. To the extent
such approvals, licenses, permits, certifications and filings are not available
as of the date hereof Borrower will promptly take or cause all actions necessary
to obtain them. All streets, easements, utilities and related services necessary
for the construction of the Project and the operation thereof for its intended
purpose are available to the Project.
6.01(U) Value of Collateral. If a reappraisal is required by any
-------------------
regulatory authority Bank shall have the right to cause said collateral to be
reappraised and the appraisal reviewed both at Borrower's expense.
ARTICLE VII
FURTHER COVENANTS
SECTION 7.01. Covenants. Until the Letter of Credit is no longer
---------
outstanding and until all sums of every nature whatsoever due or to become due
from Borrower hereunder or under the Related Documents are paid in full, the
Borrower hereby covenants and agrees that unless the Bank shall otherwise
consent in writing, the Borrower shall:
7.01(A) Use of Proceeds. To the extent within Borrower's control,
---------------
take all steps necessary to cause the proceeds of every drawing on the Letter of
Credit to be used solely for the purpose of the payment of principal of or
interest on the Bonds (as appropriate under the Indenture and in accordance with
the terms of the Letter of Credit). To the extent within Borrower's control,
take all steps necessary to cause the Bond proceeds to be used solely for the
purpose of payment of Issuance Costs of the Bonds and/or the costs of
acquisition of the Project which have been approved by Bond Counsel as eligible
for financing with tax-exempt Bonds.
7.01(B) Additional Acts. Upon demand by Bank, the Borrower will
---------------
execute and deliver all such instruments (including but not limited to Uniform
Commercial Code continuation statements) and perform all such other acts as the
Bank may reasonably request to carry out the transactions and establish or
preserve the first lien status and priority contemplated by this Agreement or
any Related Document. Borrower shall also furnish to Bank upon demand all
approvals of Governmental Bodies or other Persons as may be required from time
to time to perform its obligations under this Agreement and any Related
Documents or, to the extent such approvals have not yet been issued, use its
best efforts to obtain all necessary approvals.
7.01(C) Financial Statements and Reports. Deliver to Bank in form
--------------------------------
and detail reasonably satisfactory to Bank and, if Borrower now or hereafter has
Subsidiaries, prepared on a consolidated basis:
(i) Quarterly. As soon as reasonably possible and in any event
---------
within forty-five (45) days after the close of each quarter, the Form 10-Qs as
filed with the Securities and Exchange Commission for such period and for the
portion of the fiscal year ended with such period, for Borrower all in
reasonable detail and certified by the chief financial officer of the Borrower,
subject to year-end audit adjustments;
-25-
(ii) Annual. As soon as reasonably possible and in any event within
------
one hundred twenty (120) days after the close of each fiscal year of the
Borrower, the (1) Form 10-Ks for Borrower as filed with the Securities and
Exchange Commission, and (2) proposed operating budget for the upcoming fiscal
year including proposed Capital Expenditures and such other information as may
be reasonably requested by Bank;
Such balance sheet and income statements shall be accompanied by an report and
opinion of any one of Ernst & Young LLP, Deloitte & Touche LLP, KPMG Peat
Marwick, Arthur Andersen, Price Waterhouse or Coopers & Lybrand or other
independent public accountants of recognized standing selected by Borrower and
approved by Bank, which approval shall not be unreasonably withheld, which
report and opinion shall be in accordance with generally accepted auditing
standards relating to reporting or, if qualified, the opinion shall not be
qualified due to any limitation in scope of the examination or due to any
departure from any Generally Accepted Accounting Principles, and shall be
accompanied by a statement of such accountants that, in making the audit
necessary for the certification of such financial statements and such report,
such accountants have obtained no knowledge of any Event of Default under
Article VIII or under any other evidence of Indebtedness or of any event which,
with notice or lapse of time, or both, would constitute an Event of Default
under Article VIII or under any other evidence of Indebtedness or, if in the
opinion of such accountants any such Event of Default or other event shall
exist, shall include a statement as to the nature and status thereof;
(iii) Certificates. As soon as reasonably possible, and in any event
------------
within forty-five (45) days after the close of each quarter, submit (1) a
certificate executed by the chief financial officer of the Borrower certifying
compliance by the Borrower with the requirements of Section 7.01(G) and stating
whether any noncompliance occurred during the period in question, and containing
the calculations used to document compliance therewith; (2) a certificate
executed by the chief financial officer of the Borrower certifying that all
payments of principal and interest on the Bonds have been made and that all
payments required under the provisions of Section 7.01(Y) have been made; (3) a
certificate executed by the chief financial officer of the Borrower certifying
that there is no event of default, and no event that with the giving of notice,
the passage of time or both would constitute an event of default by Borrower
under this Agreement; and (4) a statement of the chief financial officer of the
Borrower that he has no knowledge of any Event of Default under Article VIII of
this Agreement or of any event which, with notice or lapse of time, or both,
would constitute an Event of Default under Article VIII of this Agreement, or if
in the opinion of the chief financial officer of the Borrower any such Event of
Default or other event shall exist, shall include a statement as to the nature
and status thereof.
(iv) Filings. Copies of all filings made by or concerning the
-------
Borrower with the Securities and Exchange Commission, or any Governmental Body
in the states of Nevada, Oregon or Washington delivered to Bank within ten days
of such filing (other than tax returns filed with the taxing authorities for the
states of Nevada, Oregon and Washington) and such other statements, lists of
property and accounts, budgets, Capital Expenditure plans, forecasts, and such
other information and reports regarding Borrower or the Project as Bank may
reasonably request.
-26-
7.01(D) Notices. Promptly give written notice to the Bank of the
-------
occurrence of any Event of Default or any event which, upon a lapse of time or
notice or both, would become an Event of Default. The Borrower shall promptly
give notice to the Bank of any pending or threatened litigation or other
circumstance or matter of any nature whatsoever, which, in the opinion of a
reasonably prudent lender reasonably exercised, would have a Material Adverse
Effect on the ability of the Borrower to repay any amount due or to become due
hereunder or any other Indebtedness due or to become due, including but not
limited to, Indebtedness due Persons other than the Bank. The Borrower
represents and warrants that no such circumstance or matter exists as of the
date hereof.
7.01(E) Compliance with Laws. Conduct its operations and cause those
--------------------
of any Subsidiary to be conducted in material compliance with all Requirements
of Law including but not limited to ERISA (for purposes of ERISA compliance,
"its operations" shall include all operations of the "Borrower" as defined in
Section 6.01(P) of this Agreement), FLSA, Environmental Laws, the Fair Housing
Act of 1968 (as amended) and the Americans with Disabilities Act of 1990 (as
amended) land use and zoning, or occupational health and safety.
7.01(F) Compliance with Agreement and Related Documents. Perform and
-----------------------------------------------
comply with the terms and conditions of this Agreement and each Related
Document.
7.01(G) Financial Covenants. Maintain at all times until all
-------------------
Reimbursement Obligations are paid in full the following on a consolidated
basis:
(i) The ratio of Current Assets to Current Liabilities shall be
greater than or equal to $1,000,000, measured quarterly. For purposes of this
calculation, Current Liabilities will exclude payments due under construction
draw requests that have committed takeout financing.
(ii) The sum of Tangible Net Worth plus Convertible Subordinated
Debentures shall be greater than or equal to $20,000,000.
(iii) The Cash Flow Coverage ratio will be a two tiered test, both
of which would need to be in default to cause an Event of Default under this
Agreement:
(a) The Borrower's ratio of Net Income + Interest Expense +
Depreciation & Amortization divided by Interest Expense + pro-rata (for the
quarter) scheduled principal payments on all debt + pro rata (for the quarter)
annual fees relating to the Bonds and Letter of Credit shall be greater than or
equal to 1.25:1.00, measured quarterly; and
---
(b) After nine months of operation, the five Projects being
financed by the Bonds shall maintain a financial performance level such that the
sum of their quarterly Net Income + Interest Expense + Depreciation &
Amortization shall exceed the sum of Interest Expense + pro-rata (for the
------------
quarter) scheduled Bond principal payments + pro rata (for
-27-
the quarter) annual fees relating to the Bonds and this Letter of Credit by
$50,000, measured quarterly.
In the event Borrower is not in compliance with both of the financial
covenants set forth in 7.01(G)(iii)(a) and (b) above, Borrower shall not be in
default under this Agreement if Borrower deposits $200,000 in cash collateral
with Bank within 30 days and cures such non-compliance within 180 days
thereafter. Bank will release the cash collateral to Borrower once Borrower has
satisfied the financial covenants set forth in Section 7.01(G)(iii)(a) and (b)
for two consecutive quarters.
7.01(H) Maintenance and Inspection of Records. The Borrower shall
-------------------------------------
maintain adequate and complete records and books of account in accordance with
Generally Accepted Accounting Principles, which books shall reflect all
financial transactions of the Borrower, in accordance with Generally Accepted
Accounting Principles. The Borrower shall permit any of the Bank's
representatives to visit and inspect any of the properties of the Borrower, to
examine all its books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss its affairs, finances and accounts
with its respective officers, employees and independent public accountants (and
by this provision the Borrower authorizes said accountants to discuss the
finances and affairs of the Borrower with the Bank or its accountants or other
agents) all at such reasonable times and as often as may be reasonably
requested.
7.01(I) Employee Benefit Programs. Conduct its operations so that the
-------------------------
representations, warranties and covenants in Section 6.01(P) with respect to any
Plan continue to be true during the term of this Agreement. For purposes of this
Section 7.01(I), "its operations" shall include all operations of the "Borrower"
as defined in Section 6.01(P) of this Agreement.
7.01(J) Indemnification. Indemnify and hold harmless the Bank from
---------------
and against any and all claims, actions, suits and other legal proceedings and
from and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever (including, without limitation, interest, penalties, and
reasonable attorneys' fees and expenses) which the Bank may incur (or which may
be claimed against the Bank by any other Person or entity whatsoever (other than
the Borrower) by reason of or in connection with (i) the execution and delivery
or transfer of, or payment or failure to pay under, the Letter of Credit (except
to the extent directly and actually resulting from the gross negligence or
willful misconduct of the Bank); (ii) the execution, delivery, performance,
breach (including but not limited to the inaccuracy when made of any
representation or warranty), enforcement (including affirmative suits and the
defense of any claim or liability whatsoever), collection, administration, and
any amendment of this Agreement or any Related Document (requested by the
Borrower); (iii) the offering, issuance, sale or distribution of the Bonds or
the issuance of the Letter of Credit, including, but not limited to, any
violation or alleged violation of any federal or state securities law or
regulation or restriction of any nature; (iv) any suit, proceeding or
governmental action brought or taken in connection with the execution and
delivery of the Bonds or the use of (or proposed or potential use of) the
proceeds of the Bonds or any drawing under the Letter of Credit; (v) any failure
of the Bank to honor a drawing under the Letter of Credit as a result of a
Government Act (as
-28-
hereinafter defined); (vi) any loss or liability incurred by the Bank as a
result of or in connection with the use, release or existence of hazardous
wastes, toxic substances or the like on any property upon which any part of the
Project is located, including but not limited to, the property subject to the
Deed of Trust; or (vii) the Letter of Credit (except to the extent directly and
actually resulting from the gross negligence or willful misconduct of the Bank),
including but not limited to any violations or alleged violations of securities
laws or regulations; it being the intention of the parties that this Agreement
shall be construed and applied to protect and indemnify the Bank against any and
all risks set forth in (i) through (vii) above or otherwise involved in the
issuance and maintenance of the Letter of Credit, all of which risks are hereby
assumed by the Borrower, including, without limitation, any and all risks of the
acts or omissions, whether rightful or wrongful, of any present or future de
--
jure or de facto Governmental Body ("Government Acts"). The Bank shall not, in
- ---- --------
any way, be liable for any failure by the Bank to pay any draft under the Letter
of Credit as a result of any Government Acts or any other cause beyond the
control of the Bank. Notwithstanding the foregoing, the Borrower shall not be
required to indemnify the Bank for any claims, damages, losses, liabilities,
costs or expenses to the direct and actual extent, caused by (i) the gross
negligence or willful misconduct of the Bank in determining whether a draft or
certificate timely and properly presented under the Letter of Credit complies
with the terms of the Letter of Credit, or (ii) the Bank's wrongful failure to
pay under the Letter of Credit after the timely and proper presentation to it by
the Trustee of a draft and certificate strictly complying with the terms and
conditions of the Letter of Credit and applicable law. Nothing in this Section
7.01(J) is intended to limit or shall limit any obligation of the Borrower to
the Bank, including but not limited to the Reimbursement Obligations of the
Borrower contained in Article III.
As between the Borrower and the Bank, the Borrower shall assume all
risks of the acts, omissions or misuse of the Letter of Credit by the Trustee or
any transferee of the Letter of Credit ("transferee"). The Bank shall not be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted to the Bank by any party in connection
with the application for and issuance of the Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign the Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) for the
use made of the Letter of Credit or any acts or omissions of the Trustee or any
transferee or for failure of the Trustee or any transferee to comply fully with
conditions required in order to draw upon the Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, wire, telegraph, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of terms (except to the extent actually
and directly resulting from the Bank's gross negligence or willful misconduct);
(vi) for reliance upon an oral statement or telecopy purportedly made or sent by
the Trustee or any transferee in lieu of submission of any draft, annex,
certificate or other document required under the Letter of Credit, or for any
loss or delay in the transmission or otherwise of any draft, certificate or
document required in order to make a drawing under the Letter of Credit or of
the proceeds thereof; (vii) for the misapplication of the proceeds of any
drawing under the Letter of Credit by the Trustee, any transferee or any Person
to whom payment was made pursuant to order of the Trustee or any transferee;
(viii) for
-29-
payment by the Bank under the Letter of Credit against presentation of documents
which do not strictly comply with the terms of the Letter of Credit, including
failure of any document to bear any or adequate reference to the Letter of
Credit (except to the extent directly and actually resulting from the gross
negligence or willful misconduct of the Bank); (ix) any delay in giving or
failing to give any notice, demand or protest; and (x) for any consequence
arising from causes beyond the control of the Bank, including, without
limitation, any Government Acts. None of the above shall affect, impair, or
prevent the vesting of any of the Bank's rights or powers hereunder.
The Bank shall not be responsible for calculating the amount of,
determining the authority for, or notifying the Borrower with respect to any
draw on the Letter of Credit. In supplementation and not in limitation of the
above provisions, any action taken or omitted by the Bank under or in connection
with the Letter of Credit or the annexes, if taken or omitted in good faith,
shall not put the Bank under any resulting liability to the Borrower.
Upon demand by Bank, the Borrower shall reimburse Bank for any reasonable
legal or other expenses (including attorneys' fees) incurred in connection with
investigating or defending against any of the foregoing. If any action, suit or
proceeding arising from any of the foregoing is brought against the Bank, the
Borrower, to the extent determined by Bank as necessary or advisable in order to
protect the Bank's rights hereunder, will resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel designated
by Borrower (which counsel shall be reasonably satisfactory to the Bank).
Borrower hereby expressly acknowledges that each reference to the Bank in
this Section 7.01(J) is and shall be deemed to be a reference to all officers,
agents, directors and counsel for or of Bank, which Persons shall be indemnified
to the same extent and shall have the same rights and obligations of the Bank as
if specifically named under this Section 7.01(J). The obligations of Borrower
under this Section 7.01(J) shall survive payment in full of Borrower's
obligations under this Agreement, all Related Documents and termination of the
Letter of Credit.
7.01(K) Disclosure. Make all written disclosure necessary to ensure
----------
that this Agreement, the Official Statement and the Related Documents do not
contain any untrue statement of a material fact as to the Borrower and, to the
best of Borrower's knowledge, the Project and do state all material facts
necessary in order to make such statements contained herein or therein not
misleading in light of the circumstances under which they were made.
7.01(L) Legal Existence. Preserve and maintain its legal existence,
---------------
rights, franchises and privileges in the jurisdiction of its organization and
qualify and remain qualified as a corporation in each jurisdiction where the
failure to so qualify would have a Material Adverse Effect on the business of
the Borrower or its operations. The Borrower shall take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable to the
normal conduct of its business, and will comply with all Contractual Obligations
and Requirements of Law except to the extent that the failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect on the
business, operations, property or financial or other condition of the Borrower.
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7.01(M) Maintenance of Business; No Mergers, Etc. Cause its
----------------------------------------
business to be carried on and conducted only in the ordinary course and not
merge, consolidate, reorganize, liquidate, dissolve or otherwise dispose of,
terminate or change the corporate structure of Borrower without the prior
written approval of Bank which approval shall not be unreasonably withheld;
provided, however, that Borrower may, without the prior written consent of Bank,
merge with another corporation organized under the laws of one of the states of
the United States so long as (a) there is no default and no event that with the
passage of time, the giving of notice, or both, would constitute an Event of
Default under this Agreement or any Related Document either prior to or after
giving effect to such merger; (b) the surviving corporation has a Tangible Net
Worth in excess of $46,000,000; (c) the surviving corporation has a Debt-to-
Worth ratio of no greater than 2.00:1.00 (Debt-to-Worth is defined as Total
Funded Debt divided by Tangible Net Worth); (d) Bank receives an opinion of
nationally recognized bond counsel that any such merger does not affect the tax-
exempt status of interest on the Bonds; and (e) the surviving corporation
expressly assumes all obligations of Borrower under this Agreement and each
Related Document. Borrower shall notify Bank immediately if Dr. Keren Brown
Wilson ceases to be the President and Chief Executive Officer of Borrower for
any reason whatsoever and shall provide Bank with the names and qualifications
of any successors appointed to such positions. Borrower shall cause its
properties to be maintained, preserved and kept in accordance with Requirements
of Applicable Law and in good repair, working order and condition and cause all
needful and proper repairs, renewals and replacements thereof to be made.
Borrower shall not change in any material way the design, ownership, concept or
management of the Project without the prior written consent of the Bank. Upon
demand of the Bank, Borrower shall correct any structural defect in any of the
real properties constituting the Project or any material departure from the
plans and specifications therefor approved by any Governmental Body or any
encroachment by any part of any of the real properties constituting the Project
or any other structures on or over any building lines, easements, property
lines, or other restricted areas which any survey or inspection reflects.
Borrower shall not sell, lease or otherwise dispose of a significant portion (in
the opinion of Bank) of its properties and assets until payment in full of all
Indebtedness under this Agreement, provided, however, that nothing in this
-------
Section shall prevent Borrower from selling, leasing, abandoning or otherwise
disposing of worn out or obsolete property so long as the proceeds of such sale
are used to purchase replacement property of at least comparable quality, value
and utility. Borrower shall not sell, lease or otherwise dispose of more than
ten percent (10%) of its properties and assets (except in the ordinary course of
its business) and distribute such sale proceeds to its shareholders until
payment in full of all Indebtedness under this Agreement without the prior
written approval of Bank which approval shall not be unreasonably withheld.
7.01(N) Claims. Promptly pay or otherwise satisfy, and discharge
------
all of its Indebtedness, Contractual Obligations and all demands and claims
against it as and when the same become due and payable, other than any thereof
whose validity, amount or collectability is being contested in good faith and
for which reserves to which Bank has consented have been set aside.
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7.01(O) Liens. Not cause or permit any Liens to be filed against
-----
any of the real properties constituting the Project or any part thereof except
those Liens to which Bank has consented pursuant to the provisions of Section
6.01(I) or which are permitted pursuant to the provisions of Section 7.01(U).
7.01(P) Insurance. Maintain for itself such insurance against loss
---------
or damage to any of the real properties constituting the Project of the kinds
customarily insured against by Persons similarly situated, with reputable
companies or with the United States government or any agency or instrumentality
thereof, in such amounts and by such methods as shall be adequate or by a
reasonably prudent amount of self-insurance, and will at all times maintain or
cause to be maintained in full force and effect, with reputable companies and in
such amounts and by such methods as shall be adequate, together with
professional liability (malpractice) insurance and public liability insurance
against loss or damage to it for bodily injury or death in or about any premises
occupied by it, and liability insurance against loss or damage to it for bodily
injury or death or injury to property occurring by reason of the operation by it
of any motor vehicle or other equipment. The requirements of this Section
7.01(P) shall be in addition to insurance provisions contained in the Deed of
Trust or any other Related Document. Upon demand by the Bank, Borrower shall
furnish to Bank certificates of insurance or duplicate policies evidencing such
insurance together with evidence to the satisfaction of Bank that Bank is shown
as a loss payee to the extent of its insurable interest.
7.01(Q) Third Party Beneficiary. The Borrower acknowledges that in
-----------------------
addition to all rights and benefits of Bank herein, the Bank is a beneficiary of
all representations, warranties, and covenants made by the Borrower to or for
the benefit of owners of Bonds or made in any Related Document to or for the
benefit of any Person.
7.01(R) Special Statutes. To the best of Borrower's knowledge,
----------------
issuance of the Bonds, the proposed use of Bond proceeds, and execution,
delivery and performance of the Reimbursement Agreement and the Related
Documents does not violate any Requirement of Law, including, but not limited to
the Washington Health Services Act of 1993, Medicaid, nursing home and
certificate of need requirements, if any.
7.01(S) Operation of the Project. So long as the Reimbursement
------------------------
Obligations under this Agreement remain outstanding, the Borrower shall operate
all the Projects and shall not appoint a third party to manage and operate any
Project without Bank's prior written consent which consent shall not be
unreasonably withheld.
7.01(T) Amendments. Not modify, supplement, amend or consent to the
----------
modification, supplementation or amendment of the Indenture, or any Supplemental
Indenture or any other Related Document in any respect whatsoever, and not
accept the benefit of any waiver of any provision or condition of the foregoing,
without the prior written consent of the Bank.
7.01(U) Liens. Not create, assume or suffer to exist (excluding
-----
Liens listed on Exhibit C hereto) any Lien (including the lien of an attachment,
judgment or execution) or
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security interest, securing a charge or obligation, on or of any of its
property, real or personal, whether now owned or hereafter acquired, which
secures the Reimbursement Obligations except:
(i) Liens or charges for current taxes, assessments, or other
governmental charges which are not delinquent or remain payable without any
penalty, or the validity of which is contested in good faith by appropriate
proceedings diligently prosecuted upon stay of execution of the enforcement
thereof;
(ii) Deposits or pledges securing (1) statutory obligations; (2)
surety or appeal bonds; (3) bonds for release of attachment, stay of execution
or injunction; or (4) performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, for purposes of like general nature
in the ordinary course of the Borrower's business;
(iii) Easements, rights of way, covenants, restrictions and other
encumbrances affecting the Borrower's property, whether or not currently
existing, which are accepted in writing by Bank and (1) do not directly or
indirectly constitute a lien securing an obligation for the payment of money and
(2) have no Material Adverse Effect on the use of such property for its
purposes; and
(iv) Minor irregularities in the title to any such property which
have no Material Adverse Effect on the use of such property for its purposes and
which are accepted in writing by Bank.
7.01(V) [Reserved].
7.01(W) Optional Redemption. The Borrower agrees to cause the
-------------------
Trustee to select all Pledged Bonds before any other Bonds for optional
redemption by the Borrower pursuant to the Indenture.
7.01(X) Conditions Precedent. Each condition precedent to the
--------------------
issuance of the Bonds has been satisfied in full; and Borrower intends to use
the proceeds of the Mortgage Note solely for a purpose or purposes set forth in
and as authorized by the Mortgage Loan Documents and the Indenture.
7.01(Y) Required Debt Service Payments. Commencing on the first day
------------------------------
of November 1, 1996, and on the first day of each and every month thereafter,
the Borrower shall pay Bank the monthly interest payments on the Bonds and the
monthly Letter of Credit draw fee in the amounts set forth in the Schedule
annexed hereto as Exhibit D-1 and by this reference incorporated herein.
Principal payments for annual optional redemption of Bonds in the amount set
forth on Exhibit D-1 shall be paid by Borrower to Bank no later than twenty-four
(24) hours prior to the date of optional redemption for such Bonds. Borrower
shall deliver a direction letter to Trustee on the Date of Issuance requesting
optional redemption of Bonds in accordance with said schedule in the form of
Exhibit D-2 attached hereto.
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7.01(Z) Ongoing Representations and Warranties. The provisions of
--------------------------------------
Section 6.01(A), 6.01(F), 6.01 (G), 6.01(J), 6.01(K), 6.01(L), Section 6.01(M),
Section 6.01(O), Section 6.01(P), Section 6.01(R), the last sentence of Section
6.01(S) (except to the extent Borrower obtains waivers from the appropriate
Governmental Bodies) and Section 6.01(T) (except to the extent Borrower obtains
waivers from the appropriate Governmental Bodies) shall survive the Date of
Issuance and shall continue until all Reimbursement Obligations under this
Agreement have been paid in full.
SECTION 7.02. Conditions Precedent to Disbursements of Bond Proceeds.
------------------------------------------------------
A. Conditions of Disbursements. Prior to any disbursement of Bond
---------------------------
proceeds to acquire a Project, the following conditions must be satisfied:
1. MAI appraisal for the applicable Project in form,
substance and amount satisfactory to Bank;
2. ADA Questionnaire and Disclosure Statement and ADA
Certificate of Compliance for the applicable Project satisfactory to Bank;
3. Evidence acceptable to Bank that all utility services
necessary for the uninterrupted and orderly operation of the applicable Project
are available to such Project at the boundaries thereof. All connections have
been made to abutting public water, sewer, storm drains, gas and electrical
facilities;
4. Evidence acceptable to Bank that the applicable Project is
accessible via completed, dedicated streets which have been accepted for public
maintenance and use by the appropriate City and/or County depending on location,
or that an easement creating a perpetual right of public access to a publicly
dedicated street, road or highway is in effect;
5. If requested by Bank, an ALTA survey for the applicable
Project certified to and satisfactory to Bank and the title insurance company
that will be insuring the Deed of Trust;
6. Budget for the applicable Project (including certified
final cost breakdown) satisfactory to Bank;
7. Final unconditional certificate of occupancy for the
applicable Project;
8. All licenses, permits and approvals necessary to own and
operate the applicable Project;
9. Recordation with the Auditor of the county in which the
Project is located of a duly executed original Variable Rate Deed of Trust,
Assignment of Leases and filing with the Department of Licensing of appropriate
UCC financing statements; receipt by the Bank
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of an ALTA extended coverage mortgagee's policy of title insurance (Form B-
1970), issued by a title insurance company satisfactory to Bank and in favor of
Bank as the insured with liability in the Stated Amount showing title to such
Project legally described in Exhibit A to the Deed of Trust vested in fee in the
Borrower and insuring the first lien priority of the Deed of Trust subject only
to the Liens authorized in writing by Bank, and containing such endorsements as
are requested by Bank;
10. Evidence of "all-risk" property, rental loss and
comprehensive general liability insurance for such Project in form, substance
and amount satisfactory to Bank naming the Bank as loss payee or additional
insured as appropriate;
11. A certificate by an architect or other person or entity
acceptable to Bank confirming that such Project has been constructed and
completed substantially in accordance with the plans and specifications approved
by the Government Body with jurisdiction over such Project, and complies with
all applicable building codes and zoning ordinances and all other applicable
federal and state laws, rules, regulations, codes and orders;
12. The receipt by the Bank of copies of all final unconditional
certificates of occupancy and other permits, if any, evidencing that such
Project complies with all applicable zoning ordinances, building and use
restrictions and codes and any requirements with respect to licenses, permits,
and agreements necessary for the lawful use and operation of the Project and
that necessary utilities and municipal services required for the Project are in
place.
13. The representations and warranties of Article VI are true
and correct.
14. Receipt by the Bank of a certified copy of a policy of
property insurance with extended coverage on the basis of 100% of full
replacement cost of all improvements on the Project with a mortgagee clause
attached in favor of U.S. Bank of Washington, National Association, 1420 Fifth
Avenue, 11th Floor, Mail Code WWC 395, Post Office Box 720 (98111-0720),
Seattle, Washington 98101, Attention: Northwest Washington Corporate Banking,
subject to Bank's acceptance of the insuring company and evidence satisfactory
to Bank that professional liability, public liability, property damage, worker's
compensation insurance, and all other insurance required pursuant to the Deed of
Trust are being covered in amounts satisfactory to Bank.
15. The amount to be disbursed by Bank with respect to any of
the real properties constituting the Project shall not exceed the lesser of 70%
of (a) the Appraised Value of such property or (b) 75% of actual construction
costs approved by bond counsel as eligible for reimbursement from Bond proceeds.
Appraised Value shall mean the value of such property determined by the Bank
after internal review of an MAI appraiser prepared in accordance with FIRREA
requirements.
-35-
16. Receipt by the Bank of a certificate of the Architect with
respect to compliance by the Project with the American with Disabilities Act and
the Fair Housing Act Amendments of 1988 (collectively the "Access Laws").
17. Receipt by the Bank of an executed certificate of compliance
and indemnification with respect to Access Laws.
18. There is no default by Borrower under this Agreement or any
of the Related Documents.
19. The Borrower has accepted the specific Project for which
disbursement is sought as complete.
20. The Borrower shall have provided evidence reasonably
satisfactory to the Bank that all construction costs associated with such
Project have been paid in full.
21. The period for filing workmen's and materialmen's liens has
expired or releases of liens in form and substance satisfactory to Bank have
been obtained.
22. Receipt of evidence of full payment for personal property
in which Bank has a security interest.
23. There has been no condemnation, casualty, or catastrophe
which has a Material Adverse Effect on the value of the security for the
Project.
24. Appropriate amendments duly executed by Borrower in
recordable form are recorded in the applicable real property records of the
counties in which all other Projects are located amending each previously
recorded Deed of Trust, Assignment of Leases and UCC financing statements;
25. Bank receives 110.5 and other applicable endorsements to
each of the title insurance policies with respect to all other Projects in form
and substance satisfactory to Bank insuring the continued first lien priority of
the Deeds of Trust with no additional liens, encumbrances or other exceptions
except those approved by Bank in its sole and absolute discretion.
B. Disbursements Generally. There shall be no disbursement out of
-----------------------
the Mortgage Loan Fund held by the Trustee without the written approval of Bank,
which approval shall be given in accordance with the provisions of this
Agreement and the Mortgage Loan Documents. Bank is hereby authorized without any
request or direction by Borrower, to approve disbursements out of the Mortgage
Loan Fund held by the Trustee and other deposits, if any, of the Borrower with
the Trustee, from time to time to pay interest on the Bonds, to reimburse Bank
for drawings made on the Letter of Credit or to pay directly Bank's expenses and
advances, whether or not there are adequate reserves therefor in accordance with
the provisions of this
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Agreement. Bank shall provide Borrower with invoices prior to each disbursement
of funds out of the Mortgage Loan Fund held by the Trustee.
SECTION 7.03. Assignment/Miscellaneous.
------------------------
A. Borrower Assignment. Borrower may not convey, assign, mortgage,
-------------------
pledge, transfer, hypothecate, encumber or otherwise dispose of its rights or
obligations under this Agreement, the Related Documents, or the Project (except
as provided in the Deed of Trust) without the prior written consent of Bank. A
breach of this provision, directly or indirectly, shall be an Event of Default
under this Agreement and shall not vest any rights in the purported transferee.
B. Bank Assignment. Bank may assign its rights and obligations in
---------------
and to this Agreement and the Related Documents to another lender having the
financial ability to perform Bank's obligations. Any such assignment by Bank
shall be deemed to have been made pursuant to this Agreement and not to be a
modification hereof, and the disbursements made by any such assignee hereunder
shall be evidenced and secured by the Deed of Trust.
C. Advertising. Bank reserves the right to publicize the financing
-----------
of the Project and may include in publicity releases, if applicable, the names
of the principals and a general description of the Project, its occupancy and
use. Borrower shall have the right to review and comment on such publicity
releases prior to their publication.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default; Acceleration and Remedies. The
--------------------------------------------
following shall be defaults under this Agreement and the terms "Event of
Default", "default" or "Default" shall mean any one or more of the following
events:
(a) The Borrower shall fail to pay or cause to be paid any amount of
money required under this Agreement or any of the Related Documents when due; or
(b) Any Lien(s) of Bank in any portion of the collateral which
secures Borrower's Reimbursement Obligations under this Agreement shall, for any
reason, be impaired or cease to exist as valid and binding first priority Liens
(other than for Liens expressly permitted under Sections 7.01(O) and/or 7.01(U)
of this Agreement) which is not remedied to the satisfaction of Bank within
thirty (30) days following written notice to Borrower or a Material Adverse
Effect shall have occurred with respect to any material portion of the
collateral which secures Borrower's Obligations under this Agreement as result
of any uninsured loss or theft or any material portion of such collateral
becomes the subject of or affected by any forfeiture, seizure or similar claim
which is not remedied to the satisfaction of Bank within thirty (30) days
following written notice to Borrower; or
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(c) The Borrower shall fail to perform, keep or observe any term,
covenant, agreement, warranty, or condition (not involving a payment obligation)
of Borrower contained in this Agreement and any such failure shall remain
unremedied for thirty (30) days after written notification thereof shall have
been given to the Borrower by the Bank; notwithstanding the preceding clause, if
------------------------------------
the Default is of a nature that is not susceptible to cure within 30 days and if
the Borrower commences to cure the Default within said period, the Borrower
shall not be deemed to be in Default if it diligently prosecutes said cure
thereafter to completion and, notwithstanding such diligence, cures said Default
by the sixtieth (60th) day after the date of said written notification; or
(d) Any representation or warranty made by the Borrower (or any of
its officers) under or in connection with this Agreement any Related Document
shall prove to have been untrue when made; or
(e) There is an event of default under any recourse Indebtedness of
the Borrower with a principal balance in excess of ten percent (10%) of
Borrower's Tangible Net Worth which has not been either (i) waived in writing by
the lender with respect thereto or (ii) cured to the satisfaction of the
affected lender prior to the expiration of applicable cure periods, if any; or
(f) Final judgment which is no longer the subject of any good faith
appeal is entered against the Borrower for an amount in excess of ten percent
(10%) of Borrower's Tangible Net Worth unless such judgment is paid, discharged
or settled within thirty (30) days following entry of such final judgment; or
(g) There is any default in the payment of principal or interest on
the Washington State Housing Finance Commission's Variable Rate Demand
Multifamily Revenue Bonds (LTC Properties, Inc. Project), Series 1995 or any
default under that certain Reimbursement Agreement dated as of December 1, 1995
by and between LTC Properties, Inc. and Bank which has not been either (i)
waived in writing by Bank or (ii) cured to the satisfaction of Bank prior to the
expiration of applicable cure periods, if any; or
(h) A Plan shall fail to maintain the minimum funding standard
required by Section 412 of the Code for any Plan Year or a waiver of such
standard is sought or granted under Section 412(d) of the Code; a Plan is, shall
have been or is likely to be terminated or the subject of termination
proceedings under Title IV of ERISA; or the Borrower (for purposes of this
paragraph, "Borrower" shall have the meaning set forth in Section 6.01(P) of
this Agreement) has incurred or is likely to incur a liability to or on account
of a Plan in connection with the complete or partial termination of, or complete
or partial withdrawal from, any Plan covered or previously covered by Title IV
of ERISA, which liability or material risk of liability, in the opinion of the
Bank, will have a Material Adverse Effect upon the business, operations or the
financial condition of the Borrower or such subsidiary; or
(i) The Borrower shall dissolve or liquidate or take an equivalent
action or an involuntary petition shall have been filed under any federal or
state bankruptcy, reorganization,
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insolvency, moratorium or similar statute against the Borrower, or a custodian,
receiver, trustee, assignee for the benefit of creditors or other similar
official shall be appointed to take possession, custody, or control of the
property of the Borrower, unless such petition or appointment is set aside or
withdrawn or ceases to be in effect within sixty (60) days from the date of said
filing or appointment; or the Borrower shall become insolvent or admit in
writing its inability to pay its debts as they mature, or shall file any
petition or action for relief relating to any bankruptcy, reorganization,
insolvency or moratorium law, or any other law or laws for the relief of, or
relating to, debtors unless such petition is withdrawn or ceases to be in effect
within sixty (60) days from the date of such filing; or the Borrower shall make
an assignment for the benefit of creditors or enter into an agreement of
composition with its creditors; or the Borrower shall fail generally to pay its
debts as they become due; fail to promptly have discharged any judgment,
execution, garnishment or attachment of such consequence as could have a
Material Adverse Effect on the ability of the Borrower to carry on its
operations as presently conducted or to fulfill its obligations under the Leases
or any of the Related Documents; or
(j) The Borrower has failed to deliver to the Trustee (with a copy to
the Bank and the Issuer) within five (5) days following written notice from Bank
of the occurrence of an "event of default" under any Related Document which was
not cured within the applicable cure period, its notice to optionally redeem in
whole the principal amount of all Bonds then outstanding together with interest
accrued thereon to the date of redemption, or having timely given such notice,
Borrower thereafter fails to deposit with Bank on or prior to the date fixed for
such redemption, the redemption price for all Bonds including the amount of
accrued interest payable on the redemption date and premium if any.
With respect to any Event of Default, (i) in any such event described in
Section 8.01(i), all amounts due or to become due under this Agreement shall
automatically be due and payable without notice or demand or any action
whatsoever by the Bank; and (ii) in all other Events of Default the Bank may,
upon notice (of any nature allowed by law) to the Borrower, declare all amounts
of any nature whatsoever payable under this Agreement or the Related 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 Borrower;
and may, without notice to the Borrower, deliver Annex D to the Letter of Credit
to the Trustee.
In addition, upon any Event of Default, the Bank may at its election,
without prior notice or demand, (1) require the Borrower to deposit immediately
with the Bank in cash, out of legally available funds, as security for the
obligations of the Borrower to Bank hereunder, under any Related Document and
under the Letter of Credit, a sum equal to the then Stated Amount of the Letter
of Credit (as defined therein) and to institute legal proceedings against the
Borrower to collect that sum if it is not deposited on demand; and (2) without
further notice or demand, exercise any or all rights available to it under this
Agreement, in equity or by applicable law, including but not limited to (at the
sole option of the Bank), all actions that could be taken by a secured party
under the Washington Uniform Commercial Code. If the deposit required by clause
(1) of this paragraph is not timely made, Borrower hereby agrees that Bank may
from time to time withdraw all or part of the required amount from any funds of
Borrower then held by Bank without demand, notice or liability for such
withdrawal(s), except that all amounts
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withdrawn shall be held by the Bank for the purposes specified in clause (1).
The Borrower specifically grants Bank a security interest in such moneys and
deposit and all income thereon. Borrower further agrees that the Bank may
provide notice to the Trustee upon any Default hereunder for the purpose of
causing acceleration and payment of all Bonds pursuant to Article VIII of the
Indenture. No action taken by Bank shall be deemed to be an election of remedies
by Bank, it being the intention of the parties that Bank shall be entitled to
exercise all remedies separately or concurrently and in any manner allowed by
law.
ARTICLE IX
SECURITY
SECTION 9.01. Funds, Accounts and Security Agreement. The
--------------------------------------
Borrower represents, certifies, warrants and covenants to the Bank that all
monies from time to time on deposit in the Funds and Accounts established under
the Indenture shall be held by Trustee in trust for the owners of the Bonds and
the Bank until full payment of the principal of and interest on the Bonds and of
all obligations of the Borrower to the Bank under this Agreement or the Related
Documents.
The Borrower hereby makes to the Bank or Trustee (as the case may be) for
the equal benefit of the Bank and owners of the Bonds, all pledges, assignments,
grants, covenants and agreements set forth in the Indenture and the Loan
Agreement and all pledges, grants of liens and security interests and covenants
contained therein are incorporated herein by this reference as if fully set
forth herein. The Borrower hereby consents to the Bank's status as a beneficiary
under the Indenture and acknowledges that the trust estate of the Indenture as
supplemented from time to time secures not only the payment of the Bonds but
also secures the payment of all sums due or to become due the Bank pursuant to
this Agreement or any Related Document.
SECTION 9.02. Funding and Maintaining the Funds. Until the
---------------------------------
principal of and interest on the Bonds shall have been fully paid and until all
other sums of every nature whatsoever due or to become due the Bank pursuant to
this Agreement or any Related Document are paid in full, the Borrower shall
maintain the Funds and cause moneys to be deposited in each fund or subaccount
thereof in accordance with the terms of the Indenture and this Agreement in
amounts sufficient to pay all principal of and interest on the Bonds as well as
all other sums due or to become due to the Bank pursuant to this Agreement or
any Related Document.
The Borrower agrees that whenever any sum is required to be placed in any
of said Funds by the terms of any agreement and whenever any other sum is due
and owing the Bank under this Agreement or the Related Documents, the Borrower
shall place sufficient moneys in said Funds to pay such sums. The Borrower
further agrees that the Trustee is authorized and hereby directed to forward
such sums to the Bank in accordance with the Indenture or this Agreement.
Nothing contained herein shall impair the right of the Bank to demand and
receive payment directly from the Borrower in lieu of or notwithstanding funding
of said Funds, which demand shall be at the sole option of the Bank. The
Borrower hereby represents, certifies and warrants to the Bank that payment of
all debt due or to become due Bank by virtue of this Agreement is payable from
(in
-40-
addition to said Funds and the trust estate of the Indenture) all other
available sources of moneys to the Borrower whether now or hereafter existing.
SECTION 9.03. Interest of Bank and Owners of Bonds. Any moneys
------------------------------------
transferred by the Trustee from any of the Funds for payment on the Bonds or
sums due the Bank shall continue to be held in trust for the owners of the Bonds
and the Bank until disbursement or deemed disbursement of such moneys by the
Trustee to owners of the Bonds or, to the extent not inconsistent with the
rights of the Owners of the Bonds, to the Bank.
The Borrower agrees to deliver copies of this Agreement and the Indenture
to the Trustee on the date of execution or adoption of the aforesaid to provide
specific notice of the trust for the Bank and the owners of the Bonds in the
moneys in the Funds and to provide notice for all other purposes, including but
not limited to notice to all persons of the security interests, pledges and
liens granted to or for the benefit of the owners of Bonds and the Bank in said
Funds.
SECTION 9.04. Transfers and Other Liens. The Borrower agrees that it will
-------------------------
not (i) sell or otherwise dispose of any interest in the monies in the Funds or
Accounts except as provided herein or in the Indenture, or (ii) create or permit
to exist any pledge, Lien, security interest, or other charge or encumbrance of
any nature whatsoever upon or with respect to the Gross Revenues or moneys in
the Funds (except the interest of the Bank or of the owners of the Bonds and as
otherwise allowed in the Indenture).
SECTION 9.05. Priority Of Payment; Application of Sums Upon Notice of
------------------------------------------------------
Default. Upon any drawing under the Letter of Credit honored by the Bank, the
- -------
Bank shall have priority over the owners of the Bonds to all sums then or
thereafter in any of the Funds to the extent of any such drawing (but only to
such extent). Upon an Event of Default and delivery to the Trustee of notice in
the form of Annex D to the Letter of Credit, the Trustee shall apply all sums in
the Funds available for payments on the Bonds to payment of obligations of the
Borrower in the following priority: first, to the reimbursement of the Bank for
any amount honored by the Bank pursuant to the Letter of Credit; second, payment
then due the owners of the Bonds; and third, payment of any sums then due the
Bank pursuant to this Agreement or the Related Documents.
SECTION 9.06. Acknowledgment Regarding Funds and Accounts. The Borrower
-------------------------------------------
hereby represents, warrants and certifies to the Bank that:
(a) The Trustee, on behalf of the owners of the Bonds and the Bank,
has been granted a valid first priority security or other interest in or lien
upon and assignment of the monies from time to time on deposit in the Funds and
Accounts which is not and will not be subject to attachment, judgment lien or
any interest of any nature whatsoever of any other creditor of the Borrower or
the Borrower, whether now or hereafter existing; and
(b) no other lien or pledge or other encumbrance of any nature
whatsoever is prior to the interest of the Bondholders and Bank.
-41-
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver of any provision
----------------
of this Agreement or any Related Document, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the Bank, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 10.02. Notices, Etc. Except as otherwise provided in this
------------
Agreement or as otherwise allowed to Bank by law, all notices, requests, demands
or other communications shall be in a writing addressed to the respective party
at the address given below or to such other address as the parties may from time
to time specify in writing. Notice shall be deemed to have been given when (a)
personally delivered, (b) given by a telex or machine-confirmed facsimile, or
(c) after placement in the U.S. mails as certified or registered, return receipt
requested, first-class postage prepaid, the receipt indicates delivery or
refusal or failure to accept delivery:
If to the Assisted Living Concepts, Inc.
Borrower: 9955 SE Washington, Suite 201
Portland, Oregon 97216
Attention: Stephen Gordon,
Chief Financial Officer
Telecopy: (503) 252-6597
with a copy to: Bullivant Houser Bailey Pendergrass & Hoffman
300 Pioneer Tower
888 Fifth Avenue
Portland, Oregon 97204
Attention: Sandra Campbell
Telecopy: (503) 295-0915
If to the Bank: U.S. Bank of Washington, National Association
Northwest Washington Corporate Banking
1420 Fifth Avenue, 11th Floor
Mail Code WWC 395
P.O. Box 720 (98111-0720)
Seattle, Washington 98101
Attention: Deborah S. Watson
Vice President
Telecopy: (206) 344-2887
-42-
If to the Trustee: Norwest Bank Minnesota, National Association
6th Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust
Department
Telecopy: (612) 667-9825
or as to each party, at such other address as shall be designated by such party
in a written notice to the other parties.
SECTION 10.03. No Waiver; Remedies. No failure on the part of the Bank to
-------------------
exercise, and any delay in exercising, any right under this Agreement or any
Related Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any of the aforesaid preclude any other or
further exercise thereof or the exercise of any other right from time to time
and as often as the Bank may deem expedient and without notice (except any
notice which is specifically required by written agreement). The remedies
provided in this Agreement or the Related Documents are cumulative and not
exclusive of any remedies provided by law or in equity, now or hereafter
existing.
SECTION 10.04. Accounting Terms. All accounting terms not specifically
----------------
defined herein shall be construed in accordance with Generally Accepted
Accounting Principles consistently applied, except as otherwise stated herein.
SECTION 10.05. Partial Reconveyance. Provided Borrower is not in default
--------------------
under any of the covenants, conditions, warranties or representations hereunder
or under any other document evidenced or securing this Agreement or under any of
the Related Documents, Bank agrees to release from the lien of the Deed of Trust
from time to time, one or more of the properties constituting the Project and
legally described in Exhibit B attached hereto (each, a "Release Parcel") upon
satisfaction of the following terms and conditions and only upon satisfaction of
the following terms and conditions:
(a) Borrower shall notify Bank and Bond Trustee in writing on or
before the dates specified in the Reimbursement Agreement and the Indenture,
respectively, for providing notice of optional redemptions of Bonds;
(b) Borrower shall have otherwise complied with all requirements set
forth in the Reimbursement Agreement, the Indenture, the Regulatory Agreements,
the Loan Agreement and any other of the Related Documents and shall have secured
the consent of all parties required under those agreements;
(c) Payment by Borrower to Bank with respect to the Release Parcel of
a partial reconveyance fee equal to 100% of the Net Proceeds of Sale (as
hereinafter defined) from the sale of the Release Parcel (to be applied to
optional redemption of Bonds pursuant to the Indenture) provided, however, that
in no event shall the partial reconveyance fee be less than the original
principal amount of Bond proceeds disbursed with respect to such Release Parcel
less
-43-
any principal payments made and allocated by Beneficiary to such Release Parcel
prior to the date of optional redemption of Bonds;
(d) Bank shall have received an opinion from nationally recognized
bond counsel that such sale of the Release Parcel and optional redemption of
Bonds as a result thereof does not adversely affect the tax-exempt status of
interest on the Bonds; and
(e) Borrower shall, at its sole cost and expense, deliver an
endorsement to each of Bank's policies of title insurance insuring that the
reconveyance of the Deed of Trust from the Release Parcel will not affect the
first lien priority of the Deed of Trust on the remaining Projects and without
any additional exceptions to its policies which would have priority over Bank
except those approved by Bank in its sole and absolute discretion. Borrower
shall pay all costs and expenses incurred in connection with any such
reconveyance, including but not limited to recording fees, premiums for title
insurance endorsements and escrow fees, if any charges by the title insurance
company or other closing agent.
Net Proceeds of Sale shall be defined as the gross proceeds of sale of any
Release Parcel less broker's commission, title insurance, escrow fees and
recording fees, real estate excise taxes and normal prorations of real estate
taxes, water and other utilities constituting liens against the Release Parcel,
if any.
Any reconveyance of a Deed of Trust as to any Release Parcel shall in no
way release, modify, discharge, impair or otherwise affect the validity of
enforceability of the Reimbursement Agreement, the Deed of Trust, the Regulatory
Agreement or any of the Related Documents or any of the obligations of
Borrower's obligations hereunder or thereunder.
SECTION 10.06. Security Costs, Expenses and Taxes. In addition to the
----------------------------------
fees and expenses the Borrower has agreed to pay pursuant to Section 4.05
hereof, the Borrower also agrees to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery, filing,
recording, continuation, maintenance, administration and termination of the
liens, or security interests or other interests granted by the Borrower in any
Related Document or any other documents to be delivered under the Related
Documents. The Borrower further agrees to pay all title insurance and recording
fees and costs of every nature whatsoever incurred by Bank (if any).
SECTION 10.07. Binding Effect; Assignment. This Agreement shall become
--------------------------
effective when it shall have been executed by the Borrower and the Bank and
thereafter shall be a continuing obligation binding upon and inuring to the
benefit of the Borrower and the Bank and their respective successors and
assigns, except that the Borrower shall not have the right to assign any of its
rights or obligations hereunder or under any Related Document (including but not
limited to any rights in Bond proceeds) or any interest herein or therein
without the prior written consent of the Bank. The Bank without the consent of
the Borrower, may sell, transfer, assign, negotiate, pledge or otherwise
hypothecate or participate all or any portion of this Agreement, or grant
participations herein, in the Letter of Credit or in any of its rights or
security hereunder or under the Related Documents, including without limitation,
the instruments securing the
-44-
Borrower's obligations hereunder. No such disposition by the Bank, however, will
relieve the Bank of its obligation under the Letter of Credit. In connection
with any such disposition or in connection with any examination of the Bank, the
Bank may disclose to the proposed transferee or regulatory authority any
information that the Borrower is required to deliver to the Bank or to which the
Bank is otherwise entitled pursuant to this Agreement or any Related Document
from time to time. Bank may also disclose such information to its affiliates.
SECTION 10.08. Governing Law. This Agreement and each Related Document in
-------------
favor or to which the Bank is a party shall be governed, construed and enforced
in accordance with the laws of the State of Washington. The Borrower agrees to
submit to the jurisdiction of the state or federal court selected by Bank, and
venue of any action concerning this Agreement or any Related Document shall be
held in any county in Washington in which any of the real properties
constituting the Project are located or such other county within the State of
Washington as the Bank may request.
SECTION 10.09. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties regarding the terms hereof and supersedes any and
all other agreements relating to the subject matter of this Agreement, oral or
written, among any or all of the parties (except for the Related Documents). The
headings of the various sections and subsections of this Agreement and of any
Related Documents are for convenience of reference only and do not constitute a
part of the respective document and shall not affect the meaning or construction
of any provision. No amendment, waiver or forbearance of any provision of this
Agreement or of any Related Document shall be effective unless the same shall be
in a writing signed by the party intended to be bound. Any such waiver or
forbearance shall only be effective for the specific purpose and in the specific
instance given and not for other or subsequent purposes or instances and no
forbearance or waiver shall affect Bank's right to refuse further forbearances
or waivers. If any portion of this Agreement or any Related Document is held to
be invalid or unenforceable, the remaining portions and provisions and
conditions thereof regarding Borrower's obligations shall remain in full force
and effect. Time is of the essence of this Agreement and each Related Document.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same Agreement.
SECTION 10.10. JURY WAIVER. BORROWER AND BANK EACH HEREBY WAIVE ANY RIGHT
-----------
TO TRIAL BY JURY OF ANY CLAIM ARISING OUT OF THIS AGREEMENT, THE LETTER OF
CREDIT AND ANY RELATED DOCUMENT, WHETHER NOW OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND HEREBY CONSENT AND AGREE THAT ANY
SUCH CLAIM MAY BE DECIDED BY TRIAL WITHOUT A JURY AND THAT EITHER PARTY MAY FILE
AN ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE WAIVER AND AGREEMENT CONTAINED HEREIN.
SECTION 10.11. Securities Law. The Borrower acknowledges and agrees that
--------------
except for the information describing the Bank supplied by the Bank and except
for matters
-45-
stated in the opinion of Bank's counsel, neither the Bank in its capacity as
issuer of the Letter of Credit (nor its counsel) (a) has and shall not be deemed
to have made any representation regarding sale of the Bonds or the financial
strength, integrity or revenues of the Borrower; (b) has any responsibility or
liability for the issuance, offer or sale of the Bonds; (c) has participated in
the preparation of the Official Statement (except with respect to supplying
information about the Bank) or is responsible or liable for any statements
contained therein or omissions therefrom, or for the accuracy or completeness
thereof; and that (d) nothing contained in this Agreement, the Official
Statement or any of the Related Documents is intended to impose any liability or
responsibility related to the aforesaid on the Bank or its counsel.
For use in the Official Statement, the Bank agrees to supply the aforesaid
descriptive information and, within thirty (30) days of the Borrower's written
demand therefor, an updated version of said information for use in any
subsequent or amended Official Statement regarding the Bonds. Upon written
request therefor, the Bank shall, as soon as practical, also supply copies of
the Bank's annual report. To the extent other information is requested of the
Bank, the Borrower agrees to pay all expenses and fees of every nature
whatsoever (including reasonable attorneys' fees) incurred by the Bank in
connection therewith.
SECTION 10.12. Subrogation. Notwithstanding the fact that the Bank's
-----------
obligation under the Letter of Credit is primary, as opposed to the secondary
obligation of a guarantor, Borrower expressly agrees that Bank shall be
subrogated to all rights of every nature whatsoever of the owners of Bonds or
the Trustee in or to the entire trust estate of the Indenture and that upon
payment by Bank under the Letter of Credit, Bank shall be entitled to exercise
all rights and remedies of any person with subrogation rights and all rights and
remedies accorded a guarantor by law or in equity. Nothing in this Section 10.12
shall impair any right of Bank under the Indenture.
SECTION 10.13. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained herein or made in writing by the
Borrower in connection herewith or any Related Document shall survive the
execution and delivery of this Agreement, regardless of any investigation made
by the Bank or on its behalf, and shall continue until payment in full of all
sums due or to become due from Borrower to Bank hereunder or under any Related
Documents.
SECTION 10.14. Washington State Notice. Bank hereby notifies Borrower as
-----------------------
follows: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY/EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
-46-
"BORROWER"
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation
By _________________________________________
Stephen Gordon
Secretary/Chief Administrative Officer/
Chief Financial Officer
"BANK"
U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION
By _________________________________________
Deborah S. Watson
Vice President
-47-
EXHIBIT A
FORM OF LETTER OF CREDIT
------------------------
A-1
EXHIBIT B-1
Legal Description - Victoria House
-----------------
Port Townsend, Washington
Real property located in the County of Jefferson, Washington as more
particularly described as follows:
B-1-1
EXHIBIT B-2
Legal Description - Cascade House
-----------------
Enumclaw, Washington
Real property located in the County of King, Washington as more
particularly described as follows:
B-2-1
EXHIBIT B-3
Legal Description - Albright House
-----------------
Bremerton, Washington
Real property located in the County of Kitsap, Washington more particularly
described as follows:
B-3-1
EXHIBIT B-4
Legal Description - Sydney House
-----------------
Port Orchard, Washington
Real property located in the County of Kitsap, Washington more particularly
described as follows:
B-4-1
EXHIBIT B-5
Legal Description - Windriver House
-----------------
Spokane, Washington
Real property located in the County of Spokane, Washington more
particularly described as follows:
B-5-1
EXHIBIT C
PERMITTED LIENS
---------------
None.
C-1
EXHIBIT D-1
MANDATORY DEBT SERVICE
----------------------
PAYMENT SCHEDULE
----------------
D-1-1
EXHIBIT D-2
NOTICE TO TRUSTEE RE
--------------------
OPTIONAL REDEMPTION OF BONDS
----------------------------
D-2-1
EXHIBIT E
PENDING LITIGATION
------------------
None.
E-1
EXHIBIT F
PROJECT BUDGET
--------------
Property
--------
Maximum Bond Proceeds
City/Town County Allocable*
------------------------------ ---------------------
Port Townsend (Jefferson) $1,651,200
Enumclaw (King) $1,625,900
Bremerton (Kitsap) $1,741,100
Port Orchard (Kitsap) $1,754,300
Spokane (Spokane) $1,727,500
$8,500,000
*Note in the event the Borrower elects to use two percent (2%) of Bond proceeds
to reimburse itself for Issuance Costs (as defined in the Indenture) the maximum
Bond proceeds allocable to purchase of a property shall be adjusted accordingly.
F-1