LOAN AGREEMENT
AMONG
HELLER HEALTHCARE FINANCE, INC.,
A DELAWARE CORPORATION
("LENDER")
AND
ESC-PUYALLUP, LLC, A WASHINGTON LIMITED LIABILITY COMPANY, ESC-PORT ST. RICHIE,
LLC, A WASHINGTON LIMITED LIABILITY COMPANY, AND ESC-BOZEMAN, LLC, A WASHINGTON
LIMITED LIABILITY COMPANY,
(COLLECTIVELY, "BORROWER")
LOAN IN THE PRINCIPAL AMOUNT
OF $30,550,000
SENIOR HOUSING FACILITIES
TABLE OF CONTENTS
RECITALS 2
ARTICLE I. The Loan 2
ARTICLE II. Security 5
ARTICLE III. Conditions Precedent 6
ARTICLE IV. Representations and Warranties 8
ARTICLE V. Affirmative Covenants 13
ARTICLE VI. Negative Covenants 16
ARTICLE VII. Events of Default; Acceleration of Indebtedness; Remedies 17
ARTICLE VIII. Miscellaneous 18
LIST OF EXHIBITS AND SCHEDULES
Exhibit A-1 Property Description
Exhibit A-2 Property Description
Exhibit A-3 Property Description
Exhibit B Litigation
Exhibit C Security Deposits
Exhibit D Release Prices
Schedule I Index of Defined Terms
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LOAN NO. 21-240
LOAN AGREEMENT
This LOAN AGREEMENT (this "AGREEMENT") is made this 8th day of February,
2002 by and between HELLER HEALTHCARE FINANCE, INC., a Delaware corporation
("LENDER"), ESC-PUYALLUP, LLC ("PUYALLUP"), ESC-PORT ST. RICHIE, LLC ("PORT
RICHIE"), and ESC-BOZEMAN, LLC, each a Washington limited liability company
("BOZEMAN"). Bozeman, Port Richie and Puyallup are sometimes referred to herein
individually and collectively as "BORROWER".
RECITALS
A. Lender has agreed to make a loan (the "LOAN") to Borrower in the
aggregate principal amount of Thirty Million Five Hundred Fifty Thousand and
No/100 Dollars ($30,550,000.00) subject to the terms and conditions contained
herein. The Loan is evidenced by that certain Promissory Note A of even date
herewith in the original principal amount of Nineteen Million Eight Hundred
Fifty-Seven Thousand Five Hundred and No/100 Dollars ($19,857,500.00) (this
promissory note and all amendments thereto and substitutions therefor are
hereinafter referred to herein collectively as "NOTE A") and that certain
Subordinated Promissory Note B of even date herewith in the original principal
amount of Ten Million Six Hundred Ninety-Two Thousand Five Hundred and No/100
Dollars ($10,692,500.00) (this promissory note and all amendments thereto and
substitutions therefor are hereinafter referred to herein collectively as "NOTE
B"). Note A and Note B are sometimes collectively referred to herein as the
"NOTES." The terms and provisions of the Notes are hereby incorporated herein
by reference in this Agreement.
B. On the Closing Date, Port Richie will be the owner of the real
property more particularly described on Exhibit A-1 attached hereto and commonly
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known as "LA CASA GRANDE" (the "LA CASA PROPERTY"), Bozeman will be the
owner of the real property more particularly described on Exhibit A-2 attached
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hereto and commonly known as "SPRING MEADOWS" (the "SPRING PROPERTY"), and
Puyallup will be the owner of the real property more particularly described on
Exhibit A-3 attached hereto and commonly known as "COURTYARD AT THE WILLOWS"
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(the "COURTYARD PROPERTY", and collectively with the La Casa Property and the
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Spring Property, the "PROPERTIES"; and each individually, a "PROPERTY"), and the
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assisted living facility and/or other improvements located thereon (collectively
called the "IMPROVEMENTS"). The Properties and the Improvements are sometimes
collectively called the "PROJECT". On the Closing Date, (a) Port Richie, as
landlord, shall enter into a Lease Agreement with Emeritus Properties V, Inc., a
Washington corporation, as tenant, with respect to the La Casa Property; (b)
Bozeman, as landlord, shall enter into a Lease Agreement with Emeritus
Properties II, Inc., a Washington corporation, as tenant, with respect to the
Spring Meadows Property; and (c) Puyallup, as landlord, shall enter into a Lease
Agreement with Emeritus Properties III, Inc., a Washington corporation, as
tenant, with respect to Courtyard Property. The aforementioned leases are
collectively referred to herein as the "LICENSEE LEASES", and the tenants under
each Licensee Lease are referred to as a "LICENSEE" and, collectively as
"LICENSEES".
C. Borrower's obligations under the Loan Documents will be secured by,
among other things, (i) the Environmental Indemnity, (ii) a first priority
mortgage or deed of trust, as applicable, each of even date herewith
(individually, a "MORTGAGE", and collectively, the "MORTGAGES"), encumbering
each Property and the Improvements located thereon, (iii) an assignment of
leases and rents executed by each Borrower and by each Licensee (individually,
an "ASSIGNMENT OF LEASES", collectively, the "ASSIGNMENTS OF LEASES")
encumbering each Property and the Improvements located thereon, and (iv) the
Guaranty. This Agreement, the Notes, the Mortgages, the Environmental
Indemnity, the Guaranty and any other documents evidencing or securing the Loan
or executed in connection therewith and any modifications, renewals and
extensions thereof are collectively referred to as the "LOAN DOCUMENTS".
D. The proceeds of the Loan will be used for, among other things, the
purpose of refinancing the Project.
E. An index of defined terms appears on the attached Schedule I.
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NOW, THEREFORE, in consideration of the foregoing and the mutual conditions
and agreements contained herein, the parties agree as follows:
ARTICLE I.
THE LOAN
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1.1. FUNDING.
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1.1.1. FUNDING. On the Closing Date, Lender shall disburse to Borrower from
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the proceeds of the Loan the sum of Thirty Million Five Hundred Fifty
Thousand and No/100 Dollars ($30,550,000.00). "CLOSING DATE" means the date of
disbursement of the Loan.
1.2. LOAN TERM.
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1.2.1. MATURITY DATE. The Loan shall mature on February 28, 2004 (the
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"MATURITY DATE") or any earlier date on which the Loan shall be required to be
paid in full, whether by acceleration or otherwise.
1.2.2. EXTENSION OPTION. Borrower may extend the Maturity Date to February
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28, 2005 provided that: (a) Borrower has given Lender written notice (the
"EXTENSION NOTICE") of such extension not less than 45 days nor more than 90
days prior to the Maturity Date; (b) Borrower has paid or caused to be paid to
Lender concurrently with the giving of the Extension Notice a non-refundable
extension fee equal to $305,500; (c) no default shall have occurred under the
terms of any of the Loan Documents; (d) the Project Yield is not less than
14.50% for the six (6) months immediately preceding the Maturity Date; (e) the
Debt Coverage Ratio for the six (6) months immediately preceding the Maturity
Date exceeds 1.45, and (f) the maturity date of the Deutsche Bank Debt shall
have been extended to a date which is at least thirty (30) days beyond the
Maturity Date, as extended by this Section or shall have been refinanced with a
loan having a maturity date which is at least thirty (30) days beyond the
Maturity Date, as extended by this Section.
"DEBT COVERAGE RATIO" means the ratio of (i) Net Operating Income from the
Project for a particular period, to (ii) payments of interest due on the Loan
for the same period.
"PROJECT YIELD" for any period means the quotient of (x) the Net Operating
Income from the Project (calculated using actual occupancy of the Project), as
determined by Lender's audit (or otherwise reasonably estimated by Lender), at
Borrower's expense, divided by (y) the then current outstanding principal
balance of the Loan plus all accrued but unpaid interest thereon.
"NET OPERATING INCOME" means the Effective Rental Income (as reasonably
determined by Lender and excluding non-recurring and non-Property related
income) less Expenses. Calculation of "EFFECTIVE RENTAL INCOME" shall be based
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on the lesser of:
(a) the rent rolls from the most recent three months annualized (adjusted
for concessions); or
(b) an assumed 93% occupancy rate for the same period annualized.
Effective Rental Income shall not include receipts from any other sources
including, but not limited to, late fees and interest income. Calculation of
"EXPENSES" shall mean (i) for purposes of this Section, the actual customary
operating expenses of the Property, on a stabilized accrual basis, for the
previous twelve (12) month period as reasonably adjusted by Lender, including,
but not limited to, recurring expenses, real estate taxes and assessments, a
management fee (whether or not paid) equal to the greater of five percent (5%)
of effective gross revenue or the amount actually paid by Borrower, a
replacement reserve in an amount equal to Three Hundred and No/100 Dollars
($300.00) per unit; or (ii) for purposes of Section 5.9, the actual customary
operating expenses of the Property, on a stabilized accrual basis, for the
previous twelve (12) month period, including, but not limited to, recurring
expenses, real estate taxes and assessments, a management fee (whether or not
paid) equal to the greater of five percent (5%) of effective gross revenue or
the amount actually paid by Borrower, a replacement reserve in an amount equal
to Three Hundred and No/100 Dollars ($300.00) per unit.
1.3. INTEREST RATE. Borrower shall pay interest on the outstanding
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principal balance of the Loan at a rate equal to the greater of (i) a fixed rate
per annum equal to seven percent (7.0%) and (ii) a floating rate per annum
equal to the Base Rate plus percent (4.0%) (the aggregate rate referred to as
the "INTEREST RATE"). "BASE RATE" shall mean the rate published each day in The
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Wall Street Journal for notes maturing three (3) months after issuance under the
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caption "Money Rates, London Interbank Offered Rates (LIBOR)". The Interest
Rate for each calendar month shall be fixed based upon the Base Rate published
prior to and in effect on the first (1st) business day of such month; provided,
however, the Interest Rate from and including the Closing Date through February
28, 2002 shall be fixed based upon the Base Rate in effect on the business day
immediately preceding the Closing Date. Interest shall be calculated based on a
360 day year and charged for the actual number of days elapsed.
1.4. PAYMENTS.
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1.4.1. PAYMENTS AT INTEREST RATE. Borrower shall make interest payments
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monthly in arrears on the first (1st) day of each month commencing March 1, 2002
computed on the outstanding principal balance of the Loan at the Interest
Rate.
1.4.2. PRINCIPAL PAYMENTS. Commencing on March 1, 2002 and continuing
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through February 28, 2003, on the first (1st) day of each month Borrower shall
make a monthly principal amortization payment of Thirty-Nine Thousand and No/100
Dollars ($39,000.00). Commencing on March 1, 2003 and continuing through
February 28, 2004, on the first (1st) day of each month Borrower shall make
monthly principal payments in the amount of Forty-Two Thousand and No/100
Dollars ($42,000.00). If the term of the Loan is extended pursuant to Section
1.2.2 above, then commencing on March 1, 2004 and continuing until the Repayment
Date, on the first (1st) day of each month Borrower shall make monthly principal
payments in the amount of Forty-Five Thousand and No/100 Dollars ($45,000.00).
"REPAYMENT DATE" means the date upon which the entire principal balance of
the Loan and all interest thereon and other sums due pursuant to the Loan
Documents, including, without limitation, the Exit Fee, have been paid in full.
1.5. SOURCES AND USES. The sources and uses of funds for the contemplated
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transaction are as follows:
SOURCES USES
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Loan Amount $30,550,000 Payoff of Deutsche Bank: $30,000,000
Reimbursement to Borrower for
Lender Fee: $457,500
Closing Costs: $92,500
Total: $30,550,000. . . $ 30,550,000
Borrower shall deliver such information and documentation as Lender shall
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request to verify that the sources and uses are as indicated above. A reduction
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in the amounts necessary for any of the uses shall result in an equal reduction
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in the amount of the Loan.
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1.6. INTENTIONALLY OMITTED.
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1.7. PREPAYMENTS OF LOAN. Subject to Section 2.2 below, Borrower may prepay
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the outstanding principal balance of the Loan in full (but not in part) any
time; provided Borrower gives Lender at least thirty (30) days' prior written
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notice and pays the Exit Fee, if any, then due Lender.
1.8. EXIT FEE. As additional consideration for entering into this Agreement
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and making the Loan, Borrower shall, on the date payment in full of the Loan is
made, pay to Lender the amount (the "EXIT FEE") set forth below for the
respective period in which payment in full of the Loan occurs (whether at
maturity, prepayment, acceleration or otherwise).
PERIOD IN WHICH PRINCIPAL BALANCE
OF LOAN BEING REPAID OCCURS EXIT FEE
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On or prior to February 28, 2003. $ 0
March 1, 2003 and thereafter. . . $ 152,750
ARTICLE II.
SECURITY
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2.1. COLLATERAL. The Loan and all other indebtedness and obligations under
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the Loan Documents shall be secured by the following (collectively, the
"COLLATERAL"): (a) the Mortgages, (b) the Assignments of Leases, and (c) any
other collateral or security described in this Agreement or required by Lender
in connection with the Loan.
2.2. RELEASE OF COLLATERAL. Lender shall release the lien of its Mortgage
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and Assignment of Leases with respect to a Property and such Property shall not
be included in the Project for any period thereafter for purposes of the Loan
Documents, provided that (a) Borrower pays to Lender the lesser of (i) the
applicable Release Price with respect to such Property, or (ii) the sum of (A)
the outstanding principal balance of the Loan, plus (B) the applicable Exit Fee;
(b) Borrower pays, or reimburses Lender, for all reasonable costs incurred in
connection with the release of any Property; (c) no default exists under any of
the terms of the Loan Documents; (d) the remaining Property or Properties in the
Project shall have a Debt Coverage Ratio for the prior six (6) month period of
greater than or equal to 1.50; (e) the remaining Property or Properties in the
Project shall have a Project Yield for the prior six (6) month period of greater
than or equal to 15%; and (f) the Spring Property will not be the only remaining
Property in the Project after such release. Upon satisfaction of all conditions
of this Section 2.2. for release of a Property, the Borrower owning such
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Property shall be released from all liability under the Loan Documents except
such liabilities which would survive, in accordance with the terms of the Loan
Documents, the repayment of the Loan in full.
The "RELEASE PRICE" of each Property shall be as set forth on Exhibit D
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attached hereto.
ARTICLE III.
CONDITIONS PRECEDENT
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Lender's obligation to disburse the Loan is subject to satisfaction of all
of the following conditions:
3.1. LOAN DOCUMENTS. Lender shall have received the following Loan
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Documents, all in form and substance satisfactory to Lender:
(a) this Agreement;
(b) Note A;
(c) Note B;
(d) the Mortgages;
(e) the Assignments of Leases;
(f) such Uniform Commercial Code financing statements as Lender may require;
(g) a Guaranty executed by Emeritus Corporation, a Washington corporation
(the "GUARANTOR"), in favor of Lender (the "GUARANTY").
(h) a hazardous materials indemnity agreement ("ENVIRONMENTAL INDEMNITY"),
executed by Borrower and Guarantor; and
(i) an attornment and subordination agreement with respect to each Licensee
Lease (collectively, the "SNDAS"); and
(j) an assignment of management contract, subordination and recognition
agreement, including a waiver of property management and broker's liens,
executed by each Borrower and the Manager (as hereinafter defined), relating to
the Management Contract (as hereinafter defined) for each Property.
3.2. INTENTIONALLY OMITTED.
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3.3. INTENTIONALLY OMITTED.
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3.4. TITLE POLICY AND ENDORSEMENTS. Lender shall have received a commitment
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for title insurance in an amount and issued by a title insurance company
satisfactory to Lender. On the Closing Date, Lender shall receive a title
insurance policy for each Property (collectively, the "TITLE POLICY"),
acceptable to Lender, insuring marketability of title and insuring that the lien
of each Mortgage is a valid first lien on the applicable Property and the
Improvements located thereon, subject only to exceptions to title approved by
Lender. The Title Policy shall also contain any reinsurance and endorsements
required by Lender, to the extent available in the applicable jurisdiction,
including without limitation creditors' rights, zoning 3.1, survey, access,
variable rate, usury, last dollar, first loss, and extended coverage
endorsements (Comprehensive Form 1).
3.5. SURVEY. Lender shall have received and approved a survey of each
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Property and the Improvements thereon, dated no more than forty-five (45) days
prior to the Closing Date, prepared by registered land surveyors in accordance
with the 1999 American Land Title Association/ American Congress on Surveying
and Mapping Standards and certified in favor of Lender and the title insurer.
The surveyors shall certify that no Property is located in a flood hazard area
as identified by the Secretary of Housing and Urban Development (or if it does
state that any Property is in a flood hazard area, Borrower shall maintain flood
insurance with respect to such Property in amounts reasonably acceptable to
Lender and otherwise in compliance with the Loan Documents). The surveys shall
be sufficient for the title insurer to remove the general survey exception from
the Title Policy.
3.6. ENVIRONMENTAL REPORT. Lender shall have received a Phase I
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Environmental audit of the Project. The audit shall (i) be addressed to Lender;
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(ii) state that Lender may rely thereon; and (iii) be acceptable to Lender in
its sole discretion.
3.7. LEASES. All leases, licenses and other agreements with regard to the
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occupancy of each of the Properties, including patient and resident care
agreements and service agreements which include an occupancy agreement
("LEASES") shall be in form and substance reasonably acceptable to Lender;
provided Borrower need not seek Lender's approval for any new Qualified
Non-Residential Lease entered into hereafter. Borrower shall submit for
Lender's approval a copy of the form of residential Lease Borrower proposes to
utilize at the Project, and all residential Leases entered into after the
Closing Date shall be on forms reasonably approved by Lender without material
modification. Lender must approve all non-residential Leases of any part of the
Project; provided, however, Lender's approval shall not be required for (but
Borrower shall provide Lender with a copy of) the execution, amendment,
surrender or termination of any Lease of non-residential space with an occupant
thereof which provides for market rentals and otherwise contains market terms
and provisions, so long as such Lease is not entered into with any Guarantor or
any of its or Borrower's Affiliates, does not have a term (including extension
options in favor of lessee) in excess of two (2) years and will not (in Lender's
reasonable estimation) account for Twenty-Five Thousand and No/100 Dollars
($25,000.00) or more of gross revenue from such Property in any one (1) year
period (a "QUALIFIED NON-RESIDENTIAL LEASE"). On the Closing Date, Borrower
shall deliver to Lender a rent roll showing all existing Leases. On the Closing
Date, all existing Leases shall be in full force and effect and Borrower shall
submit a revised and recertified rent roll for each of the Properties. If any
non-residential leases, other than Qualified Non-Residential Leases, exist or
are hereafter entered into with respect to the Project, each tenant thereunder
shall execute and deliver to Lender prior to the Closing or prior to execution
thereof by Borrower, as applicable, a Subordination and Attornment Agreement in
a form acceptable to Lender, if requested by Lender.
3.8. INSURANCE. Borrower shall have provided Lender with and Lender shall
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have approved copies of certificates evidencing the insurance policies required
to be delivered pursuant to the Loan Documents and otherwise acceptable to
Lender in form and substance.
3.9. COMPLIANCE WITH LAWS. Borrower shall have submitted and Lender shall
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have approved (a) a final certificate of occupancy (or the equivalent) for each
Property and the Improvements thereon, (b) evidence satisfactory to Lender that
each Property and the Improvements thereon complies in all material respects
with all applicable laws (including, without limitation, all building, zoning,
density, land use, ordinances, regulations and planning requirements),
covenants, conditions and restrictions, subdivision requirements (including,
without limitation, parcel maps), and environmental impact and other
environmental requirements.
3.10. COMMITMENT FEE. Borrower shall have paid Lender a commitment fee in
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the amount of Four Hundred Fifty-Seven Thousand Five Hundred and No/100 Dollars
($457,500.00) which commitment fee shall be nonrefundable and shall be deemed
fully earned upon receipt and which commitment fee Lender acknowledges it has
received as of the date hereof.
3.11. AUDIT REQUIREMENT. Lender shall have determined that the annualized
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Net Operating Income of the Project is at least Four Million and No/100 Dollars
($4,000,000.00).
3.12. MANAGEMENT CONTRACT. Lender shall have approved the management
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contract (the "MANAGEMENT CONTRACT") between Guarantor, as manager (Guarantor
being sometimes referred to herein as "MANAGER"), and the applicable Borrower
for each Property.
3.13. ADDITIONAL ITEMS. Lender shall have received such other items as
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Lender may reasonably require.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
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As an inducement to Lender to disburse the Loan, Borrower hereby represents
and warrants as follows, which representations and warranties shall be true as
of the date hereof and shall remain true throughout the term of the Loan:
4.1. BORROWER EXISTENCE. Each Borrower is a limited liability company duly
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formed, validly existing and in good standing under the laws of the State of
Washington with its principal place of business at 3131 Elliott Avenue, Suite
500, Seattle, Washington 98121. Borrower is in good standing under the laws of
the State of Washington and is authorized to transact business in and is in good
standing under the laws of the state in which its Property is located. The
Loan Documents have each been duly authorized, executed and delivered and each
constitutes the duly authorized, valid and legally binding obligation of
Borrower and Guarantor, as the case may be, enforceable against Borrower and
Guarantor, as the case may be, in accordance with their respective terms, except
as such enforceability may be limited by creditors' rights laws and general
principles of equity.
4.2. OWNERSHIP OF BORROWERS. Guarantor is the manager of each Borrower and
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owns one hundred percent (100%) of the membership interests in each Borrower
free and clear of all liens, claims, encumbrances and rights of others.
4.3. OPERATING AGREEMENT A true and complete copy of the agreement creating
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each Borrower and any and all amendments thereto (collectively, the "OPERATING
AGREEMENT") have been forwarded to Lender. The Operating Agreement constitutes
the entire agreement among the members of each Borrower and is binding upon and
enforceable against Guarantor in its capacity as the sole member, in accordance
with its terms, except as such enforceability may be limited by creditors'
rights laws and general principles of equity. There are no other agreements,
oral or written, to which Guarantor is a party relating to the ownership or
management of the corporate business affairs of Borrower. No breach exists
under the Operating Agreement and no condition exists which, with the giving of
notice or passage of time would constitute a breach under the Operating
Agreement.
4.4. BORROWER'S OTHER AGREEMENTS. No Borrower is in default under any
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contract, agreement or commitment to which it is a party. The execution,
delivery and compliance with the terms and provisions of this Agreement and the
Loan Documents will not (i) to the best of Borrower's knowledge, violate any
provisions of law or any applicable regulation, order or other decree of any
court or governmental entity by which Borrower or its Property is bound or
affected, or (ii) conflict or be inconsistent with, or result in any default
under, any contract, agreement or commitment to which any Borrower is bound.
Borrower has delivered to Lender copies of any agreements (including leases)
between Borrower and any Affiliate of Borrower or Guarantor, related in any way
to the Project or any part thereof, and any other agreements or documents
materially affecting the use and operation of the Project or any part thereof.
4.5. THE PROPERTY. Fee simple title to each Property is owned by a
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Borrower, free and clear of all liens, claims, encumbrances, covenants,
conditions and restrictions, security interests and claims of others, except
only the existing Leases and such exceptions as are set forth in the Title
Policy. To the best of Borrower's knowledge, each Property and the Improvements
are in compliance with all zoning requirements, building codes, subdivision
improvement agreements, and all covenants, conditions and restrictions of
record. The zoning and subdivision approval of each Property and the right and
ability to, use or operate the Improvements thereon are not in any way dependent
on or related to any real estate other than such Property, except as disclosed
on Exhibit E attached hereto with respect to the Courtyard Property. To the
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best of Borrower's knowledge, except as have been disclosed to Lender in writing
prior to the date hereof, there are no, nor are there any alleged or asserted,
violations of law, regulations, ordinances, codes, permits, licenses,
declarations, covenants, conditions, or restrictions of record, or other
agreements relating to the Project, or any part thereof.
4.6. PROPERTY ACCESS. Each Property is accessible through fully improved
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and dedicated roads accepted for maintenance and public use by the public
authority having jurisdiction.
4.7. UTILITIES. All utility services necessary and sufficient for the use
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or operation of each Property and the Improvements thereon are available
including water, storm, sanitary sewer, gas, electric and telephone facilities.
4.8. FLOOD HAZARDS/WETLANDS. No Property, other than the Spring Property as
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described on Exhibit F attached hereto, is situated in an area designated as
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having special flood hazards as defined by the Flood Disaster Protection Act of
1973, as amended, or as a wetlands by any governmental entity having
jurisdiction over the Property.
4.9. TAXES/ASSESSMENTS. There are no unpaid or outstanding real estate or
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other taxes or assessments on or against any Property or Improvements or any
part thereof, except general real estate taxes not yet due or payable. Copies
of the current general real estate tax bills with respect to each Property and
the Improvements thereon have been delivered to Lender. Said bills cover the
entire Project and do not cover or apply to any other property. Borrower has
not received notice of any pending or contemplated action pursuant to which any
special assessment may be levied against any portion of the Project.
4.10. EMINENT DOMAIN. Borrower has not received notice of any eminent
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domain or condemnation proceeding pending and to Borrower's knowledge there are
none threatened, relating to any part of the Project.
4.11. LITIGATION. Except as set forth in Exhibit B, there is no material
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litigation, arbitration or other proceeding or governmental investigation
pending or, to the best of Borrower's knowledge, threatened against or relating
to Guarantor, Borrower or any of their property, assets, or business, including
the Project, which if decided adversely would affect the business, affairs,
assets or financial condition of Borrower, Guarantor, any Property or the
Improvements thereon or the prospects for repayment of the Loan.
4.12. ACCURACY. Neither this Agreement nor any document, financial
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statement, credit information, certificate or statement furnished to Lender by
Borrower or Guarantor contains any untrue statement of a material fact or omits
to state a material fact which would affect Lender's decision to make the Loan.
4.13. FOREIGN OWNERSHIP. Neither Borrower nor Guarantor, as the sole member
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of Borrower, is or will be, and no legal or beneficial interest of a member of
Borrower is or will be held, directly or indirectly, by a "FOREIGN CORPORATION",
"FOREIGN PARTNERSHIP", "FOREIGN TRUST", "FOREIGN ESTATE", "FOREIGN PERSON",
"AFFILIATE" of a "FOREIGN PERSON" or a "UNITED STATES INTERMEDIARY" of a
"FOREIGN PERSON" within the meaning of IRC Sections 897 and 1445, the Foreign
Investments in Real Property Tax Act of 1980, the International Foreign
Investment Survey Act of 1976, the Agricultural Foreign Investment Disclosure
Act of 1978, or the regulations promulgated pursuant to such Acts or any
amendments to such Acts.
4.14. SOLVENCY. Neither Borrower nor Guarantor is insolvent and there has
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been no: (i) assignment made for the benefit of the creditors of any of them;
(ii) appointment of a receiver for any of them or for the property of any of
them; or (iii) bankruptcy, reorganization, or liquidation proceeding instituted
by or against any of them.
4.15. FINANCIAL STATEMENT/NO CHANGE. Borrower and Guarantor have heretofore
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delivered to Lender copies of the most current financial statements of the
Project and Guarantor. Said financial statements were prepared on a basis
consistent with that of preceding years, and all of such financial statements
present fairly the financial condition of Borrower and Guarantor as of the dates
in question and the results of operations for the periods indicated. Neither
Borrower nor any Guarantor has any material contingent liabilities not provided
for or disclosed in said financial statements. There has been no material
adverse change since September 30, 2001, as to Guarantor, or since October 31,
2001, as to the Project, in the structure, business, operations, credit,
prospects or financial condition of Borrower, the Guarantor or the Project.
4.16. SINGLE ASSET ENTITY. No Borrower: (i) holds, directly or indirectly,
--------------------
any ownership interest (legal or equitable) in any real or personal property
other than the interest which it owns in the Property and the Improvements; (ii)
is a shareholder or partner or member of any other entity; and (iii) conducts
any business other than the ownership, management and operation of the Project.
4.17. NO BROKER. No brokerage commission or finder's fee is owing to any
----------
broker or finder arising out of any actions or activity of Borrower in
connection with the Loan.
4.18. GUARANTOR EXISTENCE. Guarantor is a corporation duly formed, validly
--------------------
existing and in good standing under the laws of the State of Washington with its
principal place of business at 3131 Elliott Avenue, Suite 500, Seattle,
Washington 98121.
4.19. CORPORATE DOCUMENTS. A true and complete copy of the articles of
--------------------
incorporation and by-laws of Guarantor (collectively, the "CORPORATE DOCUMENTS")
have been furnished to Lender. The Corporate Documents were duly executed and
delivered, are in full force and effect, and binding upon and enforceable in
accordance with their terms. No breach exists under the Corporate Documents and
no act has occurred and no condition exists which, with the giving of notice or
the passage of time would constitute a breach under the Corporate Documents.
4.20. OTHER AGREEMENTS. Guarantor is not in default in any material respect
----------------
under any contract, agreement or commitment to which it is a party. The
execution, delivery and compliance with the terms and provisions of this
Agreement and the Loan Documents will not (i) to the best of Borrower's
knowledge, violate any provisions of law or any applicable regulation, order or
other decree of any court or governmental entity, or (ii) conflict or be
inconsistent with, or result in any default under, any contract, agreement or
commitment to which Guarantor is bound. Borrower has delivered to Lender copies
of any agreements (including leases) between Guarantor and any Affiliate related
in any way to the Project and any other agreements or documents materially
affecting the use and operation of the Project, other than copies of all
resident or patient occupancy agreements unless such agreements are requested by
Lender.
4.21. SECURITY DEPOSITS. Neither Borrower nor Manager has collected or is
------------------
in receipt of any security deposit from any resident of the Project, except as
described on Exhibit C.
----------
4.22. COMPLIANCE WITH HEALTH CARE LAWS.
------------------------------------
(a) Without limiting the generality of any other provision of this
Agreement including, without limitation, any other representation or warranty
made herein, Borrower and the Project and, to Borrower's knowledge, each of any
Borrower's or Manager's licensed employees and contractors (other than
contracted agencies) in the exercise of their respective duties on behalf of
Borrower, Manager (with respect to its operation of the Project) or any portion
of the Project, is in compliance with all applicable statutes, laws, ordinances,
rules and regulations of any federal, state or local governmental authority with
respect to regulatory matters primarily relating to patient healthcare and/or
patient healthcare information, including without limitation the Health
Insurance Portability and Accountability Act of 1996, as amended, and the rules
and regulations promulgated thereunder ("HIPAA") (collectively, "HEALTHCARE
LAWS")). Borrower has maintained in all material respects all records required
to be maintained by any governmental agency or authority or otherwise under the
Healthcare Laws and, to the knowledge of Borrower, there are no presently
existing circumstances which would result or likely would result in material
violations of the Healthcare Laws. Borrower and its Affiliates have such
permits, licenses, franchises, certificates and other approvals or
authorizations of governmental or regulatory authorities as are necessary under
applicable law to own their respective Properties and to conduct their
respective business in connection with the Properties (including without
limitation such permits as are required under such the Healthcare Laws).
(b) To the extent that and for so long as (i) Borrower is a "covered entity"
within the meaning of HIPAA or (ii) Borrower or Manager (with respect to its
operation of the Project) and/or their respective business and operations (with
respect to the Project) are subject to or covered by the so-called
"Administrative Simplification" provisions of HIPAA, Borrower (x) has undertaken
or will promptly undertake all necessary surveys, audits, inventories, reviews,
analyses and/or assessments (including any necessary risk assessments) of all
areas of its business and operations required by HIPAA and/or that could be
adversely affected by the failure of Borrower to be HIPAA Compliant (as defined
below); (y) has developed or will promptly develop a detailed plan and time line
for becoming HIPAA Compliant (a "HIPAA COMPLIANCE PLAN"); and (x) has
implemented or will implement those provisions of such HIPAA Compliance Plan in
all material respects necessary to ensure that Borrower is or becomes HIPAA
Compliant. For purposes hereof, "HIPAA COMPLIANT" shall mean that Borrower (x)
is or will be in compliance with each of the applicable requirements of the
so-called "ADMINISTRATIVE SIMPLIFICATION" provisions of HIPAA on and as of each
date that any part thereof, or any final rule or regulation thereunder, becomes
effective in accordance with its or their terms, as the case may be (each such
date, a "HIPAA COMPLIANCE DATE") and (y) is not and could not reasonably be
expected to become, as of any date following any such HIPAA Compliance Date, the
subject of any civil or criminal penalty, process, claim, action or proceeding,
or any administrative or other regulatory review, survey, process or proceeding
(other than routine surveys or reviews conducted by any government health plan
or other accreditation entity) that could result in any of the foregoing or that
could reasonably be expected to adversely affect Borrower's business,
operations, assets, properties or condition (financial or otherwise), in
connection with any actual or potential violation by Borrower of the then
effective provisions of HIPAA
ARTICLE V.
AFFIRMATIVE COVENANTS
- ----------------------
5.1. INSPECTION. Subject to the rights of tenants under Leases approved or
----------
deemed approved by Lender, Lender and its authorized agents may enter upon and
inspect the Project at all reasonable times upon reasonable notice given orally
or in writing to Borrower. Lender, at Borrower's expense, may retain one or
more independent consultants to periodically inspect the Project and all
documents, drawings, plans, and consultants' reports relating thereto. During
the term of the Loan, Borrower shall pay to Lender, in addition to all other
amounts due under the Loan Documents, the sum of Three Thousand and No/100
Dollars ($3,000.00) per year per Property, payable in equal monthly installments
of Two Hundred and Fifty Dollars ($250) which shall be due and payable
concurrently with each payment due under Note A and which Lender shall apply
against the cost of the aforesaid inspections; provided, however, so long as no
default exists under this Agreement or any of the other Loan Documents, Borrower
shall not be obligated to pay Lender an amount greater than Three Thousand and
No/100 Dollars ($3,000.00) per Property per calendar year with respect to such
inspections after the Closing Date. Nothing contained in this Section 5.1.
------------
shall limit Borrower's obligations with respect to inspections performed
pursuant to the terms of the Environmental Indemnity, including without
limitation Borrower's obligation to pay for, perform or caused to be performed
such inspections.
5.2. BOOKS AND RECORDS/AUDITS. Borrower shall keep and maintain at all
--------------------------
times at Borrower's address stated below, or at the property, or such other
place as Lender may approve in writing, complete and accurate books of accounts
and records adequate to reflect the results of the operation of the Project and
to provide the financial statements required to be provided to Lender pursuant
to Section 5.3 below and copies of all written contracts, correspondence,
------------
reports of Lender's independent consultant, if any, and other documents
---
affecting the Project. Lender and its designated agents shall have the right to
---
inspect and copy any of the foregoing. Additionally, after the occurrence and
during the continuance of a default or if Lender has a reasonable basis to do
so, Lender may audit and determine, in Lender's sole and absolute discretion,
the accuracy of Borrower's records and computations. The costs and expenses of
the audit shall be paid by Borrower if the audit discloses a monetary variance
in any financial information or computation of the aggregate income or expense
for any Property equal to or greater than the greater of: (i) five percent
(5%); or (ii) Ten Thousand and No/100 Dollars ($10,000.00) more than the
computation of income or expense submitted by Borrower; provided, however, if a
default has occurred and is continuing, Borrower shall pay the costs and
expenses of such audit regardless of any variance disclosed.
5.3. FINANCIAL STATEMENTS; BALANCE SHEETS. Borrower shall furnish to Lender
------------------------------------
and shall cause the Guarantor to furnish to Lender such financial statements and
other financial information as Lender may from time to time request. All such
financial statements shall show all material contingent liabilities and shall
accurately and fairly present the results of operations and the financial
condition of Borrower and/or Guarantor, as applicable, at the dates and for the
period indicated. Without limitation of the foregoing, Borrower shall furnish
to Lender and shall cause Guarantor to furnish to Lender the following
statements:
5.3.1. MONTHLY AND ANNUAL OPERATING STATEMENTS. Statements of the operation
---------------------------------------
of the Project (including a current rent roll and monthly operating
statements as of the last day of each month), to be delivered within thirty (30)
days after the end of each month and certified by Borrower as true, correct, and
complete, and yearly statements of the operation of the Project, to be delivered
within one hundred twenty (120) days after the end of each fiscal year and
certified by Borrower as true, correct, and complete.
5.3.2. ANNUAL BALANCE SHEETS AND FINANCIAL STATEMENTS. Annual balance
---------------------------------------------------
sheets and financial statements from Borrower within one hundred twenty (120)
days of the end of each fiscal year and annual balance sheets and financial
statements from the Guarantor within one hundred eighty (180) days of the end of
each fiscal year, each of which are true and correct in all respects, have been
prepared in accordance with sound accounting practices, and fairly present the
financial condition(s) of the person(s) referred to therein as of the date(s)
indicated. At Lender's request, such financial statements shall include,
specific information concerning Guarantor's other real estate holdings,
including property income and expenses, debt service requirements and occupancy.
5.3.3. AUDITS. If Borrower fails to furnish or cause to be furnished
------
promptly any report required by this Section 5.3, or if Lender reasonably deems
-----------
such reports to be unacceptable, Lender may elect (in addition to exercising any
other right and remedy) to conduct an audit of all books and records of Borrower
which in any way pertain to the Project and to prepare the statement or
statements which Borrower or Guarantor failed to procure and deliver. Such
audit shall be made and such statement or statements shall be prepared by an
independent firm of certified public accountants to be selected by Lender. If
and so long as Guarantor is not a publicly held company, Lender shall have the
right to audit Guarantor's books and records in accordance with this Section.
Borrower shall pay all reasonable expenses of such audit and other services,
which expenses shall be immediately due and payable with interest thereon at the
default rate contained in the Notes.
5.4. USE OF PROCEEDS. Borrower shall use the proceeds of the Loan for
-----------------
proper business purposes. No portion of the proceeds of the Loan shall be used
by Borrower in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Act of 1933 or the Securities Exchange Act
of 1934.
5.5. NOTICE OF LITIGATION OR DEFAULT. Borrower shall promptly provide
-----------------------------------
Lender with:
(a) written notice of any litigation, arbitration, or other proceeding or
governmental investigation pending or, to Borrower's or Guarantor's knowledge,
threatened against or relating to any Borrower or the Property or the
Improvements thereon;
(b) written notice of any material litigation, arbitration, or other
proceeding or governmental investigation pending or, to Borrower's or
Guarantor's knowledge, threatened against or relating to Guarantor;
(c) a copy of all notices of default and violations of laws, regulations,
codes, ordinances and the like received by any Borrower or Guarantor relating to
Borrower, the Collateral, or the Project or any part thereof; and
(d) a copy of all notices sent to or received from Manager under a
Management Agreement.
5.6. AFFILIATE TRANSACTIONS. Prior to entering into any agreement with an
-----------------------
Affiliate pertaining to the Project or any part thereof, Borrower shall deliver
to Lender a copy of such agreement, which shall be satisfactory to Lender in its
sole reasonable discretion. If requested by Lender, such agreement shall
provide Lender the right to terminate it upon Lender's (or its designee's)
acquisition of the Project or any part thereof through foreclosure, a
deed-in-lieu of foreclosure, UCC sale or otherwise.
"AFFILIATE" means with respect to any individual, trust, estate,
partnership, limited liability company, corporation or any other incorporated or
unincorporated organization (each a "PERSON"), a Person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with Borrower or any Guarantor, or any officer,
director, partner or shareholder of Borrower or any Guarantor, or any relative
of any of the foregoing. The term "CONTROL" means possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
5.7. ADVERTISEMENT. Borrower agrees to allow Lender to advertise in the
-------------
various news or financial media that Heller has provided financing to Borrower.
5.8. REPLACEMENT RESERVE. At the time of and in addition to the monthly
--------------------
installments of interest and, if applicable, principal, due under the Notes,
Borrower shall pay to Lender an amount equal to Twenty-Five and No/100 Dollars
($25.00) per unit in the Project (the "REPLACEMENT RESERVE"). The Replacement
Reserve may be commingled with the general funds of Lender, and these sums shall
not be deemed to be held in trust for the benefit of Borrower. So long as no
default exists hereunder or under any of the other Loan Documents, Lender shall
credit for Borrower's account interest in such funds contained in the
Replacement Reserve (if any) at the money market account rate announced by a
national banking association selected by Lender. On the Maturity Date (as it
may be extended), the monies then remaining on deposit with Lender shall, at
Lender's option, be applied against the Indebtedness or if no Event of Default
is continuing, returned to Borrower. So long as there is no Event of Default,
Borrower may request Lender to disburse funds from the Replacement Reserve
(which request will include a reasonably detailed description of the capital
expenditures at the Property, Borrower intends to pay for with such funds),
which request shall not be unreasonably denied by Lender. If requested by
Lender, each disbursement request will be accompanied by copies of invoices or
purchase orders, lien waivers and other evidence reasonably required by Lender.
5.9. FINANCIAL COVENANTS. Commencing on May 1, 2002 and at all times
--------------------
thereafter, (a) the Debt Coverage Ratio (as determined by Lender) for the
trailing three (3) months shall be greater than or equal to 1.25, and (b) the
Project Yield for the trailing three (3) month period shall be greater than or
equal to 12.50%.
5.10. INTENTIONALLY OMITTED.
----------------------
5.11. DEUTSCHE BANK DEBT. On or prior to April 26, 2003, the maturity date
--------------------
of the Deutsche Bank Debt shall be extended to a date which is thirty (30) days
beyond the then applicable Maturity Date or shall be refinanced with a loan
having a maturity date which is thirty (30) days beyond the then applicable
Maturity Date.
ARTICLE VI.
NEGATIVE COVENANTS
- -------------------
6.1. NO AMENDMENTS. Borrower shall not amend, modify or terminate, or
--------------
permit the amendment, modification or termination of:
(a) Operating Agreement or Articles of Organization of Borrower;
(b) the Management Agreement; or
(c) the Corporate Documents.
6.2. NO ADDITIONAL INDEBTEDNESS. No Borrower shall, without Lender's prior
---------------------------
written consent, incur additional indebtedness, except for (a) trade payables in
the ordinary course of business, (b) management fees due to Manager if and
to the extent the same are accrued and unpaid as a result of the requirement
that the same be subordinated to the payments due to Lender, and (c) up to (i)
One Hundred Thousand and No/100 Dollars ($100,000.00) of additional indebtedness
for purchase money indebtedness, capital leases or operating leases for
equipment or vehicles (such amounts to be determined in the case of operating
leases on the basis of what the book value of the property subject to such lease
would be if such property had been purchased on the commencement date of such
lease) for the La Casa Property or (ii) Seventy-Five Thousand and No/100 Dollars
($75,000.00) of additional indebtedness for purchase money indebtedness, capital
leases or operating leases for equipment or vehicles (such amounts to be
determined in the case of operating leases on the basis of what the book value
of the property subject to such lease would be if such property had been
purchased on the commencement date of such lease) for each of the Courtyard
Property and Spring Property. Capital or operating leases of equipment or
vehicles shall be deemed to be additional indebtedness for borrowed money and
shall require Lender's prior written consent unless such lease would not require
Lender's consent under clause (b) above.
6.3. NO COMMINGLING FUNDS. Borrower shall not commingle the funds related
----------------------
to the Property with funds from any other property or venture.
6.4. PROPERTY MANAGER. Borrower shall not change or permit the change in
-----------------
Manager or amend or terminate the Management Contract without Lender's prior
written consent, which shall not be unreasonably withheld.
6.5. LIENABLE WORK. No excavation, construction, earth work, site work or
--------------
any other mechanic's lienable work shall be done to or for the benefit of the
Project or any part thereof, without Lender's approval (which approval will not
be unreasonably withheld), except for (a) normal repair and maintenance in the
ordinary course of business and (b) work related to the alteration, replacement,
repair and maintenance to a Property not estimated to have an aggregate cost in
excess of (i) with respect to the La Casa Property, One Hundred Thousand Dollars
($100,000) or (ii) with respect to the Courtyard Property or the Spring
Property, Seventy-Five Thousand Dollars ($75,000).
6.6. CONVERSION. Borrower shall not, and shall not permit, the Project or
----------
any portion thereof to be converted or take any preliminary actions which could
lead to a conversion to condominium or cooperative form or ownership.
6.7. USE OF PROJECT. Unless required by applicable law, Borrower shall not
---------------
permit changes in the use of any part of the Project from the use existing at
the Closing Date or other uses reasonably incidental thereto. Borrower shall
not initiate or acquiesce in a change in the plat of subdivision, or zoning
classification of any Property without Lender's prior written consent.
ARTICLE VII.
EVENTS OF DEFAULT; ACCELERATION OF INDEBTEDNESS; REMEDIES
- ---------------------------------------------------------------
7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following
------------------
events shall constitute an "EVENT OF DEFAULT" under this Agreement:
(a) Failure of Borrower to pay, within ten (10) days of the due date, any of
the payment obligations of a Borrower to Lender ("INDEBTEDNESS"), including
any payment due under the Notes, this Agreement or the other Loan Documents; or
(b) Failure of Borrower to strictly comply with the provisions of Section
-------
4.16 (single asset entity) or 5.1 (inspection), 5.9 (financial covenants), or
-- --- ---
5.11 (Deutsche Bank debt) of this Agreement; or
--
(c) Breach of any covenant, representation or warranty other than as set
forth in subsections (a) and (b) above which is not cured within thirty (30)
-------------------------
days after notice; provided, however, if such breach cannot by its nature be
cured within thirty (30) days, and Borrower diligently pursues the curing
thereof (and then in all events cures such failure within sixty (60) days after
the original notice thereof), Borrower shall not be in default hereunder; or
(d) A petition under any Chapter of Title 11 of the United States Code or
any similar law or regulation is filed by or against Borrower or any Guarantor
(and in the case of an involuntary petition in bankruptcy, such petition is not
discharged within sixty (60) days of its filing), or a custodian, receiver or
trustee for any of the Project is appointed, or Borrower or any Guarantor makes
an assignment for the benefit of creditors, or any of them are adjudged
insolvent by any state or federal court of competent jurisdiction, or any of
them admit their insolvency or inability to pay their debts as they become due
or an attachment or execution is levied against any of the Project; or
(e) The occurrence of a default and the expiration of any cure period
applicable thereto under any Loan Document; or
(f) Borrower shall default in the payment of any indebtedness (other than
the Indebtedness) and such default is declared and is not cured within the time,
if any, specified therefor in any agreement governing the same; or
(g) Any statement, report or certificate made or delivered to Lender by
Borrower or any Guarantor is not materially true and complete at any time; or
(h) The occurrence of a default under the Management Agreement which
continues beyond the expiration of any applicable cure period thereunder; or
(i) There shall occur a material adverse change in the financial condition
or business prospects of Borrower or any Guarantor.
7.2. ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default at
-----------------------
the option of Lender, the Indebtedness shall become immediately due and payable
without notice to Borrower and Lender shall be entitled to all of the rights and
remedies provided in the Loan Documents or at law or in equity. Each
remedy provided in the Loan Documents is distinct and cumulative to all other
rights or remedies under the Loan Documents or afforded by law or equity, and
may be exercised concurrently, independently, or successively, in any order
whatsoever.
ARTICLE VIII.
MISCELLANEOUS
- -------------
8.1. EXPENDITURES AND EXPENSES. Borrower shall promptly pay all reasonable
--------------------------
Costs (defined below) incurred by Lender in connection with the documentation,
modification, workout, collection or enforcement of the Loan or any of the Loan
Documents (as applicable) and all such Costs shall be included as additional
Indebtedness bearing interest at the Default Rate set forth in the Notes until
paid. For the purposes hereof "COSTS" means all expenditures and expenses which
may be paid or incurred by or on behalf of Lender including repair costs,
payments to remove or protect against liens, attorneys' fees (including fees of
Lender's inside counsel), receivers' fees, engineers' fees, accountants' fees,
independent consultants' fees (including environmental consultants), all costs
and expenses incurred in connection with any of the foregoing, Lender's
out-of-pocket costs and expenses related to any audit or inspection of the
Project, outlays for documentary and expert evidence, stenographers' charges,
stamp taxes, publication costs, and costs (which may be estimates as to items to
be expended after entry of an order or judgment) for procuring all such
abstracts of title, title and UCC searches, and examination, title insurance
policies, Torrens' Certificates (if applicable) and similar data and assurances
with respect to title as Lender may deem reasonably necessary either to
prosecute any action or to evidence to bidders at any foreclosure sale of the
Project or any part thereof the true condition of the title to, or the value of,
the Project or any part thereof.
8.2. DISCLOSURE OF INFORMATION. Lender shall have the right (but shall be
---------------------------
under no obligation) to make available to any party for the purpose of granting
participations in or selling, transferring, assigning or conveying all or any
part of the Loan (including any governmental agency or authority and any
prospective bidder at any foreclosure sale of the Project or any part thereof)
any and all information which Lender may have with respect to the Project, any
Borrower or any Guarantor or any of their Affiliates, whether provided by
Borrower, Guarantor or any third party or obtained as a result of any
environmental assessments. Borrower and Guarantor agree that Lender shall have
no liability whatsoever as a result of delivering any such information to any
third party, and each Borrower and Guarantor, on behalf of themselves and their
successors and assigns, hereby release and discharge Lender from any and all
liability, claims, damages, or causes of action, arising out of, connected with
or incidental to the delivery of any such information to any third party.
8.3. SALE OF LOAN. Lender, at any time and without the consent of Borrower
-------------
or the Guarantor, may grant participations in or sell, transfer, assign and
convey all or any portion of its right, title and interest in and to the Loan,
this Agreement and the other Loan Documents, any guaranties given in connection
with the Loan and any collateral given to secure the Loan.
8.4. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in
---------------------------------------
exercising any right or remedy under any of the Loan Documents, or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise of
any right or remedy. Lender's acceptance of payment of any sum secured by any
of the Loan Documents after the due date of such payment shall not be a waiver
of Lender's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens or charges by
Lender shall not be a waiver of Lender's right to accelerate the maturity of the
Loan, nor shall Lender's receipt of any awards, proceeds, or damages under
Section 4 of any Mortgage operate to cure or waive Borrower's or Guarantor's
-----
default in payment of sums secured by any of the Loan Documents. With respect
to all Loan Documents, only waivers made in writing by Lender shall be effective
against Lender.
8.5. GOVERNING LAW; SEVERABILITY. The Loan Documents shall be governed by
-----------------------------
and construed in accordance with the internal laws of the State of Illinois,
except that the provisions of the laws of the State where the Project is located
shall be applicable to the creation, perfection and enforcement of the lien
created by the Mortgages and the provisions of the State where the bank holding
the Approved Bank Account(s) is (are) located shall be applicable to the
creation, perfection, and enforcement of the security interest in the Security
Deposits. The invalidity, illegality or unenforceability of any provision of
this Agreement shall not affect or impair the validity, legality or
enforceability of the remainder of this Agreement, and to this end, the
provisions of this Agreement are declared to be severable.
8.6. RELATIONSHIP. The relationship between Lender and Borrower shall be
------------
that of creditor-debtor only. No term in this Agreement or in the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any relationship of agency, partnership or joint venture or any fiduciary duty
by Lender to any other party.
8.7. INDEMNITY. Borrower shall indemnify, protect, hold harmless and defend
---------
Lender, its successors, assigns, shareholders, directors, officers, employees,
and agents (each, an "INDEMNITEE") from and against any and all loss, damage,
cost, expense (including attorneys' fees), and claims arising out of or in
connection with (a) the Project, (b) the Collateral, (c) any act or omission of
any Borrower, any Guarantor, Manager, or their respective employees or agents,
whether actual or alleged, and (d) any and all brokers' commissions or other
costs of similar type by any party in connection with the Loan, in each case
except to the extent arising from the indemnitee's gross negligence or willful
misconduct. Upon written request by an Indemnitee, Borrower will undertake, at
its own cost and expense, on behalf of such Indemnitee, using counsel
satisfactory to the Indemnitee, the defense of any legal action or proceeding
whether or not such Indemnitee shall be a party and for which such Indemnitee is
entitled to be indemnified pursuant to this section. At Lender's option, Lender
may, at Borrower's expense, prosecute or defend any action involving the
priority, validity or enforceability of any of the Loan Documents.
Any provision in this Agreement by which one party agrees to indemnify the
other, or the agents and employees of the Indemnitee, against liability, claims,
damages, losses or expenses, including attorney fees, arising out of bodily
injury to persons or damage to property caused by, or resulting from, in whole
or in part, the negligence, act or omission of the Indemnitee, or the agents or
employees of the Indemnitee, or any legal entity for whose negligence, acts or
omission any of them may be liable, shall not extend to liability, claims,
damages, losses or expenses, including attorney fees, arising out of:
(i) The preparation or approval of maps, drawings, opinions, reports,
surveys, change orders, designs or specifications by the Indemnitee, or the
agents or employees of the Indemnitee; or
(ii) The giving of or the failure to give directions or instructions by the
Indemnitee, or the agents or employees of the Indemnitee, which such giving of
or failure to give directions or instructions is the primary cause of bodily
injury to persons or damage to property.
This Section shall be deemed to be incorporated by reference into the other Loan
Documents.
8.8. NOTICE. Any notice or other communication required or permitted to be
------
given shall be in writing addressed to the respective party as set forth below
and may be personally served, telecopied or sent by overnight courier or U.S.
Mail and shall be deemed given: (a) if served in person, when served; (b) if
telecopied, on the date of transmission if before 3:00 p.m. (Chicago time) on a
business day; provided that a hard copy of such notice is also sent pursuant to
--------
(c) or (d) below; (c) if by overnight courier, on the first business day after
delivery to the courier; or (d) if by U.S. Mail, certified or registered mail,
return receipt requested on the fourth (4th) day after deposit in the mail
postage prepaid.
c/o Emeritus Corporation
3131 Elliott Avenue
Suite 500
Seattle, Washington 98121
Attn: Raymond R. Brandstrom
Notices to Borrower: Facsimile No. (206) 301-4500
The Nathanson Group PLLC
1520 Fourth Avenue
Sixth Floor
Seattle, Washington 98101
Attn: Randi S. Nathanson
With a copy to: Facsimile No. (206) 623-1738
Heller Healthcare Finance, Inc.
Loan No. 21-240
2 Wisconsin Circle, Suite 400
Chevy Chase, Maryland 20815
Attn: Manager, Portfolio Administration Group
Notices to Lender: Telecopy: (301) 664-9843
Heller Healthcare Finance, Inc.
Loan No. 21-240
816 Congress Avenue, Suite 1900
Austin, Texas 78701
Attn: Diana Pennington, Vice President and Chief Counsel, Senior Living Group
With a copy to: Telecopy: (512) 505-5487
Heller Healthcare Finance, Inc.
Loan No. 21-240
500 West Monroe Street
Chicago, Illinois 60661
Attn: Kevin McMeen, Senior Vice President
And a copy to: Telecopy: (312) 441-7119
8.9. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; AND
-----------------------------------------------------------------------
CAPTIONS. The covenants and agreements contained in the Loan Documents shall
- --------
bind, and the rights thereunder shall inure to, the respective successors and
- --
assigns of Lender, Borrower and Guarantor, subject to the provisions of this
- --
Agreement. All covenants and agreements of each Borrower and Guarantor shall be
- --
joint and several. In exercising any rights under the Loan Documents or
taking any actions provided for therein, Lender may act through its employees,
agents or independent contractors as authorized by Lender. The captions and
headings of the paragraphs and sections of this Agreement are for convenience
only and are not to be used to interpret or define the provisions hereof.
8.10. TERMS AND USAGE. As used in the Loan Documents "BUSINESS DAY" means
-----------------
any day, other than a Saturday or a Sunday, when banks in Chicago, Illinois are
not required or authorized to be closed.
8.11. INTENTIONALLY OMITTED.
-----------------------
8.12. TIME OF ESSENCE. Time is of the essence of this Agreement and the
-----------------
other Loan Documents and the performance of each of the covenants and agreements
contained herein and therein.
8.13. VENUE. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
-----
FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND
IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER,
AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
8.14. JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE
------------------
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO,
THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER
ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS
MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS
TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER AND
LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH OF THEM
WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER
AND LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
8.15. COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which shall constitute an original, and together shall
--
constitute the Agreement.
8.16. FINAL AGREEMENT/MODIFICATION. This Agreement (including the Senior
-----------------------------
Housing Rider attached hereto and hereby made a part hereof), together with the
other Loan Documents, represents the entire agreement among Borrower, Guarantor
and Lender and supersedes all prior agreements among the parties with respect to
the Loan. This Agreement and the other Loan Documents may only be modified by
written instrument executed by the applicable parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or has
caused the same to be executed by their duly authorized representatives as of
the date first above written.
BORROWER:
ESC-PUYALLUP, LLC, a Washington limited liability company
By: Emeritus Corporation, its sole member
By /s/ Raymond R. Brandstrom
----------------------------
Name Raymond R. Brandstrom
-----------------------
Its Vice President of Finance
----------------------------
ESC-PORT ST. RICHIE, LLC, Washington limited liability company
By: Emeritus Corporation, its sole member
By /s/ Raymond R. Brandstrom
----------------------------
Name Raymond R. Brandstrom
-----------------------
Its Vice President of Finance
----------------------------
ESC-BOZEMAN, LLC, Washington limited liability company
By: Emeritus Corporation, its sole member
By /s/ Raymond R. Brandstrom
----------------------------
Name Raymond R. Brandstrom
-----------------------
Its Vice President of Finance
----------------------------
LENDER:
HELLER HEALTHCARE FINANCE, INC.,
a Delaware corporation
By /s/ Kevin J. McMeen
----------------------
Name Kevin J. McMeen
-----------------
Its Senior Vice President
-----------------------
EXHIBIT A-1
Property: La Casa Property
- --------
Number of Units: 193 Units
- -----------------
Legal Description:
- ------------------
THE WEST 60 FEET OF TRACT 49 AND THE EAST 270 FEET OF TRACT 50, IN SECTION 16,
TOWNSHIP 26 SOUTH, RANGE 16 EAST, PASCO COUNTY, FLORIDA, SAID TRACTS BEING
DESIGNATED IN ACCORDANCE WITH THE PLAT OF TAMPA AND TARPON SPRINGS LAND COMPANY
SUBDIVISION RECORDED IN PLAT BOOK 1, PAGES 68, 69, AND 70, OF THE PUBLIC RECORDS
OF PASCO COUNTY, FLORIDA.
LESS ROAD RIGHT OF WAY, ALSO DESCRIBED AS:
A PORTION OF TRACTS 49 AND 50, TAMPA AND TARPON SPRINGS LAND COMPANY SUBDIVISION
OF SECTION 16, TOWNSHIP 26 SOUTH, RANGE 16 EAST, AS SHOWN ON PLAT RECORDED IN
PLAT BOOK 1, PAGES 68, 69 AND 70, OF THE PUBLIC RECORDS OF PASCO COUNTY,
FLORIDA, BEING MORE FULLY DESCRIBED AS FOLLOWS:
COMMENCE AT THE NORTHEAST CORNER OF SAID TRACT 49; THENCE NORTH 89 45' 20"
WEST, ALONG THE NORTHERLY BOUNDARY LINE OF SAID TRACT 49, 377.29 FEET; THENCE
SOUTH 00 15' 48" WEST, 33.00 FEET TO THE POINT OF BEGINNING; THENCE SOUTH 00
15' 48" WEST, ALONG THE EASTERLY BOUNDARY LINE OF THE WEST 60.00 FEET OF SAID
TRACT 49, 630.28 FEET; THENCE NORTH 89 42' 50" WEST, ALONG THE SOUTHERLY
BOUNDARY LINE OF A PORTION OF SAID TRACTS 49 AND 50, 330.00 FEET; THENCE NORTH
00 15' 48" EAST, ALONG THE WESTERLY BOUNDARY LINE OF THE EAST 270.00 FEET OF
SAID TRACT 50, 630.04 FEET; THENCE SOUTH 89 45' 20" EAST, ALONG THE SOUTHERLY
RIGHT OF WAY LINE OF TROUBLE CREEK ROAD, 330.00 FEET TO THE POINT OF BEGINNING.
EXHIBIT A-2
Property: Spring Property
- --------
Number of Units: 72 Units
- -----------------
Legal Description:
- ------------------
LOT 2 IN BLOCK 2 OF SPRING MEADOWS SUBDIVISION, BEING A PORTION OF UNPLATTED SW
1/4 OF SECTION 19 AND CERTIFICATE OF SURVEY 819A, SITUATED IN THE NW 1/4 OF
SECTION 19, T.2S., R.6E., P.M.M., GALLATIN COUNTY, MONTANA, ACCORDING TO THE
PLAT ON FILE AND OF RECORD IN THE OFFICE OF THE COUNTY CLERK AND RECORDER OF
GALLATIN COUNTY, MONTANA (PLAT J-145).
EXHIBIT A-3
Property: Courtyard Property
- --------
Number of Units: 101 Units
- -----------------
Legal Description:
- ------------------
LOT 1 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN RECORDED JULY 19, 1995
UNDER AUDITOR'S NO. 9507190625, RECORDS OF PIERCE COUNTY, WASHINGTON.
EXCEPT THE SOUTH 30 FEET THEREOF DEEDED TO THE CITY OF PUYALLUP, A WASHINGTON
MUNICIPAL CORPORATION, BY DEED RECORDED UNDER AUDITOR'S NO. 9701090196.
TOGETHER WITH A NON-EXCLUSIVE ROAD EASEMENT AREA FOR PURPOSES OF INGRESS, EGRESS
AND UTILITIES AS DELINEATED ON COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN
RECORDED JULY 19, 1995 UNDER AUDITOR'S NO. 9507190625, AS GRANTED BY INSTRUMENT
RECORDED UNDER RECORDING NUMBER 9806190616.
EXCEPT FROM SAID EASEMENT THAT PORTION LYING WITHIN SAID LOT 1.
ALSO TOGETHER WITH A NON-EXCLUSIVE FENCE EASEMENT AREA FOR PURPOSES OF FENCING
AND LANDSCAPING AS GRANTED BY INSTRUMENT RECORDED UNDER RECORDING NUMBER
9806190616, OVER LOTS 2, 3 AND 4 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE
PLAN RECORDED JULY 19, 1995 UNDER AUDITOR'S NO. 9507190625.
ALSO TOGETHER WITH A NON-EXCLUSIVE STORM DRAINAGE EASEMENT AREA FOR PURPOSES OF
STORM DRAINAGE AS GRANTED BY INSTRUMENT RECORDED UNDER RECORDING NUMBER
9806190616, OVER LOTS 2, 3 AND 4 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE
PLAN RECORDED JULY 19, 1995 UNDER AUDITOR'S NO. 9507190625.
ALSO TOGETHER WITH A NON-EXCLUSIVE PERPETUAL EASEMENT OVER, UNDER, ACROSS AND
THROUGH PORTION OF LOT 2 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN
RECORDED JULY 19, 1995 UNDER AUDITOR'S NO. 9507190625, NECESSARY FOR PURPOSES OF
CONSTRUCTING, MODIFYING, MAINTAINING, OPERATING, AND USING THOSE LOT 1 OFFSITE
IMPROVEMENTS LOCATED ON SAID LOT 2, AS GRANTED BY INSTRUMENT RECORDED UNDER
RECORDING NUMER 9806190616.
ALSO TOGETHER WITH A NON-EXCLUSIVE PERPETUAL EASEMENT OVER, UNDER, ACROSS AND
THROUGH PORTION OF LOT 4 OF COLUMBIA PACIFIC MANAGEMENT BINDING SITE PLAN
RECORDED JULY 19, 1995 UNDER AUDITOR'S NO. 9507190625, NECESSARY FOR PURPOSES OF
CONSTRUCTING, MODIFYING, MAINTAINING, OPERATING, AND USING THOSE LOT 1 OFFSITE
IMPROVEMENTS LOCATED ON SAID LOT 4, AS GRANTED BY INSTRUMENT RECORDED UNDER
RECORDING NUMBER 9806190616.
SITUATE IN THE CITY OF PUYALLUP, PIERCE COUNTY, WASHINGTON.
EXHIBIT B
LITIGATION
----------
None
EXHIBIT C
SECURITY DEPOSITS
-----------------
EXHIBIT D
RELEASE PRICES
--------------
Spring Property $ 7,000,000
La Casa Property $14,850,000
- ------------------ -----------
Courtyard Property $ 8,700,000
- ------------------- ------------
EXHIBIT E
APPURTENANT EASEMENT FOR COURTYARD PROPERTY
-------------------------------------------
1. A non-exclusive road easement area for purposes of ingress, egress and
utilities as delineated on Columbia Pacific Management Binding Site Plan
recorded July 19, 1995 under Auditor's No. 9507190625, as granted by instrument
recorded under Recording No. 9806190616.
2. A non-exclusive fence easement area for purposes of fencing and
landscaping as granted by instrument recorded under Recording No. 9806190616,
over Lots 2, 3 and 4 of Columbia Pacific Management Binding Site Plan recorded
July 19, 1995 under Auditor's No. 9507190625.
3. A non-exclusive storm drainage easement area for purposes of storm
drainage as granted by instrument recorded under Recording No. 9806190616, over
Lots 2, 3 and 4 of Columbia Pacific Management Binding Site Plan recorded July
19, 1995 under Auditor's No. 9507190625.
4. A non-exclusive perpetual easement over, under, across and through
portion of Lot 2 of Columbia Pacific Management Binding Site Plan recorded July
19, 1995, under Auditor's No. 9507190625, necessary for purposes of
constructing, modifying, maintaining, operating and using those Lot 1 Offsite
improvements located on said Lot 2, as granted by instrument recorded under
Recording No. 9806190616.
5. A non-exclusive perpetual easement over, under, across and through
portion of Lot 4 of Columbia Pacific Management Binding Site Plan recorded July
19, 1995, under Auditor's No. 9507190625, necessary for purposes of
constructing, modifying, maintaining, operating and using those Lot 1 Offsite
improvements located on said Lot 2, as granted by instrument recorded under
Recording No. 9806190616.
EXHIBIT F
FLOOD HAZARD INFORMATION FOR SPRING PROPERTY
--------------------------------------------
The Survey for the Spring Property, dated December 2001 and prepared by
Gaston Engineering reflects that a portion of the Spring Property is located in
a 100-Year Flood Plain and is in an identified "flood prone area" as defined by
the U.S. Department of Housing and Urban Development, pursuant to the Flood
Disaster Protection Act of 1973, as amended, as reflected by Flood Insurance
Rate Map Panel #3000028 0016c, dated July 15, 1988, which such map panel covers
the area in which the property is situated. No portion of the building is
located in the "flood prone area."
SCHEDULE I
INDEX OF DEFINED TERMS
DEFINED TERM PAGE DEFINED TERM PAGE
- ------------- ---- ------------- ----
Administrative Simplification 14
Affiliate 16
Agreement 2
Assignment of Leases 3
Assignments of Leases 3
Base Rate 5
Borrower 2
Bozeman 2
business day 23
Closing Date 3
Collateral 6
control 16
Corporate Documents 12
Costs 20
Courtyard at the Willows 2
Courtyard Property 2
Debt Coverage Ratio 4
Effective Rental Income 4
Environmental Indemnity 7
Event of Default 19
Exit Fee 6
Expenses 4
Extension Notice 4
Guarantor 7
Guaranty 7
Healthcare Laws 13
HIPAA 13
HIPAA Compliance Date 14
HIPAA Compliance Plan 14
HIPAA Compliant 14
Improvements 2
Indebtedness 19
Indemnitee 21
Interest Rate 5
La Casa Grande 2
La Casa Property 2
Leases 8
Lender 2
Licensee 3
Licensee Leases 3
Licensees 3
Loan 2
Loan Documents 3
Management Contract 9
Manager 9
Maturity Date 3
Mortgage 3
Mortgages 3
Net Operating Income 4
Note A 2
Note B 2
Notes 2
Operating Agreement 10
Person 16
Port Richie 2
Project 2
Project Yield 4
Properties 2
Property 2
Puyallup 2
Qualified Non-Residential Lease 8
Release Price 7
Repayment Date 5
Replacement Reserve 17
SNDAs 7
Spring Meadows 2
Spring Property 2
Title Policy 8