PROMISSORY NOTE
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$800,000.00 September 18, 2002
FOR VALUE RECEIVED, EMERITUS CORPORATION, a Washington corporation, having
an address of 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121
(hereinafter called "Maker"), promises to pay to HEALTH CARE PROPERTY INVESTORS,
INC., a Maryland corporation, or its successors or assigns (hereinafter
collectively called "Lender"), or to its order, at its principal office at 4675
MacArthur Court, Suite 900, Newport Beach, California 92660, the principal sum
of Eight Hundred Thousand and No/100 Dollars ($800,000.00), together with
interest in arrears on the unpaid principal balance from time to time
outstanding from the date hereof until the entire principal amount due under
this Promissory Note (this "Note") is paid in full at the rates and in
accordance with the payment schedule hereinafter provided.
From the date hereof through the Maturity Date (as hereinafter defined), the
rate of interest on the unpaid principal balance hereunder shall be equal to
twelve percent (12%) per annum (the "Interest Rate"). Whenever there is an
Event of Default (as defined below) in existence under this Note, the rate of
interest on the unpaid principal and interest shall be increased to five percent
(5%) over the Interest Rate (the "Default Rate"). As additional consideration
for Lender making the loan to Maker that is evidenced hereby (the "Loan"), Maker
shall pay to Lender the following: (i) on the date that the principal balance
hereunder is disbursed to Maker, an interest payment in the amount of one and
one-half of one percent (1.5%) of the original principal amount of this Note
(i.e., Twelve Thousand Dollars ($12,000)), which amount may be deducted by
Lender from the disbursement of principal hereunder (the "Points"), (ii) on the
date that the principal balance hereunder is disbursed to Maker, an amount equal
to the aggregate legal fees, expenses and disbursements to counsel incurred by
Lender in connection with the preparation and negotiation of this Note and any
related guaranties and the consummation of the transactions contemplated
hereunder and thereunder, which amount may be deducted by Lender from the
disbursement of principal hereunder, and (iii) on the date payment in full of
the Loan is made, an interest payment in an amount equal to nine percent (9%) of
the original principal amount of this Note (i.e., Seventy-Two Thousand Dollars
($72,000)) (the "Exit Interest Payment").
Interest (other than the Points and the Exit Interest Payment, which shall be
paid at the times set forth in the foregoing paragraph) shall be paid monthly in
arrears on the first business day of each month, beginning on October 1, 2002,
with a final payment of all unpaid principal and interest on September 1, 2005
(the "Maturity Date").
Maker may prepay this Note in whole (but not in part) without premium or penalty
upon fifteen (15) days' prior written notice to Lender, which notice shall
specify the date of such prepayment. The written notice of Maker to make
prepayment hereunder shall create an obligation of Maker to pay on the date
specified in such notice. Lender shall be under no obligation to accept
prepayments of less than the entire principal balance due hereunder.
Upon the occurrence of an Event of Default (as defined below), then the holder
hereof may declare the entire unpaid principal balance hereunder, together with
all accrued and unpaid interest thereon, immediately due and payable without
notice, demand or presentment and may exercise any of its rights and remedies
hereunder, at law or in equity. The occurrence of any of the following events
shall constitute an "Event of Default" under this Note: (a) Maker's failure to
pay any amount due under this Note within ten (10) days after the date such
amount is due or Maker's failure to perform any other obligation under this
Note; or (b) a default shall occur under that certain Master Lease dated as of
September 18, 2002 (the "Master Lease"), by and between Lender and Texas HCP
Holding, L.P., a Delaware limited partnership, collectively as "Lessor", and
Maker and ESC III, L.P., d/b/a Texas-ESC III, L.P., a Washington limited
partnership, collectively as "Lessee", or any other note or other agreement or
instrument now or hereafter with or in favor of Lender or any Affiliate (as
defined in the Master Lease) of Lender and made by or with Maker or any
Affiliate of Maker, where the default is not cured within any applicable grace
period set forth therein; or (c) any repudiation by Maker of any of Maker's
obligations under this Note; or (d) if Maker shall make an assignment for the
benefit of creditors; or (e) if a custodian, trustee, receiver or agent is
appointed or takes possession of all or substantially all of Maker's assets; or
(f) if Maker is generally not paying Maker's debts as they become due; or (g) if
Maker becomes "insolvent" as that term is defined in Title 11 of the United
States Code (the "Bankruptcy Code"); or (h) if Maker files, or has filed against
it, a petition with the bankruptcy court under the Bankruptcy Code, or otherwise
files, or has filed against it, any petition or applies to any tribunal for
appointment of a custodian, trustee, receiver or agent of Maker or commences any
proceeding relating to Maker under any bankruptcy or reorganization statute or
under any arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect. In
the event that Lender or any subsequent holder of this Note shall exercise or
endeavor to exercise any of its remedies hereunder, Maker shall pay on demand
all reasonable costs and expenses incurred in connection therewith, including,
without limitation, reasonable attorneys' fees, and Lender may take judgment for
all such amounts in addition to all other sums due hereunder. Irrespective of
the exercise or nonexercise of any of the aforesaid rights, if any payment of
principal or interest hereunder is not paid in full within ten (10) days after
the same is due, Maker shall pay to the holder a processing fee on such unpaid
amount equal to five percent (5%) of such late payment.
Maker, co-makers, signers, sureties, endorsers and guarantors and each of them
waives presentment for payment, protest and demand, and notice of protest,
demand and/or dishonor and nonpayment of this Note, notice of intent to
accelerate the maturity hereof, bringing of suit and diligence in taking any
action to collect amounts called for hereunder, right to plead the statute of
limitations as a defense to a demand hereunder to the full extent permitted by
law, and all other notices or demands otherwise required by law that Maker may
lawfully waive. Maker expressly agrees that this Note, or any payment
hereunder, may be extended from time to time, without in any way affecting the
liability of Maker, co-makers, signers, sureties, endorsers and guarantors and
each of them. No unilateral consent or waiver by Lender with respect to any
action or failure to act which, without consent, would constitute a breach of
any provision of this Note shall be valid and binding unless in writing and
signed by Lender. Maker, co-makers, sureties, endorsers and guarantors and each
of them are and shall be jointly and severally, directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder or in connection with any right,
lien, interest or property at any and all times had or existing as security for
any amount called for hereunder.
The rights and obligations of Maker and all provisions hereof shall be governed
by and construed in accordance with the laws of the State of California.
All agreements between Maker and Lender are hereby expressly limited so that in
no contingency or event whatsoever, whether by reason of acceleration of
maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to Lender for the use, forebearance or detention of
the indebtedness evidenced hereby exceed the maximum permissible under
applicable law. As used herein, the term "applicable law" shall mean the law in
effect as of the date hereof, provided, however, that in the event there is a
change in the law which results in a higher permissible rate of interest, then
this Note shall be governed by such new law as of its effective date.
In this regard, it is expressly agreed that it is the intent of Maker and Lender
in the execution, delivery and acceptance of this Note to contract in strict
compliance with the laws of the State of California from time to time in effect.
If, from any circumstance whatsoever, fulfillment of any provision hereof at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if from any
circumstances Lender should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance evidenced hereby and
not to the payment of interest. This provision shall control every other
provision of all agreements between Maker and Lender.
Specifically and without limiting the generality of the foregoing, it is
expressly provided that:
(i) In the event of payment prior to the normal Maturity Date hereof
resulting from acceleration of maturity of this Note, if the aggregate amount of
interest and any other compensation taken by Lender for services or expenses
incidental to the making, negotiation or collection of the loan evidenced hereby
would exceed the maximum amount of interest which could lawfully be charged on
the net proceeds of the loan evidenced by this Note from time to time remaining
unpaid from the date hereof to the date of final payment thereof, then in such
event the amount of such excess shall be credited toward the payment of
principal of this Note so as to reduce the amount of the final payment of
principal due on this Note; and
(ii) If under any circumstances the aggregate amount paid on this Note prior
to and incident to final payment hereof include amounts which by the terms of
this Note or law are deemed interest and which would exceed the maximum amount
of interest which could lawfully have been collected on this Note, Maker
stipulates that such payment and collection will have been and will be deemed to
have been the result of mathematical error on the part of both Maker and holder
of this Note, and the party receiving such excess payments shall promptly refund
the amount of such excess (to the extent only of such interest payments above
the maximum amount which could lawfully have been collected and retained) upon
discovery of such error by the party receiving such payment or notice thereof
from the party making such payment.
Maker shall remain primarily liable on this Note until full payment,
unaffected by any forebearance or extension of time, guaranty or assumption by
others, or by any other matter, as to all of which notice is hereby waived by
Maker.
IN WITNESS WHEREOF, Maker has caused this Note to be executed by its duly
authorized representative as of the day and year first above written.
EMERITUS CORPORATION,
a Washington corporation
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Title: CFO