LOAN NO. 07-0004024
LOAN AGREEMENT
AMONG
GENERAL ELECTRIC CAPITAL CORPORATION,
A DELAWARE CORPORATION,
AS LENDER
AND
EMERITUS REALTY II, LLC
EMERITUS REALTY III, LLC
EMERITUS REALTY V, LLC
EMERITUS REALTY VII, LLC
EMERITUS REALTY XIV, LLC
EMERITUS REALTY BOZEMAN, LLC, AND
EMERITUS REALTY PUYALLUP, LLC,
EACH A DELAWARE LIMITED LIABILITY COMPANY, AND
ESC-PORT ST. RICHIE, LLC, A
WASHINGTON LIMITED LIABILITY COMPANY,
COLLECTIVELY, AS BORROWER
LOAN IN THE PRINCIPAL AMOUNT
OF UP TO $65,000,000
SENIOR HOUSING FACILITIES
TABLE OF CONTENTS
ARTICLE I. The Loan 2
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ARTICLE II. Security 7
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ARTICLE III. Conditions Precedent 8
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ARTICLE IV. Representations and Warranties 11
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ARTICLE V. Affirmative Covenants 16
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ARTICLE VI. Negative Covenants 20
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ARTICLE VII. Events of Default; Acceleration of Indebtedness; Remedies 21
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ARTICLE VIII. Miscellaneous 23
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LIST OF EXHIBITS AND SCHEDULES
Exhibits A-1 to A-11 Property Description
Exhibit B Litigation
Exhibit C Security Deposits
Exhibit D Principal Payments
Exhibit E Borrower's Addresses
Schedule I Index of Defined Terms
Rider Senior Housing Rider
Loan No. 07-0004024
LOAN AGREEMENT
This LOAN AGREEMENT (this "AGREEMENT") is made this 6th day of December,
2002 by and between GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation
("LENDER"), and EMERITUS REALTY II, LLC; EMERITUS REALTY III, LLC; EMERITUS
REALTY V, LLC; EMERITUS REALTY VII, LLC; EMERITUS REALTY XIV, LLC; EMERITUS
REALTY BOZEMAN, LLC; and EMERITUS REALTY PUYALLUP, LLC; each a Delaware limited
liability company, and ESC-PORT ST. RICHIE, LLC, a Washington limited liability
company (each a "BORROWER" and collectively with certain affiliates of such
parties which are now or hereafter become parties to this Agreement, "BORROWER"
or "BORROWERS", as the context requires).
RECITALS
A. Lender has agreed to make a loan (the "LOAN") to Borrowers in the
aggregate principal amount of up to Sixty-Five Million and No/100 Dollars
($65,000,000.00) 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 Forty-Three Million Six Hundred Ninety-Eight
Thousand and No/100 Dollars ($43,698,000.00) made by Borrowers to the order of
Lender (said promissory note and all amendments thereto and substitutions
therefor are hereinafter referred to herein collectively as "NOTE A") and that
certain Subordinated Renewal Promissory Note B of even date herewith in the
original principal amount of Twenty-One Million Three Hundred Two Thousand and
No/100 Dollars ($21,302,000.00) made by ESC-Port St. Richie, LLC to the order of
Lender (said promissory note and all amendments thereto and substitutions
therefor and as it may be assumed by any Affiliate of a Borrower or Guarantor
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, Borrowers will be the owners of the real property
more particularly described on Exhibits A-1 through A-11 attached hereto (each,
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a "PROPERTY" and collectively, the "PROPERTIES"), and the assisted living
facility and/or other improvements located thereon (collectively called the
"IMPROVEMENTS"). Borrowers have entered into a lease (the "OPERATING LEASE"),
leasing their respective Property (or Properties) and the Improvements located
thereon (each, a "PROJECT") with Guarantor and certain entities wholly-owned by
Guarantor, as tenants, which tenant entities shall hold the license to operate
the facilities (Guarantor (in its capacity as a tenant under the Operating Lease
and an operator of certain Properties) and such wholly-owned entities are each
referred to as an "OPERATOR" and collectively, as the "OPERATORS"). The
Properties and the Improvements are sometimes collectively called the
"PROJECTS."
C. Borrowers' obligations under the Loan Documents will be secured by, among
other things, (i) the Environmental Indemnity, (ii) a first priority mortgage,
deed of trust, or document of similar effect of even date herewith, executed by
each Borrower, encumbering each Project, and a leasehold mortgage, leasehold
deed of trust or document of similar effect of even date herewith, executed by
each Operator, encumbering its leasehold interest under the Operating Lease of a
Project (each a "MORTGAGE" and collectively, the "MORTGAGES"), (iii) an
assignment of leases and rents of even date herewith, (each an "ASSIGNMENT OF
LEASES" and collectively, the "ASSIGNMENTS OF LEASES"), executed by each
Borrower and each Operator and (iv) the Guaranty. This Agreement, the Notes,
the Mortgages, the Assignments of Leases, 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 Projects.
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. INITIAL FUNDING. On the Closing Date, Lender shall disburse to
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Borrower from the proceeds of the Loan the sum of Fifty-Eight Million and No/100
Dollars ($58,000,000.00) (the "INITIAL FUNDING AMOUNT"). "CLOSING DATE"
means the date of disbursement of the Initial Funding Amount.
1.1.2. EARNOUT ADVANCES. Subject to the conditions set forth in this
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Section 1.1.2. and the other provisions of this Agreement, Lender shall make up
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to two (2) additional disbursements from the proceeds of the Loan to Borrower
(each an "EARNOUT ADVANCE") each in the amount of $3,500,000.
(a) Borrower shall submit a written request to Lender for an Earnout Advance
no less than thirty (30) days prior to the date of the Earnout Advance;
(b) No Earnout Advance shall be made after December 6, 2004;
(c) No default shall have occurred under any of the Loan Documents;
(d) Borrower shall, at Borrower's expense, deliver to Lender a date-down or
such other endorsement to the Title Policy, but only if required to ensure that
such Title Policy shall provide Lender with title insurance for the Earnout
Advance;
(e) The aggregate Net Operating Income for the Projects for each of the six
(6) full months immediately preceding the disbursement of the applicable Earnout
Advance shall be greater than or equal to (i) $8,550,000 for disbursement of the
first Earnout Advance, and (ii) $9,025,000 for disbursement of the second
Earnout Advance;
(f) The Debt Coverage Ratio for each of the twelve (12) months immediately
succeeding the disbursement of the applicable Earnout Advance is projected by
Lender to be greater than or equal to 1.40:1.00; and
(g) the Earnout Advance is used to pay down the outstanding balance of the
Mezzanine Loan (and Lender may elect to pay the Earnout Advance directly to the
Mezzanine Lender), provided that if the Mezzanine Loan has been fully repaid or
to the extent that Mezzanine Lender will not allow prepayment of the Mezzanine
Loan, the proceeds or remaining proceeds (as applicable) of any Earnout Advance
shall be applied to the Loan in such order as Lender shall elect.
"DEBT COVERAGE RATIO" means the ratio of (i) Net Operating Income from the
Projects for a particular period, to (ii) payments of interest and principal due
on the Loan for the same period.
"PROJECT YIELD" for any period means the quotient of (x) the Net Operating
Income from the Projects for a particular period, 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 (excluding
non-recurring and non-Project related income) less Expenses, each as determined
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by Lender's audit (or otherwise reasonably estimated by Lender) at Borrowers'
expense. Calculation of "EFFECTIVE RENTAL INCOME" shall be based on the lesser
of:
(i) the rent rolls of the Operators of the Projects from the most recent (A)
three (3) months for purposes of Section 1.2.2, Section 2.2, and Section 5.9,
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and (B) six (6) months for purposes of this Section 1.1.2, in each case
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annualized and adjusted for concessions; or
(ii) an assumed 95% 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, interest income and rent under the
Operating Lease. Calculation of "EXPENSES" shall mean (i) for purposes of this
Section 1.1.2, Section 1.2.2 and Section 2.2, the actual customary operating
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expenses of the Projects, on a stabilized accrual basis, for the previous twelve
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(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 a Borrower or an Operator, as
applicable, and a replacement reserve in an amount equal to Three Hundred Sixty
and No/100 Dollars ($360.00) per unit and (ii) for purposes of Section 5.9, the
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actual customary operating expenses of the Projects, 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 a Borrower or an Operator, as applicable,
and a replacement reserve in an amount equal to Three Hundred Sixty and No/100
Dollars ($360.00) per unit. Expenses shall not include any rent paid under the
Operating Lease.
1.2. LOAN TERM.
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1.2.1. MATURITY DATE. The Loan shall mature on December [5], 2006 or any
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earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "MATURITY DATE").
1.2.2. EXTENSION OPTION. Borrower may extend the Maturity Date to September
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[5], 2007 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 one-half percent (0.5%) of the outstanding balance of the
Loan on the date of delivery of the Extension Notice; (c) no default shall have
occurred under the terms of any of the Loan Documents; (d) the Project Yield is
not less than 13.87% for each of the three (3) full months immediately preceding
the Maturity Date; and (e) the Debt Coverage Ratio for each of the three (3)
full months immediately preceding the Maturity Date is not less than 1.40:1.00.
1.3. INTEREST RATE. Borrower shall pay interest on the outstanding
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principal balance of the Loan at a floating rate per annum equal to the Base
Rate plus four and fifteen hundredths percent (4.15%); provided, however, in no
event shall the interest rate be less than six and one-half percent (6.50%) (the
greater rate referred to as the "INTEREST RATE"). "BASE RATE" shall mean
the rate published each day in The Wall Street Journal for notes maturing three
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(3) months after issuance under the 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 December 31, 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 January 1,
2003 computed on the outstanding principal balance of the Loan at the Interest
Rate.
1.4.2. PRINCIPAL PAYMENTS. Commencing on January 1, 2003 and continuing
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through the earlier of (a) disbursement of the first Earnout Advance or (b) the
Repayment Date, Borrower shall make a principal amortization payment on the
first (1st) day of each month in the amount set forth on the schedule attached
hereto as Exhibit D. Upon disbursement of the first Earnout Advance, Lender
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shall provide Borrower with a new amortization schedule, and commencing on the
first (1st) day of the first (1st) month after such Earnout Advance and
continuing through the earlier of (i) the Repayment Date or (ii) disbursement of
the second Earnout Advance, Borrower shall make a principal amortization payment
on the first (1st) day of each month in the amount set forth on such new
amortization schedule. Upon disbursement of the second Earnout Advance, Lender
shall provide Borrower with a new amortization schedule, and commencing on the
first (1st) day of the first (1st) month after the second (2nd) Earnout Advance
and continuing through the Repayment Date, Borrower shall make a principal
amortization payment on the first (1st) day of each month in the amount set
forth on such new amortization schedule.
Each new amortization schedule shall be prepared by Lender based upon the
then outstanding principal balance of the Loan (taking into account the Earnout
Advance being made) and using the remainder of the twenty-five (25)-year period
commencing on [THE CLOSING DATE] and an annual interest rate of seven (7)
percent.
"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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Initial Funding Amount $ 58,000,000 Payoff of Existing Debt
$72,850,000
Mezzanine Loan $ 16,000,000 Lender Fee $650,000
Borrower's Equity $ 500,000 Lender Closing Costs $350,000
Available Earnout Advance $ 7,000,000 Borrower Closing Costs
$650,000
Available Earnout Advance $7,000,000
Total: $81,500,000 Total: $81,500,000
Borrower shall deliver such information and documentation as Lender shall
request to verify that the sources and uses are as indicated above. A reduction
in the amounts necessary for any of the uses shall result in an equal reduction
in the amount of the Loan.
1.6. INTENTIONALLY OMITTED.
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1.7. PREPAYMENTS OF LOAN. Other than the principal payments required under
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Sections 1.1.3(g), 1.4.2 and 2.2, Borrower may not prepay the outstanding
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principal balance of the Loan in full or in part prior to December [6], 2004.
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Thereafter, Borrower may prepay the outstanding principal balance of the Loan in
full (but not in part) any time; provided Borrower gives Lender at least thirty
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(30) days' prior written 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
BALANCEOF LOAN BEING REPAID OCCURS EXIT FEE
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On or prior to December [5], 2004 The Loan may not be voluntarily prepaid
prior to December [6], 2004, other than principal payments required under
Section 1.4.2. In the event the Loan is repaid for any reason, including if it
is accelerated by Lender, prior to December [6], 2004, an Exit Fee will be due
equal to the sum of (a) the interest that would have come due and payable by
Borrower from and after the date of repayment through December [6], 2004 at the
Interest Rate (as reasonably estimated by Lender), and (b) $650,000
December [6], 2004 and thereafter $650,000
1.9. CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.
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(a) If Lender determines that any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by Lender
with any request or directive regarding capital adequacy, reserve requirements
or similar requirements (whether or not having the force of law), in each case,
adopted after the Closing Date, from any central bank or other governmental
authority increases or would have the effect of increasing the amount of
capital, reserves or other funds required to be maintained by Lender and thereby
reducing the rate of return on the Loan made by Lender hereunder as a
consequence of its obligations hereunder to a level below that which Lender
would have achieved but for such adoption, change or compliance, then Borrowers
shall from time to time upon fifteen (15) days prior notice from Lender, pay to
Lender additional amounts sufficient to compensate Lender for such reduction. A
certificate as to the amount of that reduction and showing the basis of the
computation thereof submitted by Lender to Borrowers shall, absent manifest
error, be final, conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (ii) the compliance
with any guideline or request from any central bank or other governmental
authority (whether or not having the force of law), in each case adopted after
the Closing Date, there shall be any increase in the cost to Lender of
maintaining the Loan (other than an increase in cost solely as a result of
income or franchise taxes payable by Lender), then Borrowers shall from time to
time, upon demand by Lender, pay to Lender additional amounts sufficient to
compensate Lender for such increased cost. A certificate as to the amount of
such increased cost, submitted to Borrowers by Lender, shall be conclusive and
binding on Borrowers for all purposes, absent manifest error. Lender agrees
that, as promptly as practicable after it becomes aware of any circumstances
referred to above which would result in any such increased cost, Lender shall,
to the extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrowers pursuant to this Section 1.9(b).
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(c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
governmental authority shall assert that it is unlawful, for Lender to agree to
make or to make or to continue to fund or maintain any Loan bearing interest
computed by reference to LIBOR, then, unless Lender is able to make or to
continue to fund or to maintain the Loan at another branch or office of Lender
without, in Lender's opinion, adversely affecting it or its Loan or the income
obtained therefrom, on notice thereof and demand therefor by Lender to
Borrowers, (i) the obligation of Lender to agree to make or to make or to
continue to fund or maintain the Loan shall terminate and (ii) Borrowers shall
forthwith prepay in full the Loan, together with interest accrued thereon
without penalty or any Exit Fee.
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 the Stanford Project and/or the
Concorde Project, as applicable, and such Project or Projects, as applicable,
shall not be included in the Projects for any period thereafter for purposes of
the Loan Documents, provided that (a) Borrower pays or reimburses Lender, for
all reasonable costs incurred in connection with the release of any such Project
or Projects; (b) no default has occurred under any of the terms of the Loan
Documents; (c) the Projects shall have a Project Yield for each of the three (3)
full months immediately preceding the proposed release of greater than or equal
to 13.5%; (d) the applicable Project is (or Projects are) sold to a third party
in an arm's length transaction for not less than (i) $2,925,000 as to the
Stanford Project or (ii) $2,575,000 for the Concorde Project; and (e) the first
$5,500,000 of net sale proceeds are used to pay down the outstanding balance of
the Loan and the remaining net sale proceeds are used to pay down the
outstanding balance of the Mezzanine Loan, provided that if the Mezzanine Loan
has been fully repaid or to the extent that Mezzanine Lender will not allow
prepayment of the Mezzanine Loan, the remaining net sales proceeds shall be
applied to the Loan in such order as Lender elects. Upon satisfaction of all
conditions of this Section 2.2 for release of the last of the Stanford Project
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or the Concorde Project, the Borrower owning such Project 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.
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) an authorization to file Uniform Commercial Code financing statements
from each Borrower;
(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 each Borrower, each Operator and Guarantor;
(i) an assignment of management contract, subordination and recognition
agreement, including a waiver of property management and broker's liens,
executed by each Operator and Guarantor relating to the Management Contract (as
hereinafter defined); and
(j) an Intercreditor and Subordination Agreement by and between Lender and
Mezzanine Lender, in form and substance reasonably acceptable to Lender,
executed by Mezzanine Lender.
3.2. BORROWER'S EQUITY. On or prior to the Closing Date, Borrower shall
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have invested cash equity in the Project in an aggregate amount not less than
Five Hundred Thousand and No/100 Dollars ($500,000.00) ("BORROWER'S EQUITY").
3.3. 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 Project (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 Project and the corresponding
leasehold estate, 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).
3.4. SURVEY. Lender shall have received and approved a survey of each
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Property, 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 a survey 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.
3.5. ENVIRONMENTAL REPORT. Lender shall have received a Phase I
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Environmental audit of the Projects. The audit shall (i) be addressed to
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Lender; (ii) state that Lender may rely thereon; and (iii) be acceptable to
Lender in its sole discretion.
3.6. LEASES. All leases, licenses and other agreements with regard to the
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occupancy of the Projects, including patient and resident care agreements and
service agreements which include an occupancy agreement, including the Operator
Leases ("LEASES"), shall be in form and substance reasonably acceptable to
Lender; provided Borrowers need not seek Lender's approval for any new Qualified
Non-Residential Lease entered into hereafter. Borrowers shall cause each
Operator to submit for Lender's approval a copy of the form of residential Lease
each Operator proposes to utilize at its Project(s), 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 any Project; provided, however, Lender's approval shall
not be required for (but the applicable Borrower shall cause the applicable
Operator to 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 Guarantor or any of
its or any 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 the applicable Project in any one (1)
year period (a "QUALIFIED NON-RESIDENTIAL LEASE"). On the Closing Date,
Borrowers 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
Borrowers shall submit a revised and recertified rent roll for the Projects. If
any non-residential leases, other than Qualified Non-Residential Leases, exist
or are hereafter entered into with respect to any Project, each tenant
thereunder shall execute and deliver to Lender prior to the Closing or prior to
execution thereof by a Borrower or an Operator, as applicable, a Subordination
and Attornment Agreement in a form acceptable to Lender, if requested by Lender.
3.7. INSURANCE. Borrowers 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.
3.8. COMPLIANCE WITH LAWS. Borrowers shall have submitted and Lender shall
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have approved (a) a final certificate of occupancy (or the equivalent) for each
Project, and (b) evidence satisfactory to Lender that each Project 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.
3.9. COMMITMENT FEE. Borrowers shall have paid Lender a commitment fee in
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the amount of Six Hundred Fifty Thousand and No/100 Dollars ($650,000.00) 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.
3.10. INTENTIONALLY OMITTED.
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3.11. MANAGEMENT CONTRACT. Lender shall have approved the management
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contract (each, a "MANAGEMENT CONTRACT") between Guarantor and each Operator for
each of the Projects, none of which shall provide for a management fee (by any
name) to exceed five percent (5%) of the gross revenues of such Project.
3.12. MEZZANINE LOAN. Lender shall have approved the terms of that certain
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loan (the "MEZZANINE LOAN") in the amount of Sixteen Million and No/100 Dollars
($16,000,000.00) to be made by Health Care Property Investors, Inc. ("MEZZANINE
LENDER") to Emeritus Realty Corporation, a Nevada corporation and a wholly owned
subsidiary of Guarantor ("MEZZANINE BORROWER"), and shall have approved the
documents evidencing, securing or otherwise pertaining to the Mezzanine Loan
executed by Mezzanine Borrower, Guarantor, Borrowers or their respective
Affiliates (the "MEZZANINE LOAN DOCUMENTS"). The proceeds of the Mezzanine Loan
shall be used to fund Mezzanine Borrower's capital contribution to Borrowers.
3.13. ADDITIONAL ITEMS. Lender shall have received such other items as
-----------------
Lender may reasonably require.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
- --------------------------------
As an inducement to Lender to disburse the Loan, each 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 other than ESC-Port St. Richie, LLC
-------------------
is a limited liability company duly formed, validly existing and in good
standing under the laws of the State of Delaware with its principal place of
business as shown on Exhibit E. ESC-Port St. Richie, LLC is a limited liability
---------
company duly formed, validly existing and in good standing under the laws
of the State of Washington with its principal place of business as shown on
Exhibit E. Each Borrower is qualified to transact business and in good standing
-----
under the laws of the state (or states) where its Property is (or Properties
are) located. Each Operator is a limited liability company or corporation, as
applicable, duly formed, validly existing and in good standing under the laws of
the State of Washington. Each Operator is qualified to transact business and in
good standing under the laws of the state (or states) where its Property is (or
Properties are) located. The Loan Documents have each been duly authorized,
executed and delivered and each constitutes the duly authorized, valid and
legally binding obligation of each Borrower, each Operator and Guarantor, as the
case may be, enforceable against each Borrower, each Operator 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. Prior to the joinder hereto of a Borrower, or the joinder of an
Operator to any of the other Loan Documents, Borrowers shall provide Lender with
evidence reasonably satisfactory to Lender that such Borrower or Operator, as
applicable, is an entity duly formed, validly existing and in good standing in
its state of formation, and in good standing and authorized to transact business
in the state in which its Property is (or Properties are) located.
4.2. OWNERSHIP OF BORROWERS AND OPERATORS.
----------------------------------------
4.2.1. OWNERSHIP OF BORROWER. Mezzanine Borrower owns one hundred percent
-----------------------
(100%) of the membership interests in each Borrower free and clear of all liens,
claims, encumbrances and rights of others, except as provided in the
Mezzanine Loan Documents. Mezzanine Borrower has collaterally assigned the
ownership interests in each Borrower to Mezzanine Lender pursuant to the terms
of the Mezzanine Loan Documents.
4.2.2. OWNERSHIP OF OPERATORS. Guarantor owns one hundred percent (100%) of
----------------------
the ownership interest in each Operator and one hundred percent (100%) of the
ownership interest in Mezzanine Borrower free and clear of all liens, claims,
encumbrances and rights of others.
4.3. OPERATING AGREEMENT. A true and complete copy of the operating
--------------------
agreement and certificate of formation creating each Borrower and any and all
amendments thereto (collectively, the "BORROWER OPERATING AGREEMENT") have been
forwarded to Lender (or, with respect to a Borrower joined hereto or thereto, or
an Operator joined to any other Loan Document, will be furnished to Lender
prior to the joinder hereto of such Borrower or Operator, as applicable). The
Borrower Operating Agreement constitutes the entire agreement among the members
of each Borrower and is binding upon and enforceable against such members, 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, among the members relating to the ownership or
management of the corporate business affairs of any Borrower. No breach exists
under the Borrower Operating Agreement and no condition exists which, with the
giving of notice or passage of time would constitute a breach under the Borrower
Operating Agreement.
4.4. BORROWER'S OTHER AGREEMENTS. No Borrower is in default 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 each Borrower's knowledge, violate
any provisions of law or any applicable regulation, order or other decree of any
court or governmental entity by which any Borrower or any Project, or any part
thereof, is bound or affected, or (ii) conflict or be inconsistent with, or
result in any default under, any contract, agreement or commitment to which
Borrower is bound. Each Borrower has delivered to Lender copies of any
agreements (including leases) between such Borrower and any Affiliate of any
Borrower or Guarantor, related in any way to any Project or any part thereof,
and any other agreements or documents materially affecting the use and operation
of any Project or any part thereof.
4.5. INTENTIONALLY OMITTED.
----------------------
4.6. INTENTIONALLY OMITTED.
----------------------
4.7. INTENTIONALLY OMITTED.
----------------------
4.8. INTENTIONALLY OMITTED.
----------------------
4.9. INTENTIONALLY OMITTED.
----------------------
4.10. EXISTENCE OF MEZZANINE BORROWER. Mezzanine Borrower is a corporation
--------------------------------
duly incorporated validity existing and in good standing under the laws of the
State of Nevada, with its principal place of business at 3131 Elliott Avenue,
Suite 500A, Seattle, Washington 98121.
4.11. MEZZANINE BORROWER DOCUMENTS. A true and complete copy of the
------------------------------
articles of incorporation and by-laws of Mezzanine Borrower and all other
documents creating and governing Mezzanine Borrower (collectively, the
"MEZZANINE BORROWER DOCUMENTS") have been furnished to Lender. There are no
other agreements, oral or written, among any of the shareholders of Mezzanine
Borrower relating to Mezzanine Borrower. The Mezzanine Borrower Documents were
duly executed and delivered, are in full force and effect, and binding upon and
enforceable in accordance with their terms. The Mezzanine Borrower Documents
constitute the entire understanding among the shareholders of Mezzanine
Borrower. No breach exists under the Mezzanine Borrower 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 Mezzanine Borrower
Documents.
4.12. MEZZANINE BORROWER'S OTHER AGREEMENTS. Mezzanine Borrower is not in
---------------------------------------
default 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 each Borrower's
knowledge, violate any provisions of law or any applicable regulation, order or
other decree of any court or governmental entity by which Mezzanine Loan
Borrower or any Project, or any part thereof, is bound or affected, or (ii)
conflict or be inconsistent with, or result in any default under, any contract,
agreement or commitment to which Mezzanine Loan Borrower is bound. Borrowers
have delivered to Lender copies of any agreements (including leases) between
Mezzanine Loan Borrower and any Affiliate of Mezzanine Loan Borrower or
Guarantor, related in any way to any Project or any part thereof, and any other
agreements or documents materially affecting the use and operation of any
Project or any part thereof.
4.13. THE PROPERTY. Fee simple title to each Property is, or on the Closing
------------
Date, will be, owned by a 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 each Borrower's knowledge, each
Property and the Improvements located thereon 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 the applicable Property. To the best of each Borrower's
knowledge, 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 its
Projects, or any part thereof.
4.14. PROPERTY ACCESS. Each Property is accessible through fully improved
----------------
and dedicated roads accepted for maintenance and public use by the public
authority having jurisdiction.
4.15. UTILITIES. All utility services necessary and sufficient for the use
---------
or operation of each Project are available including water, storm, sanitary
sewer, gas, electric and telephone facilities.
4.16. FLOOD HAZARDS/WETLANDS. No Property, other than the Spring Property
-----------------------
(as defined on Exhibit A-10 (an unimproved portion of which is located in a
-------------
100-year flood plain), is situated in an area designated as 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.
4.17. TAXES/ASSESSMENTS. There are no unpaid or outstanding real estate or
-----------------
other taxes or assessments on or against any Project 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 Project have been delivered to
Lender. Said bills cover each entire Project and do not cover or apply to any
other property. No Borrower has received notice of any pending or contemplated
action pursuant to which any special assessment may be levied against any
portion of any Project.
4.18. EMINENT DOMAIN. No Borrower has received notice of any eminent domain
--------------
or condemnation proceeding pending and to each Borrower's knowledge there are
none threatened, relating to any part of any Project.
4.19. LITIGATION. Except as set forth in Exhibit B, there is no material
---------- ---------
litigation, arbitration or other proceeding or governmental investigation
pending or, to the best of each Borrower's knowledge, threatened against or
relating to Guarantor, any Borrower, any Operator or any of their property,
assets, or business, including the Projects, which if decided adversely would
affect the business, affairs, assets or financial condition of any Borrower,
Guarantor, any Project or the prospects for repayment of the Loan.
4.20. ACCURACY. Neither this Agreement nor any document, financial
--------
statement, credit information, certificate or statement furnished to Lender by
any Borrower or Guarantor or Operator 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.
4.21. FOREIGN OWNERSHIP. No Borrower, Operator nor Guarantor is or will be,
-----------------
and no legal or beneficial interest of a partner of a Borrower or Operator 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.
4.22. SOLVENCY. No Borrower, Operator nor Guarantor is insolvent and there
--------
has 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.
4.23. FINANCIAL STATEMENT/NO CHANGE. Borrowers, Operators and Guarantor
-------------------------------
have heretofore delivered to Lender copies of the most current financial
statements of each 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 each Borrower,
Operator and Guarantor as of the dates in question and the results of operations
for the periods indicated. No Borrower, Operator nor Guarantor has any material
contingent liabilities not provided for or disclosed in said financial
statements. There has been no material adverse change since November 4, 2002, in
the structure, business, operations, credit, prospects or financial condition of
any Borrower, any Operator, the Guarantor or any Project.
4.24. 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 its Property (or Properties) and the
Improvements located thereon; (ii) is a shareholder or partner or member of any
other entity; or (iii) conducts any business other than the ownership,
management and operation of its Project(s).
4.25. NO BROKER. No brokerage commission or finder's fee is owing to any
----------
broker or finder arising out of any actions or activity of any Borrower in
connection with the Loan.
4.26. SECURITY DEPOSITS. As of the date hereof, no Borrower, Operator nor
------------------
Guarantor has collected or is in receipt of any security deposit from any
resident of any Project, except as described on Exhibit C.
----------
4.27. 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, (i) as of the date hereof, each Borrower, each Operator and each
Project and, to each Borrower's knowledge, each of any Borrower's, any
Operator's or Guarantor's licensed employees and contractors (other than
contracted agencies) in the exercise of their respective duties on behalf of any
Borrower, any Operator or Guarantor (with respect to its operation of the
Projects) or any portion of the Projects, 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")); and (ii) at all times that the Loan is
outstanding, Borrower shall and shall cause each Operator, Guarantor, their
respective employees and all Projects to comply with all Healthcare Laws. Each
Borrower has maintained and/or has caused each Operator, to maintain, as
applicable, 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 any Borrower, there are no presently existing circumstances
which would result or likely would result in material violations of the
Healthcare Laws. Each Borrower has and/or has caused Operator and its or their
respective Affiliates, as applicable, to have such permits, licenses,
franchises, certificates and other approvals or authorizations of governmental
or regulatory authorities as are necessary under applicable law to own or lease,
as applicable, their respective Projects and to conduct their respective
business in connection with the Projects (including without limitation such
permits as are required under such the Healthcare Laws).
(b) To the extent that and for so long as (i) any Borrower, Operator or
Guarantor is a "covered entity" within the meaning of HIPAA or (ii) any
Borrower, Operator or Guarantor (with respect to its operation of the Projects)
and/or their respective business and operations (with respect to the Projects)
are subject to or covered by the so-called "Administrative Simplification"
provisions of HIPAA, Borrower has or shall (if such entity is Borrower) or has
caused or shall cause such entity to, as applicable (x) undertaken/undertake or
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 such entity to be HIPAA Compliant (as defined below);
(y) developed/develop or promptly develop a detailed plan and time line for
becoming HIPAA Compliant (a "HIPAA COMPLIANCE PLAN"); and (z)
implemented/implement or implement those provisions of such HIPAA Compliance
Plan in all material respects necessary to ensure that such entity is or becomes
HIPAA Compliant. For purposes hereof, "HIPAA COMPLIANT" shall mean that each
Borrower, each Operator and Guarantor, as applicable, (1) 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 (2) 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 any Borrower's, any Operator's or
Guarantor's business, operations, assets, properties or condition (financial or
otherwise), in connection with any actual or potential violation by any such
entity 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 Projects at all reasonable times upon reasonable notice given orally
or in writing to the applicable Borrower. Lender, at Borrowers' expense,
may retain one or more independent consultants to periodically inspect the
Projects and all documents, drawings, plans, and consultants' reports relating
thereto. During the term of the Loan, Borrowers 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 Fifty and No/100 Dollars ($250.00) per
Property, 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, Borrowers shall not be obligated
to pay Lender an amount greater than Three Thousand and No/100 Dollars
($3,000.00) per calendar year per Property with respect to such inspections
after the Closing Date. Nothing contained in this Section 5.1. shall limit
------------
Borrowers' obligations with respect to inspections performed pursuant to the
terms of the Environmental Indemnity, including without limitation Borrowers'
obligation to pay for, perform or caused to be performed such inspections.
5.2. BOOKS AND RECORDS/AUDITS. Each Borrower shall and shall cause each
--------------------------
Operator to keep and maintain at all times at such Borrower's or Operator's, as
applicable, address stated below, or at its respective Project, 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 its respective
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 its 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 any Borrower's or any Operator's records and
computations. The costs and expenses of the audit shall be paid by Borrowers if
the audit discloses a monetary variance in any financial information or
computation of the aggregate income or expense 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 any
Borrower or any Operator; provided, however, if a default has occurred and is
continuing, Borrowers shall pay the costs and expenses of such audit regardless
of any variance disclosed.
5.3. FINANCIAL STATEMENTS; BALANCE SHEETS. Each Borrower shall furnish to
--------------------------------------
Lender and shall cause each Operator and 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 each Borrower, each Operator 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 and
each Operator to furnish to Lender the following statements:
5.3.1. MONTHLY AND ANNUAL OPERATING STATEMENTS. Statements of the operation
---------------------------------------
of each 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 the applicable Borrower as
true, correct, and complete, and yearly statements of the operation of its
Project, to be delivered within one hundred twenty (120) days after the end of
each fiscal year and certified by the applicable Borrower as true, correct, and
complete.
5.3.2. ANNUAL BALANCE SHEETS AND FINANCIAL STATEMENTS. Annual balance
---------------------------------------------------
sheets and financial statements from each Borrower and each Operator 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 any Borrower, any Operator or Guarantor 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 such Borrower (or if Guarantor is not then a publicly held
company, Guarantor) which in any way pertain to the Projects and to prepare the
statement or statements which any Borrower, any Operator 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. Borrowers 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. Borrowers shall use the proceeds of the Loan for
-----------------
proper business purposes. No portion of the proceeds of the Loan shall be used
by Borrowers in any manner that might cause the borrowing or the application of
such proceeds to violate 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. Each Borrower shall promptly provide
--------------------------------
Lender with:
(a) written notice of any litigation, arbitration, or other proceeding or
governmental investigation pending or, to any Borrower's knowledge, threatened
against or relating to any Borrower, any Operator or any Project or any part
thereof;
(b) written notice of any material litigation, arbitration, or other
proceeding or governmental investigation pending or, to any Borrower'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 a Borrower, an Operator or Guarantor
relating to any Borrower, any Operator, the Collateral, or the Projects or any
part thereof;
(d) a copy of all notices sent to or received from Guarantor under any of
the Management Contracts;
(e) a copy of all notices sent to or received from any Operator or Guarantor
under the Operating Lease; and
(f) a copy of all notices sent to Mezzanine Lender or received by Mezzanine
Borrower, any Borrower or Guarantor under the Mezzanine Loan Documents.
5.6. AFFILIATE TRANSACTIONS. Prior to entering into any agreement with an
-----------------------
Affiliate pertaining to a Project or any part thereof, Borrowers 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 any Borrower, any Operator or Guarantor, or any
officer, director, partner or shareholder of any Borrower, any Operator or
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. Each Borrower agrees to allow Lender to advertise in
-------------
the various news or financial media that Lender has provided financing to
Borrowers.
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,
Borrowers shall pay to Lender an amount equal to Thirty and No/100 Dollars
($30.00) per unit in the Projects (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 any Borrower. So long as
no default exists hereunder or under any of the other Loan Documents, Lender
shall credit for Borrowers' 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 Borrowers. So long as there is no Event of Default,
Borrowers may request Lender to disburse funds from the Replacement Reserve
(which request will include a reasonably detailed description of the capital
expenditures at a Project which a 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 the Closing Date and continuing
--------------------
through May 31, 2004, (a) the Project Yield for the Projects for each of the
trailing three (3) months shall be greater than or equal to twelve percent (12%)
and (b) the Debt Coverage Ratio for the Projects for each of the trailing three
(3) months shall be greater than or equal to 1.25:1.00. Commencing on June 1,
2004 and continuing through the Maturity Date, as it may be extended, the
Project Yield for the Projects for each of the trailing three (3) months shall
be greater than or equal to thirteen percent (13%) and (b) the Debt Coverage
Ratio for the Projects for each of the trailing three (3) months shall be
greater than or equal to 1.35:1.00. For purposes of this Section 5.9,
calculation of Net Operating Income shall be based on an Effective Rental Income
determined using actual occupancy.
ARTICLE VI.
NEGATIVE COVENANTS
- -------------------
6.1. NO AMENDMENTS. Borrower shall not amend, modify or terminate, or
--------------
permit the amendment, modification or termination of:
(a) Any Borrower Operating Agreement;
(b) the Operating Lease; or
(c) the Mezzanine Borrower Documents.
6.2. NO ADDITIONAL INDEBTEDNESS. No Borrower or Operator 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
Guarantor 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) as to each Operator, 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 Project (as
defined on Exhibit A-6), 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 other Project.
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 (c) above. The limitation of the indebtedness of Guarantor as the
Operator of the Fulton Villa Project (as defined on Exhibit A-1 ) and the Villa
Del Rey Project (as defined on Exhibit A-2)) imposed by this Section 6.2 shall
-----------
apply only to indebtedness incurred in connection with or relating to each of
the Fulton Villa Project and the Villa Del Rey Project.
6.3. NO COMMINGLING FUNDS. No Borrower shall, or shall permit any Operator
---------------------
to, commingle the funds related to a Project with funds from any other property
or venture, except other Projects. The prohibition of commingling of the funds
of Guarantor as the Operator of the Fulton Villa Project and the Villa Del Rey
Project shall apply only to the funds of Guarantor derived from or relating to
such Projects.
6.4. PROPERTY MANAGER. No Borrower or Operator shall change or permit the
-----------------
change in Guarantor's status as manager of the Projects or amend or terminate
any 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 any
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 Project not estimated to have an aggregate cost in
excess of (i) One Hundred Thousand and No/100 Dollars ($100,000.00) with respect
to the La Casa Project, or (ii) Seventy-Five Thousand and No/100 Dollars
($75,000.00) with respect to each other Project.
6.6. CONVERSION. No Borrower shall, nor shall any Borrower permit, its
----------
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, no Borrower or
----------------
Operator shall permit changes in the use of any part of a Project from the use
existing at the Closing Date or other uses reasonably incidental thereto. No
Borrower shall initiate or acquiesce in a change in the plat of subdivision, or
zoning classification of its 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 Borrowers to pay, within ten (10) days of the due date, any
of the payment obligations of Borrowers to Lender ("INDEBTEDNESS"), including
any payment due under the Notes, this Agreement or the other Loan Documents; or
(b) Failure of any Borrower to strictly comply with the provisions of
Section 4.24 (single asset entity) or 5.1 (inspection) or 5.9 (financial
------- --- ---
covenants); 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 Borrowers diligently pursue the curing
thereof (and then in all events cures such failure within sixty (60) days after
the original notice thereof), Borrowers 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 any Borrower, any Operator
or 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 portion of any Project is appointed, or
any Borrower, any Operator or 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 portion of any Project; or
(e) The occurrence of a default and the expiration of any cure period
applicable thereto under any other Loan Document; or
(f) Any Operator (other than Guarantor) or any 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 any
Borrower, any Operator or Guarantor is not materially true and complete at any
time; or
(h) The occurrence of a default under any Management Contract 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 any Borrower, any Operator or Guarantor; or
(j) A default under the Operating Lease which continues beyond the
expiration of any applicable cure period thereunder; or
(k) Mezzanine Borrower acquires or owns any property other than its
interests in the Borrowers, its interest in ESC-Land, LLC, a Delaware limited
liability company, and cash in its bank accounts; or
(l) Guarantor shall default in the payment of any indebtedness (other than
the Indebtedness) related to the Fulton Villa Project or the Villa Del Rey
Project and such default is declared and is not cured within the time, if any,
specified therefor in any agreement governing the same
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 Borrowers 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. Borrowers 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 Projects, 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 Projects or any part thereof the true condition of the title to, or the
value of, the Projects 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 any Project or any part thereof)
any and all information which Lender may have with respect to the Projects, any
Borrower, any Operator or Guarantor or any of their Affiliates, whether provided
by a Borrower, an Operator, Guarantor or any third party or obtained as a result
of any environmental assessments. Lender shall have no liability whatsoever as
a result of delivering any such information to any third party, and by executing
this Agreement and/or the Senior Housing Rider, each Borrower, each Operator 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 any
--------------
Borrower, Operator or 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 a Borrower's, an Operator'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 applicable Project
is located shall be applicable to the creation, perfection and enforcement of
the lien created by the Mortgages and Assignments of Leases relating to such
Project. 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 Borrowers 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. Borrowers shall, jointly and severally, 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 Projects, (b) the
Collateral, (c) any act or omission of any Borrower, any Operator or Guarantor,
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, Borrowers will undertake, at their 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 Borrowers' expense, prosecute or
defend any action involving the priority, validity or enforceability of any of
the 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.
Attn: Raymond R. Brandstrom, CFO
Facsimile No. (206) 301-4500
Notices to Borrower: At the addresses shown on Exhibit E
----------
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
General Electric Capital Corporation
Loan No. 07-0004024
2 Wisconsin Circle, Suite 400
Chevy Chase, Maryland 20815
Attn: Manager, Portfolio Management Group
Notices to Lender: Telecopy: (301) 664-9843
General Electric Capital Corporation
Loan No. 07-0004024
100 Congress, Suite 700
Austin, Texas 78701
Attn: Diana Pennington, Vice President and Chief Counsel, Senior Living
Group
With a copy to: Telecopy: (512) 476-7832
General Electric Capital Corporation
Loan No. 07-0004024
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; 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, each
Borrower, each Operator and Guarantor, subject to the provisions of this
Agreement. 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. BORROWERS HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR
-----
FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND
IRREVOCABLY AGREE 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. BORROWERS EXPRESSLY SUBMIT AND CONSENT TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON
CONVENIENS. BORROWERS HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWERS BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWERS, 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. BORROWERS 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 BORROWERS AND LENDER, AND BORROWERS
ACKNOWLEDGE 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. BORROWERS 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.
BORROWERS 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 Borrowers,
Operators, 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
thereto.
8.17. BORROWER'S KNOWLEDGE. When the phrase "to Borrower's knowledge" or
---------------------
words of similar meaning is/are used in this Agreement, Borrower's knowledge
shall be deemed to include the knowledge of any Operator or Guarantor. It is
understood and agreed that Borrower has an obligation to make appropriate
inquiry and investigation of each Operator and Guarantor regarding the subject
matter of this Agreement and the other Loan Documents and the operation of the
Projects.
8.18. OPERATION OF THE PROJECT. To the extent that this Agreement,
---------------------------
including the Senior Housing Rider, requires any Borrower to perform obligations
relating to the operation of the Projects, or any of them, for which an Operator
or Guarantor is responsible, it is intended to mean that Borrowers shall cause
the Operators or Guarantor, as applicable, to perform such obligations;
provided, however, the failure of such Operator(s) and/or Guarantor to perform
any such obligation shall be deemed to be a failure of Borrowers to perform
their obligations under this Agreement.
8.19. JOINT AND SEVERAL LIABILITY. All covenants and agreements of each
------------------------------
Borrower, each Operator and Guarantor under the Loan Documents (or any of them)
shall be joint and several. Without limiting the generality of the foregoing,
each Borrower agrees that it is liable for the repayment of the entire Loan
outstanding from time to time notwithstanding the fact it may not have executed
each Note.
8.20. BORROWERS' WAIVERS. Each Borrower's obligations hereunder and under
-------------------
the other Loan Documents to which it is a party shall not be released,
discharged or affected in any way by any circumstance or condition, including,
without limitation:
(a) an election of remedies by Lender, even though that election of
remedies, such as a nonjudicial foreclosure (or UCC sale) with respect to
security (whether such security is real property or personal property), for a
guaranteed obligation, has destroyed a Borrower's rights of subrogation and
reimbursement against any other Borrower by the operation of Section 580d of the
California Code of Civil Procedure, any similar statute of any other State
or otherwise;
(b) any right to a fair value hearing with respect to any Project under
California Code of Civil Procedure Section 580a or any similar statute of any
other State to determine the size of any deficiency under the Loan following a
trustee's sale with respect to such Project;
(c) the attempt or the absence of any attempt by Lender to obtain payment or
performance by any Borrower or any guarantor of the Loan (the obligations of
Borrowers for payment of the Loan and performance of this Loan Agreement being
joint and several);
(d) Lender's delay in enforcing any Borrower's obligations hereunder or of
any other party under the Loan Documents, or any prior partial exercise by
Lender of any right or remedy hereunder or under any of the other Loan
Documents;
(e) any renewal, extension, substitution, modification, replacement of or
indulgence with respect to, the Indebtedness, all of which Lender is hereby
authorized to make;
(f) the fact that any Borrower is not liable for the payment or performance
of the Indebtedness, or any portion thereof, for any reason whatsoever, each
Borrower being liable for the Indebtedness notwithstanding that one or more
other Borrowers may not be;
(g) any sale, exchange, release, surrender or other disposition of, or
realization upon, any collateral securing the Indebtedness, or any settlement or
compromise of any guaranties of the Indebtedness, or any other obligation of any
person or entity with respect to the Loan Documents;
(h) the acceptance by Lender of any additional security for the
Indebtedness;
(i) the lack of validity or enforceability of, or Lender's waiver or consent
with respect to, any provision of any instrument evidencing, securing or
otherwise relating to the Indebtedness, or any part thereof, including without
limitation the Loan Documents;
(j) the failure by Lender to take any steps to perfect, maintain, or enforce
its security interests or remedies under the Loan Documents, or to preserve its
rights to or protect any security or collateral, for the Indebtedness;
(k) any voluntary or involuntary bankruptcy, insolvency, reorganization,
arrangement, readjustment, assignment for the benefit of creditors, composition,
receivership, liquidation, marshalling of assets and liabilities or similar
event or proceedings with respect to any Borrower or Guarantor, as applicable,
or any of their respective properties (each, an "INSOLVENCY PROCEEDING"), or any
action taken by Lender, any trustee or receiver or by any court in any such
proceeding;
(l) the failure by Lender to file or enforce a claim against the estate
(either in an Insolvency Proceeding or other proceeding) of any Borrower or
Guarantor;
(m) in any proceeding under Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as amended (the "BANKRUPTCY CODE"): (i) any election by
Lender under Section 1111(b)(2) of the Bankruptcy Code, (ii) any borrowing or
grant of a security interest by a Borrower as debtor-in-possession under Section
364 of the Bankruptcy Code, (iii) the inability of Lender to enforce the
Indebtedness against any Borrower by application of the automatic stay
provisions of Section 362 of the Bankruptcy Code, or (iv) the disallowance,
under Section 502 of the Bankruptcy Code, of all or any portion of Lender's
claim(s) against any Borrower for repayment of the Indebtedness;
(n) the failure of any Borrower to receive notice of any intended
disposition of the collateral for the Indebtedness;
(o) any merger or consolidation of any Borrower into or with any other
entity, or any sale, lease or transfer of any of the assets of any Borrower or
Guarantor to any other person or entity;
(p) any change in the ownership of any Borrower, or any change in the
relationship between any Borrower and Guarantor or any termination of any such
relationship;
(q) the dissolution or other change in status of Borrower or Guarantor;
(r) the making of additional loans to any Borrower, the increase or
reduction of the maximum principal amount of the Indebtedness, the increase or
reduction in the interest rate provided in the Notes, or any other modification,
amendment, release or waiver of the terms of the Loan Documents;
(s) the absence, impairment or loss of any right of reimbursement or
subrogation or other right or remedy of any Borrower; and
(t) Nevada Revised Statute 40.430, Nevada's one-action rule, the application
and protections of which each Borrower waives; and
(u) any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of any Borrower, Guarantor or any other guarantor
of the Indebtedness.
Each Borrower hereby expressly waives and surrenders any defense to its
liability under this Loan Agreement and the other Loan Documents to which it is
a party based upon any of the foregoing acts, omissions, agreements, waivers or
matters, whether or not such Borrower had notice or knowledge of same. It is
the purpose and intent hereof that the obligations of each Borrower hereunder
shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, each Borrower hereby expressly
waives any and all benefits which might otherwise be available to it under
California Civil Code Sections 2809, 2810, 2819, 2839, 2845 through 2847, 2849,
2850, 2899 and 3433, and California Code of Civil Procedure Sections 580a, 580b,
580d and 726, or any similar statutes of any State.
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.
BORROWERS:
EMERITUS REALTY II, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
EMERITUS REALTY III, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
EMERITUS REALTY V, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
EMERITUS REALTY VII, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
EMERITUS REALTY XIV, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
EMERITUS REALTY BOZEMAN, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
ESC-PORT ST. RICHIE, LLC, a Washington limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
EMERITUS REALTY PUYALLUP, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By: /s/ Raymond R. Brandstrom
Name: Raymond R. Brandstrom
Its: Vice President of Finance
LENDER:
GENERAL ELECTRIC CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Jefferey N. Muchmore
---------------------------
Name: Jefferey N. Muchmore
----------------------
Its: Vice President
---------------
EXHIBIT A-1
Property: Fulton Villa, Stockton, California (the "FULTON VILLA PROJECT")
- --------
Owner: Emeritus Realty VII, LLC
- -----
Number of Units: 81
- -----------------
Legal Description:
- ------------------
PARCEL ONE:
Parcel A, as shown on that certain Parcel Map filed for record July 18, 1972 in
Book 1 of Parcel Maps, page 81, San Joaquin County Records, being a portion of
the Southeast quarter of Section 17, C.M. Weber Grant, in the City of Stockton.
PARCEL TWO:
A right of way 20 feet in width lying Southerly of the Northerly line of the
land described in Deed to Five Oak Pyramid, Inc., a California corporation,
dated June 30,. 1954 recorded July 1, 1954 in Book 1646 of official Records,
page 496, San Joaquin County Records.
EXCEPT THEREFROM the Westerly 203.81 feet.
EXHIBIT A-2
Property: Villa Del Rey, Escondido, California (the "VILLA DEL REY PROJECT")
- --------
Owner: Emeritus Realty VII, LLC
- -----
Number of Units: 84
- -----------------
Legal Description:
- ------------------
(ASSESSOR'S PARCEL NO. 230-141-11)
ALL THAT PORTION OF LOT 7 IN BLOCK 179 OF THE RANCHO RINCON DEL DIABLO, IN THE
CITY OF ESCONDIDO, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF NO. 723 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, AUGUST 13, 1892, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE NORTHWESTERLY LINE OF SAID LOT 7 DISTANT THEREON
NORTH 53 59' 20" EAST 226.83 FEET FROM THE NORTHWESTERLY CORNER THEREOF, SAID
POINT BEING ALSO A POINT IN THE CENTER LINE OF THE SAN DIEGO COUNTY WATER
AUTHORITY EASEMENT; THENCE CONTINUING NORTH 53 59' 20" EAST ALONG SAID
NORTHWESTERLY LINE OF LOT 7 A DISTANCE OF 66.87 FEET TO A CUSP FORMED WITH THE
ARC OF A 20.00 FOOT RADIUS CURVE, CONCAVE EASTERLY A RADIAL OF WHICH BEARS NORTH
36 00' 40" WEST TO SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE
SOUTHERLY ALONG SAID CURVE 30.83 FEET THROUGH A CENTRAL ANGLE OF 88 19' 45";
THENCE TANGENT TO SAID_ CURVE SOUTH 34 20' 25" EAST 317.19 FEET TO THE
BEGINNING OF A TANGENT 1000 FOOT RADIUS CURVE, CONCAVE NORTHEASTERLY; THENCE
SOUTHEASTERLY ALONG SAID CURVE 21.43 FEET THROUGH A CENTRAL ANGLE OF 1 13' 40";
THENCE TANGENT TO SAID CURVE SOUTH 35 34' 05" EAST 83.06 FEET TO THE
NORTHEASTERLY LINE OF THE LAND CONVEYED TO THE CITY OF ESCONDIDO BY DEED
RECORDED DECEMBER 20, 1968 FILE NO. 223861 OF OFFICIAL RECORDS SAID POINT BEING
ALSO A POINT IN THE ARC OF A 1077 FOOT RADIUS CURVE, CONCAVE SOUTHERLY, A RADIAL
OF WHICH BEARS NORTH 4 27' 04" WEST TO SAID POINT; THENCE EASTERLY ALONG SAID
NORTHEASTERLY LINE TO AND ALONG THE NORTHEASTERLY LINE OF THE LAND CONVEYED TO
THE CITY OF ESCONDIDO BY DEED RECORDED DECEMBER 20, 1968, FILE NO. 223862 OF
OFFICIAL RECORDS ALONG THE ARC OF SAID 1077 FOOT RADIUS CURVE THROUGH A CENTRAL
ANGLE OF 9 16' 54" A DISTANCE OF 178.04 FEET (RECORD 9 27' 38" A DISTANCE OF
177.83 FEET) AND TANGENT TO SAID CURVE SOUTH 84 58' 46" EAST 77.22 FEET (RECORD
SOUTH 83 52' 27" EAST 77.78 FEET TO THE EASTERLY LINE OF SAID LOT 7; THENCE
ALONG SAID EASTERLY LINE NORTH 18 03' 27" WEST 627.50 FEET (RECORD NORTH 16
58' 15" WEST 627.52 FEET PER SAID FILE NO. 223862) TO THE MOST NORTHERLY CORNER
OF SAID LOT 7; THENCE ALONG THE NORTHWESTERLY LINE THEREOF SOUTH 53 59' 20"
WEST 364.34 FEET TO THE TRUE POINT OF BEGINNING.
EXHIBIT A-3
Property: The Condorde, Las Vegas, Nevada (the "CONCORDE PROJECT")
- --------
Owner: Emeritus Realty V, LLC
- -----
Number of Units: 103
- -----------------
Government Lot Thirty-Seven (37) in Section 13, Township 21 South, Range 61
East, M.D.B.&M., County of Clark County, Nevada.
EXCEPT that portion conveyed to the County of Clark for road purposes by
Deed recorded January 17, 1996 in Book 960117 as Document No. 01463 of Official
Records.
Legal Description:
- ------------------
EXHIBIT A-4
Property: River Oaks, Englewood, Florida
- --------
Owner: Emeritus Realty III, LLC
- -----
Number of Units: 155
- -----------------
Legal Description: The Northwesterly 533.39 feet, more or less, of Lots 509,
- -----------------
510 and 511, of ENGLEWOOD GARDENS - UNIT-NO. 6, as per plat thereof, recorded in
Plat Book 4, pages 74 and 75, Public Records of Sarasota County, Florida. LESS
AND EXCEPT the Northwesterly 27 feet thereof, conveyed to county for road.
EXHIBIT A-5
Property: Stanford Center, Altamonte Springs, California (the "STANFORD
- --------
PROJECT")
- ----
Owner: Emeritus Realty V, LLC
- -----
Number of Units: 117
- -----------------
Legal Description:
- ------------------
That part of Lots 613, 614, 615, 616, 634, 635, 636 and 637, all in the
subdivision of Altamonte Land, Hotel and Navigation Company, according to the
plat thereof as recorded in Plat Book 1, page 12, of the Public Records of
Seminole County, Florida, described as follows:
Commencing at the Southeast corner of said Lot 637; thence North 000 17' 25"
West, along the East line of said Lot 637, a distance of 5.00 feet to the North
right of way line of Orange Drive; thence on a bearing of South 90 00' 00"
West, along said North right of way line, 141.71 feet to the West line of the
East 9.71 feet of said Lot 636 and the Point of Beginning; thence continue on a
bearing of South 90 00' 00" West along said North right of way line 260.00
feet to the West line of the East 5.80 feet of said Lots 634 and 613; thence
North 00 18' 40" West, along said West line, 369.91 feet to the North line of
the South 111.00 feet of said Lots 613 and 616; thence South 89 53' 35" East,
along said North line, 401.85 feet to the East line of said Lots 616 and 637;
thence South 00 17'32" East, along said East line, 184.16 feet to the North
line of the South 190.00 feet of said Lots 636 and 637; thence on a bearing of
West, along said North line, 127.44 feet; thence South 53 48' 08" West, 17.62
feet to the West line of the East 9.71 feet of said Lot 636; thence South 000
17'25" East, along said West line 174.59 feet to the Point of Beginning.
TOGETHER WITH an easement as created by access and parking easement dated
December 23, 1986, and recorded February 19, 1987, in Official Records Book
1820, and 287, of the Public Records of Seminole County, Florida, for access and
parking purposes over and across that part of said Lots 636 and 637, described
as follows:
Commencing at the Southeast corner of said Lot 637; thence North 00 17' 25"
West, along the East line of said Lot 637, a distance of 5.00 feet to the North
right-of-way line of Orange Drive; thence on a bearing of West, along said North
line 141.71 feet to the West line of the East 9.71 feet of said Lot 636; thence
North 00 17' 25" West, 120.00 feet to the Point of Beginning; thence on a
bearing of East, 75.00 feet; thence South 00 17' 25" East 90.00 feet; thence
on a bearing of West, 75.00 feet to the West line of the East 9.71 feet of said
Lot 636; thence North 00 17' 25" West, 90.00 feet to the Point of Beginning.
Subject to an easement for ingress, egress and utility purposes over and across
that part of said Lot 636, described as follows:
A portion of Lot 636, ALTAMONTE LAND HOTEL AND NAVIGATION COMPANY SUBDIVISION,
as recorded in Plat Book 1, page 12, Public Records of Seminole County, Florida,
being described as follows:
From the Southeast corner of Lot 637 of said ALTAMONTE LAND HOTEL AND NAVIGATION
COMPANY SUBDIVISION, run West along the South line of said Lots 636 and 637, a
distance of 141.71 feet to the Point of Beginning; thence continue West along
said South lot line 65.00 feet; thence North 000 17' 25" West 110.00 feet;
thence East 65.00 feet; thence South 00 17' 25" East 110.00 feet to the Point
of Beginning, as recorded in Official Records Book 1820, page 291, Public
Records of Seminole County, Florida.
NOW KNOWN AS Parcel A and part of Parcel B, "LA CASA GRANDE", Plat Book 39,
pages 50 and 51, Public Records of Seminole County, Florida.
EXHIBIT A-6
Property: La Casa Grand, New Port Richey, Florida
- --------
Owner: ESC-Port St. Richie, LLC
- -----
Number of Units: 193
- -----------------
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 aid 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-7
Property: Silver Pines, Cedar Rapids, Iowa
- --------
Owner: Emeritus Realty II, LLC
- -----
Number of Units: 69
- -----------------
Legal Description: LOT 2 , EXCEPTING THEREFROM THE NORTH 150 FEET, AND LOT
- ------------------
3, RADEC FREEWAY THIRD ADDITION TO THE CITY OF CEDAR RAPIDS, LINN COUNTY, IOWA.
EXHIBIT A-8
Property: Juniper Meadows, Lewiston, Idaho
- --------
Owner: Emeritus Realty II, LLC
- -----
Number of Units: 74
- -----------------
Legal Description: Lot 1 of Scenic Crest 4th Addition to the City of
- ------------------
Lewiston, according to the official plat thereof, filed in CABII 327B of Plats,
- -------
Official Records of Nez Perce County, Idaho
EXHIBIT A-9
Property: Courtyard at the Willows, Puyallup, Washington
- --------
Owner: Emeritus Realty Puyallup, LLC
- -----
Number of Units: 101
- -----------------
Legal Description:
- ------------------
PARCEL A:
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.
PARCEL B:
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. PARCEL C:
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.
PARCEL D:
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.
PARCEL E:
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 NUMBER
9806190616.
PARCEL F:
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 A-10
Property: Spring Meadows, Bozeman, Montana (the "Spring Property")
- --------
Owner: Emeritus Realty Bozeman, LLC
- -----
Number of Units: 71
- -----------------
Legal Description: Lot 2 in Block 2 of Spring Meadows Subdivision, being a
- ------------------
portion of unplatted SW1/4 of Section 19 and Certificate of Survey 819A,
situated in the NW1/4 of Section 19, Township 2 South, Range 6 East, P.M.M.,
Gallatin County, Montana, according to Plat on file and of record in the office
of the County Clerk and Recorder of Gallatin County, Montana. [Plat J-145]
EXHIBIT A-11
Property: The Lodge at Eddy Pond, Auburn, Massachusetts
- --------
Owner: Emeritus Realty XIV, LLC
- -----
Number of Units: 108
- -----------------
Legal Description:
- ------------------
Lot 1
- ------
Auburn, Massachusetts
A certain parcel of land in the Commonwealth of Massachusetts, County of
Worcester, Town of Auburn, Situated on the southerly side of Washington Street
(Route 20) and shown as Lot 1 on a plan entitled "Plan of Land in Auburn, MA
(Worcester County)," scale 1" - 50', dated August 14, 2002, prepared by Beals
and Thomas, Inc., recorded on August 28, 2002 in Plan Book 785 as Plan 28, being
more particularly bounded and described as follows:
Beginning at the northwesterly corner of the parcel on the southerly side of
Washington Street, thence running:
N 73 41 31 E 13.19 Feet, to a point, said course being by Washington Street,
thence turning and running;
S 16 18 29 E 25.00 Feet, to a point, said course being by Washington Street,
thence turning and running;
N 73 41 31 E 281.07 Feet, to a point, said course being by Washington
Street, thence turning and running;
S 20 04 51 W 330.52 feet, to a point, said course being by Lot 2 on said
plan, thence turning and running;
S 23 52 15 E 193.52 feet, to a point, said course being by said Lot 2,
thence turning and running;
S 75 0144 E 144.12 feet to a point, said course being by said Lot 2, thence
turning and running;
S 36 36 20 E 270.85 feet, to a point, said course being by said Lot 2,
thence turning and running;
S 05 48 25 E 113.00 feet, to a point, said course being by said Lot 2,
thence turning and running;
N 79 20 40 W 737.00 feet, to a point, said course being by land n/f of the
Town of Auburn, thence turning and running;
N 13 27 36 E 678.19 feet, to a point, said course being by land n/f of the
Town of Auburn, to the point of beginning.
Containing 300,897 square feet more or less.
Subject to and with the benefit of Drainage, Utility and Access Easement
Agreement by and between Auburn Land, LLC and LM Auburn Assisted Living, LLC,
dated April 26, 1996 and recorded May 1, 1996 at Book 17872, Page 321.
Subject to and with the benefit of Deed of Easement from LM Auburn Assisted
Living, LLC and Auburn Land, LLC to Auburn Water District dated April 29, 1996
and recorded May 1, 1996 at Book 17872, Page 398.
Confirmatory Gas Easement dated August 22, 2002 and recorded on August 28, 2002
at the Worcester Registry of Deeds as instrument number 164439.
EXHIBIT B
LITIGATION
----------
Attached.
EXHIBIT C
SECURITY DEPOSITS
-----------------
Attached.
EXHIBIT D
PRINCIPAL PAYMENTS
------------------
Attached.
EXHIBIT E
BORROWER'S ADDRESSES
--------------------
SCHEDULE I
INDEX OF DEFINED TERMS
DEFINED TERM PAGE DEFINED TERM PAGE
- ------------- ---- ------------- ----
Administrative Simplification 15
Affiliate 18
Agreement 1
Assignment of Leases 2
Assignments of Leases 2
Base Rate 4
Borrower 1
Borrower Operating Agreement 11
Borrowers 1
Borrower's Equity 8
business day 25
Closing Date 2
Collateral 7
Concorde Property 1
control 18
Costs 22
Debt Coverage Ratio 3
Earnout Advance 2
Effective Rental Income 3
Environmental Indemnity 8
Event of Default 21
Exit Fee 6
Expenses 3
Extension Notice 4
Guarantor 8
Guaranty 8
Healthcare Laws 15
HIPAA 15
HIPAA Compliance Date 16
HIPAA Compliance Plan 15
HIPAA Compliant 15
Improvements 1
Indebtedness 21
Indemnitee 23
Initial Funding Amount 2
Interest Rate 4
Leases 9
Lender 1
Loan 1
Loan Documents 2
Management Contract 10
Maturity Date 4
Mezzanine Borrower Documents 12
Mezzanine Lender 10
Mezzanine Loan 10
Mezzanine Loan Documents 10
Mortgage 2
Mortgages 2
Net Operating Income 3
Note A 1
Note B 1
Notes 1
Operating Lease 1
Operator 1
Operators 1
Person 18
Project 1
Project Yield 3
Projects 1
Properties 1
Property 1
Qualified Non-Residential Lease 9
Repayment Date 5
Replacement Reserve 19
Stanford Property 1
Title Policy 9
Loan No. 07-0004024
SENIOR HOUSING RIDER
THIS SENIOR HOUSING RIDER is attached to and made a part of that certain
Loan Agreement dated as of the ___ day of December, 2002, among EMERITUS REALTY
VII, LLC; EMERITUS REALTY III, LLC; EMERITUS REALTY V, LLC; EMERITUS REALTY II,
LLC; EMERITUS REALTY PUYALLUP, LLC; EMERITUS REALTY BOZEMAN, LLC; and EMERITUS
REALTY XIV, LLC; each a Delaware limited liability company, and ESC-PORT ST.
RICHIE, LLC, a Washington limited liability company, (each a "BORROWER" and
collectively with certain affiliates of such parties which are now or hereafter
become parties to this Rider, "BORROWERS"), EMERITUS PROPERTIES III, INC.;
EMERITUS PROPERTIES II, INC.; and EMERITUS PROPERTIES V, INC., each a Washington
corporation, ESC-NEW PORT RICHEY, LLC; LLC; ESC-BOZEMAN, LLC; and EMERITUS
PROPERTIES XIV, LLC; each a Washington limited liability company (each an
"OPERATOR" and collectively with certain affiliates of such parties which are
now or hereafter become parties to this Rider, "OPERATORS") EMERITUS
CORPORATION, a Washington corporation (as an "Operator" with respect to the
Projects located in California, and a "MANAGER" with respect to certain other
Projects) and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation
(General Electric Capital Corporation and its successors and assigns are
hereinafter referred to as "LENDER"). To the extent of any conflict between the
terms and provisions of this Rider and the terms and provisions of the Loan
Agreement, the terms and provisions of this Rider shall govern and control the
rights and obligations of the parties; provided, however, in any event, the
obligations and covenants of Borrowers, Operators and Manager set forth herein
shall be subject to the notice and cure periods set forth in Section 7.1(c) of
the Loan Agreement.
R-1. All capitalized terms not defined in this Rider shall have the
meanings ascribed to such terms as set forth in the Loan Agreement.
R-2. The following representations, warranties and covenants are hereby
added to the representations, warranties and covenants contained in the Loan
Agreement.
Each Borrower represents, covenants, and warrants, as of the date hereof and
through the term of Loan, as follows:
(a) Each Borrower, together with Manager, and the applicable Operator,
is using and operating its Property and Improvements (collectively, each a
"FACILITY" and collectively, the "FACILITIES") as assisted and/or independent
senior housing facilities, each Facility having the number of units set forth on
Exhibit A to the Loan Agreement (as modified from time to time with Lender's
consent, which consent shall not be unreasonably withheld, the "LICENSED USE").
As of the date hereof, in connection with the operation of each Facility,
Manager, each Borrower and each Operator complies, and throughout the term of
the Loan will comply, with all federal, state and local laws, regulations,
quality and safety standards, accreditation standards and requirements of the
applicable state department of health or other applicable state regulatory
agency (each a "DOH") and all other federal, state or local governmental
authorities including, to the extent applicable to the Facilities, those
relating to the quality and adequacy of medical care, distribution of
pharmaceuticals, rate setting, equipment, personnel, operating policies,
additions to facilities and services and fee splitting. Each Facility shall be
operated at all times in compliance with such laws and requirements.
Notwithstanding anything to the contrary set forth herein, no Borrower Operator
or Manager shall be deemed to be in default under this clause (a) in the event
it is cited for minor deficiencies during the course of licensure or
certification surveys and the same are corrected within thirty (30) days, or so
long as Borrower, Operator or Manager, as applicable is diligently pursuing a
cure, such longer period as is required to correct such deficiency, and provided
further that Borrower, Operator or Manager delivers to Lender evidence that the
DOH has approved such cure in its ordinary course of review of the Facility.
(b) All governmental licenses, permits, regulatory agreements or other
approvals or agreements necessary or desirable for the Licensed Use of each
Facility are held by a Borrower, Operator or Manager in the name of the
Borrower, Operator or Manager as required under applicable law and are in full
force and effect, including, if required, a valid certificate of need ("CON") or
similar certificate, license, or approval issued by the DOH for the requisite
number of units in each Facility, and a provider agreement or other required
documentation of approved provider status for each provider payment or
reimbursement program listed in Exhibit R-1 hereto, if applicable. All required
permits, certificates, licenses and governmental approvals necessary for
operation of each Facility for the Licensed Use are listed on Exhibit R-1 hereto
(collectively, the "LICENSES"). So long as the Loan remains outstanding, each
Borrower (and each Operator and Manager) shall operate its Facility or cause its
Facility to be operated in a manner such that the Licenses shall remain in full
force and effect. True and complete copies of the Licenses have been delivered
to Lender.
(c) The Licenses for each Facility, including without limitation, if
applicable, the CON:
(i) May not be, and have not been, and will not be transferred to any
location other than that Facility;
(ii) Are not now and will not be pledged as collateral security for any
other loan or indebtedness; and
(iii) Are held free and will remain free from restrictions or known
conflicts which would materially impair the use or operation of the Facility for
the Licensed Use, and shall not be provisional, probationary or restricted in
any way which would have an adverse affect on the operation of the Facility for
the Licensed Use.
(d) No Borrower, Operator or Manager shall:
(i) Rescind, withdraw, revoke, amend, modify, supplement, or otherwise
alter the nature, tenor or scope of the Licenses for any Facility; provided,
however, nothing herein shall be construed as prohibiting Borrower, Operator or
Manager from modifying the Licenses in any manner which will permit Borrower,
Operator or Manager to provide additional services at the Facility which are not
currently offered but which are within the use of the Project at the time this
Rider was executed or other uses reasonably incidental thereto;
(ii) Amend or otherwise change any Facility's authorized units capacity
and/or the number of units approved by the DOH; except that, subject to Lender's
consent, which consent shall not be unreasonably withheld or delayed, a Borrower
may change the allocation of units between assisted living and independent
living and except that, without Lender's consent but with notice to Lender,
Borrower may increase the number of approved beds/units at the Facility unless
doing so involves an expenditure which is otherwise subject to Lender's approval
under the provisions of the Loan Agreement or one or more of the other Loan
Documents, in which case such approval shall be governed by the terms of the
other provisions of the Loan Agreement or the applicable Loan Documents;
(iii) Replace or transfer all or any part of a Facility's units or beds to
another site or location; or
(iv) Voluntarily transfer or encourage the transfer of any resident of a
Facility to any other facility not subject to a Mortgage, unless such transfer
is at the request of the resident or is for reasons relating to the health,
required level of medical care or safety of the resident to be transferred or
for non-payment of stay or as required by applicable law.
(e) If and when a Borrower, Operator or Manager participates in any
Medicare or Medicaid or other third-party payor program with respect to a
Facility, that Facility will remain in compliance with all requirements for
participation in Medicare and Medicaid, including the Medicare and Medicaid
Patient Protection Act of 1987, and such other third party payor programs,
including any local third-party payor program ("LOCAL PROGRAM"); provided,
however, that no Borrower, Operator or Manager shall be deemed to be in default
of its obligations under this clause (e) in the event it is cited for minor
deficiencies during the course of licensure or certification surveys and the
same are corrected within thirty (30) days (or such longer period as required so
long as Borrower, Operator or Manager is diligently pursuing correction) in
accordance with a plan of correction acceptable to the entity or agency having
jurisdiction over the applicable Medicare, Medicaid or Local Program;
(f) Each Facility will remain in conformance in all material respects with
all insurance, reimbursement and cost reporting requirements, and, if
applicable, has a current provider agreement which is in full force and effect
under Medicare and Medicaid.
(g) There is no, and during the term of the Loan there shall be no
threatened, existing or pending revocation, suspension, termination, probation,
restriction, limitation, or nonrenewal affecting any Borrower, any Operator,
Manager (with respect to its operation of the Facilities) or any Facility or any
participation or provider agreement with any third-party payor, including
Medicare, Medicaid, Local Program, Blue Cross and/or Blue Shield, and any other
private commercial insurance managed care and employee assistance program (such
programs, the "THIRD-PARTY PAYORS' PROGRAMS") to which a Borrower, an Operator
or Manager may presently be subject with respect to a Facility, or at any time
hereafter is subject. All Medicaid, Medicare, Local Program, and private
insurance cost reports and financial reports submitted by a Borrower, an
Operator or Manager, if any, in connection with the ownership or operation of
the Facilities are and will be materially accurate and complete and have not
been and will not be misleading in any material respects. Except as otherwise
disclosed in writing to Lender by Borrower prior to the execution of this Rider,
no cost reports submitted prior to the date hereof for any Facility remain open
or unsettled.
(h) None of the Borrowers, Operators, Manager (with respect to its
operations at the Facilities) or any Facility is or will be the subject of any
proceeding by any governmental agency, and no notice of any violation has been
or will be issued by a governmental agency that would, directly or indirectly,
or with the passage of time:
(i) Have a material adverse impact on a Borrower's, an Operator's or
Manager's ability to accept and/or retain patients at any Facility or operate
any Facility for its Licensed Use or result in the imposition of a fine, a
sanction, a lower rate certification or a lower reimbursement rate for services
rendered to eligible patients at any Facility;
(ii) Modify, limit or annul or result in the transfer, suspension,
revocation or imposition of probationary use of any of the Licenses; or
(iii) If applicable, affect a Borrower's, an Operator's or Manager's
continued participation in the Medicaid or Medicare programs with respect to the
operation of any Facility, or the Local Program, or any other of the Third-Party
Payors' Programs in which any Facility now or at anytime hereafter participates,
or any successor programs thereto, at current rate certifications.
(i) Each Facility and the use thereof complies and will continue to
comply in all material respects with all applicable local, state and federal
building codes, fire codes, health care, senior housing and other regulatory
requirements (the "PHYSICAL PLANT STANDARDS") and no waivers of Physical Plant
Standards exist at any Facility, except those that are described on Exhibit R-2
attached hereto.
(j) Except as otherwise disclosed to Lender in writing prior to the
execution of this Rider, no Facility has received a "Level A" (or equivalent)
violation, and no statement of charges or deficiencies has been made or penalty
enforcement action has been undertaken against any Facility, Manager (in
connection with its operation of the Facilities), an Operator or a Borrower, or
against any officer, director, partner, member or stockholder of Manager (in
connection with its operation of the Facilities), an Operator or a Borrower by
any governmental agency during the last three calendar years, and there have
been no violations over the past three years which have threatened any
Facility's, any Manager's (in connection with its operation of the Facilities),
an Operator's or a Borrower's certification for participation in Medicare or
Medicaid or the other Third-Party Payors' Programs, if and to the extent any
Facility does now participate or has, at any time during such three year period,
participated therein.
(k) Except as otherwise disclosed to Lender in writing prior to the
execution of this Rider, there are no current, pending or outstanding Medicaid,
Medicare or Third-Party Payors' Programs reimbursement audits or appeals pending
at any Facility, and there are no years that are subject to audit for which an
audit has not yet been conducted.
(l) Except as otherwise disclosed to Lender in writing prior to the
execution of this Rider, there are no current or pending Medicaid or Medicare or
Third-Party Payors' Programs recoupment efforts at any Facility. No Borrower is
a participant in any federal program whereby any governmental agency may have
the right to recover funds by reason of the advance of federal funds, including
those authorized under the Hill-Burton Act (42 U.S.C. 291, et seq.).
(m) No Borrower or Operator will pledge its receivables as collateral
security for any other loan or indebtedness.
(n) There are no and there will remain no patient or resident care
agreements with patients or residents which deviate in any material adverse
respect from the form agreements which have been delivered to and approved by
Lender pursuant to Section 3.7 of the Loan Agreement.
(o) All patient or resident records at each Facility, including patient or
resident trust fund accounts, are true and correct in all material respects, and
will remain true and correct in all material respects.
(p) Any agreement relating to the management, and operation of any Facility
(each a "MANAGEMENT AND OPERATING AGREEMENT") and the manager thereunder shall
be subject to Lender's approval and no Management and Operating Agreement shall
be modified, amended or terminated except in accordance with the requirements of
the Loan Documents. Under the applicable laws and regulations in effect as of
the date hereof, in the event any Management and Operating Agreement is
terminated or in the event of foreclosure or other acquisition of a Facility by
Lender or its designee or any purchaser at a foreclosure sale, Borrower,
Operator, Lender, any subsequent manager or any subsequent purchaser need not
obtain a CON prior to applying for and receiving Medicare or Medicaid payments.
(q) No Borrower shall, nor shall any Facility, any Operator or Manager,
other than in the normal course of business, change the terms of any of the
Third-Party Payors' Programs now or hereinafter in effect or their normal
billing payment or reimbursement policies and procedures with respect thereto
(including the amount and timing of finance charges, fees and write-offs), where
such change would have an adverse affect on the operations at or financial
condition of any Facility.
(r) From time to time, upon the request of Lender, regardless of whether or
not an Event of Default has occurred hereunder or under the other Loan
Documents, each Borrower shall, and shall cause each Operator and Manager to
complete, execute and deliver to Lender any applications, notices,
documentation, and other information necessary or desirable, in Lender's
judgment, to permit Lender or its designee (including a receiver) to obtain,
maintain or renew any one or more of the Licenses for a Facility (or to become
the owner of the existing Licenses for a Facility) and to the extent permitted
by applicable law to obtain any other provider agreements, licenses or
governmental authorizations then necessary or desirable for the operation of a
Facility by Lender or its designee for its Licensed Use (including, without
limitation, any applications for change of ownership of the existing Licenses or
change of control of the owner of the existing Licenses). Upon an occurrence of
an Event of Default, to the extent permitted by applicable law, (i) Lender is
hereby authorized (without the consent of any Borrower, any Operator or Manager)
to submit any such applications, notices, documentation or other information
which a Borrower caused to be delivered to Lender in accordance with the above
provisions to the applicable governmental authorities, or to take such other
steps as Lender may deem advisable to obtain, maintain or renew any License or
other license or governmental authorization in connection with the operation of
any Facility for its Licensed Use, and each Borrower agrees to cooperate and to
cause each Operator and Manager to cooperate with Lender in connection with the
same and (ii) each Borrower, upon demand by Lender, shall take any action and
cause each Operator and Manager to take any action necessary or desirable, in
Lender's sole judgment, to permit Lender or its designee (including a receiver)
to use, operate and maintain each Facility for its Licensed Use. If any
Borrower fails to comply with the provisions of this subsection (q) for any
--------------
reason whatsoever, such Borrower hereby irrevocably appoints Lender and its
designee as such Borrower's attorney-in-fact, with full power of substitution,
to take any action and execute any documents and instruments necessary or
desirable in Lender's sole judgment to permit Lender or its designee to
undertake Borrower's obligations under this subsection (q), including without
--------------
limitation, obtaining any licenses or governmental authorizations then required
for the operation of a Facility by Lender or its designee for its Licensed Use.
The foregoing power of attorney is coupled with an interest and is irrevocable
and Lender may exercise its rights thereunder in addition to any other remedies
which Lender may have against any Borrower or Guarantor as a result of a
Borrower's breach of the obligations contained in this subsection (q).
---------------
(s) Each Borrower each Operator and Manager shall at all times comply with
all obligations under the contracts and leases with residents of each Facility,
and no Borrower shall commit or permit any default by a Borrower, an Operator or
Manager thereunder. Each Borrower hereby indemnifies and holds harmless Lender
and agrees to defend Lender (with counsel reasonably acceptable to Lender) from
and against (collectively, the "INDEMNIFIED CLAIMS") any (i) claims, proceedings
or causes of action brought by any resident of a Facility, and (ii) loss,
damage, cost or expense, including reasonable attorneys' fees, incurred or
suffered by Lender as a result of any (x) breach by a Borrower, an Operator or
Manager of any contract or lease with a resident of a Facility or (y) violation
of any license or any federal, state or local law governing a Facility or the
use, operation or maintenance thereof for its Licensed Use.
(t) Notwithstanding the foregoing or any other provision of this Senior
Housing Rider to the contrary, if through the exercise of Lender's rights under
the Loan Documents or otherwise, Lender or an affiliate of Lender shall take
permanent possession and control of any Facility, Borrower shall not be liable
to Lender for any Indemnified Claims which first arose after the date ("TRANSFER
DATE") Lender or an affiliate of Lender took permanent possession and control of
that Facility if (but only if) the following conditions are fully satisfied:
(i) None of any Borrower, any Operator, Manager any Affiliate of
Borrower or Manager or any agent, employee or contractor of any of the foregoing
contributed, by act or omission, to the cause, existence, or occurrence of such
Indemnified Claims; and
(ii) The events or state of facts resulting (or with the passage of time
eventually permanently resulting) in any such Indemnified Claims did not exist
prior to the Transfer Date.
IN WITNESS WHEREOF, each Borrower, each Operator and Manager have executed this
Senior Housing Rider or have caused the same to be executed by its duly
authorized representatives as of the date first written above.
BORROWERS:
EMERITUS REALTY VII, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By
Name
Its
EMERITUS REALTY III, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By:
Name:
Its:
EMERITUS REALTY V, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By
Name
Its
ESC-PORT ST. RICHIE, LLC, a Washington limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By
Name
Its
EMERITUS REALTY II, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By
Name
Its
EMERITUS REALTY PUYALLUP, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By
Name
Its
EMERITUS REALTY BOZEMAN, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By
Name
Its
EMERITUS REALTY XIV, LLC, a Delaware limited liability company
By: Emeritus Realty Corporation, a Nevada corporation, its sole member
By
Name
Its
OPERATORS:
EMERITUS PROPERTIES III, INC., a Washington corporation
By
Name
Its
EMERITUS PROPERTIES V, INC., a Washington corporation
By
Name
Its
EMERITUS PROPERTIES II, INC., a Washington corporation
By
Name
Its
ESC-NEW PORT RICHEY, LLC, a Washington limited liability company
By: Emeritus Corporation, a Washington corporation
By
Name
Its
ESC-BOZEMAN, LLC, a Washington limited liability company
By: Emeritus Corporation, a Washington corporation
By
Name
Its
EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company
By: Emeritus Corporation, a Washington corporation
By
Name
Its
MANAGER:
EMERITUS CORPORATION, a Washington corporation
By
Name
Its
EXHIBIT R-1
LICENSES
Attached.
EXHIBIT R-2
DISCLOSURES
None.