CREDIT AGREEMENT
Between
U.S. BANK NATIONAL ASSOCIATION
and
EMERITUS CORPORATION
Dated as of March 16, 2004
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS 1
1.1 Terms Defined 1
1.2 Accounting Terms 5
1.3 Rules of Construction 5
1.4 Incorporation of Recitals and Exhibits 5
ARTICLE II. LOAN 5
2.1 Loan Commitment 5
2.2 Use of Proceeds 6
2.3 Note 6
2.4 Interest Rate 6
2.5 Repayment 6
2.6 Fundings 7
2.7 Loan Fee 7
2.8 Resting of Loan 7
ARTICLE III. GENERAL PROVISIONS APPLICABLE TO THE LOAN 8
3.1 Manner of Payment 8
3.2 Statements 8
3.3 Book Entry Loan Account 8
3.4 Computations of Interest 8
3.5 Default Interest 9
3.6 Maximum Interest Rate 9
3.7 Late Charge 9
3.8 Prepayments 9
3.9 Extensions, Renewals and Modifications 9
3.10 Increased Costs 9
3.11 LIBOR Rate Loan Provisions 10
3.12 Deposits Unavailable or Interest Rate Unascertainable or Inadequate;
Impracticability 11
3.13 Changes in Law Rendering LIBOR Rate Loan Unlawful 11
3.14 Discretion of U.S. Bank as to Manner of Funding 11
ARTICLE IV. CONDITIONS PRECEDENT FOR FUNDINGS UNDER THE LOAN 12
4.1 Conditions Precedent for Initial Funding 12
4.2 Conditions Precedent to Each Subsequent Funding 14
ARTICLE V. AFFIRMATIVE COVENANTS 15
5.1 Financial Data 15
5.2 Licenses and Permits 16
5.3 Maintenance of Properties 16
5.4 Payment of Charges 17
5.5 Insurance 17
5.6 Maintenance of Records 17
5.7 Inspection 17
5.8 Hazardous Substances 18
5.9 Corporate Existence 19
5.10 Notice of Disputes and Other Matters 19
5.11 Exchange of Note 19
5.12 Maintenance of Liens 20
5.13 Other Agreements 20
5.14 After-Acquired Collateral 20
5.15 Further Assurances 20
ARTICLE VI. NEGATIVE COVENANTS 20
6.1 Dividends and Distributions 20
6.2 Transactions With Affiliates 21
6.3 Liens 21
6.4 Advances and Loans 21
6.5 Consolidation, Merger and Sale of Assets 22
6.6 Contributions to Capital 22
6.7 Type of Business 22
6.8 Change of State of Organization or Name 22
6.9 Change in Documents 23
6.10 Control 23
6.11 Pension Plan 23
6.12 Debt Service Coverage Ratio 23
ARTICLE VII. REPRESENTATIONS AND WARRANTIES 23
7.1 Corporate Status 23
7.2 Power and Authority 24
7.3 No Violation of Agreements 24
7.4 Recording and Enforceability 24
7.5 Litigation 25
7.6 Good Title to Properties 25
7.7 Licenses and Permits 25
7.8 No Burdensome Agreements 25
7.9 Properties in Good Condition 25
7.10 Financial Statements 26
7.11 Outstanding Indebtedness 26
7.12 Taxes 26
7.13 License Fees 26
7.14 Trademarks, Patents, Etc. 26
7.15 Governmental Approvals 27
7.16 Disclosure 27
7.17 Regulations U and X 27
7.18 Condition of Property 27
7.19 Pension Plans 27
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES 28
8.1 Events of Default 28
8.2 Acceleration; Remedies 30
ARTICLE IX. MISCELLANEOUS 30
9.1 Notices 30
9.2 Payment of Expenses 31
9.3 Setoff 32
9.4 Waiver of Setoff 32
9.5 Fees and Commissions 32
9.6 No Waiver 32
9.7 Agreement to Release Deed of Trust 33
9.8 Entire Agreement and Amendments 34
9.9 Benefit of Agreement 34
9.10 Severability 34
9.11 Descriptive Headings 34
9.12 Governing Law 34
9.13 Consent to Jurisdiction, Service and Venue 34
9.14 Counterparts 35
9.15 Jury Waiver 35
9.16 Statutory Notice 35
EXHIBITS
Exhibit A -- Note, Section 2.3
Exhibit B -- Pledge Agreement, Section 4.1(b)
Exhibit C -- Deed of Trust, Section 4.1(c)
Exhibit D -- Indemnity Agreement, Section 4.1(g)
Exhibit E -- Board Resolution and Incumbency Certificate, Section
4.1(n)(iii)
CREDIT AGREEMENT
This credit agreement is made and entered into as of the 16th day of March,
2004, by and between U.S. BANK NATIONAL ASSOCIATION, a national banking
association ("U.S. Bank"), and EMERITUS CORPORATION, a Washington corporation
("Borrower"). Words and phrases with initial capitalized letters have the
meanings assigned in Article I hereof.
RECITALS
A. Borrower has requested U.S. Bank to extend to Borrower a revolving
line of credit in the amount of $3,000,000.
B. U.S. Bank is willing to extend such credit facility to Borrower on the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.1 Terms Defined
As used herein, the following terms have the meanings set forth below:
"Affiliate" means a Person that now or hereafter, directly or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with Borrower. A Person shall be deemed to control a corporation,
limited liability company or partnership if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management of such
corporation, limited liability company or partnership, whether through the
ownership of voting securities, by contract, or otherwise. For purposes hereof,
an Affiliate of Borrower shall specifically exclude Columbia Pacific Management,
Alterra Healthcare Corporation, Holiday Retirement Corporation and any other
entity which would be deemed to be an affiliate of Borrower solely as a result
of the common ownership or control thereof held by Daniel R. Baty or by entities
owned or controlled by Daniel R. Baty.
"Agreement" means this credit agreement and includes all renewals, amendments,
modifications and restatements of this Agreement.
"Applicable Law" means all applicable provisions and requirements of all (a)
constitutions, statutes, ordinances, rules, regulations, standards, orders and
directives of any Governmental Bodies, (b) Governmental Approvals, and (c)
orders, decisions, decrees, judgments, injunctions and writs of all courts and
arbitrators, whether such Applicable Laws presently exist, or are modified,
promulgated or implemented after the date hereof.
"Borrower" means Emeritus Corporation, a Washington corporation, and its
successors.
"Borrowing Notice" has the meaning set forth in Section 2.6(a) hereof.
"Business Day" means any day except a Saturday, Sunday or other day on which
national banks in the state of Washington are authorized or required by law to
close.
"Collateral" means all the property, real or personal, tangible or intangible,
now owned or hereafter acquired, in which U.S. Bank has been or is to be granted
a security interest by Borrower or any other Person, to secure the Indebtedness
of Borrower to U.S. Bank under this Agreement.
"Commitment Amount" means an amount equal to $3,000,000, reduced as provided for
in Section 9.7(c)(ii) hereof.
"Deed of Trust" has the meaning set forth in Section 4.1(c) hereof and includes
all renewals, amendments, modifications and restatements of the Deed of Trust.
"Debt Service Coverage Ratio" means the ratio of (a) EBITDA (EBITDA for a given
period means net income, plus interest expense, plus income tax expense, plus
depreciation expense plus amortization expense plus other non-cash expenses
approved for inclusion by U.S. Bank) minus cash taxes, minus cash dividends and
minus cash paid to redeem or repurchase any stock of Borrower for the previous
four rolling fiscal quarters to (b) the sum of all required principal payments
on long term debt plus interest expense (on short and long term debt) plus the
sum of all payments on capital leases over the last four rolling fiscal
quarters.
"Default" means any condition or event that constitutes an Event of Default or
that, with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"Event of Default" has the meaning set forth in Section 8.1 hereof.
"Funding" means any disbursement of the proceeds of the Loan.
"Governmental Approval" means any authorization, consent, approval, certificate
of compliance, license, permit or exemption from, contract with, registration or
filing with, or report or notice to, any Governmental Body required or permitted
by Applicable Law.
"Governmental Body" means the government of the United States, any state or any
foreign country, or any governmental or regulatory official, body, department,
bureau, subdivision, agency, commission, court, arbitrator or authority, or any
instrumentality thereof, whether federal, state, or local.
"Hazardous Materials" means oil or petrochemical products, PCB's, asbestos, urea
formaldehyde, flammable explosives, radioactive materials, hazardous wastes,
toxic substances or related materials, including, but not limited to, substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials" or "toxic substances" under any Hazardous
Materials Laws.
"Hazardous Materials Claims" means (a) enforcement, cleanup, removal or other
regulatory actions instituted, completed or threatened by any Governmental Body
pursuant to any applicable Hazardous Materials Laws and (b) claims made or
threatened by any third party against Borrower or its property relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from
Hazardous Materials.
"Hazardous Materials Laws" means all Applicable Laws pertaining to Hazardous
Materials.
"Indebtedness" means all items that in accordance with generally accepted
accounting principles would be included in determining total liabilities as
shown on the liabilities side of the balance sheet as of the date that
"Indebtedness" is to be determined and in any event includes liabilities secured
by any mortgage, deed of trust, pledge, lien or security interest on property
owned or acquired, whether or not such a liability has been assumed, and the
guaranties, endorsements (other than for collection in the ordinary course of
business) and other contingent obligations with regard to the obligations of
other Persons.
"Indemnity Agreement" has the meaning set forth in Section 4.1(g) hereof and
includes all replacements, amendments, and modifications of the Indemnity
Agreement.
"Interest Differential" means that sum equal to the greater of zero or the
financial loss incurred by U.S. Bank resulting from prepayment, calculated as
the difference between the amount of interest U.S. Bank would have earned (from
like investments in the Money Markets as of the first day of the LIBOR Rate
Loan) had prepayment not occurred and the interest U.S. Bank will actually earn
(from like investments in the Money Markets as of the date of prepayment) as a
result of the redeployment of funds from the prepayment.
"LIBOR Rate Loan" has the meaning set forth in Section 2.4 hereof.
"Loan Documents" means this Agreement, the Note, the Deed of Trust, the
Indemnity Agreement and the Pledge Agreement, together with all other
agreements, instruments and documents arising out of or relating to this
Agreement or the Loan, and includes all renewals, replacements and amendments
thereof.
"Loan Period" means the period commencing on the advance date of the applicable
LIBOR Rate Loan and ending on the numerically corresponding day 1, 2 or 3 months
thereafter matching the interest rate term selected by Borrower; provided,
however, (a) if any Loan Period would otherwise end on a day which is not a New
York Banking Day, then the Loan Period shall end on the next succeeding New York
Banking Day unless the next succeeding New York Banking Day falls in another
calendar month, in which case the Loan Period shall end on the immediately
preceding New York Banking Day; or (b) if any Loan Period begins on the last New
York Banking Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of the Loan
Period), then the Loan Period shall end on the last New York Banking Day of the
calendar month at the end of such Loan Period.
"Loan" has the meaning set forth in Section 2.1 hereof and includes all
renewals, replacements and amendments of the Loan.
"Maturity Date" has the meaning set forth in Section 2.5(b) hereof.
"Money Markets" refers to one or more wholesale funding markets available
to and selected by U.S. Bank, including negotiable certificates of deposit,
commercial paper, eurodollar deposits, bank notes, federal funds, interest rate
swaps or others.
"New York Banking Day" means any day (other than a Saturday or Sunday) on which
commercial banks are open for business in New York, New York.
"Note" has the meaning set forth in Section 2.3 hereof and includes all
renewals, amendments, modifications and restatements of the Note.
"Obligations" has the meaning set forth in Section 9.3 hereof.
"Participant" means any financial institution to which U.S. Bank sells a
participation in the Loan.
"Person" means any individual, partnership, limited liability company, joint
venture, firm, corporation, association, trust or other enterprise or any
Governmental Body.
"Plan" means an employee pension benefit plan that is covered by ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code of 1986 and is either (a) maintained by Borrower or any Affiliate
for employees of Borrower or any Affiliate or (b) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which Borrower or any Affiliate is then
making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Pledge Agreement" has the meaning set forth in Section 4.1(b) hereof and
includes all renewals, amendments, modifications and restatements of the Pledge
Agreement.
"Prime Rate Loan" has the meaning set forth in Section 2.4 hereof.
"Scottsdale Property" has the meaning set forth in Section 9.7 hereof.
"Setoff" has the meaning set forth in Section 9.3 hereof.
"Subsidiary" a corporation, partnership, limited liability company or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership,
limited liability company or other entity are at the time owned by Borrower.
"U.S. Bank" means U.S. Bank National Association, a national banking
association, and its successors and assigns.
1.2 Accounting Terms
Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles consistently applied.
1.3 Rules of Construction
Unless the context otherwise requires, the following rules of construction
apply to the Loan Documents:
(a) Words in the singular include the plural and in the plural include the
singular.
(b) In the event of any inconsistency between the provisions of this
Agreement and the provisions of any of the other Loan Documents, the provisions
of this Agreement govern.
1.4 Incorporation of Recitals and Exhibits
The foregoing recitals are incorporated into this Agreement by reference.
All references to "Exhibits" contained herein are references to exhibits
attached hereto, the terms and conditions of which are made a part hereof for
all purposes.
ARTICLE II. LOAN
2.1 Loan Commitment
Subject to and upon the terms and conditions set forth herein and in
reliance upon the representations, warranties, and covenants of Borrower
contained herein or made pursuant hereto, U.S. Bank will make Fundings to
Borrower from time to time during the period ending on June 30, 2004, but such
Fundings shall not exceed, in the aggregate principal amount at any one time
outstanding, the Commitment Amount (the "Loan"). Borrower may borrow, repay and
reborrow hereunder either the full amount of the Loan or any lesser sum.
2.2 Use of Proceeds
The proceeds of the Loan shall be used by Borrower for funding short-term
and seasonal operating cash needs.
2.3 Note
The Loan shall be evidenced by a promissory note in the form attached
hereto as Exhibit A (the "Note").
2.4 Interest Rate
Interest on each Funding under the Loan shall accrue at one of the
following per annum rates selected by Borrower (i) upon notice to U.S. Bank (or
in the event no other selection is made by Borrower), 1.0% plus the prime rate
announced by U.S. Bank from time to time, as and when such rate changes (a
"Prime Rate Loan"); or (ii) upon a minimum of two New York Banking Days prior
notice, 3.5% plus the 1, 2 or 3 month LIBOR rate quoted by U.S. Bank from
Telerate Page 3750 or any successor thereto (which shall be the LIBOR rate in
effect two New York Banking Days prior to commencement of the advance), adjusted
for any reserve requirement and any subsequent costs arising from a change in
government regulation (a "LIBOR Rate Loan"). In the event Borrower does not
timely select another interest rate option at least two New York Banking Days
before the end of the Loan Period for a LIBOR Rate Loan, U.S. Bank may at any
time after the end of the Loan Period convert the LIBOR Rate Loan to a Prime
Rate Loan, but until such conversion, the funds advanced under the LIBOR Rate
Loan shall continue to accrue interest at the same rate as the interest rate in
effect for such LIBOR Rate Loan prior to the end of the Loan Period. No LIBOR
Rate Loan may extend beyond the Maturity Date. In any event, if the Loan Period
for a LIBOR Rate Loan should happen to extend beyond the Maturity Date, such
loan must be prepaid on the Maturity Date. U.S. Bank's internal records of
applicable interest rates shall be determinative in the absence of manifest
error. Each LIBOR Rate Loan shall be in a minimum principal amount of $100,000.
The aggregate number of LIBOR Rate Loans in effect at any one time may not
exceed three. If a LIBOR Rate Loan is prepaid prior to the end of the Loan
Period for such loan, whether voluntarily or because prepayment is required on
the Maturity Date or due to acceleration of the Loan upon an Event of Default or
otherwise, Borrower agrees to pay all of U.S. Bank's costs, expenses and
Interest Differential (as determined by U.S. Bank) incurred as a result of such
prepayment. Because of the short-term nature of this facility, Borrower agrees
that the Interest Differential shall not be discounted to its present value.
Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining
entire principal balance of such loan.
2.5 Repayment
(a) Interest is payable beginning June 10, 2004, and on the same date
of each consecutive month thereafter (except that if a given month does not have
such a date, the last day of such month), plus a final interest payment with the
final payment of principal.
(b) Principal is payable on June 30, 2004 (the "Maturity Date").
2.6 Fundings
(a) U.S. Bank is hereby authorized by Borrower to make Fundings under
the Loan upon receipt for each Funding of an oral or written request therefor
(including written requests communicated by facsimile) ("Borrowing Notice") from
the Director of Financial Services, the Chief Financial Officer, the Cash
Manager and/or the Director of Real Estate Finance of Borrower, each of whom is
authorized to request Fundings and direct the disposition of any such Fundings
until written notice by Borrower of the revocation of such authority is received
by U.S. Bank. Any such Funding shall be conclusively presumed to have been made
to or for the benefit of Borrower when made in accordance with such a request
and direction for disposition or when such Funding is deposited to the credit of
the account of Borrower with U.S. Bank or is transmitted to any other bank with
directions to credit the same to the account of Borrower at such bank,
regardless of whether persons other than those authorized hereunder to make
requests for Fundings have authority to draw against any such account.
(b) Borrower acknowledges that U.S. Bank cannot effectively determine
whether a particular request for a Funding is valid, authorized or authentic.
It is nevertheless important to Borrower that it has the privilege of making
requests for Fundings in accordance with Section 2.6(a) hereof. Therefore, to
induce U.S. Bank to lend funds in response to such requests and in consideration
for U.S. Bank's agreement to receive and consider such requests, except as
otherwise specifically provided herein, Borrower assumes all risk of the
validity, authenticity and authorization of such requests, whether or not the
individual making such requests has authority to request Fundings and whether or
not the aggregate sum owing exceeds the maximum principal amount referred to
above. Absent gross negligence or willful misconduct, U.S. Bank shall not be
responsible under principles of contract, tort or otherwise for the amount of an
unauthorized or invalid Funding; rather, Borrower agrees to repay any sums with
interest as provided herein.
2.7 Loan Fee
Concurrently with the execution of this Agreement, Borrower shall pay U.S.
Bank a nonrefundable fee for the Loan in the amount of $3,750.
2.8 Resting of Loan
Notwithstanding any provision of this Agreement to the contrary, the
outstanding principal balance of the Loan shall be $-0- for not fewer than (a)
30 days (consecutive or non-consecutive) during the period from the date of this
Agreement through the Maturity Date, and (b) 60 days (consecutive or
non-consecutive) during each one year period commencing July 1, 2004. This
provision shall not be construed to constitute a commitment of U.S. Bank to
extend the commitment period or Maturity Date of the Loan.
ARTICLE III. GENERAL PROVISIONS APPLICABLE TO THE LOAN
3.1 Manner of Payment
All sums payable to U.S. Bank pursuant to this Agreement shall be paid
directly to U.S. Bank in immediately available United States funds. Whenever
any payment to be made hereunder or on the Note becomes due and payable on a day
that is not a Business Day, such payment may be made on the next succeeding
Business Day and such extension of time shall in such case be included in
computing interest on such payment. U.S. Bank is hereby authorized to deduct
any and all payments required hereunder from Borrower's accounts at U.S. Bank.
3.2 Statements
U.S. Bank shall send Borrower statements of all amounts due hereunder; the
statements shall be considered correct and conclusively binding, absent manifest
error, on Borrower unless Borrower notifies U.S. Bank to the contrary within 30
days of receipt of any statement that Borrower claims to be incorrect. Borrower
agrees that accounting entries made by U.S. Bank with respect to Borrower's loan
accounts shall constitute evidence of all Fundings made under and payments made
on the Loan. Without limiting the methods by which U.S. Bank may otherwise be
entitled by Applicable Law to make demand for payment of the Loan upon Borrower,
Borrower agrees that any statement, invoice or payment notice from U.S. Bank to
Borrower with respect to any principal or interest obligation of Borrower to
U.S. Bank shall be deemed to be a demand for payment in accordance with the
terms of such statement, invoice or payment notice. Under no circumstances
shall a demand by U.S. Bank for partial payment of principal or interest or both
be construed as a waiver by U.S. Bank of its right thereafter to demand and
receive payment (in part or in full) of any remaining principal or interest
obligation.
3.3 Book Entry Loan Account
U.S. Bank shall establish a book entry loan account for the Loan in which
U.S. Bank will make debit entries of all Fundings pursuant to the terms of this
Agreement. U.S. Bank will also record in the applicable loan account, in
accordance with customary banking practices, all interest and other charges,
expenses and other items properly chargeable to Borrower, if any, together with
all payments made by Borrower on account of the Indebtedness evidenced by
Borrower's respective loan accounts and all other sums credited to the
respective loan accounts. The debit balance of Borrower's respective loan
accounts shall reflect the amount of Borrower's Indebtedness to U.S. Bank from
time to time by reason of advances, charges, payments or credits.
3.4 Computations of Interest
All computations of interest shall be based on a 360-day year for the
actual number of days elapsed.
3.5 Default Interest
Upon the occurrence and during the continuance of any Event of Default,
U.S. Bank may, at its option, raise the interest rate charged on the Loan to a
rate of up to the then-applicable interest rate plus 4 percent per annum from
the date of the occurrence of the Event of Default until the Event of Default is
cured or waived by U.S. Bank or, absent cure or waiver, until the Loan is repaid
in full.
3.6 Maximum Interest Rate
Notwithstanding any provision contained herein or in the Note, the total
liability of Borrower for payment of interest pursuant hereto, including late
charges, shall not exceed the maximum amount of interest permitted by Applicable
Law to be charged, collected or received from Borrower; and if any payments by
Borrower include interest in excess of that maximum amount, U.S. Bank shall
apply the excess first to reduce the unpaid balance of the Loan, then to reduce
the balance of any other Indebtedness of Borrower to U.S. Bank. If there is no
such Indebtedness, the excess shall be returned to Borrower.
3.7 Late Charge
If any payment of principal or interest required under the Loan is past due
for a period in excess of 10 days, Borrower will be charged a late charge of 5
percent of the delinquent payment or $5, whichever is greater, for each such
late payment.
3.8 Prepayments
Borrower shall have the right, at any time, to prepay the whole or any part
of any Prime Rate Loan without prepayment charges concurrently with any regular
monthly payment of interest. Borrower may not prepay all or any portion of any
LIBOR Rate Loan whether voluntarily, by acceleration or otherwise unless
concurrently with such prepayment Borrower pays U.S. Bank all amounts due in
accordance with Section 2.4. All prepayments shall be applied first to accrued
interest on the Loan and then to the outstanding principal balance of the Loan
in the inverse order of maturity.
3.9 Extensions, Renewals and Modifications
Any extensions, renewals, and modifications of the Loan shall be governed
by the terms and conditions of this Agreement and the other Loan Documents
unless otherwise agreed to in writing by U.S. Bank and Borrower.
3.10 Increased Costs
If, as a result of any law, rule, regulation, treaty or directive, or any
change therein or in the interpretation or administration thereof, or compliance
by U.S. Bank with any request or directive (whether or not having the force of
law) from any court, central bank, governmental authority, agency or
instrumentality, or comparable agency:
(a) Any tax, duty or other charge to the Loan is imposed thereunder,
modified or deemed applicable, or the basis of taxation of payments to U.S. Bank
of interest or principal of the Loan or of the commitment fees (other than taxes
imposed on the overall net income of U.S. Bank by the jurisdiction in which has
its principal office) is changed;
(b) Any reserve, special deposit, special assessment or similar requirement
against assets of, deposits with, or for the account of, or credit extended by,
U.S. Bank is imposed, modified or deemed applicable;
(c) Any increase in the amount of capital required or expected to be
maintained by U.S. Bank or any person or entity controlling U.S. Bank is
imposed, modified or deemed applicable; or
(d) Any other condition affecting the Loan is imposed on U.S. Bank or the
relevant funding markets;
and U.S. Bank determines that, by reason thereof, the cost to U.S. Bank of
making or maintaining the Loan is increased, or the amount of any sum receivable
by U.S. Bank hereunder or under the Note is reduced;
then, Borrower shall pay to U.S. Bank upon a written reasonably detailed demand
- ----
such additional amount or amounts as will compensate U.S. Bank (or the
controlling person or entity in the instance of (c) above) for such additional
costs or reduction (provided that U.S. Bank has not been compensated for such
additional cost or reduction in the calculation of the rate applicable to LIBOR
Rate Loans). Determinations by U.S. Bank for purposes of this Section 3.10 of
the additional amounts required to compensate U.S. Bank shall be conclusive in
the absence of manifest error. In determining such amounts, U.S. Bank may use
any reasonable averaging, attribution and allocation methods.
3.11 LIBOR Rate Loan Provisions
(a) Borrower may obtain LIBOR rate quotes from U.S. Bank between 8 a.m.
and 12 noon (Seattle, Washington time) on any New York Banking Day.
(b) Notwithstanding any other term of this Agreement, Borrower may not
select the LIBOR rate if an Event of Default hereunder has occurred and is
continuing.
(c) Nothing contained in this Agreement, including without limitation the
determination of any Loan Period for a LIBOR Rate Loan or U.S. Bank's quotation
of any LIBOR rate, shall be construed to prejudice U.S. Bank's right to decline
to make any requested Funding provided that U.S. Bank acts in accordance with
the provisions of this Agreement.
3.12 Deposits Unavailable or Interest Rate Unascertainable or Inadequate;
Impracticability
If U.S. Bank determines (which determination shall be conclusive and
binding on the parties hereto absent manifest error) that:
(a) Deposits of the necessary amount for the relevant Loan Period for any
LIBOR Rate Loan are not available to U.S. Bank in the relevant markets or that,
by reason of circumstances affecting such market, adequate and reasonable means
do not exist for ascertaining the LIBOR rate;
(b) The LIBOR rate will not adequately and fairly reflect the cost to U.S.
Bank of making or funding the LIBOR Rate Loan for a relevant Loan Period; or
(c) The making or funding of LIBOR Rate Loans has become impracticable as a
result of any event occurring after the date of this Agreement which, in the
opinion of U.S. Bank, materially and adversely affects such LIBOR Rate Loan or
U.S. Bank's commitment to make such LIBOR Rate Loan or the relevant market;
U.S. Bank shall promptly give notice of such determination to Borrower, and (i)
any notice of a new LIBOR Rate Loan previously given by Borrower and not yet
borrowed or converted shall be deemed to be a notice to make a Prime Rate Loan,
and (ii) Borrower shall be obligated to either prepay in full any outstanding
LIBOR Rate Loan on the expiration date of the current Loan Period with respect
thereto or convert any such LIBOR Rate Loan to a Prime Rate Loan on such
expiration date.
3.13 Changes in Law Rendering LIBOR Rate Loan Unlawful
If at any time due to the adoption of any law, rule, regulation, treaty, or
directive, or any change therein or in the interpretation or administration
thereof by any court, central bank, governmental authority, agency, or
instrumentality, or comparable agency charged with the interpretation or
administration thereof, or for any other reason arising subsequent to the date
of this Agreement, it shall become unlawful or impossible for U.S. Bank to make
or fund any LIBOR Rate Loan, the obligation of U.S. Bank to provide such LIBOR
Rate Loan shall, upon the happening of such event, forthwith be suspended for
the duration of such illegality or impossibility. If any such event shall make
it unlawful or impossible for U.S. Bank to continue any LIBOR Rate Loan
previously made by it hereunder, U.S. Bank shall, upon the happening of such
event, notify Borrower thereof in writing, and Borrower shall, at the time
notified by U.S. Bank, either convert each such unlawful LIBOR Rate Loan to a
Prime Rate Loan or repay such LIBOR Rate Loan in full, together with accrued
interest thereon, subject to the provisions of Section 2.4.
3.14 Discretion of U.S. Bank as to Manner of Funding
Notwithstanding any provision of this Agreement to the contrary, U.S. Bank
shall be entitled to fund and maintain its funding of all or any part of the
Loan in any manner it elects; it being understood, however, that for purposes of
this Agreement, all determinations hereunder shall be made as if U.S. Bank had
actually funded and maintained each LIBOR Rate Loan during the Loan Period for
such LIBOR Rate Loan through the purchase of deposits having a term
corresponding to such Loan Period and bearing an interest rate equal to the
LIBOR rate for such Loan Period (whether or not U.S. Bank shall have granted any
participations in such LIBOR Rate Loan).
ARTICLE IV. CONDITIONS PRECEDENT FOR FUNDINGS UNDER THE LOAN
4.1 Conditions Precedent for Initial Funding
U.S. Bank shall not be required to make the initial Funding under the Loan
unless or until the following conditions have been fulfilled to the satisfaction
of U.S. Bank:
(a) U.S. Bank shall have received this Agreement and the Note, duly executed
and delivered by the respective parties thereto.
(b) U.S. Bank shall have received, duly executed and delivered by Borrower,
a pledge agreement in the form attached hereto as Exhibit B ("Pledge
Agreement"), granting to U.S. Bank a first priority and exclusive security
interest in all of Borrower's membership interest in Senior Healthcare Partners,
LLC, a Colorado limited liability company, now owned or hereafter acquired,
together with a Control Agreement in form and substance acceptable to U.S. Bank,
duly executed and delivered by Borrower and Senior Healthcare Partners, LLC. In
addition, Borrower shall use diligent efforts to provide to U.S. Bank, as
expeditiously as possible, a consent to such pledge in form and substance
acceptable to U.S. Bank, duly executed and delivered by all members of Senior
Healthcare Partners, LLC.
(c) U.S. Bank shall have received, duly executed and delivered by Borrower,
a deed of trust, assignment of leases and rents, and security agreement in the
form attached hereto as Exhibit C ("Deed of Trust"), granting to U.S. Bank a
first priority and exclusive security interest in Borrower's fee interest in the
Scottsdale Property and legally described therein.
(d) U.S. Bank shall have received such documents deemed necessary by U.S.
Bank to perfect the security interest granted to U.S. Bank, together with an
Article 9 certificate in a form designated by U.S. Bank, all duly executed and
delivered by Borrower.
(e) U.S. Bank shall have received, reviewed, and approved a FIRREA-compliant
appraisal for the real property encumbered by the Deed of Trust, provided that
such requirement is not required to be satisfied by Borrower until 60 days
following the initial Funding.
(f) U.S. Bank shall have received a supplement to the February 17, 2004,
preliminary commitment for title insurance No. 03002252, issued by Fidelity
National Title Insurance Company, dated as of the estimated date of the initial
Funding, stating that the title company is ready, able and willing to issue to
U.S. Bank, without condition, change or exception other than the exceptions
standard to such policy, an American Land Title Association (ALTA) extended
coverage mortgagee's policy of title insurance insuring the validity and first
priority of the lien of the Deed of Trust against the real property described
therein, in the amount of $3,000,000, and with such endorsements as U.S. Bank
deems necessary, in its reasonable discretion, including endorsements ALTA 100
(compliance with covenants), 102.5 (foundation), 103.7 (abuts a public street),
116 (address), 116.1 (survey), a variable interest rate endorsement, a revolving
line endorsement, a contiguity endorsement, a subdivision endorsement, and an
environmental lien endorsement, as well as an endorsement removing the
creditor's rights exclusion if and to the extent such endorsements are available
in Arizona. All title exceptions shall be subject to U.S. Bank's reasonable
approval. The title insurance policy shall insure that the real property
described in the Deed of Trust is free of the possibility of any prior
mechanics' or materialmen's liens, and that all taxes and assessments on such
property or any part thereof which are due and payable on the date of closing
have been paid.
(g) U.S. Bank shall have received, duly executed and delivered by Borrower,
an indemnity agreement in the form attached hereto as Exhibit D (the "Indemnity
Agreement"), pursuant to which Borrower agrees to indemnify U.S. Bank against
certain claims more particularly described therein.
(h) U.S. Bank shall have received and approved a flood hazard determination
with respect to the real property encumbered by the Deed of Trust. If the real
property described in the Deed of Trust is located in an area designated by the
Department of Housing and Urban Development as a special flood hazard area,
Borrower must purchase a flood insurance policy as required by the Flood
Disaster Protection Act of 1973. The policy shall name U.S. Bank as loss payee
on a Form 438-BFU or acceptable equivalent attached to the policy.
(i) U.S. Bank shall have received and approved an environmental
questionnaire with respect to the real property encumbered by the Deed of Trust.
(j) U.S. Bank shall have received and approved a Phase I Environmental
Report reasonably acceptable to U.S. Bank and from a geotechnical engineer or
other person reasonably acceptable to U.S. Bank verifying that, after
investigation into the prior uses of the property encumbered by the Deed of
Trust, there is no material possibility that such property is contaminated by
Hazardous Materials, or that Hazardous Materials have been generated, stored or
disposed of on, under or around such property in an unlawful or potentially
dangerous manner. If the Phase I Environmental Report does not indicate to U.S.
Bank's satisfaction that there is no material possibility of contamination by
Hazardous Materials, then Borrower shall provide a Phase II Environmental Report
reasonably acceptable to U.S. Bank and from a geotechnical engineer or other
person reasonably acceptable to U.S. Bank verifying to U.S. Bank's satisfaction
after due inspection and tests of such property, that there is no Hazardous
Materials located on, under or around such property which poses a possibility of
contamination of the property encumbered by the Deed of Trust.
(k) U.S. Bank shall have received and approved an ADA questionnaire with
respect to the real property encumbered by the Deed of Trust.
(l) No Default or Event of Default hereunder shall exist, and after having
given effect to the requested Funding, no Default or Event of Default shall
exist.
(m) All representations and warranties of Borrower contained herein or
otherwise made in writing in connection herewith shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of the initial Funding.
(n) All corporate proceedings of Borrower shall be satisfactory in form and
substance to U.S. Bank, and U.S. Bank shall have received all information and
copies of all documents, including records of all corporate proceedings, that
U.S. Bank has requested in connection therewith, such documents where
appropriate to be certified by proper corporate authorities or Governmental
Bodies. Borrower shall provide U.S. Bank with the following documents prior to
or upon the execution of this Agreement:
(i) Copies of the articles of incorporation and bylaws of Borrower,
together with all amendments thereto, certified by Borrower to be true and
complete;
(ii) A certificate of authority for Borrower in the state of
Washington, dated within 30 days of the date of the execution of this Agreement;
and
(iii) A certified resolution of the directors of Borrower and
incumbency certificate in the form attached hereto as Exhibit E.
(o) U.S. Bank shall have received such evidence deemed necessary by
U.S. Bank that U.S. Bank's security interests in the Collateral constitute first
priority and exclusive security interests, except as otherwise provided herein.
(p) U.S. Bank shall have received a Borrowing Notice from Borrower for the
initial Funding requested under the Loan.
(q) U.S. Bank shall have received insurance certificates and lender loss
payable endorsements on casualty/property loss insurance with respect to the
Scottsdale Property.
4.2 Conditions Precedent to Each Subsequent Funding
The obligation of U.S. Bank to make any Funding subsequent to the initial
Funding hereunder is subject to the fulfillment, to the satisfaction of U.S.
Bank, of the following:
(a) The conditions set forth in Section 4.1 hereof shall have been
previously satisfied, and U.S. Bank shall have received evidence satisfactory to
U.S. Bank of satisfaction thereof;
(b) U.S. Bank shall have received a Borrowing Notice for each requested
Funding under the Loan;
(c) There shall be executed and delivered to U.S. Bank such further
instruments, agreements and documents, as may be reasonably necessary or proper
in the opinion of U.S. Bank to confirm the obligations of Borrower to U.S. Bank
hereunder, the grant of security therefor and the proper use of the proceeds of
all Fundings;
(d) The representations and warranties of Borrower in Article VII hereof
shall be true on the date of each Funding with the same force and effect as if
made on and as of that date;
(e) No Default or Event of Default shall exist, and after having given
effect to the requested Funding, no Default or Event of Default shall exist; and
(f) To the extent not previously delivered, all other documents, agreements
and instruments from or with respect to Borrower or any other Person that may be
called for hereunder shall be duly executed and delivered to U.S. Bank,
including, but not limited to, all documents, agreements and instruments deemed
necessary by U.S. Bank to perfect its security interest in Collateral acquired
after the date of this Agreement. For the purposes of this Agreement, the
waiver of delivery of any document, agreement or instrument from or with respect
to Borrower or any other Person does not constitute a continuing waiver with
respect to the obligation to fulfill the conditions precedent to each Funding
hereunder.
ARTICLE V. AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that so long as this Agreement is in
effect, and until the Loan, together with interest thereon, and all other
obligations incurred hereunder is paid or satisfied in full, Borrower shall:
5.1 Financial Data
Keep its books of account in accordance with generally accepted accounting
principles, consistently applied, and furnish to U.S. Bank:
(a) As soon as practicable and in any event within 45 days after the close
of each fiscal quarter of Borrower, the following unaudited financial statements
of Borrower for each such quarter, all in reasonable detail and certified by
Borrower to be true and correct: balance sheet and statement of income. There
shall be included in such financial statements a calculation of the financial
covenants provided for in Article VI hereof.
(b) As soon as practicable and in any event within 120 days after the close
of each fiscal year of Borrower, the following financial statements of Borrower,
setting forth the corresponding figures for the previous fiscal year in
comparative form where appropriate, all in reasonable detail and audited
(without any qualification or exception deemed material by U.S. Bank) by the
independent certified public accountant engaged by Borrower as of the date of
this Agreement or such other independent certified public accountants selected
by Borrower and satisfactory to U.S. Bank: balance sheet, statement of income
and statement of cash flows. Borrower shall provide U.S. Bank with a copy of
its independent certified public accountants' management letter or other similar
report or correspondence to Borrower.
(c) As soon as practicable and in any event within 45 days after the close
of each fiscal quarter of Borrower, certificates signed by Borrower, stating
that during such period no Default or Event of Default existed or if any such
Default or Event of Default existed, specifying the nature thereof, the period
of existence thereof and what action Borrower proposes to take or has taken with
respect thereto, and that during such period Borrower was in compliance with all
of the financial covenants set forth in Article VI hereof; and promptly upon
Borrower becoming aware of the occurrence of any Default or Event of Default, a
certificate signed by Borrower, specifying the nature thereof, the period of
existence thereof and what action Borrower proposes to take or has taken with
respect thereto.
(d) As soon as practicable and in any event within three days after the end
of each week, an occupancy report for all facilities owned or managed by
Borrower or its Affiliates for each such week in a form and in such detail as is
acceptable to U.S. Bank.
(e) As soon as practicable and in any event within 120 days after the
beginning of each fiscal year, a projection of the financial operations of
Borrower (including an operating budget and cash budget) in a form and in such
detail as is acceptable to U.S. Bank.
(f) Upon request by U.S. Bank, copies of all reports relative to the
operations of Borrower and its Affiliates filed with any Governmental Body.
(g) With reasonable promptness, such other information regarding the
business, operations and financial condition of Borrower and its Affiliates as
U.S. Bank may from time to time reasonably request.
5.2 Licenses and Permits
Maintain all Governmental Approvals and all related or other material
agreements necessary for Borrower to operate its business, as it now exists or
as it may be modified or expanded. Borrower will at all times comply with all
Applicable Laws relating to the operations, facilities or activities of Borrower
where the failure to comply with the same could reasonably be expected to have a
material adverse affect on Borrower.
5.3 Maintenance of Properties
Keep Borrower's properties in good repair and in good working order and
condition, in a manner consistent with past practices; from time to time make
all appropriate and proper repairs, renewals, replacements, additions and
improvements thereto; and keep all equipment that may now or in the future be
subject to compliance with any Applicable Laws in compliance with such
Applicable Laws where the failure to so comply could reasonably be expected to
have a material adverse affect on Borrower.
5.4 Payment of Charges
Duly pay and discharge all material (a) taxes, assessments, levies and any
other charges of Governmental Bodies imposed on or against Borrower or its
property or assets, or upon any property leased by Borrower, prior to the date
on which penalties attached thereto, unless and to the extent only that such
taxes, assessments, levies and any other charges of Governmental Bodies, after
written notice thereof having been given to U.S. Bank, are being contested in
good faith and by appropriate proceedings; (b) claims allowed by Applicable
Laws, whether for labor, materials, rentals or anything else, which could, if
unpaid, become a lien or charge upon Borrower's property or assets or the
outstanding capital stock of Borrower or adversely affect the facilities or
operations of Borrower (unless and to the extent only that the validity thereof
is being contested in good faith and by appropriate proceedings after written
notice thereof has been given to U.S. Bank); (c) trade bills in accordance with
the terms thereof; and (d) other Indebtedness heretofore or hereafter incurred
or assumed by Borrower, unless such Indebtedness be renewed or extended. In the
event any charge is being contested by Borrower as allowed above, Borrower shall
establish adequate reserves against possible liability therefor if and to the
extent required by generally accepted accounting principles.
5.5 Insurance
Maintain insurance upon the real and personal property encumbered by the
Deed of Trust which complies with the requirements of the Deed of Trust and
shall cause the insurer issuing such policy to certify to U.S. Bank that if such
insurance is proposed to be canceled or materially changed for any reason
whatsoever, such insurer will promptly notify U.S. Bank, and such cancellation
or change shall not be effective as to U.S. Bank for 30 days after receipt by
U.S. Bank of such notice, unless the effect of the change is to extend or
increase coverage under the policy.
5.6 Maintenance of Records
Keep at all times books of account and other records in which entries which
are true and correct in all material respects will be made of all dealings or
transactions in relation to the business and affairs of Borrower.
5.7 Inspection
Allow any representative of U.S. Bank to visit and inspect any of the
properties of Borrower, to examine the books of account and other records and
files of Borrower, to make copies thereof, and to discuss the affairs, business,
finances and accounts of Borrower with its officers and employees, all at such
reasonable times and on reasonable advance notice as U.S. Bank may reasonably
determine to be necessary to monitor the Loan and the Borrower's compliance with
the terms of this Agreement and the other Loan Documents. This right of
inspection shall specifically include U.S. Bank's collateral and financial
examinations but shall be subject to all applicable laws governing the
confidentiality of patient and employee records.
5.8 Hazardous Substances
(a) Borrower hereby covenants and agrees that so long as any
Indebtedness of Borrower to U.S. Bank is outstanding:
(i) Borrower will not permit its property or any portion thereof to be
a site for the storage, use, generation, manufacture, disposal or transportation
of Hazardous Materials in violation of Hazardous Materials Laws;
(ii) Borrower will not permit any Hazardous Materials to be disposed of
off its property other than in properly licensed disposal sites;
(iii) Borrower, at Borrower's sole cost and expense, will keep and
maintain its property and each portion thereof in compliance with and shall not
cause or knowingly permit its property or any portion thereof to be in violation
of any Hazardous Materials Laws; and
(iv) Borrower will promptly after obtaining actual knowledge thereof
advise U.S. Bank in writing of any Hazardous Material Claim.
(b) Borrower agrees to indemnify U.S. Bank and hold U.S. Bank harmless
from and against any and all claims, demands, damages, losses, liens,
liabilities, penalties, fines, lawsuits and other proceedings and costs and
expenses (including reasonable attorneys' fees), arising directly or indirectly
from or out of or in any way connected with (i) the accuracy of the
representations contained in Section 7.18 hereof; (ii) any activities on its
property during Borrower's ownership, possession or control of its property
which directly or indirectly results in its property or any other property
becoming contaminated with Hazardous Materials; (iii) the discovery of Hazardous
Materials on its property; (iv) the cleanup of Hazardous Materials from its
property; and (v) the discovery of Hazardous Materials or the cleanup of
Hazardous Materials from adjacent or other property that has become contaminated
as a result of any activity on Borrower's property. As between Borrower and
U.S. Bank, Borrower acknowledges that it will be solely responsible for all
costs and expenses relating to the cleanup of Hazardous Materials from its
property or from any other properties that become contaminated with Hazardous
Materials as a result of activities on or the contamination of its property.
(c) Borrower's obligations under this Section 5.8 are unconditional and
shall not be limited by any nonrecourse or other limitations of liability
provided for in the Loan Documents. The representations, warranties and
covenants of Borrower set forth in this Section 5.8 and Section 7.18 hereof
(including, but not limited to, the indemnity provided for in Section 5.8(b)
hereof) shall survive the closing and repayment of the Loan to U.S. Bank; and,
to the extent permitted by Applicable Laws and Hazardous Materials Laws, shall
survive the transfer of its property by foreclosure proceedings (whether
judicial or nonjudicial), deed in lieu of foreclosure or otherwise. Borrower
acknowledges and agrees that its covenants and obligations hereunder are
separate and distinct from its obligations under the Loan and the Loan
Documents. Notwithstanding any provision of this Agreement or any of the other
Loan Documents to the contrary, the provisions of this Section 5.8 shall not be
secured by the Deed of Trust.
5.9 Corporate Existence
Maintain and preserve the corporate existence of Borrower.
5.10 Notice of Disputes and Other Matters
Promptly give written notice to U.S. Bank of:
(a) Any citation, order to show cause or other legal process or order that
could reasonably be expected to have a material adverse effect on Borrower and
directing Borrower to become a party to or to appear at any proceeding or
hearing by or before any Governmental Body that has granted to Borrower any
Governmental Approval, and include with such notice a copy of any such citation,
order to show cause, or other legal process or order;
(b) Any (i) refusal, denial, threatened denial or failure by any
Governmental Body to grant, issue, renew or extend any material Governmental
Approval; (ii) proposed or actual revocation, termination or modification
(whether favorable or adverse) of any Governmental Approval by any Governmental
Body; (iii) dispute or other action with regard to any Governmental Approval by
any Governmental Body; (iv) notice from any Governmental Body of the imposition
of any material fines or penalties or forfeitures; or (v) threats or notice with
respect to any of the foregoing or with respect to any proceeding or hearing
that could reasonably be expected to result in any of the foregoing and that, in
each instance described in the foregoing clauses (i) through (v), if decided
adversely to Borrower, could reasonably be expected to have a material adverse
affect on Borrower;
(c) Any dispute concerning or any threatened nonrenewal or modification of
any material lease for real or personal property to which Borrower is a party
which, if decided adversely to Borrower, could reasonably be expected to have a
material adverse affect on Borrower; or
(d) Any actions, proceedings or claims of which Borrower has notice that may
be commenced or asserted against Borrower in which the amount involved is
$1,000,000 or more and is not fully covered by insurance or which, if not solely
a claim for monetary damages and if adversely determined, could reasonably be
expected to have a material adverse affect on Borrower.
5.11 Exchange of Note
Upon receipt of a written notice of loss, theft, destruction or mutilation
of a Note, and upon surrendering such Note for cancellation if mutilated,
execute and deliver a new Note or a Note of like tenor in lieu of such lost,
stolen, destroyed or mutilated Note. Any Note issued pursuant to this Section
5.11 shall be dated so that neither gain nor loss of interest shall result
therefrom.
5.12 Maintenance of Liens
At all times maintain the liens and security interests provided under or
pursuant to this Agreement as valid and perfected first liens and security
interests on the property and assets intended to be covered thereby. Borrower
shall take all action reasonably requested by U.S. Bank necessary to assure that
U.S. Bank has valid and exclusive liens and security interests in all
Collateral.
5.13 Other Agreements
Comply with all covenants and agreements set forth in or required pursuant
to any of the other Loan Documents as and when required or within any applicable
cure period.
5.14 After-Acquired Collateral
Upon request by U.S. Bank, execute and deliver to U.S. Bank appropriate
instruments in order to effectuate the proper granting and perfection of a first
priority security interest in or assignment of all property to U.S. Bank,
whether personal, real or mixed, hereafter acquired by Borrower, concurrently
with the acquisition thereof.
5.15 Further Assurances
Within ten days of request by U.S. Bank, duly execute and deliver or cause
to be duly executed and delivered to U.S. Bank such further instruments,
agreements and documents and do or cause to be done such further acts as may be
reasonably necessary or proper in the opinion of U.S. Bank to carry out more
effectively the provisions and purpose of this Agreement and the other Loan
Documents.
ARTICLE VI. NEGATIVE COVENANTS
Borrower covenants and agrees that until the Loan, together with interest
thereon, and all other obligations incurred hereunder are paid or satisfied in
full, Borrower shall not, without the prior written consent of U.S. Bank:
6.1 Dividends and Distributions
During the continuation of any Default or Event of Default, declare or pay
any cash distributions or dividends or return any capital to any of Borrower's
shareholders; authorize or make any distribution, payment or delivery of
property or cash to any of Borrower's shareholders; redeem, retire, purchase or
otherwise acquire, directly or indirectly, for consideration, any shares or
other interests of Borrower now or hereafter outstanding; or set aside any funds
for any of the foregoing purposes. Notwithstanding the foregoing, Borrower is
permitted to (a) issue stock dividends; (b) pay its employees cash and other
compensation for services rendered by such employees and reimburse employees for
out-of-pocket expenses incurred on behalf of Borrower; and (c) provide up to 25
percent of the cash consideration for the purchase of stock acquired by
employees pursuant to Borrower's stock purchase plan.
6.2 Transactions With Affiliates
Other than an arm's-length transaction, (i) enter into any transaction, in
which an Affiliate of Borrower shall have any interest; or (ii) make any payment
or agree to make any payment to any such Affiliate; or (iii) transfer or agree
to transfer ownership or possession of any of its business or assets, tangible
or intangible, real, personal or mixed, to any Affiliate. For purposes of this
Section 6.2 only, the Persons referred to in the last sentence of the definition
of the term "Affiliate" shall be considered to be Affiliates.
6.3 Liens
Contract, create, incur, assume or suffer to exist any mortgage, pledge,
lien or other charge or encumbrance of any kind (including, but not limited to,
the charge upon property purchased under conditional sales or other title
retention agreements) upon or grant any interest in Borrower's ownership
interest in Alterra Healthcare Corporation.
6.4 Advances and Loans
Lend money, make credit available (other than in the ordinary course of
business to customers) or lend property or the use thereof to any Person;
purchase or repurchase the stock or Indebtedness or all or a substantial part of
the assets or properties of any Person; guarantee, assume, endorse or otherwise
become responsible for (directly or indirectly or by any instrument having the
effect of assuring any Person's payment, performance, or capability) the
Indebtedness, performance, obligations, stock or dividends of any Person; or
agree to do any of the foregoing; but Borrower may endorse negotiable
instruments for deposit or collection in the ordinary course of business.
Notwithstanding the foregoing, Borrower is permitted to (a) make loans to
Subsidiaries, provided that prior to funding any loan to a Subsidiary such that
the aggregate outstanding principal balance of all loans from Borrower to such
Subsidiary would exceed $10,000,000, such Subsidiary shall execute and deliver
to U.S. Bank a guaranty of the obligations of Borrower under this Agreement and
the Loan, which guaranty shall be in a form designated by U.S. Bank; (b) make
loans to Persons who are not Subsidiaries, provided that (i) the borrower in
each such loan is in the senior housing or senior care business and (ii) the
outstanding principal balance of all such loans shall not exceed $10,000,000 in
the aggregate at any time; (c) acquire the assets or ownership interests of any
Person in the senior housing or senior care business, provided that the
consideration paid by Borrower for such acquisition is (i) stock issued by
Borrower to the seller or (ii) cash obtained by Borrower from the issue of stock
by Borrower in contemplation of such acquisition; (d) acquire the assets or
ownership interests of any Person in the senior housing or senior care business,
provided that (i) the cash consideration paid by Borrower for acquisitions
(other than cash described in clause (c)(ii) above) does not exceed $10,000,000
during any 12-month period or (ii) in the event that the case consideration paid
by Borrower for acquisitions (other than cash described in clause (c)(ii) above)
is to exceed $10,000,000 during any 12-month period, Borrower provides to U.S.
Bank evidence reasonably deemed sufficient by U.S. Bank reflecting pro forma
compliance with the Debt Service Coverage Ratio, (e) guarantee the indebtedness
of its Subsidiaries (f) make short term extensions of credit in the ordinary
course of its business for the benefit of facilities that Borrower manages or
leases, and (g) enter into agreements to consummate any transaction permitted
pursuant to clauses (a) through (f).
6.5 Consolidation, Merger and Sale of Assets
Wind up, liquidate or dissolve Borrower's affairs or enter into any
transaction of merger or consolidation with any Person unless Borrower is the
surviving Person; convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any time) any of its material licenses, contracts or
permits; sell all or a substantial part of its property or assets or sell any
part of its property or assets necessary or desirable for the conduct of its
business as now generally conducted or as proposed to be conducted; or sell any
of its notes receivable, installment or conditional sales agreements, or
accounts receivable. Notwithstanding the foregoing, Borrower is permitted to
(a) enter into sale and leaseback transactions of its real property facilities
on an arm's length basis, (b) sell the Scottsdale Property in accordance with
the provisions of Section 9.7 hereof, (c) consummate the sale or other
disposition of other assets, provided that Borrower may not sell or dispose of
assets during any 12-month period that generated in excess of 10 percent of the
EBITDA of Borrower during such 12-month period.
6.6 Contributions to Capital
Contribute to the capital of any Person cash in an amount or other property
with fair market value in excess of $10,000,000, in aggregate, unless such
Person first executes and delivers to U.S. Bank a guaranty of the obligations of
Borrower under this Agreement and the Loan in a form designated by U.S. Bank.
6.7 Type of Business
Enter into any business which is substantially different from or not
connected with the business in which Borrower is presently engaged or make any
substantial change in the nature of its business or operations.
6.8 Change of State of Organization or Name
Change (a) the state of organization of Borrower, (b) the chief executive
office of Borrower, (c) Borrower's name, or (d) the location of any of the
Collateral; or adopt or use any trade name without in each of the instances
described in the foregoing clauses (a) through (d), (x) prior written notice to
U.S. Bank and (y) the execution, delivery and filing (and payment of filing fees
and taxes) of all such documents as may be necessary or advisable in the opinion
of U.S. Bank to continue to perfect and protect the liens and security interests
in the Collateral.
6.9 Change in Documents
Amend, supplement, terminate or otherwise modify in any way Borrower's
articles of incorporation, contracts or other documents delivered to U.S. Bank
hereunder or executed in connection herewith in a manner that could reasonably
be expected to adversely affect the ability of Borrower to fulfill its
obligations under this Agreement or under the other Loan Documents.
6.10 Control
Enter into any agreement (other than employment agreements) with any Person
that confers upon such Person the right or authority to control or direct a
major portion of the business or assets of Borrower.
6.11 Pension Plan
Terminate or partially terminate any Plan now existing or hereafter
established for Borrower or its Affiliates or withdraw from participation
therein under circumstances that result or would reasonably be expected to
result in a material liability to the Pension Benefit Guaranty Corporation, to
the fund by which the Plan is funded, or to the employees (or their
beneficiaries) for whom the Plan is or shall be maintained; or permit any other
event or circumstance to occur that results or would reasonably be expected to
result in a material liability to the Pension Benefit Guaranty Corporation or a
material violation of ERISA.
6.12 Debt Service Coverage Ratio
Permit the Debt Service Coverage Ratio calculated at the end of any fiscal
quarter of Borrower with reference to the prior four quarters to be less than
1.00:1.00.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
In order to induce U.S. Bank to enter into this Agreement and to make the
Loan as herein provided, Borrower hereby makes the following representations,
covenants and warranties, all of which shall survive the execution and delivery
of this Agreement and shall not be affected or waived by any inspection or
examination made by or on behalf of U.S. Bank:
7.1 Corporate Status
Borrower is a corporation organized and validly existing under the laws of
the state of Washington. Borrower has the power and authority to own its
property and assets and to transact the business in which it is engaged or
presently proposes to engage. Borrower is qualified to do business in all
states except where the failure to be qualified would not reasonably be expected
to have a material adverse affect on Borrower.
7.2 Power and Authority
Borrower has the power to execute, deliver and carry out the terms and
provisions of this Agreement and each of the Loan Documents and has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents, the borrowings hereunder and the making
and delivery of the Note and all other Loan Documents delivered hereunder. This
Agreement constitutes and the Note and other Loan Documents and instruments
issued or to be issued hereunder, when executed and delivered pursuant hereto,
constitute or will constitute the authorized, valid and legally binding
obligations of Borrower enforceable in accordance with their respective terms
except as such enforceability may be limited by creditors rights laws and
general principles of equity.
7.3 No Violation of Agreements
Borrower is not in default under any material provision of any agreement to
which it is a party or in violation of any Applicable Laws where such default or
violation could reasonably be expected to have a material adverse affect on
Borrower. The execution and delivery of this Agreement, the Note, the other
Loan Documents and the instruments incidental hereto; the consummation of the
transactions herein or therein contemplated; and compliance with the terms and
provisions hereof or thereof (a) will not violate any material Applicable Law,
(b) will not conflict or be inconsistent with, result in any breach of any of
the material terms, covenants, conditions or provisions of, constitute a default
under, or result in the creation or imposition of (or the obligation to impose)
any lien, charge or encumbrance upon any of the property or assets of Borrower
pursuant to the terms of any material Governmental Approval, mortgage, deed of
trust, lease, agreement or other instrument to which Borrower is a party, by
which Borrower may be bound or to which Borrower may be subject, and (c) will
not violate any of the provisions of the articles of incorporation of Borrower.
No Governmental Approval is necessary (x) for the execution of this Agreement,
the making of the Note or the assumption and performance of this Agreement or
the Note by Borrower or (y) for the consummation by Borrower of the transactions
contemplated by this Agreement, including, but not limited to, the grant of the
security interests to U.S. Bank.
7.4 Recording and Enforceability
Neither the articles of incorporation, bylaws or other applicable corporate
documents of Borrower nor other agreements to which Borrower is a party require
recording, filing, registration, notice or other similar action by Borrower in
order to insure the legality, validity, binding effect or enforceability against
Borrower of this Agreement, the Note or other Loan Documents executed or to be
executed hereunder, other than filings or recordings that may be required under
the securities laws of the United States and any filings required under the
Uniform Commercial Code or in connection with the perfection of the security
interests of U.S. Bank in patents, trademarks and similar types of Collateral
where perfection can only occur upon filing.
7.5 Litigation
There are no actions, suits or proceedings pending or threatened against or
affecting Borrower before any Governmental Body that could reasonably be
expected to have a material adverse affect on Borrower or the Collateral.
Borrower is not in default under any material provision of any Applicable Law or
Governmental Approval of any Governmental Body which could reasonably be
expected to have a material adverse affect on Borrower or on the Collateral.
7.6 Good Title to Properties
Borrower has good and marketable title to, or a valid leasehold interest
in, its property and assets where the failure to have the same could reasonably
be expected to have a material adverse affect on Borrower.
7.7 Licenses and Permits
All Governmental Approvals with respect to the business of Borrower were,
to Borrower's knowledge, duly and validly issued by the respective Governmental
Bodies, are in full force and effect and are, to Borrower's knowledge, valid and
enforceable in accordance with their terms. With regard to such Governmental
Approvals, to the Borrower's knowledge, no fact or circumstance exists that
constitutes or, with the passage of time or the giving of notice or both, would
constitute a material default under any thereof, or that would permit the
grantor thereof to cancel or terminate the rights granted to Borrower
thereunder, except upon the expiration of the full term thereof. Borrower
presently holds all material Governmental Approvals as are necessary in
connection with the conduct of its business as now conducted and as presently
proposed to be conducted.
7.8 No Burdensome Agreements
Borrower is not a party to any agreement or instrument or subject to any
restrictions that now have or, as far as can be foreseen, could reasonably be
expected to have a material adverse affect on Borrower.
7.9 Properties in Good Condition
All the material properties of Borrower are, and all material properties to
be added in connection with any contemplated expansion when acquired will be, in
good repair and good working order and condition ordinary wear and tear excepted
and in a manner consistent with past practices of Borrower, and are and will be
in compliance with all Applicable Laws where the failure to so comply could
reasonably be expected to have a material adverse affect on Borrower.
7.10 Financial Statements
The (a) audited financial statements of Borrower dated December 31, 2002,
and all schedules and notes included in such financial statements and (b)
unaudited financial statements of Borrower that have heretofore been delivered
to U.S. Bank are true and correct in all material respects and present fairly
(i) the financial position of Borrower as of the date of said statements and
(ii) the results of operations of Borrower for the periods covered thereby; and
there are not any significant liabilities that should have been reflected in the
financial statements or the notes thereto under generally accepted accounting
principles, contingent or otherwise, including liabilities for taxes or any
unusual forward or long-term commitments, that are not disclosed or reserved
against in the statements referred to above or in the notes thereto or that are
not disclosed herein. All such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied.
There has been no material adverse change (including, but not limited to, any
such change occasioned by accident, act of God, war, fire, flood, explosion,
strike or other labor dispute, or orders or action by any Governmental Body or
public utility) in the operations, business, property, assets or condition
(financial or otherwise) of Borrower since December 31, 2002.
7.11 Outstanding Indebtedness
Other than current trade payables, Borrower has no Indebtedness, including,
but not limited to, Indebtedness to Affiliates, that is required under generally
accepted accounting principles to be reflected on Borrower's audited or
unaudited financial statements, as applicable, which is not so reflected
thereon.
7.12 Taxes
Borrower has duly filed all tax returns and reports required by Applicable
Law to be filed; and all taxes, assessments, levies, fees and other charges of
Governmental Bodies upon Borrower or upon its assets that are due and payable
have been paid (except as otherwise permitted in this Agreement).
7.13 License Fees
Borrower has paid all fees and charges that have become due for any
Governmental Approval for its business or has made adequate provisions for any
such fees and charges that have accrued where the failure to pay the same could
reasonably be expected to have a material adverse affect on Borrower.
7.14 Trademarks, Patents, Etc.
Borrower possesses all necessary trademarks, trade names, service marks,
copyrights, patents, patent rights and licenses to conduct its businesses as now
and as proposed to be conducted, without conflict with the rights or claimed
rights of others where the failure to possess the same could reasonably be
expected to have a material adverse affect on Borrower.
7.15 Governmental Approvals
Borrower possesses all Governmental Approvals necessary for the operation
of Borrower's business where the failure to possess the same could reasonably be
expected to have a material adverse affect on Borrower.
7.16 Disclosure
To the best of Borrower's knowledge, the exhibits hereto, the financial
information and statements referred to in Section 7.10 hereof, any certificate,
statement, report or other document furnished to U.S. Bank by Borrower or any
other Person in connection herewith or in connection with any transaction
contemplated hereby, and this Agreement, do not contain any untrue statements of
material fact or omit to state any material fact necessary in order to make the
statements contained therein or herein not misleading.
7.17 Regulations U and X
Borrower does not own and no part of the proceeds hereof will be used to
purchase or carry any margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) or to extend credit to others
for the purpose of purchasing or carrying any margin stock. Borrower is not
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock. If
requested by U.S. Bank, Borrower will furnish to U.S. Bank a statement in
conformity with the requirements of Federal Reserve Form U-1 referred to in said
Regulation. No part of the proceeds of the Loan will be used for any purpose
that violates or is inconsistent with the provisions of Regulation X of said
Board of Governors.
7.18 Condition of Property
Except as otherwise disclosed to U.S. Bank, Borrower hereby represents and
warrants to U.S. Bank that as of the date hereof and continuing hereafter,
Borrower's property (both owned and leased) and each portion thereof (a) are not
and to the best knowledge of Borrower after due investigation have not been a
site for the use, generation, manufacture, storage, disposal or transportation
of any Hazardous Material other than Hazardous Materials which are used, stored
and disposed of in the ordinary course of the Business conducted by Borrower in
compliance with Applicable Law; (b) are presently in compliance with all
Hazardous Materials Laws; and (c) are not being used and to the best knowledge
of Borrower after due investigation have not been used in any manner that has
resulted in or will result in Hazardous Materials being spilled or disposed of
on any adjacent or other property.
7.19 Pension Plans
No "reportable event" as defined in Section 4043(b) of Title IV of ERISA
has occurred and is continuing with respect to any plan maintained for employees
of Borrower or any Affiliate. In addition, each of the plans maintained for the
employees of Borrower and its Affiliates are in compliance with the requirements
of ERISA, including the minimum funding requirements.
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES
8.1 Events of Default
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for the Event of Default, whether it shall relate to
one or more of the parties hereto, and whether it shall be voluntary or
involuntary or be pursuant to or affected by operation of Applicable Law):
(a) If Borrower fails to pay the principal of the Note when and as the same
becomes due and payable or any installment of interest on the Note within five
days after the due date thereof, whether at scheduled maturity, by acceleration
or otherwise; or
(b) If any Indebtedness of Borrower for money borrowed or credit extended in
excess of $1,000,000 becomes or is declared due and payable (after any
applicable grace period) prior to the stated maturity thereof or is not paid as
and when it becomes due and payable or within any applicable cure period, or if
any event occurs which constitutes an event of default under any instrument,
agreement or evidence of such Indebtedness relating to any such obligation of
Borrower; or
(c) If any representation or warranty (i) made by Borrower in this Agreement
or (ii) made by Borrower or any other Person owned or controlled by Borrower in
any document, certificate or statement furnished pursuant to this Agreement or
in connection herewith, is false or misleading in any material respect; or
(d) If Borrower fails to observe or perform any term, covenant or agreement
to be performed or observed pursuant to Articles V and VI hereof and such
failure continues after the expiration of the following cure periods:
(i) Five days after the occurrence without notice: Sections 5.1, 5.5,
5.9, 5.10, 6.2, 6.3, 6.4, 6.6 and 6.8;
(ii) Five days after written notice: Sections 5.7, 5.11, 5.12, 5.14
and 5.15;
(iii) Thirty days after the occurrence without notice: Sections 5.2,
5.3, 5.4, 5.6, 5.8; provided that in the event cure of any such breach cannot in
good faith be completed within 30 days, and provided that Borrower commences the
cure within such 30-day period and diligently pursues the same to completion,
Borrower shall have up to 90 days to complete such cure;
(iv) No cure period: Sections 5.13 (except as otherwise specified in
Section 8.1(d)), 6.1, 6.5, 6.7, 6.9, 6.10, 6.11 and 6.12; or
(e) If Borrower fails to observe or perform (not otherwise specified in
this Article VIII) any term, covenant or agreement to be performed or observed
pursuant to the provisions of this Agreement, the other Loan Documents or any
other agreement incidental hereto and such failure continues for a period of 30
days after receipt of written notice setting forth in reasonable detail the
nature of such failure; provided that in the event cure of any such breach
cannot in good faith be completed within 30 days, and provided that Borrower
commences the cure within such 30-day period and diligently pursues the same to
completion, Borrower shall have up to 90 days to complete such cure; or
(f) If custody or control of any substantial part of the property of
Borrower is assumed by any Governmental Body or if any Governmental Body takes
any final action, the effect of which could reasonably be expected to have a
material adverse affect on Borrower; or
(g) If Borrower suspends or discontinues a material portion of its business,
or if Borrower makes an assignment for the benefit of creditors or a composition
with creditors, is unable or admits in writing its inability to pay its debts as
they mature, files a petition in bankruptcy, becomes insolvent (howsoever such
insolvency may be evidenced), is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for the appointment of any receiver, liquidator or
trustee of or for it or any substantial part of its property or assets,
commences any proceeding relating to it under any Applicable Law of any
jurisdiction whether now or hereafter in effect relating to bankruptcy,
reorganization, arrangement, readjustment of debt, receivership, dissolution or
liquidation; or if there is commenced against Borrower any such proceeding that
remains undismissed for a period of 60 days or more, or an order, judgment or
decree approving the petition in any such proceeding is entered; or if Borrower
by any act or failure to act indicates its consent to, approval of, or
acquiescence in, any such proceeding or any appointment of any receiver,
liquidator or trustee of or for it or for any substantial part of its property
or assets, suffers any such appointment to continue undischarged or unstayed for
a period of 60 days or more, or takes any corporate action for the purpose of
effecting any of the foregoing; or if any court of competent jurisdiction
assumes jurisdiction with respect to any such proceeding, or if a receiver or a
trustee or other officer or representative of a court or of creditors, or if any
Governmental Body, under color of legal authority, takes and holds possession of
any substantial part of the property or assets of Borrower; or
(h) If any Person or Persons (other than Daniel R. Baty ("Baty") or a Person
owned or controlled by Daniel R. Baty or Saratoga Partners IV, L.P. or a Person
owned or controlled by (i) Saratoga Partners IV, L.P. or (ii) the general
partner of Saratoga Partners IV, L.P.) after the date of this Agreement acquires
an aggregate 30 percent or more of the outstanding shares of voting stock of
Borrower; or
(i) If any material adverse change in the business or financial condition of
Borrower occurs, or if any event occurs that materially impairs the Collateral.
8.2 Acceleration; Remedies
(a) If any Event of Default described in Section 8.1(g) shall occur,
then immediately and automatically U.S. Bank's commitment under the Loan shall
terminate and amounts owing under this Agreement and the Note shall become due
and payable and U.S. Bank's obligation to make any advances under the Loan shall
immediately terminate.
(b) If any Event of Default other than those described in Section 8.1(g)
shall occur and be continuing, U.S. Bank may (i) by written notice to Borrower,
declare U.S. Bank's commitment under the Loan terminated forthwith, whereupon
such obligations shall immediately terminate; and (ii) by written notice of
default to Borrower, declare the Loan, with accrued interest thereon, and all
other amounts owing under this Agreement and the Note to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
(c) Except as expressly provided above in this Section 8.2, presentment,
demand and all other notices of any kind are hereby expressly waived. U.S. Bank
may proceed to protect and enforce its rights hereunder or realize on any or all
security granted pursuant to any of the Loan Documents in any manner or order it
deems expedient without regard to any equitable principles of marshaling or
otherwise. No failure or delay on the part of U.S. Bank in exercising any
right, power or privilege hereunder and no course of dealing between Borrower
and U.S. Bank shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies that U.S. Bank would otherwise have. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances or shall constitute a waiver
of the right of U.S. Bank to any other or further action in any circumstances
without notice or demand.
ARTICLE IX. MISCELLANEOUS
9.1 Notices
All notices, requests, consents, demands, approvals and other
communications hereunder shall be deemed to have been duly given, made or served
if made in writing and delivered personally, sent via facsimile or mailed by
first-class mail, postage prepaid, to the respective parties to this Agreement
as follows:
(a) If to Borrower:
Emeritus Corporation
3131 Elliott Ave., Suite 500
Seattle, Washington 98121
Attention: Raymond R. Brandstrom, Chief Financial Officer
Facsimile No.: (206) 301-4500
(b) If to U.S. Bank:
U.S. Bank National Association
1420 Fifth Avenue - PD-WA-T10M
Seattle, Washington 98101
Attention: Kenneth A. Refvem
Facsimile No.: (206) 344-3654
The designation of the persons to be so notified or the address of such persons
for the purposes of such notice may be changed from time to time by similar
notice in writing, except that any communication with respect to a change of
address shall be deemed to be given or made when received by the party to whom
such communication was sent. Notices shall be deemed received upon the actual
confirmed receipt or refusal of receipt thereof, regardless of the method of
delivery used.
9.2 Payment of Expenses
Whether or not the transactions hereby contemplated are consummated,
Borrower shall pay on demand all costs and expenses of U.S. Bank reasonably
incurred in connection with the preparation, negotiation, execution and delivery
of the Loan Documents, as well as any amendments, modifications, consents or
waivers relating thereto, including, without limitation, reasonable attorneys'
fees, appraisal fees, title insurance fees and recording fees. In addition, if
there shall occur any Event of Default, U.S. Bank shall be entitled to recover
any costs and expenses incurred in connection with the preservation of rights
under, and enforcement of, the Loan Documents, whether or not any lawsuit or
arbitration proceeding is commenced, in all such cases, including, without
limitation, reasonable attorneys' fees and costs (but specifically excluding the
allocated fees of internal counsel). Reasonable attorneys' fees shall include,
without limitation, attorneys' fees and costs incurred in connection with any
bankruptcy case or other insolvency proceeding commenced by or against Borrower
or any Person granting a security interest in any item of Collateral, including
all fees incurred in connection with (a) moving from relief from the automatic
stay, to convert or dismiss the case or proceeding, or to appoint a trustee or
examiner, or (b) proposing or opposing confirmation of a plan of reorganization
or liquidation, in any case without regard to the identity of the prevailing
party.
9.3 Setoff
As additional security for the payment of the obligations described in this
Agreement and the other Loan Documents and any other obligations of Borrower to
U.S. Bank of any nature whatsoever (collectively the "Obligations"), Borrower
hereby grants to U.S. Bank, and any Participant, a security interest in, a lien
on and an express contractual right to set off against all depository account
balances, cash and any other property of Borrower now or hereafter in the
possession of U.S. Bank, or any Participant, and the right to refuse to allow
withdrawals from any account (collectively "Setoff"). U.S. Bank and any
Participant may, at any time upon the occurrence of an Event of Default, Setoff
against the Obligations whether or not the Obligations (including future
installments) are then due or have been accelerated, all without any advance or
contemporaneous notice or demand of any kind to Borrower, such notice and demand
being expressly waived.
9.4 Waiver of Setoff
In the event that U.S. Bank sells all or any portion of the Loan to any
Participant, Borrower hereby waives the right to interpose any setoff,
counterclaim or cross-claim (other than compulsory counterclaims or
cross-claims) in connection with any litigation or dispute under this Agreement,
regardless of the nature of such setoff, counterclaim or cross-claim.
9.5 Fees and Commissions
Borrower agrees to indemnify U.S. Bank and hold it harmless with regard to
any commissions, fees, judgments or expenses of any nature and kind that U.S.
Bank may become liable to pay by reason of any claims by or on behalf of
brokers, finders or agents in connection with any act or failure to act by
Borrower or any litigation or similar proceeding arising from such claims.
Borrower states that it is aware of no valid basis for any such claims.
9.6 No Waiver
No failure or delay on the part of U.S. Bank or the holder of the Note in
exercising any right, power or privilege hereunder and no course of dealing
between Borrower and U.S. Bank or the holder of the Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
that U.S. Bank or any subsequent holder of the Note would otherwise have. No
notice to or demand on Borrower in any case shall entitle Borrower to any other
or further notice or demand in similar or other circumstances unless
specifically required by the terms of this Agreement or any of the other Loan
Documents or shall constitute a waiver of the right of U.S. Bank to any other or
further action in any circumstances without notice or demand.
9.7 Agreement to Release Deed of Trust
Pursuant to the terms set forth in the Deed of Trust, Borrower has granted
to U.S. Bank a first priority and exclusive security interest in Borrower's fee
interest in its real property located in Scottsdale, Arizona (the "Scottsdale
Property"). Borrower has informed U.S. Bank that it intends to sell the
Scottsdale Property. U.S. Bank acknowledges and agrees that Borrower has
advised U.S. Bank that there are no assurances that a sale of the Scottsdale
Property will occur, and accordingly U.S. Bank acknowledges that it is not
relying on such sale in entering into this Agreement or any of the other Loan
Documents or in making the Loan to Borrower. In connection with such proposed
sale, U.S. Bank agrees to release the Deed of Trust upon satisfaction of the
following conditions:
(a) At the time of the closing of such sale, there shall not exist any Event
of Default.
(b) The amount of the purchase price is not less than $1,500,000 and the
amount of the cash down payment is not less than 25 percent of the total
purchase price.
(c) All cash paid for the Scottsdale Property (including the down payment
and all subsequent payments ) shall (i) be immediately paid to U.S. Bank to
reduce the outstanding principal balance of the Loan to the extent there are
outstanding amounts under the Loan and (ii) immediately reduce the Commitment
Amount.
(d) For any sale other than an all cash sale, U.S. Bank shall have reviewed
and approved (such review and approval not to be unreasonably withheld or
delayed) any promissory note, mortgage, deed of trust and other documents
arising out of or related to the payment and collateral for the deferred
purchase price.
(e) Borrower shall deliver to U.S. Bank the following documents, in form and
substance acceptable to U.S. Bank concurrently with the sale:
(i) The original promissory note made by the purchaser to the order of
Borrower. The following endorsement shall be added to the last page of the
promissory note: "Pay to the order of U.S. Bank" and shall be executed by
Borrower.
(ii) An assignment to U.S. Bank of the mortgage or deed of trust
evidencing the encumbrance by Borrower of the Scottsdale Property, duly executed
by Borrower and acknowledged by a notary.
(iii) All other documents, agreements and instruments which secure the
purchaser's obligations to Borrower under the Purchase Agreement, which
documents shall be duly executed and assigned by Borrower to U.S. Bank.
9.8 Entire Agreement and Amendments
This Agreement represents the entire agreement between the parties hereto
with respect to the Loan and the transactions contemplated hereunder and, except
as expressly provided herein, shall not be affected by reference to any other
documents. This Agreement, or any provision hereof, may not be changed, waived,
discharged or terminated orally, but only by an instrument in writing, signed by
both parties, in the case of an amendment or modification, or by the party
against whom enforcement of the waiver, discharge or termination is sought.
9.9 Benefit of Agreement
This Agreement is binding upon and inures to the benefit of Borrower and
U.S. Bank and their successors and assigns and all subsequent holders of the
Note or any portion thereof. Borrower expressly acknowledges that U.S. Bank is
not prohibited or restricted from assigning rights or participations hereunder
or any portion thereof to another Person but U.S. Bank shall provide Borrower
with notice of any such assignment of rights or participation interests.
Borrower, however, is precluded from assigning any of its respective rights or
delegating any of its obligations hereunder or under any of the other agreements
between Borrower and U.S. Bank without the prior written consent of U.S. Bank.
9.10 Severability
If any provision of this Agreement or any of the Loan Documents is held
invalid under any Applicable Laws, such invalidity shall not affect any other
provision of this Agreement that can be given an effect without the invalid
provision, and, to this end, the provisions hereof are severable.
9.11 Descriptive Headings
The descriptive headings of the several sections of this Agreement are
inserted for convenience only and do not affect the meaning or construction of
any of the provisions hereof.
9.12 Governing Law
Except to the extent that the federal laws of the United States of America
provide U.S. Bank with greater rights or remedies, this Agreement and the rights
and obligations of the parties hereunder and under the other Loan Documents
shall be construed in accordance with and shall be governed by the laws of the
state of Washington without regard to the choice of law rules thereof.
9.13 Consent to Jurisdiction, Service and Venue
For the purpose of enforcing payment of the Note, performance of the
obligations under the Note, any arbitration award under the other Loan
Documents, or otherwise in connection herewith, Borrower hereby consents to the
jurisdiction and venue of the courts of the state of Washington or of any
federal court located in such state including, but not limited to, the Superior
Court of Washington for King County and the United States District Court for the
Western District of Washington. Borrower hereby waives the right to contest the
jurisdiction and venue of courts located in King County, Washington, on the
ground of inconvenience or otherwise and waives any right to bring any action or
proceeding against U.S. Bank in any court outside King County, Washington. The
provisions of this Section 9.13 do not limit or otherwise affect the right of
U.S. Bank to institute and conduct action in any other appropriate manner,
jurisdiction, or court.
9.14 Counterparts
This Agreement and each of the Loan Documents may be executed in one or
more counterparts, each of which shall constitute an original agreement, but all
of which together shall constitute one and the same instrument.
9.15 Jury Waiver
BORROWER AND U.S. BANK HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM
ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, WHETHER NOW OR
HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND
HEREBY CONSENT AND AGREE THAT ANY SUCH CLAIM SHALL BE DECIDED BY TRIAL WITHOUT A
JURY AND THAT EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER AND AGREEMENT CONTAINED
HEREIN.
9.16 Statutory Notice
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, Borrower and U.S. Bank have caused this Agreement to be duly
executed by the respective, duly authorized signatories as of the date first
above written.
EMERITUS CORPORATION
By /s/ Willam M. Shorten
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Name: William M. Shorten
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Title: Director of Real Estate Finance
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U.S. BANK NATIONAL ASSOCIATION
By /s/ Ken Refvem
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Name: Ken Refvem
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Title: Vice President
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