TERM LOAN AGREEMENT
Dated: As of May 1, 1997
Between
EMERITUS PROPERTIES V, INC.
("Borrower")
and
FLEET NATIONAL BANK ("Lender")
$26,000,000 TERM LOAN
SECURED BY PROPERTY
LOCATED IN NEW PORT RICHEY,
ENGLEWOOD AND
ALTAMONTE SPRINGS, FLORIDA
LOAN AGREEMENT
This is an agreement (this "Loan
Agreement" or "Agreement") made and entered
into as of the 1st day of May, 1997, by and
between EMERITUS PROPERTIES V, INC., having
an address at c/o Emeritus Corporation, 3131
Elliott Avenue, Suite 500, Seattle,
Washington 98121 ("Borrower") and FLEET
NATIONAL BANK, a national banking association
having an address at 75 State Street, Boston,
Massachusetts 02109 ("Lender").
WITNESSETH:
1. BACKGROUND.
1.1 DEFINED TERMS.
Capitalized terms used in this Agreement
are defined either in Exhibit A, or in
specific sections of this Agreement, or in
another Loan Document, as referenced in
Exhibit A.
1.2 BORROWER.
Borrower is a corporation organized under
the laws of the State of Washington.
1.3 LAND AND IMPROVEMENTS; PROPERTY.
Simultaneously with the closing of this
Loan Borrower will acquire the following
three assisted living communities:
(i) The 242 bed, 200 unit assisted
living facility commonly known as La Casa
Grande at New Port Richey located at 6400
Trouble Creek Road in New Port Richey, Pasco
County, Florida (the "New Port Richey
Facility") on the real property described as
Parcel 1 in Exhibit B (the "New Port Richey
Land");
(ii) The 216 bed, 155 unit assisted
living facility commonly known as Englewood
Retirement Center located at 925 South River
Road in Englewood, Sarasota County, Florida
(the "Englewood Facility") on the real
property described as Parcel 2 in Exhibit B
(the "Englewood Land"); and
(iii) The 180 bed, 118 unit assisted
living facility commonly known as Stanford
Centre and located at 433 Orange Drive in
Altamonte Springs, Seminole County, Florida
(the "Stanford Facility" and together with
the New Port Richey Facility and the
Englewood Facility, the "Facilities") on the
real property described in Exhibit B (the
"Stanford Land" and together with the New
Port Richey Land and the Englewood Land, the
"Land").
The Land and the Facilities are individually
and collectively called the "Property".
1.4 USE OF LOAN PROCEEDS.
Borrower has applied to Lender for a loan
of $26,000,000 ("Loan") the proceeds of which
are to be used to finance the acquisition of
Property and to pay costs and expenses
incident to closing the Loan.
1.5 GUARANTIES AND INDEMNITIES.
As an inducement to Lender to make the
Loan, Emeritus Corporation (the "Guarantor")
has agreed to furnish certain guaranties and
indemnities.
1.6 LOAN.
Subject to all of the terms, conditions
and provisions of this Agreement, and of the
agreements and instruments referred to
herein, Lender agrees to make the Loan and
Borrower agrees to accept and repay the Loan.
2. LOAN PROVISIONS.
2.1 AMOUNT OF LOAN.
The Loan shall be in the amount of
$26,000,000.
2.2 TERM OF LOAN; EXTENSION RIGHT.
The Loan shall be for a term ("Initial
Term") commencing on the date hereof and
ending on April 30, 1999 ("Maturity Date").
The Initial Term may be extended for one
"Extended Term" until April 30, 2000
("Extended Maturity Date") upon satisfaction
of the conditions set forth in Section 2.6.
2.3 INTEREST RATE AND PAYMENT TERMS.
The Loan shall be payable as to interest
and principal in accordance with the
provisions of the Note. The Note also
provides for interest at a Default Rate, Late
Charges and prepayment rights and fees.
2.4 LOAN FEES.
Borrower shall pay a loan fee in
accordance with the terms of a letter
agreement dated as of the date hereof between
the Borrower and Lender, as the same may be
amended, restated, modified or supplemented
from time to time.
2.5 ACCELERATION.
The Loan may be accelerated, at the option
of Lender, following an Event of Default.
Upon such an acceleration, all principal,
accrued interest and costs and expenses
shall be due and payable together with
interest on such principal at the Default
Rate and any applicable Yield Maintenance
Prepayment Fee.
2
2.6 CONDITIONS TO EXTENDING LOAN.
Upon satisfaction of each of the following
conditions, Borrower may extend the Loan
until the Extended Maturity Date:
2.6.1NO DEFAULT.
No Default shall exist;
2.6.2NOTICE FROM BORROWER.
Borrower shall have given Lender
written notice of Borrower's request to
exercise its extension right at least
thirty (30) days, but not more than
sixty (60) days, before the Maturity
Date;
2.6.3CONDITIONS SATISFIED.
All of the conditions set forth in 7
of this Agreement, to the extent
applicable, shall continue to be
satisfied;
2.6.4EXTENSION FEE.
The extension fee referred to in
Section 2.4 shall have been paid at
least ten (10) Business Days prior to
the Maturity Date;
2.6.5ADDITIONAL DOCUMENTS.
Borrower and Guarantor shall have
executed and delivered to Lender such
agreements and documents as Lender may
reasonably require incident to the
extension;
2.6.6BEFORE END OF TERM.
Each of the following conditions are
satisfied not later than, and on, the
Maturity Date:
2.6.6.1LTV REQUIREMENT.
The Loan to Value Ratio based on the
Value of the Property (as defined in
Section 9.17.1) shall not be in excess
of 75%; and
2.6.6.2DEBT SERVICE COVERAGE.
The Debt Service Coverage for the
preceding quarter ending March 31, 1999
shall be not less than 1.40:1, where
Debt Service on the Loan is calculated
based on a twenty-five year amortization
schedule and an interest rate equal to
the then current rate of interest of
United States Treasury Bills having a
maturity of ten (10) years plus 225
basis points (2.25%). For the purposes
of this calculation Net
3
Operating Income shall be based on
Borrower's Net Operating Income for the
three month period prior to the
commencement of the Extended Term or
such other evidence as Lender in its
sole and absolute discretion may accept.
With reasonable promptness following
receipt by Lender of Borrower's written
notice under clause 2.6.2 above requesting
the extension, Lender shall notify Borrower
in writing if all of the conditions precedent
to the extension, other than payment of the
extension fee, have been satisfied, or if
further information or certificates are
required. If Lender determines that the
conditions to extension have been satisfied,
other than payment of the extension fee,
Lender shall so notify Borrower and upon
Lender's receipt of the extension fee not
later than ten (10) Business Days prior to
the Maturity Date, so long as no Default
exists, the Loan Term shall be extended until
the Extended Maturity Date.
3. SECURITY FOR THE LOAN; LOAN AND SECURITY
DOCUMENTS.
3.1 SECURITY.
The Loan together with interest thereon
and all other charges and amounts payable by,
and all other obligations of, Borrower and
Guarantor to Lender, with respect to the
Property, whenever incurred, direct or
indirect, absolute or contingent
("Obligations") shall be secured by the
following "Security" which Borrower, and
Guarantor where applicable, agree to provide
and maintain:
3.1.1MORTGAGE DEED AND SECURITY
AGREEMENT.
A first priority mortgage deed and
security agreement ("Mortgage") on (i)
the Property, (ii) all land,
improvements, furniture, fixtures,
goods, equipment, and other assets
(including, without limitation,
accounts, contracts, contract rights,
Licenses and Permits, general
intangibles, documents and instruments),
including all after-acquired property,
owned, or in which Borrower has or
obtains any interest, in connection with
the Property; (iii) all insurance
proceeds and other proceeds therefrom,
and (iv) all other assets of Borrower
whether now owned or hereafter acquired
and related to the Property.
3.1.2COLLATERAL ASSIGNMENT OF LEASES
AND RENTS.
A first priority collateral
assignment of leases and rents
("Assignment of Leases and Rents") with
respect to all leases, subleases and
occupancy rights of the Property and all
income and profits to be derived from
the operation and leasing of the
Property.
4
3.1.3COLLATERAL ASSIGNMENT OF
CONTRACTS, LICENSES AND PERMITS.
A first priority collateral
assignment and security agreement
("Assignment of Contracts") with respect
to all Licenses and Permits and all
contracts, agreements and warranties now
owned or hereafter acquired by Borrower
and related in any manner to the
Property if and to the extent such an
assignment and security interest can be
granted under applicable law.
3.1.4GUARANTY.
The unconditional, continuing
guaranty ("Guaranty") from Guarantor
guaranteeing payment of the Loan, and
performance of all Borrower's
Obligations under the Loan Documents.
3.1.5ENVIRONMENTAL COMPLIANCE AND
INDEMNIFICATION AGREEMENT.
A compliance and indemnification
agreement with respect to environmental
matters ("Environmental Indemnity") from
Borrower and Guarantor (collectively,
"Indemnitors").
3.2 LOAN DOCUMENTS AND SECURITY DOCUMENTS.
The Loan shall be made, evidenced,
administered, secured and governed by all of
the terms, conditions and provisions of the
"Loan Documents", each as the same may be
hereafter modified or amended, consisting of:
(i) this Loan Agreement; (ii) the $26,000,000
promissory note ("Note"); (iii) the Mortgage
and related UCC financing statements; (iv)
the Assignment of Leases and Rents; (v) the
Assignment of Contracts, Licenses and Permits
and related UCC financing statements; (vi)
the Guaranty from Guarantor; (vii) the
Environmental Indemnity from the Indemnitors;
and (viii) any other documents, instruments,
or agreements executed to further evidence or
secure the Loan, not including any
intercreditor or subordination agreement with
any other lender.
Each of the Loan Documents listed in items
(i) through (viii), inclusive is dated of
even date herewith. The Mortgage, Assignment
of Leases and Rents, Assignment of Contracts,
Licenses and Permits, Environmental Indemnity
and Guaranty are sometimes collectively
referred to as the "Security Documents".
4. CONTINUING AUTHORITY OF AUTHORIZED
REPRESENTATIVES.
Lender is authorized to rely upon the
continuing authority of the persons,
officers, signatories or agents hereafter
designated ("Authorized Representatives") to
bind Borrower with respect to all matters
pertaining to the Loan and the Loan Documents
including, but not limited to, the selection
of interest rates. Such authorization may be
changed only upon written notice to Lender
accompanied by evidence, reasonably
satisfactory to Lender, of the
5
authority of the person giving such notice
and such notice shall be effective not sooner
than five (5) Business Days following receipt
thereof by Lender. The present Authorized
Representatives are listed on Exhibit D.
Lender shall have a right of approval, not to
be unreasonably withheld or delayed, over
the identity of the Authorized
Representatives so as to assure Lender that
each Authorized Representative is a
responsible and senior official of Borrower.
5. LENDER'S CONSULTANTS.
5.1 RIGHT TO EMPLOY.
Lender shall have the right to employ its
own personnel, or one or more engineers,
architects, builders or other construction
specialists, environmental advisors,
scientists, accountants, and attorneys to act
as an advisor to Lender in connection with
the Loan (each of which shall be a "Lender's
Consultant").
5.2 FUNCTIONS.
The functions of a Lender's Consultant
shall include, without limitation: (i)
inspection and physical review of the
Property; (ii) review and analysis of any
work to be done in connection with the
Property; (iii) review and analysis of
environmental matters; and (iv) review and
analysis of financial and legal matters, all
as Lender shall reasonably determine.
5.3 PAYMENT.
The reasonable costs and fees of Lender's
Consultants shall be paid by Borrower upon
billing therefor.
5.4 ACCESS.
Borrower shall provide Lender's
Consultants with continuing reasonable access
to all aspects of the Property and books and
records related thereto at reasonable times
during the day and upon at least two (2)
Business Days' prior written notice to
Borrower.
5.5 NO LIABILITY.
Neither Lender nor any of its Consultants
shall have liability to Borrower, Guarantor,
or any third party, on account of: (i)
services performed by Lender's Consultants;
(ii) any failure or neglect by Lender's
Consultants to properly perform services; or
(iii) any approval or disapproval of work,
plans or other matters. Neither Lender nor
Lender's Consultants shall have any
obligation regarding proper performance of
work related to the Property. Borrower shall
have no rights under or relating to any
agreement, report, or similar document
prepared by any of Lender's Consultants for
Lender.
6.LOAN DISBURSEMENT AND BORROWER'S REQUIRED
EQUITY CONTRIBUTIONS.
6
6.1 ADVANCE OF LOAN PROCEEDS.
Lender shall, subject to compliance with
all of the other terms, conditions and
provisions of this Agreement, make
disbursement of the Loan proceeds entirely at
closing.
6.2 REQUIRED EQUITY CONTRIBUTION;
ADDITIONAL FUNDS FROM BORROWER.
Borrower agrees to make and maintain
Borrower's "Required Equity Contribution"
which shall consist of: (i) on or before
closing an initial contribution of $7,000,000
in cash, subject to verification by Lender,
which cash may be the proceeds of the
Mezzanine Loan.
7. CONDITIONS PRECEDENT.
It shall be a condition precedent of
Lender's obligation to close and fund the
Loan that each of the following conditions
precedent be satisfied in full (as determined
by Lender in its discretion which discretion
shall be exercised in good faith having due
regard for the advice of Lender's Consultants
unless otherwise provided below), unless
specifically waived in writing by Lender at
or prior to closing and funding the Loan:
7.1 SATISFACTORY LOAN DOCUMENTS.
Each of the Loan Documents and Security
Documents shall be satisfactory in form,
content and manner of execution and delivery
to Lender and its counsel.
7.2 NO MATERIAL CHANGE.
No material adverse change shall have
occurred in the financial condition,
business, affairs, operations or control of
Borrower or Guarantor since the date of their
respective financial statements most recently
delivered to Lender.
7.3 WARRANTIES AND REPRESENTATIONS
ACCURATE.
All warranties and representations made by
or on behalf of any of Borrower or Guarantor
to Lender shall be true, accurate and
complete in all material respects and shall
not omit any material fact necessary to make
the same not misleading.
7.4 FINANCIALS AND APPRAISALS.
Lender shall have received and approved:
(i) financial statements from Borrower and
Guarantor complying with the standards set
forth in Section 9.2. and (ii) an appraisal
of the Property from an appraiser acceptable
to Lender setting forth an appraised value of
the Property which results in a Loan to Value
Ratio not in excess of 75%.
7
7.5 VALIDITY AND SUFFICIENCY OF SECURITY
DOCUMENTS.
The Mortgage and the other Security
Documents shall create a valid and perfected
lien on the property described therein
("Collateral") and each of the Security
Documents and related UCC filings shall have
been duly recorded and filed to the
satisfaction of Lender and its counsel.
7.6 NO OTHER LIENS; TAXES AND MUNICIPAL
CHARGES CURRENT.
The Collateral shall not be subject to any
liens or encumbrances, whether inferior or
superior to the Loan Documents or the
Security Documents, except in respect of: (i)
real estate taxes and personal property taxes
not yet due and payable; and (ii) Permitted
Title Exceptions, if any. All real estate
taxes, personal property taxes and other
municipal charges relating to any of the
Collateral shall be current.
7.7 PROPERTY MATTERS.
Lender shall have received and
independently approved each of the following:
(i) evidence of Licenses and Permits for the
Property sufficient to allow the Property to
be operated in the ordinary course of
business and as licensed assisted living
facilities; (ii) a report from a Lender's
Consultant to the effect that the Property is
in good repair and safe condition with no
structural deficiencies and no material need
for repairs or replacements except in the
ordinary course of business; (iii) a
detailed, current rent roll; and (iv) the
Form Lease.
7.8 COMPLIANCE WITH LAW.
Lender shall have received and
independently approved evidence that:
(i)PRESENT COMPLIANCE. All real
estate and tangible personal property
constituting or intended to constitute
Collateral for the Loan complies with
all applicable Legal Requirements and
the provisions of all applicable
Licenses and Permits.
(ii) NO PROHIBITIONS OR VIOLATIONS.
There are no applicable Legal
Requirements which prohibit or adversely
limit the use of the Property for the
purposes the same are intended for, nor
is there any outstanding and uncured
violation of any applicable Legal
Requirements.
(iii) LICENSES AND PERMITS. All
Licenses and Permits and private
approvals of every nature whatsoever, if
any, which are reasonably necessary in
order to allow the operation of the
Property as contemplated by this
Agreement and as needed under applicable
Legal Requirements have been duly and
finally received with all appeal
8
periods therefrom having elapsed, with
no appeal having been taken therefrom,
and with no violations existing under
the terms thereof.
7.9 TITLE INSURANCE; OTHER EVIDENCE OF
PERFECTION.
Lender shall have received: (i)(a) at
closing a mortgagee's pro forma title
insurance policy dated as of the date of the
Loan closing and (b) within twenty (20) days
thereafter a mortgagee's title insurance
policy, each of which meets Lender's title
insurance requirements previously furnished
to Borrower to the reasonable satisfaction of
Lender and its counsel; and (ii) such other
evidence of the perfection of its security
interests as Lender and its counsel may
reasonably require.
7.10SURVEY.
Lender shall have received and approved a
current, on-site instrument survey of the
Land containing a certification thereon, or
on a separate surveyor's certificate, of a
Registered Land Surveyor acceptable to Lender
which meets Lender's survey requirements
previously furnished to Borrower.
7.11CONDITION OF PROPERTY.
There shall have been no material
unrepaired or unrestored damage or
destruction by fire or otherwise to any of
the real or tangible personal property
comprising or intended to comprise the
Collateral.
7.12NO TAKINGS.
Neither the Property nor any material
portion thereof shall have been taken by
eminent domain nor shall there be any threat
of such a taking.
7.13INSURANCE.
Borrower shall have provided to Lender
with respect to the Property and the
Collateral evidence of: insurance coverages
which meet the property, hazard and other
insurance requirements set forth on Exhibit D
of this Loan Agreement to the satisfaction of
Lender and Lender's Consultants.
7.14UTILITIES; WATER; DRAINAGE.
Lender shall have received letters
addressed to Lender from the applicable
municipality that sanitary drinking water,
sanitary sewer disposal systems, utility and
power connections and storm drainage adequate
for the Property are available as a matter of
right.
7.15HAZARDOUS WASTE, HAZARDOUS MATERIALS
AND TOXIC SUBSTANCES.
Lender shall have received, and in its
sole discretion approved, satisfactory
reports addressed to Lender from acceptable,
qualified professionals prepared in
9
accordance with Lender's protocols indicating
the acceptability of the environmental risk
associated with the Property, addressing the
existence of any Hazardous Materials at, or
which may affect, the Property and the
Property's compliance with Environmental
Legal Requirements.
7.16ORGANIZATIONAL DOCUMENTS AND ENTITY
AGREEMENTS.
Lender shall have received and approved
the Articles of Incorporation and by-laws of
Borrower and Guarantor.
7.17VOTES, CONSENTS AND AUTHORIZATIONS.
Lender shall have received and approved
certified copies of all corporate votes,
consents and authorizations as may be
reasonably required to evidence authority
for: (i) closing the Loan and the
transactions contemplated hereby; (ii)
providing continuing authorization to
designated persons to deal in all respects on
behalf of Borrower; and (iii) the execution
of all Loan Documents.
7.18LEGAL AND OTHER OPINIONS.
Lender shall have received and approved
legal opinion letters from counsel
representing Borrower and Guarantor which
meet Lender's legal opinion requirements
previously furnished to Borrower.
Lender shall also have received from
qualified attorneys, engineers, surveyors and
architects, such other certificates,
opinions, surveys, and other evidence of
compliance with each of the conditions herein
set forth as Lender may reasonably require.
7.19NO DEFAULT.
There shall not be any Default under any
of the Loan Documents.
8. WARRANTIES AND REPRESENTATIONS.
Borrower warrants and represents to Lender
for the express purpose of inducing Lender to
enter into this Agreement, to make the Loan,
and to otherwise complete all of the
transactions contemplated hereby, that as of
the date of this Agreement, upon the date the
Loan is funded (if other than the date of
this Agreement) and at all times thereafter
until the Loan has been repaid and all
Obligations to Lender have been satisfied as
follows:
8.1 FINANCIAL INFORMATION.
True, accurate and complete financial
statements of Borrower and Guarantor have
been delivered to Lender and the same fairly
present the financial condition of Borrower
and Guarantor as of the dates thereof and no
material and adverse change has occurred in
such financial condition since the dates
thereof. All financial statements of
Borrower and Guarantor hereafter
10
furnished to Lender shall be true, accurate
and complete and shall fairly present the
financial condition of Borrower and Guarantor
as of the dates thereof.
8.2 NO VIOLATIONS.
The consummation of the Loan and the
subsequent payment and performance of the
Obligations evidenced and secured by the Loan
Documents do not constitute a violation of,
or conflict with, any law, order, regulation,
contract, agreement or organizational
document to which Borrower or Guarantor is a
party or by which Borrower or Guarantor, or
the property thereof, is bound.
8.3 NO LITIGATION.
There is no material litigation now
pending, or to the best of Borrower's
knowledge threatened, against Borrower or
Guarantor which if adversely decided would
reasonably be expected to materially impair
the ability of Borrower or Guarantor to pay
and perform its obligations hereunder or
under the other Loan Documents. There is no
litigation, whether or not material, pending,
or to the best of Borrower's knowledge
threatened, against Borrower in which the
amount in controversy exceeds $25,000.00
which either: (i) is not covered by
insurance, or (ii) has not been previously
disclosed to Lender.
8.4 LEASES.
True and complete copies of all leases of
each Property which are now in effect (and
all guaranties thereof) have been delivered
to Lender. To Borrower's knowledge, such
leases have not been further amended or
changed in any respect and are in full force
and effect, enforceable in accordance with
the terms thereof, subject, however, to the
terms of the Loan Documents.
8.5 COMPLIANCE WITH LEGAL REQUIREMENTS.
To Borrower's knowledge, after due and
diligent inquiry, the Property complies with
all material Legal Requirements and any and
all covenants, conditions, restrictions or
other matters which materially affect the
Property. The Borrower is not in violation
of any law, ordinance, license or regulation
of the United States of America, the State of
Florida and any political subdivisions
thereof, and any agency, department,
commission, board, bureau or instrumentality
of any of them, including without limitation
the Florida Agency on Healthcare
Administration (collectively "Governmental
Authorities") now in effect applicable to the
conduct of its businesses, including without
limitation, the General Statutes of the State
of Florida and the rules and regulations
promulgated thereunder, except for violations
which will not singly nor in the aggregate
have a material adverse effect on the
business, operations, properties, prospects,
assets or financial condition of the
Borrower. The Borrower has duly filed all
applications and reports required to be filed
by it with any Governmental Authority in
order to purchase the Property and lawfully
operate the Property after closing the Loan.
There is not now pending, issued nor
outstanding by or before any Governmental
Authority, or to the knowledge of
11
the Borrower threatened, any order to show
cause, notice of violation, notice of
apparent liability or notice of forfeiture
or, to the knowledge of the Borrower, any
investigation or material complaint against
the Borrower. To Borrower's knowledge, after
due and diligent inquiry, the Facilities and
the equipment located thereon, along with the
staffing and operation of each, satisfy,
without material exception, the applicable
licensing requirements of the State of
Florida.
8.6 REQUIRED LICENSES AND PERMITS.
As of the Closing of the Loan, the
Borrower will be the holder of all Licenses
and Permits and Certificates of Need ("CONs")
issued by any state agency or authority
necessary to operate the Facilities. The
Licenses and Permits and CONs constitute all
of the Licenses, CONs and authorizations
required by any Governmental Authority for
the existing and proposed operation of the
Facilities by Borrower as of the Closing of
the Loan, and the Licenses and Permits and
CONs will be in full force and effect and
unimpaired by any act or omission of the
Borrower or of its officers, directors,
employees, representatives or agents. No
waivers of any laws, rules, regulations or
requirements (including, but not limited to,
minimum square footage requirements per bed)
are required for the Facilities to operate at
their current licensed bed capacity.
Borrower is in good standing with the
respective governmental, quasi-governmental
and other third party payors and regulatory
agencies under such applicable licenses and
any applicable Reimbursement Contracts. To
Borrower's knowledge, after due and diligent
inquiry, there is not now pending nor
threatened, any action or investigation by or
before any Governmental Authority or any
state or federal grand jury to revoke,
cancel, rescind, modify or refuse to renew
any of the Licenses and Permits or CONs held
by the current operator of the Facilities.
To Borrower's knowledge, after due and
diligent inquiry, each required application
for renewal of any of the Licenses and
Permits has been or will be timely filed with
the appropriate state agency or authority.
The Borrower has provided to the Lender the
most recent state licensure report and list
of deficiencies, if any, related to the
Facilities. The Borrower is not currently
the subject of any Governmental Authority
Office of Inspector General investigation,
recoupment, audit or review nor are any of
the reimbursement, operational or other
practices of the Borrower currently being
investigated by a state or federal grand jury
or by any other governmental entity or agency
empowered to review Medicare or Medicaid,
particularly any fraud and/or abuse, issues.
8.7 PERMITS, ROADS, CURB CUTS AND UTILITY
CONNECTIONS.
All Licenses and Permits and regulatory
approvals have been obtained by Borrower to
permit its lawful occupancy and operation of
the Facilities; all public utility and public
sanitary sewage services necessary for the
use of the Facilities are in existence to the
Property; and dedicated and publicly
maintained roads and curbcuts necessary for
the full use of the Property for their
intended purposes have been completed. There
are no unsatisfied conditions and no
12
offsite roads, sewage systems, water systems
or other improvements which must be
completed.
8.8 GOOD TITLE AND NO LIENS.
As of the Closing of the Loan, the
Borrower will be the lawful owner of the
Property and will be the lawful owner of or
have the legal right to use the areas over,
under or on which utility or passage
easements are required to make use of the
Property and parking, and is and will be the
lawful owner of the Property, free and clear
of all liens and encumbrances of any nature
whatsoever, except for the Permitted Title
Exceptions.
8.9 USE OF PROCEEDS.
The proceeds of the Loan shall be used
solely and exclusively for the acquisition of
the Property and payment of costs and
expenses incurred in connection with the
financing provided by the Loan. No portion
of the proceeds of the Loan shall be used
directly or indirectly, and whether
immediately, incidentally or ultimately (i)
to purchase or carry any margin stock, or to
extend credit to others for the purpose
thereof, or to repay or refund indebtedness
previously incurred for such purpose, or (ii)
for any purpose which would violate or is
inconsistent with the provisions of
regulations of the Board of Governors of the
Federal Reserve System including, without
limitation, Regulations G, T, U AND X
THEREOF.
8.10ENTITY MATTERS.
8.10.1 ORGANIZATION.
Borrower is a duly organized validly
existing corporation in good standing
under the laws of the State of
Washington and is duly qualified in the
jurisdiction where the Property is
situated and in each jurisdiction where
the nature of its business is such that
qualification is required and has all
requisite power and authority to conduct
its business and to own its property, as
now conducted or owned, and as
contemplated by this Loan Agreement.
8.10.2 OWNERSHIP AND TAXPAYER
IDENTIFICATION NUMBERS.
The Borrower is a 100% owned
subsidiary of the Guarantor, and no
additional ownership interests, or
rights or instruments convertible into
such ownership interests, shall be
issued, nor shall any ownership change,
except for Permitted Transfers and
except in connection with the present
terms of the Mezzanine Loan. The
taxpayer identification numbers of
Borrower and the Guarantor are
accurately stated in Exhibit C.
13
8.10.3 AUTHORIZATION.
All required corporate actions and
proceedings have been duly taken so as
to authorize the execution and delivery
by Borrower and Guarantor of the Loan
Documents.
8.11VALID AND BINDING.
Each of the Loan Documents constitute
legal, valid and binding obligations of
Borrower and, where applicable, Guarantor in
accordance with the respective terms thereof,
subject to bankruptcy, insolvency and similar
laws of general application affecting the
rights and remedies of creditors and, with
respect to the availability of the remedies
of specific enforcement, subject to the
discretion of the court before which any
proceeding therefor may be brought.
8.12DEFERRED COMPENSATION AND ERISA.
Borrower does not have any pension, profit
sharing, stock option, insurance or other
arrangement or plan for employees covered by
Title IV of the Employment Retirement
Security Act of 1974 ("ERISA") ("ERISA Plan")
and no "Reportable Event" as defined in ERISA
has occurred and is now continuing with
respect to any such ERISA Plan. The granting
of the Loan, the performance by Borrower of
its obligations under the Loan Documents and
Borrower's conducting of its operations do
not and will not violate any provisions of
ERISA.
8.13CONDITIONS SATISFIED.
Assuming that Lender and Lender's
Consultants have approved all matters
requiring their approval, all of the
conditions precedent to closing and funding
the Loan set forth in Section 7 have been
satisfied.
8.14NO MATERIAL CHANGE; NO DEFAULT.
There has been no material adverse change
in the financial condition, business, affairs
or control of Borrower or Guarantor since the
date of their respective last financial
statements most recently delivered to the
Lender in accordance with the requirements of
Section 9.2. hereof. There is no Default on
the part of Borrower or Guarantor under this
Agreement or any of the other Loan Documents
and no event has occurred and is continuing
which could constitute a Default under any
Loan Document.
8.15NO BROKER OR FINDER.
Neither Borrower, nor Guarantor, nor
anyone on behalf thereof, has dealt with any
broker, finder or other person or entity who
or which may be entitled to a broker's or
finder's fee, or other compensation, payable
by Lender in connection with this Loan.
14
8.16BACKGROUND INFORMATION AND
CERTIFICATES.
All of the factual information contained
or referred to in Section 1 of this Agreement
and in the Exhibits to this Agreement or the
other Loan Documents, and in the certificates
and opinions furnished to Lender by or on
behalf of Borrower in connection with the
Property or the Loan, is true, accurate and
complete in all material respects, and omits
no material fact necessary to make the same
not misleading.
8.17GUARANTOR'S WARRANTIES AND
REPRESENTATIONS.
Borrower has no reason to believe that any
warranties or representations made in writing
by Guarantor to Lender are untrue, incomplete
or misleading in any respect.
8.18TRANSFER OF LICENSE OR BED CAPACITY.
The Borrower has not granted to any third
party the right to reduce the number of
licensed beds in any Facility or to apply for
approval to move the right to any or all of
the licensed beds to any other location.
8.19MEDICARE AND MEDICAID CERTIFICATION.
None of the Facilities is certified for
participation in the Medicare or Medicaid
Programs.
9. COVENANTS.
Borrower covenants and agrees that from
the date hereof and so long as any of the
Loan or other Obligations remains
outstanding, as follows:
9.1 NOTICES.
Borrower shall, with reasonable promptness,
but in all events within ten (10) days after
it has actual knowledge thereof, notify
Lender in writing of the occurrence of any
act, event or condition which constitutes a
Default under any of the Loan Documents.
Such notification shall include a written
statement of any remedial or curative actions
which Borrower proposes to undertake to cure
or remedy such Default. Borrower will
specifically report to the Lender promptly
the receipt by the Borrower of any material
correspondence from the Florida Agency on
Healthcare Administration or other state and
federal agencies regarding the "quality of
care" at the Facilities, other than
correspondence received in the ordinary
course of its business of a positive or
neutral nature.
15
9.2 FINANCIAL STATEMENTS AND REPORTS.
Borrower shall furnish or cause to be
furnished to Lender from time to time, the
following financial statements and reports
and other information, all in form, manner of
presentation and substance acceptable to
Lender:
9.2.1ANNUAL STATEMENTS.
By April 30 in each calendar year,
(i) unaudited financial statements of
Borrower prepared in accordance with
generally accepted accounting
principles, or other recognized method
of accounting acceptable to Lender,
consistently applied, in form and manner
of presentation acceptable to Lender by
an independent, certified public
accountant acceptable to Lender, such
financial statements to include and to
be supplemented by such detail and
supporting data and schedules as Lender
may from time to time reasonably
determine, but such data and schedules
shall not be required to be certified by
anyone other than the Borrower and (ii)
separate financial statements on the
operations of each of the Facilities
certified by the Borrower to be true and
correct;
9.2.2PERIODIC STATEMENTS.
Within forty five (45) days following
the end of each calendar quarter the
following, internally prepared by
Borrower and certified by Borrower to
be true, accurate and complete: (i) an
operating statement showing the results
of operation for the prior quarter and
on a year-to-date basis for the period
just ended; (ii) a detailed, current
rent roll and leasing status reports
(which shall include existing and
prospective tenants) for the Property,
containing such details as Lender may
reasonably request, (iii) cash flows for
the quarter just ended and (iv) a
certificate of compliance with regard to
Debt Service Coverage from and after the
date on which the first such calculation
is to be made pursuant to Section 9.19;
9.2.3DATA REQUESTED.
Within a reasonable period of time
and from time to time such other
financial data or information as Lender
may reasonably request with respect to
the Property or Borrower, including, but
not limited to, rent rolls, aged
receivables, aged payables, leases,
budgets, forecasts, reserves, cash flow
projections, physical condition of the
Property and pending lease proposals;
9.2.4OPERATING BUDGET.
Prior to the end of each calendar
year, an annual operating budget for the
Property for the next year, in form
acceptable to Lender.
16
9.2.5GUARANTOR'S STATEMENTS.
The financial statements and reports
required to be furnished in the
Guaranty.
9.3 PAYMENT OF TAXES AND OTHER
OBLIGATIONS.
Subject to the right to contest set forth
in Section 10.1, Borrower shall duly pay and
discharge, or cause to be paid and
discharged, before the same shall become
overdue, all taxes, assessments and other
governmental charges payable by it, or with
respect to the Property, as well as all
claims or obligations for labor, materials,
supplies or services (involving an amount in
excess of $25,000.00 in any instance or
$100,000.00 in the aggregate) or for borrowed
funds in any amount. Lender shall be
provided with evidence of the payment of all
real estate taxes (or payments in lieu
thereof) within twenty (20) days after
payment of same. After a Default or Event of
Default during the Initial Term and at any
time during the Extension Term, at Lender's
option, Borrower shall be required to deposit
with Lender each month 1/12th of the annual
real estate taxes and insurance premiums for
the Property.
9.4 CONDUCT OF BUSINESS; COMPLIANCE WITH
LAW.
Borrower shall cause the operation of
Facilities to be conducted at all times in a
manner consistent with the level of operation
of Facilities as of the date hereof. Without
limiting the foregoing, Borrower shall:
(i) maintain the standard of care
for the residents of the Facilities at
all times at a level necessary to
insure quality care for the residents
of the Facilities;
(ii) operate the Facilities in
compliance with applicable licenses,
laws and regulations relating thereto
and cause all licenses, permits,
certificates of need (if any),
Reimbursement Contracts (if any are
from time to time in effect), and any
other agreements necessary for the use
and operation of the Facilities or as
may be necessary for participation in
the Medicaid, Medicare, or other
applicable reimbursement programs (to
the extent the Facilities elect to
participate in any such programs) to
remain in effect without reduction in
the number of licenses beds or beds
authorized for use in Medicaid,
Medicare, or other applicable
reimbursement programs;
(iii) maintain sufficient inventory
and equipment of types and quantities
at each Facility to enable Borrower to
adequately operate each Facility; and
(iv) keep all improvements and
equipment located on our used or
useful in connection with each
Facility in good repair, working order
and condition, reasonably wear and
tear excepted, and from time to time
make all needed and proper repairs,
renewals, replacements, additions, and
improvements thereto to keep the same
17
in good operating condition.
In addition, Borrower shall engage solely
in the ownership and operation of the
Property, and will not enter into any new
ventures, or undertake any Investments,
except as permitted in Section 9.8, or any
new business dealings, without Lender's
express prior written consent in each
instance. As an express inducement to Lender
to make and maintain the Loan, the Borrower
agrees at all times prior to payment and
satisfaction of all Obligations to be and
remain a single purpose entity. Borrower
shall operate the Property and conduct its
affairs in a lawful manner and in compliance
with all Legal Requirements applicable
thereto and all provisions of ERISA.
9.5 INSURANCE.
Borrower shall at all times maintain in
full force and effect the insurance coverages
set forth in Exhibit E of this Loan Agreement
and shall cause Lender to be designated as
mortgagee/loss payee/additional insured in
accordance with the requirements of Exhibit
E. All insurance premiums shall be paid as
and when due, and Lender shall be provided
with evidence of such payment of insurance
premiums prior to closing and thereafter
prior to each date on which the coverage may
lapse for non-payment. Such insurance may,
at Borrower's option, be provided in blanket
coverage, insured along with other properties
owned by affiliates of Borrower provided the
coverage provided under such policy meets the
requirements of Exhibit E for the Property.
9.6 RESTRICTIONS ON LIENS, TRANSFERS AND
ADDITIONAL DEBT.
9.6.1PROHIBITED TRANSACTIONS.
Except for Permitted Transactions,
Borrower shall not:
(i) create or incur, or
suffer to be created or
incurred, or to exist, any
encumbrance, mortgage, pledge,
lien, charge or other security
interest of any kind upon any
of its assets of any character
related to the Property, or
any portion thereof, whether
now owned or hereafter
acquired or upon the proceeds
or products thereof;
(ii) create or incur any
indebtedness for borrowed
funds with respect to the
Property whether secured or
unsecured either directly or
as a guarantor except for the
Loan and the Mezzanine Loan;
(iii) directly or
indirectly permit any sale,
transfer, exchange, assignment
or pledge of or grant of any
security interest in any
ownership interests in
Borrower except to Mezzanine
Lender
18
and so long as the transferor
maintains voting control over
such ownership interest in a
manner reasonably acceptable
to Lender; or
(iv) sell, convey,
transfer or exchange any of
its assets of any character
related to the Property, or
any portion thereof, whether
now owned or hereafter
acquired.
9.6.2PERMITTED TRANSACTIONS.
The term "Permitted Transactions"
shall mean Permitted Transfers,
Permitted Additional Debt, Permitted
Title Exceptions and Approved Leases.
9.6.3PERMITTED TRANSFERS.
The term "Permitted Transfers" shall
mean:
(i) the Security
Documents and other agreements
in favor of Lender;
(ii) transactions,
whether outright or as
security, for which Lender's
prior written consent has been
obtained, which consent may be
withheld, granted or granted
conditionally, subject to such
protective and other
conditions as Lender may
require in its sole and
absolute discretion;
(iii) sales or
dispositions in the ordinary
course of business of worn,
obsolete or damaged items of
personal property or fixtures
which are suitably REPLACED;
AND
9.6.4PERMITTED ADDITIONAL DEBT.
The term "Permitted Additional Debt"
shall mean:
(i) transactions,
whether secured or unsecured,
for which Lender's prior
written consent has been
obtained, which consent may be
withheld, granted or granted
conditionally subject to such
protective and other
conditions as Lender may
require in its sole and
absolute discretion;
(ii) indebtedness
incurred in the ordinary
course of business for the
purchase of goods or services;
19
(iii) fully subordinated
unsecured loans from Guarantor
the proceeds of which are used
solely to pay costs related to
the Property and the repayment
of which is subject to the
limitations set forth in the
Guaranty; and
(iv) indebtedness for
leased or financed furniture,
fixtures or equipment used in
connection with the operation
of the Property where the
aggregate payments due
thereunder do not exceed
$200,000 during any fiscal
year.
9.6.5ADDITIONAL FUNDS.
All funds required for the operation
of the Property in excess of those
available from ordinary cash flow of the
Property shall be provided by Borrower
or Guarantor as additional equity
contributions or as Permitted Additional
Debt.
9.6.6RIGHT TO ACCELERATE LOAN.
The Loan shall become due and payable
in full, and the Lender shall have the
right to accelerate the Loan and declare
an Event of Default, at the option of
Lender, upon any breach or violation of
the provisions of Section 9.6.,
provided, however, except for a
voluntary conveyance, mortgage or lien
(as to which no notice or grace periods
shall be applicable), a Default under
Section 9.6 shall be subject to the
grace or notice periods provided in
11.2.4.
9.6.7LENDER'S OPTIONS.
Lender may, at its option, in lieu of
accelerating the Loan, and in its sole
and absolute discretion, agree to waive
compliance with the provisions of this
Section 9.6. in any instance upon
compliance with such terms and
conditions as Lender may impose,
including, without limitation, the
payment of a material fee and a change
in the interest rate and other terms.
Except for Permitted Transfers, Lender
may grant or withhold, or conditionally
grant, its consent to any proposed
transfer in its sole and absolute
discretion. In the case of a sale or
transfer with Lender's prior written
consent, or any such Permitted Transfer,
the seller or transferor shall remain
jointly and severally liable with the
purchaser or transferee for all
liabilities of Borrower hereunder.
9.7 LIMITS ON GUARANTIES AND
DISTRIBUTIONS.
9.7.1LIMITS.
Borrower shall not guarantee to
anyone other than Lender the obligations
of any person or entity. Borrower shall
not pay any money or distribute any
property (in any form) out of proceeds
of the Loan or
20
proceeds of the Property to Guarantor,
or to any affiliated entity or related
party, except for Permitted
Distributions.
9.7.2PERMITTED DISTRIBUTIONS.
The term "Permitted Distributions"
shall mean so long as no Default or
Event of Default has occurred
distributions made out of Available
Excess Cash Flow as set forth in Section
10.2.
9.8 RESTRICTIONS ON INVESTMENTS.
Borrower will not make or permit to exist
or to remain outstanding any Investment out
of proceeds of the Loan or the proceeds of
the Property except an Investment in assets
which constitute the Property or investments
of the proceeds of the Property and which are
in:
(i)marketable direct or guaranteed
general obligations of the United States
of America which mature within one year
from the date of purchase by Borrower;
(ii) bank deposits, certificates of
deposit and banker's acceptances, or
other obligations in or of Lender or
other banks located within and chartered
by the United States of America or a
state and having assets of over
$500,000,000.00; and
(iii) personal property and real
estate acquired in the normal and
ordinary course of Borrower's present
business and in connection with the
Property.
All such Investments shall be made in a
manner which assures that Lender shall have
and maintain a perfected first lien security
interest therein.
9.9 INDEMNIFICATION AGAINST PAYMENT OF
BROKERS' FEES.
Borrower agrees to defend, indemnify and
save harmless Lender from and against any and
all liabilities, damages, penalties, costs,
and expenses, relating in any manner to any
brokerage or finder's fees in respect of the
Loan for any broker utilized by Borrower.
Lender agrees to defend, indemnify and save
Borrower from and against any and all
liabilities, damages, penalties, costs, and
expenses, relating in any manner to any
brokerage or finder's fee in respect of the
Loan for any broker utilized by Lender.
9.10LIMITATIONS ON CERTAIN TRANSACTIONS.
Borrower agrees to the following
limitations:
21
9.10.1 NO MERGER, ACQUISITION OR
AMENDMENT.
Borrower shall not, nor shall
Borrower enter into any agreement to,
dissolve or liquidate, nor merge or
consolidate with or otherwise acquire
all or substantially all of the assets
of any other entity or make any material
amendment or modification of its
organizational documents.
9.11APPROVAL AND SUBORDINATION OF
MANAGEMENT AND MANAGEMENT CONTRACT.
Lender shall have the continuing right to
reasonably approve the identity of any
management company (other than Guarantor or
another wholly owned subsidiary of Guarantor,
as to which no such consent is required)
operating the Property and the terms and
conditions of the contract for such
management. Lender's approval shall not be
unreasonably withheld or delayed. If
required by Lender, Borrower shall obtain a
subordination agreement with respect to all
management fees due or to become due to any
affiliate of Borrower, as manager of the
Property (the "Manager"), which shall be in
form and content reasonably satisfactory to
Lender and shall provide that so long as no
Event of Default under any of the Loan
Documents has occurred, the Borrower shall be
entitled to pay said management fees in an
amount to be approved by Lender but which
shall not in the aggregate exceed five (5%)
percent of the gross operating income of the
Property. Manager shall acknowledge that if
Lender exercises its remedies upon an Event
of Default, the management agreement may be
canceled without recourse to Lender.
Borrower shall deliver to Lender, for its
review and approval, the current and any
future management agreement with respect to
the Property.
9.12PLACE FOR RECORDS; INSPECTION.
Borrower shall maintain all of its
business records related to the Property and
the operation thereof at the Facilities or at
address specified at the beginning of this
Agreement. Upon two (2) Business Days' prior
notice and at reasonable times during normal
business hours Lender shall have the right
(through such agents or Lender's Consultants
as Lender may designate) to examine
Borrower's property and make copies of and
abstracts from Borrower's books of account,
correspondence and other records and to
discuss its financial and other affairs with
any of its officers and any accountants hired
by Borrower, it being agreed that Lender
shall use reasonable efforts to not divulge
information obtained from such examination to
others except in connection with Legal
Requirements and in connection with
administering the Loan, enforcing its rights
and remedies under the Loan Documents and in
the conduct, operation and regulation of its
banking and lending business (which may
include, without limitation, the transfer of
the Loan or of participation interests
therein). Any transferee of the Loan or any
holder of a participation interest in the
Loan shall be entitled to deal with such
information in the same manner and in
connection with any subsequent transfer of
its interest in the Loan or of further
participation interests therein.
22
9.13COSTS AND EXPENSES.
Borrower shall pay all costs and expenses
(excluding salaries or wages of full time
employees of Lender) reasonably incurred by
Lender in connection with the enforcement of
Lender's rights under the Loan Documents,
including, without limitation, reasonable
legal fees and disbursements, appraisal fees,
inspection fees, plan review fees, travel
costs, fees and out-of-pocket costs of
independent engineers and consultants.
Borrower's obligations to pay such costs and
expenses shall include, without limitation,
all reasonable attorneys' fees and other
costs and expenses reasonably incurred for
preparing and conducting litigation or
dispute resolution arising from any breach by
Borrower or Guarantor of any covenant,
warranty, representation or agreement under
any one or more of the Loan Documents.
9.14COMPLIANCE WITH LEGAL REQUIREMENTS.
Borrower shall comply with all Legal
Requirements applicable to the Property,
Borrower, or both except to the extent the
same are being duly contested by Borrower in
accordance with the provisions of Section
10.1.2 hereof.
9.15INDEMNIFICATION.
Borrower shall at all times, both before
and after repayment of the Loan, at its sole
cost and expense defend, indemnify, exonerate
and save harmless Lender and all those
claiming by, through or under Lender
("Indemnified Party") against and from all
damages, losses, liabilities, obligations,
penalties, claims, litigation, demands,
defenses, judgments, suits, proceedings,
costs, disbursements or expenses of any kind
whatsoever, including, without limitation,
reasonable attorneys' fees and experts' fees
and disbursements, which may at any time
(including, without limitation, before or
after discharge or foreclosure of the
Mortgage) be imposed upon, incurred by or
asserted or awarded against the Indemnified
Party and arising from or out of:
(i)any Hazardous Materials or any
violation of, or failure to comply with,
any Environmental Legal Requirements all
as more particularly provided for in the
Environmental Indemnity with respect to
the Property or any other Collateral;
(ii) any liability for damage to
person or property arising out of any
violation of any Legal Requirement
applicable to the Property, Borrower, or
both, or
(iii) any act, omission, negligence
or conduct at the Property, or arising
or claimed to have arisen, out of any
act, omission, negligence or conduct of
Borrower or any contractor, sub-
contractor, tenant, occupant or invitee
thereof, which is in any way related to
the Property.
Notwithstanding the foregoing, an
Indemnified Party shall not be entitled to
indemnification in respect of claims arising
from acts of its own gross
23
negligence or willful misconduct to the
extent that such gross negligence or willful
misconduct is determined by the final
judgment of a court of competent
jurisdiction, not subject to further appeal,
in proceedings to which such Indemnified
Party is a proper party or arising from the
acts or omissions of any Indemnified Party or
any third party after Borrower has been
dispossessed of the Property.
9.16LEASING MATTERS.
9.16.1 [intentionally omitted]
9.16.2 LENDER'S FURTHER APPROVAL
REQUIRED.
Borrower shall be at liberty to
modify, amend or terminate existing
leases, or enter into new leases, of
premises within the Property on
commercially reasonable terms and
conditions, except that without Lender's
prior written consent in each instance:
(i) no lease or leases involving more
than five percent (5%) of the rentable
space at the Property in the aggregate
shall be terminated except for material
breach of a tenant's monetary
obligation, and (ii) no existing lease
shall be modified or amended, and no new
lease shall be entered into, on terms
and conditions which are materially less
favorable than those set forth in the
approved Leasing Pro-Forma or the Form
Lease. Lender shall not unreasonably
withhold, delay or condition its consent
to any such requested termination or
deviation so long as the request is
consistent with then existing market
conditions. Lender shall be provided,
within ten (10) Business Days following
execution thereof with a full and
complete copy of each permitted lease
and any amendment or modification
thereof. Lender shall not withhold its
approval of the economic terms of any
lease which are not less favorable than
the economic terms established by the
Leasing Pro-Forma. Any lease, or
modification or amendment of lease,
which has been so approved by Lender,
and any lease, or modification or
amendment of lease which does not
require Lender's approval, shall be an
"Approved Lease".
9.16.3 BORROWER'S REQUESTS.
Any request by Borrower for an
approval from Lender with respect to
leasing matters shall be accompanied, at
a minimum, by the following: (i) the
proposed lease or amendment or
modification thereof complete with all
applicable schedules and exhibits; (ii)
a complete copy of any proposed
guaranty; (iii) comprehensive financial
information with respect to the proposed
tenant, sub-tenant or assignee and, if
applicable, the proposed guarantor (as
to new leases or amendments or
modifications to existing leases
involving material economic changes, and
as to proposed sub-lets or assignments);
(iv) a brief written summary of the
proposed permitted uses and a discussion
of how such uses relate to other
tenancies then existing at the Property;
(v) an executive summary of the terms
and conditions of the proposed lease,
sub-lease or assignment, and, if
applicable, the proposed
24
guaranty; and (vi) an executive summary
of the facts and conditions relating to
any proposed termination of lease.
9.16.4 LENDER RESPONSE.
Lender shall act on requests from
Borrower for any approval under Section
9.17 in a commercially reasonable manner
and shall use commercially reasonable
efforts to respond to any such request
within five (5) Business Days following
Lender's receipt thereof. Lender's
response may consist of an approval or
disapproval of the request, or a
conditional approval thereof subject to
specified conditions, or a request for
further data or information, or any
combination thereof. If a proposed
lease which otherwise meets the Leasing
Pro Forma is not disapproved or
conditionally approved within such
five (5) Business Days following Lenders
receipt thereof, such proposed lease
shall be deemed approved by Lender, and
Borrower may proceed on that basis. In
order to expedite the processing of
requests for such approvals, Borrower
agrees to provide Lender with as much
advance information as is possible in a
commercially reasonable manner in
advance of Borrower's formal request for
an approval. Borrower agrees to prepare
and submit to Lender for Lender's prior
approval, which approval shall not be
unreasonably withheld or delayed a
standard lease form ("Form Lease").
Whenever reasonably possible all
Borrower's requests for lease approvals
shall be accompanied by an express
description of any deviations from the
Form Lease and the Leasing Pro-Forma.
9.16.5 SNDAS AND ESTOPPELS.
Lender shall have the right to
require each tenant to execute and
deliver to Lender a subordination, non-
disturbance of possession and attornment
agreement ("SNDA Agreement") in form,
content and manner of execution
reasonably acceptable to Lender and,
from time to time, an estoppel
certificate in form and manner of
execution reasonably acceptable to
Lender for any commercial tenant. Upon
Borrower's request, Lender shall execute
an SNDA Agreement with each tenant under
an Approved Lease occupying more than
five percent (5%) of the rentable square
feet of the Property upon: (i)
satisfaction of all landlord obligations
under the applicable Approved Lease such
that the tenant has taken full
possession of the leases premises and is
obligated to pay rent, and (ii) receipt
by Lender of a satisfactory estoppel
certificate confirming the full
performance of landlord obligations to
date including, but not limited to,
landlord obligations relating to the
construction of Tenant Improvements, and
the absence of any fact or circumstance
which constitutes, or with the passage
of time or giving of notice, or both,
would constitute, a default under such
lease.
25
9.16.6 EXCEPTIONS FOR APPROVALS.
Notwithstanding the foregoing,
Lender's prior written approval under
Section 9.17.2 above shall not be
required with respect to any lease,
tenant, guarantor, sublet, assignment,
modification, amendment, termination,
cancellation or surrender, if (i) the
same relates in any single instance, to
not more than 7,500 rentable square feet
at the Property or, when aggregated with
all other circumstances for which
Lender's such approval has not been
obtained, do not involve more than
25,000 rentable square feet at the
Property or (ii) relate solely to leases
with the residents of the Facilities
which provide for tenancy on a month to
month basis.
9.17LOAN TO VALUE RATIO COVENANT.
9.17.1 LTV.
At all times the ratio ("Loan To
Value Ratio" or "LTV") obtained by
dividing: (i) the outstanding principal
balance of the Loan, by (ii) the Value
of the Property, expressed as a
percentage, shall not be greater than
seventy five percent (75%). For the
purposes of this Loan Agreement, the
"Value of the Property" shall mean
$34,900,000 as established pursuant to
appraisal of each Facility, each dated
as of April 16, 1997 prepared by Gulf
Atlantic Valuation Services, Inc. (the
"Original Appraisals") which have been
accepted by Lender, as such Value of the
Property may hereafter be changed either
by an update to the Original Appraisal
or by a new appraisal ordered by and
acceptable to Lender.
9.17.2 UPDATED APPRAISALS.
Lender shall have the right at its
option from time to time, if Lender
reasonably believes in good faith that
the LTV is not then in compliance with
this Agreement, to order an update to
the Original Appraisal or a new
appraisal (collectively, an "Updated
Appraisal"). Each Updated Appraisal
shall be prepared by the original or
more recent appraiser unless Lender
makes a good faith determination not to
have such appraiser prepare the same in
which event the Updated Appraisal shall
be prepared at Lender's direction by an
appraiser selected by Lender. Any
appraiser selected by Lender shall be:
(i) an MAI member with experience
appraising properties of a similar type
to the Property in the general area and,
(ii) otherwise qualified pursuant to
provisions of applicable laws and
regulations under and pursuant to which
Lender operates.
9.17.3 COSTS OF APPRAISAL.
Borrower shall pay for the costs of
the Original Appraisal and each Updated
Appraisal; provided that Borrower shall
not be required to pay for more than one
(1) Updated Appraisal in any twelve (12)
month
26
period unless either: (i) a Default has
occurred and is then continuing, or (ii)
Lender has determined in good faith that
there is a material likelihood that an
updated Appraisal would reflect that the
LTV is not then in compliance with this
Agreement.
9.17.4 PRINCIPAL REDUCTION.
If at any time the Loan To Value
Ratio is not satisfied, Borrower shall
within ten (10) Business Days following
Lender's notice thereof (i) make a
principal payment or (ii) pledge
additional cash, cash equivalents or a
letter of credit reasonably acceptable
to the Lender in an amount sufficient to
reduce the Loan To Value Ratio to not
more than seventy five percent (75%).
It shall be an Event of Default if such
payment is not so made. Any cash, cash
equivalents or letters of credit
delivered to Lender pursuant hereto
shall be returned to Borrower in whole
or in part to the extent it is
subsequently determined by means of
future Updated Appraisals that such
collateral is not required in order to
comply with the Loan to Value Ratio set
forth herein.
9.18DEBT SERVICE COVERAGE RATIO.
9.18.1 CERTAIN DEFINITIONS.
(i) "Calculation Date"
shall mean the last day of
each calendar quarter
commencing with the calendar
quarter ending June 30, 1998.
(ii) "Calculation Period"
shall mean each preceding
calendar quarter ending on a
Calculation Date.
(iii) "Debt Service
Coverage" shall mean the ratio
for the Calculation Period of:
(A) Net Operating Income to
(B) Debt Service on the Loan.
(iv) "Net Operating
Income" shall mean revenues
accrued in connection with
Reimbursement Contracts and
actual cash collected by
Borrower from revenues and the
ownership and operation of the
Property and the interim
investment of accumulated
funds minus all Operating
Expenses.
(v) "Operating Expenses"
shall mean expenditures of all
kinds made or accrued with
respect to the operation of
the Property in the normal
course of business including,
but not limited to,
expenditures for taxes,
insurance, repairs,
replacements, maintenance,
management
27
fees, salaries, advertising
expenses, professional fees,
wages and utility costs,
amounts payable with respect
to the Property under or with
respect to any Permitted Title
Exceptions and reasonable
additions to, or creations of,
reserves for repairs and
replacements and for capital
expenditures required to
comply with Legal Requirements
or Approved Leases or
amendments thereto, but
expressly excluding: (a) any
Debt Service on the Loan, and
(b) expenditures made out of
reserves previously created.
Any expenditures which in
accordance with the accrual
basis income tax accounting
are depreciated or amortized
over a period which exceeds
one (1) year shall be treated
as an expenditure, for the
purposes of the foregoing
calculations, ratably over the
period of depreciation or
amortization.
(vi) "Debt Service on the
Loan" shall mean the higher
of: (i) the actual principal
and interest paid or payable
under the Loan during the
Calculation Period, or (ii)
the payments of principal and
interest that would have been
payable under an assumed loan
during the Calculation Period
in an amount equal to the
outstanding principal balance
of the Loan at the inception
of the relevant Calculation
Period bearing interest at the
Deemed Rate of Interest
payable on a conventional
mortgage amortization schedule
over twenty-five (25) years.
(vii) "Deemed Rate of
Interest" shall mean an issued
rate of interest equal to the
rate of interest on United
States Treasury Securities
with a 10 year maturity plus
2.25%.
9.18.2 DSC COVENANT.
The Debt Service Coverage for each
Calculation Period shall be not less
than 1.25:1 during the Initial Term of
the Loan and 1.40:1 during the Extended
Term. If such Debt Service Coverage
covenant shall not be satisfied on any
Calculation Date, Borrower shall (i)
prepay a sufficient amount of principal
outstanding on the Loan or (ii) provide
the Lender with cash, cash equivalents
or a letter of credit reasonably
acceptable to Lender as additional
collateral. Such additional collateral
shall be in an amount which is
sufficient if offset against the
outstanding principal amount such that
if such principal reduction had been
made or additional collateral offset
against the principal amount of the Loan
on the first day of the Calculation
Period the Debt Service Coverage
covenant would have been satisfied. Any
28
cash, cash equivalents or letters of
credit delivered to Lender pursuant
hereto shall be returned to Borrower in
whole or in part to the extent it is
subsequently determined by means of
future updated appraisals that such
collateral is not required in order to
comply with the Loan to Value Ratio set
forth herein. It shall be an Event of
Default if Borrower fails to make such a
prepayment or provide such additional
collateral not later than the first to
occur of: (i) ten (10) Business Days
after notice from Lender to Borrower
properly requesting the payment, or (ii)
if Borrower has failed to give Lender
sufficient reports to enable Lender to
make the necessary calculations, forty-
five (45) days following the applicable
Calculation Date.
9.19DELIVERY OF TITLE INSURANCE POLICY.
The Borrower shall deliver the mortgagee's
title insurance policy within the period set
forth in Section 7.9.
9.20MEDICAL WASTE.
The Borrower shall comply with all
applicable state and federal laws now or
hereafter enacted by any Governmental
Authority with respect to the management and
disposal of infectious and/or medical waste
(herein "Medical Waste Laws"). The Borrower
agrees to provide the Lender with copies of
any correspondence from any Governmental
Authority which indicates that the Borrower
is not in compliance with any medical waste
laws.
9.21MEZZANINE FINANCING.
The Borrower shall comply with all
obligations, covenants, terms and conditions
set forth in the Mezzanine Loan. Borrower
agrees not to amend any documents evidencing
the Mezzanine Loan in such a manner as would
improve the rights of the holder thereof vis-
a-vis the rights of Lender hereunder or under
the other Loan Documents or to make any
payments thereunder prior to making the
monthly payments of principal or interest due
under the Note other than on the terms set
forth in the Mezzanine Loan as of the date
hereof.
10. SPECIAL PROVISIONS.
10.1RIGHT TO CONTEST.
10.1.1 TAXES AND CLAIMS BY THIRD
PARTIES.
Notwithstanding the provisions of
Section 9.3 which obligate Borrower to
pay taxes and other obligations to third
parties when due, it is agreed that any
tax, assessment, charge, levy, claim or
obligation to a third party (expressly
excluding an obligation created under
the Loan Documents) need not be paid
while the validity or amount thereof
shall be contested currently, diligently
and in good faith by appropriate
proceedings and if Borrower shall have
adequate unencumbered (except in favor
of Lender) cash reserves with respect
thereto, and
29
provided that such contest does not
create a default by landlord under any
lease assigned to Lender; and provided,
further, that Borrower shall pay all
taxes, assessments, charges, levies or
obligations: (i) immediately upon the
commencement of proceedings to enforce
any lien which may have attached as
security therefor, unless such
proceeding is stayed by proper court
order pending the outcome of such
contest; and (ii) as to claims for
labor, materials or supplies, prior to
the imposition of any lien on the
Property unless the lien is discharged
or bonded as set forth in
Section 11.1.8.
10.1.2 LEGAL REQUIREMENTS.
Borrower may contest any claim,
demand, levy or assessment under any
Legal Requirements by any person or
entity if: (i) the contest is based
upon a material question of law or fact
raised by Borrower in good faith; (ii)
Borrower properly commences and
thereafter diligently pursues the
contest; (iii) the contest will not
materially impair the ability to
ultimately comply with the contested
Legal Requirement should the contest not
be successful and the conduct of the
contest will not materially interfere
with the ability to obligate all tenants
under Approved Leases to pay rent
without offset; (iv) Borrower
demonstrates to Lender's reasonable
satisfaction that Borrower has the
financial capability to undertake and
pay for such contest and any corrective
or remedial action then or thereafter
reasonably likely to be necessary; (v)
no Event of Default exists; and (vi) the
contest relates to an Environmental
Legal Requirement, the conditions set
forth in the Environmental Indemnity
relating to such contests shall be
satisfied.
10.2PERMITTED DISTRIBUTION OF AVAILABLE
EXCESS CASH FLOW.
10.2.1 RIGHT TO DISTRIBUTE.
Lender agrees that at any time when
the Property has achieved and is
maintaining a Debt Service Coverage at
not less than 1.25:1 and no other
Default or Event of Default exists
Borrower may make distributions to its
shareholder to the extent Borrower has
Available Excess Cash Flow (as
hereinafter defined).
10.2.2 AVAILABLE EXCESS CASH FLOW.
"Available Excess Cash Flow" shall
mean cash accumulated by Borrower from
the operations of the Property in excess
of reasonable reserves, which reserves
shall be determined reasonably by
Borrower.
11. EVENTS OF DEFAULT.
The following provisions deal with
Default, Events of Default, notice, grace and
cure periods, and certain rights of Lender
following an Event of Default.
30
11.1DEFAULT AND EVENTS OF DEFAULT.
The term "Default" as used herein or in
any of the other Loan Documents shall mean an
Event of Default, or any fact or circumstance
which constitutes, or upon the lapse of time,
or giving of notice, or both, would
constitute, an Event of Default. Each of the
following events, unless cured within any
applicable grace period set forth or referred
to below in this Section 11.1., or in Section
11.2., shall constitute an "Event of
Default":
11.1.1 GENERALLY.
A Default by Borrower in the
performance of any term, provision or
condition of this Agreement to be
performed by Borrower, or a breach, or
other failure to satisfy, any other
term, provision, condition, covenant or
warranty under this Agreement and such
Default remains uncured beyond any
applicable specific grace period
provided for in this Agreement, or as
set forth in Section 11.2. below;
11.1.2 NOTE, MORTGAGE AND OTHER LOAN
DOCUMENTS.
A Default by Borrower in the
performance of any term or provision of
the Note, or of the Mortgage, or of any
of the other Loan Documents, or a
breach, or other failure to satisfy, any
other term, provision, condition or
warranty under the Note, the Mortgage or
any other Loan Document, regardless of
whether any undisbursed portion of the
Loan is sufficient to cover any payment
of money required thereby, and the
specific grace period, if any, allowed
for the default in question shall have
expired without such default having been
cured;
11.1.3 FINANCIAL STATUS AND
INSOLVENCY.
A. Borrower shall: (i) admit in
writing its inability to pay its debts
generally as they become due; (ii) file
a petition in bankruptcy or a petition
to take advantage of any insolvency act;
(iii) make an assignment for the benefit
of creditors; (iv) consent to, or
acquiesce in, the appointment of a
receiver, liquidator or trustee of
itself or of the whole or any
substantial part of its properties or
assets; (v) file a petition or answer
seeking reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under the
Federal Bankruptcy laws or any other
applicable law; (vi) have a court of
competent jurisdiction enter an order,
judgment or decree appointing a
receiver, liquidator or trustee of
Borrower, or of the whole or any
substantial part of the property or
assets of Borrower, and such order,
judgment or decree shall remain
unvacated or not set aside or unstayed
for ninety (90) days; (vii) have a
petition filed against it seeking
reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under the
Federal Bankruptcy laws or any other
applicable law and such petition shall
remain undismissed for ninety (90) days;
(viii) have, under the provisions of any
other law for
31
the relief or aid of debtors, any court
of competent jurisdiction assume custody
or control of Borrower or of the whole
or any substantial part of its property
or assets and such custody or control
shall remain unterminated or unstayed
for ninety (90) days; (ix) have an
attachment or execution levied against
any substantial portion of the property
of Borrower or against any portion of
the Collateral which is not discharged
or dissolved by a bond within thirty
(30) days; or (x) have any materially
adverse change in its financial
condition since the date of this
Agreement; or
B. any such event shall occur with
respect to any Guarantor; or
11.1.4 LIENS.
A lien for the performance of work,
or the supply of materials, or a notice
of contract, or an attachment, judgment,
execution or levy is filed against the
Land or the Facilities and remains
unsatisfied or is not discharged or
dissolved by a bond (or by cash
collateral acceptable to Lender) for a
period of thirty (30) days after the
filing thereof and is not otherwise
being duly contested in accordance with
the provisions of Section 10.1.1;
11.1.5 BREACH OF REPRESENTATION OR
WARRANTY.
Any material representation or
warranty made by Borrower or Guarantor
herein or in any other instrument or
document relating to the Loan or the
Property shall at any time be materially
false or misleading, or any warranty
shall be materially breached;
11.1.6 GUARANTOR DEFAULT.
A default by Guarantor in the
performance of any term or provision of
the Guaranty.
11.1.7 MALPRACTICE AWARDS.
Any malpractice award or judgment
exceeding $200,000 shall be rendered
against the Borrower and either (i)
enforcement proceedings shall have been
commenced by any creditor upon such
award or judgment (unless such
proceedings have been stayed pending
appeal thereof) or (ii) such award or
judgment shall continue unsatisfied and
in effect for a period of 15 consecutive
days without Borrower's insurer having
agreed to fund such award or judgment in
a manner satisfactory to the Lender in
its sole discretion.
11.1.8 REVOCATION OF LICENSES OR
PERMITS.
The Borrower receives written notice
of a final determination by applicable
state authorities of the revocation of
any License or Permit or CON required
for the lawful operation of any of the
Improvements
32
or any part thereof or the loss of any
such license under any other
circumstances under which the Borrower
is required to cease its operations of
the Improvements; provided, however, the
occurrence of the foregoing shall not
constitute an Event of Default if any
such action is being duly appealed by
Borrower and such action is stayed
pending a final resolution of such
appeal.
11.1.9 DEFAULT UNDER MEZZANINE LOAN.
An Event of Default (as defined in
the Mezzanine Loan) occurs under the
Mezzanine Loan.
11.2GRACE PERIODS AND NOTICE.
As to each of the foregoing events the
following provisions relating to grace
periods and notice shall apply:
11.2.1 NO NOTICE OR GRACE PERIOD.
There shall be no grace period and no
notice provision with respect to the
payment of principal at maturity and no
grace period and no notice provision
with respect to defaults related to the
voluntary filing of bankruptcy or
reorganization proceedings or an
assignment for the benefit which are not
reasonably capable of being cured, or
with respect to a breach of warranty or
representation under Sections 8.1
(regarding Financial Information), or
with respect to breaches under Sections
9.6 (Restrictions on Liens, Transfers
and Additional Debt) except as provided
in Section 8.8, and 9.7 (Limits on
Guaranties and Distributions).
11.2.2 NONPAYMENT OF INTEREST AND
PRINCIPAL.
As to the nonpayment of interest, and
installments of principal prior to
maturity, there shall be a ten (10) day
grace period without any requirement of
notice from Lender, except that as to a
required principal reduction to comply
with the Loan To Value Ratio Covenant in
Section 9.22 or the Debt Service
Coverage Ratio Covenant in Section 9.23,
THERE SHALL BE NO GRACE PERIOD EXCEPT AS
STATED THEREIN.
11.2.3 OTHER MONETARY DEFAULTS.
All other monetary defaults shall
have a five (5) day grace period
following notice from Lender, or, if
shorter, a grace period without notice
until five (5) Business Days before the
last day on which payment is required to
be made in order to avoid: (i) the
cancellation or lapse of required
insurance, or (ii) a tax sale or the
imposition of late charges or penalties
in respect of taxes or other municipal
charges.
33
11.2.4 NONMONETARY DEFAULTS CAPABLE
OF CURE.
As to nonmonetary defaults which are
reasonably capable of being cured or
remedied, unless there is a specific
shorter or longer grace period provided
for in this Loan Agreement or in another
Loan Document, there shall be a thirty
(30) day grace period following notice
from Lender or, if such default would
reasonably require more than thirty (30)
days to cure or remedy, such longer
period of time not to exceed a total of
ninety (90) days from Lender's notice as
may be reasonably required so long as
Borrower shall commence reasonable
actions to remedy or cure the default
within thirty (30) days following such
notice and shall diligently prosecute
such curative action to completion
within such ninety (90) day period.
However, where there is an emergency
situation in which there is danger to
person or property such curative action
shall be commenced as promptly as
possible. As to breaches of warranties
and representations (other than those
related to financial information or
construction documents) there shall be a
thirty (30) day grace period following
notice from Lender.
11.3CERTAIN LENDER REMEDIES.
If an Event of Default shall occur,
Lender:
11.3.1 ACCELERATE DEBT.
May declare the indebtedness
evidenced by the Note and secured by the
Mortgage immediately due and payable
(provided that in the case of a
voluntary petition in bankruptcy filed
by Borrower or (after the expiration of
the grace period if any set forth in
Section 11.1.3 above) an involuntary
petition in bankruptcy filed against
Borrower, such acceleration shall be
automatic); and
11.3.2 PURSUE REMEDIES.
May pursue any and all remedies
provided for hereunder, or under any one
or more of the other Loan Documents.
12. ADDITIONAL REMEDIES OF LENDER.
12.1REMEDIES.
Upon the occurrence of an Event of
Default, whether or not the indebtedness
evidenced by the Note and secured by the
Mortgage shall be due and payable or Lender
shall have instituted any foreclosure or
other action for the enforcement of the
Mortgage or the Note, Lender may, in addition
to any other remedies which Lender may have
hereunder or under the other Loan Documents,
and not in limitation thereof, and in
Lender's sole and absolute discretion.
34
12.1.1 ENTER AND PERFORM.
Enter upon the Property to perform
obligations under leases, or to operate,
maintain, repair and improve the
Property and employ watchmen to protect
the Property, all at the risk, cost and
expense of Borrower, consent to such
entry being hereby given by Borrower;
12.1.2 DISCONTINUE WORK.
At any time discontinue any work
commenced in respect of the Property or
change any course of action undertaken
by it and not be bound by any
limitations or requirements of time
whether set forth herein or otherwise;
12.1.3 EXERCISE RIGHTS.
Exercise the rights of Borrower under
any contract or other agreement in any
way relating to the Property and take
over and use all or any part of the
labor, materials, supplies and equipment
contracted for by Borrower, whether or
not previously incorporated into the
realty; and
12.1.4 OTHER ACTIONS.
In connection with any work or action
undertaken by Lender pursuant to the
provisions of the Loan Documents,
(i) engage builders,
contractors, architects,
engineers and others for the
purpose of furnishing labor,
materials and equipment,
(ii) pay, settle or
compromise all bills or claims
which may become liens against
the property constituting the
Collateral, or which have been
or may be incurred in any
manner in connection with the
Property or for the discharge
of liens, encumbrances or
defects in the title of the
Property or the Collateral,
(iii) take or refrain from
taking such action hereunder
as Lender may from time to
time determine, and
(iv) engage marketing and
leasing agents and real estate
brokers to advertise, lease or
sell portions or all of the
Property or other Collateral
upon such terms and conditions
as Lender may in good faith
determine.
35
12.2REIMBURSEMENT.
Borrower shall be liable to Lender for all
sums reasonably paid or incurred pursuant to
any of the Loan Documents whether the same
shall be paid or incurred pursuant to this
section or otherwise, and all payments made
or liabilities incurred by Lender hereunder
of any kind whatsoever shall be paid by
Borrower to Lender upon demand with interest
at the Default Rate as provided in this
Agreement or the Note from the date of
payment by Lender to the date of payment to
Lender and repayment of such sums with such
interest shall be secured by the applicable
Security Documents.
12.3POWER OF ATTORNEY.
For the purpose of exercising the rights
granted by this Section 12., as well as any
and all other rights and remedies available
to Lender from and after the occurrence of an
Event of Default, Borrower hereby irrevocably
constitutes and appoints Lender (or any agent
designated by Lender) its true and lawful
attorney-in-fact, upon and following any
Event of Default, to execute, acknowledge and
deliver any instruments and to do and perform
any acts permitted hereunder or by law in the
name and on behalf of Borrower.
13. SECURITY INTEREST AND SET-OFF.
13.1SECURITY INTEREST.
Borrower grants to Lender a direct and
continuing lien and security interest, as
security for all of Borrower's Obligations in
and upon all deposits, balances and other
sums credited by or due Lender, or from any
affiliate of Lender, to Borrower including,
but not limited to, any Cash Collateral
pledged to Lender pursuant to any provision
of the Loan Documents.
13.2 SET-OFF AND DEBIT.
(i) If any payment is not made when due
under any of the Loan Documents, after giving
regard to applicable grace periods, if any,
or (ii) if any Event of Default or other
event which would entitle Lender to
accelerate the Loan occurs, or (iii) at any
time, whether or not any Default or Event of
Default exists in the event any attachment,
trustee process, garnishment, or other levy
or lien is, or is sought to be, imposed on
any property of Borrower; then, in any such
event, any such deposits, balances or other
sums credited by or due from Lender, or from
any such affiliate of Lender, to Borrower may
to the fullest extent not prohibited by
applicable law at any time or from time to
time, without regard to the existence,
sufficiency or adequacy of any other
collateral, and without notice or compliance
with any other condition precedent now or
hereafter imposed by statute, rule of law or
otherwise, all of which are hereby waived, be
set off, debited and appropriated, and
applied by Lender against any or all of
Borrower's Obligations irrespective of
whether demand shall have been made and
although such Obligations may be unmatured,
in such manner as Lender in its sole and
absolute discretion may determine. Within
five (5) Business Days of making any such set
off, debit or appropriation and
36
application, Lender agrees to notify Borrower
thereof, provided the failure to give such
notice shall not affect the validity of such
set off, debit or appropriation and
application.
13.3RIGHT TO FREEZE.
Lender shall also have the right, at its
option, upon the occurrence of any event
which would entitle Lender to set off or
debit as set forth in Section 13.2 and in
order to effectuate its rights thereunder, to
freeze, block or segregate any such deposits,
balances and other sums so that Borrower may
not access, control or draw upon the same.
13.4ADDITIONAL RIGHTS.
The rights of Lender and each affiliate of
Lender under this Section 13, are in addition
to, and not in limitation of, other rights
and remedies, including other rights of set
off, which Lender may have.
14. CASUALTY AND TAKING.
14.1CASUALTY AND OBLIGATION TO REPAIR.
In the event of any damage or destruction
to the Property or the other Collateral by
reason of fire or other hazard or casualty
(collectively, a "Casualty"), Borrower shall
give immediate written notice thereof to
Lender and proceed with reasonable diligence,
in full compliance with and subject to any
limitations of all Legal Requirements and the
other requirements of the Loan Documents, to
repair, restore, rebuild or replace the
affected property (collectively, the "Repair
Work").
14.2ADJUSTMENT OF CLAIMS.
All insurance claims shall be adjusted by
Borrower, at Borrower's sole cost and
expense, but subject to Lender's prior
written approval which approval shall not be
unreasonably withheld; provided that if any
Default or Event of Default exists under any
of the Loan Documents, Lender shall have the
right to adjust and compromise such claims
without the approval of Borrower.
14.3PAYMENT AND APPLICATION OF INSURANCE
PROCEEDS.
All proceeds of insurance shall be
paid to Lender and, at Lender's option,
be applied to Borrower's Obligations or
released, in whole or in part, to pay
for the actual cost of repair,
restoration, rebuilding or replacement
(collectively, "Cost To Repair");
[provided, however, that so long as no
Default or Event of Default is
outstanding hereunder,] Lender shall
release so much of the insurance
proceeds as may be
37
required to pay for the actual Cost to
Repair in accordance with the provisions
of Section 14.4.
14.4CONDITIONS TO RELEASE OF INSURANCE
PROCEEDS.
If Lender elects or is required to release
insurance proceeds, Lender may impose
reasonable conditions on such release which
shall include, but not be limited to, the
following:
(i)Prior written approval by Lender,
which approval shall not be unreasonably
withheld or delayed of plans,
specifications, cost estimates,
contracts and bonds for the restoration
or repair of the loss or damage;
(ii) Waivers of lien, architect's
certificates, contractor's sworn
statements and other evidence of costs,
payments and completion as Lender may
reasonably require;
(iii) If the Cost to Repair does not
exceed $100,000.00, the funds to pay
therefor shall be released to Borrower.
Otherwise, partial monthly disbursements
equal to 90% of the value of the work
completed, or, if the applicable
contract is on a cost plus basis, then
90% of the costs of the work completed
if such cost is less than the value
thereof, shall be made prior to final
completion of the repair, restoration or
replacement and the balance of the
disbursements shall be made upon full
completion and the receipt by Lender of
satisfactory evidence of payment and
release/waivers of all liens;
(iv) Determination by Lender that
the undisbursed balance of such proceeds
on deposit with Lender, together with
additional funds deposited for the
purpose, shall be at least sufficient to
pay for the remaining Cost To Repair,
free and clear of all liens and claims
for lien; and
(v)All work to comply with the
standards, quality of construction and
Legal Requirements applicable to the
original construction of the Property.
14.5 TAKING.
If there is any complete condemnation for
public use of the Property or of any
Collateral, the awards on account thereof
shall be paid to Lender and shall be applied
to Borrower's Obligations, or at Lender's
discretion released to Borrower. If, in the
case of a partial taking or a temporary
taking, in the reasonable judgment of Lender
the effect of such taking is such that there
has not been a material and adverse
impairment of the viability of the Property
or the value of the Collateral, so long as no
Default exists Lender shall release awards on
account of such taking to Borrower if such
awards are sufficient (or amounts sufficient
are otherwise made available) to repair or
restore the Property to a condition
reasonably satisfactory to Lender and such
partial or
38
temporary taking shall not be deemed to
violate the provisions of Section 9.6.
15. GENERAL PROVISIONS.
15.1NOTICES.
Any notice or other communication in
connection with this Loan Agreement, the
Note, the Mortgage, or any of the other Loan
Documents, shall be in writing, and (i)
deposited in the United States Mail, postage
prepaid, by registered or certified mail, or
(ii) hand delivered by any commercially
recognized courier service or overnight
delivery service such as Federal Express or
(ii) sent by facsimile transmission if a Fax
is designated below, addressed as follows:
If to Borrower or Guarantor to:
c/o Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
FAX Number: (206) 301-4500
with copies by regular mail or such hand
delivery to or facsimile transmission to:
The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, Washington 98101
Attn: Randi S. Nathanson, Esq.
FAX Number: (206) 623-1738
If to Lender to:
Fleet National Bank
75 State Street
Boston, Massachusetts 02109
Attention: Commercial Real Estate
Loan
Administration Manager
FAX Number: (617) 346-3200
with copies by regular mail or such hand
delivery to or facsimile transmission to:
Edwards & Angell
101 Federal Street, 23rd Floor
Boston, Massachusetts 02110
Attention: Lorne W. McDougall
FAX Number: (617) 439-4170
39
Any such addressee may change its address for
such notices to such other address in the
United States as such addressee shall have
specified by written notice given as set
forth above. All periods of notice shall be
measured from the deemed date of delivery.
A notice shall be deemed to have been
given, delivered and received for the
purposes of all Loan Documents upon the
earliest of: (i) if sent by such certified
or registered mail, on the third Business Day
following the date of postmark, or (ii) if
hand delivered at the specified address by
such courier or overnight delivery service,
when so delivered or tendered for delivery
during customary business hours on a Business
Day at the specified address, or (iii) if so
mailed, on the date of actual receipt as
evidenced by the return receipt, or (iv) if
facsimile transmission is a permitted means
of giving notices, upon receipt as evidenced
by confirmation.
15.2LIMITATIONS ON ASSIGNMENT.
Borrower may not assign this Agreement or
the monies due thereunder or convey or,
except for a Permitted Transaction, encumber
the Property or other Collateral or any
interest without the prior written consent of
Lender in each instance.
15.3FURTHER ASSURANCES.
Borrower shall upon request from Lender
from time to time execute, seal, acknowledge
and deliver such further instruments or
documents which Lender may reasonably require
to better perfect and confirm its rights and
remedies hereunder, under the Note, under the
Mortgage and under each of the other Loan
Documents.
15.4PARTIES BOUND.
The provisions of this Agreement and of
each of the other Loan Documents shall be
binding upon and inure to the benefit of
Borrower and Lender and their respective
successors and assigns, except as otherwise
prohibited by this Agreement or any of the
other Loan Documents.
This Agreement is a contract by and
between Borrower and Lender for their mutual
benefit, and no third person shall have any
right, claim or interest against either
Lender or Borrower by virtue of any provision
hereof.
40
15.5WAIVERS, EXTENSIONS AND RELEASES.
Lender may at any time and from time to
time waive any one or more of the conditions
contained herein or in any of the other Loan
Documents, or extend the time of payment of
the Loan, or release portions of the
Collateral from the provisions of this
Agreement and from the Mortgage or any other
Security Document, but any such waiver,
extension or release shall be deemed to be
made in pursuance and not in modification
hereof, and any such waiver in any instance,
or under any particular circumstance, shall
not be considered a waiver of such condition
in any other instance or any other
circumstance.
15.6GOVERNING LAW; CONSENT TO
JURISDICTION; MUTUAL WAIVER OF JURY TRIAL.
15.6.1 SUBSTANTIAL RELATIONSHIP.
It is understood and agreed that all
of the Loan Documents were negotiated
and delivered in the Commonwealth of
Massachusetts, which State the parties
agree has a substantial relationship to
the parties and to the underlying
transactions embodied by the Loan
Documents.
15.6.2 PLACE OF DELIVERY.
Borrower agrees to furnish to Lender
at the Lender's office in Boston,
Massachusetts all further instruments,
certifications and documents to be
furnished hereunder.
15.6.3 GOVERNING LAW.
This Agreement, except as otherwise
provided in Section 15.6.4, and each of
the other Loan Documents shall in all
respects be governed, construed, applied
and enforced in accordance with the
internal laws of the Commonwealth of
Massachusetts without regard to
principles of conflicts of law.
15.6.4 EXCEPTION.
Notwithstanding the foregoing choice
of law:
(i) matters relating to
the creation, perfection,
priority and enforcement of
the liens on a security
interests in the Property or
other assets situated in
Florida, including by way of
illustration, but not in
limitation, actions for
foreclosure, for injunctive
relief, or for the appointment
of a receiver, shall be
governed by the laws of the
State of Florida;
41
(ii) Lender shall comply
with applicable law in the
State of Florida to the extent
required by the law of such
jurisdiction in connection
with the foreclosure of the
security interests and liens
created under the Mortgage and
the other Loan Documents with
respect to the Property or
other assets situated in
Florida and
(iii) provisions of
Federal law and the law of
Florida shall apply in
defining the terms Hazardous
Materials, Environmental Legal
Requirements and Legal
Requirements applicable to the
Property as such terms are
used in this Loan Agreement,
the Environmental Indemnity
and the other Loan Documents.
Nothing contained herein or any other
provisions of the Loan Documents shall
be construed to provide that the
substantive laws of the State of Florida
shall apply to any parties' rights and
obligations under any of the Loan
Documents, which, except as expressly
provided in clauses (i), (ii) and (iii)
of this Section 15.6.5., are and shall
continue to be governed by the
substantive law of Commonwealth of
Massachusetts, except as set forth in
clauses (i), (ii) and (iii) of this
Section 15.7.5. In addition, the fact
that portions of the Loan Documents may
include provisions drafted to conform to
the law of the State of Florida is not
intended, nor shall it be deemed, in any
way, to derogate the parties' choice of
law as set forth or referred to in this
Loan Agreement or in the other Loan
Documents. The parties further agree
that the Lender may enforce its rights
under the Loan Documents including, but
not limited to, its rights to sue the
Borrower or to collect any outstanding
indebtedness in accordance with
applicable law.
15.6. 5CONSENT TO JURISDICTION.
Borrower hereby consents to personal
jurisdiction in any state or Federal
court located within the Commonwealth of
Massachusetts and State of Florida.
15.6.6 JURY TRIAL WAIVER
BORROWER AND LENDER MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT TO ANY LITIGATION BASED ON THIS
LOAN AGREEMENT, ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS LOAN AGREEMENT
OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED
TO BE EXECUTED IN CONNECTION HEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS
WAIVER CONSTITUTES A
42
MATERIAL INDUCEMENT FOR BORROWER AND
LENDER TO ENTER INTO THE TRANSACTIONS
CONTEMPLATED HEREBY.
15.7SURVIVAL.
All representations, warranties, covenants
and agreements of Borrower, or Guarantor,
herein or in any other Loan Document, or in
any notice, certificate, or other paper
delivered by or on behalf of Borrower or
Guarantor pursuant hereto are significant and
shall be deemed to have been relied upon by
Lender notwithstanding any investigation made
by Lender or on its behalf and shall survive
the delivery of the Loan Documents and the
making of the Loan and each advance pursuant
thereto. No review or approval by Lender, or
by its Consultants or representatives, of any
plans and specifications, opinion letters,
certificates by professionals or other item
of any nature shall relieve Borrower or
anyone else of any of the obligations,
warranties or representations made by or on
behalf of Borrower or Guarantor, or any one
or more of them, under any one or more of the
Loan Documents.
15.8CUMULATIVE RIGHTS.
All of the rights of Lender hereunder and
under each of the other Loan Documents and
any other agreement now or hereafter executed
in connection herewith or therewith, shall be
cumulative and may be exercised singly,
together, or in such combination as Lender
may determine in its sole good faith
judgment.
15.9CLAIMS AGAINST LENDER.
15.9.1 BORROWER MUST NOTIFY.
Lender shall not be in default under
this Agreement, or under any other Loan
Document, unless a written notice
specifically setting forth the claim of
Borrower shall have been given to Lender
within thirty (30) days after Borrower
first had actual knowledge or actual
notice of the occurrence of the event
which Borrower alleges gave rise to such
claim and Lender does not remedy or cure
the default, if any there be, with
reasonable promptness thereafter. Such
actual knowledge or actual notice shall
refer to what was actually known by, or
expressed in written notification
furnished to, any of the persons or
officials referred to in Schedule D as
Authorized Representatives or of the
Property manager.
15.9.2 REMEDIES.
If it is determined by the final
order of a court of competent
jurisdiction, which is not subject to
further appeal, that Lender has breached
any of its obligations under the Loan
Documents and has not remedied or cured
the same with reasonable promptness
following notice thereof, Lender's
responsibilities shall be limited to:
(i) where the breach consists of the
failure to grant consent or give
approval in
43
violation of the terms and requirements
of a Loan Document, the obligation to
grant such consent or give such approval
and to pay Borrower's reasonable costs
and expenses including, without
limitation, reasonable attorneys' fees
and disbursements in connection with
such court proceedings; and (ii) the
case of any such failure to grant such
consent or give such approval, or in the
case of any other such default by
Lender, where it is also so determined
that Lender acted in bad faith, or that
Lender's default constituted gross
negligence or willful misconduct, the
payment of any actual, direct,
compensatory damages sustained by
Borrower as a result thereof plus
Borrower's reasonable costs and
expenses, including, without limitation,
reasonable attorneys' fees and
disbursements in connection with such
court proceedings.
15.9.3 LIMITATIONS.
In no event, however, shall Lender be
liable to Borrower or to Guarantor or
anyone else for other damages such as,
but not limited to, indirect,
speculative or punitive damages whatever
the nature of the breach by Lender of
its obligations under this Loan
Agreement or under any of the other Loan
Documents. In no event shall Lender be
liable to Borrower or to Guarantor or
anyone else unless a written notice
specifically setting forth the claim of
Borrower shall have been given to Lender
within the time period specified above.
15.10 OBLIGATIONS ABSOLUTE.
Except to the extent prohibited by
applicable law which cannot be waived, the
Obligations of Borrower and the obligations
of the Guarantor under the Guaranty shall be
joint and several, absolute, unconditional
and irrevocable and shall be paid strictly in
accordance with the terms of the Loan
Documents under all circumstances whatsoever,
including, without limitation, the existence
of any claim, set off, defense or other right
which Borrower or Guarantor may have at any
time against Lender whether in connection
with the Loan or any unrelated transaction,
except for any such claim, setoff, defense or
other right, if any, as to which a written
notice shall have been given to Lender in
accordance with the provisions of Section
15.9.
15.11 TABLE OF CONTENTS, TITLE AND
HEADINGS.
Any Table of Contents, the titles and the
headings of sections are not parts of this
Loan Agreement or any other Loan Document and
shall not be deemed to affect the meaning or
construction of any of their provisions.
15.12 COUNTERPARTS.
This Loan Agreement may be executed in
several counterparts, each of which when
executed and delivered is an original, but
all of which together shall constitute one
instrument. In making proof of this
agreement, it shall not be
44
necessary to produce or account for more than
one such counterpart is executed by the
party against whom enforcement of such loan
agreement is sought.
15.13 SATISFACTION OF COMMITMENT.
The Loan being made pursuant to the terms
hereof and of the other Loan Documents is
being made in satisfaction of Lender's
obligations under the Commitment dated April
22, 1997. The terms, provisions and
conditions of this Agreement and the other
Loan Documents supersede the provisions of
the Commitment.
15.14 RIGHT TO ASSIGN, PARTICIPATE OR
ENTER INTO CO-LENDING AGREEMENTS.
Lender reserves the right upon notice to
Borrower which identifies the proposed
assignee or participant to transfer and
assign the Loan, or portions thereof, or
grant participation interests therein to one
or more lenders. In the event of a transfer
and assignment of all or any portion of the
Loan, each transferee will be severally
liable for the portion of the Loan assigned
it and Lender will have no further obligation
with respect to that portion of the Loan.
Lender may act as agent for itself and any
lender which has been assigned a portion of
the Loan. Borrower acknowledges and agrees
that to the extent there is more than one
lender who is responsible for the Loan, the
rights, privileges, consents and discretions
contained in the Loan Agreement shall be
subject to the terms and provisions of a co-
lending agreement. Lender may disclose to,
or share with, any actual or prospective
transferee or participant all information,
including, but not limited to, financial
information, in Lender's possession regarding
the Loan, Borrower, the Guarantor, or the
Property.
15.15 TIME OF THE ESSENCE.
Time is of the essence of each provision
of this Agreement and each other Loan
Document, subject to any cure or grace
periods provided for herein.
15.16 NO ORAL CHANGE.
This Loan Agreement and each of the other
Loan Documents may only be amended,
terminated, extended or otherwise modified by
a writing signed by the party against which
enforcement is sought (except no such writing
shall be required for any party which,
pursuant to a specific provision of any Loan
Document, is required to be bound by changes
without such party's assent). In no event
shall any oral agreements, promises, actions,
inactions, knowledge, course of conduct,
course of dealings or the like be effective
to amend, terminate, extend or otherwise
modify this Loan Agreement or any of the
other Loan Documents.
45
15.17 MONTHLY STATEMENTS.
While Lender may issue invoices or other
statements on a monthly or periodic basis
(a "Statement"), it is expressly acknowledged
and agreed that: (i) the failure of Lender
to issue any Statement on one or more
occasions shall not affect Borrower's
obligations to make payments under the Loan
Documents as and when due; (ii) the
inaccuracy of any Statement shall not be
binding upon Lender and so Borrower shall
always remain obligated to pay the full
amount(s) required under the Loan Documents
as and when due notwithstanding any provision
to the contrary contained in any Statement;
(iii) all Statements are issued for
information purposes only and shall never
constitute any type of offer, acceptance,
modification, or waiver of the Loan Documents
or any of Lender's rights or remedies
thereunder; and (iv) in no event shall any
Statement serve as the basis for, or a
component of, any course of dealing, course
of conduct, or trade practice which would
modify, alter, or otherwise affect the
express written terms of the Loan Documents.
NEXT PAGE IS SIGNATURE PAGE
46
IN WITNESS WHEREOF this Agreement has
been duly executed as of the date first above-
written.
BORROWER: EMERITUS PROPERTIES
V, INC.
By: /s/ Raymond R. Brandstrom
--------------------
Raymond R. Brandstrom
Its President
LENDER: FLEET NATIONAL BANK
By: /s/ Peter A. Tondreault
---------------------
Peter A. Tondreault
Vice President
47