SECOND ADDENDUM TO PROMISSORY NOTE
This Second Addendum to Promissory Note is in
addition to and an extension of that Addendum to
Promissory Note executed by Borrower, and this
Second Addendum to Promissory Note is signed by
Borrower and effective the date of the Promissory
Note to which it is attached.
3. The "Variable Interest Rate" section of the
Promissory Note is hereby amended in its entirety
and superseded by the following:
INTEREST RATE. The interest rate on this Note
may vary from time to time pursuant to the
provisions of this note. Subject to the provisions
of this note, Borrower shall have the option from
time to time of choosing to pay interest at the
rate or rates and for the applicable periods of
time based on the rate options provided herein;
provided, however, that once Borrower notifies
Lender of the rate option chosen in accordance
with the provisions of this note, such notice
shall be irrevocable. The rate options are the
Prime Borrowing Rate and the LIBOR Borrowing Rate,
each as defined herein. The term "Index" as used
in the Note shall mean one or both of the rates
defined herein.
(a) Definitions. The following terms shall have
the following meanings:
"Business Day" means any day other than
a Saturday, Sunday, or other day that commercial
banks in Portland, Oregon or New York City are
authorized or required by law to close; provided,
however that when used in connection with a LIBOR
Rate, LIBOR Amount or LIBOR Interest Period such
term shall also exclude any day on which dealings
in U.S. dollar deposits are not carried on in the
London interbank market.
"LIBOR Amount" means each principal
amount for which Borrower chooses to have the
LIBOR Borrowing Rate apply for any specified LIBOR
Interest Period.
"LIBOR Interest Period" means as to any
LIBOR Amount, a period of one, two, three, six or
twelve months commencing on the date the LIBOR
Borrowing Rate becomes applicable thereto;
provided, however, that: (i) the first day of each
LIBOR Interest Period must be a Business Day; (ii)
no LIBOR Interest Period shall be selected which
would extend beyond the maturity date of this
Note; (iii) no LIBOR Interest Period shall extend
beyond the date of any principal payment required
under this note, unless the sum of the Prime Rate
Amount, plus LIBOR Amounts with LIBOR Interest
Periods ending on or before the scheduled date of
such principal payment, plus principal amounts
remaining unborrowed under a line of credit,
equals or exceeds the amount of such principal
payment; (iv) any LIBOR Interest Period which
would otherwise expire on a day which is not a
Business Day, shall be extended to the next
succeeding Business Day, unless the result of such
extension would be to extend such LIBOR Interest
Period into another calendar month, in which event
the LIBOR Interest Period shall end on the
immediately preceding Business Day; and (v) any
LIBOR Interest Period that begins on the last
Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in
the calendar month at the end of such LIBOR
Interest Period) shall end on the last Business
Day of a calendar month.
"LIBOR Rate" means, for any LIBOR
Interest Period, the rate per annum (computed on
the basis of a 360-day year and the actual number
of days elapsed and rounded upward to the nearest
1/16 of 1%) established by Lender as its LIBOR
Rate, based on Lender's determination, on the
basis of such factors as Lender deems relevant, of
the rate of interest at which U.S. dollar deposits
would be offered to United States National Bank of
Oregon in the London interbank market at
approximately 11 a.m. London time on the date
which is two Business Days prior to the first day
of such LIBOR Interest Period for delivery on the
first day of such LIBOR Interest Period for the
number of months therein; provided, however, that
the LIBOR Rate shall be adjusted to take into
account the maximum reserves required to be
maintained for Eurocurrency liabilities by banks
during each such LIBOR Interest Period as
specified in Regulation D of the Board of
Governors of the Federal Reserve System or any
successor regulation.
"Prime Rate" means the rate of interest
which Lender from time to time establishes as
its prime rate and is not, for example, the
lowest rate of interest which Lender collects
from any borrower or class of borrowers. When
the Prime Rate is applicable, the interest rate
hereunder shall be adjusted without notice
effective on the day the Prime Rate changes, but
in no event shall the rate of interest be higher
than allowed by law.
"Prime Rate Amount" means any portion
of the Principal Balance bearing
interest at the Prime Borrowing Rate.
(b) The Prime Borrowing Rate.
(i) The Prime Borrowing Rate is a per annum
rate equal to the Prime Rate plus One
Percent (1%) per annum.
(ii) Whenever Borrower desires to use the
Prime Borrowing Rate option, Borrower shall give
Lender notice orally or in writing in accordance
with this note, which notice shall specify the
requested effective date (which must be a
Business Day) and principal amount of the
Advance or increase in the Prime Rate Amount,
and whether Borrower is requesting a new Advance
under a line of credit or conversion of a LIBOR
Amount to the Prime Borrowing Rate.
(iii) So long as Borrower is not in default
of this note, interest shall accrue on the
unpaid Principal Balance at the Prime Borrowing
Rate unless and except to the extent that the
LIBOR Borrowing Rate is in effect.
(c) The LIBOR Borrowing Rate.
(i) The LIBOR Borrowing Rate is the LIBOR
Rate plus Two and One Quarter Percent
(2.25%)per annum.
(ii) The LIBOR Rate shall be established
by Lender at approximately 8:00 a.m. (Portland,
Oregon time) on each Business Day. Borrower may
obtain LIBOR Borrowing Rate quotes from Lender
between 8:00 a.m. and 10:00 a.m. (Portland,
Oregon time) on any Business Day. Borrower may
request an Advance, conversion of any portion
of the Prime Rate Amount to a LIBOR Amount or a
new LIBOR Interest Period for an existing LIBOR
Amount, at such rate only by giving Lender notice
in accordance with this Section 3 (c) (iii) before
10:00 a.m. (Portland, Oregon time) on such day.
(iii) Whenever Borrower desires to use the
LIBOR Borrowing Rate option, Borrower shall give
Lender irrevocable notice (either in writing or
orally and promptly confirmed in writing) between
8:00 a.m. and 10:00 a.m. (Portland, Oregon time)
two (2) Business Days prior to the desired
effective date of such rate. Any oral notice shall
be given by, and any written notice or
confirmation of an oral notice shall be signed by,
the person(s) on behalf of or authorized by
Borrower, and shall specify the requested
effective date of the rate, LIBOR Interest Period
and LIBOR Amount, and whether Borrower is
requesting a new Advance at the LIBOR Borrowing
Rate under a line of credit, conversion of all or
any portion of the Prime Rate Amount to a LIBOR
Amount, or a new LIBOR Interest Period for an
outstanding LIBOR Amount. Notwithstanding any
other term of this note, Borrower may elect the
LIBOR Borrowing Rate in the minimum principal
amount of $1,000,000.00 and in multiples of
$500,000.00 above such amount; provided, however,
that no more than two separate LIBOR Interest
Periods may be in effect at any one time.
(iv) If at any time the LIBOR Rate is
unascertainable or unavailable to Lender or if
LIBOR Rate loans become unlawful, the option to
select the LIBOR Borrowing Rate shall terminate
immediately. If the LIBOR Borrowing Rate is then
in effect, (A) it shall terminate automatically
with respect to all LIBOR Amounts (i) on the last
day of each then applicable LIBOR Interest Period,
if Lender may lawfully continue to maintain such
loans, or (ii) immediately if Lender may not
lawfully continue to maintain such loans through
such day, and (B) the Prime Borrowing Rate
automatically shall become effective as to such
amounts upon such termination.
(v) If at any time after the date hereof (A)
any revision in or adoption of any applicable law,
rule, or regulation or in the interpretation or
administration thereof (i) shall subject Lender or
its Eurodollar lending office to any tax, duty, or
other charge, or change the basis of taxation of
payments to Lender with respect to any loans
bearing interest based on the LIBOR Rate, or (ii)
shall impose or modify any reserve, insurance,
special deposit, or similar requirements against
assets of, deposits with or for the account of, or
credit extended by Lender or its Eurodollar
lending office, or impose on Lender or its
Eurodollar lending office any other condition
affecting any such loans, and (B) the result of
any of the foregoing is (i) to increase the cost
to Lender of making or maintaining any such loans
or (ii) to reduce the amount of any sum receivable
under this note by Lender or its Eurodollar
lending office, Borrower shall pay Lender within
15 days after demand by Lender such additional
amount as will compensate Lender for such
increased cost or reduction. The determination
hereunder by Lender of such additional amount
shall be conclusive in the absence of manifest
error. If Lender demands compensation under this
Section 3(c)(v), Borrower may upon three (3)
Business Days' notice to Lender pay the accrued
interest on all LIBOR Amounts, together with any
additional amounts payable under Section 3(c)(vi).
Subject to Section 11, upon Borrower's paying such
accrued interest and additional costs, the Prime
Borrowing Rate immediately shall be effective
with respect to the unpaid principal balance of
such LIBOR Amounts.
(vi) Borrower shall pay to Lender, on demand,
such amount as Lender reasonably determines
(determined as though 100% of the applicable LIBOR
Amount had been funded in the London interbank
market) is necessary to compensate Lender for any
direct or indirect losses, expenses, liabilities,
costs, expenses or reductions in yield to Lender,
whether incurred in connection with liquidation or
re-employment of funds or otherwise, incurred or
sustained by Lender as a result of: (A) Any
payment or prepayment of a LIBOR Amount,
termination of the LIBOR Borrowing Rate or
conversion of a LIBOR Amount to the Prime
Borrowing Rate on a day other than the last day of
the applicable LIBOR Interest Period (including as
a result of acceleration or a notice pursuant to
Section 4(c)(v)); or (B) Any failure of Borrower
to borrow, continue or prepay any LIBOR Amount or
to convert any portion of the Prime Rate Amount to
a LIBOR Amount after Borrower has given a notice
thereof to Lender.
(vii) If Borrower chooses the LI BOR
Borrowing Rate, Borrower shall pay interest based
on such rate, plus any other applicable taxes or
charges hereunder, even though Lender may have
obtained the funds loaned to Borrower from sources
other than the London interbank market. Lender's
determination of the LI BOR Borrowing Rate and any
such taxes or charges shall be conclusive in the
absence of manifest error.
(viii) Notwithstanding any other term of this
note, Borrower may not select the LIBOR Borrowing
Rate if an event of default hereunder has occurred
and is continuing.
(ix) Nothing contained in this note,
including without limitation the determination of
any LIBOR Interest Period or Lender's quotation of
any LIBOR Borrowing Rate, shall be construed to
prejudice Lender's right, if any, to decline to
make any requested Advance or to require payment
on demand.
(x) Prepayment is not permitted on funds
subject to the LIBOR Interest Rate. Should a
prepayment be made while funds of this Note are
subject to the LIBOR Interest Rate, a Yield
Maintenance premium shall be paid to Lender by
Borrower at the time of prepayment. The Yield
Maintenance premium will be calculated as shown on
attached Exhibit "A" attached hereto and made a
part hereof.
Dated as of May 22,1997.
LENDER:
U.S. BANK OF WASHINGTON
By : /s/ Monica Rhule
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Loan Administration Officer
BORROWER:
EMERITUS PROPERTIES VI, INC., a Washington
corporation
By: /s/ Kelly J. Price
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Its: Chief Financial Officer