PROMISSORY NOTE
$1,450,000.00
January 15,1997
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned LM
Louisville Assisted Living LLC, a Delaware limited
liability company having an address c/x Xxxxxxx
XxXxxx Companies, 00 Xxxx Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 (hereinafter referred to as
"Borrower"), promises to pay to the order of
Emeritus Corporation, a Washington corporation
(hereinafter referred to as "Lender", Lender and
any and all other holders of this Note being
hereinafter collectively referred to as "Holder"),
at its head office at 0000 Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxxxxx 00000 ("Head Office") or
such other place as Holder hereof may designate in
writing, the principal sum of ONE MILLION FOUR
HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($1,450,000.00), or so much thereof as may be
advanced hereunder pursuant to the terms hereof,
together with interest as provided herein, as
follows:
I. PRINCIPAL.
(a) With respect to that portion of the
principal amount of the Loans evidenced hereby
that is attributable to the Second Advance (as
hereinafter defined), such principal amount; shall
be repaid on the basis of a twelve (12) year
amortization schedule commencing on the Permanent
Loan Closing Date, together with quarterly
interest payments in an amount and at an interest
rate to be determined in accordance with Paragraph
II(b) below. Such principal amortization payments
shall be made on the last day of each calendar
quarter. If the Permanent Loan Closing Date does
not occur on the last day of a calendar quarter,
the first and last such quarterly principal
payments shall be prorated based on the number of
days elapsed in said partial calendar quarter.
(b) The outstanding principal balance of the
Initial Advance (as hereinafter defined), together
with all accrued but unpaid interest thereon
(other than interest capitalized pursuant to
Paragraph II(a)) and all other sums due under this
Note, shall be due and payable in full on the
earlier of (i) the Maturity Date (as defined
below), or (ii) the date on which a Capital Event
first occurs. For purposes of this Note, the
Maturity Date shall mean April 15, 2017; provided
that if (i) the term of the Lease (as defined
below) is extended to a date later than April 15,
2017, (ii) no Default or Event of Default is
continuing hereunder at the time of such
extension, and (iii) the Borrower pays to the
Lender a fee in an amount equal to one percent
(1%) of the then outstanding principal balance of
the Loans hereunder, the Maturity Date shall mean
the earlier of (a) the date on which the extended
term of the Lease expires or is terminated, or (b)
April 15, 2027. Notwithstanding the foregoing, the
principal amount of the Initial Advance shall be
repaid only to the extent of (i) seventy-five
percent (75%) of Cash Available for Recapture (as
hereinafter defined) attributable to a Capital
Event (as hereinafter defined), or (ii) if no
Capital Event has occurred on or prior to the
Maturity Date, seventy-five percent (75%) of the
Appraised Value (as hereinafter defined) of the
Facility.
(c) Borrower shall have no right to prepay
this Note without the prior written consent of the
Holder.
II. INTEREST.
(a) From and after the date of the Initial
Advance, interest on the principal amount of the
Initial Advance shall accrue at a rate per annum
equal to fourteen percent (14%) without
compounding. Unless an Event of Default has
occurred and is continuing (in which event
interest shall become immediately due and
payable), such interest shall accrue but shall not
be payable. Upon the occurrence of the Permanent
Loan Closing Date (as hereinafter defined), such
accrued and unpaid interest shall be capitalized
by becoming part of the principal amount of the
Initial Advance.
(b) From and after the occurrence of the
Permanent Loan Closing Date, interest on the Loans
(both the Initial Advance and the Second Advance)
shall accrue at a rate per annum to be calculated
based upon a 10 year amortization of the Second
Advance at an annual rate of interest on such
Second Advance equal to fourteen percent (14%),
with such rate of interest on all Loans calculated
to equal the interest component of such ten year
amortization (an example of such calculation is
attached hereto as Exhibit A). Such interest shall
be payable in arrears on the last day of each
calendar quarter. From and after the date at which
the principal amount of the Second Advance has
fully amortized pursuant to this Paragraph II(b),
interest shall continue to accrue and be paid with
respect to the outstanding principal amount of the
Initial Advance at the rate calculated on the
Permanent Loan Closing Date pursuant to this
Paragraph II(b). Such interest shall continue to
be payable in arrears on the last day of each
calendar quarter.
(c) In addition to the foregoing, the
Borrower shall pay to the Holder additional
interest ("Additional Interest") in an amount
equal to seventy-five percent (75%) of Cash
Available for Recapture. Such interest shall be
payable in arrears fifteen days following the end
of each calendar quarter, provided, that if a
Capital Event or Refinancing Event occurs during
such calendar quarter, such Additional Interest
shall be payable fifteen days following such
occurrence.
(d) In addition to the foregoing, as another
component of Additional Interest, if no Capital
Event shall have occurred on or before the
Maturity Date, Lender and Borrower shall each
select an independent appraiser who shall be a
member of the American Institute of Real Estate
Appraisers of the National Association of
Realtors, and who has received a certificate as an
M.A.I., or its equivalent, and has more than 10
years of experience appraising comparable real
estate in the area of the Facility. The selection
of the second appraiser shall be made within ten
(10) days after either the Lender or Borrower
notifies the other party of the selection of its
appraiser. The first and second appraisers so
selected shall select a third appraiser no later
than ten (10) days after the selection of the
second appraiser. If either the Lender or the
Borrower shall fail to select an appraiser having
the qualifications provided for herein within the
time period specified herein, the appraiser
selected in accordance herewith shall select the
second appraiser within five (5) days after the
date that the second duly qualified appraiser
should have been, but has not been selected. No
appraiser shall have any personal or financial
interest as would disqualify such appraiser from
exercising an independent and impartial judgment
as to the value of the Facility. Within twenty
(20) days after the selection of the last
appraiser, each appraiser shall independently
determine and certify to the Lender and Borrower
in writing the fair market value of the Facility.
Upon the
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completion of such appraisals, the Borrower shall
make a final payment of Additional Interest in an
amount equal to seventy-five percent (75%) of (i)
the value of the Facility established by such
appraisals, less (ii) the principal amount of all
"Senior Indebtedness" (as that term is defined
below) and all accrued and unpaid interest thereon
after repaying the outstanding principal amount of
the Loans evidenced hereby and interest accrued
thereon pursuant to Paragraph II(b) and after
paying the Disposition Fee, as hereinafter defined
(the difference of (i) less (ii) being referred to
herein as the "Appraised Value"). The phrase
"Disposition Fee" shall mean a disposition fee
payable to Xxxxxxx XxXxxx Retirement Properties
LLC in an amount equal to the sum of (A) $100,000,
plus (B) one-third (1/3) of the amount of interest
capitalized on the Permanent Loan Closing Date
pursuant to the last sentence of Paragraph II(a).
Notwithstanding anything to the contrary set forth
herein, (1) at no time shall the aggregate amount
of Additional Interest that has been paid by the
Borrower pursuant to Paragraph II(c) and this
Paragraph II(d) exceed an amount equal to twenty
percent (20%) (compounding annually) per annum on
the outstanding principal amount of the Loans
hereunder, less the aggregate amount of all
interest paid pursuant to Paragraph II (b) above,
and (2) at no time shall the sum of all amounts
(whether in respect of principal, interest, or
otherwise) paid under this Note exceed an
aggregate amount equal to the sum of (A) seventy-
five percent (75%) of Cash Available for
Recapture, plus (B) any amounts paid or payable
hereunder, to the extent deducted in determining
Cash Available for Recapture.
As used herein, the following terms shall
have the following meanings:
CAPITAL EVENT. The occurrence, on or before
the Maturity Date, of the sale of all or
substantially all of the Facility.
CASH AVAILABLE FOR RECAPTURE. For any period,
an amount equal to the sum of (i) Excess Cash Flow
for such period hereunder, plus (ii) all of the
net proceeds from a Capital Event, after payment
of reasonable brokerage fees and other reasonable
closing costs, and payment of all Senior
Indebtedness, plus (iii) all of the net proceeds
from a Refinancing Event, after payment of such
Senior Indebtedness and reasonable out-of-pocket
costs and fees incurred by the Borrower in
connection with such Refinancing Event.
EXCESS CASH FLOW: For any period, the amount
by which gross payments received under the Lease
during such period exceed the sum of (i) operating
and/or ownership expenses for the Facility
incurred and paid by the Borrower during such
period; plus (ii) payment of any scheduled amounts
of principal, interest or fees due during such
period with respect to any Senior Indebtedness to
the extent that the Loans are subordinate to such
Senior Indebtedness; plus (iii) amounts due during
such period with respect to scheduled principal
amortization pursuant to Paragraph I(b) and
accrued interest through the end of any such
period commencing on or after the Permanent Loan
Closing Date at the rate set forth in Paragraph
II(b).
FACILITY. The real estate described on
Exhibit B hereto, together with the assisted
living facility to be constructed thereon.
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PERMANENT LOAN. The loan to be made to the
Borrower pursuant to that certain Loan Application
and Commitment Agreement dated as of
April 4, 1996, by and between the Borrower and
Teachers Insurance and Annuity Association of
America.
PERMANENT LOAN CLOSING DATE. The earlier of
(i) the date on which 100% of the proceeds of the
Permanent Loan are advanced to the Borrower, or
(ii) the date which is six (6) months after the
initial disbursement of proceeds in connection
with the Permanent Loan.
REFINANCING EVENT. The occurrence, on or
before the Maturity Date, of any refinancing, or
other replacement, of the Senior Indebtedness.
SENIOR INDEBTEDNESS. The sum of (i) any
indebtedness of Borrower which is secured by a
lien upon the Facility, and (ii) that certain
promissory note dated as of April 29, 1996, in the
original principal amount of $1,505,000, executed
and delivered by the Borrower to Hansa Finance
Limited Liability Company, the collective total
amount of which shall not exceed $6,474,700.
Notwithstanding any provisions in this Note,
or in any instrument securing this Note, the total
liability for payments legally regarded as
interest shall not exceed the maximum limits
imposed by the laws of the State of Washington in
effect on the date hereof, and any payment of same
in excess of the amount allowed thereby shall, as
of the date of such payment, automatically be
deemed to have been applied to the payment of the
principal indebtedness evidenced hereby, or, if
same has been fully repaid, shall be deemed to be
held by Holder as additional security for all
remaining indebtedness of Borrower to Holder and
shall be repaid to Borrower upon demand after all
of such indebtedness has been fully paid. Any
notation or record of Holder with respect to such
required application which is inconsistent with
the provisions of this paragraph shall be
disregarded for all purposes and shall not be
binding upon either Borrower or Holder.
The Borrower and the Lender have entered into
a Lease Agreement dated as of February 26, 1996
(the "Lease"), pursuant to which the Borrower has
leased the Facility to the Lender. In the event
that the Lender fails to pay to the Borrower any
amounts owing with respect to the Lease from time
to time, then until such time as such amounts are
paid, the Borrower's obligations under this Note
shall be abated by an amount (the "Reduction
Amount") equal to the lesser of (i) any amounts
then due and payable under this Note that have not
otherwise been paid or (ii) the amount of such
nonpayment under the Lease, such reduction to be
applied first to accrued interest which is due and
payable (other than Additional Interest), and then
to the outstanding principal amount of the Loans
evidenced hereby. Upon payment by Lender of
amounts due under the Lease, such abatement shall
cease and all amounts then due and payable,
including interest accruing at the non-default
rate during such period of abatement, shall be
promptly paid to Lender.
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The loans evidenced hereby (the "Loans")
shall be made to the Borrower in two separate
advances. The first such advance shall occur on
the date hereof in the amount of $300,000 (the
"Initial Advance"). So long as (a) no Event of
Default is continuing hereunder, and (b) the
Lender shall have received an assignment of all of
the economic interests of the members of the
Borrower, other than the one percent (1%) interest
of the managing member of the Borrower, pursuant
to a collateral assignment of membership interests
(all such interests assigned pursuant to any such
collateral assignment being hereinafter
collectively referred to as the "Collateral") in
the form of Exhibit A attached hereto
(collectively, the "Collateral Assignments" and,
collectively with this Note, the "Loan
Documents"), the second such advance shall occur
on the Permanent Loan Closing Date in the amount
of $1,150,000, or such other amount as the Lender
and the Borrower shall agree to in writing (the
"Second Advance"), provided, that the Borrower may
request a lesser amount without the written
consent of the Lender.
All sums payable under this Note shall be
paid in immediately available funds in lawful
money of the United States of America which shall
be legal tender for public and private purposes at
the time of such payment.
All payments under this Note shall be made to
Holder without notice, demand, set-off (except for
the abatement of payments due expressly set forth
herein with respect to Xxxxxx's failure to make
payments under the Lease) or counterclaim and free
and clear of and without deduction on account of
taxes, levies, fees, deductions, withholdings,
restrictions or conditions of any nature now or
hereafter imposed or levied by any country or any
political subdivision thereof unless Borrower is
required by law to make such deductions. If any
such obligation is imposed upon Borrower with
respect to any amount payable by it hereunder, it
will pay to Xxxxxx, on the date on which such
amount becomes due and payable hereunder, such
additional amount as shall be necessary to enable
Holder to receive the same net amount which it
would have received on such due date had no such
obligation been imposed upon Borrower.
III. EVENTS OF DEFAULT.
If any of the following events ("Events of
Default") shall occur:
(a) the Borrower shall fail to pay when due
and payable any principal, interest, Additional
Interest or any other monetary amount with respect
to the obligations hereunder when the same becomes
due, and such failure shall continue for five (5)
business days thereafter;
(b) the Borrower shall fail to perform any
other nonmonetary term, covenant or agreement
contained in the Loan Documents within ten (10)
business days following Xxxxxxxx's receipt of
notice of such failure;
(c) any of the Loan Documents shall cease to
be in full force and effect,
(d) the Borrower (i) shall make an assignment
for the benefit of creditors, (ii) shall be
adjudicated bankrupt or insolvent, (iii) shall
seek the appointment of, or be the subject of an
order appointing, a trustee, liquidator or
receiver as to all or part of its assets, (iv)
shall commence, approve or consent to, any case or
proceeding under any
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bankruptcy, reorganization or similar law and, in
the case of an involuntary case or proceeding,
such case or proceeding is not dismissed within
sixty (60) days following the commencement
thereof, or (v) shall be the subject of an order
for relief in an involuntary case under federal
bankruptcy law;
(e) there shall remain undischarged for more
than sixty (60) days following the expiration of
any applicable appeals period any final judgment
or execution action against the Borrower, with
respect to which the Borrower has failed to
provide a surety bond, that, together with other
outstanding claims and execution actions against
the Borrower exceeds $100,000.00 in the aggregate;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under
clause III(d) above, the Lender shall have no
obligation to advance further funds hereunder, and
the entire unpaid principal amount of this Note,
all interest accrued and unpaid thereon, and all
other amounts payable hereunder and under the
other Loan Documents (including, without
limitation, the payment of Additional Interest
pursuant to an appraisal of the Facility) shall
automatically become forthwith due and payable,
without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived
by the Borrower; and
(2) In the case of any Event of Default other
than an Event of Default under clause III(d)
above, the Lender may, by written notice to the
Borrower that has caused or is otherwise the
subject of such Event of Default, terminate any
further obligation to provide funds hereunder
and/or declare the unpaid principal amount of this
Note, all interest accrued and unpaid thereon, and
all other amounts payable hereunder and under the
other Loan Documents (including, without
limitation, the payment of Additional Interest
pursuant to an appraisal of the Facility) to be
forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all
of which are hereby expressly waived by the
Borrower.
No remedy herein conferred upon the Lender is
intended to be exclusive of any other remedy and
each and every remedy shall be cumulative and in
addition to every other remedy hereunder, now or
hereafter existing at law or in equity or
otherwise.
Anything contained in this Note or the Loan
Documents notwithstanding, the Lender hereby
agrees that none of the members of the Borrower
shall be personally liable for the repayment of
any of the obligations hereunder or under any
other Loan Documents, including any deficiency
judgment obtained by the Lender after foreclosure
on its Collateral.
In the event of any default in the payment of
this Note, and if the same is referred to an
attorney at law for collection or suit is brought
hereon, Borrower shall pay Holder, in either case,
all expenses and costs of collection, including,
but not limited to, reasonable attorney's fees.
Time is of the essence of this Note.
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Borrower and Xxxxxx acknowledge and agree
that the late payment of amounts due under this
Note shall result in Lender incurring
administrative costs and expenses that will be
difficult, if not impossible, to calculate.
Therefore, as a reasonable estimation of such
costs and expenses that Lender will incur upon
such late payment, Borrower agrees to pay Lender a
late payment fee in an amount equal to five
percent (5%) of the late-paid amount, provided,
that in the event of any payments due to the
Lender in connection with a Capital Event or a
Refinancing Event, such late payment fee shall not
be applicable so long as the Borrower makes such
payments to the Lender not later than fifteen (15)
days after the occurrence of such Capital Event or
Refinancing Event. Such late payment fee shall
become due and payable when Borrower's failure to
pay the amount owed constitutes an Event of
Default.
From time to time, without affecting the
obligation of Borrower or any sureties,
guarantors, endorsers, accommodation parties or
other persons liable or to become liable on this
Note to pay the outstanding principal balance of
this Note and observe the covenants of Borrower
contained herein, without giving notice to or
obtaining the consent of Borrower or any such
sureties, guarantors, endorsers, accommodation
parties or other persons, and without liability on
the part of Holder, Holder may, at the option of
Holder, extend the time for payment of said
outstanding principal balance, interest or any
part thereof, reduce the payments thereon, release
anyone liable on any of said outstanding principal
balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding
principal balance or join in any extension or
subordination agreement, and agree in writing with
Borrower to modify the rate of interest or period
of amortization of this Note or change the amount
of the monthly installments payable hereunder. No
one or more of such actions shall constitute a
novation.
Presentment, notice of dishonor, protest and
notice of protest are hereby waived by Borrower
and all sureties, guarantors, endorsers and
accommodation parties hereof and all other persons
liable or to become liable on this Note. Borrower
further waives any and all homestead and exemption
rights under the laws and constitutions of the
United States of America, the State of Washington
and any other state. This Note shall be the joint
and several obligation of Borrower and all
sureties, guarantors, endorsers, accommodation
parties and all other persons liable or to become
liable on this Note, and shall be binding upon
them and their successors and assigns.
The obligations evidenced hereby are
expressly subordinate and junior in right and
payment to (i) the Senior Liabilities under and as
defined in (and to the extent provided for in)
that certain Subordination and Standstill
Agreement of even date herewith by and between
Fleet National Bank and the Lender, and (ii) the
Senior Liabilities under and as defined in (and to
the extent provided for in) that certain
Subordination and Standstill Agreement of even
date herewith, by and between Hansa Finance
Limited Liability Company and the Lender.
This Note shall be governed and construed in
accordance with the laws of the State of
Washington.
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Borrower hereby irrevocably and
unconditionally (a) submits to personal
jurisdiction in the State of Washington over any
suit, action or proceeding arising out of or
relating to this Note, and (b) waives any and all
personal rights under the laws of any state (i) to
the right, if any, to trial by jury, or (ii) to
object to jurisdiction within the State of
Washington or venue in any particular forum within
the State of Washington. Xxxxxxxx agrees that, in
addition to any methods of service of process
provided for under applicable law, all service of
process in any such suit, action or proceeding may
be made by certified or registered mail, return
receipt requested, directed to Borrower at the
address set forth above, and service so made shall
be complete five (5) days after the same shall be
so mailed. Nothing contained herein, however,
shall prevent Holder from bringing any suit,
action or proceeding or exercising any rights
against any security and against Borrower, and
against any property of Borrower, in any other
state. Initiating such suit, action or proceeding
or taking such action in any state shall in no
event constitute a waiver of the agreement
contained herein that the laws of the State of
Washington shall govern the rights and obligations
of Xxxxxxxx and Holder hereunder or the submission
herein made by Borrower to personal jurisdiction
within the State of Washington.
This Note may not be amended, modified, or
changed, nor shall any waiver of any provision
hereof be effective, except only by an instrument
in writing signed by the party against whom
enforcement of any waiver, amendment, change,
modification or discharge is sought.
Whenever used herein, the words "Borrower"
and "Holder" shall be deemed to include their
respective heirs, legal representatives,
successors and assigns.
IN WITNESS WHEREOF, Xxxxxxxx has executed
this Note under seal as of the date first above
written.
LM LOUISVILLE ASSISTED LIVING
LLC, by its general partner
By: Xxxxxxx XxXxxx Retirement
Properties LLC
By: /s/ Xxxx X. Xxxxxx, Xx.
------------------------------------------
Authorized Member
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