LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is
made as of the 30th day of January, 1997, by and
between EMERITUS PROPERTIES m, INC., a Washington
corporation ("Borrower"), and OCWEN FEDERAL BANK
FSB, a federally chartered savings bank
("Lender").
Terms which are used in this Agreement and
not otherwise defined herein shall have the
meanings set forth in Article I below.
RE CITALS
Borrower has requested that Lender make a
loan to Borrower in the maximum aggregate
principal amount of Six Million Four Hundred
Sixty-Five Thousand and No/100 Dollars
($6,465,000.00) (the "Loan"), the proceeds of
which will be used for the acquisition of certain
real property situated in Xxxxxx County,
Washington, and the construction of a one hundred
(100) unit Assisted Living Facility thereon.
Lender has agreed to make the Loan upon and
subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of these
premises and the mutual promises herein contarned,
the parties intending to be legally bound agree as
follows:
ARTICLE I.
CERTAIN DEFINITIONS
1.1. "ACCREDITATION BODY" shall have the
meaning ascribed to such term in the Operating
Agreement.
1.2. "ACQUISITION ADVANCE" shall have the
meaning ascribed to such term in Section 3.
1(a)(ii).
1.3. "ACQUISITION CONTRACT" shall mean the
purchase and sale agreement previously submitted
by Borrower to Lender pursuant to which Borrower
will acquire the Land.
1.4. "ADDITIONAL INTEREST" shall have the
meaning ascribed to such term in the Note.
1.5. "ADVANCE" shall mean a disbursement by
Lender of any of the proceeds of the Loan and, if
the context requires, a disbursement of any part
of Borrower's Deposit or the Mandatory Sweep
Account.
1.6. "AFFILIATE" shall mean with respect to
an individual, any relative of such individual;
and with respect to any Person, any other Person
directly or indirectly controlling, controlled by
or under direct or indirect common control with,
such Person. A Person shall be deemed to control
another Person if such Person possesses, directly
or indirectly, the power to direct or cause the
direction of the management and policies of such
other Person, whether through the ownership of
voting securities, by contract or otherwise, or if
such Person owns or has the power to vote ten
percent (10%) or more of the outstanding voting
securities or interests in such other Person.
1.7. "APPRAISAL" shall mean an appraisal of
the Project in form, substance, and amount
acceptable to Lender, prepared by an Appraiser who
is selected by or approved by Lender prior to the
Closing Date, and any subsequent appraisal of the
Project delivered to Lender pursuant to the terms
of this Agreement or obtained by Lender subsequent
to the Closing Date. The initial Appraisal shall
show (a) the value of
the Project in its "as is" condition and (b) the
value of the Project as constructed in accordance
with the Plans, with occupancy stabilized in
accordance with criteria approved by Lender.
Unless otherwise provided, references in this
Agreement to the "Appraisal" shall mean the most
recent Appraisal of the Project approved by
Lender.
1.8. "APPRAISER" shall mean an independent
appraiser who (a) is a member of the American
Institute of Real Estate Appraisers - 1) or a
successor body hereafter constituted exercising a
similar function and licensed or otherwise
authorized to appraise real property in the State
of Washington, (b) has experience in appraising
projects similar or comparable to the Project, and
(c) is not employed by, or an Affiliate of, and
does not have any substantial direct or indirect
financial or other business interests in, Borrower
or Lender or any Affiliate of either of them.
1.9. "APPROVED CONSTRUCTION BUDGET" shall
mean the budget prepared by Borrower and approved
by Lender at least sixty (60) days prior to the
Closing Date, which is attached hereto as Exhibit
A.
1.10. "ARCHITECT" shall mean Architects Xxxx
Xxxxxxxx Xxxxxxx Willows PLLC, whose address is
000 Xxxxx X Xxxxxx, Xxxxxx, XX 00000.
1.11. "ARCHITECT'S AGREEMENT" shall mean the
Standard Form of Agreement Between Owner and
Architect dated June 7, 1996, between Emeritus and
Architect, as assigned to Borrower and approved by
Lender.
1.12. "ASSIGNMENT OF LICENSES AND PERMITS"
shall mean the Assignment of Licenses and Permits
dated of even date herewith executed by Borrower
and delivered to Lender, as the same may be
amended from time to time.
1.13. "ASSIGNMENT OF RENTS AND LEASES" shall
mean the Assignment of Rents and Leases dated of
even date herewith executed by Borrower and
delivered to Lender, as the same may be amended
from time to time.
1.14. "ASSISTED LIVING FACILITY" shall mean a
facility providing board and domiciliary care
pursuant to Chapter 18.20 of the Revised Code of
Washington, as amended from time to time.
1.15. "BORROWER'S COUNSEL'S OPINION" shall
mean an opinion letter from Borrower's counsel and
from counsel to Emeritus satisfying the opinion
requirements set forth in the Loan Application and
such additional reasonable requirements as may
previously have been delivered by Lender to
Borrower.
1.16. "BORROWER'S DEPOSIT" shall have the
meaning ascribed to such term in Section 2.5.
1.17. "BORROWER'S EQUITY CONTRIBUTION" shall
mean the sum of: (a)(i)Total Project Costs less
(ii) the aggregate principal amount of the Loan
(as such principal amount may be limited by the
terms of the Loan Documents), plus (b) the portion
of any Borrower's Deposit advanced by Lender as
provided in Section 2.5 for the purpose of paying
construction cost overruns during the Construction
Period (i.e. construction costs in excess of the
amounts set forth in the Approved Construction
Budget).
1.18. "BORROWING GROUP" shall mean,
collectively, Borrower, Guarantor, any Person
which is an Affiliate of Borrower or Guarantor or
any Manager which is an Affiliate of Borrower or
Guarantor.
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1.19. "BUSINESS DAY" shall mean any day other
than a Saturday or Sunday or any day which is a
legal holiday in Florida or any day on which
banking institutions are authorized or are
required by law or other governmental action to
close.
1.20. "CHATTEL SEARCH OPINION" shall mean a
search report from the Title Company or reputable
search firm regarding the status of financing
statement filings naming Borrower and the seller
under the Acquisition Contract as debtors as of
the date thereof.
1.21. "CLOSING COSTS ADVANCE" shall have the
meaning ascribed to such term in Section
1.22. "CLOSING COSTS AMOUNT" shall mean the
portion of the bona fide fees and expenses
incident to the closing of the Loan which is
approved by Lender as appropriate for the Closing
Costs Advance and such other reimbursable costs
and expenses relating to the Project as Lender in
its reasonable discretion allows to be advanced at
Closing as a portion of the Closing Costs Advance.
1.23. "CLOSING DATE" shall mean January 30,
1997.
1.24. "COLLATERAL" shall mean all Property
that is covered by the Mortgage, any Security
Agreement, or any of the other Loan Documents and
identified as collateral or security for the Loan.
1.25. "COMPLETION DATE" shall mean the date
one (1) year from the Closing Date, as such one
(1) year period may be extended for a period not
to exceed forty-five (45) days in accordance with
the provisions of Section 5.1 hereof as a result
of Force Majeure Events.
1.26. "CONSENT OF CONTRACTOR" shall mean the
Consent of Contractor to be delivered by the
General Contractor and each Major Subcontractor to
Lender with respect to the Construction Contract
and each Major Subcontract, each of which shall be
in form and substance acceptable to Lender.
1.27. "CONSENT OF DESIGN PROFESSIONAL" shall
mean the Consent of Design Professional to be
delivered by each Design Professional to Lender
with respect to their Design Services Contract
and, if applicable, the Plans, each of which shall
be in for.n and substance acceptable to Lender.
1.28. "CONSTRUCTION ADVANCE" shall have the
meaning ascribed to such term in Section
1.29. "CONSTRUCTION AMOUNT" shall mean the
total amount payable by Borrower under the General
Construction Contract.
1.30. "CONSTRUCTION AND LEASE-UP TERM" shall
mean the period commencing on the Closing Date and
continuing for a period of twenty-four (24) months
thereafter.
1.31. "CONSTRUCTION CONTRACTS" shall mean the
General Construction Contract and all other
const.uction contracts and subcontracts between
Borrower andlor the General Contractor and each
Major Subcontractor.
1.32. "CONSTRUCTION INTEREST RESERVE ADVANCE"
shall have the meaning ascribed to such term in
Section 3.1(a)(iii).
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1.33. "CONSTRUCTION INTEREST RESERVE" shall
mean Three Hundred One Thousand Nine Hundred
Ninety Eight and No/100 Dollars ($301,998.00).
1.34. "CONSTRUCTION LOAN TERM" shall mean the
period of time encompassed by both the
Construction and Lease-Up Term and the
Pre-Stabilization Period, not to exceed thirty-six
(36) months.
1.35. "CONSTRUCTION PERIOD" shall mean the
one year period commencing on the Closing Date and
ending on the one year anniversary thereof,
provided, however, such one year period may be
extended for a period not to exceed forty-five
(45) days in accordance with the provisions of
Section 5.1 hereof as a result of Force Majeure
Events.
1.36. "CONSULTING ENGINEERS" shall mean
Xxxxxxx Consultants, Inc., whose address is
Washington Mutual Tower, 0000 Xxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, XX 00000.
1.37. "CONTRACTS" shall have the meaning
ascribed to such term in the Operating
1.38. "DECLARATION" shall mean the
declaration of covenants, conditions and
restrictions to be entered into by and among
Borrower and certain adjacent property owners with
respect to the construction, maintenance and
operation of the property to be covered thereby,
including the Land.
1.39. "DESIGN PROFESSIONAL" shall mean
individually or collectively, as the context may
require, the architects, engineers, other
professional consultants and planners, if any,
with whom Borrower contracts at any time to
provide planning, design, architectural,
engineering or other similar services relating to
the Project, including the Architect.
1.40. "DESIGN SERVICES CONTRACT" shall mean
individually or collectively, as the context may
require, all contracts and agreements entered into
between Borrower and each Design Professional
pertaining to the planning, desigo, development,
engineering, and construction of the Project,
including the Architect's Agreement.
1.41. "DEVELOPER" shall mean Emeritus.
1.42. "DEVELOPER'S FEE" shall mean the fee
not to exceed Two Hundred Thousand and No/100
Dollars ($200,000) to be paid to Developer
pursuant to the Development Agreement simultaneous
with the last Construction Advance.
1.43. "DEVELOPMENT AGREEMENT" shall mean the
agreement between Borrower and Developer providing
for the development of the Project in
consideration for the payment of the Developer's
Fee which has been approved by Lender. The
Development Agreement and the Developer's Fee
payable thereunder shall be subordinate to the
Loan and shall be terminable by Lender without
cost or liability upon the occurrence of an Event
of Default.
1.44. "DISBURSING AGENT" shall mean Chicago
Title Insurance Company, 0000 Xxxxx 00xx Xxxxxx,
Xxxxx 000, Xxxxxx, XX 00000, Attention: Xx. Xxxxx
Xxxxxx, or such other Person as may be designated
by Lender as the disbursing agent for Lender under
this Agreement.
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1.45. "EMERITUS" shall mean Emeritus
Corporation, a Washington corporation, whose
addressis3131 Xxxxxxx Xxxxxx, Xxxxx000,
Xxxxxxx,XX00000.
1.46. "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, and the
regulations promulgated thereunder, as the same
may be amended from time to time.
1.47. "EVENT OF DEFAULT" shall have the
meaning ascribed to such term in Article IX
1.48. "FORCE MAJEURE EVENT" shall mean (a)
unusually prolonged periods of extreme and unusual
rain, floods, wind, ice or snow, (b) earthquake,
volcaoic eruption or other natural disaster, (c)
strikes or other labor troubles beyond the control
of Borrower, (d) unavailability of materials
beyond the control of Borrower (but not
unavailability resulting from failure to order
materials in a timely manner) or (e) national or
state emergency as declared by the President,
Governor of Washington or other appropriate
Governmental Authority.
1.49. "GAAP" shall mean generally accepted
accounting principles applied on a consistent
basis, as set forth in the Opinions of the
Accounting Principles Board of the American
Institute of Certified Public Accountants or in
statements of the Financial Accounting Standards
Board or their respective successors and which are
applicable in the circumstances as of the date in
question.
1.50. "GENERAL CONSTRUCTION CONTRACT" shall
mean the construction contract between Borrower
and the General Contractor which has been approved
by Lender.
1.51. "GENERAL CONTRACTOR" shall mean
Xxxxxxxxx Construction Company, Inc., whose
address is 0000 Xxxxxxxxx Xxxxxx X, Xxxxxx, XX
00000.
1.52. "GOVERNMENTAL AUTHORITY" shall mean the
United States, the state, the county, the city, or
any other political subdivision in which the
Property is located, and any other political
subdivision, agency or instrumentality exercising
jurisdiction over Borrower, Guarantor, the
Project, or if the context requires, any Design
Professional, the General Contractor, any
subcontractor, the Developer, or the Manager under
the Management Contract.
1.53. "GOVERNMENTAL REQUIREMENTS" shall mean
all laws, statutes, ordinances, by-laws, codes,
rules, regulations, restrictions, orders, writs,
injunctions, judgments, or decrees (including,
without limitation, all applicable building,
health code, zoning, subdivision, and other land
use and health-care licensing statutes,
ordinances, by-laws, codes, rules and regulations)
whether now or hereafter enacted, promulgated or
issued by any Governmental Authority,
Accreditation Body or Third Party Payor,
applicable at any time and from time to time to
Lender, any member of the Borrowing Group (to the
extent applicable to the Project or the Loan), the
Project, or if the context requires, any Design
Professional, the General Contractor, any
subcontractor, the Developer or the Manager under
the Management Contract, or the ownership,
construction, development, maintenance,
management, repair, use, occupancy, possession or
operation of the Project, or the operation of any
programs or services in connection with the
Project, including, without limitation, any of the
foregoing which may (i) require repairs,
modifications or alterations in or to the Project,
(ii) in any way affect (adversely or otherwise)
the use and enjoyment of the Project, or (iii)
require the assessment, monitoring, clean-up,
containment, removal, remediation or other
treatment
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of any Substances (as deemed in the Mortgage) on,
under or from the Project. Without limiting the
foregoing, the term Governmental Requirements
includes all Permits and Contracts issued or
entered into by any Governmental Authority, any
Accreditation Body and/or any Third Party Payor
and the requirements of Chapter 18.20 of the
Revised Code of Washington.
1.54. "GROSS REVENUES" shall have the meaning
ascribed to such term in the Note.
1.55. "GUARANTOR" shall mean Emeritus. If,
after the Closing Date, any Person in addition to
Emeritus becomes directly liable or otherwise
obligated to Lender with respect to all or any
part of Borrower's obligations to Lender with
respect to the Loan, such Person shall also be
deemed a "Guarantorn.
1.56. "GUARANTY" shall mean each guaranty
given at any time by any Guarantor to Lender to
secure the Loan in whole or in part, as the same
may be amended from time to time.
1.57. "IMPROVEMENTS" shall mean all of the
improvements previously made or to be made, in,
on, under, and over the Land in connection with
the Project, including but not limited to all
buildings, appurtenant parking areas, driveways,
roadways, walkways and landscaped areas.
1.58. "INSPECTION FEE" shall have the meaning
ascribed to such term in Section 5.7
1.59. "INTEREST RESERVE ADVANCES" shall mean,
as applicable, Construction Interest Reserve
Advances or Lease-Up Interest Reserve Advances.
1.60. "INTEREST RESERVE AMOUNT" shall mean,
as applicable, the Construction Interest Reserve
Amount or the Lease-Up Interest Reserve Amount.
1.61. "LAND" shall mean the approximately
three (3) acres of real property situated in
Xxxxxx County, Washington, upon which the Project
will be constructed, as more particularly
described on Exhibit C attached hereto.
1.62. "LEASE-UP INTEREST RESERVE ADVANCES"
shall have the meaning ascribed to such term in
Section 3.1(a)(iv).
1.63. "LEASE-UP INTEREST RESERVE AMOUNT''
shall mean Two Hundred Thousand and No/100 Dollars
($ 200,000.00).
1.64. "LOAN APPLICATION" shall mean
collectively, the Application for Financing dated
September 3, 1996, referencing NWillow Gardens,
Puyallup, Washington" addressed to Emeritus from
Lender, and that certain letter dated October 25,
1996, from Lender to Emeritus providing
conditional approval of the Application, subject
to the terms and conditions set forth therein.
1.65. "LOAN DISBURSING AGREEMENT" shall mean
the agreement entered into of even date herewith
by and among Lender, Borrower and the Disbursing
Agent pursuant to which the Disbursing Agent
agrees to disburse certain Advances upon the terms
and conditions set forth therein.
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1.66. "LOAN DOCUMENTS" shall mean the Loan
Application, this Agreement, the Note, the
Mortgage, the Assignment of Licenses and Permits,
the Assignment of Rents and Leases, the
Conditional Assignment of Management Contract, the
Operating Agreement, the Security Agreements, the
Guaranties, the Loan Disbursing Agreement,
Borrower's Counsel's Opinion, each Consent of
Design Professional, each Consent of Contractor
and all other documents, instruments and
agreements now existing or hereafter entered into
by Borrower or any Guarantor with or for the
benefit of Lender in relation to the Loan, as the
same may be amended from time to time, including
all documents evidencing the authority and
capacity of Borrower and Guarantor to consummate
the transactions contemplated by this Agreement.
1.67. "MAJOR SUBCONTRACT" shall mean each
contract between the General Contractor and a
Major Subcontractor.
1.68. "MAJOR SUBCONTRACTOR" shall mean each
subcontractor whose aggregate contract for the
construction of the Project exceeds One Hundred
Thousand Dollars ($100,000.00) or whose contract
involves a function Lender reasonably believes,
after consultation with Borrower and the
Consulting Engineers, to be essential to the
Project, including without limitation all
subcontractors performing site work and all
subcontractors performing work with regard to
HVAC, masonry, plumbing systems or equipment,
electrical systems or equipment, framing, roofing,
windows, cabinets and fire sprinkler systems,
regardless of the amounts payable to such
subcontractors.
1.69. "MANAGEMENT CONTRACT" shall mean the
management agreement between Borrower and Manager
pursuant to which Manager agrees to operate the
Project as an Assisted Living Facility in
accordance with all applicable Governmental
Requirements and the Loan Documents. The
Management Contract and the fees payable to
Manager thereunder shall be subordinate to the
Loan and shall be terminable by Lender without
cost or liability upon the occurrence of an Event
of Default.
1.70. "MANAGER" shall mean Emeritus, whose
address is 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx,
XX 00000, or any subsequent manager of the Project
approved by Lender.
1.71. "MANDATORY SWEEP ACCOUNT" shall have
the meaning ascribed to such term in the
1.72. "MORTGAGE" shall mean the mortgage or
deed of trust dated of even date herewith executed
by Borrower for the benefit of Lender covering the
Property, which will be recorded among the land
records of the jurisdiction in which the Land is
located, as the same may be amended from time to
time.
1.73. "NET CASH FLOW" shall have the meaning
ascribed to such term in the Note.
1.74. "NOTE" shall mean the Promissory Note
dated of even date herewith executed by Borrower
and made payable to the order of Lender in the
maximum pnncipal amount of the Loan, as the same
may be amended from time to time.
1.75. "OPERATING AGREEMENT" shall mean that
certain Washington Assisted Living Facilities
Operating and Licensing Agreement dated of even
date herewith executed by Borrower and Lender.
1.76. "OPERATING EXPENSES" shall have the
meaning ascobed to such term in the Note.
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1.77. "OPERATING RESERVE ADVANCES" shall have
the meaning ascribed to such term in Section
3.1(a)(viii).
1.78. "OPERATING RESERVE AMOUNT" shall mean
Eighty Thousand and N0/100 Dollars ($80,000.00)
(Shown as Marketing Expenses in Cost Breakdown)
1.79. "OPERATING RESERVE REQUEST" shall have
the meaning ascubed to such term in Section 3.9
hereof
1.80. "PERMANENT LOAN CONDITIONS" shall have
the meaning ascribed to such term in
1.81. "PERMANENT LOAN TERM" shall have the
meaning ascribed to such term in the Note.
1.82. "PERMITS" shall have the meaning
ascribed to such term in the Operating Agreement.
1.83. "PERMITTED ENCUMBRANCES" shall mean (i)
the liens and security interests of Lender arising
under the Loan Documents; (ii) such mauers as are
expressly stated as exceptions to title in any
Title Insurance Policy accepted by Lender; (iii)
liens for taxes, assessments, or governmental
charges or levies not yet due and payable, or
being contested in good faith by appropriate
proceedings promptly initiated and diligently
conducted, provided that a reserve or other
appropriate provision as may be required by GAAP
shall have been made therefor and no foreclosure,
distraint, sale or other similar proceedings shall
have been commenced and any additional
requirements with respect thereto imposed by the
Loan Documents have been satisfied; (iv) Resident
Agreements on a form previously approved by Lender
and other residency agreements that are acceptable
to Lender; and (v) such other mahers affecting the
Property as Lender may accept in writing from time
to time in Lender's sole discretion.
1.84. "PERSON" shall mean any individual,
sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association,
corporation, institution, entity, party or
government (whether territorial, national,
federal, state, county, city, municipal or
otherwise, including, without limitation, any
instrumentality, division, agency, body or
department thereof).
1.85. "PERSONAL PROPERTY" shall mean all of
Borrower's right, title and interest in and to all
now owned and hereafter acquired (a) tangible and
intangible personal property located on the Land
or in the Improvements or obtained or held in
connection with the Land, the Improvements, the
Project, or the Loan, regardless of where such
personality is located, including, but not by way
of limitation, all goods, consumer goods,
equipment, inventory, accounts, contract rights,
documents, chattel paper, general intangibles,
instruments, and money, which is attached to,
installed on or placed or used on, in connection
with or is acquired for such attachment,
installation, placement or use, or which arises
out or the development, improvement, financing,
leasing, operation or use of, the Land, the
Improvements, fixtures or other goods located on
the Land or Improvements, together with all
additions, accessions, accessories, amendments and
modifications thereto, extensions, renewals,
enlargements and proceeds thereof, substitutions
therefor, and income and proceeds therefrom; (b)
materials, supplies, equipment, apparatus and
other items now or hereafter attached to,
installed on or in the Land or the Improvements,
or which in some fashion are deemed to be fixtures
to the Land or the Improvements under the laws of
the State of Washington, including the Uniform
Commercial Code as adopted in Washington; and (c)
without limiting the
8
foregoing, all furniture, fixtures, furnishings
and specialized equipment and systems necessary or
customary (now or in the future) to operate the
Project for its Intended Use (as defined in the
Operating Agreement) in accordance with the all
applicable
Governmental Requirements and the terms of this
Agreement, including but not limited to all
equipment required for the operation of kitchens,
laundries and resident and health care facilities,
and all beds, mattresses, linens, bedding, towels,
chairs, desks, computers, copiers, tables, sofas,
wheel chairs, walkers, canes, vans and other
transportation equipment, televisions, radios,
intercoms, telephones and office equipment.
1.86. "PERSONAL PROPERTY ADVANCES" shall have
the meaning ascribed to such term in Section 3.
l(a)(vi).
1.87. "PLANS" shall mean the final plans,
drawings, and specifications for the construction
of the Project that have been or are to be
prepared by or under the supewision of the
Architect and other Design Professionals, and have
been or are to be delivered to, and must be
acceptable to, Lender and the Consulting
Engineers. To the extent the Plans are mod)fied
from time to time in accordance with the terms of
the Loan Documents, the term "Plans" shall mean
the previously existing Plans as so mod)fied.
1.88. "PRE-STABILIZATION PERIOD" shall mean
the period commencing upon the expiration of the
Construction and Lease-Up Term and continuing
until the Permanent Loan Conditions are satisfied
in full; provided, however, if not sooner
terminated, the Pre-Stabilization Period will
automatically terminate on the date thirty-six
(36) months from the Closing Date.
1.89. "PROGRESS SCHEDULE" shall mean have the
meaning ascribed to such term in Section 4. l(r).
1.90. "PROJECT" shall mean the acquisition of
the Land and the development, construction and
operation of a one hundred (100) unit assisted
living facility thereon, including assisted living
residences and related amenities including
activity lounges, dining facilities, a library and
a xxxxxx/beauty salon. All references to the term
Project shall be deemed to include the Property.
1.91. "PROPERTY" shall mean the Land, the
Improvements, and the Personal Property.
1.92. "REQUISITIONS FOR ADVANCES" shall mean
the requisitions for Advances to be completed by
Borrower in accordance with the requirements of
Section 3.6 hereof as a condition precedent to any
Construction Advance, Personal Property Advance,
and Advances for payment of the Developer's Fee.
1.93. "RESIDENT AGREEMENTS" shall mean all
contracts, agreements and consents executed by or
on behalf of any resident or other Person seeking
sewices at the Project, including, without
limitation, assignments of benefits and
guarantees. Resident Agreements shall include all
agreements pursuant to which Persons are granted
the right to reside or remain in the Project for
any period of time.
1.94. "SECURITY AGREEMENT" shall mean each
security agreement other than the Mortgage, if
any, executed by Borrower to secure the Loan, as
the same may be amended from time to time.
1.95. "SURVEY" means a survey prepared at
Borrower's expense in accordance with the survey
requirements previously delivered by Lender to
Borrower and approved by Lender, and any
subsequent survey of the Land and Improvements
delivered to Lender in accordance with this
Agreement and thereafter approved by Lender.
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1.96. "TANGIBLE NET WORTH" shall mean with
respect to any Person, the value of such Person's
gross assets less the value of such Person's
intangible assets less the amount of such Person's
liabilities.
1.97. "THIRD PARTY PAYOR" shall have the
meaning ascribed to such term in the Operating
Agreement.
1.98. "TITLE COMPANY" shall mean the National
Business Unit of Chicago Title Insurance Company,
000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attn:
Mr. Xxxxxx Xxxxxxxx, or such other title insurance
company as may be acceptable to Lender.
1.99. "TITLE INSURANCE COMMITMENT" shall mean
the Commitment for Title Insurance issued by the
Title Company under Commitment Number 14 5 8 6 3
and dated January 23, 1997, providing fior the
issuance of a Title Insurance Policy by the Title
Company.
1.100. "TITLE INSURANCE POLICY" shall mean an
ALTA Loan Policy of Title Insurance in the amount
of the Loan issued by the Title Company, insuring
Lender that the Mortgage constitutes a first and
prior lien covering the Property, subject only to
those exceptions and encumbrances which Lender may
approve, with such endorsements as Lender may
request.
1. 101. "TOTAL PROJECT COSTS" shall mean the
sum of (a) the costs of acquiring the Land in its
"as is" condition, including all bona fide
transaction costs incurred by Borrower in
connection with such acquisition, as approved by
Lender; (b) all "hard" and "soft" costs incurred
in connection with the development and
construction of the Project in accordance with the
Approved Construction Budget; (c) the Operating
Reserve Amount, to the extent actually advanced by
Lender; (d) the Interest Reserve Amount, to the
extent actually advanced by Lender; and (e) the
bona fide fees and expenses incident to the
closing of the Loan, as approved by Lender.
1.102. "TOTAL PROJECT VALUE" shall mean the
value of the Project as constructed in accordance
with the Plans, as reflected in the initial
Appraisal of the Project approved by Lender.
ARTICLE II.
THE
LOAN
2.1. COMMITMENT TO MAKE ADVANCES. Lender
agrees, upon the terms and subject to the
conditions and limitations hereinafter set forth,
to make Advances to Borrower in the maximum
aggregate principal amount of the Loan.
2.2. LOAN TO VALUE LIMITATIONS.
Notwithstanding any provision contained in this
Agreement or the other Loan Documents to the
contrary, the maximum aggregate principal amount
of the Loan shall be limited to the lesser of (a)
Six Million Four Hundred Sixty-Five Thousand and
No/100 Dollars (S6,465,000), (b) ninety percent
(90%) of Total Project Costs, or (c) eighty
percent (80%) of Total Project Value.
2.3. INTEREST AND PRINCIPAL PAYMENTS.
Borrower shall make payments of interest and
principal to Lender in accordance with the terms
of the Note. All outstanding and unpaid principal
of the Loan, and all accrued but unpaid interest
thereon and all Additional Interest payable with
respect thereto, unless sooner paid, shall be due
and payable in full on the Maturity Date (as
defined in the Note).
10
2.4. ADDITIONAL PAYMENTS. In addition to the
payments of principal and interest to be made
pursuant to the Note, Borrower shall also make all
other payments required by the Loan Documents, as
and when required by such Loan Documents.
2.5. BORROWER'S DEPOSIT. If at any time
Lender, in its sole discretion, determines that
the undisbursed proceeds of the Loan are
insufficient to meet the costs of completing
construction of the Project in accordance with the
Plans and any Governmental Requirements and
thereafter, leasing and operating the Project in
accordance with the Operating Agreement, including
all costs covered by the Approved Construction
Budget and, to the extent not covered by such
budget, the costs of insurance, ad valorem taxes
and other costs incident to the construction
contemplated by the Plans, Lender may refuse to
make additional Advances to Borrower until
Borrower deposits with Lender aufficient
additional funds ("Borrower's Deposit") to cover
the deficiency which Lender deems to exist.
Borrower agrees to make the Borrower's Deposit
with Lender within fifteen (15) days of written
demand therefor by Lender. The Borrower's Deposit
will be disbursed by Lender to Borrower pursuant
to the terms and conditions hereof as if it
constituted a portion of the Loan being made
hereunder, provided, however, Lender shall be
entitled to disburse the Borrower's Deposit prior
to advancing any of the Loan proceeds and the
Borrower's Deposit actually disbursed by Lender
for the purpose of paying construction cost
overruns during the Construction Period (i.e.,
construction costs in excess of the amounts set
forth in the Approved Construction Budget) shall
constitute a portion of Borrower's Equity
Contribution. Any portion of Borrower's Deposit
disbursed for the purpose of paying Operating
Expenses, interest, principal with respect to the
Loan or for any purpose other than construction
cost overruns shall not constitute a portion of
Borrower's Equity Contribution. Unless required by
Governmental Requirements, Lender shall not be
required to pay interest on the Borrowefs Deposit.
ARTICLE III
ADVANCES
3.1. USE OF ADVANCES.
(a) Upon and subject to the terms, conditions
and limitations set forth in this Agreement,
Lender shall make Advances solely for the
following purposes:
(i) for the purpose of paying bona fide fees
and expenses incident to the closing of the Loan
and such other reimbursable costs and expenses
relating to the Project as Lender in its sole
discretion may approve ("Closing Costs Advance");
provided that the aggregate amount of the Closing
Costs Advance shall not exceed the Closing Costs
Amount, and provided, further, that all such fees
and expenses shall be subject to the approval of
Lender;
(ii) for the purpose of paying the costs of
acquiring the Land pursuant to the Acquisition
Contract ("Acquisition Advance"), provided that
the aggregate amount of the Acquisition Advance
shall not exceed the lesser of seventy-five
percent (75%) of the lower of (A) the value of the
Land in its "as is" condition as reflected in the
initial Appraisal, or (B) the purchase price for
the Land as set forth in the Acquisition Contract;
(iii) during the Construction Period only,
for the purpose of paying a portion of the
interest which hereafter accrues on outstanding
Advances during such period ("Construction
Interest Reserve Advances"), provided that the
aggregate amount of all Construction Interest
Reserve Advances shall not exceed the Construction
Interest Reserve Amount;
11
(iv) during the period commencing upon the
expiration of the Construction Period and
continuing only until the expiration of the
Construction Loan Term, for the purpose of paying
a portion of the interest which then accrues on
outstanding Advances during such period ("Lease-Up
Interest Reserve Advances"), provided that the
aggregate amount of all Lease-Up Interest Reserve
Advances shall not exceed the Lease-Up Interest
Reserve Amount;
(v) for the purpose of paying the costs
identified in the Approved Construction Budget as
"hard" costs as well as the costs identified
therein for site improvements and the other
expenses directly related to the construction of
the Improvements and identified as being covered
by the General Construction Contract
("Construction Advances"), provided that,
Construction Advances shall not exceed the
aggregate of (A) the costs of labor, materials,
services and other expenses incorporated into the
Improvements or the Project in a manner acceptable
to Lender, plus tO if approved by Lender, the
purchase price of all uninstalled materials to be
utilized in the construction of the Improvements
and stored on the Property, if properly secured
and insured to the satisfaction of Lender, plus
(C) the "General Contractor's Fee" payable under
the General Construction Contract, less (D)
retainage as required by Section 3.8 of this
Agreement, and less (O all prior Advances for
payment of the costs of labor, materials, services
and expenses for the construction of the
Improvements; and provided, further, that the
aggregate amount of all Construction Advances
shall not exceed the Construction Amount;
(vi) for the purpose of paying the costs of
acquiring and installing the Personal Property
necessary for the operation of the Project, to the
extent the costs of such Personal Property are not
covered by the Construction Amount ("Personal
Property Advances"), provided that the aggregate
amount of Personal Property Advances shall not
exceed the total costs for such Personal Property
set forth in the Approved Construction Budget;
(vii) for the purpose of paying the
Developer's Fee as and when such fee becomes due
and payable under the Development Agreement,
provided that the aggregate amount of Advances
available for paying such Developer's Fee shall
not exceed the Developer's Fee Amount; and
(viii) no sooner than 120 days prior to the
scheduled expiration of the Construction Period,
for the purpose of paying Operating Expenses
consisting only of marketing expenses for the
Project, and except with respect to such marketing
expenses, after the expiration of the Construction
Period only, for the purpose of paying Operating
Expenses (all Advances for purposes described in
this Section 3. l(a)(viii) being "Operating
Reserve Advances"); provided that the aggregate
amount of all Operating Reserve Advances shall not
exceed the Operating Reserve Amount.
(b) Upon the occurrence of an Event of
Default under this Agreement, whether or not
declared to be such by Lender, Lender shall have
the right to withhold all further Advances, but at
the sole election of Lender, without waiving such
Event of Default or being required to make any
further or future Advances, Lender may (i) make
Advances to pay interest and/or principal which is
due and payable under the Note, (ii) make Advances
either to Borrower, the General Contractor,
subcontractors, laborers, materialmen, or other
persons furnishing labor, services, or materials
used or to be used on or in the construction of
the Project (including extras approved by Lender)
for the purpose of paying the fees and expenses of
such parties, (iii) make Advances to pay taxes or
insurance premiums which may be due and payable,
(iv) make Advances to pay license, permit, or
other fees payable in connection with any
Governmental Requirements
12
and, (v) make such additional Advances as may be
necessary or desirable, in the sole judgment of
Lender, to preserve and protect the Project and
the value of the Collateral for the Loan.
3.2. REALLOCATIONS. From time to time
Borrower may request that Lender disburse Loan
proceeds allocated to any of the items in the
Approved Construction Budget for other purposes
and Lender, in its sole discretion, may elect to
approve or disapprove such requested
reallocations. Borrower shall not be entitled to
require that Lender reallocate funds among such
items and Borrower shall not be entitled to
reallocate items of cost or change the Approved
Construction Budget without the prior written
consent of Lender. Lender reserves the right, at
its option, to disburse Loan proceeds allocated to
any of the items in the Approved Construction
Budget for such other purposes or in such
different proportions as Lender, in its sole
discretion, deems necessary or advisable.
3.3. CONTINGENG ALLOCATIONS. Any amount
allocated in the Approved Construction Budget for
"contingencies" or other non-specific purposes
may, in Lender's discretion, be disbursed by
Lender to pay future contingent costs and expenses
of maintaining, leasing, operating and promoting
the Project and such other costs or expenses as
Lender shall approve. Under no circumstances shall
Borrower have the right to require Lender to
disburse any amounts so allocated and Lender may
impose such requirements and conditions as it
deems prudent and necessary should it elect to
disburse all or any portion of the amounts so
allocated.
3.4. WITHHOLDING OF ADVANCES.
(a) Provided that Lender has first not)fied
Borrower of the circumstances upon which it relies
in exercising its rights under this Section
3.4(a), Lender may withhold from an Advance or, on
account of subsequently discovered evidence,
withhold from a later Advance under this
Agreement, or require Borrower to repay to Lender
the whole or any part of any earlier Advance, to
such extent as may be necessary to protect Lender
from loss on account of (i) defective work not
remedied or requirements of this Agreement not
performed, (ii) liens filed or reasonable evidence
indicating probable filing of liens against the
Property, (iii) failure of Borrower or the General
Contractor to make payments to subcontractors for
material or labor, or (iv) a reasonable doubt that
the construction can be completed for the balance
of the Loan then undisbursed. When all such
grounds for withholding advances are removed,
payment shall be made of any amount so withheld
because of them, provided Lender shall have no
obligation to make such payment until the next
scheduled Advance.
(b) Lender shall be entitled to refrain from
making Advances at any time after Lender has
requested that Borrower make a Borrower's Deposit
until such time as the requested Borrower's
Deposit is made. In addition, even if Lender has
not previously requested that Borrower make a
Borrower's Deposit with Lender, Lender shall be
entitled to refrain from making Advances at any
time that Lender, in its sole discretion, deems
the undisbursed proceeds of the Loan to be
insufficient to complete the construction of the
Project, including all items covered by the
Approved Construction Budget and, to the extent
not covered by such budget, the costs of
insurance, ad valorem taxes and other costs
incident to the construction contemplated by the
Plans.
3.5. ADVANCES AT CLOSING. The Closing Costs
Advance and the Acquisition Advance will be made
on the Closing Date, upon satisfaction of the
applicable conditions to such Advances set forth
in Article IV. The Closing Costs Advance and the
Acquisition Advance will be funded by Lender to
the Title Company for application in accordance
with closing instructions to be delivered to the
Title Company by Lender.
13
3.6. REQUISITIONS FOR ADVANCES.
(a) Unless Lender makes direct payments under
Section 3.7, Construction Advances, Personal
Property Advances and Advances for payment of the
Developer's Fee shall be made after satisfaction
of all applicable conditions precedent set forth
in Article IV, following receipt, review and
approval by Lender and the Consulting Engineer of
periodic Requisitions for Advances on the standard
A I.A. "Application and Certificate for Payment"
signed by Borrower, the General Contractor, the
appropriate Design Professionals, and the
Consulting Engineers, which shall set forth in
trade breakdown form, showing percentage of
completion, and in such detail as Lender may
require, the amounts expended or costs incurred
for work done and necessary material delivered to
the Land and incorporated in the Project since the
previous requisition. Each Requisition for Advance
shall be accompanied by a certificate in the form
attached hereto as Exhibit B signed by Borrower,
the General Contractor, the appropriate Design
Professionals, and the Consulting Engineers, and,
unless previously delivered in accordance with
subsection (d) below, receipts and partial lien
releases or waivers from the General Contractor
and all appropriate subcontractors or suppliers
evidencing payment for all labor and material
funded by Lender under prior Requisitions for
Advance.
(b) Construction Advances and Personal
Property Advances shall be made not more
frequently than once each month and only after
Borrower has made all required payments of
Additional Interest and all required deposits of
Net Cash Flow to the Mandatory Sweep Account, as
set forth in the Note, and delivered all required
reports with respect thereto.
(c) Borrower shall submit Requisitions for
Advances to Lender and the Consulting Engineers at
least fifteen (15) days before the date of a
requested Construction Advance, Personal Property
Advance or Advance for payment of the Developer's
Fee. If Borrower does not submit a complete
Requisition for Advance, including all required
supporting information, certifications, releases
and waivers, at least fifteen (15) days before the
date of such a requested Advance, Lender shall
have no obligation to make the requested Advance
on the date requested; provided, however, Lender
shall make such requested Advance no later than
fifteen ( 15) days after receipt and approval of
all such supporting documentation.
(d) Notwithstanding the requirements of
subsection (a) above, Borrower shall be required
to deliver partial lien releases or waivers
evidencing payment for all labor and materials
funded under any Construction Advance within
thirty (30) days following such Construction
Advance. Accordingly, to the extent more than
thirty (30) days have elapsed since the
immediately preceding Construction Advance, the
requirements of subsection (a) with respect to
partial lien releases and waivers shall be deemed
modified to provide that such lien releases and
waivers shall have been delivered within the
required thirty (30) day period.
(e) All Requisitions for Advances signed by
Borrower shall be deemed representations and
covenants that all items noted thereon are
expenses properly incurred in respect of the
construction of the Project. Upon funding of any
requisition by Lender or the Disbursing Agent to
Borrower, Borrower shall promptly use such
proceeds to pay all items noted on such
requisition.
3.7. TO WHOM CONSTRUCTION ADVANCES, PERSONAL
PROPERTY ADVANCES AND ADVANCES FOR DEVELOPER'S FEE
MADE. All Construction Advances, Personal Property
Advances and Advances for payment of the
Developer's Fee shall be disbursed by Lender to
the Disbursing Agent (net of any
14
amounts payable thereunder to Lender). Upon
receipt of such Advances, and provided all
conditions to disbursement set forth in the Loan
Disbursing Agreement have been met, the Disbursing
Agent shall disburse such Advances to Borrower or,
at Lender's sole option as evidenced by written
directions from Lender to the Disbursing Agent, in
one of the following manners: (a) jointly to
Borrower and the General Contractor, or applicable
subcontractor or material or Personal Property
supplier or the Developer; or (b) directly to the
General Contractor or applicable subcontractor or
material or Personal Property supplier or the
Developer.
3.8. RETAINAGE FROM CONSTRUCTION ADVANCES.
Until such time as construction of the Project is
fifty percent (50%) complete, as confirmed in
writing to Lender by the Consulting Engineers and
the General Contractor, Lender shall retain from
each Construction Advance an amount equal to 10%
of the amount requisitioned and as a result, shall
advance not more than 90/O of each requisitioned
Construction Advance. Thereafter, Lender shall
retain from each Construction Advance (other than
the last Construction Advance) an amount equal to
5% of the amount requisitioned and as a result,
shall advance, not more than 95% of each such
requisitioned Construction Advance. Amounts
retained by Lender pursuant to this Section 3.8
shall be advanced by Lender pursuant to Section
4.3.
3.9. OPERATING RESERVE ADVANCES. From time to
time during the Construction Loan Term when Gross
Revenues are insufficient to pay the Operating
Expenses of the Project, Borrower may request that
Lender make Operating Reserve Advances to pay
Operating Expenses by submitting a written request
therefor ("Operating Reserve Request") at least
fifteen (15) days prior to the date of the
requested Advance, accompanied by invoices and
such additional information as Lender may
reasonably request to evaluate and confirm that
such invoices relate to bona fide Operating
Expenses of the Project which are then due and
payable and that there are insufficient Gross
Revenues or other available funds to pay such
Operating Expenses. So long as all conditions
applicable to Operating Reserve Advances under
Article IV have been satisfied and no Event of
Default has occurred and is continuing, Lender
shall make the requested Operating Reserve Advance
on the first day of the first calendar month
immediately following receipt and approval of
Borrower's Operating Reserve Request, by advancing
the requested Operating Reserves to the Disbursing
Agent, or at the option of Lender, by advancing
the requested Operating Reserves in direct payment
of the invoices submitted by Borrower; provided,
hawever, Lender shall have no obligation to make
any Operating Reserve Advance if such Advance,
when combined with all previous Operating Reserve
Advances, would exceed the Operating Reserve
Amount. Upon receipt of any Operating Reserve
Advance, provided all conditions to disbursement
set forth in the Loan Disbursing Agreement have
been satisfied, the Disbursing Agent shall
disburse the Operating Reserve in one of the
following manners, as directed by Lender in
writing: (a) directly to Borrower, (b) jointly to
Borrower and the Person to whom the Operating
Expenses covered thereby are due, or (c) directly
to the Person to whom the Operating Expenses
covered thereby are due.
3.10. INTEREST RESERVE ADVANCES.
(a) At any time during the Construction
Period when there is insufficient Net Cash Flow
from the Project and an insufficient balance in
the Mandatory Sweep Account to pay interest which
has become due and payable, so long as all
conditions applicable to Interest Reserve Advances
under Article IV have been satisfied and no Event
of Default has occurred and is continuing, Lender
shall make Construction Interest Reserve Advances
not to exceed in the aggregate the Construction
Interest Reserve Amount. Lender shall have no
obligation to make any Construction Interest
Reserve Advance if such Advance, when combined
with all previous Construction Interest Reserve
15
Advances, would exceed the Construction Interest
Reserve Amount. Lender's obligation to make
Construction Interest Reserve Advances shall
terminate without any further action upon the
expiration of the Construction Period.
(b) At any time after the expiration of the
Construction Period but before the commencement of
the Permanent Loan Term, if there is insufficient
Net Cash Flow from the Project and an insufficient
balance in the Mandatory Sweep Account to pay
interest which has become due and payable, so long
as all conditions applicable to Interest Reserve
Advances under Article IV have been satisfied and
no Event of Default has occurred and is
continuing, Lender shall make Lease-Up Interest
Reserve Advances not to exceed in the aggregate
the Lease-Up Interest Reserve Amount. Lender shall
have no obligation to make any Lease-Up Interest
Reserve Advance if such Advance, when combined
with all previous Lease-Up Interest Reserve
Advances, would exceed the Lease-Up Interest
Reserve Amount. Lender's obligation to make
Lease-Up Interest Reserve Advances shall terminate
without any further action upon the expiration of
the Construction Loan Term.
(c) To the extent authorized as provided
above, all Lnterest Reserve Advances will be made
on the first day of a calendar month to pay
accrued, unpaid interest on the Loan and shall be
applied directly to the Loan without being funded
to Borrower.
3.11. ADVANCES TO DISBURSING AGENT. Borrower
hereby acknowledges and agrees that all advances
by Lender to the Disbursing Agent in accordance
with this Agreement shall constitute an Advance to
Borrower under this Agreement and the other Loan
Documents and that interest shall accrue and be
computed thereon from the date advanced by Lender
to the Disbursing Agent, notwithstanding any
subsequent delay in delivery of such Advance to
Borrower or any other Person entitled to the
proceeds of such Advance under the terms of this
Agreement. Notwithstanding the foregoing, nothing
contained herein shall be construed to modify,
limit or impair any rights or remedies of Borrower
contained in the Disbursing Agreement.
3.12. LIABILITY OF LENDER TO THIRD PARTIES.
Lender shall in no event be responsible or liable
to any person other than Borrower for any Advance
of or failure to advance the proceeds of the Loan
or any part thereof, and no contractor,
subcontractor, supplier, or other person shall
have any right or claim against Lender under or
with respect to this Agreement or the
administration thereof.
ARTICLE IV.
CONDITIONS TO
ADVANCES
4.1. CONDITIONS TO INITIAL ADVANCES. Unless
waived by Lender in writing, the following shall
be conditions precedent to the initial Advance
under this Agreement:
(a) LOAN DOCUMENTS. Borrower and each other
party to the Loan Documents shall have executed
and de&vered to Lender all of the Loan Documents
requested by Lender, all of which shall be in form
and content acceptable to Lender. All Loan
Documents required by Lender to be recorded or
filed, shall have been recorded or filed and
Lender shall have received evidence satisfactory
to it that it has a first priority, perfected
security interest in, or first priority lien upon,
the Collateral.
(b) LOAN FEE. Lender shall have received, in
immediately available funds, a non-refundable loan
fee equal to $64,650.
16
(c) BORROWER'S EQUITY CONTRIBUTION. Borrower
shall have made Borrower's Equity Contribution (as
estimated by Lender and Borrower) and any required
Borrower's Deposit, both of which must be made
from funds other than proceeds of the Loan.
(d) INSURANCE POLICIES. Lender shall have
received counterpart originals of each insurance
policy (or satisfactory certificates of insurance)
required under the Operating Agreement or any
other of the other Loan Documents. All such
insurance policies shall be in form and substance,
and in amounts, satisfactory to Lender, and shall
be endorsed as required by the Operating
Agreement.
(e) TITLE INSURARNCE. Borrower shall have
caused the Title Company to deliver to Lender the
Title Insurance Commitment, together with written
assurance that the Title Insurance Policy will be
delivered to Lender within thirty (30) days ofthe
Closing Date.
(f) SURVEY. Lender shall have received the
Survey.
(g) SEPARATE TAX LOT. Lender shall have
received evidence satisfactory to Lender that the
Land is carried on all applicable tax rolls as a
separate tax lot or more than one separate tax
lot, and that no property not part of the Land is
included within any tax lot that includes all or
part of the Land.
(h) APPRAISAL. Lender shall have received the
Appraisal.
(i) ENVIRONMENTAL REPORT. Lender shall have
received and approved the phase I environmental
report with respect to the Land ordered by Lender
from an environmental firm acceptable to Lender,
and Borrower shall have completed (or caused to be
completed) all clean-up work required or
recommended by such report.
(j) PLANS. The Plans shall have been approved
by Lender and authenticated by signatures of
Borrower, the Design Professional(s) responsible
for preparation of the Plans, the General
Contractor, the Consulting Engineers, and all
Governmental Authorities having jurisdiction,
including without limitation the Washington
Department of Social and Health Services pursuant
to Washington Administrative Code Chapter 246-316;
one copy ofthe Plans, as so authenticated, shall
have been delivered to Lender and the Consulting
Engineers; and the Plans shall have been assigned
to Lender as collateral for the Loan.
(k) PERMITS. All necessary building and other
Permits and all other governmental and private
authorizations and approvals necessary for
construction of the Improvements in accordance
with the Plans and all Governmental Requirements
shall have been obtained and copies thereof
delivered to Lender and the Consulting Engineers.
(1) PLANNING AND ZONING APPROVALS. A
favorable certificate as to any required planning
and zoning approvals required in connection with
the construction of the Project in accordance with
the Plans and any Governmental Requirements shall
have been issued by the Governmental Authorities
having jurisdiction and furnished to Lender and
the Consulting Engineers.
(m) UTILITY AVAILABILITY. Lender shall have
received satisfactory written evidence of the
availability of utilities (including without
limitation adequate water, storm water sewer,
sanitary sewer, electricity and gas, if required
by the Plans) adequate to serve the Project.
17
(n) DEVELOPER. Lender shall have approved the
Development Agreement and such approved
Development Agreement shall have been assigned to
Lender as Collateral for the Loan.
(o) GENERAL CONTRACTOR. Lender, in
consultation with the Consulting Engineers, shall
have approved the General Contractor, its
construction manager for the Project, and the
General Construction Contract, and such General
Construction Contract shall have been assigned to
Lender as Collateral for the Loan.
(p) SUBCONTRACTORS. Borrower shall have
furnished to Lender a list of the names of all
subcontractors which have been identified as of
the Closing Date. In addition, the Consulting
Engineers shall have approved all Major
Subcontractors and the terms and conditions of
their Major Subcontracts.
(q) PAYMENT AND PERFORMANCE BONDS.
Performance and labor and material payment bonds
in the full amount of the General Construction
Contract and in form and substance and from a
company satisfactory to Lender, shall have been
issued in respect of the General Construction
Contract, naming Lender as an obligee. In
addition, the form and content of the dual obligee
rider naming Lender as an obligee shall have been
reviewed and approved by Lender.
(r) PROGRESS SCHEDULE. Borrower shall have
furnished Lender with a construction progress
schedule, in form and substance satisfactory to
Lender and the Consulting Engineers, which must
show the anticipated completion of the
construction of the Project in accordance with the
Plans and all Governmental Requirements on or
before the Completion Date (as such schedule may
be modified from time to time with the consent of
Borrower, Lender and the Consulting Engineers, the
"Progress Schedule").
(s) MATERIALS. Borrower shall have furnished
to Lender a list of the materials, equipment, and
names of the manufacturers of all materials to be
incorporated into the Project pursuant to the
Plans, all of which and all of whom shall be
satisfactory to Lender and approved by the
Consulting Engineers.
(t) GOVERNMENTAL REQUIREMENTS. Borrower shall
have delivered to Lender evidence satisfactory to
Lender demonstrating that the Project as designed
and constructed in accordance with the Plans and
operated by the Manager under the Management
Contract will qualify for all applicable Permits
and other Governmental Requirements necessary to
operate the Project as an Assisted Living
Facility.
(u) MANAGEMENT CONTRACT. Lender shall have
approved the Management Contract and such approved
Management Contract shall have been assigned to
Lender as Collateral for the Loan.
(v) DRAFT FORM OF RESIDENT AGREEMENTS.
Borrower shall have delivered, and Lender shall
have approved, the draft form of Resident
Agreement(s) Borrower currently intends to use for
the Project.
(w) LAND ACQUISITION. Emeritus shall have
assigned to Borrower all of its right, title and
interest in and to the Acquisition Contract and
all conditions to the purchase and sale
contemplated thereby shall have been satisfied as
provided therein.
(x) CONSULTING ENGINEER'S REPORT. Borrower
shall have satisfied each of the requirements set
forth on Schedule I attached hereto to the
satisfaction of Lender and the Consulting
Engineers.
18
4.2. CONDITIONS TO SUBSEQUENT CONSTRUCTION
ADVANCES. Unless otherwise waived in writing by
Lender, Lender shall have no obligation to make
any Construction Advance after the first
Construction Advance if the Title Company has not
actually issued and delivered to Lender the Title
Insurance Policy, together with such reinsurance
agreements and direct access agreements as Lender
shall designate as requirements on or before the
Closing Date, all of which shall be in form and
substance acceptable to Lender.
4.3. CONDITIONS TO FINAL CONSTRUCTION ADVANCE
AND ADVANCE OF DEVELOPER'S FEE.
(a) Prior to the final Construction Advance,
which Advance shall include all retainage withheld
by Lender pursuant to Section 3.8, and the Advance
of any portion of the Developer's Fee, the
following conditions shall have been satisfied:
(i) the construction of the Project in
accordance with the Plans and all Governmental
Requirements shall have been completed, as
evidenced by the issuance of a certificate of
substantial completion by the Architect and
Consulting Engineers and a "punch list" of
outstanding items approved by Borrower and the
Consulting Engineers as being the only items
remaining to be completed under the General
Construction Contract;
(ii) final and unconditional lien releases
from the General Contractor and all
subcontractors, suppliers, and any other Person
entitled to file a mechanic's lien with respect to
the Project shall have been furnished to Lender in
form and substance satisfactory to Lender and no
mechanics' or materialmen's liens shall have been
filed against the Property; provided, however, to
the extent sums remain outstanding as a result of
"punch list" items identified as provided in
Section 4.3(a)(i) above, such lien releases may be
conditioned upon or subject to payment of such
outstanding sums only.
(iii) Lender shall have received copies of
the final certificates of occupancy issued by the
appropriate Governmental Authorities for each
building and for any other portion of the Project
for which certificates of occupancy must be issued
as a result of Governmental Requirements to enable
the Project to open for business and accept
residents;
(iv) all Permits necessary for the
administration, operation, occupancy and use of
the Project as an Assisted Living Facility shall
be in full force and effect and free from default,
complaint or challenge by any Governmental
Authority having jurisdiction.
(v) Borrower shall have delivered, and Lender
shall have approved, the final form of Resident
Agreement(s) to be used for the Project;
(vi) if requested by Lender, no later than
five (5) Business Days prior to the date of such
Advance, Lender shall have received an updated
as-built survey of the Project, in form and
substance satisfactory to Lender;
(vii) all insurance required to be maintained
pursuant to the Operating Agreement, including
without limitation "all-risk" property insurance,
shall be in full force and effect and copies of
such policies or certificates with respect thereto
as provided by the Operating Agreement shall have
been delivered to Lender, and
(viii) no Event of Default shall have
occurred and be continuing.
19
(b) Notwithstanding anything to the contrary
contained herein, after consulting with, and
obtaining the approval of, Borrower and the
Consulting Engineer, Lender, in its sole
discretion, may release the final holdback often
percent (10%) or five percent (5%), as applicable,
of Construction Advances withheld as to any
contractor or subcontractor at such time as (i)
such contractor or subcontractor has completed its
work to the satisfaction of Lender and the
Consulting Engineers and (ii) Lender has been
furnished with an executed final release of
mechanics' kens from each such contractor or
subcontractor.
(c) To the extent any Person delivers a lien
release pursuant to Section 4.3(a)(ii) which is
conditioned upon receipt of payment for
outstanding "punch list" items, such Person shall
be obligated to complete its "punch list" work
promptly and upon completion thereof and payment
therefor, Borrower shall obtain a final and
unconditional lien release.
4.4. CONDITIONS TO EACH ADVANCE. The
following shall be conditions precedent to each
Advance (except to the extent waived by Lender or
otherwise expressly provided below), including the
Closing Costs Advance, the Acquisition Advance,
each Construction Advance, each Personal Property
Advance, each Interest Reserve Advance and each
Operating Reserve Advance:
(a) CONDITIONS TO INITIAL ADVANCE. The
conditions set forth in Section 4. l(a)-(x) shall
have been satisfied.
(b) REPRESENTATIONS AND WARRANTIES. As of the
date any Advance is made, the representations and
warranties made by Borrower in the Loan Documents
shall be true and correct on and as of such time
with the same effect as though such
representations and warranties had been made on
and as of such time, except to the extent that
such representations and warranties expressly
relate to an earlier date.
(c) COVENANTS. Borrower shall have furfilled
each and every covenant of this Agreement
(including, but not limited to, the afflrmative
covenants set forth in Article V of this Agreement
and the negative covenants set forth in Article VI
of this Agreement) and the other Loan Documents.
(d) NO DEFAULT. As of the date such Advance
is made, no Event of Default, nor any event that,
with the passage of time or the giving of notice,
or both, would become an Event of Default, shall
have occurred and be continuing.
(e) NO ADVERSE CHANGE. There shall not have
occurred any material and adverse change in
Borrower's or Emeritus' financial position since
the date of this Agreement, nor any condition,
event, or act that, in any case or in the
aggregate, would materially and adversely affect
Borrower's or Emeritus' ability to complete the
construction of the Project in accordance with the
Plans and any Governmental Requirements and to
repay the Loan.
(f) REQUISITIONS. With respect to
Construction Advances and Personal Property
Advances only, Borrower shall have delivered to
Lender a properly executed Requisition for Advance
and the additional documentation and
certifications required to be delivered or to have
been delivered pursuant to Section 3.6 hereof.
With respect to Operating Reserve Advances only,
Borrower shall have delivered to Lender a properly
executed Operating Reserve Request and the
additional documentation required to be delivered
pursuant to Section 3.9 hereof
20
(g) CONSTRUCTION PROGRESS. The construction
of the Project shall be proceeding in accordance
with the Progress Schedule and the Plans, as
determined by Lender, Borrower and the Consulting
Engineers. As a condition to any Construction
Advance and if required by Lender, any other
Advance, Lender shall receive a certification from
the Consulting Engineers certifying that the
construction of the Project to date has been
completed in accordance with the Plans and all
Governmental Requirements and that the
construction is on schedule in accordance with the
Progress Schedule.
(h) CERTIFICATION OF CONSULTING ENGINEERS.
The Consulting Engineers shall have certified that
they have no reason to believe the construction of
the Project cannot or will not be completed in
accordance with the Plans by the Completion Date
with the balance of the funds then held by Lender
and available for Construction Advances and
Personal Property Advances under the provisions of
this Agreement. If the Consulting Engineers cannot
make such a certification, whether by reason of
changes in the Plans or for any other reason
whatsoever, Borrower shall, before any further
Advance is made by Lender, make a Borrower's
Deposit with Lender in the amount requested by
Lender or, with the consent of Lender, take such
action as will justify a certification by the
Consulting Engineers as herein required.
(i) TITLE BRING-TO-DATE. The Title Company
shall have issued a title bring-todate showing
that title to the Land is free and clear of liens
(other than the lien of the Mortgage and Permitted
Encumbrances, if any) to the date of such Advance,
and the Title Company shall have delivered an
endorsement to the Title Insurance Policy to such
effect in form and substance satisfactory to
Lender.
( ) CHATTEL SEARCH If requested by Lender,
Lender shall have been provided with a current
Chattel Search Opinion showing no additional
financing statement filings since the Closing Date
other than financing statements naming Lender as
secured party.
(k) SURVEY. If requested by Lender, no later
than five (5) Business Days prior to the date of
such Advance, Borrower shall provide Lender with a
current survey of the Land, which survey must be
satisfactory to Lender. All such surveys shall
show the location of the Improvements on the Land
with relation to the boundary lines of the Land
and all easements and set-back lines, shall be
prepared by a registered engineer who shall
guaranty thereon that such location is in
compliance with all set-back lines and other
applicable restrictions, and shall comply with the
Survey Requirements heretofore delivered to
Borrower. As soon as the footings and foundations
of each building or structure are in place,
Borrower shall deliver a survey to Lender showing
the location thereof and showing monuments placed
at all major corners of the boundary of the
Property. At any time a survey is required from
Borrower, as aforesaid, an original print thereof
shall be supplied to the Title Company, and it
shall be a condition precedent to making any
subsequent Advance that the Title Company shall
certify that the same discloses no violations,
encroachments, or variations of set-back or other
restrictions, except such which Lender may waive
in writing.
(1) INSURANCE. All insurance required by the
Loan Documents shall be in full force and effect,
and Lender shall have been provided with
satisfactory evidence of such coverage in
accordance with the Loan Documents.
(m) BONDS IN EFFECT. Borrower shall not have
done and shall not have permitted anything to be
done that would affect the coverage of any
performance or labor and material payment bonds
required by the terms of this Agreement, and
Borrower shall, within one (1) Business Day
following demand of Lender, furnish a written
statement from the bonding company assuring that
such coverage continues in full force and effect.
21
(n) ADDITIONAL BONDS. With respect to all
Major Subcontractors identified after the Closing
Date, Lender shall have approved such Major
Subcontractors and their respective construction
contracts, and if required by Lender, such parties
shall have delivered performance and labor and
material payment bonds, in form, substance and
amount and from companies satisfactory to Lender.
(o) PERMITS AND APPROVALS IN EFFECT. The
building and other Permits and all other
governmental and private approvals and
authorizations required or obtained under
applicable law pertaining to the construction of
the Project in accordance with the Plans and
Governmental Requirements shall have been issued
and continue in force and effect.
ARTICLE V.
AFfIRMATIVE COVENANTS
Borrower covenants and agrees that from the
date hereof and until payment in full of all
amounts owing by Borrower to Lender, unless Lender
shall otherwise consent in writing:
5.1. CONSTRUCTION OF PROJECT.
(a) Borrower will commence construction of
the Project within ten (10) Business Days of the
Closing Date, but in no event prior to the
execution of this Agreement and the recordation of
the Mortgage, and will thereafter proceed with
diligence and continuity, in a good and
workmanlike manner, to construct the Project in
accordance with the Plans, all Governmental
Requirements and the requirements of the Loan
Documents in accordance with the Progress
Schedule, and Borrower shall not permit cessation
of work for a period in excess of fifteen (15)
consecutive days without the prior written consent
of Lender, provided, hawever, that the
restrictions of this sentence shall not apply in
the case of any failure to commence construction
or any such cessation of work due to one or more
Force Majeure Events, provided, further, hawever,
that (i) Borrower shall give prompt written notice
(a "Force Majeure Notice") of such cause or delay
to Lender, and Borrower shall promptly commence or
recommence work immediately upon termination of
such cause of delay and thereafter diligently
prosecute such work to completion as required
hereby, and (ii) no such failure to commence
construction or any such cessation of work shall
in any event continue for more than forty-five
(45) consecutive days without the prior written
consent of Lender. Any notice provided by Borrower
pursuant to the immediately preceding sentence
shall be designated a Force Majeure Notice and
shall include therein a description of the events
or circumstances which Borrower believes
constitute a Force Majeure Event and Borrower's
good faith determination of the date on which the
Force Majeure Event began. Unless Lender not)fies
Borrower within ten (10) Business Days following
receipt of such Force Majeure Notice that Lender
disputes Borrower's characterization of the Force
Majoure Event or the commencement date thereof,
the Completion Date and the Completion Period
shall be extended for a period equal to the number
of days during which the Force Majeure Event of
which Lender has received notice continues, as
such period is approved by Borrower and Lender,
such approval not to be unreasonably withheld, but
in no event more then forty-five (45) days in the
aggregate (regardless of the number of Force
Majeure Events which may occur or the period or
periods of time they may actually last). Borrower
shall complete construction of the Project in
accordance with the Plans and all Governmental
Requirements on or before the Completion Date.
(b) All costs of construction of the Project
in accordance with the Plans and Governmental
Requirements, including the fees and expenses of
the Consulting Engineers, shall be paid by
Borrower. Except as provided in Section 5.1(c)
below, no
22
work other than that shown in the Plans and the
Approved Construction Budget shall be authorized
or undertaken in the construction of the Project.
The cost of the construction of the Project shall
include all costs of construction (both direct and
indirect) and all other costs. Borrower agrees to
pay all costs as they become due and payable. If
the General Contractor does not proceed diligently
with the completion of the work described in the
Plans as required under the General Construction
Contract or fai!.s for any reason to complete the
work in accordance with its obligations under the
General Construction Contract, Borrower agrees to
cause another contractor or contractors
satisfactory to Lender to be employed at
Borrower's expense to complete such work.
(c) No changes shall be made in either the
General Construction Contract or in any contract
with a Major Subcontractor without the prior
written approval of the Consulting Engineers and
the prior written consent of Lender. No change
orders will be permitted pursuant to the General
Construction Contract or any Major Subcontract
without the prior written consent of Lender, the
Consulting Engineers, and if required by Lender or
the terms of any such contract, the Design
Professionals and any governmental authorities
having jurisdiction. Lender agrees to act
reasonably promptly and non-arbitrarily in the
consideration of any such changes. Except when any
Governmental Authority requires Lender's consent
prior to giving its consent to any such change,
Lender shall not be required to consider any
change unless the same has first been approved in
writing by the other Persons whose written
approval is required under this Section.
(d) Borrower will deliver to Lender, on
demand, any contracts, bills of sale, statements,
receipts, vouchers or agreements under which
Borrower claims title to any materials, fixtures
or articles incorporated in the Improvements or
subject to the lien of the Mortgage;
5.2. EXISTENCE, PROPERTIES, ETC Borrower will
(a) do or cause to be done all things necessary to
preserve and keep in full force and effect its
corporate existence; and (b) do or cause to be
done all things necessary to obtain, extend,
preserve, renew, and keep in full force and effect
the rights, licenses, permits, franchises,
patents, copyrights, trademarks, and trade names
material to the conduct of its business; maintain
and operate such business in substantially the
manner in which it is presently conducted and
operated; comply in all material respects with all
Governmental Requirements and with any and all
other applicable laws, rules, regulations, and
governmental orders; and at all times maintain,
preserve, and protect all property material to the
conduct of such business and keep such property in
good repair, working order, and condition and from
time to time make, or cause to be made, all needed
and proper repairs, renewals, additions,
improvements, and replacements thereto necessary
in order that the business carried on in
connection therewith may be properly conducted at
all times; provided, however, nothing herein shall
be construed to require Borrower to participate in
or, if at any time during the Term Borrower elects
to participate in, to continue to participate in,
the Medicare/Medicaid programs or any successors
thereto. Borrower shall not abandon the Property.
5.3. PAYMENT OF INDEBTEDNESS. Borrower will
pay all of its indebtedness and obligations
promptly and in accordance with the terms and
conditions thereof and before the same become in
default or subject to fine or penalty and in all
events before any property of Borrower may become
subject to a lien or security interest as a result
of such nonpayment; provided, however, to the
extent allowed by the Operating Agreement and the
other Loan Documents, Borrower shall be allowed to
contest the validity of any such liabilities and
obligations.
23
5.4. PURSUIT OF PERMITS. Borrower will
undertake all actions necessary or desirable to
obtain the Permits necessary to open and operate
the Project as quicl;ly as possible and in any
event not later than thirty (30) days after
issuance of the final or permanent certificates of
occupancy delivered to Lender pursuant to Section
4.3(a)(iii) hereof, including without limitation a
"Boarding Home" License issued pursuant to Chapter
18.20 of the Revised Code of Washington. Lender
recognizes that certain Permits may not be
obtained prior to Gompletion or substantial
completion of the Project, but Borrower
nevertheless covenants and agrees that it will
undertake and diligently pursue all applications
and other actions possible under applicable
Governmental Requirements (consistent with any
stage of construction and prudent business
practices) to cause all necessary Governmental
Authorities to issue the Permits as soon as
lawfully possible and within the time periods
prescribed by the Loan Documents.
5.5. NOTICE OF DEFAULT. In the event any
officer or agent of Borrower knows of any Event of
Default which shall have occurred or knows of the
occurrence of any event which, upon notice or
lapse of time or both, would constitute an Event
of Default, Borrower shall promptly furnish to
Lender a written statement as to such occurrence,
specifying the nature and extent thereof and the
action (if any) which is proposed to be taken with
respect thereto.
5.6. NOTICE OF LITIGATION. Borrower shall
promptly give Lender notice in writing of all
litigation and of all proceedings before any
governmental or regulatory agencies which, if
adversely determined, would materially affect the
Project, the availability of the Permits necessary
to open and operate the Project as required by
this Agreement and the Operating Agreement, or
Borrower's or Guarantor's financial or operating
condition. Upon Lender's request from time to
time, Borrower shall provide Lender with a current
list of all litigation or other proceedings
pending against Borrower or Guarantor.
5.7. PAYMENT OF COSTS AND EXPENSES. The Loan
shall be made without cost or expense to Lender.
Borrower will pay all costs and expenses
(including attorneys' fees and the fees of the
Consulting Engineers and the fees and expenses of
the Disbursing Agent) incurred by Lender for
preparation of the Loan Documents, perfecting the
security interests of Lender in the Collateral,
and all other reasonable expenses related to the
Loan, whether such expenses are incurred before or
after the date of this Agreement, and regardless
of whether any Advance is made under the Loan
(unless Lender improperly refuses to make an
Advance in accordance with the Loan Documents) and
including all such costs and expenses as may be
incurred by Lender in collecting the Loan. Without
limiting the generality of the foregoing, Borrower
agrees to pay on demand all recordation taxes,
filing or recording fees, mortgage and documentary
taxes, transfer taxes, certificate of title fees,
and all other governmental assessments, taxes,
charges, and fees that may be due upon the filing
or recording of any financing statement, security
agreement, mortgage, document, or like instrument
for purposes of documenting or perfecting Lender's
security interests in any of Borrower's real or
personal property and Lender's security interests
in any real or personal property given by any
Guarantor to secure the Loan. As part of the costs
to be paid by Borrower in accordance with this
Section, Borrower shall pay to Lender a fee of
$1,200 for each inspection visit of the Project
made by Lender (the "Inspection Fee"); provided,
however, that during the Construction Period, so
long as no Event of Default has occurred and is
continuing, Borrower shall not be obligated to pay
such Inspection Fee more than once each calendar
quarter. The Inspection Fee shall be payable in
full upon receipt of Lender's invoice therefor.
24
5.8. ACCESS TO PROJECT. Borrower shall permit
representatives of Lender, including without
limitation the Consulting Engineers, to enter upon
the Land to inspect the Project at all reasonable
times and also to examine all books and records of
the Project, including all detailed plans, shop
drawings, and specifications.
5.9. FURTHER ASSURANCES. Borrower will
execute any and all further documents and take all
further actions which may be required under
applicable law, or which Lender may reasonably
request, to grant, preserve, protect, and perfect
Lender's first priority security interest in the
Collateral.
5.10. APPRAISAL Borrower, at Borrower's sole
cost and expense, shall deliver a current
Appraisal to Lender, within fifteen (15) Business
Days aBer Lender's request, aRer a default by
Borrower or Guarantor under the Loan Documents.
5.11. TITLE INSURANCE. Borrower shall cause
the Title Company to issue the Title Insurance
Policy pursuant to the Title Insurance Commitment
within thirty (30) days of the Closing Date.
5.12. SECURITY INTEREST. To further secure
this Agreement and the Loan made hereunder, and
without limiting the scope, effect, or generality
of any Security Agreement, Borrower hereby grants
to Lender a security interest in the Personal
Property. Borrower agrees to execute such further
documents, financing statements and other
instruments as may be reasonably requested by
Lender in order to perfect the security interests
granted herein. To the extent that possession of
the Personal Property is necessary or advisable to
perfect the security interest, Borrower shall
deliver such Personal Property to Lender upon
Lender's request. Borrower agrees to provide such
evidence as Lender shall request from time to time
as to the perfection and first priority of such
security interests and liens.
5.13. PROCEEDS OF THE LOAN TO BE DRAWN.
Borrower shall cause the requisitions and
certifications referred to herein to be made and
delivered to Lender promptly so as to obtain funds
as they become available for advance under the
terms of this Agreement. Borrower will not borrow
from any other source any amount or use any other
funds which would result in postponing an Advance
or would reduce the amount of an Advance that
otherwise would be made under the terms of this
Agreement. Borrower will provide Lender, from time
to time, with evidence satisfactory to Lender that
Borrower is complying with the conditions of this
Section.
5.14. DECLARATION. Promptly following
Closing, Borrower shall use all reasonable efforts
to negotiate the Declaration with the other
Persons who will be parties thereto. Lender shall
have the right to review and approve the
Declaration and upon receipt of Lender's approval,
the Declaration shall be recorded in the real
property records of Xxxxxx County, Washington, and
become a Permitted Encumbrance. Upon receipt of a
written request from Borrower, Lender shall
consider whether the lien of the Mortgage shall be
subordinated to the Declaration, which decision
shall be based upon such considerations and
subject to such conditions as Lender, in its sole
discretion, deems necessary to protect and
preserve the Collateral, including the value
thereof
ARTICLE VI.
NEGATIVE
COVENANTS
Borrower covenants and agrees that, from the
date hereof and until payment in full of all
amounts owed by Borrower to Lender, unless Lender
shall otherwise consent in writing:
25
6.1. CONSOLIDATIONS, MERGERS AND
ACQUISITIONS. Borrower will not merge or
consolidate with or into any corporation or other
entity or acquire any ongoing business or group of
assets which together constitute an operating
business, or enter into any consolidation,
recapitalization, or reorganization, or invest in
or advance funds to any subsidiary or affiliated
corporation or commence an initial public offering
of the equity interests in Borrower to the public.
6.2. INVESTMENTS, LOANS, AND ADVANCES.
Borrower will not purchase, hold or acquire
baneficially any stock other securities, or
evidences of indebtedness of, or make or permit to
exist any loans or advances to, or make any
investment or acquire any interest whatsoever in,
any other Person.
6.3. SALE OF INTERESTS IN BORROWER. Borrower
will not sell, grant or issue any interest in
Borrower to any Person.
6.4. EQUAL DISTRIBUTIONS. Until the Permanent
Loan Term commences, Borrower shall not make
distributions of any of Borrower's cash or
property to any Person now or hereafter owning an
equity interest in Borrower. Without limiting the
foregoing, Lender hereby acknowledges and agrees
that fees payable to the Manager under the
Management Contract and payment of the Developer's
Fee in accordance with the terms of this Agreement
shall not constitute a distribution in violation
of the terms of this Section 6.4.
6.5. Judgments Borrower will not permit any
judgment entered against it to remain unsatisfied
for a period of more than thirty (30) days after
the judgment has become final and unappealable.
ARTICLE VIl.
ASSIGNMENTS
7.1. ASSIGNMENT OF CONSTRUCTION CONTRACT.
As additional security for the payment of the
Loan, Borrower hereby grants, transfers and
assigns to Lender all of Borrower's rights and
interest, but not its obligations, in, under and
to each Construction Contract upon the following
terms and conditions:
(a) Borrower represents and warrants that the
copy of each Construction Contract the Borrower
has furnished or wiLl furnish to Lender is or wiLI
be (as applicable) a true and complete copy
thereof, including aLI amendments thereto, if any,
and that Borrower's interest therein is not
subject to any claim, setoffor encumbrance.
(b) Neither this assignment nor any action by
Lender shall constitute an assumption by Lender of
any obligations under any Construction Contract,
and Borrower shall continue to be liable for all
obligations of Borrower thereunder, Borrower
hereby agreeing to perform aLI of its obligations
under each Construction Contract. Borrower agrees
to indemnify and hold Lender harmless against and
from any loss, cost, liability or expense
(including but not limited to attorneys' fees)
resulting from any failure of Borrower to so
perform.
(c) Lender shall have the right at any time
(but shall have no obligation) to take in its name
or in the name of Borrower such action as Lender
may at any time determine to be necessary or
advisable to cure any default under any
Construction Contract or to protect the rights of
Borrower or Lender thereunder. Lender shall incur
no liability if any action so taken by it or in
its behalf shall prove to be inadequate or
invalid, and Borrower
26
agrees to indemnify and hold Lender harmless
against and from any loss, cost, liability or
expense (including but not limited to reasonable
attorneys' fees) incurred in connection with any
such action, excepting only liability arising
solely from the gross negligence, willful
misconduct or fraud of Lender or Lender's
officers, directors, employees or duly authorized
agents.
(d) Prior to the occurrence of an Event of
Default and aBcer any Event of Default is cured to
the satisfaction of Lender, Borrower shall have
the right to exercise its rights as owner under
each Construction Contract, provided that Borrower
shaLI not cancel or amend any Construction
Contract or do or suffer to be done any act which
would impair the security constituted by this
assignment without the prior written consent of
Lender. Subject to the limitations of the
preceding sentence, and subject to the approval
and consent rights otherwise provided in the Loan
Documents, unless an Event of Default has occurred
and is continuing, Lender shall not exercise the
rights of Borrower under the Construction
Contract.
(e) Borrower hereby irrevocably constitutes
and appoints Lender as Borrower's
attorney-in-fact, in Borrower's or Lender's name,
to enforce all rights of Borrower under each
Construction Contract, to the extent authorized by
this Agreement. Such appointment is coupled with
an interest and is therefore irrevocable.
(f) This assignment shall inure to the
benefit of Lender and its successors and assigns,
any purchaser upon foreclosure of the Mortgage,
any receiver in possession of the Property and any
corporation affiliated with Lender which assumes
Lender's rights and obligations under this
Agreement.
7.2. ASSIGNMENT OF PLANS.
As additional security for the Loan, Borrower
hereby grants, transfers and assigns to Lender all
of Borrower's right, title and interest in and to
the Plans and hereby represents and warrants to
and agrees with Lender as follows:
(a) Each schedule of the Plans delivered or
to be delivered to Lender is and shatl be a
complete and accurate descHption of the Plans.
(b) The Plans are and shall be complete and
adequate for the construction of the Project and
there have been no mod)fications thereof except as
described in the schedules thereof delivered or to
be delivered to Lender as provided above. The
Plans shall not be mod)fied without the phor
wdtten consent of Lender.
(c) Lender may use the Plans for any purpose
relating to the Project, including but not limited
to inspections of construction and the completion
of the construction of the Project.
(d) Lender's acceptance of this assignment
shall not constitute approval of the Plans by
Lender. Lender has no liability or obligation in
connection with the Plans and no responsibility
for the adequacy thereof or for the construction
of the Project contemplated by the Plans. Lender
has no duty to inspect the construction of the
Project, and if Lender should inspect the
construction, Lender shall have no liability or
obligation to Borrower or any other party arising
out of such inspection. No such inspection nor any
failure by Lender to make objections after any
such inspection shall constitute a representation
by Lender that the construction is in accordance
with the Plans or any other requirement or
constitute a waiver of Lender's right thereaRer to
insist that the construction be completed in
accordance with the Plans or any other
requirement.
27
(e) This assignment shall inure to the
benefit of Lender and its successors and assigns,
any purchaser upon foreclosure of the Mortgage,
any receiver in possession of the Property and any
corporation affiliated with Lender which assumes
Lender's dghts and obligations under this
Agreement.
7.3. ASSIGNMENT OF DESIGN SERVICES CONTRACT.
As additional security for the payment of the
Loan, Borrower hereby grants, transfers and
assigns to Lender all of Borrower's rights and
interest, but not its obligations, in, under and
to each Design Services Contract upon the
following terms and conditions:
(a) Borrower represents and warrants that the
copy of each Design Services Contract the Borrower
has furnished or will furnish to Lender is or will
be (as applicable) a true and complete copy
thereof, including all amendments thereto, if any,
and that Borrower's interest therein is not
subject to any claim, setoffor encumbrance.
(b) Neither this assignment nor any action by
Lender shall constitute an assumption by Lender of
any obligations under any Design Services
Contract, and Borrower shall continue to be liable
for all obligations of Borrower thereunder,
Borrower hereby agreeing to perform all of its
obligations under each Design Services Contract.
Borrower agrees to indemnify and hold Lender
harmless against and from any loss, cost,
liability or expense (including but not limited to
attorneys' fees) resulting from any failure of
Borrower to so perform.
(c) Lender shall have the right at any time
(but shall have no obligation) to take in its name
or in the name of Borrower such action as Lender
may at any time determine to be necessary or
advisable to cure any default under any Design
Services Contract or to protect the rights of
Borrower or Lender thereunder. Lender shall incur
no liability if any action so taken by it or in
its behalf shall prove to be inadequate or
invalid, and Borrower agrees to indemnify and hold
Lender harmless against and from any loss, cost,
liability or expense (including but not limited to
reasonable attorneys' fees) incurred in connection
with any such action, excepting only liability
arising solely from the gross negligence, willful
misconduct or fraud of Lender or Lender's
officers, directors, employees or duly authorized
agents.
(d) Prior to the occurrence of an Event of
Default and after any Event of Default is cured to
the satisfaction of Lender, Borrower shall have
the right to exercise its rights as owner under
each Design Services Contract, provided that
Borrower shall not cancel or amend any Design
Services Contract or do or suffer to be done any
act which would impair the security constituted by
this assignment without the prior written consent
of Lender. Subject to the limitations of the
preceding sentence, and subject to the approval
and consent rights otherwise provided in the Loan
Documents, unless an Event of Default has occurred
and is continuing, Lender shall not exercise the
rights of Borrower under any Design Services
Contract.
(e) Borrower hereby irrevocably constitutes
and appoints Lender as Borrower's
attorney-in-fact, in Borrower's or Lender's name,
to enforce all rights of Borrower under each
Design Services Contract, to the extent authorized
by this Agreement. Such appointment is coupled
with an interest and is therefore irrevocable.
(f) This assignment shall inure to the
benefit of Lender and its successors and assigns,
any purchaser upon foreclosure of the Mortgage,
any receiver in possession of the Property and any
corporation affiliated with Lender which assumes
Lender's rights and obligations under this
Agreement.
7.4. ASSIGNMENT OF DEVELOPMENT AGREEMENT.
As additional security for the payment of the
Loan, Borrower hereby grants, transfers and
assigns to Lender all of Borrower's rights and
interest, but not its obligations, in, under and
to the Development Agreement upon the following
terms and conditions:
(a) Borrower represents and warrants that the
copy of the Development Agreement the Borrower has
furnished or will furnish to Lender is or will be
(as applicable) a true and complete copy thereof,
including all amendments thereto, if any, and that
Borrower's interest therein is not subject to any
claim, setoff or encumbrance.
(b) Neither this assignment nor any action by
Lender shall constitute an assumption by Lender of
any obligations under the Development Agreement,
and Borrower shall continue to be liable for all
obligations of Borrower thereunder, Borrower
hereby agreeing to perform all of its obligations
under the Development Agreement. Borrower agrees
to indemnify and hold Lender harmless against and
from any loss, cost, liability or expense
(including but not limited to attorneys' fees)
resulting from any failure of Borrower to so
perform.
(c) Lender shall have the right at any time
(but shall have no obligation) to take in its name
or in the name of Borrower such action as Lender
may at any time determine to be necessary or
advisable to cure any default under the
Development Agreement or to protect the rights of
Borrower or Lender thereunder. Lender shall incur
no liability if any action so taken by it or in
its behalf shall prove to be inadequate or
invalid, and Borrower agrees to indemnify and hold
Lender harmless against and from any loss, cost,
liability or expense (including but not limited to
reasonable attorneys' fees) incurred in connection
with any such action, excepting only liability
arising solely from the gross negligence, willful
misconduct or fraud of Lender or Lender's
officers, directors, employees or duly authorized
agents.
(d) Prior to the occurrence of an Event of
Default and after any Event of Default is cured to
the satisfaction of Lender, Borrower shall have
the right to exercise its rights as owner under
the Development Agreement, provided that Borrower
shall not cancel or amend the Development
Agreement or do or suffer to be done any act which
would impair the security constituted by this
assignment without the prior written consent of
Lender. Subject to the limitations of the
preceding sentence, and subject to the approval
and consent rights otherwise provided in the Loan
Documents, unless an Event of Default has occurred
and is continuing, Lender shall not exercise the
rights of Borrower under the Development
Agreement.
(e) Borrower hereby irrevocably constitutes
and appoints Lender as Borrower's
attorney-in-fact, in Borrower's or Lender's name,
to enforce all rights of Borrower under the
Development Agreement, to the extent authorized by
this Agreement. Such appointment is coupled with
an interest and is therefore irrevocable.
(f) This assignment shall inure to the
benefit of Lender and its successors and assigns,
any purchaser upon foreclosure of the Mortgage,
any receiver in possession of the Property and any
corporation affiliated with Lender which assumes
Lender's rights and obligations under this
Agreement.
29
ARTICLE VIII.
REPRESENTATIONS AND
WARRANTIES
Borrower makes the following representations
and warranties to Lender on the date hereof and at
the time any Advance is made, and with respect to
each such Advance; provided, hcswever, if at the
time that an Advance is requested Borrower is
unable to make one or more of the following
representations or warranties, then Borrower shall
not be required to make such representation or
warranty if Borrower shall have given Lender
written notice of, and Lender shall have accepted,
Borrower's inability to make such representation
or warranty, which notice shall identify each
representation and warranty that Borrower is
unable to make and shall include an explanation in
reasonable detail as to why Borrower is unable to
make such representation or warranty. If Borrower
is unable to make one or more of the
representations or warranties contained in this
Article with respect to any requested Advance and
such inability is not accepted by Lender as
provided in the preceding sentence, such inability
shall constitute a failure to satisfy the
condition precedent set forth in Section 4.4 with
respect to such requested Advance.
8.1. ORGANIZATION, POWER, ETC. Borrower (a)
is a corporation, duly formed, validly existing
and in good standing under the laws of the State
of Washington, (b) has the corporate power and
authority to own its properties and assets and to
carry on its business as now conducted, (c) has
the corporate power to execute, deliver and
perform its obligations under each of the Loan
Documents and each agreement or instrument
contemplated thereby to which it is or will be a
party, and (d) is qualified to do business in
every jurisdiction where such qualification is
necessary except where the failure so to qualify
would not have a materially adverse effect on its
business, properties, operations, prospects or
condition, financial or otherwise, or would impair
its ability to perform its obligations under or in
connection with the Loan Documents.
8.2. AUTHORIZATION OF BORROWING, ETC The
borrowings hereunder and the execution, delivery
and performance of each of the Loan Documents have
been duly authorized by all requisite action on
the part of Borrower and will not (a) contravene
any provision of law, any order of any court or
other agency of government, which contravention
could reasonably be expected to have a material
adverse effect upon the prospects, profits, or
financial or operating condition of Borrower or
Borrower's ability to perform its obligations
under the Loan Documents, or (b) contravene the
articles of incorporation, bylaws, or other
charter documents governing Borrower or any
indenture, agreement, or other instrument binding
upon Borrower, which contravention could
reasonably be expected to have a material adverse
effect upon the prospects, profits, or financial
or operating condition of Borrower or Borrower's
ability to perform its obligations under the Loan
Documents, or (c) be in conflict with, result in
the breach of or constitute (with due notice or
lapse of time or both) a default under any such
indenture, agreement, document or other instrument
binding upon Borrower, which default or breach
could reasonably be expected to have a material
adverse effect upon the prospects, profits, or
financial or operating condition of Borrower or
Borrower's ability to perform its obligations
under the Loan Documents, or (d) result in the
creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of
the property or assets of Borrower, except
pursuant to the Loan Documents.
8.3. GOVERNMENTAL APPROVAL Except as provided
in the Operating Agreement with respect to the
Permits necessary to construct, open and operate
the Project as an assisted living facility, no
action or consent of, or registration or filing
with, any Governmental Authority is required under
existing law in connection with the execution,
delivery, and performance by Borrower of this
Agreement, the borrowings hereunder or the
execution and delivery by Borrower of any of the
Loan Documents, or, if any such action, consent,
filing, or registration is required, Borrower has
given Lender
30
written notice thereof, including notice that (a)
the required action has been taken, (b) the
required consent has been obtained, and/or (c) the
required filing or registration has been made.
8.4. PLANS APPROVED. The Plans have been
approved by all Governmental Authorities having
jurisdiction, and all necessary building and all
other construction related Permits and all other
governmental and private authorizations and
approvals with respect to the Plans and
construction of the Improvements have been
obtained.
8.5. LITIGATION.
(a) On the date of this Agreement, there are
no actions, suits, or proceedings at law or in
equity or by or before any Governmental Authority
pending against Borrower or Emeritus or affecting
the Project or the Property other than as
disclosed on Schedule II hereto, and, to
Borrower's knowledge, there are no actions, suits,
or proceedings threatened against or affecting
Borrower or Emeritus or any property or rights of
Borrower or Emeritus, including the Project or the
Property.
(b) There are no pending actions, suits, or
proceedings at law or in equity or by or before
any Governmental Authority which if adversely
determined would have a material adverse effect
upon the prospects, profits, or financial or
operating condition of Borrower or Emeritus.
(c) Neither Borrower nor Emeritus is in
default with respect to any judgment, order, writ,
injunction, decree, demand, rule, or regulations
of any court, arbitrator, grand jury, or of any
Governmental Authority.
8.6. AGREEMENTS Neither Borrower nor Emeritus
is a party to, or bound by, any contract or
instrument, or subject to any charter or other
corporate restriction, materially and adversely
affecting the business, property, assets,
operations or condition, financial or otherwise,
of Borrower or Emeritus.
8.7. TAXES. Borrower and Emeritus have filed
and will continue to file all United States income
tax returns and all state income tax returns that
are required to be filed, and have paid, or made
adequate provisions for the payment of, all taxes
that have or may become due pursuant to said
returns or pursuant to any assessment received by
Borrower or Emeritus, except such taxes, if any,
as are being contested in good faith and as to
which adequate reserves have been provided.
8.8. COMPLIANCE WITH LAW. To the best of
Borrower's knowledge, after due investigation and
inquiry, Borrower and Emeritus are in compliance,
in all material respects, with all applicable
statutes, rules, regulations, orders, and
restrictions of any Governmental Authority having
jurisdiction over the conduct of their businesses
or the ownership of their properties. The
construction to be performed on the Land in
accordance with the Plans and upon obtaining the
required Permits described in the Operating
Agreement, the use and continued use of the
Project as an Assisted Living Facility, will not
violate any environmental, ecological,
subdivision, zoning, use, or other Governmental
Requirement or any agreement applicable to the
Land, the Property or the Project.
8.9. ERISA. Based upon ERISA and published
interpretations thereunder, Borrower, Emeritus,
their affiliates and any employee plan or pension
plan of Borrower or Emeritus are in compliance in
all material respects with ERISA.
31
8.10. FINANCIAL STATEMENTS. Each financial
statement of Borrower and Emeritus delivered to
Lender heretofore, concurrently herewith, or
hereafter, was and will be prepared in conformity
with GAAP, or other good accounting principles
approved by Lender in writing, applied on a basis
consistent with that of previous statements and
completely and accurately discloses the financial
condition of Borrower and Emeritus (including all
contingent liabilities) as of the date thereof and
for the period covered thereby, and there has been
no material adverse change in either Borrower's or
Emeritus' financial condition subsequent to the
date of the most recent financial statement of
Borrower and Emeritus delivered to Lender.
8.11. FISCAL YEARS. Borrower's fiscal year
begins on January 1 and ends on December 31. The
fiscal year of Emeritus begins on January 1 and
ends on December 31.
8.12. PLACE OF BUSINESS On the date of this
Agreement, the address of Borrower's chief
executive offlce and chief place of business is
0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000, which is the mailing address for Borrower.
8.13. BROKERAGE COMMISSION. Borrower has not
made any agreement or taken any action that may
cause anyone to become entitled to a commission or
finder's fee directly attributable to the making
of the Loan or the acquisition of the Property,
except as disclosed in the Loan Application and
the Acquisition Contract.
ARTICLE IX.
EVENTS OF DEFAULT AND CERTAIN
REMEDIES
9.1. DEFAULT. The occurrence of any of the
following shall be deemed an Event of
(a) A failure to pay any sum due and payable
under the terms of the Note, the Mortgage, this
Agreement or any of the other Loan Documents as
and when the same becomes due and payable and the
continuation of such failure a period of ten (10)
days after such payment is due; provided that in
the case of any payment of Additional Interest due
and payable under the terms of the Note, the grace
period afforded Borrower shall be limited to five
(5) days; and provided, further, that in the case
of payments due on the Maturity Date of the Note,
no grace period shall apply; or
(b) A failure to perform any term, condition
or covenant of the Note, the Mortgage, this
Agreement or any of the other Loan Documents
(other than a failure to pay any sum due and
payable thereunder) as and when required by the
terms of such Loan Documents, and unless otherwise
provided in this Agreement or the other Loan
Documents, the continuation of such failure for a
period of thirty (30) days following wriKen notice
of such failure from Lender to Borrower, or
(c) Any representation, warranty, or
statement made by Borrower or Emeritus in, under,
or pursuant to the Loan Documents is determined by
Lender to be false or misleading in any material
respect as of the date hereof or thereof or shall
become so at any time prior to the repayment in
full of the Loan; or
(d) Any representation, warranty, or
statement made by the Architect or any other
Design Professional, the General Contractor or any
subcontractor or any other Person engaged by or on
behalf of Borrower or Emeritus in connection with
the development, construction or operation of the
Project, in, under or pursuant to the Loan
Documents is determined by Lender to be false or
misleading in any material respect as of the date
hereof or thereof or shall become so at any time
prior to the repayment in full of the Loan; or
32
(e) Failure of the Title Company to deliver
the Title Insurance Policy as required herein
within thirty (30) days of the Closing Date and
the continuation of such failure for a period of
five (5) Business Days following wriKen notice of
such failure from Lender to Borrower; or
(f) Failure to complete construction of the
Improvements in accordance with the Plans and all
applicable Governmental Requirements on or before
the expiration of the Construction Period, as
evidenced by the issuance of a certificate of
substantial completion by the Architect and
Consulting Engineers and a "punch list" of
outstanding items approved by Borrower and the
Consulting Engineers as being the only items
remaining to be completed under the General
Construction Contract; or
(g) If the Project is so materially injured
or destroyed by fire or other casualty that the
Consulting Engineers are unable to certify to
Lender or Lender, in its sole discretion, is
otherwise unable to confine, that the construction
of the Project in accordance with the Plans and
all Governmental Requirements and any additional
construction or repair necessary as a result of
the fire or other casualty will be completed prior
to the Completion Date (as such Completion Date
may be extended in accordance with the provisions
of Section 5.1 hereof as a result of Force Majeure
Events); or
(h) If Borrower fails to satisfy the
conditions to any Advance within thirty (30) days
following the submission of a Requisition for
Advance requesting such Advance; or
(i) Any change in the stock ownership of
Borrower; or
(j) If Borrower or its directors or
stockholders shall institute any proceedings for
the dissolution or liquidation of Borrower or fail
to protect and preserve Borrower's independent
corporate franchise or pay taxes imposed in
connection therewith or comply with any and all
additional requirements under Governmental
Requirements necessary thereto; or
(k) Any court of competent jurisdiction shall
sign an order (i) adjudicating Borrower or any
Guarantor bankrupt, (ii) appointing a trustee or
receiver of the Property or any substantial or
material portion thereof, or (iii) approving a
petition for, or effecting, an arrangement in
bankruptcy, or any other judicial mod)fication or
alteration of the rights of Lender or of other
creditors of Borrower or any Guarantor, or if
Borrower or any Guarantor shaD (A) file any
petition in bankruptcy or become the subject of
any involuntary petition filed in bankruptcy or
(B) consent to any other action seeking any such
judicial order; or if Borrower or any Guarantor
shaD make an assignment for the benefit of
creditors or shad admit in writing its inability
to pay its or their debts generally as they become
due; it being agreed that for purposes of this
provision, the term Borrower shaR be deemed to
include aD Persons included in the Borrowing Group
if the rights of Lender under the Loan Documents
or the enforcement of any remedies of Lender under
the Loan Documents are chaRenged, stayed or
affected in or as a result of any proceedings
involving any such member of the Borrowing Group;
or
(l) If the Tangible Net Worth of Emeritus as
set forth in the financial statements required to
be delivered to Lender with respect to Emeritus
pursuant to the Operating Agreement is less than
$25,000,000 or if Borrower or Emeritus fails to
deliver such financial statements (without
intending to waive any Event of Default which
might otherwise result from such failure), if
Lender otherwise determines that the Tangible Net
Worth of Emeritus is less than $25,000,000; or
33
(m) The occurrence of an event of default
(regardRess of how such default may be defined or
described) under any of the other Loan Documents
and the expiration of any cure period expressly
provided with respect thereto.
9.2. Remedies Upon the occurrence of an Event
of Default, Lender may exercise any one or more of
the following rights or remedies or any other
rights or remedies available to Lender at law or
in equity upon the occurrence of an Event of
Default hereunder:
(a) Lender shall have no further obligation
to make any additional Advances to Borrower, and
Lender may declare the Note to be immediately due
and payable, whereupon the Note shall become
immediately due and payable, both as to principal
and interest, without presentment, protest, notice
of acceleration, notice of intent to accelerate or
other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in
the Note to the contrary notwithstanding.
(b) Lender may (but shall not be obliged to)
apply any part of the undisbursed proceeds of the
Loan to the payment of all costs and expenses that
may be incurred by Lender under any Loan Document
as a result of an Event of Default and to the
payment of interest on the Note.
(c) Lender may, at its election, proceed to
finish construction of the Project, and for that
purpose may employ such contractors, agents, and
employees as it deems appropriate and may advance
any proceeds of the Loan remaining unadvanced, as
well as any previously made Borrower's Deposit and
any balance in the Mandatory Sweep Account, which
proceeds and other sums, together with any
additional sums required to protect and preserve
the Project and Lender's interest therein, shall
be secured by the Mortgage.
(d) Borrower hereby irrevocably constitutes
and appoints Lender Borrower's attorney-in-fact
(which appointment shall be deemed coupled with an
interest) for and in its name or the name of
Borrower to perform all the obligations of
Borrower under the terms of this Agreement, and to
exercise all the rights and powers of Borrower
under the General Construction Contract, the
contracts with the Design Professionals, and such
other contracts and agreements as Borrower has
executed or should have executed or intends to
execute in connection with completion of
construction of the Project, and payment of all
costs relating thereto. Borrower hereby grants and
gives to Lender full power and authority to do and
perform all and every act and thing whatsoever
authorized, permitted, requisite, or necessary to
be done by Borrower to complete construction of
the Project in accordance with the Plans and all
Governmental Requirements and to pay all costs in
connection therewith, to all intents and purposes
the same as Borrower migh't do, hereby ratifying
and confirming all the said attorney shall
lawfully do or choose to do or be done by virtue
hereof, it being understood and agreed that the
aforesaid provisions impose no duty or obligation
on Lender to do or perform any act whatsoever. Any
such action by Lender shall not relieve Borrower
of its responsibility to furnish any additional
funds needed to complete construction of the
Project in accordance with the Plans and all
Governmental Requirements. Upon demand by Lender,
any or all agreements or contracts with the
General Contractor, subcontractors, and suppliers
shall be assigned to Lender by Borrower and/or the
General Contractor, subcontractors, and suppliers.
After an Event of Default, Lender may, at its sole
discretion, continue to make Advances and all sums
so advanced shall be deemed Advances under this
Agreement and not modifications thereof.
34
9.3. REMEDIES CUMULATIVE. The rights and
remedies of Lender upon the occurrence of an Event
of Default set forth herein are in addition to the
rights and remedies contained elsewhere in the
Loan Documents, and available at law and in
equity. No failure by Lender to exercise and no
delay in exercising any right, power, or privilege
under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise
of any right, power, or privilege hereunder
preclude any other further exercise thereof or the
exercise of any other right, power, or privilege.
Each waiver shall be strictly construed and shall
apply only to the next succeeding disbursement.
ARTICLE
X.
LENDER'S DISCLAIMERS - BORROWER'S INDEMNITIES
10.1. NO OBLIGATION BY LENDER TO CONSTRUCT.
Lender has no liability or obligation whatsoever
or howsoever in connection with the Property or
the development, construction, or completion
thereof or work performed thereon, and has no
obligation except to disburse the Loan proceeds as
herein agreed. Lender is not obligated to inspect
the Project nor is Lender liable, and under no
circumstances whatsoever shall Lender be or become
liable, for the performance or default of any
contractor or subcontractor, or for any failure to
construct, complete, protect or insure the
Property, or any part thereof, or for the payment
of any cost or expense incurred in connection
therewith, or for the performance or
nonperformance of any obligation of Borrower or
Guarantor to Lender or to any other person, firm
or entity without limitation. Nothing, including
without limitation any disbursement of Loan
proceeds or the Borrower's Deposit or funds from
the Mandatory Sweep Account nor acceptance of any
document or instrument, shall be construed as such
a representation or warranty, express or implied,
on Lender's part.
10.2. NO OBLIGATION BY LENDER TO OPERATE. Any
term or condition of any of the Loan Documents to
the contrary notwithstanding, Lender shall not
have, and by its execution and acceptance of this
Agreement hereby expressly disclaims, any
obligation or responsibility for the management,
conduct or operation of the business and affairs
of Borrower or Guarantor. Moreover, Lender's
approval of the Plans is solely for the benefit of
Lender and shall not be deemed a representation,
warranty or guaranty as to the completeness,
correctness or adequacy (legal, technical or
otherwise) of the Plans or the work of any person
who prepared the Plans, and Lender's approval of
the Plans shall not be relied upon by Borrower,
Guarantor or any other person for any purpose. Any
term or condition of the Loan Documents which
permits Lender to disburse funds, whether from the
proceeds of the Loan, the Borrower's Deposit, the
Mandatory Sweep Account or otherwise, or to take
or refrain from taking any action with respect to
Borrower, Guarantor, the Property or any other
Collateral, shall be deemed to be solely to permit
Lender to audit and review the management,
operation and conduct of the business and affairs
of Borrower and Guarantor, and to maintain and
preserve the security given by Borrower to Lender
for the Loan, and may not be relied upon by any
other person. Further, Lender shall not have, has
not assumed and by its execution and acceptance of
this Agreement hereby expressly disclaims any
liability or responsibility for the payment or
performance of any indebtedness or obligation of
Borrower or Guarantor and no term or condition of
the Loan Documents shall be construed otherwise.
Borrower hereby expressly acknowledges that no
term or condition of the Loan Documents shall be
construed so as to deem the relationship between
Borrower, Guarantor and Lender to be other than
that of borrower, guarantor and lender, and
Borrower shall at all times represent that the
relationship between Borrower, Guarantor and
Lender is solely that of borrower, guarantor and
lender. Borrower hereby indemnifies and agrees to
hold Lender harmless from and against any cost,
expense or liability incurred or suffered by
Lender as a result of any assertion or claim of
any obligation or responsibility of Lender for the
management, operation and
35
conduct of the business and affairs of Borrower or
Guarantor, or as a result of any assertion or
claim of any liability or responsibility of Lender
for the payment or performance of any indebtedness
or obligation of Borrower or Guarantor.
10.3. INDEMNTY BY BORROWER BORROWER HEREBY
INDEMNIFES LENDER, ANY SUBSEQUENT HOLDER OF THE
NOTE AND OCWEN FINANCL9L CORPORATION AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AND
AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS
AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS,
DAMAGES, COSTS, AND EXPENSES TO WHICH ANY OF THEM
MAY BECOME SUBJECT, INSOFAR AS SUCH LOSSES,
LIABILITES, CLAIMS, DAMAGES, COSTS, AND EXPENSES
ARISE FROM OR RELATE TO ANY OF THE LOAN DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR
FROM ANY INVESTIGATION, LITIGATION, OR OTHER
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
THREATENED INVESTIGATION, LITIGATION, OR OTHER
PROCEEDING RELATING TO ANY OF THE FOREGOING
(WHETHER OR NOT THE NEGLIGENCE OF TEE INDEMNIFED
PARTY WAS TlE SOLE OR A CONTRlBUTlNG CAUSE THEREOF
TO THE EXTENT PERMITTED BY APPLICABLE LAW;
PROVIDED, HOWEVER, NOTWITHSTANDING ANY PROVISION
OF THE LOAN DOCUMENTS TO THE CONTRARY, 1N NO EVENT
SHALL BORROWER'S DEFENSE AND INDEMNIFICATION
OBLIGATIONS UNDER THE LOAN DOCUMENTS EXTEND TO ANY
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR FRAUD OF
LENDER, OR LENDER'S OFFICERS, DIRECTORS, EMPLOYEES
OR DULY AUTHORIZED AGENTS). WITHOUT INTENDING TO
LIMIT THE REMEDIES AVAILABLE TO LENDER WITH
RESPECT TO THE ENFORCEMENT OF ITS INDEMNIFICATION
RIGHTS AS STATED HEREIN OR AS STATED IN ANY LOAN
DOCUMENT, IN THE EVENT ANY CLAD!vI OR DEMAND IS
MADE OR ANY OTHER FACT COMES TO THE ATTENTION OF
LENDER IN CONNECTION WITH, RELATING OR PERTAINING
TO, OR ARISING OUT OF THE TRANSACTIONS
CONTEMPLATED BY 'l'HlS AGREEMENT, WHICH LENDER
REASONABLY BELIEVES MIGHT INVOLVE OR LEAD TO SOME
LIABILITY OF LENDER, BORROWER SHALL, IMMEDIATELY
UPON RECEIPT OF WRITTEN NOTIFICATION FROM LENDER
OF ANY SUCH CLAIM OR DEMAND OR UPON OBTAINING
ACTUAL NOTICE THEREOF, WHICHEVER OCCURS FIRST,
ASSUME 1N FULL THE PERSONAL RESPONSIBILITY FOR AND
THE DEFENSE OF ANY SUCH CLAIM OR DEMAND AND PAY 1N
CONNECTION THEREWITH ANY LOSS, DAMAGE, DEFICIENCY,
LIABILITY OR OBLIGATION, INCLUDING, WITHOUT
LIMITATION, LEGAL FEES AMD COURT COSTS INCURRED IN
CONNECTION THEREWITH. IN THE EVENT OF COURT ACTION
1N CONNECTION WITH ANY SUCH CLAIM OR DEMAND,
BORROWER SHALL ASSUME 1N FULL THE RESPONSIBILITY
FOR THE DEFENSE OF ANY SUCH ACTION AMD SHALL
IMMEDIATELY SATISFY AND DISCHARGE ANY FINAL AND
NONAPPEALABLE DECREE OR JUDGMENT RENDERED THEREIN.
LENDER MAY, IN ITS SOLE DISCRETION, MAKE ANY
PAYMENTS SUSTAINED OR INCURRED BY REASON OF ANY OF
THE FOREGOING; AND BORROWER SHALL IMMEDIATELY
REPAY TO LENDER, IN CASH AND NOT WITH PROCEEDS OF
THE LOAN, OR AMOUNT OF SUCH PAYMENT, WITH INTEREST
THEREON AT THE MAXIMUM RATE OF INTEREST PERMITTED
BY APPLICABLE LAW FROM THE DATE OF SUCH PAYMENT.
LENDER SHALL HAVE THE RIGHT TO JOIN BORROWER AS A
PARTY DEFENDANT IN ANY LEGAL ACTION BROUGHT
AGAINST LENDER, AND BORROWER HEREBY CONSENTS TO
THE ENTRY OF AN ORDER MAKING BORROWER A PARTY
DEFENDANT TO ANY SUCH ACTION.
36
10.4. NO AGENCY. Nothing herein shall be
construed as making or constituting Lender as the
agent of Borrower in making payments pursuant to
any Construction Contracts or subcontracts entered
into by Borrower for construction of the
Improvements or otherwise. The purpose of all
requirements of Lender hereunder is solely to
allow Lender to check and require documentation
(including, but not limited to, lien waivers)
sufficient to protect Lender and the Loan
contemplated hereby. Borrower shall have no right
to rely on any procedures required by Lender,
Borrower hereby acknowledging that Borrower has
sole responsibility for constructing the Project
in accordance with the Plans and Governmental
Requirements and paying for work done in
accordance therewith and that Borrower has solely,
on Borrower's own behalf, selected or approved
each contractor, each subcontractor and each
materialman, Lender having no responsibility for
any such persons or entities or for the quality of
their materials or workmanship.
10.5. RELATIONSHIP OF PARTIES. THE
RELATIONSHIP BETWEEN BORROWER AND LENDER IS, AND
AT ALL TIMES SHALL REMAIN, SOLELY THAT OF DEBTOR
AND CREDITOR, AND SHALL NOT BE, OR BE CONSTRUED TO
BE, A JOINT VENTU1lE, EQUITY VENTVRE, PARTNERSHIP
OR OTHER RELATIONSHIP OF ANY NATURE.
10.6. LIABILITY OF LENDER. Lender shall not
be liable hereunder for any act or omission by it,
in the absence of fraud, willful misconduct or
gross negligence. Lender shall incur no liability
to Borrower by acting upon any certificate or
other paper believed by it to be genuine and
purporting to be assigned by the proper party or
with respect to anything which Lender may do or
refrain from doing unless it amounts to fraud,
willful misconduct or gross negligence. Lender may
consult with counsel selected by it, and any
action taken or suffered in good faith by it in
accordance with the opinion of such counsel shall
be full justification and protection to it.
ARTICLE XI.
MISCELLANEOUS
11.1. AMENDMENT; WAIVER. No amendment or
waiver of any provision of this Agreement or the
other Loan Documents and no consent to any
departure by Borrower therefrom shall in any event
be effective unless the same shall be in writing
and signed by Lender. Any such waiver, consent, or
approval shall be effective only in the specific
instance and for the purpose for which given. No
notice to or demand on Borrower in any case shall
entitle Borrower to any other or further notice or
demand in the same, similar, or other
circumstances. Each holder of the Note shall be
bound by any modification, waiver, or consent
authorized by this Section whether or not the Note
shall have been marked to indicate such
modification, waiver, or consent. No waiver by
Lender of any breach or default of or by Borrower
under this Agreement shall be deemed a waiver of
any other previous breach or default or any
thereafter occurring. In no event shall the delay
of enforcement of any rights or remedies available
to Lender, or any other indulgence, be construed
as a waiver of rights or remedies unless the same
shall be agreed to in writing by Lender.
11.2. SEVERABILITY. In the event any
provision of this Agreement is declared or
adjudged to be unenforceable or unlawful by any
Governmental Authority, then such unenforceable or
unlawful provision shall be excised herefrom, and
the remainder of this Agreement, together with all
rights and remedies granted thereby, shall
continue and remain in full force and effect.
37
11.3. ESTOPPEL CERTIFICATES. Borrower, within
ten Business Days (10) days aRer written request
by mail, will furnish an estoppel certificate or
written statement, duly acknowledged, stating (a)
the amounts advanced to it under this Agreement,
(b) the amounts due under the Note, (c) the
indebtedness secured by the Mortgage, (d) whether
any offsets or defenses exist thereunder or
against the said indebtedness secured by the
Mortgage, and (e) such other xxxxxx as may be
reasonably requested by Lender.
11.4. ADVERTISING BY LENDER. Borrower agrees
that during the Loan term, Lender may erect and
maintain on the Property one or more advertising
signs indicating that the construction financing
for the Project has been provided by Lender and
may, from time to time during or after the term of
the Loan, place in one or more newspapers or other
publications advertisements, announcements and
other similar notices indicating that financing
for the Project has been provided by Lender.
11.5. PARTICIPATIONS. Lender shall have the
right at any time to sell, assign, transfer,
negotiate or grant participations in all or any
part of the Loan or the Note. Borrower hereby
acknowledges and agrees that any such disposition
will give rise to a direct obligation of Borrower
to each such participant. Notwithstanding the
sale, assignment, negotiation or grant of
participations in the Loan or the Note, (a)
Borrower shall be entitled to rely conclusively on
any consent, approval or notice given by Lender to
Borrower pursuant to this Agreement and the other
Loan Documents and (b) Borrower shall have no
obligation to request any consent or approval
from, give any notice to or respond to any notice
given by, any purchaser or assignee of, or
participant in, all or any part of the Loan or the
Note.
11.6. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF WASHINGTON (EXCLUDING
CONFLICTS OF LAWS) AND THE UNITED STATES OF
AMERICA. XXXXXX COUNTY, WASHINGTON, SHALL BE A
PROPER PLACE OF V1INUE FOR ALL SUITS TO ENFORCE
THIS AGREEMENT. BORROWER AND LENDER EACH HEREBY
IRREVOCABLY AGREE THAT ANY LEGAL PROCEEDING
ARISING OUT OF OR 1N CONNECTION WITH THIS
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS
SHALL BE BROUGHT 1N THE SUPERIOR COURTS OF XXXXXX
COUNTY, WASHINGTON, OR THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT OF WASHINGTON.
BORROWER HEREBY SUBMITS TO THE JURISDICTION OF
SUCH COURTS AND ACKNOWLEDGES AND AGREES THAT
BORROWER'S AGREEMENT TO SUBMIT TO SUCH
JURISDICTION IS A MATERIAL INDUCEMENT TO LENDER TO
MAKE THE LOAN.
11.7. HEADINGS. The captions used for the
Articles and Sections in this Agreement are
inserted only as a matter of convenience and for
reference and in no way define, limit or describe
the scope or intent of this Agreement or any
Article or Section hereof.
11.8. NOTICES. No notice or other
communication shall be deemed given unless sent in
the manner, and to the persons, specified in this
Section at the addresses or telecopy numbers (or
at such other address or telecopy number for a
party as will be specified by lilce notice) set
forth in this Section 11.8. All notices and other
communications hereunder shall be in writing and
shall be deemed given (a) upon receipt if
delivered personally or if deposited with the
United States Postal Service as registered or
certified mail, return receipt requested, (b) at
noon on the first Business Day after dispatch if
sent by reputable overnight courier capable of
providing evidence of delivery,
38
or (c) upon the completion of transmission (which
is confirmed telephonically by the receiving
party) if transmitted by telecopy or other means
of facsimile which provides immediate or near
immediate transmission to compatible equipment in
the possession of the recipient:
If to Borrower: Emeritus Properties III,
Inc.
c/o Emeritus Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Telecopy or Facsimile Number: (206)
301-4500
Confirmation Number: (000) 000-0000
With a copy to: The Xxxxxxxxx Group
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: RandiNathanson,Esq.
Telecopy or Facsimile Number:
(000)000-0000
Confirmation Number: (000) 000-0000
If to Lender: Ocwen Federal Bank FSB
0000 Xxxx Xxxxx Xxxxx Xxxxxxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attention: Secretary
Telecopy or Facsimile Number: (561)
681-8177
Confirmation Number: (000) 000-0000
Notwithstanding the foregoing, any notice in fact
received shall be effective as of the time of
receipt.
11.9. SURVIVAL OF AGREEMENT. All covenants,
agreements, representations and
warranties made herein and in the certificates
delivered pursuant hereto shall survive the making
by Lender of the Loan and the execution and
delivery to Lender of the Note and shall continue
in full force and effect so long as the Note or
any amount due hereunder is outstanding and
unpaid.
11.10. MUTUAL WAIVER OF JURY TRIAL. LENDER
AND BORROWER EACH WAIVE ALL RIGHTS TO TRIAL BY
JURY OF ANY AND ALL CLAIMS, COUNTER CLAMIS, AND
DEFENSES AMONG AND BETWEEN ANY OF THEM ARISING
UNDER THIS AGREEMENT, THE NOTE, THE OTHER LOAN
DOCUMENTS, OR ANY OTHER AGREEMENT OR AGREEMENTS
BETWEEN OR AMONG ANY OF THEM AT ANY TIME RELATING
TO THE LOAN, INCLUDING ANY SUCH AGREEMENTS,
WHETHER WRITTEN OR ORAL, MADE OR ALLEGED TO HAVE
BEEN MADE AT ANY TIME PRIOR TO THE DATE HEREOF,
AND ALL AGREEMENTS MADE HEREAFTER OR
OTHERWISE. IN MAKING THIS WAIVER LENDER AND
BORROWER
ACKNOWLEDGE AND AGREE THAT ANY AND ALL SUCH CLASS,
COUNTERCLAIMS, AND DEFENSES SHALL BE HEARD BY A
JUDGE OF A COURT OF COMPETENT JURISDICTION,
WITHOUT A JURY. LENDER AND BORROWER ACKNOWLEDGE
AND AGREE THAT THIS WAIVER OF TRIAL BY JURY IS A
MATERIAL ELEMENT OF THE CONSIDERATION FOR THIS
AGREEMENT. LENDER AND BORROWER ACKNOWLEDGE THAT
THIS IS A WAIVER OF A LEGAL RIGHT AND THAT THIS
WAIVER IS MADE KNOWINGLY AND VOLUNTARILY AFTER
CONSULTATION WITH, OR THE OPPORTUNITY TO CONSULT
WITH, COUNSEL OF ITS CHOICE.
39
11.11. CONTROLLING DOCUMENT. In the event of
a conflict between the terms and conditions of
this Agreement and the terms and conditions of any
other Loan Document (other than the Note), the
terms and conditions of this Agreement shall
control. In the event of a conflict between the
terms and conditions of this Agreement and the
terms and conditions of the Note, the terms and
conditions of the Note shall control.
11.12. SUCCESSORS; NO ASSIGNMENT. This
Agreement shall be binding upon and inure to the
benefit of Borrower, its successors, and those
assigns consented to in writing by Lender, and
upon Lender, its successors and assigns. Any
assignment attempted by Borrower without the
written consent of Lender shall be void. Wherever
the word "Lender" is used herein it shall be
deemed to include also the successors and assigns
of Lender, and the word "Borrower" shall include
the successors of Borrower and shall include those
assignees of Borrower consented to in writing by
Lender. No consent by Lender of an assignment by
Borrower shall release Borrower as a party
primarily obligated and liable under the terms of
this Agreement unless Borrower shall be released
specifically by Lender in writing. No consent by
Lender to an assignment shall be deemed to be a
waiver of the requirement of consent by Lender of
each and every further assignment, as a condition
precedent to the effectiveness of such assignment.
11.13. TIME. Time is of the essence of this
Agreement and each and every term, covenant, and
condition herein.
11.14. COUNTERPARTS. This Agreement may be
executed in multiple counterparts, each of which
shall be deemed an original, and all of which when
taken together shall be construed as a single
instrument.
11.15. FINAL AGREEMENT OF THE PARTIES. THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED (OR CANCELED) BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTES.
11.16. NO ORAL AGREEMENTS. ORAL AGREEMENTS OR
ORAL COMMITMENTS TO LOAN MONEY. EXTEND CREDIT, OR
TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE
NOT ENFORCEABLE UNDER WASHINGTON LAW.
40
WITNESS WHEREOF, and intending to be legally
bound hereby, Borrower and Lender execute this
Agreement under seal the day and year first above
wntten.
BORROWER:
EMERITUS PROPERTIES III, INC.,
a Washington corporation
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Secretary
LENDER:
OCWEN FEDERAL BANK FSB
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: Vice President
41
