LOAN AGREEMENT
THIS LOAN AGREEMENT is dated as of December
31, 1996, by and between EMERITUS
CORPORATION, a Washington corporation
("Borrower"), and BANK UNITED, a federal
savings bank ("Lender").
Borrower has requested Lender to make two
certain loans to Borrower in an aggregate
principal amount of up to TWELVE MILLION TWO
HUNDRED SEVENTY-FIVE THOUSAND DOLLARS AND
NO/100 ($12,275,000.00). Lender is willing
to make such loans to Borrower upon the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the
premises and the mutual covenants herein
contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. As used in
this Agreement, the following terms have the
following meanings:
"ABSOLUTE ASSIGNMENTS" means the two
Absolute Assignments of Leases and Rents
covering the Arizona Projects and the Florida
Project respectively executed by Borrower in
favor of Lender of even date herewith, as the
same may be amended, supplemented or modified
from time to time.
"ADVANCE" means the advance of funds by
Lender to Borrower pursuant to Article II.
"ADVANCE DATE" means February 1, 1997
and each August 1 and February 1 thereafter
until the Maturity Date.
"AFFIDAVIT OF OWNER" means the Affidavit
of Owner covering the Florida Project
executed by the Borrower in favor of the
Lender of even date herewith.
"AFFILIATE" means any Person directly or
indirectly controlling, controlled by, or
under common control with Borrower. For
purposes of this definition, "control"
(including "controlled by" and "under common
control with") means (i) ownership of twenty-
five percent (25%) or more of the voting
rights of any class of shares of an entity or
(ii) the possession, directly or indirectly,
of the power to direct or cause the direction
of the management and policies of such
Person, whether through the ownership or
voting securities or otherwise. Without
limiting the generality of the foregoing, for
purposes of this Agreement, Borrower and each
of its subsidiaries shall be deemed an
Affiliate of one another.
1
"AHCA" means the Florida Agency for
Health Care Administration.
"AHCA LICENSES" means all now or
hereafter issued licenses from the Florida
Agency for Health Care Administration or
other governmental entities or political
subdivisions issued to Borrower for the
operation of the Florida Project as an
assisted and/or congregate care living
facility and any food services licenses
related thereto issued to Borrower in
connection with the Florida Project.
"ANTI-COERCION STATEMENT" means the Anti-
Coercion Statement executed by Borrower in
favor of Lender of even date herewith
executed in connection with the Florida
Project.
"ARIZONA ECONOMIC HOLDBACK" shall have
the meaning designated in Section 2.01(b)
hereof.
"ARIZONA IMPROVEMENTS" shall means the
assisted living facilities and/or congregate
care facilities located on the Arizona Real
Property.
" ARIZONA LOAN" means a certain loan in
the original principal amount of
$6,775,000.00 made or to be made by Lender
pursuant to Section 2.01.
"ARIZONA LOAN DOCUMENTS" shall mean the
following loan documents executed in
connection with the Arizona Loan: (i) this
Agreement, (ii) the Arizona Note, (iii) the
Assignment, (iv) the Absolute Assignment, (v)
Deed of Trust, Security Agreement, Assignment
of Leases and Rents and Fixture Filing
(Financing Statement), (vi) Environmental
Indemnity, (vii) Borrower's Affidavit, (viii)
Financing Statements, (ix) Affidavit of
Owner, (x) Rent Roll Certificates, (xi)
FIRPTA Certificate, (xii) Power of Attorney
and (xiii) all other promissory notes, deeds
of trust, assignments, financing statements,
easements, security agreements and other
instruments, documents and agreements
executed by Borrower in connection with the
Arizona Loan.
"ARIZONA NOTE" means the recourse
Promissory Note executed by Borrower of even
date herewith in the amount of $6,775,000.00
payable to the order of Lender, and all
extensions, renewals, and modifications
thereof.
"ARIZONA PERSONALTY" means all
equipment, furnishings, furniture,
trademarks, trade names and all tangible and
intangible personal property of whatever
character now owned or hereafter acquired by
Borrower for use in, on or about the Arizona
Projects, including replacements,
substitutions and after acquired property.
"ARIZONA PROJECTS" means the Arizona
Improvements, the Arizona Real Property, and
the Arizona Personalty.
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"ARIZONA REAL PROPERTY" means the real
property located in Scottsdale, Arizona, as
more fully described on Exhibit A-1, attached
hereto and incorporated herein by reference
for all purposes and the real property
located in Scottsdale, Arizona, as more fully
described on Exhibit A-2, attached hereto and
incorporated herein by reference for all
purposes.
"ASSIGNMENT OF CONSTRUCTION CONTRACT"
means the Assignment of Construction Contract
executed by Borrower in favor of Lender of
even date herewith covering the Florida
Project.
"ASSIGNMENT OF PLANS AND SPECIFICATIONS
AND OWNER-ARCHITECT AGREEMENT" means the
Assignment of Plans and Specifications and
Owner-Architect Agreement executed by
Borrower in favor of Lender of even date
herewith and covering the Florida Project.
" ASSIGNMENTS" means two Assignments of
Contracts, Plans, Permits and Approvals
of even date herewith covering the Arizona
Projects and the Florida Project executed by
Borrower in favor of Lender.
"ASSUMED MONTHLY PAYMENT" means an
assumed monthly payment of principal and
interest resulting from a 25-year
amortization of the principal balance of the
applicable Loan at a fixed rate of interest
equal to the Contract Rate as of the month
preceding the applicable Advance Date.
"BASE FINANCIALS" means the consolidated
balance sheet of Borrower and its
Consolidated Subsidiaries as of December 31,
1995 and the related consolidated statements
of operations, stockholders' equity and cash
flows for the year then ended, together with
the notes thereto, reported on without
qualification by an independent third party
public accounting firm acceptable to Lender.
"BUSINESS DAY" means any day other than
a Saturday, Sunday or legal holiday for
commercial banks in Houston, Texas.
"CLOSING DATE" means the date upon which
Borrower and Lender execute the Loan
Documents and all conditions precedent to
closing the Loans have been satisfied.
"COLLATERAL" has the meaning specified
in Section 4.01.
"CONSOLIDATED EBITDA" means, for any
period, Consolidated Net Income of Borrower
and its Consolidated Subsidiaries for such
period plus, without duplication, any amounts
deducted in determining such Consolidated Net
Income in respect of (a) Consolidated
Interest Charges for such period, (b) taxes
for such period and (c) expenses for such
period of the types classified as
"depreciation and amortization" on the
consolidated statement of operations included
in the Base Financials.
3
"CONSOLIDATED INTEREST CHARGES" means,
for any period, all items for such period of
the types classified as "interest" on the
consolidated statement of operations included
in the Base Financials.
"CONSOLIDATED NET CAPITAL EXPENDITURES"
means, for any period, the sum, without
duplication, of (i) the total amount of
additions to property and equipment of
Borrower and its Consolidated Subsidiaries
during such period of the types classified as
"Capital Expenditures" on the consolidated
statement of cash flows included in the Base
Financials provided that "Consolidated Net
Capital Expenditures" shall exclude (A) the
application of insurance or condemnation
proceeds to rebuilding facilities and (B) the
amount of any Debt incurred or assumed for
the purpose of financing all or any part of
the costs of constructing any assets to the
extent that such amount does not exceed 75%
of the cost of acquiring or constructing such
asset.
"CONSOLIDATED NET INCOME" means, for any
period, the net income (loss) (calculated
(a) before preferred and common stock
dividends and (b) exclusive of the effect of
any extraordinary or other material non-
recurring gain or loss outside the course of
business) of Borrower and its Consolidated
Subsidiaries, determined on a consolidated
basis for such period.
"CONSOLIDATED RENTAL EXPENSE" means, for
any period, the rental expense (net of
sublease income) of Borrower and its
Consolidated Subsidiaries with respect to
leases of real property and improvements of
real property, determined on a consolidated
basis for such period.
"CONSOLIDATED SUBSIDIARY" means, with
respect to any Person and at any date, any of
its Subsidiaries or any other entity the
accounts of which would be consolidated with
those of such Person in its consolidated
financial statements if such statements were
prepared as of such date.
"CONSTRUCTION CONTRACT" means the
construction contract between the Borrower
and the General Contractor for the
construction of the renovations and repairs
to the Florida Project.
"CONSTRUCTION INSPECTOR" means a
reputable engineering firm approved by
Lender.
"CONTRACT RATE" means a variable rate of
interest, adjusted monthly equal to the LIBOR
Rate plus 2.25% per annum. The Contract Rate
shall be set each month based on the LIBOR
Rate quoted two (2) business days prior to
the first day of each calendar month during
the term of each Note.
"CONTRACTS" means the leases, management
agreements, licenses, the contracts with the
Borrower's General Contractor, Project
Architect and Project Engineers on the
Florida Project and all other contracts
relative to the Projects.
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"DEBT" of any Person means at any date,
without duplication, (i) all obligations of
such Person for borrowed money, (ii) all
obligations of such Person evidenced by
bonds, debentures, notes or other similar
instruments, (iii) all obligations of such
Person to pay the deferred purchase price of
property or services, except trade accounts
payable arising in the ordinary course of
business, (iv) all obligations of such Person
as lessee which are capitalized in accordance
with GAAP, (v) all obligations of such Person
with respect to letters of credit and similar
instruments, including, without limitation,
obligations under reimbursement agreements,
(vi) all mandatory redeemable preferred stock
of such Person, (vii) all Debt of others
secured by a lien on any asset of such
Person, whether or not such Debt is assumed
by such Person, and (viii) all debt of others
guaranteed by such Person.
"DEBT SERVICE COVERAGE RATIO" for any
calendar quarter means the ratio of Net
Operating Income for such calendar quarter to
the Assumed Monthly Payment on the applicable
Loan for the same calendar quarter.
"DEEDS OF TRUST" means the first lien
Deed of Trust, Security Agreement, Assignment
of Leases and Rents and Fixture Filing
(Financing Statement) covering the Arizona
Projects and the first lien Mortgage and
Security Agreement covering the Florida
Project respectively executed by Borrower in
favor of Lender of even date herewith, as the
same may be amended, supplemented, or
modified from time to time.
"DEFAULT RATE" means a floating rate of
interest equal to the lesser of (i) the
Contract Rate, from time to time in effect,
plus five percent (5.0%) per annum or (ii)
the Maximum Rate.
"DHS" means the Arizona Department of
Human Services.
"DHS LICENSES" means all now or
hereafter issued licenses from the Arizona
Department of Human Services or other
governmental entities or political
subdivisions issued by Borrower for the
operation of the Arizona Projects as assisted
and/or congregate care living facilities and
any food services licenses related thereto
issued to Borrower in connection with the
Arizona Projects.
"ENVIRONMENTAL INDEMNITIES" means two
certain Certificates and Indemnification
Regarding Hazardous Substances relating to
the Arizona Projects and the Florida Project
respectively executed by Borrower in favor of
Lender of even date herewith, as the same may
be amended, supplemented or modified from
time to time.
"EVENT OF DEFAULT" has the meaning
specified in Section 9.01.
"FIRPTA CERTIFICATE" means the FIRPTA
Certificate executed by Borrower in favor of
Lender of even date herewith certifying
Borrower's residency status and taxpayer
identification number.
5
"FIXED CHARGE COVERAGE RATIO" means, on
any date, the ratio of (i) Consolidated
EBITDA for the four consecutive fiscal
quarters most recently ended on or prior to
such date to (ii) the sum of Consolidated
Interest Charges, Consolidated Rental Expense
and Consolidated Net Capital Expenditures for
such four fiscal quarters.
"FLORIDA CONSTRUCTION HOLDBACK" shall
have the meaning specified in Section 2.06(c)
hereof.
"FLORIDA ECONOMIC HOLDBACK" shall have
the meaning specified in Section 2.06(b)
hereof.
"FLORIDA IMPROVEMENTS" means the
assisted living facility located on the
Florida Real Property.
"FLORIDA LOAN" means one certain loan in
the original principal amount of
$5,500,000.00 made or to be made by Lender
pursuant to Section 2.01.
"FLORIDA LOAN DOCUMENTS" shall mean the
following loan documents executed in
connection with the Florida Loan: (i) this
Agreement, (ii) the Florida Note, (iii) the
Assignment, (iv) the Absolute Assignment, (v)
Mortgage and Security Agreement, (vi)
Environmental Indemnity, (vii) Borrower's
Affidavit, (viii) Financing Statements, (ix)
Affidavit of Owner, (x) Rent Roll
Certificates, (xi) FIRPTA Certificate, (xii)
Assignment of Construction Contract, (xiii)
Assignment of Plans and Specifications and
Owner-Architect Agreement, (xiv) the Anti-
Coercion Statement and (xv) all other
promissory notes, deeds of trust,
assignments, financing statements, easements,
security agreements and other instruments,
documents and agreements executed by Borrower
in connection with the Florida Loan.
"FLORIDA NOTE" means the recourse
Promissory Note executed by Borrower of even
date herewith in the amount of $5,500,000.00
payable to the order of Lender, and all
extensions, renewals, and modifications
thereof.
"FLORIDA PERSONALTY" means all
equipment, furnishings, furniture,
trademarks, trade names and all tangible and
intangible personal property of whatever
character now owned or hereafter acquired by
Borrower for use in, on or about the Florida
Project, including replacements,
substitutions and after acquired property.
"FLORIDA PROJECT" means the Florida
Improvements, the Florida Real Property, and
the Florida Personalty.
"FLORIDA REAL PROPERTY" means the real
property located in Clearwater, Florida, as
more fully described on EXHIBIT A-3, attached
hereto and incorporated herein by reference
for all purposes.
"FLORIDA TITLE AGENT" means XxXxxxxxx,
Will & Xxxxx, as agent for Chicago Title
Insurance Company.
6
"GAAP" means generally accepted
accounting principles, applied on a
consistent basis, as set forth in Opinions of
the Accounting Principles Board of the
American Institute of Certified Public
Accountants and/or in statements of the
Financial Accounting Standards Board and/or
their respective successors and which are
applicable in the circumstances as of the
date in question. Accounting principles are
applied on a "consistent basis" when the
accounting principles observed in a current
period are comparable in all material
respects to those accounting principles
applied in a preceding period.
"GENERAL CONTRACTOR" means Xxxxxx and
Xxxx Constructors, Inc.
"LIBOR RATE" means the one month London
Interbank Offered Rate, reflected as the one-
month LIBOR Rate on page 5 of the Telerate
screen or as published or quoted by such
other reputable and nationally-recognized
rate quoting service or publication selected
by Lender.
"LIEN" means any lien, mortgage,
security interest, tax lien, pledge,
encumbrance, financing statement, or
conditional sale or title retention
agreement, or any other interest in property
designed to secure the repayment of Debt or
any other obligation, whether arising by
agreement, operation of law, or otherwise.
"LIQUIDITY" means unpledged liquid
assets of Borrower consisting of cash or cash
equivalents such as short term (less than one
year) certificates of deposit, government
securities or other readily marketable
securities.
"LOANS" means two certain loans in the
aggregate principal amount of $12,275,000.00
made or to be made by Lender pursuant to
Sections 2.01.
"LOAN DOCUMENTS" means, without
limitation, the Arizona Loan Documents, the
Florida Loan Documents, a State of Washington
Financing Statement and all other promissory
notes, deeds of trust, assignments, financing
statements, easements, security agreements
and other instruments, documents, and
agreements executed by Borrower and delivered
pursuant to or in connection with this
Agreement, as such instruments, documents,
and agreements may be amended, modified,
renewed, extended, or supplemented from time
to time and in accordance with their
respective terms.
"LOAN TO VALUE RATIO" means in
connection with the Arizona Loan, the ratio
of the principal amount of the Arizona Note
to the combined appraised value of the
Arizona Projects, as determined by an
appraisal acceptable to the Lender; and, in
connection with the Florida Loan, the ratio
of the principal amount of the Florida Note
to the appraised value of the Florida
Project, as determined by an appraisal
acceptable to Lender.
"MATERIAL CASUALTY LOSS." A casualty
loss to any Project where (i) the damaged
portion of such Project is more than 25% of
the net leasable square footage of such
Project; or (ii) the insurance proceeds for
such damage are more than 25% of the
outstanding balance of the Note secured by
such Project.
7
"MATERIAL CONDEMNATION LOSS. A
condemnation loss to any Project where (i)
the portion of such Project subject to such
condemnation or similar proceedings is more
than 25% of the net leasable square footage
of such Project; or (ii) the condemnation
proceeds for such loss are more than 25% of
the outstanding balance of the Note secured
by such Project.
"MATURITY DATE" means twenty-four months
from the date hereof.
"MAXIMUM RATE" means the maximum rate
of nonusurious interest permitted from day to
day by applicable law, including Article
5069-1.04, Vernon's Texas Civil Statutes (and
as the same may be incorporated by reference
in other Texas statutes), but otherwise
without limitation, that rate based upon the
"indicated rate ceiling" and calculated after
taking into account any and all relevant
fees, payments and other charges in respect
to the Loan Documents which are deemed to be
interest under applicable law.
"NET OPERATING INCOME" means the monthly
average net income from normal operations of
either the Florida Project or from the
combined normal operations of the Arizona
Projects, as applicable, (excluding
extraordinary income and expense and before
income taxes applicable to the applicable
Project(s), but after all property taxes and
other taxes applicable to such Project(s)
without deduction for actual management fees
paid) and based upon average revenue per unit
and an occupancy rate of not more than ninety-
five percent (95%), as set forth in the
quarterly financial information provided to
Lender under the Loan Documents, calculated
based upon the preceding calendar quarter
plus non-cash expenses or allowances for
depreciation or amortization of such
Project(s) for such period, less the greater
of actual management fees or assumed
management fees of five percent (5%) of total
resident revenues for such preceding calendar
quarter.
"NONMATERIAL CASUALTY LOSS" A casualty
loss to any Project where (i) the damaged
portion of such Project is equal to or less
than 25% of the net leasable square footage
of such Project; or (ii) the insurance
proceeds for such damage are equal to or less
than 25% of the outstanding balance of the
Note secured by such Project.
"NONMATERIAL CONDEMNATION LOSS". A
condemnation loss to any Project where (i)
the portion of such Project subject to such
condemnation or similar proceedings is equal
to or less than 25% of the net leasable
square footage of such Project; or (ii) the
condemnation proceeds for such loss are equal
to or less than 25% of the outstanding
balance of the Note secured by such Project.
"NOTES" means the Arizona Note and the
Florida Note.
"NOTICES" means the two Notices Pursuant
to Section 26.02, Texas Business and Commerce
Code executed by Borrower in favor of Lender
of even date herewith.
8
"OBLIGATIONS" means (i) all amounts,
including, without limitation, principal and
interest, due or becoming due under the
Notes; (ii) any and all costs or sums due and
owing or to become due and owing under any of
the Loan Documents; (iii) any renewal or
extension of the indebtedness or costs
described in (i) through (ii) preceding or
any part thereof; and (iv) all covenants,
agreements and undertakings of the Borrower
to the Lender hereunder or under any of the
Loan Documents.
"PERSON" means any individual,
corporation, business trust, association,
company, partnership, joint venture, limited
liability company or other entity.
"PERSONALTY" means the Arizona
Personalty and the Florida Personalty.
"PLANS AND SPECIFICATIONS" means the
final plans and specifications for the
renovations and improvements to the Florida
Project certified by the Borrower's Project
Architect (with their respective seals
affixed) and approved by Lender.
"POWER OF ATTORNEY" means the
Irrevocable Power of Attorney executed by
Borrower in favor of Lender of even date
herewith in connection with the Arizona
Project.
"PROJECT ARCHITECT" means
Xxxxxxx/Xxxxxxxx Architects, Inc.
"PROJECTS" mean the Arizona Projects and
the Florida Project.
"PROPERTY REVENUES" means all income,
revenues, profits, distributions and any
ancillary revenues derived directly from a
given Project.
"REAL PROPERTY" means the Arizona Real
Property and the Florida Real Property.
"RENT ROLL CERTIFICATES" means the Rent
Roll Certificates for each Project delivered
by Borrower to Lender at Closing and monthly
thereafter in accordance with the
requirements of Section 7.02 hereof in the
form set forth in Exhibit "B attached hereto
and made a part hereof for all purposes.
"REQUIRED LICENSES" means the licenses
and permits required to be issued, if any, by
any government or quasi-government agency or
other political subdivision for the operation
of (i) the Arizona Project known as Villa
Ocotillo as a residential care institution or
an unclassified health care facility, (ii)
the Arizona Project known as the Scottsdale
Royale as an adult living facility with only
non-emergency assisted living services
provided to its residents, and (iii) the
Florida Project known as the Xxxxxxx Xxxx as
an assisted living facility.
9
"SUBSIDIARY" means, with respect to any
Person, any corporation or other entity of
which securities or other ownership interests
having ordinary voting power to elect a
majority of the board of directors or other
persons performing similar functions are at
the time directly or indirectly owned by such
Person.
"TANGIBLE NET WORTH" means with respect
to any Person at any date, the sum of total
shareholders' equity in such Person and such
Person's Consolidated Subsidiaries (including
capital stock, additional paid in capital,
and retained earnings, but excluding treasury
stock, if any), on a consolidated basis; less
the aggregate book value of all intangible
assets of such Person and such Person's
Consolidated Subsidiaries (as determined in
accordance with GAAP), including without
limitation, goodwill, trademarks, trade
names, service marks, copyrights, patents,
licenses and franchises, each to be
determined in accordance with GAAP consistent
with those applied in the preparation of the
financial statements referred to in Section
7.01 hereof; provided that, for the purposes
of this Agreement, there shall be excluded
from total assets, advances or loans to
shareholders, officers or Affiliates,
investments in Affiliates, assets pledged to
secure any liabilities not included in the
Debt of such Person, and further, in the case
of Borrower, the $32,000,000 senior
subordinated debentures (or such amounts as
are outstanding from time to time) shall be
excluded from total assets.
"TITLE COMPANY" means Chicago Title
Insurance Company.
"TITLE POLICIES" means the Mortgagee
Policies of Title Insurance described in
Section 5.01(t) hereof.
Section 1.02. OTHER DEFINITIONAL
PROVISIONS. All definitions contained in
this Agreement are equally applicable to the
singular and plural forms of the terms
defined. The words "hereof", "herein", and
"hereunder" and words of similar import
referring to this Agreement refer to this
Agreement as a whole and not to any
particular provision of this Agreement.
Unless otherwise specified, all Article and
Section references pertain to this Agreement.
All accounting terms not specifically defined
herein shall be construed in accordance with
GAAP.
ARTICLE II
SECTION A: THE ARIZONA
LOAN
Section 2.01. ARIZONA LOAN: ADVANCES.
Subject to the terms and conditions of this
Agreement, Lender agrees to make the Arizona
Loan to Borrower in Advances strictly in
accordance with this Agreement as follows:
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(a) INITIAL ADVANCE. Upon closing of
the Arizona Loan, the sum of $5,270,000.00
shall be advanced to Borrower, provided that
Borrower shall have satisfied all terms and
conditions for the initial Advance as set
forth under Section 5.01 below.
(b) ARIZONA ECONOMIC HOLDBACK. At the
time of the closing of the Arizona Loan, loan
proceeds in the amount of $1,505,000.00 shall
be withheld ("Arizona Economic Holdback") by
the Lender and shall be advanced in such
amounts and under such terms and conditions
as set forth in this paragraph. No interest
shall be payable on the Arizona Holdback
until such time as and only to the extent
actually advanced to Borrower as hereinafter
provided. Commencing February 1, 1997 and
on each Advance Date until the Maturity Date,
Lender shall make further Advances of the
Arizona Economic Holdback. Each additional
Advance shall be in an amount that when added
to the outstanding principal balance of the
Arizona Loan shall result in an Assumed
Monthly Payment that when divided into the
Net Operating Income for the Arizona Projects
derived from the last preceding quarter
results in a Debt Service Coverage Ratio of
1.20 to 1.0. Lender's obligation to advance
any portion of the Arizona Economic Holdback
on any Advance Date is contingent upon (i) no
Event of Default then existing under any of
the Loan Documents and (ii) the amount to be
then be advanced under the Arizona Economic
Holdback when coupled with all prior Advances
under the Arizona Loan will not exceed 75.0%
of the then appraised value of the Arizona
Projects as determined by an updated
appraisal acceptable to Lender.
Section 2.02. THE ARIZONA NOTE. The
obligation of Borrower to repay the Arizona
Loan (or so much thereof as may have been
advanced at any time) shall be evidenced by
the Arizona Note executed by Borrower,
payable to the order of Lender, in the
principal amount of the Arizona Loan and
dated of even date herewith, and shall be
full recourse to Borrower.
Section 2.03. REPAYMENT OF ARIZONA
LOAN. Interest on the outstanding principal
balance of the Arizona Note shall be due and
payable monthly, the first payment of which
shall be due and payable on the first (1st)
day of the calendar month next following one
(1) month from the date hereof, and
subsequent payments of interest shall be due
and payable on the same day of each month
thereafter until the Maturity Date. All
outstanding principal, plus accrued and
unpaid interest at the Contract Rate, on the
Arizona Note shall be due and payable in one
final balloon payment on the Maturity Date.
Section 2.04. INTEREST. The unpaid
principal amount of Advances on the Arizona
Loan shall bear interest prior to maturity at
a per annum rate equal to the lesser of (i)
the Maximum Rate or (ii) the Contract Rate.
Notwithstanding the foregoing, in the event
that any payment on the Arizona Note is more
than thirty (30) days past due, all past due
principal and interest shall bear interest
from the date such payment became due until
the date of payment at the Default Rate.
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SECTION B: THE FLORIDA
LOAN
Section 2.05. FLORIDA LOAN: ADVANCES.
Subject to the terms and conditions of this
Agreement, Lender agrees to make the Florida
Loan to Borrower in Advances strictly in
accordance with this Agreement as follows:
(a) INITIAL ADVANCE. Upon closing of
the Florida Loan, the sum of $4,000,000.00
shall be advanced to Borrower, provided that
Borrower shall have satisfied all terms and
conditions for the initial Advance as set
forth under Section 5.01 below.
(b) FLORIDA ECONOMIC HOLDBACK. At the
time of the closing of the Florida Loan,
loan proceeds in the amount of $550,000.00
shall be withheld ("Florida Economic
Holdback") by the Lender and shall be
advanced in such amounts and under such terms
and conditions as set forth in this
paragraph. No interest shall be payable on
the Florida Economic Holdback until such time
as and only to the extent actually advanced
to the Borrower as herein provided.
Commencing February 1, 1997 and on each
Advance Date thereafter until the Maturity
Date, Lender shall make further Advances of
the Florida Economic Holdback. Each
additional Advance shall be in an amount that
when added to the outstanding principal
balance of the Florida Loan shall result in
an Assumed Monthly Payment that when divided
into the Net Operating Income for the
Florida Project derived from the last
preceding quarter results in a Debt Service
Coverage Ratio of 1.20 to 1.0. Lender's
obligation to advance any portion of the
Florida Economic Holdback on any Advance Date
is contingent upon (i) no Event of Default
then existing under any of the Loan Documents
and (ii) the amount to be then be advanced
under the Florida Economic Holdback when
coupled with all prior Advances under the
Florida Loan will not exceed 75.0% of the
then appraised value of the Florida Project
as determined by an updated appraisal
acceptable to Lender.
(c) FLORIDA CONSTRUCTION HOLDBACK. At
the time of closing of the Florida Loan, the
sum of $950,000.00 shall be withheld
("Construction Holdback") by the Lender. The
Borrower shall complete the renovations and
improvements to the Florida Project described
in the Construction Contract. No interest
shall be payable on the Construction Holdback
until such time as and only to the extent
actually advanced to Borrower. Upon the
completion of the renovations and
improvements to the Florida Project, the
Lender will advance the Construction Holdback
to the Borrower provided that the following
items have been provided to the Lender: (i) a
certificate of occupancy for the Florida
Improvements from the appropriate
governmental agency; (ii) a certificate of
completion prepared and submitted by the
Borrower and Borrowers' Project Architect,
and approved by the Lender's construction
inspector, which certificate shall contain
only such qualifications as are acceptable to
Lender, in Lender's sole discretion, and
indicating that the construction of the
Florida Improvements has been completed
substantially in accordance with the approved
Plans and Specifications, all construction
has
12
been completed in a good and workmanlike
manner, all applicable zoning, building, or
other governmental codes or regulations have
been complied with, there are no known
structural deficiencies, and all mechanical
equipment, including, without limitation,
plumbing, air conditioning and heating,
electrical, and kitchen equipment, if any, is
in good working order; (iii) an affidavit of
completion executed by the Borrower's General
Contractor satisfactory to Lender, Lender's
counsel and the Title Company in their sole
discretion; (iv) lien waivers from any and
all contractors, in form and substance
satisfactory to Lender, Lender's counsel and
the Title Company in their sole discretion;
and (v) any and all other additional
documents as Lender may reasonably require.
Lender's obligation to advance any portion of
the Construction Holdback is contingent upon
(i) no Event of Default then existing under
any of the Loan Documents and (ii) the amount
to then be advanced under the Construction
Holdback when coupled with all prior Advances
under the Florida Loan will not exceed 75.0%
of the then appraised value of the Florida
Project as determined by an updated appraisal
acceptable to Lender.
Section 2.06. THE FLORIDA NOTE. The
obligation of Borrower to repay the Florida
Loan or so much thereof as may have been
advanced at any time shall be evidenced by
the Florida Note executed by Borrower,
payable to the order of Lender, in the
principal amount of the Florida Loan and
dated of even date herewith, and shall be
full recourse to Borrower.
Section 2.07. REPAYMENT OF FLORIDA
LOAN. Interest on the outstanding principal
balance of the Florida Note shall be due and
payable monthly, the first payment of which
shall be due and payable on the first (1st)
day of the calendar month next following one
(1) month from the date hereof, and
subsequent payments of interest shall be due
and payable on the same day of each month
thereafter until the Maturity Date. All
outstanding principal, plus accrued and
unpaid interest at the Contract Rate, shall
be due and payable in one final balloon
payment on the Maturity Date.
Section 2.08. INTEREST. The unpaid
principal amount of Advances on the Florida
Loan shall bear interest prior to maturity at
a per annum rate equal to the lesser of (i)
the Maximum Rate or (ii) the Contract Rate.
Notwithstanding the foregoing, in the event
that any payment on the Florida Note is more
than thirty (30) days past due, all past due
principal and interest shall bear interest
from the date such payment became due until
the date of payment at the Default Rate.
13
ARTICLE
III
PAYMENTS
Section 3.01. METHOD OF PAYMENT. All
payments of principal, interest, and other
amounts to be made by Borrower hereunder and
under the Notes shall be made to Lender at
its office at 0000 Xxxxxxxxx Xxxxxxx, Xxxxx
0000, X.X. Xxx 0000, Xxxxxxx, Xxxxx 00000-
1370, Attention: Commercial Loan Servicing,
in lawful money of the United States of
America and in immediately available funds.
Notwithstanding the foregoing, the term
"immediately available funds" shall not
require Borrower to make payments by wire
transfer. Borrower may make payment by check
drawn on any FDIC insured financial
institution. Whenever any payment hereunder
or under the Notes shall be stated to be due
on a day that is not a Business Day, such
payment may be made on the next succeeding
Business Day, and interest shall continue to
accrue during such extension.
Section 3.02. PREPAYMENT. Borrower
shall have the right to prepay, at any time
and from time to time without premium or
penalty, the entire unpaid outstanding
principal balance of the Notes or any portion
thereof, with accrued interest to the date of
prepayment on the amounts prepaid.
Section 3.03. INSURANCE AND TAX ESCROW.
Borrower shall provide Lender with evidence
satisfactory to Lender that Borrower has
fully prepaid insurance premiums or has made
arrangements to finance and is in compliance
with such arrangements to finance such
insurance premiums relating to the Projects
for the period through September 1, 1997, and
evidence satisfactory to Lender that all
taxes for 1996 for the Projects as well as
any other taxes due and owing for the
Projects have been paid or provided for.
Following an Event of Default, Lender may
require Borrower to pay to Lender each month
concurrently with the payment on the Florida
Note a sum equal to one-twelfth (1/12th) of
the estimated annual taxes and insurance
premiums affecting the Florida Project, for
deposit in a non-interest bearing escrow
account maintained with Lender, and Lender
may require Borrower to pay to Lender
concurrently with the payment on the Arizona
Note a sum equal to one twelfth of the
estimated taxes and insurance premiums
affecting the Arizona Projects, for deposit
in a non-interest bearing escrow account
maintained with Lender. In such case, Lender
will cause the amounts collected in such
escrow accounts to be applied toward payment
of ad valorem property taxes against the
Projects, and casualty and extended coverage
insurance premiums required hereunder,
however, in the event of a shortage in the
escrow account, Borrower shall be responsible
for payment of such shortage and will, within
ten (10) days after written demand by Lender,
promptly make up such shortage.
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ARTICLE IV
COLLATERAL
Section 4.01. COLLATERAL. To secure
full and complete payment and performance of
the Obligations, Borrower shall execute and
deliver or cause to be executed and delivered
the documents described below covering the
property and collateral described in this
Section (which, together with any other
property that may now or hereafter secure the
Obligations or any part thereof, is sometimes
herein called the "COLLATERAL"):
(a) Borrower shall grant to Lender a
first priority lien and/or security interest
on the Real Property, Improvements and
Personalty pursuant to the Deeds of Trusts
and shall assign to Lender all rents, income,
and profits relating to the Projects pursuant
to the Absolute Assignments;
(b) Borrower shall collaterally assign
and grant a first lien security interest in,
without limitation, all accounts receivable,
utility deposits, security deposits (subject
to the tenants' rights to reimbursement under
the tenant leases), commercial and tenant
leases, management agreements, construction
contracts, architect contracts and
agreements, waste water capacity reservation
agreements, and any other contracts, licenses
(including the DHS Licenses and AHCA
Licenses, to the extent assignable), permits,
architects and engineering contracts, and
agreements pertaining to the Projects
pursuant to the Assignments or such other
instruments as Lender may reasonably require;
(c) Borrower shall execute and cause to
be executed such further documents and
instruments, including without limitation,
Uniform Commercial Code financing statements,
necessary to evidence and perfect Lender's
liens and security interests as herein
described, in the Collateral.
Section 4.02. SETOFF. Upon the
occurrence of an Event of Default, Lender
shall have the right to set off and apply
against the Obligations in such manner as
Lender may determine, at any time and without
notice to Borrower, any and all deposits
(general or special, time or demand,
provisional or final) or other sums at any
time credited by or owing from Lender to
Borrower whether or not the Obligations are
then due. As further security for the
Obligations, Borrower hereby grants to Lender
a security interest in all money,
instruments, and other property of Borrower
now or hereafter held by Lender, including,
without limitation, property held in
safekeeping. In addition to Lender's right of
setoff and as further security for the
Obligations, Borrower hereby grants to Lender
a security interest in all deposits (general
or special, time or demand, provisional or
final) and other accounts of Borrower now or
hereafter on deposit with or held by Lender
and all other sums at any time credited by or
owing from Lender to Borrower, and any and
all other property of the Borrower in the
possession of Lender. The rights and
remedies of Lender hereunder are in addition
to other rights and remedies (including,
without limitation, other rights of setoff)
which Lender may have; provided, however
15
that with respect to security deposits by
tenants or residents, the foregoing is
subject to the residents' or tenants' rights
to reimbursement under the tenants' or
residents' leases.
ARTICLE V
CONDITIONS
PRECEDENT
Section 5.01. LOANS. The obligation of
Lender to make the initial Advances under the
Loans provided for in Sections 2.01(a) and
2.06(a) is subject to the condition precedent
that Lender shall have received all of the
following, each dated as of the Closing Date
(unless otherwise indicated) and in form and
substance satisfactory to Lender:
(a) RESOLUTIONS. Borrower shall have
delivered to Lender a resolution of Borrower
certified by its secretary or assistant
secretary that generally authorizes the
execution, delivery, and performance by
Borrower of this Agreement and the other Loan
Documents to which Borrower is or is to be a
party. Within five (5) business days from the
date hereof, Borrower shall deliver to Lender
a Resolution of the Borrower certified by its
secretary or assistant secretary that
specifically authorizes the transactions
contemplated hereby with respect to the
Projects and authorizes execution, delivery
and performance by Borrower of this Agreement
and the other Loan Documents which
Resolutions shall designate (i) the officers
of the Borrower that are authorized to sign
the Loan Documents and (ii) the officers of
Borrower that are authorized to request and
receive Advances under the Loans.
(b) INCUMBENCY CERTIFICATES. Borrower
shall have delivered to Lender certificates
of incumbency certified by the respective
secretary or assistant secretary of Borrower
certifying the names of the officers of
Borrower authorized to sign this Agreement
and each of the other Loan Documents to which
Borrower is to be a party (including the
certificates contemplated herein) and to
request and receive Advances under the Loans
together with specimen signatures of such
officers.
(c) ARTICLES OF INCORPORATION AND
BYLAWS. Borrower shall have delivered to
Lender: (i) Borrower's Articles of
Incorporation and Bylaws, and all amendments
thereto and (ii) certified copies of
certificates of existence for Borrower and
certified copies of corporate and tax good
standing certificates in Washington and
certified copies of tax good standing and
authorization certificates to do business in
Florida and Arizona for Borrower (all of the
above dated within ten (10) days prior to the
Closing Date).
(d) LOAN AGREEMENT. The Borrower shall
have executed and delivered this Agreement to
the Lender.
(e) NOTES. Borrower shall have
executed and delivered the Notes to Lender.
16
(f) ABSOLUTE ASSIGNMENTS. Borrower
shall have executed and delivered the
Absolute Assignments to Lender.
(g) ASSIGNMENTS. Borrower shall have
executed and delivered the Assignments to
Lender.
(h) ENVIRONMENTAL INDEMNITIES.
Borrower shall have executed and delivered
the Environmental Indemnities to Lender.
(i) DEEDS OF TRUST. Borrower shall
have executed and delivered the Deeds of
Trust to Lender which shall grant a first
lien on the Projects covered thereby and a
first and prior security interest in the
Personalty covered thereby.
(j) FINANCING STATEMENTS. Borrower
shall have executed and delivered to Lender
the Uniform Commercial Code financing
statements covering the Collateral described
in Section 4.01.
(k) NOTICES. Borrower shall have
executed and delivered to Lender the Notices.
(l) AFFIDAVIT. Borrower shall have
executed and delivered the Affidavit of
Borrower in form and substance satisfactory
to Lender.
(m) ANTI-COERCION STATEMENT. Borrower
shall have executed and delivered the Anti-
Coercion Statement.
(n) Affidavit of Owner. Borrower shall
have executed and delivered the Affidavit of
Owner.
(o) RENT ROLL CERTIFICATES. Borrower
shall have executed and delivered the Rent
Roll Certificates in the form set forth in
Exhibit "B" attached hereto and made a part
hereof for all purposes and the attached rent
rolls.
(p) ASSIGNMENT OF CONSTRUCTION
CONTRACT. Borrower shall have executed and
delivered the Assignment of Construction
Contract.
(q) ASSIGNMENT OF PLANS AND
SPECIFICATIONS AND OWNER-ARCHITECT CONTRACT.
Borrower shall have executed and delivered to
Lender the Assignment of Plans and
Specifications and Owner-Architect Contract.
(r) FIRPTA CERTIFICATE. Borrower shall
have executed and delivered the FIRPTA
Certificate.
17
(s) MORTGAGEE TITLE INSURANCE POLICY.
Simultaneously with the execution of this
Loan Agreement, but before funding of the
Loans, Borrower, at Borrower's sole cost and
expense, shall have caused to be furnished to
Lender, Mortgagee Policies of Title Insurance
covering the Florida Project and the Arizona
Projects issued by the Florida Title Agent
and the Title Company, in favor of Lender
pursuant to an insured closing protection
letter satisfactory to Lender showing a
policy amounts equal to the amount of the
applicable Loan covered by each Policy, with
each Policy insuring that the Lender has a
valid first and prior lien against the
applicable Real Property, and containing only
such exceptions as shall be approved by
Lender and its legal counsel. Any exception
in the Title Policies regarding restrictive
covenants shall be deleted or shall list such
restrictive covenants and insure that they
will not affect the validity or priority of
Lender's liens. The standard pre-printed
exception in the Title Policies regarding any
discrepancies, conflicts or shortages in area
or boundary lines shall be modified to read
only "shortages in area." The standard pre-
printed exception regarding taxes shall be
modified to read "Standby fees and taxes for
the year 1997 and subsequent years not yet
due and payable." The Title Policies shall
also insure access to the Projects from a
publicly dedicated street.
(t) APPRAISAL. Lender shall have
received an MAI appraisal for each of the
Projects in form and substance satisfactory
to Lender and conducted by an appraiser
selected by Lender. The appraisals shall show
that the Florida Project shall have a fair
market value of not less than 75.0% of the
initial Advance of the Florida Loan, and that
the combined Arizona Projects shall have a
fair market value of not less than 75.0% of
the initial Advance of the Arizona Loan. The
appraisal shall be commissioned by Lender,
but paid for by Borrower.
(u) ENVIRONMENTAL REPORT. Borrower, at
Borrower's sole cost and expense, shall have
delivered to Lender an unqualified Phase I
environmental site assessments covering each
Project which shall be in form and substance
satisfactory to Lender and which shall be
conducted by an environmental service firm
selected by Lender or selected from Lender's
approved list of environmental service firms.
Such environmental assessments shall verify
that each Project is free from any Hazardous
Materials and Hazardous Waste not acceptable
to Lender, as those terms are defined by
federal and state statutes, laws and
regulations, including, without limitation,
asbestos and diesel fuel (as reflected on the
Phase I environmental assessment). Such
environmental assessments shall include a
determination of "wetlands" status and
condition. Borrower shall provide Lender
with evidence in form and substance
acceptable to Lender, in Lender's sole
discretion, indicating that any Hazardous
Materials or Hazardous Waste previously
located on the Projects not acceptable to
Lender have been properly disposed of in
accordance with all applicable laws and which
satisfies the requirements of Thrift Bulletin
16.
18
(v) SURVEY. Borrower, at Borrower's
sole cost and expenses, shall have provided
Lender and Lender's counsel with originals of
current staked surveys ("Surveys") of the
Real Property and all Improvements thereon,
prepared by a professional engineer or
registered surveyor, acceptable to Lender and
Title Company, in form and substance
satisfactory to Lender, dated within ninety
(90) days of the Closing Date, which Surveys
shall satisfy the requirements of a 1992
American Land Title Association/American
Congress on Surveying and Mapping Standards
as to the Arizona Projects and Section
472.027 of the Florida statutes for land
surveys as to the Florida Project. Unless
otherwise agreed by Lender, each Survey shall
contain a certificate which shall among other
things contain the following information: (i)
metes and bounds description of each tract of
Real Property showing all corners and points
of course changes and/or marked with iron
pins or rods or in the case of platted or
subdivided land, the legal description
thereof; and (ii) the location of all
existing and proposed roads, highways and
streets adjoining each tract of the Real
Property and access thereto and all
Improvements, encroachments, easements,
drainage districts, utilities, parking areas,
rights of way, set-back lines, and other
matters located upon or affecting each tract
of the Real Property. The Surveys shall
contain a certification that each tract of
the Real Property is not located in any flood
hazard area or identifying the type of flood
hazard area in which the Real Property is
located. The certificates shall be in form
and substance acceptable to Lender and
Lender's counsel and shall be in favor of
both the Lender and the Title Company. The
certificates must be acceptable to the Title
Company to delete from the Title Policies the
preprinted survey exception regarding
encroachments except as to (i) shortages in
area and (ii) any specific encroachments
reflected on the Survey approved by Lender.
(w) UCC SEARCH. Lender shall have
received Uniform Commercial Code searches
(which searches shall be ordered by Lender's
counsel but paid for by Borrower) showing no
financing statements or other documents or
instruments on file against Borrower in the
office of the Secretary of State of Florida,
Arizona and Washington and the UCC Records of
the Counties where the Real Property is
located or the counties where the Borrower
resides, such search to be as of a date no
more than ten (10) days prior to the Closing
Date.
(x) OPINION OF COUNSEL. Borrower shall
have delivered to Lender favorable opinions
of legal counsels to Borrower in form, scope
and substance satisfactory to Lender
acceptable to Lender, concerning all aspects
of the Loans including, without limitation,
usury, doing business, due authorization,
legality, validity, enforceability, and
binding effect of all required Loan
Documents.
(y) FINANCIAL STATEMENTS. Lender shall
be provided with certified financial
statements from Borrower in a form and only
with qualifications acceptable to Lender in
Lender's sole discretion for the year ended
December 31, 1995 and the nine months ended
September 30, 1996.
19
(z) DHS AND AHCA LICENSES. Borrower
will provide Lender will copies of all
applicable DHS Licenses, AHCA Licenses and
other licenses necessary for the operation of
the Projects.
(aa) ORIGINATION FEE. Borrower shall
have paid to Lender an origination fee in the
amount of Forty-One Thousand Two Hundred
Fifty and 00/100 Dollars ($41,250.00) with
respect to the Florida Loan and an
origination fee in the amount of Fifty
Thousand Eight Hundred Twelve and 50/100
Dollars ($50,812.50) for the Arizona Loan,
which fees shall be fully earned, non-
refundable, and due and payable on the
Closing Date.
(bb) TAXES, ASSESSMENTS AND INSURANCE.
Lender shall have received evidence that all
ad valorem taxes for 1996 and prior years
against the Projects and all required
insurance premiums through September 1, 1997
of the Loans shall have either been paid in
full or financing arrangements have been made
and are in place for such premiums and
Borrower is in compliance therewith.
(cc) INSURANCE POLICIES. Borrower shall
have provided Lender with certified copies of
all insurance policies required by this
Agreement, from companies satisfactory to
Lender showing Lender as loss payee and in
amounts and with deductibles acceptable to
Lender, including, without limitation,
policies of flood insurance if any Project is
situated in a "Flood Hazard Area."
(dd) ESTOPPEL CERTIFICATE. Borrower
shall have delivered to Lender an estoppel
certificate and/or pay off letter from every
individual and entity holding a lien on the
Real Property and/or Improvements thereon.
The certificate shall be signed by the
lienholders and shall indicate the present
unpaid balance of the liens including accrual
interest to the proposed Closing Date, the
daily rate of accrual after such date, and
the amount required to satisfy and release
the liens as of the proposed Closing Date.
(ee) EVIDENCE OF AVAILABLE CAPITAL.
Lender shall have received evidence
satisfactory to it that the Borrower has
available a minimum of $2,780,000.00 in
equity in the Projects prior to the initial
advance of the Loans;
(ff) PLANS AND SPECIFICATIONS.
Borrower, at Borrower's sole cost and
expense, shall have provided Lender with two
(2) complete sets of final Plans and
Specifications for the Florida Project signed
and dated by the Borrower and certified by
the Project Architect and the Project
Engineer (and with their respective seals
affixed). The Plans and Specifications shall
contain all certificates and approvals
required by all governmental authorities
(including AHCA) having jurisdiction over the
Florida Project, which Plans and
Specifications shall have been submitted to
and approved by Lender prior to closing. Any
material deviation from the approved plans or
specifications must be approved by Lender in
writing in advance of the issuance of any
change orders.
20
(gg) CONTRACTS. Borrower shall have
provided Lender with fully executed
counterparts of all construction and design
related contracts (together with all
amendments and modifications thereto) with
the General Contractor, Project Architect,
Project Engineer, and any other person or
entity relating to the renovation and
improvements to the Florida Improvements,
which contracts shall be subordinated to
Lender and its liens. Borrower will not
agree or consent to any material amendment
thereto without Lender's prior written
consent. The contracts, together with the
identity of the General Contractor, Project
Architect, Project Engineer, and any other
person or entity relating to the construction
of the Improvements shall have been
previously approved by Lender in writing.
(hh) CONSTRUCTION PERMITS. Borrower
shall have provided Lender with certified
copies of all necessary building and
construction permits, curb cut, sewer and
water tap and other permits, licenses,
franchises and other.
(ii) LEASES. Borrower shall have
provided Lender with a copy of the form(s)
lease agreement covering residential units in
the Projects, which agreements shall be in
form and substance satisfactory to Lender.
(jj) ADDITIONAL INFORMATION. Borrower
shall have delivered such additional
documents, instruments, and information as
Lender or Lender's legal counsel may
reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this
Agreement, Borrower represents and warrants
to Lender that:
Section 6.01. EXISTENCE AND AUTHORITY.
Borrower is a Washington corporation duly
organized and validly existing under the laws
of the State of Washington; Borrower (a) has
all requisite power to own assets and carry
on its business as now being or as proposed
to be conducted; and (b) is qualified to do
business in all jurisdictions in which the
nature of its business makes such
qualification necessary and where failure to
so qualify would have a material adverse
effect on its business, financial condition,
or operations. Borrower has the power and
authority to execute, deliver, and perform
its obligations under this Agreement and the
other Loan Documents to which it is or may
become a party.
21
Section 6.02. FINANCIAL STATEMENTS.
Borrower has delivered to Lender certain
financial statements of Borrower. The
financial statements are true and correct,
have been prepared in accordance with GAAP,
and fairly and accurately present the
financial condition of Borrower therein and
the results of operations for the period
indicated therein. Borrower does not have any
material contingent liabilities, liabilities
for taxes, material forward or long-term
commitments, or unrealized or anticipated
losses from any unfavorable commitments not
reflected in such financial statements. No
material adverse change in the condition,
financial or otherwise, or operations of
Borrower has occurred since the effective
date of the most recent financial statement
referred to in this Section.
Section 6.03. DEFAULT. Borrower is not
in default in any respect under any loan
agreement, indenture, mortgage, security
agreement, or other agreement or obligation
to which it is a party or by which any of its
properties may be bound.
Section 6.04. AUTHORIZATION AND
COMPLIANCE WITH LAWS AND MATERIAL AGREEMENTS.
The execution, delivery, and performance by
Borrower of this Agreement and the other Loan
Documents to which Borrower is or may become
a party have been duly authorized by all
requisite action on the part of Borrower and
do not and will not violate the
organizational agreements of Borrower or any
law or any order of any court, governmental
authority, or arbitrator, and do not and will
not conflict with, result in a breach of, or
constitute a default under, or result in the
imposition of any Lien upon any assets of
Borrower pursuant to the provisions of any
indenture, mortgage, deed of trust, security
agreement, franchise, permit, license, or
other instrument or agreement by which
Borrower is bound.
Section 6.05. LITIGATION AND JUDGMENTS.
There is no action, suit, or proceeding
before any court, governmental authority, or
arbitrator pending, or to the knowledge of
Borrower, threatened against or affecting
Borrower that would, if adversely determined,
have a material adverse effect on the
financial condition or operations of Borrower
or the ability of Borrower to pay and
perform the Obligations. There are no
outstanding judgments against Borrower.
Section 6.06. RIGHTS IN PROPERTIES.
Borrower has good and indefeasible title to
or valid leasehold interests in its
properties and assets, real and personal
reflected in the financial statements
described in Section 6.02.
Section 6.07. ENFORCEABILITY. This
Agreement constitutes, and the other Loan
Documents to which Borrower is party, when
delivered, shall constitute the legal, valid,
and binding obligations of Borrower,
enforceable against Borrower in accordance
with their respective terms, except as
limited by bankruptcy, insolvency, or other
laws of general application relating to the
enforcement of creditor's rights.
22
Section 6.08. APPROVALS. No
authorization, approval, or consent of, and
no filing or registration with, any court,
governmental authority, or third party is or
will be necessary for the execution,
delivery, or performance by Borrower of this
Agreement and the other Loan Documents to
which Borrower is or may become a party or
the validity or enforceability thereof.
Section 6.09. TAXES. Borrower has
filed all tax returns (federal, state, and
local) required to be filed, including all
income, franchise, employment, property, and
sales taxes, and has paid all of its tax
liabilities, and Borrower has no knowledge of
any pending investigation of Borrower by any
taxing authority or of any pending but
unassessed tax liability of Borrower.
Section 6.10. DISCLOSURE. No
representation or warranty made by Borrower
in this Agreement or in any other Loan
Document contains any untrue statement of a
material fact or omits to state any material
fact necessary to make the statements herein
or therein not misleading. There is no
circumstance or event which exists as of the
date hereof known to Borrower which has a
material adverse effect or which with the
passage of time would reasonably be expected
to have a material adverse effect on the
business, assets, financial condition, or
operations of Borrower that has not been
disclosed in writing to Lender.
Section 6.11. PRINCIPAL PLACE OF
BUSINESS. The principal place of business
and chief executive office of Borrower and
the place where Borrower keeps its books and
records is located at the address set forth
in Section 10.09.
Section 6.12. COMPLIANCE WITH LAW.
Borrower is in compliance with all laws,
rules, regulations, orders, and decrees which
are applicable to Borrower or any of its
properties.
Section 6.13. FORFEITURE. Borrower has
not been charged with or, to their knowledge,
are under investigation for, possible
violations of the Racketeering, Influenced
and Corrupt Organizations Act ("RICO"), the
Continuing Criminal Enterprises Act ("CCE"),
the Controlled Substance Act of 1978, the
Money Laundering Act of 1986, the AntiDrug
Abuse Act of 1986, or similar law providing
for the possible forfeiture of any of their
respective assets or properties.
Section 6.14. CONTRACTS. The
Contracts as presented to Lender, include all
amendments and modifications to the
Contracts.
Section 6.15. AHCA/DHS REQUIREMENTS.
The Borrower will operate the Projects in
accordance with all applicable AHCA and DHS
rules and regulations. Borrower shall
promptly notify Lender of any notices or
other correspondence received from the AHCA,
the DHS or any other governmental entity
indicating that any Project is not in
compliance with the applicable AHCA or DHS
rules and regulations. Borrower shall take
all action necessary to
23
maintain its AHCA and DHS Licenses and shall
take prompt action to renew its AHCA and DHS
Licenses when necessary. Borrower hereby
represents and warrants to Lender that, with
respect to the ownership and operation of all
Arizona Projects, the only required DHS
License is a DHS health care institution
license for the Arizona Project known as the
"Villa Ocotillo Retirement Community" as an
"Unclassified Health Care Institution" (as
defined in the DHS regulations). Borrower
hereby further represents and warrants to
Lender that no DHS License is required for
the Arizona Project known as the "Scottsdale
Royale" because such Arizona Project is
limited to an adult apartment facility with
no personal care, residential care, medical,
nursing or health-related services, or other
non-emergency assisted living services being
provided by Borrower at such Arizona Project.
6.16. MEDICARE/MEDICAID. None of
the Projects are Medicare or Medicaid
certified facilities or participate in
Medicare or Medicaid programs.
ARTICLE
VII
AFFIRMATIVE COVENANTS AND AGREEMENTS
Borrower covenants and agrees that, as
long as the Obligations or any part thereof
are outstanding or Lender has any commitment
hereunder, Borrower will perform and observe
the following positive covenants and
agreements, unless Lender shall otherwise
consent in writing which consent may be
conditioned upon such terms as Lender may
require.
Section 7.01. FINANCIAL STATEMENTS.
Borrower shall furnish management prepared
financial statements to Lender for each
fiscal quarter which statements shall be due
thirty (30) days after the end of each fiscal
quarter. Monthly operating statements shall
be due from Borrower with respect to the
Projects within thirty (30) days of the end
of each month. Borrower shall also furnish
to Lender audited annual financial statements
beginning with the fiscal year ending
December 31, 1996, containing balance sheets
(reflecting, without limitation, all
contingent liabilities), income statements
and statements of changes in financial
position (reflecting, without limitation,
cash flow changes) as at the end of such
fiscal year and for the 12-month period then
ended, in each case setting forth in
comparative form the figures for the
preceding fiscal year. All financial
statements will be prepared in reasonable
detail, and all of the above prepared in
accordance with GAAP, consistently followed
and applied and containing only
qualifications acceptable to Lender, in
Lender's sole discretion. Borrower shall
provide Lender with copies of its 10K and 10Q
Forms within thirty (30) days of filing.
Borrower's financial statements shall be
accompanied by (i) a compliance statement
from Borrower's chief financial officer that
the Borrower is in compliance with all terms
and conditions of the Loan Agreement and that
there is no default thereunder and (ii) such
other financial information as Lender shall
reasonably request.
24
Section 7.02. CERTIFICATES; RENT ROLL;
OTHER INFORMATION. Borrower shall furnish to
Lender all of the following:
(a) Within thirty (30) days from the
end of each month: (i) a copy of the rent
roll of the Projects, together with the Rent
Roll Certificates reflecting, at a minimum,
the names of all tenants, terms of leases,
base rents, security deposits and renewal
options, and (ii) operating statements for
the Projects , which rent roll and operating
statement shall be certified by an authorized
officer of Borrower as to their accuracy,
completeness and truthfulness; and
(b) Promptly, upon request by Lender,
any additional information concerning
Borrower which Lender may reasonably request.
Section 7.03. PERFORMANCE OF
OBLIGATIONS. Borrower will duly and
punctually pay and perform the Obligations in
accordance with their respective terms.
Section 7.04. PRESERVATION OF EXISTENCE
AND CONDUCT OF BUSINESS. Borrower will
preserve and maintain its corporate status
and all of its leases, privileges,
franchises, qualifications, and rights that
are necessary in the ordinary conduct of its
business, and conduct its business as
presently conducted in accordance with
applicable law. The Borrower will provide to
Lender copies of all written reports, surveys
and inspections with respect to the Projects
issued by all applicable licensing and/or
accrediting agencies promptly upon receipt,
and Borrower's written response to same
within three (3) business days of the
submission of such response.
Section 7.05. MAINTENANCE OF PROJECTS.
Borrower will maintain the Projects in good
condition and repair (ordinary wear and tear
excepted).
Section 7.06. PAYMENT OF TAXES AND
CLAIMS. Borrower will pay or discharge at or
before maturity or before becoming delinquent
(i) all taxes, levies, assessments, and
governmental charges imposed on it or any of
the Projects, and (ii) all lawful claims for
labor, material, and supplies, which, if
unpaid, might become a Lien upon the
Projects; provided, however, that Borrower
shall not be required to pay or discharge any
tax, levy, assessment, or governmental charge
which is being contested in good faith by
appropriate proceedings diligently pursued,
and for which adequate reserves have been
established.
Section 7.07. INSURANCE. Except as
otherwise agreed by Lender, Borrower will
maintain with insurance companies reasonably
acceptable to Lender meeting the
requirements set forth herein, workmen's
compensation insurance and insurance on
Borrower's property, assets, and business at
the Projects in such amounts, and with
deductibles, acceptable to Lender, and
against such risks as required by Lender
(including, without limitation, all builder's
risk coverage for the Florida Improvements,
hazard,
25
comprehensive general liability insurance,
extended coverage and business interruption
insurance coverage for at least twelve (12)
months), and Borrower shall provide Lender
with evidence satisfactory to Lender in
Lender's reasonable discretion of such
insurance coverage. Hazards covered, the
amounts of such coverage and the carrier
providing such coverage must be approved by
Lender in writing. In the case of hazard
insurance and all builder's risk, such
insurance shall at least be in an amount
equal to the lesser of hundred percent (100%)
of the full insurable value of the insurable
portion of the Improvements or an amount
equal to the amount of the Loans All
insurance policies shall be issued by
insurers with a Best's rating of not less
than A+ and a financial size category of at
least VII, unless otherwise agreed by Lender.
Each insurance policy covering Collateral
shall name Lender (or the holder of the
Notes) as a loss payee subject to a mortgagee
clause (without contribution) of the standard
form attached to or otherwise made a part of
the applicable policy, and shall provide that
the same shall not be canceled or modified
without at least thirty (30) days prior
written notice to Lender. All insurance
policies and renewals thereof shall be in a
form reasonably acceptable to Lender. Lender
shall have the right to hold the policies and
Borrower shall promptly furnish or cause to
be furnished to Lender all renewal notices
and all receipts of paid premiums. At least
fifteen (15) days prior to the expiration
date of a policy, Borrower shall deliver to
Lender a renewal policy in form reasonably
satisfactory to Lender.
If the Improvements on any Project are
in a "Flood Hazard Area", Borrower shall
provide Lender with a flood insurance policy
in an amount equal to the appraised value of
the applicable Project or the maximum amount
available under the Flood Disaster Protection
Act of 1973 and regulations issued pursuant
thereto, as may be amended from time to time,
whichever is less, in form complying with the
"insurance purchase requirement" of the Act
which shall contain a mortgagee clause in
favor of Lender.
In the event of any loss to any Project
(whether a Material Casualty Loss or a
Nonmaterial Casualty Loss), Borrower shall
give immediate notice to the insurance
carrier and to Lender and shall provide
Lender with good and sufficient documentation
and information necessary and required by
Lender to verify and confirm the exact nature
and extent of the damage or destruction to
such Project. In the case of a Material
Casualty Loss, Borrower shall also provide
Lender with an estimate of the amount of
funds required to repair or replace such
damage, an estimate for the time frame for
completion of the repair or replacement of
all damaged portions of such Project, and a
budget, which shall be subject to Lender's
approval, describing the repair work to be
performed and the costs of labor and material
for each stage of repair work
In the case of a Material Casualty Loss,
the Borrower hereby authorizes and appoints
Lender as attorney-in-fact for Borrower (such
appointment being coupled with an interest)
to make proof of loss, to adjust and
compromise any claim under insurance
policies, to appear in and prosecute any
action arising from such insurance policies,
to collect and receive insurance proceeds,
and to deduct therefrom Lender's expenses
incurred in the collection of such proceeds;
provided, however, that nothing contained
herein shall require Lender to incur
26
any expense or take any action hereunder.
Except as otherwise herein provided, Borrower
further authorizes Lender at Lender's option,
(a) to hold the balance of such proceeds to
be used to reimburse Borrower for the cost of
reconstruction or repair of the affected
Project or (b) to apply the balance of such
proceeds to the payment of the Note secured
by such Project, whether or not then due.
Notwithstanding the foregoing, Lender shall
not exercise Lender's option to apply
insurance proceeds to the payment of the Note
secured by the affected Project in the case
of a Material Casualty Loss, if all of the
following conditions are met:(i) Borrower is
not in default of any term or condition
contained in the applicable Note or other
Loan Documents relating to such Project; (ii)
Lender has determined that the repair or
replacement of such damages portions of such
Project can be completed within a reasonable
period of time not to exceed the coverage
period provided under the loss of rents
insurance coverage in force with respect to
such Project; (iii) Lender determines that
the insurance proceeds together with any
additional funds received from Borrower as
required under this Section, are sufficient
to complete restoration, or repair; and (iv)
Lender determines that such Project, after
restoration or repair, will be sufficiently
leased to enable Borrower to pay all
operating expenses of such Project and debt
service relating to the Note secured by such
Project, as and when due. Any insurance
proceeds not paid to repair or replace any
damaged or destroyed portion of the affected
Project shall be released to the Borrower
after completion of the repairs.
Notwithstanding the foregoing, the Borrower
shall have the option in the last year of the
term of the Loans to require Lender to apply
all insurance proceeds received as a result
of a Material Casualty Loss or a Nonmaterial
Casualty Loss to reduce the balance of the
applicable Note provided that (i) all
necessary repairs and restoration are made to
the applicable Project or (ii) the insurance
proceeds are sufficient to pay off the
outstanding balance of the Note.
In the event the insurance proceeds are
to be applied toward the cost of restoration
and repair of such Project in the case of a
Material Casualty Loss, the affected Project
shall be restored to the equivalent of its
condition immediately prior to such Material
Casualty Loss or such other condition as
Lender may approve writing. Upon demand by
Lender in the case of a Material Casualty
Loss, Borrower shall deposit with Lender or
Lender's designee, an amount equal to the
difference between insurance proceeds
received and the amount Lender reasonably
determines is necessary to complete the
restoration or repair of such Project
("Borrower's Deposit"). In the case of a
Material Casualty Loss, Lender may condition
disbursement of proceeds and the Borrower's
Deposit upon Lender's receipt of architect's
certificates, waivers of liens, sworn
statements of mechanics and materialmen and
such other evidence of costs, percentage
completion of construction, application of
payments, satisfaction of liens and evidence
of conformance with plans and specifications
approved by Lender, as Lender may reasonably
require. Any portion of Borrower's Deposit
remaining following the final disbursement
toward the cost of restoration and repair of
such Project shall be refunded to Borrower.
In the case of a Material Casualty Loss,
Borrower covenants to promptly repair and
restore the damaged portions of the Project
to the equivalent of their condition
immediately prior to the Material Casualty
Loss or such other condition as Lender may
approve in writing
27
Notwithstanding anything contained
herein to the contrary, in the event of a
Nonmaterial Casualty Loss, Borrower shall be
entitled to utilize the insurance proceeds
received in connection with such Nonmaterial
Casualty Loss to repair and replace the
damaged portions of the Project provided: (i)
that no Event of Default has occurred under
the Loan Documents and (ii) Lender determines
that such Project, after restoration or
repair, will be sufficiently leased to enable
Borrower to pay all operating expenses of
such Project and debt service relating to the
Note secured by such Project, as and when
due. In the case of a Nonmaterial Casualty
Loss, Borrower covenants to promptly repair
and restore the damaged portions of the
Project to the equivalent of their condition
immediately prior to the Nonmaterial Casualty
Loss or such other condition as Lender may
approve in writing. If the conditions set
forth in (i) and (ii) of this paragraph are
not satisfied, the Lender shall have the
option to apply any insurance proceeds from
such Nonmaterial Casualty Loss to the
outstanding balance of the Note securing the
affected Project.
If the insurance proceeds are applied to
the payment of the Note secured by affected
Project, any such application of proceeds
shall not extend or postpone the due dates of
installments due under such Note.
Section 7.08. CONDEMNATION. Promptly,
upon obtaining knowledge of the institution
of any proceedings for the condemnation of
any Project or any portion thereof, or any
other proceedings arising out of injury or
damage to such Project, or any portion
thereof, Borrower will notify the Lender of
the pendency of such proceedings. The Lender
may participate in any such proceedings, and
Borrower shall from time to time deliver to
the Lender all instruments requested by it
which are in Borrower's possession or are
reasonably obtainable by Borrower to permit
such participation. Borrower shall, at its
expense, diligently prosecute any such
proceedings, and shall consult with the
Lender, its attorneys and experts, and
cooperate with them in the carrying on or
defense of any such proceedings.
All proceeds of condemnation awards or
proceeds of sale in lieu of condemnation with
respect to such Project and all judgments,
decrees and awards for injury or damage to
such Project shall be paid to the Lender and
shall be applied, first, to reimburse the
Lender for all reasonable costs and expenses,
including reasonably attorney's fees,
incurred in connection with collection of
such proceeds and, second, except as
otherwise provided herein, the remainder of
said proceeds shall be applied to the payment
of the Note secured by such Project in the
order determined by the Lender in its sole
discretion or paid out to repair or restore
such Project so affected by such
condemnation, injury or damage.
Notwithstanding the foregoing, Lender shall
not exercise Lender's option to apply any
condemnation proceeds to the payment of the
Note secured by the affected Project in the
case of a Material Condemnation Loss, if all
of the following conditions are met: (i)
Borrower is not in default of any term or
condition contained in the applicable Note or
other Loan Documents relating to such
Project; (ii) Lender has determined that the
repair or replacement of such condemned
portions of such Project can be completed
within a reasonable
28
period of time not to exceed the coverage
period provided under the loss of rents
insurance coverage in force with respect to
such Project; (iii) Lender determines that
the condemnation proceeds together with any
additional funds received from Borrower as
required under this Section, are sufficient
to complete restoration or repair, and the
Loan to Value Ratio for the applicable
Project(s) following the completion of such
repairs shall be at least 75.0%; and (iv)
Lender determines that such Project, after
restoration or repair, will be sufficiently
leased to enable Borrower to pay all
operating expenses of such Project and debt
service relating to the Note secured by such
Project, as and when due. In the case of a
Material Condemnation Loss, if the
condemnation proceeds are to be applied to
the restoration of the applicable Project,
Borrower shall comply with and be subject to
all requirements and conditions set forth in
Section 7.07 for the utilization of insurance
proceeds for repair and restoration of the
applicable Project following a Material
Casualty Loss. In the case of a Material
Condemnation Loss, Borrower covenants to
promptly repair and restore the damaged
portions of the Project to the equivalent of
their condition immediately prior to the
Material Condemnation Loss or such other
condition as Lender may approve in writing.
Notwithstanding the foregoing, the Borrower
shall have the option in the last year of the
term of the Loans to require Lender to apply
all condemnation proceeds received as a
result of a Material Condemnation Loss or
Nonmaterial Condemnation Loss to reduce the
balance of the applicable Note provided that
(i) all necessary repairs and restoration are
made to the applicable Project or (ii) the
condemnation proceeds are sufficient to pay
off the outstanding balance of the applicable
Note
Notwithstanding anything contained
herein to the contrary, in the event of a
Nonmaterial Condemnation Loss, Borrower shall
be entitled to utilize the condemnation
proceeds received in connection with such
Nonmaterial Condemnation Loss to repair and
restore the condemned portions of the Project
provided that (i) no Event of Default has
occurred under the Loan Documents, (ii)
Lender determines that such Project, after
restoration or repair, will be sufficiently
leased to enable Borrower to pay all
operating expenses of such Project and debt
service relating to the Note secured by such
Project, as and when due and (iii) the Loan
to Value Ratio for the applicable Project(s)
following the completion of such repairs
shall be at least 75.0%. In the case of a
Nonmaterial Condemnation Loss, Borrower
covenants to promptly repair and restore the
condemned portions of the Project to the
equivalent of their condition immediately
prior to the Nonmaterial Condemnation Loss or
such other condition as Lender may approve in
writing. If the conditions set forth in
Sections (i), (ii) and (iii) of this
paragraph are not satisfied, the Lender shall
have the option to apply any condemnation
proceeds from such Nonmaterial Condemnation
Loss to the outstanding balance of the Note
securing the affected Project.
29
Borrower hereby assigns and transfers
all such proceeds, judgments, decrees and
awards to the Lender and agrees to execute
such further assignments of all such
proceeds, judgments, decrees and awards as
the Lender may request. The Lender is hereby
authorized to execute and deliver valid
acquittances for, and to appeal from, any
such judgment, decree or award. The Lender
shall not, in any event or circumstances, be
liable or responsible for failure to collect,
or exercise diligence in the collection of,
any such proceeds, judgments, decrees or
awards.
Section 7.09. INSPECTION RIGHTS. Upon
reasonable notice (except in an emergency
situation in which case no notice shall be
required), Borrower will permit
representatives of Lender to examine the
books and records of, and visit and inspect
the Projects of Borrower and to discuss the
business, operations, and financial condition
of Borrower with Borrower's officers and
employees and with their independent
certified public accountants.
Section 7.10. KEEPING BOOKS AND
RECORDS. Borrower will maintain proper books
of record and account in which full, true,
and correct entries in conformity with GAAP
shall be made of all dealings and
transactions in relation to the business of
and accounting for each Project and of all
financial transactions materially related to
the financial condition of the Borrower.
Section 7.11. COMPLIANCE WITH LAWS.
Borrower will comply with all material
applicable laws, rules, regulations, and
orders of any court, governmental authority
or arbitrator with respect to the Projects or
where failure to comply therewith would
reasonably be expected to have a material
adverse impact on the financial and business
affairs of Borrower.
Section 7.12. COMPLIANCE WITH
AGREEMENTS. Borrower will comply in all
material respects with all material
agreements, indentures, mortgages, deeds of
trust, and other documents binding on it or
affecting its properties or business with
respect to the Projects or where failure to
comply therewith would reasonably be expected
to have a material adverse impact on the
financial and business affairs of Borrower.
Section 7.13. NOTICES. Borrower will
promptly notify Lender of (i) the occurrence
of an Event of Default, (ii) the commencement
of any action, suit, or proceeding against
Borrower that would reasonably be expected to
have a material adverse effect on the
business, financial condition, or operations
of Borrower, and (iii) any other matter that
would reasonably be expected to have a
material adverse effect on the business,
financial condition, or operations of
Borrower.
Section 7.14. FURTHER ASSURANCES.
Borrower will execute and deliver such
further instruments as may be deemed
reasonably necessary or desirable by Lender
to carry out the provisions and purposes of
this Agreement and the other Loan Documents
and to preserve and perfect the Liens of
Lender in the Collateral.
30
Section 7.15. SECURITY DEPOSITS. From
and after the occurrence of an Event of
Default, Borrower will upon Lender's written
request, establish an escrow account with
Lender into which all security deposits
received by Borrower in connection with
leasing units in the Projects shall be
deposited, subject to the rights of tenants
to reimbursement under the leases.
Section 7.16. LICENSES AND CONTRACTS.
Borrower shall maintain all Required Licenses
in full force and effect until the Loan
secured by each Project is paid in full.
Borrower shall also maintain all other
Contracts in full force and effect during the
term thereof, other than Contracts (other
than Required Licenses) which are terminated
in accordance with the terms thereof.
Section 7.17. NET WORTH AND LIQUIDITY.
At all times during the Loans, Borrower shall
maintain a Tangible Net Worth of
$23,000,000.00 and Liquidity of
$7,000,000.00.
Section 7.18. FIXED CHARGE COVERAGE
RATIO. Beginning with the quarter ending
September 30, 1997, Borrower shall maintain a
Fixed Charge Coverage Ratio at all times of
at least 1.05 to 1.0. Until such time as all
Loans have been paid in full, Borrower shall
at all times maintain credit facilities or
financing commitments with other lender(s)
for the financing of facilities similar to
the Project with aggregate funding
availability in an amount of not less
$12,275,000.00. In the event of a breach of
the covenants set forth in this Section 7.18,
Borrower shall and does hereby affirm that it
will in good faith use its commercially
reasonable efforts to have such other
lender(s) refinance and repay the Loans,
irrespective of whether the Lender has
notified the Borrower of its intention to
accelerate the Maturity Date and require
immediate repayment of the Loans.
Section 7.19. PROPERTY MANAGEMENT. In
the event that Borrower desires to enter into
any management or third party operating
agreements or operating leases for any of the
Projects, Borrower shall submit such
management agreements, operating agreements
or operating leases to Lender for its review
and approval.
Section 7.20. MEDICARE/MEDICAID.
Borrower shall notify Lender if and at such
time as Borrower seeks to participate in any
Medicare or Medicaid programs with respect to
any of the Projects and agrees to assign, to
the extent permitted by applicable law, its
interests in any reimbursements due to it
under either such program, to the extent not
previously assigned to Lender.
31
ARTICLE
VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that, as
long as the Obligations or any part thereof
are outstanding or Lender has any commitment
hereunder, Borrower will perform and observe
the following negative covenants, unless
Lender shall otherwise consent in writing,
which consent may be conditioned upon the
payment of a consent fee or an increase in
the interest rate on the Notes:
Section 8.01. LIMITATION ON LIENS.
Borrower will not incur, create, assume, or
permit to exist any Lien against the Projects
without the Lender's prior written consent.
Notwithstanding the foregoing, the limitation
contained in this Section shall not apply to
liens arising in connection with equipment
leases for equipment serving any Project
provided that the total equipment lease
payments relating to any Project do not
exceed $50,000 per year.
Section 8.02. TRANSACTIONS WITH
AFFILIATES. Borrower shall not enter into
any transaction with any director, officer,
employee, or any Affiliate of Borrower,
without the express written approval of
Lender, other than in the ordinary course of
its business and upon substantially the same
or better terms as it could obtain in an
arm's length transaction with an entity or
person who is not an Affiliate of Borrower.
Section 8.03. DISPOSITION OF PROJECTS.
Borrower will not sell, lease (other than to
tenants in the ordinary course of business),
assign, transfer, or otherwise dispose of any
of the Projects, without the Lender's prior
written approval.
Section 8.04. DISTRIBUTIONS/FEES.
Distributions of Project Revenues are
permitted so long as (i) no Event of Default
exists at such time, or would exist
immediately thereafter, and (ii) the Borrower
has complied with Section 7.05 hereof.
Section 8.05. MANAGEMENT OF THE
PROJECTS. The management agreements, if any,
approved by Lender shall not be amended
without Lender's approval.
Section 8.06. LEASE AGREEMENTS.
Borrower shall not enter into any residential
leases providing for the occupancy of any
unit in the Projects except for tenant leases
in substantially the form approved by Lender
in writing, which approval shall not be
unreasonably withheld. No commercial lease
which generates revenues in excess of ten
percent (10.0%) of the total revenue of any
Project ("Regulated Commercial Leases") shall
be entered into without Lender's written
approval, and each commercial tenant on a
Regulated Commercial Lease shall execute and
deliver to Lender an estoppel, subordination
agreement and attornment agreement in favor
of Lender.
32
Borrower shall not permit any amendment of
the leases (other than Regulated Commercial
Leases) except in the ordinary course of
business and shall not terminate any lease
(other than Regulated Commercial Leases)
except in accordance with the terms thereof.
Further, a Regulated Commercial Lease may not
be amended in any material respect or
terminated without Lender's prior written
approval, which approval shall not be
unreasonably withheld.
Section 8.07. ASBESTOS CONTAINING
MATERIALS. Borrower will not permit the use
of any product, floor covering, insulation,
or paint that contains asbestos in connection
with the construction of the Improvements.
Section 8.08. FLORIDA PROJECT - TANK
TIGHTNESS. Until the Florida Loan is paid in
full and all Obligations under the Florida
Loan Documents have been satisfied, Borrower
shall, not less than once every twelve (12)
months, conduct a tank tightness test on any
underground fuel storage tanks located at the
Florida Project and shall within five (5)
business days of its receipt of the same
provide Lender with a copy of the results of
such test. In the event such test indicates
that fuel contained in any such underground
tank is leaking, Borrower shall promptly
undertake appropriate remedial measures to
stop such leakage, repair and/or relocate
such tank to an above-ground location, and
cleanup any spillage or leakage of fuel, all
in accordance with the procedures and
specifications that have been reviewed and
accepted by Lender.
ARTICLE IX
DEFAULT
Section 9.01. EVENTS OF DEFAULT. Each
of the following shall be deemed an "Event of
Default":
(a) Borrower shall fail to pay or
perform when due the Obligations or any part
thereof, and such failure, shall continue for
ten (10) days following notice thereof from
Lender.
(b) Any representation or warranty made
by Borrower in any Loan Document or in any
certificate, report, notice, or financial
statement furnished at any time in connection
with this Agreement shall be false,
incomplete or erroneous in any material
adverse respect when made.
(c) Borrower fails to perform, observe
or comply with the affirmative covenants set
forth in Sections 7.16 and 7.17 of this
Agreement, or fails to perform, observe or
comply in any material respect with any
covenant, agreement or term contained in the
Environmental Indemnities (subject to the
notice and cure provisions set forth in the
Environmental Indemnities.
33
(d) Unless otherwise specified herein,
Borrower shall fail to perform, observe, or
comply in any material respect with any
covenant, agreement, or term contained in
this Agreement or any other Loan Document
(other than the failure to make payment when
due on the Obligations, the failure to
observe the affirmative covenants set forth
in Sections 7.16 and 7.17 of this Agreement
or a default under the Environmental
Indemnities), and such failure shall continue
for thirty (30) days following notice thereof
from Lender. Notwithstanding the foregoing
in the event that a default covered by this
Section cannot be reasonably cured within
such thirty (30) day period, such default
shall not constitute an Event of Default
hereunder provided that Borrower (i)
commences the cure of such default within the
initial thirty (30) day cure period, (ii)
diligently pursues such cure and (iii)
completes such cure within sixty (60) days of
the original written notice from Lender.
(e) Borrower shall commence a voluntary
proceeding seeking liquidation,
reorganization, or other relief with respect
to itself or its debts under any bankruptcy,
insolvency, or other similar law now or
hereafter in effect or seeking the
appointment of a trustee, receiver,
liquidator, custodian, or other similar
official of it or a substantial part of its
property or shall consent to any such relief
or to the appointment of or taking possession
by any such official in an involuntary case
or other proceeding commenced against it or
shall make a general assignment for the
benefit of creditors or shall generally fail
to pay its debts as they become due or shall
take any corporate action to authorize any of
the foregoing.
(f) Borrower shall fail to contest and
dismiss within a period of ninety (90) days
after the commencement thereof ("DISMISSAL
PERIOD") any involuntary proceeding commenced
against Borrower seeking liquidation,
reorganization, or other relief with respect
to it or its debts under any bankruptcy,
insolvency, or other similar law now or
hereafter in effect or seeking the
appointment of a trustee, receiver,
liquidator, custodian, or other similar
official for it or a substantial part of its
property.
(g) Borrower shall fail to discharge
within a period of thirty (30) days after the
commencement thereof ("DISCHARGE PERIOD") any
attachment, sequestration, or similar
proceeding against the Projects, the
Personalty or other Collateral that will in
Lender's reasonable discretion have a
materially adverse impact on the financial
and business affairs of Borrower.
(h) Borrower shall fail to satisfy and
discharge within sixty (60) days after entry
(but in any event prior to the commencement
of proceedings to enforce collection) of any
final judgment or judgments against it for
the payment of money in an amount that will
in Lender's reasonable discretion have a
materially adverse impact on the financial
and business affairs of Borrower.
(i) This Agreement or any other Loan
Document shall cease to be in full force and
effect in a material respect or shall be
declared null and void or the validity or
enforceability thereof shall be contested or
challenged by Borrower or Borrower shall deny
that it has any further liability or
obligation under any of the Loan Documents.
34
(j) Borrower shall default in the
payment of any principal or interest due on
any other recourse Debt with an outstanding
principal balance of at least $1,000,000 or
more beyond any applicable grace period.
(k) A material deterioration in the
financial condition of Borrower shall have
occurred.
(l) Borrower shall admit in writing its
inability to pay its Debts as they become
due.
(m) Borrower shall fail to discharge
within a period of thirty (30) days of the
filing of any formal charges under federal or
state law for which forfeiture of Borrower's
interest in any Project or the granting of a
lien against any Project, which lien is or
could be superior to any of Lender's liens
against such Project, is a potential penalty
or remedy.
(n) Xxxxxx Xxxx fails to retain at all
times ownership, either directly or
indirectly, of at least 20.00% of all
outstanding voting shares of the Borrower
and/or fails to remain as Chairman of the
Board of Borrower or Xxxxxxx Xxxxxxxxxx or
Xxxxx Xxxxx are removed as senior managers of
Borrower.
Section 9.02. REMEDIES UPON DEFAULT.
Upon the occurrence of an Event of Default,
Lender may without notice terminate its
obligation to lend hereunder and declare the
Obligations or any part thereof to be
immediately due and payable, and the same
shall thereupon become immediately due and
payable, without notice, demand, presentment,
notice of dishonor, notice of acceleration,
notice of intent to accelerate, notice of
intent to demand, protest, or other
formalities of any kind, all of which are
hereby expressly waived by Borrower;
provided, however, that upon the occurrence
of an Event of Default under Section 9.01(d)
or Section 9.01(e), the Obligations shall
become immediately due and payable without
notice, demand, presentment, notice of
dishonor, notice of acceleration, notice of
intent to accelerate, notice of intent to
demand, protest, or other formalities of any
kind, all of which are hereby expressly
waived. Notwithstanding the foregoing,
immediately upon the occurrence of any of the
events described under Section 9.01(d) or
Section 9.01(e), the obligations of Lender to
lend hereunder shall automatically terminate
(regardless of whether any Dismissal Period
or Discharge Period has expired.) Upon the
occurrence of any Event of Default, Lender
may exercise all rights and remedies
available to it in law or in equity, under
the Loan Documents, or otherwise. Upon the
occurrence of any Event of Default, Lender
shall have the right to require Borrower to
replace the property manager, if any, and to
immediately deposit all security deposits in
an escrow account maintained with Lender
subject to the rights of tenants under tenant
leases.
35
ARTICLE X
MISCELLANEOUS
Section 10.01. REIMBURSEMENT OF
EXPENSES OF LENDER. Borrower shall be liable
for and hereby agree to pay Lender on demand
or if no demand is made within twenty (20)
days following receipt of an invoice
therefor: (i) all reasonable costs and
expenses incurred by Lender in connection
with the preparation, negotiation, and
execution of this Agreement and the other
Loan Documents and any and all amendments,
modifications, renewals, extensions, and
supplements thereof and thereto, including,
without limitation, the reasonable fees and
expenses of Lender's legal counsel, (ii) all
reasonable costs and expenses incurred by
Lender in connection with the enforcement of
this Agreement or any other Loan Document,
including, without limitation, the reasonable
fees and expenses of Lender's legal counsel,
(iii) all other reasonable costs and expenses
incurred by Lender in connection with this
Agreement or any other Loan Document,
including, without limitation, all costs,
expenses, taxes (excluding income taxes),
assessments, filing fees, credit
investigations, and other charges levied by a
governmental authority or otherwise payable
in respect of this Agreement or any other
Loan Document or in obtaining any mortgagee
title insurance policy, endorsement, survey,
environmental report, or appraisal in respect
of the Collateral, and (iv) all reasonable
costs and expenses incurred by Lender or
Lender's agents relating to any inspections
of the Projects and any audit of the books,
records and operations of Borrower and the
Projects, including independent analysts,
consultants, engineers, inspectors, auditors,
and appraisers. The amounts described herein
shall be paid even if Borrower fails to
satisfy the conditions of Article V hereof
and the Loans fails to fund as a result.
Lender shall not be required to pay any
premium or other charge or any brokerage fee
or commission or similar compensation in
connection with the Loans .
Section 10.02. INDEMNIFICATION.
Borrower hereby indemnifies Lender and each
affiliate thereof 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, liabilities, claims, damages,
costs, and expenses arise from or relate to
(i) any of the Loan Documents or any of the
transactions contemplated thereby, (ii) from
any investigation, litigation, or other
proceeding, including, without limitation,
any threatened investigation, litigation, or
other proceeding relating to any of the
foregoing, including the violation of any
applicable environmental law, rule or
regulation, now or hereafter existing, that
affects any Project, but excluding any of the
foregoing attributable to Lender's gross
negligence or willful misconduct, and (iii)
the claims of any and all brokers or anyone
else claiming a fee by, through or under
Borrower in connection with arranging the
financing herein described.
36
Section 10.03. RESTATEMENT. The
delivery of each statement, report, and
certificate to Lender pursuant to this
Agreement shall by virtue of such delivery
alone constitute a restatement of the
representations and warranties contained in
Article VI hereof on and as of the date of
delivery. Each such delivery shall except as
otherwise specified by Borrower at the time
of delivery also constitute a representation
and warranty at the time of said delivery
that no Event of Default has occurred and is
continuing.
Section 10.04. NO WAIVER; CUMULATIVE
REMEDIES. No failure on the part of Lender
to exercise and no delay in exercising, and
no course of dealing with respect to, 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 under this
Agreement preclude any other or further
exercise thereof or the exercise of any other
right, power, or privilege. The rights and
remedies provided for in this Agreement and
the other Loan Documents are cumulative and
not exclusive of any rights and remedies
provided by law.
Section 10.05. SUCCESSORS AND ASSIGNS.
This Agreement is binding upon and shall
inure to the benefit of Lender and Borrower
and their respective successors and assigns,
except that Borrower may not assign or
transfer any of its rights or obligations
under this Agreement without the prior
written consent of Lender.
Section 10.06. SURVIVAL OF
REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this
Agreement or any other Loan Document or in
any document, statement, or certificate
furnished in connection with this Agreement
shall survive the execution and delivery of
this Agreement and the other Loan Documents,
and no investigation by Lender or any closing
shall affect the representations and
warranties or the right of Lender to rely
upon them.
Section 10.07. ENTIRE AGREEMENT;
AMENDMENT. THE PARTIES HERETO EXPRESSLY
ACKNOWLEDGE AND AGREE, THAT WITH REGARD TO
THE SUBJECT MATTER OF THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN: (1) THERE
ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES
HERETO AND (2) THIS AGREEMENT, INCLUDING THE
DEFINED TERMS AND ALL EXHIBITS AND ADDENDA,
IF ANY, ATTACHED HERETO: (a) EMBODIES THE
FINAL AND COMPLETE AGREEMENT BETWEEN THE
PARTIES; (b) SUPERSEDES ALL PRIOR AND
CONTEMPORANEOUS NEGOTIATIONS, OFFERS,
PROPOSALS, AGREEMENTS, COMMITMENTS, PROMISES,
ACTS, CONDUCT, COURSE OF DEALING,
REPRESENTATIONS, STATEMENTS, ASSURANCES AND
UNDERSTANDINGS, WHETHER ORAL OR WRITTEN; AND
(c) MAY NOT BE VARIED OR CONTRADICTED BY
EVIDENCE OF ANY SUCH PRIOR OR CONTEMPORANEOUS
MATTER OR BY EVIDENCE OF ANY SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES HERETO. The
provisions of this Agreement and the other
Loan Documents to which Borrower is a party
may be amended or waived only by an
instrument in writing signed by the parties
hereto.
37
Section 10.08. MAXIMUM INTEREST RATE.
It is the intention of Lender and Borrower
and all other parties to the Loans to
conform to and contract in strict compliance
with applicable usury laws from time-to-time
in effect. All agreements between Lender or
any other holder of the Notes and Borrower
(or any other party liable with respect to
indebtedness under the Loan Documents) are
hereby limited by this provision, which shall
control and override all such agreements. In
no way, nor in any event or contingency
(including, but not limited to, prepayment,
default, demand for payment, or the
acceleration of maturity of any Obligations,
or the recharacterization of any application
fee, loan commitment fees, additional
commitment fees, or origination fees as
interest), shall the interest taken,
reserved, contracted for, charged or received
under the Notes, or otherwise, exceed the
Maximum Rate. If, from any possible
construction of any document, interest would
otherwise be payable in excess of the Maximum
Rate, any such construction shall be subject
to this provision, and such document shall be
automatically reformed, and the interest
payable shall be automatically reduced to the
Maximum Rate permitted under applicable law,
without the necessity of the execution of any
amendment or new document. If Lender or the
holder of the Notes shall ever receive any
thing of value that is characterized as
interest under applicable law and that would
apart from this provision, be in excess of
the Maximum Rate, an amount equal to the
amount that would have been excessive
interest shall, without penalty, be applied
to the reduction of the principal amount
owing on the applicable Note in the inverse
order of its maturity and not to the payment
of interest, or refunded to Borrower or the
other payor thereof if and to the extent such
amount, which would have been excessive,
exceeds such unpaid principal. The right to
accelerate the maturity of the Notes, or any
other indebtedness, does not include the
right to accelerate any interest that has not
otherwise accrued on the date of such
acceleration, and the Lender or the holder
thereof does not intend to charge or receive
any unearned interest in the event of
acceleration. All interest paid or agreed to
be paid to the Lender or the holder of the
Notes shall, to the extent permitted by
applicable law, be amortized, prorated,
allocated and spread throughout the full
stated term (including any renewal or
extension) of the Notes so that the amount of
interest on account of such indebtedness does
not exceed the Maximum Rate. As used in this
paragraph, the term "applicable law" shall
mean the laws of the State of Texas or the
federal laws of the United States of America,
which ever laws allow the greater interest,
as such laws now exist may be changed or
amended or come in effect in the future.
Section 10.09. NOTICES. Any notice,
consent, request, demand or other
communication required or permitted to be
given under any of the Loan Documents to
Lender or Borrower must be in writing and
shall be deemed sufficiently given or made
when (i) delivered in person, (ii) sent by
private courier or national overnight
delivery service with proof of delivery and
courier fees paid by sender, (iii) sent by
telecopy with either telephonic confirmation
of receipt or with a hard copy sent that day
by national overnight delivery service, or
(iv) three (3) days after depositing in the
United States mail by first class mail,
registered or certified, return receipt
requested, postage prepaid, as follows:
38
To Lender: Bank United
0000 Xxxxxxxxx Xxxxxxx, Xxxxx
0000
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With copy to: Xxxxx X. Xxxxxx
Shannon, Martin, Xxxxxxxxxxx &
Xxxxx
1300 Two Xxxxx Center
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
To Borrower: Emeritus Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With copy to: Xxxxx Xxxxxxxxx
The Xxxxxxxxx Group
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
or such other address as shall be set forth
in a notice from the appropriate party given
in compliance with this Section.
Notwithstanding anything to the contrary
herein, any notice delivered pursuant to
Section 51.002 of the Texas Property Code
shall be deemed sufficiently given when
deposited in the United States mail by first
class mail, registered or certified, return
receipt requested, postage prepaid to the
address of Borrower as set forth above.
Section 10.10. APPLICABLE LAW AND
VENUE. This Agreement shall be governed by
and construed in accordance with the laws of
the State of Texas and the applicable laws of
the United States of America without regard
to choice of law principles. This Agreement
has been entered into in Xxxxxx County,
Texas, and it shall be performable for all
purposes in Xxxxxx County, Texas. Courts
within the State of Texas shall have
jurisdiction over any and all disputes
between Borrower and Lender, whether in law
or equity, including, but not limited to, any
and all disputes arising out of or relating
to this Agreement or any other Loan Document;
and venue in any such dispute whether in
federal or state court shall be laid in
Xxxxxx County, Texas. Notwithstanding the
foregoing, the laws of the state in which
specific Collateral is located shall govern
the perfection of any lien or security
interest in such Collateral and the
foreclosure or execution upon any lien or
security interest in such Collateral.
39
Section 10.11. COUNTERPARTS. This
Agreement may be executed in one or more
counterparts, each of which shall be deemed
an original, but all of which together shall
constitute one and the same instrument.
Section 10.12. SEVERABILITY. Any
provision of this Agreement held by a court
of competent jurisdiction to be invalid or
unenforceable shall not impair or invalidate
the remainder of this Agreement and the
effect thereof shall be confined to the
provision held to be invalid or illegal.
Section 10.13. HEADINGS. The headings,
captions, and arrangements used in this
Agreement are for convenience only and shall
not affect the interpretation of this
Agreement.
Section 10.14. PARTICIPATION. Borrower
acknowledges and agrees that Lender may
assign all or a part of its interests under
the Loan Documents to one or more third
parties. Borrower acknowledges that all
information relating to the Loan Documents,
the Projects, Borrower, any guarantor, or
holders of equity interests in Borrower,
within the possession of or later acquired by
Lender or its agents may be disclosed to
prospective or actual purchasers,
participants, and their respective agents,
and further, in connection with a potential
or actual securitization of the Note, to
underwriters, rating agencies, other loan
servicers, and persons or entities acting as
trustee of any trusts, investment conduits,
or other entities to which the Note may be
assigned. Borrower hereby consents to such
disclosures.
Section 10.15. CONSTRUCTION. Borrower
and Lender acknowledge that each of them has
had the benefit of legal counsel of its own
choice and has been afforded an opportunity
to review this Agreement and the other Loan
Documents with its legal counsel.
Section 10.16. WAIVER OF JURY TRIAL.
Borrower and Lender hereby expressly waive
any right to a trial by jury in any action or
legal proceeding arising out of or relating
to this Agreement or any other Loan Document
or the transactions contemplated hereby or
thereby.
Section 10.17. ARBITRATION. To the
maximum extent not prohibited by law, any
controversy, dispute or claim arising out of,
in connection with, or relating to the Loans
or the Loan Documents or any transaction
provided for therein, including, but not
limited to, any claim based on or arising
from an alleged tort or an alleged breach of
any agreement contained in any of the Loan
Documents, shall, at the request of any party
to the Loans or Loan Documents (either
before or after the commencement of judicial
proceedings) be settled by arbitration
pursuant to Title 9 of the United States
Code, which the parties hereto acknowledge
and agree applies to the transaction involved
herein, and in accordance with the Commercial
Arbitration Rules of the American Arbitration
Association (the "AAA"). In any such
arbitration proceeding: (i) all statutes of
limitations which would otherwise be
applicable shall apply; and (ii) the
proceeding shall be conducted in Houston,
Texas, by a single arbitrator, if the amount
in controversy is one million dollars
40
($1,000,000.00) or less, or by a panel of
three arbitrators if the amount in
controversy is over one million dollars
($1,000,000.00). All arbitrators shall be
selected by the process of appointment from a
panel pursuant to Section 13 of the AAA
Commercial Arbitration Rules, and each
arbitrator shall have AAA acknowledged
expertise in the subject matter of the
controversy, dispute or claim. Any award
rendered in any such arbitration proceeding
shall be final and binding, and judgment upon
any such award may be entered in any court
having jurisdiction.
If any party to the Notes or Loan
Documents files a proceeding in any court to
resolve any such controversy, dispute or
claim, such action shall not constitute a
waiver of the right of such party or a bar to
the right of any other party to seek
arbitration under the provisions of this
Section of that or any other claim, dispute
or controversy, and the court shall, upon
motion of any party to the proceeding made
within sixty (60 days of the filing of such
action, direct that such controversy, dispute
or claim be arbitrated in accordance with
this Section.
Notwithstanding any of the foregoing,
the parties hereto agree that no arbitrator
or panel of arbitrators shall possess or have
the power to (i) assess punitive damages,
(ii) dissolve, rescind or reform (except that
the arbitrator may construe ambiguous terms)
the Loans or any Loan Documents, (iii) enter
judgment on the debt, (iv) exercise equitable
powers or issue or enter any equitable
remedies or (v) allow discovery of
attorney/client privileged information. The
Commercial Arbitration Rules of the AAA are
hereby modified to this extent for the
purpose of arbitration of any dispute,
controversy or claim arising out of, in
connection with, or relating to the Loans or
any Loan Document. The parties further agree
to waive, each to each other, any claims for
punitive damages, and agree that neither an
arbitrator nor any court shall have the power
to assess punitive damages.
No provision of, or the exercise of any
rights under, this Section shall limit or
impair the right of any party to the Loan
Documents before, during or after any
arbitration proceeding to: (i) exercise self-
help remedies such as setoff or repossession;
(ii) foreclose (judicially or otherwise) any
lien on or security interest in any real or
personal property Collateral; or (iii) obtain
emergency relief from a court of competent
jurisdiction to prevent the dissipation,
damage, destruction, transfer, hypothecation,
pledging or concealment of assets or of
Collateral securing any indebtedness,
obligation or guaranty referenced in the Loan
Documents. Such emergency relief may be in
the nature of, but is not limited to: pre-
judgment attachments, garnishments,
sequestrations, appointments of receivers, or
other emergency injunctive relief to preserve
the status quo.
In the event applicable law prohibits
the submission of a particular controversy,
dispute, or claim arising out of or in
connection with any of the Loan Documents or
transactions contemplated therein to
arbitration, Borrower and Lender agree that
any actions or proceedings in connection
therewith shall be tried and litigated only
in the state and federal courts located in
Houston,
41
Texas except for actions or proceedings for
enforcement of any lien or security interest
in the Collateral which shall be in the
jurisdiction where the applicable Collateral
is located or any other court in which Lender
shall initiate legal or equitable proceedings
that has subject matter jurisdiction over the
matter in controversy. Borrower and Lender,
to the extent permitted by applicable law,
waive any right to assert the doctrine of
forum non-conveniens or to object to the
venue to the extent any proceeding is brought
in accordance with this paragraph.
Section 10.19. ADDITIONAL OBLIGATIONS.
In addition to all Obligations hereunder,
under the Notes and under the other Loan
Documents, Borrower shall be personally
liable, in the amount of any loss, damage or
cost resulting from (i) fraud or intentional
misrepresentation by Borrower in connection
with obtaining the Loans evidenced by the
Notes or in complying with Borrower's
obligations under the Notes, the Deeds of
Trust, or any other Loan Documents ( In such
event, the "loss" shall be deemed to include
but not be limited to, any loss of sums owing
from Borrower under the Notes, the Deeds of
Trust and any other Loan Documents), (ii)
failure to remit to Lender insurance
proceeds, condemnation awards, or other sums
or payments attributable to the Projects in
accordance with the provisions of the Deeds
of Trust, except to the extent that Borrower
did not have the legal right, because of a
bankruptcy, receivership, or similar judicial
proceeding, to direct disbursement of such
sums or payments, (iii) failure to apply to
principal and interest under the Notes,
payment of utilities, taxes and assessments,
ground rents, if any, on the Projects as they
become due and payable, or otherwise remit to
Lender all rents, profits, issues, products
and income of the Projects received following
any Event of Default and its continuance
under the Notes or the Deeds of Trust
(including any received or collected by or on
behalf of Borrower after an Event of Default,
except to the extent that Borrower did not
have the legal right, because of a
bankruptcy, receivership or similar judicial
proceeding, to direct the disbursement of
such sums), (iv) removal of any personalty or
fixtures constituting a portion of any
Projects except as otherwise allowed herein
or under the terms of the Deeds of Trust, (v)
failure to pay any valid mechanics',
materialman's or similar lien claimants'
liens arising from work performed or
materials furnished in connection with any
Project prior to any sale or foreclosure
thereof, (vi) Borrower's failure to deliver
to Lender following default under the Loan
Documents and upon demand by Lender, all
security deposits received in connection with
the Projects, subject to the rights of
tenants under tenant leases, (vii) any waste
of or damage to any Project caused by the
willful or wanton acts or omissions of
Borrower or its agents, or any deferred
maintenance of any Project caused by the
inaction of Borrower in which case the loss
shall be deemed to include all costs of
repair, replacement or rehabilitation of such
Project (for purposes of this Section 10.19,
"deferred maintenance" shall mean a failure
to maintain any Project in good repair by
failing to replace and/or repair
improvements, fixtures, and appliances as
needed to maintain such Project in good
repair and (viii) any obligation of Borrower
arising under Paragraph 2.4 of the Deeds of
Trust, and/or the Environmental Indemnities
which event, the "loss" shall include all
obligations of Borrower under the
Environmental Indemnities .
42
Signature Page to Loan Agreement by and
between EMERITUS CORPORATION, a Washington
corporation, and BANK UNITED, a federal
savings bank
---------------------------------------------
---------------------------------------------
--
IN WITNESS WHEREOF, the parties hereto have
duly executed this Agreement as of the day
and year first above written.
BORROWER:
EMERITUS CORPORATION,
a
Washington corporation
By:
/s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
---------------------------------------
Title: Secretary, director of Finance
and CFO
LENDER:
BANK UNITED
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Xxxxx Xxxxx, Vice President
43
