LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is entered
into as of the 10th day of January, 1997, by and
between FlNOVA Capital Corporation, a Delaware
corporation ("Lender") and Fairfield Retirement
Center, LLC, a California limited liability
company ("Borrower").
RECITALS:
A. Borrower desires to obtain a loan in an
amount of up to TWELVE MILLION EIGHT HUNDRED
THOUSAND AND NO/100 DOLLARS ($12,800,000.00) from
Lender for the purpose of providing construction
and term financing for the NorthBay Retirement
Center.
B. Lender is willing to make the loan to
Borrower based on the terms and conditions of, and
Borrower's compliance with, this Agreement and the
other Loan Documents (as hereafter defined).
AGREEMENT:
NOW, THEREFORE, for good and valuable
consideration, the receipt and suff'ciency of
which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE
1
DEFINITIONS
As used in this Agreement and in the Loan
Documents, unless otherwise expressly indicated
herein or therein, the following terms shall have
the following meanings (such meanings to be
applicable equally both to the singular and plural
terms defined):
1.1 "ADVANCE" shall mean the [nitial Advance
and any subsequent advance of proceeds of the Loan
by Lender pursuant to this Agreement.
1.2 "AFFIDAVIT OF BORROWER" shall mean a
sworn Affidavit of Borrower in the form of Exhibit
F-2. to accompany a Work-Related Advance Request.
1.3 "AFFILIATE" shall mean with respect to
any Person, a Person that directly or indirectly,
through one or more intermediaries, controls or is
controlled by or is under common control with such
Person; any officer, director, partner or
shareholder of such Person; and any relative of
any of the foregoing. Notwithstanding anything to
the contrary set forth in this definition,
Affiliate shall not include (a) any shareholder of
Emeritus Corporation or any relative of such
shareholder, or (b) Xxxxxx X. Xxxx or any Person
who otherwise would be an Affiliate of Xxxxxx X.
Xxxx. The term "control" means possession.
directly or indirectly, of the power to direct or
cause the direction of the management and policies
of a Person, whether through the ownership of
voting securities. by contract or otherwise.
1.4 "ARCHITECT/ENGINEER" shall mean an
architect or engineer employed by Borrower to
perform architectural or engineering services.
1.5 "ARCHITECT/ENGINEER AGREEMENT" shall mean
a contract (written or oral, now or hereafter in
effect) between Borrower and an Architect/Engineer
for the performance of architectural or
engineering services, as approved by Lender in
writing and modified from time to time with
Lender's prior written consent.
1.6 "BASE RATE" shall mean: (a) the Citibank
prime rate; or (b) such per annum rate which has
been selected by Lender as the Base Rate pursuant
to the terms of the following sentences. If the
Base Rate then being utilized ceases to be
published, then Lender shall choose as the Base
Rate a reference rate which Lender deems
comparable in its sole and absolute discretion. As
used above, the Citibank prime rate shall mean the
rate per annum publicly announced from time to
time by Citibank, N.A., New York, New York
(together with any successor, "Citibank"), as its
base rate or equivalent rate of interest charged
by Citibank to its largest and most creditworthy
commercial borrowers, notwithstanding the fact
that some borrowers of Citibank may borrow from
Citibank at rates less than such announced prime
rate.
1.7 "BASIC INTEREST" shall mean the interest
due and payable on the outstanding principal
balance of the Note, which shall accrue on the
outstanding principal balance of the Loan Amount
at the lesser of (i) the Maximum Rate, or (ii) a
floating rate per annum equal to seventy- five
(75) basis points above the Base Rate ("Basic
Rate"); which shall be initially determined using
the Base Rate in effect on the first Business Day
of the month in which the Loan Closing occurs, and
thereafter shall automatically change on each
Interest Rate Change Date.
At any time during the first one-year period
following the Permanent Term Commencement Date
(herein defined), Borrower shall have the one time
right upon seven (7) days' prior written notice to
Lender to convert the floating Basic Rate to a
fixed rate for the remaining term of the Loan (the
"Conversion Option") at a rate equal to the sum of
the Treasury Constant Maturity Rate as published
by the Federal Reserve Bank for Treasury Notes
having a maturity closest to the remaining term of
the Note plus three hundred (300) basis points,
provided that no Event of Default (herein defined)
or Incipient Default (herein defined) of which
Lender has not)fied Borrower has occurred and that
Borrower has paid to Lender a conversion fee equal
to one-quarter of one percent (0.25%) of the then
outstanding principal balance of the Note as of
the date of Borrower's notice of Borrower's
exercise of the Conversion Option. In the event
that Borrower does not exercise the Conversion
Option and convert the floating Basic Rate to a
fixed Basic Rate during the first year after
commencement of the Permanent Term, Borrower shall
be conclusively deemed to have elected to retain
the variable Basic Rate set forth in the preceding
paragraph for the remainder of the term of the
Loan until the Maturity Date. Notwithstanding the
foregoing to the contrary, in the event Borrower
is unable to exercise the Conversion Option on the
date one year after the commencement of the
Permanent Term because at such time there exists
an Incipient Default of which Lender has not)fied
Borrower, and such Incipient Default is
subsequently cured by Borrower, then Borrower may
exercise the Conversion Option at any time within
thirty (30) days after the date the Incipient
Default is cured.
Basic Interest shall be calculated on the
basis of actual number of days elapsed during the
period for which interest is being charged
predicated on a year consisting of three hundred
sixty (360) days. Interest shall accrue from
Lender's wiring or disbursement of funds through
Lender's receipt of repayment.
1.8 "BORROWER" shall mean Fairfield
Retirement Center, LLC, a California limited
liability company and its permitted successors,
baneficiaries and assigns. The members of Borrower
are each of the Guarantors.
1.9 "BUDGET" shall mean a detailed budget
cost itemization prepared by Borrower with respect
to construction of the Work, and approved in
writing by Lender, which specifies by item the
cost, source of payment and draw schedule of (a)
all labor, materials and services necessary for
Completion of the Work; and (b) all other expenses
incidental to the Completion of the Work. The
Budget shall include an interest reserve,
retainage and contingency reserve deemed adequate
by Lender. The original Budget for the Work shall
be attached hereto as Exhibit D at such time as it
has been prepared by Borrower and approved by
Lender in writing.
1.10 "BUSINESS DAY" shall mean any day other
than a Saturday, Sunday or any holiday on which
banks in Phoenix, Arizona are required to close.
1.11 "CASH FLOW". shall mean, for any given
accounting period, net income (as determined in
accordance with GAAP applied on a basis consistent
with prior periods) (to the extent deducted from
revenues in arriving at net income) depreciation,
amortization, interest expense, accrued income
taxes, Management Fees, and any expenses for the
Work funded with proceeds of the Loan (excluding
interest reserve payments already included in
interest expense) is without duplication, income
taxes actually paid, gain on the sale of assets,
extraordinary income, and an amount equal to two
percent (2%) of Gross Revenues (as a replacement
reserve). In no instance will any capital
expenditure be accounted for in determining Cash
Flow.
1.12 "CERTIFICATE OF COMPLETION" shall mean,
with respect to the Work, a certificate issued by
the governmental authority having jurisdiction
over the Work when all
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of the Work has been completed, allowing the use
of the Improvements by Borrower tbr their intended
purpose.
1.13 "COLLATERAL" shall mean the Property and
the Leases and any and all other property
constituting security for the Loan under the
Mortgage or any of the other Loan Documents.
1.14 "COMPLETION" or "COMPLETION OF THE WORK"
shall mean completion of the Work (excluding
certain "punch-list" items which are not necessary
for the full operation of the Project),
substantially in accordance with the Plans and
Specifications, the Construction Contracts, all
applicable, zoning, building and other
governmental laws, regulations and private
restrictions, the Loan Documents, sound
construction, engineering and architectural
principles and commonly accepted safety standards,
and lien free and free of defective materials and
workmanship; and receipt by Lender of the
following in form and substance reasonably
satisfactory to it:
1.14.1 A certificate of completion from
Borrower and its Architect/Engineer and, if Lender
elects, from Lender's Consultant, certifying that
the Work has been so completed, all utilities
necessary to serve the Property have been
connected and are operating, and-the Improvements
are ready for occupancy by those Tenants whose
tenant improvement work is included in the Budget
(if any);
1.14.2 A Certificate of Completion;
1.14.3 If applicable laws provide that the
recording of a notice of completion for the Work
will cause the expiration upon a date certain of
the statutory period within which mechanics' and
similar liens can be filed, verification of the
recording of such notice in the manner prescribed
by such laws;
1.14.4 Final lien waivers (which may be
conditional on payments only with respect to the
work, material, equipment, or services to be paid
from proceeds of the final Advance);
1.14.5 The Re-lssued Title Policy required
pursuant to paragraph 5.16.9;
1.14.6 The "AS-BUILT SURVEY" required
pursuant to paragraph 5.16.8;
1.14.7 All environmental licenses or
approvals for operation within or on the Project
if any; and any other applicable governmental
permits, approvals, consents, licenses and
certificates for the use and operation of the
Project as a 172-unit congregate living facility;
1.14.8 Evidence satisfactory to Lender that
there are no material judgments or pending
litigation or, to the best of Borrower's
knowledge, threatened litigation of a material
nature outstanding against the Borrower. or the
Project including but-not limited to litigation or
judgments which may affect title or Lender's lien
position with respect to any of the Collateral or
any litigation or judgment which might materially
affect the ability of Borrower to perform its
obligations under the Loan Documents; and
1.14.9 Evidence satisfactory to Lender that
all Debt owing to third parties and secured by the
Project, or any portion thereof, has been paid
except for the Debt secured by the Emeritus Deed
of Trust.
1.15 "COMPLETION DATE" shall mean the date
upon which the final Advance is funded by Lender
pursuant to paragraph 3.2.6.
1.16 "CONSTRUCTION CONTRACT" shall mean a
contract (written or oral, now or hereafter in
effect) between Borrower and a Contractor, or
between any Contractor and any other person or
entity relating in any way to the Completion of
the Work, including the performing of labor and
the furnishing of equipment, materials or services
(other than architectural or engineering
services), as approved by Lender in writing and
modified from time to time with Lender's prior
reasonable wriffen consent.
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1.17 "CONSTRUCTION TERM" shall mean a term
commencing on the Loan Closing and ending on the
earlier of (a) the date eighteen ( 18) months
after the Loan Closing, or (b) the Completion
Date.
1.18 "CONTRACTOR" shall mean a contractor
employed by Borrower to provide labor and/or to
furnish equipment, materials or services for any
portion of the Work.
1.19 "CONTRACTS. INTANGIBLES. LICENSES AND
PERMITS" shall mean the property so described in
Exhibit A-2.
1.20 "DEBT" means for any Person: (i) all
indebtedness, whether or not represented by bonds,
debentures, notes, securities, or other evidences
of indebtedness, for the repayment of money
borrowed, (ii) all indebtedness representing
deferred payment of the purchase price of property
or assets, (iii) all indebtedness under any lease
which, in conformity with GAAP, is required to be
capitalized for balance sheet purposes, (iv) all
indebtedness under guaranties, endorsements,
assumptions, or other contingent obligations, in
respect of, or to purchase or otherwise acquire,
indebtedness of others, and (v) all indebtedness
secured by a Lien existing on property owned,
subject to such lien, whether or not the
indebtedness secured thereby shall have been
assumed by the owner thereof. Debt shall not
include principal and interest payments (if any)
made under the note secured by the Emeritus Deed
of Trust.
1.21 "DEBT SERVICE" shall mean, for any given
accounting period, all regularly scheduled
principal and interest payments due under the Note
plus all payments on operating and capita] leases
(including Equipment Leases) and any other Debt
approved by Lender.
1.22 "DEBT SERVICE AFTER MANAGEMENT FEE
COVERAGE RATIO" shall mean the ratio of (a) Post
Management Fees Cash Flow for the relevant period,
to (b) Debt Service.
1.23 "DEBT SERVICE COVERAGE RATIO" shall mean
the ratio of (a) Cash Flow for the relevant
period, to (b) Debt Service for the relevant
period.
1.24 "DEFAULT RATE" shall mean the Default
Rate of interest more fully described and set
forth in paragraph 7.1.10.
1.25 "DISTRIBUTIONS" shall have the meaning
prescribed in paragraph 5.10.
1.26 "DUE DATE" shall mean the first to occur
of (i) the Maturity Date, (ii) full repayment of
the Loan, or (iii) acceleration of the Loan upon
the occurrence of an Event of Default under the
Loan Documents.
1.27 "EMERITUS DEED OF TRUST" shall mean that
certain Deed of Trust dated luly 31, 1996 executed
by Borrower for the benefit of Emeritus
Corporation, executed on August 1, 1996 under
Series No. 96-51994, Off'cial Records, Xxxxxx
County, California, as amended by instrument
recorded concurrently with the Mortgage, securing
payment of a promissory note in the original
principal amount of $2,500,000.00 of even date
therewith executed by Borrower and payable to
Emeritus Corporation. The foregoing note and deed
of trust shall be in form and substance acceptable
to Lender.
1.28 "EQUIPMENT LEASES" shall have the
meaning prescribed in paragraph 3.1. 18.
1.29 "EVENT OF DEFAULT" shall have the
meaning described and set forth in Article 6.
1.30 "EXCESS CASH FLOW" shall mean Cash Flow
minus Debt Service, for the relevant period.
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1.31 "FORCE MAJEURE EVENT" shall mean any
"Act of God", fire, strike, casualty or
governmental order, or injunction issued by a
court of competent jurisdiction. which are entered
for reasons other than for Borrower's acts or
omissions which would constitute a default under
this Agreement, or similar occurrences beyond
Borrower's reasonable control.
1.32 "GAAP" shall mean generally accepted
accounting principles.
1.33 "GENERAL CONTRACT" shall mean that
Construction Contract dated as of January 7, 1997
between Borrower and General Contractor covering
the Work for a guaranteed fixed or maximum price
not to exceed $9,917,086.00, as the same may be
modified from time to time with Lender's prior
written consent. The General Contract shall
provide that the Work shall be fully completed for
the foregoing guaranteed maximum price
notwithstanding (a) any future events, including
without limitation, cost overruns, whether
foreseeable or unforeseeable (except Force Majeure
Events) or (b) any defaults, disputes or
litigation between the General Contractor and its
subcontractors or materialmen.
1.34 "GENERAL CONTRACTOR" shall mean Xxxxxx
Contracting, Inc., a California
1.35 "GROSS REVENUE" shall mean for any given
accounting period, the aggregate gross rental
income, percentage rental income and all other
income from the Property realized during such
period in accordance with GAAP.
1.36 "GUARANTIES" shall mean those guaranties
of payment and performance and subordinations
executed by the Guarantors and more particularly
described in paragraph 5.12. "Guaranty" shall mean
any one ofthe Guaranties.
1.37 "GUARANTORS" shall mean BW (Fairfield)
Real Estate Corporation, a California corporation,
Emeritus Corporation, a Washington corporation and
NorthBay Health Advantage, a California public
non-profit benefit corporation.
1.38 "IMPROVEMENTS" shall mean all
improvements to be constructed upon the Real
Property as part of the Work, together with any
off-site improvements which must be completed in
connection therewith, all as set for in the Plans
and Specifications and the Construction
Contract(s) and as described in the Budget.
1.39 "INCIPIENT DEFAULT" shall mean the
occurrence of any event, which with the giving of
notice or the passage of time or both, would
constitute an Event of Default under the Loan
Documents.
1.40 "INITIAL ADVANCE" shall mean the initial
Advance in an amount not to exceed $411,393.60, in
accordance with the terms and provisions of this
Agreement including, without limitation, paragraph
2.3.
1.41 "INTEREST RATE CHANGE DATE" shall mean
the first Business Day of the publisher of the
Base Rate during each calendar month following the
date of the [nitial Advance of the Loan.
1.42 "LEASES" shall mean all of the leases of
the Real Property or any portion thereof made by
Borrower as landlord, together with any and all
other existing or future leases or other
agreements for the use and/or occupancy of the
Real Property or any portion thereof by Borrower
as landlord, as the same may from time to time be
modified or amended.
1.43 "LENDER" shall mean FINOVA Capital
Corporation, a Delaware corporation, and/or its
successors and assigns.
1.44 "LENDER'S CONSULTANT" shall have meaning
given to it in paraaraph 9.1.
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1.45 "LOAN" shall mean the advances of money
(including any accrued interest and other charges
under the Loan Documents not paid when due) made
by Lender to Borrower, or on Borrower's behalf,
pursuant to this Agreement and the Loan Documents.
1.46 "LOAN CLOSING" shall mean the date the
Initial Advance is advanced to Borrower from
Lender, which advancement will be made through
escrow with the Title Agent, and which Lender and
Borrower contemplate will be no later than January
17, 1997.
1.47 "LOAN DOCUMENTS" shall mean those
documents (including this Agreement) now or
hereafter evidencing, securing or otherwise
ancillary to the Loan, as they may be hereafter
amended, renewed, replaced or restated.
1.48 "LOAN FEE" shall mean a fee for the Loan
in the amount of Two Hundred Fifty-Six Thousand
Dollars ($256,000.00).
1.49 "MANAGEMENT AGREEMENT" shall mean that
Agreement to Provide Management Services to an
Assisted Living Facility dated August 13, 1996
between Borrower and Manager, or such other
management agreement from time to time entered
into between Borrower and a manager governing the
management of the Property, and reasonably
approved in writing by Lender.
1.50 "MANAGEMENT FEES" fees payable pursuant
to the Management Agreement, not to exceed five
percent (5%) of the Gross Revenue for the period
with respect to which the Management Fees are
paid.
1.51 "MANAGER" shall mean Emeritus
Corporation, a Washington corporation or such
other Person who has been designated to act as the
manager of the Property and approved in writing by
Lender.
1.52 "MATURITY DATE" shall mean the earlier
to occur of (i) the date falling ninety (90)
months after the Loan Closing, or (ii) the sixth
(6th) anniversary date of the Permanent Term
Commencement Date.
1.53 "MAXIMUM LOAN AMOUNT" shall mean the
maximum principal amount of the Loan, which shall
be least of (a) TWELVE MILLION EIGHT HUNDRED
THOUSAND AND NO/100 DOLLARS ($12,800,000.00), (b)
the sum of (i) one hundred percent ( 100%) of the
costs of the Work set forth in the Budget and
designated as costs to be paid from Loan proceeds,
and (ii) all other amounts Lender is obligated to
advance hereunder, or (c) eighty percent (80%) of
the appraised completed stabilized value of the
Project upon Completion, as determined by
Valuation Counselor's, Inc.
1.54 "MAXIMUM RATE" means the maximum rate of
nonusurious interest permitted from day to day by
applicable law, and calculated after taking into
account any and all relevant fees, payments, and
other charges in respect of the Loan Documents
which are deemed to be interest under applicable
law.
1.55 "MORTGAGE" shall mean the Deed of Trust,
Security Agreement, Assignment of Leases and Rents
and Fixture Filing securing Borrower's obligations
under the Loan Documents as more fully described
in paragraph 3.1.1.2. as it may be hereafter
amended, renewed, replaced or restated.
1.56 "NOTE" shall mean the promissory note of
Borrower evidencing the Loan, as more fully
described in paragraph 2.6. as it may be hereafter
amended, renewed, replaced or restated.
1.57 "OBLIGATIONS" shall mean any and all of
the covenants, warranties, representations and
other obligations, including the obligation to
repay the Loan, made or undertaken by Borrower or
others to Lender, or others as set forth in the
Loan Documents, any other documents or instruments
executed in connection with the Loan.
1.58 "PERMITTED ENCUMBRANCES" shall mean all
matters shown on Exhibit B.
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1.59 "PERSON" shall mean an individual,
trust, estate, partnership, limited liability
company, corporation or any other incorporated or
unincorporated organization.
1.60 "PERSONAL PROPERTY" shall mean all items
of personal property, tangible and intangible
(including without limitation, fixtures,
furniture, inventory, supplies, vehicles,
machinery and equipment, together with all chattel
paper, documents, instruments, accounts, contract
rights, proprietary rights, rights to payment,
trademarks, tradenames, copyrights, patents and
patent rights, general intangibles, and books and
records) owned by Borrower and used in connection
with the Real Property or the operation of
Borrower's business thereon, or necessary or
incident to the operation of Borrower's business
on the Real Property, whether now owned or
hereafter acquired, together with all products and
proceeds of the same, all as more fully described
in Exhibit A-2 attached hereto and incorporated
herein by this reference.
1.61 "PERMANENT TERM" shall mean a permanent
term for the Loan running from the Permanent Term
Commencement Date through the Maturity Date.
1.61 "PERMANENT TERM COMMENCEMENT DATE" shall
mean the first day following the end of tne
Construction Term.
1.62 "PLANS AND SPECIFICATIONS" shall mean
the architectural, structural, mechanical,
electrical and other plans and specifications for
the construction of the Project and the completion
of tne Work and prepared by the
Architect(s)/Engineer(s), as approved by Lender
and as modified from time to time with Lender's
prior written consent.
1.63 "POST MANAGEMENT FEES CASH FLOW" shall
mean shall mean, for any given accounting period,
net income (as determined in accordance with GAAP
applied on a basis consistent with prior periods)
(to the extent deducted from revenues in arriving
at net income) depreciation, amortization,
interest expense, accrued income taxes, and any
expenses for the Work funded with proceeds of the
Loan (excluding interest reserve payments already
included in interest expense), without
duplication, income taxes actually paid, gain on
the sale of assets, extraordinary income, and an
amount equal to two percent (2%) of Gross Revenues
(as a replacement reserve). In no instance will
any capital expenditure be accounted for in
determining Post Management Fees Cash Flow.
1.63 "PRINCIPAL WORK-RELATED ITEMS" shall
mean the Plans and Specifications and all
agreements between Borrower and third parties
pertaining to the Work, including, without
limitation, the Construction Contract(s) and the
Architect/Engineer Agreement(s), as approved by
Lender in writing and modified from time to time
with Lender's prior written consent.
1.64 "PROJECT" shall mean the 172 unit
congregate living facility to be constructed on
the Real Property.
1.65 "PROPERTY" shall mean the Personal
Property and the Real Property.
1.66 "REAL PROPERTV" shall mean the real
property legally described on Exhibit A- I
attached hereto and incorporated herein by this
reference, and all improvements and additions
thereto, and all mineral rights, easements and
other rights appurtenant thereto, all as more
fully described in the Mortgage.
1.67 "REQUIRED COMPLETION ASSURANCE DEPOSITS"
shall mean all amounts deposited by Borrower with
Lender pursuant to paraaraph 5.22 of this
Agreement.
1.68 "REQUIRED COMPLETION DATE" shall mean
the date which is eighteen ( 18) months after the
Loan Closing subject to Force Majeure Events not
exceeding sixty (60) days in the aggregate as
Force Majeure Events not constituting casualties
(e.g., flood, earthquake, fire and similar types
of occurrences) and as to Force Majeure Event
constituting casualties, not exceeding a time
deemed reasonable by Lender in the circumstances
given the nature and extent of such casualty.
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1.69 "REQUIRED FINANCIAL INFORMATION" shall
mean:
(a) Copies of financial statements of
Borrower and the Property for all fiscal quarters
ending prior to the scheduled Maturity Date of the
Note, which shall be delivered to Lender no more
than thirty (30) days after the end of each fiscal
quarter;
(b) Copies of annual financial statements for
Borrower and the Property for all fiscal years
ending prior to the Maturity Date of the Note,
which shall be delivered to Lender no more than
one hundred twenty (120) days after the end of
each fiscal year,
(c) Copies of the annual financial statement
of such Guarantor as of December 31 of each
calendar year prior to the Maturity Date of the
Note, to be delivered no later than May 1 of each
calendar year with respect to the immediately
preceding calendar year. Copies of the federal
income tax returns of each Guarantor (except for
Emeritus Corporation) shall be delivered to Lender
within thirty (30) days aRer same are filed with
the Internal Revenue Service;
(d) A copy of each Form 10-K and Form 10-Q
filed by Emeritus Corporation with the United
States Securities Exchange Commission, which shall
be delivered to Lender within thirty (30) days
after filing such form with said comnussion; and
(e) To the extent not included under
subparagraph (a) above, a rent rolVtenant summary
reflecting the status of all Leases of the
Property or portions thereof, and accounts
receivable and accounts payable agings for each
calendar quarter (with year- to-date figures) and
each calendar year falling within the term of the
Loan prepared in accordance with GAAP, which shall
be delivered to Lender within thirty (30) days
after the end of each calendar quarter (in the
case of quarterly statements) and within ninety
(90) days after the end of each calendar year (in
the case of annual statements) during the term of
the Loan.
The financial statements delivered pursuant
to subparagraphs (a) and (b) above shall include:
for Borrower, certified balance sheets, statements
of income and expenses and statements of cash
flow; and for Guarantors, balance sheets. The
financial statements shall be prepared in
accordance with GAAP, consistently applied and
prepared in accordance with the "accrual basis" of
accounting; and shall be in reasonable detail.
Borrower's financial statements shall include
calculations of Cash Flow, Debt Service, Excess
Cash Flow, Gross Revenue, the Debt Service
Coverage Ratio for the period in question and the
Debt Service After Management Fee Coverage Ratio
for the period in question; and shall include a
reconciliation of, and copy of the bank statement
from, each of the Special Accounts including a
summary of all expenditures made therefrom. All
financial statements of Borrower shall be
certified to be true, complete and correct in all
material aspects by the manager or members of
Borrower, and include a signed statement by the
principal financial officer of Borrower that the
financial statements represent fairly, in all
material respects, the financial position and
operation of Borrower subject to annual year end
adjusting entries. All Guarantors' financial
statements shall be signed and certified as true,
correct and complete in all material respects by
the subject Guarantor. Borrower's annual financial
statements required pursuant to subparagraph (b)
shall be audited by a firm of certified public
accountants satisfactory to Lender and shall
include a separate accountant's certificate
acceptable to Lender, and a management letter from
the auditors to Borrower detailing any
deficiencies in Borrower's accounting practices
and commenting on any other accounting- related
matters.
1.70 "SPECIAL ACCOUNTS" shall mean the
Operating Cash Flow Account and Management Fee
Account, all as defined in paragraph 5.6.
1.71 "TENANTS" shall mean each and every
party now or hereafter entitled to the possession
and use of the Property, or any part thereof,
pursuant to the Leases.
1.72 "TITLE AGENT" shall mean Chicago Title
Company.
1.73 "TITLE COMPANY" shall mean Chicago Title
Company.
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1.74 "TITLE POLICY" shall have the meaning
given to it in paragraph 3. 1.4.
1.75 "UNCOVERED COST OF THE WORK" shall mean
the amount equal to the excess (if any) of (a) the
remaining unpaid costs of Completion of the Work
over (b) the committed and undisbursed portion of
the Loan and any Required Completion Assurance
Deposits held by Lender.
1.76 "WORK" shall mean the construction of
the Project and the installation of any and all
furniture, furnishings, fixtures and/or equipment
required by this Agreement or shown as costs on
the Budget the Plans and Specifications or the
Construction Contract(s) tor the Project.
1.77 "WORK PROGRESS SCHEDULE" shall mean the
schedule for the Completion of the Work and parts
thereof, as reasonably approved by Lender in
writing. The Work Progress Schedule shall be
attached hereto as Exhibit E at such time as it
has been prepared by Borrower and reasonably
approved by Lender in writing.
1.78 "WORK-RELATED ADVANCE" shall mean any
Advance made for the purpose of paying or
reimbursing Borrower for the costs of the Work.
1.79 "WORK-RELATED ADVANCE REQUEST" shall
mean the written application of Borrower on
Lender's standard forms made by Borrower
specifying by name and amount all parties to whom
Borrower is obligated for labor, materials,
equipment or services supplied for the Completion
of the Work whether or not specified in the
Budget, and requesting a Work- Related Advance for
payment of such items, accompanied by an Affidavit
of Borrower and such schedules, affidavits,
releases, waivers, statements, invoices, bills and
other documents as Lender may request.
ARTICLE 2
LOAN AMOUNT AND TERMS
2.1 MAXIMUM LOAN AMOUNT AND TERM. Lender
hereby agrees to make the Advances to Borrower in
a principal sum not to exceed the Maximum Loan
Amount, provided Borrower has complied with, and
subject to the terms and conditions of, this
Agreement and all other Loan Documents. Unless
Lender, in its sole and absolute discretion,
agrees in writing with Borrower to make such
Advances thereafter on terms and conditions
satisfactory to Lender, Borrower shall not be
entitled to obtain Work-Related Advances after the
Required Completion Date.
2.2 USE, ALLOCATION AND TIMING OF ADVANCES.
Borrower shall use Advances (after the Initial
Advance) only for payment of and reimbursement for
hard and soft construction costs and interest
reserve set forth in the Budget and designated as
costs to be paid from the Loan proceeds. All
Advances shall be subject to the conditions and
limitations of paragraph 3.2 below.
2.3 USE AND ALLOCATION OF INITIAL ADVANCE.
The proceeds of the Initial Advance shall be
disbursed by Lender on the Loan Closing to or for
the benefit of Borrower through an escrow
established with Title Agent, for use in strict
accordance with the Initial Advance Disbursement
Schedule attached hereto as Exhibit G.
2 .4 [INTENTIONALLY NOT USED]
2.5 BASIC INTEREST. Basic Interest shall
begin to accrue on each Advance as of the date
disbursed by Lender by check or wire transfer to
the Title Agent or Borrower. and such Advance
shall be added to the outstanding principal
balance of the Loan on such date. An Advance shall
be deemed to have been disbursed by Lender to
Borrower and deemed to be part of the outstanding
principal balance of the Loan if disbursed to a
third party on Borrower's behalf or disbursed to
the Title Agent to hold for disbursement to
Borrower subject to the furfillment of certain
conditions to which Borrower has agreed. Interest
shall accrue on Advances only to the extent of the
outstanding principal balance of the Loan.
9
2.6 THE NOTE. In order to evidence the Loan,
Borrower shall execute and deliver to Lender the
Note in the Maximum Loan Amount, which Note shall
be payable in accordance with the terms set forth
therein and in this Agreement, with Basic Interest
at the rates set forth therein and herein. The
principal balance and interest thereon shall be
payable as follows:
2.6.1 CONSTRUCTION INTEREST PAYMENTS.
Commencing on the first day of the second calendar
month following the Loan Closing and on the first
day of each calendar month thereafter during the
Construction Term, Borrower shall remit monthly
payments consisting of accrued Basic Interest (at
the Basic Rate) on the outstanding principal
balance of the Loan (in arrears); provided that,
during the Construction Term, as long as there is
no Event of Default or Incipient Default, such
Basic Interest shall be paid from the interest
reserve set forth in the Budget, until such
interest reserve is exhausted, at which point
Borrower will commence making such interest
payments.
2.6.2 PERMANENT TERM INTEREST PAYMENTS.
Commencing on the first day of the first full
calendar month after the Permanent Term
Commencement Date, and on the first day of each
calendar month thereafter until the first day of
the thirteenth (13th) full calendar month after
the Permanent Term Commencement Date (the
"Principal Commencement Date") Borrower shall
remit monthly payments consisting of accrued Basic
Interest (at the Basic Rate) on the outstanding
principal balance of the Loan (in arrears).
2.6.3 PERMANENT TERM PRINCIPAL AND INTEREST
PAYMENTS. Commencing on the Principal Commencement
Date through Lender's receipt of repayment of the
Loan in full, Borrower shall remit monthly
payments consisting of the amounts specified in
2.6.2 above plus principal in an amount which
would be amortized monthly if the outstanding
principal balance of the Loan Amount on the
Principal Commencement Date was being fully
amortized in consecutive level monthly
installments of principal and interest calculated
over two hundred forty (240) months, assuming a
fixed interest rate for purposes of calculating
such amortization equal to the Basic Rate in
effect on the Principal Commencement Date.
2.6.4 PAYMENT OF REMAININA AMOUNTS. The
remaining principal balance of the Note together
with all accrued but unpaid Basic Interest and all
other amounts payable thereunder and hereunder
shall be all due and payable in xxxx upon the Due
Date.
2.7 PREPAYMENT.
2.7.1 VOLUNTARY FULL PREPAYMENT. Borrower
shall have no right to prepay the Loan in whole or
in part at any time prior to the third anniversary
date of the Loan Closing. At any time after the
third anniversary date of the Loan Closing,
Borrower may, upon giving Lender (i) thirty (30)
days advance written notice thereof if Borrower
has exercised the Conversion Option, or (ii)
ninety (90) days advance written notice thereof if
Borrower has not exercised the Conversion Option,
prepay all, but not a portion of, the amount of
principal and interest due on this Note provided
that (A) on the date of such prepayment Borrower
shall also pay to the order of Lender on the date
of prepayment a fee (the "Prepayment Fee"); (B) no
Event of Default exists; and (C) Borrower pays, in
addition to the full principal amount of the Note,
all accrued but unpaid interest at the applicable
interest rate and all fees and other charges then
outstanding. The Prepayment Fee shall be equal to
the appropriate amount set forth below:
(a) If Borrower has not exercised the
Conversion Option, an amount equal to $100,000;
and
(b) If Borrower has exercised the Conversion
Option, if there is a decline between the yield to
maturity (expressed as a percentage) on the date
the Basic Rate was fixed pursuant to the
Conversion Option on United States Treasury Notes
with a maturity closest to and prior to the
scheduled Maturity Date (the "Existing Treasury
Note Rate")
10
and the yield on United States Treasury Notes with
a maturity closest to and prior to the scheduled
Maturity Date as reported in the Wall Street
lournal or similar publication reasonably
acceptable to Lender on the fifth business day
preceding the prepayment date (the "Future
Treasury Note Rate"), an amount equal to the
product of (i) the difference between the Existing
Treasury Note Rate and the Future Treasury Note
Rate (expressed as a percentage) multiplied by
(ii) the outstanding balance of the Note inclusive
of all accrued and unpaid interest as of the date
of prepayment and further multiplied by (iii) the
number of whole and fractional years remaining
until the scheduled Maturity Date.
2.7.2 INVOLUNTARY PREPAYMENT. The Prepayment
Fee shall be due
and payable on all amounts paid prior to the due
date thereof for any reason including,
without limitation, refinancing, acceleration
(upon the occurrence of an Event of
Default or otherwise) or otherwise. The foregoing
Prepayment Fee represents the
estimate of Lender and Borrower of a fair average
compensation for the loss that mav be sustained by
Lender due to the payment of any of the
indebtedness evidenced by the Note prior to the
due date thereof stated herein. Such Prepayment
Fee shall be paid without prejudice to the right
of Lender to collect any other amounts provided to
be paid hereunder.
2.7.3 PREPAYMENT IN FIRST THREE YEARS.
Although a prepayment of the Loan is prohibited
during the period within three (3) years after the
Loan Closing, in the event Borrower tenders
prepayment of the Loan in whole or in part during
such period and the prohibition on such prepayment
is not enforceable under applicable law, or is
waived by Lender, the Prepayment Fee applicable to
such a prepayment shall be equal to fifteen
percent ( 15%) of the amount so prepaid.
2.7.4 UNPERMITTED PARTIAL PAYMENTS. In the
event Borrower makes any partial prepayment(s) of
principal not permitted hereunder, such
prepayment(s) shall be deemed a payment(s) of the
principal as of the scheduled Maturity Date, and
interest shall continue to accrue on the full Loan
amount as if such prepayment(s) had not been made
until the scheduled Maturity Date.
2.8 APPLICATION OF PAYMENTS. All payments
received by Lender in respect of the Loan shall be
applied first to any late charges and other fees
and expenses due under the Loan Documents, then to
accrued and unpaid interest and then to
outstanding principal.
ARTICLE 3
CONDITIONS PRECEDENT TO THE
LOAN
3.1 CONDITIONS TO LOAN CLOSING AND INITIAL
ADVANCE. The obligation of Lender to make the
Initial Advance is subject to the following
express conditions precedent, which requirements
must be satisfied at least three (3) Business Days
prior to the Loan Closing, unless such paragraph
states that the condition must be satisfied on or
before the Loan Closing, or on or before ten ( 10)
Business Days prior to the Loan Closing.
3.1.1 LOAN DOCUMENTS. On or before the Loan
Closing, Borrower shall have executed or obtained
execution of and delivered to Lender the following
documents and instruments, the final form and
substance of which shall be acceptable to Lender
3.1.1.1 The Note;
3.1.1.2 Deed of Trust, Security Agreement,
Assignment of Leases and Rents and Fixture Filing
securing the Note and all of Borrower's
obligations under the other Loan Documents
(excluding the Environmental Certificate with
Representations, Covenants and Warranties
described in paragraph 3.1.1.8) and constituting:
(a) a first and prior lien on the fee title to the
Real Property, including all buildings and
improvements now or hereafter located on the Real
Property, and all fixtures and attachments of and
to the buildings now on the Real Property, if any,
and those to be erected on the Real Property and
all rights and interest appurtenant thereto; (b) a
first priority assignment of all
11
Borrower's interest in and to the Leases including
without limitation all rents, issues or profits
therefrom; and (c) a security agreement
establishing a valid first priority security
interest in and to all of the Personal Property
not otherwise encumbered in another Loan Document;
3.1.1.3 UCC - I Financing Statements for
filing and recording as required to perfect all of
the security interests granted andfor created
pursuant to the Loan Documents;
3.1.1.4 A Collateral Assignment of
Agreements;
3.1.1.5 An Acknowledgment of Assignment and
Subordination Agreement (Contractor);
3.1.1.6 An Acknowledgment of Assignment and
Subordination Agreement (Engineer);
3.1.1.7 An Acknowledgment of Assignment and
Subordination Agreement (Architect);
3.1.1.8 An Environmental Certificate with
Representations, Covenants and Warranties;
3.1.1.9 The Guaranties;
3.1.1.10 A Subordination Agreement executed
by each Emeritus Corporation, NorthBay Health
Advantage, and BW (Fairfield) Real Estate
Corporation;
3.1.1.1 I The Account Agreements required by
paragraph 5.6 below;
3.1.1.12 A "comfort letter" from NorthBay
Healthcare Systems (the "Parent"), wherein the
Parent agrees for the benefit of Lender to
undertake certain obligations with respect to the
financial strength and ability of its subsidiary,
NorthBay Health Advantage; and
3.1.1.13 A separate Assignment of Leases and
Rents. according to Lender, as additional security
tor the Loan. a first priority assignment of all
of Borrower's rights under and interest in all
Leases and the rents payable thereunder;
3.1.1.14 This Agreement;
3.1.1.15 Escrow Agreement with respect to the
money to be held in escrow under paragraph 5. 11;
and
3.1.1.16 Such other documents and security
instruments as Lender deems necessary to
effectuate the purposes hereof.
3.1.2 ORGANIZATION DOCUMENTS. Borrower shall
provide, at Borrower's cost and expense, the
following organizational documents, the final form
and substance of which shall be acceptable to
Lender in its reasonable discretion (collectively
"Organization Documents"):
3.1.2.1 Certified copies of Borrower's
organizational documents and all amendments
thereto;
3.1.2.2 A certificate of "Status" from the
Secretary of State, State of California and tax
clearance from the California franchise tax board;
3.1.2.3 A Company Authorization of Borrower
authorizing its obtaining the Loan, ratifying the
terms of this Agreement, approving the Loan
Documents, and setting forth the person or persons
authorized to execute the Loan Documents on behalf
of Borrower;
12
3.1.2.4 Certified copies of the Articles of
Incorporation and by- laws of each Guarantor and
all amendments thereto;
3.1.2.5 Certificate of "Good Standing" or
"Status" from the State of incorporation
addressing the corporate status of each Guarantor
and tax clearance from the California franchise
tax board;
3.1.2.6 True and correct certified copies of
the bylaws and all amendments thereto of each
Guarantor;
3.1.2.7 Corporate Resolution of the corporate
manager of Borrower authorizing Borrower's
obtaining the Loan, ratifying the terms of this
Agreement, approving the Loan Documents, and
setting forth the person or persons authorized to
execute the Loan Documents on behalf of Borrower;
3.1.2.8 Corporate Resolution of each
Guarantor authorizing such Guarantor's guarantee
of the Loan. ratifying the terms of the Guaranty
approving the Guaranty, and setting forth the
person or persons authorized to execute the
Guaranty on behalf of such corporation; and
3.1.2.9 Any other organization documents
and/or verifications of authority, consent and
existence as Lender may reasonably require.
3.1.3 GOVERNMENTAL APPROVALS. On or before
ten (10) Business Days prior to the Loan Closing,
Borrower shall deliver to Lender, and Lender shall
be satisfied with copies of any licenses or
approvals for construction of the Improvements and
operation (within or on the Real Property) of the
Property as a congregate living facility, if any;
and any other applicable governmental permits,
approvals, consents, licenses and certificates for
the construction of the Improvements of the
Property or which may affect the value of the
Collateral.
3.1.4 TITLE INSURANCE COMMITMENT. On or
before ten ( 10) Business Days prior to the Loan
Closing, Title Agent shall issue or be committed
to issue an extended coverage lender's policy of
title insurance (the "Title Policy") underwritten
by Title Company in an amount not less than the
amount of the Loan (with a pending disbursements
clause acceptable to Lender) and insuring the lien
of the Mortgage to be a first priority lien on the
Property, subject only to the Permitted
Encumbrances, and including such endorsements and
co-insurance as Lender reasonably requires.
3.1.5 SURVEY. On or before ten ( 10) Business
Days prior to the Loan Closing, Borrower shall
deliver to Lender an ALTA/ACSM survey of the
Property by a licensed surveyor acceptable to
Lender and the Title Company dated not more than
sixty (60) days prior to the Loan Closing and
certified in favor of Borrower, Lender, and the
Title Company. The certification shall be in a
form reasonably acceptable to Lender and the Title
Company.
3.1.6 APPRAISAL. On or before ten (10)
Business Days prior to the Loan Closhg, Borrower
shall deliver to Lender a current MAI as-built
appraisal of the Property prepared by Valuation
Counselors, Inc., establishing that the completed
stabilized value of the Project is not less than
$15,940,000.00.
3.1.7 INSURANCE. Borrower shall provide
evidence that there is in effect such hazard,
earthquake, flood, business interruption, public
liability, builder's risk and other insurance as
is required by Lender, and written by insurers,
and in forms and amounts, satisfactory to Lender.
3.1.8 LITIGATION. There shall be no material
judgments or pending litigation (beyond that
disclosed in Exhibit C hereto) or, to the best of
Borrower's knowledge, threatened litigation of a
material nature outstanding against Borrower. the
Property or any Guarantor, including but not
limited to litigation or judgments which may
affect title or Lender's lien position with
respect to any of the Collateral or any litigation
or judgment which might materially, adversely
affect the ability of Borrower or any Guarantor to
perform its obligations under the Loan Documents.
13
3.1.9 TAXES. Borrower shall provide evidence
that all taxes and assessments levied against or
affecting the Collateral have been paid current;
or in the event Borrower has commenced a legal or
administrative challenge to any such tax or
assessment, evidence that such liability has been
bonded over, or that funds for the payment thereof
(in the amount of the original assessment) have
been escrowed with an independent third party with
provisions for the payment thereof reasonably
satisfactory to Lender.
3.1.10 HAZARDOUS WASTE. Borrower shall
provide to Lender, at Borrower's sole cost and
expense, a Phase I Environmental Site Assessment
of the Property (the "Site Assessment"). The
results of such Site Assessment must be
satisfactory to Lender. Lender has the right to
require Borrower to retain the services of an
environmental engineer acceptable to Lender to
perform such additional environmental
investigations as may be required by Lender. Such
investigations may include but are not limited to
soil and ground water testing to fully identify
the scope of any environmental issues impacting
the Property. All costs incurred in performing any
additional investigation shall be borne by
Borrower. If any environmental issues exist prior
to the Loan Closing, Lender reserves the right, in
its sole and absolute discretion, to terminate
this Agreement. However, if Lender determines, in
its sole discretion, that known environmental
problems with respect to the Property are capable
of being resolved at a reasonable cost, Lender may
proceed with the closing and funding of the Loan
provided that suff'cient funds, as determined by
Lender in its sole discretion, are held back from
the Loan proceeds and deposited into an escrow
account which is established for the purpose of
securing all aspects of correcting the subject
environmental problems and is pledged to Lender.
Release of such escrowed funds will be controlled
exclusively by Lender.
3.1.1 1 ZONING. Borrower shall provide
evidence reasonably satisfactory to Lender that
the Real Property is properly zoned for its
intended use as a congregate living facility and
that any and all zoning stipulations have been
complied with.
3.1.12 ACCESS. PARKING AND COMMON AREAS.
Lender shall be reasonably satisfied that all
easements and other agreements providing for
public access to, adequate parking for, and the
maintenance of any and all common areas and
party walls related to the Property and its
intended use as a congregate living facility are
in effect, fully enforceable, and xxxxx assignable
to Lender as part of its collateral for the Loan.
3.1.13 UTILITIES. Borrower shall provide
evidence reasonably satisfactory to Lender that
all utilities, including without limitation,
water, gas and electricity, are available to the
Real Property (or will be upon Comptetion of the
Work), and that the suppliers of such utilities
have the capacity to serve the Real Property in
amounts necessary for its intended use as a
congregate living facility and are committed to
supply those utilities in such amounts upon
Completion of the Work.
3.1.14 ADDITIONAL CONSTRUCTION-RELATED
REQUIREMENTS. Borrower shall provide to Lender (at
least ten (10) Business Days prior to the Loan
Closing):
3.1.14.1 a payment bond which is issued by a
surety satisfactory to Lender and in a form
satisfactory to Lender and is for the construction
of the Improvements adequate to cause all persons
providing labor, materials, equipment or services
with respect thereto to look solely to such bond,
rather than the Property and other security for
the Loan, in the event of non-payment;
3.1.14.2 a performance bond or bonds which
is/are issued by a surety satisfactory to Lender
and in a form satisfactory to Lender, covering
contracts for the Improvements and naming Lender
as co- obligee;
3.1.14.3 if required by Lender, a soils test
report with respect to the suitability of the
soils on the Real Property for purposes of
constructing the Work;
3.1.14.4 if required by Lender, a traffic
study with respect to the impact of existing and
anticipated traffic upon the Property;
14
3.1.14.5 if the survey of the Real Property
indicates that the Real Property is within a flood
zone, a flood and drainage study with respect to
the Real Property and the Improvements;
3.1.14.6 the Architect/Engineer Agreement and
consent to the assignment of that agreement to
Lender; such certificates as Lender may require
from the Architect/Engineer regarding the adequacy
of the Plans and Specifications (including,
without limitation, their compliance with the
Americans With Disabilities Act and all other
applicable laws and regulations) and the Budget
and such other matters as Lender may deem
pertinent;
3.1.14.7 the Plans and Specifications;
3.1.14.8 the Budget;
3.1.14.9 a detailed draw schedule acceptable
to Lender, and the Work Progress Schedule;
3.1.14.10 The General Contract and any other
Construction Contracts, any other consents from
the General Contractor and any other Contractor to
the assignment of their contracts to Lender; and
such certificates and financial information as
Lender may request from the General Contractor and
any other direct contractors regarding their
financial viability, the adequacy of the Budget
and such other matters as Lender may deem
appropriate;
3.1.14.11 A construction completion schedule
to which Borrower shall agree to adhere; failure
of Borrower to comply with and adhere to such
construction schedule (subject to a Force Majeure
Event) shall constitute an Event of Default;
3.1.14.12 A list of all contractors and major
subcontractors who will perform work, all whom
must be reasonably satisfactory to Lender;
3.1.14.13 Evidence that the General Contract
provides that (a) the General Contractor must
begin and complete construction by certain
specified dates in accordance with the Loan
Documents and (b) change orders will be permitted
only up to amounts of $15,000 for any single
occurrence and up to $150,000 in the aggregate;
3.1.14.14 Financial statements for the last
two (2) years and federal employer tax
identification numbers for the General Contractor,
any other direct contractors, and, if required by
Lender, the major subcontractors; and
3.1.14. 15 Copies of all other direct
contracts with contractors and all major
subcontracts all of which shall be reasonably
acceptable to Lender.
3.1.15 EQUITY INVESTMENT. Borrower shall
deliver evidence that $2,500,000.00 cash equity
has been invested in the Property so that such
cash equity and the committed but undisbursed Loan
Amount equals the total costs for the Work set
forth in the Budget.
3.1.16 GENERAL INFORMATION. Borrower shall
provide Lender with legible copies of all
Property-related information which Lender may trom
time to time reasonably request.
3.1.17 REVIEW AND APPROVAL OF RELATED
DOCUMENTATION. Borrower shall have provided to
Lender, and Lender shall have reviewed and
approved all documentation reasonably deemed
material by Lender to the present condition and
proposed operation or use of the Property.
3.1.18 EQUIPMENT LEASES. Lender shall have
reviewed and approved all leases and financing
agreements covering furniture, fixtures, equipment
and other personal property used on the Property
(the "Equipment Leases"). The obligations under
the Equipment Leases shall be considered
"indebtedness for borrowed money", "debt" and
"expense" of Borrower for purposes of this Loan
Agreement. In addition, Borrower
15
shall provide to Lender written agreements from
each of the equipment lessors or financiers under
such Equipment Leases granting to Lender rights to
notice and cure under such Equipment Leases.
3.1.19 ESTABLISHMENT OF SPECIAL ACCOUNTS.
Borrower shall have established each of the
Special Accounts.
3.1.20 MATERIAL ADVERSE CHANCE. Lender shall
have the right to terminate this Agreement at any
time prior to the Loan Closing and to retain the
Loan Fee in the event of any material adverse
change in the financial condition of Borrower or
of any Guarantor (as compared to the financial
condition as presented in the financial
information provided to Lender as of the date of
the commitment letter dated September 12, 1996,
from Lender to Borrower).
3.1.21 OPINION LETTERS. A favorable legal
opinion of counsel for Borrower and each
Guarantor, which counsel must be reasonably
acceptable to Lender, dated as of the Closing
Date, covering the due authorization, execution,
delivery, enforceability, validity and binding
effect of the Loan Documents to which the Borrower
and each of the Guarantors, respectively, is a
party, and (except with respect to the Guarantors
and Guaranties) of all liens and security
interests granted thereby, compliance with
applicable usury laws (provided, however, such
opinion may assume that Lender is the holder of a
valid commercial finance lender license issued by
the State of Califomia and/or that the Loan was
arranged by a real estate broker licensed in the
State of California) and such other matters as
Lender may reasonably require. The Loan Documents
provide that California law applies to certain
portions of the Loan Documents and that Arizona
law applies to all other portions of the Loan
Documents. The attorney for Borrower and the
Guarantors will not be required to opine on the
enforceability of the choice of law provisions and
will be entitled to assume, with respect to the
portions of the Loan Documents covered by Arizona
law, that Arizona law is identical to California
law. [n connection with such usury opinion,
counsel shall be required to opine that the Loan
is not usurious (without reliance cn any usury
savings clause). Each such opinion of counsel
shall confirm, to the satisfaction of Lender, that
the opinion is being delivered to Lender at the
instruction of the party represented by such
counsel, that Lender is entitled to rely on such
opinion, that for purposes of such reliance Lender
is deemed to be in privily with the opining
counsel, and that such counsel shall not assert
and waive any position to the contrary.
3.1.22 TAX LIEN SEARCH. Lender will have
obtained a tax lien, litigation, judgment and UCC
searches conducted on Borrower and each Guarantor,
all of which shall be satisfactory to Lender.
3.1.23 CREDIT REFERENCES. Borrower shall
provide to Lender credit references for Borrower
and each Guarantor, which shall be satisfactory to
Lender.
3.1.24 START-UP FINANCIAL STATEMENTS.
Borrower shall provide to Lender copies of the
"start-up" financial statements of Borrower and
copies of the financial statements of each
Guarantor for the last two (2) fiscal year ends.
3.1.25 TERMINATIONS BV EXISTING LENDERS. On
or before the Loan Closing, Borrower's existing
lenders shall have executed and delivered to the
Title Agent all UCC and mortgage terminations
evidencing the termination of their liens and
security interests (except for the Emeritus Deed
of Trust), in a form satisfactory to Lender and
the Title Company.
3.1.26 MISCELLANEOUS. Borrower shall furfill
any other reasonable conditions and provide such
additional information, security and documentation
as may be required by Lender and the results of
all credit inquiries, tax lien, litigation,
judgment and UCC searches on Borrower, Guarantors
and the Property shall have proven satisfactory to
Lender.
16
3.1.27 ASSIGNMENT OF RIGHTS. To the extent
assignable, Lender shall receive from Borrower a
valid first priority assignment of (and to the
extent reasonably required by Lender, Borrower
will use reasonable efforts to obtain rights to
cure defaults under) any and all management
contracts, equipment leases and any other
contracts, agreements, licenses and permits as are
necessary or desirable for the operation, design,
construction and use of the Property as a
congregate living facility (the "Contracts and
Licenses"). The form and content of all Contracts
and Licenses shall be fully acceptable to Lender.
3.2 ADDITIONAL CONDITIONS TO ADVANCES. In
addition to all other terms and conditions set
forth herein, Advances shall be subject to
satisfaction of all of the following conditions
and limitations:
3.2.1 FREQUENCY OF ADVANCES. Advances shall
be made no more frequently than monthly and each
such monthly disbursement shall be based upon
actual completed work in place rather than upon
percentage of completion.
3.2.2 ADVANCE LIMITATIONS. Lender shall have
no obligation to make an Advance if the
undisbursed portion of the Loan Amount is less
than the unpaid costs of Completion of the Work.
3.2.3 RETAINAGE. During the Construction
Term, Lender shall withhold from each Work-Related
Advance an amount equal to ten percent (10%) of
such costs ("Basic Retainage") or such greater
amount as is provided for in the General Contract
or any other Construction Contracts for the Work
("Additional Retainage"). The Basic Retainage
shall be released as provided in paragraph 3.2.7
below. The Additional Retainage shall be released
at the times specified in the applicable
Construction Contract(s).
3.2.4 ADVANCE REQUEST AFFIDAVIT. Each
Work-Related Advance shall be conditioned upon
Lender's receipt and reasonable approval of all
items required to be delivered by Borrower
pursuant to Exhibit F hereof.
3.2.5 TITLE INSURANCE: AND SURVEY. NO BREAK
IN PRIORITY. Advances shall be subject to the
receipt of the Title Policy, Title Policy
endorsements, trailing mechanics' and
materialmen's lien waivers on a thirty (30) day
basis and any surveys required pursuant to
paragraphs 3.1.4, 3.1.S. 5.16.8 and 5.16.9.
Borrower shall not commence any work on the
Property prior to recordation of the Mortgage, if
it would affect priority of the Mortgage.
3.2.6 FINAL CONSTRUCTION ADVANCES. Subject to
the escrow provisions of paragraph 3.2.7 below,
the final Advance (including all Basic Retainage
and any unused contingency reserves) shall be made
directly to the Title Agent upon Compledon.
3.2.7 POST-COMPLETION ESCROW. Upon the
funding of the fina! Advance, the Title Agent
shall retain in escrow (and invest in an interest
bearing account for the benefit of Borrower) the
Basic Retainage and any unused contingency
reserves. The Basic Retainage and any unused
contingency reserves shall be funded by Title
Agent to, or at the direction of, Borrower upon
Borrower's written certification to Lender that
all "punch list items" have been resolved to
Borrower's satisfaction, accompanied by a
certificate from the Borrower's Architect/Engineer
and Lender's Consultant certifying to the same,
and Lender's subsequent written notice to Title
Agent to fund such Basic Retainage and any unused
contingency reserves. At the time of making each
disbursement of the Basic Retainage and any unused
contingency reserves, the Title Agent shall, as a
condition to such disbursement, be irrevocably
committed to issue to Lender a date-down
endorsement to the Title Policy meeting the
substantive requirements of paragraph 5.16.9
hereof; provided, however. that actual issuance of
a date- down endorsement may be deferred by the
Title Agent until its final advance of such Basic
Retainage, whereupon a final date-down endorsement
(or reissued Title Policy, as the case may be)
shall be issued to Lender.
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3.2.8 DISBURSEMENTS THROUGH TITLE COMPANY.
Lender will make the initial Advance and the final
Advance directly to the Title Agent. Other
Advances may, at Borrower's election, be made
directly to Borrower provided that all conditions
precedent to the making of an Advance have been
satisfied.
3.3 CONDITIONS TO ALL ADVANCES AFTER THE LOAN
CLOSING. All Advances made after the Loan Closing
shall be subject to the furfillment of each of the
following conditions precedent:
3.3.1 NO DEFAULT: REAFF1RMATION OF
REPRESENTATIONS AND WARRANTIES. No Event of
Default or Incipient Default exists and all
representations and warranties shall be reaffirmed
as of the Advance date.
3.3.2 MATERIAL ADVERSE CHANGE. There shall
exist no material adverse change in the financial
condition of Borrower, the Property proforma, or
any Guarantor (as compared to the financial
condition as presented in the financial
information provided to Lender as of the date of
this Agreement).
3.3.3 OTHER. Lender shall have received,
reviewed and approved all other items required
under this Agreement that are conditional to the
making of an Advance.
3.3.4 ADVANCES AGAINST GOODS. Lender shall
have the right to approvc or disapprove
disbursements for stored or ordered goods. Without
limiting the generality of such right, Lender may
condition its approval of disbursements of the
Loan for payments of or deposits upon stored or
ordered goods upon Lender's prior receipt of the
following:
3.3.4.1 Evidence satisfactory to Lender that
such goods are covered by the insurance policies
required to be delivered pursuant to paragraph
5.14;
3.3.4.2 Evidence satisfactory to Lender from
the vendor of such goods that, upon xxxx payment
tO the vendor ownership of such goods will vest in
the name of Borrower free and clear of any liens
or claims of the vendor or any other third party;
3.3.4.3 (i) Evidence satisfactory to Lender
that the goods are and upon disbursement shall be
stored upon the Property in a manner which is
adequate to protect the goods against theft and
damage and otherwise satisfactory to Lender; or
(ii) if the goods will not be stored upon the
Property at disbursement, evidence (including the
original warehouse receipt) satisfactory to Lender
that the goods are being fabricated or sold by a
reputable and creditworthy vendor, that the goods
are being or will be stored in a bonded warehouse
or storage yard unless the goods are still being
fabricated ant that the warehouse or storage yard
has been not)fied of Lender's security interest.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
BORROWER
Borrower hereby represents and warrants as
follows:
4.1 Borrower is a validly existing limited
liability company duly organized and in good
standing under the laws of the State of
California; is in good standing and is authorized
and has the requisite power and authority to
conduct business in the State of California; and
has the full legal right and authority to make
this Agreement and to borrow hereunder.
4.2 The execution, delivery, and performance
by Borrower of the Loan Documents will not (a)
violate any provision of any law of the United
States of America, the State of Califonia, any
municipal department or governmental authority; or
(b) result in the breach of, or require any
consent under, or result in the creation of any
lien, charge, or encumbrance upon any property or
assets of Borrower pursuant to, any indenture or
other agreements or instruments to which Borrower
is a party or by which Borrower or its property
may be bound or affected, other than as
specifically provided herein.
18
4.3 The proceeds of the Loan will be used by
Borrower solely for the purposes specified in this
Agreement, and in all events for a valid business
purpose of Borrower.
4.4 All information set forth in Borrower's
loan application and in the financial statements
given by Borrower to Lender and all other
information given (or to be given) by Borrower to
Lender in connection with the Loan, including any
statement regarding Borrower's past credit
dealings, is true, correct, and complete in all
material respects. No material adverse change has
occurred as of the Loan Closing in any such
financial condition nor with respect to any other
information supplied by Borrower to Lender.
4.5 The Loan Documents are in all respects
legal, valid, and binding upon Borrower, according
to their terms (other than as such enforceability
may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement,
moratorium, similar laws relating or affecting
rights of creditors generally or general
principles of equity) and grant to Lender direct,
valid, and enforceable first liens upon, and
security interests in, the Collateral, and the
Loan Documents executed by the Guarantors are in
all respects legal, valid and binding upon
Guarantors according to their terms.
4.6 No xxxx of sale, security agreement,
financing statement or other instrument affecting
title or creating security interests (except those
executed in favor of Lender) has been or will be
executed in connection with or with respect to any
of the Collateral, except for liens which have
been released on or before the Loan Closing, the
Permitted Encumbrances and Personal Property
financing or dispositions disclosed to and
approved in writing by Lender or permitted under
the Loan Documents.
4.7 The consummation of the Loan described in
this Agreement and the performance of the
obligations of Borrower under and by virtue of the
Loan Documents will not result in any breach of,
or constitute a default under, any mortgage, deed
of trust, loan or credit agreement, articles of
organization, regulations, or any breach of any
other agreement or instrument to which Borrower is
a party or by which Borrower may be bound or
affected.
4.8 Except as disclosed on Exhibit C. there
are no judgments, and no actions, suits, or
proceedings pending, or to Borrower's knowledge
threatened, against or affecting Borrower or the
Collateral, or involving the validity or
enforceability of any of the Loan Documents or the
priority of the lien thereof, at law or in equity,
or before or by any governmental authority, and
Borrower is not in default with respect to any
writ, injunction, decree, or demand of any court
or any governmental authority, other than as
specifically disclosed on Exhibit C.
4.9 Borrower has received no written notice
of and, to Borrower's knowledge, there is not any
violation of any law, municipal ordinance, or
order, or of any requirement of the State of
California or any other state, municipal
department or other governmental authority, which
violations in any way relate to or affect Borrower
or the Property.
4.10 Except as otherwise specifically
provided herein to the contrary. the title to the
Collateral and Borrower's interest therein as of
the Loan Closing is free and clear of all liens,
encumbrances, and security interests except only
the Permitted Encumbrances.
4.11 The Loan Documents and all other
instruments executed and delivered to Lender in
connection with this Loan were executed and
delivered in accordance with the requirements of
law.
4.12 Borrower is and shall continue to be the
lawful owner of the Collateral; no third party,
including without limitation any Affiliate of
Borrower has any interest in the Collateral (or
any part thereof) or in Borrower's interest in the
Collateral except as described in Exhibit "B"; and
Borrower agrees to protect, preserve, and defend
Lender's interest in the Collateral and the title
thereto.
19
4.13 All utility services (including water,
storm and sanitary sewer, gas, electric and
telephone facilities and garbage removal)
necessary for the Completion of the Work and the
intended use of the Property as congregate living
facility are available to the Real Property (or
will be upon Completion); the suppliers of such
utilities have the capacity to serve the Property
and are committed to supply such utilities in such
amounts as are required upon Completion; and all
fees and deposits due to the suppliers of such
utilities have been paid current or amounts
adequate for such purposes have been reserved in
the Budget.
4.14 All Leases, contracts and agreements
relating to the Property, or utilized in
connection therewith, or constituting any portion
of the Collateral, are in full force, and true and
correct copies of all such Leases, contracts and
agreements have previously been furnished to
Lender.
4.15 No services, work, equipment or
materials of any kind that may give rise to any
mechanics or similar statutory lien, including,
without limitation, site work, clearing, grubbing,
draining or fencing of the Real Property has been
performed or commenced on the Real Property or
otherwise provided in connection with the Work,
except to the extent that such servicts, work,
equipment, materials have been fully disclosed in
writing to Lender and Title Company and the Title
Policy insures the priority of the Mortgage over
all mechanics and similar liens.
4.16 Each of the representations and
warranties made by Borrower in the Loan Documents
shall be considered and determined to have been
made by Borrower at the time of its execution of
this Agreement and to have been made again at the
time of each Advance and shall survive funding of
the Loan, and shall survive the Loan Closing.
4.17 The relationship of Borrower and Lender
is that of debtor and creditor, and it is not the
intention of either of such parties by this or any
other instrument being
executed in connection with the Loan to establish
a partnership, and the parties hereto shall not
under any circumstances be construed to be
partners or joint venturers.
4.18 Borrower has dealt with no mortgage
broker, finder or placement agent with regard to
the Loan except for Xxxxxx Securities
Incorporated. Borrower shall indemnify and hold
Lender harmless from any and all claims for fees
or compensation claimed to be due in connection
with the Loan as a result of the acts of Borrower.
4.19 The Real Property has legal access to
publicly dedicated streets.
ARTICLE 5
COVENANTS OF
BOWRROWER
Borrower hereby covenants and agrees as
follows (with the understanding that unless
specifically provided to the contrary herein, a
breach of any of the following covenants shall
constitute an Event of Default upon expiration of
any cure period provided in Article 6):
5.1 NO ADDITIONAL LIENS. Subject to its right
to contest such lien in accordance with the
Mortgage, and except for the Permitted
Encumbrances, Borrower shall not allow any liens,
encumbrances or other interests to affect the
Collateral or any part thereof or Lender's first
priority lien therein without the prior written
consent of Lender, which may be withheld in
Lender's sole and absolute discretion.
5.2 NO ADDITIONAL DEBT. During the term of
the Loan, Borrower shall not, without Lender's
prior written consent, which may be withheld in
Lender's sole and absolute discretion, incur any
additional Debt with respect to, or in connection
with its ownership and operation of the Property
(including without limitation any contingent or
guarantor liability), except for (a) short term
accounts payable incurred in connection with the
ordinary course of Borrower's construction and
operation of the Property, (b) the Debt secured by
the Emeritus Deed of Trust, and (c) loans to
Borrower by members of Borrower in lieu of a
capital contribution to Borrower, which loans
shall be expressly subordinated to the Loan and
not secured by any Collateral.
20
5.3 RESTRICTIONS ON TRANSFER. Except for (a)
the lease of space in accordance with the approval
requirements of paragraph 5.18 (including the
lease of space to residents occupying the Project
pursuant to the Lender-approved form of residency
agreement), and (b) the disposal of Personal
Property when such property is replaced with
property of equal or greater value subject to
Lender's first priority lien, without repayment of
the Loan in full (including any applicable
prepayment premium), Borrower shall not sell.
transfer. tease, encumber or otherwise dispose of
the Collateral or any part thereof or interest
therein without the prior written consent of
Lender. which consent may be withheld bv Lender in
its sole and absolute discretion.
5.4 REQUIRED FINANCIAL INFORMATION. Borrower
shall timely tender, or cause to be tendered, the
Required Financial Information as described in
Article I hereof.
5.5 LIMITATION ON MANAGEMENT AND DEVELOPMENT
FEES.
5.5.1 LIMITATION ON MANAGEMENT CONTRACT.
Borrower shall not pay to any Affiliate of
Borrower or of any Guarantor, any fees for the
operation and management of the Project or any
fees for consulting services rendered in
connection therewith, until the thirteenth full
calendar month after the commencement of the
Permanent Term. Borrower may pay to the Management
Fee Account (defined in paragraph 5.6 below) any
fees for the operation and management of the
Project which would otherwise have been paid to
any Affiliate of Borrower prior to the date
thirteen full calendar months after the
commencement of the Permanent Term. Thereafter,
Borrower shall pay only such fees for the
operation and management of the Project (and
consulting services rendered in connection
therewith) which do not exceed those provided for
in any management or consulting agreement as
reasonably approved by Lender and in any event
shall not exceed six percent (6%) of the Gross
Revenues of the Project. Lender acknowledges that
Borrower has agreed to pay Emeritus Corporation a
fee of five percent (5%) of the Gross Revenues of
the Project to manage the Project, pursuant to
that certain Agreement to Provide Management
Services to an Assisted Living Facility dated
August 13, 1996 which Lender has approved and has
agreed to pay NonhBay Health Advantage a fee of
one percent (1%) of the Gross Revenues of the
Project for consulting services associated with
the Project pursuant to that certain Consulting
Agreement dated August 13, 1996 which Lender has
approved. Borrower shall not enter into any other
contract to manage the Project or any substantial
portion thereof or to render consulting services
to Borrower in connection therewith without
Lender's prior written consent, which will not be
unreasonably withheld or delayed. Any consent to
such management contract may be conditioned upon
(a) the agreement of the manager thereunder that
all fees to be paid to it are subordinated to the
payment of any sums owing to Lender under the Note
and any other sums then due and payable by
Borrower to Lender under any other instrument
securing the payment of the Note and cannot be
paid or collected during the occurrence and
continuance of an Event of Default, (b) Borrower
collaterally assigning its rights under such
contract to Lender as additional collateral for
the Note, and (c) the consent of the manager to
such collateral assignment. The form of such
collateral assignment and consent of manager shall
be subject to the approval of counsel for Lender.
Borrower agrees to pay all of Lender's costs and
expenses incurred in connection with reviewing the
foregoing described matters.
5.5.2 LIMITATION ON CONSTRUCTION TERM FEES.
During the Construction Term, Borrower shall not
pay to any Affiliate of Borrower or of any
Guarantor, any contractor's fee, construction
management fee. development tee or any other
similar fee, compensation or payment
(collectively, the "Construction and Development
Fees"), except for Twelve Thousand Three Hundred
Dollars ($12,300) per month (constituting Ten
Thousand Dollars ($10,000) as compensation and Two
Thousand Three Hundred Dollars ($2,300) as
overhead) to BW (Fairfield) Real Estate
Corporation pursuant to that certain Development
Agreement between BW (Fairfield) Real Estate
Corporation and Borrower dated May 17, 1985, and
One Thousand Nine Hundred Twenty Dollars ($ 1,920)
per month to NorthBay Health Advantage pursuant to
that Borrower's limited liability company
agreement which has been approved by Lender. Any
such Construction and Development Fees in excess
of the forgoing amounts may be
21
paid by Borrower solely pursuant to the foregoing
agreement and only upon the achievement of
Completion and the commencement of the Permanent
Term of the Loan. Lender shall have the right to
approve any other agreements between Borrower and
any Aff'liate of Borrower or of any Guarantor
regarding the Construction and Development Fees.
5.6 SPECIAL ACCOUNTS. Borrower shall maintain
two (2) segregated
accounts (collectively, the "Special Accounts")
with a federally insured bank approved by Lender,
as provided herein. Such bank, Borrower and Lender
shall enter into an account agreement acceptable
to Lender, which includes the bank's waiver of any
right of set off and grants to Lender the
exclusive right to withdraw all funds in the
Special Accounts upon an Event of Default under
the Loan Documents. Borrower shall deliver to
Lender within thirty (30) days after the end of
each calendar quarter, an accounting of all
deposits and withdrawals of each of the Special
Accounts. The Special Accounts shall consist of
the Operating Cash Flow Account, and the
Management Fee Account as follows:
5.6.1 Prior to the commencement of the
Permanent Term, Borrower shall deposit all of
Borrower's Cash Flow into an account (the
"Operating Cash Flow Account"). Borrower shall
have no right to make withdrawals from the
Operating Cash Flow Account prior to the Permanent
Term. So long as there is no Event of Default or
Incipient Default of which Lender has not)fied
Borrower under the Loan Documents, on the first
day of the Permanent Term (or, if such funds may
not be withdrawn due to the existence of an
Incipient Default which is thereafter cured, then
on the date such Incipient Default is cured),
Borrower may withdraw all amounts previously
deposited in the Operating Cash Flow Account.
5.6.2 As more fully set forth in paragraph
5.5.1, prior to the thirteenth ( I 3th) full
calendar month after the commencement of the
Permanent Term, Borrower shall deposit within an
account (the "Management Fee Account") any fees
for the operation and management of the Project
and fees for consulting services rendered in
connection therewith. So long as there is no Event
of Default or Incipient Default of which Lender
not)fied Borrower under the Loan Documents. on the
first day of the Permanent Term (or if such funds
may not be withdrawn due to the existence of an
Incipient Default which is thereafter cured. then
on the date such Incipient Default is cured)
Borrower may withdraw all amounts previously
deposited in the Management Fee Account.
5.7 INSPECTIONS. Lender and Lender's
Consultant or Lender's designee shall have the
right to inspect the Property at any time prior to
Completion, and Borrower hereby agrees to
reimburse Lender upon request and presentation of
written invoices, for any and all reasonable
travel expenses and other costs incurred by Lender
in performing a monthly inspection of the Work
prior to Completion; provided, however, Lender
may, at its election, advance such expenses and
costs directly to itself under the Loan. Borrower
agrees that Lender retains the right to inspect
the Property after Completion once each calendar
year when no Event of Default exists and as often
as Lender may deem appropriate when an Event of
Default exists; and, Borrower hereby agrees to
reimburse Lender upon request and presentation of
written invoices, for any and all reasonable
travel expenses and other costs incurred by Lender
in performing such inspections.
5.8 ANNUAL RECERTIFICATION REGARDING
ENVIRONMENTAL MATTERS. Borrower shall, upon
Lender's request, on each anniversary of the Loan
Closing, throughout the term of the Loan, provide
to Lender a written statement signed by an officer
of Borrower certifying that all representations
and warranties set forth in the Environmental
Certificate with Representations, Covenants and
Warranties executed by Borrower on the Loan
Closing remain, as of such anniversary date, true,
correct and complete in all material respects,
together with a detailed explanation of any
exceptions to such certification.
22
5.9 DEBT SERVICE RATIOS.
5.9.1 DEBT SERVICE COVERAGE RATIO. Commencing
with the first full calendar quarter after
"Stabilization" (as defined herein) Borrower shall
maintain with respect to the Property a Debt
Service Coverage Ratio of 1.25:1. The foregoing
ratio shall be tested quarterly, on a trailing
twelve (12) month basis. As used herein,
Stabilization shall be deemed to have occurred on
the earlier of (i) the last day of the calendar
quarter in which the Project reaches ninety-four
percent (94%) occupancy, or (ii) the last day of
the fifteenth ( I 5th) full calendar month after
the commencement of the Permanent Term.
5.9.2 DEBT SERVICE AFTER MANAGEMENT FEE
COVERAGE RATIO. Commencing with the first full
calendar quarter after "Stabilization" (as defined
herein) Borrower shall maintain with respect to
the Property a Debt Service After Management Fee
Coverage Ratio of 1.15:1. The foregoing ratio
shall be tested quarterly, on a trailing twelve
(12) month basis.
5.10 LIMITATIONS ON DISTRIBUTIONS. Capital
distributions loans to. and/or repayment of loans
from any Affiliates (including without limitation
the Debt secured by the Emeritus Deed of Trust and
loans to Borrower by members of Borrower in lieu
of capital contributions to Borrower)
(collectively "Distributions") shall be made by
Borrower during the term of the Loan only on the
following terms and conditions:
5.10. 1 No Distributions shall be made prior
to the Permanent Term;
5.10.2 During the Permanent Term,
Distributions may be made only once each calendar
quarter from Excess Cash Flow after all Required
Financial Information for the immediately
preceding calendar quarter has been delivered to
and approved by Lender; Lender shall deliver
notice of approval or disapproval to Borrower
within thirty (30) days of Lender's receipt of the
Required Financial Information for such quarter;
5.10.3 There exists no Event of Default or
Incipient Default of which
Lender has notified Borrower under the Loan
Documents;
5.10.4 Without limiting the generality of
subparagraph 5.10.3 above,
the most current financial information provided by
Borrower to Lender demonstrates
that the Property is in compliance with the Debt
Service Coverage Ratio and Debt
Service After Management Fee Coverage Ratio
requirements set forth in
paragraph 5.9 above; and
5.10.5 Without limiting the generality of
subparagraph 5.10.3 above,
Borrower has not incurred any additional Debt
except as permitted by the Loan Documents, without
Lender's prior written consent.
Any Distribution not taken in one quarter may
be carried over to a future quarter and taken out
at that time, so long as Borrower is entitled to a
Distribution at that time under the requirements
set forth in this paragraph.
5. 11 ESCROWED FUNDS. Contemporaneously with
the initial Advance, Lender shall advance to the
Title Company the sum of $2S0,000.00 under the
Note (the "Escrowed Funds") to be held in escrow
by the Title Company to secure Borrower's
obligations under the Note pursuant to a written
escrow agreement in a form satisfactory to Lender
(the "Escrow Agreement"). On or before ninety (90)
days after the date hereof Borrower shall deliver
to Lender a letter of credit (the "Letter of
Credit") in such amount, as security for the
payment and performance of the Obligations and as
a replacement for the Escrowed Funds, in which
event the Escrowed Funds shall be released to
Borrower.
At such time as Borrower not)fies Lender that
it desires to replace the Escrowed Funds with a
Letter of Credit in favor of Lender, Lender agrees
to accept said
Letter of Credit in exchange for the Escrowed
Funds provided that (i) the Letter of Credit shall
be in an amount of $250,000.00, (ii) the Letter of
Credit shall be unconditional, shall permit
partial draws and otherwise shall be in a form and
for a term acceptable to Lender. (iii) the Letter
of Credit shall be issued by a bank acceptable to
Lender, (iv) the
23
Letter of Credit shall have an expiration date no
sooner than one year after its issuance date, (v)
the Letter of Credit shall provide according to
its terms that it will be automatically renewed
for successive one-year periods unless the issuer
of the Letter of Credit not)fies Lender in writing
that it has elected not to extend such Letter of
Credit at least sixty (60) days prior to its
expiration, (vi) no Event of Default shall have
occurred and (vii) Borrower shall pay tor Lender's
reasonable costs and expenses (including legal
fees) associated with such exchange of collateral.
Upon the earlier to occur of (A) such time as the
Debt Service Coverage Ratio has been l. lS to 1.0
or greater for a one year period during the Loan
term as evidenced by the Required Financial
Statements, or (B) payment in full of the
Obligations, any Letter of Credit held by Lender
and any portion of the Escrowed Funds (including
all interest included in the Escrowed Funds) which
have not been applied by Lender in accordance
herewith, shall be returned to Borrower. Borrower
shall replace the Letter of Credit (which
replacement Letter of Credit shall be in form and
for a term acceptable to Lender and be issued by a
bank acceptable to Lender) no later than
forty-five (45) days prior to the expiration of
the then current Letter of Credit. Lender shall
have the right to draw upon the Letter of Credit
upon the occurrence of an Event of Default.
5.12 GUARANTIES. Borrower shall cause
Guarantors to execute the Guaranties and shall
deliver them to Lender at the Loan Closing. The
Guaranties shall constitute an unconditional
guarantee of the Obligations of Borrower to
Lender. If during the Permanent Term, Borrower
maintains a Debt Service Coverage Ratio of 1.25 to
1.0 for two (2) consecutive calendar quarters
(based upon the Required Financial Information),
then on such date, provided no Event of Default or
Incipient Default of which Lender has not)fied
Borrower exists, the guaranteed amount under the
Guaranties executed by BW (Fairfield) Real Estate
Corporadon and NorthBay Health Advantage (but not
Emeritus Corporation) shall be reduced to fifty
percent (S0%) of the Obligations. Provided there
is no Event of Default or Incipient Default of
which Borrower has received notice from Lender at
such time, the Guaranties of all of the Guarantors
shall terminate on the fifth anniversary of the
Loan Closin& In the event a Guarantor is not
entitled to a reduction or termination of its
Guaranty because of the existence of an Incipient
Default of which Lender has not)fied Borrower and
such Incipient Default is cured by Borrower within
the time period permitted in the Loan Documents,
such Guarantor shall be entitled to a reduction or
termination of its Guaranty upon the date the
Incipient Default is cured.
5.13 LAWS. Borrower will comply with all
applicable laws and regulations, including,
without limitation, all environmental laws and
regulations applicable to the Property.
5.14 INSURANCE. Borrower will maintain all
insurance policies required by Lender, upon forms
required by Lender, and written by insurers and in
amounts satisfactory to Lender; and will deliver
such policies or copies thereof to Lender.
5.15 MAINTENANCE OF LICENSES. ETC. Borrower
shall maintain in force at all times. and apply in
a timely manner for renewal of, all licenses,
patents, approvals, permits franchises,
trademarks, tradenames and other agreements
necessary to cause Completion of the Work to occur
and to operate the Property, the loss of which
would have a material adverse effect upon Borrower
or upon the operation of the Property or the
ability of Borrower to perform its obligations
under the Loan Documents, and shall give Lender at
least thirty (30) days prior written notice of the
proposed amendment of any of such licenses,
patents, permits, franchises, trademarks,
tradenames and other agreements.
5. 16 Construction-Related Covenants.
Borrower shall:
5.16.1 cause commencement and completion of
the Work to occur in substantial compliance with
the Work Progress Schedule, subject to Force
Majeure Events (not to exceed sixty (60) days in
the aggregate), all in accordance with the Plans
and Specifications, Construction Contract(s),
applicable laws, regulations and private
restrictions, the Loan Documents, sound
construction, engineering and architectural
principles and commonly accepted safety standards
and free from defective materials and workmanship;
subject to Force Majeure Events not to exceed
sixty (60) days in the
24
aggregate, cause Completion to occur on the
Required Completion Date. The Work Progress
Schedule shall require commencement of the Work to
occur in thirty (30) days following Loan Closing;
5.16.2 pay when due all costs, expenses and
claims pertaining to the Work; and deliver to
Lender during the course of the Work in order to
monitor and/or provide assurance that the Work is
proceeding lien free in accordance with the
requirements of this Agreement: bills of sale,
conveyances and paid invoices pertaining to the
Work; all waivers and releases of lien or claims
on the Real Property and/or the Improvements on
account of the Work Lender may deem necessary or
may request for its protection; and from persons
acceptable to Lender, additional engineering or
architectural studies and reports as Lender or
Lender's Consultant may requue,
5.16.3 record all notices of
commencement/completion and similar notices
permitted by applicable laws and regulations which
have the effect of shortening periods within which
mechanics and similar liens may be filed;
5.16.4 not enter into any ArchitectlEngineer
Agreement or Construction Contract with respect to
the Work except upon terms and with such parties
as Lender may reasonably approve in writing (which
approval or rejection shall occur within five (5)
Business Days after Lender's receipt of a request
tor such approval);
5.16.5 deliver to Lender true and complete
copies of all Principal Work- Related Items and
all other Contracts, Intangibles, Licenses and
Permits;
5.16.6 not amend any of the Principal
Work-Related Items without Lender's consent,
except for change orders which (a) do not change
the cost of Completion of the Work by more than
Fifteen Thousand and No/100 Dollars ($15,000.00)
individually or One Hundred Fifty Thousand and
No/100 Dollars ($150,000.00) in the aggregate
beyond that shown in the Budget as originally
approved by Lender, and (b) do not materially
affect the design, structural integrity or quality
of the Improvements. Borrower shall deliver to
Lender, immediately upon execution thereof, all
change orders with respect to the Work including
those within the scope of clauses (a) and (b)
above;
5.16.7 perform all its obligations and
preserve its rights under the Principal
Work-Related Items in force and secure the
performance of the other parties to the Principal
Work-Related Items and all other Contracts,
Intangibles, Licenses and Permits;
5.16.8 deliver to Lender promptly after the
completion of the foundation and, if required by
Lender, after the pouring of a street, curbstone
or concrete slab on the Real Property, a survey
prepared in accordance with the requirements of
paragraph 3.1.5 showing such Improvements, their
location within Property lines and a lack of
encroachments, and deliver to Lender promptly upon
the Completion, a survey which is certified to
Lender, and the Title Company showing the
"as-built" Improvements and othervvise satisfying
the requirements of paragraph 3.1.5;
5.16.9 deliver to Lender prior to or
concurrently with each WorkRelated Advance, a date
down endorsement in a form acceptable to Lender
issued by the Title Company insuring that the
Mortgage at the time of each Work-Related Advance,
constitutes a valid first lien upon the Real
Property or title, subject only to the Permitted
Encumbrances; upon construction of the foundation
for any building comprising part of the
Improvements deliver to Lender an endorsement
("foundation endorsement") insuring that the
foundations, as constructed, are located within
all setback and boundary lines of the Real
Property and do not encroach upon any easements,
rights of way (public or private) or upon any
other adjoining landowner's property; and upon the
final advance by Title Agent of the Basic
Retainage described in paragraph 3.2.7 hereof,
Borrower shall deliver, or cause Title Agent to
deliver, to Lender a date down endorsement or a
re-issued title policy ("Re-lssued Title Policy")
meeting the substantive requirements set forth
above.
25
5.16.10 after obtaining knowledge or
receiving notice thereof: correct or cause to be
corrected (a) any material defect in the Work, (b)
any material departure in the completion of the
Work from the Plans and Specifications and the
Construction Contract(s) unless expressly
permitted in this Agreement or consented to in
writing by Lender, (c) any failure of the Work to
comply with applicable laws, regulations or
restrictions of record, sound construction,
engineering or architectural principles or
commonly accepted safety standards or (d) any
encroachment of any part of the Improvements on
any set-back or boundary line, easement, or other
restricted area;
5.16.11 promptly deliver to Lender any and
all notices received by Borrower that it is not
complying with applicable laws, regulations and
private restrictions pertaining to the Work or
that the Work is not being completed in accordance
with the Plans and Specifications, the
Construction Contract(s), sound construction,
engineering and architectural principles and
commonly accepted safety standards;
5.16.12 notify Lender in writing if and when
the unpaid costs of Completion of the Work exceeds
or appears likely to exceed the undisbursed
portion of the Loan and any undisbursed Required
Completion Assurance Deposit(s) held by Lender;
5. l6. 13 cause all materials supplied for or
intended to be utilized in the Completion of the
Work, but previously not affixed to or
incorporated into the Improvements, to be stored
on the Real Property with adequate safeguards, to
prevent loss, theft, darnage or commingling with
other materials; and
5.16.14 promptly after receipt by Borrower,
deliver to Lender copies of all building permits
and certificates of acceptance and/or occupancy
relating to the Work.
5.17 SUBORDINATION OF DEBT TO AFFLIATES.
Borrower shall obtain and deliver to Lender
Subordination Agreements (collectively, the
"Subordination Agreements") in form and substance
satisfactory to Lender, from Guarantors, and from
Affliates of Borrower or of Guarantor
(collectively, the "Subordinating Parties")
subordinating any and all obligations now or
hereafter owing to such Subordinating Party by
Borrower (including, without limitation, all
management fees, salaries and loan repayments) to
Borrower's obligations to Lender under the Loan
Documents; subordinating the lien of any deed of
trust or other security instrument in any of
Borrower's assets to liens created by Lender's
Mortgage and other Loan Documents; and evidencing
such Subordinating Party's agreement to not
exercise any remedies against Borrower with
respect to such loans so long as the Loan is
outstanding. Bona fide indebtedness owed by
Borrower to an Affiliate in the way of salary and
other
compensation paid on an arm's-length basis to bona
tide employees of Borrower shall not be subject to
a Subordination Agreement.
5.18 LEASES. Prior to the commencement of
the Permanent Term, Borrower shall obtain from all
tenants and subtenants under any leases or
subleases (except for residents occupying the
Project pursuant to the Lender approved form of
residency agreement) which will be in effect upon
the commencement of the Permanent Term, and
deliver to Lender, estoppel certificates executed
and effective as of a date not earlier than thirty
(30) days prior to the commencement of the
Permanent Term, and (where required) subordination
agreements, embodying such subordination,
attornment and other provisions as Lender deems
necessary. The form and content of all leases,
subleases, tenancies, licenses and any other
agreements with tenants or subtenants of the
Project shall be reasonably acceptable to Lender;
however Lender may elect to approve Borrower's
standard form of residency agreement in advance in
which event Borrower shall be authorized to enter
into residency agreements on such standard form
without, in each instance, Lender's consent. All
leases, subleases, tenancies, licenses and other
agreement shall contain provisions, in form and
content reasonably acceptable to Lender,
subordinating such leases, in lien and priority to
all payments due Lender under the Loan Documents.
5.19 SIGNAGE. Throughout the Construction
Term, Borrower shall maintain prominent
informational signage acceptable to Lender,
stating that financing was provided by Lender and
including the telephone numbers of Lender's New
York, Chicago, and Scottsdale, Arizona offices.
26
5.20 FURTHER ASSURANCES. Borrower will
execute or cause to be executed all documents and
do or cause to be done all acts reasonably deemed
necessary or appropriate by Lender to perfect and
to continue the perfection of the first priority
security interests of Lender in the security for
the performance of the obligations or otherwise to
effect the intent and purposes of the Loan
Documents.
5.21 MEDICARE/MEDICAID REPORTS. Borrower
shall submit to Lender all certificates of
necessity, licenses, inspection reports for
licensure, and, if applicable, Medicaid and
Medicare purposes, for the Project, within thirty
(30) days of issuance.
5.22 REQUIRED COMPLETION ASSURANCE DEPOSITS.
If at any time the remaining Project costs which
must be incurred before Completion can occur
("Completion Costs") are more than the committed
and undisbursed portion of the Loan and, in any
event within ten ( 10) days after Lender's demand
that it do so, Borrower shall deliver to Lender
cash deposits equal to the shortfall ("the
Required Completion Deposit Assurances"). In the
event of any dispute, the necessity for an amount
of any Completion Deposit shall be determined by
Lender at its discretion based upon the approved
Budget and the advice of Lender's Consultant. The
required Completion Deposit may be deposited in a
non-interest bearing account and need not be
segregated from any of Lender's other funds.
Lender shall disburse the Required Assurance
Completion Deposits to pay and/or reimburse
Borrower for the cost of the Work prior to any
further disbursement of Loan proceeds for such
purposes but subject to the terms and conditions
of the Loan Documents. Borrower shall promptly
notify Lender in writing ifand when the Completion
Costs appear likely to exceed the committed and
undisbursed portion of the Loan and any
undisbursed Required Completion Assurance Deposits
held by Lender.
5.23 ARCHITECTURAL AND ENGINEERING REPORTS.
Borrower shall pay when due the cost of all
architectural, engineering, structural and
mechanical studies, reports and inspections with
respect to the design and construction of the
Project.
5.24 OTHER COVENANTS. Borrower shall timely
perform and strictly comply with all other
covenants set forth in the Loan Documents.
ARTICLE
6
EVENTS OF DEFAULT
For all purposes under this Agreement, any of
the following shall be deemed to constitute an
Event of Default hereunder and under the Loan
Documents:
6.1 A failure to pay when and as the same
shall become due and payable, whether by maturity
or otherwise, any interest, principal or other
amounts required to be paid hereunder or on the
Note or under any of the Loan Documents; which
default continues for a period of five (5) days
after Lender delivers written notice of such
failure to Borrower; provided, however, Lender
shall only be obligated to deliver two such
notices within any twelve month period and if
Lender has delivered two written notices of prior
failures to Borrower, Lender shall not be
obligated to deliver any additional written
notices of subsequent failures within the twelve
(12) month period after the two written notices of
the prior failures and an Event of Default shall
be deemed to occur automatically upon the
subsequent failure to pay any such sum when due
and payable within said twelve (12) month period
without any notice to Borrower;
6.2 Any failure on the part of Borrower to
strictly comply with and perform any term,
provision, covenant, or condition contained in the
Loan Documents not covered by paragraph 6.1 above,
or the default on any other indebtedness or
obligation of Borrower to Lender, or the failure
of any warranty or representation of Borrower to
be true (provided, however, that any such failure
shall not constitute an Event of Default if
performance of any non-monetary obligation or
covenant not specifically addressed in paragraph
6.3 through 6.23 below is commenced immediately
and completed within thirty (30) days after
written notice demanding performance thereof;
provided, however, that if such performance is of
a nature that it cannot be completed solely by the
payment of money to a third party. and cannot
otherwise be accomplished within such thirty (30)
day period, then so long as
27
Borrower has commenced and is diligently pursuing
such performance, it shall have such additional
time as is necessary (but in no event more than an
additional sixty (60) days to complete such
performance);
6.3 The voluntary or involuntary commencement
of bankruptcy or insolvency proceedings or the
filing for an arrangement or composition of
creditors against Borrower or upon the filing of
any suit or legal action materially adversely
affecting the Collateral or adversely affecting
Borrower's ability to perform its obligations
under the Loan Documents unless such proceeding is
involuntary and is dismissed within sixty (60)
days of commencement or filing;
6.4 Immediately upon any final action, rule,
law, or decision of any legislative or
administrative body or of any court which would
materially impair or adversely affect the lien or
enforceability of this Agreement or any one or
more of tne Loan Documents;
6.5 Immediately upon the commencement of any
action or proceeding to establish, assert,
perfect, foreclose, or enforce any claim,
restriction, encumbrance, deficiency tax
assessment, or tax lien, on or with respect to the
Collateral, whether or not superior or inferior to
the lien of the Loan Documents unless such matter
is fully insured by the Title Company, unless
Borrower within thirty (30) days from the
commencement of such action causes the same to be
dismissed, or unless Borrower shall within such
thirty (30) day period record and serve a surety
bond pursuant to California law or otherwise fully
protect Lender from any loss or liability arising
therefrom;
6.6 Immediately upon the assignment by
Borrower, without Lender's prior written consent,
of any of the Loan Documents or any rights of
Borrower thereunder;
6.7 Immediately upon the material damage or
destruction of the Collateral by any casualty not
covered by insurance required pursuant to
paragraph5.14 hereof or rendering impossible, in
Lender's reasonable judgment, the Completion of
the Work in accordance with the Budget, or upon
Completion, the continued operation of the
Property as a congregate living facility;
6.8 Immediately upon the Borrower's
abandonment of all or any part of the Collateral
or the cessation, upon Completion, of operation of
the Property as a congregate living facility;
6.9 Immediately upon the insolvency of
Borrower or the execution by Borrower of an
assignment for the benefit of its creditors; or
the convening by Borrower of a meeting of its
creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or
composition of its debts;
6.10 Immediately upon the admission in
writing by Borrower that it is unable to pay its
debts as they mature or that it is generally not
paying its debts as they mature;
6.11 Immediately upon the existence or the
filing of any lien or encumbrance against any and
all of the Collateral, other than those permitted
hereunder, unless Borrower shall immediately
record and serve a surety bond pursuant to
applicable law or otherwise fully protect Lender
from any loss or liability arising therefrom;
6.12 Immediately upon the occurrence of any
default under, or breach of any provision of,
covenants, conditions and restrictions or
easements now or hereafter recorded against the
Real Property or any part thereof, which default
materially affects the value, use or operation of
the Property;
6.13 Immediately upon Borrower's failure to
(i) pay any taxes due on the Collateral prior to
such taxes being delinquent, or (ii) maintain
insurance on the Collateral of the types and in
the amounts required under this Agreement;
6.14 Any of the events enumerated in
Daragraphs 6.3. 6.9 and/or 6.10 occurs with
respect to any Guarantor;
28
6.15 An order or decree has been entered by
any court of competent jurisdiction enjoining the
intended use of the Property as a congregate
living facility and judgment is not vacated within
ninety (90) days after Borrower has obtained
knowledge or notice thereof;
6.16 Unless otherwise covered in this
Article6. upon fifteen (15) days following written
notice, upon a default in the performance of the
obligations of Borrower set forth in Daragraphs
5.1 through 5.1 1;
6.17 Immediately upon (a) Failure to cause
Completion to occur on or before the Required
Completion Date, or (b) at any time prior to
Completion of the Work, (i) Borrower abandons the
Work or (ii) Borrower delays construction of the
Improvements for any period of time, for any
reason whatsoever not covered by item (i) above
which in the reasonable judgment of Lender will
prevent Completion of the Work in the ordinary
course of construction on or before the Required
Completion Date subject to Force Majeure Events
not to exceed sixty (60) days in the aggregate; or
6.18 Immediately, if whether voluntarily,
involuntarily, by operation of law or otherwise,
Borrower sells, leases (other than leases approved
by Lender), exchanges, assigns, transfers, conveys
or otherwise disposes of the Property or any
interest therein, including the Leases, rents or
income thereof, or enters into a written agreement
to do so, or grants or permits to exist any other
mortgage, deed of trust or other lien, charge or
Guarantors; or encumbrance against the Property
(other than the Emeritus Deed of Trust). whether
superior or inferior to this Deed of Trust unless
Borrower immediately records and serves a surety
bond pursuant to applicable law or otherwise xxxxx
protects Lender from any loss or liability arising
therefrom; of
6.19 Immediately upon the occurrence of any
default under the Emeritus Deed of Trust, the note
secured thereby or any other instrument securing
said note? which default continues beyond any
applicable cure period granted to Borrower therein
unless such default is waived in writing by
Emeritus; or
6.20 Immediately, if Borrower is in default
under the terms of any document evidencing or
securing payment of a Debt secured by any lien or
security interest on the Property (without
implying geneficiary's consent to the existence,
placing, creating or permitting of any lien or
security interest); or
6.21 Immediately upon the dissolution of
Borrower or any of the
6.22 Immediately if without the prior written
consent of geneficiary, (A) any of the Guarantors
cease to be a member in Borrower, (B) the
Guarantors cease to control Borrower, or (C) the
Guarantors cease to own at least fifty percent
(50%) of the beneficial ownership interest and
membership interest in Borrower. As used herein
the term "control" as used with respect to
Borrower shall mean the possession of the power to
direct the management and policies of Borrower, or
6.23 Immediately in the event Borrower fails
to replace the Letter of Credit (as defined in
Daragraph 5.1 1 ) a replacement Letter of Credit
in form and content required by paragraph 5.1 I
within forty five (45) days prior to the
expiration of the then current Letter of Credit.
ARTICLE 7
LENDER'S
REMEDIES
7.1 Upon the occurrence of any Event of
Default hereunder, Lender may at its option either
simultaneously or in any order whatsoever, take
the following actions:
7.1.1 Decline and refuse and be relieved of
any obligation to make any Advance hereunder or
under the Note.
7.1.2 Declare to be immediately due and
payable, with interest, all funds advanced by or
owed to Lender under the Note and any of the other
Loan Documents.
29
7.1.3 Foreclose its lien and/or exercise its
right to cause the Collateral to be sold under the
Mortgage and exercise any other rights and
remedies given to Lender in all other Loan
Documents.
7.1.4 Take such other action as Lender may
deem necessary to protect its interest
7.1.5 File suit against Borrower for any sums
owing and/or for
7.1.6 Enter into possession of the Property
in accordance with and for the purposes set forth
in the Mortgage (all funds disbursed by Lender in
exercising such rights shall be deemed to have
been disbursed to Borrower, shall become
additional obligations under the Loan Documents
and shall be secured by the Loan Documents).
7.1.7 Exercise any and all remedies of a
secured party under the Uniform Commercial Code
with respect to the Collateral;
7.1.8 Take such other actions or remedies as
may be available to Lender under the Loan
Documents and/or at law or in equity.
7.1.9 Take one or more of the following
actions in connection with the construction of the
Improvements: (a) use any funds of Borrower,
including the Required Completion Assurance
Deposit(s) (if any) and any sums which may remain
unadvanced hereunder, to continue and/or cause
Completion of the Work; (b) demand and receive
performances due under the Principal Work-Related
Items and the other Contracts, Intangibles,
Permits and Licenses; (c) make such changes to the
scope of the Work and to the Principal
Work-Related Items and other Contracts,
Intangibles, Permits and Licenses as Lender may
deem necessary or desirable in its sole and
absolute judgment; (d) file claims, institute
enforcement actions and otherwise prosecute and
defend all actions or proceedings relating to the
Work, the Principal Work-Related Items and the
other Contracts, Intangibles, Permits and Licenses
as Lender may deem necessary or desirable in its
sole and absolute judgment; (e) pay, settle or
compromise all existing bills and claims which are
or may be liens against the Property or any
Contracts, Intangibles, Permits and Licenses, or
may be necessary or desirable for the continuance
or Completion of the Work related thereto or the
clearance of title, all without notice to
Borrower; (f) execute in Borrower's name all
applications, certificates, notices and other
instruments and give all instructions and
communications which may be required or permitted
by the Principal Work-Related Principal Items,
other Contracts' Intangibles, Permits and
Licenses, as determined by Lender in its sole and
absolute judgment; (g) do any and every act with
respect to the Completion of the Work. the
Principal Work-Related Items and the other
Contracts. Intangibles, Permits and Licenses which
Borrower may do in its behalf: (h) employ such
contractors, subcontractors. suppliers, agents,
attorneys, architects, accountants. appraisers,
security guards and inspectors as Lender may in
its sole and absolute judgment deem necessary or
desirable to accomplish any of the above purposes;
and (i) receive, collect, open and read all mail
of Borrower for the sole purpose of obtaining all
items pertaining to the Work, the Principal
Work-Related Items and the other Contracts,
intangibles, Permits and Licenses.
7.1.10 Charge and collect interest on the
outstanding principal balance of the Loan at a
Default Rate equal to the lesser of (i) the
Maximum Rate, or (ii) the Basic Rate plus 500
basis points (the "Default Rate").
7.2 If Borrower shall fail to comply with or
fully perform any of its obligations under the
Loan Documents, regardless of whether an Event of
Default shall then exist, Lender may (but shall
not be obligated to), without further demand upon
Borrower and without waiving or releasing Borrower
from any such obligation or remedying any Event of
Default or Incipient Default pay or perform any of
such obligations. Lender shall give Borrower at
least ten (10) Business Days' notice before making
any payment required to be made by Borrower,
except that if such payment is required, as
determined by Lender in its sole discretion, to be
made immediately to protect the Collateral, no
prior notice of payment to Borrower shall be
required. Unless an Event of Default exists and
the Note is then due in full (whether by
acceleration or otherwise), Lender shall notify
Borrower
30
within a reasonable period of time after it takes
any action without notice pursuant to the
preceding sentence, but failure to do so shall not
excuse Borrower from its obligation to reimburse
Lender in accordance with the terms of the
following sentence or otherwise prevent the
exercise by Lender of its rights and remedies on
account of any default by Borrower. Borrower shall
immediately pay to Lender upon demand all expenses
incurred by Lender in taking any action permitted
by this paragraph, together with interest from the
date of expenditure by Lender at the rate at which
interest is then accruing under the Note or, at
the option of Lender, if not paid within five (S)
Business Days after demand, at the Default Rate
from and after such fifth (5th) Business Day. All
such sums, together with interest as aforesaid,
shall become additional indebtedness secured by
the Collateral. No such payment by Lender shall be
deemed to relieve Borrower from any default or
Event of Default under any of the Loan Documents.
7.3 For the purpose set forth under paragraph
7. 1.6. 7.1.9 and 7.2, Borrower hereby irrevocably
appoints Lender as Borrower's true and lawful
attorney-in-fact with full power of substitution
(and such power of attorney shall be deemed to be
a power coupled with an interest that cannot be
revoked for any reason) from and after the
occurrence of an Event of Default, to operate the
Property and to take such action and require such
performance as it deems necessary. Without
limiting the generality of the powers granted to
Lender, Borrower hereby specifically empowers
Lender, as such attorney-in-tact:
7.3.1 To take all actions reasonably
necessary in connection therewith for the purpose
of operating the Property;
7.3.2 To employ such management companies as
shall be convenient to operate the Property; and
7.3.3 To pay, settle, or compromise all
existing or future bills and claims which are or
may be liens against the Property or may be
reasonably necessary or desirable for the
operation of the Property.
ARTICLE 8
LEGAL FEES AND
COSTS
8.1 Except as otherwise expressly provided
herein, Borrower shall pay all actual reasonable
closing and pre-closing costs for the Loan and all
expenses of Lender with respect thereto,
including, without limitation, all of Lender's
outside attorneys' fees, Lender's Consultant fees
and costs (Borrower hereby acknowledging that the
fees and costs of the existing Lender's Consultant
(i.e., High-Point Xxxxxx) as described in that
certain Letter Agreement between Borrower and
Lender's Consultant dated November 14, 1996 are
reasonable), travel expenses, escrow fees,
recording fees, title search and title insurance
fees, UCC lien, litigation and tax lien searches,
mortgage taxes and appraisal and survey fees and
all other legal fees incurred by Lender in
conjunction with the Loan, including all fees
incurred subsequent to the closing of the Loan in
connection with the disbursement, administration
(includin& without limitation, Lender's Consultant
fees), collection (regardless of whether
litigation is commenced), or satisfaction of the
Loan, advances, recording expenses, survey, taxes,
expenses of collection or foreclosure (including
attomeys' fees) and similar items. Lender may, at
its option, withhold funds from the Advances for
application against Lender's expenses and Borrower
shall pay any excess within ten (10) days after
its receipt of a written request therefor.
8.2 In addition to any rights Borrower and
Lender may have under applicable law, Borrower
shall pay Lender's attorneys' fees and costs
(including expert witness fees) incurred in the
collection of any indebtedness hereunder, or in
enforcing this Agreement, whether or not suit is
brought, including any reasonable attorneys' fees
and costs (including expert witness fees) incurred
by Lender in any proceeding under the Federal
Bankruptcy Code in order to collect any
indebtedness hereunder or to preserve, protect or
realize upon any security for such indebtedness.
31
ARTICLE 9
LENDER'S CONSULTANT
9.1 Lender may retain an architectural,
engineering or consulting firm or firms acceptable
to Lender ("Lender's Consultant") to review the
Plans and Specifications, the Construction
Contract(s) and the Budget; perform an analysis of
the anticipated cost of the Work; make periodic
inspections of the Property and Work so that
Lender may monitor whether Borrower is in
compliance with the terms and conditions of this
Agreement with respect to completion of the Work;
certify that each Work-Related Advance Request is
not in excess of the Work completed and the amount
to which Borrower is entitled under the terms and
conditions of this Agreement; and provide evidence
satisfactory to Lender prior to the funding of any
Work- Related Advance that (subject to completion
thereof as part of the Work as contemplated by
this Agreement), all necessary streets, easements
and utilities are available to the boundary of the
Real Property and that the respective lines and
treatment or generator plants are of adequate
capacity and size for the intended use of the
Property. Furthermore, Lender may require an
inspection of the Work by Lender's Consultant (a)
prior to each Work-Related Advance; (b) at least
once each month during the course of construction
of the Work; (c) upon Completion of the Work; and
(d) at such other time as Lender may deem
necessary due to actual or suspected
non-compliance with the Plans and Specifications,
Construction Contract(s), the Loan Documents, any
law, regulation or private restriction, sound
architectural, engineering or construction
principles or commonly accepted safety standards
or Borrower's failure to satisfy the requirements
of the Loan Documents.
9.2 Lender shall have no duty to supervise or
to review and inspect the Plans and
Specifications, the Construction Contract(s), any
budget proposed to be the Budget, the construction
of the Work, or any books and records pertaining
thereto. Any inspection made by Lender shall be
for the sole purpose of determining whether
Borrower's obligations under the Loan Documents
are being performed and preserving Lender's rights
under these documents. If Lender, or Lender's
Consultant acting on behalf of Lender, should
review or inspect the Plans and Specifications,
the Construction Contract(s), the Budget, the
construction of the Work or any books and records
pertaining thereto, Lender and Lender's Consultant
shall have no liability or obligation to Borrower
or any third person arising out of such
inspection; and neither Borrower nor any third
person shall be entitled to rely upon any such
inspection or review. Inspection not followed by
notice of default shall not constitute (a) a
waiver of any default then existing, (b) an
acknowledgment or representation by Lender or
Lender's Consultant that there has been or will be
compliance with the Plans and Specifications, the
Construction Contract(s), the Budget, the Loan
Documents, applicable laws, regulations and
private restrictions, sound construction,
engineering or architectural principles or
commonly accepted safety standards, or that the
construction is free from defective materials or
workmanship; or (c) a waiver of Lender's right to
insist that Completion of the Work occur in
accordance with the Plans and Specifications,
Construction Contract(s), the Budget, Loan
Documents, applicable laws, regulations and
restrictions of record. sound construction,
engineering or architectural principles or
commonly safety
standards and free trom defective materials and
workmanship. Lender and Lender's Consultant owe no
duty of care to Borrower or any third person to
protect against, or inform Borrower or any third
person of, the existence of negligence. faulty,
inadequate or defective design or construction of
the Work.
ARTICLE 10
MISCELLANEOUS
10.1 Any waiver of any of the terms of this
Agreement by Lender shall not be construed as a
waiver of any other terms of this Agreement, and
no waiver shall be effective unless made in
writing. The failure of Lender to exercise any
right with respect to the declaration of any
default shall not be deemed or construed to
constitute a waiver of, or to preclude Lender from
exercising, any right with respect to such default
at a later date or with respect to any subsequent
default by Borrower.
10.2 Borrower shall execute and deliver any
and all documents which may reasonably be
requested by Lender in order to effectuate the
purposes of this Agreement.
32
10.3 This Agreement is made solely between
Borrower and Lender. No other person shall have
any right of action hereunder. The parties
expressly agree that no person shall be a
third-party baneficiary to this Agreement.
10.4 Borrower shall indemnify, defend and
hold Lender harmless from and against all claims,
costs, expenses, actions, suits, proceedings,
losses, damages, and liabilities of any kind
whatsoever, including but not limited to,
attorneys' fees and expenses (including, without
limitation, expert witness fees), arising out of
any matter relating to the Loan or to the
ownership, development, construction, sale, rental
or financing of the Property and whether resulting
from internal disputes of Borrower, disputes
between Borrower and any Affiliate of Borrower or
whether involving other third persons or entities,
or out of any other matter whatsoever related to
this Agreement, any of the Loan Documents or any
property encumbered thereby; excluding, however,
claims, costs, expenses, actions, suits,
proceedings, losses, damages and liabilities of
any kind whatsoever which result from Lender's
gross negligence or willful misconduct. This
indemnity provision shall continue in full force
and effect and shall swive not only the making of
the Loan and all Advances thereof but shall also
swive the repayment of the Loan and the
performance of all of Borrower's other obligations
under this Agreement.
10.5 This Agreement shall inure to the
benefit of, and be binding upon, the parties
hereto, their respective executors,
administrators, heirs, successors, and assigns
(including without limitation any other lender
participating with Lender in the Loan), provided,
however, that neither this Agreement nor any
rights or obligations hereunder shall be
assignable by Borrower without the prior express
written consent of Lender, and any purported
assignment made in contravention hereof shall be
void. No standard ot reasonableness shall attach
to Lender's discretion in consenting or not
consenting to any assignment.
10.6 The Recitals and all of the exhibits
attached hereto are an integral part hereof and
are fully incorporated herein by this reference.
10.7 Time is of the essence of each and every
provision of this Agreement and the other Loan
Documents.
10.8 This Agreement embodies the entire
agreement of the parties in relation to the
subject matter hereof, and supersedes all terms,
conditions and provisions embodied in the
commitment letter between Lender and Borrower
dated September 12, 1996, and any and all other
previous writings between Borrower and Lender.
There are no representations, promises,
warranties, understandings or agreements,
expressed or implied, oral or otherwise, in
relation thereto, except those expressly referred
to or set forth herein. Borrower acknowledges that
the execution and delivery of this Agreement is
its free and voluntary act and deed, and that said
execution and delivery have not been induced by,
nor done in reliance upon, any representations,
promises, warranties, understandings, or
agreements made by Lender, its agents, officers,
employees, or representatives, other than those
expressly set forth herein. No promise,
representation, warranty or agreement made
subsequent to the execution and delivery hereof by
either party hereto, and no revocation, partial or
otherwise, or change, amendment, addition,
alteration or modification of this Agreement.
shall be valid unless the same be in writing
signed by all the parties hereto.
10.9 Unless otherwise specifically stipulated
elsewhere in this Agreement, all approvals,
consents and other matters requiring acceptance or
satisfaction on Lender's part contained in the
Loan Documents shall be deemed exerciseable by
Lender in its sole and absolute discretion.
However, whenever the Loan Documents contain the
terms "reasonably satisfactory to Lender",
"reasonably determined by Lender", "reasonably
acceptable to Lender", "reasonable consent of
Lender", "Lender shall reasonably elect", "Lender
shall reasonably request" or similar terms wherein
the word reasonable or a derivative thereof is
used with regard to an action of Lender, such
terms shall mean satisfactory to, at the election
of, determined by, acceptable to or requested by,
as applicable, Lender in its sole (but reasonably
exercised) discretion. It is the intention of the
parties to permit Lender a broad latitude in which
to exercise its discretion, within the
33
range of reasonableness, acknowledging that, while
such discretion may not be exercised arbitrarily
or capriciously, it may be exercised
conservatively for Lender's protection and
benefit. By way of illustration, and not of
limitation, it shall not be unreasonable for
Lender, in exercising its discretion, to make
conservative assumptions regarding the possible
outcome of future events.
10.10 Any notice required or permitted to be
given hereunder shall be in writing and shall be
(i) personally delivered to the party being
not)fied if an individual or to
an officer, general partner or member if a
corporation. partnership or limited liability
company, (ii) transmitted by postage prepaid.
certified or registered mail (return receipt
requested) or (iii) transmitted by a nationally
recognized overnight courier service such as
Federal Express, to s-uch party at its address set
forth below or such other address as the party
being not)fied may have otherwise designated in a
notice given as provided in this paragraph. Such
notice shall be deemed to given and effective,
unless actual receipt is expressly elsewhere
specified herein, upon the date of receipt or the
date delivery is first attempted and refused if
transmitted by registered or certified mail, or by
overnight courier service, whichever shall occur
first.
If to Borrower: Fairfield Retirement Center,
LLC
c/o NorthBay Health Advantage
0000 X. Xxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
With Copy to: Emeritus Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
BW (Fairfield) Real Estate Corporation
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 913S6
Xxxxx Xxxxxxxxx
The Xxxxxxxxx Group
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
If to Lender: FINOVA Capital Corporation
0000 Xxxx Xxxxxx Xxxxx, Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
with copy to: FINOVA Capital Corporation
0000 Xxxx Xxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attn.: Vice President - Group Counsel
10.11 THIS LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE DEEMED TO HAVE BEEN, DELIVERED
AND ACCEPTED IN, AND THIS LOAN AGREEMENT, AND THE
OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS
AND DECISIONS OF, THE STATE OF ARIZONA (WITHOUT
REGARD FOR ITS CONFLICTS OF LAW PRINCIPLES), THE
STATE IN WHICH LENDER'S PRINCIPAL PLACE OF
BUSINESS IS LOCATED, AND BY EXECUTION HEREOF
BORROWER AND BY ACCEPTANCE HEREOF' LENDER, EACH
AGREES THAT SUCH LAWS AND DECISIONS OF THE STATE
OF ARIZONA SHALL GOVERN THIS LOAN AGREEMEI
