ADDENDUM TO
ALL-INCLUSIVE DEED OF TRUST AND
ASSIGNMENT OF RENTS
This Addendum is attached to and
forms a part of that certain All-Inclusive
Deed of Trust and Assignment of Rents
dated __________ executed by EMERITUS
CORPORATION, a Washington corporation as
Trustor, in favor of SUNDAY ESTATES,
INC., a Nevada corporation as Beneficiary
and shall be attached to and form a part
of said Deed of Trust.
1. Trustor has delivered a form of
Residence Agreement ("Residence
Agreement") which shall be used by Trustor
for each resident of the assisted living
facilities on the Property. Beneficiary
has approved the form of said Residence
agreement and Trustor agrees that it will
not make any amendments or modifications
thereto which would have any material,
adverse effect on the operation,
maintenance or income from the Property
without the prior written consent of
Beneficiary. Beneficiary's consent shall
not be unreasonably withheld or delayed.
2. By no later than the quarter
commencing twelve (12) months after the
"Funding Date" (as defined in the Senior
Note), the Property shall achieve and
maintain compliance with a minimum of 1.15
debt service coverage ratio (the "Debt
Coverage Ratios") to be tested quarterly
based on the operation of the Property.
As used herein, "Debt Coverage Ratio"
means a ratio in which the first number is
the sum of net income from normal
operations for the Property (without
deduction for actual management fees
incurred or paid in connection with the
operation of the Property), calculated
based upon the preceding three (3) months,
plus interest expense or lease expense to
the extent deducted in determining net
income and non-cash expenses or allowances
for depreciation and amortization of the
Property for said period, less either
assumed management fees or actual
management fees (as applicable) for said
period, and the second number is the
interest expense relating to the Senior
Note for the applicable period. In
calculating "net income," federal and
state taxes on such income shall be
deducted and any extraordinary income
shall be excluded.
Trustor shall deposit cash or other
liquid collateral with Beneficiary (the
"Additional Collateral") in the event the
required debt service coverage ratio is
not achieved, which will be deposited by
Beneficiary with the holder of the Senior
Note as additional collateral for the
Senior Loan pursuant to a Deposit and
Security Agreement, in form and content
acceptable to Trustor, Beneficiary and the
holder of the Senior Note. Initially, the
Additional Collateral will be equal to an
amount which, when added to the first
number of the debt service coverage
calculation, would have resulted in the
non-complying debt service requirement
having been met. However, if the debt
service coverage ratio requirement is not
corrected within two (2) consecutive
quarters, Borrower will be required to
increase the Additional Collateral to an
amount which, if the same had been applied
on the first (1st) day of the prior three
(3) month period to reduce the outstanding
principal indebtedness of the Senior Note,
would have resulted in the non-complying
debt service coverage requirement having
been satisfied, which such increased
amount will be held for an additional two
(2) consecutive quarters. Borrower's
failure to post either of the required
Additional Collateral amounts, or
Borrower's failure to correct the debt
service coverage requirements within the
period specified in the preceding sentence
shall constitute a default hereunder. The
Additional Collateral shall be released to
Trustor upon satisfaction in full of the
Senior Note.
Further, the Property shall maintain
an average annual occupancy of 80% or
greater (based on the number of units
available at the Property) upon
stabilization (which shall be deemed to
have occurred when the Property has been
80% occupied for three (3) consecutive
months) and continuing during the Loan
term.
Trustor will furnish to Beneficiary,
or will cause the manager of the Property
to furnish to Beneficiary, within forty-
five (45) days of the end of each calendar
quarter, a certificate of a financial
officer of Trustor or such manager,
confirming compliance with the covenants
required by paragraph 42.
3. REPORTS AND STATEMENTS. Trustor
shall deliver to Beneficiary throughout
the term of the Loan the following:
(a) Within ninety (90) days after
the end of the fiscal years of the
Property and Trustor (if different from
Property) audited financial statements of
the Trustors and Unaudited financial
statements of the Property, which
statements shall include a balance sheet
and a statement of income and expenses for
the year then ended, and shall be
certified as true and correct by a
financial officer of Trustor.
(b) Within forty-five (45) days
after the end of each fiscal quarter,
unaudited interim financial statements of
the Property and Trustor (if different
from Property), certified as true and
correct in all material respects by a
financial officer of the Trustor, prepared
in accordance with generally accepted
accounting principles consistently
applied, which such statements shall
include a balance sheet, statement of
income and expenses for the quarter then
ended, and quarterly census information of
the Property in sufficient detail to show
patient-mix on a daily average basis for
such quarter.
(c) In the event the Property is
certified to participate in Medicaid,
within forty-five (45) days of filing or
receipt, all Medicaid cost reports and any
amendments thereto filed with respect to
the Property and all responses, audit
reports, or inquiries received by Trustor
with respect to such cost reports.
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(d) Within twenty (20) days of
receipt, copies of all licensure and
certification survey reports and
statements of deficiencies (with plans of
correction attached thereto is and to the
extent the same have been prepared and
filed within such 20-day period).
(e) Within three (3) days of
receipt, any and all notices (regardless
of form) from any and all licensing and/or
certifying agencies that the Property's
license is being downgraded to a
substandard category, revoked, or
suspended, or that action is pending or
being considered to downgrade to a
substandard category, revoke, or suspended
the Property's license or certification.
(f) Within ten (10) days after a
request by Beneficiary, evidence of
payment by Trustor or Manger of any
applicable provider bed taxes or similar
taxes.
(g) Within ten (10) days after a
request by Beneficiary, an accounts aging
report of each Property.
(h) In the event the Property is
certified to participate in Medicaid,
within ten (10) days of receipt, a copy of
the "Medicaid Rate Calculation Worksheet"
(or the equivalent thereof) from the
applicable agency.
Any deficiency (identified pursuant
to (d) or (e) above) shall be corrected by
the date required by the licensure and
certification agency, if such deficiency
could adversely affect either the right to
continue participation in Medicaid for
existing patients or the right to admit
Medicaid patients, if applicable, or the
continued licensure of the Property.
The Beneficiary reserves the right to
reasonably require such other financial
information of Trustor or the Property at
such other times as it shall deem
necessary. All financial statements must
be in such form and detail as Beneficiary
shall from time to time reasonably
request.
4. Trustor hereby acknowledges that
Deed of Trust to which this Addendum is
attached is subordinate to the Senior Deed
of Trust, the Beneficiary of which is GMAC
Commercial Mortgage Corporation. Trustor
agrees that the terms and conditions of
this Addendum shall be for the benefit of
GMAC Commercial Mortgage Corporation as
well as Beneficiary as long as said Senior
Deed of Trust remains as a first lien
against the Property.
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IN WITNESS WHEREOF, the undersigned
Trustor has executed this Addendum
concurrently with the execution of the
Deed of Trust to which it is attached. In
the event of any conflict between the
terms of this Addendum and the terms of
the Deed of Trust, the terms of this
Addendum shall prevail.
EMERITUS CORPORATION,
a Washington corporation
By: /s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx
Its: Chairman
STATE OF Washington )
) ss.
COUNTY OF King )
On November 15, 1996, before me,
Xxxxxxxxx X. Xxxxxxx, a Notary Public in
and for said state, personally appeared
Xxxxxx X. Xxxx, personally known to me (or
proved to me on the basis of satisfactory
evidence) to be the person whose name is
subscribed to the within instrument and
acknowledged to me that he/she executed
the same in his/her authorized capacity,
and that by his/her signature on the
instrument, the person, or the entity upon
behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
/s/ Xxxxxxxxx X. Xxxxxxx
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Xxxxxxxxx X. Xxxxxxx
Notary Public in and for said
State
[SEAL]
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