$9,765,000.00
CREDIT AGREEMENT
Dated as of June 30, 1998
Between
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LIMITED PARTNERSHEIP
as Borrower,
and
DEUTSCHE BANK AG, NEW YORK BRANCH,
as the Lender
CREDIT AGREEMENT
CREDIT AGREEMENT (this "Agreement") dated as of June 30,1998 by
and among ▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LIMITED PARTNERSHIP, a Washington
limited partnership ("Borrower"), having an address c/o Columbia
Pacific, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and DEUTSCHE BANK AG, a bank chartered under the laws of the
Federal Republic of Germany, acting by and through its New York
Branch (together with its successors and assigns, the "Lender"),
having an address at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇.
WITNESSETH:
WHEREAS, Borrower is the owner ofthe assisted living facility
listed on Schedule A attached hereto (the "Property");
WHEREAS, Borrower has requested and the Lender has agreed to make
a loan to Borrower in the principal amount of NINE MILLION SEVEN
HUNDRED SIXTY-FIVE THOUSAND AND NO/100 DOLLARS ($9,765,000.00)
(the "Loan"), which will be secured, inter alia, by a first
mortgage lien on the Property, all on the terms and conditions
ofthis Agreement; and
WHEREAS, ▇▇▇▇▇▇ ▇. ▇▇▇▇ owns an indirect beneficial interest in
Borrower;
NOW, THEREFORE, in consideration ofthe premises and ofthe mutual
covenants and agreements contained herein, the paities hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural
forms ofthe terms defined):
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under
common control with such Person or is a director or officer ofsuch
Person. For purposes ofthis definition, the term "control"
(including the terms "controlling," "conholled by" and "under
common control with") of a Person means the possession, direct or
indirect, ofthe power to vote ten percent (1O%) or more ofthe
Voting Stock ofsuch Person or to direct or cause the direction
ofthe management
2
and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Applicable Lending Office" means Lender's Eurodollar Lending
Office during any period in which the Loan is maintained as a
Eurodollar Rate Loan and Lender's Domestic Lending Office during
any period in which the Loan is maintained as a Base Rate Loan.
"Appraisal" means an appraisal ofthe Property prepared by an
Appraiser in accordance with the Uniform Standards of Appraisal
Practice ofthe Appraisal Foundation and complying with the
requirements of Title 11 of the Federal Financial Institutions
Reform, Recovery and Enforcement Act of 1989 and otherwise in form
and substance acceptable to the Lender, as may be updated by
recertification from time to time.
"Appraiser" means an Independent appraiser as shall be approved by
the Lender.
"Asbestos" means any hydrated mineral silicate separable into
commercially usable fibers, including, but not limited to,
chrysotile (serpentine), amosite (cummingtonite-grunerite),
crocidolite (riebecktite), tremolite, anthophylite and actinolite,
which is or could become friable.
"Asbestos-Containing Material" means any material which contains
one percent (1%) or more Asbestos by weight.
"Assignee" means any assignee of the Lender pursuant to Section
7.01.
"Assignment and Acceptance" means an assignment and acceptance
entered into by the Lender and an Assignee, and accepted by the
Lender, in accordance with Section 7.01 and in substantially the
form of Exhibit B hereto.
"Base Rate" means a fluctuating interest per annum in effect from
time to time, which rate per annum shall be equal to the lesser of
(i) the maximum nonusurious rate permitted by Law or (ii) the
greater of (A) the rate of interest announced publicly by Deutsche
Bank AG, New York Branch, in New York, from time to time, as its
Prime Rate" and (B) one percent (l%) above the Federal Funds Rate.
"Base Rate Loan" means the Loan during any period in which
interest is determined in accordance with Section 2.05(a)(i).
3
"▇▇▇▇" means ▇▇▇▇▇▇ ▇. ▇▇▇▇, an individual having an address c/o
Columbia Pacific, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ 98 I 21.
"Borrower" has the meaning specified in the recitals to this
Agreement.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City or the
city in which the principal office of the Loan Servicer is
located.
"Capitalized Leases" means, with respect to any Person, any leases
of any
property by such Person, as lessee, which, in accordance with
GAAP, is required to be accounted for as a capital lease on the
balance sheet of such Person.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to
time.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the
U.S. Environznental Protection Agency.
"Change of Control" means with respect to any Person (i) the sale
or transfer by Persons who are the direct beneficial owners ofsuch
Person as of the Closing Date of more than forty-nine and nine-
tenths percent (49.9"%) of the direct or indirect right to
distributions from such Person in the aggregate to Persons who
were not direct beneficial owners as of such date or (ii) the sale
or transfer by such direct beneficial owners of such Person as of
the Closing Date of more than forty-nine and nine-tenths percent
(49.9"%) of the direct or indirect voting rights in such Person to
Persons who were not direct beneficial owners as of such date.
"Closing Date" means the date on which the proceeds of the Loan
are disbursed to Borrower.
"Collateral" means all "Collateral" referred to in the Collateral
Documents and all other property that is or is intended to be
subject to any Lien in favor of the Lender.
"Collateral Documents" means the Security Agreement, the Mortgage,
and any other agreement that creates or purports to create a Lien
in favor of the Lender.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all
Obligations of such Person for the deferred purchase price of
property or services (other than trade payables not overdue by
more than ninety
4
(90) days incurred in the ordinary course of such Person's
business), (c) all Obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all
Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property),
(e) all Obligations of such Person as lessee under Capitalized
Leases, (all Obligations, contingent or otherwise, of such
Person under acceptance, letter of credit or similar facilities,
(g) all Obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital
stock of or other ownership or profit interest in such Person or
any other Person, valued, in the case of redeemable preferred
stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (h) all Debt of
others referred to in clauses (a) through (g) above or clause (i)
below guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (1) to pay or purchase such Debt or to
advance or supply funds for the payment or purchase of such Debt,
(2) to purchase, sell or lease (as lessee or lessor) property, or
to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss, (3) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay
for property or services irrespective of whether such property is
received or such services are rendered) for (4) otherwise to
assure a creditor against loss, and (i) all Debt referred to in
clauses (a) through (h) above of another Person secured by (or for
which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable
for the payment of such Debt.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice
be given or time elapse or both.
"Default Rate" has the meaning specified in Section 2.05(b).
"Determination Date" means, with respect to each Interest Period,
the second Business Day prior to the Interest Reset Date.
"Disclosed Litigation" has the meaning specified in Section
3.01(lb).
"Disclosure Schedule" means Schedule B attached hereto.
"DOH" has the meaning specified in Section 4.01(n).
5
"Domestic Lending Office" means the office of the Lender specified
as its
"Domestic Lending Office" in any notice to Borrower or in the
Assignment and Acceptance pursuant to which it became a Lender
Party, as the case may be, or such other office of such Lender
Party as such Lender Party may specify to Borrower and the Lender.
"Effective Capacity" means, with respect to the Property, the
number of licensed beds from time to time at the Property actually
available for utilization (which may be less than the numbers of
beds licensed due to utilization of single patient rooms or other
reasonable and prudent operation decisions).
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding,
consent order or consent agreement relating in any way to any
Environmental Law, any Environmental Permit or Hazardous Material
or arising from alleged injury or threat to health, safety or the
environment, including, without limitation, (a) by any
governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by
any governmental or regulatory authority or third party for
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ,
judgment, injunction, decree or judicial or agency interpretation,
policy or guidance relating to pollution or protection of the
environment, health, safety or natural resources, including,
without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge
of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any
Environmental Law.
"Equipment" means all equipment referred to in Section 1(a) ofthe
Security Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning specified in Regulation
D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
6
"Eurodollar Lending Office" means the office of the Lender
specified as its
"Eurodollar Lending Office" in any notice to Borrower or in the
Assignment and Acceptance pursuant to which it became a Lender
Party, as the case may be, or such other office of Lender Party as
such Lender Party may from time to time specify to Borrower and
the Lender.
"Eurodollar Margin" means, with respect to the outstanding
principal of the Loan, 295 basis points (2.95%) per annum.
"Eurodollar Rate" means, for any Interest Period, (a) either (i)
the quotation (expressed as percentage per annum) appearing on
Telerate Page 3750 as of 11:00 a.m., New York time, on the
relevant Determination Date for such Interest Period for one month
U.S. Dollar deposits in the London interbank market (rounded
upward, if necessary, to the nearest one hundred-thousandth of a
percentage point) or, if no such rate appears on Telerate Page
3750, or (ii) the arithmetic mean (rounded upward, if necessary,
to the nearest one hundred-thousandth of a percentage point) of
the rates quoted at approximately 11:00 a.m., London time, on such
Determination Date, by four (4) major banks in the London
interbank market, selected by Lender, to prime banks in the London
interbank market for one-month U.S. Dollar deposits commencing on
the first day of the applicable Interest Period and in a principal
amount equal to an amount of not less than One Million and No/100
Dollars ($1,000,000.00) that is representative for a single
transaction in such market at such time, provided that, if fewer
than four (4) such quotations are provided as requested, the rate
of interest that is in effect on such Determination Date will be
the Eurodollar Rate for the immediately preceding Interest Period
divided by (b) one (1) minus the Eurodollar Rate Reserve
Percentage.
"Eurodollar Rate Loan" means any Loan which bears interest in
accordance
with Section 2.05(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for
any Eurodollar Rate Loan means the reserve percentage applicable
two (2) Business Days before the first day of such Interest Period
under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities (or with respect to any
other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Rate Loans is determined)
having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
7
"Excluded Taxes" has the meaning specified in Section 2.08.
"Exit Fee" has the meaning specified in Section 2.07(b).
"Fiscal Year" means a fiscal year of Borrower ending on December
31 in any calendar year or such other fiscal year as Borrower may
select from time to time in accordance with the terms of this
Agreement.
"GAAP" means generally accepted accounting principles consistently
applied and consistent with those applied in the preparation of
the financial statements referred to in Section 5.03.
"General Partner" means Columbia Pacific Master Fund 98 Limited
Partnership, a Washington partnership, the general partner of
Borrower or any successor thereto in accordance with the terms
ofthis Agreement.
"Governmental Authority" shall mean (i) any nation or government,
(ii) any state or other political subdivision thereof, (iii) any
entity or officer exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government, (iv) any court or arbitrator having jurisdiction over
the Loan Parties or any of their Subsidiaries, any of their
respective Subsidiaries or the Property, and (v) any corporation
or other entity which is an Affiliate of any of the foregoing.
"Guaranteed Obligations" shall mean:
(i) the payment, as and when due, or by stated maturity,
acceleration, or otherwise, of the Note and all other amounts due
and payable under the other Loan Documents to the Lender at such
times and in the manner provided for in the Loan Documents, and
(ii) the payment of all other obligations of Borrower that can be
performed by the payment of monies, to the Lender directly or by
reimbursement of advances by it, including, without limitation,
the payment of income and other taxes by Borrower.
"Guaranty and Limited Indemnity" has the meaning specified in
Section 3.01(d)(ix).
"Hazardous Materials" means (a) refined petroleum products, by-
products or breakdown products, radioactive materials, Asbestos-
Containing Materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or
8
substances designated, classified or regulated as hazardous or
toxic or as a pollutant or contaminant under any Environmental
Law.
"Health Care Facility" means a facility which provides any health
care services, whether licensed as a skilled nursing facility,
intermediate care facility, personal care facility, assisted
living facility or a hospital or otherwise.
"Health Care Permit" means every accreditation, authorization,
certificate of need, license or permit that is required pursuant
to applicable federal or state law to own, lease, operate or
manage a Health Care Facility.
"Impositions" has the meaning specified in the Mortgage.
"Indemnified Party" has the meaning specified in Section
10.04(lb).
"Indemnitor" means ▇▇▇▇, together with any successors thereto in
accordance with the terms of the Guaranty and Limited Indemnity.
"Independent" means, with respect to any specified Person, such a
Person who (a) does not have any direct financial interest or any
material indirect financial interest in Borrower or the General
Partner or in any of their respective Affiliates, (b) is not
connected with Borrower or the General Partner as an officer,
employee, promoter, underwriter, trustee, partner or director and
(c) is not controlled by or under common control with Borrower or
the General Partner or any of their respective Affiliates.
"Interest Payment Date" means the first (1st) day of each calendar
month while any portion of the Loan remains unpaid; provided,
however, that if such Interest Payment Date is not a Business Day,
such Interest Payment Date shall be the immediately succeeding
Business Day.
"Interest Period" means (a) the period beginning on (and
including) the Closing Date and ending on (but excluding) the
first Interest Payment Date and (b) each successive period
beginning on (and including) an Interest Payment Date and ending
on (but excluding) the next succeeding Interest Payment Date.
"Interest Reset Date" means, with respect to any Eurodollar Rate
Loan, the first day of the applicable Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
9
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or
other ownership or profit interest, warrants, rights, options,
obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such
Person, including, without limitation, any arrangement pursuant to
which the investor incurs Debt of the types referred to in clause
(h) or (i) of the definition of "Debt" in respect of such Person.
"Laws" means all present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, injunctions, rules,
regulations, determinations, awards and court orders of any
federal, state, municipal or local government, governmental
authority, regulatory agency or authority.
"Lender Party" means, collectively Lender and any assignee of all
or a portion of Lender's interests in this Agreement or the Loan
and any subsequent assignee of any Lender Party.
"Lender's Account" means an account of the Lender or Loan Servicer
designated in writing by the Lender or Loan Servicer to Borrower.
"LIBOR Breakage Costs" means the amount of all losses, costs,
charges and damages which are actually incurred by the Lender
through the end of an Interest Period as a result of any early
termination of any arrangement, or the entering into a new
arrangement, with any member of the London interbank market for
the funding of the aggregate outstanding principal amount of the
Loan (determined as though Lender had funded one hundred percent
(l00%) of such outstanding principal amount in the London
interbank market and calculated as of the date of any applicable
early termination, in the same manner as the Eurodollar Rate).
"Licenses" has the meaning specified in Section 4.01(o).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property.
"Loan" has the meaning specified in the Recitals.
"Loan Amount" means the outstanding principal amount of the Loan
as of the
relevant date of determination.
10
"Loan Documents" means (i) this Agreement, (ii) the Note, (iii)
the Guaranty and Limited Indemnity, (iv) the Collateral Documents
and any other written agreement, document or instrument
evidencing, securing or otherwise related to the Loan, in each
case as amended or otherwise modified from time to time.
"Loan Parties" means, collectively, Borrower and ▇▇▇▇, in his
capacity as Indemnitor under the Guaranty and Limited Indemnity.
"Loan Servicer" has the meaning specified in Section 7.03.
"Loan-to-Value Ratio" means the ratio, as of the applicable date
of determination, of(a) the outstanding principal amount of the
Loan to (b) the aggregate fair market value of the Property, as
established by on Appraisal (or as determined by the Lender with
respect to Section 8.01(a)(ii)), made no earlier than three (3)
months prior to the date of determination.
"Management Agreement" means any management agreement between
Borrower and a Manager with respect to the management and
operation of the Properties.
"Manager" means Emeritus Corporation, a Washington corporation,
and any successor property manager approved by the Lender for the
Property.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Effect" means a material adverse effect on (a)
the business , condition (financial or otherwise), operations,
performance or the properties of Borrower or ▇▇▇▇, (b) the rights
and remedies of the Lender under any Loan Document or (c) the
ability of Borrower or ▇▇▇▇ to perform its Obligations under any
Loan Document to which it is or is to be a party.
"Maturity Date" means June 30, 2001.
"Mortgage" has the meaning specified in Section 3.01(d)(viii).
"Mortgage Policy" has the meaning specified in Section
3.01(d)(viii)(B).
"Net Proceeds" has the meaning specified in the Mortgage.
"Note" means the promissory note of Borrower payable to the order
of the
Lender, in form and substance satisfactory to the Lender,
evidencing the indebtedness of Borrower to the Lender resulting
from the Loan made by the Lender.
11
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind,
including, without limitation, any liability of such Person on any
claim, whether or not the right of any creditor to payment in
respect of such claim is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured or unsecured, and whether or not such
claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01( Without limiting the
generality of the foregoing, the Obligations of Borrower under the
Loan Documents include (a) the obligation to pay principal,
interest, charges, expenses, fees, attorneys' fees and
disbursements, iiidemnities and other amounts payable by Borrower
under any Loan Document and (b) the obligation of Borrower to
reimburse any amount in respect of any of the foregoing that the
Lender, in its sole discretion, may elect to pay or advance on
behalf of Borrower.
"Organizational Documents" means, (i) with respect to any Person
that is a corporation, the certificate of incorporation or charter
and by-laws of such Person, (ii) with respect to any Person that
is a partnership, the partnership agreement and, if a limited
partnership, certificate of limited partnership of such person,
and (iii) with respect to any Person that is a limited liability
company, the articles of organization and the operating agreement
of such Person.
"Origination Fee" has the meaning specified in Section 2.07(a).
"Other Taxes" has the meaning specified in Section 2.08.
"Permitted Encumbrances" has the meaning specified in the
Mortgage.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies not yet due and payable; (b) Liens
imposed by law, such as materialmen's, mechanics', carners',
workmen's and repairmen's Liens and other similar Liens arising in
the ordinary course of business securing obligations that are not
overdue for a period of more than thirty (30) days; (c) pledges or
deposits to secure obligations under workers' compensation laws or
similar legislation or to secure public or statutory obligations;
(d) Permitted Encumbrances; (e) Liens arising in connection with
installment sales agreements permitted under Section 5.02(b)(ii);
and (Liens arising in connection with leases permitted under
Section 5.02(c).
"Person" means an individual, partnership, corporation (including
a business trust), limited liability company, joint stock company,
trust, unincorporated association,
12
joint venture or other entity, or a government or any
political subdivision or agency thereof.
"Phase I Reports" means a Phase I environmental assessment report
of the Property, in form and substance satisfactory to the Lender,
prepared by ATC Associates or such other environmental consulting
firm reasonably acceptable to the Lender, which have been provided
to Lender.
"Physical Plant Standards" has the meaning specified in Section
4.01(s).
"Premises" has the meaning specified in the Mortgage.
"Property" has the meaning specified in the Recitals and as listed
on Schedule A attached hereto, as more particularly described in
the Mortgage.
"Receivables" has the meaning specified in the Security Agreement.
"Register" has the meaning specified in Section 7.01(d).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Contracts" means all contracts and rights pursuant
to reimbursement or third party payor programs and contracts for
the Property which are now or hereafter in effect with respect to
residents or patients qualifying for coverage under the same,
including, but not limited to, Medicare, Medicaid, any successor
program or other similar reimbursement program (whether operated
by a governmental or quasi government agency or by a private
Person) and private insurance agreements.
"Responsible Officer" means any officer of any Loan Party or any
of its Subsidiaries.
"Secured Obligations" has the meaning specified in the Security
Agreement.
"Security Agreement" has the meaning specified in Section
3.01(d)(vii).
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the
property of such Person is greater than the total amount of
liabilities, including, without limitation, contingent
liabilities, of such Person, (b) such Person does not intend to,
and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay such debts and liabilities as
they mature
13
and (c) such Person is not engaged in business or a transaction,
and is not about to engage in business or a transaction, for which
such Person's property would constitute an unreasonably small
capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured
liability.
"Specified Repairs" means those repairs with respect to the
Properties set forth on Schedule D attached hereto.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which
(or in which) more than fifty percent (50%) of(a) the issued and
outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency), (b) the interest in
the capital or profits of such partnership, joint venture or
limited liability company or (c) the beneficial interest in such
trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its
other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Taxes" has the meaning specified in Section 2.08.
"Third-Party Payors Programs" has the meaning specified in Section
4.01(q).
"Title Company" means Chicago Title Insurance Company.
"Voting Stock" means capital stock issued by a corporation, or
equivalent
interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for
the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"
and the words "to" and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP.
14
ARTICLE II
AMOUNT AND TERMS OF THE LOAN
SECTION 2.01. The Loan. Subject to the terms and conditions set
forth in this Agreement, the Lender shall lend to Borrower, and
Borrower shall borrow from the Lender, a principal amount equal to
NINE MILLION SEVEN HUNDRED SIXTY-FIVE THOUSAND AND NO/100 DOLLARS
($9,765,000.00). Amounts of the Loan borrowed, repaid or prepaid
by Borrower may not be reborrowed.
SECTION 2.02. Making the Loan. Upon satisfaction of the conditions
precedent set forth in Article III to Lender's obligation pursuant
to this Agreement, the Loan shall be made before 11:00 A.M. (New
York City time) on the Closing Date.
SECTION 2.03. Repayment of the Loan. Subject to the provisions of
Section 2.04 and Section 2.07(b), Borrower shall repay the
aggregate outstanding principal amount of the Loan on the Maturity
Date.
SECTION 2.04. Prepayments. (a) Voluntary. The Loan may be prepaid,
in whole or in part, upon at least fifteen (15) days' prior
written notice by Borrower to Lender specifying the date on which
the Loan is to be repaid. If such notice is given, Borrower shall,
consistent with such notice, prepay the applicable portion of the
outstanding principal amount of the Loan in whole, together with
(A) accrued interest to the date of such prepayment on the
aggregate principal amount prepaid, (B) an amount equal to the
Exit Fee (if required pursuant to Section 2.07(b)) and (C) LIBOR
Breakage Costs, if any.
(b) Mandatory. If an Event of Default occurs, and the Loan is
declared to be immediately due and payable, then there shall be
added to the principal amount of the Loan then due an amount equal
to the Exit Fee plus all LIBOR Breakage Costs, if any.
(c) Prepayment on Casualty or Condemnation. The Loan shall be
prepayable, in whole or in part, together with the Exit Fee but
without premium, upon any application by Lender of any net
insurance proceeds or net condemnation proceeds or awards in
accordance with Article I of the Mortgage.
SECTION 2.05. Interest. (a) Scheduled Interest. Borrower shall pay
interest on the unpaid principal amount of the Loan owing to the
Lender from the date of disbursement of the Loan until such
principal amount shall be paid in full, at the following rates per
annum:
(i) Base Rate. During the periods, if any, during which Section
2.10 provides that the Loan shall accrue interest based on the
Base Rate, a rate per annum
15
equal to the Base Rate in effect from time to time, payable in
arrears on each applicable Interest Payment Date.
(ii) Eurodollar Rate. Except as otherwise provided in clause (i)
above, a rate per annum equal at all times during each Interest
Period to the sum of (A) the Eurodollar Rate for such Interest
Period plus (B) the Eurodollar Margin, payable in arrears on each
applicable Interest Payment Date.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default, Borrower shall pay interest
(the "Default Rate") on (i) the unpaid principal amount of the
Loan, payable in arrears on each Interest Payment Date and on
demand, at a rate per annum equal at all times to the lesser of
(x) the maximum non-usurious rate permitted by Law or (y) five
percent (5%) per annum above the rate per annum required to be
paid on the Loan pursuant to clause (a)(i) or (a)(ii) above, as
the case may be, and (ii) to the fullest extent permitted by Law,
the amount of any interest, fee or other amount payable hereunder
that is not paid when due, from the date such amount shall be due
until such amount shall be paid in full, payable in arrears on the
date such amount shall be paid in full and on demand, at a rate
per annum equal at all times to the lesser of (x) the maximum
nonusurious rate permitted by Law or (y) five percent (5"%) per
annum above the rate per annum required to be paid, in the case of
interest, on the Loan pursuant to clause (a)(i) or (a)(ii), as the
case may be.
(c) Notice of Interest Rate. The Lender (or a Loan Servicer on
behalf of Lender) shall, on each Determination Date, determine and
provide and provide Borrower with a statement of the Eurodollar
Rate applicable for the next succeeding related Interest Period
and the applicable interest rate for such Interest Period. After
determining the applicable interest rate, the Lender (or a Loan
Servicer on behalf of the Lender) shall calculate the aggregate
interest payment payable on the Loan on the next succeeding
Interest Payment Date and shall, as soon as practicable, notify
Borrower of such rates and the amount of the applicable interest
installments. The determination of the interest rate payable on
the Loan and the calculation of each interest installment by the
Lender (or a Loan Servicer on behalf of the Lender) shall, in the
absence of manifest error, be final and binding; provided,
however, that any error in the determination of such interest
rates and the calculation of each interest installment made by the
Lender (or a Loan Servicer on behalf of the Lender) shall not
relieve Borrower from their obligations hereunder, but, Borrower
shall not be required to pay any erroneous amounts.
SECTION 2.06. Payments and Computations. (a) Borrower shall make
each payment hereunder and under the Notes, irrespective of any
right of counterclaim or set-off, not later than 1:00 P.M. (New
York City time) on each Interest Payment Date, and the Maturity
Date in U.S. dollars to the Lender at the Lender's Account (or as
the Lender may otherwise designate) in same day funds.
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(b) [Reserved].
(c) All computations of interest and fees shall be made by the
Lender (or any Loan Servicer on behalf of the Lender) on the basis
of a year of360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest, fees or commissions are
payable. Each determination by Lender (or any Loan Servicer on
behalf of the Lender) of an interest rate or fee hereunder shall
be conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of payment of interest; provided, however, that, if
such extension would cause payment of interest on or principal of
the Loan (at any time during which the Loan is a Eurodollar Rate
Loan) to be made in the next following calendar month, such
payment shall be made on the next preceding Business Day.
SECTION 2.07. Fees. (a) Origination Fee. Lender agrees and
acknowledges that on April 29,1998 it received an origination fee
(the "Origination Fee") in the amount of THREE HUNDRED SEVENTY TWO
THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($372,500.00), which
included an amount equal to FORTY-EIGHT THOUSAND EIGHT HUNDRED
TWENTY-FIVE AND NO/100 DOLLARS ($48,825.00) with respect to the
Property.
(b) Exit Fee. Upon any repayment or prepayment of the Loan
(including a prepayment pursuant to Section 2.04(c)), Borrower
shall pay to the Lender a fee (the "Exit Fee") in an amount equal
to one percent (l%) of the principal amount of the Loan being
repaid or prepaid. The foregoing notwithstanding, to the extent
that (i) the Lender or one of its Affiliates provides any mortgage
refinancing proceeds which are used to prepay the Loan, (ii) the
Lender has assigned all of its interest in the Loan to a party
that is not an Affiliate of the Lender (and other than in
connection with a securitization) prior to the time the Exit Fee
would be payable for such Loan or (iii) the Lender is no longer in
the business of making permanent mortgage loans with respect to
properties similar to the Properties, then the Exit Fee shall be
waived by the Lender in its entirety and Borrower shall have no
further obligations with respect thereto.
SECTION 2.08. Taxes. (a) Any and all payments by Borrower
hereunder or under the Note shall be made, in accordance with
Section 2.06, free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto,
excluding taxes that are imposed on the Lender's overall net
income by the United States, taxes that are imposed on the
Lender's overall net income (and franchise taxes imposed in lieu
thereof by the state or foreign jurisdiction under
17
the laws of which the Lender is organized or any political
subdivision thereof, taxes that are imposed on the Lender's
overall net income (and franchise taxes imposed in lieu thereof by
the state or foreign jurisdiction of the Lender's Applicable
Lending Office or any political subdivision thereof and taxes that
are imposed on Lender's overall net income in any jurisdiction
where any of the Properties are located (all such excluded taxes
being hereafter referred to as "Excluded Taxes" and all such non-
excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities in respect of payments hereunder or under the Note
being hereinafter referred to as "Taxes"). If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under the Note to the Lender (i) the sum
payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 2.08) the Lender
receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such
deductions and (iii) Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies
that arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, performing under,
or otherwise with respect to, this Agreement or the Note other
than Excluded Taxes (hereinafter referred to as "Other Taxes").
(c) Borrower shall indemnify the Lender for and hold it harmless
against the full amount of Taxes and Other Taxes, and for the full
amount of taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.08, imposed on or paid by the Lender
and any liability (including penalties, additions to tax, interest
and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within (30) thirty days from the
date the Lender makes written demand therefor.
(d) Within (30) thirty days after the date of any payment of
Taxes, Borrower shall furnish to the Lender, at its address
referred to in Section 10.02, the original or a certified copy of
a receipt evidencing such payment. In the case of any payment
hereunder or under the Note by or on behalf of Borrower through an
account or branch outside the United States or by or on behalf of
Borrower by a payor that is not a United States person, if
Borrower determine that no Taxes are payable in respect thereof,
Borrower shall furnish, or shall cause such payor to furnish, to
the Lender, at such address, an opinion of counsel acceptable to
the Lender stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms
"United States" and "United States person" shall have the meanings
specified in Section 7701 of the Internal Revenue Code.
(e) The Lender shall, on or prior to the date of its execution and
delivery of this Agreement, and from time to time thereafter as
requested in writing by Borrower (but only
18
so long thereafter as the Lender remains lawfully able to do so),
provide Borrower with two original Internal Revenue Service forms
1001 or 4224, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that the
Lender is exempt from or entitled to a reduced rate of United
States withholding tax on payments pursuant to this Agreement or
the Note. If any form or document referred to in this subsection
(e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on
the date hereof by Internal Revenue Service form 1001 or 4224 that
the Lender reasonably considers to be confidential, the Lender
shall give notice thereof to Borrower and shall not be obligated
to include in such form or document such confidential information.
For any. period with respect to which the Lender has failed to
provide Borrower with the appropriate form described in subsection
(e) above other than if such failure is due to a change in law
occurring after the date on which a form originally was required
to be provided or if such form otherwise is not required under
subsection (e) above), the Lender shall not be entitled to
indemnification under subsection (a) or (c) with respect to Taxes
imposed by the United States by reason of such failure; provided,
however, that should the Lender become subject to Taxes because of
its failure to deliver a form required hereunder, Borrower shall
take such steps as the Lender shall reasonably request to assist
the Lender to recover such Taxes.
SECTION 2.09. Late Charge. Subject to Section 10.11, in the event
that any installment of interest or principal shall become overdue
for a period in excess of five (5) days, a "late charge" in an
amount equal to five percent (5%) of the amount so overdue may be
charged to Borrower by the Lender for the purpose of defraying the
expenses incident to handling such delinquent payments. Subject to
Section 10.11, such late charge shall be in addition to, and not
in lieu of, any other remedy the Lender may have and is in
addition to the Lender's right to collect reasonable fees and
charges of any agents or attorneys which the Lender may employ in
connection with any Default.
SECTION 2.10. Increased Costs, Etc. If, due to either (i) the
introduction of or any change in or in the interpretation by any
applicable Governmental Authority of any law or regulation of (ii)
the compliance with any guideline or request from any central bank
or other Governmental Authority (whether or not having the force
of law), there shall be any increase in the cost to the Lender of
agreeing to make or of making, funding or maintaining the Loan as
a Eurodollar Rate Loan (excluding for purposes of this Section
2.10 any such increased costs resulting from (i) Taxes or Other
Taxes (as to which Section 2.08 shall govern) and (ii) changes in
the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or
state under the laws of which the Lender is organized or has its
Applicable Lending Office or any political subdivision thereof,
Borrower shall from time to time, upon notice thereof and demand
by the Lender therefor, pay to the Lender additional amounts
sufficient to compensate the Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to
Borrower by the Lender, shall be conclusive and
19
binding for all purposes, absent manifest error. To the extent the
Lender delivers such a certificate to any of Borrower, such
Borrower shall have the right to prepay the Note in whole, not in
part, without any Exit Fee.
(b) If, due to either (i) the introduction of or any change in or
in the interpretation by any applicable Government Authority of
any law or regulation or (ii) the compliance with any guideline or
requirement from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any
increase in the amount of capital required or expected to be
maintained by the Lender or any corporation controlling the Lender
as a result of or based upon the existence of the Lender's
commitment to lend hereunder and other commitments of such type,
then, five (5) days after written demand by the Lender, Borrower
shall pay to the Lender, from time to time as specified by the
Lender, additional amounts sufficient to compensate the Lender in
the light of such circumstances, to the extent that the Lender
reasonably determines such increase in capital to be allocable to
the existence of the Lender's commitment to lend hereunder. A
certificate as to such amounts submitted to Borrower by the Lender
shall be conclusive and binding for all purposes, absent manifest
error. To the extent the Lender delivers such a certificate to any
of Borrower, such Borrower shall have the right to prepay the Note
in whole, not in part, without any Exit Fee.
(c) [Reserved).
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any
law or regulation by any Governmental Authority shall make it
unlawful, or any central bank or other Governmental Authority
shall assert that it is unlawful, for the Lender or its Eurodollar
Lending Office to perform its obligations hereunder to fund or
maintain the Loan as a Eurodollar Rate Loan hereunder, then, on
written notice thereof and written demand therefor by the Lender
to Borrower (i) the Loan will automatically, upon such demand,
covert into a Base Rate Loan and (ii) the obligation of the Lender
to make or maintain the Loan as a Eurodollar Rate Loan shall be
suspended until the Lender shall notify Borrower that it has
determined that the circumstances causing such suspension no
longer exist. To the extent the Lender delivers such a certificate
to any of Borrower, and Borrower shall have the right to prepay
Note in whole, not in part, without any Exit Fee.
SECTION 2.11. Security for the Loan. The Note shall constitute
general obligations of Borrower to the Lender and Borrower's
obligations hereunder and under the other Loan Documents shall be
secured by (a) the Mortgage, (b) the Security Agreement, (c) the
other Collateral Documents and (d) the security interests and
Liens granted in this Agreement and in the other Loan Documents.
20
SECTION 2.12. The Note. Borrower obligation to pay the principal
of and interest on its applicable portion of the Loan shall be
evidenced by the Note, which shall be duly executed and delivered
by Borrower on the Closing Date. The Note shall be payable as to
principal, interest and all other amounts due under the Loan
Documents, as specified in this Agreement, the Note, and the other
Loan Documents.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Disbursement of the Loan.
The obligation of the Lender to make the Loan hereunder is subject
to the satisfaction of the following conditions precedent before
or concurrently with the Closing Date:
(a) The following statements shall be true on the Closing Date and
Borrower shall have delivered to the Lender a certificate executed
by a Responsible Officer to such effect:
(i) the representations and warranties contained in each Loan
Document are correct on and as of the Closing Date, before and
after giving effect to the making of the Loan by the Lender and to
the application of the proceeds therefrom, as though made on and
as of such date; and
(ii) no material event has occurred and is continuing, or would
result from the making of the Loan by the Lender or from the
application of the proceeds thereof, that constitutes a Default.
(b) There shall exist no action, suit, investigation, litigation
or proceeding affecting Borrower or the Property pending or
threatened before any court, governmental agency or arbitrator
that (i) would be reasonably likely to have a Material Adverse
Effect other than the matters described on the Disclosure Schedule
(the "Disclosed Litigation") or (ii) purports to affect the
legality, validity or enforceability of, this Agreement, the Note,
any other Loan Document or the consummation of the transactions
contemplated hereby.
(c) Borrower shall have paid or caused to be paid all reasonable
and documented accrued fees and expenses of the Lender which
Borrower is required to pay under the Loan Documents (including
the accrued fees and expenses of counsel to the Lender).
21
(d) The Lender shall have received on or before the Closing Date
the following, each dated such day (unless otherwise specified),
in form and substance satisfactory to the Lender (unless otherwise
specified):
(i) The Note payable to the order of the Lender.
(ii) Partner Resolutions for Borrower approving this Agreement,
the Note and each other Loan Document to which Borrower is or is
to be a party, and of all documents evidencing other necessary
action and governmental and other third party approvals and
consents, if any, with respect to such Borrower, the Loan, this
Agreement, the Note and each other Loan Document.
(iii) A copy of the Organizational Documents of Borrower, in each
case together with any amendments thereto, and a copy of
Borrower's partnership agreement certified by Borrower as of the
Closing Date as being a true, correct and complete copy thereof.
(iv) A copy of a certificate of the Washington Secretary of State,
dated reasonably near the Closing Date, certifying that (A) such
Borrower has paid all applicable franchise taxes to the date of
such certificate and (B) such Borrower is duly formed and in good
standing under the laws of the State of Washington.
(v) A copy of a certificate of the Secretary of State of each
state in which the Property is located, dated reasonably near the
Closing Date, stating that Borrower is duly qualified and in good
standing in such State and has filed all annual reports required
to be filed to the date of such certificate.
(vi) A certificate of the General Partner certifying the names and
true signatures of the officers of such General Partner,
authorized to sign this Agreement, the Note and each other Loan
Document to which it is or is to be a party and the other
documents to be delivered hereunder and thereunder.
(vii) A security agreement in the form and substance satisfactory
to the Lender pledging to the Lender and granting the Lender a
security interest in all of Borrower's right, title and interest
in the Collateral (such agreement, as amended, supplemented or
otherwise modified from time to time in accordance with its terms,
the "Security Agreement"), duly executed by Borrower, together
with:
(A) financing statements in proper form for filing under the
Uniform Commercial Code of the State of Washington and the
jurisdiction in which the Property is located, as well as any
other jurisdictions deemed
22
necessary or desirable by the Lender, covering the personal
property Collateral and fixtures described in the Mortgage,
(B) completed requests for information, dated on or a
reasonable time before the Closing Date, listing all effective
financing statements filed in the jurisdictions referred to in
clause (A) above that names Borrower as debtor, together with
copies of such other financing statements,
(C) copies ofthe Assigned Agreements referred to in the Mortgage,
together with a consent to such assignment, in a form acceptable
to the Lender, from each party to any Material Agreement (as
defined in the Mortgage) other Borrower, and
(D) evidence that all other action that the Lender may deem
reasonably necessary or desirable in order to perfect and protect
the first and security interests and fixtures in personal property
Collateral created under the Mortgage has been taken.
(viii) Deed of trust, trust deed, mortgage, deed to secure debt,
leasehold mortgage and leasehold deed of trust in form and
substance satisfactory to the Lender and covering the Property (as
amended, supplemented or otherwise modified from time to time in
accordance with their terms, the "Mortgage"), duly executed by
Borrower, together with:
(A) evidence that counterparts of the Mortgage have been duly
executed and delivered for recording to the Title Company on or
before the Closing Date in such form as Lender may deem necessary
or desirable in order to create a valid first and subsisting Lien
on the property described therein in favor of the Lender and that
provision has been made for the payment of all filing and
recording taxes and fees,
(B) fully paid mortgagee title insurance policy (the "Mortgage
Policy") in form and substance, with endorsements and in amounts
acceptable to, the Lender, issued by the Title Company, insuring
the Mortgage to be a valid first and subsisting Lien on the
Property, free and clear of all defects (including, but not
limited to, mechanics' and materialmen's Liens) and encumbrances,
excepting only Permitted Encumbrances, and providing for such
other affirmative insurance (including endorsements for mechanics'
and materialmen's Liens) and
23
such coinsurance and direct access reinsurance as the Lender may
deem necessary or desirable,
(C) American Land Title Association form surveys, certified to the
Lender and the issuer of the Mortgage Policy in a manner
satisfactory to the Lender by a land surveyor duly registered and
licensed in the States in which the Property described in such
surveys is located and acceptable to the Lender, showing all
buildings and other improvements, any off site improvements, the
location of any easements, parking spaces, rights of way, building
set-back lines and other dimensional regulations and the absence
of encroachments, either by such improvements onto other property
or by improvements of others onto such property, and other
defects, other than encroachments and other defects acceptable to
the Lender,
(D) An Appraisal of the Property indicating an aggregate Loan to-
Value Ratio for the Property not in excess of eighty-five percent
(85%) and otherwise in form and substance satisfactory to the
Lender,
(E) engineering reports of the Property, in form and substance and
from professional firms acceptable to the Lender,
(F) such consents and agreements of lessors and other third
parties, and such estoppel letters and other confirmations, as the
Lender may deem reasonably necessary or desirable,
(G) evidence of the insurance required by the terms of the
Mortgage, and
(H) evidence that all other action that the Lender may deem
reasonably necessary or desirable in order to create valid first
and subsisting Lien on the Property has been taken.
(ix) A Guaranty and Indemnity Agreement in the form attached
hereto as Exhibit A (as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the
"Guaranty and Limited Indemnity"), duly
executed by ▇▇▇▇.
(x) Such financial, business and other information regarding the
Property, Borrower and ▇▇▇▇ as the Lender shall have requested,
including, without limitation, information as to possible
contingent liabilities, environmental
24
matters, collective bargaining agreements, interim financial
statements dated the end of the most recent fiscal quarter for
which financial statements are available (or, in the event the
Lender's due diligence review reveals material changes since such
financial statements, as of a later date within forty-five (45)
days of the Closing Date).
(xi) The Phase I Report for the Property.
(xii) A favorable opinion of ▇▇▇▇▇▇, Pepper & Shefelman, counsel
for Borrower, in form satisfactory to the Lender, as to:
(a) the organization, existence, formation and good standing of
Borrower; and
(b) the authorization by Borrower of the Loan Documents;
(c) the enforceability of this Agreement, the Note, the Guaranty
and Limited Indemnity and the other Loan Documents.
(xiii) On the Closing Date, the Lender shall disburse a portion of
the Loan amount released from such escrow account equal to the
amount allocated for a Specified Repair upon a written request to
the Lender accompanied by reasonable evidence of completion of
such Specified Repair. Until the funds in such escrow account are
released, they shall constitute additional security for the Loan.
So long as no Event of Default has occurred that has not been
waived and is continuing, Lender shall, to the extent funds are
available for such purpose in the escrow account, disburse to
Grantor any amounts requested by Grantor for such Specified
Repairs provided, that (i) such expenditures for such Specified
Repairs are consistent with the use of the Property as a Health
Care Facility, and (ii) Grantor delivers to Lender all invoices,
receipts or other evidence satisfactory to Lender, verifying the
cost of performing such Specified Repairs. Upon the reasonable
request of Lender, Grantor shall deliver to Lender a certification
from an inspecting architect or other third party acceptable to
Lender describing the completed portion of the Specified Repairs
with respect to which the disbursement request has been made and
verifying the completion of the Specified Repairs and that the
cost of the such Specified Repairs does not substantially vary
from the budgeted amount:
ARTICLE IV
25
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of Borrower. Borrower
represents and warrants as to itself and the Property as follows:
(a) Borrower and the General Partner each (i) are duly organized,
validly existing and in good standing under the laws of the
jurisdiction of their respective incorporation or formation, (ii)
are duly qualified and in good standing in each other jurisdiction
in which either one owns or leases property or in which the
conduct of their respective business requires either one to so
qualify or be licensed except where the failure to so qualify or
be licensed would not have a Material Adverse Effect and (iii) has
all requisite power and authority (including, without limitation,
all governmental licenses, permits and other approvals) to own or
lease and operate its properties and to carry on its business as
now conducted and as proposed to be conducted.
(b) The execution, delivery and performance by each Loan Party of
this
Agreement, the Note and each other Loan Document to which it is or
is to be a party, and the consummation of the transactions
contemplated hereby, are within such Loan Party's partnership
powers, have been duly authorized by all necessary partnership
action, and do not (i) contravene such Loan Party's partnership
agreement, (ii) violate any law (including, without limitation,
the Securities Exchange Act of 1934 and the Racketeer Influenced
and Corrupt Organizations Chapter of the Organized Crime Control
Act of 1970), rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination
or award, (iii) conflict with or result in the breach of, or
constitute a default under, any contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting any Loan Party, any of its Subsidiaries or
any of their properties or (iv) except for the Liens created under
the Loan Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the
properties of any Loan Party or any of its Subsidiaries. No Loan
Party or any of its Subsidiaries is in violation of any such law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which would have a Material
Adverse Effect.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due execution;
delivery, recordation, filing or performance by any Loan Party of
this Agreement, the Note or any other Loan Document to which it is
or is to be a party, or for the consummation of the transactions
contemplated hereby, (ii) the grant by any Loan Party of the Liens
granted by it pursuant to the Collateral Documents, (iii) the
26
perfection or maintenance of the Liens created by the Collateral
Documents (including the first priority nature thereof or (iv) the
exercise by the Lender of its rights under the Loan Documents or
the remedies in respect of the Collateral pursuant to the
Collateral Documents, except for any license, authorization,
approval or other action that may be required in order for the
Lender or any purchaser at foreclosure to operate the Property as
an assisted living facility and except to the extent consents may
be required but not obtained under certain service contracts and
agreements applicable to a Property, so long as the failure to
obtain same will not have a Material Adverse Effect.
(d) This Agreement has been, and the Note and each other Loan
Document when delivered hereunder will have been, duly executed
and delivered by each Loan Party thereto. This Agreement is, and
the Note and each other Loan Document when delivered hereunder
will be, the legal, valid and binding obligation of each Loan
Party thereto, enforceable against such Loan Party in accordance
with its terms.
(e) The consolidated balance sheet of the General Partner as at
December 31, 1997, and the related consolidated statement[s] of
income and consolidated statement of cash flows of the General
Partner and its Subsidiaries for the fiscal year then ended,
accompanied by an opinion of a nationally recognized, independent
public accountants, copies of which have been furnished to the
Lender, fairly present the consolidated financial condition of the
General Partner and its Subsidiaries as at such date and the
consolidated results of the operations of the General Partner and
its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles applied
on a consistent basis, and since December 31, 1997, there has been
no Material Adverse Effect.
(f) The forecasted balance sheets, income statements and cash
flows statements of Borrower delivered to the Lender pursuant to
Section 5.03 were prepared in good faith on the basis of the
assumptions stated therein, which assumptions were fair in the
light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, Borrower's
best estimate of its future financial performance.
(g) No information, exhibit or report furnished by any Loan Party
to the Lender in connection with the negotiation of the Loan
Documents or pursuant to the terms of the Loan Documents contained
any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements made therein not
misleading.
(h) Except for Disclosed Litigation, there is no action, suit,
investigation, litigation or proceeding affecting any Loan Party
or any of its Subsidiaries, including any Environmental Action,
pending or threatened before any court, governmental agency or
arbitrator that (i) would have a Material Adverse Effect or (ii)
purports to affect the
28
approved provider status in any approved provider payment program
(collectively, the
"Licenses"), and to the best of Borrower's knowledge, there exists
no condition or state of facts that would prevent Borrower from
being able to obtain such Licenses in due course. Borrower has not
granted any third party the right to reduce the number of licensed
beds at the Property or to apply for approval to move the right to
any or all of the licensed beds at the Property to any location.
Under current Laws, in the event that the Lender acquires the
Property through foreclosure or otherwise, neither Borrower, the
Lender or any subsequent lessee, nor a subsequent purchaser must
obtain a certificate of need from any applicable state health care
regulator authority or agency prior to applying for, or receiving,
a license to operate the Property and certification to receive
payments pursuant to Reimbursement Contracts for patients or
residents qualified for coverage thereunder, provided that no
service or the bed compliment is changed.
(p) Except as set forth in the Disclosure Schedule, the Property
is in compliance with all requirements for participation in
Medicare and Medicaid, including, without limitation, the Medicare
and Medicaid Patient Protection Act of 1987, except where failure
to comply would not have a Material Adverse Effect. The Property
is in conformance in all material respects with all insurance,
reimbursement and cost reporting requirements, and has a current
provider agreement which is in full force and effect under
Medicare and Medicaid, except where failure to comply would not
have a Material Adverse Effect.
(q) Borrower has received no written notice that there is any
threatened or pending revocation, suspension, termination,
prohibition, restriction, limitation or nonrenewal affecting
Borrower, to the best of Borrower's knowledge, any related the
Property or any participation or provider agreement with any third-
party payor, including Medicare, Medicaid, Blue Cross and/or Blue
Shield, and any other private commercial insurance managed care
and employee assistance program (such program, the "ThirdParty
Payors' Programs") to which Borrower presently is subject. All
Medicaid, Medicare and private insurance cost reports and
financial reports submitted by Borrower are and will be materially
accurate and complete and have not been and will not be misleading
in any material respects.
(r) Except as set forth in Disclosure Schedule, neither Borrower
or, to the best of Borrower's knowledge, the Property is currently
the subject of any proceeding by any governmental agency, and no
notice of any violation has been received fiom a governmental
agency that would, directly or indirectly, or with the passage of
time:
(i) have a material adverse impact on Borrower's ability to accept
and/or retain patients or result in the imposition of a fine, a
sanction, a lower rate
29
certification or a lower reimbursement rate for services rendered
to eligible patients;
(ii) modify, limit or annul or result in the transfer, suspension,
renovation or imposition of probationary use of any of Borrower's
Licenses; or
(iii) affect Borrower's continued participation in the Medicaid or
Medicare programs or any other of the Third-Party Payors'
Programs, or any successor programs thereto, at current rate
certifications.
(s) Except as set forth in the Disclosure Schedule or in the
engineering reports previously obtained by Lender, and to the best
of Borrower's knowledge, the Property and the use thereof complies
in all material respects with all applicable local, state and
federal building codes, fire codes, health care, nursing facility
and other similar regulatory requirements (the "Physical Plant
Standards") and no waivers of Physical Plant Standards exist at
the Property. The Property is free of structural defects and all
material building systems contained therein are in good working
order.
(t) Except as set forth in the Disclosure Schedule, the Property
has not received a material violation, and no statement of charges
or deficiencies has been made or penalty enforcement action has
been undertaken against the Property, Borrower, or against any
partner, officer, director or stockholder of Borrower by any
governmental agency during the last three calendar years, and
there have been no violations over the past three years or such
shorter period as Borrower or its Affiliates have owned the
Property which have threatened the Property's or Borrower's
certification for participation in Medicare or Medicaid or the
other Third-party Payors' Programs, which have not been remedied
within applicable cure periods and appeal periods before the
agency asserting the violation.
(u) Except as set forth in the Disclosure Schedule, there are no
current, pending or outstanding Medicaid, Medicare or Third-party
Payors' Programs reimbursement audits or appeals pending at the
Property, and there are no years that are subject to audits.
(v) There are no current or pending Medicaid or Medicare or Third-
party Payors' Programs recoupment efforts at the Property.
Borrower is not a participant in any federal program whereby any
governmental agency may have the right to recover funds by reason
of the advance of federal funds, including, without limitation,
those authorized under the ▇▇▇▇-▇▇▇▇▇▇ Act (42 U.S.C. 291 et
seq.).
30
(w) Borrower has not pledged its Receivables as collateral
security for any other loan or indebtedness.
(x) There are no patient or resident care agreements with patients
or residents or with any other persons which deviate in any
material adverse respect from the standard form customarily used
at the Properly.
(y) To the actual knowledge of Borrower, all patient or resident
records at the Property, including patient or resident trust fund
accounts, are true and correct in all material respects.
(z) [Reserved]
(aa) Except as set forth on the Disclosure Schedule, the Property
has not been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that would be reasonably
likely to have a Material Adverse Effect.
(bb) Except as set forth on the Disclosure Schedule, the Property
complies in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non
compliance with such Environmental Laws and Environmental Permits
has been resolved without ongoing obligations or costs, and no
circumstances exist that would be reasonably likely to (i) form
the basis of an Environmental Action against any Loan Party or any
ofthe Property that would have a Material Adverse Effect or (ii)
cause any the Property to be subject to any restrictions on
ownership, occupancy, use or transferability under any
Environmental Law.
(cc) Except as set forth on the Disclosure Schedule or as set
forth in the
environmental reports delivered to the Lender prior to the date
hereof, the Property is not listed or proposed for listing on the
NPL or on the CERCLIS or any analogous foreign, state or local
list or is adjacent to any such property; there are no and never
have been any underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, swamps or lagoons in
which Hazardous Materials are being or have been treated, stored
or disposed on the Property; there is no Asbestos or Asbestos-
Containing Material on the Property; and Hazardous Materials have
not been released, discharged or disposed of on the Property.
(dd) No Loan Party or any of its Subsidiaries is undertaking, and
has not completed, either individually or together with other
potentially responsible parties, any investigation or assessment
or remedial or response action relating to any actual or
31
threatened release, discharge or disposal of Hazardous Materials
at the Property, either voluntarily or pursuant to the order of
any governmental or regulatory authority or the requirements of
any Environmental Law; and all Hazardous Materials generated,
used, treated, handled or stored at, or transported to or from,
the Property have been disposed of in a manner not reasonably
expected to result in material liability to any Loan Party or any
of its Subsidiaries.
(ee) [Reserved]
(f) Except for Permitted Liens, when recorded or filed with the
appropriate governmental offices, the Collateral Documents create
a valid and perfected first priority lien on and security interest
in the Collateral, securing the payment of the Secured
Obligations. Borrower is the legal and beneficial owner of the
Collateral free and clear of any Lien, except for the liens and
security interests created or permitted under the Loan Documents.
(gg) Each Loan Party and each of its Subsidiaries and Affiliates
has filed, has caused to be filed or has been included in all tax
returns (Federal, state, local and foreign) required to be filed
and has paid all taxes shown thereon to be due, together with
applicable interest and penalties.
(hh) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ii) The location of Borrower's principal place of business and
chief executive officer is at the respective addresses set forth
on the first page hereof.
(jj) Borrower is not a "foreign person" within the meaning of
Section 1445(3) of the Code.
(kk) Except as set forth on the Disclosure Schedule, Borrower is
not a party to any collective bargaining agreements.
(11) Borrower has not conducted any business or other activity on
or prior to the Closing Date, other than in connection with the
acquisition, management and ownership of the Property.
(mm) The licensed bed capacity and current Effective Capacity of
the Property is set forth on Schedule C attached hereto. Except
for those licenses for which application has been made by
Borrower, no waivers of any laws, rules, regulations or
requirements are required for the Property to operate at the
foregoing licensed bed capacity.
32
(nn) Borrower has received or is legally entitled to receive a
permanent certificate of occupancy from the applicable
Governmental Authority for each of its Property.
ARTICLE V
COVENANTS OF BORROWER
SECTION 5.01. Affirmative Covenants. So long as any portion of the
Loan shall remain unpaid, Borrower, with respect to itself and the
Property, will:
(a) Operations. Maintain or cause to be maintained the standard of
care for the patients or residents of the Property at all times at
a level necessary to insure quality care for such patients and
comply, in all material respects, with all applicable laws, rules,
regulations and orders including, without limitation, any Health
Care Permits or other Licenses and with the terms of all
Reimbursement Contracts and obtain and renew all
Health Care Permits and Licenses necessary for the operation of
the Property.
(b) Payment of Taxes, Etc. Pay and discharge before the same shall
become delinquent, (i) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property and (ii)
all lawful claims that, if unpaid, might by law become a Lien upon
the Property; provided, however, that Borrower shall not be
required to pay or discharge any such tax, assessment, charge or
claim that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches
to the Property and becomes enforceable against its other
creditors.
(c) Compliance with Environmental Laws. Comply, and cause all
lessees and other Persons operating or occupying the Property to
comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew all
Environmental Permits necessary for its operations and the
Property; and conduct any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other
action necessary to remove and clean up all Hazardous Materials
from the Property, the existence, condition, handling, storage or
treatment of which violates applicable Environmental Laws, in
accordance with the requirements of all Environmental Laws;
provided, however, that Borrower shall not be required to
undertake any such cleanup, removal, remedial or other action to
the extent that its obligation to do so is being contested in good
faith and by proper proceedings and appropriate reserves are being
maintained with respect to such circumstances.
33
(d) Preservation of Existence, Etc. Preserve and maintain its
existence, legal structure, legal name, rights (charter and
statutory), permits, licenses, approvals, privileges and
franchises; provided, however, that Borrower shall not be required
to preserve any right, permit, license, approval, privilege or
franchise if the General Partner shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of Borrower, as the case may be, and that the loss
thereof is not disadvantageous in any material respect to Borrower
or the Lender.
(e) Visitation Rights. At any reasonable time and from time to
time, permit the Lender or any agents or representatives thereof,
to examine and make copies of and abstracts from the records and
books of account of, and visit the Property and to discuss the
affairs, finances and accounts of Borrower with any of their
officers or employees and with their independent certified public
accountants; provided, however, that prior to the occurrence of an
Event of Default, the Lender shall exercise such rights only upon
reasonable prior written notice to Borrower and during regular
business hours.
Preparation of Environmental Reports. If the Lender reasonably
suspects that the Property has been contaminated or that Hazardous
Materials are being used on the Property in violation of the terms
of this Agreement or applicable Law and the Lender has requested
an environmental site assessment report, provide to the Lender
within sixty (60) days after such request, at the expense of
Borrower, an environmental site assessment report for Property,
prepared by an environmental consulting firm acceptable to the
Lender, indicating the presence or absence of Hazardous Materials
and the estimated cost of any compliance, removal or remedial
action in connection with any Hazardous Materials on such
properties; without limiting the generality of the foregoing, if
such report is not provided within the time referred to above, the
Lender may retain an environmental consulting firm to prepare such
report at the expense of Borrower, and Borrower hereby grants to
the Lender, such firm and any agents or representatives thereof an
irrevocable non-exclusive license, subject to the rights of
tenants, to enter onto the Property to undertake such an
assessment; provided that any such environmental assessment report
shall be a Phase I Report unless such Phase I Report discloses the
need for further investigation.
(g) Keeping of Books. Keep proper books of record and account, in
which full and correct entries shall be made of all financial
transactions and the assets and business of Borrower in accordance
with GAAP.
(h) Management of the Property. Operate the Property at all times
as Health Care Facilities in accordance with all applicable Laws.
Upon the occurrence and continuance of an Event of Default, the
Lender may require Borrower to enter into a Management Agreement,
on terms and conditions reasonably acceptable to Lender, with
34
a Manager who shall be a nationally recognized first-class manager
of assisted living facilities. As a condition to retaining any
Manager, Borrower shall cause such Manager to enter into an
agreement to subordinate its management fees in such form
acceptable to the Lender in its sole discretion.
(i) ERISA. Deliver to the Lender such certifications or other
evidence from time to time throughout the term of the Loan, as
reasonably requested by the Lender, that (i) each Borrower is not
an "employee benefit plan" as defined in Section 3(3) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan"
within the meaning of Section 3(32) of ERISA; (ii) Borrower is not
subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans; and (iii) one or
more of the following circumstances is true:
(A) equity interests in Borrower are publicly offered securities,
within the meaning of29 C.F.R. 2510.3-101(b)(2);
(B) less than twenty-five percent (25%) of each outstanding class
of equity interests in Borrower are held by "benefit plan
investors" within the meaning of29 C.F.R. Section 2510.3-101((2);
or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of29 C.F.R. 2510.3-101(c)
or (e) or an investment company registered under The Investment
Company Act of 1940.
(j) Appraisals. Borrower shall furnish to the Lender at Borrower's
expense
upon request of the Lender after the Closing Date and prior to the
Maturity Date an Appraisal from an Appraiser upon the occurrence
of a refinancing of the Loan by the Lender or any Affiliate of the
Lender. The Lender, at its own expense, shall have the right to
obtain one or more Appraisals of the Property and Borrower shall
cooperate with Lender and any Appraiser to the extent necessary to
obtain such Appraisal.
(k) Reimbursement Contracts. Maintain in full force and effect all
Reimbursement Contracts except where the failure to do so would
not have a Material Adverse Effect.
(1) Specified Repairs. Promptly commence and diligently pursue to
completion the Specified Repairs such that all such Specified
Repairs shall be completed within one (1) year after the Closing
Date.
(m) Operation and Maintenance Program. Establish and maintain an
operations and maintenance program within thirty (30) days from
the date hereof with respect to Asbestos and Asbestos-Containing
Materials located at the Property, which
35
operations and maintenance program shall comply with all
applicable Laws, conform to applicable guidelines established by
federal, state or local governmental agency or otherwise be
designed to incorporate all prudent and reasonable safeguards in
order to minimize any health risk to the patients, residents,
employees and guests at the aforementioned sites from the presence
of Asbestos or Asbestos-Containing Materials.
(n) Repairs. Maintain or cause to be maintained the Property in
good order, repair and operating condition, ordinary wear and tear
excepted, make or cause to be made promptly, when necessary, all
necessary repairs, restorations, renewals, replacements, additions
and improvements thereto, interior and exterior, structural and
nonstructural; foreseen and unforeseen, or otherwise necessary to
insure that the same as part of the security under the Mortgage
shall not in any way be diminished or impaired in any material
respect, and not cause or allow the Property to be misused, wasted
or to deteriorate.
(o) Replacement of Equipment. Keep the Property fully equipped and
will replace in the ordinary course of business all worn out or
obsolete equipment in accordance with applicable standards of Laws
to operate as a Health Care Facility.
SECTION 5.02. Negative Covenants. So long as any portion of the
Loan shall remain unpaid, Borrower will not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer
to exist, any Lien on or with respect to the Property of any
character (including, without limitation, accounts) whether now
owned or hereafter acquired, or sign or file or suffer to exist,
under the Uniform Commercial Code of any jurisdiction, a financing
statement that names Borrower as debtor, or sign or suffer to
exist, any security agreement authorizing any secured party
thereunder to file such financing statement, or assign any
accounts or other right to receive income, excluding, however,
from the operation of the foregoing restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens; and
(iii) the replacement, extension or renewal of any Lien permitted
by clause (ii) above upon or in the same property theretofore
subject thereto or the replacement, extension or renewal (without
increase in the amount or change in any direct or contingent
obligor) of the Debt secured thereby.
36
(b) Debt. Create, incur, assume or suffer to exist, any Debt other
than:
(i) Debt under the Loan Documents;
(ii) unsecured Debt not evidenced by promissory notes incurred in
the ordinary course of business for the deferred purchase price of
property or services, maturing within one year from the date
created, and aggregating not more than $500,000 at any one time
outstanding;
(iii) trade payables that are more than ninety (90) days past due;
provided, that such trade payables (i) are no more than one
hundred twenty (120) days past due and (ii) represent no more than
ten percent (10"%) of Borrower's aggregate trade payables; and
(iv) indorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business.
(c) Lease Obligations. Create, incur, assume or suffer to exist,
any obligations as lessee (i) for the rental or hire of real or
personal property in connection with any sale and leaseback
transaction, or (ii) for the rental or hire of other real or
personal property of any kind under leases or agreements to lease,
including Capitalized Leases having an original term of one year
or more, other than leases of equipment entered into in the
ordinary course of business provided that the total annual
monetary obligations under any such equipment lease or leases
shall not exceed $500,000 in aggregate.
(d) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of any Collateral (except to the extent Equipment (i) is
being replaced by Equipment of equal or better quality or (ii)
that has become obsolete or worn-out is disposed of in the
ordinary course of any of Borrower's business), or grant any
option or other right to purchase, lease or otherwise acquire any
Collateral, except sales of the Property for cash and for a price
not less than the Release Price for the Property, provided that
Borrower shall, on the date of receipt by Borrower of the proceeds
from such sale, prepay the Loan pursuant to, and in the amount set
forth in, Section 8.01.
(e) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its-
business as carried on at the date hereof, except as permitted
pursuant to Section 5.04.
37
Amendments of its Organizational Documents. Amend its
Organizational Documents, unless such amendment would not cause a
Material Adverse Effect to occur.
(g) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies
or reporting practices, except as required by GAAP, unless such
change would not cause a Material Adverse Effect to occur.
(h) Management Agreement. Enter into any management agreement
other than a Management Agreement.
(i) Negative Pledge. Enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien
upon any of its property or assets other than in favor of the
Lender.
(j) ERISA. Engage in any transaction which would cause any
obligation, or action taken or to be taken, hereunder (or the
exercise by the Lender of any of its rights under the Note, this
Agreement and the Loan Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited
transaction under ERISA.
(k) Licenses. (i) Assign, transfer, rescind, withdraw, revoke,
amend, modify, supplement, or otherwise alter the nature, tenor or
scope of the Licenses for the Property except to the extent
necessary to operate the Property in accordance with prudent
business standards for assisted living facilities and provided
that no such action would result in a Material Adverse Effect; or
(ii) amend or otherwise change the Property's authorized bed
.capacity and/or the number of beds approved by the DOH.
(1) Affiliate Transactions. Enter into, or be a party to, any
transaction with an Affiliate of Borrower, except in the ordinary
course of business and on terms which are fully disclosed to
Lender in advance and are no less favorable to Borrower or such
Affiliate than would be obtained in a comparable arm's length
transaction with an
unrelated third party.
(m) Fiscal Year. Change its Fiscal Year unless such change would
not adversely affect the ability of such Borrower to obtain
Medicare and Medicaid cost reimbursements.
(n) Repairs/Maintenance. No part of the Property shall be removed,
demolished or structurally or materially altered nor shall any new
building, structure, facility or other improvement be constructed
on the properties without Lender's prior written consent in the
case of each such removal, demolition, alternation or
construction.
38
SECTION 5.03. Reporting Requirements. So long as any portion of
the Loan shall remain unpaid, Borrower will furnish to the Lender:
(a) Default Notice. As soon as possible and in any event within
five (5) days after the occurrence of each Default or any event,
development or occurrence reasonably likely to have a Material
Adverse Effect continuing on the date of such statement, a
statement of Borrower setting forth details of such Default and
the action that Borrower has taken and proposes to take with
respect thereto.
(b) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each month, a balance
sheet of Borrower as of the end of such month and a statement of
income and a statement of cash flows of Borrower and the Property
for the period commencing at the end of the previous month and
ending with the end of such month and a statement of income and a
statement of cash flows of Borrower and the Property for the
period commencing at the end of the previous Fiscal Year and
ending with the end of such month, setting forth in each case in
comparative form the corresponding figures (i) set forth in the
applicable budget for such Fiscal Year and (ii) for the
corresponding month of the preceding Fiscal Year, all in
reasonable detail and duly certified by Borrower and the Manager.
(c) Quarterly Financials. As soon as available and in any event
within forty five (45) days after the end of each quarter, a
balance sheet of Borrower as of the end of such quarter and a
statement of income and a statement of cash flows of Borrower and
of the Properly for the period commencing at the end of the
previous quarter and ending with the end of such quarter and a
statement of income and a statement of cash flows of Borrower and
the Property for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, setting forth
in each case in comparative form the corresponding figures (i) set
forth in the applicable budget for such Fiscal Year and (ii) for
the corresponding quarter of the preceding Fiscal Year, all in
reasonable detail and duly certified by Borrower;
(d) Annual Financials. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, a
balance sheet of Borrower and of the General Partner as of the end
of such Fiscal Year and a statement of income and a statement of
cash flows of such Borrower for such Fiscal Year, [which in the
case of the General Partner shall be accompanied by an opinion
acceptable to the Lender of a nationally recognized public
accountant firm acceptable to the Lender, and a certificate of the
chief financial officer of Borrower in the form of Exhibit D
attached hereto stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a
statement as to the nature thereof and the action that Borrower
has taken
39
and proposes to take with respect thereto.) In addition, as soon
as available and in any event within ninety (90) days after the
end of each Fiscal Year, a complete set of the Federal tax returns
of Borrower.
(e) Annual Budgets. As soon as available and in any event no later
than thirty (30) days before the end of each Fiscal Year,
forecasts prepared by management of Borrower, in form reasonably
satisfactory to the Lender, of balance sheets, income statements
and cash flow statements on a monthly basis for the Fiscal Year
following such Fiscal Year then ended and on an annual basis for
each Fiscal Year thereafter.
Litigation. Promptly after the commencement thereof, notice of all
actions, suits, investigations, litigation and proceedings before
any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, affecting any Loan
Party or any of its Subsidiaries of the type described in Section
4.01(h), and promptly after the occurrence thereof, notice ofany
adverse change in the status or the financial effect on any Loan
Party or any of its Subsidiaries of the Disclosed Litigation from
that described on the Disclosure Schedule.
(g) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or
of any noncompliance by the Property with any Environmental Law or
Environmental Permit.
(h) Cost Reports. To the extent applicable during the term of this
Agreement, within ten ( 10) days of the date of the required
filing of cost reports of the Properly with the Medicaid or
Medicare agency or the date of actual filing of such cost report
of the Properly with such agency, whichever is earlier, Borrower
shall furnish to the Lender a complete and accurate copy of the
annual Medicaid and Medicare cost reports for the Property, which
will be prepared by an independent certified public accountant or
by an experienced cost report preparer acceptable to the Lender,
and promptly furnish the Lender any amendments filed with respect
to such reports and all responses, audit reports or inquiries with
respect to such reports.
(i) Licensing Agency Report. Within fifteen (IS) days of receipt,
Borrower shall furnish to the Lender a copy of any Medicare,
Medicaid or licensing agency survey or report and any statement of
deficiencies, and within the time period required by the
particular agency for furnishing a plan of correction. Borrower
shall also furnish or cause to be furnished to the Lender a copy
of the plan of correction generated from such survey or report for
the Property, and correct or cause to be corrected any deficiency,
the curing of which is a condition of continued licensure or for
full participation in Medicare and Medicaid for existing patients
or for new patients to be admitted with Medicare or
40
Medicaid coverage, by the date required for cure by such agency
(plus extensions granted by such agency).
(j) Notices. Within five (5) days after receipt, Borrower shall
furnish to the Lender any and all written notices from any
licensing and/or certifying agency that a Property's license or
the Medicare or Medicaid certification of the Property 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 suspend the Property's license or
certification.
(k) [Reserved].
(1) Property Data. Within forty-five (45) days of the end of each
fiscal
quarter, a statement o fthe number of bed days available and the
actual patient days incurred for the quarter, together with
quarterly census information of the Property as of the end of such
quarter by patient-mix (i.e., private, Medicare, Medicaid, and
V.A.) the average quarterly census of the Property, certified by a
financial officer of Borrower to be true and correct in all
material respects.
(m) Medicare/Medicaid Downgrades, Etc. As soon as possible, but no
later than ten (10) days after Borrower's receipt, any and all
written notices from any and all licensing and/or certifying
agencies that the Property's license, and/or the Medicare and/or
Medicaid certification is being downgraded to a substandard
category, revoked, or suspended.
(n) Bed Taxes. If requested by Lender, evidence of payment by
Borrower of any applicable provider bed taxes or similar taxes.
(o) Accounts Aging Report. If requested by Lender, an accounts
aging report of the Property.
(p) Reimbursement Rates. Within twenty (20) days of receipt, the
State of Washington Medicaid Reimbursement Rates for the Property.
(q) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations,
performance, property or prospects of any Loan Party as the Lender
may from time to time reasonably request.
SECTION 5.04. Single Purpose Entity. Borrower covenants and agrees
that it has not and shall not:
41
(a) engage in any business or activity other than the ownership,
operation and maintenance of the Property as assisted living
facilities (including the providing of health care services), and
activities incidental thereto;
(b) acquire or own any material assets other than (i) the
Property, and (B) such incidental personal property as may be
necessary for the operation of the Property;
(c) merge into or consolidate with any person or entity or
dissolve, terminate or liquidate in whole or in part, transfer or
otherwise dispose of all or substantially all of, its assets or
change its legal structure, without, in each case, the Lender s
consent;
(d) fail to preserve its existence as an entity duly organized,
validly existing and in good standing (if applicable) under the
Laws of the jurisdiction of its organization or formation, or
without the prior written consent of the Lender, amend, modify,
terminate or fail to comply with the provisions of Borrower's
partnership agreement limited liability company agreement,
articles or certificate of incorporation, certificate of
organization, operating agreement or similar organizational
documents, as the case may be, whichever is applicable, as the
same may be further amended or supplemented, if such amendment,
modification, termination or failure to comply would (i) create an
amendment to the limitations on the amendment of such documents as
contained therein, (ii) affect the provisions of such documents
pertaining to the matters set forth in this Section 5.04, or (iii)
materially adversely affect the ability of Borrower to perform the
Obligations or its obligations under the Note or the Loan
Documents;
(e) own any subsidiary or make any Investment in, any person or
entity without the consent of the Lender;
(f) commingle its assets with the assets of any of its Affiliates,
principals or of any other person or entity;
(g) except as provided in Section 5.02, incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any
obligation), other than the Obligations of Borrower under the Loan
Documents;
(h) fail to maintain its Solvency status or fail to pay its debts
and liabilities from its assets as the same shall become due;
(i) fail to maintain its records, books of account and bank
accounts separate and apart from those of the principals and
Affiliates of Borrower and any other person or entity;
42
(j) enter into any contract or agreement with any principal or
Affiliate of Borrower or any principal or Affiliate thereof,
except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-
length basis with third parties other than any principal or
Affiliate of Borrower, or any principal or Affiliate thereof;
(k) seek the dissolution or winding up in whole, or in part, of
Borrower;
(1) fail to correct any known misunderstandings regarding the
separate identity of Borrower, which understanding if uncured
would result in a Material Adverse Effect;
(m) hold itself out to be responsible for the debts of another
person except for Borrower hereunder;
(n) make any loans or advances to any third party, including any
principal or Affiliate of Borrower;
(o) pledge its assets for the benefit of any third party,
principal or Affiliate of Borrower;
(p) fail to file tax returns;
(q) agree to, enter into or consummate any transaction which would
render the representation set forth in Section 4.01(k) or 4.01(1)
untrue at any time;
(r) fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to
conduct its business solely in its own name in order not (i) to
mislead others as to the identity with which such other party is
transacting business, or (ii) to suggest that Borrower is
responsible for the debts of any third party (including any
principal or Affiliate of Borrower or any principal or Affiliate
thereof;
(s) fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and
in light of its contemplated business
operations;
(t) fail to pay the salaries of its own employees and maintain a
sufficient number of employees in light of its contemplated
business operations;
43
(u) file or consent to the filing of any petition, either
voluntary or involuntary, to take advantage of any applicable
insolvency, bankruptcy, liquidation or reorganization statute, or
make an assignment for the benefit of creditors;
(v) except as in existence on the date hereof, share any common
logo with or hold itself out as or be considered as a department
or division of any principal or Affiliate of Borrower or any other
person or entity;
(w) fail to allocate any overhead for shared office space in a
fair and reasonable manner; or
(x) fail to use separate stationary, invoices and checks;
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) (i) if the payment of any principal is not paid under the Note
when the same shall be due and payable or (ii) if the payment of
any interest payable under the Note is not made, or if any other
payment under any Loan Document is not made, in each case under
this clause. (ii) within five (5) days after the same becomes due
and payable; or
(b) any representation or warranty made by any Loan Party (or any
of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when
made; or
(c) if any provision of the Organizational Documents affecting the
purpose for which Borrower is formed is amended or modified in any
manner which is reasonably likely to result in a Material Adverse
Effect, or if Borrower fails to perform or enforce the provisions
of the Organizational Documents in a manner that is reasonably
likely to result in a Material Adverse Effect or attempt to
dissolve Borrower; or
(d) if a Change of Control has occurred with respect to Borrower
other than a Change of Control resulting from the death or
incapacity of any natural person; or
(e) if the General Partner merges with, consolidates with or sells
substantially all of its assets to, another entity without the
consent of the Lender; provided, however, that in connection with
any such merger, consolidation or sale of all or substantially all
of
44
the assets of the General Partner, the Lender will not withhold
its consent, provided that the Lender reasonably determines that
such surviving entity's financial condition is not materially less
than that of the General Partner; or
(f) if the Property eligible at any time to participate in the
Medicare and Medicaid program, becomes decertified and Borrower
does not, within thirty (30) days after obtaining actual knowledge
or receiving written notice of such decertification, effect a
release of the Property pursuant to Section 8.01; or
(g) except as expressly permitted in this Agreement, any of the
Licenses shall be terminated, canceled or revoked such that the
Property is no longer licensed to operate as a Health Care
Facility and Borrower does not, within thirty (30) days after
obtaining actual knowledge or receiving written notice of such
termination, cancellation or revocation either (i) cause the
restoration of reissuance of such License or (ii) effect a release
of the Property pursuant to Section 8.01; or
(h) if Borrower shall fail to correct, within the time deadlines
set by any Medicare, Medicaid or licensing agency, any material
deficiency that justifies either (i) a termination of Borrower's
Medicare contract, Medicaid contract, or assisted living facility
or nursing facility license; or (ii) a ban on new admissions
generally or on admission of patients otherwise qualifying for
Medicaid or Medicare coverage; or
(i) if Borrower shall violate or fail to comply with any of the
provisions of Section 5.02 or 5.04( or
(j) if Borrower shall fail to keep in full force and effect the
policies of insurance required pursuant to the Mortgage, or if
such policies are not delivered to the Lender upon request or
Borrower has not delivered evidence of the renewal of such
policies thirty (30) days prior to their expiration as required by
the Mortgage; or
(k) any Loan Party shall fail to perform any other term, covenant
or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for
thirty (30) days after the earlier of the date on which (A) a
Responsible Officer becomes aware of such failure or (B) written
notice thereof shall have been given to Borrower by the Lender; or
(1) any Loan Party shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or
against any Loan Party seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of
45
it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or
other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted
against it (but not instituted by it) that is being diligently
contested by it in good faith, either such proceeding shall remain
undismissed or unstayed for a period of sixty (60) days or any of
the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall
occur; or any Loan Party shall take any corporate action to
authorize any of the actions set forth above in this subsection
(I); or
(m) any judgment or order for the payment of money in excess
of$1,000,000 shall be rendered against Borrower and either (i)
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of
ten ( 10) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(n) any non-monetary judgment or order shall be rendered against
any Loan Party that is reasonably likely to have a Material
Adverse Effect, and there shall be any period of ten ( 10)
consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(o) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01 shall for any reason cease to be valid
and binding on or enforceable against any Loan Party to it and the
Lender's ability to collect any amounts due or enforce the Loan
Documents would be materially impaired, or any such Loan Party
shall so state in writing; or
(p) any Collateral Document after delivery thereof pursuant to
Section 3.01 shall for any reason (other than pursuant to the
terms thereof cease to create a valid and perfected first priority
lien on and security interest in the Collateral purported to be
covered thereby; or
(q) except as permitted under Section 5.02(d), Borrower shall
sell, transfer or encumber any of the Property or any interest
therein;
then, and in any such event, the Lender (i) may by notice to
Borrower, declare the Note, all interest thereon and all other
amounts payable under this Agreement and the other Loan Documents
to be forthwith due and payable, including, without limitation,
the Exit Fee, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of
which are
46
hereby expressly waived by Borrower; provided, however, that in
the event of an actual or deemed entry of an order for relief with
respect to any Loan Party under the Federal Bankruptcy Code, the
Note, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand,
protest or. any notice of any kind, all of which are hereby
expressly waived by Borrower.
ARTICLE VII
SECONDARY MARKET SERVICING
SECTION 7.01. Assignments and Participations. (a) The Lender may
assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation,
all or a portion of the Note) (each, an "Assignee"); provided that
the parties to each such assignment shall execute and deliver to
the Lender, for its acceptance and recording in the Register, an
Assignment and Acceptance.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have
the rights and obligations of a Lender, as the case may be,
hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a
party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the Assignee thereunder confirm to
and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or
any other Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or
purported to be created under or in connection with, this
Agreement or any other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (ii) such assigning
Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower
or any other Loan Party or the performance or observance by any
Loan Party of any of its obligations under any Loan Documents or
any other instrument or document furnished pursuant thereto; (iii)
such assignee confirms that it has received a copy
47
of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and Section 5.03 and such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently
and without reliance upon the Lender, such assigning Lender or any
other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the Lender to
take such action as agent on its behalf and to exercise such
powers and discretion under the Loan Documents as are delegated to
the Lender by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement
are required to be performed by it as a Lender, as the case may
be.
(d) The Lender shall maintain at its address referred to in
Section 10.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the
names and addresses of the Lender Parties and the principal amount
of the Loan owing to each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and Borrower, the
Lender and the Lender Parties shall treat each Person whose name
is recorded in the Register as a Lender Party hereunder for all
purposes of this Agreement. The Register shall be available for
inspection by Borrower or any Lender Party at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender Party and an assignee, together with Note
subject to such assignment, the Lender shall, if such Assignment
and Acceptance has been completed and is in substantially the form
of Exhibit B hereto, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to Borrower. In the case of any
assignment by a Lender, within five (5) Business Days after its
receipt of such notice, Borrower, at its sole cost and expense
shall execute and deliver to the Lender in exchange for the
surrendered Note a new Note to the order of such Assignee in an
amount equal to the outstanding and unpaid portion of the Loan
assigned to it and a new Note to the order of the assigning Lender
in an amount equal to the outstanding and unpaid portion of the
Loan retained by it hereunder. Such new Note shall be in an
aggregate outstanding and unpaid principal amount equal to the
aggregate outstanding and unpaid principal amount of such
surrendered Note, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in the form of
the Note.
(f) Each Lender Party may sell participations to one or more
Persons (other than any Loan Party or any of its Affiliates) in or
to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of the
Note held by it); provided, however, that (i) such Lender Party's
obligations under this Agreement shall remain
48
unchanged, (ii) such Lender Party shall remain solely responsible
to the other parties hereto for the performance of such
obligations, (iii) such Lender Party shall remain the holder of
any such Note for all purposes of this Agreement, and (iv)
Borrower, the Lender and the other Lender Parties shall continue
to deal solely and directly with such Lender Party in connection
with such Lender Party's rights and obligations under this
Agreement.
(g) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to
this Section 7.01, disclose to the assignee or participant or
proposed assignee or participant, any information relating to the
related Borrower furnished to such Lender Party by or on behalf of
the related Borrower; provided, however, that, prior to any such
disclosure, the assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any
Confidential Information received by it from such Lender Party.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender Party may at any time create a security
interest in all or any portion of its rights under this Agreement
(including, without limitation, the Advances owing to it and the
Note held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 7.02. Securitization. (a) Lender, at its option, may elect
to effect a securitization of the Loan by means of the issuance of
certificates of interest therein or notes secured thereby (the
"Securities") rated by one or more rating Agencies (the
"Securitization"). In such event and upon request by Lender,
Borrower and the General Partner shall cooperate (in each case, at
the Lender's sole cost and expense) in all reasonable respects
with Lender in the Securitization, including, but not limited to,
(i) amending this Agreement and the other Loan Documents in order
to bifurcate the Loan into two or more constituent loans on the
same terms as set forth herein and therein, (ii) providing
information in connection with obtaining preliminary ratings from
two or more Ratings Agencies in preparation of a private placement
memorandum or registration statement required to privately place
or publicly distribute the Securities in a manner which does not
conflict with federal or state securities laws, (iii) delivery of
interim audited financials and updated information; or (iv)
delivery ofu pdated information with respect to Borrower or the
General Partner; provided, however, that no such cooperation shall
have any adverse effect on Borrower or the General Partner.
(b) Borrower hereby covenants and agrees that in the event of a
Securitization, Borrower shall (i) provide a favorable opinion
acceptable to Lender of ▇▇▇▇▇▇, Pepper & Shefelman, as to the
likelihood of the assets of Borrower being substantively
consolidated with those of ▇▇▇▇ or any owner of greater than forty-
nine percent (49"%) interest in Borrower in an insolvency
proceeding, with respect to such owner, and (ii) the General
Partner shall have at least one independent director that is not
and has not been for at least three (3) years a director, officer,
49
employee or significant shareholder (or spouse, parent, sibling or
child of the foregoing) of (1 ) the Borrower, (2) the General
Partner, or (3) any principal or Affiliate of the Borrower or
Emeritus.
SECTION 7.03. Servicing. At any time after the Closing Date, the
Lender shall have the right to transfer the servicing of the Loan
and the administration of the Loan Documents to such party as
shall be designated by the Lender in its reasonable discretion
(together with any successor service appointed by the Lender, the
"Loan Servicer"). The Loan Servicer shall have such right to
exercise all rights of the Lender and enforce all obligations of
Borrower pursuant to the provisions of this Agreement, the Note
and the other Loan Documents, and Borrower shall deliver to Loan
Servicer duplicate originals of all notices and other instruments
which Borrower may deliver pursuant to this Agreement, the Note
and the other Loan Documents (and no delivery of such notices or
other instruments by Borrower shall be of any force or effect
unless delivered to Lender and Loan Servicer as provided above).
ARTICLE VIII
[RESERVED)
ARTICLE IX
[RESERVED)
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Note or any other Loan
Document, nor consent to any departure by Borrower therefrom,
shall in any event be effective unless the same shall be in
writing and signed (or, in the case of the Collateral Documents,
consented to) by the Lender, and then such waiver or consent shall
be effective only in the specific instance and for the specific
purpose for which given.
SECTION 10.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic,
telecopy or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered, if to Borrower, at its address
at c/o Columbia Pacific, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: Chief
50
Financial Officer, with a copy to Emeritus Corporation, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention:
General Counsel; and if to the Lender, at its address at ▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel
with a copy to the Loan Servicer at an address specified by the
Loan Servicer; or as to each other party, at such other address as
shall be designated by such party in a written notice to Borrower
and the Lender. All such notices and communications shall, when
mailed, telecopied or sent via overnight courier, be effective
when deposited in the mails, confirmed by telex answerback or
delivered to an overnight courier, respectively, except that
notices and communications to the Lender pursuant to Article II,
III or VII shall not be effective until received by the Lender.
Delivery by telecopier of an executed counterpart of any amendment
or waiver of any provision of this Agreement or the Note or of any
Exhibit hereto to be executed and delivered hereunder shall be
effective as delivery of a manually executed counterpart thereof.
SECTION 10.03. No Waiver; Remedies. No failure on the part of any
Lender Party or the Lender to exercise, and no delay in
exercising, any right hereunder or under the Note shall operate as
a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 10.04. Costs, Expenses. (a) Except as expressly provided
to the contrary herein, Borrower agrees to pay on demand (i) all
reasonable costs and expenses of the Lender or Loan Servicer in
connection with the preparation, execution, delivery,
administration, and when requested by Borrower, the modification
and amendment of the Loan Documents (including, without
limitation, (A) all due diligence, collateral review, appraisal as
expressly provided for herein, audit, insurance, consultant,
search, filing and recording fees and expenses and (B) the
reasonable fees and expenses of counsel for the Lender or Loan
Servicer with respect thereto, with respect to advising the Lender
or Loan Servicer as to its rights and responsibilities, or the
perfection, protection or preservation of rights or interests,
under the Loan Documents, with respect to negotiations with any
Loan Party or with other creditors of any Loan Party or any of its
Subsidiaries arising out of any Default or any events or
circumstances that may give rise to a Default and with respect to
presenting claims in or otherwise participating in or monitoring
any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto)
and (ii) all costs and expenses of the Lender or Loan Servicer in
connection with the enforcement of the Loan Documents, whether in
any action, suit or litigation, any bankruptcy, insolvency or
other similar proceeding affecting creditors' rights generally
(including, without limitation, the reasonable fees and expenses
of counsel for the Lender and with respect thereto).
(b) Borrower agrees to indemnify and hold harmless the Lender, the
Loan Servicer and each of their respective Affiliates and their
officers, directors, employees, agents and advisors (each, an
"Indemnified Party") from and against any and all claims, damages,
51
losses, liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) that may be incurred by
or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including,
without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in connection
therewith) (i) the Loan, the actual or proposed use of the
proceeds ofthe Loan, the Loan Documents or any of the transactions
contemplated thereby, including, without limitation, any
acquisition or proposed acquisition (including, without
limitation, the acquisition and any of the other transactions
contemplated hereby) or (ii) the actual or alleged presence of
Hazardous Materials on the Property or any Environmental Action
relating in any way to the Property, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-
appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party' s gross negligence or
willful misconduct. In the case of an investigation, litigation or
other proceeding to which the indemnity in this Section 10.04(lb)
applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by any Loan
Party, its directors, shareholders or creditors or an Indemnified
Party or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are
consummated. Borrower also agrees not to assert any claim against
the Lender or any of its Affiliates, or any of their respective
officers, directors, employees, attorneys and agents, on any
theory of liability, for special, indirect, consequential or
punitive damages arising out of or otherwise relating to the Loan,
the actual or proposed use of the proceeds of the Loan, the Loan
Documents or any of the transactions contemplated thereby. THE
FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY
APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.
(c) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including,
without limitation, fees and expenses of counsel and indemnities,
such amount may be paid on behalf of such Loan Party by the
Lender, in its sole discretion.
(d) Without prejudice to the survival of any other agreement of
any Loan Party hereunder or under any other Loan Document, the
agreements and obligations of Borrower contained in Sections 2.08
and 2.09 and this Section 10.04 shall survive the payment in full
of principal, interest and all other amounts payable hereunder and
under any of the other Loan Documents.
SECTION 10.05. [Reserved].
SECTION 10.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by Borrower and the
Lender and thereafter shall be binding upon and inure to the
benefit of Borrower and the Lender and their respective successors
and assigns, except that Borrower shall not have the right to
assign its rights hereunder or any interest herein without the
prior written consent of the Lender.
SECTION 10.07. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 10.08. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement
or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be
heard and determined in any such New York State court or, to the
extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right
that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan
Documents in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Loan Documents to
which it is a party in any New York State or federal court. Each
of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
SECTION 10.09. Governing Law. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the
State of Washington.
SECTION 10.10. Waiver of Jury Trial. To the maximum extent
permitted by law, Borrower, the Lender and the Lender Parties
irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Loan
Documents, the Advances or the actions of the Lender or any Lender
Party in the negotiation, administration, performance or
enforcement thereof.
53
SECTION 10.11. Compliance with Usury Laws. It is expressly
stipulated and agreed to be the intent of Borrower and the Lender
that the Loan made hereunder comply with the usury and other laws
relating to the Loan Documents now or hereafter in ef3Eect in the
state in which the Property is located, to the extent any of the
same are applicable thereto. If any such applicable laws render
usurious any amount called for under any of the Loan Documents, or
contracted for, charged or received with respect to the Loan, or
if the acceleration of the maturity of the Loan or if any
prepayment by Borrower results in Borrower having paid any
interest in excess of that permitted by law, then it is the
express intent of the parties that all excess amounts theretofore
collected the Lender be credited on the principal balance of the
Note (or, if the Note has been paid in full, refunded to
Borrower), and the provisions of the Loan Documents immediately be
deemed reformed and the amounts thereafter collected under the
Loan Documents reduced, without the necessity of the execution of
any new document, so as to comply with the then applicable law,
but so as to permit the recovery of the fullest amount otherwise
called for under the Loan Documents.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT
ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
BORROWER:
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LIMITED PARTNERSHIP,
a Washington limited partnership
By: Columbia Pacific Master Fund 98 General Partnership,
a Washington general partnership
By: Columbia Pacific Growth Fund 98 Limited Partnership,
a Washington limited partnership, its partner
By: B.F. Limited Partnership,
a Washington limited partnership, its general partner
By: Columbia Pacific Group, Inc.. a Washington corporation, its
general partnership
By: /s/: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
[CONTINUED]
LENDER:
DEUTSCHE BANK AG,NEW YORK BRANCH
By: /s/: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇.▇▇▇▇▇▇
Title : ATTORNEY-I N -FACT
By: /s/: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Attorney-In-Fault"