EX 10.79.1
THIS NOTE AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993 (THE "ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE
OPTION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY, AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT IS AVAILABLE FOR SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION.
$5,000,000 Dated as of January
7,1998
CONVERTIBLE PROMISSORY NOTE
For value received, Aurora Bay Investments, L.L.C., a
Washington limited liability company, having an office at 0000 XXX
Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000-0000 ("Maker"), hereby
promises to pay to the order of Emeritus Corporation, a Washington
corporation ("Payee"), at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxxxx 00000, or such other place designated in writing by
Payee in lawful money of the United State of America, Five Million
Dollars ($5,000,000) or such lesser amount as may be advanced by
Payee to Maker from time to time under that certain Credit
Agreement dated as of January 7, 1998, by and between Maker and
Payee (the "Credit Agreement"), together with interest thereon from
the date of such advances until paid as hereinafter stated.
1. INTEREST ACCRUAL AND PAYMENT. Interest shall accrue on the
aggregate outstanding principal balance of this Convertible
Promissory Note (the "Note"), commencing on the date hereof, at
nine percent (9.0"%) per annum, and shall be payable quarterly in
arrears on the first day of each calendar quarter (January 1,
April l, July l, and October 1), commencing on April 1,1998.
Interest on this Note shall be calculated on the basis of the
actual number of days elapsed in any period in which interest is
payable. Whenever any payment under this Note is due on a
Saturday, Sunday or any other day on which banks in the State of
Washington are required to be closed, such payment shall be made
on the next succeeding day on which banks in the State of
Washington are not required or permitted by law to be closed.
2. PRINCIPAL PAYMENT: MATURITY. Unless sooner paid, all
interest and principal payable hereunder, and all other amounts
due under this Note, shall be due and payable by Maker on January
7, 2003 (the "Maturity Date").
3. VOLUNTARY PREPAYMENT. Maker shall not lie entitled to
prepay, in part or in whole, the outstanding principal balance of
this Note at any time prior to its Maturity Date without the
prior consent of Payee, which consent may be withheld by Payee in
its sole and absolute discretion.
4. PLACE OF PAYMENT. All amounts due hereunder shall be
payable to Payee at the address of Payee or at such other place
as Payee may designate in writing to Maker at Maker's address set
forth above.
5. CONVERSION RIGHTS. As long as there is not an uncured
material default by Payee under the Credit Agreement, Payee shall
have a one-time right, exercisable at any time prior to the
Maturity Date, to convert effective five (5) days after the
giving of such notice (the "Conversion Date"), all (but not less
than all) of the principal amount of this Note outstanding as at
the Conversion Date into a membership interest in Maker entitling
Payee to receive cash distributions made by Maker and to be
allocated profits, gains, losses, deductions, credits, or any
items thereof, allocated by Maker to its Members, as such rights
are stipulated in the Maker's Operating Agreement dated as of
January 6,1998, which is attached hereto as Exhibit A-1 (the
"Operating Agreement"). The conversion right described herein
shall lapse if not exercised on or prior to the Maturity Date.
Payee shall effect a conversion by surrendering this Note to
Maker, together with a written notice of Xxxxx's intent to
exercise its conversion rights (the "Holder Conversion Notice").
Each Holder Conversion Notice, once given, shall be irrevocable.
6. PROCEDURES FOR IMPLEMENTING CONVERSIONS. The following
procedures shall apply to the voluntary conversion of this Note
pursuant to Section 5.
(a) If upon the Conversion Date, Payee has not advanced to Maker all
funds that might be drawn upon by Maker under the Credit Agreement to
fund its acquisition, development, construction and initial carrying
cost of projects, Payee will be obligated to contribute to Maker, as
additional capital contributions, funds at such times, and in such E
amounts, that such funds would have been made available to Maker
pursuant to the terms of the Credit Agreement. The funding of such
capital contributions will be subject to the conditions set forth in
the Credit Agreement, as though the Credit Agreement had. been
incorporated into Maker's Operating Agreement in its entirety and
Payee shall not be obligated to make such capital contributions
unless and until all conditions precedent to the funding of such
amounts under the Credit Agreement have been satisfied in full. Any
funds contributed by Payee to Maker, pursuant to the obligations set
forth in the paragraph, shall be credited to Xxxxx's capital account
in Maker.
(b) If Payee exercises the conversion right described
in Section 5, then, effective as of the Conversion
Date, this Note shall be canceled and terminated, and
Maker shall thereafter have no further obligations,
and Payee shall thereafter have no further rights,
under this Note.
(c) The Conversion Notice shall be given by facsimile
and by mail, postage prepaid, addressed to Maker at
the facsimile telephone number and address of the
principal place of business of Maker.
(d) The membership interests issuable upon conversion
of this Note will be, when as and if issued,
"restricted securities" under the Securities Act and
will bear a legend to that effect. The membership
interests may not be sold or transferred and must be
held indefinitely unless an redemption from
registration is available. Maker is not obligated to
register the membership interests or to comply with
any exemption under the Securities Act or to supply
or file any information which would facilitate the
resale thereof.
7. LATE CHARGES. In the event that any payment due
hereunder or under the Credit Agreement shall not be made when
due a late charge of five cents ($.05) for each dollar ($ 1.00)
so overdue may be charged by Payee for the purpose of defraying
the expense incident to handling such delinquent payment (the
"Late Charge Fee"). Such Late Charge Fee represents the
reasonable estimate of Payee and Maker of a fair average
compensation for the loss that will be sustained by Payee due to
the failure of Maker to make timely payments. Such Late Charge
Fee shall be paid without . prejudice to the right of Payee to
collect any other amounts provided to be paid or to declare an
Event of Default under this Note or the Credit Agreement. If an
Event of Default (as hereunder defined) occurs, then the
interest rate applicable in calculating any defaulted payments
from the due date of the defaulted payments shall be the default
rate stipulated in Section 8 until paid in full and the Late
Charge Fee shall apply to any such payments.
8. DEFAULTS. At the option of Payee, all principal and
interest shall immediately become due and payable on any of
the following events:
(a) Maker fails to make any payment as provided for in
this Note, or in the Credit Agreement, and such
failure to make payment continues for five (5)
calendar days after Maker's receipt of written notice
from Payee that such payment is due;
(b) Maker makes a general assignment for the benefit of
creditors; a receiver is appointed for the assets of
Maker upon request by any person(s) other than Maker,
or Maker makes a formal request for appointment of a
receiver; or any proceeding is brought by Maker in
any court or under supervision of any court-appointed
officer under any federal or state bankruptcy
reorganization, rearrangement, insolvency or debt
readjustment law, or if any such proceedings are
instituted against Maker and he fails to obtain
dismissal of such proceeding within ninety (90) days
after the same has been instituted;
2
(c) Maker fails to cure any material breach (other than nonpayment
of a
monetary obligation) of any agreement of Maker
contained in this Note
or in the Credit Agreement after Maker has been sent 30
calendar days'
written notice of such breach (other than nonpayment of
a monetary
obligation) from Payee;
(d) Any breach by Maker of any material representation or warranty
contained in the Credit Agreement or any other instrument or
agreement
delivered by Maker to Payee in connection therewith; or
(e) The cessation of Maker's business operations, or
the insolvency of
Maker an admission in writing of its inability to
pay debts as they
mature.
In the event of such Default, the rate of interest due under this
Note will. increase to a rate per annum equal to the lesser of (x) 16%
per annum and (y) the maximum rate allowed by law and will continue
until such Default has been cured or waived.
9. ATTORNEYS' FEES AND COSTS AND CONSULTANT/EXPERT WITNESS
EXPENSES. Maker shall pay Payee a11 its direct or indirect reasonable
attorneys' fees and costs and the reasonable expense of expert witness
and consultants engaged directly or indirectly by Payee to advise
Payee and to take whatever steps Payee deems reasonably necessary to
collect this Note, including, without limitation, commencement of any
action or proceeding to enforce this Note against Maker. Without
limiting the generality of the foregoing, Maker understands and agrees
to pay the reasonable attorneys' fees and costs and reasonable
expenses for expert witnesses and consultants (a) engaged by Xxxxx in
connection with this Note, (b) incurred by Xxxxx directly or
indirectly in any insolvency proceeding or in any contested matter or
adversity proceeding that is part of bankruptcy, and (c) incurred by
Xxxxx in advance of any action or proceeding relating to this Note or
for the appeal of certiorari proceeding subsequent to an action or
proceeding on this Note.
10. NO WAIVER. Maker hereby waives diligence, presentment,
protest, any demand for payment, notice of protest, dishonor and
nonpayment of this Note. Maker xxxxxx agrees to pay all sums which are
payable by it hereunder without set-off or offset. .
1l. CUMULATIVE RIGHTS. The rights and remedies of Payee provided
in this Note shall be cumulative and concurrent and may be pursued
singly, successively, or together against Maker for the payment hereof
in the sole discretion on Payee. The failure to exercise any such
right or remedy shall in no event be construed as a waiver of release
of said rights and remedies or the rights to exercise them at any
later time.
12. MODIFICATION. This Note may not be amended, modified, or
changed, nor shall any waiver of any provision be effective, except
only by an instrument in writing signed by the person against whom
enforcement of such waiver, amendment, change, modification or
discharge is sought.
13. JURISDICTION AND VENUE. Maker agrees that the state and
federal (as Payee may in its sole discretion elect) courts in the
State of Washington situated in King County, Washington, will have non-
exclusive jurisdiction and venue over any action or proceeding
relating to this Note. Maker submits to such courts and their
jurisdiction and agrees that venue in King County, Washington is
proper over any such action or proceeding.
14. USURY. It is the intent of Payee and Maker in the execution
of this Note and all other instruments now or hereafter securing this
Note to contract in strict compliance with applicable usury law. In
furtherance thereof Payee and Maker stipulate and agree that none of
the terms and provisions contained in this Note, or in any other
instrument executed in connection herewith, shall ever be construed to
create a contract to pay for the use, forbearance or detention of
money, interest at a rate in excess of the Maximum Interest Rate
permitted under applicable law (the "Maximum Rate") (the parties
hereby acknowledging and confirming that applicable law is to mean the
laws of the State of Washington or the laws of the United States,
whichever laws allow the greater rate of interest (as noted below)
but, if for whatever reason, notwithstanding the parties' joint
determination of the applicable law, which determination the parties
intend to be conclusive, a court were to
3
determine that the applicable law was the laws of the State of Texas,
and if such law provides for a ceiling upon interest rates
under Tex. Rev. Civ. Stat. Xxx. art. 5069-1.04, as amended, or any
successor laws or regulations, such ceiling shall be the indicated
maximum interest rate); neither Maker nor any guarantors, endorsers or
other parties now or hereafter becoming liable for payment of this
Note shall ever be obligated or required to pay interest on this Note
at a rate in excess of the Maximum Rate that may be lawfully charged
under applicable law, and the provisions of this paragraph shall
control over all other provisions of this Note and any other
instruments now or hereafter executed in connection herewith which may
be in apparent conflict herewith. Payee, including each holder of this
Note, expressly disavows any intention to enlarge or collect excessive
unearned interest or finance charges in the event the maturity of this
Note is accelerated. If the maturity of this Note shall be accelerated
for any reason or if the principal of this Note is paid prior to the
end of the term of this Note, and as a result thereof the interest
received for the actual period of existence of the Loan exceeds the
amount of interest that would have accrued at the Maximum Rate, Payee
or other holder of this Note shall, at its option, either refund to
Maker the amount of such excess or credit the amount of such excess
against the principal amount and thereby shall render inapplicable any
and all penalties of any kind provided by applicable law as a result
of such excess interest. In the event that Payee or any other holder
of this Note shall contract for, charge or receive any amounts and/or
any other thing of value which are determined to constitute interest
which would increase the effective interest rate on this Note to a
rate in excess of that permitted to be charged by applicable law, all
such sums determined to constitute interest in excess of the amount of
Interest at the lawful rate shall, upon such determination, at the
option of Payee or other holder of this Note, be either immediately
returned to Maker or credited against the principal amount in which
event any and all penalties of any kind under applicable law as a
result of such excess interest shall be inapplicable. By execution of
this Note, Maker acknowledges that it believes the loan evidenced by
this Note, and all arrangements in connection. therewith, to be non-
usurious and agrees that if, at any time, Maker should have reason to
believe that the loan is in fact usurious, it will give the Payee or
other holder of this Note notice of such condition and Maker agrees
that Payee or other holder shall have ninety (90) days in which to
make appropriate refund or other adjustment in order to correct such
condition if in fact such exists. 'The term applicable law as used in
this Note shall mean the laws of the State of Washington or the laws
of the United States, whichever laws allow the greater rate of
interest, as such laws now exist or may be changed or amended or come
into effect in the future.
15. MISCELLANEOUS. Every provision of this Note is intended to be
severable and in the event any term or provision hereof is declared by
a court of competent jurisdiction to be illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the
balance of the terms and provisions hereof, which terms and provisions
shall be interpreted so as to make the remaining terms and provisions
binding and enforceable to the fullest extent possible. This Note may
not be changed, modified or terminated orally, but only by an
agreement in writing signed by the party to be charged. In this Note,
the singular shall include the plural and the masculine shall include
the feminine and neuter gender, and vice versa, if the context so
requires. The headings at the beginning of each numbered paragraph of
this Note are intended solely for convenience of reference and are not
to be deemed or construed to be a part of this Note. Nothing contained
in this Note or elsewhere shall be deemed or construed as creating a
partnership or joint venture between Payee and Maker or between Payee
and any other person, or cause the holder hereof to be responsible in
any way for the debts or obligations of Maker. This Note shall be
governed by and construed in accordance with the laws of the State of
Washington (without giving effect to its choice of law principles).
"ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR
TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE
UNDER WASHINGTON LAW."
4
IN WITTINESS WHEREOF, Maker has executed this Note on the 7th day
of January, 1998.
AURORA BAY INVESTMENTS, L.L.C., a
Washington limited liability company
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxxxx, Manager
By: /s/ Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx, Manager
5
