1
Exhibit 10.4
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
(the "INSTRUMENT") is made as of the 20th day of May, 1999, between SUNRISE
HAVERFORD ASSISTED LIVING, L.L.C., a limited liability company organized and
existing under the laws of Pennsylvania, whose address is c/o Sunrise Assisted
Living Investments, Inc., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
as mortgagor ("BORROWER"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a
corporation organized and existing under the laws of California, whose address
is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, as
mortgagee ("LENDER").
Borrower is indebted to Lender in the principal amount of
$8,850,000.00, as evidenced by Borrower's Multifamily Note payable to Lender,
dated as of the date of this Instrument, and maturing on June 1, 2009.
TO SECURE TO LENDER the repayment of the Indebtedness, and all
renewals, extensions and modifications of the Indebtedness, and the performance
of the covenants and agreements of Borrower contained in the Loan Documents,
Borrower mortgages, warrants, grants, conveys and assigns to Lender the
Mortgaged Property, including the Land located in ▇▇▇▇▇▇▇▇▇▇ County,
Commonwealth of Pennsylvania and described in Exhibit A attached to this
Instrument.
Borrower represents and warrants that Borrower is lawfully seized of
the Mortgaged Property and has the right, power and authority to mortgage,
grant, convey and assign the Mortgaged Property, and that the Mortgaged
Property is unencumbered. Borrower covenants that Borrower will warrant and
defend generally the title to the Mortgaged Property against all claims and
demands, subject to any easements and restrictions listed in a schedule of
exceptions to coverage in any title insurance policy issued to Lender
contemporaneously with the execution and recordation of this Instrument and
insuring Lender's interest in the Mortgaged Property.
COVENANTS. Borrower and Lender covenant and agree as follows:
1. DEFINITIONS. The following terms, when used in this Instrument
(including when used in the above recitals), shall have the following meanings:
(a) "BORROWER" means all persons or entities identified as
"Borrower" in the first paragraph of this Instrument, together with their
successors and assigns.
(b) "COLLATERAL AGREEMENT" means any separate agreement between
Borrower and Lender for the purpose of establishing replacement reserves for
the Mortgaged Property, establishing
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 1
2
a fund to assure the completion of repairs or improvements specified in that
agreement, or assuring reduction of the outstanding principal balance of the
Indebtedness if the occupancy of or income from the Mortgaged Property does not
increase to a level specified in that agreement, or any other agreement or
agreements between Borrower and Lender which provide for the establishment of
any other fund, reserve or account.
(c) "CONTROLLING ENTITY" means an entity which owns, directly or
indirectly through one or more intermediaries, (A) a general partnership
interest or more than 50% of the limited partnership interests in Borrower (if
Borrower is a partnership or joint venture), (B) a manager's interest in
Borrower or more than 50% of the ownership or membership interests in Borrower
(if Borrower is a limited liability company), or (C) more than 50% of any class
of voting stock of Borrower (if Borrower is a corporation).
(d) "ENVIRONMENTAL PERMIT" means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.
(e) "EVENT OF DEFAULT" means the occurrence of any event listed in
Section 22.
(f) "FIXTURES" means all property which is so attached to the Land
or the Improvements as to constitute a fixture under applicable law, including:
machinery, equipment, engines, boilers, incinerators, installed building
materials; systems and equipment for the purpose of supplying or distributing
heating, cooling, electricity, gas, water, air, or light; antennas, cable,
wiring and conduits used in connection with radio, television, security, fire
prevention, or fire detection or otherwise used to carry electronic signals;
telephone systems and equipment; elevators and related machinery and equipment;
fire detection, prevention and extinguishing systems and apparatus; security
and access control systems and apparatus; plumbing systems; water heaters,
ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers,
washers, dryers and other appliances; light fixtures, awnings, storm windows
and storm doors; pictures, screens, blinds, shades, curtains and curtain rods;
mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees
and plants; swimming pools; and exercise equipment.
(g) "GOVERNMENTAL AUTHORITY" means any board, commission,
department or body of any municipal, county, state or federal governmental
unit, or any subdivision of any of them, that has or acquires jurisdiction over
the Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.
(h) "HAZARDOUS MATERIALS" means petroleum and petroleum products
and compounds containing them, including gasoline, diesel fuel and oil;
explosives; flammable materials; radioactive materials; polychlorinated
biphenyls ("PCBs") and compounds containing them; lead and lead-based paint;
asbestos or asbestos-containing materials in any form that is or could become
friable; underground or above-ground storage tanks, whether empty or containing
any substance; any substance the presence of which on the Mortgaged Property is
prohibited by any federal, state or local authority; any substance that
requires special handling; and any other material or substance
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 2
3
now or in the future defined as a "hazardous substance," "hazardous material,"
"hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or
"pollutant" within the meaning of any Hazardous Materials Law.
(i) "HAZARDOUS MATERIALS LAWS" means all federal, state, and local
laws, ordinances and regulations and standards, rules, policies and other
governmental requirements, administrative rulings and court judgments and
decrees in effect now or in the future and including all amendments, that
relate to Hazardous Materials and apply to Borrower or to the Mortgaged
Property. Hazardous Materials Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601,
et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the
Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, and their state
analogs.
(j) "IMPOSITIONS" and "IMPOSITION DEPOSITS" are defined in Section
7(a).
(k) "IMPROVEMENTS" means the buildings, structures, improvements,
and alterations now constructed or at any time in the future constructed or
placed upon the Land, including any future replacements and additions.
(l) "INDEBTEDNESS" means the principal of, interest on, and all
other amounts due at any time under, the Note, this Instrument or any other
Loan Document, including prepayment premiums, late charges, default interest,
and advances as provided in Section 12 to protect the security of this
Instrument.
(m) "INITIAL OWNERS" means, with respect to Borrower or any other
entity, the persons or entities who on the date of the Note own in the
aggregate 100% of the ownership interests in Borrower or that entity.
(n) "LAND" means the land described in Exhibit A.
(o) "LEASES" means all present and future leases, subleases,
licenses, concessions or grants or other possessory interests now or hereafter
in force, whether oral or written, covering or affecting the Mortgaged
Property, or any portion of the Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is a cooperative housing
corporation), and all modifications, extensions or renewals.
(p) "LENDER" means the entity identified as "Lender" in the first
paragraph of this Instrument, or any subsequent holder of the Note.
(q) "LOAN DOCUMENTS" means the Note, this Instrument, all
guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs,
and any other documents now or in the future executed by Borrower, any
guarantor or any other person in connection with the loan evidenced by the
Note, as such documents may be amended from time to time.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 3
4
(r) "LOAN SERVICER" means the entity that from time to time is
designated by Lender to collect payments and deposits and receive notices under
the Note, this Instrument and any other Loan Document, and otherwise to service
the loan evidenced by the Note for the benefit of Lender. Unless Borrower
receives notice to the contrary, the Loan Servicer is the entity identified as
"Lender" in the first paragraph of this Instrument.
(s) "MORTGAGED PROPERTY" means all of Borrower's present and
future right, title and interest in and to all of the following:
(1) the Land;
(2) the Improvements;
(3) the Fixtures;
(4) the Personalty;
(5) all current and future rights, including air rights,
development rights, zoning rights and other similar
rights or interests, easements, tenements,
rights-of-way, strips and gores of land, streets,
alleys, roads, sewer rights, waters, watercourses,
and appurtenances related to or benefitting the Land
or the Improvements, or both, and all rights-of-way,
streets, alleys and roads which may have been or may
in the future be vacated;
(6) all proceeds paid or to be paid by any insurer of the
Land, the Improvements, the Fixtures, the Personalty
or any other part of the Mortgaged Property, whether
or not Borrower obtained the insurance pursuant to
Lender's requirement;
(7) all awards, payments and other compensation made or
to be made by any municipal, state or federal
authority with respect to the Land, the Improvements,
the Fixtures, the Personalty or any other part of the
Mortgaged Property, including any awards or
settlements resulting from condemnation proceedings
or the total or partial taking of the Land, the
Improvements, the Fixtures, the Personalty or any
other part of the Mortgaged Property under the power
of eminent domain or otherwise and including any
conveyance in lieu thereof;
(8) all contracts, options and other agreements for the
sale of the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged
Property entered into by Borrower now or in the
future, including cash or securities deposited to
secure performance by parties of their obligations;
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 4
5
(9) all proceeds from the conversion, voluntary or
involuntary, of any of the above into cash or
liquidated claims, and the right to collect such
proceeds;
(10) all Rents and Leases;
(11) all earnings, royalties, accounts receivable, issues
and profits from the Land, the Improvements or any
other part of the Mortgaged Property, and all
undisbursed proceeds of the loan secured by this
Instrument and, if Borrower is a cooperative housing
corporation, maintenance charges or assessments
payable by shareholders or residents;
(12) all Imposition Deposits;
(13) all refunds or rebates of Impositions by any
municipal, state or federal authority or insurance
company (other than refunds applicable to periods
before the real property tax year in which this
Instrument is dated);
(14) all tenant security deposits which have not been
forfeited by any tenant under any Lease; and
(15) all names under or by which any of the above
Mortgaged Property may be operated or known, and all
trademarks, trade names, and goodwill relating to any
of the Mortgaged Property.
(t) "NOTE" means the Multifamily Note described on page 1 of this
Instrument, including all schedules, riders, allonges and addenda, as such
Multifamily Note may be amended from time to time.
(u) "O&M PROGRAM" is defined in Section 18(a).
(v) "PERSONALTY" means all furniture, furnishings, equipment,
machinery, building materials, appliances, goods, supplies, tools, books,
records (whether in written or electronic form), computer equipment (hardware
and software) and other tangible personal property (other than Fixtures) which
are used now or in the future in connection with the ownership, management or
operation of the Land or the Improvements or are located on the Land or in the
Improvements, and any operating agreements relating to the Land or the
Improvements, and any surveys, plans and specifications and contracts for
architectural, engineering and construction services relating to the Land or
the Improvements and all other intangible property and rights relating to the
operation of, or used in connection with, the Land or the Improvements,
including all governmental permits relating to any activities on the Land.
(w) "PROPERTY JURISDICTION" is defined in Section 30(a).
(x) "RENTS" means all rents (whether from residential or
non-residential space), revenues
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 5
6
and other income of the Land or the Improvements, including parking fees,
laundry and vending machine income and fees and charges for food, health care
and other services provided at the Mortgaged Property, whether now due, past
due, or to become due, and deposits forfeited by tenants.
(y) "TAXES" means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are
levied, assessed or imposed by any public authority or quasi-public authority,
and which, if not paid, will become a lien, on the Land or the Improvements.
(z) "TRANSFER" means (A) a sale, assignment, transfer or other
disposition (whether voluntary, involuntary or by operation of law); (B) the
granting, creating or attachment of a lien, encumbrance or security interest
(whether voluntary, involuntary or by operation of law); (C) the issuance or
other creation of an ownership interest in a legal entity, including a
partnership interest, interest in a limited liability company or corporate
stock; (D) the withdrawal, retirement, removal or involuntary resignation of a
partner in a partnership or a member or manager in a limited liability company;
or (E) the merger, dissolution, liquidation, or consolidation of a legal entity
or the reconstitution of one type of legal entity into another type of legal
entity. "Transfer" does not include (i) a conveyance of the Mortgaged Property
at a judicial or non-judicial foreclosure sale under this Instrument or (ii)
the Mortgaged Property becoming part of a bankruptcy estate by operation of law
under the United States Bankruptcy Code. For purposes of defining the term
"Transfer," the term "partnership" shall mean a general partnership, a limited
partnership, a joint venture and a limited liability partnership, and the term
"partner" shall mean a general partner, a limited partner and a joint venturer.
2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is
also a security agreement under the Uniform Commercial Code for any of the
Mortgaged Property which, under applicable law, may be subject to a security
interest under the Uniform Commercial Code, whether acquired now or in the
future, and all products and cash and non-cash proceeds thereof (collectively,
"UCC COLLATERAL"), and Borrower hereby grants to Lender a security interest in
the UCC Collateral. Borrower shall execute and deliver to Lender, upon
Lender's request, financing statements, continuation statements and amendments,
in such form as Lender may require to perfect or continue the perfection of
this security interest. Borrower shall pay all filing costs and all costs and
expenses of any record searches for financing statements that Lender may
require. Without the prior written consent of Lender, Borrower shall not
create or permit to exist any other lien or security interest in any of the UCC
Collateral. If an Event of Default has occurred and is continuing, Lender
shall have the remedies of a secured party under the Uniform Commercial Code,
in addition to all remedies provided by this Instrument or existing under
applicable law. In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in
any way affecting the availability of Lender's other remedies. This Instrument
constitutes a financing statement with respect to any part of the Mortgaged
Property which is or may become a Fixture.
3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN
POSSESSION.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 6
7
(a) As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all Rents. It is
the intention of Borrower to establish a present, absolute and irrevocable
transfer and assignment to Lender of all Rents and to authorize and empower
Lender to collect and receive all Rents without the necessity of further action
on the part of Borrower. Promptly upon request by Lender, Borrower agrees to
execute and deliver such further assignments as Lender may from time to time
require. Borrower and Lender intend this assignment of Rents to be immediately
effective and to constitute an absolute present assignment and not an
assignment for additional security only. For purposes of giving effect to this
absolute assignment of Rents, and for no other purpose, Rents shall not be
deemed to be a part of the "Mortgaged Property" as that term is defined in
Section 1(s). However, if this present, absolute and unconditional assignment
of Rents is not enforceable by its terms under the laws of the Property
Jurisdiction, then the Rents shall be included as a part of the Mortgaged
Property and it is the intention of the Borrower that in this circumstance this
Instrument create and perfect a lien on Rents in favor of Lender, which lien
shall be effective as of the date of this Instrument.
(b) After the occurrence of an Event of Default, Borrower
authorizes Lender to collect, ▇▇▇ for and compromise Rents and directs each
tenant of the Mortgaged Property to pay all Rents to, or as directed by,
Lender. However, until the occurrence of an Event of Default, Lender hereby
grants to Borrower a revocable license to collect and receive all Rents, to
hold all Rents in trust for the benefit of Lender and to apply all Rents to pay
the installments of interest and principal then due and payable under the Note
and the other amounts then due and payable under the other Loan Documents,
including Imposition Deposits, and to pay the current costs and expenses of
managing, operating and maintaining the Mortgaged Property, including
utilities, Taxes and insurance premiums (to the extent not included in
Imposition Deposits), tenant improvements and other capital expenditures. So
long as no Event of Default has occurred and is continuing, the Rents remaining
after application pursuant to the preceding sentence may be retained by
Borrower free and clear of, and released from, Lender's rights with respect to
Rents under this Instrument. From and after the occurrence of an Event of
Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, or by a receiver,
Borrower's license to collect Rents shall automatically terminate and Lender
shall without notice be entitled to all Rents as they become due and payable,
including Rents then due and unpaid. Borrower shall pay to Lender upon demand
all Rents to which Lender is entitled. At any time on or after the date of
Lender's demand for Rents, Lender may give, and Borrower hereby irrevocably
authorizes Lender to give, notice to all tenants of the Mortgaged Property
instructing them to pay all Rents to Lender, no tenant shall be obligated to
inquire further as to the occurrence or continuance of an Event of Default, and
no tenant shall be obligated to pay to Borrower any amounts which are actually
paid to Lender in response to such a notice. Any such notice by Lender shall
be delivered to each tenant personally, by mail or by delivering such demand to
each rental unit. Borrower shall not interfere with and shall cooperate with
Lender's collection of such Rents.
(c) Borrower represents and warrants to Lender that Borrower has
not executed any prior assignment of Rents (other than an assignment of Rents
securing indebtedness that will be paid off and discharged with the proceeds of
the loan evidenced by the Note), that Borrower has not performed, and Borrower
covenants and agrees that it will not perform, any acts and has not
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 7
8
executed, and shall not execute, any instrument which would prevent Lender from
exercising its rights under this Section 3, and that at the time of execution
of this Instrument there has been no anticipation or prepayment of any Rents
for more than two months prior to the due dates of such Rents. Borrower shall
not collect or accept payment of any Rents more than two months prior to the
due dates of such Rents.
(d) If an Event of Default has occurred and is continuing, Lender
may, regardless of the adequacy of Lender's security or the solvency of
Borrower and even in the absence of waste, enter upon and take and maintain
full control of the Mortgaged Property in order to perform all acts that Lender
in its discretion determines to be necessary or desirable for the operation and
maintenance of the Mortgaged Property, including the execution, cancellation or
modification of Leases, the collection of all Rents, the making of repairs to
the Mortgaged Property and the execution or termination of contracts providing
for the management, operation or maintenance of the Mortgaged Property, for the
purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Instrument, or for
such other purposes as Lender in its discretion may deem necessary or
desirable. Alternatively, if an Event of Default has occurred and is
continuing, regardless of the adequacy of Lender's security, without regard to
Borrower's solvency and without the necessity of giving prior notice (oral or
written) to Borrower, Lender may apply to any court having jurisdiction for the
appointment of a receiver for the Mortgaged Property to take any or all of the
actions set forth in the preceding sentence. If Lender elects to seek the
appointment of a receiver for the Mortgaged Property at any time after an Event
of Default has occurred and is continuing, Borrower, by its execution of this
Instrument, expressly consents to the appointment of such receiver, including
the appointment of a receiver ex parte if permitted by applicable law. Lender
or the receiver, as the case may be, shall be entitled to receive a reasonable
fee for managing the Mortgaged Property. Immediately upon appointment of a
receiver or immediately upon the Lender's entering upon and taking possession
and control of the Mortgaged Property, Borrower shall surrender possession of
the Mortgaged Property to Lender or the receiver, as the case may be, and shall
deliver to Lender or the receiver, as the case may be, all documents, records
(including records on electronic or magnetic media), accounts, surveys, plans,
and specifications relating to the Mortgaged Property and all security deposits
and prepaid Rents. In the event Lender takes possession and control of the
Mortgaged Property, Lender may exclude Borrower and its representatives from
the Mortgaged Property. Borrower acknowledges and agrees that the exercise by
Lender of any of the rights conferred under this Section 3 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and
Improvements.
(e) If Lender enters the Mortgaged Property, Lender shall be
liable to account only to Borrower and only for those Rents actually received.
Lender shall not be liable to Borrower, anyone claiming under or through
Borrower or anyone having an interest in the Mortgaged Property, by reason of
any act or omission of Lender under this Section 3, and Borrower hereby
releases and discharges Lender from any such liability to the fullest extent
permitted by law.
(f) If the Rents are not sufficient to meet the costs of taking
control of and managing the Mortgaged Property and collecting the Rents, any
funds expended by Lender for such purposes shall
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 8
9
become an additional part of the Indebtedness as provided in Section 12.
(g) Any entering upon and taking of control of the Mortgaged
Property by Lender or the receiver, as the case may be, and any application of
Rents as provided in this Instrument shall not cure or waive any Event of
Default or invalidate any other right or remedy of Lender under applicable law
or provided for in this Instrument.
4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.
(a) As part of the consideration for the Indebtedness, Borrower
absolutely and unconditionally assigns and transfers to Lender all of
Borrower's right, title and interest in, to and under the Leases, including
Borrower's right, power and authority to modify the terms of any such Lease, or
extend or terminate any such Lease. It is the intention of Borrower to
establish a present, absolute and irrevocable transfer and assignment to Lender
of all of Borrower's right, title and interest in, to and under the Leases.
Borrower and Lender intend this assignment of the Leases to be immediately
effective and to constitute an absolute present assignment and not an
assignment for additional security only. For purposes of giving effect to this
absolute assignment of the Leases, and for no other purpose, the Leases shall
not be deemed to be a part of the "Mortgaged Property" as that term is defined
in Section 1(s). However, if this present, absolute and unconditional
assignment of the Leases is not enforceable by its terms under the laws of the
Property Jurisdiction, then the Leases shall be included as a part of the
Mortgaged Property and it is the intention of the Borrower that in this
circumstance this Instrument create and perfect a lien on the Leases in favor
of Lender, which lien shall be effective as of the date of this Instrument.
(b) Until Lender gives notice to Borrower of Lender's exercise of
its rights under this Section 4, Borrower shall have all rights, power and
authority granted to Borrower under any Lease (except as otherwise limited by
this Section or any other provision of this Instrument), including the right,
power and authority to modify the terms of any Lease or extend or terminate any
Lease. Upon the occurrence of an Event of Default, the permission given to
Borrower pursuant to the preceding sentence to exercise all rights, power and
authority under Leases shall automatically terminate. Borrower shall comply
with and observe Borrower's obligations under all Leases, including Borrower's
obligations pertaining to the maintenance and disposition of tenant security
deposits.
(c) Borrower acknowledges and agrees that the exercise by Lender,
either directly or by a receiver, of any of the rights conferred under this
Section 4 shall not be construed to make Lender a mortgagee-in-possession of
the Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and the Improvements. The acceptance by Lender of the
assignment of the Leases pursuant to Section 4(a) shall not at any time or in
any event obligate Lender to take any action under this Instrument or to expend
any money or to incur any expenses. Lender shall not be liable in any way for
any injury or damage to person or property sustained by any person or persons,
firm or corporation in or about the Mortgaged Property. Prior to Lender's
actual entry into and taking possession of the Mortgaged Property, Lender
shall not (i) be obligated to perform any of the terms, covenants and
conditions contained in any Lease (or otherwise have any obligation with
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 9
10
respect to any Lease); (ii) be obligated to appear in or defend any action or
proceeding relating to the Lease or the Mortgaged Property; or (iii) be
responsible for the operation, control, care, management or repair of the
Mortgaged Property or any portion of the Mortgaged Property. The execution of
this Instrument by Borrower shall constitute conclusive evidence that all
responsibility for the operation, control, care, management and repair of the
Mortgaged Property is and shall be that of Borrower, prior to such actual entry
and taking of possession.
(d) Upon delivery of notice by Lender to Borrower of Lender's
exercise of Lender's rights under this Section 4 at any time after the
occurrence of an Event of Default, and without the necessity of Lender entering
upon and taking and maintaining control of the Mortgaged Property directly, by
a receiver, or by any other manner or proceeding permitted by the laws of the
Property Jurisdiction, Lender immediately shall have all rights, powers and
authority granted to Borrower under any Lease, including the right, power and
authority to modify the terms of any such Lease, or extend or terminate any
such Lease.
(e) Borrower shall, promptly upon Lender's request, deliver to
Lender an executed copy of each residential Lease then in effect. All Leases
for residential dwelling units shall be on forms approved by Lender, shall be
for initial terms of at least six months and not more than two years, and shall
not include options to purchase.
(f) Borrower shall not lease any portion of the Mortgaged Property
for non-residential use except with the prior written consent of Lender and
Lender's prior written approval of the Lease agreement. Borrower shall not
modify the terms of, or extend or terminate, any Lease for non-residential use
(including any Lease in existence on the date of this Instrument) without the
prior written consent of Lender. Borrower shall, without request by Lender,
deliver an executed copy of each non-residential Lease to Lender promptly after
such Lease is signed. All non-residential Leases, including renewals or
extensions of existing Leases, shall specifically provide that (1) such Leases
are subordinate to the lien of this Instrument; (2) the tenant shall attorn to
Lender and any purchaser at a foreclosure sale, such attornment to be
self-executing and effective upon acquisition of title to the Mortgaged
Property by any purchaser at a foreclosure sale or by Lender in any manner; (3)
the tenant agrees to execute such further evidences of attornment as Lender or
any purchaser at a foreclosure sale may from time to time request; (4) the
Lease shall not be terminated by foreclosure or any other transfer of the
Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property,
Lender or any other purchaser at such foreclosure sale may, at Lender's or such
purchaser's option, accept or terminate such Lease; and (6) the tenant shall,
upon receipt after the occurrence of an Event of Default of a written request
from Lender, pay all Rents payable under the Lease to Lender.
(g) Borrower shall not receive or accept Rent under any Lease
(whether residential or non-residential) for more than two months in advance.
5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS;
PREPAYMENT PREMIUM. Borrower shall pay the Indebtedness when due in accordance
with the terms of the Note and the other Loan Documents and shall perform,
observe and comply with all other provisions of the Note and the other Loan
Documents. Borrower shall pay
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 10
11
a prepayment premium in connection with certain prepayments of the
Indebtedness, including a payment made after Lender's exercise of any right of
acceleration of the Indebtedness, as provided in the Note.
6. EXCULPATION. Borrower's personal liability for payment of the
Indebtedness and for performance of the other obligations to be performed by it
under this Instrument is limited in the manner, and to the extent, provided in
the Note.
7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.
(a) Borrower shall deposit with Lender on the day monthly
installments of principal or interest, or both, are due under the Note (or on
another day designated in writing by Lender), until the Indebtedness is paid in
full, an additional amount sufficient to accumulate with Lender the entire sum
required to pay, when due (1) any water and sewer charges which, if not paid,
may result in a lien on all or any part of the Mortgaged Property, (2) the
premiums for fire and other hazard insurance, rent loss insurance and such
other insurance as Lender may require under Section 19, (3) Taxes, and (4)
amounts for other charges and expenses which Lender at any time reasonably
deems necessary to protect the Mortgaged Property, to prevent the imposition of
liens on the Mortgaged Property, or otherwise to protect Lender's interests,
all as reasonably estimated from time to time by Lender, plus one-sixth of such
estimate. The amounts deposited under the preceding sentence are collectively
referred to in this Instrument as the "IMPOSITION DEPOSITS". The obligations
of Borrower for which the Imposition Deposits are required are collectively
referred to in this Instrument as "IMPOSITIONS". The amount of the Imposition
Deposits shall be sufficient to enable Lender to pay each Imposition before the
last date upon which such payment may be made without any penalty or interest
charge being added. Lender shall maintain records indicating how much of the
monthly Imposition Deposits and how much of the aggregate Imposition Deposits
held by Lender are held for the purpose of paying Taxes, insurance premiums and
each other obligation of Borrower for which Imposition Deposits are required.
Any waiver by Lender of the requirement that Borrower remit Imposition Deposits
to Lender may be revoked by Lender, in Lender's discretion, at any time upon
notice to Borrower.
(b) Imposition Deposits shall be held in an institution (which may
be Lender, if Lender is such an institution) whose deposits or accounts are
insured or guaranteed by a federal agency. Lender shall not be obligated to
open additional accounts or deposit Imposition Deposits in additional
institutions when the amount of the Imposition Deposits exceeds the maximum
amount of the federal deposit insurance or guaranty. Lender shall apply the
Imposition Deposits to pay Impositions so long as no Event of Default has
occurred and is continuing. Unless applicable law requires, Lender shall not
be required to pay Borrower any interest, earnings or profits on the Imposition
Deposits. Borrower hereby pledges and grants to Lender a security interest in
the Imposition Deposits as additional security for all of Borrower's
obligations under this Instrument and the other Loan Documents. Any amounts
deposited with Lender under this Section 7 shall not be trust funds, nor shall
they operate to reduce the Indebtedness, unless applied by Lender for that
purpose under Section 7(e).
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 11
12
(c) If Lender receives a ▇▇▇▇ or invoice for an Imposition, Lender
shall pay the Imposition from the Imposition Deposits held by Lender. Lender
shall have no obligation to pay any Imposition to the extent it exceeds
Imposition Deposits then held by Lender. Lender may pay an Imposition
according to any ▇▇▇▇, statement or estimate from the appropriate public office
or insurance company without inquiring into the accuracy of the ▇▇▇▇, statement
or estimate or into the validity of the Imposition.
(d) If at any time the amount of the Imposition Deposits held by
Lender for payment of a specific Imposition exceeds the amount reasonably
deemed necessary by Lender plus one-sixth of such estimate, the excess shall be
credited against future installments of Imposition Deposits. If at any time
the amount of the Imposition Deposits held by Lender for payment of a specific
Imposition is less than the amount reasonably estimated by Lender to be
necessary plus one-sixth of such estimate, Borrower shall pay to Lender the
amount of the deficiency within 15 days after notice from Lender.
(e) If an Event of Default has occurred and is continuing, Lender
may apply any Imposition Deposits, in any amounts and in any order as Lender
determines, in Lender's discretion, to pay any Impositions or as a credit
against the Indebtedness. Upon payment in full of the Indebtedness, Lender
shall refund to Borrower any Imposition Deposits held by Lender.
8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender
such amounts as may be required by any Collateral Agreement and shall perform
all other obligations of Borrower under each Collateral Agreement.
9. APPLICATION OF PAYMENTS. If at any time Lender receives, from
Borrower or otherwise, any amount applicable to the Indebtedness which is less
than all amounts due and payable at such time, then Lender may apply that
payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender's discretion. Neither Lender's acceptance of
an amount which is less than all amounts then due and payable nor Lender's
application of such payment in the manner authorized shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction. Notwithstanding the application of any such amount to the
Indebtedness, Borrower's obligations under this Instrument and the Note shall
remain unchanged.
10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws,
ordinances, regulations and requirements of any Governmental Authority and all
recorded lawful covenants and agreements relating to or affecting the Mortgaged
Property, including all laws, ordinances, regulations, requirements and
covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and Leases. Borrower
also shall comply with all applicable laws that pertain to the maintenance and
disposition of tenant security deposits. Borrower shall at all times maintain
records sufficient to demonstrate compliance with the provisions of this
Section 10. Borrower shall take appropriate measures to prevent, and shall not
engage in or knowingly permit, any illegal activities at the Mortgaged Property
that could endanger tenants or visitors, result in damage to the Mortgaged
Property, result in forfeiture of the
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 12
13
Mortgaged Property, or otherwise materially impair the lien created by this
Instrument or Lender's interest in the Mortgaged Property. Borrower represents
and warrants to Lender that no portion of the Mortgaged Property has been or
will be purchased with the proceeds of any illegal activity.
11. USE OF PROPERTY. Unless required by applicable law, Borrower
shall not (a) except for any change in use approved by Lender, allow changes in
the use for which all or any part of the Mortgaged Property is being used at
the time this Instrument was executed, (b) convert any individual dwelling
units or common areas to commercial use, (c) initiate or acquiesce in a change
in the zoning classification of the Mortgaged Property, or (d) establish any
condominium or cooperative regime with respect to the Mortgaged Property.
12. PROTECTION OF LENDER'S SECURITY.
(a) If Borrower fails to perform any of its obligations under this
Instrument or any other Loan Document, or if any action or proceeding is
commenced which purports to affect the Mortgaged Property, Lender's security or
Lender's rights under this Instrument, including eminent domain, insolvency,
code enforcement, civil or criminal forfeiture, enforcement of Hazardous
Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender's option may make such
appearances, disburse such sums and take such actions as Lender reasonably
deems necessary to perform such obligations of Borrower and to protect Lender's
interest, including (1) payment of fees and out of pocket expenses of
attorneys, accountants, inspectors and consultants, (2) entry upon the
Mortgaged Property to make repairs or secure the Mortgaged Property, (3)
procurement of the insurance required by Section 19, and (4) payment of amounts
which Borrower has failed to pay under Sections 15 and 17.
(b) Any amounts disbursed by Lender under this Section 12, or
under any other provision of this Instrument that treats such disbursement as
being made under this Section 12, shall be added to, and become part of, the
principal component of the Indebtedness, shall be immediately due and payable
and shall bear interest from the date of disbursement until paid at the
"DEFAULT RATE", as defined in the Note.
(c) Nothing in this Section 12 shall require Lender to incur any
expense or take any action.
13. INSPECTION. Lender, its agents, representatives, and
designees may make or cause to be made entries upon and inspections of the
Mortgaged Property (including environmental inspections and tests) during
normal business hours, or at any other reasonable time.
14. BOOKS AND RECORDS; FINANCIAL REPORTING.
(a) Borrower shall keep and maintain at all times at the Mortgaged
Property or the management agent's offices, and upon Lender's request shall
make available at the Mortgaged Property, complete and accurate books of
account and records (including copies of supporting bills and invoices)
adequate to reflect correctly the operation of the Mortgaged Property, and
copies of
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 13
14
all written contracts, Leases, and other instruments which affect the Mortgaged
Property. The books, records, contracts, Leases and other instruments shall be
subject to examination and inspection at any reasonable time by Lender.
(b) Borrower shall furnish to Lender all of the following:
(1) within 120 days after the end of each fiscal year of
Borrower, a statement of income and expenses for
Borrower's operation of the Mortgaged Property for
that fiscal year, a statement of changes in financial
position of Borrower relating to the Mortgaged
Property for that fiscal year and, when requested by
Lender, a balance sheet showing all assets and
liabilities of Borrower relating to the Mortgaged
Property as of the end of that fiscal year;
(2) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, a rent schedule for the Mortgaged Property
showing the name of each tenant, and for each tenant,
the space occupied, the lease expiration date, the
rent payable for the current month, the date through
which rent has been paid, and any related information
requested by Lender;
(3) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, an accounting of all security deposits held
pursuant to all Leases, including the name of the
institution (if any) and the names and identification
numbers of the accounts (if any) in which such
security deposits are held and the name of the person
to contact at such financial institution, along with
any authority or release necessary for Lender to
access information regarding such accounts;
(4) within 120 days after the end of each fiscal year of
Borrower, and at any other time upon Lender's
request, a statement that identifies all owners of
any interest in Borrower and any Controlling Entity
and the interest held by each, if Borrower or a
Controlling Entity is a corporation, all officers and
directors of Borrower and the Controlling Entity, and
if Borrower or a Controlling Entity is a limited
liability company, all managers who are not members;
(5) upon Lender's request, quarterly income and expense
statements for the Mortgaged Property;
(6) upon Lender's request at any time when an Event of
Default has occurred and is continuing, monthly
income and expense statements for the Mortgaged
Property;
(7) upon Lender's request, a monthly property management
report for the Mortgaged Property, showing the number
of inquiries made and rental applications received
from tenants or prospective tenants and deposits
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 14
15
received from tenants and any other information
requested by Lender; and
(8) upon Lender's request, a balance sheet, a statement
of income and expenses for Borrower and a statement
of changes in financial position of Borrower for
Borrower's most recent fiscal year.
(c) Each of the statements, schedules and reports required by
Section 14(b) shall be certified to be complete and accurate by an individual
having authority to bind Borrower, and shall be in such form and contain such
detail as Lender may reasonably require. Lender also may require that any
statements, schedules or reports be audited at Borrower's expense by
independent certified public accountants acceptable to Lender.
(d) If Borrower fails to provide in a timely manner the
statements, schedules and reports required by Section 14(b), Lender shall have
the right to have Borrower's books and records audited, at Borrower's expense,
by independent certified public accountants selected by Lender in order to
obtain such statements, schedules and reports, and all related costs and
expenses of Lender shall become immediately due and payable and shall become an
additional part of the Indebtedness as provided in Section 12.
(e) If an Event of Default has occurred and is continuing,
Borrower shall deliver to Lender upon written demand all books and records
relating to the Mortgaged Property or its operation.
(f) Borrower authorizes Lender to obtain a credit report on
Borrower at any time.
15. TAXES; OPERATING EXPENSES.
(a) Subject to the provisions of Section 15(c) and Section 15(d),
Borrower shall pay, or cause to be paid, all Taxes when due and before the
addition of any interest, fine, penalty or cost for nonpayment.
(b) Subject to the provisions of Section 15(c), Borrower shall pay
the expenses of operating, managing, maintaining and repairing the Mortgaged
Property (including insurance premiums, utilities, repairs and replacements)
before the last date upon which each such payment may be made without any
penalty or interest charge being added.
(c) As long as no Event of Default exists and Borrower has timely
delivered to Lender any bills or premium notices that it has received, Borrower
shall not be obligated to pay Taxes, insurance premiums or any other individual
Imposition to the extent that sufficient Imposition Deposits are held by Lender
for the purpose of paying that specific Imposition. If an Event of Default
exists, Lender may exercise any rights Lender may have with respect to
Imposition Deposits without regard to whether Impositions are then due and
payable. Lender shall have no liability to Borrower for failing to pay any
Impositions to the extent that any Event of Default has occurred and is
continuing, insufficient Imposition Deposits are held by Lender at the time an
Imposition becomes
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 15
16
due and payable or Borrower has failed to provide Lender with bills and premium
notices as provided above.
(d) Borrower, at its own expense, may contest by appropriate
legal proceedings, conducted diligently and in good faith, the amount or
validity of any Imposition other than insurance premiums, if (1) Borrower
notifies Lender of the commencement or expected commencement of such
proceedings, (2) the Mortgaged Property is not in danger of being sold or
forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the
contested Imposition, if requested by Lender, and (4) Borrower furnishes
whatever additional security is required in the proceedings or is reasonably
requested by Lender, which may include the delivery to Lender of the reserves
established by Borrower to pay the contested Imposition.
(e) Borrower shall promptly deliver to Lender a copy of all
notices of, and invoices for, Impositions, and if Borrower pays any Imposition
directly, Borrower shall promptly furnish to Lender receipts evidencing such
payments.
16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the
extent provided in Section 21, the grant, creation or existence of any
mortgage, deed of trust, deed to secure debt, security interest or other lien
or encumbrance (a "LIEN") on the Mortgaged Property (other than the lien of
this Instrument) or on certain ownership interests in Borrower, whether
voluntary, involuntary or by operation of law, and whether or not such Lien has
priority over the lien of this Instrument, is a "TRANSFER" which constitutes an
Event of Default and subjects Borrower to personal liability under the Note.
17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED
PROPERTY. Borrower (a) shall not commit waste or permit impairment or
deterioration of the Mortgaged Property, (b) shall not abandon the Mortgaged
Property, (c) shall restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing,
whether or not insurance proceeds or condemnation awards are available to cover
any costs of such restoration or repair, (d) shall keep the Mortgaged Property
in good repair, including the replacement of Personalty and Fixtures with items
of equal or better function and quality, (e) shall provide for professional
management of the Mortgaged Property by a residential rental property manager
satisfactory to Lender under a contract approved by Lender in writing, and (f)
shall give notice to Lender of and, unless otherwise directed in writing by
Lender, shall appear in and defend any action or proceeding purporting to
affect the Mortgaged Property, Lender's security or Lender's rights under this
Instrument. Borrower shall not (and shall not permit any tenant or other
person to) remove, demolish or alter the Mortgaged Property or any part of the
Mortgaged Property except in connection with the replacement of tangible
Personalty.
18. ENVIRONMENTAL HAZARDS.
(a) Except for matters covered by a written program of operations
and maintenance approved in writing by Lender (an "O&M PROGRAM") or matters
described in Section 18(b),
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 16
17
Borrower shall not cause or permit any of the following:
(1) the presence, use, generation, release, treatment,
processing, storage (including storage in above
ground and underground storage tanks), handling, or
disposal of any Hazardous Materials on or under the
Mortgaged Property or any other property of Borrower
that is adjacent to the Mortgaged Property;
(2) the transportation of any Hazardous Materials to,
from, or across the Mortgaged Property;
(3) any occurrence or condition on the Mortgaged Property
or any other property of Borrower that is adjacent to
the Mortgaged Property, which occurrence or condition
is or may be in violation of Hazardous Materials
Laws; or
(4) any violation of or noncompliance with the terms of
any Environmental Permit with respect to the
Mortgaged Property or any property of Borrower that
is adjacent to the Mortgaged Property.
The matters described in clauses (1) through (4) above are referred to
collectively in this Section 18 as "PROHIBITED ACTIVITIES OR CONDITIONS".
(b) Prohibited Activities and Conditions shall not include the
safe and lawful use and storage of quantities of (1) pre-packaged supplies,
cleaning materials and petroleum products customarily used in the operation and
maintenance of comparable multifamily properties, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for
consumer use and used by tenants and occupants of residential dwelling units in
the Mortgaged Property; and (3) petroleum products used in the operation and
maintenance of motor vehicles from time to time located on the Mortgaged
Property's parking areas, so long as all of the foregoing are used, stored,
handled, transported and disposed of in compliance with Hazardous Materials
Laws.
(c) Borrower shall take all commercially reasonable actions
(including the inclusion of appropriate provisions in any Leases executed after
the date of this Instrument) to prevent its employees, agents, and contractors,
and all tenants and other occupants from causing or permitting any Prohibited
Activities or Conditions. Borrower shall not lease or allow the sublease or
use of all or any portion of the Mortgaged Property to any tenant or subtenant
for nonresidential use by any user that, in the ordinary course of its
business, would cause or permit any Prohibited Activity or Condition.
(d) If an O&M Program has been established with respect to
Hazardous Materials, Borrower shall comply in a timely manner with, and cause
all employees, agents, and contractors of Borrower and any other persons
present on the Mortgaged Property to comply with the O&M Program. All costs of
performance of Borrower's obligations under any O&M Program shall be paid by
Borrower, and Lender's out-of-pocket costs incurred in connection with the
monitoring and
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 17
18
review of the O&M Program and Borrower's performance shall be paid by Borrower
upon demand by Lender. Any such out-of-pocket costs of Lender which Borrower
fails to pay promptly shall become an additional part of the Indebtedness as
provided in Section 12.
(e) Borrower represents and warrants to Lender that, except as
previously disclosed by Borrower to Lender in writing:
(1) Borrower has not at any time engaged in, caused or
permitted any Prohibited Activities or Conditions;
(2) to the best of Borrower's knowledge after reasonable
and diligent inquiry, no Prohibited Activities or
Conditions exist or have existed;
(3) except to the extent previously disclosed by Borrower
to Lender in writing, the Mortgaged Property does not
now contain any underground storage tanks, and, to
the best of Borrower's knowledge after reasonable and
diligent inquiry, the Mortgaged Property has not
contained any underground storage tanks in the past.
If there is an underground storage tank located on
the Property which has been previously disclosed by
Borrower to Lender in writing, that tank complies
with all requirements of Hazardous Materials Laws;
(4) Borrower has complied with all Hazardous Materials
Laws, including all requirements for notification
regarding releases of Hazardous Materials. Without
limiting the generality of the foregoing, Borrower
has obtained all Environmental Permits required for
the operation of the Mortgaged Property in accordance
with Hazardous Materials Laws now in effect and all
such Environmental Permits are in full force and
effect;
(5) no event has occurred with respect to the Mortgaged
Property that constitutes, or with the passing of
time or the giving of notice would constitute,
noncompliance with the terms of any Environmental
Permit;
(6) there are no actions, suits, claims or proceedings
pending or, to the best of Borrower's knowledge after
reasonable and diligent inquiry, threatened that
involve the Mortgaged Property and allege, arise out
of, or relate to any Prohibited Activity or
Condition; and
(7) Borrower has not received any complaint, order,
notice of violation or other communication from any
Governmental Authority with regard to air emissions,
water discharges, noise emissions or Hazardous
Materials, or any other environmental, health or
safety matters affecting the Mortgaged Property or
any other property of Borrower that is adjacent to
the Mortgaged Property.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 18
19
The representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.
(f) Borrower shall promptly notify Lender in writing upon the
occurrence of any of the following events:
(1) Borrower's discovery of any Prohibited Activity or
Condition;
(2) Borrower's receipt of or knowledge of any complaint,
order, notice of violation or other communication
from any Governmental Authority or other person with
regard to present or future alleged Prohibited
Activities or Conditions or any other environmental,
health or safety matters affecting the Mortgaged
Property or any other property of Borrower that is
adjacent to the Mortgaged Property; and
(3) any representation or warranty in this Section 18
becomes untrue after the date of this Agreement.
Any such notice given by Borrower shall not relieve Borrower of, or result in a
waiver of, any obligation under this Instrument, the Note, or any other Loan
Document.
(g) Borrower shall pay promptly the costs of any environmental
inspections, tests or audits ("ENVIRONMENTAL INSPECTIONS") required by Lender
in connection with any foreclosure or deed in lieu of foreclosure, or as a
condition of Lender's consent to any Transfer under Section 21, or required by
Lender following a reasonable determination by Lender that Prohibited
Activities or Conditions may exist. Any such costs incurred by Lender
(including the fees and out-of-pocket costs of attorneys and technical
consultants whether incurred in connection with any judicial or administrative
process or otherwise) which Borrower fails to pay promptly shall become an
additional part of the Indebtedness as provided in Section 12. The results of
all Environmental Inspections made by Lender shall at all times remain the
property of Lender and Lender shall have no obligation to disclose or otherwise
make available to Borrower or any other party such results or any other
information obtained by Lender in connection with its Environmental
Inspections. Lender hereby reserves the right, and Borrower hereby expressly
authorizes Lender, to make available to any party, including any prospective
bidder at a foreclosure sale of the Mortgaged Property, the results of any
Environmental Inspections made by Lender with respect to the Mortgaged
Property. Borrower consents to Lender notifying any party (either as part of a
notice of sale or otherwise) of the results of any of Lender's Environmental
Inspections. Borrower acknowledges that Lender cannot control or otherwise
assure the truthfulness or accuracy of the results of any of its Environmental
Inspections and that the release of such results to prospective bidders at a
foreclosure sale of the Mortgaged Property may have a material and adverse
effect upon the amount which a party may bid at such sale. Borrower agrees
that Lender shall have no liability whatsoever as a result of delivering the
results of any of its Environmental Inspections to any third party, and
Borrower hereby releases and forever discharges Lender from any and all claims,
damages, or causes of action,
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 19
20
arising out of, connected with or incidental to the results of, the delivery of
any of Lender's Environmental Inspections.
(h) If any investigation, site monitoring, containment, clean-up,
restoration or other remedial work ("REMEDIAL WORK") is necessary to comply
with any Hazardous Materials Law or order of any Governmental Authority that
has or acquires jurisdiction over the Mortgaged Property or the use, operation
or improvement of the Mortgaged Property under any Hazardous Materials Law,
Borrower shall, by the earlier of (1) the applicable deadline required by
Hazardous Materials Law or (2) 30 days after notice from Lender demanding such
action, begin performing the Remedial Work, and thereafter diligently prosecute
it to completion, and shall in any event complete the work by the time required
by applicable Hazardous Materials Law. If Borrower fails to begin on a timely
basis or diligently prosecute any required Remedial Work, Lender may, at its
option, cause the Remedial Work to be completed, in which case Borrower shall
reimburse Lender on demand for the cost of doing so. Any reimbursement due
from Borrower to Lender shall become part of the Indebtedness as provided in
Section 12.
(i) Borrower shall cooperate with any inquiry by any Governmental
Authority and shall comply with any governmental or judicial order which arises
from any alleged Prohibited Activity or Condition.
(j) Borrower shall indemnify, hold harmless and defend (i) Lender,
(ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any
prior Loan Servicer, (v) the officers, directors, shareholders, partners,
employees and trustees of any of the foregoing, and (vi) the heirs, legal
representatives, successors and assigns of each of the foregoing (collectively,
the "INDEMNITEES") from and against all proceedings, claims, damages, penalties
and costs (whether initiated or sought by Governmental Authorities or private
parties), including fees and out of pocket expenses of attorneys and expert
witnesses, investigatory fees, and remediation costs, whether incurred in
connection with any judicial or administrative process or otherwise, arising
directly or indirectly from any of the following:
(1) any breach of any representation or warranty of
Borrower in this Section 18;
(2) any failure by Borrower to perform any of its
obligations under this Section 18;
(3) the existence or alleged existence of any Prohibited
Activity or Condition;
(4) the presence or alleged presence of Hazardous
Materials on or under the Mortgaged Property or any
property of Borrower that is adjacent to the
Mortgaged Property; and
(5) the actual or alleged violation of any Hazardous
Materials Law.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 20
21
(k) Counsel selected by Borrower to defend Indemnitees shall be
subject to the approval of those Indemnitees. However, any Indemnitee may
elect to defend any claim or legal or administrative proceeding at the
Borrower's expense.
(l) Borrower shall not, without the prior written consent of those
Indemnitees who are named as parties to a claim or legal or administrative
proceeding (a "CLAIM"), settle or compromise the Claim if the settlement (1)
results in the entry of any judgment that does not include as an unconditional
term the delivery by the claimant or plaintiff to Lender of a written release
of those Indemnitees, satisfactory in form and substance to Lender; or (2) may
materially and adversely affect Lender, as determined by Lender in its
discretion.
(m) Borrower's obligation to indemnify the Indemnitees shall not
be limited or impaired by any of the following, or by any failure of Borrower
or any guarantor to receive notice of or consideration for any of the
following:
(1) any amendment or modification of any Loan Document;
(2) any extensions of time for performance required by
any Loan Document;
(3) any provision in any of the Loan Documents limiting
Lender's recourse to property securing the
Indebtedness, or limiting the personal liability of
Borrower or any other party for payment of all or any
part of the Indebtedness;
(4) the accuracy or inaccuracy of any representations and
warranties made by Borrower under this Instrument or
any other Loan Document;
(5) the release of Borrower or any other person, by
Lender or by operation of law, from performance of
any obligation under any Loan Document;
(6) the release or substitution in whole or in part of
any security for the Indebtedness; and
(7) Lender's failure to properly perfect any lien or
security interest given as security for the
Indebtedness.
(n) Borrower shall, at its own cost and expense, do all of the
following:
(1) pay or satisfy any judgment or decree that may be
entered against any Indemnitee or Indemnitees in any
legal or administrative proceeding incident to any
matters against which Indemnitees are entitled to be
indemnified under this Section 18;
(2) reimburse Indemnitees for any expenses paid or
incurred in connection with
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 21
22
any matters against which Indemnitees are entitled to
be indemnified under this Section 18; and
(3) reimburse Indemnitees for any and all expenses,
including fees and out of pocket expenses of
attorneys and expert witnesses, paid or incurred in
connection with the enforcement by Indemnitees of
their rights under this Section 18, or in monitoring
and participating in any legal or administrative
proceeding.
(o) In any circumstances in which the indemnity under this Section
18 applies, Lender may employ its own legal counsel and consultants to
prosecute, defend or negotiate any claim or legal or administrative proceeding
and Lender, with the prior written consent of Borrower (which shall not be
unreasonably withheld, delayed or conditioned) may settle or compromise any
action or legal or administrative proceeding. Borrower shall reimburse Lender
upon demand for all costs and expenses incurred by Lender, including all costs
of settlements entered into in good faith, and the fees and out of pocket
expenses of such attorneys and consultants.
(p) The provisions of this Section 18 shall be in addition to any
and all other obligations and liabilities that Borrower may have under
applicable law or under other Loan Documents, and each Indemnitee shall be
entitled to indemnification under this Section 18 without regard to whether
Lender or that Indemnitee has exercised any rights against the Mortgaged
Property or any other security, pursued any rights against any guarantor, or
pursued any other rights available under the Loan Documents or applicable law.
If Borrower consists of more than one person or entity, the obligation of those
persons or entities to indemnify the Indemnitees under this Section 18 shall be
joint and several. The obligation of Borrower to indemnify the Indemnitees
under this Section 18 shall survive any repayment or discharge of the
Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of
any deed in lieu of foreclosure, and any release of record of the lien of this
Instrument.
19. PROPERTY AND LIABILITY INSURANCE.
(a) Borrower shall keep the Improvements insured at all times
against such hazards as Lender may from time to time require, which insurance
shall include but not be limited to coverage against loss by fire and allied
perils, general boiler and machinery coverage, and business income coverage.
Lender's insurance requirements may change from time to time throughout the
term of the Indebtedness. If Lender so requires, such insurance shall also
include sinkhole insurance, mine subsidence insurance, earthquake insurance,
and, if the Mortgaged Property does not conform to applicable zoning or land
use laws, building ordinance or law coverage. If any of the Improvements is
located in an area identified by the Federal Emergency Management Agency (or
any successor to that agency) as an area having special flood hazards, and if
flood insurance is available in that area, Borrower shall insure such
Improvements against loss by flood.
(b) All premiums on insurance policies required under Section
19(a) shall be paid in the manner provided in Section 7, unless Lender has
designated in writing another method of payment.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 22
23
All such policies shall also be in a form approved by Lender. All policies of
property damage insurance shall include a non-contributing, non-reporting
mortgage clause in favor of, and in a form approved by, Lender. Lender shall
have the right to hold the original policies or duplicate original policies of
all insurance required by Section 19(a). Borrower shall promptly deliver to
Lender a copy of all renewal and other notices received by Borrower with
respect to the policies and all receipts for paid premiums. At least 30 days
prior to the expiration date of a policy, Borrower shall deliver to Lender the
original (or a duplicate original) of a renewal policy in form satisfactory to
Lender.
(c) Borrower shall maintain at all times commercial general
liability insurance, workers' compensation insurance and such other liability,
errors and omissions and fidelity insurance coverages as Lender may from time
to time require.
(d) All insurance policies and renewals of insurance policies
required by this Section 19 shall be in such amounts and for such periods as
Lender may from time to time require, and shall be issued by insurance
companies satisfactory to Lender.
(e) Borrower shall comply with all insurance requirements and
shall not permit any condition to exist on the Mortgaged Property that would
invalidate any part of any insurance coverage that this Instrument requires
Borrower to maintain.
(f) In the event of loss, Borrower shall give immediate written
notice to the insurance carrier and to Lender. Borrower hereby authorizes and
appoints Lender as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claims under policies of property damage insurance, to
appear in and prosecute any action arising from such property damage insurance
policies, to collect and receive the proceeds of property damage insurance, and
to deduct from such proceeds Lender's expenses incurred in the collection of
such proceeds. This power of attorney is coupled with an interest and therefore
is irrevocable. However, nothing contained in this Section 19 shall require
Lender to incur any expense or take any action. Lender may, at Lender's option,
(1) hold the balance of such proceeds to be used to reimburse Borrower for the
cost of restoring and repairing the Mortgaged Property to the equivalent of its
original condition or to a condition approved by Lender (the "RESTORATION"), or
(2) apply the balance of such proceeds to the payment of the Indebtedness,
whether or not then due. To the extent Lender determines to apply insurance
proceeds to Restoration, Lender shall do so in accordance with Lender's
then-current policies relating to the restoration of casualty damage on similar
multifamily properties.
(g) Lender shall not exercise its option to apply insurance
proceeds to the payment of the Indebtedness if all of the following conditions
are met: (1) no Event of Default (or any event which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default)
has occurred and is continuing; (2) Lender determines, in its discretion, that
there will be sufficient funds to complete the Restoration; (3) Lender
determines, in its discretion, that the rental income from the Mortgaged
Property after completion of the Restoration will be sufficient to meet all
operating costs and other expenses, Imposition Deposits, deposits to reserves
and loan repayment obligations relating to the Mortgaged Property; and (4)
Lender determines, in its discretion, that the Restoration
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 23
24
will be completed before the earlier of (A) one year before the maturity date
of the Note or (B) one year after the date of the loss or casualty.
(h) If the Mortgaged Property is sold at a foreclosure sale or
Lender acquires title to the Mortgaged Property, Lender shall automatically
succeed to all rights of Borrower in and to any insurance policies and unearned
insurance premiums and in and to the proceeds resulting from any damage to the
Mortgaged Property prior to such sale or acquisition.
20. CONDEMNATION.
(a) Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, or conveyance in lieu
thereof, of all or any part of the Mortgaged Property, whether direct or
indirect (a "CONDEMNATION"). Borrower shall appear in and prosecute or defend
any action or proceeding relating to any Condemnation unless otherwise directed
by Lender in writing. Borrower authorizes and appoints Lender as
attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender's
or Borrower's name, any action or proceeding relating to any Condemnation and
to settle or compromise any claim in connection with any Condemnation. This
power of attorney is coupled with an interest and therefore is irrevocable.
However, nothing contained in this Section 20 shall require Lender to incur any
expense or take any action. Borrower hereby transfers and assigns to Lender
all right, title and interest of Borrower in and to any award or payment with
respect to (i) any Condemnation, or any conveyance in lieu of Condemnation,
and (ii) any damage to the Mortgaged Property caused by governmental action
that does not result in a Condemnation.
(b) Lender may apply such awards or proceeds, after the deduction
of Lender's expenses incurred in the collection of such amounts, at Lender's
option, to the restoration or repair of the Mortgaged Property or to the
payment of the Indebtedness, with the balance, if any, to Borrower. Unless
Lender otherwise agrees in writing, any application of any awards or proceeds
to the Indebtedness shall not extend or postpone the due date of any monthly
installments referred to in the Note, Section 7 of this Instrument or any
Collateral Agreement, or change the amount of such installments. Borrower
agrees to execute such further evidence of assignment of any awards or proceeds
as Lender may require.
21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.
[NO RIGHT TO TRANSFER]
(a) The occurrence of any of the following events shall constitute
an Event of Default under this Instrument:
(1) a Transfer of all or any part of the Mortgaged
Property or any interest in the Mortgaged Property;
(2) if Borrower is a limited partnership, a Transfer of
(A) any general partnership interest, or (B) limited
partnership interests in Borrower that would cause
the
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 24
25
Initial Owners of Borrower to own less than 51% of
all limited partnership interests in Borrower;
(3) if Borrower is a general partnership or a joint
venture, a Transfer of any general partnership or
joint venture interest in Borrower;
(4) if Borrower is a limited liability company, a
Transfer of (A) any membership interest in Borrower
which would cause the Initial Owners to own less than
51% of all the membership interests in Borrower, or
(B) any membership or other interest of a manager in
Borrower;
(5) if Borrower is a corporation, (A) the Transfer of any
voting stock in Borrower which would cause the
Initial Owners to own less than 51% of any class of
voting stock in Borrower or (B) if the outstanding
voting stock in Borrower is held by 100 or more
shareholders, one or more transfers by a single
transferor within a 12-month period affecting an
aggregate of 5% or more of that stock;
(6) if Borrower is a trust, (A) a Transfer of any
beneficial interest in Borrower which would cause the
Initial Owners to own less than 51% of all the
beneficial interests in Borrower, or (B) the
termination or revocation of the trust, or (C) the
removal, appointment or substitution of a trustee of
Borrower; and
(7) a Transfer of any interest in a Controlling Entity
which, if such Controlling Entity were Borrower,
would result in an Event of Default under any of
Sections 21(a)(1) through (6) above.
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 21.
(b) The occurrence of any of the following events shall not
constitute an Event of Default under this Instrument, notwithstanding any
provision of Section 21(a) to the contrary:
(1) a Transfer to which Lender has consented;
(2) a Transfer that occurs by devise, descent, or by
operation of law upon the death of a natural person;
(3) the grant of a leasehold interest in an individual
dwelling unit for a term of two years or less not
containing an option to purchase;
(4) a Transfer of obsolete or worn out Personalty or
Fixtures that are
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 25
26
contemporaneously replaced by items of equal or
better function and quality, which are free of liens,
encumbrances and security interests other than those
created by the Loan Documents or consented to by
Lender;
(5) the grant of an easement, if before the grant Lender
determines that the easement will not materially
affect the operation or value of the Mortgaged
Property or Lender's interest in the Mortgaged
Property, and Borrower pays to Lender, upon demand,
all costs and expenses incurred by Lender in
connection with reviewing Borrower's request; and
(6) the creation of a mechanic's, materialman's, or
judgment lien against the Mortgaged Property which is
released of record or otherwise remedied to Lender's
satisfaction within 30 days of the date of creation.
(c) Lender may consent, in its discretion, to a Transfer that
would otherwise violate this Section 21 if, prior to the Transfer, Borrower has
satisfied each of the following requirements:
(1) the submission to Lender of all information required
by Lender to make the determination required by this
Section 21(c);
(2) the Mortgaged Property and the transferee meet all of
the eligibility, credit, management and other
standards (including but not limited to any standards
with respect to previous relationships between Lender
and the transferee and the organization of the
transferee) customarily applied by Lender to the
approval of borrowers and properties in connection
with the origination or purchase of similar mortgages
on multifamily properties;
(3) the absence of any Event of Default;
(4) the execution of an assumption agreement that is
acceptable to Lender and that, among other things,
requires the transferee to perform all obligations of
Borrower set forth in the Note, this Instrument and
any other Loan Documents, and may require that the
transferee comply with any provisions of this
Instrument or any other Loan Document which
previously may have been waived by Lender; and
(5) Lender's receipt of all of the following:
(A) a review fee in the amount of $2,000.00;
(B) a transfer fee in an amount equal to 1.0 % of
the unpaid principal balance of the
Indebtedness immediately before the Transfer;
and
(C) the amount of Lender's out-of-pocket costs
(including reasonable
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 26
27
attorneys' fees) incurred in reviewing the
Transfer request.
22. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an Event of Default under this Instrument:
(a) any failure by Borrower to pay or deposit when due any amount
required by the Note, this Instrument or any other Loan Document;
(b) any failure by Borrower to maintain the insurance coverage
required by Section 19;
(c) any failure by Borrower to comply with the provisions of
Section 33;
(d) fraud or material misrepresentation or material omission by
Borrower, any of its officers, directors, trustees, general partners or
managers or any guarantor in connection with (A) the application for or
creation of the Indebtedness, (B) any financial statement, rent roll, or other
report or information provided to Lender during the term of the Indebtedness,
or (C) any request for Lender's consent to any proposed action, including a
request for disbursement of funds under any Collateral Agreement;
(e) any Event of Default under Section 21;
(f) the commencement of a forfeiture action or proceeding, whether
civil or criminal, which, in Lender's reasonable judgment, could result in a
forfeiture of the Mortgaged Property or otherwise materially impair the lien
created by this Instrument or Lender's interest in the Mortgaged Property;
(g) any failure by Borrower to perform any of its obligations
under this Instrument (other than those specified in Sections 22(a) through
(f)), as and when required, which continues for a period of 30 days after
notice of such failure by Lender to Borrower. However, no such notice or grace
period shall apply in the case of any such failure which could, in Lender's
judgment, absent immediate exercise by Lender of a right or remedy under this
Instrument, result in harm to Lender, impairment of the Note or this Instrument
or any other security given under any other Loan Document;
(h) any failure by Borrower to perform any of its obligations as
and when required under any Loan Document other than this Instrument which
continues beyond the applicable cure period, if any, specified in that Loan
Document;
(i) any exercise by the holder of any debt instrument secured by a
mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a
right to declare all amounts due under that debt instrument immediately due and
payable; and
(j) Borrower voluntarily files for bankruptcy protection under the
United States Bankruptcy Code or voluntarily becomes subject to any
reorganization, receivership, insolvency
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 27
28
proceeding or other similar proceeding pursuant to any other federal or state
law affecting debtor and creditor rights, or an involuntary case is commenced
against Borrower by any creditor (other than Lender) of Borrower pursuant to
the United States Bankruptcy Code or other federal or state law affecting
debtor and creditor rights and is not dismissed or discharged within 60 days
after filing.
23. REMEDIES CUMULATIVE. Each right and remedy provided in this
Instrument is distinct from all other rights or remedies under this Instrument
or any other Loan Document or afforded by applicable law, and each shall be
cumulative and may be exercised concurrently, independently, or successively,
in any order.
24. FORBEARANCE.
(a) Lender may (but shall not be obligated to) agree with
Borrower, from time to time, and without giving notice to, or obtaining the
consent of, or having any effect upon the obligations of, any guarantor or
other third party obligor, to take any of the following actions: extend the
time for payment of all or any part of the Indebtedness; reduce the payments
due under this Instrument, the Note, or any other Loan Document; release anyone
liable for the payment of any amounts under this Instrument, the Note, or any
other Loan Document; accept a renewal of the Note; modify the terms and time of
payment of the Indebtedness; join in any extension or subordination agreement;
release any Mortgaged Property; take or release other or additional security;
modify the rate of interest or period of amortization of the Note or change the
amount of the monthly installments payable under the Note; and otherwise modify
this Instrument, the Note, or any other Loan Document.
(b) Any forbearance by Lender in exercising any right or remedy
under the Note, this Instrument, or any other Loan Document or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise
of any right or remedy. The acceptance by Lender of payment of all or any part
of the Indebtedness after the due date of such payment, or in an amount which
is less than the required payment, shall not be a waiver of Lender's right to
require prompt payment when due of all other payments on account of the
Indebtedness or to exercise any remedies for any failure to make prompt
payment. Enforcement by Lender of any security for the Indebtedness shall not
constitute an election by Lender of remedies so as to preclude the exercise of
any other right available to Lender. Lender's receipt of any awards or
proceeds under Sections 19 and 20 shall not operate to cure or waive any Event
of Default.
25. LOAN CHARGES. If any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower is
interpreted so that any charge provided for in any Loan Document, whether
considered separately or together with other charges levied in connection with
any other Loan Document, violates that law, and Borrower is entitled to the
benefit of that law, that charge is hereby reduced to the extent necessary to
eliminate that violation. The amounts, if any, previously paid to Lender in
excess of the permitted amounts shall be applied by Lender to reduce the
principal of the Indebtedness. For the purpose of determining whether any
applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower has been violated, all Indebtedness which constitutes
interest, as well as all other charges levied in connection
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 28
29
with the Indebtedness which constitute interest, shall be deemed to be
allocated and spread over the stated term of the Note. Unless otherwise
required by applicable law, such allocation and spreading shall be effected in
such a manner that the rate of interest so computed is uniform throughout the
stated term of the Note.
26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Instrument or to any action brought to enforce any Loan Document.
27. WAIVER OF MARSHALLING. Notwithstanding the existence of any
other security interests in the Mortgaged Property held by Lender or by any
other party, Lender shall have the right to determine the order in which any or
all of the Mortgaged Property shall be subjected to the remedies provided in
this Instrument, the Note, any other Loan Document or applicable law. Lender
shall have the right to determine the order in which any or all portions of the
Indebtedness are satisfied from the proceeds realized upon the exercise of such
remedies. Borrower and any party who now or in the future acquires a security
interest in the Mortgaged Property and who has actual or constructive notice of
this Instrument waives any and all right to require the marshalling of assets
or to require that any of the Mortgaged Property be sold in the inverse order
of alienation or that any of the Mortgaged Property be sold in parcels or as an
entirety in connection with the exercise of any of the remedies permitted by
applicable law or provided in this Instrument.
28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and
deliver, at its sole cost and expense, all further acts, deeds, conveyances,
assignments, estoppel certificates, financing statements, transfers and
assurances as Lender may require from time to time in order to better assure,
grant, and convey to Lender the rights intended to be granted, now or in the
future, to Lender under this Instrument and the Loan Documents.
29. ESTOPPEL CERTIFICATE. Within 10 days after a request from
Lender, Borrower shall deliver to Lender a written statement, signed and
acknowledged by Borrower, certifying to Lender or any person designated by
Lender, as of the date of such statement, (i) that the Loan Documents are
unmodified and in full force and effect (or, if there have been modifications,
that the Loan Documents are in full force and effect as modified and setting
forth such modifications); (ii) the unpaid principal balance of the Note; (iii)
the date to which interest under the Note has been paid; (iv) that Borrower is
not in default in paying the Indebtedness or in performing or observing any of
the covenants or agreements contained in this Instrument or any of the other
Loan Documents (or, if the Borrower is in default, describing such default in
reasonable detail); (v) whether or not there are then existing any setoffs or
defenses known to Borrower against the enforcement of any right or remedy of
Lender under the Loan Documents; and (vi) any additional facts requested by
Lender.
30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
(a) This Instrument, and any Loan Document which does not itself
expressly identify the law that is to apply to it, shall be governed by the
laws of the jurisdiction in which the Land is
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 29
30
located (the "PROPERTY JURISDICTION").
(b) Borrower agrees that any controversy arising under or in
relation to the Note, this Instrument, or any other Loan Document shall be
litigated exclusively in the Property Jurisdiction. The state and federal
courts and authorities with jurisdiction in the Property Jurisdiction shall
have exclusive jurisdiction over all controversies which shall arise under or
in relation to the Note, any security for the Indebtedness, or any other Loan
Document. Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any such litigation and waives any other venue to which it
might be entitled by virtue of domicile, habitual residence or otherwise.
31. NOTICE.
(a) All notices, demands and other communications ("NOTICE") under
or concerning this Instrument shall be in writing. Each notice shall be
addressed to the intended recipient at its address set forth in this
Instrument, and shall be deemed given on the earliest to occur of (1) the date
when the notice is received by the addressee; (2) the first Business Day after
the notice is delivered to a recognized overnight courier service, with
arrangements made for payment of charges for next Business Day delivery; or (3)
the third Business Day after the notice is deposited in the United States mail
with postage prepaid, certified mail, return receipt requested. As used in
this Section 31, the term "Business Day" means any day other than a Saturday, a
Sunday or any other day on which Lender is not open for business.
(b) Any party to this Instrument may change the address to which
notices intended for it are to be directed by means of notice given to the
other party in accordance with this Section 31. Each party agrees that it will
not refuse or reject delivery of any notice given in accordance with this
Section 31, that it will acknowledge, in writing, the receipt of any notice
upon request by the other party and that any notice rejected or refused by it
shall be deemed for purposes of this Section 31 to have been received by the
rejecting party on the date so refused or rejected, as conclusively established
by the records of the U.S. Postal Service or the courier service.
(c) Any notice under the Note and any other Loan Document which
does not specify how notices are to be given shall be given in accordance with
this Section 31.
32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial
interest in the Note (together with this Instrument and the other Loan
Documents) may be sold one or more times without prior notice to Borrower. A
sale may result in a change of the Loan Servicer. There also may be one or
more changes of the Loan Servicer unrelated to a sale of the Note. If there is
a change of the Loan Servicer, Borrower will be given notice of the change.
33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in
full, Borrower (a) shall not acquire any real or personal property other than
the Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property; (b) shall not operate any business
other than the management and operation of the Mortgaged Property; and (c)
shall not maintain its assets in a way difficult to segregate and identify.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 30
31
34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and
the rights granted by this Instrument shall inure to, the respective successors
and assigns of Lender and Borrower. However, a Transfer not permitted by
Section 21 shall be an Event of Default.
35. JOINT AND SEVERAL LIABILITY. If more than one person or
entity signs this Instrument as Borrower, the obligations of such persons and
entities shall be joint and several.
36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.
(a) The relationship between Lender and Borrower shall be solely
that of creditor and debtor, respectively, and nothing contained in this
Instrument shall create any other relationship between Lender and Borrower.
(b) No creditor of any party to this Instrument and no other
person shall be a third party beneficiary of this Instrument or any other Loan
Document. Without limiting the generality of the preceding sentence, (1) any
arrangement (a "SERVICING ARRANGEMENT") between the Lender and any Loan
Servicer for loss sharing or interim advancement of funds shall constitute a
contractual obligation of such Loan Servicer that is independent of the
obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall
not be a third party beneficiary of any Servicing Arrangement, and (3) no
payment by the Loan Servicer under any Servicing Arrangement will reduce the
amount of the Indebtedness.
37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability
of any provision of this Instrument shall not affect the validity or
enforceability of any other provision, and all other provisions shall remain in
full force and effect. This Instrument contains the entire agreement among the
parties as to the rights granted and the obligations assumed in this
Instrument. This Instrument may not be amended or modified except by a writing
signed by the party against whom enforcement is sought.
38. CONSTRUCTION. The captions and headings of the sections of
this Instrument are for convenience only and shall be disregarded in construing
this Instrument. Any reference in this Instrument to an "Exhibit" or a
"Section" shall, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Instrument or to a
Section of this Instrument. All Exhibits attached to or referred to in this
Instrument are incorporated by reference into this Instrument. Any reference
in this Instrument to a statute or regulation shall be construed as referring
to that statute or regulation as amended from time to time. Use of the
singular in this Agreement includes the plural and use of the plural includes
the singular. As used in this Instrument, the term "including" means
"including, but not limited to."
39. LOAN SERVICING. All actions regarding the servicing of the
loan evidenced by the Note, including the collection of payments, the giving
and receipt of notice, inspections of the Property, inspections of books and
records, and the granting of consents and approvals, may be taken by the Loan
Servicer unless Borrower receives notice to the contrary. If Borrower receives
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 31
32
conflicting notices regarding the identity of the Loan Servicer or any other
subject, any such notice from Lender shall govern.
40. DISCLOSURE OF INFORMATION. Lender may furnish information
regarding Borrower or the Mortgaged Property to third parties with an existing
or prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including but not limited to
trustees, master servicers, special servicers, rating agencies, and
organizations maintaining databases on the underwriting and performance of
multifamily mortgage loans. Borrower irrevocably waives any and all rights it
may have under applicable law to prohibit such disclosure, including but not
limited to any right of privacy.
41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the
application for the loan submitted to Lender (the "LOAN APPLICATION") and in
all financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application are complete and accurate in
all material respects. There has been no material adverse change in any fact
or circumstance that would make any such information incomplete or inaccurate.
42. SUBROGATION. If, and to the extent that, the proceeds of the
loan evidenced by the Note are used to pay, satisfy or discharge any obligation
of Borrower for the payment of money that is secured by a pre-existing
mortgage, deed of trust or other lien encumbering the Mortgaged Property (a
"PRIOR LIEN"), such loan proceeds shall be deemed to have been advanced by
Lender at Borrower's request, and Lender shall automatically, and without
further action on its part, be subrogated to the rights, including lien
priority, of the owner or holder of the obligation secured by the Prior Lien,
whether or not the Prior Lien is released.
43. ACCELERATION; REMEDIES. At any time during the existence of
an Event of Default, Lender, at Lender's option, may declare the Indebtedness
to be immediately due and payable without further demand and may foreclose this
Instrument by judicial proceedings and may invoke any other remedies permitted
by Pennsylvania law or provided in this Instrument or in any other Loan
Document. Lender shall be entitled to collect all costs and expenses incurred
in pursuing such remedies, including attorneys' fees or 5% of the unpaid
balance of the sums secured by this Instrument, but not less than $5,000.00,
and costs of documentary evidence, abstracts and title reports.
44. RELEASE. Upon payment of the Indebtedness, this Instrument
shall become null and void and Lender shall discharge this Instrument.
Borrower shall pay Lender's reasonable costs incurred in discharging this
Instrument.
45. PURCHASE MONEY MORTGAGE. If the proceeds of the Indebtedness
are used by Borrower to pay all or a part of the purchase price of the
Mortgaged Property, this Instrument is declared to be a purchase money
mortgage.
46. CONFESSION OF JUDGMENT FOR POSSESSION. During the existence
of
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 32
33
an Event of Default, Lender may enter into possession of the Mortgaged
Property, with or without legal action, and by force if necessary; collect all
Rent (which term shall also include sums payable for use and occupation) and,
after deducting all costs of collection and administration expenses, apply the
Rent in accordance with Section 9; and for that purpose Borrower hereby
confirms the assignment to Lender of all Rent due and to become due under all
Leases created after the date of this Instrument, as well as all rights and
remedies provided in such lease or leases or at law or in equity for the
collection of Rent. The taking of possession and collection of Rent by Lender
shall not be construed to be an affirmation of any Lease. FOR THE PURPOSE OF
OBTAINING POSSESSION OF THE MORTGAGED PROPERTY DURING THE EXISTENCE OF AN EVENT
OF DEFAULT, BORROWER AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF
RECORD IN THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR
BORROWER AND ALL PERSONS CLAIMING UNDER OR THROUGH BORROWER, TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST BORROWER, AND AGAINST ALL PERSONS CLAIMING UNDER OR
THROUGH BORROWER, IN AN ACTION IN EJECTMENT FOR POSSESSION OF THE MORTGAGED
PROPERTY, IN FAVOR OF LENDER, FOR WHICH THIS INSTRUMENT, OR A COPY VERIFIED BY
AFFIDAVIT, SHALL BE A SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION
MAY IMMEDIATELY ISSUE FOR POSSESSION OF THE MORTGAGED PROPERTY, WITHOUT ANY
PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR
ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR
POSSESSION OF THE MORTGAGED PROPERTY SHALL REMAIN IN OR BE RESTORED TO
BORROWER, LENDER SHALL HAVE THE RIGHT FOR THE SAME DEFAULT OR ANY SUBSEQUENT
DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS OF EJECTMENT TO RECOVER POSSESSION
OF THE MORTGAGED PROPERTY. LENDER MAY CONFESS JUDGMENT IN AN ACTION IN
EJECTMENT BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS
INSTRUMENT OR TO ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT IN THE ACTION OF
EJECTMENT OR ON THE NOTE, OR AFTER A SHERIFF'S SALE OR JUDICIAL SALE OR OTHER
FORECLOSURE SALE OF THE MORTGAGED PROPERTY IN WHICH LENDER IS THE SUCCESSFUL
BIDDER. THIS AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR CONFESSION OF
JUDGMENT IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS
INSTRUMENT AND THE NOTE, AND SHALL SURVIVE ANY EXECUTION SALE TO LENDER.
47. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS
BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT
EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COMPETENT LEGAL COUNSEL.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 33
34
ATTACHED EXHIBITS. The following Exhibits are attached to this Instrument:
|X| Exhibit A Description of the Land (required).
-
|X| Exhibit B Modifications to Instrument
-
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 34
35
IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument
or has caused this Instrument to be signed and delivered by its duly authorized
representative.
WITNESS: BORROWER:
SUNRISE HAVERFORD ASSISTED LIVING, L.L.C., a
Pennsylvania limited liability company
By: SUNRISE ASSISTED LIVING INVESTMENTS,
INC., a Virginia corporation,
Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President
Print Name
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
The address of Lender is:
650 ▇▇▇▇▇▇▇ Road
P.O. Box 1015
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
On behalf of Lender
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 35
36
CITY OF _Washington_____________________ :
: ss:
DISTRICT OF _Columbia___________________ :
ON THIS _20th__ day of May, 1999, before me, the undersigned officer,
personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇, who acknowledged himself to be the Vice
President of SUNRISE ASSISTED LIVING INVESTMENTS, INC., a Virginia
corporation, managing member of SUNRISE HAVERFORD ASSISTED LIVING, L.L.C., a
Pennsylvania limited liability company, and that he as such Vice President,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of the corporation as managing member of
the limited liability company, by himself as such officer.
__/s/ ▇▇▇▇ ▇. Swanson_________________________________________
Notary Public
My Commission Expires: 11/30/2003
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) - PENNSYLVANIA PAGE 36
37
EXHIBIT A
[DESCRIPTION OF THE LAND]
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE A-1
38
EXHIBIT B
MODIFICATIONS TO INSTRUMENT
The following modifications are made to the text of the Instrument that precedes
this Exhibit:
1. Item (15) in the definition of "MORTGAGED PROPERTY" in this Instrument is
deleted in its entirety and replaced with the following new Item (15) in
the definition of "MORTGAGED PROPERTY":
all names under or by which any of the above Mortgaged Property may be
operated or known, and all trademarks, trade names, and goodwill
relating to any of the Mortgaged Property; provided, however, that the
name "Sunrise" and/or associated trademark rights are not assigned to
Lender, subject to Section 50 hereof.
2. Subsection 4(f) of the Instrument is deleted in its entirety and replaced
with the following new Subsection 4(f):
(f) Borrower shall not lease any portion of the Mortgaged Property
for non-residential use for a rental of more than $15,000 per
annum (a "Material Lease") except with the prior written consent
of Lender and Lender's prior written approval of the Lease
agreement. Borrower shall not modify the terms of, or extend or
terminate, any Material Lease for non-residential use (including
any Material Lease in existence on the date of this Instrument)
without the prior written consent of Lender. Borrower shall,
without request by Lender, deliver an executed copy of each
non-residential Lease to Lender promptly after such Lease is
signed. All non-residential Leases, including renewals or
extensions of existing Leases, shall specifically provide that
(1) such Leases are subordinate to the lien of this Instrument;
(2) the tenant shall attorn to Lender and any purchaser at a
foreclosure sale, such attornment to be self-executing and
effective upon acquisition of title to the Mortgaged
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-1
39
Property by any purchaser at a foreclosure sale or by Lender in
any manner; (3) the tenant agrees to execute such further
evidences of attornment as Lender or any purchaser at a
foreclosure sale may from time to time request; (4) the Lease
shall not be terminated by foreclosure or any other transfer of
the Mortgaged Property; (5) after a foreclosure sale of the
Mortgaged Property, Lender or any other purchaser at such
foreclosure sale may, at Lender's or such purchaser's option,
accept or terminate such Lease; and (6) the tenant shall, upon
receipt after the occurrence of an Event of Default of a written
request from Lender, pay all Rents payable under the Lease to
Lender.
3. Subsection 4(g) of the Instrument is deleted in its entirety and replaced
with the following new Subsection 4(g):
(g) Borrower shall not receive or accept Rent under any Lease
(whether residential or non-residential) for more than two months
in advance, except for Community Fees pursuant to the Resident
Agreement for units in the Improvements approved by Lender.
4. Section 7 of the Instrument is supplemented and modified by adding the
following new Subsection (f):
(f) Notwithstanding the provisions of Subparagraph 7(a), the Lender
will not require Borrower to deposit with Lender amounts sufficient to
accumulate with Lender the entire sum required to pay the hazard or other
insurance premiums. At least annually, the Borrower must provide Lender
with proof of payment of all such Impositions for which Lender is not
collecting Imposition Deposits. In the event that Borrower does not timely
pay any of the Impositions, or fails to provide Lender with proof of such
payment, or at the any other time in Lender's discretion, Lender may
require Borrower to deposit with Lender the Imposition Deposits as provided
in Subparagraph 7(a).
5. Subsection 18(b) of the Instrument is deleted in its entirety and replaced
with the following new Section 18(b):
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-2
40
(b) Prohibited Activities and Conditions shall not include the safe
and lawful use and storage of quantities of (1) pre-packaged
supplies, cleaning materials and petroleum products customarily
used in the operation and maintenance of comparable multifamily
properties, (2) cleaning materials, personal grooming items and
other items sold in pre-packaged containers for consumer use and
used by tenants and occupants of residential dwelling units in
the Mortgaged Property; (3) petroleum products used in the
operation and maintenance of motor vehicles from time to time
located on the Mortgaged Property's parking areas, and (4)
medical products or devices or medical waste, so long as all of
the foregoing are used, stored, handled, transported and disposed
of in compliance with Hazardous Materials Laws.
6. Section 18(n) of the Instrument is amended by the addition of the following
language at the end of such Subsection:
Borrower shall not be obligated to indemnify Lender for any matter (i)
first occurring after Lender acquires the Mortgaged Property and (ii)
caused by the acts or omissions of the Lender.
7. Section 19(g) of the Instrument is amended by the addition of the following
language at the end of such Subsection:
Lender shall make such proceeds or awards available to Borrower for
repair and reconstruction of the Mortgaged Property if such proceeds
or awards are less than or equal to one hundred thousand dollars
($100,000.00) on a per occurrence basis unless an Event of Default has
occurred and is continuing.
8. Section 21(b) of the Instrument is supplemented and modified by adding the
following new Subsection (7):
(7) A Transfer of membership interests in
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-3
41
the limited liability company constituting Borrower to an entity
in which Sunrise Assisted Living, Inc. holds an ownership
interest equal to or greater than eighty percent (80%), provided
the terms and conditions set forth in (A) - (C) have been
satisfied:
(A) Borrower must provide Lender with prior written notice of
the proposed Transfer.
(B) At the time of the proposed Transfer, there must not exist
any Event of Default.
(C) Lender shall not be entitled to collect a transfer fee,
review fee or expenses as a result of these transfers.
9. Section 21(b) of the Instrument is supplemented and modified by adding the
following new Subsection (8):
(8) The Transfer of shares in Sunrise Assisted Living, Inc., a
Delaware corporation, on any publicly traded exchange.
10. Section 21 of the Instrument is supplemented and modified by adding the
following new Subsection (d):
(d) Borrower shall be permitted to substitute collateral property
(the "Substituted Property") for the Mortgaged Property (the
"Substitution") no more than one time in every twelve month
period during the term of the loan evidenced by the Note (the
"Loan") so long as:
(1) At the time of Substitution, no Event of Default (which
remains uncured within any applicable cure period) shall
exist under the Loan Documents;
(2) Not less than sixty (60) days prior to the requested
Substitution, Borrower shall
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-4
42
deliver to Lender written notice of the requested
Substitution, which shall include a detailed description of
the Substituted Property and a non-refundable application
fee in an amount equal to ten (10) basis points multiplied
by the unpaid principal balance of the Loan;
(3) The Substituted Property shall have been constructed and
completed no more than two years prior to the construction
and completion of the Mortgaged Property;
(4) The Substituted Property shall be one or two independent or
assisted living communities which together are comparable in
size and configuration to the Mortgaged Property;
(5) The loan to value ratio with respect to the Substituted
Property at the time of the proposed Substitution is not
greater than the lesser of (A) the loan to value ratio of
the Mortgaged Property which exists as of the date hereof,
or (B) the then current loan to value ratio of the Mortgaged
Property at the time of any such Substitution based on an
MAI appraisal (prepared by an appraiser acceptable to Lender
and paid for by Borrower) at the time of any such
Substitution. (As used herein, "loan to value ratio" means
the ratio of (1) the outstanding principal balance of the
Loan to (2) the value of the Substituted Property as
determined by Lender in its discretion, expressed as a
percentage);
(6) Lender shall have received an environmental report on the
Substituted Property showing that no Phase II environmental
report is required;
(7) Lender shall have received an engineering report on the
Substituted Property showing that there are at least thirty
(30) years of useful life remaining with respect to the
Substituted Property;
(8) Lender shall have received a new currently dated mortgagee's
title insurance policy in the form and containing the
exceptions and endorsements acceptable to Lender according
to its standards for title insurance policies in place at
the time of the Substitution, insuring the first lien
mortgage in favor of Lender and/or ▇▇▇▇▇▇▇ Mac encumbering
the Substituted Property;
(9) Lender shall have received a currently dated survey of the
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-5
43
Substituted Property, acceptable to Lender in accordance
with its standards and requirements for surveys in place at
the time of the Substitution;
(10) The physical condition, location and other aspects of the
Substituted Property, including, but not limited to, the
market for the Substituted Property, shall be substantially
comparable to the Mortgaged Property as determined by Lender
in its commercially reasonable discretion;
(11) If the Substitution is approved, (A) Borrower shall have
executed and delivered to Lender for recordation an
amendment to the Mortgage in form and substance acceptable
to Lender in its discretion, substituting the Substituted
Property for the Mortgaged Property; and (B) Borrower shall
have executed and delivered such additional documentation,
including without limitation new Uniform Commercial Code
Financing Statements, as Lender may reasonably require to
grant Lender a perfected first lien and security interest in
the Substituted Property and to otherwise implement the
Substitution in accordance with the terms hereof;
(12) The appraised value of the Substituted Property shall be
equal to or greater than the greater of (A) the appraised
value of the Mortgaged Property which exists as of the date
of the closing of the Loan; or (B) the appraised value of
the Mortgaged Property at the time of the Substitution based
on the MAI appraisal described in Subsection 21(d)(5) above;
(13) The Debt Service Coverage Ratio (defined below), as
determined by Lender, for the Substituted Property shall not
be less than the greater of (A) the Debt Service Coverage
Ratio for the Mortgaged Property which exists as of the date
hereof or (B) the Debt Service Coverage for the Mortgaged
Property at the time of Substitution; and
(14) Lender shall have received the amount of Lender's actual
out-of-pocket costs (including, without limitation,
commercially reasonable attorneys' fees and actual
disbursements and the costs of engineering reports,
appraisals and environmental reports) incurred in reviewing
the Substitution request and implementing the Substitution.
In the event of a substitution of collateral pursuant to the
foregoing, no transfer fee shall be payable. Lender shall be
entitled to a review fee of
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-6
44
$2,000.00, together with reimbursement of its reasonable costs
and expenses (including actual attorneys' fees) in connection
with such substitution of collateral. As used herein, "Debt
Service Coverage Ratio" means a ratio in which the first number
is the sum of net pre-tax income of the Borrower from normal
operations of the Mortgaged Property or the Substitute Collateral
(as the case may be) as set forth in the financial statements
provided to Lender (without deduction for actual management fees
or management expense incurred or paid in connection with the
operation of the Mortgaged Property), calculated based upon the
preceding twelve (12) months, plus interest expense or lease
expense to the extent deducted in determining net income and
non-cash expenses or allowances for depreciation and amortization
of the Mortgaged Property or the Substitute Collateral (as the
case may be) for said period, less an assumed 5% management fee
for said period, and the second number is the sum of the
principal amounts due (even if not paid) on the Loan (but which
shall not include that portion associated with the balloon
payment of the Loan) for the applicable period plus the interest
amount due on the Loan for the applicable period. In calculating
"net income", any extraordinary income and extraordinary expense
shall be excluded.
11. Section 33 of the Instrument is deleted in its entirety and replaced with
the following new Section 33:
33. SINGLE ASSET BORROWER AND LIMITATION ON UNSECURED INDEBTEDNESS.
Until the Indebtedness is paid in full,
Borrower (a) shall not acquire any real or personal property other than the
Mortgaged Property and personal property related to the operation and
maintenance of the Mortgaged Property; (b) shall not operate any business other
than the management and operation of the Mortgaged Property; and (c) shall not
maintain its assets in a way difficult to segregate and identify. Sunrise
Assisted Living, Inc., a Delaware corporation ("Guarantor") or an affiliate of
the Guarantor may provide unsecured financing to Borrower. The Borrower may
obtain purchase money financing in an amount not to exceed $75,000 for the
purpose of purchasing equipment for the Real Property and a vehicle to be used
solely in connection with the operation of the Mortgaged Property. Such
financing shall not result in any lien or encumbrance on the Mortgaged Property.
12. Section 14(b) of the Instrument is deleted in its entirety
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-7
45
and replaced with the following new Subsection 14(b):
(b) Throughout the term of the Loan, Borrower shall provide
Lender or cause to be provided to Lender, the following
financial statements and information on a continuing basis
during the term of the Loan:
(1) Within one hundred twenty (120) days after the end of
the fiscal years of the Borrower, Sunrise Assisted
Living, Inc., a Delaware corporation ("Guarantor") and
Sunrise Assisted Living Management, Inc., a Virginia
corporation ("Manager"), unaudited (internally prepared
in accordance with GAAP) financial statements of
Borrower and Guarantor and financial statements of
Manager reviewed by a nationally recognized accounting
firm or independent certified public accountant
acceptable to Lender. All such statements shall be
prepared in accordance with GAAP. Borrower's,
Guarantor's and Manager's financial statements
hereunder shall include a balance sheet and a statement
of income and expenses for the year then ended,
certified by an officer of Borrower, Guarantor and
Manager, respectively, to be true and correct. As used
herein, the term "GAAP" means generally accepted
accounting principles, consistently applied, as
promulgated by the American Institute of Certified
Public Accountants.
(2) Within forty-five (45) days of the end of each calendar
quarter (other than fiscal year end), unaudited,
internally prepared financial statements of Guarantor
and of Manager, respectively, prepared in accordance
with GAAP and including a balance sheet and statement
of income and expenses for the quarter then ended,
certified by an officer of Guarantor and Manager,
respectively, to be true and correct.
(3) Within forty-five (45) days of the end of each calendar
quarter, quarterly financial operating statements of
the operations of the Mortgaged Property, prepared in
accordance with GAAP, which such statements shall
include a balance sheet and statement of income and
expenses for the quarter then ended, certified by an
officer of the Borrower or Manager to be true and
correct.
(4) Within five (5) days of receipt, any and all written
notices
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-8
46
from any and all licensing and/or certifying agencies
that the applicable Mortgaged Property license and/or
permits are being downgraded to a substandard category,
revoked, or suspended or that any such action is
pending.
(5) Within forty-five (45) days of the end of each calendar
quarter, a certificate of an officer of the Borrower,
Guarantor and Manager, respectively, confirming
compliance with the covenants and requirements set
forth above.
13. Section 14(c) of the Instrument is deleted in its entirety and replaced
with the following new Subsection 14(c):
(c) The Lender reserves the right to require that the annual
financial statements of the Borrower, Guarantor and Manager
be audited and prepared by a nationally recognized
accounting firm or independent certified public accountant
acceptable to Lender if (i) an Event of Default exists under
the Loan Documents or (ii) if Lender has reasonable grounds
to believe that the unaudited financial statements do not
accurately represent the financial condition of the
Borrower, Guarantor or Manager, as the case may be.
14. Section 14(d) of the Instrument is deleted in its entirety and replaced
with the following new Subsection 14(d):
(d) In the event Lender in good faith believes that there has
been a material adverse change in Borrower, Guarantor or
Manager, the Lender shall have the right to require such
other financial information of Borrower, Guarantor, Manager
and/or the Mortgaged Property, as the case may be, in such
form and at such other times (including monthly or more
frequently) as Lender shall deem necessary, and Borrower
agrees promptly to provide or to cause to be provided, such
information to Lender. The content of such other financial
information shall not in any case be a cause to declare an
Event of Default under the Loan Documents in the absence of
any other Event of Default under the Loan Documents. Lender
may from time to time reasonably request such further
financial information as Lender deems advisable for
administration of the Loan.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-9
47
15. Section 14(e) of the Instrument is deleted in its entirety and replaced
with the following new Subsection 14(e):
(e) Borrower shall furnish, together with the foregoing
financial statements and at any other time upon Lender's
request, (i) a current rent and/or resident contract roll
for the Mortgaged Property, and (ii) a monthly property
management report.
16. Section 14(f) of the Instrument is deleted in its entirety and replaced
with the following new Subsection 14(f):
(f) In addition, upon Lender's request, Lender shall receive
written authorization as necessary to obtain a credit report
for each principal whose ownership interest in Borrower is
10% or more. At Lender's request, such Borrower's principal
shall submit to Lender such financial statements and credit
report authorizations as Lender may reasonably require.
17. Section 14 of the Instrument is supplemented and modified by adding the
following new Subsection (g):
(g) Borrower shall keep full and accurate books and records and
permit Lender at all reasonable times and with reasonable
notice to inspect such books and records for the purpose of
determining the correctness of any statements delivered to
Lender.
18. Section 40 of the Instrument is deleted in its entirety and replaced with
the following new Subsection 40:
40. DISCLOSURE OF INFORMATION. Lender may furnish information regarding
Borrower or the Mortgaged Property to third parties with an existing or
prospective interest in the servicing, enforcement, evaluation, performance,
purchase or securitization of the Indebtedness, including but not limited to
trustees, master servicers, special servicers, rating agencies, and
organizations maintaining databases on the underwriting and performance of
multifamily mortgage loans. Borrower irrevocably waives any and all rights it
may have under applicable law to prohibit such disclosure, including but not
limited to any right of privacy; provided, however, that Lender and any such
third parties shall continue to treat such information as confidential and shall
not make such information public or unnecessarily disseminate such
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-10
48
information to parties without an existing or prospective interest in the
Indebtedness.
19. Section 43 of the Instrument is deleted in its entirety and replaced with
the following new Subsection 43:
43. ACCELERATION; REMEDIES. At any time during the existence of an Event
of Default, Lender, at Lender's option, may declare the Indebtedness to be
immediately due and payable without further demand and may foreclose this
Instrument by judicial proceedings and may invoke any other remedies permitted
by Pennsylvania law or provided in this Instrument or in any other Loan
Document. Lender shall be entitled to collect all costs and expenses incurred in
pursuing such remedies, including actual attorneys' fees computed on an hourly
basis, and costs of documentary evidence, abstracts and title reports.
20. Section 44 of the Instrument is deleted in its entirety and replaced with
the following new Subsection 44:
44. TERMINATION AND RELEASE. If Borrower shall promptly pay or cause to be
paid to Lender the Indebtedness, and shall perform or cause to be performed all
the other terms, conditions, agreements and provisions contained in this
Instrument, or any and all agreements entered into with respect to any
additional credits or financing, all without fraud or delay or deduction or
abatement of anything or for any reason, then this Instrument and the estate
hereby granted shall cease, terminate and become void. Upon such termination,
Lender shall cancel this Instrument and Borrower shall pay Lender's reasonable
costs incurred in canceling this Instrument.
21. A new Section 48 to the Instrument is added as follows:
48. SENIOR HOUSING.
(a) The Mortgaged Property will be used as an independent and assisted
living facility (the "Intended Use").
(b) ADDITIONAL DEFINITIONS.
(1) The term "Mortgaged Property" shall also include, where
applicable, payments received from occupants, payment of
second party charges added to base rental income, base
and/or additional meal sales, payments received from
commercial operations located on the Mortgaged Property or
provided as a service to the occupants of the Mortgaged
Property, rental from guest suites, seasonal lease charges,
rental payment under furniture leases, income from laundry
service, and fees from any and all other services provided
to third parties in
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-11
49
connection with the Mortgaged Property, together with the
following items: licenses and contracts, all rights to
payments from Medicare or Medicaid programs or similar
federal, state or local programs or agencies and rights to
payment from residents or private insurers, arising from the
operation of the Mortgaged Property, whether as a community
residential, independent living, adult congregate care,
assisted living or skilled nursing care facility, all
personal property acquired by Borrower after the date of
this Instrument in connection with the ownership and
operation of the Mortgaged Property as such a facility,
utility deposits, unearned premiums, accrued, accruing or to
accrue under insurance policies obtained by the Borrower now
or in the future and all proceeds of any conversion of the
Mortgaged Property or any part of it including replacements
and additions thereto.
(2) The term "Lease" shall also include any occupancy agreements
pertaining to occupants of the Mortgaged Property, including
both residential and commercial agreements and patient
admission or resident care agreements.
(3) The term "Hazardous Materials" shall also include any
medical products or devices, including, those materials
defined as "medical waste" or "biological waste" under
relevant statutes or regulations pertaining to hazardous
materials law.
(c) In addition to those representations and warranties contained in the
Instrument, Borrower hereby represents and warrants to Lender as
follows:
(1) Borrower has obtained (in its own name and/or in the
relevant operator's or manager's name, if any, and in any
event in the name of the person(s) as required under all
applicable legal requirements) all licenses, permits,
certificates, approvals or authorizations necessary to use
and operate the Mortgaged Property for its Intended Use
(collectively, the "Licenses"), and all such Licenses are in
full force and effect. The use being made of the Mortgaged
Property is in conformity in all respects with the
certificate of occupancy and/or Licenses for such property
and any other restrictions, covenants or conditions
affecting such property. The Mortgaged Property contains all
equipment necessary to use and operate such property for its
Intended Use.
(2) Borrower and the Mortgaged Property (and its operation) are
in compliance in all material respects with the applicable
provisions of all laws, statutes, regulations, ordinances,
orders, standards,
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-12
50
restrictions and rules of any federal, state or local
government or quasi-governmental body, agency, board or
authority having jurisdiction over the operation of the
Mortgaged Property, including: (A) health care and fire
safety codes; (B) laws regulating the handling and disposal
of medical or biological waste; (C) the applicable
provisions of all laws, rules, regulations and published
interpretations thereof to which the Borrower or the
Mortgaged Property is subject by virtue of its Intended Use;
and (D) all criteria established to classify the Mortgaged
Property as housing for older persons under Fair Housing
Amendments Act of 1988.
(3) Borrower does not currently participate in any Medicaid or
Medicare programs or any other third party payors' programs,
or other similar provider payment programs in connection
with the operation of the Mortgaged Property.
(4) Borrower and the Mortgaged Property are not subject to any
proceeding, suit or investigation by any federal, state or
local government or quasi-government body, or agency or any
other administrative or investigative body, and Borrower has
received no notice from any such agency which may result in
the imposition of a fine, or alternative, interim or final
sanction, would have a material adverse effect on Borrower
or the operation of the Mortgaged Property, would result in
the appointment of a receiver or manager, would affect
Borrower's ability to accept and/or retain residents, or
would result in the revocation, transfer, surrender,
suspension or other impairment of any License for the
Mortgaged Property.
(5) Neither the execution and delivery of the Note, the
Instrument or any other loan documents, Borrower's
performance thereunder, the recordation of the Instrument,
nor the exercise of any remedies by Lender, will adversely
affect the Licenses.
(6) Borrower is not a participant in any federal program whereby
any federal, state or local government or quasi-governmental
body or agency may have the right to recover funds by reason
of the advance of federal funds. Borrower has received no
notice of, and is not aware of, any violation of applicable
antitrust laws.
(7) In the event any existing management agreement is terminated
or Lender acquires the Mortgaged Property through
foreclosure or otherwise, neither Borrower, Lender, any
subsequent manager, nor any subsequent purchaser (through
foreclosure or otherwise) must obtain a certificate of need
from any applicable state health care
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-13
51
regulatory authority or agency (other than giving such
notice required under the applicable state law or
regulation) prior to applying for any applicable License,
provided that no service or the unit compliment is changed.
(d) Borrower shall furnish to Lender, within ten (10) days after receipt
by Borrower, any operator or any manager, any and all notices from any
licensing and/or certifying agency that any License is being
downgraded to a substandard category, revoked, or suspended, or that
action is pending or being considered.
(e) Borrower shall furnish to Lender, within ten (10) days after receipt,
a copy of any 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, shall furnish to Lender a
copy of the plan of correction. Borrower shall correct any deficiency,
the curing of which is a condition of continued licensure, by the date
required for cure by such agency.
(f) Upon Lender's request, Borrower shall furnish to Lender true and
correct copies of all residency and resident care agreements.
(g) Borrower shall operate in a manner such that all applicable Licenses
shall remain in full force and effect.
(h) Without the prior written consent of Lender, which may be granted or
withheld in its discretion, Borrower shall not, and shall not permit
any operator or manager at the Mortgaged Property to, participate in
Medicare and Medicaid, or any provider agreement under Medicare and
Medicaid, or accept any residents whose ability to reside in the
Mortgaged Property requires that Borrower, the Mortgaged Property or
any operator or manager participate in Medicare, Medicaid or any
similar provider program.
(i) Borrower shall not, and shall not allow any operator or manager to:
(A) transfer any License to any location other than the Mortgaged
Property, (B) pledge any License as collateral security for any other
loan or indebtedness; (C) rescind, withdraw, modify, or otherwise
alter any License if doing so would have a material affect on
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-14
52
the Mortgaged Property; or (D) pledge any receivables as collateral
security for any other loan or indebtedness.
(j) The Mortgaged Property constitutes but one business enterprise and
shall be deemed to be "single asset real estate" for purposes of the
provisions of Section 362 of the U.S. Bankruptcy Code, 11 U.S.C.
Section 101 et seq. (the "Code").
22. A new Section 49 to the Instrument is added as follows:
49. ADDITIONAL DEFAULTS. The following shall also constitute an Event of
Default under the Instrument:
(a) Borrower's failure within the time deadlines set by any federal, state
or local licensing or similar agency, to correct any deficiency that
may cause any action by such agency with respect to the Mortgaged
Property that may have a material adverse affect on the income or
operation of the Mortgaged Property or on Borrower's interest in the
Mortgaged Property, including, a termination, revocation or suspension
of any applicable License, or a ban on new resident admissions.
(b) Borrower's failure to do any of the following without the prior
written consent of Lender, to be granted or withheld in its
discretion: (1) operate the Mortgaged Property as its Intended Use;
(2) provide facilities and services normally associated with its
Intended Use; (3) provide or contract for skilled nursing care for any
of the units other than that level of care which Borrower would be
permitted to provide or contract for at the Mortgaged Property given
its Intended Use, state or local statutes, regulations, orders,
standards, rules or restrictions.
(c) (1) non residential space in the Mortgaged Property exceeds ten
percent (10%) of the net rental area; (2) the Mortgaged Property is no
longer classified as housing for older persons pursuant to the Fair
Housing Amendments Act of 1988; (3) Borrower participates, or permits
the manager, operator or any resident at the Mortgaged Property to
participate in Medicare, Medicaid, or any similar or successor payment
provider plan; or (4) skilled nursing care (A) is provided in a number
of units exceeding twenty-five percent (25%) of the total number
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-15
53
of units at the Mortgaged Property or (B) accounts for more than
twenty-five percent (25%) of the total annual gross income of the
Mortgaged Property.
(d) If Borrower fails to spend $750.00 per unit each three (3) year period
(commencing with the closing of the Loan) during the term of the Loan
for Capital Replacement (as hereinafter defined) or provide proof
thereof to Lender by the end of such three (3) year period, such
failure shall be an Event of Default under the Loan Documents.
"Capital Replacement" shall mean the replacement of furniture, carpet,
vinyl flooring, window treatments, roofs, furnace/boilers, air
conditioners, ovens/ranges, refrigerators, dishwashers, water heaters
and garbage disposals.
23. A new Section 50 to the Instrument is added as follows:
50. LENDER'S RIGHT TO USE TRADE NAME. Notwithstanding anything contained
herein, Borrower agrees that Lender shall have an irrevocable license,
coupled with an interest and for which consideration has been paid and
received, to use the name "Sunrise" and/or associated trademark rights
and trade names relating to any of the Mortgaged Property for a period
not to exceed 120 days after the date Lender acquires the Mortgaged
Property by foreclosure or deed-in-lieu of foreclosure.
--------------------------------------------------------------------------------
SECURITY INSTRUMENT (▇▇▇▇▇▇▇ MAC) -- PENNSYLVANIA PAGE B-16