THIS DOCUMENT PREPARED UNDER THE SUPERVISION OF A MASSACHUSETTS LICENSED
ATTORNEY AND AFTER RECORDING
SHOULD BE RETURNED TO:
_______________________
Goldberg, Kohn, Bell, Black, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SPACE ABOVE THIS LINE FOR RECORDER'S USE
LOAN NO. 07-0004017
REAL PROPERTY MORTGAGE WITH POWER OF SALE
AND SECURITY AGREEMENT
[MASSACHUSETTS MORTGAGE]
This REAL PROPERTY MORTGAGE WITH POWER OF SALE AND SECURITY AGREEMENT (this
"MORTGAGE") is made as of this 21st day of August, 2002, between EMERITUS
PROPERTIES XIV, LLC, a Washington limited liability company ("BORROWER"), whose
address is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇
HEALTHCARE FINANCE, INC., a Delaware corporation ("LENDER"), whose address is ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS
A. Lender has agreed, subject to the terms and conditions of that certain
Loan Agreement of even date herewith, executed by and between Borrower and
Lender (the "LOAN AGREEMENT"), to make a loan (the "LOAN") to Borrower. The
Loan is evidenced by that certain Promissory Note A of even date herewith in the
original principal amount of Five Million Three Hundred Ninety-Five
Thousand and No/100 Dollars ($5,395,000.00) and that certain Subordinated
Promissory Note B of even date herewith in the original principal amount of Two
Million Nine Hundred Five Thousand Five Hundred and No/100 Dollars
($2,905,000.00) (which notes, together with all notes issued in substitution or
exchange therefor and all amendments thereto, is hereinafter referred to as the
"NOTE"), providing for monthly payments as set forth in the Note, with the
balance thereof, due and payable on August 31, 2005 (said date, any later date
to which the maturity date may be extended in accordance with the Note, or any
earlier date on which the entire unpaid principal amount shall be paid or
required to be paid in full, whether by prepayment, acceleration or otherwise is
hereinafter called the "MATURITY DATE"). The terms and provisions of the Loan
Agreement and Note are hereby incorporated by reference in this Mortgage.
B. Lender wishes to secure: (i) the payment of the Note, together with all
interest, premiums, the "EXIT FEE" (as defined in the Loan Agreement) and other
amounts, if any, due in accordance with the terms of the Note, as well as the
payment of any additional indebtedness accruing to Lender on account of any
future payments, advances or expenditures made by Lender pursuant to the Note,
the Loan Agreement or this Mortgage or any of the other Loan Documents
(hereinafter defined); (ii) the performance of each and every covenant,
condition, and agreement contained in the Note, the Loan Agreement, this
Mortgage, that certain Hazardous Materials Indemnity Agreement of even date
herewith made by Borrower and Guarantor (as defined in the Loan Agreement) in
favor of Lender and any other documents evidencing or securing the Loan or
executed in connection therewith (such documents together with any
modifications, renewals, extensions or replacements thereof are collectively
referred to as the "LOAN DOCUMENTS"); (iii) the payment of all amounts due under
and the performance of each and every covenant, condition and agreement
contained in the notes, documents, instruments, agreements, guarantees or
indemnities previously, now or hereafter delivered by ESC-Puyallup, LLC,
ESC-Port St. Richie, LLC or ESC-Bozeman, LLC (the "ESC BORROWERS"), Guarantor,
or any Affiliate (as defined in the Loan Agreement) of an ESC Borrower or
Guarantor, to Lender which evidences, pertains to or secures ESC Borrowers' or
Guarantor's, or an Affiliate of ESC Borrower or Guarantor's, indebtedness of any
kind or nature to Lender in connection with Lender's loan to ESC Borrowers,
whether existing or subsequently accruing or arising, together with all
amendments and extensions thereof (collectively, the "OTHER LOAN INSTRUMENTS"),
including without limitation, the documents listed on Exhibit C attached hereto;
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and (iv) the payment of any and all other debts, claims, obligations, demands,
monies, liabilities and indebtedness of any kind or nature now or hereafter
owing, arising, due or payable from any or all of Borrower, Guarantor to Lender
in connection with the Loan. All payment obligations of Borrower, Guarantor,
ESC Borrowers or their respective Affiliates to Lender under the Loan, any of
the Loan Documents or any of the Other Loan Instruments, are hereinafter
sometimes collectively referred to as the "INDEBTEDNESS," and all other
obligations of Borrower, Guarantor, ESC Borrowers or their respective Affiliates
to Lender under the Loan, any of the Loan Documents or any of the Other Loan
Instruments are hereinafter sometimes collectively referred to as the
"OBLIGATIONS".
NOW, THEREFORE, TO SECURE the repayment of the Indebtedness and the
performance of the Obligations, Borrower has executed this Mortgage and does
hereby grant, mortgage, convey, assign, warrant, transfer, pledge and deliver to
Lender WITH MORTGAGE COVENANTS UPON THE STATUTORY CONDITION AND WITH THE
STATUTORY POWER OF SALE, a security interest in all of Borrower's right, title
and interest in and to the following described property and all proceeds thereof
(which property is hereinafter sometimes collectively referred to as the
"PROPERTY"):
A. The real estate described on Exhibit A attached hereto (the "LAND");
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B. All of the following (collectively, the "IMPROVEMENTS"): all buildings,
improvements and fixtures now or in the future located or to be constructed on
the Land; to the extent not owned by tenants of the Property or the property
manager, all machinery, appliances, equipment, furniture, fixtures and all other
personal property of every kind or nature located in or on, or attached to, or
used or to be used in connection with the Land, buildings, improvements or
fixtures; all building materials and goods procured for use or in connection
with the foregoing; and all additions, substitutions and replacements to any of
the foregoing;
C. To the extent assignable, all plans, specifications, architectural
renderings, drawings, soil test reports, other reports of examination or
analysis of the Land or the Improvements;
D. All easements, rights-of-way, water courses, mineral rights, water
rights, air rights and appurtenances in any way belonging, relating or
appertaining to any of the Land or Improvements, or which hereafter shall in any
way belong, relate or be appurtenant thereto ("APPURTENANCES");
E. All leases, licenses and other agreements with regard to the occupancy of
the Land and/or Improvements, including, without limitation, patient and
resident care agreements and service agreements which include an occupancy
agreement now or hereafter entered into (the "LEASES") and all rents,
prepayments, security deposits, termination payments, royalties, profits, issues
and revenues from the Land and/or Improvements from time to time accruing under
the Leases (the "RENTS"), reserving to Borrower, however, so long as no Event of
Default (hereinafter defined) has occurred and is continuing hereunder, the
right to receive and apply the Rents in accordance with the terms and conditions
of Section 9 of this Mortgage and the Assignment of Leases and Rents of even
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date herewith executed by Borrower in favor of Lender;
F. All claims, demands, judgments, insurance proceeds, refunds, reserves,
deposits, rights of action, awards of damages, compensation, settlements and
other rights to the payment of money hereafter made resulting from or relating
to (i) the taking of the Land or the Improvements or any part thereof under the
power of eminent domain, (ii) any damage (whether caused by such taking, by
casualty or otherwise) to the Land, Improvements or Appurtenances or any part
thereof, or (iii) the ownership or operation of the Property;
G. To the extent assignable, all management contracts, permits,
certificates, licenses, approvals, contracts, purchase and sale agreements,
purchase options, entitlements, development rights and authorizations, however
characterized, issued or in any way furnished for the acquisition, construction,
development, operation and use of the Land, Improvements and/or Leases,
including building permits, environmental certificates, licenses, certificates
of operation, warranties and guaranties;
H. All of the following types of collateral, as defined in the Uniform
Commercial Code as in effect from time to time in the State of Illinois (the
"CODE"): accounts, contract rights, general intangibles, chattel paper,
documents, instruments, inventory, goods, equipment, investment property,
deposit accounts, letter of credit rights, commercial tort claims, health care
receivables, and all books and records relating to the foregoing; provided that
Borrower will cooperate with Lender in obtaining "control" as defined in the
Code, with respect to collateral consisting of deposit accounts, investment
property, letter of credit rights and electronic chattel paper;
I. Any monies on deposit with or for the benefit of Lender, including
deposits for the payment of real estate taxes and any cash collateral account;
J. All proceeds, products, replacements, additions, substitutions, renewals
and accessions of and to the Land, Improvements, Appurtenances or any other
property of the types described in the preceding granting clauses; and
K. Any and all after-acquired right, title or interest of Borrower in and to
any property of the types described in the preceding granting clauses.
TO HAVE AND TO HOLD the Property and all parts thereof together with the
rents, issues, profits and proceeds thereof, unto Lender to its own proper use,
benefit, and advantage forever, subject, however, to the terms, covenants, and
conditions herein.
Borrower covenants and agrees with Lender as follows:
1. PAYMENT OF INDEBTEDNESS; PERFORMANCE OF OBLIGATIONS.
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Borrower shall promptly pay when due the Indebtedness and shall promptly
perform all Obligations.
2. TAXES AND OTHER OBLIGATIONS.
------------------------------
Borrower shall pay, when due, and before any interest, collection fees or
penalties shall accrue, all taxes, assessments, fines, impositions and other
charges and obligations, which may become a lien on or charge against the
Property (collectively, "CHARGES"). Borrower shall have the right to contest,
in good faith by appropriate proceedings, the amount or validity of any such
Charges, so long as: (a) Borrower has given prior written notice to Lender of
Borrower's intent to so contest or object to any such Charges; (b) such contest
stays the enforcement or collection of the Charges or any lien created; and (c)
Borrower has obtained an endorsement, in form and substance satisfactory to
Lender, to the loan policy of title insurance issued to Lender insuring over any
such lien, or Borrower has deposited with Lender a bond or other security
satisfactory to Lender in the amount of 150% of the amount of such Charges.
Should Borrower fail to make any of such payments, Lender may, at its option and
at the expense of Borrower, pay the amounts due for the account of Borrower.
Upon the request of Lender, Borrower shall immediately furnish to Lender copies
of all notices of amounts due and receipts evidencing payment. Borrower shall
promptly notify Lender of any lien on all or any part of the Property and shall
promptly discharge any unpermitted lien or encumbrance.
3. RESERVES FOR TAXES.
--------------------
(a) Taxes. At the time of and in addition to the monthly installments of
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principal and interest due under the Note, Borrower shall pay to Lender a sum
equal to one-twelfth (1/12) of the amount estimated by Lender to be sufficient
to pay at least thirty (30) days before they become due and payable, all taxes,
assessments and other similar charges levied against the Property (collectively,
the "TAXES"). So long as no Event of Default exists hereunder, Lender
shall apply the sums to pay the Taxes when due, provided Borrower has given
Lender adequate advance written notice that such payment is due. These sums may
be commingled with the general funds of Lender, and no interest shall be payable
thereon nor shall these sums be deemed to be held in trust for the benefit of
Borrower. If Lender at any time reasonably determines that such amount on
deposit is insufficient to fully pay such taxes when due, Borrower shall, within
ten (10) days following notice from Lender, deposit such additional sum as may
be reasonably required by Lender. On the Maturity Date, the moneys then
remaining on deposit with Lender or its agent shall, at Lender's option, be
applied against the Indebtedness with the excess, if any, remitted to Borrower.
The obligation of Borrower to pay the Taxes is not affected or modified by the
provisions of this paragraph but shall be deemed satisfied if paid by Lender
from the funds held by it pursuant to this paragraph.
4. USE OF PROPERTY. Unless required by applicable law, Borrower shall not
-----------------
permit changes in the use of any part of the Property from the use existing at
the time this Mortgage was executed or other uses reasonably incidental thereto.
Borrower shall not initiate or acquiesce in a change in the zoning
classification of the Property without Lender's prior written consent.
5. INSURANCE AND CONDEMNATION.
----------------------------
(a) Insurance.
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(i) Borrower shall keep the Improvements insured, and shall maintain
casualty coverage, general liability coverage, business interruption coverage
and such other coverages reasonably requested by Lender, by carrier(s), in
amounts and in form at all times reasonably satisfactory to Lender, which
carrier(s), amounts and form shall not be changed without the prior written
consent of Lender, which consent shall not be unreasonably withheld. All
insurance policies required to be maintained pursuant to this Section 5
("INSURANCE POLICIES") shall contain a Lender's Loss Payable Endorsement. All
Insurance Policies shall provide that the coverage shall not be canceled, or
materially modified or reduced, without thirty (30) days advance written notice
from the insurance company to Lender. If a blanket policy is issued, a
certificate of insurance indicating that Lender is an additional insured (and,
if applicable, loss payee) under such policy in the designated amount shall be
provided to Lender.
(ii) In case of loss or damage by fire or other casualty, Borrower shall
give written notice thereof to the insurance carrier(s) and to Lender within
three (3) business days after such loss or damage occurs. Lender is authorized
and empowered, and Borrower hereby irrevocably appoints Lender as its
attorney-in-fact (such appointment is coupled with an interest), at its option,
to make or file proofs of loss or damage and to settle and adjust any claim
under insurance policies which insure against such risks, or to direct Borrower,
in writing, to agree with the insurance carrier(s) on the amount to be paid in
regard to such loss.
(iii) Provided no Event of Default then exists and Borrower certifies as to
same, the net insurance proceeds (after deduction of Lender's reasonable costs
and expenses, if any, in collecting the same) shall be made available for the
restoration or repair of the Property if, in Lender's reasonable judgment: (a)
restoration or repair and the continued operation of the Property is
economically feasible; (b) the value of Lender's security is not reduced; (c)
the casualty loss is $500,000 or less; (d) no material non-residential Lease has
terminated as a result of the loss or damage and no more than ten percent (10%)
of the residential Leases at the Property have terminated as a result of the
loss or damage; (e) Lender's independent consultant certifies that the
restoration of the Property can be completed at least thirty (30) days prior to
the Maturity Date; and (f) Borrower deposits with Lender from time-to-time an
amount, in cash, which Lender, in its sole discretion, determines is necessary,
in addition to the net insurance proceeds to pay in full the cost of the
restoration or repair (Borrower's deposit shall be disbursed prior to any
disbursement of insurance proceeds held by Lender). Any excess proceeds
remaining after completion of such repair shall be distributed first to Borrower
to the extent Borrower has deposited funds with Lender for such repair with the
balance applied against the Indebtedness. Notwithstanding the foregoing, it
shall be a condition precedent to any disbursement of insurance proceeds held by
Lender hereunder that Lender shall have approved (x) all plans and
specifications for any proposed repair or restoration, (y) the construction
schedule and (z) the architect's and general contractor's contract for all
restoration that exceeds Five Hundred Thousand and 00/100 Dollars ($500,000.00)
in the aggregate. Lender may establish other conditions it deems reasonably
necessary to assure the work is fully completed in a good and workmanlike manner
free of all liens or claims by reason thereof, and in compliance with all
applicable laws, rules and regulations. At Lender's option, the net insurance
proceeds shall be disbursed pursuant to a construction escrow acceptable to
Lender. If an Event of Default then exists, or any of the conditions set forth
in clauses (a) through (f) of this Section 5(a)(iii) have not been met or
-----------------
satisfied, the net insurance proceeds shall be applied to the Indebtedness in
such order and manner as Lender may elect, whether or not due and payable, with
any excess paid to Borrower.
(iv) In the event Borrower fails to provide Lender with evidence of the
insurance coverage required by this Mortgage, Lender may purchase insurance at
Borrower's expense to protect Lender's interests in the Property. This
insurance may, but need not, protect Borrower's interests. The coverage
purchased by Lender may not pay any claim made by Borrower or any claim that is
made against Borrower in connection with the Property. Borrower may later
cancel or require Lender to cancel any insurance purchased by Lender, but only
after providing Lender with evidence that Borrower has obtained insurance as
required by this Mortgage. If Lender purchases insurance for the Property,
Borrower will be responsible for the costs of that insurance, including interest
and other charges imposed by Lender in connection with the placement of the
insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The
costs of the insurance may be more than the cost of insurance Borrower is able
to obtain on its own.
(b) Condemnation.
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(i) Borrower shall within three (3) business days of its receipt of notice
thereof, notify Lender of any action or proceeding relating to any condemnation
or other taking, whether direct or indirect, of the Property, or part thereof,
and Borrower shall, after consultation with and subject to Lender's approval,
appear in and prosecute any such action or proceeding. Upon Borrower's failure
to act in accordance with Lender's prior approval, Borrower authorizes Lender,
at Lender's option, as attorney-in-fact for Borrower (such appointment as
attorney-in-fact is coupled with an interest), to commence, appear in and
prosecute, in Lender's or Borrower's name, any action or proceeding relating to
any condemnation or other taking of the Property, and to settle or compromise
any claim in connection with such condemnation or other taking. The proceeds of
any award, payment or claim for damages, direct or consequential, in
connection with any condemnation or other taking of the Property, or part
thereof, or for conveyances in lieu of condemnation, are hereby assigned to and
shall be paid to Lender and in accordance with the provisions of Section
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5(b)(ii) below. Lender is authorized (but is under no obligation) to collect
-
any such proceeds.
(ii) Lender may, in its sole discretion, elect to (y) apply the net proceeds
of any condemnation award (after deduction of Lender's reasonable costs and
expenses, if any, in collecting the same) in reduction of the Indebtedness in
such order and manner as Lender may elect, whether due or not or (z) make the
proceeds available to Borrower for the restoration or repair of the Property.
If the net proceeds of the condemnation award are made available to Borrower for
restoration or repair, the net proceeds of the condemnation award shall be
disbursed upon satisfaction of and in accordance with the terms and conditions
set forth in Section 5(a)(iii) above. Lender is authorized (but is under no
------------------
obligation) to collect any such proceeds.
6. PRESERVATION AND MAINTENANCE OF PROPERTY.
--------------------------------------------
Borrower shall: (a) not commit waste or permit impairment or deterioration
of the Property; (b) not abandon the Property; (c) keep the Property in good
repair and restore or repair promptly, in a good and workmanlike manner, all or
any part of the Property to the equivalent of its original condition, or such
other condition as Lender may approve in writing, upon any damage or loss
thereto; (d) comply with all laws, ordinances, regulations and requirements of
any governmental body applicable to the Property unless the same are being duly
contested by Borrower in good faith and compliance therewith may lawfully be
postponed while any such contest is pending and, if applicable, Borrower
complies with Section 12 hereof; (e) provide for management of the Property by a
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property manager reasonably satisfactory to Lender pursuant to a contract in
form and substance reasonably satisfactory to Lender; and (f) give notice in
writing to Lender of and, unless otherwise directed in writing by Lender, appear
in and defend any action or proceeding purporting to affect the Property, the
security granted by the Loan Documents or the rights or powers of Lender under
the Loan Documents. Neither Borrower nor any tenant or other person shall
remove, demolish or alter any Improvement on the Land except when incident to
the replacement of fixtures, equipment, machinery and appliances with items of
like kind or when incident to repair or restoration after damage, destruction or
condemnation.
7. PROTECTION OF LENDER'S SECURITY.
----------------------------------
If (a) Borrower fails to pay the Indebtedness or to perform the Obligations
when due or within any applicable cure period, (b) any action or proceeding is
commenced which affects or could affect the Property or Lender's interest
therein, including any loss, damage, cost, expense or liability incurred by
Lender with respect to (i) any environmental matters relating to the Property or
(ii) the preparation of the commencement or defense of any action or proceeding
or any threatened action or proceeding affecting the Loan Documents or the
Property, then Lender, at Lender's option, may make such appearances, disburse
such sums and take such action as Lender deems necessary, in its sole
discretion, to protect the Property or Lender's interest therein, including
entry upon the Property to take such actions Lender determines appropriate to
preserve, protect or restore the Property. Any amounts disbursed by Lender
pursuant to this Section 7 (including attorneys' fees, costs and expenses),
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together with interest thereon at the "DEFAULT RATE" (defined in the Note) from
the date of disbursement, shall become additional Indebtedness of Borrower
secured by the lien of this Mortgage and the other Loan Documents and shall be
due and payable on demand. Nothing contained in this Section 7 shall require
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Lender to incur any expense or take any action hereunder.
8. ACTIONS.
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Borrower shall (a) warrant title, subject to the permitted exceptions
described on Exhibit B attached hereto and (b) appear in and defend any claim or
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any action or other proceeding purporting to affect title or other interests
relating to any part of the Property, the security of this Mortgage or the
rights of Lender, and give Lender prompt written notice of any such claim,
action or proceeding. Lender may, at the expense of Borrower, appear in and
defend any such claim, action or proceeding and any claim, action or other
proceeding asserted or brought against Lender in connection with or relating to
any part of the Property or this Mortgage.
9. LEASES; ASSIGNMENT OF RENTS.
------------------------------
Borrower shall not, without Lender's prior written consent, execute,
modify, amend, surrender or terminate any non-residential Lease other than
Qualified Non-Residential Leases. All residential Leases shall be on the forms
previously provided to Lender, with no material modifications, and shall
otherwise meet the parameters set forth in the Loan Agreement. All
non-residential Leases, other than Qualified Non-Residential Leases, executed or
renewed after the date hereof must be approved by Lender prior to the execution
or renewal thereof by Borrower. Borrower shall not be authorized to enter into
any ground lease of the Property without Lender's prior written approval. If
Lender's consent to any non-residential Lease or the renewal of any existing
non-residential Lease is required under the Loan Agreement or this Mortgage, at
Lender's request, Borrower shall cause the tenant thereunder to execute a
subordination and attornment agreement in form and substance satisfactory to
Lender prior to Borrower's execution of such Lease; provided, however, a
subordination and attornment agreement shall not be required for any Qualified
Non-Residential Lease. Borrower shall comply with and observe Borrower's
obligations as landlord under all Leases. Within five (5) business days of each
request therefor, Borrower shall furnish Lender with a rent roll, in form
acceptable to Lender and executed copies of all Leases.
Borrower absolutely and unconditionally assigns and transfers to Lender, all of
Borrower's right, title and interest in and to the Rents; provided, however, so
long as there shall not have occurred and be continuing an Event of Default,
Borrower shall have the right to collect all Rents, and shall hold the same, in
trust, to be applied first to the payment of all impositions, levies, taxes,
assessments and other charges upon the Property, second to maintenance of
insurance policies upon the Property required hereby, third to the expenses of
Property operations, including maintenance and repairs required hereby, fourth
to the payment of that portion of the Indebtedness then due and payable, and
fifth, the balance, if any, to or as directed by Borrower. If an Event of
Default has occurred and is continuing, Borrower's right to collect and secure
the Rents shall cease and Lender shall have the sole right, with or without
taking possession of the Property, to collect all Rents. Borrower has executed
and delivered to Lender an Assignment of Leases and Rents of even date herewith,
and, to the extent the provisions of this Section 9 are inconsistent with the
---------
provisions of said Assignment of Leases and Rents, the provisions of said
Assignment of Leases and Rents shall control.
10. STATEMENTS BY BORROWER.
------------------------
Borrower shall within ten (10) days after Lender's request, furnish Lender
with a written statement, duly acknowledged, setting forth the sums, according
to Borrower's books and records, secured by the Loan Documents and any right of
set-off, counterclaim or other defense which exists against such sums and the
Obligations.
11. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTEREST IN BORROWER;
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ASSUMPTION.
--
Except only as permitted under the Loan Agreement, Borrower shall not (a)
create or permit the creation of any new ownership interest in Borrower, or (b)
transfer or permit the transfer of (i) all or any part of the Property, or any
interest therein, or (ii) any ownership interest in Borrower (including any
interest in the profits, losses or cash distributions in any way relating to the
Property or Borrower). In addition, if the Emeritus Corporation ("EMERITUS")
fails to continue to control the day to day management and operation of
Borrower's business, then Lender may, at Lender's option, declare all of the
Indebtedness to be immediately due and payable, and Lender may invoke any
remedies permitted by the Loan Documents. Intestate transfers or transfers by
devise shall not constitute a transfer for the purposes of the foregoing
provisions.
12. NO ADDITIONAL LIENS, ENCUMBRANCES OR INDEBTEDNESS.
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Borrower covenants not to execute any mortgage, security agreement,
assignment of leases and rents or other agreement granting a lien (except the
liens granted to Lender by the Loan Documents and liens with respect to the
additional indebtedness permitted by the Loan Documents) against or encumbrance
on the Property or take or fail to take any other action which would result in a
lien against the Property or the interest of Borrower or Guarantor in the
Property without the prior written consent of Lender; provided, however,
Borrower may in good faith, by appropriate proceeding, contest the validity or
amount of any asserted lien and, pending such contest, Borrower shall not be
deemed to be in default hereunder if Borrower shall first obtain an endorsement,
in form and substance satisfactory to Lender to the loan policy of title
insurance issued to Lender insuring over such lien, or, if no such loan policy
shall have been issued, then Borrower shall deposit with Lender a bond or other
security satisfactory to Lender in the amount of 150% of the amount of such lien
to assure payment of the same as and when due.
13. BORROWER AND LIEN NOT RELEASED.
----------------------------------
Without affecting the liability of Borrower or any other person liable for
the payment of the Indebtedness, and without affecting the lien or charge of
this Mortgage as security for the payment of the Indebtedness, Lender may, from
time to time and without notice to any junior lien holder or holder of any right
or other interest in and to the Property: (a) release any person so liable; (b)
waive or modify any provision of this Mortgage or the other Loan Documents or
grant other indulgences; (c) release all or any part of the Property; (d) take
additional security for any obligation herein mentioned; (e) subordinate the
lien or charge of this Mortgage; (f) consent to the granting of any easement; or
(g) consent to any map, plat or plan of the Property.
14. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.
----------------------------------------------
(a) This Mortgage shall constitute a security agreement pursuant to the Code
for any portion of the Property which, under applicable law, may be subject
to a security interest pursuant to the Code (such portion of the Property is
hereinafter called the "PERSONAL PROPERTY") and Borrower hereby grants to Lender
a security interest in the Personal Property. With respect to the Personal
Property, Lender shall have all of the rights and remedies of a secured party
under the Code as well as all other rights and remedies available at law or in
equity.
(b) Borrower agrees to execute and deliver to Lender any financing
statements, as well as extensions, renewals and amendments thereof, and
reproductions of this Mortgage in such form as Lender may require to perfect a
security interest with respect to the Personal Property if and to the extent
Borrower's signature is required under the terms of the Code. Borrower hereby
authorizes and empowers Lender and irrevocably appoints Lender its agent and
attorney-in-fact to execute and file or to file without Borrower's signature, on
Borrower's behalf, all financing statements and refilings and continuations
thereof as Lender deems necessary or advisable to create, preserve and protect
such lien if Borrower fails upon request to do so or there is an Event of
Default outstanding hereunder. Borrower shall pay all costs of filing such
financing statements and any extensions, renewals, amendments and releases
thereof, and shall pay all reasonable costs and expenses of any record searches
for financing statements as Lender may reasonably require.
(c) Except as otherwise expressly provided herein, Borrower shall not,
without the prior written consent of Lender, sell, assign, transfer, encumber,
remove or permit to be removed from the Property any of the Personal Property.
So long as no Event of Default exists, Borrower may sell or otherwise dispose of
the Personal Property when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the operation of the Property, but only upon replacing
the same with other Personal Property at least equal in value and utility to the
disposed Personal Property. Any replacement or substituted Personal Property
shall be subject to the security interest granted herein.
(d) To the extent permitted by law, Borrower and Lender agree that with
respect to all items of Personal Property which are or will become fixtures on
the Land, this Mortgage, upon recording or registration in the real estate
records of the proper office, shall constitute a "fixture filing" within the
meaning of the Code.
15. EVENTS OF DEFAULT; ACCELERATION OF INDEBTEDNESS.
----------------------------------------------------
The occurrence of any one or more of the following events shall constitute
an "Event of Default" under this Mortgage:
(a) failure of Borrower to pay, within ten (10) days of the due date, any of
the Indebtedness, including any payment due under the Note; or
(b) failure of Borrower to strictly comply with Sections 5(a)(i)
-----------------
(insurance), 9 (Leases), 11 (prohibition on transfers) and 12 (no additional
- -- --
liens) of this Mortgage; or
(c) failure of Borrower, within thirty (30) days after written notice and
demand, to satisfy each and every Obligation not set forth in the subsections
above; provided, however, if such Obligation cannot by its nature be cured
within thirty (30) days, and if Borrower commences to cure such failure promptly
after written notice thereof and thereafter diligently pursues the curing
thereof (and then in all events cures such failure within sixty (60) days after
the original notice thereof), Borrower shall not be in default hereunder during
such period of diligent curing; or
(d) Borrower changes the state of its formation/incorporation or its
corporate name without providing Lender thirty (30) days prior written notice;
or
(e) the occurrence of a default under any other Loan Document or Other Loan
Instrument and the expiration of any applicable notice and/or cure period, if
any.
Upon the occurrence of an Event of Default, at the option of Lender, the
Indebtedness shall become immediately due and payable without notice to Borrower
and Lender shall be entitled to all of the rights and remedies provided in the
Loan Documents or at law or in equity. Each remedy provided in the Loan
Documents is distinct and cumulative to all other rights or remedies under the
Loan Documents or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
16. ENTRY; FORECLOSURE.
-------------------
Upon the occurrence of an Event of Default, Borrower, upon demand of Lender
and to the extent not prohibited by law, shall forthwith surrender to Lender the
actual possession of the Property, or to the extent permitted not prohibited by
law, Lender, or a receiver appointed by a court of competent jurisdiction, may
enter and take possession of all or any part of the Property, and may exclude
Borrower and its agents and employees wholly therefrom, and may have joint
access with Borrower to the books, papers and accounts of Borrower. If Borrower
shall for any reason fail to surrender or deliver the Property or any part
thereof after such demand by Lender, Lender or such receiver may obtain a
judgment or decree conferring on Lender or such receiver, the right to immediate
possession of the Property or requiring the delivery of the Property to Lender
or such receiver, and Borrower specifically consents to the entry of such
judgment or decree. Upon every such entering upon or taking of possession,
Lender or such receiver may hold, store, use, operate, manage and control the
Property and conduct the business thereof, and Lender or such receiver may take
any action required by applicable law or which Lender or such receiver believes
necessary to enforce compliance with the environmental provisions contained
herein or in the other Loan Documents, and negotiate with governmental
authorities with respect to the Property's environmental compliance and remedial
measures in connection therewith. Lender and such receiver and their
representatives shall have no liability for any loss, damage, injury, cost or
expense resulting from any action or omission which was taken or omitted in good
faith.
If the Indebtedness or any part thereof is not paid when the same shall become
due, whether by acceleration or otherwise, Lender may, either with or without
entry or taking possession as herein provided or otherwise, proceed by suit or
suits at law or in equity or by any other appropriate proceeding or remedy to:
(a) enforce payment of the Note or the performance of any term, covenant,
condition or agreement of Borrower under any of the Loan Documents; (b)
foreclose the lien hereof for the Indebtedness or part thereof and sell the
Property as an entirety or otherwise, as Lender may determine; (c) exercise its
rights under Section 14 with respect to all or any portion of the Personal
-----------
Property in accordance with the provisions of the Code; provided Lender shall
have no obligation to clean up or otherwise prepare such Personal Property for
sale nor marshal any Personal Property in favor of Borrower or any other secured
party; and/or (d) pursue any other right or remedy available to it under or by
the law and decisions of the State in which the Land is located. Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Personal Property and compliance will not be considered
adversely to affect commercial reasonableness of any sale of the Personal
Property. Notwithstanding any statute or rule of law to the contrary, the
failure to join any tenant or tenants of the Property as party defendant or
defendants in any foreclosure action or the failure of any such order or
judgment to foreclose their rights shall not be asserted by Borrower as a
defense in any civil action instituted to collect (a) the Indebtedness, or any
part thereof or (b) any deficiency remaining unpaid after foreclosure and sale
of the Property. To the extent a notice of sale shall be required by law for
the sale or disposition of the Personal Property, a reasonable authenticated
notification of disposition shall be notification given at least ten (10) days
prior to any such sale, provided however, that no notification need be given to
Borrower if it has authenticated after default a statement renouncing or
modifying any right to notification of sale or other intended disposition.
Upon any foreclosure sale, Lender may bid for and purchase the Property and
shall be entitled to apply all or any part of the Indebtedness as a credit to
the purchase price.
Should this Mortgage encumber more than one parcel of property, Lender shall
have the option in any foreclosure sale pursuant hereto to have the parcels sold
individually, in groups, or en masse, whichever Lender deems appropriate.
17. APPOINTMENT OF RECEIVER OR MORTGAGEE IN POSSESSION.
--------------------------------------------------------
If an Event of Default is continuing or if Lender shall have accelerated
the Indebtedness, Lender, upon application to a court of competent jurisdiction,
shall be entitled as a matter of strict right, without notice, and without
regard to the occupancy or value of any security for the Indebtedness or the
insolvency of any party bound for its payment, to the appointment, at its
option, of itself as mortgagee in possession, or of a receiver without bond to
take possession of and to operate the Property, and to collect and apply the
Rents.
18. EXPENDITURES AND EXPENSES.
---------------------------
In any action to foreclose the lien hereof or otherwise enforce Lender's
rights and remedies hereunder, there shall be allowed and included as additional
Indebtedness all Costs (as defined in the Loan Agreement) which may be paid or
incurred by or on behalf of Lender; including without limitation, costs of
collection, enforcement, retaining, holding, preparing for disposition,
processing and disposing of the Personal Property. All Costs and such other
costs, expenses and fees as may be incurred by Lender in the protection of the
Property and the maintenance of the lien of this Mortgage, including, reasonable
attorneys' fees and costs in any litigation or proceeding affecting this
Mortgage, the Note, the other Loan Documents, the Property or the Personal
Property, including probate, appellate, and bankruptcy proceedings and any
post-judgment proceedings to collect or enforce any judgment or order relating
to this Mortgage or the other Loan Documents or in preparation for the
commencement or defense of any action or proceeding, shall be immediately due
and payable to Lender, with interest thereon at the Default Rate, and shall be
secured by this Mortgage.
19. APPLICATION OF PROCEEDS OF FORECLOSURE SALE.
------------------------------------------------
The proceeds of any foreclosure sale of the Property shall be distributed
and applied in the order of priority set forth in the Note with the excess, if
any, being applied, to any party entitled thereto as their rights may appear.
20. FUTURE ADVANCES.
----------------
This Mortgage is given to secure not only the existing Indebtedness, but
also future advances (whether such advances are obligatory or are made at the
option of Lender, or otherwise) made by Lender under the Note or this Mortgage,
to the same extent as if such future advances were made on the date of the
execution of this Mortgage. The total amount of indebtedness that may be so
secured may decrease or increase from time to time, but the principal amount of
all Indebtedness secured hereby shall in no event exceed five (5) times the
aggregate face amount of the Note.
It is the intent hereof to secure payment of the Note whether the entire amount
shall have been advanced to Borrower at the date hereof, or at a later date, and
to secure any other amount or amounts that may be added to the Indebtedness or
Obligations. The total amount of indebtedness secured hereby may decrease or
increase from time to time, but the total unpaid balance so secured at any one
time shall not exceed five (5) times the aggregate face amount of the Note) in
principal plus interest thereon and any disbursements made for the payment of
taxes, levies, or insurance on the Property with interest thereon. This
Mortgage shall secure any and all additional or further monies which may be
advanced by Lender to Borrower after the date hereof, which future advances of
money, if made, may be evidenced by a note or notes executed by Borrower to
Lender bearing such rate of interest and with such maturities as shall be
determined from time to time, but any and all such future advances secured by
this Mortgage shall be made not more than twenty (20) years after the date
hereof. Nothing herein contained shall be deemed an obligation on the part of
Lender to make any future advances.
21. 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 created by any of the Loan Documents or to
any action brought to enforce the Note or any other obligation secured by any of
the Loan Documents.
22. WAIVER OF HOMESTEAD AND REDEMPTION.
--------------------------------------
Borrower hereby waives all right of homestead exemption in the Property.
Borrower hereby waives all right of redemption on behalf of Borrower and on
behalf of all other persons acquiring any interest or title in the Property
subsequent to the date of this Mortgage, except decree or judgment creditors of
Borrower.
23. GOVERNING LAW; SEVERABILITY.
-----------------------------
This Mortgage shall be governed by and construed in accordance with the
internal laws of the State of Illinois except that the provisions of the laws of
the jurisdiction in which the Land is located shall be applicable to the
creation, perfection and enforcement of the lien created by this Mortgage. The
invalidity, illegality or unenforceability of any provision of this Mortgage
shall not affect or impair the validity, legality or enforceability of the
remainder of this Mortgage, and to this end, the provisions of this Mortgage are
declared to be severable.
24. NOTICE.
------
Notices shall be given under this Mortgage in conformity with the terms and
conditions of the Loan Agreement and in conformity with applicable law.
25. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS;
------------------------------------------------------------------------
CAPTIONS.
---
The covenants and agreements contained in the Loan Documents shall bind,
and the rights thereunder shall inure to, the respective successors and assigns
of Lender and Borrower, subject to the provisions of Section 11 hereof. All
----------
covenants and agreements of Borrower shall be joint and several. In exercising
any rights under the Loan Documents or taking any actions provided for therein,
Lender may act through its employees, agents or independent contractors as
authorized by Lender. The captions and headings of the paragraphs of this
Mortgage are for convenience only and are not to be used to interpret or define
the provisions hereof.
26. RELEASE.
-------
Upon payment of all sums secured by this Mortgage, Lender shall release
this Mortgage. Borrower shall pay Lender's reasonable costs incurred in
releasing this Mortgage and any financing statements related hereto.
27. LOSS OF NOTE.
--------------
Upon notice from Lender of the loss, theft, or destruction of the Note and
upon receipt of an affidavit of lost note and an indemnity reasonably
satisfactory to Borrower from Lender, or in the case of mutilation of the Note,
upon surrender of the mutilated Note, Borrower shall make and deliver a new note
of like tenor in lieu of the then to be superseded Note.
28. SUBROGATION.
-----------
Lender is hereby subrogated (a) to the lien(s) of each and every mortgage,
lien or other encumbrance on all or any part of the Property which is fully or
partially paid or satisfied out of the proceeds of the Indebtedness, and (b) to
the rights of the owner(s) and holder(s) of any such mortgage, lien or other
encumbrance. The respective rights under and priorities of all such mortgages,
liens or other encumbrances shall be preserved and shall pass to and be held by
Lender as additional security for the Indebtedness, to the same extent as if
such rights and priorities had been duly assigned by separate instrument of
assignment and notwithstanding that the same may have been cancelled and
satisfied of record.
29. STATUTORY CONDITION AND POWER OF SALE.
------------------------------------------
This Mortgage is upon the STATUTORY CONDITION and upon further condition
that all covenants and agreements of, and conditions imposed upon, Mortgagor
herein contained and in the Loan Agreement, the Loan Documents, the Other Loan
Instruments and other instruments and agreements evidencing or securing the
Obligations shall be kept and fully performed, for any breach of which
(remaining uncured beyond the grace period, if any, provided herein or therein,
or in the Loan Documents, the Other Loan Instruments or other such instruments
or agreements), Lender shall have the STATUTORY POWER OF SALE, pursuant to
M.G.L.A. Ch. 183, Section 21, and any other rights and remedies granted herein
and/or in the Loan Documents or Other Loan Instruments.
30. TIME OF ESSENCE.
-----------------
Time is of the essence of this Mortgage and the performance of each of the
covenants and agreement contained herein.
IN WITNESS WHEREOF, Borrower has executed this Mortgage or has caused the same
to be executed by its duly authorized officer, under seal, as of the date first
above written.
EMERITUS PROPERTIES XIV, LLC, a Washington limited liability company
By: EMERITUS CORPORATION, its sole member
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Its CFO
ACKNOWLEDGMENT
STATE OF WASHINGTON )
) SS
COUNTY OF KING )
On this _____ day of August, 2002, before me appeared
____________________________, to me personally known, who, being by me duly
sworn, did say that _he is the ____________________ of EMERITUS CORPORATION, a
Washington corporation, the sole member of EMERITUS PROPERTIES XIV, LLC, a
Washington limited liability company, and that said instrument was signed and
sealed on behalf of said limited liability company by authority of its members,
and _he acknowledged said instrument to be the free act and deed of said limited
liability company.
Print Name:
Commission No.
(if any)
My Commission Expires:______________
-3-
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
PERMITTED EXCEPTIONS
EXHIBIT C
OTHER LOAN INSTRUMENTS
a) That certain Loan Agreement between Lender and ESC-PUYALLUP, LLC, a
Washington limited liability company ("PUYALLUP"), ESC-PORT ST. RICHIE, LLC, a
Washington limited liability company ("PORT RICHIE"), and ESC-BOZEMAN, LLC, a
Washington limited liability company ("BOZEMAN") dated February 8, 2002 (the
"ESC LOAN AGREEMENT");
b) that certain Promissory Note A made by Puyallup, Port Richie and Bozeman
in favor of Lender dated February 8, 2002 in the original principal amount of
Nineteen Million Eight Hundred Fifty-Seven Thousand Five Hundred and No/100
Dollars ($19,857,500.00);
c) that certain Subordinated Promissory Note B made by Puyallup, Port Richie
and Bozeman in favor of Lender dated February 8, 2002 in the original principal
amount of Ten Million Six Hundred Ninety-Two Thousand Five Hundred and No/100
Dollars ($10,692,500.00);
d) the Deed of Trust granted by Puyallup in favor of Lender with respect to
the Courtyard Property (as defined in the ESC Loan Agreement) dated February 8,
2002;
e) the Mortgage granted by Port Richie in favor of Lender with respect to
the La Casa Property (as defined in the ESC Loan Agreement) dated February 8,
2002;
f) the Deed of Trust granted by Bozeman in favor of Lender with respect to
the Spring ▇▇▇▇▇▇▇ Property (as defined in the ESC Loan Agreement) dated
February 8, 2002;
g) the Assignment of Leases and Rents executed by Puyallup and Emeritus
Properties III, Inc., a Washington corporation, as tenant, with respect to
Courtyard Property dated February 8, 2002;
h) the Assignment of Leases and Rents executed by Port Richie and Emeritus
Properties V, Inc., a Washington corporation, as tenant, with respect to the La
Casa Property dated February 8, 2002;
i) the Assignment of Leases and Rents executed by Bozeman and Emeritus
Properties II, Inc., a Washington corporation, as tenant, with respect to the
Spring ▇▇▇▇▇▇▇ Property dated February 8, 2002;
j) the Guaranty executed by Emeritus Corporation, a Washington corporation
("EMERITUS"), in favor of Lender dated February 8, 2002;
k) the Hazardous Materials Indemnity Agreement executed by Puyallup, Port
Richie, Bozeman and Emeritus dated February 8, 2002;
l) the Attornment and Subordination agreement with respect to the licensee
lease between Puyallup, as landlord and Emeritus Properties III, Inc., a
Washington corporation, as tenant, with respect to the Courtyard Property dated
February 8, 2002;
m) the Attornment and Subordination agreement with respect to the licensee
lease between Port Richie, as landlord, and Emeritus Properties V, Inc., a
Washington corporation, as tenant, with respect to the La Casa Property dated
February 8, 2002;
n) the Assignment of Leases and Rents executed by Emeritus Properties III,
Inc., a Washington corporation, with respect to the Courtyard Property dated
February 8, 2002;
o) the Collateral Assignment of Management Agreement and Waiver of Property
Management and Broker's Liens, executed by Puyallup and Emeritus relating to the
management contract for the Courtyard Property dated February 8, 2002;
p) the Collateral Assignment of Management Agreement and Waiver of Property
Management and Broker's Liens, executed by Port Richie and Emeritus relating to
the management contract for the La Casa Property dated February 8, 2002; and
q) the Collateral Assignment of Management Agreement and Waiver of Property
Management and Broker's Liens, executed by Bozeman and Emeritus relating to the
management contract for the Spring ▇▇▇▇▇▇▇ Property dated February 8, 2002.