Document:

Exhibit 10.55.7

 

Exhibit 10.55.7

 

Loan No. 400029618

 

GUARANTY

 

This GUARANTY (this "Guaranty") is executed as of September 29, 1999, by EMERITUS CORPORATION, a Washington corporation (singularly and collectively referred to as "Guarantor"), for the benefit of AMRESCO CAPITAL, L.P., a Delaware limited partnership ("Lender").

 

A.    EMERITUS PROPERTIES IX, LLC, a Washington limited liability company ("Borrower") is indebted to Lender with respect to a loan (the "Loan") pursuant to that certain Fixed Rate Note dated of even date herewith, payable to the order of Lender in the original principal amount of $10,395,000.00 (together with all renewals, modifications, increases and extensions thereof, the "Note"), which is secured by the liens and security interests of a Mortgage and Security Agreement, of even date herewith (the "Mortgage"), and further evidenced, secured or governed by the other Loan Documents (as defined in the Note). Capitalized terms used in this Guaranty and not otherwise defined shall have the meanings assigned in the Mortgage.

 

B.    Lender is not willing to make the Loan, or otherwise extend credit, to Borrower unless Guarantor unconditionally guarantees payment and performance to Lender of the Guaranteed Obligations (as herein defined).

 

C.    Guarantor is the owner of a direct or indirect interest in Borrower, and Guarantor will directly benefit from Lender's making the Loan to Borrower.

 

NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrower thereunder, and to extend such additional credit as Lender may from time to time agree to extend under the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

 

ARTICLE I

 

NATURE AND SCOPE OF GUARANTY

 

1.1    Guaranty of Obligations. Guarantor hereby irrevocably and unconditionally guarantees to Lender (and its successors and assigns), jointly and severally, the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby irrevocably and unconditionally covenants and agrees that it is liable, jointly and severally, for the Guaranteed Obligations as a primary obligor, and that each Guarantor shall fully perform, jointly and severally, each and every term and provision hereof.

	 
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1.2    Definition of Guaranteed Obligations. As used herein, the term "Guaranteed Obligations" shall mean the unpaid balance of the Debt (as defined in the Note) in the event of (i) any fraud or material misrepresentation by Borrower or any Guarantor in connection with the Loan or (ii) Borrower's failure to make the first full payment of principal and interest due under the Note. In addition, the Guaranteed Obligations shall also include and Guarantor shall also be liable for, and shall indemnify, defend and hold Lender harmless from and against, any and all loss, cost, expense, damage, claim or other obligation (including without limitation reasonable attorney's fees and costs of defense) incurred or suffered by Lender and arising out of or in connection with the matters listed in subsections (a) through (k) immediately below:

 

(a)    Any breach by Borrower of the Environmental Agreement (as defined in the Note), including the indemnification provisions contained therein;

 

(b)    Borrower's failure to obtain Lender's prior written consent to (a) any subordinate financing or any other encumbrance on the Mortgaged Property (as defined in the Mortgage) or (b) any transfer of the Mortgaged Property or majority ownership in Borrower in violation of the Mortgage, except as permitted in the Mortgage;

 

(c)    any litigation or other legal proceeding related to the Debt that delays or impairs Lender's ability to preserve, enforce or foreclose its lien on the Security Property (as defined in the Note), including, but not limited to, the filing of a voluntary petition concerning Borrower under 11 U.S.C. § 101 et seq. (the "Bankruptcy Code") or the filing of an involuntary petition against Borrower under the Bankruptcy Code (unless such proceeding is dismissed within ninety [90] days without the entry of an order for relief being entered and no other Event of Default has occurred at the time of such dismissal), in which action a claim, counterclaim, or defense is asserted against Lender, other than any litigation or other legal proceeding in which a final, non-appealable judgment for money damages or injunctive relief is entered against Lender;

 

(d)    Borrower's failure to pay required taxes, assessments and insurance premiums payable with respect to the Mortgaged Property or to maintain the required escrows therefor, to the extent that monies are not paid by Borrower in escrow for the payment of such amounts, except for any amounts applicable to the period after foreclosure of Lender's lien on the Mortgaged Property, or the delivery by Borrower of a deed to the Mortgaged Property in lieu of foreclosure (which deed has been accepted by Lender in writing), or the appointment of a receiver for the Mortgaged Property;

 

(e)    the gross negligence or willful misconduct of Borrower, its agents, affiliates, officers or employees which causes or results in a diminution, or loss of value, of the Security Property that is not reimbursed by insurance or which gross negligence or willful misconduct exposes Lender to claims, liability or costs of defense in any litigation or other legal proceeding;

 

(f)    the seizure or forfeiture of the Security Property, or any portion thereof; or Lender's interest therein, resulting from criminal wrongdoing by any person or entity other than Lender under any federal, state or local law;

	 
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(g)    (i) any physical waste of the Mortgaged Property caused by the intentional or grossly negligent act(s) or omission(s) of Borrower, its agents, affiliates, officers and employees, (ii) the failure by Borrower to maintain, repair or restore any part of the Mortgaged Property as may be required by the Mortgage or any of the other Loan Documents to the extent of all gross revenues that have been generated by the Mortgaged Property following the date which is eighteen (18) months prior to notice to Borrower from Lender of such failure to maintain, repair or restore any part of the Mortgaged Property and that have not been applied to pay any portion of the Debt, reasonable and customary operating expenses and capital expenditures for the Mortgaged Property paid to third parties not affiliated (directly or indirectly) with Borrower, taxes and insurance premiums for the Mortgaged Property and escrows deposited with Lender, (iii) the removal or disposal of any portion of the Mortgaged Property after an Event of Default (as defined in the Loan Documents) under the Loan Documents to the extent such Mortgaged Property is not replaced by Borrower with like property of equivalent value, function and design, or (iv) failure to maintain in full force and effect each and every License with respect to the Assisted Living Facility;

 

(h)    the misapplication or conversion by Borrower of any insurance proceeds paid by reason of any loss, damage or destruction to the Mortgaged Property; and any awards or amounts received in connection with the condemnation of all or a portion of the Mortgaged Property and not used by Borrower for restoration or repair of the Mortgaged Property;

 

(i)    Borrower's failure to pay in accordance with the terms of the Mortgage (subject to Borrower's rights as set forth in Section 30 thereof) any charges for labor or materials or other charges for work performed or materials furnished prior to foreclosure that can create liens on any portion of the Mortgaged Property, to the extent of the amount rightfully claimed by the lien claimant, or found in any legal proceeding to be owed to the lien claimant, and not so paid;

 

(j)    Borrower's failure to deliver any security deposits collected with respect to the Mortgaged Property to Lender or any other party entitled to receive such security deposits under the Loan Documents following an Event of Default; and

 

(k)    any rents (including advanced or prepaid rents), issues, profits, accounts or other amounts generated by or related to the Mortgaged Property attributable to, or accruing after an Event of Default, which amounts were collected by Borrower or its property manager and not turned over to the Lender or used to pay unaffiliated third parties for reasonable and customary operating expenses and capital expenditures for the Mortgaged Property, taxes and insurance premiums with respect to the Mortgaged Property and any other amounts required to be paid under the Loan Documents with respect to the Mortgaged Property (provided, however, such operating expenses shall include property management fees of no more than five percent [5%] of gross effective income paid to Guarantor [or any successor entity owned by substantially the same owners thereof] in accordance with a management agreement approved by Lender).

	 
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1.3    Nature of Guaranty. This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance, is joint and several and is not a guaranty of collection. This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor and after (if Guarantor is a natural person) Guarantor's death (in which event this Guaranty shall be binding upon Guarantor's estate and Guarantor's legal representatives and heirs). The fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of Guarantor to Lender with respect to Guaranteed Obligations. This Guaranty may be enforced by Lender and any subsequent holder of the Note and shall not be discharged by the assignment or negotiation of all or part of the Note.

 

1.4    Guaranteed Obligations Not Reduced by Offset. The Guaranteed Obligations and the liabilities and obligations of Guarantor to Lender hereunder, shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower, or any other party, against Lender or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

 

1.5    Payment by Guarantor. If all or any part of the Guaranteed Obligations, as limited by Section 2 of this Article I, shall not be punctually paid when due, whether at maturity or earlier by acceleration or otherwise, Guarantor shall, immediately upon demand by Lender, and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity, or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Lender at Lender's address as set forth herein. Such demand(s) may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Obligations, and may be made from time to time with respect to the same or different items of Guaranteed Obligations. Such demand shall be deemed made, given and received in accordance with the notice provisions hereof.

 

1.6    No Duty to Pursue Others. It shall not be necessary for Lender (and Guarantor hereby waives any rights which Guarantor may have to require Lender), in order to enforce such payment by Guarantor, first to (a) institute suit or exhaust its remedies against Borrower or others liable on the Loan or the Guaranteed Obligations or any other person, (b) enforce or exhaust any of Lender's rights or remedies against any collateral which shall ever have been given to secure the Loan, (c) enforce Lender's rights or remedies available to Lender against any other guarantors of the Guaranteed Obligations, (d) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, or (e) resort to any other means of obtaining payment of the Guaranteed Obligations. Lender shall not be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations.

 

1.7    Waivers. Guarantor agrees to the provisions of the Loan Documents, and hereby waives notice of (a) any loans or advances made by Lender to Borrower, (b) acceptance of this Guaranty, (c) any amendment or extension of the Note or of any other Loan Documents, (d) the execution and delivery by 

	 
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Borrower and Lender of any other loan or credit agreement or of Borrower's execution and delivery of any promissory notes or other documents arising under the Loan Documents or in connection with the Mortgaged Property, (e) the occurrence of any breach by Borrower or Event of Default, (f) Lender's transfer or disposition of the Guaranteed Obligations, or any part thereof, (g) sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (h) protest, proof of non-payment or default by Borrower, or (i) any other action at any time taken or omitted by Lender, and, generally, all demands and notices of every kind in connection with this Guaranty, the Loan Documents, any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and the obligations hereby guaranteed.

 

1.8    Payment of Expenses. In the event that Guarantor should breach or fail to timely perform any provisions of this Guaranty, Guarantor shall, immediately upon demand by Lender, pay Lender all costs and expenses (including court costs and reasonable attorneys' fees) incurred by Lender in the enforcement hereof or the preservation of Lender's rights hereunder. The covenant contained in this section shall survive the payment and performance of the Guaranteed Obligations.

 

1.9    Effect of Bankruptcy. In the event that, pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law, or any judgment, order or decision thereunder, Lender must rescind or restore any payment, or any part thereof, received by Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Lender shall be without effect, and this Guaranty shall remain in full force and effect. It is the intention of Borrower and Guarantor that Guarantor's obligations hereunder shall not be discharged except by Guarantor's performance of such obligations and then only to the extent of such performance.

 

1.10    Deferment of Rights of Subrogation, Reimbursement and Contribution.

 

(a)    Notwithstanding any payment or payments made by any Guarantor hereunder, no Guarantor will assert or exercise any right of Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to Lender by way of subrogation, reimbursement, contribution, indemnity, or otherwise arising by contract or operation of law, and such Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower, whether or not the obligations of Borrower have been satisfied, all of such rights being herein expressly waived by such Guarantor. Each Guarantor agrees not to seek contribution or indemnity or other recourse from any other guarantor. If any amount shall nevertheless be paid to a Guarantor by Borrower or another Guarantor prior to payment in full of the Obligations (hereinafter defined), such amount shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to be credited and applied to the Obligations, whether matured or unmatured. The provisions of this subsection shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

 

(b)    Notwithstanding the provisions of subsection 1.10(a), each Guarantor shall have and be entitled to (i) all rights of subrogation otherwise provided by applicable law in respect of any payment it may make or be obligated to make under this Guaranty and (ii) all claims it would have against 

	 
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Borrower in the absence of subsection 1.10(a) and to assert and enforce same, in each case on and after, but at no time prior to, the date (the "Subrogation Trigger Date") which is ninety-one (91) days after the date on which all sums owed to Lender under the Loan Documents (the "Obligations") have been paid in full, if and only if (x) no Event of Default of the type described in subsection 23(f) or 23(g) of the Mortgage with respect to Lender or any other Guarantor has existed at any time on and after the date of this Guaranty to and including the Subrogation Trigger Date and (y) the existence of each Guarantor's rights under this subsection 1.10(b) would not make such Guarantor a creditor (as defined in the Code, as such term is hereinafter defined) of Borrower or any other Guarantor in any insolvency, bankruptcy, reorganization or similar proceeding commenced on or prior to the Subrogation Trigger Date.

 

1.11    Bankruptcy Code Waiver. It is the intention of the parties that Guarantor shall not be deemed to be a "creditor" or "creditors" (as defined in Section 101 of the Bankruptcy Code) of Borrower, or any such guarantor, by reason of the existence of this Guaranty, in the event that Borrower or any such guarantor, becomes a debtor in any proceeding under the Bankruptcy Code, and in connection herewith, Guarantor hereby waives any such right as a "creditor" under the Bankruptcy Code. This waiver is given to induce Lender to make the Loan evidenced by the Note to Borrower. After the Loan is paid in full and there shall be no obligations or liabilities under this Guaranty outstanding, this waiver shall be deemed to be terminated.

 

1.12    "Borrower." The term "Borrower" as used herein shall include any new or successor corporation, association, partnership (general or limited), joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower or any interest in Borrower.

 

ARTICLE II

 

EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING GUARANTOR'S OBLIGATIONS

 

Guarantor hereby consents and agrees to each of the following, and agrees that Guarantor's obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following:

 

2.1    Modifications. Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, Note, Loan Documents, or other document, instrument, contract or understanding between Borrower and Lender, or any other parties, pertaining to the Guaranteed Obligations or any failure of Lender to notify Guarantor of any such action.

 

2.2    Adjustment. Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to Borrower or any Guarantor.

	 
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2.3    Condition of Borrower or Guarantor. The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of Borrower, Guarantor or any other party at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor, or any changes in the shareholders, partners or members of Borrower or Guarantor; or any reorganization of Borrower or Guarantor.

 

2.4    Invalidity of Guaranteed Obligations. The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations, or any document or agreement executed in connection with the Guaranteed Obligations, for any reason whatsoever, including without limitation the fact that (a) the Guaranteed Obligations, or any part thereof, exceeds the amount permitted by law, (b) the act of creating the Guaranteed Obligations or any part thereof is ultra vires, (c) the officers or representatives executing the Note or the other Loan Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (d) the Guaranteed Obligations violate applicable usury laws, (e) Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Borrower, (f) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (g) the Note or any of the other Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason.

 

2.5    Release of Obligors. Any full or partial release of the liability of Borrower on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other party, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that Lender will look to other parties to pay or perform the Guaranteed Obligations.

 

2.6    Other Collateral. The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.

 

2.7    Release of Collateral. Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.

	 
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2.8    Care and Diligence. The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (a) to take or prosecute any action for the collection of any of the Guaranteed Obligations, or (b) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (iii) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.

 

2.9    Unenforceability. The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Guaranteed Obligations.

 

2.10    Offset. Any existing or future right of offset, claim or defense of Borrower against Lender, or any other party, or against payment of the Guaranteed Obligations, whether such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

 

2.11    Merger. The reorganization, merger or consolidation of Borrower into or with any other corporation or entity.

 

2.12    Preference. Any payment by Borrower to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to Borrower or someone else.

 

2.13    Other Actions Taken or Omitted. Any other action taken or omitted to be taken with respect to the Loan Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether or not contemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations.

	 
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ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

To induce Lender to enter into the Loan Documents and extend credit to Borrower, Guarantor represents and warrants to Lender as follows:

 

3.1    Benefit. Guarantor is an affiliate of Borrower, is the owner of a direct or indirect interest in Borrower, and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Guaranteed Obligations.

 

3.2    Familiarity and Reliance. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Note or Guaranteed Obligations; however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty.

 

3.3    No Representation by Lender. Neither Lender nor any other party has made any representation, warranty or statement to Guarantor in order to induce Guarantor to execute this Guaranty.

 

3.4    Guarantor's Financial Condition. As of the date hereof, and after giving effect to this Guaranty and the contingent obligation evidenced hereby, Guarantor is, and will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities.

 

3.5    Legality. The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights.

 

3.6    Survival. All representations and warranties made by Guarantor herein shall survive the execution hereof.

 

3.7    Review of Documents. Guarantor has examined the Note and all of the Loan Documents.

 

3.8    Litigation. Except as otherwise disclosed to Lender, there are no proceedings pending or, so far as Guarantor knows, threatened before any court or administrative agency which, if decided 

	 
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adversely to Guarantor, would materially adversely affect the financial condition of Guarantor or the authority of Guarantor to enter into, or the validity or enforceability of this Guaranty.

 

3.9    Tax Returns. Guarantor has filed all required federal, state and local tax returns and has paid all taxes as shown on such returns as they have become due. No claims have been assessed and are unpaid with respect to such taxes.

 

ARTICLE IV

 

SUBORDINATION OF CERTAIN INDEBTEDNESS

 

4.1    Subordination of All Guarantor Claims. As used herein, the term "Guarantor Claims" shall mean all debts and liabilities of Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of Guarantor's payment of all or a portion of the Guaranteed Obligations to the extent the provisions of Section 1.4 hereof are unenforceable. Upon the occurrence of an Event of Default or the occurrence of an event which would, with the giving of notice or the passage of time, or both, constitute an Event of Default, Guarantor shall not receive or collect, directly or indirectly, from Borrower or any other party any amount upon the Guarantor Claims.

 

4.2    Claims in Bankruptcy. In the event of receivership, bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency proceedings involving Guarantor as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims. Guarantor hereby assigns such dividends and payments to Lender. Should Lender receive, for application upon the Guaranteed Obligations, any such dividend or payment which is otherwise payable to Guarantor, and which, as between Borrower and Guarantor, shall constitute a credit upon the Guarantor Claims, then upon payment to Lender in full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lender to the extent that such payments to Lender on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Lender had not received dividends or payments upon the Guarantor Claims.

 

4.3    Payments Held in Trust. In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, Guarantor agrees to hold in trust for Lender an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the 

	 
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amount of such funds, payments, claims or distributions so received except to pay them promptly to Lender, and Guarantor covenants promptly to pay the same to Lender.

 

4.4    Liens Subordinate. Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Lender presently exist or are hereafter created or attach. Without the prior written consent of Lender, Guarantor shall not (a) exercise or enforce any creditor's right it may have against Borrower, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to enforce any liens, mortgages, deeds of trust, security interest, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor.

 

ARTICLE V

 

MISCELLANEOUS

 

5.1    Waiver. No failure to exercise, and no delay in exercising, on the part of Lender, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender hereunder shall be in addition to all other rights provided by law. No modification or waiver of any provision of this Guaranty, nor consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.

 

5.2    Notices. Any notice, demand, statement, request or consent made hereunder shall be in writing and shall be deemed to be received by the addressee on the day such notice is tendered to a nationally recognized overnight delivery service or on the third day following the day such notice is deposited with the United States Postal Service first class certified mail, return receipt requested, in either instance addressed to the address, as set forth below, of the party to whom such notice is to be given, or to such other address as either party shall in like manner designate in writing. The addresses of the parties hereto are as follows:

 

Guarantor:

 

Emeritus Corporation

 

3131 Elliott Avenue, Suite 500

 

Seattle, Washington 98121

 

Attention: William Shorten

	 
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Lender:

 

AMRESCO Capital, L.P.

 

c/o AMRESCO Services, L.P.

 

245 Peachtree Center Avenue, N.E.

 

Suite 1800

 

Atlanta, Georgia 30303-1231

 

Attn: David Sisom

 

5.3    GOVERNING LAW; JURISDICTION. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE LAWS OF CONFLICT) OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY COURT OF COMPETENT JURISDICTION LOCATED IN THE STATE OF TEXAS IN CONNECTION WITH ANY PROCEEDING OUT OF OR RELATING TO THIS GUARANTY.

 

5.4    Invalid Provisions. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty, unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.

 

5.5    Amendments. This Guaranty may be amended only by an instrument in writing executed by the party or an authorized representative of the party against whom such amendment is sought to be enforced.

 

5.6    Parties Bound; Assignment. This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that Guarantor may not, without the prior written consent of Lender, assign any of its rights, powers, duties or obligations hereunder.

 

5.7    Headings. The article, section and subsection headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty.

 

5.8    Recitals. The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein.

	 
[23525-0009-000000/SB043500.178]    --GUARANTY

	 	 	 
	

	 

 

5.9    Counterparts. To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages.

 

5.10    Financial Statements: Guarantor shall furnish or cause to be furnished to Lender the following: 

 

(a)    within ninety (90) days after the close of each fiscal year of Guarantor, a balance sheet of Guarantor dated as of the close of such fiscal year; 

 

(b)    contemporaneously with its delivery to the Internal Revenue Service, copies of any and all tax returns, requests for extension and other similar items; and 

 

(c)    from time to time, such additional financial statements and financial information as Lender shall require.

 

All balance sheets shall include, among other things, disclosure of all contingent liabilities and changes in financial condition, together with such supporting schedules and documentation as Lender shall require. All balance sheets shall be certified by Guarantor.

 

5.11    Rights and Remedies. If Guarantor becomes liable for any indebtedness owing by Borrower to Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may ever have against Guarantor. The exercise by Lender of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.

 

5.12    Entirety. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THIS GUARANTY, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE,

	 
[23525-0009-000000/SB043500.178]    --GUARANTY

	 	 	 
	

	 

 

NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.

 

5.13    Waiver of Right to Trial by Jury. GUARANTOR AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR AND LENDER.

 

5.14    [Intentionally deleted.]

 

(The balance of this page is intentionally left blank.)

	 
[23525-0009-000000/SB043500.178]    --GUARANTY

	 	 	 
	

	 

 

EXECUTED under seal as of the day and year first above written.

	 	
GUARANTOR:

 

EMERITUS CORPORATION,

a Washington corporation

 

 

 

By:    /s/ Daniel R. Baty    

Name:    Daniel R. Baty    

Title:    Chairman    

 

STATE OF WA    §

§

COUNTY OF KING    §

 

This instrument was ACKNOWLEDGED before me on September 17, 1999, by Daniel R. Baty to me personally known and who, being duly sworn by me, did say that he is the Chairman of EMERITUS CORPORATION, a Washington corporation, on behalf of said corporation, and he did further acknowledge such instrument to be the free act and deed of said corporation, on behalf of said corporation.

	
 

 

 

[SEAL]
	
 

 

 

/s/ Ellie J. Keen    

Notary Public - State of WA

	
 

 

My Commission Expires:

2/28/01
	
 

 

Ellie J. Keen    

Printed Name of Notary Public

	
[23525-0009-000000/SB043500.178]    GUARANTYExhibit 10.55.8

 

Exhibit 10.55.8

 

CASH MANAGEMENT AND SECURITY AGREEMENT

 

(this "Agreement")

 

dated as of September 29, 1999

 

among

 

EMERITUS PROPERTIES XII, LLC

 

c/o Emeritus Corporation

 

3131 Elliott Avenue, Suite 500

 

Seattle, Washington 98121

 

Attn: William Shorten

 

(the "Borrower"),

 

EMERITUS CORPORATION

 

3131 Elliott Avenue, Suite 500

 

Seattle, Washington 98121

 

Attn: William Shorten

 

(the "Manager"),

 

and

 

AMRESCO CAPITAL, L.P.

 

c/o AMRESCO Services, L.P.

 

245 Peachtree Center Avenue, N.E.

 

Suite 1800

 

Atlanta, Georgia 30303-1231

 

Attention: Loan Servicing

 

(together with its successors and

 

assigns, the "Lender")

 

	
[SB043500.183]    

	 	 	 
	

	 

 

WHEREAS, pursuant to the Deed of Trust and Security Agreement dated as of _______________,1999 (the "Mortgage"), by and between the Lender and the Borrower, the Lender has provided financing (the "Loan") to the Borrower secured by the property or properties owned by the Borrower and described in the Mortgage (the "Property");

 

WHEREAS, from and after the Lockbox Effective Date and continuing throughout any Sweep Period (as defined below), the Lender may deliver to the Borrower's bank or banks (the "Clearing Bank") maintaining the operating account or accounts of the Borrower (the "Property Account") a Clearing Bank Instruction Letter attached as Exhibit A, hereto (together with any modifications, amendments or replacements thereof, the "Instruction Letter"), which provides that all Rents (as defined in the Mortgage) be deposited in the account named therein (upon delivery of the Instruction Letter, a "Clearing Account") and swept periodically into the accounts established hereunder;

 

NOW THEREFORE, in consideration of the mutual premises contained herein and for other good and valuable consideration the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

Section 1.    Defined Terms.

 

(a)    As used herein the following capitalized terms shall have the respective meanings set forth below:

 

"Account Proceeds" shall mean any and all Rents and other revenue in connection with any Property that is deposited by any Clearing Bank, the Borrower, the Manager or otherwise into the Cash Collateral Account from time to time.

 

"Accrued Interest" shall have the meaning given to such term in the Note.

 

"Affiliate Expense" shall have the meaning ascribed to such term in Section 3 hereof.

 

"Amounts Due" shall have the meaning ascribed to such term in Section 6 hereof.

 

"Approved Operating Budget" shall have the meaning given to such term in Section 3(e) below.

 

"Borrower's Interest" shall have the meaning ascribed to such term in Section 2(b) below.

 

"Borrower Remainder Account" shall mean the account of Borrower to which monies in the Borrower Remainder Sub-account are allocated in accordance with the terms hereof.

	 
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"Business Day" shall mean any day other than a Saturday, Sunday or any day on which commercial banks in the City in which the Deposit Bank is located are closed for business.

 

"Capital Expenditures Budget" shall have the meaning ascribed to such term in Section 3 hereof.

 

"Cash Collateral Account" shall have the meaning ascribed to such term in Section 2 hereof.

 

"Certificates" means the securities issued in connection with a Secondary Market Transaction of the Loan.

 

"Clearing Account" shall have the meaning given such term in the Recitals.

 

"Cash Collateral Account Payments" shall mean the disbursement of funds from the Cash Collateral Account for the payment of the following items in the following order of priority:

 

	 	1st,	to the payment required to be made to the Tax and Insurance Escrow Fund in accordance with the terms and conditions of the Mortgage;

 

	 	2nd,	to the payment of the Monthly Payment (with interest payable at the Initial Interest Rate and principal payable in the scheduled installment amount);

 

	 	3rd,	to the payment required to be made to the Replacement Escrow Fund in accordance with the terms and conditions of the Mortgage;

 

	 	4th,	to the payment of operating expenses incurred for the Property pursuant to the terms and conditions of the applicable Approved Operating Budget ("Monthly Operating Expenses"), including the payment of property management fees to Manager (an affiliate of Borrower) (or the successor thereto owned substantially by the same parties thereof) pursuant to a property management agreement approved by Lender and in accordance with the Approved Operating Budget, but excluding any Affiliate Expenses;

 

	 	5th,	to the payment of Extraordinary Expenses approved in writing by Lender, if any;

 

	 	6th,	to the payment of any other amounts due under the Loan Documents, including without limitation (a) any advances made by Lender thereunder for the protection of the Property and Lender's lien thereon and (b) any escrows or reserves which are established or required under the Loan Documents and whose funding is not provided for above;

	 
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	 	7th,	to the principal amount currently due under the Note until such principal amount is paid in full;

 

	 	8th,	to the payment of Accrued Interest, including interest legally permitted to accrue thereon, or to the payment of interest accrued at the Default Rate, it being understood that upon an Event of Default or at any time on or after the Final Demand Date, Lender may apply any sums then held in the Cash Collateral Account or collected thereafter to the payment of the Debt in the foregoing or any other order, in Lender's sole discretion;

 

	 	10th,	to the payment of Affiliate Expenses; and

 

Last, the remaining funds, if any, shall be disbursed to Borrower.

 

"Clearing Bank" shall have the meaning given such term in the Recitals.

 

"Collateral" shall mean (i) the Cash Collateral Account, (ii) the Tax and Insurance Escrow Fund, (iii) the Replacement Escrow Fund, and (iv) any and all proceeds and products thereof.

 

"Collection Period" with respect to any Payment Date, shall mean the period of days from the eleventh day of the month immediately preceding the Payment Date to the tenth day of the month in which such Payment Date occurs. With respect to the first Payment Date, the Collection Period shall commence on and include the date hereof and end on and include the tenth day of the calendar month of such first Payment Date.

 

"Debt" shall have the meaning set forth for such term in the Note.

 

"Default Rate" shall have the meaning given to such term in the Note.

 

"Deposit Bank" shall mean the bank or banks selected by the Lender to maintain the Cash Collateral Account.

 

"Eligible Account" Either (i) an account or accounts maintained with an Eligible Bank or (ii) a Trust Account. Eligible Accounts may bear interest.

 

"Eligible Bank" shall mean a bank that insures deposits held by such bank through the Federal Deposit Insurance Corporation.

 

"Escrow Accounts" shall have the meaning ascribed to such term in Section 2(e) below.

 

"Event of Default" shall have the meaning set forth for such term in the Mortgage.

	 
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"Extraordinary Expenses" shall have the meaning ascribed to such term in Section 3 hereof.

 

"Final Demand Date" shall have the meaning set forth for such term in the Note.

 

"Final Payment Date" shall have the meaning given to such term in the Note. 

 

"Initial Interest Rate" shall have the meaning given to such term in the Note. 

 

"Instruction Letter" shall have the meaning ascribed to such term in the Recitals. 

 

"Loan" shall have the meaning ascribed to such term in the Recitals.

 

"Loan Documents" shall have the meaning set forth for such term in the Mortgage.

 

"Lockbox Effective Date" shall mean the earlier of the following dates: (a) the Scheduled Maturity Date if the Debt has not been paid in full by such date, or (b) the date of any Event of Default which has not been cured to Lender's satisfaction before the expiration of any applicable notice and cure period provided under the Loan Documents.

 

"Lockbox Termination Date" shall mean the earlier of (i) the date that the Debt is paid in full, (ii) the date (from time to time) that the deposit account arrangement (as set forth herein) is suspended or terminated in writing by Lender (in its sole discretion), (iii) the date an Event of Default and the passage of applicable cure periods is cured to Lender's satisfaction (Lender having no obligation to accept any such cure unless required by applicable law), or (iv) the date Lender has foreclosed upon the Property or otherwise obtained legal title and control of the Property and all Rents therefrom.

 

"Monthly Operating Expense" shall have the meaning given to such term in the definition of Cash Collateral Account Payments.

 

"Monthly Payment" shall have the meaning given to such term in the Note. 

 

"Mortgage" shall have the meaning given such term in the Recitals.

 

"Mortgage Sub-accounts" shall have the meaning ascribed to such term in Section 2(c).

 

"Note" shall mean that certain Fixed Rate Note of even date herewith, made by the Borrower in favor of the Lender and evidencing the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

"Operating Budget" shall have the meaning ascribed to such term in Section 3 hereof.

	 
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"Operating Expenses" shall mean, collectively, all capital and operating costs for the Property incurred by Borrower in accordance with the terms and provisions of the Loan Documents.

 

"Payment Date" shall mean the respective date upon which the respective payment is due under the Loan Documents.

 

"Person" shall mean any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, entity, party or government (whether territorial, national, federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

 

"Property" shall have the meaning ascribed to such term in the Recitals.

 

"Rating Agencies" shall mean (i) any nationally-recognized statistical rating organizations that provide a rating on any Certificates on the date of issuance of the Certificates or (ii) prior to the issuance of the Certificates, any nationally-recognized statistical rating organizations that have been designated by the Lender in its sole discretion.

 

"Rents" shall have the meaning ascribed to such term in the Mortgage.

 

"Replacement Escrow Fund" shall have the meaning ascribed to such term in the Mortgage.

 

"Scheduled Maturity Date" means the "Scheduled Maturity Date" as defined in the Note.

 

"Secondary Market Transaction" shall have the meaning given to such term in the Mortgage.

 

"Servicer" shall mean a servicer or account administrator of the Lender designated by and acting for the benefit of the Lender.

 

"Special Debt Service Reserve" shall have the meaning given to such term in the definition of Cash Collateral Account Payments.

 

"Sweep Period" shall mean that period of time commencing on the Lockbox Effective Date until the Lockbox Termination Date.

 

"Tax and Insurance Escrow Fund" shall have the meaning given to such term in the Mortgage.

	 
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"Trust Account" shall mean a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations § 9.10(B) which has corporate trust powers and is acting in its fiduciary capacity.

 

(b)    The meanings given to capitalized terms defined herein shall be equally applicable in both singular and plural forms of such terms.

 

(c)    Capitalized terms used and not defined herein shall have the respective meanings given to such terms in the Mortgage.

 

(d)    The Agreement constitutes the "Disbursement Agreement" referred to in the Note and constitutes one of the "Loan Documents" referred to in the Note.

 

Section 2.    Deposit of Rent; Establishment of the Accounts and Other Matters.

 

(a)    During any Sweep Period, all Rents and other revenue, income and sums collected from, or arising with respect to, the Property shall be deposited in the Clearing Account, to be disbursed in accordance with the provisions of this Agreement.

 

(b)    Prior to or during any Sweep Period, Lender will establish and maintain (while the Loan is outstanding) a cash collateral account (which may be a book-entry sub-account of an Eligible Account) at the Deposit Bank (the "Cash Collateral Account") which shall be entitled "AMRESCO Capital, L.P. as Mortgagee of Emeritus Properties XII, LLC Cash Collateral Account." In connection with a Secondary Market Transaction, the Lender shall have the right to cause Deposit Bank to entitle the Cash Collateral Account with such other designation as the Lender may select in its reasonable discretion to reflect such assignment or transfer. The Lender shall, or shall cause the Servicer to, cause the Deposit Bank to deposit into the Cash Collateral Account, all Rents and other amounts transferred to the Deposit Bank from the Clearing Bank.

 

(c)    If required under the Loan Documents, all or any sub-account of the Cash Collateral Account shall be an interest bearing account; and in conjunction therewith, Lender shall be entitled to, and shall report under its Federal tax identification number, the interest amount allocated to Borrower by Lender, if any, on such account or sub-account. With respect to any such interest, Lender shall allocate to Borrower an interest amount equal to an amount determined by applying to the average monthly balance of the applicable account (or sub-account), the quoted interest rate for the Deposit Bank's business money market savings account, as such rate changes from time to time (such allocated amount being referred to as "Borrower's Interest"). If such Deposit Bank quotes more than one interest rate for a business money market savings account, then the lowest of such rates shall be utilized. If the Deposit Bank does not have an established business money market savings account (or if any rate for such account can not otherwise be determined in connection with the deposit of the same), the comparable interest rate as quoted by Bank of America, N.A. (or its successor institution) shall be utilized. Borrower's Interest, less applicable administrative fees as set 

	 
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forth in the Loan Documents (if any), shall be and become part of the Cash Collateral Account or the Escrow Accounts (as applicable). Lender shall not be responsible for obtaining a specific return or yield on such deposit. Lender shall cause to be furnished to Borrower on an annual basis such income tax reporting forms as are required by applicable Federal law.

 

(d)    The following sub-accounts (collectively, the "Mortgage Sub-accounts") of the Cash Collateral Account shall be maintained on a ledger-entry basis:

 

(i)    "Tax and Insurance Impound Fund Sub-account";

 

(ii)    "Monthly Payment Sub-account";

 

(iii)    "Replacement Escrow Fund Sub-account";

 

(iv)    "Operating Expense Sub-account";

 

(v)    "Casualty and Condemnation Proceeds Sub-account"; and

 

(vi)    "Borrower Remainder Sub-account".

 

Amounts allocated to the Mortgage Sub-accounts shall be disbursed in accordance with the terms of this Agreement and the Mortgage.

 

(e)    (i)    During any Sweep Period, the Lender may deliver one or more executed Instruction Letters to the Clearing Bank. The Borrower hereby agrees that it shall, within five (5) Business Days after receipt of an Instruction Letter, execute an Instruction Letter to cover such bank, bank location and/or account, which Instruction Letter shall be in the form of the Instruction Letter annexed hereto as Exhibit A, with such changes thereto as may be requested by such Clearing Bank in order to conform such Instruction Letter with such new bank's customary requirements. If any Clearing Bank shall request any changes, modifications or supplements to any Instruction Letter to conform to the Clearing Bank's customary practice or requirements, as the same may change from time to time, then if such changes, modifications or supplements are acceptable to Lender, Borrower shall execute and deliver to Lender such instruments as the Clearing Bank shall request to effectuate such modifications or changes. In the event the Borrower fails to execute an Instruction Letter as provided above, Borrower hereby appoints the Lender as its attorney-in-fact with full authority to enter into Instruction Letter(s) and to execute on behalf of the Borrower any new modified Instruction Letter acceptable to the proposed Clearing Bank. All costs and expenses incurred by the Lender to negotiate and execute any Instruction Letter shall be paid by the Borrower.

 

(ii)    At the election of the Lender, during any Sweep Period, within ten (10) Business Days, the Borrower will establish a new Eligible Account (which shall become the Clearing Account) at a bank selected by the Lender and shall cause all funds in the existing 

	 
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Clearing Account to be transferred to the new Clearing Account and any future Rents from the Property to be deposited in such new Clearing Account.

 

(f)    Lender may elect to establish and maintain while the Loan is outstanding at the Deposit Bank one or more accounts (which may be a sub-account of the Cash Collateral Account) (singularly and collectively referred to as the "Escrow Accounts"), which if established shall be entitled "AMRESCO Capital, L.P. as Mortgagee of [BORROWER] [insert name of escrow] Escrow Account," and into which Lender may deposit (i) the Tax and Insurance Escrow Fund, (ii) the Replacement Escrow Fund, and (iii) any other escrow funds set forth under the Loan Documents. Amounts on deposit in the Escrow Accounts shall be disbursed at the direction of the Lender in accordance with the Loan Documents. The Escrow Accounts each shall be assigned the federal tax identification number of the Lender.

 

(g)    In order to further secure the Debt and as a material inducement for the Lender to make the Loan in accordance with the terms of the Loan Documents, the Borrower hereby (i) requests that the Cash Collateral Account and the Escrow Accounts be established on its behalf at the Deposit Bank in the names set forth above and (ii) acknowledges that (A) the Cash Collateral Account and the Escrow Accounts will be subject to the sole dominion, control and discretion of the Lender (which may be exercised through the Servicer), subject to the terms, covenants and conditions of this Agreement and the Mortgage, (B) the Lender shall have the sole right to make withdrawals or transfers of funds from the Cash Collateral Account and the Escrow Accounts, and (C) neither the Borrower nor any other Person claiming on behalf of or through the Borrower shall have any right or authority, whether express or implied, to make use of, or withdraw any funds, investments or other properties from, the Cash Collateral Account or the Escrow Accounts, or to give any instructions with respect to the Cash Collateral Account or the Escrow Accounts.

 

(h)    Lender may require Borrower to execute (or Lender may execute as Borrower's attorney-in-fact) any payment directions to the manager and tenants of the Property (whose estoppel certificates shall acknowledge their agreement to make payments in accordance with such directions) and such additional documentation as Lender may deem necessary to institute such arrangements.

 

(i)    In the event this Agreement becomes effective upon the Scheduled Maturity Date, Lender may require Borrower to do the following: (A) to execute an agreement in recordable form to toll or extend the applicable statute of limitations after the Scheduled Maturity Date, and (B) to obtain at Borrower's expense such title policy endorsements as Lender may deem necessary to reflect such agreement and such additional engineering report on the Property as Lender may deem necessary to confirm the adequacy of the Capital Expenditures Budget (as defined in the Note) beyond the Scheduled Maturity Date.

 

Section 3.    Allocation and Disbursement of Funds in the Cash Collateral Account.

 

(a)    Commencing on the first Business Day of each Collection Period on or after the commencement, and during the continuance of, a Sweep Period occurring prior to the Scheduled Maturity Date, the Lender or the Servicer shall allocate amounts deposited in the Cash Collateral 

	 
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Account from time to time during such Collection Period in the order and priority set forth for the Clearing Account Payments as set forth in the Note.

 

(b)    During a Sweep Period (and subject to Section 3(a) and 3(c) above), Lender or the Servicer shall disburse, on the tenth (10th) day of each calendar month, the following amounts from the Cash Collateral Account:

 

(i)    Amounts allocated to the Tax and Insurance Impound Fund Sub-account to the Tax and Insurance Escrow Fund on each Payment Date for further disbursement therefrom as set forth in the Mortgage;

 

(ii)    Amounts allocated to the Monthly Payment Sub-account to the Lender on the related Payment Date;

 

(iii)    Amounts allocated to the Replacement Escrow Fund Sub-account as set forth in the Mortgage;

 

(iv)    Amounts allocated to the Operating Expense Sub-account on the last Business Day of each week; and

 

(v)    Amounts allocated to the Borrower Remainder Sub-account on the last Business Day of each week.

 

(c)    Upon the occurrence of an Event of Default under the Loan Documents or at any time on or after the Final Demand Date, Lender may apply any sums then held in the Cash Collateral Account to the payment of the Debt in any order, in Lender's sole discretion.

 

(d)    Until expended or applied, amounts held in the Cash Collateral Account shall constitute additional security for the Debt.

 

(e)    Under the provisions of the Mortgage, it is understood that on or before November 30 of each calendar year Borrower must deliver to Lender for the next succeeding calendar year, on a month-by-month basis, a management plan and an itemized budget of capital expenditures (defined in the Mortgage as the "Budget" and sometimes hereinafter referred to as the "Capital Expenditures Budget"), together with an itemized operating budget for the Property ("Operating Budget"). Each such plan and budget shall be in such format and in such detail as Lender may request, and beginning with the Operating Budget and Capital Expenditures Budget for the calendar year in which the Scheduled Maturity Date occurs and otherwise beginning on the Lockbox Effective Date, Lender may require additional detail as to, among other items, budgeted monthly operating income, operating expenses, management fees, third-party service fees and proposed capital expenditures and cash uses for the Property. Beginning on the Lockbox Effective Date (a) taxes, insurance and capital replacements shall be paid or reimbursed out of the Tax and Insurance Escrow Fund or (as applicable, and subject to the Capital Expenditures Budget and other requirements of the Mortgage) and the Replacement Escrow Fund, both of which escrows shall be funded as provided below, and

	 
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(b)    the payment of other expenses of operating the Property shall be subject to the provisions of this Agreement and the Operating Budget submitted by Borrower and approved in writing by Lender ("Approved Operating Budget"). Until such time as Lender approves a proposed Operating Budget, the most recently Approved Operating Budget shall apply; provided that such Approved Operating Budget shall be adjusted to reflect actual changes as determined by Lender as to the amounts of real estate taxes, insurance premiums and utilities expenses and to defer, as provided below, any management fees, leasing commissions or other payments to, or any personal expenses of, Borrower or any person or entity which is directly or indirectly controlling, controlled by, or under common control with, Borrower or any guarantor of this Note ("Affiliate Expenses") (provided, however, in no event shall "Affiliate Expenses" include property management fees of no more than 5% of gross effective income paid to Manager [an affiliate of Borrower] [or any successor entity owned by substantially the same owners thereof] for any purposes under this Agreement in accordance with a management agreement approved by Lender). In the event that Borrower proposes to incur an extraordinary operating expense or capital expense not set forth in the Approved Operating Budget or Capital Expenditures Budget then in effect and not specifically provided for in the escrows created pursuant to the Mortgage (an "Extraordinary Expense"), then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for the Lender's written approval. Borrower covenants and agrees to endeavor in good faith to incur costs only in accordance with the Approved Operating Budget and Capital Expenditures Budget.

 

Section 4.    Fees.

 

(a)    The Borrower agrees to pay the fees of the Servicer and the Deposit Bank in accordance with the customary fees charged by the Deposit Bank and the Servicer for the services described herein, as such fees are established from time to time.

 

(b)    Upon the request of the Borrower, the Lender shall cause the Deposit Bank and the Servicer to include their fees in an account analysis statement.

 

(c)    Borrower shall pay all of Lender's or its servicer's costs and expenses in connection with this Agreement, including without limitation reasonable attorney's fees and additional servicing fees (if any) customarily charged by Lender's servicer in connection with administering lockbox accounts.

 

Section 5.    Termination.

 

(a)    The Lender may replace the Deposit Bank with a new Deposit Bank upon five days' notice to the Borrower. The Borrower hereby agrees that it shall take all reasonable action necessary to facilitate the transfer of the respective obligations, duties and rights of the Deposit Bank to the successor thereof selected by the Lender in its sole discretion.

 

(b)    The Lender shall terminate this Agreement upon the receipt by Lender of the entire Debt, and following such receipt, Lender shall return to Borrower all monies then held in the Cash Collateral Agreement and the Escrow Accounts.

 

Section 6.    Matters Concerning the Borrower.

 

(a)    At the option of the Lender, the Lender may require one or more of the following upon the commencement and during the continuation of any Sweep Period:

 

(i)    Pursuant to an instruction letter in the form of Exhibit B hereto (a "Payment Direction Letter"), the Borrower or the Manager shall immediately instruct each of the credit card companies with which the Borrower or the Manager has entered into merchant's or other credit card agreements that all Rents payable with respect to the Property, in accordance with such merchant's agreements or otherwise, shall be transferred instead by wire transfer or the ACH System to the Clearing Bank for deposit in the Clearing Account.

 

(ii)    The Borrower or the Manager shall immediately instruct all Persons that presently or hereafter maintain open accounts with Borrower or the Manager or with whom the Manager or the Borrower presently or hereafter does business on an "accounts receivable" basis with respect to the Property to deliver all payments due under such accounts to the Clearing Bank at a lock box address at the Clearing Bank (the "Lock Box Address") in the form of cashier's checks or equivalent instruments for the payment of money. Neither the Borrower nor the Manager shall direct any such Person to make payments due under such accounts in any other manner.

 

(iii)    Pursuant to an instruction letter in the form of Exhibit C hereto (a "Lessee Payment Direction Letter"), the Borrower or the Manager shall immediately notify and advise each tenant of the Property (if any) (collectively, the "Tenants") under each lease with respect to the Property (whether such lease is presently effective or executed after the date hereof), to send directly to the Lockbox Address promptly when due all payments, whether in the form of checks, cash, drafts, money orders or any other type of payment whatsoever of rent or any other item payable to the Borrower as landlord under such Leases. The foregoing requirements need not be satisfied with respect to any Lease executed after the date hereof to the extent the terms and conditions of the Lessee Payment Direction Letter are incorporated in the applicable Lease.

 

(iv)    If notwithstanding the provisions of this Section 6(a), Borrower or Manager (or any affiliate thereof) receives any Rents then (x) Borrower or Manager (or such affiliate) shall be deemed to hold such Rents in trust for Lender and (y) the Borrower and the Manager shall deposit with the Clearing Bank within one Business Day of receipt all such Rents received by the Borrower or the Manager (or such affiliate).

 

(b)    Upon request of Lender, Borrower shall deliver to Lender such evidence as Lender may reasonably request to evidence that Borrower is complying with the provisions of this Section 6(a). Without the prior written consent of the Lender, neither the Borrower nor the Manager shall (i) terminate, amend, revoke or modify any Payment Direction Letter or Lessee Payment Direction Letter in any manner or (ii) direct or cause any Credit Card Company or any Tenant to pay 

	 
[SB043500.183]    -19-

	 	 	 
	

	 

 

any amount in any manner other than as provided specifically in the related Payment Direction Letter or Lessee Payment Direction Letter, respectively.

 

(c)    The Borrower hereby absolutely conveys, transfers and assigns to the Lender, and grants to the Lender a continuing security interest in the entire right, title and interest of Borrower in the following matters: (i) the Cash Collateral Account, the Clearing Account, the Escrow Accounts, the Property Account and all of the Borrower's right, title and interest in and to all cash, property or rights transferred to or deposited therein from time to time, (ii) all earnings, investments and securities held in the Cash Collateral Account and the Escrow Accounts in accordance with this Agreement and (iii) any and all proceeds of the foregoing. This Agreement and the grant of security interest made hereby shall be irrevocable and unconditional. The Borrower acknowledges that the Servicer, Clearing Bank and Deposit Bank are acting as the agent of, and at the direction of, the Lender in connection with the subject matter of this Agreement. The Borrower further agrees to execute, acknowledge, deliver, file or do at its sole cost and expense, all other financial statements and acts, assignments, notices, agreements or other instruments as the Lender may reasonably require in order to effectuate and perfect the Lender's security interest and to assure, convey, assign, transfer and convey unto the Lender any of the rights granted by this Agreement and to more fully perfect and protect any interest granted hereby.

 

(d)    In its sole discretion, the Borrower may, from time to time deposit amounts into the Cash Collateral Account in respect of any Mortgage Sub-account from sources of the Borrower other than those received by the Clearing Bank with respect to the then-current Collection Period; provided, that if the Borrower deposits such amounts, the amounts deposited shall be subject to all of the terms hereof as if not separately deposited by the Borrower, and may not be withdrawn except as otherwise provided for in this Agreement. Nothing contained herein shall impair or otherwise limit Borrower's obligations to timely make the payments (including, without limitation, interest and principal) required by the Note, the Mortgage and the other Loan Documents, it being understood that such payments shall be so timely made in accordance with the Loan Documents regardless of the amounts on deposit in the Clearing Account, Cash Collateral Account and/or Escrow Accounts.

 

(e)    Borrower hereby covenants and agrees that amounts allocated to the Operating Expense Sub-account with respect to the payment of operating expenses or capital expenditures shall be used only for payment of checks made by the Borrower for the payment of expenses incurred in the ordinary course of business of the ownership and operation of the Property in accordance with the terms of the Loan Documents, or as otherwise approved in writing by the Lender.

 

(f)    If the actual Operating Expenses paid during any Collection Period are less than the amount transferred to the Operating Account during such Collection Period, the amount of such difference shall promptly be deposited by Borrower back into the Cash Collateral Account, in any event no later than twenty (20) days after the end of the applicable Collection Period, such amount to be applied in accordance with Section 3 above when such sum is redeposited into the Cash Collateral Account. Borrower shall promptly deliver to Lender such further documentation (including, without limitation, invoices, canceled checks or copies of contracts) and information as Lender may reasonably request regarding any payments described in Borrower's financial 

	 
[SB043500.183]    -19-

	 	 	 
	

	 

 

statements. If Borrower shall fail to deposit any excess funds in the Cash Collateral Account or provide its required financial statements or, after written request of Lender, evidence of expenditures, in each case, within the time periods provided in the preceding sentences and such failure continues for ten (10) or more days after notice of such failure, then in addition to any other remedies which Lender may have with respect thereto, Lender may elect not to fund the Operating Expense Sub-account from monies in the Cash Collateral Account or Lender may continue to hold the funds in the Operating Expense Sub-account until such failure is cured.

 

(g)    Nothing set forth in this Agreement shall limit, reduce or otherwise affect Borrower's obligations under the Loan Documents, including without limitation the obligations of Borrower (i) to operate and maintain (and to pay currently all expenses to operate and maintain) the Property, to make the Monthly Payment, (ii) to fund the Tax and Insurance Escrow Fund, the Replacement Escrow Fund and any other escrows or reserves established or required under the Loan Documents, and (iii) to pay all principal, interest and other amounts due at any time under the Note, the Mortgage and the other Loan Documents (all of the amounts in items [i], [ii] and [iii] of this paragraph being referred to as "Amounts Due"), even though the sums available in the Clearing Account may be insufficient on the Lockbox Effective Date or at other times to pay all such Amounts Due; and the failure by Borrower to (a) pay directly and timely all Amounts Due through and including the Lockbox Effective Date and (b) deposit immediately at all times on and after the Lockbox Effective Date such additional sums in the Clearing Account as may be required to pay all Amounts Due and all Extraordinary Expenses approved in writing by Lender shall constitute an Event of Default. It is also understood that the existence or continuation of the Cash Collateral Account upon or after an Event of Default, the Scheduled Maturity Date, other Lockbox Effective Date or the Final Demand Date shall constitute neither a waiver of any of Lender's rights and remedies under the Loan Documents (including without limitation foreclosure on the Property) and applicable law (including without limitation the appointment of a receiver) nor a limitation on the exercise thereof by Lender or its designee.

 

Section 7.    Certain Matters Regarding the Lender.

 

(a)    The parties agree that the Deposit Bank shall pay over to the Lender all amounts deposited in any account maintained hereunder on demand, without notice to the Borrower, provided, that in making such demand, the Lender gives notice, in writing, signed by the Lender or an authorized agent thereof, that an Event of Default under the Mortgage has occurred and is continuing. Notwithstanding the foregoing, the Borrower shall not be deemed to have waived any rights the Borrower may have against the Lender if it is determined that the Lender acted improperly.

 

(b)    Lender may exercise in respect of the Collateral all rights and remedies available to Lender hereunder or under the other Loan Documents or otherwise available at law or in equity. Without limiting the generality of the foregoing or the provisions of paragraph (a) above, upon the occurrence and during the continuance of an Event of Default, Borrower acknowledges and agrees that it will have no further right to request or otherwise require Lender to disburse funds from the Clearing Account, the Cash Collateral Account or the Escrow Accounts in accordance with the terms of this Agreement, it being agreed that Lender may, at its option, (i) direct the Deposit Bank to 

	 
[SB043500.183]    -19-

	 	 	 
	

	 

 

continue to hold the funds in the Cash Collateral Account and the Escrow Accounts and/or (ii) continue from time to time to apply all or any portion of the funds held in the Cash Collateral Account or Escrow Accounts to any payment(s) which such funds could have been applied to prior to such Event of Default (or to pay Operating Expenses directly), to the extent and in such order and manner as Lender in its sole discretion may determine, and/or (iii) direct that the Deposit Bank or Clearing Bank from time to time disburse all or any portion of the funds held in the Cash Collateral Account or the Escrow Accounts or other Collateral then or thereafter held by the Deposit Bank or Clearing Bank, as applicable, to Lender, in which event Lender may apply the funds held in the Cash Collateral Account, the Escrow Accounts or other Collateral to the Debt in any order and in such manner as Lender may determine in its sole discretion.

 

(c)    Upon the occurrence and during the continuance of any Event of Default, Lender may, at any time or from time to time, collect, appropriate, redeem, realize upon or otherwise enforce its rights with respect to the Collateral, without notice to Borrower (except as required under the Mortgage) and without the need to institute any legal action, make demand, exhaust any other remedies or otherwise proceed to enforce its rights.

 

(d)    No failure on the part of Lender to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right under this Agreement or the other Loan Documents. The remedies provided in this Agreement, the Note, the Mortgage and the other Loan Documents are cumulative and not exclusive of any remedies provided at law or in equity.

 

Section 8.    Casualty and Condemnation Proceeds Sub-account; Real Estate Tax Refunds.

 

Notwithstanding anything to the contrary contained herein during any Sweep Period, the following items of Rents shall be deposited and held in the Mortgage Sub-accounts described below and shall be applied in the order of priority set forth in this Section 8, and Borrower shall advise Lender at the time of receipt thereof of the nature of such Receipt so that Lender shall have sufficient time to instruct the Deposit Bank to deposit and hold such amounts in the appropriate Mortgage Sub-account:

 

(a)    Proceeds of any casualty insurance, including, without limitation, rent or business interruption insurance, which amounts shall be deposited in the Casualty and Condemnation Proceeds Sub-account and shall be applied (by instructions of Lender or Servicer to the Deposit Bank) in accordance with the provisions of the Mortgage applicable thereto.

 

(b)    Condemnation awards, which amounts shall be deposited in the Casualty and Condemnation Proceeds Sub-account and shall be applied (by instructions of Lender or Servicer to the Deposit Bank) in accordance with the provisions of the Mortgage applicable thereto.

	 
[SB043500.183]    -19-

	 	 	 
	

	 

 

(c)    Real estate tax refunds (net of any reasonable and customary fees and disbursements of tax certiorari counsel deducted from such refund to pay such counsel's fee), which amount shall be deposited as if the same constitute ordinary Rents to be deposited in the Cash Collateral Account.

 

(d)    If the fees and disbursements of tax certiorari counsel described in paragraph (c) above shall not have been deducted from the real estate tax refunds by such counsel prior to payment of such refunds to Borrower, then such fees and disbursements may be paid as part of Operating Expenses, provided such fees and disbursements are commercially reasonable and are incurred in accordance with the Loan Documents.

 

Section 9.    Successors and Assigns; Assignments; Agents.

 

(a)    This Agreement shall bind and inure to the benefit of and be enforceable by the Borrower, the Lender and the Manager and their respective successors and assigns.

 

(b)    The Lender shall have the right to assign or transfer rights and obligations under this Agreement without limitation. Any assignee or transferee shall be entitled to all the rights, benefits and remedies afforded the Lender under this Agreement; provided, that such assignee or transferee shall upon written request deliver to the other parties hereto written confirmation that such assignee or transferee agrees to be bound by the terms of this Agreement and is also the assignee or transferee of the Note and the other Loan Documents.

 

(c)    The Borrower shall have the right to assign and transfer its rights and obligations hereunder only with the prior written consent of the Lender.

 

(d)    Any duties or actions of the Lender hereunder may be performed by the Lender or its agent(s), including without limitation, any Servicer or trustee in a Secondary Market Transaction, which includes the Loan.

 

Section 10.    Amendment.

 

This Agreement may be amended from time to time in writing by all parties hereto. All amendments to this Agreement shall be in writing.

 

Section 11.    Notices.

 

Notices to the parties hereto shall be addressed and delivered in the manner set forth in the Mortgage. Unless otherwise expressly provided herein, all such notices, to be effective, shall be in writing (including by facsimile), and shall be deemed to have been duly given or made (a) when delivered by hand or by nationally recognized overnight carrier, (b) upon receipt after being deposited in the mail, certified mail and postage prepaid or (c) in the case of facsimile notice, when sent and electronically confirmed, addressed as set forth above.

 

Section 12.    Limitation on Liability.

 

Lender shall not be liable for any acts, omissions, errors in judgment or mistakes of fact or law, including, without limitation, acts, omissions, errors or mistakes with respect to the Collateral, except for those arising as a result of Lender's active gross negligence or willful misconduct. Without limiting the generality of the foregoing, except as otherwise expressly provided for herein or as required by applicable law, Lender shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not Lender has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other right pertaining to any Collateral. Lender is hereby authorized by Borrower to act on any written instruction believed by Lender in good faith to have been given or sent by Borrower.

 

Section 13.    Mortgagee-in-Possession.

 

Borrower hereby confirms and agrees that notwithstanding the provisions of this Agreement, Borrower retains sole control of the operation and maintenance of the Property, subject to the obligations of Borrower under the Mortgage, the Mortgage, the Assignment of Leases and Rents and the other Loan Documents, and Lender is not and shall not be deemed to be a mortgagee in possession.

 

Section 14.    GOVERNING LAW; JURISDICTION.

 

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE LAWS OF CONFLICT) OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE THE MORTGAGED PROPERTY IS LOCATED GOVERNS THE CREATION, PERFECTION AND DETERMINATION OF LIEN RIGHTS AND PRIORITY UNDER THE LOAN DOCUMENTS, THE ENFORCEMENT OF REMEDIES AND THE DISPOSITION OF THE MORTGAGED PROPERTY. GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY COURT OF COMPETENT JURISDICTION LOCATED IN THE STATE OF TEXAS IN CONNECTION WITH ANY PROCEEDING OUT OF OR RELATING TO THIS AGREEMENT.

 

 

[SIGNATURES COMMENCE ON THE FOLLOWING PAGE]

	 
[SB043500.183]    -19-

	 	 	 
	

	 

 

IN WITNESS WHEREOF, the parties hereto have executed this CASH MANAGEMENT AND SECURITY AGREEMENT in several counterparts (each of which shall be deemed an original) as of the date first above written.

 

BORROWER:

 

 

EMERITUS PROPERTIES XII, LLC, (Seal)

 

a Washington limited liability company

 

 

 

By:    /s/ Daniel R. Baty(Seal)

 

Daniel R. Baty, Managing Manager

 

 

Address:

 

 

c/o Emeritus Corporation

 

3131 Elliott Avenue, Suite 500

 

Seattle, Washington 98121

 

Attn: William Shorten

 

	 
[SB043500.183]    -19-

	 	 	 
	

	 

 

MANAGER:

 

 

EMERITUS CORPORATION, (Seal)

 

a Washington corporation

 

 

 

By:    /s/ Daniel R. Baty(Seal)

Name:    Daniel R. Baty

Title:    Chairman

 

 

Address:

 

 

3131 Elliott Avenue, Suite 500

 

Seattle, Washington 98121

 

Attn: William Shorten

 

	 
[SB043500.183]    -19-

	 	 	 
	

	 

 

LENDER:

 

 

AMRESCO CAPITAL, L.P., (Seal)

 

a Delaware limited partnership

 

	 	By:	AMRESCO Mortgage Capital, Inc.,

 

a Delaware corporation

 

Its sole General Partner

 

By:    /s/ H. Stewart Carrico II

Name:    H. Stewart Carrico II

Title:    Senior Credit Officer

 

Address:

 

 

c/o AMRESCO Services, L.P.

 

245 Peachtree Center Avenue, N.E. 

 

Suite 1800

 

Atlanta, Georgia 30303-1231

 

Attention: Loan Servicing

 

 

	
[SB043500.183]    -1-

	 	 	 
	

	 

 

EXHIBIT A

 

 

CLEARING BANK INSTRUCTION LETTER

 

[____________________], 199[___]

 

[BANK]

 

Re:    [PROPERTY NAME]

 

Ladies and Gentlemen:

 

[_________________________] (the "Borrower") has entered into a [Mortgage] [Mortgage/Deed of Trust, Assignment of Leases and Rents and Security Agreement], dated as of [____________________], 199[___] (the "Mortgage"), with [__________________] (together with its successors and assigns, the "Lender"), pursuant to which the Lender has provided financing to the Borrower secured by certain mortgages and/or deeds of trust on certain properties owned by the Borrower, including the property described in the caption of this letter (the "Property"). The Property is currently being managed by [_______________] (the "Manager").

 

Currently, the [Borrower] [Manager] maintains the following account (the "Property Account") with you:

 

Name: [__________________]

Account No. [_____________]

 

The Borrower hereby notifies you that the Lender has required that it implement certain automatic clearing and processing functions and hereby instructs you, commencing on [__________________], 199[____] (the "Sweep Commencement Date"), to disburse all revenues from the Property ("Revenues") deposited in the Property Account from time to time in accordance with the following terms and provisions:

 

Promptly upon receipt of this letter, you shall establish a post office box address in which the Borrower shall cause all Revenues in the form of checks, money orders and similar instruments to be deposited. Within one Business day (as defined below) of receipt, you, as the "Clearing Bank," shall receive and process all Revenues and shall deposit the same into the Property Account referred to above, which Property Account, or an appropriate substitution or replacement thereof, shall thereafter be referred to as the "Clearing Account." Checks made payable to the Borrower, the Manager, the Property or the Clearing Account shall be deemed suitable for deposit in the Clearing Account. Items deposited with Clearing Bank that are returned for insufficient or uncollected funds will be redeposited the first time. Items returned unpaid a second time shall be processed in accordance with the standard procedures of the Clearing Bank.

	 
[SB043500.183]    A-3

	 	 	 
	

	 

 

The Borrower has granted the Lender a continuing security interest in funds now and in the future held on deposit in the Borrower's Cleaning Account. The Clearing Account shall be an account of the Borrower but shall be under the sole dominion and control of the Lender and any servicer (a "Servicer") or other designee of the Lender named below or in a subsequent written notice from the Lender. The Clearing Account shall be assigned the federal tax identification number of the Borrower, which number is [__________________]. You shall hold amounts on deposit in the Clearing Account as agent for the Lender and shall not commingle such amounts with any other amounts held by you on behalf of the Lender, the Borrower or any other person or entity. If, in accordance with standard operating procedures, the Clearing Account may be established as a trust account for the benefit of the Lender, Borrower directs that the Clearing Account be maintained as such an account.

 

The Borrower hereby notifies the Clearing Bank that, in accordance with the Mortgage, the Clearing Account and all amounts held therein from time to time, and all renewals, replacements and substitutions therefor, have been irrevocably assigned and conveyed to the Lender. In connection with such assignment and conveyance, the Borrower hereby waives all right of withdrawal from the Clearing Account.

 

The Borrower hereby irrevocably instructs and authorizes you, beginning on the first business day after the Sweep Commencement Date, to disburse on the last business day of each week via the ACH System, if available, or otherwise by wire transfer, all amounts constituting available funds on deposit in the Clearing Account to the following account:

 

___________________________________

___________________________________

___________________________________

___________________________________

 

If transferring such amounts by the ACH System and if required by Clearing Bank, each such transfer shall be initiated by the Lender or by the Servicer. If the Clearing Bank provides electronic data transfer services, the Clearing Bank shall provide the Lender and the Servicer access to the Clearing Bank's electronic data transfer system for purposes of effecting such transfers. At any time that funds may not be transferred as described above in this paragraph, the Clearing Bank shall transfer amounts by wire transfer of immediately available funds.

 

The instructions set forth herein are irrevocable and are not subject to modification in any manner, except that the Lender or the Servicer may, by written notice to you, amend the instructions contained herein.

 

In the event that the Clearing Bank fails to acknowledge that its procedures with respect to the Property Account are governed by this letter due to an objection to the terms hereof or otherwise, the Borrower hereby appoints the Lender as its attorney-in-fact with full authority to make changes to this letter and to execute on behalf of the Borrower any new modified letter acceptable to the proposed Clearing Bank.

	 
[SB043500.183]    A-3

	 	 	 
	

	 

 

Matters not covered by this letter shall be determined in accordance with the customary procedures of the Clearing Bank and in the event of a conflict between the terms of this letter and the customary procedures of the Clearing Bank, the terms of this letter shall govern.

 

The undersigned also notifies you that the name and address of the current Servicer with respect to the Cash Management Agreement is:

 

___________________________________

___________________________________

___________________________________

___________________________________

 

If you have any questions concerning this letter or the Cash Management Agreement, please contact _____________________ of the Lender at (___) __________ or _____________________ of the Servicer at _____________________.

 

The address of the current Manager is:

 

___________________________________

___________________________________

___________________________________

___________________________________

 

Please acknowledge receipt of this letter and your agreement to the terms described herein by executing and returning to the Borrower an acknowledgment in the form of Schedule 1 hereto.

 

[BORROWER]

 

 

 

By:    

 

Name: 

 

Title: 

 

Acknowledged and Agreed:

 

[LENDER]

 

 

 

By:    

 

Name: 

 

Title: 

 

	
[SB043500.183]    A-1

	 	 	 
	

	 

 

SCHEDULE 1

 

FORM OF ACKNOWLEDGMENT

 

[DATE]

 

[Borrower]

 

 

[Lender]

 

Reference is made to that certain Clearing Bank Instruction Letter dated __________, 199[____] (the "Instruction Letter") from [______________________________________] (the "Borrower"). I, _______________, on behalf of ________________________________ (the "Bank"), hereby acknowledge receipt of the instructions set forth in the Instruction Letter and notice of the assignment and conveyance described therein. The Bank hereby agrees to perform the instructions set forth in the Instruction Letter upon the delivery by [_____________________________________] (the "Lender") of the Instruction Letter.

 

[BANK]

 

 

 

By:    

 

Name: 

 

Title: 

 

LOCK BOX ADDRESS:

 

 

 

 

 

	
[SB043500.183]    -1-

	 	 	 
	

	 

 

EXHIBIT B

 

Form of Payment Direction Letter

 

[MANAGER LETTERHEAD]

 

[Date]

 

[Addressee]

 

Re:    Payment Direction Letter for [Property]

 

Dear [__________________]:

 

[BORROWER] (the "Owner"), the owner of the [PROPERTY] (the "Property"), has mortgaged the Property to AMRESCO Capital, L.P. (together with its successors and assigns, the "Lender") and has agreed that all Rents received with respect to the Property will be paid directly to a bank selected by the Lender. Therefore, from and after [DATE], please remit all payments due to the [Owner] [MANAGER], the manager of the Property (the "Manager"),] [under that certain [REFERENCE AGREEMENT], dated [__________], 199[___] (the "Agreement") between the [Owner] [Manager] and you, as follows:

 

(1)    If paying by check, money order or other instrument, please mail such items to the following address:

 

[CLEARING BANK]

 

[Lockbox Address]

 

All checks or other instruments should be made out to the name of the "[PROPERTY]"; or

 

(2)    Transfer such amounts by the ACH System or wire transfer to the following account:

 

[CLEARING BANK]

 

ABA#

 

Attn:

 

Fax:

 

Account of:

 

Account #___________________

 

These payment instructions cannot be withdrawn or modified without the prior written consent of the Lender or its agent (the "Servicer"), or pursuant to a joint written instruction from the Borrower and the Lender or the Servicer. Until you receive written instructions from the Lender or the Servicer, continue to send all payments due under the Agreement to [CLEARING BANK]. All 

	 
[SB043500.183]    B-2

	 	 	 
	

	 

 

payments due under the Agreement shall be remitted to [CLEARING BANK] no later than the day on which such amounts are due.

 

If you have any questions concerning this letter, please contact [________________] at (________________]. We appreciate your cooperation in this matter.

 

Sincerely,

 

 

[OWNER] [MANAGER]

 

 

 

By:    

 

Name: 

 

Title: 

 

	
[SB043500.183]    B-1

	 	 	 
	

	 

 

EXHIBIT C

 

Form of Lessee Payment Direction Letter

 

[MANAGER LETTERHEAD]

 

[Date]

 

[Addressee]

 

Re:    Payment Direction Letter for [Property]

 

Dear [_______________________]:

 

[BORROWER], the owner of the [PROPERTY] (the "Property"), has mortgaged the Property to AMRESCO Capital, L.P. (together with its successors and assigns, the "Lender") and has agreed that all rents due for the Property will be paid directly to a bank selected by the Lender. Therefore, from and after [DATE], all rent to be paid by you under the [LEASE] between you and [BORROWER/MANAGER] (the "Lease") should be sent directly to the following address:

 

[CLEARING BANK]

 

[Lockbox Address]

 

All checks should be made out to the "[PROPERTY]".

 

These payment instructions cannot be withdrawn or modified without the prior written consent of the Lender or its agent (the "Servicer"), or pursuant to a joint written instruction from the Borrower and the Lender or the Servicer. Until you receive written instructions from the Lender or the Servicer, continue to send all rent payments due under the Lease to [CLEARING BANK]. All rent payments must be delivered to [CLEARING BANK] no later than the day on which such amounts are due under the Lease.

 

If you have any questions concerning this letter, please contact [________________] at [_________________]. We appreciate your cooperation in this matter.

 

[MANAGER]

 

 

 

By:    

 

Name: 

 

Title: 

 

	
[SB043500.183]    C-1

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