Mortgage Note

EXHIBIT 10.2


This instrument was prepared by and | after recordation should be returned to: |
| Thomas A. Hanson, Esquire | Carlton Fields | 222 Lakeview Avenue | Suite 1400 | West Palm Beach, FL 33401 |
|
| ___________________SPACE ABOVE THIS LINE FOR RECORDER'S USE_____________________


REAL ESTATE MORTGAGE AND SECURITY AGREEMENT


This REAL ESTATE MORTGAGE AND SECURITY AGREEMENT ("Mortgage") is made and entered into as of May 8, 2000, by LAKE SEMINOLE SQUARE MANAGEMENT COMPANY, INC., A TENNESSEE CORPORATION and FREEDOM GROUP-LAKE SEMINOLE SQUARE, INC., A TENNESSEE CORPORATION, (collectively "Mortgagor") to AID ASSOCIATION FOR LUTHERANS, A WISCONSIN CORPORATION ("Mortgagee"):


A. RECITALS.


1. Mortgagor is indebted to Mortgagee, as evidenced by a Mortgage Note ("Note") of even date, in the aggregate principal sum of Twelve Million and No/100 Dollars ($12,000,000.00), both principal and interest of the Note being payable at the office of Mortgagee as more specifically set forth therein.


2. Mortgagor and Mortgagee desire and intend that the Note be secured by (1) this Mortgage; (2) Assignment of Rents and Leases; (3) Financing Statements; and (4) other and sundry documents and agreements. This Mortgage and all other documents and agreements given as security for the Note are referred to collectively as the "Loan Documents" and singularly as a "Loan Document."


B. GRANTING CLAUSE.


To secure the payment of the principal, interest, and premium, if any, on the Note and to secure the performance by Mortgagor of each and every term, covenant, agreement and condition contained in the Note and the Loan Documents, Mortgagor does hereby mortgage, warrant, convey and grant a security interest unto Mortgagee, its successors and assigns, forever, all and singular, in the following described properties:


1. The real estate ("Land") described and set forth in Exhibit A which is
attached to and hereby made a part of this Mortgage and all of Mortgagor's
rights as the successor in interest to the "Developer," as defined in the
Declaration of Condominium identified on Exhibit A hereto, as amended from
time to time (the


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"Declaration") together with any greater or other estate or interest in
the Land hereafter acquired by Mortgagor due to the termination of life
estate interest therein or otherwise;


2. All right, title, and interest of Mortgagor, now or at any time hereafter
existing, in and to all highways, roads, streets, alleys and other public
and private thoroughfares, bordering on or adjacent to the Land, together
with all right, title, and interest of Mortgagor to the Land lying within
such highways, roads, streets, alleys, and other public and private
thoroughfares and all heretofore or hereafter vacated highways, roads,
streets, alleys and public and private thoroughfares and all strips and
gores adjoining or within the Land or any part thereof;


3. All of Mortgagor's right, title and interest as an owner of the
Condominium units described in Exhibit A hereto in all buildings,
structures, improvements, plants, works, and fixtures now or at any time
hereafter located on the land which is subject to the Declaration and,
without any further act, all articles of personal property now or
hereafter owned or leased by Mortgagor used in connection with the Land
and such buildings, structures, improvements, plants, works and fixtures,
all extensions, additions, renewals, betterments, substitutions, and
replacements thereof;


4. All rights, privileges, permits, licenses, easements, consents, tenements,
hereditaments, and appurtenances now or at any time hereafter belonging to
or in any wise appertaining to the Land or to any property now or at any
time hereafter comprising a part of the property subject to this Mortgage;
and all right, title and interest of Mortgagor, whether now or at any time
hereafter existing, in all reversions and remainders to the Land and such
other property, and all leases, subleases, rents, income, issues, profits,
royalties, and revenues derived from, concerning or belonging to such
Land, life estate interests in the Land and other property subject to this
Mortgage or any part thereof;


5. Any and all proceeds of the conversion, whether voluntary or involuntary,
of all or any part of the Land and other property and interests subject to
this Mortgage into cash or liquidated claims, including without limitation
by reason of specification, proceeds of insurance and condemnation awards;


6. All causes of action and recoveries for any damage, loss or diminution in
value of the Premises; and


7. All other personal property identified in Exhibit B set forth hereto.


Any reference herein to the "Premises" shall be deemed to apply to the above-described Land and all other property, interests and items covered by this Granting Clause, unless


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the context shall require otherwise but shall exclude all life estate interests which are "Permitted Exceptions," as hereinafter defined, or which may hereafter be sold by Mortgagor pursuant to the provisions of this Mortgage. Any reference herein to the "Collateral" shall be deemed to apply to personalty located on the Premises.


C. WARRANTIES.


Mortgagor hereby warrants to and covenants with Mortgagee, its successors and assigns, that:


1. Mortgagor has good and indefeasible title to the Premises in fee simple,
free and clear of all liens, charges, and encumbrances whatever except
those specifically set forth in the lender's title insurance policy
delivered to Mortgagee with this Mortgage which have been approved in
writing by Mortgagee and the rights of life estate residents pursuant to
their repurchase agreements and Lake Seminole Square Club Membership
Agreements and the rights of residents in the assisted care facilities
located within what is described as condominium unit B on Exhibit A hereto
(collectively, the "Continuing Obligations") (the "Permitted
Encumbrances");


2. Mortgagor has the full right and authority to execute and deliver to
Mortgagee the Note and the Loan Documents;


3. Mortgagor has taken all action required by law or otherwise necessary to
make the Note and Loan Documents the valid, binding, and legal obligations
of Mortgagor; and


4. The lien and security interest created by this Mortgage are and will be
kept a first lien and security interest upon the Premises, except for the
Permitted Encumbrances, and Mortgagor will forever warrant and defend the
same to Mortgagee, its successors and assigns, against any and all claims
and demands whatever.


Provided always, and upon the express condition that if all of the principal, interest and premium, if any, on the Note shall be paid and discharged in accordance with the terms and conditions therein contained, and if all other agreements and obligations of Mortgagor under the Note, the Loan Documents, and all other agreements between Mortgagor and Mortgagee whether now or at any time hereafter existing, shall be discharged in accordance with the terms and conditions therein and herein expressed, then these presents to be void, otherwise this Mortgage to remain in full force and effect.


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ARTICLE I
COVENANTS OF MORTGAGOR


Mortgagor does hereby covenant and agree with Mortgagee, its successors and assigns, as follows:


1.1 PAYMENT. Mortgagor shall duly and punctually pay the principal, interest,
and premium, if any, on the Note hereby secured, when and as the same
shall become due and payable in accordance with the terms thereof, and
shall duly and punctually perform and observe all of the terms, covenants,
and conditions to be performed or observed by Mortgagor in the Note and
the Loan Documents.


1.2 SECURITY. All of the Premises shall stand as security for the Note and for
the performance or observance by Mortgagor of the terms, covenants, and
agreements to be performed or observed by Mortgagor in the Note, the Loan
Documents, and all other agreements between Mortgagor and Mortgagee
whether now or at any time hereafter existing, and the lien and security
interest hereof, subject only to the exceptions herein noted, is and shall
be a valid and continuing first lien and security interest upon all of the
Premises. From time to time upon the request by Mortgagee, Mortgagor
shall, at its expense, execute and deliver such supplemental mortgages,
security agreements, additional assignments of leases and any further
conveyances and instruments as may, in the reasonable opinion of
Mortgagee, be necessary or desirable in order to effectuate, continue and
preserve the lien and security interest created by this Mortgage and the
Loan Documents and the priority thereof upon all the Premises and to make
subject to the lien hereof any property hereafter to be subjected to the
lien of this Mortgage.


1.3 NEGATIVE COVENANTS. So long as any indebtedness secured hereby remains
unpaid, Mortgagor covenants and agrees with Mortgagee that it will not,
directly or indirectly, without the prior written consent of Mortgagee:


LIENS. Create, permit to exist, or assume any mortgage, pledge, or other
lien or encumbrance upon the Premises or any part thereof or any interest
therein other than (1) the Mortgage lien and security interest of
Mortgagee created by the Loan Documents; and (2) the Permitted
Encumbrances, or


VOTING UNDER THE DECLARATION. Vote pursuant to the rights established in
the Declaration or the related articles of incorporation or bylaws adopted
in connection therewith, to amend the Declaration or to abandon or
terminate the Condominium created by the Declaration; permit the consent
to any mortgages on life estate interests in the Land.


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DISPOSITIONS. Sell, transfer, assign, convey, or otherwise dispose of in
any manner, whether voluntarily or involuntarily, by operation of law or
otherwise, the Premises or any part thereof or any interest therein. For
purposes of this subparagraph, a sale of the Premises shall mean (1) any
transfer or other alteration in any interest which any member, general
partner or shareholder holds (directly or indirectly) in Mortgagor or in
any entity which holds an interest in Mortgagor (excluding transfers of
shares of American Retirement Corporation, a Tennessee corporation ("ARC")
which is the ultimate parent company of Mortgagor), including any transfer
of any membership interests, general partnership interests or controlling
shares of any limited liability company, partnership or corporate
Mortgagor (except a corporate trustee) to any person or persons other than
those holding such interests or shares (i) on the date this Mortgage is
executed, with regard to any limited liability company, partnership or
corporate Mortgagor, or (ii) on the date of a permitted assignment of the
beneficial interest in Mortgagor, with regard to a successor limited
liability company, partnership or corporate Mortgagor in the event of such
a permitted assignment; (2) any termination of partnership or corporate
existence by any limited liability company, partnership or corporate
Mortgagor; and (3) any grant of an option to purchase, an installment
sales contract or land contract.


Notwithstanding any provisions in this Mortgage to the contrary, Mortgagee
will permit Mortgagor to sell and/or re-sell life estates in the
residential portion of the Premises in the ordinary course of its business
during the term hereof, if Mortgagee is satisfied, in its sole discretion
exercised in good faith, that: (1) the use of the Premises will not change
and (2) the loan secured hereby is not in default and no event has
occurred which if left uncured would result in an Event of Default (as
defined in the Note). Mortgagor shall provide prompt notice to Mortgagee
of all such sales and, provided such sales are permitted pursuant to the
foregoing provisions, Mortgagee shall promptly execute partial releases of
this Mortgage with respect to such life estate interests upon receipt from
Mortgagor of a written request therefor accompanied by information
satisfactory to the Mortgagee concerning the material terms of such sale
and a review fee of $100.00 for each sale.


1.4 AFFIRMATIVE COVENANTS. So long as all or any part of the principal,
interest, premium, or any other amount due Mortgagee under the Note, any
of the Loan Documents or any other agreement between Mortgagor and
Mortgagee whether now or at any time hereafter existing, remains
outstanding and unpaid, Mortgagor hereby further covenants and agrees that
it shall:


PROPERTY TAXES. Pay and discharge all taxes, assessments and governmental
charges of every character lawfully imposed upon the Premises, and
Mortgagor shall not suffer any of the Premises to be sold or forfeited for
any tax, special assessment, governmental charge or claim whatsoever.
Promptly following payment of taxes, assessments and governmental
impositions upon the Premises,


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Mortgagor shall deliver to Mortgagee a copy of the bill therefor showing
payment thereof.


LIENS. Pay and discharge all claims for labor, materials, or supplies,
which if unpaid, might by law become a lien or charge against the
Premises.


MORTGAGE TAXES. Pay and discharge all taxes, assessments, and governmental
charges of every character whatever that may be levied upon or on account
of this Mortgage or the indebtedness secured hereby whether levied against
Mortgagor or otherwise. In the event payment by Mortgagor of any tax,
assessment or charge referred to in the foregoing sentence would result in
the payment of interest in excess of the rate permitted by law then
Mortgagee may, at its option, (i) declare the entire principal balance of
the indebtedness secured hereby, together with interest thereon, to be due
and payable immediately, without notice, or (ii) pay that amount or
portion of such tax, assessment or governmental charge as renders payment
of the balance thereof by Mortgagor not in excess of the interest rate
permitted by law, in which event Mortgagor shall pay the balance of such
tax, assessment or governmental charge.


DEPOSITS. Pay to Mortgagee monthly, in addition to each payment required
under the Note, a sum equivalent to one-twelfth (1/12) of the amount
estimated by Mortgagee to be sufficient to enable Mortgagee to pay, at
least thirty (30) days before they become due, all taxes, assessments and
other similar charges levied against the Premises. Mortgagee shall not be
required to hold such sums in segregated accounts, and no interest shall
be payable by Mortgagee to Mortgagor with respect to any amounts paid by
Mortgagor pursuant to this subparagraph. Upon demand by Mortgagee,
Mortgagor shall deliver and pay over to Mortgagee such additional sums as
are necessary to satisfy any deficiency in the amount necessary to enable
Mortgagee to fully pay any of the items hereinabove mentioned before the
same become due. In the event of an Event of Default, or any default by
Mortgagor in the performance of any terms, covenants, or conditions
contained herein, in the Note, or in any of the Loan Documents, Mortgagee
may apply against the indebtedness secured hereby, in such manner as
Mortgagee may determine, any funds of Mortgagor then held by Mortgagee
under this subparagraph. In the event of a sale of the Premises (excluding
sales of life estate interests permitted hereby), any funds on deposit
with Mortgagee automatically, and without the necessity of further notice
or written assignment, shall be transferred and held thereafter for the
account of the new owner to be applied in accordance with this paragraph;
provided, however, no sale of the Premises shall be made subject to this
Mortgage without Mortgagor first obtaining the prior written consent of
Mortgagee as herein required.


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MAINTENANCE, WASTE, USE. Maintain, preserve, and keep the Premises and all
parts thereof, in good repair, working order and condition, and from time
to time make all needful and proper repairs, renewals and replacements
thereto so as at all times to maintain the efficiency thereof. Mortgagor
shall abstain from and will not suffer the commission of waste on the
Premises and will promptly notify Mortgagee in writing of the occurrence
of any loss or damage to the Premises. Mortgagor shall not materially
alter the buildings, improvements, fixtures, equipment, machinery or other
property now or hereafter upon the Land comprising the Premises, or remove
the same therefrom, or permit any tenant or other person to do so, without
the written consent of Mortgagee. Mortgagor will, at its sole cost and
expense, promptly remove, or cause the removal of, any and all hazardous
or toxic substances or wastes or solid wastes or the effects thereof at
any time identified as being on, in, under, or affecting the Premises
which in the sole and good faith judgment of Mortgagee lessen the value of
the Premises. Mortgagor will not permit any portion of the Premises to be
used for any unlawful purpose or for any purpose other than that for which
the same is now being used or intended to be used, as represented in
writing by Mortgagor to Mortgagee. Mortgagor will comply promptly with all
laws, statutes, ordinances, regulations, rules and orders of all public
authorities having jurisdiction thereof and with all covenants, agreements
and restrictions relating to the Premises or the use, occupancy and
maintenance thereof. Mortgagee shall have the right at any time, and from
time to time, to enter the Premises for the purpose of inspecting the
same. Nonpayment of any taxes, assessments or other governmental charges
levied or assessed upon the Premises, or any part thereof, shall
constitute waste.


SURVEY OF INDEPENDENT INSPECTOR. Allow Mortgagee, at any time and from
time to time, based upon a good faith reason or purpose, to engage an
independent inspector to survey the adequacy of the maintenance of the
Premises. If such maintenance is found to be inadequate, such inspector
shall determine the estimated cost of such repairs and replacements
necessary to protect and preserve the rentability and useability of the
said Premises. In such event, at the option of Mortgagee and within
fifteen (15) days after written demand therefor, a sum equal to the amount
of such estimated cost shall thereupon become due and payable by Mortgagor
to be applied upon the indebtedness unless within such period Mortgagor,
at its own cost and expense, shall have completed or shall have commenced
and thereafter with diligence, completes such repairs and replacements. In
such event, Mortgagor shall also reimburse Mortgagee the cost of such
survey, the same being secured hereby. If the survey determines such
maintenance to be adequate, then the cost therefor shall be at the expense
of Mortgagee.


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CONDUCT OF BUSINESS. Do or cause to be done all things necessary to
preserve and keep in full force and effect its legal existence and all
licenses, rights, and privileges necessary for the conduct of its business
and comply with all valid and applicable statutes, laws, rules, and
regulations.


INSURANCE. Mortgagor shall keep the Premises (which for the purpose of
this subsection Insurance and the subsection Restoration shall include all
of the common and limited common elements of the buildings which are part
of the condominium created by the Declaration) insured against loss or
damage by fire, tornado, windstorm and extended coverage perils and such
other hazards as may reasonably be required by Mortgagee, for the full
replacement value, including without limitation on the generality of the
foregoing, war damage insurance whenever in the opinion of Mortgagee such
protection is necessary and is available from an agency of the United
States of America. Mortgagor shall also provide liability insurance with
such limits for personal injury and death and property damage as Mortgagee
may require in the minimum amount of Two Million and No/100 Dollars
($2,000,000.00) per occurrence. Mortgagor shall also procure and keep in
force with responsible insurers, insurance in such amounts as may be
determined by Mortgagee to cover loss, total or partial, of rentals and
other revenues derived from the Premises for a period of at least twelve
(12) months as required by Mortgagee in the minimum amount of Six Million
and No/100 Dollars ($6,000,000.00). All policies of insurance to be
furnished hereunder shall be in forms, amounts, and with insurance
companies satisfactory to Mortgagee, with the New York standard mortgagee
clause endorsement attached to all policies in favor of and in form
satisfactory to Mortgagee, including a provision requiring that the
coverage evidenced thereby shall not be terminated or materially modified
without thirty (30) days' prior written notice to Mortgagee. Mortgagor
shall deliver all policies, including additional and renewal policies,
together with evidence of payment of premiums thereon, to Mortgagee, and
in the case of insurance about to expire, shall deliver renewal policies
not less than thirty (30) days prior to their respective dates of
expiration. The provisions in this subsection, Insurance, in the next
subsection, Adjustment of Losses with Insurer and Application of Proceeds
of Insurance and in Section 3.2 hereof shall be controlling between
Mortgagor and Mortgagee and Mortgagor shall comply with such provisions of
this Mortgage, notwithstanding any provisions to the contrary in the
Declaration.


ADJUSTMENT OF LOSSES WITH INSURER AND APPLICATION OF PROCEEDS OF
INSURANCE. Give immediate notice to Mortgagee in the event of any loss or
damage covered by insurance required to be carried hereunder. Mortgagee
may thereupon make proof of such loss or damage, if the same is not
promptly made by Mortgagor. All proceeds of insurance, in the event of
such loss or damage, shall be payable to Mortgagee and any affected
insurance company is authorized and directed to make


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payment thereof directly to Mortgagee. Mortgagee is authorized and
empowered to settle, adjust, or compromise any claims for loss, damage, or
destruction, under any such policy or policies of insurance. Mortgagee
shall give written notice within a reasonable time to Mortgagor of any
such adjustment or compromise. The power granted hereby shall be deemed to
be coupled with an interest and to be irrevocable.


In the event of damage or destruction if (a) there is projected annual net
operating income from the leases remaining in full force and effect after
such damage or destruction to equal one hundred twenty percent (120%) of
the sum of the annual principal and interest payments of the Note, the
annual taxes and assessments and the insurance premiums, (b) during the
period of repair, there is sufficient rental income including rental
abatement insurance which is sufficient to pay scheduled principal and
interest payments on the Note and sufficient to comply with the other
provisions of this section, (c) the insurance proceeds are insufficient to
pay off the outstanding balance of the Note, (d) restoration and repair is
reasonably estimated to be concluded at least three (3) months prior to
the maturity of the Note or at least three (3) months prior to any date
the Note may be called due and payable, (e) the insurers do not deny
liability as to the insureds, and (f) there is no breach or default under
the terms of the Note or the Loan Documents, such proceeds, after
deducting therefrom any expenses incurred in the collection thereof, shall
be used to reimburse Mortgagor for the cost of the rebuilding or
restoration of buildings or improvements on said Premises. The buildings
and improvements shall be so restored or rebuilt as to be of at least
equal value and substantially the same character as prior to such damage
or destruction. In the event Mortgagor is entitled to reimbursement out of
insurance proceeds, such proceeds shall be made available, from time to
time, upon Mortgagee being furnished with satisfactory evidence of the
estimated cost of completion thereof and with such architect's
certificates, waivers of lien, contractors' sworn statements and other
evidence of cost and of payments as Mortgagee may reasonably require and
approve. If the estimated cost of the work exceeds One Hundred Thousand
and No/100 Dollars ($100,000.00) Mortgagee shall also be furnished with
all plans and specifications for such rebuilding or restoration as
Mortgagee may reasonably require and approve. No payment made prior to the
final completion of the work shall exceed ninety percent (90%) of the
value of the work performed from time to time, and at all times the
undisbursed balance of said proceeds remaining in the hands of Mortgagee
shall be at least sufficient to pay for the cost of completion of the work
free and clear of liens. If the amount of such insurance proceeds is
insufficient to cover the cost of building or restoration, Mortgagor shall
pay such cost in excess of the insurance proceeds before being entitled to
any reimbursement out of the insurance proceeds. Any surplus which may
remain out of the insurance proceeds after payment of such cost of repair
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