EXHIBIT 10.6
LOAN AGREEMENT
AMONG
FORT AUSTIN REAL ESTATE HOLDINGS, LLC,
AS BORROWER,
FORT AUSTIN LIMITED PARTNERSHIP,
AS OPERATING LESSEE,
AND
GENERAL ELECTRIC CAPITAL CORPORATION,
AS LENDER
MAY 15, 2002
TABLE OF CONTENTS
Page No.
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ARTICLE 1 CERTAIN DEFINITIONS...........................................................1
Section 1.1 Certain Definitions................................................1
ARTICLE 2 LOAN TERMS....................................................................9
Section 2.1 The Loan...........................................................9
Section 2.2 Interest Rate; Late Charge.........................................9
Section 2.3 Terms of Payment..................................................10
Section 2.4 Security..........................................................11
Section 2.5 Partial Releases..................................................11
Section 2.6 Extension of Maturity Date........................................12
ARTICLE 3 INSURANCE, CONDEMNATION, AND IMPOUNDS........................................13
Section 3.1 Insurance.........................................................13
Section 3.2 Use and Application of Insurance Proceeds.........................14
Section 3.3 Condemnation Awards...............................................15
Section 3.4 Impounds..........................................................15
ARTICLE 4 ENVIRONMENTAL MATTERS........................................................16
Section 4.1 Certain Definitions...............................................16
Section 4.2 Representations and Warranties on Environmental Matters...........16
Section 4.3 Covenants on Environmental Matters................................17
Section 4.4 Allocation of Risks and Indemnity.................................17
Section 4.5 Collateral Assignment of Indemnities..............................18
Section 4.6 No Waiver.........................................................18
ARTICLE 5 LEASING MATTERS..............................................................18
Section 5.1 Representations and Warranties on Residency Agreements............18
Section 5.2 Standard Residency Agreement Form; Material Leases................19
Section 5.3 Covenants.........................................................19
Section 5.4 Operating Lease...................................................19
ARTICLE 6 REPRESENTATIONS AND WARRANTIES...............................................20
Section 6.1 Organization and Power............................................20
Section 6.2 Validity of Loan Documents........................................20
Section 6.3 Liabilities; Litigation...........................................20
Section 6.4 Taxes and Assessments.............................................20
Section 6.5 Other Agreements; Defaults........................................20
Section 6.6 Compliance with Law...............................................21
Section 6.7 Location of Borrower..............................................21
Section 6.8 ERISA.............................................................21
Section 6.9 Margin Stock......................................................21
Section 6.10 Tax Filings.......................................................21
Section 6.11 Solvency..........................................................21
Section 6.12 Full and Accurate Disclosure......................................22
Section 6.13 Borrower Separateness.............................................22
Section 6.14 Operating Lessee Separateness.....................................24
Section 6.15 Licenses and Compliance...........................................27
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ARTICLE 7 FINANCIAL REPORTING..........................................................27
Section 7.1 Financial Statements..............................................27
Section 7.2 Accounting Principles.............................................28
Section 7.3 Other Information.................................................28
Section 7.4 Annual Budget and Cash Flow Summary...............................28
Section 7.5 Audits............................................................28
ARTICLE 8 COVENANTS....................................................................29
Section 8.1 Due on Sale and Encumbrance; Transfers of Interests...............29
Section 8.2 Taxes; Charges....................................................30
Section 8.3 Control; Management...............................................30
Section 8.4 Non-compliance....................................................31
Section 8.5 Consultant........................................................31
Section 8.6 Permits and Licenses; Operation; Maintenance; Inspection..........32
Section 8.7 Taxes on Security.................................................32
Section 8.8 Reserves, Deposits, Escrows.......................................32
Section 8.9 Legal Existence; Name, Etc........................................32
Section 8.10 Affiliate Transactions............................................33
Section 8.11 Further Assurances................................................33
Section 8.12 Estoppel Certificates.............................................33
Section 8.13 Notice of Certain Events..........................................33
Section 8.14 Indemnification...................................................33
Section 8.15 ERISA.............................................................34
Section 8.16 Satisfaction of Debentures........................................34
Section 8.17 HCPI Transaction..................................................34
Section 8.18 Immediate Repairs.................................................34
Section 8.19 Debt Service Coverage and Cash on Cash Return.....................34
Section 8.20 Operation.........................................................34
Section 8.21 Services..........................................................34
Section 8.22 Non-Competition...................................................34
ARTICLE 9 EVENTS OF DEFAULT............................................................35
Section 9.1 Payments..........................................................35
Section 9.2 Insurance.........................................................35
Section 9.3 Sale, Encumbrance, Etc............................................35
Section 9.4 Covenants.........................................................35
Section 9.5 Representations and Warranties....................................36
Section 9.6 Other Encumbrances................................................36
Section 9.7 Involuntary Bankruptcy or Other Proceeding........................36
Section 9.8 Voluntary Petitions, etc..........................................36
Section 9.9 Material Adverse Change...........................................36
Section 9.10 Other Loans.......................................................36
Section 9.11 Debentures........................................................36
Section 9.12 HCPI Transaction..................................................36
ARTICLE 10 REMEDIES....................................................................37
Section 10.1 Remedies - Insolvency Events......................................37
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Section 10.2 Remedies - Other Events........................................37
Section 10.3 Lender's Right to Perform the Obligations......................37
ARTICLE 11 MISCELLANEOUS...............................................................38
Section 11.1 Notices........................................................38
Section 11.2 Amendments and Waivers.........................................39
Section 11.3 Limitation on Interest.........................................39
Section 11.4 Invalid Provisions.............................................40
Section 11.5 Reimbursement of Expenses......................................40
Section 11.6 Approvals; Third Parties; Conditions...........................40
Section 11.7 Lender Not in Control; No Partnership..........................41
Section 11.8 Time of the Essence............................................41
Section 11.9 Successors and Assigns.........................................41
Section 11.10 Renewal, Extension or Rearrangement............................41
Section 11.11 Divisions of the Loan; Syndication or Placement................41
Section 11.12 Waivers........................................................42
Section 11.13 Cumulative Rights..............................................42
Section 11.14 Singular and Plural............................................42
Section 11.15 Phrases........................................................42
Section 11.16 Exhibits and Schedules.........................................42
Section 11.17 Titles of Articles, Sections and Subsections...................42
Section 11.18 Promotional Material...........................................42
Section 11.19 Survival.......................................................42
Section 11.20 Waiver of Jury Trial...........................................43
Section 11.21 Waiver of Punitive or Consequential Damages....................43
Section 11.22 Governing Law..................................................43
Section 11.23 Entire Agreement...............................................43
Section 11.24 Counterparts...................................................43
ARTICLE 12 LIMITATIONS ON LIABILITY....................................................43
Section 12.1 Limitation on Liability........................................43
Section 12.2 Limitation on Liability of Lender's Officers, Employees, etc...44
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LIST OF DEFINED TERMS
Page No.
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Adjusted Operating Expenses....................................................1
Adjusted Operating Revenues....................................................1
Affiliate......................................................................1
Agreement......................................................................1
Allocated Loan Balance.........................................................1
ARC............................................................................1
ARCSPE.........................................................................1
Assignment of Interest Rate Protection Agreement...............................2
Assignment of Rents and Leases.................................................2
Bankruptcy Party..............................................................36
Blocked Account................................................................2
Blocked Account Agreement......................................................2
Borrower.......................................................................1
Borrower Party.................................................................2
Broadway.......................................................................2
Budget.........................................................................3
Business Day...................................................................3
Capital Expenditures...........................................................1
Capital Expenditures Budget....................................................1
Capital Improvements Reserve...................................................1
Cash on Cash Return............................................................3
Commitment Fee.................................................................3
Contract Rate..................................................................1
Control........................................................................3
Debentures.....................................................................3
Debt...........................................................................3
Debt Service...................................................................4
Debt Service Coverage..........................................................4
Default Rate...................................................................4
Environmental Laws............................................................16
ERISA.........................................................................34
Eurodollar Business Day........................................................4
Existing Facility..............................................................3
Facility Capacity..............................................................4
Fixed Rate.....................................................................9
Floating Rate..................................................................9
Hazardous Materials...........................................................16
HCPI Transaction...............................................................4
▇▇▇▇▇▇ Loans...................................................................4
Immediate Repairs..............................................................4
Independent Director......................................................24, 26
Independent Govenor...........................................................24
Insolvency Opinion........................................................24, 27
Interest Rate Protection Agreement.............................................4
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Joinder.......................................................................47
Joinder Parties...............................................................47
Joinder Party..................................................................4
Lender.........................................................................5
LIBOR Rate.....................................................................5
Lien...........................................................................5
Loan...........................................................................5
Loan Administration Fee....................................................5, 10
Loan Documents.................................................................5
Loan to Value Ratio............................................................5
Maturity Date..................................................................5
Mortgage.......................................................................5
Net Cash Flow..................................................................6
Net Operating Income...........................................................6
Net Worth......................................................................6
Note...........................................................................6
Obligations...................................................................10
Operating Expenses.............................................................6
Operating Lease................................................................7
Operating Lessee............................................................1, 7
Operating Revenues.............................................................7
Parkplace......................................................................8
Person.........................................................................8
Plan..........................................................................34
Potential Default..............................................................8
Project........................................................................8
Projects.......................................................................8
Replacement Treasury Yield.....................................................2
Residency Agreement............................................................8
Resident.......................................................................8
Single Purpose Entity..........................................................8
Site Assessment................................................................8
SPC Party.................................................................23, 26
State..........................................................................9
State Agencies.................................................................9
Summit.........................................................................9
Yield Maintenance Amount.......................................................1
Yield Maximum Amount...........................................................9
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LOAN AGREEMENT
This Loan Agreement is entered into as of May 15, 2002 among GENERAL
ELECTRIC CAPITAL CORPORATION, a Delaware corporation (formerly organized under
the laws of the State of New York), FORT AUSTIN REAL ESTATE HOLDINGS, LLC, a
Tennessee limited liability company ("BORROWER"), and FORT AUSTIN LIMITED
PARTNERSHIP, a Texas limited partnership ("OPERATING LESSEE"). In consideration
of the mutual promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 CERTAIN DEFINITIONS. As used herein, the following terms
have the meanings indicated:
"ADJUSTED OPERATING EXPENSES" means Operating Expenses as
determined and adjusted by Lender in accordance with its current audit policies
and procedures.
"ADJUSTED OPERATING REVENUES" means Operating Revenues as
determined and adjusted by Lender in accordance with its current audit policies
and procedures.
"AFFILIATE" means (a) any corporation in which Borrower or
Operating Lessee or any partner, shareholder, director, officer, member, or
manager of Borrower or Operating Lessee directly or indirectly owns or Controls
more than ten percent (10%) of the beneficial interest, (b) any partnership,
joint venture or limited liability company in which Borrower or Operating Lessee
or any partner, shareholder, director, officer, member, or manager of Borrower
or Operating Lessee is a partner, joint venturer or member, (c) any trust in
which Borrower or Operating Lessee or any partner, shareholder, director,
officer, member or manager of Borrower is a trustee or beneficiary, (d) any
entity of any type which is directly or indirectly owned or Controlled by
Borrower or any partner, shareholder, director, officer, member or manager of
Borrower or Operating Lessee, (e) any partner, shareholder, director, officer,
member, manager or employee of Borrower or Operating Lessee, (f) any Person
related by birth, adoption or marriage to any partner, shareholder, director,
officer, member, manager, or employee of Borrower or Operating Lessee, or (g)
any Borrower Party.
"AGREEMENT" means this Loan Agreement, as amended from time to
time.
"ALLOCATED LOAN BALANCE" means, for each Project, the portion
of the principal balance of the Loan allocated to such Project as specified in
Exhibit D attached hereto and made a part hereof.
"ARC" means American Retirement Corporation, a Tennessee
corporation.
"ARCSPE" means ARCPI Holdings, Inc., a Tennessee corporation
whose sole shareholder is ARC, and the sole member of Borrower.
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"ASSIGNMENT OF INTEREST RATE PROTECTION AGREEMENT" means that
Assignment of Interest Rate Protection Agreement executed by Borrower and
assigning the Interest Rate Protection Agreement to Lender.
"ASSIGNMENT OF RENTS AND LEASES" means, collectively, and as
amended, the following Assignments of Rents and Leases:
(a) Assignment of Rents and Leases of even date
herewith, executed by Borrower, filed for recording in the Real
Property Records of Tarrant County, Texas, and in the Real Property
Records of ▇▇▇▇▇▇ County, Texas, assigning to Lender the Operating
Lease and all rents and income from the Operating Lease as it relates
to Broadway and Summit;
(b) the Assignment of Rents and Leases dated of even
date herewith, executed by Borrower, filed for recording in the Real
Property Records of Denver County, Colorado, assigning to Lender the
Operating Lease and all rents and income from the Operating Lease as it
relates to Parkplace;
(c) the Assignment of Rents, Leases, and Income dated
of even date herewith, executed by Operating Lessee, filed for
recording in the Real Property Records of Tarrant County, Texas, and in
the Real Property Records of ▇▇▇▇▇▇ County, Texas, and assigning to
Lender the rents and income from Residency Agreements and other leases
and subleases of Broadway and Summit;
(d) the Assignment of Rents, Leases, and Income dated
of even date herewith, executed by Operating Lessee, filed for
recording in the Real Property Records of Denver County, Colorado, and
assigning to Lender the rents and income from Residency Agreements and
other leases and subleases of Parkplace; and
(e) any other assignment of rents and leases in
favor of Lender and pertaining to the rents, and leases, and income
of the Projects.
"BLOCKED ACCOUNT" means an account established at a bank
satisfactory to Lender, and controlled by Lender, into which all Operating
Revenues of the Projects shall be deposited for further funding into a
collection account controlled by Lender upon the occurrence of an Event of
Default.
"BLOCKED ACCOUNT AGREEMENT" means an agreement among Lender,
Borrower, Operating Lessee, and the depository bank in which the Blocked Account
is established, providing for the collection and application of Operating
Revenues of the Projects.
"BORROWER PARTY" means any Joinder Party, ARC, ARCSPE,
Operating Lessee, any member in Borrower, any member in any limited liability
company that is a member in Borrower, any general partner of Operating Lessee,
and any general partner in any partnership that is a general partner of
Operating Lessee, at any level.
"BROADWAY" means Broadway Plaza at Cityview Retirement Center,
consisting of approximately 126 independent residential living units, 88 villas,
40 assisted living units, and a
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122-bed skilled/intermediate care health center on 20.013 acres located at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, including parking for 355 automobiles, and
more particularly described on Exhibit A.
"BUDGET" means that budget for allocation of proceeds of the
Loan attached hereto as Exhibit B and made a part hereof.
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or day on which banks are required or permitted to be closed in the State of New
York.
"CAPITAL EXPENDITURES" has the meaning assigned to such term
in Schedule 2.4 of this Agreement.
"CAPITAL EXPENDITURES BUDGET" has the meaning assigned to such
term in Schedule 2.4 of this Agreement.
"CAPITAL IMPROVEMENTS RESERVE" has the meaning assigned to
such term in Schedule 2.4 of this Agreement.
"CASH ON CASH RETURN" means the ratio, expressed as a
percentage, of (a) annualized Net Operating Income to (b) the sum of the
outstanding principal balance of the Loan.
"COMMITMENT FEE" means a commitment fee payable by Borrower to
Lender on or before the initial advance of the Loan, in the amount of $957,000
(one percent of the maximum amount of the Loan).
"CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract, or
otherwise.
"DEBENTURES" shall mean the $138,000,000 in subordinated
convertible debentures issued by ARC in September 1997 and maturing October
2002.
"DEBT" means, for any Person, without duplication: (a) all
indebtedness of such Person for borrowed money (whether personal or
non-recourse, secured or unsecured), for amounts drawn under a letter of credit,
or for the deferred purchase price of property for which such Person or its
assets is liable, (b) all unfunded amounts under a loan agreement, letter of
credit, or other credit facility for which such Person would be liable, if such
amounts were advanced under the credit facility, (c) all amounts required to be
paid by such Person as a guaranteed payment to partners or a preferred or
special dividend, including any mandatory redemption of shares or interests, (d)
all indebtedness guaranteed by such Person, directly or indirectly, (e) all
obligations under leases that constitute capital leases for which such Person is
liable, and (f) all obligations of such Person under interest rate swaps, caps,
floors, collars and other interest hedge agreements, in each case whether such
Person is liable contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person otherwise assures a creditor
against loss.
3
"DEBT SERVICE" means the aggregate principal payments,
interest payments and other payments by Borrower on the Loan, other than Net
Cash Flow payments in reduction of the principal balance of the Loan under
Section 2.3(b), and required additions to the Capital Expenditures Reserve and
any other reserves deemed necessary by Lender, and on all other outstanding Debt
of Borrower or Operating Lessee for the period of time for which calculated.
"DEBT SERVICE COVERAGE" means, for the period of time for
which the calculation is being made, the ratio of Net Operating Income to Debt
Service.
"DEFAULT RATE" means the lesser of (a) the maximum rate of
interest allowed by applicable law, or (b) five percent (5%) per annum in excess
of the Floating Rate.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article 9.
"EURODOLLAR BUSINESS DAY" means any day on which banks in the
City of London are generally open for interbank or foreign exchange
transactions.
"FACILITY CAPACITY" means the total number of independent
living units and the total number of assisted living units and skilled nursing
beds, if applicable, in the Projects.
"FIXED RATE" has the meaning assigned to such term in Section
2.2.
"FLOATING RATE" has the meaning assigned to such term in
Section 2.2.
"▇▇▇▇▇▇ LOANS" means those mortgage loans held by ▇▇▇▇▇▇
Healthcare Finance, Inc. or ▇▇▇▇▇▇ Financial, Inc. or one or more of their
related entities and secured by first priority mortgages or deeds of trust on
those retirement centers operated by Affiliates of ARC and known as Countryside,
Parklane West, Greenville, and Park Regency.
"HCPI TRANSACTION" means that $125,000,000 loan by Health Care
Property Investors, Inc. to an ARCSPE to be secured by, among other interests,
pledges of ownership interests in Borrower.
"IMMEDIATE REPAIRS" means those capital improvements, repairs
and replacements to the Projects recommended in the engineering reports
furnished to Lender in connection with the initial advance of the Loan, such
Immediate Repairs to be completed no later than November 30, 2002.
"INTEREST RATE PROTECTION AGREEMENT" means an interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
similar interest rate protection agreement, as approved by Lender and as
purchased by Borrower and issued or entered into with a creditworthy
counterparty satisfactory to Lender, and providing for interest rate protection
that results in a minimum Debt Service Coverage of 1.05:1 on the Net Operating
Income of the Projects, as determined by Lender at the time of the initial
advance of the Loan.
"JOINDER PARTY" means the Persons, if any, executing the
Joinder hereto.
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"LENDER" means General Electric Capital Corporation, and its
successors and assigns.
"LIBOR RATE" means the U.S. Dollar rate (rounded upward to the
nearest one-sixteenth of one percent) listed on page 3750 (i.e., the Libor page)
of the Telerate News Services titled "British Banker Association Interest
Settlement Rates" for a designated maturity of one (1) month determined as of
11:00 a.m. London Time on the second (2nd) full Eurodollar Business Day next
preceding the first day of each month with respect to which interest is payable
under the Loan (unless such date is not a Business Day in which event the next
succeeding Eurodollar Business Day which is also a Business Day will be used).
If the Telerate News Services (1) publishes more than one (1) such Libor Rate,
the average of such rates shall apply, or (2) ceases to publish the Libor Rate,
then the Libor Rate shall be determined from such substitute financial reporting
service as Lender in its discretion shall determine.
"LIEN" means any interest, or claim thereof, in the Projects
securing an obligation owed to, or a claim by, any Person other than the owner
of the Projects, whether such interest is based on common law, statute or
contract, including the lien or security interest arising from a deed of trust,
mortgage, assignment, encumbrance, pledge, security agreement, conditional sale
or trust receipt or a lease, consignment or bailment for security purposes. The
term "Lien" shall include reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting the Projects.
"LOAN" means the loan to be made by Lender to Borrower under
this Agreement, and all other amounts owing from time to time and secured by the
Loan Documents.
"LOAN ADMINISTRATION FEE" has the meaning assigned to such
term in Section 2.3(c).
"LOAN DOCUMENTS" means: (a) this Agreement, (b) the Note, (c)
the Mortgage, (d) the Assignment of Rents and Leases, (e) financing statements,
(f) the Assignment of Interest Rate Protection Agreement, (g) the Blocked
Account Agreement, (h) the Interest Rate Protection Agreement, (i) any and all
other documents evidencing, securing, governing or otherwise pertaining to the
Loan, and (j) all amendments, modifications, renewals, substitutions and
replacements of any of the foregoing.
"LOAN TO VALUE RATIO" means the ratio, expressed as a
percentage, of the outstanding principal balance of the Loan divided by the fair
market value of the Projects, as determined by Lender's customary underwriting
and valuation methods and procedures.
"MATURITY DATE" means the earlier of (a) May 31, 2005, or (b)
any earlier on which the entire Loan is required to be paid in full, by
acceleration or otherwise, under this Agreement or any of the other Loan
Documents.
"MORTGAGE" means, collectively, the following deeds of trust
and mortgages:
(a) Deed of Trust, Security Agreement and Fixture
Filing, dated of even date herewith, executed by Borrower for the
benefit of Lender, recorded in the Real
5
Property Records of Tarrant County, Texas, and in the Real Property
Records of ▇▇▇▇▇▇ County, Texas, and encumbering Broadway and Summit;
(b) Leasehold Deed of Trust, Security Agreement and
Fixture Filing, dated of even date herewith, executed by Operating
Lessee for the benefit of Lender, recorded in the Real Property Records
of Tarrant County, Texas, and in the Real Property Records of ▇▇▇▇▇▇
County, Texas, encumbering the leasehold interest of Operating Lessee
in Broadway and Summit under the Operating Lease;
(c) Deed of Trust, Security Agreement and Fixture
Filing, dated of even date herewith, executed by Borrower for the
benefit of Lender, recorded in the Real Property Records of Denver
County, Colorado, and encumbering Parkplace;
(d) Leasehold Deed of Trust, Security Agreement and
Fixture Filing, dated of even date herewith, executed by Operating
Lessee for the benefit of Lender, recorded in the Real Property Records
of Denver County, Colorado, and encumbering the leasehold interest of
Operating Lessee in Parkplace under the Operating Lease; and
(e) any other deed of trust, mortgage or similar
instrument encumbering the Projects as security for the Loan.
"NET CASH FLOW" means, for any period, the amount by which
Operating Revenues exceed the sum of (a) Operating Expenses, (b) Debt Service,
and (c) any actual payment into impounds, escrows, or reserves required by
Lender, except to the extent included within the definition of Operating
Expenses.
"NET OPERATING INCOME" means the amount by which Adjusted
Operating Revenues exceed Adjusted Operating Expenses, calculated on the basis
of occupancy of not more than 95% of the Projects and taking into account a
management fee equal to four percent (4%) of Operating Revenues.
"NET WORTH" means, as to any period of time, total assets
(after adding back accumulated depreciation, amortization, and other reasonable
non-cash charges determined in accordance with generally accepted accounting
principles), less total liabilities (contingent or otherwise) determined on a
book basis in accordance with generally accepted accounting principles,
including declared and unpaid distributions or dividends; however, excluded from
the determination of total assets shall be all assets that are classified as
intangible, including good will, licenses, patents, trademarks, trade names,
copyrights and franchises.
"NOTE" means the Promissory Note of even date herewith in the
principal amount of up to $95,700,000, executed by Borrower, payable to the
order of Lender and evidencing the Loan.
"OPERATING EXPENSES" means all customary expenses of operating
the Projects in the ordinary course of business which are paid in cash by
Borrower or Operating Lessee and which are directly associated with and fairly
allocable to the Projects for the applicable period, including ad valorem real
estate taxes and assessments, insurance premiums, regularly scheduled tax
impounds paid to Lender, maintenance costs, management fees and costs equal to
the greater
6
of four percent (4%) of Operating Revenues, accounting, legal, and other
professional fees, fees relating to environmental and Net Cash Flow and Net
Operating Income audits, and other expenses incurred by Lender and reimbursed by
Borrower under this Agreement and the other Loan Documents, Capital Expenditures
specifically identified in a Capital Expenditures Budget (as defined in Schedule
2.4), deposits to the Capital Improvements Reserve required by Lender, wages,
salaries, and personnel expenses, but excluding Debt Service, Capital
Expenditures unless specifically included in a Capital Expenditures Budget, any
of the foregoing expenses which are paid from deposits to cash reserves
previously included as Operating Expenses, any payment or expense for which
Operating Lessee was or is to be reimbursed from proceeds of the Loan or
insurance or by any third party, and any non-cash charges such as depreciation
and amortization. Any management fee or other expense payable to Operating
Lessee or to an Affiliate of Operating Lessee shall be included as an Operating
Expense only with Lender's prior approval. Operating Expenses shall not include
federal, state or local income taxes or legal and other professional fees
unrelated to the operation of the Projects.
"OPERATING LEASE" means that Master Lease between Borrower, as
Lessor, and Operating Lessee, as Lessee, under which Borrower leases Broadway,
Summit, and Parkplace to Operating Lessee for the operation of retirement
communities or senior living centers, together with any modifications,
amendments, restatements, or subsequent leases in connection with the HCPI
Transaction that specifically replace the foregoing Master Lease, and that may
include other subsidiaries of ARCSPE as additional Lessors and/or Lessees.
"OPERATING LESSEE" means Fort Austin Limited Partnership, a
Texas limited partnership whose sole limited partner is ARC Partners II, Inc., a
Tennessee corporation, which is owned by ARCSPE, and the operator of the
Projects.
"OPERATING REVENUES" means all cash receipts of Borrower and
Operating Lessee from leasing and operation of the Projects or otherwise arising
in respect of the Projects after the date hereof which are properly allocable to
the Projects for the applicable period, including (a) gross resident service
revenues, including revenues from companion care and therapy services, less
contractual allowances and provisions for uncollectible accounts, free care and
discounted care, if any, (b) non-operating revenues, (c) entrance fees actually
paid, if any, net of refunds, (d) revenues from parking agreements, concession
fees and charges and other miscellaneous operating revenues, (e) proceeds from
rental or business interruption insurance, (f) proceeds of any loans (other than
the Loan and any refinancing of the Loan) obtained by Borrower or Operating
Lessee after the date hereof which are secured by a Project (less only
reasonable and customary expenses incurred in procuring and closing such loan
and actually paid in cash to individuals or entities other than Borrower or
Operating Lessee or any Affiliate of Borrower or Operating Lessee and without
implying any consent of Lender to the granting of any security for any such
loans), (g) withdrawals from cash reserves (except to the extent any operating
expenses paid therewith are excluded from Operating Expenses). Operating
Revenues shall not include (1) security deposits and ▇▇▇▇▇▇▇ money deposits
until they are forfeited by the depositor, (2) advance rentals until they are
earned, (3) proceeds from a sale or other disposition, (4) any gain or loss
resulting from the early extinguishment of indebtedness or the sale, exchange or
other disposition of properties not in the ordinary course of business, (5)
gifts, grants, bequests or donations restricted as to use by the donor or
grantor for a purpose inconsistent with the payment of Debt Service, or (6)
insurance proceeds (other than rental or business interruption
7
proceeds) and condemnation proceeds. For purposes of any calculation that is
made with reference to both Adjusted Operating Revenues and Adjusted Operating
Expenses, any deduction from gross resident service revenues otherwise required
by the preceding provisions of this definition shall not be made if and to the
extent that the amount of such deduction is included in Adjusted Operating
Expenses.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, trustee, estate, limited
liability company, unincorporated organization, real estate investment trust,
government or any agency or political subdivision thereof, or any other form of
entity.
"POTENTIAL DEFAULT" means the occurrence of any event or
condition which, with the giving of notice, the passage of time, or both, would
constitute an Event of Default.
"PARKPLACE" means Parkplace Retirement Community, consisting
of approximately 173 independent residential living units, and 53 assisted
living units on 1.623 acres located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in Denver, Colorado,
including adequate parking for automobiles, and more particularly described on
Exhibit A.
"PROJECTS" means, collectively, Broadway, Summit, Parkplace,
and any other retirement communities acquired, constructed or developed by
Borrower and made subject to the Mortgage and the other Loan Documents, and the
term "PROJECT" shall mean and refer to any of the Projects and all related
facilities, other amenities, fixtures, and personal property owned by Borrower
and any improvements now or hereafter located on the real property related
thereto. Any property that is sold and released from the Mortgage shall not be a
Project after the date of such sale and release.
"RESIDENCY AGREEMENT" means (a) any lease, residency or other
rental agreement for the occupancy of residential living units of any Project,
(b) any admission and financial agreement for the use and occupancy of an
assisted living unit of any Project, (c) any health center admission and
financial agreement (private payment) or health center admission agreement
(Medicare payment) and (d) any other express or implied agreement for the
occupancy of nursing beds in a Project or for space in or use of the Project.
"RESIDENT" means any resident of a Project under a Residency
Agreement.
"SINGLE PURPOSE ENTITY" shall mean a Person (other than an
individual, a government, or any agency or political subdivision thereof), which
exists solely for the purpose of owning the Projects, conducts business only in
its own name, does not engage in any business or have any assets unrelated to
the Projects (other than facilities which previously were Projects and were
released under Section 2.5 of this Agreement), does not have any indebtedness
other than as permitted by this Agreement, has its own separate books, records,
and accounts (with no commingling of assets), holds itself out as being a Person
separate and apart from any other Person, and observes corporate and partnership
formalities independent of any other entity, and which otherwise constitutes a
single purpose, bankruptcy remote entity as determined by Lender.
"SITE ASSESSMENT" means an environmental engineering report
for a Project prepared by an engineer engaged by Lender at Borrower's expense,
and in a manner satisfactory
8
to Lender, based upon an investigation relating to and making appropriate
inquiries concerning the existence of Hazardous Materials on or about a Project,
and the past or present discharge, disposal, release or escape of any such
substances, all consistent with good customary and commercial practice, and
certified for the use and reliance by Lender and its Affiliates, successors and
assigns.
"STATE" means the State of Texas.
"STATE AGENCIES" means any governmental authority having
jurisdiction over Borrower, any Joinder Party or any Project, including, with
respect to Broadway and Summit, the Texas Department of Health and the Texas
Department of Human Services, and with respect to Parkplace, the Colorado
Department of Public Health and Environment and the Colorado Department of
Health Care Policy and Financing, and any other governmental authorities having
enforcement authority over the statutes, rulings, rules, regulations, permits,
certificates and ordinances promulgated with respect to Borrower and Joinder
Party, or any Project.
"SUMMIT" means Summit at Westlake Hills Retirement Community
consisting of approximately 149 independent residential living units, 30
assisted living units, and a 90-bed skilled/intermediate care health center on
14.003 acres located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, including
parking for 212 automobiles, and more particularly described on Exhibit A.
"YIELD MAINTENANCE AMOUNT" shall have the meaning assigned to
such term in Schedule 2.3(e).
ARTICLE 2
LOAN TERMS
Section 2.1 THE LOAN. The Loan shall be funded in one or more advances
and repaid in accordance with this Agreement. The initial advance of the Loan
shall be made upon Borrower's satisfaction of the conditions to initial advance
described in Schedule 2.1, Part A, and shall be in an amount equal to
$95,700,000. The Loan shall be advanced for payment of those costs set forth in
the Budget, with any excess proceeds (that is, any allocated funds in excess of
the actual amount spent in any Budget category) being applied to reduce the
principal balance of the ▇▇▇▇▇▇ Loans.
Section 2.2 INTEREST RATE; LATE CHARGE. The outstanding principal
balance of the Loan (including any amounts added to principal under the Loan
Documents) shall bear interest as follows:
(a) $62,330,000 of the principal balance of the Loan shall bear
interest at eight and twenty one-hundredths percent (8.20%) per annum (the
"FIXED RATE") until December 31, 2002 and thereafter shall bear interest at the
Floating Rate; however, Borrower may at any time before December 31, 2002 and on
30 days prior notice to Lender and payment of the Yield Maintenance Amount,
convert the interest rate on such $62,330,000 portion of the principal balance
of the Loan to a rate of interest equal to the greater of (i) three and
ninety-five one hundredths percent (3.95%) per annum in excess of the LIBOR Rate
or (ii) six and seventy-five one hundredths percent (6.75%) per annum (the
"FLOATING RATE"); and
9
(b) Prior to January 1, 2003, the principal balance of the Loan
in excess of $62,330,000 and from and after January 1, 2003 the entire principal
balance of the Loan shall bear interest at the Floating Rate.
Interest shall be computed on the basis of a fraction, the denominator of which
is three hundred sixty (360) and the numerator of which is the actual number of
days elapsed from the date of the initial advance or the date on which the
immediately preceding payment was due. If Borrower fails to pay any installment
of interest or principal within five (5) days after the date on which the same
is due, Borrower shall pay to Lender a late charge on such past-due amount, as
liquidated damages and not as a penalty, equal to the greater of (A) interest at
the Default Rate on such amount from the date when due until paid, or (B) five
percent (5%) of such amount, but not in excess of the maximum amount of interest
allowed by applicable law. While any Event of Default exists, the Loan shall
bear interest at the Default Rate.
Section 2.3 TERMS OF PAYMENT. The Loan and the interest thereon shall
be evidenced by, and be payable as hereinafter provided (the Loan and the
interest thereon, together with any other sums payable by Borrower under the
Loan Documents, are herein collectively called the "OBLIGATIONS"), and, from and
after the date hereof shall be payable as follows:
(a) INTEREST AND PRINCIPAL. Commencing on June 1, 2002, Borrower
shall pay interest in arrears at the rate or rates set forth in Section 2.2, and
a principal installment based on a 25-year monthly amortization of the principal
balance of the Loan in equal monthly installments of principal and interest at
the rate of seven percent (7%) per annum, on the first day of each month until
all amounts due under the Loan Documents are paid in full.
(b) PRINCIPAL AMORTIZATION. In addition to monthly payments of
interest and principal hereunder, if for any calendar quarter (January through
March, April through June, July through September, or October through December)
the Debt Service Coverage is less than 1.20:1, then, in addition to regular
monthly installments of interest and principal, Borrower and Operating Lessee
shall pay to Lender on the first (1st) day of each month commencing with the
first day of the second calendar month following such calendar quarter and
continuing until Borrower has demonstrated a Debt Service Coverage of at least
1.20:1 for at least two (2) consecutive calendar quarters, all Net Cash Flow
from the Projects, such Net Cash Flow to be applied in reduction of the
principal balance of the Loan (subject to any Yield Maintenance Amount that may
be owing).
(c) LOAN ADMINISTRATION FEE. Commencing June 1, 2002 and
continuing on the first day of each month thereafter so long as the Loan is
outstanding, Borrower shall pay to Lender, in monthly installments of $7,083.40
each, an annual loan administration fee of $85,000 per year (the "LOAN
ADMINISTRATION FEE").
(d) MATURITY. On the Maturity Date, Borrower shall pay to Lender
all outstanding principal, accrued and unpaid interest, and any other amounts
due under the Loan Documents.
(e) PREPAYMENT. Borrower may not prepay any portion of the Loan
before December 1, 2002. Commencing December 1, 2002, the Loan may be prepaid as
follows:
10
(1) From and after December 1, 2002 and before June 1, 2003,
but only in connection with a sale or refinancing as allowed for a
partial release under Section 2.5, Borrower may prepay the Loan in whole
or in part, upon ten (10) days prior written notice to Lender, and on
any regularly scheduled interest payment due date, by paying Lender all
or a portion of the principal balance of the Loan and a prepayment fee
equal to one and one-half percent (1.5%) of the amount prepaid.
(2) From and after June 1, 2003 and before June 1, 2004, but
only in connection with a sale or refinancing as allowed for a partial
release under Section 2.5, Borrower may prepay the Loan in whole or in
part, upon ten (10) days prior written notice to Lender, and on any
regularly scheduled interest payment due date, by paying Lender all or a
portion of the principle balance of the Loan and a prepayment fee equal
to one percent (1%) of the amount prepaid.
(3) From and after June 1, 2004, Borrower may prepay all or
a portion of the Loan, in whole or in part, upon ten (10) days prior
written notice to Lender and on any regularly scheduled interest payment
due day, by paying Lender all or a portion of the principal balance of
the Loan, but without any premium or penalty.
In addition, Borrower may not prepay the Loan in whole or in part in any amount
which would reduce the unpaid principal balance of the Loan to less than
$62,330,000 at any time before December 31, 2002, or the earlier conversion of
the Fixed Rate portion of the Loan to a Floating Rate.
(f) MANDATORY REPAYMENT. If at any time the number of Projects
encumbered by the Mortgage is fewer than two, Lender may upon ninety (90) days
prior notice to Borrower declare the unpaid principal balance of the Loan,
together with all accrued and unpaid interest and other charges, any prepayment
fee required under Section 2.3(e), and the Yield Maintenance Amount for payment
of any portion of the Loan which is payable at the Fixed Rate, due and payable,
and the Loan then shall be due and payable at the expiration of the ninety
(90) - day period after Lender's notice to Borrower.
(g) APPLICATION OF PAYMENTS. All payments received by Lender
under the Loan Documents shall be applied: first, to any fees and expenses due
to Lender under the Loan Documents; second, to any Default Rate interest or late
charges; third, to accrued and unpaid interest; fourth, to the principal sum of
the Loan. Lender reserves the right to require any payment on the Loan, whether
such payment is of a regular installment or represents a prepayment or final
payment, to be by wired federal funds or other immediately available funds.
Section 2.4 SECURITY. The Loan shall be secured by the Mortgage, the
Assignments of Rents and Leases, and the other Loan Documents. As further
security for the Loan, Borrower shall fund the Capital Improvements Reserve in
accordance with Schedule 2.4.
Section 2.5 PARTIAL RELEASES. Upon either (a) a sale of a Project to an
entity which is owned by a third party which is not an Affiliate of Borrower or
ARC or ARCSPE, or (b) for Summit or Broadway, a refinancing or recapitalization
of Summit or Broadway in connection with the expansion of either such Project,
Borrower shall have the right to obtain a partial release
11
of such Project from the Mortgage and the other Loan Documents on the following
terms and conditions:
(a) No Event of Default or Potential Default shall have occurred
and be continuing hereunder;
(b) Borrower shall submit a prepared release instrument (the
"PARTIAL RELEASE") in form and substance satisfactory to Lender, accompanied
with information necessary for Lender to process the Partial Release, including
the name and address of the title insurance company, if any, to whose attention
the Partial Release should be directed, numbers that reference the Partial
Release (i.e., order numbers, release numbers, etc.) and the date when the
Partial Release is to become effective. Borrower shall also specify the name and
address of the prospective purchaser of or lender for the Project being
released, and such other documents and information as Lender may reasonably
request;
(c) Borrower shall make a payment in reduction of the
outstanding principal balance of the Loan in an amount of at least 115% of the
Allocated Loan Balance of the Project being released and any additional payment
in reduction of the principal balance of the Loan which may be required in order
that after the Partial Release (1) the Cash on Cash Return will be equal to or
greater than the Cash on Cash Return immediately before the Partial Release and
equal to or greater than 14.25%, and (2) the Debt Service Coverage will be equal
to or greater than the Debt Service Coverage immediately before the Partial
Release and equal to or greater than 1.75:1, and (3) the Loan to Value Ratio
will be not more than 80%;
(d) All accrued but unpaid interest on the outstanding principal
balance of the Loan shall be paid at the time the Partial Release is made; and
(e) Borrower shall pay all costs and expenses of Lender arising
in connection with the Partial Release, including but not limited to, legal fees
of Lender's counsel, all title insurance premiums arising as a result of
endorsements required by Lender in connection with the Partial Release and all
other costs arising in connection with the execution and delivery of the Partial
Release.
Section 2.6 EXTENSION OF MATURITY DATE. Provided no Event of Default or
Potential Default exists, Lender shall on request of Borrower not more than
ninety (90) days before and not fewer than sixty (60) days before the Maturity
Date, or any extension thereof, extend the Maturity Date for up to two (2)
additional one-year periods upon the following conditions:
(a) receipt and approval by Lender of a satisfactory current
environmental Site Assessment and engineering report for each of the Projects;
(b) determination by Lender, based on Lender's audit of the
Operating Revenues and Operating Expenses of the Projects, that the Net
Operating Income of the Projects provides a Cash on Cash Return of at least
13.0% per annum, a Debt Service Coverage of at least 1.45:1, and a Loan to Value
Ratio of not more than 80%;
(c) receipt by Lender of an extension fee in the amount of
one-half percent (0.5%) of the principal balance of the Loan;
12
(d) Borrower's purchase of a further Interest Rate Protection
Agreement satisfactory to Lender, and the assignment of such Interest Rate
Protection Agreement to Lender, in form satisfactory to Lender;
(e) receipt by Lender of an estoppel certificate executed by
Operating Lessee and confirming that the Operating Lease is in full force and
effect, is not subject to any offsets, credits or defenses, and as to such other
matters as Lender reasonably shall request.
(f) execution by Borrower of an agreement, in form and substance
satisfactory to Lender, renewing and extending the Maturity Date of the Loan and
the liens, security interests and other obligations created by the Mortgages and
the other Loan Documents for the applicable extension period; and
(g) payment by Borrower of all costs and expenses of extending
the Maturity Date, including, without limitation, the fees and expenses of
Lender's counsel, recording costs, and any endorsement to title insurance
required by Lender.
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.1 INSURANCE. Borrower and Operating Lessee shall maintain
insurance as follows:
(a) CASUALTY; BUSINESS INTERRUPTION. Borrower and Operating
Lessee shall keep the Projects insured against damage by fire and the other
hazards covered by a standard extended coverage and all-risk insurance policy
for the full insurable value thereof (without reduction for depreciation or
co-insurance), and shall maintain such other casualty insurance as reasonably
required by Lender. Borrower and Operating Lessee shall keep any Project that is
located in an area identified by the Federal Emergency Management Agency as an
area having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968 (and any successor act
thereto) insured against loss by flood in an amount at least equal to the lesser
of (1) the maximum amount of the Loan or (2) the maximum limit of coverage
available under said act. Borrower and Operating Lessee shall maintain use and
occupancy insurance covering, as applicable, rental income or business
interruption, with coverage in an amount not less than twelve (12)-months
anticipated gross rental income or gross business earnings, as applicable in
each case, attributable to the Projects. Neither Borrower nor Operating Lessee
shall maintain any separate or additional insurance which is contributing in the
event of loss unless it is properly endorsed and otherwise satisfactory to
Lender in all respects. The proceeds of insurance paid on account of any damage
or destruction to a Project shall be paid to Lender to be applied as provided in
Section 3.2.
(b) LIABILITY. Borrower and Operating Lessee shall maintain (1)
commercial general liability insurance with respect to each Project providing
for limits of liability of not less than $11,000,000 for both injury to or death
of a person and for property damage per occurrence, and (2) other liability
insurance as reasonably required by Lender.
(c) FORM AND QUALITY. All insurance policies shall be endorsed
in form and substance acceptable to Lender to name Lender as an additional
insured, loss payee or mortgagee
13
thereunder, as its interest may appear, with loss payable to Lender, without
contribution, under a standard New York (or local equivalent) mortgagee clause.
All such insurance policies and endorsements shall be fully paid for and contain
such provisions and expiration dates and be in such form and issued by such
insurance companies licensed to do business in the State, with a rating of "A-X"
or better as established by Best's Rating Guide (or an equivalent rating
approved in writing by Lender). Each policy shall provide that such policy may
not be canceled or materially changed except upon thirty (30) days' prior
written notice of intention of non-renewal, cancellation or material change to
Lender and that no act or thing done by Borrower shall invalidate any policy as
against Lender. At Lender's request from time to time, Borrower shall furnish to
Lender true and correct copies of all policies of insurance required hereunder.
If Borrower or Operating Lessee fails to maintain insurance in compliance with
this Section 3.1, Lender may obtain such insurance and pay the premium therefor
and Borrower and Operating Lessee shall, on demand, reimburse Lender for all
expenses incurred in connection therewith. Borrower and Operating Lessee shall
assign the policies or proofs of insurance to Lender, in such manner and form
that Lender and its successors and assigns shall at all times have and hold the
same as security for the payment of the Loan. Borrower and Operating Lessee
shall deliver copies of all original policies certified to Lender by the
insurance company or authorized agent as being true copies, together with the
endorsements required hereunder. The proceeds of insurance policies coming into
the possession of Lender shall not be deemed trust funds, and Lender shall be
entitled to apply such proceeds as herein provided.
(d) ADJUSTMENTS. Borrower and Operating Lessee shall give
immediate written notice of any loss to the insurance carrier and to Lender.
Borrower and Operating Lessee hereby irrevocably authorize and empower Lender,
as attorney-in-fact for Borrower and Operating Lessee coupled with an interest,
to make proof of loss, to appear in and prosecute any action arising from such
insurance policies, to collect and receive insurance proceeds, and to deduct
therefrom Lender's expenses incurred in the collection of such proceeds, and if
an Event of Default or Potential Default exists, to adjust and compromise any
claim under insurance policies. Nothing contained in this Section 3.1(d),
however, shall require Lender to incur any expense or take any action hereunder.
Section 3.2 USE AND APPLICATION OF INSURANCE PROCEEDS. Lender shall
apply insurance proceeds (other than proceeds of rental income or business
interruption insurance which shall constitute Operating Revenues) to costs of
restoring a damaged Project or the Loan as follows:
(a) if the loss is less than or equal to $300,000, Lender shall
apply the insurance proceeds to restoration provided (1) no Event of Default or
Potential Default exists, and (2) Borrower promptly commences and is diligently
pursuing restoration of the Project;
(b) if the loss exceeds $300,000 but is not more than 10% of the
replacement value of the improvements (for projects containing multiple phases
or stand alone structures, such calculation to be based on the damaged phase or
structure, not the project as a whole), Lender shall apply the insurance
proceeds to restoration provided that at all times during such restoration (1)
no Event of Default or Potential Default exists; (2) Lender determines that
there are sufficient funds available to restore and repair the Project to a
condition approved by Lender; (3) Lender determines that the Net Operating
Income of the Projects during restoration will be
14
sufficient to pay Debt Service; (4) Lender determines that after restoration the
Debt Service Coverage will be at least 1.48:1, the Cash on Cash Return will be
at least 12.70% and the Loan to Value Ratio will not exceed 80%; (5) Lender
determines that restoration and repair of the Project to a condition approved by
Lender will be completed within six months after the date of loss or casualty
and in any event ninety (90) days prior to the Maturity Date; and (6) Borrower
or Operating Lessee promptly commences and is diligently pursuing restoration of
the Project;
(c) if the conditions set forth above are not satisfied or the
loss exceeds the maximum amount specified in Section 3.2(b) above, in Lender's
sole discretion, Lender may apply any insurance proceeds it may receive to the
payment of the Loan or allow all or a portion of such proceeds to be used for
the restoration of the Project; and
(d) insurance proceeds applied to restoration will be disbursed
on receipt of satisfactory plans and specifications, contracts and subcontracts,
schedules, budgets, lien waivers and architects' certificates, and otherwise in
accordance with prudent commercial construction lending practices for
construction loan advances, including, as applicable, the advance conditions
under Schedule 2.1.
Section 3.3 CONDEMNATION AWARDS. Borrower and Operating Lessee shall
immediately notify Lender of the institution of any proceeding for the
condemnation or other taking of a Project or any portion thereof. Lender may
participate in any such proceeding and Borrower and Operating Lessee will
deliver to Lender all instruments necessary or required by Lender to permit such
participation. Without Lender's prior consent, Borrower and Operating Lessee,
individually or together, (a) shall not agree to any compensation or award, and
(b) shall not take any action or fail to take any action which would cause the
compensation to be determined. All awards and compensation for the taking or
purchase in lieu of condemnation of a Project or any part thereof are hereby
assigned to and shall be paid to Lender. Borrower and Operating Lessee authorize
Lender to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor, and in Lender's sole discretion to apply the
same toward the payment of the Loan, notwithstanding that the Loan may not then
be due and payable, or to the restoration of the Project; however, if the award
is less than or equal to $300,000 and Borrower and Operating Lessee request that
such proceeds be used for non-structural site improvements (such as landscape,
driveway, walkway and parking area repairs) required to be made as a result of
such condemnation, Lender will apply the award to such restoration in accordance
with disbursement procedures applicable to insurance proceeds provided there
exists no Potential Default or Event of Default. Borrower and Operating Lessee,
upon request by Lender, shall execute all instruments requested to confirm the
assignment of the awards and compensation to Lender, free and clear of all
liens, charges or encumbrances.
Section 3.4 IMPOUNDS. Borrower and Operating Lessee shall deposit with
Lender, monthly, one-twelfth (1/12th) of the annual charges for real estate
taxes, assessments and similar charges relating to the Projects. At or before
the initial advance of the Loan, Borrower and Operating Lessee shall deposit
with Lender a sum of money which together with the monthly installments will be
sufficient to make each of such payments thirty (30) days prior to the date any
delinquency or penalty becomes due with respect to such payments. Deposits shall
be made on the basis of Lender's estimate from time to time of the charges for
the current year (after giving effect to any reassessment or, at Lender's
election, on the basis of the charges for the prior
15
year, with adjustments when the charges are fixed for the then current year).
All funds so deposited shall be held by Lender in an interest-bearing account
controlled by Lender and may be commingled with Lender's general funds. Borrower
and Operating Lessee hereby grant to Lender a security interest in all funds so
deposited with Lender for the purpose of securing the Loan. While an Event of
Default exists, the funds deposited may be applied in payment of the charges for
which such funds have been deposited, or to the payment of the Loan or any other
charges affecting the security of Lender, as Lender may elect, but no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by Lender. Borrower and Operating Lessee shall furnish
Lender with bills for the charges for which such deposits are required at least
thirty (30) days prior to the date on which the charges first become payable. If
at any time the amount on deposit with Lender, together with amounts to be
deposited by Borrower or Operating Lessee before such charges are payable, is
insufficient to pay such charges, Borrower or Operating Lessee shall deposit any
deficiency with Lender immediately upon demand. Lender shall pay such charges
when the amount on deposit with Lender is sufficient to pay such charges and
Lender has received a ▇▇▇▇ for such charges. Pursuant to Section 8.2, Borrower
and Operating Lessee unconditionally and irrevocably covenant and agree to pay
all real estate taxes, assessments, and similar charges on the Projects, prior
to the delinquency thereof.
ARTICLE 4
ENVIRONMENTAL MATTERS
Section 4.1 CERTAIN DEFINITIONS. As used herein, the following terms
have the meanings indicated:
(a) "ENVIRONMENTAL LAWS" means any federal, state or local law
(whether imposed by statute, or administrative or judicial order, or common
law), now or hereafter enacted, governing health, safety, industrial hygiene,
the environment or natural resources, or Hazardous Materials, including, such
laws governing or regulating the use, generation, storage, removal, recovery,
treatment, handling, transport, disposal, control, discharge of, or exposure to,
Hazardous Materials.
(b) "HAZARDOUS MATERIALS" means (1) petroleum or chemical
products, whether in liquid, solid, or gaseous form, or any fraction or
by-product thereof, (2) asbestos or asbestos-containing materials, (3)
polychlorinated biphenyls (pcbs), (4) radon gas, (5) underground storage tanks,
(6) any explosive or radioactive substances, (7) lead or lead-based paint, or
(8) any other substance, material, waste or mixture which is or shall be listed,
defined, or otherwise determined by any governmental authority to be hazardous,
toxic, dangerous or otherwise regulated, controlled or giving rise to liability
under any Environmental Laws.
Section 4.2 REPRESENTATIONS AND WARRANTIES ON ENVIRONMENTAL MATTERS. To
the knowledge of Borrower and Operating Lessee, except as set forth in the Site
Assessment, (a) no Hazardous Material is now or was formerly used, stored,
generated, manufactured, installed, disposed of or otherwise present at or about
any Project or any property adjacent to a Project (except for cleaning and other
products currently used in connection with the routine maintenance or repair of
the Project in full compliance with Environmental Laws), (b) all permits,
licenses, approvals and filings required by Environmental Laws have been
obtained, and
16
the use, operation and condition of the Projects do not, and did not previously,
violate any Environmental Laws, and (c) no civil, criminal or administrative
action, suit, claim, hearing, investigation or proceeding has been brought or
been threatened, nor have any settlements been reached by or with any parties or
any liens imposed in connection with any Project concerning Hazardous Materials
or Environmental Laws.
Section 4.3 COVENANTS ON ENVIRONMENTAL MATTERS.
(a) Borrower and Operating Lessee shall (1) comply strictly and
in all respects with applicable Environmental Laws; (2) notify Lender
immediately upon discovery of any spill, discharge, release or presence of any
Hazardous Material at, upon, under, within, contiguous to or otherwise affecting
a Project by Borrower or Operating Lessee; (3) promptly remove such Hazardous
Materials and remediate a Project in full compliance with Environmental Laws and
in accordance with the recommendations and specifications of an independent
environmental consultant approved by Lender; and (4) promptly forward to Lender
copies of all orders, notices, permits, applications or other communications and
reports in connection with any spill, discharge, release or the presence of any
Hazardous Material or any other matters relating to the Environmental Laws or
any similar laws or regulations, as they may affect a Project, Borrower or
Operating Lessee.
(b) Borrower and Operating Lessee shall not cause, shall
prohibit any other Person within the Control of Borrower or Operating Lessee
from causing, and shall use prudent, commercially reasonable efforts to prohibit
other Persons (including tenants) from (1) causing any spill, discharge or
release, or the use, storage, generation, manufacture, installation, or
disposal, of any Hazardous Materials at, upon, under, within or about a Project
or the transportation of any Hazardous Materials to or from a Project (except
for cleaning and other products used in connection with routine maintenance or
repair of the Project in full compliance with Environmental Laws), (2)
installing any underground storage tanks at a Project, or (3) conducting any
activity that requires a permit or other authorization under Environmental Laws.
(c) Borrower and Operating Lessee shall provide to Lender, at
Borrower's and Operating Lessee's expense promptly upon the written request of
Lender from time to time, a Site Assessment or, if required by Lender, an update
to any existing Site Assessment, to assess the presence or absence of any
Hazardous Materials and the potential costs in connection with abatement,
cleanup or removal of any Hazardous Materials found on, under, at or within a
Project. Borrower and Operating Lessee shall pay the cost of no more than one
such Site Assessment or update in any twelve (12)-month period, unless Lender's
request for a Site Assessment is based on information provided under Section
4.3(a), a reasonable suspicion of Hazardous Materials at or near a Project
(exclusive of the matters established in the Site Assessment), a breach of
representations under Section 4.2, or an Event of Default, in which case any
such Site Assessment or update shall be at Borrower's expense.
Section 4.4 ALLOCATION OF RISKS AND INDEMNITY. As between Borrower and
Lender and as between Operating Lessee and Lender, all risk of loss associated
with non-compliance with Environmental Laws, or with the presence of any
Hazardous Material at, upon, within, contiguous to or otherwise affecting a
Project, shall lie solely with Borrower and Operating Lessee. Accordingly,
Borrower and Operating Lessee shall bear all risks and costs associated
17
with any loss (including any loss in value attributable to Hazardous Materials),
damage or liability therefrom, including all costs of removal of Hazardous
Materials or other remediation required by Lender or by law. Borrower and
Operating Lessee shall indemnify, defend and hold Lender harmless from and
against all loss, liabilities, damages, claims, costs and expenses (including
reasonable costs of defense) arising out of or associated, in any way, with the
non-compliance with Environmental Laws, or the existence of Hazardous Materials
in, on, or about a Project, or a breach of any representation, warranty or
covenant contained in this Article 4, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute or common law,
including those arising from the joint, concurrent, or comparative negligence of
Lender; however, Borrower and Operating Lessee shall not be liable under such
indemnification to the extent such loss, liability, damage, claim, cost or
expense results solely from Lender's gross negligence or willful misconduct
occurring after foreclosure. Borrower's and Operating Lessee's obligations under
this Section 4.4 shall arise upon the discovery of the presence of any Hazardous
Material, whether or not any governmental authority has taken or threatened any
action in connection with the presence of any Hazardous Material, and whether or
not the existence of any such Hazardous Material or potential liability on
account thereof is disclosed in the Site Assessment and shall continue
notwithstanding the repayment of the Loan or any transfer or sale of any right,
title and interest in a Project (by foreclosure, deed in lieu of foreclosure or
otherwise).
Section 4.5 COLLATERAL ASSIGNMENT OF INDEMNITIES. Borrower and
Operating Lessee hereby collaterally assign all of the rights and benefits (but
none of the obligations or liabilities) under any indemnity agreement or
provision with respect to one or more of the Projects, including any
indemnification agreement for the benefit of Borrower or Operating Lessee
executed by any previous owner of any of the Projects.
Section 4.6 NO WAIVER. Notwithstanding any provision in this Article 4
or elsewhere in the Loan Documents, or any rights or remedies granted by the
Loan Documents, Lender does not waive and expressly reserves all rights and
benefits now or hereafter accruing to Lender under the "security interest" or
"secured creditor" exception under applicable Environmental Laws, as the same
may be amended. No action taken by Lender pursuant to the Loan Documents shall
be deemed or construed to be a waiver or relinquishment of any such rights or
benefits under the "security interest exception."
ARTICLE 5
LEASING MATTERS
Section 5.1 REPRESENTATIONS AND WARRANTIES ON RESIDENCY AGREEMENTS.
Operating Lessee represents and warrants to Lender with respect to Residency
Agreements of the Projects that: (a) to the knowledge of Operating Lessee, the
rent roll last delivered to Lender is true and correct, and the Residency
Agreements are valid and in and full force and effect; (b) the Residency
Agreements (including amendments) are in writing, and, to the knowledge of
Operating Lessee, there are no material oral agreements with respect thereto;
(c) the copies of the Residency Agreements available to be furnished to Lender
at Lender's request are true and complete; (d) to the knowledge of Operating
Lessee, neither the landlord nor any resident is in default under any of the
Residency Agreements; (e) Operating Lessee has no knowledge of any notice of
termination or default with respect to any Residency Agreement; (f) Operating
Lessee
18
has not assigned or pledged any of the Residency Agreements, the rents or any
interests therein except to Lender; (g) except as set forth in the rent roll
last delivered to Lender, no resident or other party has an option to purchase
all or any portion of a Project; and (h) no resident has prepaid more than one
month's rent in advance (except for bona fide security deposits not in excess of
an amount equal to two month's rent).
Section 5.2 STANDARD RESIDENCY AGREEMENT FORM; MATERIAL LEASES. All
Residency Agreements and other rental arrangements shall in all respects be
approved by Lender and shall be on a standard form approved by Lender with no
material unfavorable modifications (except as approved by Lender). Within ten
(10) days after Lender's request, Borrower and Operating Lessee shall furnish to
Lender a statement of all resident security deposits, and copies of all
Residency Agreements not previously delivered to Lender, certified by Borrower
as being true and correct. Further, except for the Operating Lease, neither
Borrower nor Operating Lessee shall enter into any lease for occupancy of space
in any Project of in excess of 10,000 rentable square feet or five percent (5%)
of the total rentable square feet of a Project without the prior written
approval of Lender.
Section 5.3 COVENANTS. Operating Lessee (a) shall perform in all
material respects the obligations which Operating Lessee is required to perform
under the Residency Agreements; (b) shall enforce the obligations to be
performed by the residents in accordance with the normal prudent operation of
the Projects; (c) shall not collect any rents for more than thirty (30) days in
advance of the time when the same shall become due, except for bona fide
security deposits not in excess of an amount equal to two months rent; (d) shall
not enter into any ground lease or master lease of any part of a Project; (e)
shall not further assign or encumber any Residency Agreement; (f) shall not,
except in the ordinary course of business and the normal prudent operation of
the Projects, cancel or accept surrender or termination of any Residency
Agreement; and (g) shall not, except in the ordinary course of business and the
normal prudent operation of the Projects, modify or amend any Residency
Agreement and any action in violation of clauses (e), (f), and (g) of this
Section 5.3, shall be void at the election of Lender.
Section 5.4 OPERATING LEASE. Borrower and Operating Lessee represent
and warrant to Lender that (a) the Operating Lease furnished to Lender is true,
correct and complete, (b) neither Borrower nor Operating Lessee is in default
under the Operating Lease, (c) Borrower has not pledged or assigned the
Operating Lease or any interest therein, except to Lender; and (d) Operating
Lessee has not prepaid more than one month's rent in advance under the Operating
Lease. Borrower and Operating Lessee shall perform in all material respects the
obligations which Borrower and Operating Lessee are required to perform under
the Operating Lease. Borrower shall enforce the obligations to be performed by
Operating Lease under the Operating Lease, shall not collect any rents under the
Operating Lease for more than thirty (30) days in advance of the time when the
same shall become due, shall not further assign or encumber the Operating Lease,
and shall not modify, accrue, terminate or cancel any obligation or liability
under the Operating Lease and any action by Borrower or Operating Lessee in
violation of this Section 5.4 shall be void at the election of Lender.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Borrower and Operating Lessee represent and warrant to Lender that:
Section 6.1 ORGANIZATION AND POWER. Borrower and each Borrower Party is
duly organized, validly existing and in good standing under the laws of the
state of its formation or existence, and is in compliance with legal
requirements applicable to doing business in the State. Borrower is not a
"foreign person" within the meaning of ss. 1445(f)(3) of the Internal Revenue
Code.
Section 6.2 VALIDITY OF LOAN DOCUMENTS. The execution, delivery and
performance by Borrower and each Borrower Party of the Loan Documents: (a) are
duly authorized and do not require the consent or approval of any other party or
governmental authority which has not been obtained; and (b) will not violate any
law or result in the imposition of any lien, charge or encumbrance upon the
assets of any such party, except as contemplated by the Loan Documents. The Loan
Documents constitute the legal, valid and binding obligations of Borrower and
each Borrower Party, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, or similar laws generally
affecting the enforcement of creditors' rights.
Section 6.3 LIABILITIES; LITIGATION.
(a) The financial statements last delivered by Borrower and
each Borrower Party are true and correct with no significant change since the
date of preparation. Except as disclosed in such financial statements, there are
no liabilities (fixed or contingent) affecting the Projects, Borrower or any
Borrower Party. Except as disclosed in such financial statements, there is no
litigation, administrative proceeding, investigation or other legal action
(including any proceeding under any state or federal bankruptcy or insolvency
law) pending or, to the knowledge of Borrower, threatened, against the Projects,
Borrower or any Borrower Party which if adversely determined could have a
material adverse effect on such party, a Project or the Loan.
(b) Neither Borrower nor any Borrower Party is contemplating
either the filing of a petition by it under state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property, and neither Borrower nor any Borrower Party has knowledge of any
Person contemplating the filing of any such petition against it.
Section 6.4 TAXES AND ASSESSMENTS. The Projects are comprised of one or
more parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot. There are no pending or, to the
knowledge of Borrower or Operating Lessee, proposed, special or other
assessments for public improvements or otherwise affecting a Project, nor are
there any contemplated improvements to any Project that may result in such
special or other assessments.
Section 6.5 OTHER AGREEMENTS; DEFAULTS. Neither Borrower, nor Operating
Lessee, nor any Borrower Party is a party to any agreement or instrument or
subject to any court order, injunction, permit, or restriction which might
adversely affect a Project or the business, operations, or condition (financial
or otherwise) of Borrower or any Borrower Party. Neither Borrower, nor Operating
Lessee, nor any Borrower Party is in violation of any agreement which
20
violation would have an adverse effect on a Project, Borrower, Operating Lessee,
or any Borrower Party or Borrower's or Operating Lessee's or any Borrower
Party's business, properties, or assets, operations or condition, financial or
otherwise.
Section 6.6 COMPLIANCE WITH LAW.
(a) Operating Lessee holds all licenses, permits, approvals
and provider agreements necessary to own, lease, operate and carry on its
business in the Projects, and such licenses, permits, approvals, and provider
agreements are valid and in full force and effect. Each Project is in compliance
with all applicable legal requirements and, to Borrower's or Operating Lessee's
knowledge, is free of structural defects, and all building systems contained
therein are in good working order, subject to ordinary wear and tear. No Project
constitutes, in whole or in part, a legally non-conforming use under applicable
legal requirements;
(b) No condemnation has been commenced or, to Borrower's or
Operating Lessee's knowledge, is contemplated with respect to all or any portion
of a Project or for the relocation of roadways providing access to a Project;
and
(c) Each Project has adequate rights of access to public ways
and is served by adequate water, sewer, sanitary sewer and storm drain
facilities. All public utilities necessary or convenient to the full use and
enjoyment of each Project are located in the public right-of-way abutting the
Project, and all such utilities are connected so as to serve the Project without
passing over other property, except to the extent such other property is subject
to a perpetual easement for such utility benefiting the Project. All roads
necessary for the full utilization of each Project for its current purpose have
been completed and dedicated to public use and accepted by all governmental
authorities.
Section 6.7 LOCATION OF BORROWER. Borrower's and Operating Lessee's
principal place of business and chief executive offices are located at the
address stated in Section 11.1.
Section 6.8 ERISA. Neither Borrower nor Operating Lessee has
established any pension plan for employees which would cause Borrower or
Operating Lessee to be subject to the Employee Retirement Income Security Act of
1974, as amended.
Section 6.9 MARGIN STOCK. No part of proceeds of the Loan will be used
for purchasing or acquiring any "margin stock" within the meaning of Regulations
G, T, U or X of the Board of Governors of the Federal Reserve System.
Section 6.10 TAX FILINGS. Borrower and each Borrower Party have filed
(or have obtained effective extensions for filing) all federal, state and local
tax returns required to be filed and have paid or made adequate provision for
the payment of all federal, state and local taxes, charges and assessments
payable by Borrower and each Borrower Party, respectively.
Section 6.11 SOLVENCY. Giving effect to the Loan, the fair saleable
value of Borrower's assets exceeds and will, immediately following the making of
the Loan, exceed Borrower's total liabilities, including, without limitation,
subordinated, unliquidated, disputed and contingent liabilities. The fair
saleable value of Borrower's assets is and will, immediately following the
making of the Loan, be greater than Borrower's probable liabilities, including
the maximum
21
amount of its contingent liabilities on its Debts as such Debts become absolute
and matured, Borrower's assets do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. Borrower does not intend
to, and does not believe that it will, incur Debts and liabilities (including
contingent liabilities and other commitments) beyond its ability to pay such
Debts as they mature (taking into account the timing and amounts of cash to be
received by Borrower and the amounts to be payable on or in respect of
obligations of Borrower).
Section 6.12 FULL AND ACCURATE DISCLOSURE. No statement of fact made by
or on behalf of Borrower or any Borrower Party in this Agreement or in any of
the other Loan Documents contains any untrue statement of a material fact or
omits to state any material fact necessary to make statements contained herein
or therein not misleading. There is no fact presently known to Borrower or
Operating Lessee which has not been disclosed to Lender which adversely affects,
nor as far as Borrower or Operating Lessee can foresee, might adversely affect,
the Projects or the business, operations or condition (financial or otherwise)
of Borrower or any Borrower Party.
Section 6.13 BORROWER SEPARATENESS. Borrower represents, warrants and
covenants as follows:
(a) Borrower does not own and will not own any asset or
property other than (1) the Projects, and (2) incidental personal property
necessary for the ownership or operation of the Projects.
(b) Borrower will not engage in any business other than the
ownership, management and operation of the Projects (or as otherwise set forth
in Borrower's Articles of Organization) and Borrower will conduct and operate
its business as presently conducted and operated.
(c) Borrower will not enter into any contract or agreement
with any Affiliate of the Borrower, any constituent party of Borrower, any
Joinder Party or any Affiliate of any constituent party or any Joinder Party,
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than any such party.
(d) Borrower shall not, without the prior written consent of
Lender, incur any Debt other than the Loan or other than accounts payable
incurred in the ordinary course of business, and no Debt other than the Loan may
be secured (subordinate or pari passu) by the Project.
(e) Borrower has not made and will not make any loans or
advances to any third party (including any affiliate or constituent party, any
Joinder Party or Affiliate of any constituent party or any Joinder Party), and
shall not acquire obligations or securities of its affiliates or any constituent
party.
(f) Borrower is and will remain solvent and Borrower will pay
its debts and liabilities (including, as applicable, shared personnel and
overhead expenses) from its assets as the same shall become due.
22
(g) Borrower has done or caused to be done and will do all
things necessary to observe organizational formalities and preserve its
existence, and Borrower will not, nor will Borrower permit any constituent party
or any Joinder Party to amend, modify or otherwise change the partnership
certificate, partnership agreements, articles of incorporation and bylaws,
operating agreement, trust or other organizational documents of Borrower or such
constituent party or Joinder Party without the prior written consent of Lender.
(h) Borrower will maintain all of its books, records,
financial statements and bank accounts separate from those if its Affiliates and
any constituent party and shall maintain its books, records, resolutions and
agreements as official records; provided, however, that Borrower may also be
included in consolidated financial statements of another Person, provided that
such consolidated financial statements contain a note indicating that Borrower
is a separate legal entity and Borrower's assets and liabilities are neither
available to pay the debts of the consolidated entity nor constitute obligations
of the consolidated entity and that the consolidated entity is not liable for
any of the liabilities of Borrower and, provided further, that so long as
Borrower's separate tax liability and its income and expenses are readily
determinable based upon a review of Borrower's books and records, it may file
consolidated tax returns.
(i) Borrower will be, and at all times will hold itself out to
the public as, a legal entity separate and distinct from any other entity
(including any Affiliate of Borrower, any constituent party of Borrower, any
Joinder Party or any Affiliate of any constituent party or Joinder Party), shall
correct any known misunderstanding regarding its status as a separate entity,
shall conduct business in its own name, shall not identify itself or any of its
Affiliates as a division or part of the other and shall maintain and utilize a
separate telephone number and separate stationery, invoices and checks.
(j) Borrower will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(k) Neither Borrower nor any constituent party will seek the
dissolution, winding up, liquidation, consolidation or merger in whole or in
part, of the Borrower.
(l) Borrower will not commingle the funds and other assets of
Borrower with those of any Affiliate of constituent party, any Joinder Party, or
any Affiliate of any constituent party or Joinder Party, or any other Person.
(m) Borrower has and will maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or constituent party, any Joinder
Party, or any Affiliate of any constituent party or Joinder Party, or any other
Person.
(n) Borrower does not and will not hold itself out to be
responsible for the debts or obligations of any other person.
(o) Each member of Borrower (each, an "SPC PARTY") shall be a
corporation whose sole asset is its interest in Borrower and each such SPC Party
will at all times comply, and will cause Borrower to comply, with each of the
representations, warranties and covenants
23
contained in this Section 6.13 as if such representation, warranty or covenant
was made directly by such SPC Party, except that ARCSPE also shall own the
interests in and guarantee certain obligations of those entities identified in
its Charter and to the extent necessary to consummate the HCPI Transaction.
(p) Borrower shall at all times cause there to be at least one
duly appointed member of the board of governors of Borrower ("INDEPENDENT
GOVERNOR") and at least one duly appointed member of the board of directors
("INDEPENDENT DIRECTOR") of each SPC Party in Borrower, each of which
Independent Governors and each of which Independent Directors shall be
reasonably satisfactory to Lender and shall not have been at the time of such
Independent Governors' and Independent Directors' appointment, and at any time
during the preceding five years (1) a shareholder of, or an officer, director,
partner or employee of Borrower or any Borrower Party or any of their respective
shareholders, subsidiaries or Affiliates, (2) a customer of, or supplier to
Borrower or any Borrower Party or any of their respective shareholders,
subsidiaries or Affiliates, (3) a Person controlling or under common Control
with any such shareholder, partner, supplier or customer, or (4) a member of the
immediate family of any such shareholder, officer, director, partner, employee,
supplier or customer of Borrower.
(q) Borrower shall not take any action which under the
Articles of Organization of Borrower requires the consent or approval of the
board of governors of Borrower unless at the time of such action there shall be
at least one Person who is an Independent Governor.
(r) Borrower shall not cause or permit the board of directors
of each SPC Party in Borrower to take any action which, under the terms of any
certificate of incorporation, by-laws or any voting trust agreement with respect
to any common stock, requires the vote of the board of governors of Borrower
and/or the board of directors of any SPC Party in Borrower unless at the time of
such action there shall be at least one member of such board of directors who is
an Independent Director.
(s) Borrower shall conduct its business so that the
assumptions made with respect to Borrower in that certain opinion letter dated
of even date herewith (the "INSOLVENCY OPINION") delivered by Bass, ▇▇▇▇▇ and
▇▇▇▇ are true and correct in all respects.
Notwithstanding anything herein to the contrary, Borrower may, from
time to time, (i) make lawful distributions in accordance with applicable law to
its member(s) subject to Section 6.13(j), or (ii) obtain lawful capital
contributions in accordance with applicable law from its member(s) to the extent
necessary to satisfy its obligations as they become due; provided, however, that
all such transactions are accurately reflected in the books and records of
Borrower and each of its applicable affiliates.
Section 6.14 OPERATING LESSEE SEPARATENESS. Operating Lessee
represents, warrants and covenants as follows:
(a) Operating Lessee does not own and will not own any asset
or property other than (1) its interest in the Projects under the Operating
Lease, (2) the membership interests in ARC Fleetwood, LLC, a Tennessee limited
liability company, and (3) incidental personal
24
property necessary for the operation of the Projects and ARC Fleetwood, LLC, a
Tennessee limited liability company.
(b) Operating Lessee will not engage in any business other
than the management and operation of the Projects (or as otherwise set forth in
Operating Lessee's Amended and Restated Certificate of Limited Partnership) and
Operating Lessee will conduct and operate its business as it is presently
conducted and operated.
(c) Operating Lessee will not enter into any contract or
agreement with any Affiliate of the Operating Lessee, any constituent party of
Operating Lessee, any Joinder Party or any Affiliate of any constituent party or
any Joinder Party, except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an arms-length
basis with third parties other than any such party.
(d) Operating Lessee (and each general partner in Operating
Lessee) shall not, without the prior written consent of Lender, incur any Debt
other than obligations under the Operating Lease and the Loan and customary
trade payables which are payable, and shall be paid, within sixty (60) days of
when incurred (or such longer period as may be allowed by trade creditors) and
equipment or automobile lease obligations of not more than $40,000 for any
single lease obligation and of not more than $120,000 for all such lease
obligations in the aggregate for a particular Project. No Debt other than the
Loan may be secured (subordinate or pari passu) by the Project or any interest
in the Operating Lease.
(e) Operating Lessee has not made and will not make any loans
or advances to any third party (including any affiliate or constituent party,
any Joinder Party or Affiliate of any constituent party or any Joinder Party),
and shall not acquire obligations or securities of its affiliates or any
constituent party (other than its membership interest in ARC Fleetwood, LLC).
(f) Operating Lessee is and will remain solvent and Operating
Lessee will pay its debts and liabilities (including, as applicable, shared
personnel and overhead expenses) from its assets as the same shall become due.
(g) Operating Lessee has done or caused to be done and will do
all things necessary to observe organizational formalities and preserve its
existence, and Operating Lessee will not, nor will Operating Lessee permit any
constituent party or any Joinder Party to amend, modify or otherwise change the
partnership certificate, partnership agreements, articles of incorporation and
bylaws, operating agreement, trust or other organizational documents of
Operating Lessee or such constituent party or Joinder Party without the prior
written consent of Lender.
(h) Operating Lessee will maintain all of its books, records,
financial statements and bank accounts separate from those if its Affiliates and
any constituent party and shall maintain its books, records, resolutions and
agreements as official records; provided, however, that Operating Lessee may
also be included in consolidated financial statements of another Person,
provided that such consolidated financial statements contain a note indicating
that Operating Lessee is a separate legal entity and Operating Lessee's assets
and liabilities are neither available to pay the debts of the consolidated
entity nor constitute obligations of the
25
consolidated entity and that the consolidated entity is not liable for any of
the liabilities of Operating Lessee and, provided further, that so long as
Operating Lessee's separate tax liability and its income and expenses are
readily determinable based upon a review of Operating Lessee's books and
records, it may file consolidated tax returns.
(i) Operating Lessee will be, and at all times will hold
itself out to the public as, a legal entity separate and distinct from any other
entity (including any Affiliate of Operating Lessee, any constituent party of
Operating Lessee, any Joinder Party or any Affiliate of any constituent party or
Joinder Party), shall correct any known misunderstanding regarding its status as
a separate entity, shall conduct business in its own name, shall not identify
itself or any of its Affiliates as a division or part of the other and shall
maintain and utilize a separate telephone number and separate stationery,
invoices and checks; provided, however, that nothing herein shall be construed
so as to prevent Operating Lessee from using the same telephone number as any
general partner of Operating Lessee, so long as the costs and expenses
associated with such telephone number are allocated as set forth in Operating
Lessee's Amended and Restated Certificate of Limited Partnership.
(j) Operating Lessee will maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations.
(k) Neither Operating Lessee nor any constituent party will
seek the dissolution, winding up, liquidation, consolidation or merger in whole
or in part, of the Operating Lessee.
(l) Operating Lessee will not commingle the funds and other
assets of Operating Lessee with those of any Affiliate of constituent party, any
Joinder Party, or any Affiliate of any constituent party or Joinder Party, or
any other Person.
(m) Operating Lessee has and will maintain its assets in such
a manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any Affiliate or constituent party,
any Joinder Party, or any Affiliate of any constituent party or Joinder Party,
or any other Person.
(n) Operating Lessee does not and will not hold itself out to
be responsible for the debts or obligations of any other person.
(o) Each general partner of Operating Lessee (each, an "SPC
PARTY") shall be a corporation whose sole asset is its interest in Operating
Lessee and each such SPC Party will at all times comply, and will cause
Operating Lessee to comply, with each of the representations, warranties and
covenants contained in this Section 6.13 as if such representation, warranty or
covenant was made directly by such SPC Party.
(p) Operating Lessee shall at all times cause there to be at
least one duly appointed member of the board of directors ("INDEPENDENT
DIRECTOR") of each SPC Party in Operating Lessee, each of which Independent
Directors shall be reasonably satisfactory to Lender and shall not have been at
the time of such Independent Directors' appointment, and at any time during the
preceding five years (1) a shareholder of, or an officer, director, partner or
26
employee of, Operating Lessee or any of its shareholders, subsidiaries or
affiliates, (2) a customer of, or supplier to, Operating Lessee or any of is
shareholders, subsidiaries or affiliates, (3) a Person controlling or under
common Control with any such shareholder, partner, supplier or customer, or (4)
a member of the immediate family of any such shareholder, officer, director,
partner, employee, supplier or customer of Operating Lessee.
(q) Operating Lessee shall not cause or permit the board of
directors of each SPC Party in Operating Lessee to take any action which, under
the terms of any certificate of incorporation, by-laws or any voting trust
agreement with respect to any common stock, requires the vote of the general
partners of Operating Lessee and/or the board of directors of any SPC Party in
Operating Lessee unless at the time of such action there shall be at least one
member of such board of directors who is an Independent Director.
(r) Operating Lessee shall conduct its business so that the
assumptions made with respect to Operating Lessee in that certain opinion letter
dated of even date herewith (the "INSOLVENCY OPINION") delivered by Bass, ▇▇▇▇▇
and ▇▇▇▇ are true and correct in all respects.
Notwithstanding anything herein to the contrary, Operating Lessee may,
from time to time, (i) make lawful distributions in accordance with applicable
law to its partners subject to Section 6.14(j), or (ii) obtain lawful capital
contributions in accordance with applicable law from its partners to the extent
necessary to satisfy its obligations as they become due; provided, however, that
all such transactions are accurately reflected in the books and records of
Operating Lessee and each of its applicable affiliates.
Section 6.15 LICENSES AND COMPLIANCE. All licenses, permits and
approvals required under current ownership for the operation of the Projects as
nursing homes and personal care facilities under applicable law have been issued
and are in good standing, including, without limitation, (a) nursing home
licenses issued by State Agencies; and (b) personal care facilities licenses
issued by State Agencies, as the same are currently in full force and effect.
ARTICLE 7
FINANCIAL REPORTING
Section 7.1 FINANCIAL STATEMENTS.
(a) MONTHLY AND QUARTERLY REPORTS. Within thirty (30) days
after the end of each calendar month, and within thirty (30) days after the end
of each calendar quarter, Borrower and Operating Lessee shall furnish to Lender
a current (as of the calendar month or quarter just ended) balance sheet, a
detailed operating statement (showing monthly and quarterly activity and
year-to-date) stating Operating Revenues, Operating Expenses, Net Operating
Income, and Net Cash Flow for the calendar month or calendar quarter just ended,
including a summary of actual Operating Expenses, Operating Revenues, Net
Operating Income, and Net Cash Flow as compared to projections for such items as
set forth in the applicable operating and capital budgets, and updated rent
rolls, written statement setting forth any variance from the annual budget, and,
at Lender's request, copies of bank statements, bank reconciliations, and other
documentation supporting the information disclosed in such financial statements.
27
(b) ARC INFORMATION. When and as available, Borrower and
Operating Lessee shall furnish to Lender all quarterly and annual reports filed
by ARC with the Securities Exchange Commission, together with any additional or
further information as reasonably may be required by Lender to determine and
confirm compliance with the requirements of Schedule 2.1, Part C.3.
(c) ANNUAL REPORTS. Within ninety (90) days after the end of
each fiscal year of Borrower's operation of the Projects, Borrower and Operating
Lessee shall furnish to Lender a current (as of the end of such fiscal year)
balance sheet, a detailed operating statement stating Operating Revenues,
Operating Expenses, operating income and Net Cash Flow for each of Borrower,
Operating Lessee, and the Projects, a detailed statement of all expenditures for
capital improvements and replacements to the Projects during the preceding
calendar year and a reconciliation to disbursements from the Capital
Improvements Reserve (as defined in Schedule 2.4), and, if required by Lender,
prepared on a review basis and certified by an independent public accountant
satisfactory to Lender.
(d) CERTIFICATION; SUPPORTING DOCUMENTATION. Each such
financial statement shall be in scope and detail satisfactory to Lender and
certified by the chief financial representative of Borrower and the chief
financial officer of Operating Lessee, as applicable.
Section 7.2 ACCOUNTING PRINCIPLES. All financial statements shall be
prepared in accordance with sound accounting principles applicable to commercial
real estate, consistently applied from year to year.
Section 7.3 OTHER INFORMATION. Borrower and Operating Lessee shall
deliver to Lender such additional information regarding Borrower, its
subsidiaries, its business, any Borrower Party, and the Projects within 30 days
after Lender's request therefor.
Section 7.4 ANNUAL BUDGET AND CASH FLOW SUMMARY. At least thirty (30)
days after the commencement of each fiscal year, each of Borrower and Operating
Lessee will provide to Lender its proposed annual operating and capital
improvements budget for such fiscal year for review and approval by Lender.
Furthermore, within ninety (90) days after the end of each fiscal year, Borrower
shall provide Lender a certified cash flow summary which includes certifications
that each of Borrower and Operating Lessee, as applicable, has and will continue
to (a) preserve its limited liability company, partnership or other separate
legal existence, (b) preserve all its rights and licenses to the extent
necessary or desirable in the operation of its business and affairs and (c) be
and remain qualified to do business and conduct its affairs in each jurisdiction
where its ownership of projects or the conduct of its business affairs requires
such qualification.
Section 7.5 AUDITS. As required by Lender to confirm the Cash on Cash
Return, the Debt Service Coverage, the Loan to Value Ratio, and whether
conditions for any requested advance of the Loan, any requested release of
collateral under Section 2.5, any requested extension of the Maturity Date under
Section 2.6, or any other requirements hereunder have been satisfied, and
otherwise as Lender deems necessary, Lender shall conduct a complete audit of
the Operating Revenues and Operating Expenses of the Projects, at Borrower's and
Operating Lessee's expense if an audit has not been completed within the
immediately preceding twelve-month period and otherwise at Lender's expense.
Lender shall have the right to choose and
28
appoint a certified public accountant to perform such audits as it deems
necessary. Borrower and Operating Lessee shall permit Lender to examine such
records, books and papers of Borrower and Operating Lessee which reflect upon
its financial condition and the income and expense relative to the Projects. Any
waiver of the requirement for an audit under this Section 7.5 shall be at
Lender's sole discretion, shall be effective only if in writing and signed by
Lender, and unless specifically set forth therein, shall not limit or otherwise
affect any requirement for a future audit of the Operating Revenues and
Operating Expenses of the Projects.
ARTICLE 8
COVENANTS
Borrower and Operating Lessee, jointly and severally, covenant and
agree with Lender as follows:
Section 8.1 DUE ON SALE AND ENCUMBRANCE; TRANSFERS OF INTERESTS. Except
for the Operating Lease and the Residency Agreements, without the prior written
consent of Lender,
(a) neither Borrower nor Operating Lessee, nor any other
Person having an ownership or beneficial interest in Borrower or Operating
Lessee shall (1) directly or indirectly sell, transfer, convey, mortgage,
pledge, or assign any interest in a Project or any part thereof (including any
membership, partnership or any other ownership interest in Borrower or Operating
Lessee, assigned or pledged under a mezzanine loan, except for the pledge of
membership interests in Borrower under the HCPI Transaction); (2) create or
permit to be created any preferred equity or similar interest in Borrower or
Operating Lessee or any member or partner in Borrower or Operating Lessee; (3)
further encumber, alienate, ▇▇▇▇▇ ▇ ▇▇▇▇ (other than as described in Section
8.1(a)(4)) or grant any other interest in a Project or any part thereof
(including any partnership or other ownership interest in Borrower or Operating
Lessee, whether voluntarily or involuntarily); or enter into any easement or
other agreement granting rights in or restricting the use or development of a
Project that materially affects the use or operation of the subject Project;
(b) no new member, general partner, or limited partner having
the ability to control the affairs of Borrower or Operating lessee shall be
admitted to or created in Borrower or Operating Lessee (nor shall any existing
member or general partner or controlling limited partner withdraw from Borrower
or Operating Lessee), and no change in Borrower's or Operating Lessee's
organizational documents relating to Control over Borrower or Operating Lessee
and/or a Project shall be effected and
(c) no transfer shall be permitted which would cause ARC or
ARCSPE to own, directly or indirectly, less than one hundred percent (100%) of
Borrower or Operating Lessee.
As used in this Section 8.1, "transfer" shall include the sale, transfer,
conveyance, mortgage, pledge, or assignment of the legal or beneficial ownership
of (1) a Project, (2) any partnership interest in any partner in Borrower that
is a partnership, and (3) any voting stock in any general partner in Borrower
that is a corporation; "transfer" shall not include the leasing of individual
29
units within a Project so long as Borrower and Operating Lessee comply with the
provisions of the Loan Documents relating to such leasing activity.
Section 8.2 TAXES; CHARGES. Borrower and Operating Lessee shall pay
before any fine, penalty, interest or cost may be added thereto, and shall not
enter into any agreement to defer, any real estate taxes and assessments,
franchise taxes and charges, and other governmental charges that may become a
Lien upon a Project or become payable during the term of the Loan, and will
promptly furnish Lender with evidence of such payment; however, if applicable,
Borrower's and Operating Lessee's compliance with Section 3.4 of this Agreement
relating to impounds for taxes and assessments shall, with respect to payment of
such taxes and assessments, be deemed compliance with this Section 8.2. Borrower
and Operating Lessee shall not suffer or permit the joint assessment of a
Project with any other real property constituting a separate tax lot or with any
other real or personal property. Borrower and Operating Lessee shall pay when
due all claims and demands of mechanics, materialmen, laborers and others which,
if unpaid, might result in a Lien on a Project. Notwithstanding the foregoing,
Borrower or Operating Lessee may contest such taxes and charges and such claims
and demands so long as (a) Borrower or Operating Lessee notifies Lender that it
intends to contest such claim or demand, (b) Borrower or Operating Lessee
provides Lender with an indemnity, bond or other security satisfactory to Lender
(including an endorsement to Lender's title insurance policy insuring against
such claim or demand) assuring the discharge of Borrower's obligations for such
claims and demands, including interest and penalties, and (c) Borrower or
Operating Lessee is diligently contesting the same by appropriate legal
proceedings in good faith and at its own expense and concludes such contest
prior to the tenth (10th) day preceding the earlier to occur of the Maturity
Date or the date on which a Project is scheduled to be sold for non-payment.
Section 8.3 CONTROL; MANAGEMENT. Borrower and Operating Lessee shall
remain under the Control of ARCSPE at all times while this Agreement is in
effect. Operating Lessee shall not terminate, replace or appoint any manager or
terminate or amend the management agreement for a Project without Lender's prior
written approval. Operating Lessee shall fully perform all of its covenants,
agreements and obligations under the management agreement. Operating Lessee, or
an Affiliate of Operating Lessee, shall serve as manager of the Projects. If the
manager is an Affiliate of Operating Lessee, such manager shall be entitled to
receive a management fee of up to four percent (4%) of Operating Revenues
pursuant to a management agreement approved by Lender, in Lender's sole and
absolute discretion. No management fee shall be payable if Operating Lessee
manages the Projects. If Operating Lessee seeks to replace the manager, Lender
retains full and absolute approval right over such substitute manager,
management fee and management agreement. Lender shall approve all managers and
management contracts, both presently existing and prior to entering into such
contracts in the future; in addition, all management fees payable under any
management contract shall be subordinate to and be paid following full payment
of all Debt Service payments on the Loan in each fiscal year. Any change in
ownership or Control of the manager shall be cause for Lender to re-approve such
manager and management contract. Operating Lessee shall hold and maintain all
necessary licenses, certifications and permits required by law. Any manager of a
Project, if not an Affiliate of Operating Lessee, shall enter a non-competition
agreement to the effect that such manager will not acquire, construct, operate
or manage any facility similar to the Projects (i.e., an independent living
units facility or an assisted living facility) within a five-mile radius of any
Project at any time while any portion of the Loan is outstanding. Operating
Lessee shall
30
strictly comply with the Management Standards set forth in Exhibit C attached
hereto, and shall not enter into, modify, amend, or terminate any existing
management agreement, except in accordance with the Management Standards and
this Section 8.3.
Section 8.4 NON-COMPLIANCE. Borrower and Operating Lessee shall
promptly deliver to Lender copies of all reports and other documents with
respect to any inspections, surveys, investigations, or on-site visits of, or
certification actions regarding, the Projects by any federal, state, or local
licensing and regulatory authority having jurisdiction over the Projects,
including any inspections by State Agencies. Subject to Section 8.5, Lender may
retain a consultant, at Borrower's and Operating Lessee's expense, to evaluate
and review such reports and documents. Borrower and Operating Lessee shall
promptly correct any deficiency and comply with all remedial actions and
recommendations set forth in such reports or specified by the consultant
retained by Lender. Borrower and Operating Lessee will promptly notify Lender of
(a) any non-compliance, or (b) any event which, with notice or lapse of time or
both, would result in non-compliance, with any statute, law, ordinance, order,
judgment, decree, regulation, direction or requirement concerning Operating
Lessee, its operations, or any of the Projects, or in connection with which
Operating Lessee has received any notice, correspondence other communication to
or from any federal, state or local governmental official, body, board,
department or regulatory authority. If any such notice or communication of a
material nature is received by Borrower or Operating Lessee, Operating Lessee
shall engage an independent consultant as described in Section 8.5 below and
shall provide Lender with a statement setting forth its proposed action or
response to the non-compliance situation. Borrower and Operating Lessee shall
promptly notify Lender of any proposed local, state or federal law that, if
enacted, would materially and adversely affect Operating Lessee's current
operation of any of the Projects.
Section 8.5 CONSULTANT. If (a) Borrower and Operating Lessee fail to
maintain at all times a Debt Service Coverage of at least 1.20:1, or (b) the
occupancy level of the Projects (on a consolidated basis) is less than 87% for
three consecutive months, or (c) Borrower or Operating Lessee receives any
notice, correspondence or other communication of a material nature from any
federal, state or local governmental official, body, board, department or
regulatory authority citing violations of or lack of compliance with any
statute, ordinance and/or regulation concerning Operating Lessee, its
operations, or any of the Projects, then Borrower and Operating Lessee shall, at
their expense, retain an independent consultant selected from a list of
independent consultants designated by Lender from time to time, which
independent consultant is to make recommendations to increase the Debt Service
Coverage to at least 1.30:1, increase the occupancy level to at least 90%, or
make recommendations to address the violation and/or non-compliance situation,
as the case may be. With regard to a notice of violation or non-compliance
received by Borrower or Operating Lessee as described in Section 8.4 above, if
such violation or non-compliance can be cured by Borrower or Operating Lessee
within thirty (30) days from the date of receipt of the notice or other
communication relating thereto, then the independent consultant's engagement may
be limited to a review of Borrower's or Operating Lessee's proposed plan to cure
such non-compliance. Such independent consultant will provide a copy of its
report to Borrower and Operating Lessee and to Lender. Borrower and Operating
Lessee further agree that compliance with this covenant and/or the independent
consultant's recommendation will not limit any of Lender's rights and remedies
upon default or excuse Borrower or Operating Lessee from any default whether by
reason of failure to maintain the
31
above-specified Debt Service Coverage or occupancy level, or the receipt of a
notice of non-compliance or for any other reason.
Section 8.6 PERMITS AND LICENSES; OPERATION; MAINTENANCE; INSPECTION.
On request of Lender, Operating Lessee shall furnish to Lender true and correct
copies of all currently existing licenses, permits, approvals and agreements
necessary to own, lease, operate and carry on its business in the Projects.
Borrower and Operating Lessee shall observe and comply with all legal
requirements applicable to the ownership, use and operation of the Projects,
including the requirements of State Agencies, and any applicable requirements
under the Medicare (or other reimbursement) program. Borrower and Operating
Lessee shall maintain the Projects in good condition (ordinary wear and tear
excepted) and promptly repair any damage or casualty. Borrower and Operating
Lessee shall permit Lender and its agents, representatives and employees, upon
reasonable prior notice to Operating Lessee, to inspect the Projects and conduct
such environmental and engineering studies as Lender may require, provided such
inspections and studies do not materially interfere with the use and operation
of the Projects.
Section 8.7 TAXES ON SECURITY. Borrower and Operating Lessee shall pay
all taxes, charges, filing, registration and recording fees, excises and levies
payable with respect to the Note or the Liens created or secured by the Loan
Documents, other than income, franchise and doing business taxes imposed on
Lender. If there shall be enacted any law (a) deducting the Loan from the value
of a Project for the purpose of taxation, (b) affecting any Lien on a Project,
or (c) changing existing laws of taxation of mortgages, deeds of trust, security
deeds, or debts secured by real property, or changing the manner of collecting
any such taxes, Borrower and Operating Lessee shall promptly pay to Lender, on
demand, all taxes, costs and charges for which Lender is liable as a result
thereof; however, if such payment would be prohibited by law or would render the
Loan usurious, then instead of collecting such payment, Lender may declare all
amounts owing under the Loan Documents to be immediately due and payable.
Section 8.8 RESERVES, DEPOSITS, ESCROWS. Borrower and/or Operating
Lessee shall at all times maintain all reserves, deposits and/or escrows
required by Lender or State Agencies applicable from time to time to Borrower or
Operating Lessee by virtue of the nature of Borrower's or Operating Lessee's
business.
Section 8.9 LEGAL EXISTENCE; NAME, ETC. Borrower, Operating Lessee, and
each member or general partner in Borrower or Operating Lessee, if any, shall
preserve and keep in full force and effect its entity status, franchises, rights
and privileges under the laws of the state of its formation, and all
qualifications, licenses and permits applicable to the ownership, use and
operation of the Projects. Neither Borrower nor Operating Lessee, nor any member
or general partner of Borrower or Operating Lessee, shall wind up, liquidate,
dissolve, reorganize, merge, or consolidate with or into, or convey, sell,
assign, transfer, lease, or otherwise dispose of all or substantially all of its
assets. Borrower and each member in Borrower (and Operating Lessee and each
partner in Operating Lessee) shall conduct business only in its own name and
shall not change its name, identity, or organizational structure, or the
location of its chief executive office or principal place of business unless it
(a) shall have obtained the prior written consent of Lender to such change, and
(b) shall have taken all actions necessary or requested by Lender to file or
amend any financing statement or continuation statement to assure perfection and
continuation of perfection of security interests under the Loan Documents. Each
of Borrower (and each member
32
in Borrower) and Operating Lessee (and each partner in Operating Lessee) shall
maintain its separateness as an entity and shall comply with the requirements of
Section 6.13 and Section 6.14, accordingly.
Section 8.10 AFFILIATE TRANSACTIONS. Without the prior written consent
of Lender, except for management agreements complying with the provisions
hereof, Borrower and Operating Lessee shall not engage in any transaction
affecting a Project with an Affiliate of Borrower or Operating Lessee, unless
the terms thereof are the same as terms otherwise available in the marketplace
generally.
Section 8.11 FURTHER ASSURANCES. Borrower and Operating Lessee shall
promptly (a) cure any defects in the execution and delivery of the Loan
Documents, and (b) execute and deliver, or cause to be executed and delivered,
all such other documents, agreements and instruments as Lender may reasonably
request to further evidence and more fully describe the collateral for the Loan,
to correct any omissions in the Loan Documents, to perfect, protect or preserve
any liens created under any of the Loan Documents, or to make any recordings,
file any notices, or obtain any consents, as may be necessary or appropriate in
connection therewith.
Section 8.12 ESTOPPEL CERTIFICATES. Borrower, within ten (10) days
after Lender's reasonable request, shall furnish to Lender a written statement,
duly acknowledged, setting forth the amount due on the Loan, the terms of
payment of the Loan, the date to which interest has been paid, whether any
offsets or defenses exist against the Loan and, if any are alleged to exist, the
nature thereof in detail, and such other matters as Lender reasonably may
request.
Section 8.13 NOTICE OF CERTAIN EVENTS. Borrower and Operating Lessee
shall promptly notify Lender of (a) any Potential Default or Event of Default,
together with a detailed statement of the steps being taken to cure such
Potential Default or Event of Default; (b) any notice of default received by
Borrower under other obligations relating to a Project or otherwise material to
Borrower's business; and (c) any threatened or pending material legal, judicial
or regulatory proceedings, including any dispute between Borrower or Operating
Lessee and any governmental authority, affecting Borrower or Operating Lessee or
a Project.
Section 8.14 INDEMNIFICATION. Borrower and Operating Lessee, jointly
and severally, shall indemnify, defend and hold Lender harmless from and against
any and all losses (other than losses resulting solely from nonpayment of the
Loan), liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever,
including the reasonable fees and actual expenses of Lender's counsel incurred
by Lender, in connection with (a) any inspection, review or testing of or with
respect to the Projects pursuant to this Agreement, (b) any investigative,
administrative, mediation, arbitration, or judicial proceeding, whether or not
Lender is designated a party thereto, commenced or threatened at any time
(including after the repayment of the Loan) in any way related to the execution,
delivery or performance of any Loan Document or to any Project, (c) any
proceeding instituted by any Person claiming a Lien, (d) any brokerage
commissions or finder's fees claimed by any broker or other party in connection
with the Loan, any Project, or any of the transactions contemplated in the Loan
Documents, except commissions and fees arising solely from Lender's actions, (e)
the breach of any of the representations, warranties or covenants contained in
any Loan Document, and (f) any professional malpractice or negligence relating
to the operation of
33
the Projects, including those arising from the joint, concurrent, or comparative
negligence of Lender, except to the extent any of the foregoing is caused by
Lender's gross negligence or willful misconduct.
Section 8.15 ERISA. Each of Borrower and Operating Lessee shall comply
with the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder from time to time ("ERISA"), in all
material respects. Without limiting the generality of the foregoing, Borrower
and Operating Lessee shall cause all or any defined benefit pension plan,
including both single employer and multi-employer plans, subject to Title IV of
ERISA (a "PLAN"), to be funded in accordance with the minimum funding standards
of ERISA, if applicable, and shall make in a timely manner all contributions due
to any Plan.
Section 8.16 SATISFACTION OF DEBENTURES. On or before August 31, 2002,
either the Debentures shall have been satisfied or ARC shall have provided to
Lender evidence satisfactory to Lender that ARC holds an amount of unrestricted
cash sufficient to satisfy the Debentures. In any event, on or before October 1,
2002, the Debentures shall be satisfied.
Section 8.17 HCPI TRANSACTION. On or before August 31, 2002, ARC and
ARCSPE shall have consummated the HCPI Transaction.
Section 8.18 IMMEDIATE REPAIRS. On or before November 30, 2002,
Borrower and Operating Lessee shall complete the Immediate Repairs.
Section 8.19 DEBT SERVICE COVERAGE AND CASH ON CASH RETURN. Borrower
and Operating Lessee shall at all times maintain a minimum Debt Service Coverage
of 1.10:1 and a minimum Cash on Cash Return of 10.75% per annum.
Section 8.20 OPERATION. The Projects shall be operated as retirement
communities, independent living units, assisted living units, memory impaired or
Alzheimer units, or skilled nursing beds. The Projects shall be operated using
prudent business judgment and, consistent with such business judgment, in such a
manner so as to maximize the number of Residency Agreements and other occupancy
agreements in effect and to maintain a favorable reputation for the Projects.
Operating Lessee shall fully and faithfully perform, in all material respects,
all of its covenants, agreements and obligations under the Residency Agreements
and under any management agreement (and under any replacement instruments to the
foregoing which are permitted pursuant to the terms of this Agreement.)
Section 8.21 SERVICES. Operating Lessee shall maintain and continue to
provide throughout the term of the Loan materially the same services to
residents as are currently being provided at the Projects by Borrower or
otherwise on the date a facility becomes a Project. Operating Lessee shall not
materially change such services or reduce the Facility Capacity without the
prior written consent and approval of Lender.
Section 8.22 NON-COMPETITION. At any time while any portion of the Loan
is outstanding, neither Borrower nor Operating Lessee nor any Affiliate of
Borrower or Operating Lessee shall construct, develop or expand any congregate
care, assisted living, or skilled or intermediate nursing facility or any
combination of such types of facility (a) which is or is to be located within a
five-mile radius of any Project, and (b) which, as determined by Lender in
34
Lender's sole and absolute discretion (without taking into account the financing
source for such facility), would have a material adverse effect on the financial
condition or operations of such Project. Nothing in this Section 8.22 shall
prohibit Borrower or Operating Lessee or any Affiliate of Borrower or Operating
Lessee from acquiring or managing any existing facility, but neither Borrower
nor Operating Lessee nor any Affiliate of Borrower or Operating Lessee shall, in
its marketing efforts, target Residents of any Project for transfers to any
other facility. Borrower and Operating Lessee shall submit proposals for
development of any facility which is to be located within a five-mile radius of
any Project for Lender's determination prior to incurring substantial costs
(excluding costs of demographic or market studies) for or commencing
construction of any such facility, and Lender shall use good faith efforts to
respond to such proposals within a reasonable period of time.
ARTICLE 9
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default under the
Loan:
Section 9.1 PAYMENTS. Borrower's failure to pay any regularly scheduled
installment of principal, interest or other amount due under the Loan Documents
within five (5) days after the date when due, or Borrower's failure to pay the
Loan at the Maturity Date, whether by acceleration or otherwise.
Section 9.2 INSURANCE. Borrower's or Operating Lessee's failure to
maintain insurance as required under Section 3.1 of this Agreement.
Section 9.3 SALE, ENCUMBRANCE, ETC. The sale, transfer, conveyance,
pledge, mortgage or assignment of any part or all of a Project (other than
disposition of obsolete items of equipment or replacement of worn items of
equipment with new items in the ordinary course of business), or any interest
therein, or of any interest in Borrower or Operating Lessee, in violation of
Section 8.1 of this Agreement.
Section 9.4 COVENANTS. Borrower's or Operating Lessee's failure to
perform or observe any of the agreements and covenants contained in this
Agreement or in any of the other Loan Documents (other than payments under
Section 9.1, insurance requirements under Section 9.2, and transfers and
encumbrances under Section 9.3), and the continuance of such failure for ten
(10) days after notice by Lender to Borrower and Operating Lessee; however,
subject to any shorter period for curing any failure by Borrower as specified in
any of the other Loan Documents, Borrower and Operating Lessee shall have an
additional thirty (30) days to cure such failure if (a) such failure does not
involve the failure to make payments on a monetary obligation; (b) such failure
cannot reasonably be cured within ten (10) days; (c) Borrower or Operating
Lessee is diligently undertaking to cure such default, and (d) Borrower has
provided Lender with security reasonably satisfactory to Lender against any
interruption of payment or impairment of collateral as a result of such
continuing failure. The notice and cure provisions of this Section 9.4 do not
apply to any Event of Default arising under Section 8.9, Section 8.16, or
Section 8.17, or to the Events of Default described in Section 9.5, Section 9.6,
Section 9.7, Section 9.8, and Section 9.10.
35
Section 9.5 REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made in any Loan Document proves to be untrue in any material respect
when made or deemed made.
Section 9.6 OTHER ENCUMBRANCES. Any default under any document or
instrument, other than the Loan Documents, evidencing or creating a Lien on a
Project or any part thereof.
Section 9.7 INVOLUNTARY BANKRUPTCY OR OTHER PROCEEDING. Commencement of
an involuntary case or other proceeding against Borrower, any Borrower Party or
any other Person having an ownership or security interest in a Project
(excluding limited partners in Borrower or any Borrower Party) (each, a
"BANKRUPTCY PARTY") which seeks liquidation, reorganization or other relief with
respect to it or its debts or other liabilities under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeks the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
of its property, and such involuntary case or other proceeding shall remain
undismissed or unstayed for a period of 60 days; or an order for relief against
a Bankruptcy Party shall be entered in any such case under the Federal
Bankruptcy Code.
Section 9.8 VOLUNTARY PETITIONS, ETC. Commencement by a Bankruptcy
Party of a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its Debts or other
liabilities under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for it or any of its property, or consent by a Bankruptcy Party to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or the making
by a Bankruptcy Party of a general assignment for the benefit of creditors, or
the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in
writing of its inability, to pay its debts generally as they become due, or any
action by a Bankruptcy Party to authorize or effect any of the foregoing.
Section 9.9 MATERIAL ADVERSE CHANGE. The occurrence of any change in
the financial condition of Borrower or Operating Lessee, or in the Net Operating
Income of any Project which would have, in Lender's judgment, a material adverse
effect on a Project, on Borrower's ability to repay the Loan, or on Borrower's,
Operating Lessee's or any Borrower Party's ability to perform its obligations
under any of the Loan Documents.
Section 9.10 OTHER LOANS. The existence of any Event of Default under
any other loan by Lender to either Borrower or Operating Lessee or any Affiliate
of Borrower or Operating Lessee, which by its terms is intended to be secured by
a Project, or any "Event of Default" or default (however named) under any of the
▇▇▇▇▇▇ Loans.
Section 9.11 DEBENTURES. ARC's or ARCSPE's failure, on or before August
31, 2002, to fully satisfy the Debentures or to provide to Lender evidence
satisfactory to Lender that ARC holds an amount of unrestricted cash sufficient
to satisfy the Debentures, or ARC's failure to satisfy the Debentures on or
before October 1, 2002.
Section 9.12 HCPI TRANSACTION. ARC's and ARCSPE's failure to consummate
the HCPI transaction on or before August 31, 2002.
36
ARTICLE 10
REMEDIES
Section 10.1 REMEDIES - INSOLVENCY EVENTS. Upon the occurrence of any
Event of Default described in Section 9.7 or Section 9.8, the obligations of
Lender to advance amounts hereunder shall immediately terminate, and all amounts
due under the Loan Documents immediately shall become due and payable, all
without written notice and without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof, notice
of acceleration of the maturity thereof, or any other notice of default of any
kind, all of which are hereby expressly waived by Borrower and Operating Lessee;
however, if the Bankruptcy Party under Section 9.7 or Section 9.8 is a Person
other than Borrower, then all amounts due under the Loan Documents shall become
immediately due and payable at Lender's election, in Lender's sole discretion.
Section 10.2 REMEDIES - OTHER EVENTS. Except as set forth in Section
10.1 above, while any Event of Default exists, Lender may (a) by written notice
to Borrower, declare the entire Loan to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor, notice of intent to
accelerate the maturity thereof, notice of acceleration of the maturity thereof,
or other notice of default of any kind, all of which are hereby expressly waived
by Borrower, (b) terminate the obligation, if any, of Lender to advance amounts
hereunder, and (c) exercise all rights and remedies therefor under the Loan
Documents and at law or in equity.
Section 10.3 LENDER'S RIGHT TO PERFORM THE OBLIGATIONS. If Borrower or
Operating Lessee shall fail, refuse or neglect to make any payment or perform
any act required by the Loan Documents, then while any Event of Default exists,
and without notice to or demand upon Borrower or Operating Lessee and without
waiving or releasing any other right, remedy or recourse Lender may have because
of such Event of Default, Lender may (but shall not be obligated to) make such
payment or perform such act for the account of and at the expense of Borrower
and Operating Lessee, and shall have the right to enter upon the Projects for
such purpose and to take all such action thereon and with respect to the
Projects as it may deem necessary or appropriate. If Lender shall elect to pay
any sum due with reference to a Project, Lender may do so in reliance on any
▇▇▇▇, statement or assessment procured from the appropriate governmental
authority or other issuer thereof without inquiring into the accuracy or
validity thereof. Similarly, in making any payments to protect the security
intended to be created by the Loan Documents, Lender shall not be bound to
inquire into the validity of any apparent or threatened adverse title, lien,
encumbrance, claim or charge before making an advance for the purpose of
preventing or removing the same. Additionally, if any Hazardous Materials affect
or threaten to affect a Project, Lender may (but shall not be obligated to) give
such notices and take such actions as it deems necessary or advisable in order
to ▇▇▇▇▇ the discharge of any Hazardous Materials or remove the Hazardous
Materials. Borrower and Operating Lessee, jointly and severally, shall
indemnify, defend and hold Lender harmless from and against any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs, or disbursements of any kind or nature whatsoever,
including reasonable attorneys' fees, incurred or accruing by reason of any acts
performed by Lender pursuant to the provisions of this Section 10.3, including
those arising from the joint, concurrent, or comparative negligence of Lender,
except as a result of Lender's gross negligence or willful misconduct. All sums
paid by
37
Lender pursuant to this Section 10.3, and all other sums expended by Lender to
which it shall be entitled to be indemnified, together with interest thereon at
the Default Rate from the date of such payment or expenditure until paid, shall
constitute additions to the Loan, shall be secured by the Loan Documents and
shall be paid by Borrower to Lender upon demand.
ARTICLE 11
MISCELLANEOUS
Section 11.1 NOTICES. Any notice required or permitted to be given
under this Agreement shall be in writing and either shall be mailed by certified
mail, postage prepaid, return receipt requested, or sent by overnight air
courier service, or personally delivered to a representative of the receiving
party, or sent by telecopy (provided an identical notice is also sent
simultaneously by mail, overnight courier, or personal delivery as otherwise
provided in this Section 11.1). All such communications shall be mailed, sent or
delivered, addressed to the party for whom it is intended at its address set
forth below.
If to Borrower or
Operating Lessee: Fort Austin Real Estate Holdings, LLC
Fort Austin Limited Partnership
c/o American Retirement Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Executive Vice
President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Bass, ▇▇▇▇▇ & ▇▇▇▇
AmSouth Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: T. ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: GE Capital Healthcare Financial Services
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇, Vice President,
Senior Portfolio Manager
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: GE Capital Healthcare Financial Services
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
38
and a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any communication so addressed and mailed shall be deemed to be given on the
earliest of (a) when actually delivered, (b) on the first Business Day after
deposit with an overnight air courier service, or (c) on the third Business Day
after deposit in the United States mail, postage prepaid, in each case to the
address of the intended addressee (except as otherwise provided in the
Mortgage), and any communication so delivered in person shall be deemed to be
given when receipted for by, or actually received by Lender or Borrower, as the
case may be. If given by telecopy, a notice shall be deemed given and received
when the telecopy is transmitted to the party's telecopy number specified above,
and confirmation of complete receipt is received by the transmitting party
during normal business hours or on the next Business Day if not confirmed during
normal business hours, and an identical notice is also sent simultaneously by
mail, overnight courier, or personal delivery as otherwise provided in this
Section 11.1. Either party may designate a change of address by written notice
to the other by giving at least ten (10) days prior written notice of such
change of address.
Section 11.2 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of the Loan Documents shall be effective unless in writing and signed
by the party against whom enforcement is sought.
Section 11.3 LIMITATION ON INTEREST. It is the intention of the parties
hereto to conform strictly to applicable usury laws. Accordingly, all agreements
between Borrower and Lender or between Operating Lessee and Lender with respect
to the Loan are hereby expressly limited so that in no event, whether by reason
of acceleration of maturity or otherwise, shall the amount paid or agreed to be
paid to Lender or charged by Lender for the use, forbearance or detention of the
money to be lent hereunder or otherwise, exceed the maximum amount allowed by
law. If the Loan would be usurious under applicable law (including the laws of
the State and the laws of the United States of America), then, notwithstanding
anything to the contrary in the Loan Documents: (a) the aggregate of all
consideration which constitutes interest under applicable law that is contracted
for, taken, reserved, charged or received under the Loan Documents shall under
no circumstances exceed the maximum amount of interest allowed by applicable
law, and any excess shall be credited on the Note by the holder thereof (or, if
the Note has been paid in full, refunded to Borrower); and (b) if maturity is
accelerated by reason of an election by Lender, or in the event of any
prepayment, then any consideration which constitutes interest may never include
more than the maximum amount allowed by applicable law. In such case, excess
interest, if any, provided for in the Loan Documents or otherwise, to the extent
permitted by applicable law, shall be amortized, prorated, allocated and spread
from the date of advance until payment in full so that the actual rate of
interest is uniform through the term hereof. If such amortization, proration,
allocation and spreading is not permitted under applicable law, then such excess
interest shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the Note (or, if the
Note has been paid in full, refunded to Borrower). The terms and provisions of
this Section 11.3 shall control and supersede every other provision of the Loan
Documents. The Loan Documents are contracts
39
made under and shall be construed in accordance with and governed by the laws of
the State, except that if at any time the laws of the United States of America
permit Lender to contract for, take, reserve, charge or receive a higher rate of
interest than is allowed by the laws of the State (whether such federal laws
directly so provide or refer to the law of any state), then such federal laws
shall to such extent govern as to the rate of interest which Lender may contract
for, take, reserve, charge or receive under the Loan Documents.
Section 11.4 INVALID PROVISIONS. If any provision of any Loan Document
is held to be illegal, invalid or unenforceable, such provision shall be fully
severable; the Loan Documents shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof;
the remaining provisions thereof shall remain in full effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom; and in lieu of such illegal, invalid or unenforceable provision there
shall be added automatically as a part of such Loan Document a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible to be legal, valid and enforceable.
Section 11.5 REIMBURSEMENT OF EXPENSES. Borrower and Operating Lessee
shall pay all expenses incurred by Lender in connection with the Loan, including
fees and expenses of Lender's attorneys, environmental, engineering and other
consultants, and fees, charges or taxes for the recording or filing of Loan
Documents. Borrower and Operating Lessee shall pay all expenses of Lender in
connection with the administration of the Loan, including audit costs,
inspection fees, settlement of condemnation and casualty awards, and premiums
for title insurance and endorsements thereto. Borrower and Operating Lessee
shall, upon request, promptly reimburse Lender for all amounts expended,
advanced or incurred by Lender to collect the Note, or to enforce the rights of
Lender under this Agreement or any other Loan Document, or to defend or assert
the rights and claims of Lender under the Loan Documents or with respect to the
Projects (by litigation or other proceedings), which amounts will include all
court costs, attorneys' fees and expenses, fees of auditors and accountants, and
investigation expenses as may be incurred by Lender in connection with any such
matters (whether or not litigation is instituted), together with interest at the
Default Rate on each such amount from the date of disbursement until the date of
reimbursement to Lender, all of which shall constitute part of the Loan and
shall be secured by the Loan Documents.
Section 11.6 APPROVALS; THIRD PARTIES; CONDITIONS. All approval rights
retained or exercised by Lender with respect to leases, contracts, plans,
studies and other matters are solely to facilitate Lender's credit underwriting,
and shall not be deemed or construed as a determination that Lender has passed
on the adequacy thereof for any other purpose and may not be relied upon by
Borrower, Operating Lessee, or any other Person. This Agreement is for the sole
and exclusive use of Lender and Borrower and may not be enforced, nor relied
upon, by any Person other than Lender and Borrower. All conditions of the
obligations of Lender hereunder, including the obligation to make advances, are
imposed solely and exclusively for the benefit of Lender, its successors and
assigns, and no other Person shall have standing to require satisfaction of such
conditions or be entitled to assume that Lender will refuse to make advances in
the absence of strict compliance with any or all of such conditions, and no
other Person shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in whole or in part
by Lender at any time in Lender's sole discretion.
40
Section 11.7 LENDER NOT IN CONTROL; NO PARTNERSHIP. None of the
covenants or other provisions contained in this Agreement shall, or shall be
deemed to, give Lender the right or power to exercise Control over the affairs
or management of Borrower or Operating Lessee, the power of Lender being limited
to the rights to exercise the remedies referred to in the Loan Documents. The
relationship between Borrower and Lender is, and at all times shall remain,
solely that of debtor and creditor. No covenant or provision of the Loan
Documents is intended, nor shall it be deemed or construed, to create a
partnership, joint venture, agency or common interest in profits or income
between Lender and Borrower, or between Lender and Operating Lessee, or to
create an equity in the Projects in Lender. Lender neither undertakes nor
assumes any responsibility or duty to Borrower, or to Operating Lessee, or to
any other Person with respect to the Projects or the Loan, except as expressly
provided in the Loan Documents; and notwithstanding any other provision of the
Loan Documents: (a) Lender is not, and shall not be construed as, a partner,
joint venturer, alter ego, manager, controlling person or other business
associate or participant of any kind of Borrower or Operating Lessee or their
respective stockholders, members, or partners and Lender does not intend to ever
assume such status; (b) Lender shall in no event be liable for any Debts,
expenses or losses incurred or sustained by Borrower or Operating Lessee; and
(c) Lender shall not be deemed responsible for or a participant in any acts,
omissions or decisions of Borrower or Operating Lessee or their respective
stockholders, members, or partners. Lender and Borrower and Operating Lessee
disclaim any intention to create any partnership, joint venture, agency or
common interest in profits or income between Lender and Borrower, or between
Lender and Operating Lessee, or to create an equity in the Projects in Lender,
or any sharing of liabilities, losses, costs or expenses.
Section 11.8 TIME OF THE ESSENCE. Time is of the essence with respect
to this Agreement.
Section 11.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of Lender, Borrower, and Operating Lessee, and the
successors and assigns of Lender, including any assignee or transferee of the
Note, individually, and the successors and assigns of Borrower and Operating
Lessee, provided that neither Borrower nor any other Borrower Party shall,
without the prior written consent of Lender, assign any rights, duties or
obligations hereunder.
Section 11.10 RENEWAL, EXTENSION OR REARRANGEMENT. All provisions of
the Loan Documents shall apply with equal effect to each and all promissory
notes and amendments thereof hereinafter executed which in whole or in part
represent a renewal, extension, increase or rearrangement of the Loan.
Section 11.11 DIVISIONS OF THE LOAN; SYNDICATION OR PLACEMENT. For
portfolio management purposes, Lender may elect to divide the Loan into two or
more separate loans, evidenced by separate promissory notes with senior and
junior priorities, or to syndicate the Loan to a group of lenders, or to sell
the Loan in connection with a securitization, structured finance, or other
placement transaction so long as the payment and other obligations of Borrower
or Operating Lessee are not effectively increase or otherwise modified. Borrower
and Operating Lessee agree to cooperate with Lender and to execute such
documents as Lender reasonably may request to effect any division of the Loan
required by Lender and otherwise to effect any syndication, securitization,
structured finance, or secondary market transaction.
41
Section 11.12 WAIVERS. No course of dealing on the part of Lender, its
officers, employees, consultants or agents, nor any failure or delay by Lender
with respect to exercising any right, power or privilege of Lender under any of
the Loan Documents, shall operate as a waiver thereof.
Section 11.13 CUMULATIVE RIGHTS. Rights and remedies of Lender under
the Loan Documents shall be cumulative, and the exercise or partial exercise of
any such right or remedy shall not preclude the exercise of any other right or
remedy.
Section 11.14 SINGULAR AND PLURAL. Words used in this Agreement and the
other Loan Documents in the singular, where the context so permits, shall be
deemed to include the plural and vice versa. The definitions of words in the
singular in this Agreement and the other Loan Documents shall apply to such
words when used in the plural where the context so permits and vice versa.
Section 11.15 PHRASES. When used in this Agreement and the other Loan
Documents, the phrase "including" shall mean "including, but not limited to,"
the phrase "satisfactory to Lender" shall mean "in form and substance
satisfactory to Lender in all respects," the phrase "with Lender's consent" or
"with Lender's approval" shall mean such consent or approval at Lender's
discretion, the phrase "acceptable to Lender" shall mean "acceptable to Lender
at Lender's sole discretion," and, as the context may require, the phrase
"Borrower and Operating Lessee" shall mean "Borrower and Operating Lessee,
jointly and severally."
Section 11.16 EXHIBITS AND SCHEDULES. The exhibits and schedules
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for the purposes stated herein.
Section 11.17 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All titles
or headings to articles, sections, subsections or other divisions of this
Agreement and the other Loan Documents or the exhibits hereto and thereto are
only for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto.
Section 11.18 PROMOTIONAL MATERIAL. Borrower and Operating Lessee
authorize Lender to issue press releases, advertisements and other promotional
materials in connection with Lender's own promotional and marketing activities,
and describing the Loan, in a manner consistent with descriptions of other
financings, and Lender's participation in the Loan. All references to Lender
contained in any press release, advertisement or promotional material issued by
Borrower or Operating Lessee shall be approved in writing by Lender in advance
of issuance.
Section 11.19 SURVIVAL. All of the representations, warranties,
covenants, and indemnities hereunder (including environmental matters under
Article 4), and under the indemnification provisions of the other Loan Documents
shall survive the repayment in full of the Loan and the release of the liens
evidencing or securing the Loan, and shall survive the transfer (by sale,
foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all
right,
42
title and interest in and to the Projects to any party, whether or not an
Affiliate of Borrower or Operating Lessee.
Section 11.20 WAIVER OF JURY TRIAL. To the maximum extent permitted by
law, Borrower, Operating Lessee, and Lender hereby knowingly, voluntarily and
intentionally waive the right to a trial by jury in respect of any litigation
based hereon, arising out of, under or in connection with this Agreement or any
other Loan Document, or any course of conduct, course of dealing, statement
(whether verbal or written) or action of either party or any exercise by any
party of their respective rights under the Loan Documents or in any way relating
to the Loan or the Projects (including, without limitation, any action to
rescind or cancel this Agreement, and any claim or defense asserting that this
Agreement was fraudulently induced or is otherwise void or voidable). This
waiver is a material inducement for Lender to enter this Agreement.
Section 11.21 WAIVER OF PUNITIVE OR CONSEQUENTIAL DAMAGES. Neither
Lender nor Borrower nor Operating Lessee shall be responsible or liable to the
other or to any other Person for any punitive, exemplary or consequential
damages which may be alleged as a result of the Loan or the transaction
contemplated hereby, including any breach or other default by any party hereto.
Section 11.22 GOVERNING LAW. The Loan Documents are being executed and
delivered, and are intended to be performed, in the State and the laws of the
State and of the United States of America shall govern the rights and duties of
the parties hereto and the validity, construction, enforcement and
interpretation of the Loan Documents, except to the extent otherwise specified
in any of the Loan Documents.
Section 11.23 ENTIRE AGREEMENT. This Agreement and the other Loan
Documents embody the entire agreement and understanding between Lender and
Borrower, and between Lender and Operating Lessee, and supersede all prior
agreements and understandings between such parties relating to the subject
matter hereof and thereof. Accordingly, the Loan Documents may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
Section 11.24 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which shall
constitute one document.
ARTICLE 12
LIMITATIONS ON LIABILITY
Section 12.1 LIMITATION ON LIABILITY. Except as provided below, neither
Borrower nor Operating Lessee shall be personally liable for amounts due under
the Loan Documents. Borrower and Operating Lessee shall be jointly and severally
and personally liable to Lender for any deficiency, loss or damage suffered by
Lender because of: (a) Borrower's or Operating Lessee's commission of a criminal
act, (b) the failure to comply with provisions of the Loan Documents prohibiting
the sale, transfer or encumbrance of the Projects, any other collateral, or any
direct or indirect ownership interest in Borrower or Operating Lessee; (c) the
misapplication by Borrower or Operating Lessee or any Borrower Party of any
funds derived from the Projects,
43
including security deposits, insurance proceeds and condemnation awards; (d) the
fraud or misrepresentation by Borrower, Operating Lessee, or any Borrower Party
made in or in connection with the Loan Documents or the Loan; (e) Borrower's or
Operating Lessee's collection of rents more than one month in advance or
entering into or modifying the Operating Lease or any of the Residency
Agreements, or receipt of monies by Borrower, Operating Lessee, or any Borrower
Party in connection with the modification of the Operating Lease or any
Residency Agreements, in violation of this Agreement or any of the other Loan
Documents; (f) failure of Borrower or Operating Lessee to apply proceeds of
rents or any other payments in respect of the Residency Agreements and other
income of the Projects or any other collateral to the costs of maintenance and
operation of the Projects and to the payment of taxes, lien claims, insurance
premiums, Debt Service and other amounts due under the Loan Documents; (g)
subject to the provisions of Section 8.2, Borrower's or Operating Lessee's
failure to pay any real estate taxes, assessments or similar charges affecting
the Projects prior to the delinquency thereof, (h) Borrower's or Operating
Lessee's interference with Lender's exercise of rights under the Assignments of
Rents and Leases; (i) if applicable, Borrower's or Operating Lessee's failure to
timely renew any letter of credit issued in connection with the Loan; (j)
Borrower's or Operating Lessee's failure to maintain insurance as required by
this Agreement or to pay any taxes or assessments affecting a Project; (k)
damage or destruction to a Project directly caused by the acts or omissions of
Borrower, or Operating Lessee or their respective agents, employees, or
contractors; (l) Borrower's and Operating Lessee's obligations with respect to
environmental matters under Article 4; (m) Borrower's or Operating Lessee's
failure to pay for any loss, liability or expense (including attorneys' fees)
incurred by Lender arising out of any claim or allegation made by Borrower or
Operating Lessee or their respective successors or assigns, or any creditor of
Borrower or Operating Lessee, that this Agreement or the transactions
contemplated by the Loan Documents establish a joint venture, partnership or
other similar arrangement between Borrower and Lender or between Operating
Lessee and Lender; (n) any failure on the part of Borrower or Operating Lessee
to comply with any local, state or federal laws or regulations governing the
operation of the Projects as nursing homes and personal care facilities,
including the requirements of State Agencies, and any requirements under
Medicare or other reimbursement program; (o) any liability for professional
malpractice or negligence relating to the operation of the Projects; or (p) any
brokerage commission or finder's fees claimed in connection with the
transactions contemplated by the Loan Documents other than commissions or fees
incurred solely as a result of Lender's actions. None of the foregoing
limitations on the personal liability of Borrower or Operating Lessee shall
modify, diminish or discharge the personal liability of any Joinder Party.
Nothing herein shall be deemed to be a waiver of any right which Lender may have
under Sections 506(a), 506(b), 1111(b) or any other provision of the United
States Bankruptcy Code, as such sections may be amended, or corresponding or
superseding sections of the Bankruptcy Amendments and Federal Judgeship Act of
1984, to file a claim for the full amount due to Lender under the Loan Documents
or to require that all collateral shall continue to secure the amounts due under
the Loan Documents.
Section 12.2 LIMITATION ON LIABILITY OF LENDER'S OFFICERS, EMPLOYEES,
ETC. Any obligation or liability whatsoever of Lender which may arise at any
time under this Agreement or any other Loan Document shall be satisfied, if at
all, out of the Lender's assets only. No such obligation or liability shall be
personally binding upon, nor shall resort for the enforcement thereof be had to,
the property of any of Lender's shareholders, directors, officers, employees or
44
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
45
EXECUTED as of the date first written above.
LENDER: GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation (formerly organized as a New
York corporation)
By:
----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
BORROWER: FORT AUSTIN REAL ESTATE HOLDINGS, LLC, a Tennessee
limited liability company
By:
-----------------------------------------------
, Executive Vice President
-------------------
OPERATING LESSEE: FORT AUSTIN LIMITED PARTNERSHIP, a Texas limited
partnership
By: ARC Fort Austin Properties, Inc., a Tennessee
corporation, General Partner
By:
------------------------------------------
, Executive Vice President
-----------------
46
JOINDER
By executing this Joinder (the "JOINDER"), the undersigned ("JOINDER
PARTIES") jointly and severally guaranty the performance by Borrower and
Operating Lessee of Borrower's and Operating Lessee's unconditional obligation
to pay real estate taxes, assessments and similar charges relating to the
Projects under Section 8.2 of this Agreement; Borrower's and Operating Lessee's
obligations with respect to environmental matters under Article 4 of this
Agreement, Borrower's and Operating Lessee's indemnification obligations under
Section 8.14 of this Agreement, and all obligations and liabilities for which
Borrower and Operating Lessee are personally liable under Section 12.1 of this
Agreement. This Joinder is a guaranty of full and complete payment and
performance and not of collectability.
1. WAIVERS. To the fullest extent permitted by applicable law, each
Joinder Party waives all rights and defenses of sureties, guarantors,
accommodation parties and/or co-makers and agrees that its obligations under
this Joinder shall be primary, absolute and unconditional, and that its
obligations under this Joinder shall be unaffected by any of such rights or
defenses, including:
(a) the unenforceability of any Loan Document against Borrower
and/or Operating Lessee and/or any Joinder Party;
(b) any release or other action or inaction taken by Lender
with respect to the collateral, the Loan, Borrower and/or Operating Lessee
and/or any Joinder Party, whether or not the same may impair or destroy any
subrogation rights of any Joinder Party, or constitute a legal or equitable
discharge of any surety or indemnitor;
(c) the existence of any collateral or other security for the
Loan, and any requirement that Lender pursue any of such collateral or other
security, or pursue any remedies it may have against Borrower and/or Operating
Lessee and/or any Joinder Party;
(d) any requirement that Lender provide notice to or obtain a
Joinder Party's consent to any modification, increase, extension or other
amendment of the Loan, including the guaranteed obligations;
(e) any right of subrogation (until payment in full of the
Loan, including the guaranteed obligations, and the expiration of any applicable
preference period and statute of limitations for fraudulent conveyance claims);
(f) any defense based on any statute of limitations;
(g) any payment by Borrower or Operating Lessee to Lender if
such payment is held to be a preference or fraudulent conveyance under
bankruptcy laws or Lender is otherwise required to refund such payment to
Borrower, Operating Lessee, or any other party; and
(h) any voluntary or involuntary bankruptcy, receivership,
insolvency, reorganization or similar proceeding affecting Borrower or Operating
Lessee or any of their respective assets.
47
2. AGREEMENTS. Each Joinder Party further represents, warrants
and agrees that:
(a) The obligations under this Joinder are enforceable against
each such party and are not subject to any defenses, offsets or counterclaims;
(b) The provisions of this Joinder are for the benefit of
Lender and its successors and assigns;
(c) Lender shall have the right to (A) renew, modify, extend
or accelerate the Loan, (B) pursue some or all of its remedies against Borrower
or any Joinder Party, (C) add, release or substitute any collateral for the Loan
or party obligated thereunder, and (D) release Borrower or any Joinder Party
from liability, all without notice to or consent of any Joinder Party (or other
Joinder Party) and without affecting the obligations of any Joinder Party (or
other Joinder Party) hereunder;
(d) Each Joinder Party covenants and agrees to furnish to
Lender, within one hundred twenty (120) days after the end of each fiscal year
of such Joinder Party, a current (as of the end of such fiscal year) balance
sheet of such Joinder Party, in scope and detail satisfactory to Lender,
certified by the chief financial representative of such Joinder Party and, if
required by Lender, prepared on an accounting review basis and certified by an
independent public accountant satisfactory to Lender; and
(e) To the maximum extent permitted by law, each Joinder Party
hereby knowingly, voluntarily and intentionally waives the right to a trial by
jury in respect of any litigation based hereon. This waiver is a material
inducement to Lender to enter into this Agreement.
This Joinder shall be governed by the laws of the State of Texas.
Executed as of May 15, 2002.
JOINDER PARTIES: ARC FORT AUSTIN PROPERTIES, INC., a Tennessee
corporation
By:
--------------------------------------------------
, Executive Vice President
------------------------
AMERICAN RETIREMENT CORPORATION, a Tennessee
corporation
By:
--------------------------------------------------
, Executive Vice President
------------------------
48
ARCPI HOLDINGS, INC., a Tennessee corporation
By:
--------------------------------------------------
, Executive Vice President
------------------------
49
EXHIBIT A
LEGAL DESCRIPTION OF PROJECTS
BROADWAY
BEING all that certain lot, tract or parcel of land in the ▇▇▇▇ ▇▇▇▇▇ SURVEY,
ABSTRACT 641, TARRANT County, Texas, being all of that certain 20.000 acre tract
of land previously known as ▇▇▇ ▇, ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Limited Partnership by the deed recorded in Volume 10585, Page 1340, Deed
Records of Tarrant County, Texas (D.R.,▇.▇▇.,Tx.), currently being a portion of
▇▇▇ ▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ADDITION as recorded in Cabinet A, Slide 6207, Plat
Records, Tarrant County, Texas (P.R.,▇.▇▇.,Tx.), and being more particularly
described by metes and bounds as follows:
BEGINNING at a 5/8 inch steel rod set at the Southeast corner of that certain
▇▇▇ ▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇, an Addition to the City of Fort Worth, Tarrant County,
Texas, as recorded in Volume 388-181, Pages 27 and 28, P.R.,▇.▇▇.,Tx., the
Northeast corner of aforesaid Lot 3R, and being in the line common to ▇▇▇ ▇▇ ▇▇▇
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ according to the deed recorded in Volume 1129, Page 620,
D.R.,▇.▇▇.,Tx., and in the line common to said Heath Survey and the I. & G.N.
RR. Survey, Abstract 832, Tarrant County, Texas, said point being 881.12 feet
South 00 degrees 00 minutes 14 seconds West along said common survey line and
property line from a concrete monument with an aluminum cap set in place of a
very old iron pin and post which were found in place for the Northwest corner of
the I. & G.N. RR. Survey and a reentrant corner on the East side of the Heath
Survey in May, 1983;
THENCE with the line common to the Heath and I. & G.N. RR. Surveys and with the
line common to the ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇ degrees 00 minutes
14 seconds West, at approximately 220 feet (by General Land Office description)
passing the Westerly common corner of said I. & G.N. RR. Survey and the ▇▇▇▇▇
▇▇▇▇▇▇ Survey, Abstract 1742, and continuing with said common property line and
the line common to the Heath and ▇▇▇▇▇▇ Surveys, in all 873-3/10 feet to a 5/8
inch steel rod found;
THENCE departing said common property line and survey line North 81 degrees 20
minutes 40 seconds West 1100-37/100 feet to a 5/8 inch steel rod set in the
curved East right-of-way (R/W) line of ▇▇▇▇▇▇ ▇▇▇▇▇ Road (a 120 foot wide public
R/W);
THENCE with said East R/W line and Northerly with the arc of a curve to the left
having a radius of 4060-0/10 feet, a long chord that bears North 06 degrees 18
minutes 29 seconds East 327-01/100 feet and an arc distance of 327-1/10 feet to
an "x" cut in walk at its point of tangency;
THENCE continuing with said East R/W line, North 04 degrees 00 minutes East
455-31/100 feet to an "x" cut in walk at the Southwest corner of the aforesaid
▇▇▇ ▇, ▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇ ▇▇;
A-1
THENCE with the line common to said ▇▇▇ ▇, ▇▇▇▇▇ ▇ ▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇ degrees
59 minutes 21 seconds East 1022-71/100 feet to the PLACE OF BEGINNING,
containing in all some 20-000/1000 acres of land (871,205 square feet), more or
less.
Previously known as ▇▇▇ ▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇, an addition to the City of Fort
Worth, Tarrant County, Texas, according to the map thereof recorded in Volume
388-203, Page 31, Plat Records, Tarrant County, Texas.
SUMMIT
TRACT I: (FEE SIMPLE
▇▇▇ ▇, ▇▇▇▇▇ ▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇, SECTION 3, a subdivision in ▇▇▇▇▇▇ County,
Texas, according to the Map or Plat thereof recorded in Book 87, Page(s) ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇.
SAVE AND EXCEPT THEREFROM a 0.439 acre of land, more or less, conveyed to the
City of Rollingwood by Dedication Deed dated January 9, 2002, recorded as
Document No. 2002007063, Official Public Records, ▇▇▇▇▇▇ County, Texas.
TRACT II: (EASEMENT ESTATE
Easement for ingress and egress purposes in and to 0.4223 Acres of land, more or
less, out of the ▇▇▇▇▇ ▇. ▇▇▇▇ Survey, ▇▇▇▇▇▇ County, Texas, being set out in
Volume 10186, Page 293, Real Property Records, ▇▇▇▇▇▇ County, Texas; now being
part of ▇▇▇ ▇, ▇▇▇▇▇ ▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇, SECTION FOUR, a subdivision in
▇▇▇▇▇▇ County, Texas according to the Map or Plat thereof recorded in Book 90,
Page(s) ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, which has been replatted into
LIBERTY PARK CONDOMINIUMS recorded in Volume 12675, Page 183, Real Property
Records and in Volume 1, Page 136, and Volume 1, Page 138, Condominium Records,
▇▇▇▇▇▇ County, Texas, and being described as follows
FIELDNOTE Description of a tract or parcel of land containing 0.4223 acres, more
or less, situated in the ▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ being
a portion of the remainder of a 208.36 acre tract conveyed to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
III by a deed recorded in Volume 7667, Page 104 of the ▇▇▇▇▇▇ County Deed
Records and is that same 0.422 acre tract described in a Roadway and Maintenance
Agreement between Forum Group, Inc. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, and recorded in
Volume 10186, Page 293 of the said Deed Records of ▇▇▇▇▇▇ County, Texas. The
herein described tract is more particularly described by metes and bounds as
follows
COMMENCING at an iron pipe found in concrete in the West right of way of Bee
Cave Road (R.M. 2244 - 100 feet wide), said pipe is the most Northerly corner of
Lot "A" Zilker Heights Resubdivision as shown on a map or plat thereof recorded
in Book 75, Page 330 of the Plat Records of ▇▇▇▇▇▇ County, Texas, and is the
most Easterly Southeast corner of ▇▇▇ ▇ ▇▇▇▇▇ "▇" ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ "▇", Section
Three Subdivision as shown on a map or plat thereof recorded in Book 87, Page
122-D, of the said Plat Records
A-2
THENCE South 39 degrees 06 minutes 22 seconds West with the common line between
Lot "A" and Lot 1 described above, 116.00 feet to an iron pipe found at an angle
point
THENCE South 32 degrees 17 minutes 14 seconds West, continuing with the above
said common lot line 136.95 feet to an iron pipe found for another angle point
being the Northeast corner of the above said 0.422 acre tract and the POINT OF
BEGINNING of the herein described tract
THENCE, leaving the Southerly line of above said Lot 1, and following the
Westerly line of Lot "A" with the following five (5) courses
1) South 12 degrees 03 minutes 59 seconds West 89.90 feet to a found
iron pipe
2) South 07 degrees 41 minutes 17 seconds West 108.55 feet to a found
iron pipe;
3) South 03 degrees 45 minutes 43 seconds West 206.14 feet to a found
iron pipe;
4) South 11 degrees 21 minutes 23 seconds East 85.99 feet to a found
iron pipe;
5) South 18 degrees 56 minutes 02 seconds East 60.94 feet to a concrete
monument found in the North right of way line of State Highway Loop 1 (Mopac),
being the Southwest corner of Lot "A" described herein, also being a corner in
the 208.36 acre tract and the 0.422 acre tract mentioned above;
THENCE, South 69 degrees 17 minutes 28 seconds West, with the North line of said
State Highway Loop 1 and the South line of the 208.36 acre tract, 57.84 feet to
an iron rod found for the Southwest corner of the 0.422 acre tract;
THENCE, leaving the said North line of Loop 1 and crossing the said 208.36 acre
tract following the West line of the 0.422 acre tract with the following seven
(7) courses and distances:
1) A distance of 21.38 feet with the arc of a curve to the right having a
central angle of 12 degrees 38 minutes 37 seconds, a radius of 96.90 feet and a
chord which bears North 02 degrees 39 minutes 54 seconds West, a distance of
21.34 feet to an iron rod set for a point of tangency;
2) North 03 degrees 46 minutes 02 seconds East, a distance of 29.87 feet to an
iron rod set for a point of curvature:
3) A distance of 38.46 feet with the arc of a curve to the left having a central
angle of 15 degrees 01 minutes 27 seconds, a radius of 146.67 feet and a chord
which bears North 03 degrees 51 minutes 19 seconds West, a distance of 38.35
feet to an iron rod set for a point of tangency;
4) North 11 degrees 21 minutes 23 seconds West, a distance of 60.47 feet to an
iron rod set for an angle point;
5) North 03 degrees 43 minutes 13 seconds East, a distance of 223.05 feet to an
iron rod set for an angle point;
A-3
6) North 07 degrees 41 minutes 17 seconds East, a distance of 104.46 feet to an
iron rod set for an angle point;
7) North 40 degrees 13 minutes 54 seconds West, a distance of 35.96 feet to an
iron rod set in the South line of above said ▇▇▇ ▇ ▇▇▇▇▇ "▇" ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇,
Section Three
THENCE North 49 degrees 46 minutes 06 seconds East, with the said South line of
Lot 1, 95.00 feet to the POINT OF BEGINNING containing within these metes and
bounds 0.4223 acres (18,394 square feet) of land area, more or less.
A-4
PARKPLACE
Parcel 1:
Lots 1, 2, 3 and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ Second Addition to the
City of Denver, City and County of Denver, State of Colorado.
Parcel 2:
Lots 1 through ▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, together with that part of
the West 1/2 of vacated Clarkson Street adjoining Lots 2 through 12 on the East
as described in ordinance No. 348, Series of 1981, recorded on July 18, 1981, in
Book 2407 at page 244, and together with the vacated alley in Block 11, being a
part of original Lots 1 through 4 on the West, as vacated by Ordinance No. 576,
Series of 1974, recorded August 29, 1974 in Book 937 at Page 566, except that
portion of Lots 7 through 12 conveyed to the City and County of Denver, by deed
recorded in Book 2769, page ▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ of Colorado.
A-5
EXHIBIT B
BUDGET
----------------------------------------------------------------------------
Sources Estimated Uses
----------------------------------------------------------------------------
GECC Loan 95,700,000 Refinance GECC Debt 82,740,000
Reduce ▇▇▇▇▇▇ Mortgages 10,007,000
GECC Fees 957,000
Estimated Closing Costs 1,207,000
Rate Protection Costs 789,000
----------------------------------------------------------------------------
Totals 95,700,000 95,700,000
----------------------------------------------------------------------------
B-1
EXHIBIT C
MANAGEMENT STANDARDS
1. If Borrower desires to enter into, modify, amend or terminate any
management agreement, leasing agreement or any other agreement relating to
management, leasing or operation of the Projects, Borrower shall submit such
proposed modification or change to Lender in writing for Lender's prior
approval, which approval shall be given or withheld in Lender's sole discretion.
Lender shall respond to such requests for approval within a reasonable period of
time.
2. Upon Lender's request, Borrower shall, and shall cause its on-site
administrator to (i) meet with Lender at least quarterly to discuss the
financial and physical condition of the Projects and the management of the
Projects, including personnel, resident satisfaction, marketing and other issues
pertinent to the success of the Projects, and (ii) at Lender's request, provide
Lender with reports relating to such information.
3. Borrower's agreements with its management and leasing agents, if
any, shall be written so that if Lender acquires ownership of the Projects,
Lender may, without cost or liability to Lender, within sixty (60) days' of
Lender's notice, terminate the management and leasing agreement, and the on-site
administrator and director of leasing.
C-1
EXHIBIT D
ALLOCATED LOAN BALANCES
Broadway $37,041,000
Summit $32,376,000
Parkplace $26,283,000
===========
TOTAL $95,700,000
D-1
SCHEDULE 2.1
ADVANCE CONDITIONS
Part A - Initial Advance
Part B - General Conditions
Part C - Advances for Immediate Repairs
PART A. CONDITIONS TO INITIAL ADVANCE.
The initial advance of the Loan shall be subject to Lender's receipt,
review, approval and/or confirmation of the following, at Borrower's cost and
expense, each in form and content satisfactory to Lender in its sole discretion:
1. The Commitment Fee, to the extent not previously paid.
2. The Loan Documents, including the Interest Rate Protection
Agreement, executed by Borrower and, as applicable, Operating Lessee and each
other Borrower Party.
3. ALTA (or equivalent) mortgagee policies of title insurance, in the
aggregate maximum amount of the Loan, with reinsurance and endorsements as
Lender may require, containing no exceptions to title (printed or otherwise)
which are unacceptable to Lender, and insuring that the Mortgage is a
first-priority Lien on the Projects and related collateral.
4. All documents evidencing the formation, organization, valid
existence, good standing, and due authorization of and for Borrower, Operating
Lessee, and each other Borrower Party for the execution, delivery, and
performance of the Loan Documents by Borrower, Operating Lessee, and each other
Borrower Party.
5. Legal opinions issued by counsel for Borrower, Operating Lessee, and
each other Borrower Party, opining as to the due organization, valid existence
and good standing of Borrower, Operating Lessee, and each other Borrower Party,
and the due authorization, execution, delivery, enforceability and validity of
the Loan Documents with respect to, Borrower, Operating Lessee, and each other
Borrower Party; that the Loan, as reflected in the Loan Documents, is not
usurious; to the extent that Lender is not otherwise satisfied, that the
Projects and their use is in full compliance with all legal requirements; that
the Loan Documents do not create or constitute a partnership, a joint venture or
a trust or fiduciary relationship between Borrower and Lender or between
Operating Lessee and Lender; that neither Borrower nor Operating Lessee is
susceptible to being consolidated with ARC, ARCSPE or any other Affiliate of
Borrower or Operating Lessee in any bankruptcy or insolvency proceeding; and as
to such other matters as Lender and Lender's counsel reasonably may specify.
6. Current Uniform Commercial Code searches for Borrower and the
immediately preceding owner of the Projects.
7. Copies of the policies of insurance required by this Agreement,
containing all endorsements thereto and conforming in all respects to the
requirements of Lender.
Schedule 2.1 - 1
8. An "as-built" survey of each Project, dated or updated to a date not
earlier than thirty (30) days prior to the date hereof, certified to Lender and
such title insurer, prepared by a licensed surveyor acceptable to Lender and the
issuer of the title insurance, and conforming to Lender's current standard
survey requirements.
9. An engineering report or architect's certificate with respect to
each Project, covering, among other matters, inspection of heating and cooling
systems, roof and structural details and showing no failure of compliance with
building plans and specifications, applicable legal requirements (including
requirements of the Americans with Disabilities Act) and fire, safety and health
standards, and certified for the use and reliance by Lender and its Affiliates,
successors and assigns. As requested by Lender, such report shall also include
an assessment of the Project's tolerance for earthquake and seismic activity.
10. A Site Assessment for each Project.
11. The Operating Lease and a subordination, non-disturbance and
attornment agreement between Operating Lessee and Lender with respect to the
Operating Lease.
12. A current rent roll of each Project, and copies of all Residency
Agreements, certified by Borrower or the current owner of such Project. Such
rent roll shall include the following information: (a) resident names; (b)
unit/suite numbers; (c) area of each demised premises and total area of the
Project (stated in net rentable square feet); (d) rental rate (including
escalations, if any); (e) cancellation/termination provisions; (f) term (if
any); and (g) security deposit. In addition, a copy of each standard lease form,
admission agreement, occupancy or other residency agreement form to be used by
Borrower in leasing space in the Projects, or conducting a retirement home
business in the Projects, in form satisfactory to and approved by Lender.
13. Evidence satisfactory to Lender that Borrower and Operating Lessee
are and have at all relevant times been in all respects in compliance with all
requirements of the Social Security Act of 1965, the regulations promulgated
thereunder, and, as applicable, all conditions of participation in the Medicare
program thereunder, including, without limitation, those imposed by the State
Agencies and the United States Department of Health and Human Services.
14. Certified copies of (a) Medicare provider agreements, as
applicable, issued under Title XVIII and Title XIX of the Social Security Act of
1965, with current provider numbers, (b) as applicable, nursing home licenses
(or "long-term-care licenses") issued by the State Agencies, (c) a personal care
facilities license issued by the State Agencies, and (d) all licenses, permits
and approvals required or convenient for the operation of the Projects as
retirement communities under applicable laws and regulations, such
certifications to state that such agreements, licenses, permits and approvals
are in full force and effect.
15. A capital expenditures budget, as prepared by Borrower and
Operating Lessee and approved by Lender, setting forth in detail satisfactory to
Lender all capital expenditures for capital improvements to each of the Projects
which Borrower and Operating Lessee intend to complete within the five-year
period ending May 1, 2007, the schedule for completing such capital
improvements, and the estimated cost therefor.
Schedule 2.1 - 2
16. Such other documents and instruments as Lender or its counsel
reasonably may require.
17. Borrower's deposit with Lender of the amount required by Lender to
impound for taxes and assessments under Article 3 and to fund any other required
escrows or reserves.
18. Evidence that the Projects and the operation thereof comply with
all legal requirements, including that all requisite certificates of occupancy,
building permits, and other licenses, certificates, approvals or consents
required of any governmental authority have been issued without variance or
condition and that there is no litigation, action, citation, injunctive
proceedings, or like matter pending or threatened with respect to the validity
of such matters.
19. No change shall have occurred in the financial condition of
Borrower, Operating Lessee, or any other Borrower Party or in the Net Operating
Income of any Project, which would have, in Lender's judgment, a material
adverse effect on a Project or on Borrower's ability to repay the Loan or on
Borrower's, Operating Lessee's or any Borrower Party's ability to perform its
obligations under the Loan Documents.
20. No condemnation or adverse zoning or usage change proceeding shall
have occurred or shall have been threatened against a Project; no Project shall
have suffered any significant damage by fire or other casualty which has not
been repaired; no law, regulation, ordinance, moratorium, injunctive proceeding,
restriction, litigation, action, citation or similar proceeding or matter shall
have been enacted, adopted, or threatened by any governmental authority, which
would have, in Lender's judgment, a material adverse effect on Borrower,
Operating Lessee, any Borrower Party or a Project.
21. All fees and commissions payable to real estate brokers, mortgage
brokers, or any other brokers or agents in connection with the Loan or the
acquisition of the Projects have been paid, such evidence to be accompanied by
any waivers or indemnifications deemed necessary by Lender.
22. Payment of Lender's costs and expenses in underwriting,
documenting, and closing the transaction, including fees and expenses of
Lender's inspecting engineers, consultants, and outside counsel.
23. The representations and warranties contained in this Loan Agreement
and in all other Loan Documents are true and correct.
24. No Potential Default or Event of Default shall have occurred or
exist.
25. Prepayment of that loan by Lender to Borrower in the amount of up
to $112,500,000 under Loan Agreement dated December 30, 1997 between Lender and
Borrower (the "EXISTING FACILITY") (reserving the right to adjust the amount of
such prepayment based on a reconciliation of payments previously made, including
applications of reserves), it being understood and agreed that the initial
advance of the Loan is a refinancing in renewal and extension of the remaining
unpaid principal balance of the Existing Facility.
Schedule 2.1 - 3
26. ▇▇▇▇▇▇ Healthcare Finance, Inc., or ▇▇▇▇▇▇ Financial, Inc. or one
or more of their related entities shall have issued a commitment to or entered
into an agreement with the borrowers under the ▇▇▇▇▇▇ Loans for the extension of
the maturity of ▇▇▇▇▇▇ Loans to a date not earlier than May 31, 2005, subject
to, among other conditions, (a) satisfaction of the Debentures, (b) the closing
and funding of the HCPI Transaction, and (c) payment to the lender(s) under the
▇▇▇▇▇▇ Loans of an extension fee in the aggregate amount of one percent (1%) of
the outstanding principal balance of the ▇▇▇▇▇▇ Loans.
PART B. GENERAL CONDITIONS
Each advance of the Loan shall be subject to Lender's receipt, review,
approval and/or confirmation of the following, each in form and content
satisfactory to Lender in its sole discretion:
1. There shall exist no Potential Default or Event of Default
(currently and after giving effect to the requested advance).
2. The representations and warranties contained in this Loan Agreement
and in all other Loan Documents are true and correct.
3. Such advance shall be secured by the Loan Documents, subject only to
those exceptions to title approved by Lender at the time of Loan closing, or the
time that a Project was first encumbered by a Mortgage, as evidenced by title
insurance endorsements satisfactory to Lender, if necessary.
4. Borrower shall have paid Lender's costs and expenses in connection
with such advance (including title charges, and costs and expenses of Lender's
inspecting engineer and attorneys).
5. No change shall have occurred in the financial condition of
Borrower, Operating Lessee, or any Borrower Party, or in the Net Operating
Income of the Projects, or in the financial condition of Borrower, Operating
Lessee, ARC, or ARCSPE, which would have, in Lender's judgment, a material
adverse effect on the Loan, the Projects, or Borrower's, Operating Lessee's, or
any Borrower Party's ability to perform its obligations under the Loan
Documents.
6. No condemnation or adverse, as determined by Lender, zoning or usage
change proceeding shall have occurred or shall have been threatened against a
Project; no Project shall have suffered any damage by fire or other casualty
which has not been repaired or is not being restored in accordance with this
Agreement; no law, regulation, ordinance, moratorium, injunctive proceeding,
restriction, litigation, action, citation or similar proceeding or matter shall
have been enacted, adopted, or threatened by any governmental authority, which
would have, in Lender's judgment, a material adverse effect on a Project or
Borrower's, Operating Lessee's, or any Borrower Party's ability to perform its
obligations under the Loan Documents.
7. Lender shall have no obligation to make any additional advance for
less than $25,000, or to make advances more often than once in any one-month
period or to make any advance after November 30, 2002.
Schedule 2.1 - 4
8. At the option of Lender (a) each advance request shall be submitted
to Lender at least ten (10) Business Days prior to the date of the requested
advance; and (b) all advances shall be made at the Chevy Chase Maryland office
of Lender or at such other place as Lender may designate unless Lender exercises
its option to make an advance directly to the Person to whom payment is due.
Schedule 2.1 - 5
SCHEDULE 2.3(E)
DISCOUNTED YIELD MAINTENANCE
A. Yield Maintenance Amount
As used in this Schedule 2.3(e), "CONTRACT RATE" means the
Fixed Rate.
As used herein, "YIELD MAINTENANCE AMOUNT" means the sum of
the Present Value (as defined below) on the date of prepayment
of each Monthly Interest Shortfall (as defined below) for the
remaining term of the Loan discounted at the monthly
Replacement Treasury Yield (as defined below).
The Monthly Interest Shortfall is calculated for each monthly
payment date as follows:
i) The positive difference, if any, of the Contract Rate
less the Replacement Treasury Yield, plus the Break
Contract Fee (as defined below) of 20 basis points;
ii) Divided by 12;
iii) Multiplied by the outstanding principal balance of
the Loan on the date of prepayment
The Present Value is then determined by discounting each
Monthly Interest Shortfall at the Replacement Treasury Yield
divided by 12.
FOR EXAMPLE: If a loan with a Contract Rate of 9% were prepaid
with 24 months remaining in the term, at a time when the two
year Replacement Treasury Yield was 5%, and the outstanding
loan balance was $10,000,000.00 then:
Schedule 2.3(e) - 1
Contract Rate .0900
Less the Replacement Treasury Yield - .0500
---------------
= .0400
Plus the Break Contract Fee + .0020
---------------
Equals the rate difference = .0420
Divided by 12 / 12
===============
Equals the monthly rate difference = .0035
Times the principal balance x $10,000,000
---------------
Equals the Monthly Interest Shortfall = $35,000
The Present Value of each Monthly Interest Shortfall ($35,000)
discounted at the monthly Replacement Treasury Yield (5% divided by 12 or
..4167%) equals $797,786.
The Break Contract Fee shall be 20 basis points at all times.
As used herein the term "REPLACEMENT TREASURY YIELD" shall mean the
rate of interest equal to the yield to maturity of the most recently
issued U.S. Treasury Security as quoted in The Wall Street Journal on
the prepayment date. If the remaining term is less than one year, the
Replacement Treasury Yield will equal the yield for 1-Year Treasury's.
If the remaining term is 1-Year, 2-Year, etc., then the Replacement
Treasury Yield will equal the yield for the Treasury's with a maturity
equaling the remaining term. If the remaining term is longer than one
year but does not equal one of the maturities being quoted, then the
Replacement Treasury Yield will equal the yield for Treasury's with a
maturity closest to but not exceeding the remaining term. If The Wall
Street Journal (i) quotes more than one such rate, the highest of such
quotes shall apply, or (ii) ceases to publish such quotes, the U.S.
Treasury security shall be determined from such financial reporting
service or source as Lender shall determine.
Schedule 2.3(e) - 2
SCHEDULE 2.4
CAPITAL IMPROVEMENTS RESERVE
CAPITAL IMPROVEMENTS RESERVE. On the date hereof and by the fifteenth
(15th) day of each January hereafter, Borrower or Operating Lessee shall deposit
into a reserve with Lender the greater of (a) $352,400 ($400 times the number of
units in the Projects subject to reduction of and as the number of units is
reduced), or (b) such higher amount as may be recommended by Lender's consulting
engineer (the "CAPITAL IMPROVEMENTS RESERVE") for replacing or correcting
damages or defects (as opposed to normal repairs and recurring expenses) to any
Project, including but not limited to, roofing, foundation work, exterior
painting, parking lot and structures, kitchen appliances, carpeting,
furnishings, fixtures, equipment, vehicles, office equipment, landscaping,
heating, ventilating and air-conditioning systems, plumbing, electrical and
mechanical systems ("CAPITAL EXPENDITURES") as specified in a Capital
Expenditures Budget (as hereinafter defined) or otherwise approved in advance by
Lender; however, the amount of the initial deposit into the Capital Improvements
Reserve shall be reduced by the amount of funds expended for capital
improvements to the Projects approved by Lender in calendar year 2002. The
Capital Improvements Reserve will be held by Lender in an interest-bearing
reserve account controlled by Lender. The Capital Improvements Reserve shall be
advanced by Lender to Borrower or Operating Lessee for Capital Expenditures.
Operating Lessee grants to Lender a security interest in the Capital
Improvements Reserve. While an Event of Default or a Potential Default exists,
Lender shall not be obligated to advance to Borrower or Operating Lessee any
portion of the Capital Improvements Reserve, and while an Event of Default
exists, Lender shall be entitled, without notice to Borrower or Operating
Lessee, to apply any funds in the Capital Improvements Reserve to satisfy
Borrower's obligations under the Loan Documents. Within thirty (30) days after
the beginning of any calendar year Borrower or Operating Lessee shall submit to
Lender a budget for Capital Expenditures for that calendar year (the "CAPITAL
EXPENDITURES BUDGET"). The Capital Expenditures Budget shall be based on the
previous year's experience and an assessment of anticipated future needs, and
shall be subject to Lender's approval. The Capital Improvements Reserve shall be
advanced in accordance with the conditions for advances under Schedule 2.1, Part
C, and Lender's customary procedures for improvements advances.
Schedule 2.4 - 1