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Exhibit 10.22
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LOAN AGREEMENT
between
FORT AUSTIN LIMITED PARTNERSHIP,
as Borrower
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
December 31, 1997
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TABLE OF CONTENTS
ARTICLE 1
CERTAIN DEFINITIONS
Page No.
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Section 1.1 Certain Definitions.............................................1
ARTICLE 2
LOAN TERMS
Section 2.1 The Loan.........................................................8
Section 2.2 Interest Rate; Late Charge.......................................8
Section 2.3 Terms of Payment.................................................9
Section 2.4 Security........................................................11
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.1 Insurance.......................................................11
Section 3.2 Use and Application of Insurance Proceeds.......................12
Section 3.3 Condemnation Awards.............................................12
Section 3.4 Impounds........................................................13
ARTICLE 4
ENVIRONMENTAL MATTERS
Section 4.1 Certain Definitions.............................................14
Section 4.2 Representations and Warranties on Environmental Matters.........14
Section 4.3 Covenants on Environmental Matters..............................14
Section 4.4 Allocation of Risks and Indemnity...............................15
Section 4.5 Collateral Assignment of Indemnities............................15
Section 4.6 No Waiver.......................................................15
ARTICLE 5
LEASING MATTERS
Section 5.1 Representations and Warranties on Residency Agreements..........16
Section 5.2 Standard Residency Agreement Form...............................16
Section 5.3 Covenants.......................................................16
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Section 6.1 Organization and Power..........................................16
Section 6.2 Validity of Loan Documents......................................17
Section 6.3 Liabilities; Litigation.........................................17
Section 6.4 Taxes and Assessments...........................................17
Section 6.5 Other Agreements; Defaults......................................17
Section 6.6 Compliance with Law.............................................17
Section 6.7 Location of Borrower............................................18
Section 6.8 ERISA...........................................................18
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Page No.
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Section 6.9 Margin Stock.....................................................18
Section 6.10 Tax Filings......................................................18
Section 6.11 Solvency.........................................................18
Section 6.12 Full and Accurate Disclosure.....................................18
Section 6.13 Single Purpose Entity............................................19
Section 6.14 Licenses and Compliance..........................................19
ARTICLE 7
FINANCIAL REPORTING
Section 7.1 Financial Statements.............................................19
Section 7.2 Accounting Principles............................................19
Section 7.3 Other Information................................................20
Section 7.4 Annual Budget and Cash Flow Summary..............................20
Section 7.5 Audits...........................................................20
ARTICLE 8
COVENANTS
Section 8.1 Due on Sale and Encumbrance; Transfers of Interests..............20
Section 8.2 Taxes; Charges...................................................21
Section 8.3 Control; Management..............................................21
Section 8.4 Noncompliance....................................................22
Section 8.5 Consultant.......................................................22
Section 8.6 Permits and Licenses; Operation; Maintenance; Inspection.........22
Section 8.7 Taxes on Security................................................23
Section 8.8 Reserves, Deposits, Escrows......................................23
Section 8.9 Legal Existence; Name, Etc.......................................23
Section 8.10 Affiliate Transactions...........................................23
Section 8.11 Limitation on Other Debt.........................................23
Section 8.12 Limitation on Affiliate Debt.....................................24
Section 8.13 Further Assurances...............................................24
Section 8.14 Estoppel Certificates............................................24
Section 8.15 Notice of Certain Events.........................................24
Section 8.16 Indemnification..................................................24
Section 8.17 ERISA............................................................24
Section 8.18 Cash Operating Reserve Fund......................................25
Section 8.19 Security Deposits................................................25
Section 8.20 Net Worth........................................................25
Section 8.21 Operation........................................................25
Section 8.22 Services.........................................................25
Section 8.23 Non-Competition..................................................26
Section 8.24 Releases and Substitutions.......................................26
ARTICLE 9
EVENTS OF DEFAULT
Section 9.1 Payments.........................................................27
Section 9.2 Insurance........................................................27
Section 9.3 Sale, Encumbrance, Etc...........................................27
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Page No.
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Section 9.4 Covenants.......................................................27
Section 9.5 Representations and Warranties..................................27
Section 9.6 Other Encumbrances..............................................27
Section 9.7 Involuntary Bankruptcy or Other Proceeding......................27
Section 9.8 Voluntary Petitions, etc........................................28
Section 9.9 Other Loans.....................................................28
Section 9.10 Limiting Mortgage Amounts.......................................28
ARTICLE 10
REMEDIES
Section 10.1 Remedies - Insolvency Events....................................28
Section 10.2 Remedies - Other Events.........................................28
Section 10.3 Lender's Right to Perform the Obligations.......................29
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices.........................................................29
Section 11.2 Amendments and Waivers..........................................30
Section 11.3 Limitation on Interest..........................................30
Section 11.4 Invalid Provisions..............................................31
Section 11.5 Reimbursement of Expenses.......................................31
Section 11.6 Approvals; Third Parties; Conditions............................31
Section 11.7 Lender Not in Control; No Partnership...........................32
Section 11.8 Time of the Essence.............................................32
Section 11.9 Successors and Assigns..........................................32
Section 11.10 Renewal, Extension or Rearrangement.............................32
Section 11.11 Waivers.........................................................32
Section 11.12 Cumulative Rights...............................................32
Section 11.13 Singular and Plural.............................................32
Section 11.14 Phrases.........................................................33
Section 11.15 Exhibits and Schedules..........................................33
Section 11.16 Titles of Articles, Sections and Subsections....................33
Section 11.17 Promotional Material............................................33
Section 11.18 Survival........................................................33
Section 11.19 Waiver of Jury Trial............................................33
Section 11.20 Waiver of Punitive or Consequential Damages.....................33
Section 11.21 Governing Law...................................................33
Section 11.22 Entire Agreement................................................34
Section 11.23 Counterparts....................................................34
ARTICLE 12
LIMITATIONS ON LIABILITY
Section 12.1 Limitation on Liability.........................................34
Section 12.2 Limitation on Liability of Lender's Officers, Employees, etc....35
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LIST OF DEFINED TERMS
Page No.
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Adjusted Operating Expenses....................................................1
Adjusted Operating Revenues....................................................1
Advance Fee....................................................................8
Advance Fee....................................................................1
Affiliate......................................................................1
Agreement......................................................................1
ARC ......................................................................1
Assignment of Rents and Leases.................................................1
Average Line Balance...........................................................2
Average Line Balance...........................................................9
Bankruptcy Party..............................................................27
Borrower ......................................................................1
Borrower Party.................................................................2
Broadway ......................................................................2
Business Day...................................................................2
Capital Expenditures...........................................................2
Capital Expenditures Budget....................................................2
Capital Improvements Reserve...................................................2
Carriage Club..................................................................3
Cash on Cash Return............................................................2
Convertible Subordinated Debentures.............................SCHEDULE 2.1 - 5
Debt ......................................................................3
Debt Service...................................................................3
Debt Service Coverage..........................................................3
Default Rate...................................................................3
EBIDTA .......................................................SCHEDULE 2.1 - 5
Environmental Laws............................................................14
ERISA .....................................................................24
Eurodollar Business Day........................................................9
Event of Default...............................................................3
Facility Capacity..............................................................3
Fixed Rate.....................................................................3
Floating Rate..................................................................3
Hampton ......................................................................4
Hazardous Materials...........................................................14
Joinder .....................................................................37
Joinder Party..................................................................4
Lender ......................................................................4
LIBOR Rate.....................................................................8
Lien ......................................................................4
Loan Documents.................................................................4
Loan Year......................................................................4
Maturity Date..................................................................4
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Page No.
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Maximum Line Amount............................................................4
Mortgage ......................................................................4
Net Cash Flow..................................................................5
Net Operating Income...........................................................5
Net Worth......................................................................5
Obligations....................................................................9
Operating Expenses.............................................................5
Operating Reserve.............................................................25
Operating Revenues.............................................................6
Parkplace......................................................................6
Person ......................................................................6
Potential Default..............................................................6
Projects ......................................................................7
Ratio of EBIDTA to Total Interest Expense.......................SCHEDULE 2.1 - 5
Ratio of Total Assets to Total Debt.............................SCHEDULE 2.1 - 5
Residency Agreement............................................................7
Resident ......................................................................7
Santa Catalina.................................................................7
Security Deposit Accounts.....................................................25
Single Purpose Entity..........................................................7
Site Assessment................................................................7
State ......................................................................7
State Agencies.................................................................7
Summit ......................................................................8
Total Interest Expense..........................................SCHEDULE 2.1 - 5
Unused Line Fee................................................................8
Unused Line Fee................................................................9
Westlake Village...............................................................8
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LOAN AGREEMENT
This Loan Agreement (this "AGREEMENT") is entered into as of December
31, 1997 between GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
("LENDER"), and FORT AUSTIN LIMITED PARTNERSHIP, a Texas limited partnership
("BORROWER"). 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.
"ADVANCE FEE" has the meaning set forth in Section 2.1.
"AFFILIATE" means (1) any corporation in which Borrower or any
partner, shareholder, director, officer, member, or manager of Borrower
directly or indirectly owns or controls more than ten percent (10%) of
the beneficial interest, (2) any partnership, joint venture or limited
liability company in which Borrower or any partner, shareholder,
director, officer, member, or manager of Borrower is a partner, joint
venturer or member, (3) any trust in which Borrower or any partner,
shareholder, director, officer, member or manager of Borrower is a
trustee or beneficiary, (4) 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, (5) any partner,
shareholder, director, officer, member, manager or employee of
Borrower, (6) any Person related by birth, adoption or marriage to any
partner, shareholder, director, officer, member, manager, or employee
of Borrower, or (7) any Borrower Party.
"AGREEMENT" means this Loan Agreement, as amended from time to
time.
"ARC" means American Retirement Corporation, a Tennessee
corporation.
"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, in the Real Property Records of Pima
County, Arizona, assigning to Lender all of the rents, leases, and
income of Santa Catalina;
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(b) Assignment of Rents and Leases of even date
herewith, executed by Borrower and filed for recording in the Real
Property Records of Tarrant County, Texas, and in the Real Property
Records of ▇▇▇▇▇▇ County, Texas, and in the Real Property Records of
▇▇▇▇▇▇ County, Texas, assigning to Lender all of the rents, leases and
income of Broadway and Summit and Hampton;
(c) the Assignment of Rents and Leases dated of even
date herewith, executed by Borrower, filed in the Real Property Records
of Cuyahoga County, Ohio, for Westlake Village, assigning to Lender all
of the rents, leases and income of Westlake Village;
(d) the Assignment of Rents and Leases dated of even
date herewith, filed in the Real Property Records of Denver County,
Colorado for Parkplace, assigning to Lender all of the rents, leases
and income of Parkplace;
(e) Assignment of Rents and Leases dated of even date
herewith, executed by Borrower, filed in the Real Property Records of
▇▇▇▇▇ County, Florida, assigning to Lender all of the rents, leases and
income of Carriage Club; and
(f) any other assignment of rents and leases in favor
of Lender and pertaining to the rents, and leases, and income of the
Projects.
"AVERAGE LINE BALANCE" has the meaning assigned to such term
in Section 2.3(C).
"BORROWER PARTY" means any Joinder Party, any general partner
in Borrower, and any general partner in any partnership that is a
general partner in Borrower, 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 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.
"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.
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"CARRIAGE CLUB" means the senior living facility located in
Jacksonville, Florida and known as "Carriage Club of Jacksonville,"
consisting of 298 units (238 independent living units and 60 assisted
living units), and more particularly described on Exhibit A.
"DEBT" means, for any Person, without duplication: (1) 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, (2) 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, (3) 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, (4) all
indebtedness guaranteed by such Person, directly or indirectly, (5) all
obligations under leases that constitute capital leases for which such
Person is liable, and (6) 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.
"DEBT SERVICE" means the aggregate principal payments,
interest payments and other payments by Borrower on the Loan, other
than required additions to the Capital Expenditures Reserve and any
other reserves deemed necessary by Lender, and on all other outstanding
Debt of Borrower 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 (i) the maximum rate of
interest allowed by applicable law, or (ii) five percent (5%) per annum
in excess of the Floating Rate.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article 9.
"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.
"FIXED RATE LOAN" means the loan in the amount of $62,330,000
to be advanced by Lender to Borrower under the Fixed Rate Note.
"FIXED RATE NOTE" means the Promissory Note of even date
herewith in the principal amount of $62,330,000, executed by Borrower,
payable to the order of Lender and evidencing the Fixed Rate Loan.
"FLOATING RATE" has the meaning assigned to such term in
Section 2.2.
"FLOATING RATE NOTE" means the Promissory Note of even date
herewith in the principal amount of up to $50,000,000, executed by
Borrower, payable to the order of Lender and evidencing the Line of
Credit.
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"HAMPTON" shall mean The Hampton at Post Oak Road Retirement
Community, consisting of approximately 149 independent residential
living units, 21 assisted living units on 1.357 acres located at ▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ in Houston, Texas, including adequate parking for
automobiles, and more particularly described on Exhibit A.
"JOINDER PARTY" means the Persons, if any, executing the
Joinder hereto.
"LENDER" means General Electric Capital Corporation, and its
successors and assigns.
"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.
"LINE OF CREDIT" means the revolving line of credit in the
amount of up to $50,000,000.
"LOAN" means the loan to be made by Lender to Borrower under
this Agreement, and shall include the Fixed Rate Loan and the Line of
Credit and all other amounts owing from time to time and secured by the
Loan Documents.
"LOAN DOCUMENTS" means: (a) this Agreement, (b) the Notes, (c)
the Mortgage, (d) the Assignment of Rents and Leases, (e) financing
statements, (f) any and all other documents evidencing, securing,
governing or otherwise pertaining to the Loan, and (g) all amendments,
modifications, renewals, substitutions and replacements of any of the
foregoing.
"LOAN YEAR" shall mean the period between the date hereof and
December 31, 1998 for the first Loan Year and the period between each
succeeding January 1 and December 31 until the Maturity Date.
"MATURITY DATE" means the earlier of (a) December 31, 2002, 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.
"MAXIMUM LINE AMOUNT" has the meaning assigned to such term in
Section 2.3(3).
"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 Property Records
of Tarrant County, Texas, and in the Real Property Records of
▇▇▇▇▇▇ County, Texas, and in the Real Property Records of
▇▇▇▇▇▇ County, Texas, encumbering Broadway, Summit, and
Hamptons;
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(b) Deed of Trust, Assignment of Rents, 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 Pima County, Arizona, encumbering
Santa Catalina;
(c) Deed of Trust, Security Agreement and Fixture
Filing, dated of even date herewith, executed by Borrower for
the benefit of Lender and encumbering Parkplace, and filed for
recording in the Real Property Records of Denver County,
Colorado;
(d) Open-End Mortgage, Security Agreement and Fixture
Filing, dated of even date herewith, executed by Borrower for
the benefit of Lender, encumbering Westlake Village and filed
in the Real Property Records of Cuyahoga County, Ohio;
(e) Mortgage, Security Agreement and Fixture Filing,
dated of even date herewith, executed by Borrower for the
benefit of Lender, encumbering Carriage Club and filed in the
Real Property Records of ▇▇▇▇▇ County, Florida; and
(f) 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 (1) Operating Expenses, (2) Debt
Service, and (3) 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 three percent (3%) of Operating
Revenues and a reserve for replacement equal to one percent (1%) 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.
"NOTES" means, collectively, the Fixed Rate Note and the
Floating Rate Note.
"OPERATING EXPENSES" means all customary expenses of operating
the Projects in the ordinary course of business which are paid in cash
by Borrower 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 of three percent (3%) of Operating Revenues (which amount
Borrower may retain for Borrower's self-management of the Projects),
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
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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 Borrower 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 Borrower or to an Affiliate of Borrower, other than
the management fee of three percent (3%) of Operating Revenues to be
retained by Borrower, 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 REVENUES" means all cash receipts of Borrower from
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 (1) gross resident
service revenues less contractual allowances and provisions for
uncollectible accounts, free care and discounted care, if any, (2)
non-operating revenues, (3) entrance fees actually paid, if any, net of
refunds, (4) revenues from parking agreements, concession fees and
charges and other miscellaneous operating revenues, (5) proceeds from
rental or business interruption insurance, (6) proceeds of any loans
(other than the Loan and any refinancing of the Loan) obtained by
Borrower 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 any Affiliate of Borrower and without implying
any consent of Lender to the granting of any security for any such
loans), (7) withdrawals from cash reserves (except to the extent any
operating expenses paid therewith are excluded from Operating
Expenses). Operating Revenues shall not include (A) security deposits
and ▇▇▇▇▇▇▇ money deposits until they are forfeited by the depositor,
(B) advance rentals until they are earned, (C) proceeds from a sale or
other disposition, (D) 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, (E)
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 (F) insurance proceeds (other than rental or business interruption
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
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111 ▇▇▇▇▇▇▇ Street in Denver, Colorado, including adequate parking for
automobiles, and more particularly described on Exhibit A.
"PROJECTS" means, collectively, Broadway, Summit, Santa
Catalina, Parkplace, Hampton, Westlake Village and Carriage Club, 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.
"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.
"SANTA CATALINA" means Santa Catalina Villas Retirement
Community, consisting of approximately 148 independent residential
living units, and 15 assisted living units, on 11 acres located at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, including adequate
parking for automobiles, and more particularly described on Exhibit A.
"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 8.24 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 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.
"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, Summit and Hamptons, the Texas
Department of Health and the Texas Department of Human Services, with
respect to Santa Catalina, the Arizona Department of Health Services,
with respect to Parkplace, the Colorado Department of Public Health and
Environment and the Colorado Department of Health Care Policy and
Financing,
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with respect to Westlake Village, the Ohio Department of Health, the
Ohio Department on Aging, and the State of Ohio Fire ▇▇▇▇▇▇▇▇/local
fire department, and with respect to Carriage Club, the State of
Florida Agency for Health Care Administration, 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.
"UNUSED LINE FEE" means the fee payable by Borrower to Lender
under Section 2.3(3) hereof.
"WESTLAKE VILLAGE" means Westlake Village Retirement
Community, consisting of approximately 212 independent residential
living units, and 56 assisted living units on 19.6906 acres located at
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇, including parking for 201
automobiles, and more particularly described on Exhibit A.
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 Fixed Rate Loan, in the amount
of $62,330,000, shall be made as the initial advance upon Borrower's
satisfaction of the conditions to initial advance described in Schedule 2.1. All
other advances of the Loan shall be made under the Line of Credit and the
Floating Rate Note. Repayments of principal of the Fixed Rate Loan may not be
readvanced. Subject to the terms hereof, advances of the Line of Credit made
under the Floating Rate Note may be repaid, without premium or penalty, and
reborrowed as a revolving line of credit. Subsequent advances under the Line of
Credit shall be made upon Borrower's satisfaction of the conditions for such
advances described in Schedule 2.1, Parts B and C. Each advance under the Line
of Credit shall be subject to an advance fee ("ADVANCE FEE") equal to one-half
percent (0.50%) of such advance until Lender has received a total of $375,000 in
Advance Fees over the term of the Loan.
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) the Fixed Rate Note shall bear interest at eight and
twenty one-hundredths percent (8.20%) per annum (the "FIXED RATE"); and
(b) the Floating Rate Note shall bear interest at the rate of
interest equal to one and seventy-five one hundredths percent (1.75%) per annum
in excess of the LIBOR Rate (the "FLOATING RATE"). "LIBOR RATE" shall mean 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
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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 (i) publishes more
than one (1) such Libor Rate, the average of such rates shall apply, or (ii)
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. The term "EURODOLLAR BUSINESS DAY" shall mean any day on which banks
in the City of London are generally open for interbank or foreign exchange
transactions.
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");
(a) INTEREST. Commencing on February 1, 1998, Borrower shall
pay interest in arrears at the rate or rates set forth in Section 2.2
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 hereunder, if for any calendar quarter either (i) the Cash on
Cash Return is less than fourteen and twenty-five one hundredths
percent (14.25%), or (ii) the Debt Service Coverage is less than
1.75:1, then, in addition to regular monthly installments of interest,
Borrower shall pay to Lender, in reduction of the principal balance of
the Line of Credit, or if the principal balance of the Line of Credit
has been reduced to zero, in reduction of the principal balance of the
Fixed Rate Loan (which shall not be subject to being re-advanced), 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 Cash on Cash Return of at least
14.25% and a Debt Service Coverage of at least 1.75:1 for a full
calendar quarter, a principal installment based on a 25-year monthly
amortization of the principal balance of the Loan at the Fixed Rate.
(c) UNUSED LINE FEE. If the average outstanding principal
balance of the Line of Credit during any Loan Year, calculated as of
the end of that Loan Year, or for the final Loan Year as of June 30,
2002 (the "AVERAGE LINE BALANCE") is less than $50,000,000 (the
"MAXIMUM LINE AMOUNT"), then within ten (10) days after receipt of
notice from Lender, Borrower shall pay to Lender, in immediately
available funds, a fee (the "UNUSED LINE FEE") equal to one-quarter of
one percent (.25%) of the difference between the Maximum Line Amount
and the Average Line Balance. If payment of the principal amount of the
Line of Credit is accelerated by Lender, or the Line of Credit is
otherwise terminated under Section 2.3(h), Borrower, promptly upon such
acceleration or termination, shall pay to Lender the amount of the
Unused Line Fee that would have otherwise come due had the Line of
Credit not been accelerated or had this Agreement not been otherwise
terminated, calculated using the average outstanding principal balance
of the Line of Credit through the month
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immediately preceding the month in which such acceleration or
termination occurs, prorated for any partial year. The Unused Line Fee
for the final Loan Year shall be prorated as of June 30, 2002.
(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 the Fixed Rate Loan in
whole or in part at any time before the expiration of the second Loan
Year. From and after January 1, 2000, the commencement of the third
Loan Year, Borrower may prepay the Fixed Rate 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 Fixed Rate Loan, without premium or
penalty except that upon repayment prior to the Maturity Date of any
portion of the principal balance of the Fixed Rate Loan, Borrower shall
also pay to Lender the Yield Maintenance Amount, calculated as provided
in Schedule 2.3(5), for the portion prepaid. Borrower may prepay the
Line of Credit in whole or in part at any time without premium or
penalty.
(f) MANDATORY REPAYMENT. After any prepayment of the Loan
which reduces the unpaid principal balance of the Loan to less than
$35,000,000 (excluding payments of principal under Section 2.3(b) and
involuntary payments under Section 3.2 or Section 3.3), Lender may upon
three (3) months prior notice to Borrower declare the unpaid principal
balance of the Loan, together with all accrued and unpaid interest and
other charges and the Yield Maintenance Amount for payment of any
portion of the Fixed Rate Loan, due and payable, and the Loan then
shall be due and payable at the expiration of the three (3) month
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 under the Line of Credit, and fifth, to
the principal sum of the Fixed Rate 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.
(h) TERMINATION OF LINE OF CREDIT. Effective on January 1,
2000 or on January 1 of any year thereafter,
(i) upon notice to Lender on or before the
immediately preceding October 1 and payment in full of the
Line of Credit, including any Unused Line Fee, Borrower shall
have a one-time right to terminate the Line of Credit, and
(ii) upon notice to Borrower on or before the
immediately preceding October 1, Lender shall have a one-time
right to terminate any further right of Borrower to advances
of the Line of Credit.
After termination of the Line of Credit by Borrower, Lender shall have
no further obligation with respect to the Line of Credit, Borrower
shall have no right to reinstate the Line of Credit, and any obligation
to pay the Unused Line Fee shall cease. After termination of any
further right to advances
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of the Line of Credit by Lender, the Line of Credit shall be converted
to a term loan with no obligation of Lender to re-advance any principal
which is repaid.
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.
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.1 INSURANCE. Borrower shall maintain insurance as follows:
CASUALTY; BUSINESS INTERRUPTION. Borrower 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 shall keep the Projects insured against loss by flood if a Project 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) 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
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. Borrower shall not
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.
(a) LIABILITY. Borrower 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.
(b) 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 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-IX" 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. If Borrower fails to maintain insurance
in compliance with this Section 3.1, Lender may obtain such insurance and pay
the premium therefor and Borrower shall, on demand, reimburse Lender for all
expenses incurred in connection therewith. Borrower 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 shall deliver copies of all original policies
certified to
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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.
(c) ADJUSTMENTS. Borrower shall give immediate written notice
of any loss to the insurance carrier and to Lender. Borrower hereby irrevocably
authorizes and empowers Lender, as attorney-in-fact for Borrower 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(C),
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 sufficient to pay
Debt Service; (4) Lender determines that after restoration the Debt Service
Coverage will be at least 1.75:1 and the Cash or Cash Return will be at least
14.25%; (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 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 Subsection 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 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 will deliver to Lender all instruments necessary or
required by Lender to permit such participation. Without Lender's prior consent,
Borrower (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
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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 authorizes 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 requests 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, 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 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 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 year, with adjustments when the charges are fixed for the then
current year). Unless Borrower and Lender hereafter enter into a "blocked
account" or similar deposit agreement, all funds so deposited shall be held by
Lender, without interest, and may be commingled with Lender's general funds.
Borrower hereby grants 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 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 before
such charges are payable, is insufficient to pay such charges, Borrower 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 unconditionally and irrevocably covenants and agrees to pay all
real estate taxes, assessments, and similar charges on the Projects, prior to
the delinquency thereof. Notwithstanding the foregoing, Borrower shall not be
obligated to make deposits with Lender under this Section 3.4 if (a) the
Projects are producing a Net Operating Income which is generating a Cash on Cash
Return of at least 14.25% and a Debt Service Coverage of at least 1.75:1, (b)
Borrower shall have provided Lender with evidence that all real estate taxes,
assessments and similar charges relating to the Projects previously have been
paid prior to the delinquency thereof, (c) there exists no Event of Default or
Potential Default, and (d) both Borrower and ARC continue to be personally and
corporately liable for payment of such taxes, assessments and charges.
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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
Borrower's knowledge, 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 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 shall (1) comply strictly and in all respects
with applicable Environmental Laws; (2) notify Lender immediately upon
Borrower's discovery of any spill, discharge, release or presence of any
Hazardous Material at, upon, under, within, contiguous to or otherwise affecting
a Project; (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 or Borrower.
(b) Borrower shall not cause, shall prohibit any other Person
within the control of Borrower 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
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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 shall provide to Lender, at Borrower'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 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, 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. Accordingly,
Borrower shall bear all risks and costs associated 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 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 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 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 hereby
collaterally assigns 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 executed by any previous owner 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."
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ARTICLE 5
LEASING MATTERS
Section 5.1 REPRESENTATIONS AND WARRANTIES ON RESIDENCY AGREEMENTS.
Borrower represents and warrants to Lender with respect to Residency Agreements
of the Projects that: (a) to Borrower's knowledge, 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 Borrower's knowledge, 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 Borrower's
knowledge, neither the landlord nor any resident is in default under any of the
Residency Agreements; (e) Borrower has no knowledge of any notice of termination
or default with respect to any Residency Agreement; (f) Borrower 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. 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 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.
Section 5.3 COVENANTS. Borrower (a) shall perform in all material
respects the obligations which Borrower 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 (5), (6), and (7) of this Section 5.3, shall be
void at the election of Lender.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants 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.
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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
Borrower's best knowledge, 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 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 any Borrower Party is in violation
of any agreement which violation would have an adverse effect on a Project,
Borrower, or any Borrower Party or Borrower's or any Borrower Party's business,
properties, or assets, operations or condition, financial or otherwise.
Section 6.6 COMPLIANCE WITH LAW.
(a) Borrower has made applications and filed all required
notices for the transfer, renewal, recertification, and/or reissuance of all
such currently existing licenses, permits, approvals and provider agreements
necessary to own, lease, operate and carry on its business in the Projects, and
has no knowledge of any basis for the denial of such applications, subject to
completion of the application process including compliance with any applicable
on-site health facility survey and certification review requirements that can be
completed only after Borrower legally assumes responsibility for operation of
each Project. Each Project is in compliance with all applicable legal
requirements and, to Borrower's knowledge, is free of structural defects, and
all building systems contained therein are in good working order, subject to
ordinary wear and
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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
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 benefitting 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 principal place of
business and chief executive offices are located at the address stated in
Section 11.1.
Section 6.8 ERISA. Borrower has not established any pension plan for
employees which would cause Borrower 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 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 which
has not been disclosed to
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Lender which adversely affects, nor as far as Borrower 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 SINGLE PURPOSE ENTITY. Borrower is and has at all times
since its formation been a Single Purpose Entity.
Section 6.14 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, which are currently in full force and effect.
ARTICLE 7
FINANCIAL REPORTING
Section 7.1 FINANCIAL STATEMENTS.
(a) MONTHLY REPORTS. Within thirty (30) days after the end of
each calendar month, Borrower shall furnish to Lender a current (as of the
calendar month just ended) balance sheet, a detailed operating statement
(showing monthly activity and year-to-date) stating Operating Revenues,
Operating Expenses, operating income and Net Cash Flow for the calendar month
just ended, and, as requested by Lender, an updated rent roll, a written
statement setting forth any variance from the annual budget, copies of bank
statements and bank reconciliations, and other documentation supporting the
information disclosed in the most recent financial statements.
(b) ARC INFORMATION. When and as available, Borrower 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 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 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.
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.
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Section 7.3 OTHER INFORMATION. Borrower 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, Borrower 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 Borrower has and will
continue to (A) preserve its 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. Before the initial advance on the Line of Credit,
and if either (a) an audit has not been completed within the immediately
preceding six-month period, or (b) a requested advance would cause the
outstanding principal balance of the Line of Credit to exceed $20,000,000 or to
exceed $40,000,000, then before any other advance on the Line of Credit, and
otherwise as required by Lender to confirm whether conditions for any requested
release of collateral under Section 8.24 have been satisfied, Lender shall
conduct a complete audit of the Operating Revenues and Operating Expenses of the
Projects, at Borrower's expense, to determine compliance with applicable Cash on
Cash Return and Debt Service Coverage requirements. If Lender shall fail to
complete its initial audit of the Projects before February 15, 1998, no Unused
Line Fee shall be payable with respect to the period following February 15, 1998
and prior to the date on which such audit is completed. Lender shall have the
right to choose and appoint a certified public accountant to perform such audits
as it deems necessary, at Borrower's expense. Borrower shall permit Lender to
examine such records, books and papers of Borrower 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 covenants and agrees with Lender as follows:
Section 8.1 DUE ON SALE AND ENCUMBRANCE; TRANSFERS OF INTERESTS. Except
for the Residency Agreements, without the prior written consent of Lender,
(a) neither Borrower nor any other Person having an ownership
or beneficial interest in Borrower shall (1) directly or indirectly sell,
transfer, convey, mortgage, pledge, or assign any interest in a Project or any
part thereof (including any partnership or any other ownership interest in
Borrower); (2) further encumber, alienate, ▇▇▇▇▇ ▇ ▇▇▇▇ (other than as described
in Section 8.1(A)(3)) or grant any other interest in a Project or any part
thereof (including any partnership or other ownership interest in Borrower
whether voluntarily or involuntarily; or (3) 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;
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(b) no new general partner, member, or limited partner having
the ability to control the affairs of Borrower shall be admitted to or created
in Borrower (nor shall any existing general partner or member or controlling
limited partner withdraw from Borrower), and no change in Borrower's
organizational documents relating to control over Borrower and/or a Project
shall be effected and
(3) no transfer shall be permitted which would cause ARC to
own, directly or indirectly, less than one hundred percent (100%) of Borrower.
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
units within a Project so long as Borrower complies with the provisions of the
Loan Documents relating to such leasing activity.
Section 8.2 TAXES; CHARGES. Borrower 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 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 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 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 may contest such taxes and charges and such claims and
demands so long as (1) Borrower notifies Lender that it intends to contest such
claim or demand, (2) Borrower 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 (3) Borrower 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 shall remain under the
control of ARC at all times while this Agreement is in effect. Borrower shall
not terminate, replace or appoint any manager or terminate or amend the
management agreement for a Project without Lender's prior written approval.
Borrower shall fully perform all of its covenants, agreements and obligations
under the management agreement. Borrower, or an Affiliate, shall serve as
manager of the Projects. If the manager is an Affiliate of Borrower, such
manager shall be entitled to receive a management fee of up to three percent
(3%) 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 Borrower manages the Projects. If Borrower 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. Each manager shall hold and maintain all
necessary licenses, certifications and permits required by law, and, if not an
Affiliate of Borrower, shall enter a non-competition
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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 5-mile radius of any
Project at any time while any portion of the Loan is outstanding. Borrower shall
strictly comply with the Management Standards set forth in Exhibit B 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 NONCOMPLIANCE. Borrower 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 expense, to evaluate and review such reports and documents. Borrower
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 will promptly notify Lender of (i) any
noncompliance, or (ii) any event which, with notice or lapse of time or both,
would result in noncompliance, with any statute, law, ordinance, order,
judgment, decree, regulation, direction or requirement concerning Borrower, its
operations, or any of the Projects, or in connection with which Borrower 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, Borrower shall engage an independent consultant as described in
Section 8.5 below and shall provide Lender with a statement of Borrower setting
forth its proposed action or response to the noncompliance situation. Borrower
shall promptly notify Lender of any proposed local, state or federal law that,
if enacted, would materially and adversely affect Borrower's current operation
of either of the Projects.
Section 8.5 CONSULTANT. If (a) Borrower fails 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 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 statue, ordinance and/or regulation concerning
Borrower, its operations, or any of the Projects, then Borrower shall, at its
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 noncompliance situation, as the case may be. With
regard to a notice of violation or noncompliance received by Borrower as
described in Section 8.4 above, if such violation or noncompliance can be cured
by Borrower 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 proposed plan to cure such
noncompliance. Such independent consultant will provide a copy of its report to
Borrower and to Lender. Borrower further agrees that its compliance with this
covenant and/or the independent consultant's recommendation will not limit any
of Lender's rights and remedies upon Borrower's default or excuse Borrower from
any default whether by reason of its failure to maintain the above-specified
Debt Service Coverage or occupancy level, or the receipt of a notice of
noncompliance or for any other reason.
Section 8.6 PERMITS AND LICENSES; OPERATION; MAINTENANCE; INSPECTION.
Borrower shall promptly complete the application process for the transfer,
renewal, recertification, and/or reissuance of all currently existing licenses,
permits, approvals and agreements necessary to own, lease, operate and carry on
its business in the Projects and, on request by Lender, shall furnish to Lender
true and correct copies of such
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licenses, permits, approvals and agreements. Borrower 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 shall
maintain the Projects in good condition (ordinary wear and tear excepted) and
promptly repair any damage or casualty. Borrower shall permit Lender and its
agents, representatives and employees, upon reasonable prior notice to Borrower,
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 shall pay all taxes, charges,
filing, registration and recording fees, excises and levies payable with respect
to the Notes 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 (1) deducting the Loan from the value of a Project for the
purpose of taxation, (2) affecting any Lien on a Project, or (3) 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 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 shall at all times
maintain all reserves, deposits and/or escrows required by Lender or State
Agencies applicable from time to time to Borrower by virtue of the nature of
Borrower's business.
Section 8.9 LEGAL EXISTENCE; NAME, ETC. Borrower and each general
partner in Borrower, 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 any general
partner of Borrower, if any, 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
general partner in Borrower, if any, 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
Borrower (1) shall have obtained the prior written consent of Lender to such
change, and (2) 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. Borrower (and each general partner in Borrower, if any) shall
maintain its separateness as an entity, including maintaining separate books,
records, and accounts and observing corporate and partnership formalities
independent of any other entity, shall pay its obligations with its own funds
and shall not commingle funds or assets with those of any other entity.
Section 8.10 AFFILIATE TRANSACTIONS. Without the prior written consent
of Lender, except for management agreements complying with the provisions hereof
and loans from Borrower to Affiliates of Borrower, Borrower shall not engage in
any transaction affecting a Project with an Affiliate of Borrower, unless the
terms thereof are the same as terms otherwise available in the marketplace
generally.
Section 8.11 LIMITATION ON OTHER DEBT. Borrower (and each general
partner in Borrower, if any) shall not, without the prior written consent of
Lender, incur any Debt other than (1) the Loan, and (2)
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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, and (c)
subordinated unsecured Debt.
Section 8.12 LIMITATION ON AFFILIATE DEBT. Borrower shall not borrow
funds from any Affiliate of Borrower unless such parties have acknowledged that
all such debt is unsecured and subordinate to the Loan.
Section 8.13 FURTHER ASSURANCES. Borrower 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 8.14 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 8.15 NOTICE OF CERTAIN EVENTS. Borrower 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 and any governmental
authority, affecting Borrower or a Project.
Section 8.16 INDEMNIFICATION. Borrower 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 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 8.17 ERISA. Borrower 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
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all material respects. Without limiting the generality of the foregoing,
Borrower 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 8.18 CASH OPERATING RESERVE FUND. At any time during the term
of the Loan in which ARC (on a consolidated basis) is not maintaining cash and
cash equivalents of at least $3,500,000, Borrower shall maintain a cash
operating reserve fund (the "OPERATING RESERVE") in an amount representing 21
days' of estimated, routine Operating Expenses. If funds from the Operating
Reserve are withdrawn and used by Borrower to pay ordinary Operating Expenses,
Borrower shall replenish the Operating Reserve within sixty (60) days of such
withdrawal, by depositing an amount sufficient to restore the Operating Reserve
to its full amount. Borrower grants to Lender a security interest in the
Operating Reserve. While an Event of Default exists, Lender shall be entitled,
without notice to Borrower, to withdraw funds from the Operating Reserve to
satisfy Borrower's obligations under the Loan Documents.
Section 8.19 SECURITY DEPOSITS. Borrower shall maintain a separate
account for each of the Projects ("SECURITY DEPOSIT ACCOUNTS") into which it
will deposit all security deposits and other deposits received by Borrower under
the Residency Agreements for such Projects. Borrower shall make all
disbursements from the appropriate Security Deposit Account in accordance with
the terms of the Residency Agreements, the Loan Documents and all applicable
state and local statutes, ordinances and regulations, if any, and Borrower shall
continue to comply with Lender's requirements, the terms of the Residency
Agreements, and all applicable state and local statutes, ordinances and
regulations regarding maintenance of such Security Deposit Accounts. To the
maximum extent allowed by applicable law, Borrower grants to Lender a security
interest in the Security Deposit Accounts and all funds therein to Lender as
security for the Loan. To the extent allowed by law while any Event of Default
exists, Lender may withdraw funds from the Security Deposit Accounts and apply
such funds to satisfy Borrower's obligations under the Loan Documents.
Notwithstanding the foregoing, Borrower shall not be obligated to maintain the
Security Deposit Accounts with Lender under this Section 8.19 if (a) the
Projects are producing a Net Operating Income which is generating a Cash on Cash
Return of at least 14.25% and a Debt Service Coverage of at least 1.75:1, (b)
there exists no Event of Default or Potential Default, and (c) Borrower
continues to be in compliance with all applicable laws and regulations relating
to security deposits under Residency Agreements.
Section 8.20 NET WORTH. ARC shall at all times maintain a Net Worth of
at least $10,000,000.
Section 8.21 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.
Borrower 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 8.22 SERVICES. Borrower 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. Borrower shall not materially change such services
or reduce the Facility Capacity without the prior written consent and approval
of Lender.
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Section 8.23 NON-COMPETITION. At any time while any portion of the Loan
is outstanding, neither Borrower nor any Affiliate of Borrower 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 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 8.23 shall prohibit Borrower or any Affiliate
of Borrower from acquiring or managing any existing facility, but neither
Borrower nor any Affiliate of Borrower shall, in its marketing efforts, target
Residents of any Project for transfers to any other facility. Borrower 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.
Section 8.24 RELEASES AND SUBSTITUTIONS. Lender agrees that from time
to time at Borrower's request, Lender will release from time to time one or more
Projects from the covenants of this Agreement and the other Loan Documents, and
the liens, assignments and security interests of the Mortgage and the other Loan
Documents if:
(a) There exists no Event of Default or Potential Default;
(b) Borrower shall have delivered notice to Lender of any
requested release of a Project(s) at least thirty (30) days prior to
the scheduled date of such release;
(c) Borrower shall pay all costs and expenses of Lender
arising in connection with the release of the Mortgage and the other
Loan Documents, including, but not limited to, reasonable legal fees of
Lender's counsel, and all other costs arising in connection with the
execution and delivery of the release;
(d) Borrower shall deliver to Lender evidence satisfactory to
Lender that all amounts owing to any parties as a result of the release
of such Project(s) have been paid in full, or are simultaneously being
paid in full at closing;
(e) After such release there shall remain at least three (3)
Projects encumbered by the Mortgage and the other Loan Documents;
(f) The Projects which have not been released must be
generating a Cash on Cash Return of at least 14.25% and a Debt Service
Coverage of at least 1.75:1 from Residency Agreements of not more than
95% occupancy of the Projects, as determined by Lender's audit of the
Projects at Borrower's sole cost and expense;
(g) Any Project which has been released shall from the date of
such release no longer be considered a "Project;"and
(h) Any prepayment associated with a release under this
Section 8.24 shall be subject to the provisions of Section 2.3(E) and
Section 2.3(F).
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From time to time Borrower may elect to encumber additional Projects by the
Mortgage and the other Loan Documents (either as new Projects or in substitution
for existing Projects) provided that after the addition of any Project, the Net
Operating Income of the Projects is generating a Cash on Cash Return of at least
14.25% and a Debt Service Coverage of at least 1.75:1, and provided any
additional Project is satisfactory to Lender in its sole and absolute
discretion.
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 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, in violation of Section 8.1 of this
Agreement.
Section 9.4 COVENANTS. Borrower'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; however, subject to any shorter period for curing any failure by
Borrower as specified in any of the other Loan Documents, Borrower 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 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 or Section 8.20, or to the Events of Default described
in Section 9.5, Section 9.6, Section 9.7, Section 9.8, Section 9.9 and Section
9.10.
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
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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 OTHER LOANS. The existence of any Event of Default under
any other loan by Lender to either Borrower or any Affiliate thereof, which by
its terms is intended to be secured by a Project.
Section 9.10 LIMITING MORTGAGE AMOUNTS. Any filing for record of a
notice pursuant to Florida Statutes Section 697.04 (or any successor replacement
Section) limiting the maximum amount that may be secured by the Mortgage.
ARTICLE 10
REMEDIES
Section 10.1 REMEDIES - INSOLVENCY EVENTS. Upon the occurrence of any
Event of Default described in Section 9.7 or 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; however, if the Bankruptcy Party under
Section 9.7 or 9.8 is 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.
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Section 10.3 LENDER'S RIGHT TO PERFORM THE OBLIGATIONS. If Borrower
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 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 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 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 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: Fort Austin Limited Partnership
c/o American Retirement Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Executive Vice
President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to: Bass, ▇▇▇▇▇ & ▇▇▇▇
First American Center
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: T. ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: General Electric Capital Corporation
c/o GE Capital Realty Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Asset Manager
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with 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 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 Notes by the holder thereof (or, if the Notes have 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
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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 Notes (or, if the
Notes have 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 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 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 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
shall, upon request, promptly reimburse Lender for all amounts expended,
advanced or incurred by Lender to collect the Notes, 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 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
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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.
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, 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 to
create an equity in the Projects in Lender. Lender neither undertakes nor
assumes any responsibility or duty to Borrower 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 its 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; and (c)
Lender shall not be deemed responsible for or a participant in any acts,
omissions or decisions of Borrower or its stockholders, members, or partners.
Lender and Borrower disclaim any intention to create any partnership, joint
venture, agency or common interest in profits or income between Lender and
Borrower, 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 and Borrower and the successors and
assigns of Lender, including any assignee or transferee of either Note,
individually, and the successors and assigns of Borrower, 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. Borrower
agrees to cooperate with Lender and to execute such documents as Lender
reasonably may request to effect any divisions of the Loan required by Lender.
Section 11.11 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 11.12 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 11.13 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.
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Section 11.14 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, and the phrase "acceptable to Lender" shall mean "acceptable to
Lender at Lender's sole discretion."
Section 11.15 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 11.16 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 11.17 PROMOTIONAL MATERIAL. Borrower authorizes 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 shall be
approved in writing by Lender in advance of issuance.
Section 11.18 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, title and interest in and to the Projects to any party, whether or not an
Affiliate of Borrower.
Section 11.19 WAIVER OF JURY TRIAL. To the maximum extent permitted by
law, Borrower 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 11.20 WAIVER OF PUNITIVE OR CONSEQUENTIAL DAMAGES. Neither
Lender nor Borrower 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 11.21 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.
33
40
Section 11.22 ENTIRE AGREEMENT. This Agreement and the other Loan
Documents embody the entire agreement and understanding between Lender and
Borrower 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 11.23 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,
Borrower shall not be personally liable for amounts due under the Loan
Documents. Borrower shall be personally liable to Lender for any deficiency,
loss or damage suffered by Lender because of: (a) Borrower'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; (c) the
misapplication by Borrower or any Borrower Party of any funds derived from the
Projects, including security deposits, insurance proceeds and condemnation
awards; (d) the fraud or misrepresentation by Borrower or any Borrower Party
made in or in connection with the Loan Documents or the Loan; (e) Borrower's
collection of rents more than one month in advance or entering into or modifying
Residency Agreements, or receipt of monies by Borrower or any Borrower Party in
connection with the modification of any Residency Agreements, in violation of
this Agreement or any of the other Loan Documents; (f) Borrower's failure 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 failure to
pay any real estate taxes, assessments or similar charges affecting the Projects
prior to the delinquency thereof, (h) Borrower's interference with Lender's
exercise of rights under the Assignments of Rents and Leases; (i) if applicable,
Borrower's failure to timely renew any letter of credit issued in connection
with the Loan; (j) Borrower'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,
its agents, employees, or contractors; (l) Borrower's obligations with respect
to environmental matters under Article 4; (m) Borrower'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, its successors or
assigns, or any creditor of Borrower, that this Agreement or the transactions
contemplated by the Loan Documents establish a joint venture, partnership or
other similar arrangement between Borrower and Lender; (n) any failure on the
part of Borrower 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; (p) the failure of Borrower to maintain separate accounts for security
deposits if and as required in Section 8.19; or (q) 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 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
34
41
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
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
35
42
EXECUTED as of the date first written above.
LENDER: GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Attorney-In-Fact
BORROWER: FORT AUSTIN LIMITED PARTNERSHIP,
a Texas limited partnership
By: ARC FORT AUSTIN PROPERTIES, INC.,
a Tennessee corporation, General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
Vice President
36
43
JOINDER
By executing this Joinder (the "JOINDER"), the undersigned ("JOINDER
PARTIES") jointly and severally guaranty the performance by Borrower of
Borrower'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 obligations with respect to environmental matters under Article 4 of
this Agreement, Borrower's indemnification obligations under Section 8.16 of
this Agreement, and all obligations and liabilities for which Borrower is
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 any Joinder Party;
(b) any release or other action or inaction taken by Lender
with respect to the collateral, the Loan, Borrower 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 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 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 or any other party; and
(h) any voluntary or involuntary bankruptcy, receivership,
insolvency, reorganization or similar proceeding affecting Borrower or any of
its assets.
37
44
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.
38
45
Executed as of December 31, 1997.
JOINDER PARTIES: ARC FORT AUSTIN PROPERTIES, INC.,
a Tennessee corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
Vice President
AMERICAN RETIREMENT CORPORATION,
a Tennessee corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
Executive Vice President
39
46
EXHIBIT B
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.
B-1
47
SCHEDULE 2.1
ADVANCE CONDITIONS
Part A - Initial Advance
Part B - General Conditions
Part C - Advances on the Line of Credit
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 Loan Documents, executed by Borrower and, as applicable, each
Borrower Party.
2. The Advance Fee for any amount advanced under the Floating Rate
Note.
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 and each
Borrower Party for the execution, delivery, and performance of the Loan
Documents by Borrower and each Borrower Party.
5. Legal opinions issued by counsel for Borrower and each Borrower
Party, opining as to the due organization, valid existence and good standing of
Borrower and each Borrower Party, and the due authorization, execution,
delivery, enforceability and validity of the Loan Documents with respect to,
Borrower and each 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; 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. Evidence of insurance as required by this Agreement, and conforming
in all respects to the requirements of Lender.
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.
Schedule 2.1 - 1
48
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. 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. 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.
12. Evidence satisfactory to Lender that Borrower is and has 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.
13. 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.
14. 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.
15. 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.
16. No change shall have occurred in the financial condition of
Borrower or any 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 or any Borrower Party's ability to repay the Loan or otherwise
perform its obligations under the Loan Documents.
17. 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,
Schedule 2.1 - 2
49
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, any
Borrower Party or a Project.
18. 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.
19. 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.
20. Such other documents or items as Lender or its counsel reasonably
may require.
21. The representations and warranties contained in this Loan Agreement
and in all other Loan Documents are true and correct.
22. No Potential Default or Event of Default shall have occurred or
exist.
23. Reference is made to that Loan by Lender to Borrower in the amount
of up to $97,500,000 under Loan Agreement dated January 6, 1996 between Lender
and Borrower (the "EXISTING FACILITY") and to that loan by Lender to American
Retirement Communities, L.P. and ARCLP-Charlotte, L.L.C. in the amount of
$51,750,000 under that Loan Agreement dated April 30, 1996 among Lender,
American Retirement Communities, L.P. and ARCLP-Charlotte, L.L.C. (the "ONYX
FACILITY") for the following conditions to the initial advance of the Loan.
(a) Prepayment of that portion of the Existing Facility which
bears interest at a floating rate of interest (reserving the right to
adjust the amount of such prepayment based on a reconciliation of
payments previously made, including applications of reserves), plus all
prepayment premiums therefor as required under the Existing Facility,
in lieu of prepayment and 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;
(b) Prepayment in full of the Onyx Facility, plus all
prepayment premiums therefor as required under the Onyx Facility;
(c) Payment to Lender of $3,000,000 in cash in consideration
for Lender's participation interest in cash flow and appreciated value
with respect to the properties securing the Onyx Facility;
(d) Any reserves, letters of credit, or impounds with respect
to the Existing Facility or the Onyx Facility shall be returned to
Borrower upon the closing of the Loan; and
(e) Borrower shall have paid in full the construction
financing for the expansion of Santa Catalina and shall have obtained a
release of Lender from any obligation to satisfy said construction
financing through a funding under the tri-party agreement for the Santa
Catalina Expansion and the Existing Facility.
Schedule 2.1 - 3
50
PART B. GENERAL CONDITIONS
Each advance of the Line of Credit 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 (after giving effect to the
Borrower's reports under Article 7 and the notices from Borrower to Lender under
the terms of this Agreement and the other Loan Documents).
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 to Lender any Advance Fee applicable to
such advance.
5. 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).
6. No change shall have occurred in the financial condition of Borrower
or any Borrower Party, or in the Net Operating Income of the Projects, or in the
financial condition of Borrower or ARC, which would have, in Lender's judgment,
a material adverse effect on the Loan, the Projects, or Borrower's or any
Borrower Party's ability to perform its obligations under the Loan Documents.
7. 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 or any Borrower Party's ability to perform its obligations under the
Loan Documents.
8. Lender shall have no obligation to make any additional advance for
less than $5,000,000, or to make advances more often than once in any one-month
period, or to make any advance after June 30, 2002, there then being no Unused
Line Fee for the period after June 30, 2002 and before the Maturity Date.
9. 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 Dallas, Texas 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 - 4
51
PART C. ADVANCES ON THE LINE OF CREDIT.
Advances on the Line of Credit shall be subject to Lender's receipt,
review and approval and/or confirmation of the following, at Borrower's cost and
expense, each in form and substance satisfactory to Lender in its sole
discretion:
1. Confirmation by Lender's review and analysis of Borrower's operating
statements that the Operating Expenses and Operating Revenues of the Projects,
that the Net Operating Income of the Projects, will generate a Cash on Cash
Return of not less than 14.25% and a Debt Service Coverage of not less than
1.75:1, calculated taking into account a principal balance which includes the
requested advance.
2. Lender's audit of the Operating Revenues and Operating Expenses of
the Projects, as reflected in Borrower's monthly and annual reports and as
required by Lender from time to time in accordance with Section 7.5.
3. Verification by Lender that ARC has maintained in the previous
fiscal quarter, and is maintaining, on a consolidated basis, (a) a Ratio of
Total Assets to Total Debt of at least 1.33:1, and (b) a Ratio of EBIDTA to
Total Interest Expense of at least 1.50:1, and certification by ARC that ARC is
not in monetary default under any financial obligation in excess of $1,000,000.
As used herein, "RATIO OF TOTAL ASSETS TO TOTAL DEBT" means the ratio
(1) of the fair market value of all of the assets of ARC, after the restatement
of the current fair market value of the Projects as determined by Lender, to (2)
the total Debt of ARC.
As used herein, "RATIO OF EBIDTA TO TOTAL INTEREST EXPENSE" means, for
any fiscal quarter, the ratio of the EBIDTA of ARC to the Total Interest Expense
of ARC.
As used herein, "EBIDTA" means, for any fiscal quarter, without
duplication, consolidated earnings of ARC before adjustments for interest
income/expense, income taxes, depreciation and amortization, and excluding from
the calculation thereof non-recurring revenues and charges, and extraordinary
gains and losses.
As used herein, "TOTAL INTEREST EXPENSE" means, for any fiscal quarter,
without duplication, the total interest expense of ARC, on a consolidated basis,
whether paid or accrued as liabilities (including the interest component of
capital lease obligations) with respect to all Debt of ARC, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to any financing or letters of credit and net costs under any interest
rate swap agreement, to the extent that such costs are included within interest
expense under generally accepted accounting principles. For purposes of this
definition, interest expense related to the Convertible Subordinated Debentures
shall be offset by the consolidated interest income of ARC.
As used herein, "CONVERTIBLE SUBORDINATED DEBENTURES" means those
convertible subordinated debentures in the principal amount of $138,000,000,
issued by ARC in September 1997.
4. Receipt by Lender of the accrued but unpaid Unused Line Fee, if any,
which is then owing.
Schedule 2.1 - 5
52
SCHEDULE 2.3(5)
DISCOUNTED YIELD MAINTENANCE
A. YIELD MAINTENANCE AMOUNT
As used in this Schedule 2.3(5), "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:
Contract Rate .0900
Less the Replacement Treasury Yield - .0500
--------------
= .0400
Plus the Break Contract Fee + .0020
--------------
Equals the rate difference = .0420
Divided by 12 divided by 12
==============
Equals the monthly rate difference = .0035
Times the principal balance x $10,000,000
--------------
Equals the Monthly Interest Shortfall = $ 35,000.00
Schedule 2.3(5) - 1
53
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(5) - 2
54
SCHEDULE 2.4
CAPITAL IMPROVEMENTS RESERVE
CAPITAL IMPROVEMENTS RESERVE. On January 15, 1998 and by the fifteenth
(15th) day of each January thereafter, Borrower shall deposit into a reserve
with Lender (the "CAPITAL IMPROVEMENTS RESERVE") an amount equal to the amount,
if any, by which (a) one percent (1%) of Operating Revenues for the immediately
preceding calendar year exceeded (b) the sum of all expenditures by Borrower 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") during the
preceding calendar year which were specified in a Capital Expenditures Budget
(as hereinafter defined) or otherwise approved in advance by Lender and not paid
with disbursements from the Capital Improvements Reserve; however, if the amount
of approved Capital Expenditures in any calendar year exceeded one percent (1%)
of Operating Revenues in such calendar year, the amount of any excess shall be
credited to Borrower's obligation to make deposits to the Capital Improvements
Reserve in any succeeding calendar year(s). The Capital Improvements Reserve
will be held by Lender without interest and may be commingled with Lender's own
funds. The Capital Improvements Reserve shall be advanced by Lender to Borrower
for Capital Expenditures. Borrower 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 any portion of the
Capital Improvements Reserve, and while an Event of Default exists, Lender shall
be entitled, without notice to Borrower, 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 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 B, and Lender's customary procedures for improvements advances.
Schedule 2.4 - 1