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EXHIBIT 10.1
FINANCING AND SECURITY AGREEMENT
(MASTER AGREEMENT)
ARC CAPITAL CORPORATION II, ET AL
AS BORROWERS
BANK UNITED
AS AGENT
June 8, 1999
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TABLE OF CONTENTS
ARTICLE I.......................................................................1
SECTION 1.1 CERTAIN DEFINED TERMS..........................................1
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS............20
ARTICLE II.....................................................................20
SECTION 2.1 THE LOAN......................................................20
SECTION 2.2 PROCEDURE FOR ADVANCES........................................22
SECTION 2.3 FEES..........................................................23
SECTION 2.4 INTEREST RATE MATTERS.........................................23
2.4.1 Lender Tax Adjustment............................................23
2.4.2 Inability to Determine Eurodollar Rate...........................23
2.4.3 Illegality.......................................................24
2.4.4 Increased Costs and Reduced Return...............................24
SECTION 2.5 CHANGE IN BASIS POINT SPREAD..................................25
SECTION 2.6 EXTENSIONS....................................................25
ARTICLE III....................................................................26
SECTION 3.1 COLLATERAL....................................................26
SECTION 3.2 ELIGIBLE PROJECTS.............................................26
SECTION 3.3 NOTE ASSIGNMENT...............................................27
SECTION 3.4 GUARANTIES....................................................27
SECTION 3.5 COLLATERAL FOR OBLIGATIONS....................................27
SECTION 3.6 COSTS.........................................................27
SECTION 3.7 OPTIONAL COLLATERAL...........................................28
ARTICLE IV.....................................................................28
GENERAL FINANCING PROVISIONS...................................................28
SECTION 4.1 CONDITIONS PRECEDENT TO CREDIT FACILITY CLOSING AND
ADDITION OF ELIGIBLE PROJECTS.................................28
SECTION 4.2 ADDITIONAL CONDITIONS PRECEDENT TO ACCEPTING AN ELIGIBLE
PROJECT THAT IS UNDER CONSTRUCTION OR TO BE CONSTRUCTED:......30
SECTION 4.3 ADDITIONAL CONDITIONS PRECEDENT TO ACCEPTING AN
ELIGIBLE PROJECT THAT HAS BEEN CONSTRUCTED OR ACQUIRED:.......34
SECTION 4.4 ADDITIONAL CONDITIONS PRECEDENT TO ACCEPTING A FACILITY
SUBJECT TO A SYNTHETIC LEASE TRANSACTION AS AN
ELIGIBLE PROJECT..............................................37
SECTION 4.5 CONDITIONS PRECEDENT TO DETERMINING ADDITIONAL
AVAILABILITY UNDER BORROWING BASE.............................38
SECTION 4.6 CONDITIONS UNDER WHICH AN ELIGIBLE PROJECT IS A
COMPLETED PROJECT.............................................41
SECTION 4.7 VERIFICATION OF OPERATING RESERVE EXPENDITURES................42
SECTION 4.8 ASSIGNMENTS OF PAYMENTS.......................................42
SECTION 4.9 LIABILITY OF THE LENDERS......................................42
SECTION 4.10 COMPUTATION OF INTEREST AND FEES..............................42
SECTION 4.11 LIENS; SETOFF.................................................42
SECTION 4.12 PAYMENT AND PERFORMANCE OF OBLIGATIONS........................43
SECTION 4.13 PAYMENTS TO OTHERS FOR THE ACCOUNT OF THE BORROWERS...........43
SECTION 4.14 PREPAYMENT....................................................44
SECTION 4.15 DELIVERY OF DOCUMENTS.........................................44
ARTICLE V......................................................................44
SECTION 5.1 GOOD STANDING.................................................44
SECTION 5.2 POWER AND AUTHORITY...........................................44
SECTION 5.3 BINDING AGREEMENTS............................................45
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SECTION 5.4 LITIGATION....................................................45
SECTION 5.5 NO CONFLICTING AGREEMENTS.....................................45
SECTION 5.6 FINANCIAL INFORMATION.........................................46
SECTION 5.7 NO DEFAULT UNDER OTHER AGREEMENTS.............................46
SECTION 5.8 TAXES.........................................................46
SECTION 5.9 PLACE(S) OF BUSINESS AND LOCATION OF COLLATERAL...............46
SECTION 5.10 TITLE TO PROPERTIES...........................................46
SECTION 5.11 MARGIN STOCK..................................................47
SECTION 5.12 ERISA.........................................................47
SECTION 5.13 GOVERNMENTAL CONSENT..........................................47
SECTION 5.14 FULL DISCLOSURE...............................................47
SECTION 5.15 BUSINESS NAMES AND ADDRESSES..................................48
SECTION 5.16 LICENSES AND CERTIFICATIONS...................................48
SECTION 5.17 OPERATING AGREEMENTS AND MANAGEMENT CONTRACTS.................48
SECTION 5.18 PARTICIPATION AGREEMENTS AND RESIDENT AGREEMENTS..............49
SECTION 5.19 COMPLIANCE WITH LAWS..........................................49
SECTION 5.20 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS
CONTAMINATION.................................................49
SECTION 5.21 COMPLIANCE IN ZONING..........................................50
SECTION 5.22 PLANS AND SPECIFICATIONS......................................50
SECTION 5.23 BUILDING PERMITS; OTHER PERMITS...............................50
SECTION 5.24 UTILITIES.....................................................50
SECTION 5.25 ACCESS; ROADS.................................................50
SECTION 5.26 OTHER LIENS...................................................51
SECTION 5.27 DEFAULTS......................................................51
SECTION 5.28 NATURE OF CREDIT FACILITY; USURY; DISCLOSURES.................51
SECTION 5.29 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES...........51
SECTION 5.30 ACCOUNTS......................................................51
SECTION 5.31 SINGLE PURPOSE ENTITY.........................................52
ARTICLE VI.....................................................................52
CONDITIONS OF LENDING..........................................................52
SECTION 6.1 NO DEFAULT....................................................52
SECTION 6.2 OPINION OF COUNSEL FOR THE BORROWER...........................52
SECTION 6.3 APPROVAL OF COUNSEL FOR THE LENDERS...........................52
SECTION 6.4 SUPPORTING DOCUMENTS..........................................52
SECTION 6.5 FINANCING DOCUMENTS...........................................53
SECTION 6.6 INSURANCE.....................................................53
SECTION 6.7 SECURITY DOCUMENTS............................................53
SECTION 6.8 ADDITIONAL BORROWER JOINDER SUPPLEMENT........................53
ARTICLE VII....................................................................54
AFFIRMATIVE COVENANTS OF BORROWER..............................................54
SECTION 7.1 FINANCIAL STATEMENTS..........................................54
SECTION 7.2 FINANCIAL COVENANTS...........................................55
7.2.1 Minimum Pool A Projects..........................................55
7.2.2 Pool A Project Covenants.........................................55
7.2.3 Debt Service Coverage............................................57
7.2.4 License..........................................................57
7.2.5 Percentage of Stabilized Projects................................57
SECTION 7.3 TAXES AND CLAIMS..............................................57
SECTION 7.4 LEGAL EXISTENCE...............................................57
SECTION 7.5 CONDUCT OF BUSINESS AND COMPLIANCE WITH LAWS..................57
7.5.1 Maintenance of Agreements........................................57
7.5.2 Maintenance of Line of Business..................................58
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7.5.3 Compliance with Laws Governing Participation Agreements...........58
7.5.4 Other Operating Covenants.........................................58
SECTION 7.6 USE OF PROCEEDS................................................59
SECTION 7.7 INSURANCE......................................................59
7.7.1 Builder's Risk Insurance; Hazard Insurance........................59
7.7.2 Liability Insurance...............................................59
7.7.3 Worker's Compensation Insurance...................................60
7.7.4 Business Interruption Insurance...................................60
7.7.5 Professional Liability Insurance..................................60
7.7.6 Flood Insurance...................................................60
7.7.7 General Insurance Provisions......................................60
SECTION 7.8 MAINTENANCE OF PROPERTIES.....................................61
SECTION 7.9 MAINTENANCE OF THE COLLATERAL.................................61
SECTION 7.10 OTHER LIENS, SECURITY INTERESTS, ETC..........................61
SECTION 7.11 DEFENSE OF TITLE AND FURTHER ASSURANCES.......................61
SECTION 7.12 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING REQUIREMENTS....62
SECTION 7.13 BOOKS AND RECORDS.............................................62
SECTION 7.14 COLLECTIONS...................................................62
SECTION 7.15 NOTICE TO ACCOUNT DEBTORS AND ESCROW ACCOUNT..................63
SECTION 7.16 BUSINESS NAMES................................................63
SECTION 7.17 ERISA.........................................................63
SECTION 7.18 MANAGEMENT....................................................63
SECTION 7.19 SURVEYS.......................................................65
SECTION 7.20 INSPECTIONS; COOPERATION; PAYMENT OF INSPECTING ENGINEER......65
SECTION 7.21 VOUCHERS AND RECEIPTS.........................................65
SECTION 7.22 PAYMENTS FOR LABOR AND MATERIALS..............................65
SECTION 7.23 CORRECTION OF CONSTRUCTION DEFECTS............................66
SECTION 7.24 FEES AND EXPENSES; INDEMNITY..................................66
SECTION 7.25 GOVERNMENTAL SURVEYS OR INSPECTIONS...........................66
SECTION 7.26 COST REPORTS..................................................66
SECTION 7.27 APPRAISALS....................................................66
SECTION 7.28 NOTIFICATION OF CERTAIN EVENTS, EVENTS OF DEFAULT AND
ADVERSE DEVELOPMENTS..........................................67
SECTION 7.29 COMPLIANCE WITH ENVIRONMENTAL LAWS............................68
SECTION 7.30 HAZARDOUS MATERIALS; CONTAMINATION............................68
SECTION 7.31 PARTICIPATION IN REIMBURSEMENT PROGRAMS.......................69
SECTION 7.32 INSPECTION AND OTHER REPORTS AND NOTICES......................69
SECTION 7.33 INTEREST RATE FOR ASSIGNED NOTES..............................70
ARTICLE VIII...................................................................70
NEGATIVE COVENANTS OF BORROWER.................................................70
SECTION 8.1 BORROWINGS....................................................70
SECTION 8.2 DEEDS OF TRUST AND PLEDGES....................................70
SECTION 8.3 SALE OR TRANSFER OF ASSETS....................................70
SECTION 8.4 OTHER LIENS; TRANSFERS; "DUE-ON-SALE"; ETC....................70
SECTION 8.5 ADVANCES AND LOANS............................................71
SECTION 8.6 CONTINGENT LIABILITIES........................................71
SECTION 8.7 LICENSES......................................................71
SECTION 8.8 ERISA COMPLIANCE..............................................71
SECTION 8.9 TRANSFER OF COLLATERAL........................................72
SECTION 8.10 SALE OF ACCOUNTS OR RECEIVABLES...............................72
SECTION 8.11 AMENDMENTS; TERMINATIONS......................................72
SECTION 8.12 PROHIBITION ON HAZARDOUS MATERIALS............................72
SECTION 8.13 SUBSIDIARIES..................................................73
SECTION 8.14 MERGERS OR ACQUISITIONS.......................................73
SECTION 8.15 CONDITIONAL SALES.............................................73
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SECTION 8.16 CHANGES TO PLANS AND SPECIFICATION............................73
SECTION 8.17 CONSTRUCTION CONTRACT; CONSTRUCTION MANAGEMENT................73
SECTION 8.18 LINE OF BUSINESS..............................................73
SECTION 8.19 STOCK REDEMPTION..............................................73
SECTION 8.20 SINGLE PURPOSE ENTITY.........................................73
SECTION 8.21 LIMITATION ON ACQUISITION PROJECTS............................74
SECTION 8.22 AMENDMENTS TO SYNTHETIC LEASE TRANSACTION DOCUMENTS...........74
ARTICLE IX.....................................................................74
EVENTS OF DEFAULT..............................................................74
SECTION 9.1 FAILURE TO PAY AND/OR PERFORM THE OBLIGATIONS.................74
SECTION 9.2 BREACH OF REPRESENTATIONS AND WARRANTIES......................74
SECTION 9.3 FAILURE TO COMPLY WITH COVENANTS..............................74
SECTION 9.4 FAILURE TO COMPLY WITH FINANCIAL REPORTING OR BOOKS
AND RECORDS...................................................74
SECTION 9.5 OTHER DEFAULTS................................................75
SECTION 9.6 DEFAULT UNDER OTHER FINANCING DOCUMENTS.......................75
SECTION 9.7 RECEIVER; BANKRUPTCY..........................................75
SECTION 9.8 JUDGMENT......................................................75
SECTION 9.9 EXECUTION; ATTACHMENT.........................................75
SECTION 9.10 DEFAULT UNDER OTHER BORROWINGS................................75
SECTION 9.11 CHANGE IN STATUS OR OWNERSHIP.................................75
SECTION 9.12 DAMAGE TO IMPROVEMENTS........................................76
SECTION 9.13 MECHANIC'S LIEN...............................................76
SECTION 9.14 SURVEY MATTERS................................................76
SECTION 9.15 GENERAL CONTRACTOR DEFAULT....................................76
SECTION 9.16 ZONING........................................................76
SECTION 9.17 UPDATED APPRAISAL.............................................76
SECTION 9.18 DEFAULT UNDER SYNTHETIC LEASE TRANSACTION.....................76
ARTICLE X......................................................................77
RIGHTS AND REMEDIES UPON DEFAULT...............................................77
SECTION 10.1 DEMAND; ACCELERATION..........................................77
SECTION 10.2 FURTHER ADVANCES; IMMEDIATE ACCELERATION......................77
SECTION 10.3 FURTHER ADVANCES; MATERIAL ADVERSE CHANGE OR
IMPAIRMENT OF POSITION........................................77
SECTION 10.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL.....................77
SECTION 10.5 PERFORMANCE BY LENDERS........................................79
SECTION 10.6 UNIFORM COMMERCIAL CODE AND OTHER REMEDIES....................80
SECTION 10.7 RECEIVER OR OTHER COURT ORDER.................................81
SECTION 10.8 LICENSE OF TRADENAME..........................................81
ARTICLE XI.....................................................................82
MISCELLANEOUS..................................................................82
SECTION 11.1 NOTICES.......................................................82
SECTION 11.2 CONSENTS AND APPROVALS........................................82
SECTION 11.3 REMEDIES, ETC. CUMULATIVE.....................................83
SECTION 11.4 NO WAIVER OF RIGHTS BY THE AGENT OR LENDERS...................83
SECTION 11.5 ENTIRE AGREEMENT; CONFLICT WITH AGENCY AGREEMENT..............83
SECTION 11.6 SURVIVAL OF AGREEMENT; SUCCESSORS AND ASSIGNS.................83
SECTION 11.7 EXPENSES......................................................84
SECTION 11.8 COUNTERPARTS..................................................84
SECTION 11.9 GOVERNING LAW.................................................84
SECTION 11.10 MODIFICATIONS.................................................84
SECTION 11.11 ILLEGALITY....................................................85
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SECTION 11.12 GENDER, ETC..................................................85
SECTION 11.13 HEADINGS.....................................................85
SECTION 11.14 WAIVER OF TRIAL BY JURY......................................85
SECTION 11.15 NO WARRANTY BY LENDERS OR AGENT..............................85
SECTION 11.16 LIABILITY OF THE LENDERS.....................................86
SECTION 11.17 NO PARTNERSHIP...............................................86
SECTION 11.18 THIRD PARTIES; BENEFIT.......................................87
SECTION 11.19 CONDITIONS; VERIFICATION.....................................87
SECTION 11.20 SIGNS; PUBLICITY.............................................87
SECTION 11.21 MANDATORY ARBITRATION........................................87
SECTION 11.22 ASSIGNMENT BY LENDERS........................................89
SECTION 11.23 REQUIRED LENDERS.............................................89
SECTION 11.24 BORROWERS APPROVAL OF LENDERS................................89
SECTION 11.25 TIME OF ESSENCE..............................................89
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FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (the "Agreement") is made this
8th day of June, 1999, by and among ARC CAPITAL CORPORATION II, a Tennessee
corporation ("ARCC"), the other Borrowers, if any, listed on the signature pages
hereof and BANK UNITED, as agent (the "Agent") for itself and for certain
additional Lenders (as hereinafter defined).
R E C I T A L S
A. The Lenders have agreed to make a Credit Facility available to the
Borrowers and any Additional Borrowers in the maximum principal sum of
$75,000,000 or such greater amount, not to exceed in the aggregate at any one
time $150,000,000, as may be from time to time committed by the Agent and the
other Lenders.
B. The Credit Facility is made available by the Lenders upon the terms
and subject to the conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrowers and the
Lenders hereby agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Defined Terms.
As used herein, the terms defined in the Preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:
"Account," individually, and, "Accounts," collectively, mean with
respect to each Borrower and the Guarantor pertaining to all Eligible Projects
and Optional Collateral, all presently existing or hereafter acquired or created
accounts, accounts receivable, contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a security interest in or a lease of goods, all rights to receive the payment
of money or other consideration under present or future contracts arising out of
or relating to any and all Eligible Projects or Optional Collateral (including,
without limitation, all rights to receive the payment of money or other
consideration from, or on behalf of, any private pay patient), or by virtue of
services rendered, loans and advances made or other considerations given, by or
set forth in, or arising out of, any present or future chattel paper, note,
draft, lease, acceptance,
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writing, bond, insurance policy, instrument, document or general intangible, and
all extensions and renewals of any thereof, all rights under or arising out of
present or future contracts, agreements which gave rise to any or all of the
foregoing insofar as they pertain to the Eligible Projects or the Optional
Collateral, including all claims or causes of action now existing or hereafter
arising in connection with or under any agreement or document or by operation of
law or otherwise, all collateral security of any kind (including real property
mortgages) given by any person with respect to any of the foregoing, including,
without limitation, all rights to receive payment of money or other
consideration from, or on behalf of, any private pay patient, all rights to
receive payments under all Resident Agreements, and all third-party payor
contracts (including Medicare and Medicaid to the extent permitted by Law),
including, but not limited to, the Veterans Administration, Participation
Agreements, and any and all depository accounts (other than resident trust
accounts) into which the proceeds of all or any portion of such accounts may be
now or hereafter deposited, and all proceeds (cash and non-cash) of the
foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"Act of Bankruptcy" means the filing of a petition in bankruptcy under
the Bankruptcy Code or the other commencement of a proceeding under any other
applicable law concerning insolvency, reorganization or bankruptcy, now or
hereafter in effect.
"Acquisition Project" means a Facility purchased by a Borrower from a
third party as a Completed Project or such a Facility that a Borrower has
arranged to be purchased in a Synthetic Lease Transaction and which, in either
case, is not a Stabilized Project.
"Additional Borrower" means a Wholly Owned Subsidiary of ARCC or ARC
that is acceptable to the Agent and that has executed and delivered an
Additional Borrower Joinder Supplement and has otherwise complied with the
provisions of this Agreement, including but not limited to Section 4.1 hereof.
"Additional Borrower Joinder Supplement" means an Additional Borrower
Joinder Supplement in the form attached hereto as EXHIBIT F, with the blanks
appropriately completed and executed and delivered by an Additional Borrower and
by the Borrowers.
"Adjusted Total Capital" means the sum of Net Worth, Funded Debt,
Subordinated Debt and all equity of a joint venture of the Guarantor or any of
its subsidiaries, whether such joint venture is consolidated or unconsolidated
in accordance with GAAP.
"Affiliate" means an entity in which ARC (or another entity which ARC
controls) holds an ownership interest equal to or greater than fifty-one percent
(51%).
"Agency Agreement" means the Agency Agreement of even date herewith
executed by and among the Agent and the other Lenders, as the same may be
amended, restated or substituted from time to time.
"Agent" means Bank United, its successors and assigns.
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"Agreement" means this Financing and Security Agreement and all
amendments, extensions, restatements, substitutions and supplements hereto which
may from time to time become effective in accordance with the provisions of
Section 11.10 hereof.
"Appraised Value" means the appraised value of a Facility as
stabilized, as reviewed by the Agent.
"ARC" means American Retirement Corporation, a Tennessee corporation.
"ARCC" means ARC Capital Corporation II, a Tennessee corporation.
"Architect" means the architect named in an Architect's Contract, if
any, and his, her or its successors and permitted assigns.
"Architect's Contract" means an agreement by and between a Borrower, as
owner, and the Architect for a particular Facility, or any contract for
architectural services relating to the development of the Land and/or the
construction of the Improvements for each of the Eligible Projects made by a
Borrower and an Architect and approved in writing by the Agent, as the same may
be amended from time to time with the prior written approval of the Agent.
"Asset Value" means for any Facility included in Optional Collateral
which has been a completed asset or has been acquired for a period of less than
twelve (12) months, the lesser of (a) such Facility's Costs Incurred to Date, or
(b) its Net Operating Income for the immediately prior twelve (12) consecutive
months capitalized at the rate of 12%. "Asset Value" for any Facility included
in Optional Collateral which has not been completed or acquired within a period
of twelve (12) months shall be its Net Operating Income for the immediately
prior twelve (12) consecutive months capitalized at the rate of 12%.
Alternatively, the Borrowers may elect to provide or the Agent may require, at
the Borrowers' expense, an appraisal of any of such Facilities to be considered
as Optional Collateral in which case, the "Asset Value" shall mean 100% of the
Appraised Value of such Facility (if an appraisal is obtained or provided).
"Asset Value" for any Eligible Project means the then applicable availability
attributed to such Eligible Project in the Borrowing Base; provided, however,
that the "Asset Value" of any Eligible Project which is not a Completed Project
shall be the least of (a) (i) 81.25% of its Deed of Trust Lien Amount or (ii)
the maximum principal amount of the Assigned Note, (b) 65% of its Appraised
Value if it is a Pool A Project, 50% of its Appraised Value if it is a Pool B
Project or 35% of its Appraised Value if it is a Pool C Project or (c) 65% of
the Total Development Budget if it is a Pool A Project, 50% of the Total
Development Budget if it is a Pool B Project or 35% of the Total Development
Budget if it is a Pool C Project.
"Assigned Note," individually, or "Assigned Notes," collectively means
one or more secured promissory notes and any amendments thereto or substitutions
therefor payable to ARCC or an Additional Borrower by a Synthetic Lessor and
assigned to the Agent for the benefit of the Lenders as security for the Credit
Facility pursuant to an Assignment of Transaction Documents or similar
assignment.
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"Banking Day" means a day on which each of the Lenders is open for the
conduct of substantially all of its banking business at its office in the city
in which its Note is payable and must also be a day on which dealings are
carried on in the applicable interbank Eurodollar market.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
101 et seq.
"Borrower," individually, or "Borrowers," collectively means one or
more of ARCC, the other Borrowers, if any, listed on the signature pages hereof,
and any Additional Borrowers.
"Borrowing Base" means at any time an amount equal to the lesser of (a)
the lesser of the aggregate dollar amounts of (i) 81.25% (65% divided by 80%) of
the Deed of Trust Lien Amounts (except that for Special Eligible Projects it
shall be 93.75% (75% divided by 80%) of the Deed of Trust Lien amount) plus 100%
of the outstanding aggregate principal amount of all Assigned Notes, or (ii) 65%
of the Appraised Value of each Pool A Project other than Special Eligible
Projects and 75% of the Appraised Value of each Special Eligible Project which
is also a Pool A Project, plus 50% of the Appraised Value of each Pool B
Project, plus 35% of the Appraised Value of each Pool C Project; or (b) the
combined aggregate dollar amount equal to 65% of the Costs Incurred to Date for
each Pool A Project that is a Completed Project (or for a Development Project
that is a Pool A Project after the Borrowers have invested 20% equity in the
project, 81.25% [or other lesser percentage calculated by the Agent as may be
necessitated by the Appraisal Value] of subsequent Costs Incurred to Date but
not to exceed at any time 65% of the Costs Incurred to Date in the aggregate)
other than Special Eligible Projects and 75% of the Costs Incurred to Date of
each Special Eligible Project, 50% of the Costs Incurred to Date for each Pool B
Project, and 35% of the Costs Incurred to Date for each Pool C Project.
"Borrowing Base Deficiency" shall have the meaning set forth in Section
2.1(h) hereof.
"Borrowing Base Report" shall have the meaning set forth in Section
2.1(d) hereof.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods, any
returned, rejected or repossessed goods covered by any such writing or writings
and all proceeds (in any form including, without limitation, accounts, contract
rights, documents, chattel paper, instruments and general intangibles) of such
returned, rejected or repossessed goods, and all proceeds (cash and non-cash) of
the foregoing but only to the extent that any of the foregoing relates to an
Eligible Project or Optional Collateral.
"Collateral" means each Borrower's Accounts, Equipment, General
Intangibles, documents, Chattel Paper, Instruments and Inventory, pertaining to
all Eligible Projects, all right, title and interest of each Borrower and the
Management Company in and to the Operating Agreements and Management Contracts
(including, without limitation, the Management Agreement), Resident Agreements
(to the extent and only to the extent the same can be pledged or assigned in
compliance with applicable law), Physician Contracts, Participation Agreements,
the Licenses (to the extent and only to the extent the same can be pledged or
assigned in compliance with applicable law) whether or not designated with
initial capital letters, and all
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other management contracts, operating agreements, service agreements and any
other agreements pertaining to any Eligible Project or Optional Collateral, as
those terms are defined herein and in the Uniform Commercial Code as presently
adopted and in effect in the State of Texas, and shall also cover, without
limitation, (i) any and all property specifically included in those respective
terms in this Agreement or in the Financing Documents, (ii) all right, title and
interest of each Borrower in and to Leases or subleases, rents, royalties,
issues, profits, revenues, earnings, income or other benefits of the Property,
or arising from the use or enjoyment of the Property, or from any lease or other
use and occupancy agreement pertaining to the Property (to the extent and only
to the extent the same can be pledged or assigned in compliance with applicable
law), (iii) all right, title and interest of each Borrower, any other owner, ARC
and any party obligated to construct the Improvements, under all construction,
architectural and design contracts and plans and specifications, (iv) any and
all property and/or collateral described in any of the Security Documents,
including, without limitation, this Agreement and the Deeds of Trust, (v) any
and all bank accounts or other deposit accounts of each Borrower wherever
located, (vi) the Assigned Notes and the Note Collateral; and (vii) all proceeds
(cash and non-cash, including, without limitation, insurance proceeds) of the
foregoing.
"Collateral Assignments" means, collectively, any Collateral Assignment
of Licenses, Participation Agreements and Resident Agreements among a Borrower,
the Management Company and the Agent, any Collateral Assignment of Operating
Agreements and Management Contracts among a Borrower, the Management Company and
the Agent any Collateral Assignment and Security agreement in respect to
contracts, Licenses and Permits from a Synthetic Lessee for the benefit of a
Synthetic Lessor and any Collateral Assignment and Security Agreement in respect
of Special Assignment in connection with a Synthetic Lease Transaction, any
Tradename License Agreement and any assignment of Transaction Documents.
"Collateral Value Ratio" means, for any fiscal quarter, the ratio of
(a) the aggregate Asset Value of the Eligible Projects during such fiscal
quarter, divided by (b) the sum of (i) the aggregate Appraised Value of the
Eligible Projects during such fiscal quarter, plus (ii) the aggregate Asset
Value of the Optional Collateral during such fiscal quarter.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with a Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended and
the regulations promulgated or issued thereunder.
"Completion Guaranty" or "Completion Guaranties" means, individually or
collectively, a Guaranty of Completion executed by the Guarantor in favor of the
Lenders in connection with the Facility Closing for a Development Project that
is not a Completed Project and which is not the subject of a Synthetic Lease
Transaction.
"Completed Project" means an Eligible Project for which the Agent has
received all of the due diligence items listed in Section 4.6 hereof or has
expressly waived the receipt of the same.
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"Construction Contract" or "Construction Contracts" means, individually
or collectively, the general contractor's agreements by and between a Borrower
or Synthetic Lessee as owner of a Facility, or ARC as the Management Company and
a general contractor for the development of any of the Land and/or the
construction of any of the Improvements as approved in writing by the Agent, and
as the same may be amended from time to time with the prior written approval of
the Agent.
"Contingent Funded Debt" means, as to any Person (the "guaranteeing
person"), any obligation (determined without duplication) of (a) the
guaranteeing person or (b) another Person (including, without limitation, any
bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counter indemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing, or becoming
contingently liable for, in any manner any Funded Debt (the "primary
obligations") of any Person. The amount of any Contingent Funded Debt of any
guaranteeing person shall be deemed to be the maximum stated amount of the
primary obligation relating to such Contingent Funded Debt (or, if less, the
maximum stated liability set forth in the instrument embodying such Contingent
Funded Debt).
"Costs Incurred to Date" means as to a Facility constructed or under
construction by a Borrower, actual costs expended by such Borrower, a Synthetic
Lessor or, Synthetic Lessee or ARC on behalf of any of the foregoing, under a
Total Development Budget and reported to the Agent through the requisition
process as verified by the Agent pursuant to the provisions of this Agreement;
provided, however, no cost overruns not otherwise covered by a contingency
category in the Total Development Budget will be included in the definition of
Costs Incurred to Date without the Agent's prior written consent. "Costs
Incurred to Date" for an Acquisition Project means the purchase price and
related expenses of acquisition.
"Credit Facility" means the revolving line of credit in a maximum
principal sum at any one time outstanding equal to the Credit Facility Committed
Amount.
"Credit Facility Closing" shall mean the date on which the Notes, this
Agreement and any other documents then evidencing and securing the Credit
Facility are executed and delivered to the Agent.
"Credit Facility Committed Amount" means $75,000,000 or such larger
amount, not to exceed $150,000,000, that the Lenders may from time to time
severally commit to lend to the Borrowers pursuant to the terms of the Agency
Agreement, any amendment to this Agreement and the Notes.
"Current Assets" means at any date, the amount which, in conformity
with GAAP, would be set forth opposite the caption "total current assets" (or
any like caption) on a consolidated balance sheet of the Guarantor, excluding
inventory, Prepaids (as defined by GAAP) and Restricted Cash (as defined by
GAAP).
"Current Liabilities" means at any date, the amount which in conformity
with GAAP, would be set forth opposite the caption "total current liabilities"
(or any like caption) on a consolidated balance sheet of the Guarantor,
excluding balloon payments of principal greater
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than 300% of the regularly scheduled amortization payment in connection with
such indebtedness, provided such indebtedness is refinanced with ninety (90)
days of such balloon payment.
"Current Ratio" means the ratio of (a) Current Assets to (b) Current
Liabilities.
"Debt Service" means for any period of determination the principal and
interest payments for the specified period required to fully amortize an
Eligible Project's then applicable availability within the Borrowing Base in
equal monthly installments of principal and interest based on a 25-year
amortization schedule and a rate equal to 300 basis points per annum in excess
of the then current rate for ten (10) year United States Treasury Notes, as
reported in the most recent Federal Reserve Statistical Release H.15(519) but in
no event shall the rate (as calculated as aforesaid) be less than 8% per annum.
"Debt Service Coverage Ratio" means the ratio of Net Operating Income
to Debt Service.
"Deed of Trust" or "Deeds of Trust" means one or more first lien
mortgages or deeds of trust in favor of the Agent on behalf of the Lenders as
security for the Obligations on a Borrower's fee simple interest in an Eligible
Project owned by such Borrower.
"Deed of Trust Lien Amount" means the dollar principal amount of the
Lien created by a Deed of Trust on a Borrower's fee simple interest in a
Eligible Project, the amount being the lesser of (i) 80% of an Eligible
Project's Appraised Value or (ii) 80% of an Eligible Project's Total Development
Budget.
"Default" means, with respect to each Financing Document, a default
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default.
"Development Project" means a Facility being constructed by a Borrower
or being constructed in connection with a Synthetic Lease Transaction arranged
by a Borrower which has not become a Stabilized Project.
"EBITDAR" means earnings before interest, taxes, depreciation,
amortization, and Rent.
"Eligible Project" means a Facility approved by the Agent for any
location in the continental United States (a) which is a Development Project, an
Acquisition Project or a Stabilized Project; (b) for which the Agent has
received, reviewed and approved all applicable pre-closing due diligence items
as required by this Agreement or has waived receipt of the same; (c) for which
the Agent has received a Total Development Budget including a Pro Forma
Operating Statement acceptable to the Agent; (d) for which either a Facility
Closing has been completed and a Deed of Trust has been recorded or the relevant
Assigned Note has been assigned to the Agent; (e) for which the Agent has
received all other documentation necessary to perfect a lien on the Collateral
in favor of the Agent for itself and the other Lenders; and (f) which is
included in the Borrowing Base.
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"Enforcement Costs" means all expenses, charges, costs and fees
whatsoever (including, without limitation, attorney's fees and expenses) of any
nature whatsoever paid or incurred by or on behalf of the Lenders in connection
with (a) the collection or enforcement of any or all of the Obligations, (b) the
preparation of or changes to this Agreement, the Notes, the Security Documents
and/or any of the other Financing Documents, (c) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral,
including, without limitation, those sums paid or advanced, and costs and
expenses, more specifically described in Sections 3.6, 10.4, 10.5 and 11.7, (d)
the monitoring, administration, processing, servicing of any or all of the
Obligations and/or the Collateral (e) post-judgment enforcement or collection
actions, and (f) bankruptcy proceedings of any Borrower or Guarantor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Equipment" means all equipment, machinery, furniture and fixtures and
supplies of every nature pertaining to an Eligible Project or Optional
Collateral, presently existing or hereafter acquired or created and wherever
located, together with all accessions, additions, fittings, accessories, special
tools, and improvements thereto and substitutions therefor and all parts and
equipment which may be attached to or which are necessary for the operation and
use of such personal property, whether or not the same shall be deemed to be
affixed to real property, and all rights under or arising out of present or
future contracts relating to the foregoing and all proceeds (cash and non-cash)
of the foregoing.
"Eurodollar Period" or "Eurodollar Periods" shall have the meaning set
forth in each Note.
"Eurodollar Rate" means, for any portion of the principal sum for any
Eurodollar Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London Time) three (3) Banking Days prior to the first
day of such Eurodollar Period for a term comparable to such Eurodollar Period.
If for any reason such rate is not available, the term "Eurodollar Rate" shall
mean, for any Eurodollar Loan for any Eurodollar Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London Time) three (3) Banking Days prior
to the first day of such Eurodollar Period for a term comparable to such
Eurodollar Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.
"Event(s) of Default" means the occurrence of any one or more of the
events specified in Part IX of this Agreement or in any other Financing Document
and the continuance of such event beyond the applicable grace and/or cure
periods therefor, if any, set forth in Part IX or in such other Financing
Document.
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15
"Expansion Project" means a Facility constructed adjacent to other
Facilities owned or managed by ARC or its Affiliates but operating independently
of such other Facilities.
"Expense Payments" shall have the meaning set forth in Section 10.5
hereof.
"Facility" and "Facilities" mean, individually or collectively, a
Senior Living Facility that is an Eligible Project or Optional Collateral.
"Facility Closing" has the meaning set forth in Section 4.1 hereof.
"Fee Interest Deed of Trust" has the meaning set forth in Section 3.2
hereof.
"Financing Documents" means at any time, collectively, this Agreement,
the Notes, the Deeds of Trust, the Guaranty Agreement, any Completion Guaranty,
any Additional Borrower Joinder Supplement, any Management Fee Subordination
Agreement, the Security Documents, and any other instrument, agreement or
document previously, simultaneously or hereafter executed and delivered by any
Borrower and/or any other Person, singly or jointly with another Person or
Persons, evidencing, securing, guarantying or in connection with any of the
Obligations and/or in connection with this Agreement, the Notes and/or any of
the Security Documents, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Funded Debt" of any Person at any time means the sum, without
duplication, at such time of (a) indebtedness for borrowed money or for the
deferred purchase price of property or services, (b) any obligations in respect
of letters of credit, banker's or other acceptances or similar obligations
issued or created for the account of any Person, (c) lease obligations which
have been or should be, in accordance with GAAP, capitalized on the books of any
Person, (d) all liabilities secured by any property owned by any Person to the
extent attached to the Person's interest in such property, even though the
Person has not assumed or become liable for the payment thereof, (e) in the case
of the Guarantor or any subsidiary, any obligation of the Guarantor or a
Commonly Controlled Entity to a Multiemployer Plan; and (f) all liabilities of a
joint venture of a Person whether such joint venture is consolidated or
unconsolidated, as determined in accordance with GAAP, but excluding (a) trade
and other accounts payable in the ordinary course of business in accordance with
customary trade terms and which are not overdue (as determined in accordance
with customary trade practices) or which are being disputed in good faith by the
Guarantor or any subsidiary and for which adequate reserves are being provided
on the books of a Person in accordance with GAAP, and (b) Subordinated Debt.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"General Contractor" or "General Contractors" shall mean individually
or collectively the general contractors named in the Construction Contracts and
his or its respective successors and permitted assigns.
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"General Intangibles" means any and all general intangibles of every
nature, whether presently existing or hereafter acquired or created arising out
of or relating to any Eligible Project, including without limitation all books,
correspondence, credit files, records, computer programs, computer tapes, cards
and other papers and documents in the possession or control of any Borrower or
the Guarantor, claims (including without limitation all claims for income tax
and other refunds), choses in action, judgments, patents, patent licenses,
trademarks, trademark licenses, (excluding the following tradenames and
derivations thereof: "Homewood", ARC, and American Retirement Corporation)
licensing agreements, rights in intellectual property, goodwill, as that term is
defined in accordance with GAAP (including all goodwill of any Borrower's
business symbolized by, and associated with, any and all trademarks, trademark
licenses, copyrights and/or service marks), royalty payments, contractual
rights, rights as lessee under any lease of real or personal property, literary
rights, copyrights, service names, service marks, logos, trade secrets, all
amounts received as an award in or settlement of a suit in damages, deposit
accounts, interests in joint ventures or general or limited partnerships, all
Licenses, construction permits, Operating Agreements and Management Contracts,
Participation Agreements, Management Agreements and Resident Agreements, and all
proceeds (cash and non-cash) of the foregoing.
"Governmental Authority or Authorities" means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Ground Leases" means any and all leases to any Synthetic Lessor, as
ground lessee, and ARC, as fee owner and ground lessor.
"Guarantor" means ARC.
"Guaranty Agreement" means the Guaranty of Payment Agreement by the
Guarantor of even date herewith.
"Hazardous Materials" means any flammable explosives, radioactive
materials, hazardous waste, toxic substances or related materials, including,
without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde,
radon, and any substance defined as or included in the definition of (a) any
"hazardous waste" as defined by the Resource Conservation Recovery Act of 1976,
as amended from time to time, and regulations promulgated thereunder; (b) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; (c) any "toxic substance" as defined by the
Toxic Substances Control Act, as amended from time to time, and regulations
promulgated thereunder; (d) any hazardous or infectious medical waste including,
but not limited to, cultures and stocks of infectious agents and associated
biologicals, pathological wastes, human and animal blood specimens and blood
products, anatomical materials, blood, blood-soiled articles, contaminated
materials, microbiological laboratory wastes, sharps, chemical wastes,
infectious wastes, chemotherapeutic wastes, and radioactive wastes; (e) any
substance, the presence of which on any property now or hereafter owned,
operated or acquired by any Borrower is prohibited or regulated under any
applicable Federal or state laws or regulations; and (f) any other substance,
pollutant,
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contaminant, chemical, or industrial toxic hazardous substance or waste,
including without limitation hazardous materials, which by law is prohibited or
is otherwise regulated as a hazardous material.
"Hazardous Materials Contamination" means the contamination by, release
or spill of (whether presently existing or occurring after the date of this
Agreement), Hazardous Materials of or on any property owned, operated or
controlled by any Borrower, or for which any Borrower has responsibility,
including, without limitation, improvements, facilities, soil, ground water, air
or other elements on, or of, any property now or hereafter owned, operated or
acquired by any Borrower, and any other contamination by Hazardous Materials for
which any Borrower is, or is claimed to be, responsible.
"Hydric Soils" means any soil category upon which building would be
prohibited or restricted under applicable governmental requirements (including,
without limitation, those imposed by the U.S. Army Corps of Engineers based upon
its guidelines as to, among other things, soil, vegetation and effect on the
ecosystem).
"Improvements" means all site improvements, base building, building
systems, equipment or related fixtures not or hereafter existing on the Land.
"Inspecting Engineer" shall mean such person or firm as the Agent may
from time to time appoint or designate for purposes related to the inspection of
the progress of the development of any of the Land and the construction of any
of the Improvements, conformity of construction with the applicable Plans and
Specifications, and for such other purposes as the Agent may from time to time
deem appropriate or as may be required by the terms of this Agreement.
"Instruments" means any and all notes, notes receivable, drafts,
acceptances, and similar instruments or documents, both now owned or hereafter
created or acquired arising out of or relating to any Facility (or any part
thereof).
"Interest" means the sum of all interest expense (as defined by GAAP
excluding, however, the amortization of prepaid financing costs) net of interest
income.
"Interest Rate Margin" means, initially, two hundred twenty-five (225)
basis points per annum, and, thereafter, during such time or times as the
Borrowers have provided Optional Collateral as additional security for the
Credit Facility, means the interest rate margin per annum determined in
accordance with the following table:
---------------------------------------------------------------
COLLATERAL VALUE RATIO INTEREST RATE MARGIN
---------------------- --------------------
---------------------------------------------------------------
Greater than 65% 235 basis points
---------------------------------------------------------------
Greater than 50% but less 225 basis points
than 65%
---------------------------------------------------------------
Less than 50% but greater 213 basis points
than 40%
---------------------------------------------------------------
Less than 40% 200 basis points
---------------------------------------------------------------
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During such time or times as the Borrowers have provided Optional
Collateral as additional security for the Credit Facility, the Interest Rate
Margin shall be reset quarterly based on the Collateral Value Ratio calculated
as the of the end of the prior fiscal quarter.
"Inventory" means any and all inventory and all right, title and
interest in, and to, all now owned and hereafter acquired goods, merchandise and
other personal property furnished under any contract of service or intended for
sale or lease arising out of or relating to any and all Eligible Projects or
Optional Collateral, including, without limitation, all supplies of any kind,
nature or description which are used or consumed in each Borrower's or the
Guarantor's business at such Facilities and all documents of title or documents
representing the same and all proceeds (cash and non-cash) and products of the
foregoing.
"Land" shall have the meaning described in each Deed of Trust or in the
Note Collateral.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any Governmental Authority or any court or
similar entity established by any thereof.
"Lease" shall have the meaning set forth in a Deed of Trust.
"Lenders" means collectively, except as the context may otherwise
indicate, the Agent and any and all additional lenders who are or shall be from
time to time participating as lenders under the Credit Facility pursuant to any
Agency Agreement. "Lender" means any of the Lenders individually.
"Lender Tax" means any present or future tax, levy, cost or charge of
any nature imposed by any Governmental Authority, excluding taxes on or measured
by the income of any Lender.
"Licenses" means any and all licenses, certificates of need, operating
permits, franchises, and other licenses, authorizations, certifications,
permits, or approvals, other than construction permits, issued by, or on behalf
of, any Governmental Authority now existing or at any time hereafter issued,
with respect to the acquisition, construction, renovation, expansion, leasing,
management, ownership and/or operation of any and all Facilities, accreditation
of any Facility, and/or the participation or eligibility for participation in
any third party payment or reimbursement programs to the extent any Borrower or
Synthetic Lessee is participating in such programs (but specifically excluding
any and all Participation Agreements to the extent required by law), any and all
operating licenses issued by any state Governmental Authority, any and all
pharmaceutical licenses and other licenses related to the purchase, dispensing,
storage, prescription or use of drugs, medications, and other "controlled
substances," any and all licenses relating to the operation of food or beverage
facilities or amenities, if any, and any and all certifications and eligibility
for participation in Medicare, Medicaid, Blue Cross and/or Blue Shield, or any
of the Managed Care Plans, private insurer, employee assistance programs or
other third party payment or reimbursement programs as the same may from time to
time be amended, renewed, restated, reissued, restricted, supplemented or
otherwise modified.
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"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien or charge of
any kind, whether perfected or unperfected, avoidable or unavoidable, consensual
or non-consensual, including, without limitation, any conditional sale or other
title retention agreement, filed or unfiled tax liens, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction.
"Liquid Assets" means cash, cash equivalents and marketable securities.
"Liquidation Costs" shall have the meaning set forth in Section 10.6
hereof.
"Loan" shall have the meaning set forth in Section 2.1 hereof.
"Managed Care Plans" means any health maintenance organization,
preferred provider organization, individual practice association, competitive
medical plan, or similar arrangement, entity, organization, or Person.
"Management Agreement" means any and all Management Agreements entered
into or to be entered into by and between a Borrower, a Synthetic Lessor and/or
Synthetic Lessee or other owner of a Facility and the Management Company
relating to the management of an a Facility, as the same may from time to time
be amended, restated, supplemented or otherwise modified.
"Management Company" means ARC, its successors and assigns and any
other Person which may become the manager of the Facilities.
"Management Fee Subordination Agreement" shall have the meaning set
forth in Section 7.18 hereof.
"Material Lease" shall mean a lease of a portion of any Facility which
represents 2,000 square feet or more of leaseable space or which has a term of
three (3) or more years.
"Maximum Construction Period" for a Development Project, including an
Expansion Project, means the construction period indicate in the original
projected construction schedule set forth in such Development Project's
Construction Contract plus three (3) months.
"Minimum Occupancy Requirement" means for a Development Project
including an Expansion Project shall have the meaning set forth in Section
7.2.2(d), for a Stabilized Project, "Minimum Resident Occupancy" for such
Eligible Project shall mean 85% Resident Occupancy, measured on a quarterly
basis and for an "Acquisition Project" shall have the meaning set forth in
Section 7.2.2(e).
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Operating Income" means total operating revenue less total
operating expenses (excluding interest, federal and state income taxes,
depreciation and amortization) but including
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a management fee to the Management Company of five percent (5%) of gross
revenues for the Facility for the period in question as shown in financial
information provided by the Borrowers.
"Net Operating Income Margin" of a Facility means its Net Operating
Income divided by its total revenue for such period.
"Net Worth" means Shareholders' Equity (as defined by GAAP).
"Notes" shall have the meaning set forth in Section 2.1 hereof.
"Note Collateral" means collectively, all of the following pledged and
assigned to the Agent for the benefit of the Lenders: (a) all Assigned Notes
payable to ARCC by a Synthetic Lessor, (b) the Assignments of the Synthetic
Lease and all ancillary contracts between the Synthetic Lessee and the Synthetic
Lessor and/or ARC (c) all other security for either of the foregoing and (d) all
other documents executed by ARCC, ARC, the Synthetic Lessor or the Synthetic
Lessee in connection with a Synthetic Lease Transaction.
"Obligations" means all present and future debts, or any of them,
obligations, and liabilities, whether now existing or hereafter arising, of the
Borrowers to the Agent or any Lender under, arising pursuant to, in connection
with and/or on account of the provisions of this Agreement, the Notes, the Deeds
of Trust, each Security Document, and any of the other Financing Documents,
including, without limitation, the principal of, and interest on, the Notes,
late charges, Enforcement Costs, and other prepayment penalties (if any), letter
of credit fees or fees charged with respect to any guaranty of any letter of
credit, and also means all other present and future indebtedness, or any of
them, liabilities and obligations, whether now existing or hereafter arising, of
the Borrowers to the Lenders of any nature whatsoever regardless of whether such
debts, obligations and liabilities be direct, indirect, primary, secondary,
joint, several, joint and several, fixed or contingent, and any and all
renewals, extensions and rearrangements of any such debts, obligations and
liabilities.
"Operating Agreements and Management Contracts" means any and all
contracts and agreements previously, now or at any time hereafter at any time
entered into by any Borrower with respect to the acquisition, construction or
renovation of a significant nature, expansion, ownership, operation,
maintenance, use or management of any or all of the Facilities or otherwise
concerning the operations and business of any or all of the Facilities,
including, without limitation, any and all service and maintenance contracts,
any employment contracts, any and all management agreement other than the
Management Agreements, any and all consulting agreements, laboratory servicing
agreements, pharmaceutical contracts, physician, other clinician or other
professional services provider contracts, food and beverage service contracts,
and other contracts for the operation and maintenance of, or provision of
services to, a Facility, as the same may from time to time be amended, restated,
supplemented, renewed, or modified.
"Operating Month" means the second full calendar month after the
issuance of all required Licenses for any Facility or any calendar month
thereafter.
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"Operating Reserve" shall mean a reserve in an amount approved by the
Agent included in each Total Development Budget to cover the anticipated costs
of leasing up a Facility and initial operating deficits.
"Optional Collateral" means individually or collectively, a Facility
not used in calculating the Borrowing Base for which the Agent has reviewed and
found satisfactory the existing owner's title insurance policy, existing survey,
and a current Phase I environmental assessment and asbestos report and which
meets and at all times continues to meet all of the following criteria:
(a) a certificate of occupancy (or equivalent permit or
certificate) has been issued by the appropriate Governmental Authorities for
such Facility;
(b) an operating License and/or certificate of need (if either
is applicable in the jurisdiction where the Facility is located) has been
obtained;
(c) the Facility has maintained a minimum Resident Occupancy of
not less than 75% for the preceding three (3) consecutive months;
(d) the Facility has maintained a Net Operating Income Margin of
not less than thirty percent (30%) for the preceding three (3) consecutive
months;
(e) the Facility is owned by ARC or a Wholly Owned Subsidiary of
ARC or ARCC or a Synthetic Lessee pursuant to a Synthetic Lease Transaction; and
(f) the Facility is managed by ARC.
"Participation Agreements" means any and all third party payor
participation or reimbursement agreements now or at any time hereafter existing
for the benefit of any Borrower relating to rights to payment or reimbursement
from, and claims against, private insurers, Managed Care Plans, material
employee assistance programs, Blue Cross and/or Blue Shield, federal, state and
local Governmental Authorities, including without limitation, Medicare and
Medicaid, and other third party payors, as the same may from time to time be
amended, restated, extended, supplemented or modified but only to the extent
that any of the foregoing relate to an Eligible Project or Optional Collateral.
"Permitted Liens" means: (a) Liens for Taxes that are not delinquent or
that the Agent has determined in the exercise of its sole and absolute
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, (ii) the Borrowers have the financial ability to pay, with all
penalties and interest, at all times without materially and adversely affecting
any Borrower, and (iii) are not, and will not be with appropriate filing, the
giving of notice and/or the passage of time, entitled to priority over any Lien
of the Lenders; (b) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance
in the ordinary course of business; (c) Liens in favor of the Lenders pursuant
to the Loan; (d) judgment Liens to the extent the entry of such judgment does
not constitute an Event of Default under the terms of this Agreement or result
in the sale of, or levy
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22
of execution on, any of the Collateral; and (e) such other Liens, if any, as are
identified as "Permitted Encumbrances" in a Deed of Trust.
"Person" shall mean and include an individual, a corporation, a
partnership, a limited liability company, a joint venture, a trust, an
unincorporated association, any Governmental Authority or any other entity.
"Plans and Specifications" shall mean any and all plans and
specifications prepared in connection with the development of the Land and/or
the construction of the Improvements for any Eligible Project which is a
Development Project and which are approved in writing by the Agent, as the same
may from time to time be amended with the prior written approval of the Agent,
including but not limited to, plans and specifications prepared by an Architect,
a copy of which have been initialed by the applicable Borrower and the Agent for
identification and delivered to the Agent.
"Pool A Project" means any Eligible Project which, at any time when the
Borrowing Base is computed, meets the applicable Pool A covenants set forth in
Section 7.2.2 hereof.
"Pool B Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent three (3) months and is not a Pool C Project.
"Pool C Project" means any Eligible Project which, when the Borrowing
Base is computed, has not met the definition of a Pool A Project for the most
recent six (6) months.
"Post Default Rate" means the interest rate on the Note in the absence
of an Event of Default plus two percent (2%) per annum.
"Prime Rate" shall have the meaning set forth in Section 2.4.2 hereof.
"Principal Sum" shall have the meaning set forth in the Notes.
"Pro Forma Operating Statement" means a Borrower's projection for not
less than 36 months from the first Operating Month including occupancy
projections and projected operating expenses and operating losses plus the first
full year of operations as a Stabilized Project.
"Property" shall mean collectively the "Land" and the "Improvements".
"Receivables" means each Borrower's or Management Company's now or
hereafter owned, acquired or created Accounts, Chattel Paper, Contract Rights,
General Intangibles and Instruments, and all cash and noncash proceeds and
products thereof but only to the extent that they arise out of or are related to
an Eligible Project or Optional Collateral.
"Rent" means lease expense as defined pursuant to GAAP.
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23
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requisition" or "Requisitions" shall have the meaning set forth in
Section 2.2 hereof.
"Resident Agreements" means any and all contracts, authorizations,
agreements and/or consents executed by, or on behalf of any resident or other
person seeking services from any Borrower pursuant to which any Borrower
provides or furnishes health or assisted living care and related services at any
and all of the Facilities, including the consent to treatment, assignment of
payment of benefits by third party, as the same may from time to time be
amended, restated, supplemented or modified.
"Resident Occupancy" means the number of residents who are paying fees
according to the normal fee schedule for such Facility pursuant to a Resident
Agreement for a Facility, expressed as a percentage of licensed capacity.
"Revolving Credit Expiration Date" means May 1, 2002, or any date to
which it may be extended from time to time pursuant to the terms of Section 2.6
hereof.
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Credit Facility
is terminated pursuant to Article X hereof or otherwise.
"Security Documents" shall mean, collectively, any assignment,
including, without limitation, the Collateral Assignments and any assignment,
pledge agreement, security agreement, mortgage, deed of trust (including the
Deeds of Trust), leasehold mortgage, leasehold deed of trust, deed to secure
debt, financing statement, initial transaction statement and any similar
instrument, document or agreement under or pursuant to which a Lien is now or
hereafter granted to, or for the benefit of, the Lenders on any collateral to
secure the Obligations, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Senior Living Facility" and "Senior Living Facilities" mean
individually or collectively, an assisted living facility, an independent living
facility, a dementia care facility for persons with Alzheimer's disease and
other forms of memory impairment or a skilled nursing facility containing
residential units and common facilities.
"Special Eligible Project" means an Acquisition Project which is a
Stabilized Project and has achieved a Debt Service Coverage Ratio of 1.4 to 1.0
for the twelve (12) consecutive months preceding its inclusion in the Borrowing
Base as a Special Eligible Project (regardless of whether or not it was
previously an Eligible Project in the Borrowing Base), and which has an average
Resident Occupancy of 85% or higher for the last six (6) consecutive months.
"Stabilized Project" means a Facility which has achieved Resident
Occupancy of at least 85% for three (3) consecutive months and a Debt Service
Coverage Ratio of not less than 1.25 to 1.00 measured for the same three (3)
consecutive months including a Facility which was a
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Development Project which has satisfied the foregoing Resident Occupancy and
Debt Service Coverage Ratio requirements.
"Subordinated Debt" means any indebtedness of a person incurred at any
time the repayment of which is subordinated to other indebtedness of such person
pursuant to a written agreement and on which interest is chargeable at a fixed
rate and specifically including the Guarantor's 5.75% convertible subordinated
debentures due October 1, 2002 in the aggregate original principal amount of
$138,000,000.
"Survey" shall mean a plat of the Land for any Facility which clearly
designates at least (i) the location of the perimeter of such Land by courses
and distances; (ii) the location of all easements, rights-of-way, alleys,
streams, waters, paths and encroachments; (iii) the location of all building
restriction lines and set-backs however established; (iv) the location of any
streets or roadways abutting such Land; and (v) the "as-built" locations of the
Improvements located on such Land and the relation of such Improvements by
courses and distances to the perimeter of such Land, building restriction lines
and set-backs, all in conformity with the Minimum Standard Detail Requirements
for Land Title Surveys adopted by the American Congress on Surveying and Mapping
(1992 Edition).
"Synthetic Lease Funded Debt" means any Funded Debt of any lessor that
has entered into a synthetic lease with ARC or its Affiliates, but only to the
extent that such Funded Debt relates to, is associated with, or is secured by,
the property that is subject to such synthetic lease. Notwithstanding the
foregoing, Synthetic Lease Funded Debt shall not include such Funded Debt owed
or due to Guarantor or any Guarantor's Affiliates.
"Synthetic Lease Pool" means a group of one or more Synthetic Lease
Transactions which have the same Synthetic Lessee or Synthetic Lessees which are
affiliated or is a Common Controlled Entity and are cross-defaulted.
"Synthetic Lease Transaction" means a transaction involving an
off-balance sheet transaction of ARC or its affiliates including what is
commonly referred to as a synthetic lease ("Synthetic Lease") of a Facility for
which costs of construction of the Facility are being financed by a loan by ARCC
evidenced by an Assigned Note and which involves certain commitments from the
Synthetic Lessee and ARC to build and operate the facility and to finance the
remaining costs of constructing and operating the Facility in excess of the ARCC
loan.
"Synthetic Lessee" means the single purpose entity which is the tenant
under a Synthetic Lease.
"Synthetic Lessor" means a single purpose entity which owns property
for a Facility or leases such Property under a Ground Lease, and leases such
property to a Synthetic Lessee pursuant to a Synthetic Lease and which is the
maker of an Assigned Note.
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental
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Authority on any Borrower or any of their properties or assets or any part
thereof or in respect of any of its franchises, businesses, income or profits.
"Total Capital" means the sum of Net Worth, Total Funded Debt,
Subordinated Debt, the Value of Assets Associated with Contingent Debt and all
equity of a joint venture of the Guarantor or any of its subsidiaries whether
such joint venture is consolidated or unconsolidated.
"Total Development Budget" means the development, construction and
opening operating expense budget or acquisition and opening operating expense
budget for an Eligible Project as reviewed and approved by the Agent.
"Total Funded Debt" of any Person at any time means the sum, without
duplication, at such time of (a) indebtedness for borrowed money or for the
deferred purchase price of property or services, (b) any obligations in respect
of letters of credit, banker's or other acceptances or similar obligation issued
or created for the account of any Person, (c) lease obligations which have been
or should be, in accordance with GAAP, capitalized on the books of any Person,
(d) all liabilities secured by any property owned by any Person to the extent
attached to the Person's interest in such property, even though the Person has
not assumed or become liable for the payment thereof, (e) in the case of the
Guarantor or any subsidiary, any obligation of the Guarantor or a Commonly
Controlled Entity to a Multiemployer Plan, (f) Synthetic Lease Funded Debt, (g)
all liabilities of a joint venture of a Person whether such joint venture is
consolidated or unconsolidated, and (h) Contingent Funded Debt, but excluding
(i) trade and other accounts payable in the ordinary course of business in
accordance with customary trade terms and which are not overdue (as determined
in accordance with customary trade practices) or which are being disputed in
good faith by the Guarantor or any subsidiary and for which adequate reserves
are being provided on the books of a Person in accordance with GAAP, and (ii)
Subordinated Debt.
"Value of Assets Associated with Contingent Debt" means for any period
the product of (a) the aggregate pre-tax net income of Guarantor and/or its
Affiliates arising from, or out, of any lease(s) or management agreement(s) that
is entered into by Guarantor or its Affiliates in connection with any Contingent
Funded Debt, multiplied by (b) the contingent value multiplier. As used herein,
"contingent value multiplier" means either (x) eight (8), or (y) if such lease
or management agreement does not, at the time of measurement, have a remaining
term of at least twelve years, the product obtained by multiplying (i) eight
(8), by (ii) a fraction, the numerator of which is the number of years of the
remaining term, and the denominator of which is twelve (12).
"Wholly Owned Subsidiary" or "Wholly Owned Subsidiaries" means one or
more subsidiaries, directly or indirectly, 100% owned by ARC or ARCC which is or
has been created for the sole purpose of acquiring or constructing and owning
and operating a Facility.
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Section 1.2 Accounting Terms and Other Definitional Provisions.
Unless otherwise defined in this Agreement, as used in this Agreement
and in any certificate, report or other document made or delivered pursuant
hereto, accounting terms not otherwise defined in this Agreement, and accounting
terms only partly defined in this Agreement, to the extent not defined, shall
have the respective meanings given to them under GAAP. Unless otherwise defined
in this Agreement, all terms used in this Agreement which are defined by the
Texas Uniform Commercial Code shall have the same meanings as assigned to them
by the Texas Uniform Commercial Code unless and to the extent varied by this
Agreement. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, Section, subsection, schedule
and exhibit references are references to sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless otherwise
specified. As used in this Agreement, the singular number shall include the
plural, the plural the singular and the use of the masculine, feminine or neuter
gender shall include all genders, as the context may require. Any reference to
Land, the Improvements or the Property shall mean all or any portion of each of
the foregoing, respectively unless the context indicates that such terms refer
to an individual Facility. Reference to any one or more of the Financing
Documents and any of the Financing Documents shall mean the same as the
foregoing may from time to time be amended, restated, substituted, extended,
renewed, supplemented or otherwise modified.
ARTICLE II
BORROWING
Section 2.1 The Loan.
(a) The Lenders agree to lend to the Borrowers pursuant to the
terms and conditions of this Agreement and the Borrowers agree to borrow on a
revolving basis from the Lenders from time to time a principal amount (the
"Loan") not to exceed at any time outstanding the lesser of (i) the Credit
Facility Committed Amount, or (ii) the Borrowing Base.
(b) The obligation of the Borrowers to repay the Loan shall be
evidenced by certain promissory notes of even date herewith payable to the
Lenders in the form attached hereto as EXHIBIT A and such other promissory notes
which may be executed by the Borrowers in the future payable to the Lenders in
substantially the form set forth in EXHIBIT A (as amended, restated,
substituted, extended, renewed and otherwise modified from time to time,
individually, a "Note" and collectively the "Notes"). Each Note shall bear
interest and shall be repaid by the Borrowers in the manner and at the times set
forth in such Note and this Agreement.
(c) The conditions precedent for making an advance under the Loan
shall be as set forth in this Agreement. Sums borrowed and repaid may be
readvanced under the terms and conditions of this Agreement.
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(d) Not more frequently than twice monthly, but at least
quarterly, the Borrower will prepare a Borrowing Base Report (each a "Borrowing
Base Report") in the form attached hereto as EXHIBIT B which must be certified
by ARC and ARCC on behalf of the Borrowers calculating the Borrowing Base and
listing for each of such Eligible Project (i) the applicable Deed of Trust Lien
Amount or the maximum principal sum of an Assigned Note, (ii) the status of such
Eligible Project as a Development Project (including whether or not it is an
Expansion Project), an Acquisition Project or a Stabilized Project, (iii) the
Costs Incurred to Date, as described in the applicable Total Development Budget,
(iv) the length of time such Eligible Project has been under construction (if
applicable), and (v) such Eligible Project's status as of the most recent
reporting date as a Pool A Project, Pool B Project or Pool C Project. The
Borrowing Base Report will be reviewed, verified and approved by the Agent based
on the outcome of the cost verification procedures hereinafter described,
appraisals obtained by the Agent and other information on the Eligible Projects
provided by the Borrowers or obtained by the Agent. The Borrowing Base shall be
computed based on the Borrowing Base Report most recently received and accepted
by the Agent. In the event the Borrowers shall fail to furnish other current
reports or information as required, or in the event the Agent believes that a
Borrowing Base Report is no longer accurate, the Agent may, in its sole and
absolute discretion exercised from time to time and without limiting its other
rights and remedies under the Financing Documents, upon notice to the Borrowers
and the expiration of a cure period of five (5) Banking Days, designate any
Eligible Project as a Pool C Project or suspend the making of or limit advances
under the Loan. The Borrowing Base shall be subject to appropriate reduction as
a result of the following events: (i) the release of an Eligible Project from
the lien of the applicable Deed of Trust or the release or repayment (in part or
whole) or cancellation of any Assigned Note applicable to an Eligible Project;
(ii) the change of any Eligible Project's status as a Pool A Project or Pool B
Project to a Pool B Project or Pool C Project, respectively, since the date of
the most recent Borrowing Base Report, as determined by the Agent; or (iii) the
diminution in the value of an Eligible Project based upon an appraisal obtained
pursuant to Section 7.27. The Borrowing Base shall be subject to appropriate
increase as a result of the following events: (i) the addition of an Eligible
Project; (ii) an increase in the verified Costs Incurred to Date as determined
by the Agent during the period since the last Borrowing Base Report; (iii) an
increase in the principal amount outstanding under any Assigned Note; or (iv)
the change of an Eligible Project's status as a Pool B Project or Pool C Project
to a Pool A Project since the date of the most recent Borrowing Base Report, as
determined by the Agent. No Eligible Project may remain in the Borrowing Base
for more than a period of thirty (30) full calendar months; however, such
Eligible Project will remain as Collateral unless released in accordance with
this Agreement.
(e) No advances may be made or be outstanding under the Credit
Facility until and except during such times as eighty-five percent (85%) of the
Principal Sum outstanding is supported by availability in the Borrowing Base
from Pool A Projects. At any time fewer than eighty-five percent (85%) of the
Eligible Projects in the Borrowing Base are Pool A Projects, a breach of this
covenant may be cured by immediately paying down the Loan sufficiently so that
availability under the Borrowing Base from Pool A Projects is equal to at least
eighty five percent (85%) of the Principal Sum outstanding or by adding
additional Pool A Projects to the Borrowing Base.
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(f) For purposes of determining Costs Incurred to Date, each
Total Development Budget may include the cost of (i) the acquisition by the
applicable Borrower of the Land which is the site of such Facility or, in the
case of an Acquisition Facility, the Land and the Facility's Improvements
including the purchase price paid and expenses incurred in connection with the
due diligence for and the closing of such acquisition; (ii) the construction on
the Land of a Facility which is not an Acquisition Facility; (iii) marketing,
staffing and similar pre-opening expenses; and (iv) an Operating Reserve.
(g) The Borrowers shall furnish to the Agent such schedules,
certificates, lists, records, reports, information and documents as required by
the Agent from time to time so that the Agent may, in its reasonable discretion,
determine the Borrowing Base.
(h) If at any time the aggregate principal amount of the Loan
outstanding exceeds the Borrowing Base, a borrowing base deficiency ("Borrowing
Base Deficiency") shall exist. Each time a Borrowing Base Deficiency exists, the
Borrowers shall within three (3) Banking Days of notice thereof from the Agent
either pay the amount of the Borrowing Base Deficiency and/or add Eligible
Projects (such that after such addition the requirements of Section 2.1(e) and
Section 7.2.1 are satisfied) to increase the Borrowing Base to an amount which
is at least equal to the aggregate principal amount outstanding under the Loan.
Section 2.2 Procedure for Advances.
(a) The Agent will make advances not more frequently than twice
during each month upon receipt of a written request from the Borrowers in the
form of borrowing request attached hereto as Exhibit C (each a "Requisition",
and collectively, the "Requisitions").
(b) Each Requisition is subject to the Agent's determination that
after giving effect to such Requisition, the outstanding principal balance of
the Loan will not exceed the lesser of the then applicable Credit Facility
Committed Amount or the Borrowing Base. Each advance under the Loan shall be in
an amount of not less than $1,000,000, and in increments of $100,000 in excess
thereof. Advances shall be requested by the Borrower in writing by 10:00 A.M.
(Houston time) not less than five (5) Banking Days prior to the Banking Day on
which the funds will be advanced. The Agent shall have no obligation to make any
advance if at the time such advance is requested and/or is proposed to be
funded, there exists a Default or an Event of Default under any Financing
Document.
(c) Unless the Agent shall have received notice from a Lender
prior to the date on which such Lender is to provide funds to the Agent for an
advance to be made by such Lender that such Lender will not make available to
the Agent such funds, the Agent may assume that such Lender has made such funds
available to the Agent on the date of such advance in accordance with the terms
of the Agency Agreement and the Agent in its sole discretion may, but the Agent
shall not be obligated to, in reliance upon such assumption, make available to
the Borrowers on such date a corresponding amount.
(d) In addition, if the Agent has reason to believe a Default or
an Event of Default has occurred, each Borrower hereby irrevocably authorizes
the Lenders to make
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advances of the Loan at any time and from time to time, without further request
from or notice to any Borrower, which the Lenders, in their sole and absolute
discretion, deem necessary or appropriate to protect the Lenders' interests
under this Agreement or otherwise, including, without limitation, advances of
the Loan made to cover interest on the Loan, fees, and/or Enforcement Costs,
prior to, on, or after the termination of this Agreement, regardless of whether
the aggregate amount of the advances of the Loan which the Lenders may make
hereunder exceeds the Credit Facility Committed Amount. The Lenders shall have
no obligation whatsoever to make any advance under this subsection and the
making of one or more advances under this subsection shall not obligate the
Lenders to make other similar advances. Any such advances will be evidenced by
the Notes and secured by the Collateral and the Deeds of Trust or the Assigned
Notes.
(e) Any advance under the Loan to be used to reimburse ARCC for
any portion of an advance under an Assigned Note shall also comply with any
requirements for an advance under the Note Collateral and no default shall have
occurred and be continuing under the Assigned Note regardless of whether any
applicable cure period has expired in connection with such default.
Section 2.3 Fees.
The Borrowers shall pay to the Agent the fees described in the Fee
Agreement between the Borrowers and the Agent of even date herewith.
Section 2.4 Interest Rate Matters.
2.4.1 Lender Tax Adjustment
Each payment made by the Borrowers under the Notes shall either (i) be
exempt from, and be made without reduction by reason of, any Lender Tax or (ii)
to the extent that any such payment shall be subject to any Lender Tax, be
accompanied by an additional payment by the Borrowers of such amount as may be
necessary so that the net amount received by each Lender (after deducting all
applicable Taxes) is the same as such Lender would have received had such
payment not been subject to such Lender Tax. Upon any payment of Lender Tax by
the Borrowers, the Borrowers shall promptly (and in any event within 30 days)
furnish to the Agent and applicable Lender or Lenders such tax receipts,
certificates an other evidence of such payment as the Borrowers may have or the
Agent or the applicable Lender or Lenders may reasonably request.
2.4.2 Inability to Determine Eurodollar Rate.
In the event that the Agent determines (which determination shall be
conclusive absent manifest error) that, by reason of circumstances affecting the
London interbank market, quotation of Eurodollar Rates for any portion of the
Notes are not being provided in the relevant amounts or for the relevant
maturities for the purpose of determining a Eurodollar Rate for any portion of
the Principal Sum, the Agent will give notice of such determination to the
Borrowers and each Lender at least one day prior to the date of an advance or
any subsequent Eurodollar Period for the Loan. If any such notice is given, no
Lender shall have any obligation to make
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any advance or maintain any principal sum outstanding at a Eurodollar Rate.
Until the earlier of the date any such notice has been withdrawn by the Agent or
the date when the Lenders and the Borrowers have mutually agreed upon an
alternate method of determining the rates of interest payable on the Loan, as
the case may be, the Borrowers shall not have the right to have additional
advances or maintain any portion of the Credit Facility at a Eurodollar Rate and
interest shall accrue on all sums then outstanding under the Notes and on any
additional advances at the fluctuating prime rate of interest established and
declared by the Agent from time to time (the "Prime Rate") and shall be adjusted
immediately and contemporaneously with any change in the Prime Rate. Interest
accruing at the Prime Rate shall be computed for the actual number of days which
have elapsed from the date of each advance at the Prime Rate or the date of
conversion to the Prime Rate on the basis of a 360-day year. The Prime Rate does
not necessarily represent the lowest rate of interest charged by the Agent to
borrowers.
2.4.3 Illegality
Notwithstanding any other provision of the Financing Documents to the
contrary, in the event that it shall become unlawful for any Lender to obtain
funds in the London interbank market or for such Lender to maintain the Loan at
the Eurodollar Rate, then, by written notice to the Borrowers and to the Agent,
such Lender may declare that advances will not thereafter be made or the Loan
maintained by such Lender hereunder at the Eurodollar Rate, whereupon the
Lenders and the Borrowers shall mutually agree upon an alternate method of
determining the rates of interest payable on the Loan or interest shall
immediately commence to accrue at the Prime Rate as provided in Section 2.4.2.
2.4.4 Increased Costs and Reduced Return.
(a) If any event shall occur (whether in the form of a reserve
requirement (not included in the definition of the Eurodollar Rate), exchange
control regulations, governmental charges, compliance with any guideline or
request from any central bank or other Governmental Authority, changes in the
London interbank market or the position of any Lender in such market or
otherwise) and the result of any such event is, in such Lender's reasonable
judgment, to increase the costs which such Lender determines are attributable to
its making or maintaining the Loan at the Eurodollar Rate, or its obligation to
make available the Loan at the Eurodollar Rate or to reduce the amount of any
sum received or receivable by such Lender under the Note, then, within ten (10)
days after demand by such Lender, the Borrowers hereby agree to pay to such
Lender such additional amount or amounts as will compensate such Lender for such
increased cost or reduction.
(b) In addition to any amounts payable pursuant to Section 2.4.2
if any Lender shall have determined that the applicability of any law, rule,
regulation or guideline adopted pursuant to or arising out of the July 1988
report of the Basle Committee on Banking Regulations and Supervisory Practices
entitled "International Convergence of Capital Measurement and Capital
Standards," or the adoption after the date hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change in any of the
foregoing or in the enforcement or interpretation or administration of any of
the foregoing by any court or any central bank or other Governmental Authority,
charged with the enforcement or interpretation or
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administration thereof, or compliance by such Lender (or any lending office of
such Lender) or such Lender's holding company with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's capital or on the capital of such
Lender's holding company, if any, as a consequence of its making or maintaining
the Loan or its incurring any obligations under this Agreement to a level below
that which such Lender or such Lender's holding company could have achieved but
for such applicability, adoption, change or compliance (taking into
consideration such Lender's policies and the policies of such Lender's holding
company with respect to capital adequacy) by an amount deemed by such Lender to
be material, then, upon demand by such Lender, the Borrowers hereby agree to pay
to such Lender from time to time such additional amount or amounts as will
compensate such Lender or such Lender's holding company for any such reduction
suffered.
(c) If any Lender shall seek payment of any amounts from the
Borrowers pursuant to this Section or under Section 2.4.2, it shall notify the
Borrowers and the Agent of the amount payable by the Borrowers to such Lender
hereunder. A certificate of such Lender seeking payment setting forth in
reasonable detail the factual basis for and the computation of the amount
specified, shall be conclusive and binding on all parties for all purposes,
absent manifest error, as to the amounts owned. The Borrowers' obligations under
this Section shall survive the termination of this Agreement and the repayment
of the Obligations.
Section 2.5 Change in Basis Point Spread.
Any change in the Interest Rate Margin based on the addition of or a
change in Optional Collateral pursuant to the terms of Section 3.7 and the
definition of Interest Rate Margin shall take effect one (1) Banking Day
following notice by the Agent to the Lenders of such rate change. Such rate
change shall occur not more frequently than once per fiscal quarter during such
time or times as the Borrowers have provided Optional Collateral as additional
security for the Facility. The Agent will calculate the Collateral Value Ratio
based upon the most current Borrowing Base Report and other information provided
to the Agent as of the end of any fiscal quarter during which Optional
Collateral has been granted to the Agent for the benefit of the Lenders. The
Agent will promptly advise the Lenders.
Section 2.6 Extensions.
Provided that no Event of Default has occurred and is then continuing,
at any time not later than sixty (60) days nor earlier than one hundred twenty
(120) days prior to the Revolving Credit Expiration Date or any anniversary of
the Credit Facility Closing, the Borrowers may request that the Agent and the
Lenders, in their sole discretion, may agree to extend the Revolving Credit
Expiration Date one or more times for a period of twelve (12) months each. The
Agent and the Lenders shall respond to such request within sixty (60) days.
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ARTICLE III
COLLATERAL
Section 3.1 Collateral.
As security for the payment of any and all of the Obligations and for
each Borrower's performance of, and compliance with, all of the terms,
covenants, conditions, stipulations and agreements contained in the Financing
Documents, each Borrower hereby assigns, grants and conveys to the Lenders, and
agrees that the Lenders shall have, to the extent permitted by law a perfected,
continuing security interest in, all of the Collateral. Each Borrower further
agrees that the Lenders shall have in respect of the Collateral all of the
rights and remedies of a secured party under the Texas Uniform Commercial Code
and the Uniform Commercial Code of those other states in which the Facilities
are located, whichever is applicable, and under other applicable Laws as well as
those provided in this Agreement. Each Borrower covenants and agrees to execute
and deliver such financing statements and other instruments and filings as are
necessary in the opinion of the Agent to perfect such security interest.
Notwithstanding the fact that the proceeds of the Collateral constitute a part
of the Collateral, no Borrower may dispose of the Collateral, or any part
thereof, other than in the ordinary course of its business except nothing herein
shall permit the Borrower to dispose of Collateral to the extent otherwise
expressly limited by this Agreement or other Financing Documents.
Section 3.2 Eligible Projects.
The Borrowers may from time to time with the consent of the Lenders
designate a Facility owned by a Borrower or a Synthetic Lease Transaction as an
Eligible Project to be included in the Borrowing Base pursuant to the terms
hereof. The Facilities which are then Eligible Projects shall be listed on any
future Borrowing Base Report. The Obligations shall be secured by all of the
following property and assets of each Borrower, each Synthetic Lessee, ARC or
any Affiliate, wherever situated with regard to each of the Eligible Projects:
(a) a Deed of Trust on the fee simple interest held by the applicable Borrower
in the premises of such Eligible Project and all other Improvements now or
hereafter located thereon; or an assignment of an Assigned Note and the related
Note Collateral pertaining to such Eligible Project which is the subject of a
Synthetic Lease Transaction; provided that ARC will provide to the Agent for the
benefit of the Lenders as additional Collateral for the applicable Assigned Note
a first lien deed of trust on its fee ownership of any Eligible Project that is
the subject of a Ground Lease in connection with a Synthetic Lease Transaction
(each a "Fee Interest Deed of Trust" as it may from time to time be amended,
restated or substituted); (b) a first lien security interest in all fixtures,
building materials and all other machinery, equipment and other personality used
or installed by any Borrower or the Synthetic Lessors or Synthetic Lessees on
the premises of such Eligible Project or in the Improvements constructed
thereon; and (c) all of the other Collateral relating to such Eligible Project.
In connection with a Synthetic Lease Transaction the collateral described in (b)
and (c) above may be assigned through and in connection with the assignment to
the Agent of the Note Collateral. The Borrowers may obtain the release of an
Eligible Project and all Collateral associated therewith from the liens of the
applicable Deed of Trust or
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assignment of Assigned Note, Collateral Assignments, Security Documents and
other Financing Documents at any time provided no Default or Event of Default
has occurred and is continuing or would occur as a result of such release and
provided that the provisions of Section 2.1(e) and Section 7.2.1 are satisfied
and provided that the Borrowers pay any resulting Borrowing Base Deficiency
before or contemporaneously with any such release.
Section 3.3 Note Assignment.
In connection with each assignment of an Assigned Note, the Assigned
Note shall be endorsed and delivered to the Agent, the assignment of the
Assigned Note and the Note Collateral shall be recorded in the applicable land
records and financing statements describing the Assigned Note and the Note
Collateral shall be filed in the appropriate recording offices.
Section 3.4 Guaranties.
The Obligations are the subject of the Guaranty Agreement executed and
delivered by the Guarantor in favor of the Lenders and of one or more Completion
Guaranties which may from time to time be executed and delivered by the
Guarantor.
Section 3.5 Collateral for Obligations.
Each Borrower acknowledges that it is the intention of the Borrowers
that the Collateral and all the Deeds of Trust be security for all of the
Obligations, both those now existing and those hereafter created or incurred by
future loans, advances, extensions of credit or otherwise and whether or not
currently contemplated by the Borrowers and/or the Lenders on or about the date
hereof.
Section 3.6 Costs.
The Borrowers agree to pay on demand, to the fullest extent permitted
by applicable laws, all reasonable fees, commissions, costs, charges, travel
expenses and other expenses incurred by the Lenders, or any of them, in
connection with the review of information relating to Facilities or the taking,
perfection, preservation, protection and/or release of any security interest or
lien on any of the Collateral or Deeds of Trust, including, but not limited to,
reasonable fees and expenses of counsel for the Agent and any other Lender,
appraisal fees, fees of Inspecting Engineers, fees and charges for surveys,
environmental audits, examination of title of each of the Eligible Projects and
mortgagee title insurance thereon, insurance and bond premiums, mortgage taxes,
transfer taxes and all recording fees and charges. The foregoing
notwithstanding, the Borrowers shall not be obligated to pay the travel expenses
of the Lenders with the exception of travel expenses incurred in connection with
(a) an initial site inspection, (b) a site inspection upon completion of any
construction and (c) travel related to any enforcement actions following the
occurrence of an Event of Default.
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Section 3.7 Optional Collateral.
The Borrowers or other entities acceptable to the Agent may at their
sole option grant to the Agent for the benefit of the Lenders a first lien deed
of trust on the fee simple ownership interest in a Facility acceptable to the
Agent as Optional Collateral and pledge the related Collateral and a first lien
security interest in all fixtures, building materials and all other machinery,
equipment and other personality used or installed by such entity or its
Management Company on each of the premises of the Optional Collateral or the
improvements constructed thereon in connection with that Facility as security
for the Obligations if each of the conditions for Optional Collateral is met and
continues to be maintained. The Borrowers may assign an Assigned Note and the
related Note Collateral in connection with a Synthetic Lease Transaction as
Optional Collateral if each of the conditions for Optional Collateral is met and
continues to be maintained. The Optional Collateral will not be included in the
Borrowing Base. It will only be referred to by the Agent in calculating the
interest rate applicable to the Loan. Provided that no Default or Event of
Default has occurred and is continuing, the Borrowers may in their sole
discretion add, substitute or remove Facilities from the Optional Collateral;
provided, however, that any change in the Optional Collateral may only become
effective at the end of a fiscal quarter. The Borrowers shall notify the Agent
in writing of their intent to release Optional Collateral. Optional Collateral
may remain as security for the Loan longer than thirty (30) months. Nothing
contained herein shall require or permit release of Optional Collateral as
security for the Obligations while a Default or Event of Default exists or if a
Default or Event of Default would occur as a result of such release.
ARTICLE IV
GENERAL FINANCING PROVISIONS.
Section 4.1 Conditions Precedent to Credit Facility Closing and
Addition of Eligible Projects.
The following requirements, along with the applicable requirements set
forth in Section 4.2, Section 4.3 or Section 4.4, shall be conditions precedent
to the Credit Facility Closing or to the addition of an Eligible Project to the
Borrowing Base (a "Facility Closing"):
(a) The Notes, this Agreement, the Guaranty, or the assignments
of any applicable Assigned Notes and the related Note Collateral (the "Synthetic
Lease Assignment"), the other Security Documents and the other Financing
Documents in connection with the Loan shall have been properly executed and
delivered to the Agent. Any applicable Deeds of Trust or Synthetic Lease
Assignments shall have been acknowledged and recorded in the appropriate public
office or delivered to a representative of the title company for recording, and
payment shall have been made for all conveyancing and recording in connection
with the settlement of the Loan, and for any transfer or documentary stamp taxes
due under any federal, state or municipal law.
(b) The Agent shall have received and approved a copy of each
Borrower's and the Guarantor's fully executed by-laws, and a certified copy of
the charter or other organizational documents or, for a Facility Closing, a
certificate of no changes therein since the
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Credit Facility Closing. In connection with the addition of an Additional
Borrower or a new Assigned Note, the Agent shall have received and approved
copies of all organizational documents for such Additional Borrower or the
applicable Synthetic Lessor and Synthetic Lessee, including certified copies of
all documents on record with the state in which such entity is organized.
(c) The Agent shall have received and approved certificates
executed by an authorized officer of each Borrower certifying as to the validity
of the resolutions of the boards of directors of such Borrower and the
Guarantors authorizing the execution and delivery of the Financing Documents and
consenting to the Loan and similar resolutions of any Additional Borrower.
(d) The Agent shall have received and approved a current
certificate of good standing and, if applicable, a certificate of authority to
do business in the state where each Eligible Project is located for the
applicable Borrower and, if applicable, for the Synthetic Lessor and Synthetic
Lessee and in connection with the addition of an Additional Borrower a
certificate of good standing, a certificate of authority to do business in the
state where such Eligible Project is located or certificate of fact from the
state in which any Additional Borrower is formed. The foregoing notwithstanding
the Agent may agree in its sole discretion to accept certificates of good
standing and certificates of authority to do business which are not current,
which were provided in connection with the closing of a Synthetic Lease
Transaction.
(e) The Agent shall have received and approved an opinion of
counsel for the Borrowers as to each Borrower's good standing, form, power and
authority and as to the validity, binding effect and enforceability of the
Financing Documents. In connection with any Synthetic Lease assignment, the
Agent may require that the law firm which gave the opinions of counsel in
connection with the closing of a Synthetic Lease Transaction either bring such
opinions current and/or re-address them to the Agent on behalf of the Lenders or
issue a letter to the Agent on behalf of the Lenders confirming that the Lenders
may rely upon the opinion previously given and advising of any material changes
in the applicable law since the prior opinion. The Agent may also require an
opinion of counsel for the Borrowers that the Synthetic Lease is a lease and not
an equitable mortgage. The Agent may also require an opinion of local counsel
for the Borrowers confirming that any Security Document including an assignment
of an Assigned Note and Note Collateral be in proper form and enforceable under
the law of the applicable jurisdiction.
(f) The Agent shall have received a properly executed Additional
Borrower Joinder Supplement from any Additional Borrower.
(g) The Borrowers shall provide the Agent with the Management
Agreement entered into by a Borrower or a Synthetic Lessor and/or Synthetic
Lessee with the Management Company. The terms and provisions of the Management
Agreement shall be fully approved by the Agent prior to the Credit Facility
Closing.
(h) The Agent shall have received and approved a guaranty by ARC
of the operating deficits of any Eligible Project; provided, however, that in
connection with a Synthetic Lease Transaction, provisions for funding of
operating deficits shall be evidenced by the
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inclusion of such operating deficits in the applicable Total Development Budget
and the agreement of ARC in favor of the Synthetic Lessee to fund operating
deficits in excess of those the Synthetic Lessee has agreed to fund so long as
such Synthetic Lease is collaterally assigned to secure an Assigned Note.
(i) At the time the Borrowers request the consent of the Agent to
the inclusion of a Facility as an Eligible Project, the Borrowers shall have
advised the Agent of the following information regarding the proposed new
Eligible Project (i) the type and tradename of the Facility, (ii) its status as
a Development Project, an Acquisition Project or a Stabilized Project, (iii)
whether it is an Expansion Project, (iv) the stage of construction of any
Facility under construction, (v) the location of the Facility including ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, (▇▇) the name of the entity which owns the
Facility and its relationship to ARC or any Borrower, and (vii) whether a
Synthetic Lease is or will be applicable to the Facility. The Lenders will
determine whether the Facility will be added as an Eligible Project to the
Borrowing Base in accordance with the provisions of this Agreement.
(j) the Agent shall have received a certified financial statement
in form and detail satisfactory to the Agent regarding any Additional Borrower.
(k) The Agent shall have a period of not less than thirty (30)
days to review a Facility and decide whether to permit its inclusion in the
Borrowing Base.
(l) The Agent shall have received other information (actual or
projected as applicable) regarding each Facility, including the number of units,
types of units, payor mix or rate schedule.
Section 4.2 Additional Conditions Precedent to Accepting an Eligible
Project That is Under Construction or to be Constructed:
The following requirements, along with applicable requirements of
Section 4.1 and Section 4.4, shall be conditions precedent to a Facility Closing
for an Eligible Project that is under construction or to be constructed:
(a) The Facility Closing shall have been completed.
(b) The Agent shall have received a certificate of authority to
do business for the applicable Borrower in the jurisdiction where such Eligible
Project is located.
(c) The Total Development Budget for such Eligible Project shall
have been reviewed and approved in writing by the Agent. Each Total Development
Budget for a Development Project under construction or to be constructed shall
include (A) a project summary describing such proposed Eligible Project in
reasonable detail, (B) a detailed construction cost estimate and a two-year
estimated cash flow analysis (or such longer period as is necessary to include
at least twelve (12) complete calendar months of full stabilized operation), (C)
other cost, feasibility, demographic and marketing information and analysis with
respect to such Eligible Project, (D) a five percent (5%) of "hard" costs
included in the
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contingency line item; and (E) an operating deficit/working capital category
sufficient to equal the higher of the amount set forth in the Borrower's Pro
Forma Operating Statement or the amount the Agent or its consultants believe
such working capital requirements should be; and all such material shall be
satisfactory in all respects to the Agent, in its sole discretion. Such Total
Development Budget shall demonstrate to the Agent's satisfaction that the
Eligible Project qualifies and is likely to continue to qualify as a Pool A
Project. Such review for a Facility to be constructed or under construction
shall include a review of the Plans and Specifications by an inspecting engineer
selected by the Agent to verify that the Improvements can be constructed for the
amount set forth in the Total Development Budget.
(d) The Pro Forma Operating Statement for such Eligible Project
shall have been reviewed and approved in writing by the Agent. Each Pro Forma
Operating Statement shall demonstrate to the Agent's satisfaction in its sole
discretion that the Eligible Project is likely to qualify and continue to
qualify as a Pool A Project.
(e) The Agent shall have received (A) a paid policy of title
insurance (American Land Title Association Standard Form "B" Loan Policy-Current
Edition) covering the Facility or a valid and enforceable commitment to issue
the same, together with such reinsurance agreements and direct access agreements
as may be required by the Agent and/or endorsements to policies issued to the
Agent in connection with the Credit Facility Closing, or (B) an endorsement(s)
to the Agent on behalf of the Lenders of the policy or policies of insurance
issued to the applicable Borrower as lender under a Synthetic Lease Transaction
and including such additional endorsements as the Agent may require in
connection with the Synthetic Lease assignments in the dollar amount agreed upon
by the Agent from a title insurance company acceptable to the Agent and which
may be endorsed or assigned to the successors and assigns of the Lenders and to
additional Lenders without additional cost, insuring the liens of the Deeds of
Trust or the Note Collateral, as applicable, to be valid first liens on the
Facility, free and clear of all defects, exceptions and encumbrances except such
as the Agent and its counsel shall have approved and with such endorsements as
Agent may require but without a creditor's rights exception and (unless
otherwise agreed by the Agent) containing affirmative insurance against
mechanic's liens.
(f) The Agent shall have received advice, in form and substance
and from a search company or other source satisfactory to the Agent, to the
effect that a UCC, judgment and tax lien search of the applicable public records
discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements or title retention agreements filed or recorded
against the Facility except such as the Agent shall have approved.
(g) The Agent shall have received ▇▇▇▇▇ Evidence forms evidencing
all policies of insurance required by the terms hereof and by the other
Financing Documents to be in effect from a company or companies and in form and
amount satisfactory to the Agent, including without limitation, flood insurance
(in the amount required by the applicable Deed of Trust or Note Collateral or
evidence that flood insurance is not available or otherwise required with
respect to the Facility), and with mortgagee and loss payee provisions in favor
of the Agent for the benefit of the Lenders, together with written evidence, in
form and substance satisfactory to the Agent, that all fees and premiums due on
account thereof have been paid in full.
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(h) The Agent shall have received and approved an appraisal of
the Facility meeting the requirements set forth herein.
(i) The Agent shall have received from the Borrowers a complete
set of the Plans and Specifications for the Facility signed and sealed by the
architect, together with written evidence, in form and substance satisfactory to
the Agent, to the effect that the Plans and Specifications are satisfactory to
the Borrowers or the Synthetic Lessor and Synthetic Lessee, as applicable, the
General Contractor, the Inspecting Engineer and, to the extent required by
applicable law or any effective restrictive covenant, have been approved by all
Governmental Authorities having or claiming jurisdiction and by the beneficiary
of any such restrictive covenant, respectively.
(j) The Agent shall have approved the General Contractor for any
Eligible Project under construction or to be constructed. The Agent shall have
received and approved a fully executed copy of the applicable fixed-price
Construction Contract and the Architect's Contract as well as any information
regarding the General Contractor or the Architect which the Agent has requested.
The Agent shall have received a dual obligee payment and performance bond or
letter of credit for the account of each General Contractor or other evidence of
satisfactory credit of the General Contractor.
(k) The Agent shall have received and approved a copy of a
current Survey of the Land certified to the Agent and to the title insurance
company.
(l) The Agent shall have received and approved a site plan for
the Improvements approved by all appropriate Governmental Authorities.
(m) The Agent shall have received from the Borrowers written
evidence, in form and substance satisfactory to the Agent, from all Governmental
Authorities having or claiming jurisdiction to the effect that all building,
construction and other permits required in connection with the development of
the Land and the construction of the Improvements have been validly issued, that
all fees and bonds required in connection therewith have been paid in full or
posted, as the circumstances may require, and that the Improvements meet zoning
requirements and all sewer and storm drain requirements.
(n) The Agent shall have received and approved a report setting
forth a construction progress schedule in form and substance satisfactory to the
Agent, calling for the completion of the Improvements by a date no later than
the end of the applicable Maximum Construction Period, which Maximum
Construction Period must be acceptable to the Agent.
(o) If construction work of any kind has commenced upon the Land
or materials have been placed or stored upon the Land prior to the recordation
of the Deed of Trust among the Land Records where the Land is located, the same
shall be fully insured against by the title insurance company.
(p) The Agent shall have received and approved evidence that the
applicable General Contractor carries public liability and property damage
insurance and workers' compensation insurance in form and amounts and issued by
companies acceptable to the Agent.
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(q) The Agent shall have received and approved a Phase I
environmental audit of the applicable Facility prepared by a person or firm
acceptable to the Agent.
(r) The Agent shall have received evidence acceptable in all
respects through certification by the Architect or other source acceptable to
the Agent that the applicable Improvements, when constructed, will comply with
all legal requirements regarding access and facilities for handicapped or
disabled persons, including, without limitation and to the extent applicable to
assisted living facilities (or, if applicable, independent living facilities),
The Federal Architectural Barriers Act (42 U.S.C. ss. 4151 et seq.), The Fair
Housing Amendments Act of 1988 (42 U.S.C. Section 3601 et seq.), The Americans
With Disabilities Act of 1990 (42 U.S.C. ss. 12101 et seq.), The Rehabilitation
Act of 1973 (29 U.S.C. ss. 794) and any applicable state statutes relating to
access and facilities for handicapped or disabled persons.
(s) The Agent shall have received and approved soil reports
demonstrating that the soil conditions of the Property are suitable for
construction of the Improvements, which reports shall include evidence to the
Agent's satisfaction that there are no hydric soils on the Land.
(t) The Agent shall have received and approved copies of any
executed Material Leases of the applicable Facility or of any portion thereof
and subordination and attornment agreements acceptable to the (with
non-disturbance provisions if acceptable to the Agent) from each.
(u) The Agent shall have received and approved an opinion of
Borrowers' outside or in-house regulatory counsel regarding licensing
requirements and the transferability of Licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located on a form provided
by the Agent that the Financing Documents applicable to that Facility are
enforceable against the Borrowers in accordance with their terms and that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do business or taxation (except ad valorem taxes on
the Property) in the state where the applicable Facility is located and that the
Loan is not usurious, which opinion must also inform the Agent (i) of the cost
and timing of foreclosure; (ii) of any limitations on the Agent's right to
obtain, or the amount of, a deficiency judgment; and (iii) the existence of and
details surrounding any redemption period enjoyed by the Borrowers following a
sale at foreclosure. Each opinion of local counsel will reflect such counsel's
understanding of the structure of the Credit Facility as a whole and the
enforceability of the documents for each jurisdiction as a part of such Credit
Facility structure. In connection with an Assigned Note, the Agent may agree in
its sole discretion to accept a letter from the lawyer or lawyers who issued
such opinions in connection with the Synthetic Lease Transaction confirming that
the Agent and the Lenders may rely upon such existing opinions and advising of
any material changes in the applicable law since the issuance of such opinions.
(v) With regard to any Facility located in any state having such
requirement, the Agent shall have received evidence satisfactory to the Agent
that a Certificate of Need has been issued for such Facility.
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(w) The Agent shall have received and approved any Management
Agreement then in place for the Facility.
(x) The Agent shall have received and approved a market
feasibility study for the Facility satisfactory to the Agent including, but not
limited to, information regarding market occupancy rates, proposed and existing
competition, monthly rates and a Claritas Senior Life Report (or other source
acceptable to the Agent) on the defined market area for the Facility. The market
feasibility study may be internally prepared; however, the Agent reserves the
right to require the Borrowers to provide a market feasibility study prepared by
a third party acceptable to the Agent.
(y) The Agent shall have received a copy of any acquisition
contract for the Facility.
(z) The Agent and/or one or more of the other Lenders shall have
inspected the Facility and finds it acceptable.
Section 4.3 Additional Conditions Precedent to Accepting an Eligible
Project That Has Been Constructed or Acquired:
The following requirements, along with the applicable requirements of
Section 4.1 and Section 4.4, shall be conditions precedent to a Facility Closing
for an Eligible Project that has been constructed or acquired:
(a) The Facility Closing shall have been completed.
(b) The Agent shall have received a certificate of authority to
do business for the applicable Borrower in the jurisdiction where such Eligible
Project is located.
(c) The Total Development Budget for such Eligible Project shall
have been reviewed and approved in writing by the Agent consistent with the
provisions of Section 2.1. Each Total Development Budget shall demonstrate to
the Agent's satisfaction in its sole discretion that such Eligible Project will
be designated as a Pool A Project.
(d) The Pro Forma Operating Statement and recent actual operating
statements for any such Eligible Project that is not a Stabilized Project shall
have been reviewed and approved in writing by the Agent. Each Pro Forma
Operating Statement shall demonstrate to the Agent's satisfaction in its sole
discretion that the Eligible Project will qualify and is likely to continue to
qualify as a Pool A Project.
(e) The Agent shall have received (A) a paid policy of title
insurance (American Land Title Association Standard Form "B" Loan Policy-Current
Edition) covering the Facility or a valid and enforceable commitment to issue
the same, together with such reinsurance agreements and direct access agreements
as may be required by the Agent and/or endorsements to policies issued to the
Agent in connection with the Credit Facility Closing, or (B) an endorsement(s)
to the Agent on behalf of the Lenders of the policy or policies of insurance
issued to the applicable Borrower as lender under a Synthetic Lease Transaction
and including
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such additional endorsements as the Agent may require in connection with the
Assigned Note assignments in the dollar amount agreed upon by the Agent from a
title insurance company acceptable to the Agent and which may be endorsed or
assigned to the successors and assigns of the Lenders and to additional Lenders
without additional cost, insuring the liens of the Deeds of Trust or the Note
Collateral, as applicable, to be valid first liens on the Facility, free and
clear of all defects, exceptions and encumbrances except such as the Agent and
its counsel shall have approved and with such endorsements as Agent may require
but without a creditor's rights exception and (unless otherwise agreed by the
Agent) containing affirmative insurance against mechanic's liens.
(f) The Agent shall have received advice, in form and substance
and from a search company satisfactory to the Agent, to the effect that a UCC,
judgment and tax lien search of the applicable public records discloses no
conditional sales contracts, chattel mortgages, leases of personality, financing
statements or title retention agreements filed or recorded against the Property
except such as the Agent shall have approved.
(g) The Agent shall have received ▇▇▇▇▇ Evidence forms evidencing
all policies of insurance required by the terms hereof and by the other
Financing Documents to be in effect from a company or companies and in form and
amount satisfactory to the Agent, including without limitation, flood insurance
(in the amount required by the applicable Deed of Trust or evidence that flood
insurance is not available or otherwise required with respect to the Property),
and with mortgagee and loss payee provisions in favor of the Agent for the
benefit of the Lenders, together with written evidence, in form and substance
satisfactory to the Agent, that all fees and premiums due on account thereof
have been paid in full.
(h) The Agent shall have received and approved an appraisal of
the Facility.
(i) The Agent shall have received and approved a copy of a
current as-built Survey of the Land certified to the Agent and to the title
insurance company.
(j) The Agent shall have received and approved a Phase I
environmental audit of the applicable Facility prepared by a person or firm
acceptable to the Agent.
(k) The Agent shall have received evidence acceptable in all
respects through certification by the Architect or other source acceptable to
the Agent that the applicable Improvements comply with all legal requirements
regarding access and facilities for handicapped or disabled persons, including,
without limitation and to the extent applicable to assisted living facilities
(or, if applicable, independent living facilities), The Federal Architectural
Barriers Act (42 U.S.C. ss. 4151 et seq.), The Fair Housing Amendments Act of
1988 (42 U.S.C. ss. 3601 et seq.), The Americans With Disabilities Act of 1990
(42 U.S.C. ss. 12101 et seq.), The Rehabilitation Act of 1973 (29 U.S.C. Section
794) and any applicable state statutes relating to access and facilities for
handicapped or disabled persons.
(l) The Agent shall have received and approved copies of any
executed Material Leases of the applicable Property or of any portion thereof
and subordination and attornment agreements acceptable to the Agent from each.
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(m) The Agent shall have received and approved an opinion of
Borrowers' outside or in-house regulatory counsel regarding licensing
requirements and the transferability of licenses and an opinion of local counsel
in the jurisdiction where the applicable Facility is located that the Financing
Documents applicable to that Facility are enforceable and for the Borrowers that
neither the making nor the servicing of the Loan will subject the Lenders to a
requirement of qualifying to do business or taxation (except ad valorem taxes on
the Property) in the state where the applicable Facility is located and that the
Loan is not usurious, which opinion must also inform the Agent (i) of the cost
and timing of foreclosure; (ii) of any limitations on the Agent's right to
obtain, or the amount of, a deficiency judgment; and (iii) the existence of and
details surrounding any redemption period enjoyed by any Borrower following a
sale at foreclosure. In connection with as Assigned Note, the Agent may agree in
its sole discretion to accept a letter from the lawyer or lawyers who issued
such opinions in connection with the Synthetic Lease Transaction confirming that
the Agent and the Lenders may rely upon such existing opinion and advising of
any material changes in the applicable law since the issuance of such opinions.
(n) With regard to any Deed of Trust for a Facility located in
any state having such requirement, the Agent shall have received evidence
satisfactory to the Agent that a Certificate of Need has been issued for such
Facility.
(o) The Agent shall have received and approved a copy of the
fully executed Management Agreement for the Facility.
(p) If requested by the Agent, the Agent shall have received and
approved a physical assessment report prepared by a professional acceptable to
the Agent (unless the Agent accepts a report prepared by ARC) for any Eligible
Project which was not constructed by ARC or which has been completed more than
five (5) years.
(q) The Agent shall have received a market feasibility study for
the Facility satisfactory to the Agent including, but not limited to,
information regarding market occupancy rates, proposed and existing competition,
monthly rates and a Claritas Senior Life Report (or other source acceptable to
the Agent) on the defined market area for the Facility. The market feasibility
study may be internally prepared; however, the Agent reserves the right to
require the Borrowers to provide a market feasibility study prepared by a third
party acceptable to the Agent.
(r) The Agent shall have received a copy of any acquisition
contract for the Property.
(s) If applicable in the state where the Facility is located or
unless the Agent has consented to defer receipt thereof in connection with a
particular Facility, the Agent shall have received a certificate of occupancy
for the Improvements.
(t) The Agent shall have received a copy of an operating License
for the Facility or other evidence satisfactory to the Agent that the Facility
may be lawfully operated as contemplated by the Financing Documents.
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(u) The Agent shall have received cost reports for the Facility
for the preceding two (2) years (if available).
(v) The Agent shall have received the most recent licensure and
reimbursement survey for the Facility, any statement of deficiencies and the
related plan of correction.
Section 4.4 Additional Conditions Precedent to Accepting a Facility
Subject to a Synthetic Lease Transaction as an Eligible Project.
The following requirements, along with applicable requirements of
Section 4.1 and Section 4.2 or Section 4.3, shall be conditions precedent to a
Facility Closing for an Eligible Project subject to a Synthetic Lease
Transaction:
(a) The Agent shall have received written records satisfactory to
the Agent of the disbursement and payment history of and the principal balance
outstanding of the Assigned Note.
(b) The Agent shall have received and approved the Synthetic
Lease and all collateral for and guaranties of the Synthetic Lease. Rent from
such Synthetic Lease must be sufficient to pay debt service on its respective
Assigned Note or at least on a 1.0 to 1.0 basis. The Synthetic Lease shall
provide that if interest is accruing at the default rate, rent will be increased
to cover such increased interest rate.
(c) The Agent shall have received and approved all of the other
Note Collateral and any and all other documents executed or provided in
connection with the Synthetic Lease Transaction.
(d) The Agent shall have received and approved estoppel
certificates from the Synthetic Lessor regarding the Assigned Note and the
Synthetic Lease and related documents, from the Synthetic Lessee regarding the
Synthetic Lease and related documents and from ARCC as Lender regarding the
Assigned Note, the Note Collateral and related documents.
(e) The Assigned Notes with a particular Synthetic Lessee (or
Entity under common control with such Synthetic Lessee) will be cross-defaulted
with each other. The Assigned Note and Note Collateral will secure all
obligations under the Credit Facility. No Synthetic Lessee will enter into a
Synthetic Lease Transaction with more than one Synthetic Lessor unless the Agent
determines to its satisfaction that such Synthetic Lease Transaction can be
cross-defaulted. Neither the Assigned Note nor the Note Collateral will be
amended, modified, substituted or cancelled without the Agent's prior written
consent. Any prepayment of principal outstanding under an Assigned Note shall be
paid to the Agent to be applied to the Obligations.
(f) No more than four (4) Synthetic Lease Pools may be included
in the Borrowing Base at any one time during the period that the Credit Facility
Committed Amount is $75,000,000 or less. One additional Synthetic Lease Pool may
be added for each additional $25,000,000 which is added to the Credit Facility
Committed Amount.
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(g) The Borrower which is the payee on each Assigned Note will
continue to administer the loan to the applicable Synthetic Lessor including,
but not limited to, making advances thereunder, in accordance with the Assigned
Note and the loan documents in connection therewith. Such Borrower will comply
with and enforce the Assigned Note and the related loan documents in accordance
with their written terms. Such Borrower will give the Agent notice of any
default under the Assigned Note, the Synthetic Lease, the Note Collateral or any
other related documents.
(h) The Lender's title insurance policy being assigned as part of
the Note Collateral may not include a recharacterization exclusion.
Section 4.5 Conditions Precedent to Determining Additional
Availability Under Borrowing Base.
The Lenders shall not be obligated to include any costs incurred by any
Borrower under a Total Development Budget in the calculation of the Borrowing
Base unless the conditions described in Section 4.1, Section 4.2, Section 4.3
and/or Section 4.4, as applicable, and the following additional conditions shall
have been satisfied to the Agent's satisfaction:
(a) Construction cost reports prepared by a construction manager
and certified by an officer of ARC showing the percentage of completion and
setting forth in trade breakdown form and in such detail as may be required by
the Agent, the amounts expended and/or costs incurred for work done and
necessary materials incorporated into the Improvements. The cost reports shall
also show the percentage of completion of each line item on the Borrowers' cost
breakdown approved by the Agent. The Borrowers shall submit with each cost
report a statement that the work completed to the date of such cost report is of
quality consistent with the applicable Plans and Specifications. In connection
with any Assigned Note the cost report shall also include a statement of the
principal sum of such Assigned Note advanced to date by ARCC. In addition, at
the time of delivery of each cost report by the Borrowers, the Borrowers shall
furnish to the Agent such additional information (such as paid receipts,
invoices, statements of accounts, etc.) as the Agent may reasonably require to
assure that amounts shown in the cost report have been paid by the Borrowers.
(b) Cost reports verified by the Agent's Real Estate Loan
Administration group during the period since the issuance of the last Borrowing
Base Report will be included in the calculation of the next Borrowing Base
Report. Unless otherwise agreed to by the Agent and to the extent specifically
permitted by the Agent, the process of verification of Requisitions shall
confirm the payment by the Borrowers of the following costs and expenses related
to the development of the Land and the construction of the Improvements and no
others may be included in a Total Development Budget: (i) the payment of
interest when due without further authorization or consent of the Borrowers;
(ii) the actual cost of the Land and all labor, services, materials,
supervision, construction fees and the like reasonably incurred by the Borrowers
in connection with the construction upon the Land of the Improvements in
accordance with the Plans and Specifications; (iii) for the actual cost of
pre-opening expenses, marketing expenses and operations of the Facility to the
extent of operating deficits; (iv) for the actual cost of commitment fees,
extension fees, appraisal fees, closing or settlement costs, fees of attorneys,
engineers, architects and accountants, insurance and bond premiums, ad valorem
real estate taxes
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and other costs directly related to the development of the Land and the
construction, marketing, initial start-up operating of the Improvements; (v) for
reasonable development fees to ARC and (vi) for pre-opening fees. Development
fees shall be deemed incurred and included in "Costs Incurred to Date" in the
following manner: fifty percent (50%) of the development fees paid to ARC shall
be deemed incurred at the commencement of the Development Project and the
remaining balance shall be deemed incurred in equal quarterly installments
earned at the end of each three month period during the projected construction
period for a Facility constructed or under construction. Construction management
fees paid to third parties shall be deemed incurred and included in "Costs
Incurred to Date" in a percentage equal to the approximate percentage of
completion of the Facility constructed or under construction.
(c) The cost verification procedure hereunder will be
administered by the Agent's Real Estate Loan Administration group. Validation of
Costs Incurred to Date for Development Projects (including Expansion Projects)
under construction or constructed by a Borrower shall be based upon inspections
and certifications by or on behalf of the Agent demonstrating that the work
included in Costs Incurred to Date shown in the most current reports submitted
by the Borrowers has been completed in a manner satisfactory to the Agent and
upon verification by the Agent that the Borrowers have paid for the Costs
Incurred to Date shown on such requisition. Such inspections shall be performed
when construction is approximately one-third and two-thirds completed and at
substantial completion of the Improvements; provided, however, that the Agent
shall have the right in its sole discretion to conduct or cause to be conducted
such inspections at any other time or times. The Lender shall use the
information so provided by the Inspecting Engineer to verify that the
construction disbursements which have theretofore been made by the Borrowers
accurately reflected the amount of construction completed at such times. It
shall not be a condition to issuing a new Borrowing Base Report reflecting
updated Costs Incurred to Date that the Agent shall have actually received a
report of the Inspecting Engineer verifying that the actual construction
completed and paid for conforms to the percentage of completion reflected in the
Borrowers' reports to the Agent. Rather, it is anticipated that the Agent will
use reasonable discretion in scheduling the physical inspections and reports by
the Inspecting Engineer so that such reports may be used by the Agent as a
periodic verification of the information contained in the Borrowing Base Report;
however, with regard to Development Projects, the Agent shall have received
confirmation from the Inspecting Engineer of his review and approval of the AIA
Form 702/703 referred to in subsection (i) below. The Borrowers shall make
arrangements for advance payment or reimbursement by the Borrowers of the fees
and expenses of the Inspecting Engineer in making any such physical inspections.
In addition:
(i) All reports of costs incurred shall be made on forms
approved by the Agent similar to construction loan requisition
forms detailing the purpose and application of the Costs Incurred
to Date by Eligible Project at such times as the Borrowers may
determine, using (x) as to "hard costs," AIA Form 0702, or such
other standardized forms or formats for information typically
used by the Borrowers as shall be reasonably acceptable to the
Agent accompanied by a cost breakdown, the accuracy of which
shall be certified by ARC on behalf of the Borrowers, and (y) as
to "soft costs," a standardized request form, containing such
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information and/or documentation, certified by ARC on behalf of
the Borrowers, as the Agent may reasonably require.
(ii) Costs Incurred to Date on Acquisition Projects will be
verified from the settlement sheet signed at the closing of the
acquisition and other records deemed acceptable by the Agent.
Costs Incurred to Date on Stabilized Projects constructed by the
Borrowers will be verified from applicable invoices and other
payment records satisfactory to the Agent.
(iii) The Borrowers shall furnish the Agent with lien
waivers signed by the general contractor for all construction
work done and materials supplied that are included in the current
requisition. Such lien waivers will be in the form of AIA forms
G706 and G706A.
(iv) Validation of requisitions will also be contingent upon
receipt of the most current monthly report of title to all
Eligible Projects which are under construction or have been
completed less than 120 days (or such longer period as the Agent
shall deem necessary based on applicable mechanics' lien laws),
which must be satisfactory to the Agent. If required by the terms
of the existing title insurance policy, the Agent shall have
received an endorsement which shall have the effect of advancing
the effective date of the policy to the date of the advance then
being made and increasing the coverage of the policy by an amount
equal to the cost report being verified if the policy does not by
its terms provide for such an increase.
(v) The Borrowers shall deliver to the Agent at least
monthly written evidence of the principal sum then outstanding
under each Assigned Note.
(d) No Default or Event of Default shall have occurred and be
continuing under any Note or any of the other Financing Documents.
(e) No Improvements shall have been materially damaged by fire or
other casualty unless the Agent shall have received proceeds of insurance
sufficient in the judgment of the Agent to effect a satisfactory restoration of
such Improvements in accordance with the terms of the applicable Deed of Trust.
(f) The Agent shall have received written evidence, in form and
substance satisfactory to the Agent, in its reasonable discretion, to the effect
that all work requiring inspection by Governmental Authorities having or
claiming jurisdiction has been duly inspected and approved by such authorities
and by any rating or inspection organization, bureau, association or office
having or claiming jurisdiction.
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(g) The representations and warranties made in ARTICLE V of this
Agreement shall be true and correct in all material respects on and as of the
date of the advance with the same effect as if made on such date.
(h) All terms and conditions of the Financing Documents required
to be met as of the date of consideration applicable cost report shall have been
met to the complete satisfaction of the Agent.
(i) In the reasonable judgment of the Agent, all work completed
on the applicable Eligible Project under construction at the time of the
application for an advance has been performed in a good and workmanlike manner
and all materials and fixtures usually furnished and installed at that stage of
construction have been furnished and installed. All costs covered by the cost
report have been paid by the Borrowers.
(j) The Agent shall have determined whether each Eligible Project
is a Pool A, Pool B or Pool C Project. Borrowers agree to provide sufficient
information to the Agent to permit the Agent to confirm which Eligible Projects
fall into each category.
Section 4.6 Conditions Under Which an Eligible Project is a
Completed Project.
The Agent shall verify that an Eligible Project is a Completed Project
based on the satisfaction of the following additional conditions:
(a) Within sixty (60) days after the issuance of the applicable
certificate of occupancy, the Agent shall have received the final "as built"
Survey for the applicable Facility.
(b) Within sixty (60) days after the issuance of the applicable
certificate of occupancy, the Agent shall have received written evidence from
the Architect or another qualified third party, in form and substance
satisfactory to the Agent, to the effect that the applicable Improvements have
been substantially completed in accordance with the applicable Plans and
Specifications.
(c) The Agent shall have received written evidence, in form and
substance satisfactory to the Agent, to the effect that requisite certificates
for permanent occupancy or completion of the Improvements have been validly
issued.
(d) Final waivers of liens of the General Contractor, and, if
required by the applicable title insurance company, subcontractors, laborers and
material suppliers have been furnished to the Agent or, as to any disputed lien
or claim of lien, a bond in form and substance acceptable to the Agent has been
provided or other arrangements satisfactory to the Agent have been made.
(e) The Agent shall have received a copy of an operating License
for the Facility or other evidence satisfactory to the Agent that the Facility
may be lawfully operated as contemplated by the Financing Documents.
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Section 4.7 Verification of Operating Reserve Expenditures.
No portion of any costs included in the Operating Reserve shall be
verified until both a certificate of occupancy has been issued by the applicable
Governmental Authorities and, if applicable to the Facility, an operating
License has been issued for the Facility by the appropriate Governmental
Authority or Authorities. Advances from the Operating Reserve shall be for the
sole purpose of paying a portion of the Debt Service on the Loan or net
operating losses as shown on a monthly financial report for such Facility
prepared in accordance with the requirements set forth in this Agreement, and
certified by the chief financial officer of the applicable Borrower.
Section 4.8 Assignments of Payments.
Each Borrower agrees not to transfer, assign, pledge or hypothecate any
right or interest in any payment or advance due under this Agreement, or any of
the other benefits of this Agreement, without the prior written consent of the
Agent. Any assignment made or attempted by any Borrower without the prior
written consent of the Agent shall be void and of no effect. No consent by the
Agent to an assignment by any Borrower shall release such Borrower as a party
primarily obligated and liable under the terms of this Agreement unless such
Borrower shall be released specifically by the Agent in writing. No consent by
the Agent to an assignment shall be deemed to be a waiver of the requirement of
prior written consent by the Agent with respect to each and every further
assignment and as a condition precedent to the effectiveness of such assignment.
Section 4.9 Liability of the Lenders.
The Lenders shall in no event be responsible or liable to any person
other than the Borrowers for the disbursement of or failure to disburse the Loan
proceeds or any part thereof and neither the General Contractor nor any
subcontractor, laborer or material supplier shall have any right or claim
against the Lenders under this Agreement or the administration thereof. Neither
the Agent, any of the other Lenders nor any Inspecting Engineer shall be
responsible or liable for the construction methods or the quality of
construction employed in connection with a Facility or for any construction
defects but are merely reviewing construction or causing it to be reviewed in
connection with the verification of Costs Incurred to Date. Furthermore, all
verification of Costs Incurred to Date shall be for the sole benefit of Agent
and Lenders and neither any Borrower nor any other third party shall have the
right to rely thereon, and it shall be the sole responsibility of the Borrowers
and not the responsibility of the Lenders or the Agent to apply any Loan funds
to the payment of such costs.
Section 4.10 Computation of Interest and Fees.
All applicable fees and interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed pursuant to the terms of
each Note and interest shall be payable monthly in arrears.
Section 4.11 Liens; Setoff.
Each Borrower hereby grants to the Lenders a continuing lien and
security interest for all the Obligations upon any and all monies, securities,
and other property of the Borrowers and the
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proceeds thereof, now or hereafter held or received by or in transit to, the
Lenders, or any affiliate of any of the Lenders, from or for any Borrower, and
also upon any and all deposits (general or special) and credits of such
Borrowers with any of the Lenders, if any, at any time existing. During the
continuance of any Event of Default under this Agreement, each Lender is hereby
authorized by each Borrower at any time and from time to time, without notice to
any Borrower, to set off, appropriate and apply any or all items hereinabove
referred to against all Obligations then outstanding.
Section 4.12 Payment and Performance of Obligations.
The payment and performance by the Borrowers of the Obligations shall
be absolute and unconditional, irrespective of any defense or any rights of
set-off, recoupment or counterclaim any Borrower might otherwise have against
the Lenders, or any of them, and the Borrowers shall pay absolutely net all of
the Obligations, free of any deductions and without abatement, diminution or
set-off; and until payment in full of all of the Obligations, the Borrowers: (a)
will not suspend or discontinue any payments provided for in the Notes, (b) will
perform and observe all of their other agreements contained in this Agreement,
including (without limitation) all payments required to be made to the Agent,
and (c) will not terminate or attempt to terminate this Agreement or any of the
other Financing Documents to which the Borrowers, or any of them, are a party
for any cause.
Section 4.13 Payments to Others for the Account of the Borrowers
At the option of the Agent and without any request from any Borrower,
and without waiving any of its rights hereunder, the Agent may do the following:
(a) Elect to cure or avoid any default by any Borrower under the
Financing Documents by applying amounts due hereunder or advancing the Lenders'
own funds to the satisfaction of the conditions of the Financing Documents and
any amounts so applied shall be part of the Loan and shall be secured by the
Deeds of Trust and the other Collateral. The Agent agrees to endeavor to give
the Borrowers notice of any such payment or performing such act and the amount
of any payment whether prior to or contemporaneously with its making such
payment or performance of such act; provided, however, that failure to give such
notice shall not constitute a waiver by the Lenders of, or constitute a defense
to, any of the rights of the Lenders under this Agreement, or the Deeds of
Trust, including (without limitation) the right of the Lenders to repayment of
the amount of such payment.
(b) Apply amounts due hereunder to the satisfaction of the
conditions of the Financing Documents and any amounts so applied shall be part
of the Loan and shall be secured by the Deeds of Trust and other Collateral. At
the option of the Agent, and without limiting the generality of the foregoing,
the Agent may pay directly from the Loan proceeds all interest bills rendered by
the Agent in connection with the Loan, and following the occurrence of an Event
of Default may make advances directly to the General Contractor, the title
insurance company, any subcontractor or materialmen, or to any of them jointly,
and the execution hereof by the Borrowers shall, and hereby does, constitute an
irrevocable authorization to so advance the proceeds of the Loan. No further
direction or authorization from any Borrower shall be necessary to warrant such
direct advances and all such advances shall satisfy pro tanto the obligations of
the Lenders hereunder and shall be secured by the Deeds of Trust and other
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Collateral as fully as if made to the Borrowers, regardless of the disposition
thereof by the party or parties to whom such advances is made.
Section 4.14 Prepayment.
The Borrowers shall have the right to prepay the Loan in full or in
part, at any time and from time to time, upon five (5) days' prior written
notice to the Agent without premium or penalty. The foregoing notwithstanding,
in connection with any prepayment of a principal sum on any day other than the
last day of the Eurodollar Period applicable thereto, the Borrowers shall pay to
the Agent upon request by the Agent, such amount as shall be sufficient to
compensate any of the Lenders for any and all losses or expenses which such
Lender may sustain or incur (including without limitation, any such loss or
expense arising from the redeployment of funds obtained by such Lender). Unless
an Event of Default has occurred, any partial prepayment shall be applied first
to such breakage costs, second to accrued and unpaid interest and third to the
outstanding principal balance of the Loan. The foregoing notwithstanding, at all
times prior to the repayment in full and termination of the Credit Facility the
provisions of Section 2.1(e) and Section 7.2.1 shall be satisfied. Sums borrowed
and repaid may be readvanced. The obligations of the Borrowers under this
Section shall survive the termination of this Agreement and the repayment of the
Obligations.
Section 4.15 Delivery of Documents.
At the request of the Agent, the Borrowers shall promptly deliver to
any Lender or Lenders designated by the Agent copies of any document or
documents required by the Financing Documents to be provided to the Agent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to make available the Credit Facility,
each Borrower represents and warrants to the Lenders that:
Section 5.1 Good Standing.
Each Borrower and the Management Company (a) is a legal entity duly
organized and existing and in good standing under the laws of its state of
formation, (b) has the power to own its property and to carry on its business as
now being conducted, and (c) is duly qualified to do business and is in good
standing in each jurisdiction in which each Facility it owns or operates is
located and in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary.
Section 5.2 Power and Authority
Each Borrower has full power and authority to execute and deliver this
Agreement and each of the other Financing Documents executed and delivered by
it, to make the borrowing hereunder, and to incur the Obligations, all of which
have been duly authorized by all proper and necessary corporate action. No
consent or approval of holders of ownership interests in or
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lenders to any Borrower, and no consent or approval of any Governmental
Authority or any third party payor on the part of any Borrower, is required as a
condition to the validity or enforceability of this Agreement or any of the
other Financing Documents executed and delivered by any Borrower or to the
payment or performance by any Borrower of the Obligations.
Section 5.3 Binding Agreements.
This Agreement and each of the other Financing Documents executed and
delivered by the Borrowers, or any of them, have been properly executed by each
applicable Borrower, constitute valid and legally binding obligations of each
applicable Borrower, and are fully enforceable against each applicable Borrower
in accordance with their respective terms.
Section 5.4 Litigation.
There are no proceedings pending before any court or arbitrator or
before or by any Governmental Authority which, in any one case or in the
aggregate, will cause a material adverse change in the financial condition or
operations of any Borrower or affect the authority of any Borrower to enter into
this Agreement or any of the other Financing Documents executed and delivered by
the Borrowers, or any of them. There is no pending revocation, suspension,
termination, probation, restriction, limitation or non-renewal of any License,
Participation Agreement or any similar accreditation or approval organization or
Governmental Authority for healthcare providers, including, without limitation,
the issuance of any provisional License or other License with a term of less
than twelve (12) months, as a consequence of any sanctions imposed by any
Governmental Authority, nor is there any pending assessment of any civil or
criminal penalties by any Governmental Authority, the outcome of which, if
determined adversely to any Borrower, or any other License holder, including any
Synthetic Lessee of the Management Company, could result in a material adverse
change in the business or financial condition of such Borrower or such other
License holder. None of the Borrowers has any appeals regarding rates or
reimbursements currently pending or contemplated before any Governmental
Authority or any administrator of any third party payor or preferred provider
program or referral source, the outcome of which, if determined adversely to
such Borrower, could result in a material adverse change in the financial
condition or operations of such Borrower. There are no Medicare or Medicaid
recoupments of any other third party payor being sought, requested or claimed,
against any Borrower, the outcome of which, if determined adversely to such
Borrower, could materially impair such Borrower's ability to pay the
Obligations, except as otherwise disclosed in writing to, and approved by, the
Agent.
Section 5.5 No Conflicting Agreements.
There is (a) no provision of any Borrower's Articles of Incorporation
or By-Laws and no provision of any existing mortgage, indenture, contract or
agreement binding on any Borrower or affecting any Borrower's property, and (b)
to the knowledge of each Borrower no provision of law or order of court binding
upon any Borrower, which would conflict with or in any way prevent the
execution, delivery, or performance of the terms of this Agreement or of any of
the other Financing Documents executed and delivered by the Borrowers, or which
would be violated as a result of such execution, delivery or performance, or, if
so, all necessary consents have been obtained.
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Section 5.6 Financial Information.
All financial statements or information hereto furnished to any of the
Lenders with respect to any Borrower, any Facility or the Guarantor is complete
and correct in all material respects and fairly presents the financial position
of such Borrower, such Facility or the Guarantor. There are no liabilities,
direct or indirect, fixed or contingent, of any Borrower or the Guarantor which
are not reflected in the their respective financial statements or in the notes
thereto except those incurred subsequently in the ordinary course of their
business. There has been no material adverse change in the financial condition
or operations of the Guarantor since the financial statements dated September
30, 1998 (and to each Borrower's and the Guarantor's knowledge, no such material
adverse change is pending), and neither any Borrower nor the Guarantor has
guaranteed the obligations of, or made any investments in or advances to, any
company, individual or other entity, except as disclosed in such information and
except those incurred subsequently in the ordinary course of their business.
Section 5.7 No Default Under Other Agreements.
Neither any Borrower nor the Management Company is in default under or
with respect to any obligation under any agreement to which such Borrower is a
party in any respect which could result in a material adverse change in the
financial condition or operations of such Borrower or the Management Company.
Section 5.8 Taxes.
Each Borrower and the Management Company has filed or has caused to be
filed all federal, state and local tax or informational returns which are
required by law to be filed, and has paid or caused to be paid all Taxes as
shown on such returns or on any assessment received by it, to the extent that
such Taxes have become due, or which are required by law to be paid, unless and
to the extent only that such Taxes, assessments and governmental charges are
currently contested in good faith and by appropriate proceedings by such
Borrower and adequate reserves therefor have been established as required under
GAAP.
Section 5.9 Place(s) of Business and Location of Collateral.
The address of each Borrower's and the Management Company's chief
executive office is as specified in EXHIBIT C attached hereto and made a part
hereof and the address of each other place of business of each Borrower and the
Management Company, if any, is as disclosed in EXHIBIT C. The Collateral and all
books and records pertaining to the Collateral are and/or will be located at the
addresses indicated on EXHIBIT C. The Borrowers will immediately advise the
Agent in writing of the opening of any new place of business or the closing of
any existing place of business of any Borrower or the Management Company, and of
any change in the location of the places where the Collateral, or any part
thereof, or the books and records concerning the Collateral, or any part
thereof, are kept. EXHIBIT C may be modified from time to time to add the
locations of additional Facilities.
Section 5.10 Title to Properties.
Each Borrower and the Management Company has good and marketable title
to all of its properties, including, without limitation, the Property and
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the Collateral, and the Property and the Collateral are free and clear of
mortgages, pledges, liens, charges and other encumbrances other than the
Permitted Liens.
Section 5.11 Margin Stock.
None of the proceeds of the Loan will be used, directly or indirectly,
by any Borrower for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry, any "margin security" within the meaning of Regulation G (12 CFR Part
207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of
the Board of Governors of the Federal Reserve System (herein called "margin
security" and "margin stock") or for any other purpose which might make the
transactions contemplated herein a "purpose credit" within the meaning of said
Regulation G or Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as
amended, or any rules or regulations promulgated under any of such statutes.
Section 5.12 ERISA.
With respect to any "pension plan," as defined in Section 3(2) of
ERISA, which plan is now or previously has been maintained or contributed to by
any Borrower and/or by any Commonly Controlled Entity: (a) no "accumulated
funding deficiency" as defined in Code 412 or ERISA 302 has occurred, whether or
not that accumulated funding deficiency has been waived; (b) no "reportable
event" as defined in ERISA 4043 has occurred; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither any Borrower nor any
Commonly Controlled Entity has incurred a "complete withdrawal" within the
meaning of ERISA 4203 from any multiemployer plan; (e) neither any Borrower nor
any Commonly Controlled Entity has incurred a "partial withdrawal" within the
meaning of ERISA 4205 with respect to any multiemployer plan; (f) no
multiemployer plan to which any Borrower or any Commonly Controlled Entity has
an obligation to contribute is in "reorganization" within the meaning of ERISA
4241 and no notice has been received by any Borrower or any Commonly Controlled
Entity that such a multiemployer plan will be placed in "reorganization."
Section 5.13 Governmental Consent.
Neither the nature of any Borrower or of its business or properties,
nor any relationship between any Borrower and any other Person, nor any
circumstance in connection with the making of the Loan, or the offer, issue,
sale or delivery of the Notes is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority, on the part of any Borrower, as a condition to the
execution and delivery of this Agreement or any of the other Financing
Documents, the borrowing of the principal amounts of the Loan or the offer,
issue, sale or delivery of the Notes.
Section 5.14 Full Disclosure.
The financial statements referred to in this Article V do not, nor does
this Agreement, nor do any written statements furnished by any Borrower to the
Agent in connection with the making available of the Credit Facility, contain
any untrue statement of fact or knowingly omit a material fact necessary to make
the statements contained therein or herein not materially misleading. No
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Borrower has failed to disclose any fact to the Agent in writing which
materially adversely affects or, will or could prove to materially adversely
affect the properties, business, prospects, profits or condition (financial or
otherwise) of any Borrower or the ability of any Borrowers to perform this
Agreement or any of the other Financing Documents.
Section 5.15 Business Names and Addresses.
Neither any Borrower nor the Management Company has conducted business
under any name other than its current name, and no Borrower has conducted its
business in any jurisdiction other than those listed on EXHIBIT C. The Borrowers
intend to operate the Facilities under the names set forth on EXHIBIT C. The
Borrower shall promptly notify the Agent of any change in the name of any
Facility.
Section 5.16 Licenses and Certifications.
With respect to any License any Borrower, any Synthetic Lessee or the
Management Company possesses or has applied for, (a) no default or event of
default has occurred or is continuing under the terms of any of the Licenses, or
any condition to the issuance, maintenance, renewal and/or continuance of any
License, (b) each Borrower has paid all fees, charges and other expenses to the
extent due and payable with respect to, and has provided all information and
otherwise complied with all material conditions precedent to, the issuance,
maintenance, renewal, and continuance of all Licenses, (c) no Borrower or other
License holder has received any notice from any Governmental Authority relating
to any actual or pending suspension, revocation, restriction, or imposition of
any probationary use, of any License, nor has any License been materially
amended, supplemented, rescinded, terminated, or otherwise modified except as
otherwise disclosed in writing to, and approved by, the Agent, (d) no Borrower
or other License holder has made any previous assignment of any of the Licenses
to any Person, and (e) no financing statement covering any of the Licenses is on
file in any public office except financing statements in favor of the Agent on
behalf of the Lenders. Without implying any limitation to the other
representations and warranties contained in this Agreement, neither any Borrower
nor any Synthetic Lessee required by any applicable Laws of any state, county or
city in which any of the Facilities is located to obtain a Certificate of Need
to operate any Facility for its intended purpose or such Borrower has applied
for and obtained such Certificate(s) of Need. Licenses to operate are required
in most states where the Facilities are located and Certificates of Need are
also required in the certain states.
Section 5.17 Operating Agreements and Management Contracts.
The Borrowers have furnished to the Agent photocopies of all material
Operating Agreements and Management Contracts entered into with respect to the
Facilities, and all amendments, supplements and modifications thereto including,
without limitation, the Management Agreement. Each Borrower further represents
and warrants to the Lenders that (a) all of the material Operating Agreements
and Management Contracts are or will be at the time of execution and delivery
thereof valid and binding on the parties thereto and in full force and effect,
(b) no Default or Event of Default has occurred or is continuing under the terms
of any of the material Operating Agreements and Management Contracts, and no
party thereto has attempted or threatened to terminate any such Management
Contract or Operating Agreement, (c) no Borrower has made any previous
assignment of any Operating Agreements, Management
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Contracts, Management Agreements or Management Lease to any Person, and (d) no
financing statement covering any of the Operating Agreements, Management
Contracts, Management Agreement or Management Leases is on file in any public
office, except financing statements in favor of the Lenders in connection with
the Credit Facility.
Section 5.18 Participation Agreements and Resident Agreements.
(a) The Agent has been furnished, on or before the applicable
Facility Closing, the form of Resident Agreement used with respect to such
Facility and, if requested by the Agent, copies of all current, executed
Resident Agreements.
(b) Each Borrower further covenants to the Lenders that, with
respect to the Participation Agreements, if any, (i) to the best of each
Borrower's knowledge, all Participation Agreements will be at the time of
execution and delivery thereof valid and binding on the parties thereto and in
full force and effect, and (ii) all Participation Agreements will provide for
payment to the applicable Borrower or the Management Company for services
rendered to residents. Each Borrower represents and warrants that as of the date
hereof no Participation Agreements have been entered into for any Facility
except as disclosed in writing to the Agent.
(c) To the extent any Borrower or other owner of an Eligible
Project participates or will participate in Medicare or Medicaid payment and
reimbursement programs, such Borrower or other owner has complied and will
comply with all notice and other requirements under Title XVIII and Title XIX of
the Social Security Act to enable such Borrower to participate in the Medicare
and Medicaid payment and reimbursement programs.
Section 5.19 Compliance with Laws.
Neither the Borrower nor the Management Company is in violation of any
applicable laws of any Governmental Authority pertaining to employment
practices, health standards or controls, environmental and occupational
standards or controls or order of any court or arbitrator, the violation of
which, considered in the aggregate, would result in a material adverse change in
the financial condition or operations of such Borrower. Each Borrower is in
compliance with all material accreditation standards and requirements to which
it is subject. Each Borrower, each Synthetic Lessee or the Management Company
has obtained or will obtain all Licenses necessary to the ownership of its
property or to the conduct of its activities which, if not obtained, could
materially adversely affect the ability of such Borrower to conduct its
activities of operating each Facility as a Senior Living Facility, including,
without limitation if and as required by any Governmental Authorities for the
dispensing, storage, prescription, disposal, and use of drugs, medications and
other "controlled substances" and for the maintenance of cafeteria and other
food and beverage facilities or services or the condition (financial or
otherwise) of such Borrower.
Section 5.20 Presence of Hazardous Materials or Hazardous Materials
Contamination.
No Borrower has placed Hazardous Materials on any real property owned,
controlled or operated by such Borrower or for which such Borrower is
responsible. To the best of each Borrower's knowledge, no Hazardous Materials
are located on any real property owned, controlled or operated by any Borrower
or for which any Borrower is responsible, except for
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reasonable quantities of necessary supplies for use by such Borrower in the
ordinary course of its current line of business and stored, used and disposed of
in accordance with applicable Laws, and no property owned, controlled or
operated by any Borrower has ever been used by any Borrower or, to the best of
such Borrower's knowledge, by any other Person as a manufacturing, storage, or
dump site for Hazardous Materials nor is such property affected by Hazardous
Materials Contamination, except as may be disclosed in any Phase I environmental
assessment delivered to the Agent.
Section 5.21 Compliance in Zoning.
The anticipated use of each Eligible Project complies with applicable
zoning ordinances, regulations and restrictive covenants affecting such Land,
all use requirements of any Governmental Authority having jurisdiction have been
satisfied, and no violation of any law or regulation exists with respect
thereto.
Section 5.22 Plans and Specifications.
To the extent required by applicable law or any effective restrictive
covenant, the Plans and Specifications for each Eligible Project have been
approved by all Governmental Authorities having or claiming jurisdiction and by
any beneficiary of any such restrictive covenant.
Section 5.23 Building Permits; Other Permits.
All building, construction and other permits then necessary or required
in connection with the development of the Land and the construction of the
Improvements have been or, will be on a timely basis, unless otherwise agreed to
by the Agent, validly issued and all fees and bonds required in connection
therewith have been paid or posted, as the circumstances may require.
Section 5.24 Utilities.
All utility services necessary for the development of all the Land and
the construction of the Improvements for each Eligible Project and the operation
thereof for their intended purpose are or will be available at the boundaries of
all the Land, including, without limitation, telephone service, water supply,
storm and sanitary sewer facilities, natural gas (if available) and electric
facilities.
Section 5.25 Access; Roads.
All roads and other accesses necessary for the development of all the
Land and the construction of all the Improvements for all Eligible Projects and
full utilization thereof for their intended purposes have either been completed
or the necessary rights of way therefor have either been or will be acquired by
the appropriate Governmental Authorities or have been or will be dedicated to
public use and accepted by such Governmental Authorities and all necessary steps
have been taken by the Borrowers or such Governmental Authorities to assure the
complete construction and installation thereof by a date sufficient to ensure
the timely completion of the Improvements and in no event later than the end of
the applicable Maximum Construction Period.
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Section 5.26 Other Liens.
Except as otherwise provided in the Financing Documents, no Borrower or
other owner or operator of the Facility has made any contract or arrangement of
any kind the performance of which by the other party thereto would give rise to
a lien on any Eligible Project or Optional Collateral.
Section 5.27 Defaults.
There is no default on the part of any Borrower under the Financing
Documents and no event has occurred and is continuing which, with notice or the
passage of time, or both, would constitute a default under the Notes or any of
the other Financing Documents.
Section 5.28 Nature of Credit Facility; Usury; Disclosures.
Each Borrower is a business or commercial organization, and the Credit
Facility is being made solely for the purpose of carrying on or acquiring a
business or commercial enterprise. The rate or rates of interest charged on the
Notes do not, and will not, violate any applicable usury Law or interest rate
limitation. The Credit Facility is not subject to the federal Consumer Credit
Protection Act (15 U.S.C. 1601 et. seq.) nor any other federal or state
disclosure or consumer protection laws. The Credit Facility is being transacted
solely for business or commercial purposes and not for personal, family or
household purposes.
Section 5.29 Survival; Updates of Representations and Warranties.
Each Requisition shall constitute an affirmation that the foregoing
representations and warranties of each Borrower and those set forth in the other
Financing Documents are true and correct as of the date thereof and, unless the
Agent is notified to the contrary in writing prior to the disbursement of an
advance, will be so as of the date thereof. All representations and warranties
contained in or made under or in connection with this Agreement and the other
Financing Documents shall survive the date of this Agreement and the Loan made
hereunder. The Lenders acknowledge and agree that any and all representations
and warranties contained in, or made under, or in connection with, this
Agreement may be amended, changed or otherwise modified by the Borrowers at any
time and from time to time after the date of this Agreement so as to accurately
reflect the matters represented and warranted therein; provided, that such
amendments, changes and/or modifications are disclosed in writing to the Agent.
The Lenders shall have no obligation to waive any Event of Default due to any
present or future inaccuracy of such representation or warranty or to agree to
any amendment, change or modification of any such representation or warranty.
Section 5.30 Accounts.
With respect to the Accounts (a) they are genuine, and in all respects
what they purport to be, and are not evidenced by a judgment, an instrument, or
chattel paper (unless such judgment has been assigned and such instrument or
chattel paper has been endorsed and delivered to the Agent); (b) they represent
undisputed, bona fide transactions completed in accordance with the terms and
provisions contained in the invoices relating thereto; (c) the services rendered
which resulted in the creation of the Accounts have been delivered or rendered
to and accepted by the Account Debtor; (d) the amounts shown on each Borrower's,
Synthetic Lessee's or the
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Management Company books and records, with respect thereto are actually and
absolutely owing to each Borrower, Synthetic Lessee, or the Management Company
and are not contingent for any reason; (e) there are no set-offs, counterclaims
or disputes known by any Borrower or asserted with respect thereto, and no
Borrower has made any agreement with any Account Debtor thereof for any
deduction or discount of the sum payable thereunder except regular discounts
allowed by such Borrower in the ordinary course of its business for prompt
payment; (f) there are no facts, events or occurrences known to any Borrower
which in any way impair the validity or enforcement thereof or tend to reduce
the amount payable thereunder; (g) all Account Debtors thereof, to the best of
each Borrower's knowledge, have the capacity to contract; (h) the services
furnished giving rise thereto are not subject to any Liens other than Permitted
Liens; and (i) no Borrower has any knowledge of any fact or circumstance which
would impair the validity or collectibility thereof.
Section 5.31 Single Purpose Entity.
ARCC owns no assets other than the Assigned Notes and has no business
operations other than its loans to Synthetic Lessors in connection with the
Synthetic Lease Transactions. Each Additional Borrower is also a single purpose
entity.
ARTICLE VI
CONDITIONS OF LENDING
The making of any advance under the Loan is subject to the
conditions set forth under this Agreement and the following conditions
precedent:
Section 6.1 No Default.
No Default and no Event of Default Event of Default has occurred and is
existing and all representations and warranties set forth herein or in the other
Financing Documents are true and correct.
Section 6.2 Opinion of Counsel for the Borrower.
At the Facility Closing and when a lien on an Eligible Project is
subsequently granted by the Borrowers, the Lenders shall receive a written
opinion of counsel for the Borrowers and the Guarantor satisfactory in all
respects to the Agent.
Section 6.3 Approval of Counsel for the Lenders.
All legal matters incident to the Loan and all documents necessary in
the opinion of the Agent to make the Loan or the addition of either an Eligible
Project to the Borrowing Base or add such Deeds of Trust and related Collateral
shall be satisfactory in all material respects to counsel for the Lenders.
Section 6.4 Supporting Documents.
The Agent shall receive from the Borrowers at the Credit Facility
Closing and in connection with any subsequent Facility Closing: (a) a
certificate of a duly authorized officer of each applicable Borrower, in a form
acceptable to the Agent in all respects, dated as of the date
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hereof and certifying (i) that attached thereto is a true, complete and correct
copy of resolutions duly adopted by board of directors of such Borrower
authorizing the execution and delivery of this Agreement, the Note and the other
Financing Documents, the borrowing thereunder, and the performance of the
Obligations, and (ii) as to the incumbency and specimen signature of the
authorized officer of such Borrower executing this Agreement, the Note and the
other Financing Documents; (b) such other documents as the Agent may reasonably
require such Borrower to execute, in form and substance acceptable to the Agent;
and (c) such additional information, instruments, opinions, documents,
certificates and reports as the Agent may reasonably deem necessary.
Section 6.5 Financing Documents.
All of the Financing Documents required by the Agent whether at the
Credit Facility Closing or any subsequent Facility Closing shall be executed,
delivered and, if deemed necessary by the Agent, recorded, all at the sole
expense of the Borrowers.
Section 6.6 Insurance.
The Borrower shall have satisfied the Agent that any and all insurance
required by this Agreement is in effect as of the date of this Agreement or as
of the date of the addition of a Deed of Trust and related Collateral, and that,
to the extent required by the Financing Documents, the Agent on behalf of the
Lenders have been named as an insured lienholder.
Section 6.7 Security Documents.
In order to perfect the lien and security interest created by this
Agreement, the Borrowers shall have executed and delivered to the Agent all
Security Documents (in form and substance acceptable to the Agent in its sole
discretion) deemed necessary by the Agent, in a sufficient number of
counterparts for recordation, and, at the Borrowers' sole expense, shall record
all such financing statements and Security Documents, or cause them to be
recorded, in all public offices deemed necessary by the Agent.
Section 6.8 Additional Borrower Joinder Supplement.
In order to add an Additional Borrower under the Credit Facility,
confirm that such additional Borrower is jointly and severally liable with
existing Borrowers for all the Obligations, and perfect the lien and security
interest of the Lenders in the Collateral related to the construction and
operation of any Facility encumbered by a Deed of Trust provided by an
Additional Borrower, such Additional Borrower shall execute and deliver to the
Agent an Additional Borrower Joinder Supplement joining in the Notes, this
Agreement, such assignments of Collateral and such other Security Documents as
the Agent may require and in sufficient number of counterparts for recordation,
and, at the Borrowers' sole expense, shall make available for recording all such
financing statements and other Security Documents, or cause them to be recorded,
in all public offices deemed necessary to the Agent.
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ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
Until payment in full and the performance of all of the
Obligations hereunder, each Borrower agrees that:
Section 7.1 Financial Statements.
The Borrowers will, with respect to each Borrower, furnish to each of
the Lenders:
(a) as soon as available, but in no event more than one hundred
twenty (120) days after the close of each of the Borrowers' fiscal years, (i) a
copy of the Borrowers' financial statements for the year in question, in form
and detail satisfactory to the Agent, prepared in accordance with GAAP, and
prepared by the Borrower in a manner consistent with the Guarantor, which
financial statements shall include a balance sheet, as of the end of such fiscal
year, and a certificate of compliance signed by each Borrower's chief financial
officer regarding the covenants contained in the Financing Documents and whether
there has been an event which constitutes an Event of Default under the
Financing Documents, or which would constitute such an Event of Default with the
giving of notice or the lapse of time or both, and, if so, stating the facts
with respect thereto, and (ii) the related statements of operations and retained
earnings and cash statements for such fiscal year in a format acceptable to the
Agent. The foregoing notwithstanding, the Agent reserves the right to request
that the Borrowers provide audited annual financial statements prepared by an
independent certified public accountant satisfactory to the Agent;
(b) as soon as available, but in no event more than forty-five
(45) days after the close of each of such Borrower's fiscal quarters, internally
prepared, consolidated and consolidating financial statements of such Borrower,
as of the close of such period and an income and expense statement for such
period, and including a certificate of compliance with the Financing Documents,
certified as to accuracy by the chief financial officer of such Borrower;
provided, however, that this requirement may be met by the receipt of the
consolidating quarterly statements of the Guarantor.
(c) beginning with the first Operating Month, as soon as
available, but in no event more than thirty (30) days after the last day of each
such calendar month, operating statements for each Eligible Project for such
month, including an income and expense statement for such period and certified
rent roll with respect to each Eligible Project then operating for such period;
and
(d) with reasonable promptness, such additional information,
reports or statements as the Agent may from time to time reasonably request.
All required financial statements required under (a) hereof shall be
accompanied by a certificate of compliance with the applicable financial
covenants signed by the chief financial
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officer of such Borrower or other officer acceptable to the Agent and shall
include the Borrower's computation of such covenants.
(e) In addition, the Borrowers will provide to the Agent, within
thirty (30) days of the end of each fiscal quarter of the Borrowers and the
Guarantor, a certificate of compliance with financial covenants applicable to
the Borrowers and the Guarantor in the form attached hereto as Exhibit D, duly
certified by an authorized officer of ARCC on behalf of the Borrowers and an
authorized officer of the Guarantor.
Section 7.2 Financial Covenants.
7.2.1 Minimum Pool A Projects.
At least eighty-five percent (85%) of the Principal Sum outstanding is
supported by availability in the Borrowing Base from Pool A Projects.
7.2.2 Pool A Project Covenants.
The following provisions shall determine whether a Facility qualifies
as a Pool A Project under applicable circumstances. If any Eligible Project does
not qualify as a Pool A Project, it shall be classified as a Pool B Project or a
Pool C Project based upon the length of time that it has failed to satisfy the
applicable criteria for a Pool A Project.
(a) Each Development Project, including any Expansion Project,
shall be a Pool A Project; provided that such Facility shall cease to be a Pool
A Project if it does not become a Completed Project within the applicable
Maximum Construction Period or if it fails to timely satisfy the requirements of
subsection (d) of this Section. The construction period shall be measured from
the date of commencement of construction as reported by the applicable Borrower
and verified by the Agent.
(b) Each Stabilized Project shall maintain an 85% Minimum
Occupancy Requirement, and a Debt Service Coverage Ratio equal to not less than
1.25 to 1.0 as of the end of each fiscal quarter beginning with the first fiscal
quarter after the first Operating Month after the Eligible Project becomes a
Stabilized Project measured on a cumulative rolling basis, as set forth below:
--------------------------------------------------------------------------------------------
Stabilized 1Q 2Q 3Q 4Q Thereafter
Projects
---------------------------------------------------------------------------------------------
Debt Service
Coverage
Ratio 1.25x 1.25x 1.25x 1.25x 1.25x
---------------------------------------------------------------------------------------------
Rolling
Historical
Operations 3 month test 6 month test 9 month test 12 month test 12 month test
---------------------------------------------------------------------------------------------
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(c) Each Acquisition Project, in order to qualify as a Pool A
Project, shall maintain a Debt Service Coverage Ratio equal to not less than .75
to 1.0 for three (3) full months prior to its acquisition and equal to the ratio
set forth below as of the end of each full fiscal quarter ending after its
acquisition, as set forth below:
-----------------------------------------------------------------------------------------------
Acquisition 1Q 2Q 3Q 4Q 5Q Thereafter
Projects
-----------------------------------------------------------------------------------------------
Debt Service
Coverage Ratio 1.0x 1.0x 1.25x 1.25x 1.25x 1.25x
-----------------------------------------------------------------------------------------------
Rolling 3 months 3 months 3 months 6 months 9 months 12 months
Historical
Operations
-----------------------------------------------------------------------------------------------
(d) Each Development Project, in order to qualify as a Pool A
Project, shall satisfy the following Minimum Occupancy Requirement. A minimum
Resident Occupancy of at least 24 residents by the end of its first six
Operating Months plus an average of a net additional four (4) residents per
month thereafter (measured quarterly) until 85% Resident Occupancy is first
reached; provided that 85% Resident Occupancy is achieved within 24 Operating
Months for Eligible Projects of 100 units or more. For each quarter beginning
with the quarter after 85% Resident Occupancy Issue the Minimum Occupancy
Requirement is achieved, each Development Project in order to qualify as a Pool
A Project shall also achieve a Debt Service Coverage of not less than 1.25 to
1.0 measured for three (3) consecutive months of such quarter and for such
quarter shall also maintain such 85% Resident Occupancy (and, upon satisfying
such criteria, shall be classified as a Stabilized Project.)
(e) Each Acquisition Project, in order to qualify as a Pool A
Project, shall satisfy the Minimum Occupancy Requirement as of the end of each
quarter after it enters the Borrowing Base, measured on a rolling daily average,
as set forth below:
---------------------------------------------------------------------------------------
Acquisition 1Q 2Q 3Q 4Q Thereafter
Projects
---------------------------------------------------------------------------------------
Resident No No 75% 80% 85%
Occupancy Minimum Minimum
--------------------------------------------------------------------------------------
Rolling 3 months 3 months 3 months 3 months 3 months
Historical
Occupancy
---------------------------------------------------------------------------------------
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7.2.3 Debt Service Coverage.
All Stabilized Projects and all Acquisition Projects in the Borrowing
Base shall maintain an aggregate Debt Service Coverage Ratio of not less than
1.25 to 1.0 measured quarterly and each Stabilized Project or Acquisition
Project shall maintain a Debt Service Coverage Ratio of 1.0 to 1.0. The
foregoing notwithstanding, a breach of this covenant may be cured by the
Borrowers' eliminating any such Eligible Project from the calculation of the
Borrowing Base which causes a breach of the Debt Service Charge Ratio provided
the requirement for the minimum percentage of Pool A Projects is satisfied. The
foregoing notwithstanding, no Acquisition Project shall be included in the
measurement under this Section 0 until it has been held for three (3) fiscal
quarters or has otherwise met the 1.25 to 1.0 Debt Service Coverage Ratio for
one (1) fiscal quarter.
7.2.4 License.
Each Development Project shall have received its License to operate as
the type of Facility originally designated within sixty (60) days of issuance of
its certificate of occupancy.
7.2.5 Percentage of Stabilized Projects.
By June 30, 1999, at least 10%, by September 30, 1999 at least 17.5%
and by March 31, 2000, at least 30% of the Eligible Projects in the Borrowing
Base will be Pool A Projects which also are Stabilized Projects.
Section 7.3 Taxes and Claims.
Each Borrower will pay and discharge and cause the Management Company
to pay and discharge all taxes, assessments and governmental charges or levies
imposed upon it or any of its income or properties prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
lien or charge upon any of its properties; provided, however, no Borrower or the
Management Company shall be required to pay any such tax, assessment, charge,
levy or claim, the payment of which is being contested in good faith and by
proper proceedings.
Section 7.4 Legal Existence.
Each Borrower will maintain its legal existence in good standing in the
state of its formation and in each jurisdiction where it is required to register
or qualify to do business.
Section 7.5 Conduct of Business and Compliance with Laws.
7.5.1 Maintenance of Agreements
Each Borrower will do or cause to be done and will cause each Synthetic
Lessee and the Management Company to do or cause to be done all things necessary
to obtain, enter into, preserve and to keep in full force and effect its
material rights and its trade names, patents, trademarks and Licenses,
Participation Agreements, and Operating Agreements and Management Contracts
which are necessary for the operation of each Facility as contemplated by any
such party.
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7.5.2 Maintenance of Line of Business
Each Borrower will engage in and continue to engage substantially only
in the business of owning and operating Senior Living Facilities and related
services in compliance with all applicable laws of the state in which the
applicable Facilities are located or any other Governmental Authority having
jurisdiction over any such Facility or in the business of making acquisition and
construction loans to Synthetic Lessors.
7.5.3 Compliance with Laws Governing Participation
Agreements.
Each Borrower will comply with and will cause the Management Company to
comply with all applicable Laws, including, without limitation, regulations
issued under the Omnibus Budget Reconciliation Act of 1987 (OBRA'87) (▇▇▇.▇.▇▇.
100-203), as amended, and observe the valid requirements of Governmental
Authorities, and perform the terms of all Participation Agreements to which it
is a party, the noncompliance with or the nonobservance of which might
materially interfere with the performance of its Obligations or the proper or
prudent conduct of its business or the applicable Property.
7.5.4 Other Operating Covenants.
In addition, each Borrower covenants and agrees that each Borrower will
or will cause the Synthetic Lessee or Management Company to:
(a) obtain and maintain in full force and effect all Licenses
necessary to the acquisition and/or ownership and/or operation of each Facility
including, without limitation, Licenses and other approvals related to the
storage, dispensation, use, prescription and disposal of drugs, medications and
other "controlled substances" and, to the extent offered, the maintenance of
cafeteria and other food and beverage facilities or services;
(b) administer, maintain and operate (or will cause to be
administered, maintained and operated) each Facility as a revenue-producing
Senior Living Facility;
(c) to the extent any Borrower, Synthetic Lessee or Management
Company participates in any such programs, maintain and operate each Facility to
meet the standards and requirements and to provide healthcare of such quality
and in such manner as would enable such Person to participate in, and provide
services in connection with, recognized medical and healthcare insurance
programs;
(d) obtain, maintain and comply with all conditions for the
continuance of all Licenses, including without limitation, Licenses which may at
any time be required by the state in which the applicable Facility is located or
other appropriate governmental entity, necessary or desirable for the operation
of each Facility as its applicable Senior Living Facility;
(e) to the extent any Borrower, Synthetic Lessee or Management
Company presently participates or in the future will participate in such
programs, obtain, maintain and comply with all conditions for the continuance of
certification from each applicable
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Governmental Authority that such Person meets all conditions for participation
in the Medicare and Medicaid programs; and
(f) construct the Improvements entirely on the Land without
encroaching upon any easement or right-of-way or upon the land of others in
accordance with all applicable (whether present or future) laws, ordinances,
rules, regulations, requirements and orders of any Governmental Authority having
or claiming jurisdiction, including all applicable building restriction lines
and set-backs, all use or other restrictions and the provisions of any prior
agreements, declarations, covenants and all applicable zoning and subdivision
ordinances and regulations unless a variance shall have been obtained.
Section 7.6 Use of Proceeds.
Each Borrower will use the proceeds of the Loan for the purpose or
purposes set forth in Section 2.1 and, without the prior written consent of the
Agent for no other purpose or purposes.
Section 7.7 Insurance.
Each Borrower will provide or cause to be provided and will cause any
Synthetic Lessee, the Management Company or any other owner of any Facility to
provide or cause to be provided to the Agent and maintain in full force and
effect at all times during the term of the Loan, such policies of insurance as
may be required by the terms of the Financing Documents from a company or
companies, and in form and amounts satisfactory to the Agent including, by way
of example and not by way of limitation, at least the following:
7.7.1 Builder's Risk Insurance; Hazard Insurance
During any period of construction on an Eligible Project, builder's
risk, fire and extended coverage insurance, including vandalism and malicious
mischief endorsements covering the Improvements in the form of an "all risk",
100% non-reporting policy and containing such other extended coverage as may be
required by the agent in an amount to be designated by the Agent as to the
insurable value of the Property, which policy, for any Eligible Project on which
construction is complete, shall be converted to a standard hazard insurance
policy with extended coverage endorsement and insurance for boiler or pressure
vessel explosion (if there are boilers or pressure vessels located on the
property). The policy shall indicate the Agent's interest as first mortgagee,
shall prohibit cancellation or reduction in coverage upon less than thirty (30)
days prior written notice to the Agent and shall be in form and issued by
companies acceptable to the Agent. In no event shall such insurance contain a
co-insurance provision;
7.7.2 Liability Insurance
Comprehensive public liability and property damage insurance in limits
of not less than $5,000,000 aggregate for each Eligible Project shall be in form
and issued by companies acceptable to the Agent, shall name the Agent as a
certificate holder and shall prohibit cancellation or reduction in coverage upon
less than thirty (30) days prior written notice to the Agent;
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7.7.3 Worker's Compensation Insurance
Workers' compensation insurance in accordance with the requirements of
applicable law or regulation naming the Agent on behalf of the Lenders as loss
payee thereunder;
7.7.4 Business Interruption Insurance
Business interruption insurance naming the Lenders as additional
insureds with respect to each Facility once a certificate of occupancy has been
issued for such Facility in an amount equal to at least twelve (12) months' debt
service on the applicable Deed of Trust Lien Amounts and in form and issued by a
company acceptable to the Agent in all respects;
7.7.5 Professional Liability Insurance
To the extent that healthcare professionals are employed at an Eligible
Project by the Management Company or the Borrowers, medical liability,
malpractice and other healthcare professional liability insurance protecting the
Borrowers and the Management Company, as the case may be, against claims arising
from the professional services performed by the Borrowers or the Management
Company, as the case may be, with limits of (a) not less than One Million
Dollars ($1,000,000.00) with respect to injury or death for each person or
occurrence, and (b) an umbrella policy insuring against such liability in an
aggregate amount of not less than Ten Million Dollars ($10,000,000.00). In
addition, the Borrowers or the Management Company, as the case may be, shall
ensure that all healthcare providers with whom the Borrowers or the Management
Company, as the case may be, contract to provide services at any Facility are
insured against claims arising from such services with limits as set forth
above.
7.7.6 Flood Insurance.
If, on the date of inclusion of the Borrowing Base or at any time
thereafter, any Eligible Project is in an area that has been identified by the
Federal Emergency Management Agency as having special flood and mud slide
hazards and in which the sale of flood insurance has been made available under
the Flood Disaster Protection Act of 1973, or if it is otherwise in a flood
hazard area, the Borrowers shall procure a flood insurance policy for such
property in form and amount satisfactory to the Agent. For those Facilities that
are not in an area having special flood and mud slide hazards, the Borrowers
shall deliver to the Agent, or the Agent shall obtain at the expense of the
Borrowers, prior to the inclusion of a Facility as an Eligible Project, evidence
satisfactory to the Agent that flood insurance is not required by the terms
hereof.
7.7.7 General Insurance Provisions
The Borrowers will file with the Agent, upon its request, a detailed
list of the insurance then in effect and stating the names of the insurance
companies, the amounts and rates of the insurance, dates of the expiration
thereof and the properties and risks covered thereby. Each policy of insurance
shall (a) be issued by one or more recognized, financially sound and responsible
insurance companies approved by the Agent and which are qualified or authorized
by the laws of the state in which the applicable Facility is located to assume
the risk covered by such policy, (b) with respect to the insurance described
under the preceding subsections 7.7.1
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and 7.7.5, have attached thereto standard noncontributing, non-reporting
mortgagee clauses in favor of and entitling the Lenders without contribution to
collect any and all proceeds payable under such insurance, (c) provide that such
policy shall not be canceled or modified without at least thirty (30) days prior
written notice to the Agent, and (c) provide that any loss otherwise payable
thereunder shall be payable notwithstanding any act or negligence of any
Borrower which might, absent such agreement, result in a forfeiture of all or a
part of such insurance payment. Unless an escrow account has been established
for insurance premiums pursuant to the provisions of a Deed of Trust, the
Borrowers shall promptly pay all premiums when due on such insurance and, on or
prior to the expiration date of each such policy, the Borrowers shall deliver to
the Agent a renewal policy or policies marked "premium paid" and ▇▇▇▇▇ evidence
of insurance or other evidence of payment satisfactory to the Agent. The
Borrowers shall immediately give the Agent notice of any cancellation of, or
change in, any insurance policy. The Lenders shall not individually or
collectively, because of accepting, rejecting, approving or obtaining insurance,
incur any liability for (i) the existence, nonexistence, form or legal
sufficiency thereof, (ii) the solvency of any insurer, or (iii) the payment of
losses.
Section 7.8 Maintenance of Properties.
Each Borrower will keep and will cause the Management Company to keep
its properties, whether owned in fee or otherwise, or leased, including, without
limitation, all of the Property, in good operating condition; make all proper
repairs, renewals, replacements, additions and improvements thereto needed to
maintain such properties in good operating condition; comply with the provisions
of all leases to which it is a party or under which it occupies property so as
to prevent any loss or forfeiture thereof or thereunder; and comply with all
laws, rules, regulations and orders applicable to its properties or business or
any part thereof.
Section 7.9 Maintenance of the Collateral.
No Borrower will permit anything to be done to the Collateral which may
impair the value thereof. Any of the Lenders or an agent designated by such
Lender shall be permitted upon prior notice to the Borrowers to enter the
premises of any Borrower and examine, audit and inspect the Collateral at any
reasonable time and from time to time without notice. The Lenders shall not have
any duty to, and each Borrower hereby releases the Lenders from, all claims of
loss or damage caused by the delay or failure to collect or enforce any of the
Accounts or Receivables or to preserve any rights against any other party with
an interest in the Collateral.
Section 7.10 Other Liens, Security Interests, etc.
Each Borrower will keep the Collateral and the Property free from all
liens, security interests and claims of every kind and nature, other than
Permitted Liens.
Section 7.11 Defense of Title and Further Assurances.
Each Borrower will, at its expense, defend the title to the Collateral
(or any part thereof), and promptly upon request execute, acknowledge and
deliver any financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate or other document the
Agent may reasonably require in order to perfect, preserve, maintain, protect,
continue and/or extend any lien or security interest granted to the Lenders
under this Agreement or any of the Security Documents and its priority. Each
Borrower shall pay to the Agent, on
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demand all taxes, costs and expenses incurred by any of the Lenders, in
connection with the preparation, execution, recording and filing of any such
document or instrument.
Section 7.12 Subsequent Opinion of Counsel as to Recording
Requirements.
Each Borrower will provide to the Agent a subsequent opinion of counsel
as to the filing, recording and other requirements with which such Borrower has
complied to maintain the liens and security interests in favor of the Lenders in
the Collateral in the event that any Borrower shall transfer its principal place
of business or the office where it keeps its records pertaining to the Accounts
and Receivables.
Section 7.13 Books and Records.
Each Borrower will and will cause the Management Company to:
(a) keep and maintain accurate books and records;
(b) make entries on such books and records in form reasonably
satisfactory to the Agent disclosing the Lenders' assignment of, and security
interest in and lien on, the Collateral and all collections received by each
Borrower or the Management Company, as applicable, on its Accounts;
(c) furnish to the Agent promptly upon request such information,
reports, contracts, invoices, lists of purchases of Inventory (showing names,
addresses and amount owing) and other data concerning Account Debtors and
Accounts and Inventory and all contracts and collection(s) relating thereto as
the Agent may from time to time specify; and
(d) unless the Agent shall otherwise consent in writing, keep and
maintain all such books and records mentioned in (a) above only at the addresses
listed in EXHIBIT C, and (a) permit any person designated by any of the Lenders
to enter the premises of any Borrower or the Management Company upon prior
notice to the Borrowers and the Management Company and examine, audit and
inspect the books and records at any reasonable time and from time to time.
Section 7.14 Collections.
Until such time as the Agent shall notify the Borrower of the
revocation of such privilege following an Event of Default, each Borrower will
(a) at its own expense exercise the privilege for the account of and in trust
for the Lenders of collecting its Accounts and receiving in respect thereto all
items of payment and shall otherwise completely service all of the Accounts,
including (i) the billing, posting and maintaining of complete records
applicable thereto, and (ii) the taking of such action with respect to such
Accounts as the Agent may reasonably request or in the absence of such request,
as the Borrower may deem advisable; and (b) in its discretion, grant, in the
ordinary course of business, to any Account Debtor, any rebate, refund or
adjustment to which the Account Debtor may be lawfully entitled. The Agent may,
at its option but solely in accordance with applicable law, at any time or from
time to time after the occurrence of an Event of Default hereunder, revoke the
collection privilege given to each Borrower herein by either giving notice of
its assignment of, and lien on the Collateral, subject to the provisions of
Section 7.1(e) hereof, to the Account Debtors or giving notice of such
revocation to the Borrowers.
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Section 7.15 Notice to Account Debtors and Escrow Account.
In the event that (a) a Default or an Event of Default exists, or (b)
demand has been made for any or all of the Obligations, each Borrower will
promptly upon the request of the Agent, in such form and at such times as
reasonably specified by the Agent, give notice of the Lenders' lien on the
Accounts to the Account Debtors, requiring those Account Debtors that are
permitted by applicable law to make payments thereon directly to the Agent.
Section 7.16 Business Names.
Each Borrower will immediately notify the Agent of any change in the
name or names under which it or any other Person executing a Security Agreement
conducts its business or any change in its principal place of business or state
of incorporation and will execute for filing at the Borrowers' expense any
financing statements or amendments to existing financing statements as the Agent
shall require.
Section 7.17 ERISA.
With respect to any pension plan which any Borrower and/or any Commonly
Controlled Entity maintains or contributes to, either now or in the future: (a)
such bonding as is required under ERISA 412 will be maintained; (b) as soon as
practicable and in any event within 15 days after such Borrower or any Commonly
Controlled Entity knows or has reason to know that a "reportable event" has
occurred or is likely to occur, such Borrower will deliver to the Agent a
certificate signed by each chief financial officer setting forth the details of
such "reportable event"; (c) neither such Borrower nor any Commonly Controlled
Entity will: (i) engage in or permit any "prohibited transaction" (as defined in
ERISA 406 or Code 4975) to occur; (ii) cause any "accumulated funding
deficiency" as defined in ERISA 302 and/or Code 412; (iii) terminate any pension
plan in a manner which could result in the imposition of a lien on the property
of such Borrower pursuant to ERISA 4068; (iv) terminate or consent to the
termination of any multiemployer plan; (v) incur a complete or partial
withdrawal with respect to any multiemployer plan within the meaning of ERISA
4203 and 4205; and (d) within 15 days after notice is received by such Borrower
or any Commonly Controlled Entity that any multiemployer plan has been or will
be placed in "reorganization" within the meaning of ERISA 4241, such Borrower
will notify the Agent to that effect. Upon the Agent's request, the Borrowers
will deliver to the Agent a copy of the most recent actuarial report, financial
statements and annual report completed with respect to any "defined benefit
plan," as defined in ERISA 3(35).
Section 7.18 Management.
(a) Prior to the Credit Facility Closing, the Borrowers will
provide the Agent with a proposed form of Management Agreement to be entered
into by each Borrower with the Management Company. The terms and provisions of
the Management Agreement shall be fully approved by the Lender prior to the
Credit Facility Closing. The interest of each Borrower in the Management
Agreement shall be assigned to the Agent on behalf of the Lenders as security
for the Loan. In the case of a Synthetic Lease Transaction, such assignment may
be made through and in connection with an assignment to the Agent of the Note
Collateral.
(b) Pursuant to the terms of a management fee subordination
agreement by and among a Borrower, the Management Company and the Agent executed
in connection with
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each Facility Closing except in connection with a Synthetic Lease Transaction,
the payment of management fees to the Management Company pursuant to the
Management Agreement (the "Management Fees") will be subordinate to payment of
the Obligations, provided, however, that payments of Management Fees may be made
as contracted for (but not prior to accrual) until the occurrence of an Event of
Default.
(c) Each Management Agreement, except those entered into in
connection with a Synthetic Lease Transaction, shall provide that the applicable
Borrower or subsequent owner may terminate such agreement, at the discretion of
such Borrower, upon thirty (30) days' prior written notice to the Management
Company. Each Management Agreement entered into in connection with a Synthetic
Lease Transaction shall provide that the holder of an Assigned Note who is in
possession of the Facility following the occurrence of an event of default under
the Assigned Note or a new owner as the result of a foreclosure proceeding may
terminate such agreement upon thirty (30) days' prior written notice to the
Management Company. The Management Company shall acknowledge and consent in
writing to the assignment by each Borrower of its rights under the Management
Agreement to the Agent. Pursuant to the Financing Documents, each Borrower and
the Management Company shall agree to enter into a consulting agreement
acceptable to the Agent with an independent company selected by the Agent if and
as and when directed by the Agent if an Event of Default under the Credit
Facility has occurred and is continuing; and it shall constitute an Event of
Default under the Financing Documents if any Borrower fails to do so. Any
Management Agreement and any other applicable synthetic lease documents in
connection with a Synthetic Lease Transaction shall provide that the Management
Company cannot be changed without the prior written consent of the Agent. Each
Management Agreement between the Management Company and a Synthetic Lessee shall
provide that an event of default under a financing for which the Management
Company has direct or contingent liability in excess of a committed principal
sum of $25,000,000 shall constitute a default under such Management Agreement.
The Financing Documents shall provide that upon the occurrence of an Event of
Default under this Agreement all income of all Facilities shall be paid at the
option of the Agent by the Management Company to a lockbox for the payment of
scheduled payments under the Assigned Notes prior to the payment of operating
expenses of such Facilities. In connection with any Deed of Trust in the
Borrowing Base, each Borrower shall agree to enter into a Management Agreement
with an independent manager, selected by the Agent, as and when directed by the
Agent if the Management Agreement has been terminated pursuant to the terms of
this paragraph or if an Event of Default has occurred and is continuing; and it
shall constitute an Event of Default under the Loan Documents if any Borrower
fails to do so. The Financing Documents shall provide that termination of the
Management Agreement without the prior written consent of the Agent shall
constitute an Event of Default under the Financing Documents. No consent of the
Agent shall be required for the termination of a Management Agreement if it is
required to meet an obligation for a License and (a) the Management Company
remains a Borrower, ARC or a Wholly Owned Subsidiary of ARC, and (b) any
additional assignments of such Management Agreements required by the Agent are
executed and delivered to the Agent. The foregoing notwithstanding, in
connection with a Synthetic Lease Transaction, the Management Company must be
ARC unless otherwise consented to in writing by the Agent.
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Section 7.19 Surveys.
Not less than twenty (20) business days prior to the inclusion of any
Eligible Project in the Borrowing Base, the Borrowers shall furnish to the
Agent, for approval by the Agent, six (6) copies of a survey of such Facility
not more than ninety (90) days old (or more current if required for the title
insurance company to delete the survey exception) and any recent recorded
subdivision plats relating thereto. The foregoing notwithstanding, for a
Development Project for which construction of building foundations has been
completed, an ALTA foundation survey shall be required. The surveys shall be
certified to the title company and to the Agent in the form provided by the
Agent and shall comply with the survey requirements provided by the Agent. At
the completion of construction of any Eligible Project, the Borrowers shall
provide the Agent with an additional "as-built" survey.
Section 7.20 Inspections; Cooperation; Payment of Inspecting
Engineer.
Each Borrower or other owner of any Facility will permit the Lenders
and their duly authorized representatives (including, without limitation, the
Inspecting Engineer) to enter upon any of the Land, to inspect the Improvements
and any and all materials to be used in connection with the development of any
of the Land and/or the construction of the Improvements, to examine all detailed
plans and shop drawings and similar materials as well as all records and books
of account maintained by or on behalf of such Borrower or other owner of a
Facility relating thereto and to discuss the affairs, finances and accounts
pertaining to any Facility and any of the Improvements with representatives of
such Borrower or other owner of such Facility. Each Borrower and any other owner
of a Facility shall at all times cooperate and cause the General Contractor and
each and every one of its subcontractors and materialmen to cooperate with the
Lenders and their duly authorized representatives (including, without
limitation, the Inspecting Engineer) in connection with or in aid of the
performance of the Agent's or Lenders' functions under this Agreement. The
reasonable fees of any Inspecting Engineer engaged or employed by the Agent in
connection with or in aid of the performance of the Agent's or the Lenders'
functions under this Agreement shall be paid by the Borrowers or such other
owner of a Facility.
Section 7.21 Vouchers and Receipts.
Each Borrower or other owner of a Facility will furnish to the Agent,
promptly on demand, any contracts, bills of sale, statements, receipted vouchers
or agreements pursuant to which the Borrowers, or any of them, have any claim of
title to any materials, fixtures or other articles delivered or to be delivered
to the Land or incorporated or to be incorporated into any of the Improvements.
The Borrowers or other owner of a Facility shall furnish to the Agent, promptly
on demand, a verified written statement, in such form and detail as the Agent
may require, showing all amounts paid for labor and materials and all items of
labor and materials furnished or to be furnished for which payment has not been
made and the amounts to be paid therefor.
Section 7.22 Payments for Labor and Materials.
Each Borrower or other owner of a Facility will pay when due all bills
for services or labor performed and materials supplied in connection with the
development of the Land and the construction of the Improvements. In the event
any mechanics' lien or other lien or
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encumbrance shall be filed or attached against the Property without the prior
written consent of the Agent in each instance, each Borrower covenants and
agrees that, within twenty (20) days after the filing of such lien, the
Borrowers or other owner of a Facility will promptly discharge the same by
payment or filing bond or otherwise as permitted by law; and if the Borrowers
fail to do so, the Agent may, at its option, in addition to, and not in
limitation of, all other rights and remedies of the Agent in the Event of
Default by the Borrowers, and without regard to the priority of said mechanics'
lien or other lien or encumbrance, pay the same, and all amounts expended by the
Agent for such purpose shall constitute loans to the Borrowers and shall be
secured by the Deed of Trust and the other Financing Documents, and be due and
payable forthwith by the Borrower to the Agent with interest thereon at the
Reimbursement Rate provided for in the Deed of Trust.
Section 7.23 Correction of Construction Defects.
Each Borrower or other owner of a Facility will promptly following any
demand by the Agent, correct or cause the correction of any structural defects
in the Improvements and any material departures or deviations from the Plans and
Specifications, as determined by the Agent in its sole but reasonable
discretion, not approved in writing by the Agent.
Section 7.24 Fees and Expenses; Indemnity.
Each Borrower will pay all reasonable fees, charges, costs and expenses
required to satisfy the conditions of the Financing Documents. Each Borrower
shall hold the Lenders harmless and indemnify the Lenders against all claims of
brokers and "finders" arising by reason of the execution and delivery of the
Financing Documents or the consummation of the transaction contemplated hereby.
Neither party is aware of any broker having a claim for payment.
Section 7.25 Governmental Surveys or Inspections.
Each Borrower will furnish to the Agent copies of any and all annual
inspections performed by any Governmental Authority or accreditation or
certification organization with respect to any Facility.
Section 7.26 Cost Reports.
Each Borrower will prepare and file all applicable cost reports to all
third-party payors, if any, to the extent required by any such third-party payor
and, within thirty (30) days thereafter, notify the Agent of any settlement of
any cost report disclosed to the Agent as being open or unsettled as of the
Credit Facility Closing Date to the extent any such cost report would have a
materially adverse effect on any Borrower. Copies of any such cost reports will
be furnished to the Agent.
Section 7.27 Appraisals.
(a) The Agent's obligation to make available the Loan shall be
subject to the receipt by the Agent of an appraisal of each Eligible Project
from an appraiser designated by the Agent. The basis of the appraisal
calculation shown on the appraisal report and all other aspects of the appraisal
report must be satisfactory to the Agent in all material respects and shall
comply
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with all requirements of FIRREA. The Borrowers shall reimburse the Agent for all
costs and expenses incurred by the Agent in connection with the preparation and
review of such appraisal.
(b) In addition, the Agent shall have the right but not the
obligation to require updated appraisals of any or all of the Eligible Projects,
which appraisals shall be prepared by an appraiser or appraisers designated by
the Agent and shall be in all respects reasonably acceptable to the Agent. The
Borrowers shall reimburse the Agent upon demand for all costs and expenses
incurred by any of the Lenders with respect to the preparation and review of all
future appraisals required pursuant to the terms hereof not to exceed one (1)
future appraisal per Eligible Project per annum. The costs of any future
appraisal in excess of one (1) future appraisal per Eligible Project per annum
shall be borne by the Lenders.
(c) Appraisals shall include, if deemed necessary by the Agent,
in its sole discretion, updated discounted cash flow analysis, inspections of
and commentary on the physical status of the applicable Facility and an
engineering review. The basis of the appraisal calculations shown on such
appraisal reports and all other aspects of the appraisal reports must be
satisfactory to the Agent in all material respects. If the Borrowers have paid
the cost of the appraisal, a copy of the appraisal will be provided to the
Borrower upon its signing of the Agent's standard appraisal release letter.
A Default shall occur, if upon receipt of an updated appraisal, the
value of the Facility, as determined by the Agent based upon its review of such
appraisal is less than that required pursuant to this Agreement; provided,
however, that the Borrowers will have three (3) days to cure such Default after
notice thereof by the Agent.
Section 7.28 Notification of Certain Events, Events of Default and
Adverse Developments.
Each Borrower will promptly notify the Agent upon obtaining knowledge
of the occurrence of any of the following:
(a) any Default or Event of Default under the Financing
Documents;
(b) any default under a Synthetic Lease or any Assigned Note
and/or Note Collateral;
(c) any event, development or circumstance whereby the financial
statements furnished under the Financing Documents fail in any material respect
to present fairly the financial condition and operational results of any
Borrower;
(d) any judicial, administrative or arbitral proceeding pending
against any Borrower or any judicial or administrative proceeding known by any
Borrower to have been threatened against it in a written communication, which
threatened proceeding, if adversely decided, could materially adversely affect
any Borrower's financial condition or operations (present or prospective);
(e) (i) the revocation, suspension, probation, restriction,
limitation or refusal to renew, or any administrative procedure then in process
for the revocation, suspension,
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probation, restriction, limitation, or refusal to renew, of any License, or (ii)
the decertification, revocation, suspension, probation, restriction, limitation,
or refusal to renew, or the pending decertification, revocation, suspension,
probation, restriction, limitation, or refusal to renew any participation or
eligibility in any third party payor program in which any Borrower elects to
participate, including, without limitation, Medicare, Medicaid or other private
insurer programs, or any accreditation of any Borrower, or (iii) the issuance or
pending issuance of any License for a period of less than twelve (12) months as
a consequence of sanctions imposed by any Governmental Authority, or (iv) the
assessment or pending assessment of any civil or criminal penalties by any
Governmental Authority, any third party payor or any accreditation organization
or Person, which could materially adversely affect the financial condition or
operations of any Borrower or any Affiliate (present or prospective) as
determined by the Agent in its sole discretion;
(f) any other development in the business or affairs of any
Borrower which may be a material adverse change in the business or operations of
any Borrower;
(g) any action, including, but not limited to, the filing of any
certificate of need application if required by law, the amendment of any
Facility License or certification, or the issuance of any new License or
certification for any Facility, under which any Borrower proposes (i) to develop
a new Facility or service, and/or (ii) eliminate, materially expand or
materially reduce any service;
(h) any actual contingent liability or a potential contingent
liability of any Borrower of $50,000 or more individually or in the aggregate;
In each case described in (a) through (h) above, such notification
shall describe in detail satisfactory to the Agent the nature thereof and the
action the Borrowers propose to take with respect thereto or a statement that
the Borrowers intend to take no action and an explanation of the reasons for
such inaction. In addition, each Borrower will furnish to the Agent immediately
after receipt thereof copies of all administrative notices material to such
Borrower's business and operation of any Facility and all responses by or on
behalf of such Borrower with respect to such administrative notices.
Section 7.29 Compliance with Environmental Laws.
If any Hazardous Materials are used, present or generated on any real
property owned or controlled by any Borrower or any other owner of a Facility or
for which any Borrower or any other owner of a Facility is responsible, such
Person will use, process, distribute, handle, maintain, treat, store, dispose of
and transport such substance in compliance with all applicable laws, including,
but not limited to, those regulating PCB, underground storage tanks, radon and
medical waste tracking, as well as any laws that are enacted after the date of
this Agreement.
Section 7.30 Hazardous Materials; Contamination.
Each Borrower will:
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(a) Give notice to the Agent within five (5) Banking Days of such
Borrower's; acquiring knowledge of the presence of any Hazardous Materials on
any property owned or controlled by any Borrower or any Synthetic Lessee or for
which any Borrower or Synthetic Lessee is responsible or of any Hazardous
Materials Contamination with a full description thereof, except for reasonable
quantities of necessary supplies for use by such Borrower in the ordinary course
of its current line of business and stored, used and disposed of in accordance
with applicable Laws;
(b) promptly comply with any laws requiring special handling,
maintenance, servicing, removal, treatment or disposal of Hazardous Materials or
Hazardous Materials Contamination and provide the Agent upon request with
satisfactory evidence of such compliance;
(c) provide the Agent, within thirty (30) days after a demand by
the Agent, with a bond, letter of credit or similar financial assurance
evidencing to the Agent's satisfaction that funds are available to pay the cost
of removing, treating, and disposing of such Hazardous Materials or Hazardous
Materials Contamination and discharging any lien which may be established as a
result thereof on any property owned, operated or controlled by any Borrower or
Synthetic Lessee or for which any Borrower or Synthetic Lessee is responsible;
and
(d) defend, indemnify and hold harmless the Lenders and each of
their agents, employees, trustees, successors and assigns from any and all
claims which may now or in the future (whether before or after the termination
of this Agreement) be asserted as a result of the presence of any Hazardous
Materials on any property owned, operated, controlled or managed by the
Borrowers or Synthetic Lessee or for which any of the Borrowers or Synthetic
Lessee are responsible for any Hazardous Materials Contamination.
Section 7.31 Participation in Reimbursement Programs.
In the event any Borrower, any Synthetic Lessee or the Management
Company elects to participate in any plans and/or programs for third-party
payment and/or reimbursement, and the revenues derived from a single plan or
program exceed ten percent (10%) of the gross revenues of the applicable
Facility, such Borrower will continue its participation in any and all such
plans and/or programs for third-party payment and/or reimbursement from, and
claims against, private insurers or programs for payment and/or reimbursement
from federal, state and local governmental agencies and/or private or
quasi-public insurers, including, without limitation, Managed Care Plans,
Medicaid and Medicare and the Veterans Administration (as determined by the
Borrowers in the good faith exercise of their prudent and commercially
reasonable business judgment). While participating in such plans, such Borrower,
Synthetic Lessee or Management Company shall comply in all material respects
with any and all rules, regulations, standards, procedures and decrees necessary
to maintain such party's participation in any such third party payment or
reimbursement program or plan.
Section 7.32 Inspection and Other Reports and Notices.
Each Borrower will furnish to the Agent copies of any and all annual
inspections performed by any Governmental Authority or accreditation or
certification organization with respect to any Facility. Each Borrower will also
furnish to the Agent copies of all reports or
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notices from any Governmental Authority or other organization pertaining to the
licensure of or Participation Agreements or Operating Agreements for any
Eligible Project or Optional Collateral which (a) cite any deficiency, (b)
indicate that a penalty will be imposed unless a corrective action is taken, (c)
impose a penalty (including, but not limited to, a monetary penalty, a ban on
admissions or a suspension of a license) or (d) would be otherwise materially
adverse to the business or operations of such Facility, together with Borrower's
written response to any such report or notice.
Section 7.33 Interest Rate for Assigned Notes.
Each Assigned Note shall bear interest at a rate not less than the
LIBOR Rate (as defined in the Assigned Notes) plus 300 basis points per annum
but in no event less that eight percent (8%) per annum.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
Until payment in full and the performance of all of the Obligations,
without the prior written consent of the Agent as permitted pursuant to the
Agency Agreement, no Borrower will directly or indirectly:
Section 8.1 Borrowings.
Create, incur, assume or suffer to exist any liability for borrowed
money other than the Loan or loans from Affiliates that are bearing interest at
a rate no higher than that then applicable to the Loan and are unsecured and
subordinated as to payment of principal and interest (either by their terms or
by separate written agreement) to the Loan; provided, however, that so long as
no Event of Default has occurred, the Borrowers may make scheduled payments of
interest on such debt.
Section 8.2 Deeds of Trust and Pledges.
Create, incur, assume, permit or suffer to exist any deed of trust,
mortgage, pledge, Lien or other encumbrance of any kind upon, or any security
interest in, any of its property or assets, including the Collateral or impair
the value thereof, whether now owned or hereafter acquired.
Section 8.3 Sale or Transfer of Assets.
Enter into any arrangement whereby such Borrower shall sell, lease,
transfer, assign or otherwise dispose of any of its assets other than (a) sales
or other disposition of assets in the ordinary course of business for value,
provided the proceeds thereof are used to pay down the Loan, or the asset sold
or disposed of is replaced by one of equal or greater value, or (b) the transfer
of an Eligible Project or the sale of an Eligible Project or the transfer of an
Assigned Note, in either case, in which case the Borrowing Base will be reduced
by the availability attributed to such Facility.
Section 8.4 Other Liens; Transfers; "Due-on-Sale"; etc.
Without the prior written consent of the Agent, create or permit to be
created or remain with respect to any of the Property or any part thereof or
income therefrom, any mortgage,
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pledge, lien, encumbrance or charge, or security interest, or conditional sale
or other title retention agreement, whether prior or subordinate to the lien of
the Financing Documents, other than in connection with the Financing Documents
or as otherwise provided or permitted therein. Except for any grant, conveyance,
sale, assignment or transfer in the ordinary course of any Borrower's business
and which is specifically conditioned upon the release of record of the lien of
the Deed of Trust and the other Financing Documents as to that Eligible Project
granted, conveyed, sold, assigned or transferred as otherwise permitted
hereunder, no Borrower will, without the prior written consent of the Agent,
make, create, permit or consent to any conveyance, sale, assignment or transfer
of any of the Property or any part thereof, other than in connection with the
Financing Documents or as otherwise provided or permitted therein.
Section 8.5 Advances and Loans.
Make loans or advances to any Person, including, without limitation,
any Affiliates, partners or employees of any Borrower except for loans evidenced
by the Assigned Notes.
Section 8.6 Contingent Liabilities.
Assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit and collection or similar transactions in the
ordinary course of business.
Section 8.7 Licenses.
Allow any License, permit, right, franchise or privilege necessary for
the ownership or operation of any Facility for the purposes for which any
Facility is intended to be used to lapse, be suspended, be revoked, be denied
renewal, be forfeited or be placed on probation unless solely due to
administrative delay by the licensing authority.
Section 8.8 ERISA Compliance.
(a) Restate or amend any Plan established and maintained by any
Borrower or any Commonly Controlled Entity and subject to the requirements of
ERISA, in a manner designed to disqualify such Plan and its related trusts under
the applicable requirements of the Code;
(b) permit any partners of any Borrower or any Commonly
Controlled Entity to materially adversely affect the qualified tax-exempt status
of any Plan or related trusts of any Borrower or any Commonly Controlled Entity
under the Code;
(c) engage in or permit any Commonly Controlled Entity to engage
in any Prohibited Transaction;
(d) incur or permit any Commonly Controlled Entity to incur any
Accumulated Funding Deficiency, whether or not waived, in connection with any
Plan;
(e) take or permit any Commonly Controlled Entity to take any
action or fail to take any action which causes a termination of any Plan in a
manner which could result in the
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imposition of a lien on the property of any Borrower or any Commonly Controlled
Entity pursuant to Section 4068 of ERISA;
(f) fail to notify the Agent that notice has been received of a
"termination" (as defined in ERISA) of any Multiemployer Plan to which any
Borrower or any Commonly Controlled Entity has an obligation to contribute;
(g) incur or permit any Commonly Controlled Entity to incur a
"complete withdrawal" or "partial withdrawal" (as defined in ERISA) from any
Multiemployer Plan to which any Borrower or any Commonly Controlled Entity has
an obligation to contribute; or
(h) fail to notify the Agent that notice has been received from
the administrator of any Multiemployer Plan to which any Borrower or any
Commonly Controlled Entity has an obligation to contribute that any such Plan
will be placed in "reorganization" (as defined in ERISA).
Section 8.9 Transfer of Collateral.
Transfer, or permit the transfer, to another location of any of the
Collateral or the books and records related to any of the Collateral; provided,
however, that the Borrowers may transfer the Collateral or the books and records
related thereto to another location if the Borrowers shall have provided to the
Agent prior to such transfer an opinion of counsel addressed to the Agent to the
effect that the Lenders' perfected security interest shall not be affected by
such move or if it shall be affected, setting forth the steps necessary to
continue the Lender's perfected security interest together with the commencement
of such steps by the Borrowers at their expense.
Section 8.10 Sale of Accounts or Receivables.
Sell, discount, transfer, assign or otherwise dispose of any of its
Accounts or Receivables of any Facility, such as accounts receivable, notes
receivable, installment or conditional sales agreements or any other rights to
receive income, revenues or moneys, however evidenced.
Section 8.11 Amendments; Terminations.
Except as otherwise provided herein, amend or terminate or agree to
amend or terminate any License, Participation Agreement which exceeds ten
percent (10%) of the gross revenue of the applicable Facility, any Management
Agreement, or, except in the ordinary course of business any other Management
Contracts and Operating Agreements which may have been entered into by any
Borrower with respect to any Facility and which exceeds ten percent (10%) of the
gross revenue of the applicable Facility, or consent to or waive any material
provisions thereof.
Section 8.12 Prohibition on Hazardous Materials.
Place, manufacture or store or permit to be placed, manufactured or
stored, any Hazardous Materials on any property owned, controlled or operated by
any Borrower or any Wholly Owned Subsidiary or for which any Borrower or any
Wholly Owned Subsidiary is responsible, except for reasonable quantities of
necessary supplies for use by any Borrower or
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any Wholly Owned Subsidiary in the ordinary course of its current line of
business and stored, used and disposed of in accordance with applicable Laws.
Section 8.13 Subsidiaries.
Create or acquire any Subsidiaries other than Wholly Owned Subsidiaries
of which the Agent has approved in the exercise of their sole and absolute
discretion, which approval may be conditioned, among other things, on the
execution and delivery of an Additional Borrower Joinder Supplemental and such
other Financing Documents as the Agent may require.
Section 8.14 Mergers or Acquisitions.
Enter into any merger or consolidation or amalgamation, wind up or
dissolve itself (or suffer any liquidation or dissolution), or acquire all or
substantially all of the assets of any person, firm, joint venture or
corporation except to acquire a Wholly Owned Subsidiary.
Section 8.15 Conditional Sales.
Incorporate in the Improvements any property acquired under a
conditional sales contract, or lease, or as to which the vendor retains title or
a security interest without the prior written consent of the Agent.
Section 8.16 Changes to Plans and Specification.
After review and approval of a Total Development Budget by the Agent,
permit any change order increasing the price of the Improvements for an Eligible
Project by more than $50,000 for any one change order or by more than $50,000 in
the aggregate or materially altering the scope of the Improvements, without the
prior written consent of the Agent which consent will not be unreasonably
withheld.
Section 8.17 Construction Contract; Construction Management.
Execute any contract or agreement or become a party to any arrangement
for the construction of any Improvements or for construction management services
with respect to any Property without the prior written consent of the Agent.
Section 8.18 Line of Business.
Allow any Borrower, the Guarantor or any Subsidiary of any of them to
enter into any lines or areas of business if as a result, the general nature of
the business, taken on a consolidated basis, which would be engaged in by the
Borrowers or the Guarantor individually or on a consolidated basis with its
subsidiaries, would be substantially changed from the general nature of the
business engaged in by the Borrowers and the Guarantor on the date hereof.
Section 8.19 Stock Redemption.
Repurchase, redeem or retire any stock or partnership interest in any
Borrower.
Section 8.20 Single Purpose Entity.
Engage in any activity which would cause any Borrower to be other than
a single purpose entity for the purpose of the Loan.
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Section 8.21 Limitation on Acquisition Projects.
Acquire any Acquisition Project for a purchase price in excess of
$25,000,000.
Section 8.22 Amendments to Synthetic Lease Transaction Documents.
Amend, modify, substitute or terminate any Assigned Note or any Note
Collateral, including but not limited to any Synthetic Lease or Management
Agreement.
ARTICLE IX
EVENTS OF DEFAULT
The occurrence of one or more of the following events shall be an
"Event of Default" under this Agreement, and the term "Event of Default" shall
mean, whenever it is used in this Agreement, any one or more of the following
events:
Section 9.1 Failure to Pay and/or Perform the Obligations.
The Borrowers shall fail to:
(a) make any payment of interest on the Notes within five (5)
calendar days of the date when due, or
(b) pay any of the other Obligations including but not limited to
the Expense Payments and Liquidation Costs within five (5) calendar days of the
date when due, except with regard to payment of (a) any Borrowing Base
Deficiency which shall be due as provided in Section 2.1(h) hereof, and (b)
amounts due at maturity for which no notice or cure period shall be required to
be given.
Section 9.2 Breach of Representations and Warranties.
Any material representation or warranty made in this Agreement or in
any report, certificate, opinion (including any opinion of counsel for the
Borrowers), financial statement or other instrument furnished in connection with
the Obligations or with the execution and delivery of any of the Financing
Documents, shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect.
Section 9.3 Failure to Comply with Covenants.
Default shall be made by any Borrower in the due observance and
performance of any covenant, condition or agreement contained in Article VII
hereof (except for Section 7.8, Section 7.9, Section 7.12, Section 7.13, Section
7.17, Section 7.19, Section 7.20, Section 7.24, Section 7.27) or in ARTICLE VIII
hereof.
Section 9.4 Failure to Comply with Financial Reporting or Books and
Records.
Default shall be made by any Borrower in the due observance or
performance of Section 7.1 or Section 7.13, which default shall remain
unremedied, for more than ten (10) days after written notice thereof to the
Borrowers by the Agent.
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Section 9.5 Other Defaults.
Default shall be made by any Borrower in the due observance or
performance of any other term, covenant or agreement of this Agreement other
than as set forth in this Article IX, which default shall remain unremedied for
more than thirty (30) days after written notice thereof to the Borrowers by the
Agent.
Section 9.6 Default Under Other Financing Documents.
A Default shall occur under any of the other Financing Documents, and
such Default is not cured within any applicable grace period provided therein.
Section 9.7 Receiver; Bankruptcy.
An Act of Bankruptcy occurs with respect to any Borrower or any
Borrower becomes generally unable to pay its debts as they become due; provided,
however, if a proceeding with respect to an Act of Bankruptcy is filed or
commenced against any Borrower, the same shall not constitute an Event of
Default if such proceeding is dismissed within sixty (60) days from the date of
such Act of Bankruptcy.
Section 9.8 Judgment.
Unless adequately insured in the reasonable opinion of the Agent, the
entry of a final judgment against any Borrower of $1,000,000 or more or any
attachment or other levy against the property of any Borrower remains unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty
(30) days.
Section 9.9 Execution; Attachment.
Any execution or attachment shall be levied against the Collateral, or
any part thereof, and such execution or attachment shall not be set aside,
discharged or stayed within thirty (30) days after the same shall have been
levied.
Section 9.10 Default Under Other Borrowings.
(a) A Default which continues beyond any applicable grace period
shall occur under any obligation of or guaranteed by any Borrower equal to or
greater than $100,000, or any recourse obligation of or guaranteed by the
Guarantor equal to or greater than $1,000,000, if the effect of such default is
to accelerate the maturity of such obligation or to permit the holder or obligee
thereof to cause such obligation to become due prior to its stated maturity;
(b) A Default shall occur under any obligation of a consolidated
Affiliate equal to or greater than $10,000,000, which is otherwise non-recourse
to each Borrower and the Guarantor.
Section 9.11 Change in Status or Ownership.
Any Borrower is dissolved, merged, consolidated or reorganized, or any
change occurs in the ownership of the outstanding stock of any Borrower without
the prior written consent of the Agent.
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Section 9.12 Damage to Improvements.
At any time prior to the issuance of a certificate of occupancy or
completion therefor, any of the Improvements are substantially damaged or
destroyed by fire or other casualty and the Agent determines in good faith that
such Improvements cannot be restored and completed in accordance with the terms
and provisions of the Deed of Trust unless the Borrowers exclude the affected
Eligible Project from the calculation of the Borrowing Base.
Section 9.13 Mechanic's Lien.
A lien for the performance of work or the supply of materials which is
perfected against any of the Land remains unsatisfied or un-bonded or for which
no other arrangements satisfactory to the Agent have been made for a period of
twenty (20) days after the date of perfection unless the Borrowers exclude the
affected Eligible Project from the calculation of the Borrowing Base.
Section 9.14 Survey Matters.
Any Survey required by the Lenders during the period of construction
shows any matters not approved by the Agent and such matters not approved are
not removed within thirty (30) days after Notice thereof by the Agent to the
Borrowers unless the Borrowers exclude the affected Eligible Project from the
Borrowing Base.
Section 9.15 General Contractor Default.
The General Contractor shall have defaulted under any Construction
Contract, which default the Agent, in its sole discretion, shall deem
substantial, and the Borrowers, after thirty (30) days notice from the Agent,
shall fail to commence exercising any resulting right or remedy to which it may
be entitled thereunder and diligently pursue such right or remedy unless the
Borrowers exclude the affected Eligible Project from the calculation of the
Borrowing Base.
Section 9.16 Zoning.
Any change in any zoning ordinance or any other public restriction is
enacted, limiting or defining the uses which may be made of any of the Property
or a part thereof, such that the use of any of the Property, as specified
herein, would be in material violation of such restriction or zoning change
unless the Borrowers exclude the affected Eligible Project from the calculation
of the Borrowing Base.
Section 9.17 Updated Appraisal
The value of any Facility, as determined by the Agent based on its
review of an updated appraisal provided pursuant to Section 7.27, is less than
that required pursuant to the terms hereof; provided, however, that the
Borrowers shall have three (3) days to cure such Default after notice thereof by
the Agent.
Section 9.18 Default Under Synthetic Lease Transaction.
A default or event of default shall occur under any Assigned Note or
Note Collateral and continue beyond any applicable cure period; provided,
however, that a default in the payment of
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interest due on the Assigned Note alone will not constitute an Event of Default
hereunder unless such default continues for ninety (90) days or longer.
ARTICLE X
RIGHTS AND REMEDIES UPON DEFAULT
Section 10.1 DEMAND; ACCELERATION.
THE OCCURRENCE OR NONOCCURRENCE OF AN EVENT OF DEFAULT UNDER THIS
AGREEMENT SHALL IN NO WAY AFFECT OR CONDITION THE RIGHT OF THE LENDERS TO DEMAND
PAYMENT AT ANY TIME OF ANY OF THE OBLIGATIONS WHICH ARE PAYABLE ON DEMAND
REGARDLESS OF WHETHER OR NOT AN EVENT OF DEFAULT HAS OCCURRED. Upon the
occurrence of an Event of Default, and in every such event and at any time
thereafter, the Agent may declare the Obligations due and payable, without
presentment, demand, protest, or any notice of any kind, all of which are hereby
expressly waived, anything contained herein or in any of the other Financing
Documents to the contrary notwithstanding.
Section 10.2 Further Advances; Immediate Acceleration.
Following a Default or an Event of Default the Agent may from time to
time without notice to any Borrower suspend, terminate or limit any further
advances under the Loan or other extensions of credit under this Agreement and
under any of the other Financing Documents. Further, upon the occurrence of an
Event of Default or Default specified in Article IX above, the unpaid principal
amount of the Notes (with accrued interest thereon) and all other Obligations
then outstanding, shall immediately become due and payable in the Agent's sole
discretion without further action of any kind and without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by each
Borrower.
Section 10.3 Further Advances; Material Adverse Change or Impairment
of Position.
If the Agent determines in its reasonable discretion that (a) a
material adverse change has occurred in the financial condition or operation of
the Guarantor or any Borrower or an event has occurred which impairs the
prospect of payment of the obligations and/or the value of the Facilities or the
Collateral (in either case, regardless of whether it would constitute an Event
of Default under this Agreement), the Agent may from time to time without notice
to any Borrower suspend, terminate or limit any further advances under the Loan
or other extensions of credit under this Agreement and refuse to include any
additional Eligible Projects in the Borrowing Base.
Section 10.4 Specific Rights With Regard to Collateral.
Following an Event of Default, in addition to all other rights and
remedies provided in this Agreement, the Deed of Trust, and any of the other
Financing Documents, and all other rights and remedies as shall exist at law or
in equity from time to time, the Agent may, without further notice to the
Borrowers and subject to the terms of the Agency Agreement:
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(a) assign any and all Operating Agreements and Management
Contracts to any Person designated by the Agent, and/or exercise all rights and
privileges of the applicable Borrowers under such contracts and agreements for
the purpose of realizing on the Collateral and to the extent and for the time
required to realize the value of the Collateral;
(b) to the extent permitted by applicable law,
(i) enter into possession of any of the Property
and perform any and all work and labor necessary to complete the
development of the Land and the construction of the Improvements
thereon (whether or not in accordance with the Plans and
Specifications thereon);
(ii) employ watchmen to protect the Property and
the Improvements; and
(iii) assume such management, operation and
control of the Property to the extent and for the time necessary
to realize the value of the Collateral;
(c) cause any Borrower to engage, contract with, and/or hire
qualified service, billing, collection and other such agents, organizations and
companies acceptable to the Agent to collect and/or realize upon any or all of
the Collateral and to remit the proceeds to the Agent;
(d) subject to applicable state and federal laws pertaining to
resident confidentiality, request any Account Debtor obligated on any of the
Accounts to make payments thereon directly to the Agent to the extent permitted
by applicable law, with the Agent taking control of the cash and non-cash
proceeds thereof and/or direct any Borrower to (and such Borrower shall) turn
over to the Agent immediately following receipt all payments with respect to the
Collateral in the form received (with the addition of all necessary
endorsements) and not to deposit, negotiate or otherwise deal with those
payments;
(e) compromise, extend or renew any of the Collateral or deal
with the same as it may deem advisable;
(f) make exchanges, substitutions or surrenders of all or any
part of the Collateral;
(g) remove from any Borrower's places of business all books,
records, ledger sheets, correspondence, invoices and documents, relating to or
evidencing any of the Collateral or without cost or expense to the Lenders, make
such use of any Borrower's places of business as may be reasonably necessary to
administer, control and collect the Collateral;
(h) demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
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(i) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;
(j) settle, renew, extend, compromise, compound, exchange or
adjust claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
(k) endorse the name of any Borrower upon any items of payment
relating to the Collateral or on any Proof of Claim in Bankruptcy against an
Account Debtor; and
(l) notify the post office authorities to change the address for
the delivery of mail to any Borrower to such address or post office box as the
Agent may designate and receive and open all mail addressed to any Borrower.
(m) Notify any Synthetic Lessor to make payments on any Assigned
Note directly to the Agent.
In addition, each Borrower shall, following an Event of Default
promptly, upon request, execute and deliver to the Agent written assignments, to
the extent permitted by applicable law, in form and content acceptable to the
Agent, of specific Accounts or groups of Accounts; provided, however, that the
lien and/or security interest granted to the Lenders under this Agreement shall
not be limited in any way to or by the inclusion or exclusion of Accounts within
such assignments. Such Accounts shall secure payment of the Obligations and are
not sold to the Lenders whether or not any assignment thereof, which is separate
from this Agreement, is in form absolute.
Following an Event of Default, the Lenders may also direct any Borrower
to appoint a manager for any or all of the Facilities and enter into a
Management Agreement with one or more management companies approved by the
Lenders, the terms of which agreement shall be approved by the Lenders.
Section 10.5 Performance by Lenders.
Following an Event of Default, the Agent without the necessity of prior
notice to or demand upon any Borrower and without waiving or releasing any of
the Obligations or any Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the account
and at the expense of any Borrower, and may enter upon the premises of any
Borrower for that purpose and take all such action thereon as the Agent may
consider necessary or appropriate for such purpose. The Agent will give the
Borrowers notice following any such performance by the Agent. All sums so paid
or advanced by the Agent and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred in connection
therewith (the "Expense Payments") together with interest thereon from the date
of payment, advance or incurring until paid in full at the Post Default Rate
shall be paid by the Borrowers to the Agent on demand and shall constitute and
become a part of the Obligations and be secured by the Deed of Trust. For this
purpose, each Borrower hereby constitutes and appoints the Lenders, or the Agent
on behalf of the Lenders, its true and lawful
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attorney-in-fact with full power of substitution to complete work on any
Eligible Project in the name of such Borrower, and hereby empowers said attorney
or attorneys as follows:
(a) To use any funds of such Borrower including any balance which
may be held in escrow and any funds which may remain un-advanced under the Loan
for the purpose of completing the development of any of the Land and the
construction of any of the Improvements, whether or not in the manner called for
in the Plans and Specifications;
(b) To make such additions and changes and corrections to any of
the Plans and Specifications which shall be necessary or desirable in the
judgment of the Agent to complete the development of any of the Land and the
construction of any of the Improvements;
(c) To employ such contractors, subcontractors, agents,
architects and inspectors as shall be necessary or desirable for said purpose;
(d) To pay, settle or compromise all existing bills and claims
which are or may be liens against any of the Property, or may be necessary or
desirable for the completion of the work or the clearance of title to any of the
Property;
(e) To execute all applications and certificates which may be
required in the name of such Borrower; and
(f) To do any and every act with respect to the development of
the Land and the construction of the Improvements which such Borrower may do in
its own behalf.
It is understood and agreed that this power of attorney shall be deemed
to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the development of the Land and the
construction of the Improvements and to take such actions and to require such
performance as the Lenders may deem necessary.
Section 10.6 Uniform Commercial Code and Other Remedies.
Upon the occurrence of an Event of Default (and in addition to all of
their other rights, powers and remedies under this Agreement), the Agent shall
have all of the rights and remedies of a secured party under the applicable
Uniform Commercial Code and other applicable laws, and the Lenders are
authorized to offset and apply to all or any part of the Obligations all moneys,
credits and other property of any nature whatsoever of any Borrower now or at
any time hereafter in the possession of, in transit to or from, under the
control or custody of, or on deposit with, any of the Lenders; and upon demand
by the Agent, the Borrowers shall assemble the Collateral and make it available
to the Agent, at a place designated by the Agent; and the Lenders or their
agents may enter upon the Borrower's premises to take possession of the
Collateral, to remove it, to render it unusable, or to sell or otherwise dispose
of it.
Any written notice of the sale, disposition or other intended action by
the Agent with respect to the Collateral including but not limited to any
Assigned Note which is sent by certified mail, postage prepaid, to the Borrowers
at the address set forth in Section 11.1 hereof, or such
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other address of the Borrowers which may from time to time be shown on the
Agent's records, at least ten (10) days prior to such sale, disposition or other
action, shall constitute reasonable notice to the Borrowers. The Borrowers shall
pay on demand all costs and expenses, including, without limitation, attorneys'
fees and expenses, incurred by or on behalf of the Lenders, or any of them, in
preparing for sale or other disposition, selling, managing, collecting or
otherwise disposing of, the Collateral. All of such costs and expenses (the
"Liquidation Costs") together with interest thereon from the date incurred until
paid in full at the Post Default Rate, shall be paid by the Borrowers to the
Agent on demand and shall constitute and become a part of the Obligations. Any
proceeds of sale or other disposition of the Collateral will be applied by the
Lenders to the payment of the Liquidation Costs and Expense Payments, and any
balance of such proceeds will be applied by the Lenders to the payment of the
balance of the Obligations in such order and manner of application as the
Lenders may from time to time in their sole discretion determine. After such
application of the proceeds, any balance shall be paid to the Borrowers or to
any other party entitled thereto.
Section 10.7 Receiver or Other Court Order.
Following an Event of Default, as a matter of right, following ten (10)
days notice and without regard to the adequacy of the security, and upon
application to a court of competent jurisdiction, the Agent shall be entitled to
the immediate appointment of a receiver for all or any part of the Collateral,
and of the payments and proceeds thereof and therefrom, whether such
receivership be incidental to a proposed sale of the Collateral or otherwise,
and each Borrower hereby consents to the appointment of such a receiver and to
an order of court directing that payments, including Medicare and Medicaid
payments, be made directly to the receiver. The Borrowers will pay to the Agent,
upon demand, all expenses, including receiver's fees, attorney's fees, costs and
agents compensation, advanced by any of the Lenders and incurred pursuant to the
provisions contained in this Section.
Section 10.8 License of Tradename.
Each Borrower does hereby grant to the Agent for the benefit of the
Lenders and their affiliates, any trustee under a Deed of Trust and their
management company a license to use the applicable Borrower's name, and the name
"Homewood" or any other additional tradename used now or in the future in
connection with any Eligible Project or Optional Collateral during the term of
the Credit Facility and any marks associated therewith in the operation of a
Facility upon such Lender's or trustee's taking of possession or taking over
management of a Facility or acquiring title thereto at a foreclosure sale which
license shall be in effect for a period of twenty-four (24) months from the date
thereof but shall be extended for any period up to an additional six (6) months
if the Borrowers take any action to delay or obstruct the Lenders' exercise of
their remedies under the Financing Documents. Each Borrower further agrees that
a third-party purchaser of a Facility may continue to operate the Facility under
the applicable Borrower's name unless the Borrowers object in writing thereto.
In connection herewith, the Borrowers have caused or shall cause ARC to grant a
similar license.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices.
All notices, certificates or other communications hereunder shall be
deemed given when delivered by hand or courier, the following Banking Day after
delivery by Federal Express or similar overnight delivery service, or three (3)
Banking Days after being mailed by certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Agent
or the Lenders: Bank United
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇, Esq.
Office of General Counsel
Bank United
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
With a courtesy
copy to: ▇▇▇▇ & Valentine L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, Esq.
if to the Borrowers: c/o American Retirement Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
With a courtesy T. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
copy to: Bass, ▇▇▇▇▇ & ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Section 11.2 Consents and Approvals.
If any consent, approval, or authorization of any Governmental
Authority or of any Person having any interest therein, should be necessary to
effectuate any sale or other disposition of the Collateral, each Borrower agrees
to execute all such applications and other instruments, and to take all other
action, as may be required in connection with securing any such consent,
approval or authorization.
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Section 11.3 Remedies, etc. Cumulative.
Each right, power and remedy of the Agent or Lenders as provided for in
this Agreement or in any of the other Financing Documents or now or hereafter
existing at law or in equity or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for in this Agreement or in any of the other Financing Documents or now
or hereafter existing at law or in equity, by statute or otherwise, and the
exercise or beginning of the exercise by the Lenders of any one or more of such
rights, powers or remedies shall not preclude the simultaneous or later exercise
by the Lenders of any or all such other rights, powers or remedies. In order to
entitle the Lenders to exercise any remedy reserved to it herein, it shall not
be necessary to give any notice, other than such notice as may be expressly
required in this Agreement.
Section 11.4 No Waiver of Rights by the Agent or Lenders.
No failure or delay by the Agent or the Lenders to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, including foreclosure on the
Property under the Deed of Trust shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach or preclude the Agent or
the Lenders from exercising any such right, power or remedy at any later time or
times. By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, neither the Agent nor
the Lenders shall be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any of the
other Financing Documents, or to declare a Default or Event of Default for
failure to effect such prompt payment of any such other amount.
Section 11.5 Entire Agreement; Conflict with Agency Agreement.
The Financing Documents shall completely and fully supersede all other
agreements, both written and oral, between the Lenders and the Borrowers, or any
of them, relating to the Obligations. Neither the Lenders nor any Borrower shall
hereafter have any rights under such prior agreements but shall look solely to
the Financing Documents for definition and determination of all of their
respective rights, liabilities and responsibilities relating to the Obligations.
In the event of a conflict between this Agreement and the Agency Agreement, this
Agreement shall govern; provided, however, that the Borrowers hereby acknowledge
and agree that although this Agreement refers to the Agent's rights, remedies
and authority to give a consent or to act in connection with the Credit
Facility, the Agency Agreement requires that the Agent obtain the approval of or
act in accordance with the direction of some or all of the Lenders and such
requirement shall not be considered a conflict with this Agreement.
Section 11.6 Survival of Agreement; Successors and Assigns.
All covenants, agreements, representations and warranties made by each
Borrower herein and in any certificate, in the Financing Documents and in any
other instruments or documents delivered pursuant hereto shall survive the
making by the Lenders of the Loan and the execution and delivery of the Notes,
and shall continue in full force and effect so long as any of the Obligations
are outstanding and unpaid. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party;
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and all covenants, promises and agreements by or on behalf of each Borrower,
which are contained in this Agreement shall inure to the benefit of the
respective successors and assigns of each of the Lenders, and all covenants,
promises and agreements by or on behalf of the Lenders which are contained in
this Agreement shall inure to the benefit of the permitted successors and
permitted assigns of each Borrower, but this Agreement may not be assigned by
any Borrower without the prior written consent of the Lenders.
Section 11.7 Expenses.
The Borrowers agree to pay all reasonable out-of-pocket expenses of the
Lenders (including the reasonable fees and expenses of the legal counsel of the
Agent or any other Lender) in connection with the preparation of this Agreement,
the making of the Loan hereunder, the recordation of all financing statements
and such other instruments as may be required by the Agent at the time of, or
subsequent to, the execution of this Agreement to secure the Obligations
(including any and all recordation tax and other costs and taxes incident to
recording), the protection or preservation of Collateral or the Lenders'
interest therein, the administration of the Loan (not otherwise contemplated by
any fee paid by the Borrowers), any future modification of the Financing
Documents, the addition of Eligible Projects to the Borrowing Base, or the
enforcement of any provision of this Agreement and the collection of the
Obligations. The Borrowers agree to indemnify and save harmless the Lenders from
any liability resulting from the failure to pay any required recordation tax,
transfer taxes, recording costs or any other expenses incurred by the Lenders in
connection with the Obligations. The provisions of this Section shall survive
the execution and delivery of this Agreement and the repayment of the
Obligations. The Borrowers further agree to reimburse the Lenders upon demand
for all reasonable out-of-pocket expenses (including reasonable attorneys' fees
and legal expenses and travel expenses) incurred by the Lenders, or any of them,
in enforcing any of the Obligations or any security therefor or incurred in
connection with any bankruptcy proceeding or in any post-judgment enforcement or
collection action, together with interest at the Post Default Rate which
agreement shall survive the termination of this Agreement and the repayment of
the Obligations.
Section 11.8 Counterparts.
This Agreement may be executed in any number of counterparts all of
which together shall constitute a single instrument.
Section 11.9 Governing Law.
This Agreement and all of the other Financing Documents shall be
governed by and construed in accordance with the laws of the State of Texas;
provided, however, any Deed of Trust and any financing statements covering
fixtures securing the Loan shall be governed by, and construed in accordance
with, the laws of the state in which the applicable Facility is located.
Section 11.10 Modifications.
No modification or waiver of any provision of this Agreement or of any
of the other Financing Documents, nor consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which
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given. No notice to or demand on any Borrower in any case shall entitle any
Borrower to any other or further notice or demand in the same, similar or other
circumstance.
Section 11.11 Illegality.
If fulfillment of any provision hereof or any transaction related
hereto or to any of the other Financing Documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provisions herein
contained other than the provisions hereof pertaining to repayment of the
Obligations operates or would prospectively operate to invalidate this Agreement
in whole or in part, then such clause or provision only shall be void, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect; and if such provision pertains to repayment of the
Obligations, then, at the options of the Lenders, all of the Obligations of the
Borrowers to the Lenders shall become immediately due and payable.
Section 11.12 Gender, etc.
Whenever used herein, the singular number shall include the plural, the
plural the singular and the use of the masculine, feminine or neuter gender
shall include all genders.
Section 11.13 Headings.
The headings in this Agreement are for convenience only and shall not
limit or otherwise affect any of the terms hereof.
Section 11.14 Waiver of Trial by Jury.
EACH BORROWER, THE AGENT AND EACH LENDER HEREBY JOINTLY AND SEVERALLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH ANY OF THEM MAY BE
PARTIES, NOT GOVERNED BY THE ARBITRATION PROVISIONS HEREOF OR OF ANY OF THE
OTHER FINANCING DOCUMENTS, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS
AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS
WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES
TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT
PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by each
Borrower and each Lender, and each Borrower and each Lender hereby represent
that no representations of fact or opinion have been made by any individual to
induce this waiver of trial by jury or to in any way modify or nullify its
effect. Each Borrower and each Lender further represent that they have been
represented in the signing of this Agreement and in the making of this waiver by
independent legal counsel, selected of their own free will, and that they have
had the opportunity to discuss this waiver with counsel.
Section 11.15 No Warranty by Lenders or Agent.
By accepting or approving anything required to be observed, performed
or fulfilled by any Borrower or to be given to the Agent or the Lenders pursuant
to this Agreement, including,
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without limitation, any certificate, balance sheet, statement of profit and loss
or other financial statement, Survey, receipt, appraisal or insurance policy,
the Lenders shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof and any such acceptance or approval thereof
shall not be or constitute any warranty or representation with respect thereto
by the Lenders.
Section 11.16 Liability of the Lenders.
No Lender shall be liable for another Lender's failure to fund its
ratable share of any advance under the Loan. The Lenders shall not be liable for
any other act or omission by the Lenders, or any of them (INCLUDING ANY ACT OR
OMISSION CONSTITUTING, CAUSED BY OR RESULTING FROM THE ORDINARY NEGLIGENCE OF
THE LENDERS), pursuant to the provisions of this Agreement in the absence of
fraud or gross negligence. The Lenders shall incur no liability to the Borrowers
or any other party in connection with the acts or omissions of any of the
Lenders in reliance upon any certificate or other paper believed by the Lenders
to be genuine or with respect to any other thing which the Lenders may do or
refrain from doing, unless such act or omission amounts to fraud or gross
negligence. The Borrowers hereby agree that the Lenders shall not be chargeable
for any negligence, mistake, act or omission of any accountant, examiner, agency
or attorney employed by the Lenders, or any of them, (except for the gross
negligence or willful misconduct of any person, corporation, partnership or
other entity employed by any of the Lenders) in making examinations,
investigations or collections, or otherwise in perfecting, maintaining,
protecting or realizing upon any lien or security interest or any other interest
in the Collateral or other security for the Obligations. In connection with the
performance of their duties pursuant to this Agreement, the Lenders may consult
with counsel of their own selection, and do anything which the Lenders may do or
refrain from doing, in good faith, in reliance upon the opinion of such counsel
shall be full justification and protection to the Lenders. THE BORROWERS SHALL
INDEMNIFY, DEFEND AND HOLD THE LENDERS AND THEIR SUCCESSORS AND ASSIGNS HARMLESS
FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, SUITS, LOSSES, DAMAGES,
ASSESSMENTS, FINES, PENALTIES, COSTS OR OTHER EXPENSES (INCLUDING REASONABLE
ATTORNEY'S FEES AND COURT COSTS) ARISING FROM OR IN CONNECTION WITH THIS
AGREEMENT CAUSED BY OR RESULTING FROM THE ORDINARY NEGLIGENCE OF THE AGENT OR
ANY OTHER LENDER. Any indemnity provision for the benefit of the Lenders set
forth herein or in any of the Financing Documents shall extend to any other
lender who becomes a Lender under the Credit Facility. The provisions of this
Section shall survive the termination of the Credit Facility.
Section 11.17 No Partnership.
Nothing contained in this Agreement shall be construed in a matter to
create any relationship between any Borrower and any Lender other than the
relationship of borrower and lender, and no Borrower and any Lender shall be
considered partners or co-venturers for any purpose on account of this
Agreement.
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Section 11.18 Third Parties; Benefit.
All conditions to the obligation of the Lenders to make advances
hereunder are imposed solely and exclusively for the benefit of the Lenders and
their assigns and no other persons shall have standing to require satisfaction
of such conditions in accordance with their terms or be entitled to assume that
the Lenders will refuse to make advances in the absence of strict compliance
with any or all thereof and no other person shall, under any circumstances, be
deemed to be the beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by the Agent at any time in the sole and
absolute exercise of its discretion pursuant to its agreements with the Lenders.
The terms and provisions of this Agreement are for the benefit of the parties
hereto and, except as herein specifically provided, no other person shall have
any right or cause of action on account thereof.
Section 11.19 Conditions; Verification.
Any condition of this Agreement that requires the submission of
evidence of the existence or non-existence of a specified fact or facts implies
as a condition to the existence or non-existence, as the case may be, of such
fact or facts that the Lenders shall, at all times, be free independently to
establish to their satisfaction and in its absolute discretion such existence or
non-existence.
Section 11.20 Signs; Publicity.
At the Agent's request, but at the expense of the Agent, the Borrowers
shall place a sign acceptable to the Borrowers at a location on each of the
Development Projects satisfactory to the Agent, which sign shall recite, among
other things, that the Lenders are financing the construction of the
Improvements. Each Borrower expressly authorizes the Agent to prepare and to
furnish to the news media for publication from time to time news releases with
respect to each Eligible Project, specifically to include but not limited to,
releases detailing the Agent's and the Lenders' involvement with the financing
of the Eligible Project, and all subject to prior review by the Borrowers.
Section 11.21 Mandatory Arbitration.
To the maximum extent not prohibited by law, any controversy, dispute
or claim arising out of, in connection with, or relating to this Agreement or
any other Financing Documents or any transaction provided for therein, including
but not limited to any claim based on or arising from an alleged tort or an
alleged breach of any agreement contained in any of the Financing Documents,
shall, at the request of any party to the Financing Documents (either before or
after the commencement of judicial proceedings) be settled by arbitration
pursuant to Title 9 of the United States Code, which the parties acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). In any such arbitration proceeding: (i) all statutes of limitation which
would otherwise be applicable shall apply; and (ii) the proceeding shall be
conducted in Houston, Texas, by a single arbitrator, if the amount in
controversy is $1 million or less, or by a panel of three arbitrators if the
amount in controversy is over $1 million. All arbitrators shall be selected by
the process of appointment from a panel pursuant to Section 13 of the AAA
Commercial Arbitration Rules and each arbitrator will have AAA acknowledged
expertise in the
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appropriate subject matter. Any award rendered in any such arbitration
proceeding shall be final and binding, and judgment upon any such award may be
entered in any court having jurisdiction.
If any party to this Agreement or other Financing Documents files a
proceeding in any court to resolve any such controversy, dispute or claim, such
action shall not constitute a waiver of the right of such party or a bar to the
right of any other party to seek arbitration under the provisions of this
Section of that or any other claim, dispute or controversy, and the court shall,
upon motion of any party to the proceeding, direct that such controversy,
dispute or claim be arbitrated in accordance with this Section.
Notwithstanding any of the foregoing, no arbitrator or panel of
arbitrators shall possess or have the power to (i) assess punitive damages, (ii)
dissolve, rescind or reform (except that the arbitrator may construe ambiguous
terms) any Financing Document to which the Borrower or the Guarantor is a party,
(iii) enter judgment on the debt, (iv) exercise equitable powers or issue or
enter any equitable remedies or (v) allow discovery of attorney/client
privileged information. The Commercial Arbitration Rules of the AAA are hereby
modified to this extent for the purpose of arbitration of any dispute,
controversy or claim arising out of, in connection with, or relating to any
Financing Document to which the Borrower or the Guarantor is a party. The
parties further waive, each to the other, any claims for punitive damages, and
agree that neither an arbitrator nor any court shall have the power to assess
such damages.
No provisions of, or the exercise of any rights under, this Section
shall limit or impair the right of any party to the Financing Documents before,
during or after any arbitration proceeding to take any of the following actions
or contest any of the following actions: (i) exercise self-help remedies such as
set off or repossession, (ii) cease making advances under the Loan, (iii)
foreclose (judicially or otherwise) any lien on or security interest in any real
or personal property collateral; or (iv) obtain emergency relief from a court of
competent jurisdiction to prevent the dissipation, damage, destruction,
transfer, hypothecation, pledging or concealment of assets or of collateral
securing any indebtedness, obligation or guaranty referenced in the Financing
Documents. Such emergency relief and action to contest the same shall include
equitable relief and may be in the nature of, but is not limited to:
pre-judgment attachments, garnishments, sequestrations, appointments of
receivers, or other emergency injunctive relief to preserve the status quo.
In the event applicable law prohibits the submission of a particular
controversy, dispute or claim arising out of or in connection with any of the
Financing Documents or transactions contemplated therein to arbitration, the
parties agree that any actions or proceedings in connection therewith shall be
tried and litigated only in the state and federal courts located in the
jurisdiction in which the Property is located or any other court in which the
Agent shall initiate legal or equitable proceedings that has subject matter
jurisdiction over the matter in controversy and to the extent permitted by
applicable law, waive any right to assert the doctrine of forum non-conveniens
or to object to the venue to the extent any proceeding is brought in accordance
with this paragraph.
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Section 11.22 Assignment By Lenders.
The Lenders may, sell, assign or transfer to or participate with any
person or persons all or any part of the Credit Facility obligations pursuant to
the following terms. Assignments will be permitted with the consent of the Agent
and the Borrowers which approval will not be unreasonably withheld provided the
Borrowers shall not have the right to consent if an Event of Default has
occurred and is continuing. In connection with any assignment, the Agent will
retain not less than $25,000,000, each assignment shall be for not less than
$10,000,000 and no Lender shall hold less than $5,000,000. The foregoing
notwithstanding, the Agent and SouthTrust Bank, National Association shall agree
that provided no Event of Default has occurred and is continuing, they will
retain their original committed amounts until the earlier of nine (9) months
following the date of this Agreement or the date on which an additional
$75,000,000 has been added to the Credit Facility Committed Amount.
Participations will not require consent, however, the Lender participating its
interest shall remain fully liable for its pro rata share of the Credit
Facility. The Agent shall have no obligation with regard to a participant. In
connection with any sale, assignment, transfer or participation to a person who
is an affiliate or successor of the Agent, the Agent shall give notice to
Borrowers of such transaction either before or after the transaction has
occurred as the Agent shall determine.
Section 11.23 Required Lenders.
During such time as the Agent and SouthTrust Bank, National Association
are the only Lenders, the Agent and SouthTrust Bank, National Association must
both agree in connection with any decision to be made by the Lenders in
connection with the Credit Facility (including the decision to include a
Facility as an Eligible Project in the Borrowing Base). During such time as
there are additional Lenders in the Bank Group, all decisions to be made by the
Lenders in connection with the Credit Facility (including the decision to
include a Facility as an Eligible Project in the Borrowing Base) will require an
affirmative vote of the Lenders holding at least 66.67% of the pro rata shares
of the Credit Facility Committed Amount. The foregoing notwithstanding, certain
major changes or actions with regard to the Credit Facility (as determined by
separate agreement among the Lenders and Agent) will require the consent of all
Lenders. If requested by the Agent, the Borrowers will provide to the Lenders
copies of any documents or other information required to be delivered to the
Agent hereunder.
Section 11.24 Borrowers Approval of Lenders.
Provided no Event of Default has occurred and is continuing, the
Borrowers shall have the right to approve any additional Lender (other than
Agent and SouthTrust Bank, N.A., which have been approved as Lenders).
Section 11.25 Time of Essence.
Time shall be of the essence for each and every provision of this
Agreement of which time is an element.
[SIGNATURES ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
WITNESS/ATTEST: ARC CAPITAL CORPORATION II
a Tennessee corporation
By: (SEAL)
------------------------------ ----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
WITNESS: BANK UNITED,
as Agent for the Lenders
By: (SEAL)
------------------------------ ----------------------------------------
Name:
Title:
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LIST OF EXHIBITS
A. Form of Note
B. Form of Borrowing Base Report
C. Form of Borrowing Request
D. Places of Business
E. Form of Compliance Certificate
F. Form of Additional Borrower Joinder Supplement
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