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EXHIBIT 10.12
Banc One Capital Funding Corporation
150 E. Gay Street
24TH Floor
Columbus, Ohio 43215
June 28, 1999
Retirement Inns III, LLC
245 Fisher Avenue, D-1
Costa Mesa, California 92626
Re: Loans in the aggregate amount of $39,703,100 (the
"Loans") from Banc One Capital Funding Corporation
("BOCFC") to Retirements Inns II (the "Borrower"), which
is a direct or indirect subsidiary or affiliate of ARV
Assisted Living, Inc. ("ARV"), secured by first lien
deeds of trust on assisted living properties (the
"Projects")
Ladies and Gentlemen:
This will confirm the following agreements by and among BOCFC
and Borrower with respect to the Loans:
1. In the engagement letter dated June 10, 1999 from BOCFC to ARV
regarding, among other things, the above-referenced Loans (the "Engagement
Letter"), ARV and the Borrower, in consideration of BOCFC making the Loans,
granted to BOCFC the last right of refusal to arrange or provide any permanent
financing to replace the Loans at or prior to the maturity thereof on July 1,
2001 (the "Maturity Date"). The Loans may be voluntarily prepaid by the Borrower
thereof only during the one hundred eighty (180) day period immediately
preceding the Maturity Date. Said last right of refusal with respect to
permanent financing to replace any Loan will be extinguished if BOCFC exercises
its option to extend the Maturity Date for such Loan as described in the
Engagement Letter and the promissory note of the Borrower of such Loan
evidencing the Loan (the "Lender Extension Option").
The terms and conditions of such last right of refusal are as
follows:
(a) At any time within the one hundred eighty (180) day
period immediately preceding the Maturity Date, Borrower
may deliver to BOCFC a copy of any proposal from another
lender for permanent financing ("Replacement Financing")
to replace one or more of the Loans which Borrower
desires to accept (the "Replacement Loan Proposal").
BOCFC will have up to ten (10) days from the date of its
receipt of the Replacement Loan Proposal, within which
to exercise its last right of refusal, but not
obligation, by issuing an engagement letter to Borrower
thereby notifying Borrower that BOCFC will attempt to
arrange for or provide Replacement Financing for the
Loans
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described in the Replacement Loan Proposal substantially
upon the terms and conditions set forth in the
Replacement Loan Proposal. BOCFC will also have the
right to exercise its Lender Extension Option with
respect to such Loans until the ninetieth (90th) day
immediately preceding the Maturity Date.
(b) If BOCFC exercises its last right of refusal with
respect to the Replacement Financing for any Loan or
Loans, it will have a period of thirty (30) days from
the date BOCFC receives all requested third party
information, and property information and other
underwriting due diligence information requested from
Borrower, following the date of such exercise, within
which to issue a binding commitment for such Replacement
Financing. If BOCFC issues such binding commitment, it
will have a period of two weeks following such issuance
to close the Replacement Financing. If it does not issue
a binding commitment for such Replacement Financing
within such period, it will then be deemed to have
withdrawn the exercise of its last right of refusal with
respect to such Replacement Financing.
(c) If BOCFC does not exercise its last right of refusal
with respect to the Replacement Financing for any Loan
or Loans within the ten (10) day period referred to in
paragraph 1(a), or if, after exercising its last right
of refusal with respect to such Replacement Financing,
it fails to issue a binding commitment for such
Replacement Financing within the time period set forth
in paragraph 1(b), Borrower will be free to obtain such
Replacement Financing from the lender issuing the
Replacement Loan Proposal substantially upon the terms
and conditions set forth in the Replacement Loan
Proposal. Borrower shall not obtain Replacement
Financing for any Loan without first providing BOCFC
with the opportunity to exercise its last right of
refusal to provide such Replacement Financing in
accordance with paragraphs 1(a) and 1(b) hereof.
(d) Notwithstanding the provisions of the preceding
paragraphs, if after BOCFC has failed to exercise its
last right of refusal with respect to the Replacement
Financing for any Loan or Loans within the time period
set forth in paragraph 1(a), or failed to issue the
binding commitment for such Replacement Financing within
the time period set forth in paragraph 1(b), Borrower
desires to obtain such Replacement Financing from the
lender which submitted the Replacement Loan Proposal or
from another lender, upon Terms (as hereinafter defined)
which are materially different from the Terms set forth
in the Replacement Loan Proposal submitted to BOCFC with
respect to such Replacement Financing, then BOCFC will
have a continuing last right of refusal to arrange or
provide for such Replacement Financing upon such
materially different Terms and Borrower shall not obtain
such Replacement Financing upon such materially
different Terms from any other lender without first
providing BOCFC with notice of such materially different
Terms and the opportunity to exercise its last right of
refusal to provide such Replacement Financing upon such
materially different Terms in accordance
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with paragraphs 1(a) and (b) hereof. For purposes of
this paragraph 1, the "Terms" of any Replacement
Financing shall be: (i) the interest rate; (ii) the loan
amount; (iii) the term; (iv) any loan origination and
other fees, equity participations, options, warrants or
similar consideration provided to the lender; (v) the
collateral; and (vi) the guarantor or guarantors.
2. In connection with the Loans, Borrower and BOCFC have entered
into that certain Agreement to Amend or Comply, of even date herewith (the
"Agreement to Amend or Comply"), whereby the Borrower has agreed with BOCFC to,
among other things, assist and cooperate with Lender in the event Lender sells
the Loans in whole or in part. By this letter agreement, Borrower and BOCFC
agree that such Agreement to Amend and Comply shall further extend to and apply
to any refinancing of the Loans with FHA, provided, however, that such
refinancing satisfies the following conditions: (i) the interest rate of the
refinancing shall be identical to the applicable interest rate to the Loans;
(ii) no prepayment premium shall be due and payable by the Borrower to BOCFC
with respect to the refinancing of the Loans; (iii) the terms of the refinancing
shall be substantially identical to the terms of the Loans, subject to FHA
requirements; and (iv) the term of the refinancing shall be for a ten (10) year
period.
3. Any breach or default by Borrower in the performance of its
obligations under this letter shall constitute a default under the documents
evidencing, securing and guarantying the Loans to which Borrower is a party.
Please indicate your agreement to the terms set forth herein by
signing a copy of this letter and returning it to the undersigned. Once signed
by all parties, this letter shall constitute a legally binding agreement among
the parties with respect to the matters set forth herein last.
Very truly yours,
Banc One Capital Funding Corporation
By:
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Michael S. Wood, Vice President
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Agreed this 28th day of June, 1999
Retirement Inns III, LLC
By:
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Abdo H. Khoury
Manager
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