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EXHIBIT 10.11
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AMERICAN RETIREMENT COMMUNITIES, L.P.
Borrower
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LOAN AGREEMENT
$2,500,000 REVOLVING CREDIT LOAN
$2,000,000 TERM LOAN
Dated as of October 31, 1995
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FIRST UNION NATIONAL BANK OF TENNESSEE
Lender
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TABLE OF CONTENTS
RECITALS......................................................................................................... 1
I. DEFINITIONS.................................................................................................. 1
II. LOAN......................................................................................................... 9
2.1 Revolving Credit Loan................................................................ 9
2.2 Term Loan............................................................................ 9
2.3 Advances of Revolving Loans..........................................................10
2.4 Interest.............................................................................14
2.5 Principal Repayment..................................................................15
2.6 Fees.................................................................................15
2.7 Prepayment of Prime Rate Loans.......................................................16
2.8 Prepayment of LIBOR Loans............................................................16
2.9 Prepayment of Term Loan..............................................................17
2.10 Additional Costs.....................................................................17
III. CONDITIONS PRECEDENT.......................................................................................17
3.1 Conditions to Initial Advance........................................................17
3.2 Conditions to Subsequent Revolving Loans.............................................19
IV. REPRESENTATIONS AND WARRANTIES...............................................................................19
4.1 Capacity.............................................................................19
4.2 Authorization........................................................................19
4.3 Binding Obligations..................................................................20
4.4 No Conflicting Law or Agreement......................................................20
4.5 No Consent Required..................................................................20
4.6 Financial Statements.................................................................20
4.7 Fiscal Year..........................................................................20
4.8 Litigation...........................................................................20
4.9 Taxes; Governmental Charges..........................................................20
4.10 Title to Properties..................................................................21
4.11 No Default...........................................................................21
4.12 Casualties; Taking of Properties.....................................................21
4.13 Compliance with Laws.................................................................21
4.14 ERISA................................................................................21
4.15 Full Disclosure of Material Facts....................................................21
4.16 Accuracy of Projections..............................................................22
4.17 Investment Company Act...............................................................22
4.18 Personal Holding Company.............................................................22
4.19 Solvency.............................................................................22
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4.20 Chief Executive Office...............................................................22
4.21 Subsidiaries.........................................................................22
4.22 Ownership of Patents, Licenses, Etc..................................................22
4.23 Environmental Compliance.............................................................22
4.24 Labor Matters........................................................................22
4.25 OSHA Compliance......................................................................23
4.26 Regulation U.........................................................................23
V. AFFIRMATIVE COVENANTS........................................................................................23
5.1 Payment of Obligations...............................................................23
5.2 Maintenance of Existence and Business................................................23
5.3 Financial Statements and Reports and Other Information...............................23
5.4 Operating Data.......................................................................25
5.5 Other Information....................................................................25
5.6 Certain Additional Reporting Requirements............................................25
5.7 Taxes and Other Encumbrances.........................................................26
5.8 Payment of Debts.....................................................................26
5.9 Compliance with Laws.................................................................26
5.10 Maintenance of Property..............................................................26
5.11 Maintenance of Bank Accounts.........................................................26
5.12 Compliance with Contractual Obligations..............................................26
5.13 Further Assurances...................................................................27
5.14 Security Interest; Setoff............................................................27
5.15 Insurance............................................................................27
5.16 Accounts and Records.................................................................29
5.17 Official Records.....................................................................29
5.18 Right of Inspection..................................................................29
5.19 ERISA Information and Compliance.....................................................30
5.20 Indemnity; Expenses..................................................................30
5.21 Assistance in Litigation.............................................................31
5.22 Name Changes.........................................................................31
5.23 Estoppel Letters.....................................................................31
5.24 Environmental Matters................................................................31
VI. NEGATIVE COVENANTS..........................................................................................32
6.1 Debts, Guaranties, and Other Obligations.............................................32
6.2 Change of Management.................................................................33
6.3 Distributions........................................................................33
6.4 Stock Acquisitions...................................................................33
6.5 Encumbrances.........................................................................33
6.6 Prepayment of Indebtedness...........................................................33
6.7 Investments..........................................................................33
6.8 Sales and Leasebacks.................................................................34
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6.9 Change of Control....................................................................34
6.10 Nature of Business...................................................................34
6.11 Further Acquisitions, Mergers, Etc...................................................34
6.12 Sale of Receivables..................................................................34
6.13 Disposition of Assets................................................................34
6.14 Loans to Others......................................................................34
6.15 Inconsistent Agreements..............................................................35
6.16 Fictitious Names.....................................................................35
6.17 Subsidiaries and Affiliates..........................................................35
6.18 Place of Business....................................................................35
6.19 Adverse Action With Respect to Plans.................................................35
6.20 Transactions With Affiliates.........................................................35
6.21 Constituent Document Amendments......................................................35
6.22 Adverse Transactions.................................................................35
6.23 Use of Lender's Name.................................................................35
6.24 Margin Securities....................................................................36
6.25 Accounting Changes...................................................................36
6.26 Capital Stock........................................................................36
6.27 Modification of Management Agreements................................................36
6.28 Action Outside Ordinary Course.......................................................36
VII. FINANCIAL COVENANTS.........................................................................................36
7.1 Debt Service Coverage Ratio..........................................................36
7.2 Liquidity............................................................................36
7.3 Capital Expenditure Reserves, Operating Expense Reserves.............................37
VIII. EVENTS OF DEFAULT.........................................................................................37
8.1 Events of Default....................................................................37
8.2 Remedies.............................................................................39
IX. GENERAL PROVISIONS..........................................................................................39
9.1 Notices..............................................................................40
9.2 Renewal, Extension, or Rearrangement.................................................40
9.3 Application of Payments..............................................................40
9.4 Computations; Accounting Principles..................................................41
9.5 Counterparts.........................................................................41
9.6 Negotiated Document..................................................................41
9.7 Consent to Jurisdiction; Exclusive Venue.............................................41
9.8 Not Partners; No Third Party Beneficiaries...........................................41
9.9 No Reliance on Lender's Analysis.....................................................41
9.10 No Marshalling of Assets.............................................................42
9.11 Impairment of Collateral.............................................................42
9.12 Business Days........................................................................42
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9.13 Participations.......................................................................42
9.14 Standard of Care; Limitation of Damages..............................................42
9.15 Incorporation of Schedules...........................................................42
9.16 Indulgence Not Waiver................................................................42
9.17 Cumulative Remedies..................................................................42
9.18 Amendment and Waiver in Writing......................................................42
9.19 Assignment...........................................................................43
9.20 Entire Agreement.....................................................................43
9.21 Severability.........................................................................43
9.22 Time of Essence......................................................................43
9.23 Applicable Law.......................................................................43
9.24 Gender and Number....................................................................43
9.25 Captions Not Controlling.............................................................43
9.26 Waiver of Right to Jury Trial........................................................43
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LOAN AGREEMENT
This Loan Agreement is entered into as of the 31st day of
October, 1995, by and between AMERICAN RETIREMENT COMMUNITIES, L.P.
("Borrower"), a Tennessee limited partnership; and FIRST UNION NATIONAL BANK OF
TENNESSEE ("Lender"), a national banking association.
RECITALS
WHEREAS, Lender has agreed to extend credit to Borrower, on
certain terms and conditions, as set forth in detail in this Agreement;
NOW, THEREFORE, as an inducement to cause Lender to extend
credit to Borrower, and for other valuable consideration, the receipt and
sufficiency of which are acknowledged, it is agreed as follows:
I. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings, unless the context expressly requires
otherwise:
"ACCOUNT AGREEMENTS" has the meaning assigned in Section
2.3.1 hereof.
"AFFILIATE" means, with respect to any Person, another Person
that, directly or indirectly, (i) has an equity interest in that Person, in any
degree, (ii) has common ownership with that Person, in any degree, (iii)
Controls that Person, or (iv) shares common Control with that Person.
"AGREEMENT" means this Loan Agreement (including all
schedules and exhibits hereto), as the same may be amended from time to time.
"ARC ENTITIES" means Borrower; American Retirement
Communities, L.L.C. ("ARC, L.L.C."), a Tennessee limited liability company;
American Retirement Corporation ("ARC"), a Tennessee corporation; ARC
Management Corporation ("ARCM"), a Tennessee corporation; ARC Chattanooga,
Inc., a Tennessee corporation; ARC Fort Austin Properties, Inc., a Tennessee
corporation; ARC Corpus Christi, Inc., a Tennessee corporation; ARC Oak Park,
Inc., a Tennessee corporation; ARC Lexington Equities, Inc., a Tennessee
corporation; ARC Chattanooga, Inc.; and all other Subsidiaries of Borrower from
time to time.
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"BANKRUPTCY CODE" means Title I of the Bankruptcy Reform Act
of 1978, as it may be amended from time to time.
"BORROWER" means American Retirement Communities, L.P., a
Tennessee limited partnership, its successors and assigns. This definition does
not abrogate the requirement set forth below restricting Borrower's ability to
assign its rights under this Agreement.
"BORROWING NOTICE" has the meaning assigned in Section
2.3.2(b) hereof.
"BUSINESS DAY" or "BUSINESS DAYS" means any day or days on
which Lender's main office in Nashville, Tennessee is open for business with
the public.
"CAPITAL LEASE" means a lease that would be characterized as
a financed sale under GAAP.
"CHANGE OF CONTROL" means the occurrence, after the date of
this Agreement, of the acquisition of Control of any ARC Entity by any Person
which does not presently Control such entity.
"CLOSING DATE" means the date of this Agreement.
"COLLATERAL" means all Property now or hereafter securing the
Obligations.
"COMMITMENT LETTER" means that letter from Lender to Borrower
dated September 25, 1995, describing the Loans.
"CONTROL" or "CONTROLLED" means that a Person has the power
to conduct or govern the policies of another Person.
"DEBT" means, with respect to any Person, all obligations,
contingent or otherwise, that would be classified under GAAP as a liability of
that Person including, but not limited to, any nonrecourse obligations secured
by Property of that Person.
"DEFAULT RATE" means the highest lawful rate or such lesser
rate as Lender may elect in writing in a given instance.
"EVENT OF DEFAULT" means the occurrence of any of the events
specified in Section 8.1 hereof, as to which any requirement for notice or
lapse of time has been satisfied.
"ENCUMBRANCE" means any interest in Property in favor of one
not the owner thereof, whether voluntary or involuntary, including, but not
limited to, (i) the lien or security interest arising from a deed of trust,
mortgage, pledge, security agreement, conditional sale,
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Capital Lease, consignment, or bailment for security purposes, and (ii)
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions.
"ENVIRONMENTAL LAWS" means the Environmental Protection Act,
the Resource Conservation and Recovery Act of 1976, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Hazardous
Materials Transportation Act and any other federal, state or municipal law,
rule or regulation relating to air emissions, water discharge, noise emissions,
solid or liquid waste disposal, hazardous or toxic waste or materials, or other
environmental or health matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person who for purposes of Title
IV of ERISA is a member of Borrower's controlled group, or under common control
with Borrower, within the meaning of Section 414 of the IRC, and the
regulations promulgated pursuant thereto and the rulings issued thereunder.
"ERISA EVENT" means (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, unless the 30-day notice
requirement with respect thereto has been waived by the PBGC; (ii) the
provision by the administrator of any Plan of a notice of intent to terminate
such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice
with respect to a plan amendment referred to in Section 4041(e) of ERISA);
(iii) the cessation of operations at a facility in the circumstances described
in Section 4068(f) of ERISA; (iv) the withdrawal by Borrower or an ERISA
Affiliate from a Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in 4001(a)(2) of ERISA; (v) the failure by
Borrower or any ERISA Affiliate to make a material payment to a Plan required
under Section 302(f)(1) of ERISA; (vi) the adoption of an amendment to a Plan
requiring the provision of initial or additional security to such Plan,
pursuant to Section 307 of ERISA; or (vii) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, a Plan.
"FINANCIAL STATEMENTS" means the consolidated balance sheet
and income statement for ARC, L.P. and the consolidating balance sheet and
income statement representing Richmond Place, Heritage Club, Trinity Towers
Limited Partnership, Fort Austin Limited Partnership, Holley Court Terrace,
L.P. and ARC, dated September 30, 1995, delivered by Borrower to Lender, and
all subsequent financial statements delivered to Lender pursuant to this
Agreement as of the date hereof, including all notes thereto.
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"FIXED-RATE PERIOD" has the meaning assigned in Section 2.8
hereof.
"FUNB-NC" means First Union National Bank of North Carolina,
a national banking association and the issuer of the Richmond Place Letter of
Credit.
"GAAP" means generally accepted accounting principles
pronounced by the Financial Accounting Standards Board or any successor
thereto, as in effect from time to time.
"GOVERNMENTAL AUTHORITY OR AUTHORITIES" shall mean any
governmental or quasi-governmental entity, court or tribunal including, without
limitation, any department, commission, board, bureau, agency, administration,
service or other instrumentality of any foreign or domestic governmental
entity.
"HAZARDOUS SUBSTANCES" means those substances included from
time to time within the definition of hazardous substances, hazardous
materials, toxic substances, or solid waste under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended, 42
U.S.C. ss. 9601 et seq.; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss. 6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
ss. 1801 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et. seq.; the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et. seq., and in the
regulations promulgated pursuant to such acts and laws; and such other
substances that are or become regulated under any applicable local, state, or
federal law or regulation addressing environmental hazards.
"INTEREST EXPENSE" means expenses for interest (including
current charges on Capital Leases) and expenses for any interest rate swaps or
similar derivative contracts used for the management of interest expense,
letter of credit fees, remarketing and guaranty fees.
"INTEREST PAYMENT DATE" means, as to Prime Rate Loans, the
10th day of each January, April, July and October, and as to LIBOR Loans, the
last day of the applicable Interest Period and, as to all Loans, the maturity
thereof, whether by acceleration or otherwise.
"INTEREST PERIOD" means the period of one (1), two (2) or
three (3) months selected for a LIBOR Loan in a Borrowing Notice.
"IRC" means the Internal Revenue Code of 1986, as amended
from time to time.
"LAW" or "LAWS" means all applicable constitutional
provisions, statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, and requirements of all Governmental
Authorities.
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"LENDER" means First Union National Bank of Tennessee, its
successors and assigns.
"LIBOR LOAN" means a Loan for which Borrower has elected
application of an interest rate based on the LIBOR Rate.
"LIBOR RATE" means that rate (rounded upwards, if necessary,
to the next higher 1/100 of 1%) for deposits in United States Dollars for a
maturity of one, two or three months (as elected by Borrower; each such period
is referred to herein as an "Interest Period"), which appears on the Telerate
Page 3750 at approximately 11:00 a.m. London time, two (2) London business days
prior to the effective date of the applicable LIBOR Rate, as such rate is
adjusted in accordance with Lender's standard practices to reflect the LIBOR
Reserve Percentage and other requirements.
"LIBOR RESERVE PERCENTAGE" means, for the purpose of
computing the LIBOR Rate, the daily arithmetic reserve requirements (percentage
expressed as a decimal) imposed by the Board of Governors of the Federal
Reserve System (or any successor) under Regulation D on LIBOR liabilities (as
such term is defined in Regulation D) for the applicable Interest Period as of
the first day of such Interest Period, but subject to any changes in such
reserve requirement becoming effective during the Interest Period. For purposes
of calculation of the LIBOR Reserve Percentage, the reserve requirement shall
be as set forth in Regulation D without benefit or credit for prorations,
exemptions or offsets under Regulation D, and further, without regard to
whether or not Lender elects to actually fund the Revolving Loans with LIBOR
liabilities. Lender, at its sole option, may elect, from time to time, to waive
application of the Reserve Percentage on specified maturities.
"LOAN" means an extension of credit under the Term Loan or
the Revolving Credit Loan.
"LOAN DOCUMENTS" means, collectively, each written agreement
executed and delivered by any ARC Entity to Lender relating to the Revolving
Credit Loan, whenever delivered, and each written agreement executed and
delivered by any ARC Entity to Lender or FUNB-NC relating to the transactions
evidenced by the Reimbursement Agreement.
"MATERIAL ADVERSE CHANGE" means any material and adverse
change in the business, Properties, or operations of Borrower or Trinity
individually or of the ARC Entities on a consolidated basis.
"MATERIAL ADVERSE EFFECT" means any event or condition which,
singly or in the aggregate with other events or conditions, materially and
adversely affects the business, Properties, or operations of Borrower or
Trinity individually or of the ARC Entities on a consolidated basis.
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"OBLIGATIONS" means all present and future debts and other
obligations of Borrower to Lender, whether arising by contract, tort, guaranty,
overdraft, or otherwise; whether or not the advances or events creating such
debts or other obligations are presently foreseen; and regardless of the class
of the debts or other obligations, be they otherwise secured or unsecured.
Without limiting the foregoing, the "Obligations" specifically includes the
obligations of Borrower under this Agreement and the other Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED DISTRIBUTION" means distributions made to
Borrower's or Trinity's partners in the absence of any Event of Default or
Unmatured Default hereunder or any default or unmatured default by any ARC
Entity under any other obligation respecting borrowed money and shall in all
circumstances be limited to (i) for any fiscal quarter, the amount of net
income for that fiscal quarter plus depreciation, amortization and other
non-cash charges, less the principal component of debt service (including debt
service escrow payments, current maturities of long-term debt and current
maturities of Capital Lease obligations due and payable within that quarter),
and less capital expenditures of $500 per unit owned by the ARC Entity making
the distribution (whether or not actually expended), and (ii) the ARC Entities
will further be permitted to distribute excess cash in an amount up to
$2,000,000 consisting of cash collateralizing letter of credit obligations in
an amount of approximately $1,575,000 and an additional amount not to exceed
$425,000. The ARC Entities will also be permitted to distribute amounts
available as a result of Lender-approved asset sales or refinancings (subject
in each case to the overriding limitation that there exists no default or
unmatured default by any ARC Entity under any obligation respecting borrowed
money). The calculation described in subsection (i) of this definition shall be
made at the end of any fiscal quarter for the quarter just ended. Any Permitted
Distribution calculated under subsection (i) may be paid at any time during the
12 months following the end of the quarter for which it was permitted. The term
"Permitted Distribution" shall additionally include any cash distribution made
on account of any partnership or shareholder interest from any ARC Entity
(other than Trinity) to any ARC Entity (other than ARC, L.L.C.).
"PERMITTED ENCUMBRANCES" means all of the following:
(a) Encumbrances securing the payment of any of
the Obligations.
(b) Encumbrances securing taxes, assessments,
or other governmental charges not yet due
or which are being contested in good faith
by appropriate action promptly initiated
and diligently conducted, if Borrower has
made reserve therefor as required by GAAP.
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(c) Mechanics', repairmen's, materialmen's,
warehousemen's and other like liens arising
by operation of law securing accounts that
are not delinquent.
(d) Encumbrances on real property used by
Borrower not securing monetary obligations,
provided that the Encumbrances are of a
type customarily placed on real property
and do not materially impair the value of
the affected property.
(e) Pledges or deposits in the ordinary course
of business to secure nondelinquent
obligations under workman's compensation or
unemployment laws or similar legislation or
to secure the performance of leases or
contracts entered into in the ordinary
course of business.
(f) Encumbrances described on the attached
Schedule 1.
"PERSON" means any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government, governmental agency or political subdivision thereof,
or any other form of entity.
"PLAN" means any employee benefit or other plan established
or maintained, or to which contributions have been made, by Borrower or any
Subsidiary and covered by Title IV of ERISA or to which Section 412 of the IRC
applies.
"PRIME RATE" shall be that rate announced by Lender from time
to time as its Prime Rate and is one of several interest rate bases used by
Lender. Lender lends at rates both above and below Lender's Prime Rate and
Borrower acknowledges that Lender's Prime Rate is not represented or intended
to be the lowest or most favorable rate of interest offered by Lender.
"PRIME RATE LOAN" means a Loan for which Borrower has elected
application of an interest rate based on the Prime Rate.
"PROPERTY" or "PROPERTIES" means any interest in any kind of
property, whether real, personal, or mixed, or tangible or intangible.
"REIMBURSEMENT AGREEMENT" means the Reimbursement Agreement
of even date herewith executed by Borrower in favor of Lender and FUNB-NC,
pursuant to which the Richmond Place Letter of Credit has been issued.
"REVOLVING CREDIT LOAN" has the meaning assigned in Article
II hereof.
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"REVOLVING CREDIT NOTE" means the Revolving Credit Note made
by Borrower dated the date of this Agreement in the maximum principal amount of
Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) in the
form attached hereto as Exhibit A and all modifications, amendments,
extensions, renewals and restatements thereof.
"REVOLVING LOAN" means a Loan advanced under the Revolving
Credit Loan.
"RICHMOND PLACE LETTER OF CREDIT" means the Irrevocable
Direct Pay Letter of Credit issued by FUNB-NC for the account of Borrower to
Third National Bank in Nashville as Trustee under the Trust Indenture dated as
of April 1, 1987, as amended and restated as of November 1, 1994, governing the
issuance of the Lexington-Fayette Urban County Government Residential
Facilities Refunding Revenue Bonds (Richmond Place Associates, L.P. Project)
Series 1987.
"SOLVENT" shall mean, as to any Person, that as of any date
of determination, (i) the then fair value of the assets of such Person is (a)
greater than the then total amount of liabilities (including subordinated
liabilities) of such Person and (b) greater than the amount that will be
required to pay such Person's probable liability on such Person's then existing
debts as they become absolute and matured, (ii) such Person's capital is not
unreasonably small in relation to its business, and (iii) such Person does not
intend to incur, or believe or reasonably should believe that it will incur,
debts beyond its ability to pay such debts as they become due.
"SUBSIDIARY" means any present or future corporation,
partnership or other entity at least a majority of whose outstanding voting
stock shall at the time be owned directly or indirectly by Borrower, by one or
more Subsidiaries of Borrower or a combination thereof, or any partnership in
which Borrower or a Subsidiary of Borrower is a general partner.
"TAXES" means all taxes and assessments whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, which at any
time may be assessed, levied, confirmed or imposed on Borrower or on any of its
properties or assets or any part thereof or in respect of any of its
franchises, businesses, income or profits.
"TERM LOAN" has the meaning assigned in Article II hereof.
"TERM LOAN NOTE" means the Term Loan Note made by Borrower
dated the date of this Agreement in the maximum principal amount of Two Million
and No/100 Dollars ($2,000,000.00) in the form attached hereto as Exhibit B and
all modifications, amendments, extensions, renewals and restatements thereof.
"TRINITY" means Trinity Towers Limited Partnership, a
Tennessee limited partnership.
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"UCC" means the Uniform Commercial Code as adopted in
Tennessee, as it may be amended from time to time.
"UNMATURED DEFAULT" means any event or condition that, but
for the giving of any required notice by Lender and/or the passing of time,
would be an Event of Default hereunder.
II. LOANS
2.1 Revolving Credit Loan. Concurrently with the execution of
this Agreement, Lender shall make a Revolving Credit Loan (the "Revolving
Credit Loan") available to Borrower under the following terms:
2.1.1 Amount of Revolving Credit Loan. The
principal indebtedness of Borrower to Lender under the
Revolving Credit Loan shall not exceed Two Million Five
Hundred Thousand and No/100 Dollars ($2,500,000.00);
provided, however, that until the closing of the contemplated
loan transaction between Lender and Trinity described in the
Commitment Letter, Borrower's availability under the
Revolving Credit Loan shall be limited to $800,000 (including
the $500,000 letter of credit described in the immediately
succeeding subparagraph).
2.1.2 Use of Proceeds of Revolving Credit Loan. The
proceeds of Revolving Loans shall be used by Borrower for
general working capital needs, and the issuance of letters of
credit. All letters of credit issued by Lender for any ARC
Entity's account (including, but not limited to, the existing
$500,000 letter of credit in favor of Reliance National
Indemnity Company) shall be regarded as Loans outstanding
under the Revolving Credit Loan for the purpose of
determining the remaining availability under the Revolving
Credit Loan.
2.1.3 Revolving Credit Note. Borrower's obligations
under the Revolving Credit Loan shall be evidenced by the
Revolving Credit Note.
2.2 Term Loan. Concurrently with the execution of this
Agreement, Lender shall make a Term Loan (the "Term Loan") available to
Borrower under the following terms:
2.2.1 Amount of Term Loan. The original principal
indebtedness of Borrower to Lender under the Term Loan shall
be Two Million and No/100 Dollars ($2,000,000.00).
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2.2.2 Use of Proceeds of Term Loan. The proceeds of
the Term Loan shall be used by Borrower to refinance the
obligations of Borrower to Lender under that Promissory Note
made by Borrower dated June 23, 1995 payable to the order of
Lender in the original principal amount of Two Million and
No/100 Dollars ($2,000,000.00).
2.2.3 Term Loan Note. Borrower's obligations under
the Term Loan shall be evidenced by the Term Loan Note.
2.3 Advances of Revolving Loans. Subject to the terms and
conditions of this Agreement, Borrower may from time to time request and repay
Revolving Loans, provided that the total principal amount outstanding under the
Revolving Credit Loan shall not at any time exceed the amount provided in
Section 2.1.1 above. Revolving Loans shall be disbursed as follows:
2.3.1 Revolving Loans Advanced Pursuant to Cash
Management Account. Borrower may have in effect from time to
time separate agreements with depository institutions
establishing cash management procedures ("Account
Agreements") that may involve the automatic disbursement of
amounts available under the Revolving Credit Loan. If Lender
or its Affiliates serve as depository institutions under
Account Agreements, they may use standardized forms for
Account Agreements that do not address the specific
circumstances of the Revolving Credit Loan. To resolve
potential inconsistencies between this Agreement and Account
Agreements, the terms of this Agreement and of Account
Agreements entered into by Lender or its Affiliates shall
relate to one another as follows:
2.3.1(a) Funding and Payment
Procedures Controlled by Account Agreements. The
Account Agreements shall control this Agreement as
to (i) Section 2.3.2 hereof regarding funding
procedures, and (ii) Interest Payment Dates, to the
extent that an Account Agreement may provide for
such payment more frequently than otherwise
required under this Agreement.
2.3.1(b) Certain Provisions
Controlled by this Agreement. Notwithstanding any
provision of an Account Agreement to the contrary,
except as provided above in Section 2.3.1(a), the
provisions of this Agreement shall control any
Account Agreement to the extent that an Account
Agreement may be inconsistent with this Agreement.
Without limiting the foregoing, Borrower
acknowledges that Article III hereof shall remain
in full effect notwithstanding any provision
contained in an Account Agreement. Accordingly, and
without limiting any other provision of this
Agreement, Borrower
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acknowledges that Lender shall have no obligation to
make Revolving Loans under the Revolving Credit Loan
after the occurrence of an Unmatured Default or an
Event of Default under this Agreement or to allow
balances to remain in Borrower's account after the
occurrence of an Event of Default hereunder.
Therefore, while an Unmatured Default is outstanding
under this Agreement, Lender or its Affiliate may
dishonor any item presented for payment on the
applicable account that is not funded by the amount
of collected balance then available in Borrower's
account. Additionally, after the occurrence of an
Event of Default, Lender may apply balances in
Borrower's account(s) to the Obligations and may
dishonor any item presented for payment on
Borrower's account. Lender's right to dishonor items
may be exercised without any liability whatsoever
and shall apply regardless of when the item
dishonored may have been issued by Borrower.
2.3.1(c) Continuing Warranty Under Account
Agreements. Because Account Agreements may provide
for the making of Revolving Loans without formal
draw requests from Borrower, Borrower agrees that
Borrower's warranty under Section 2.3.5 hereof as to
the satisfaction of all conditions to the right to
receive Revolving Loans shall be a continuing one
during any period that such an Account Agreement may
be in effect. Therefore, any Revolving Loans funded
by Lender pursuant to an Account Agreement after the
failure of a condition stated in Article III hereof
shall be deemed made upon the affirmative
misrepresentation of Borrower unless Lender has
received written notice of and waived the failed
condition in writing. Lender may terminate any
Account Agreement upon ten (10) days written notice
to Borrower or upon such lesser notice as may be
provided in any Account Agreement.
2.3.1(d) Prime Rate Loans. All Revolving
Loans made as advances pursuant to Account
Agreements shall be Prime Rate Loans.
2.3.2 Revolving Loans Advanced Other Than Pursuant
to Cash Management Account.
2.3.2(a) Applicability. Except for
Revolving Loans made pursuant to Account Agreements,
which shall be Prime Rate Loans, Revolving Loans
advanced hereunder may be LIBOR Loans, Prime Rate
Loans, or a combination thereof and the funding
thereof shall be subject to this Section 2.3.2.
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2.3.2(b) Borrowing Notices. As long as
Borrower meets the conditions for funding stated in
this Agreement, Borrower may submit requests for
Revolving Loans ("Borrowing Notices") to Lender's
representatives by telephone at 615-251-9365 or such
other telephone number as Lender may advise Borrower
from time to time. All requests shall be subject to
any applicable security procedures that Lender may
have in effect from time to time, shall be submitted
or confirmed promptly in writing, and shall specify
the requested date of the requested disbursement;
the aggregate amount of such disbursement; the type
of Revolving Loan, i.e., LIBOR Loan or Prime Rate
Loan; and if a LIBOR Loan, the designated Interest
Period. Each Borrowing Notice shall irrevocably
obligate Borrower to accept the Revolving Loan
requested thereby. No draw shall be requested in an
amount less than $100,000.
2.3.2(c)Funding of Revolving Loans. Lender
shall fund Prime Rate Loans so requested on the same
Business Day if the request is received before 1:00
p.m. local time in Nashville, Tennessee, and on the
succeeding Business Day if received after that time.
Lender shall fund LIBOR Loans so requested on the
third Business Day after receipt if the Borrowing
Notice is received before 1:00 p.m. local time in
Nashville, Tennessee, and on the fourth succeeding
Business Day if received after that time. All funds
shall be disbursed directly into an account
maintained by Borrower with Lender. Borrower agrees
that if Lender elects to fund any requested
Revolving Loan(s) sooner after requested than is
required of Lender hereunder, Lender may
nevertheless use the entire response period allowed
hereunder upon receipt of any subsequent request, at
Lender's sole option.
2.3.3 Additional Limitations on Loans.
2.3.3(a) Prime Rate Loan Limitations. Individual
Prime Rate Loans may be in any amount. Any number of
Prime Rate Loans may be outstanding at any one time.
2.3.3(b) LIBOR Loan Limitations. Individual LIBOR
Loans shall each be in the minimum amount of
$100,000.00. No more than a total of six (6) LIBOR
Loans may be outstanding at any one time under this
Agreement and under any document evidencing
Lender's credit relationship with Trinity.
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2.3.3(c) Additional Limitation on LIBOR Interest
Periods. No Interest Period may be selected for any
LIBOR Loan that would end later than the maturity
date of the applicable facility.
2.3.4 Conversion of Loans. Borrower shall have the right at
any time, on prior irrevocable written notice to Lender not
later than 1:00 p.m. local time in Nashville, Tennessee,
three (3) Business Days prior to the date of any requested
conversion, to convert any Prime Rate Loan or LIBOR Loan into
a Loan of another type, or to continue any LIBOR Loan for
another Interest Period (specifying in each case the
applicable Interest Period), subject in each case to the
following;
2.3.4(a) Application of Converted Loans.
Each conversion shall be effected by applying the
proceeds of the new LIBOR and/or Prime Rate Loan, as
the case may be, to the Loan (or portion thereof)
being converted.
2.3.4(b) Notices of Conversions. Each
notice pursuant to this Section shall be irrevocable
and shall refer to this Agreement and specify (i)
the identity and principal amount of the particular
Loan that Borrower's request be converted or
continued, (ii) if such notice requests conversion,
the date of such conversion (which shall be a
Business Day), and (iii) if a Loan is to be
converted to a LIBOR Loan or a LIBOR Loan is to be
continued, the Interest Period with respect thereto.
No LIBOR Loan shall be converted at any time other
than at the end of the Interest Period applicable
thereto. In the event that Borrower shall not give
notice to continue any LIBOR Loan for a subsequent
period, such LIBOR Loan (unless repaid) shall
automatically be converted into a Prime Rate Loan.
If Borrower fails to specify in any Borrowing Notice
the type of borrowing or, in the case of a LIBOR
Loan, the applicable Interest Period, Borrower will
be deemed to have requested a Prime Rate Loan.
2.3.5 Implied Representations Upon Request for
Revolving Loan. Upon making any request for a Revolving Loan,
Borrower shall be deemed to have warranted to Lender that all
conditions to funding are satisfied as of the submission of
the request to Lender.
2.3.6 Advance Not Waiver. Lender's making of any
Loan that it is not obligated to make under any provision of
Article III hereof or any other provision hereof shall not be
construed as a waiver of Lender's right to withhold future
Loans, declare an Event of Default, or otherwise demand
strict compliance with this Agreement.
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2.3.7 Draws by Debit Memorandum. Lender may draw
amounts available under the Revolving Credit Loan to pay any
Obligation that is not otherwise timely paid.
2.4 Interest. Interest shall be charged and paid on each Loan
as follows:
2.4.1 Revolving Credit Loan. Loans advanced under the Revolving Credit
Loan may be Prime Rate Loans or LIBOR Loans, as elected by Borrower.
2.4.2 Term Loan. The Term Loan may constitute a single Prime Rate Loan
or LIBOR Loan or, if elected by Borrower from time to time, a portion thereof
may be designated as a Prime Rate Loan and the balance designated as a single
LIBOR Loan. Additionally, should Borrower wish to convert the Term Loan to a
fixed rate loan, Lender shall quote a rate at which Lender would be willing to
agree to this conversion on one occasion during the term of the Term Loan.
2.4.3 Prime Rate Loans. Interest shall accrue on
Prime Rate Loans at an annual rate equal to fifty basis
points (.5%) above the Prime Rate, said rate to change
contemporaneously with any change in the Prime Rate.
2.4.4 LIBOR Loans. Interest shall accrue on LIBOR
Loans at a rate equal to the Adjusted LIBOR Rate for the
selected Interest Period plus two hundred fifty basis points
(2.50%); provided, however, in the event, and on each
occasion, that on the date of commencement of any Interest
Period for a LIBOR Loan, Lender shall have determined, in its
sole discretion, that LIBOR funds are not available to it,
then Lender's obligation to make, maintain or convert into a
LIBOR Loan shall be suspended until such time as Lender shall
have concluded that the circumstances giving rise to such
suspension no longer exist. Upon a determination of
unavailability of LIBOR funds as set out above, Lender shall,
until notice to the Borrower that the circumstances giving
rise to the suspension of availability of the LIBOR Rate no
longer exist, charge interest on all Loans as Prime Rate
Loans. Each determination by Lender hereunder as to the
availability of the LIBOR Rate shall be conclusive absent
manifest error.
2.4.5 Calculation of Interest. Interest for both
Prime Rate Loans and LIBOR Loans shall be computed on the
basis of a 360-day year counting the actual number of days
elapsed.
2.4.6 Payment of Interest. Interest for both Prime
Rate Loans and LIBOR Loans shall be due and payable in
arrears without notice on each Interest Payment Date.
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2.4.7 Default Rate. Notwithstanding the foregoing,
upon the occurrence of an Event of Default and during the
continuation of such Event of Default until it is cured or
waived, interest shall be charged at the Default Rate,
regardless of whether Lender has elected to exercise any
other remedies available to Lender, including, without
limitation, acceleration of the maturity of the outstanding
principal of the Revolving Credit Loan and Term Loan. All
such interest shall be paid at the time of and as a condition
precedent to the curing of any such Event of Default to the
extent any right to cure is given in this Agreement.
2.4.8 Usury Savings Provision. It is the intention
of the parties that all charges under or in connection with
this Agreement and the Obligations, however denominated, and
including (without limitation) all interest, commitment fees,
late charges and loan charges, shall be limited to the
maximum lawful amount that may be assessed under Tennessee
law or, if higher, applicable federal law. Such charges shall
be characterized and all provisions of the Loan Documents
shall be construed as to uphold the validity of charges
provided for therein and, all such charges shall be spread
over the entire term of the Loans to the extent permitted by
law. If for any reason whatsoever, however, any charges paid
or contracted to be paid in respect of the Revolving Credit
Loan or Term Loan shall exceed the maximum amounts
collectible under applicable laws in effect from time to
time, then, ipso facto, the obligation to pay such interest
and/or other charges shall be reduced to the maximum lawful
amount in effect from time to time, and any amounts collected
by Lender that exceed the maximum lawful amount shall be
applied to the reduction of the principal balance of the
Revolving Credit Loan or Term Loan and/or refunded to
Borrower so that at no time shall the interest or loan
charges paid or payable in respect of the Revolving Credit
Loan or Term Loan exceed the maximum lawful amount. This
provision shall control every other provision herein and in
any and all other agreements and instruments now existing or
hereafter arising between Borrower and Lender with respect to
the Loans.
2.5 Principal Repayment.
2.5.1 Revolving Credit Loan. All remaining principal
outstanding under the Revolving Credit Loan shall become due
on October 31, 1996.
2.5.2 Term Loan. Payments of principal shall be made
under the Term Loan in the amount of One Hundred Thousand and
No/100 Dollars ($100,000.00) each due on the 10th day of each
January, April, July and October until October 31, 1997, when
all remaining principal, interest and expenses shall become
due.
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2.6 Fees.
2.6.1 Revolving Credit Loan Commitment Fee.
Concurrently with the execution hereof, Borrower shall pay
the balance due of the Twelve Thousand Five Hundred and
No/100 Dollars ($12,500.00) commitment fee provided for by
the Commitment Letter as a commitment fee for the Revolving
Credit Loan.
2.6.2 Term Loan Commitment Fee. Concurrently with
the execution hereof, Borrower shall pay the balance due of
the Ten Thousand and No/100 Dollars ($10,000.00) commitment
fee provided for by the Commitment Letter as a commitment fee
for the Term Loan.
2.6.3 Letter of Credit Fees. Borrower will pay a
letter of credit fee equal to 1.15% per annum of the face
amount of any letter of credit issued under the Revolving
Credit Loan, payable annually in advance. Borrower shall also
pay Lender's standard administrative fees upon the issuance
of any such letter of credit.
2.7 Prepayment of Prime Rate Loans. Borrower may at any time prepay
any outstanding Prime Rate Loans in whole or in part without premium or
penalty.
2.8 Prepayment of LIBOR Loans. Prepayment of a LIBOR Loan shall not be
permitted; provided, however, in the event that Lender receives a prepayment of
principal from Borrower on other than those dates specified by the Loan
Agreement such that the prepayment must apply to a LIBOR Loan, or if Borrower
elects to terminate a LIBOR Loan before its stated maturity date, and Lender,
at its sole option in either case, elects to permit such prepayment, Borrower
shall pay to Lender on demand any amounts required to compensate Lender for any
losses, costs or expenses which it may incur as a result of such prepayment or
election (including, but not limited to, reinvestment costs). Compensation due
Lender as reinvestment costs shall be determined in accordance with the
following formula:
PREPAYMENT COMPENSATION = (A - B) X C X D
A = The LIBOR Rate determined as of the funding date
of the advance, on a per annum basis for deposits in
United States Dollars for a term equal to the term
of the LIBOR Loan being prepaid (the "Applicable
Term") which appeared on the Telerate Page 3750 at
11:00 a.m. London time two Business Days prior to
the effective date of the applicable LIBOR Rate, as
such rate was adjusted in accordance with Lender's
standard practices for reserves and other
requirements.
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B = The LIBOR Rate determined as of the prepayment
date on a per annum basis for deposits in United
States Dollars for the Applicable Term which
appeared on the Telerate Page 3750 at 11:00 a.m.
London time on such date, as such rate is adjusted
in accordance with Lender's standard practices for
reserves and other requirements.
C = Principal amount prepaid.
D = Number of days from the date of prepayment to the
end of the Fixed-Rate Period divided by a year base
of 360 days.
As used herein, the "Fixed-Rate Period" shall be the period during which the
applicable LIBOR Rate is to remain in effect. In addition, in the event the
amount determined as variable B above is greater than the amount determined as
variable A above, no prepayment compensation shall be due hereunder. The
determination of prepayment compensation due Lender hereunder shall be made by
Lender in good faith using such methodology as Lender deems appropriate and
customary under the circumstances and shall be conclusive absent manifest
error.
2.9 Prepayment of Term Loan. If Borrower elects at any time
to convert the Term Loan to a fixed rate loan, a prepayment fee shall be
assessed on any prepayment. Such prepayment fee shall be based on a prepayment
compensation formula to be negotiated prior to conversion in form and substance
satisfactory to Lender.
2.10 Additional Costs. If, at any time, a change in any law,
regulation, or reserve requirement applicable to this Agreement or
interpretation or administration of the same by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any reversal by such entities of an interpretation
by Lender as to compliance with such law or regulation impose, increase, or
modify any reserve, and the result of any of the foregoing is to increase the
cost to Lender of maintaining its commitment to make LIBOR Loans by an amount
deemed by Lender in its sole discretion to be material, then within fifteen
(15) days after demand by Lender the Borrower agrees to pay to Lender such
additional amount or amounts as will compensate Lender for such increased cost
related to Lender's commitment to make LIBOR Loans hereunder. A certificate of
Lender setting forth such amount or amounts as shall be necessary to compensate
Lender (or its participating banks or other entities) for such additional costs
shall be delivered to Borrower and shall be conclusive absent manifest error.
III. CONDITIONS PRECEDENT
3.1 Conditions to Initial Advance. Lender shall not be
obligated to make its initial Loan pursuant to this Agreement unless and until
Borrower provides Lender with
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the following documents, all fully executed by all appropriate parties and in
form and substance satisfactory to Lender and its counsel (Lender may accept
certain of the following requirements as satisfied for the purpose hereof by
the documents provided by Borrower in connection with the Prior Loan
Agreement):
3.1.1 This Agreement.
3.1.2 The Revolving Credit Note.
3.1.3 The Term Loan Note.
3.1.4 UCC Financing Statements to be filed at the
office of the Tennessee Secretary of State and such other
offices as Lender may require.
3.1.5 Collateral Assignment of Contract Rights in
all management contracts and associated receivables owned by
ARCM, accompanied by such third-party consents as Lender may
require.
3.1.6 Collateral Assignment of Promissory Note
granting Lender a first priority perfected security interest
in a promissory note executed by ARC in favor of ARC, L.P. in
the original principal amount of Two Million and No/100
Dollars ($2,000,000.00).
3.1.7 Deed of Trust on certain unimproved property
located in Williamsburg, Virginia and owned by ARC, together
with land survey, environmental survey, title insurance and
other diligence matters as Lender may require.
3.1.8 Unlimited Guaranties by each of the ARC
Entities other than Borrower.
3.1.9 Stock Pledge granting a first priority
perfected pledge of 100% of the outstanding stock of the
corporate ARC Entities (not including ARC, LLC). If such
pledge is precluded by the primary debt instruments
evidencing or securing obligations of any of the ARC
Guarantors to their primary lenders, Lender will agree to
waive this requirement in such cases, provided that in any
event Lender must receive pledges in the stock of ARC, ARCM,
ARC Equities-Lexington, Inc. and ARC Corpus Christi, Inc.
3.1.10 Opinions of Borrower's Counsel addressed to
Lender, addressing matters reasonably required by Lender.
3.1.11 Evidence of insurance as required by this
Agreement.
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3.1.12 Such Corporate and Partnership Diligence
materials as Lender may require, including but not limited to
partnership agreements, corporate charters, authorizing
resolutions, certificates of existence, and certified copies
of Medicare provider contracts bearing the ARC Entities'
provider numbers.
3.1.13 Such other documents as Lender may reasonably
require.
3.1.14 Consummation of the Transactions evidenced by
the Reimbursement Agreement.
3.2 Conditions to Subsequent Revolving Loans. Lender shall
not be obligated to make any Revolving Loan unless all of the following
conditions are satisfied as of the time of the request and of funding:
3.2.1 Conditions to Initial Advance. All of the
conditions in Section 3.1 hereof must have been satisfied.
3.2.2 Warranties. All warranties made in the Loan
Documents must be true as of the dates of the Borrowing
Notice and as of the date of funding thereof, except such
warranties as, by their terms, speak of a specific date.
3.2.3 Covenants. All covenants made in the Loan
Documents must have been complied with as of the dates of the
Borrowing Notice and funding thereof.
3.2.4 Absence of Unmatured Default. No Event of
Default or Unmatured Default shall exist under this
Agreement.
3.2.5 Material Adverse Change. There shall not have
occurred a Material Adverse Change.
IV. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that, as of the
Closing Date:
4.1 Capacity. Each ARC Entity is a limited partnership or
corporation, as applicable, duly organized, validly existing and in good
standing under the laws of the State of Tennessee. Each ARC Entity is qualified
or authorized to do business in all jurisdictions in which its ownership of
property or conduct of business requires such qualification or authorization.
Each ARC Entity has the power and authority to own its Properties and to carry
on its business as now being conducted and as proposed to be conducted after
the
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execution hereof, to execute and deliver this Agreement and the other Loan
Documents, and to perform its obligations hereunder and under the other Loan
Documents.
4.2 Authorization. Each ARC Entity's execution, delivery and
performance of this Agreement and the other Loan Documents, as applicable, have
been duly authorized by all requisite partnership and corporate action.
4.3 Binding Obligations. This Agreement is and the other Loan
Documents, when executed and delivered to Lender, will be, legal, valid and
binding upon each ARC Entity, enforceable in accordance with their respective
terms, subject only to principles of equity and laws applicable to creditors
generally, including bankruptcy laws.
4.4 No Conflicting Law or Agreement. Each ARC Entity's
execution, delivery and performance of the Loan Documents do not constitute a
breach of or default under, and will not violate or conflict with, any
provisions of the corporate charter of any ARC Entity; any contract, financing
agreement, lease, or other agreement to which any ARC Entity is a party or by
which its Properties may be affected; or any Law to which any ARC Entity is
subject or by which its Properties may be affected; nor will the same result in
the creation or imposition of any Encumbrance upon any Properties of any ARC
Entity, other than those contemplated by the Loan Documents.
4.5 No Consent Required. Each ARC Entity's execution,
delivery, and performance of this Agreement and the other Loan Documents do not
require the consent or approval of or the giving of notice to any Person except
for those consents which have been duly obtained and are in full force and
effect on the date hereof.
4.6 Financial Statements. The Financial Statements are
complete and correct, have been prepared in accordance with GAAP, and present
fairly the financial condition and results of operations of the ARC Entities as
of the date and for the period stated therein, subject to year-end adjustments.
No Material Adverse Change has occurred since the date of the Financial
Statements. Borrower acknowledges that Lender has advanced (or shall advance)
the Loans in reliance upon the Financial Statements.
4.7 Fiscal Year. Each ARC Entity's fiscal year ends on
December 31 of each year.
4.8 Litigation. Except as disclosed on Schedule 4.8 hereto,
there is no litigation, arbitration, legal or administrative proceeding, tax
audit, investigation, or other action or proceeding of any nature pending or,
to the knowledge of Borrower, threatened against, likely to be instituted
against or affecting any ARC Entity or any of its Properties, except any such
proceeding involving only a claim for money damages less than $100,000. No ARC
Entity is subject to any outstanding court, arbitral or administrative order,
writ or injunction. To the best of Borrower's knowledge, information and
belief, no facts exist under
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which third parties have unasserted claims against any ARC Entity that would
involve a claim for injunctive relief or payment of money damages in excess of
$100,000.
4.9 Taxes; Governmental Charges. Each ARC Entity has filed or
caused to be filed all tax returns and reports required to be filed. Each ARC
Entity has paid, or made adequate provision for the payment of, all Taxes that
have or may have become due pursuant to such returns or otherwise, or pursuant
to any assessment received by Borrower, except such Taxes, if any, as are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided. Borrower knows of no proposed material tax
assessment against any ARC Entity. No extension of time for the assessment of
federal, state or local taxes of borrower is in effect or has been requested,
except as disclosed in the Financial Statements. Each ARC Entity has timely
made all required remittances of withholding deposits and other assessments
against payroll expenditures.
4.10 Title to Properties. Each ARC Entity has good and
marketable title to its Properties, free and clear of all Encumbrances except
for Permitted Encumbrances.
4.11 No Default. No ARC Entity is in default in any respect
that affects its business, Properties, operations, or condition, financial or
otherwise, under any document evidencing an obligation for the repayment of
borrowed money. No ARC Entity is in default in any respect under any other
instrument to which any ARC Entity is a party or by which its Properties are
bound, except to the extent that such default could not reasonably be expected
to have a Material Adverse Effect. To the best of Borrower's knowledge,
information and belief, no other party to any contract with any ARC Entity is
in default or breach thereof and no circumstances exist which, with the giving
of notice and/or the passing of time would constitute such default or breach.
No Event of Default or Unmatured Default exists under this Agreement.
4.12 Casualties; Taking of Properties. Neither the business
nor the Property of any ARC Entity is presently impaired as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of property,
cancellation of contracts, permits, concessions by any domestic or foreign
government or any agency thereof, riot, activities of armed forces or acts of
God or of any public enemy.
4.13 Compliance with Laws. No ARC Entity is in violation of
any Law to which any ARC Entity, its business or any of its Properties are
subject, the violation of which would likely have a Material Adverse Effect,
and there are no outstanding citations, notices or orders of noncompliance
issued to any ARC Entity under any such Law, the violation of which would
likely have a Material Adverse Effect. Each ARC Entity has obtained all
licenses, permits, franchises, or other governmental authorizations necessary
to the ownership of its Properties or to the conduct of any ARC Entity's
business.
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4.14 ERISA. No ERISA Event has occurred with respect to any
Plan or is reasonably expected to occur with respect to any Plan.
4.15 Full Disclosure of Material Facts. Borrower has fully
advised Lender of all matters involving Borrower's, Trinity's and the
consolidated ARC Entities' financial condition, business, operations,
Properties or industry that would be reasonably expected to have a Material
Adverse Effect. No information, exhibit, or report furnished or to be furnished
by Borrower to Lender in connection with this Agreement contains, as of the
date thereof, any misrepresentation of fact or failed or will fail to state any
material fact, the omission of which would render the statements therein
materially false or misleading.
4.16 Accuracy of Projections. With respect to all business
plans and other forecasts and projections furnished by or on behalf of Borrower
and made available to Lender relating to the financial condition, business,
operations, Properties or prospects of the ARC Entities, to the best of
Borrower's knowledge, information and belief, all facts stated as such therein
are true and complete in all material respects and all estimates and
assumptions were made in good faith and believed to be reasonable at the time
made.
4.17 Investment Company Act. No ARC Entity is an "investment
company" under the Investment Company Act of 1940, as amended.
4.18 Personal Holding Company. No ARC Entity is a "personal
holding company" as defined in Section 542 of the IRC.
4.19 Solvency. Each ARC Entity is Solvent as of the Closing
Date and will remain Solvent upon the consummation of the transactions
contemplated hereby.
4.20 Chief Executive Office. The address designated herein to
which notices are to be sent under this Agreement is the chief executive office
for each ARC Entity within the meaning of Tennessee Code Annotated Section
47-9-103(3)(d).
4.21 Subsidiaries. No ARC Entity has any Subsidiaries other
than those depicted in the organizational chart attached as Schedule 4.21
hereof.
4.22 Ownership of Patents, Licenses, Etc. Each ARC Entity
owns all licenses, permits, franchises, registrations, patents, copyrights,
trademarks, trade names or service marks, or the rights to use the foregoing,
that are necessary for the continued operation of its business.
4.23 Environmental Compliance. Each ARC Entity has duly
complied with, and its Properties are owned and operated in compliance with,
all Environmental Laws, the violation of which would have a Material Adverse
Effect. There have been no citations, notices or orders of non-compliance
issued to any ARC Entity or, to Borrower's knowledge,
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relating to any ARC Entity's business or Properties pursuant to any
Environmental Law. Each ARC Entity has obtained all required federal, state and
local licenses, certificates or permits relating to it and its Properties as
required by applicable Environmental Laws.
4.24 Labor Matters. No ARC Entity is subject to any
collective bargaining agreements or any agreements, contracts, decrees or
orders requiring it to recognize, deal with or employ any Person. No demand for
collective bargaining has been asserted against any ARC Entity by any union or
organization. No ARC Entity has experienced any strike, labor dispute, slowdown
or work stoppage due to labor dispute and, to the best knowledge of Borrower,
there is no such strike, dispute, slowdown or work stoppage threatened against
any ARC Entity. Each ARC Entity is in compliance in all material respects with
the Fair Labor Standards Act of 1938, as amended.
4.25 OSHA Compliance. Each ARC Entity is in compliance in all
material respects with the Federal Occupational Safety and Health Act, as
amended, and all regulations under the foregoing.
4.26 Regulation U. No ARC Entity is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System). No proceeds of any Revolving Loan will be used to
purchase or carry any margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System) in violation of
applicable law, including, without limitation, Regulation U issued by the Board
of Governors of the Federal Reserve System.
V. AFFIRMATIVE COVENANTS
Borrower covenants that, during the term of this Agreement
(and thereafter where expressly stated herein), it will observe and cause the
other ARC Entities to observe the following covenants:
5.1 Payment of Obligations. Borrower shall pay all amounts
due under the Obligations when due.
5.2 Maintenance of Existence and Business. Except as
permitted by Section 6.11 hereof, each ARC Entity shall maintain its corporate
or partnership existence, name, rights, and franchises, and shall continue to
operate in the same type of business as it engages in as of the date hereof.
5.3 Financial Statements and Reports and Other Information.
Borrower shall furnish to Lender or cause Lender to receive all of the
following, all of which must be in form and substance satisfactory to Lender:
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5.3.1 Monthly Financial Reports. As soon as
available, and in any event by the 45th day following the end
of each month, Borrower shall deliver to Lender a
consolidated balance sheet, income statement and, beginning
on April 30, 1996, statement of cash flows, for and as of the
end of the preceding month. Additionally, Lender shall
receive consolidating financial statements for Borrower and
for Trinity, Fort Austin Limited Partnership, Holley Court
Terrace L.P. and ARC, as well as consolidating entries for
Richmond Place and Heritage Club. All such financial
statements shall be internally-prepared and certified by
Borrower's chief financial officer or other representative
chosen by Lender to be complete and correct and to present
fairly, in accordance with GAAP (excluding year-end
adjustments and required footnote disclosures), the financial
condition of such entities and their consolidated affiliates
as of the date of such statements and the results of their
operations for such period. The monthly financial reports
shall show comparisons to budget for Trinity, Richmond Place,
Holley Court Terrace L.P., Heritage Club and Fort Austin
Limited Partnership through March 31, 1996, and in addition,
on a consolidated basis beginning April 30, 1996.
Calculations of all financial ratios shall be included on
applicable reporting dates, and each monthly financial report
shall contain a certificate confirming that no Event of
Default or Unmatured Default exists hereunder.
5.3.2 Annual Financial Reports. As soon as
available, and in any event within 120 days after the end of
each fiscal year, Borrower shall deliver to Lender its
audited balance sheets as of the end of such year and the
related audited statements of income, retained earnings and
cash flows for such year, together with supporting schedules,
all such statements prepared in accordance with GAAP on a
consolidated basis and accompanied by an unqualified audit
report prepared by an independent certified public accountant
acceptable to Lender showing the financial condition of the
ARC Entities and their consolidated affiliates at the close
of such year and the results of their operations during such
year. The annual financial information shall include
calculations of all financial ratios as determined based upon
the audited financial statements. Annual unaudited
consolidating financial statements shall be delivered to
Lender concurrently with the audited financial statements
described herein. The unaudited statements shall be certified
as to accuracy and completeness by Borrower's chief financial
officer or other representative chosen by Lender. Lender
shall retain the right to require audited financial
statements on Trinity, in Lender's sole discretion, and to
the extent that any other debt instrument of any of the ARC
Entities requires that any such entity produce audited
financial statements, such audited statements shall be
delivered to Lender as well.
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5.3.3 Budgets. Prior to the beginning of each fiscal
year, Borrower shall provide Lender with consolidated and
consolidating budgets, including proposed capital
expenditures.
5.3.4 Licensure Reports. Promptly upon receipt
thereof, Borrower shall provide Lender with copies of all
regulatory and licensure inspection or audit reports for
Richmond Place and Trinity, and for any other ARC Entity as
requested.
5.3.5 Accountant Reports. Promptly upon the receipt
thereof, the ARC Entities shall deliver to Lender a copy of
each other report (other than work papers) submitted to any
of them or their consolidated affiliates by their accountants
in connection with any annual, interim or special audit made
by them. The ARC Entities shall also provide Lender with
copies of all management letters issued by their accountants.
5.4 Operating Data. Upon request, the ARC Entities will
provide Lender with operating statistics on any or all Properties owned by any
ARC Entity, including but not limited to occupancy reports.
5.5 Other Information. The ARC Entities shall provide
Lender with such additional information regarding the financial condition,
properties, operations and prospects of the ARC Entities and their consolidated
affiliates as Lender may reasonably require.
5.6 Certain Additional Reporting Requirements.
5.6.1 Owner Mailings. Promptly upon the sending
thereof, Borrower shall deliver to Lender a copy of each
statement, report or notice sent by any ARC Entity to its
partners or shareholders.
5.6.2 Notice to Lender Upon Perceived Breach.
Borrower agrees to give Lender prompt written notice of any
action or inaction by or on behalf of Lender in connection
with this Agreement or the Obligations that Borrower believes
may be actionable against Lender or a defense to payment of
any or all Obligations for any reason, including, but not
limited to, commission of a tort or violation of any
contractual duty or duty implied by law, in order to give
Lender the opportunity to mitigate any damages allegedly
arising therefrom.
5.6.3 Changes in Constituent Documents. Borrower
shall promptly notify Lender in writing of any change in the
partnership agreement, corporate charter or bylaws of any ARC
Entity, and shall provide Lender with a copy of such change
(the ARC Entities are restricted in the adoption of such
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amendments as provided elsewhere in the Loan Documents, and
nothing contained in this Section shall be deemed a waiver of
such restrictions).
5.6.4 Notice of Litigation. Borrower shall give
Lender prompt written notice of any litigation, arbitration,
tax audit, administrative proceeding or investigation that
may hereafter be instituted or threatened in writing in which
any ARC Entity would be a party or which otherwise may affect
any ARC Entity or any of its business, operations or
Properties, except for (i) actions seeking only monetary
damages in an amount of less than $100,000, and (ii) matters
arising from premises or vehicular liability seeking only
monetary damages and which are fully covered by insurance,
subject only to the applicable deductible.
5.6.5 Other Notices. Borrower shall promptly notify
Lender in writing if Borrower learns of the occurrence of (i)
any event that constitutes an Event of Default or an
Unmatured Default, together with a detailed statement of the
steps being taken as a result thereof, or (ii) any Material
Adverse Change.
5.7 Taxes and Other Encumbrances. Each ARC Entity shall make
due and timely payment or deposit of all federal, state and local taxes,
assessments or contributions required of it by law, and execute and deliver to
Lender, on demand, appropriate certificates attesting to the payment or deposit
thereof; provided, however, that no ARC Entity Borrower shall be required to
pay or discharge any such tax, assessment, charge or claim for as long as it is
being diligently contested in good faith by proper proceedings and for which
appropriate reserves are being maintained.
5.8 Payment of Debts. Each ARC Entity shall pay all of its
Debts as and when the same become due in accordance with their terms.
5.9 Compliance with Laws. Each ARC Entity shall observe and
comply with all Laws, and shall maintain all certificates, franchises, permits,
licenses, and authorizations necessary to the conduct of its business or the
operation of its Properties.
5.10 Maintenance of Property. Each ARC Entity shall maintain
its Property (and any Property leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable condition at all
times and make all repairs, replacements, additions, and improvements to its
Property reasonably necessary and proper to ensure that the business carried on
in connection with its Property may be conducted properly and efficiently at
all times. Without limiting the generality of the foregoing, the ARC Entities
shall take such measures as identified in the structural engineering reports
delivered to Lender to bring the Richmond Place Retirement Community and the
Trinity Towers Retirement Community into compliance with the Americans with
Disabilities Act.
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5.11 Maintenance of Bank Accounts. The ARC Entities shall
maintain their primary operating accounts and all escrow accounts described
herein with Lender. Borrower acknowledges that this requirement is a material
aspect of the consideration for Lender's willingness to make credit available
to Borrower at the interest rates and other terms described herein.
5.12 Compliance with Contractual Obligations. Each ARC Entity
will perform all of its obligations in respect of all material contracts to
which it is a party will and use its best efforts to keep, and to take all
action to keep, such contracts in full force and effect and not allow any such
contract to lapse or be terminated or any rights to renew such to be forfeited
or cancelled; provided, however, that any such contract may lapse or be
terminated or such renewal rights may be forfeited or cancelled if in the
reasonable business judgment of the ARC Entity in its best interests to allow
or cause such lapse, termination, forfeiture or cancellation.
5.13 Further Assurances. Borrower shall promptly cure any
defects in the creation, issuance, or delivery of the Loan Documents. Borrower
at its expense will execute (or cause to be executed) and deliver to Lender
upon request all such other and further documents, agreements, and instruments
in compliance with or accomplishment of the covenants and agreements of
Borrower in the Loan Documents, or to evidence further and to describe more
fully any Collateral intended as security for the Obligations, or to correct
any omissions in the Loan Documents, or to state more fully the Obligations and
agreements set out in any of the Loan Documents, or to perfect, protect, or
preserve any Encumbrances created pursuant to any of the Loan Documents, or to
make any recordings, to file any notices, or to obtain any consents, all as may
be reasonably necessary or appropriate in connection therewith. Borrower
appoints Lender as Borrower's attorney-in-fact to execute any financing
statements or other instruments of perfection with respect to the Collateral.
5.14 Security Interest; Setoff. In order to further secure
the payment of the Obligations, Borrower hereby grants to Lender a security
interest and right of setoff against all of Borrower's presently owned or
hereafter acquired monies, items, credits, deposits and instruments (including
certificates of deposit) presently or hereafter in the possession of Lender. By
maintaining any such accounts or other property at Lender, Borrower
acknowledges that Borrower voluntarily subjects the property to Lender's rights
hereunder. Lender may exercise its rights under this Section without prior
notice following an Event of Default. Borrower agrees that Lender shall not be
liable for the dishonor of any instrument resulting from Lender's exercise of
its rights under this Section.
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5.15 Insurance.
5.15.1 General Insurance Requirements. In addition
to the other specific requirements set forth in this
Agreement and in other Loan Documents, the ARC Entities shall
maintain insurance on all insurable Properties now or
hereafter owned by them against such risks and to the extent
customary in their industry, and shall maintain or cause to
be maintained public liability, worker's compensation
insurance to the extent customary in their industry, and loss
of rental income or business interruption insurance coverage,
all in form and amounts reasonably acceptable to Lender. A
listing of the ARC Entities' current insurance coverages is
provided on the attached Schedule 5.15.1, which is
incorporated herein by reference.
5.15.2 Insurance on Tangible Collateral. Each ARC
Entity shall keep its Property insured against "all risks of
physical loss" (except earthquake, unless Lender specifically
so requires at its election, and also including flood
insurance, if applicable) under a casualty insurance policy
with the "replacement cost" endorsement and a deductible
calculated on an "occurrence" basis of no more than $10,000
(other than coverage for windstorm damage in Florida and
Texas, where a deductible of one percent is permitted). Each
ARC Entity shall maintain public liability coverage in an
amount of at least $1,000,000 per occurrence. The following
provisions shall apply to all such insurance policies issued
with respect to tangible Collateral:
5.15.2(a) Rating of Insurer. Each
insurance policy shall be issued by an insurance
company with a rating of "A" or better by A. M. Best
& Co.
5.15.2(b) Mortgagee Provisions. Each
casualty policy covering Collateral shall name
Lender as an insured mortgagee pursuant to a
non-contribution mortgagee clause satisfactory to
Lender, and all liability insurance policies shall
name Lender as an additional insured. The issuers
of such policies must agree in writing (by the
policy provisions, endorsement or letter) to give
Lender at least twenty (20) days prior written
notice before termination or any reduction of
amount or scope of coverage.
5.15.2(c) Original and Renewal
Policies. Borrower shall deliver certificates of
insurance in form and substance satisfactory to
Lender on the Closing Date. Within 90 days
thereafter, Borrower shall deliver certified copies
of all insurance policies covering any Collateral
and, if requested by Lender, Borrower shall deliver
such original
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policies to Lender. Not less than thirty (30) days
prior to the expiration date of each policy of
insurance required under this Instrument, Borrower
shall deliver to Lender evidence of the renewal of
such policy or policies or of the substitution of
another policy or policies complying with the terms
of this Agreement. Lender may require that such
evidence consist of the presentment of a renewal
policy or policies marked "premium paid." If
Borrower fails to maintain the required insurance,
Lender may, at Lender's option, obtain such
insurance, or Lender may obtain single interest
coverage insuring only Lender's interest in the
Collateral. Lender agrees to give Borrower
reasonable advance notice of its decision to
purchase insurance pursuant to this paragraph unless
in so doing it will be without the benefit of the
required insurance for any period of time. In such
later case, Lender will advise Borrower of its
decision with reasonable promptness. In no event
shall Lender be under any obligation to procure or
maintain insurance on the Collateral. The cost of
any insurance so obtained shall become part of the
Obligations and shall be due from Borrower upon
demand.
5.15.2(d) Application of Proceeds. Borrower hereby
assigns to Lender, as further security for the
payment of the Obligations, all policies of
insurance which now or hereafter insure against any
loss or damage to the Collateral. Borrower shall
promptly give written notice to Lender of any loss
or damage to the Collateral and will not adjust or
settle any such loss without the written consent of
Lender. If Lender, on account of any insurance on
the Collateral, receives any money for loss or
damage, such amount may, in the reasonable
exercise of Lender's discretion, be retained and
applied by Lender toward payment of the
Obligations, or be paid to Borrower, wholly or in
part, subject to such conditions as Lender may
require. Lender is hereby irrevocably appointed
attorney-in-fact for Borrower to receive any sums
collected under insurance policies insuring the
Collateral, to endorse any drafts or instruments
received under such policies, and to make proof of
loss for, settle, and give binding acquittances for
claims under such policies. To the extent of any
inconsistency regarding the application of
insurance proceeds between this Agreement and the
Mortgage securing the obligations under the
Reimbursement Agreement (the "Kentucky Mortgage"),
the provisions of the Kentucky Mortgage will
control with respect to the Project as defined in
the Kentucky Mortgage.
5.15.2(e) Impairment of Insurance.
Borrower covenants that neither it nor any other
ARC Entity will do any act or voluntarily
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suffer or permit any act to be done whereby any
insurance required hereunder shall or may be
suspended, impaired or defeated, unless replaced
with similar insurance required hereby without any
intervening lapse of coverage.
5.16 Accounts and Records. Each ARC Entity shall maintain
current books of record and account, in which full, true, and correct entries
will be made of all transactions.
5.17 Official Records. Each ARC Entity shall maintain current
corporate records, minute books and stock ledgers or partnership records, as
applicable.
5.18 Right of Inspection. Borrower shall permit any officer,
employee, or agent of Lender to visit and inspect any of the Property of any
ARC Entity, to examine its books of record and accounts and corporate records,
to take copies and extracts from such books of record and accounts, and to
discuss the affairs, finances, and accounts of any ARC Entity with their
respective officers, accountants, and auditors, all at such reasonable times
and as often as Lender may reasonably desire and upon reasonable advance notice
absent an Event of Default, and Borrower will further cause all other ARC
Entities to afford such privileges to Lender. Without limiting Lender's right
to obtain equitable relief as to any other appropriate right in this Agreement
or in other Loan Documents, Borrower agrees that the rights in this Section may
be enforced by affirmative injunction and, to the extent the right to review
records may be denied, the right may be enforced by a restraining order
prohibiting the interference by Borrower with Lender's exercise of its rights
to review of the records.
5.19 ERISA Information and Compliance. Each ARC Entity shall
comply with ERISA and all other applicable laws governing any pension or profit
sharing plan or arrangement to which it is a party. Each ARC Entity shall (i)
provide Lender with copies of any annual report required to be filed pursuant
to ERISA with respect to any Plan or any other employee benefit plan; (ii)
notify Lender upon the occurrence of any ERISA Event or of any additional act
or condition arising in connection with any Plan which it believes might
constitute grounds for termination thereof by the PBGC or for the appointment
of a trustee to administer the Plan; and (iii) furnish to Lender, promptly upon
request, such additional information concerning any Plan or any other employee
benefit plan as Lender may request.
5.20 Indemnity; Expenses. Borrower agrees to indemnify,
defend (with counsel reasonably satisfactory to Lender) and hold harmless
Lender against any loss, liability, claim or expense, including reasonable
attorneys' fees, that Lender may incur in connection with the Loan Documents or
the Obligations, except those losses, etc. that may result from Lender's gross
negligence or willful misconduct. Without limiting the foregoing, upon demand
by Lender, Borrower will reimburse Lender for the following reasonable expenses
if not paid by Borrower promptly after written demand by Lender:
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5.20.1 Administration. All out-of-pocket expenses
that Lender may incur in the preparation and negotiation
hereof and in the course of administration of the Loans.
5.20.2 Taxes. All taxes that Lender may be required
to pay because of the Obligations or because of Lender's
interest in any property securing the payment of the
Obligations, excepting taxes based upon the net income of
Lender.
5.20.3 Protection of Collateral. All costs of
preserving, insuring, preparing for sale (whether by
improvement, repair or otherwise) or selling any collateral
securing the Obligations.
5.20.4 Costs of Collection. All court costs and
other reasonable costs of collecting any debt, overdraft or
other obligation included in the Obligations.
5.20.5 Litigation. All reasonable costs arising
from any litigation, investigation, or administrative
proceeding (whether or not Lender is a party thereto) that
Lender may incur as a result of the Obligations or as a
result of Lender's association with the ARC Entities,
including, but not limited to, expenses incurred by Lender in
connection with a case or proceeding involving any ARC Entity
under any chapter of the Bankruptcy Code or any successor
statute thereto.
5.20.6 Attorneys' Fees. Reasonable attorneys' fees
incurred in connection with any of the foregoing.
If Lender pays any of the foregoing expenses, they shall become a part of the
Obligations and shall bear interest at the Default Rate. This Section shall
remain in full effect regardless of the full payment of the Obligations, the
purported termination of this Agreement, the delivery of the executed original
of this Agreement to Borrower, or the content or accuracy of any representation
made by Borrower to Lender; provided, however, Lender may terminate this
Section by executing and delivering to Borrower a written instrument of
termination specifically referring to this Section.
5.21 Assistance in Litigation. Borrower covenants to, upon
request, cooperatively participate in any proceeding in which Borrower is not
an adverse party to Lender and which concerns Lender's rights regarding the
Obligations or any Collateral.
5.22 Name Changes. Borrower shall give Lender at least thirty
(30) days prior written notice before Borrower or any other ARC Entity changes
its name or begins doing business under any trade name.
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5.23 Estoppel Letters. Borrower covenants to provide Lender,
within ten (10) days after request, an estoppel letter stating (i) the balance
of the Obligations, (ii) whether Borrower is aware of any defenses to payment
of the Obligations, and (iii) the nature of any defenses to payment of the
Obligations. Such balance as presented for confirmation and the nonexistence of
defenses shall be presumed (subject to rebuttal by Borrower) if Borrower fails
to respond to such a request within the required period.
5.24 Environmental Matters.
5.24.1 Compliance With Environmental Laws. Each ARC
Entity will (i) employ in connection with its operations,
appropriate technology and compliance procedures to maintain
compliance with any applicable Environmental Laws, (ii)
obtain and maintain any and all materials permits or other
permits required by applicable Environmental Laws in
connection with its operations and (iii) dispose of any and
all Hazardous Substances only at facilities and with carriers
reasonably believed to possess valid permits under any
applicable state and local Environmental Laws. Each ARC
Entity shall use its best efforts to obtain all certificates
required by law to be obtained from all contractors employed
in connection with the transport or disposal of any Hazardous
Substances.
5.24.2 Remedial Work. If any investigation, site
monitoring, containment, clean-up, removal, restoration or
other remedial work of any kind or nature with respect to any
ARC Entity's Properties is required to be performed under any
applicable local, state or federal law or regulation, any
judicial order, or by any governmental or non-governmental
entity or Person because of, or in connection with, the
current or future presence, suspected presence, release or
suspected release of a Hazardous Substance in or into the
air, soil, groundwater, surface water or soil vapor at, on,
about, under, or within any ARC Entity's Property (or any
portion thereof), it shall within 30 days after written
demand for performance thereof (or such shorter period of
time as may be required under applicable law, regulation,
order or agreement), commence and thereafter diligently
prosecute to completion, all such remedial work.
5.24.3 Indemnification of Lender. Borrower agrees
to indemnify, defend (with counsel satisfactory to Lender)
and hold harmless Lender against any loss, liability claim or
expense, including attorneys' fees, that Lender may incur as
a result of the violation or alleged violation of any
Environmental Law by Borrower or with respect to any other
violation of Environmental Laws with respect to any Property
of any ARC Entity. This covenant shall survive the repayment
of the Loans but shall not extend to any affirmative
misconduct of Lender with respect to environmental matters
following Lender's acquisition of
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any of any ARC Entity's Property following foreclosure or
proceeding in lieu thereof.
VI. NEGATIVE COVENANTS
Borrower covenants and agrees that, without Lender's prior
written consent:
6.1 Debts, Guaranties, and Other Obligations. No ARC Entity
shall incur, create, assume, or in any manner become or be liable with respect
to any Debt, except the following:
6.1.1 Obligations to Lender. Any Obligations to
Lender.
6.1.2 Existing Liabilities. Liabilities, direct or
contingent, of the ARC Entities existing on the date of this
Agreement that are reflected in the Financial Statements.
6.1.3 Endorsements. Endorsements of negotiable or
similar instruments for collection or deposit in the ordinary
course of business.
6.1.4 Trade Debt. Trade payables from time to time
incurred in the ordinary course of business.
6.1.5 Taxes. Taxes, assessments, or other
governmental charges that are not delinquent or are being
contested in good faith by appropriate action promptly
initiated and diligently conducted, if Borrower has made the
reserve therefor required by GAAP.
6.1.6 Miscellaneous Indebtedness. Miscellaneous
indebtedness not to exceed $500,000 in the aggregate
outstanding at any time.
6.2 Change of Management. Borrower shall not allow or suffer
any change of management staffing or structure (other than as
caused by death or disability) whereby W.E. Sheriff will
cease active participation in the management of Borrower and
the ARC Entities; provided, however, such a change shall not
in itself cause an Event of Default hereunder, but shall only
permit Lender at its option to accelerate the maturity of the
Obligations upon ninety (90) days' prior written notice.
Lender represents, and Borrower acknowledges, that the
participation in management of the individuals named above is
a primary factor in Lender's approval of the extension of the
Loans.
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6.3 Distributions. No ARC Entity shall declare or pay a
distribution to its shareholders or partners (of cash, property or stock),
except for Permitted Distributions.
6.4 Stock Acquisitions. No ARC Entity shall redeem or acquire
any stock or warrants, such consent not to be unreasonably withheld.
6.5 Encumbrances. No ARC Entity shall create, incur, assume,
or permit to exist any Encumbrance on any of its Property (now owned or
hereafter acquired) except for Permitted Encumbrances. No ARC Entity shall sign
or file under the Uniform Commercial Code a financing statement that names an
ARC Entity as debtor or the equivalent or sign any security agreement
authorizing any secured party thereunder to file any such financing statement,
except to secure Permitted Encumbrances.
6.6 Prepayment of Indebtedness. No ARC Entity shall make any
prepayment on any obligation for borrowed money.
6.7 Investments. Unless Lender gives its consent, not to be
unreasonably withheld, no ARC Entity shall make investments (including but not
limited to acquisitions or purchases of the obligations or stock of, or any
other or additional interest) in any person, firm, partnership, joint venture
or corporation except: (a) those investments in existence as of the Closing
Date, (b) general obligations of, or obligations unconditionally guaranteed as
to principal and interest by, the United States of America maturing within
fifteen (15) months of the date of purchase, (c) commercial paper having a
rating of not less than "A2" of "P2" from Moody's or S & P, respectively, and
(d) certificates of deposit and bankers acceptances issued by a Lender or
another banking institution with a minimum net worth of $200,000,000 and having
a letter of credit rating of not less than "A" from Moody's or S & P,
respectively.
6.8 Sales and Leasebacks. No ARC Entity shall enter into any
arrangement, directly or indirectly, with any Person by which it shall sell or
transfer any of its Property, whether now owned or hereafter acquired, and by
which it shall then or thereafter rent or lease as lessee such Property or any
part thereof or other Property that it intends to use for substantially the
same purpose or purposes as the Property sold or transferred.
6.9 Change of Control. Except as permitted by Section 6.11,
no ARC Entity shall suffer or permit the occurrence of a Change of Control.
6.10 Nature of Business. No ARC Entity shall suffer or permit
any material changes to be made in the character of its business as carried on
at the Closing Date.
6.11 Further Acquisitions, Mergers, Etc. No ARC Entity shall
enter into any agreement to merge, consolidate, or otherwise reorganize or
recapitalize, or sell, assign, lease, or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
Property (whether now owned or hereafter acquired), provided that
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approval of proposed acquisitions (of assets or equity interests) shall not be
unreasonably withheld.
6.12 Sale of Receivables. No ARC Entity shall sell any of its
receivables at a discount or otherwise.
6.13 Disposition of Assets. No ARC Entity shall dispose of
any of its assets other than in the ordinary course of its present business
upon terms standard in its industry. Notwithstanding the foregoing, Lender
agrees that, provided no Event of Default or Unmatured Default exists
hereunder, American Retirement Corporation may sell the Williamsburg Property
and, if at the time of such sale the Loan to Value Ratio does not exceed 75%,
the proceeds from the sale of the Williamsburg Property need not be applied to
reduce the Obligations. The term "Loan to Value Ratio" shall mean the total
commitment of Lender to the ARC Entities expressed as a percentage of the
market values (including the benefit of the favorable financing associated
therewith and crediting any debt service escrow balance as a part of the value
for this purpose) of the Richmond Place Retirement Community and the Trinity
Towers Retirement Community established pursuant to the appraisals commissioned
and approved by Lender.
6.14 Loans to Others. No ARC Entity shall make any loan or
advance to any Person, other than trade credit extended in the ordinary course
of business. Notwithstanding the foregoing, (a) loans among Borrower, ARC and
Trinity (following the closing of the loan to Trinity described in the
Commitment Letter) shall be unrestricted; (b) the transactions described on the
attached Schedule 6.14 are permitted; and (c) the ARC Entities may make
additional loans among themselves and their respective Subsidiaries in an
aggregate amount not to exceed $500,000 at any time outstanding.
6.15 Inconsistent Agreements. No ARC Entity shall enter into
any agreement containing any provision which would be violated or breached by
the performance of the Obligations.
6.16 Fictitious Names. No ARC Entity shall use any name other
than the name used in executing this Agreement or any assumed or fictitious
name.
6.17 Subsidiaries and Affiliates. No ARC Entity shall create
or acquire any direct or indirect Subsidiary or Affiliate or divest itself of
any material assets by transferring them to any existing Subsidiary or
Affiliate or to any Subsidiary or Affiliate to whose existence Lender has not
consented; nor shall any ARC Entity enter into any partnership, joint venture,
or similar arrangement, or otherwise make any material change in its corporate
structure.
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6.18 Place of Business. No ARC Entity shall transfer its
executive offices, or maintain records with respect to accounts at any
locations other than at the address for notices specified herein.
6.19 Adverse Action With Respect to Plans. No ARC Entity
shall take any action to terminate any Plan which could reasonably result in a
material liability to any Person.
6.20 Transactions With Affiliates. except as permitted by
Section 6.14 hereof, no ARC Entity shall enter into any transaction with any
Affiliate except in the ordinary course of business and on fair and reasonable
terms no less favorable than it would obtain in a comparable arms length
transaction with a Person not an Affiliate.
6.21 Constituent Document Amendments. No ARC Entity shall
amend its partnership or corporate documents.
6.22 Adverse Transactions. No ARC Entity shall enter into any
transaction that materially and adversely affects or may materially and
adversely affect the Collateral or its ability to repay the Obligations.
6.23 Use of Lender's Name. No ARC Entity shall, without the
prior written consent of Lender, use the name of Lender or the name of any
Affiliates of Lender in connection with any of its business or activities,
except in connection with internal business matters, as required in making
required securities law disclosures, in dealings with governmental agencies and
financial institutions and to trade creditors solely for credit reference
purposes.
6.24 Margin Securities. No ARC Entity shall own, purchase or
acquire (or enter into any contract to purchase or acquire) any "margin
security" as defined by any regulation of the Federal Reserve Board as now in
effect or as the same may hereafter be in effect.
6.25 Accounting Changes. No ARC Entity shall change its
fiscal year, or make any other significant change in consolidated or
consolidating accounting treatment and reporting practices, except as required
or permitted by GAAP.
6.26 Capital Stock. No ARC Entity shall issue or sell any of
its capital stock or equity interest or any rights, warrants or options to
acquire any of its capital stock or equity interest, or dispose of any capital
stock of any of its Subsidiaries.
6.27 Modification of Management Agreements. The management
agreements between ARCM and Trinity and Borrower (as to the Richmond Place
property), shall not be modified without Lender's prior written consent.
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6.28 Action Outside Ordinary Course. No ARC Entity shall take
any other action outside the ordinary course of its business.
VII. FINANCIAL COVENANTS
7.1 Debt Service Coverage Ratio. On a rolling 4 quarter
basis, tested quarterly, ARC, L.P. (to the extent accountable by the Richmond
Place Complex), ARC, L.P. on a consolidated basis and Trinity each shall
maintain a debt service coverage ratio of no less than 1.35:1. This ratio shall
be determined as follows:
NIBT + D/A + INT. EXP. + LEASE EXP.
INT. EXP. (incl. Letter of Credit, Remarketing & Guaranty fees, as appl.) +
CURRENT MATURITIES OF LTD (including required escrow payments) + LEASE EXP.
As used in the formula above, NIBT means net income plus tax expense; D/A means
expenses for depreciation and amortization, and other non-cash items; INT.EXP
means Interest Expense; LEASE EXP. means expenses under leases other than
Capital Leases; LTD means long-term Debt and CURRENT MATURITIES OF LTD means
principal and escrow payments actually due and payable within the applicable
test period.
7.2 Liquidity. ARC, ARCM and ARC, L.P. shall collectively
maintain a minimum of $350,000 in unrestricted liquidity at all times. Up to
$125,000 of the required liquidity amount may be held by Trinity. Assets
qualifying as "unrestricted liquidity" shall be cash and cash deposits that are
unencumbered.
7.3 Capital Expenditure Reserves, Operating Expense Reserves.
ARC, L.P. (for the account of the Richmond Place Retirement Community) and
Trinity shall maintain escrowed capital expenditure reserve accounts in an
amount no less than $88,000 and $130,000 respectively ($500/unit). In addition,
each shall similarly maintain escrowed operating expense reserve accounts in an
amount no less than that amount representing fourteen (14) days of estimated
annual operating expenses for each such facility. These capital expenditure and
operating expense reserve accounts will serve as additional security for the
Loans.
7.4 Security Deposit Escrows. The ARC Entities shall maintain
tenant security deposits in full compliance with their contractual agreements
and all applicable laws.
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VIII. EVENTS OF DEFAULT
8.1 Events of Default. Any of the following events shall be
considered an Event of Default under this Agreement:
8.1.1 Payments. Borrower's failure to make payment
of any installment of principal, interest or expenses to
Lender within 10 days of the date when due.
8.1.2 Representations and Warranties. Lender's
determination that any representation or warranty made by any
ARC Entity in any Loan Document was incorrect in any material
respect as of the date thereof.
8.1.3 Negative Covenants. The failure of any ARC
Entity to comply with any of the requirements of Article VI
hereof.
8.1.4 Reporting Requirements. The failure of
Borrower or any other party to timely perform all covenants
in the Loan Documents requiring the furnishing of notices,
financial reports or other information to Lender.
8.1.5 Other Covenants. The failure of any ARC
Entity to observe or perform any covenant contained in any
Loan Document, which covenant is not subject to any specific
provision in this Article VIII; provided, however, as to any
such breach that is reasonably susceptible to being cured (a
"Curable Default"), the occurrence of such Curable Default
shall not constitute an Event of Default hereunder if such
Curable Default is fully cured and/or corrected within thirty
(30) days (five (5) days, if such Curable Default may be
cured by the payment of a sum of money) after the earlier of
Borrower's knowledge of the facts giving rise thereto or
Lender's written notice thereof to Borrower given in
accordance with the provisions hereof.
8.1.6 Involuntary Bankruptcy or Receivership
Proceedings. The appointment of a receiver, custodian,
liquidator, or trustee for any ARC Entity, or for any of its
Property, by the order or decree of any court or agency or
supervisory authority having jurisdiction; or any ARC
Entity's adjudication as being bankrupt or insolvent; or the
sequestering of any of the Property of any ARC Entity by
court order or the filing of a petition against any ARC
Entity under any state or federal bankruptcy, reorganization,
debt arrangement, insolvency, readjustment of debt,
dissolution, liquidation, or receivership law of any
jurisdiction, whether now or hereafter in effect, if such
involuntary proceedings are not dismissed within 30 days.
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8.1.7 Voluntary Petitions. Any ARC Entity's filing
of a petition in voluntary bankruptcy or to seek relief under
any provision of any bankruptcy, reorganization, debt
arrangement, insolvency, receivership, readjustment of debt,
dissolution, or liquidation law of any jurisdiction, whether
now or hereafter in effect, or its consent to the filing of
any petition against it under any such law.
8.1.8 Discontinuance of Business. Any ARC Entity's
discontinuance of its usual business or its dissolution.
8.1.9 Default on Other Debt. Any ARC Entity shall
fail to make any payment due from it on any indebtedness or
other security for borrowed money beyond any applicable cure
period (whether its liability therefor is direct or
contingent), or if any other event (other than the mere
passage of time) or any other condition in respect of any
indebtedness or other security for borrowed money of any ARC
Entity in a principal amount in excess of $100,000 (whether
its liability therefor is direct or contingent) or under any
agreement securing or relating to such indebtedness or other
security for borrowed money shall occur the effect of which,
after the giving of any required notice and the expiration of
any applicable cure period, is to cause (or permit any holder
of such indebtedness or other security or a trustee to cause)
such indebtedness or other security, or a portion thereof, to
become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, or if any such
indebtedness or other security for borrowed money otherwise
is accelerated and becomes due prior to its stated maturity
or prior to its regularly scheduled dates of payment.
8.1.10 Undischarged Judgments. Any judgment against
any ARC Entity or any attachment or levy against the property
of any ARC Entity with respect to a claim for an amount in
excess of $25,000 not adequately insured or indemnified
against, remains unpaid, unstayed on appeal, undischarged,
unbonded or undismissed for a period of twenty (20) days.
8.1.11 Insolvency. Any ARC Entity's no longer being
Solvent. For purposes of making the determination of solvency
hereunder, any ARC Entity may include funds available from
any other ARC Entity to the extent permitted under the terms
of this Agreement.
8.1.12 Attachment. The issuance of an attachment or
other process against any Property of any ARC Entity, unless
removed (by bond or otherwise) within twenty (20) days.
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8.1.13 Insurance. Any ARC Entity's failure to
maintain any insurance required herein or in any other Loan
Document.
8.1.14 Other Event. The occurrence of any event or
condition which, in Lender's reasonable discretion,
materially and adversely affects the ability of Borrower to
perform the Obligations.
8.1.15 Contest. Any ARC Entity's challenge or
contest the validity or enforceability of this Agreement or
any other Loan Document or the validity, priority or
perfection of any security interest created hereunder or
under any other Loan Document in any action, suit or
proceeding.
8.1.16 Cross-Default. The occurrence of an Event of
Default under (i) the Reimbursement Agreement or (ii) any
document evidencing or securing obligations of Trinity to
Lender.
8.2 Remedies. Upon the happening of any Event of Default:
8.2.1 Default Rate. Lender may declare the
Obligations to thereafter bear interest at the Default Rate.
8.2.2 Acceleration. Lender may declare the entire
principal amount of all Obligations then outstanding,
including interest accrued thereon, to be immediately due and
payable without presentment, demand, protest, notice of
protest, or dishonor or other notice of default of any kind,
all of which are hereby expressly waived.
8.2.3 Exercise of Setoff. Lender may exercise its
right of setoff against Borrower.
8.2.4 Other Remedies. Lender may exercise its
remedies under any or all of the Loan Documents and all other
rights afforded a creditor under applicable law.
IX. GENERAL PROVISIONS
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9.1 Notices. All communications relating to this Agreement or
any of the other Loan Documents shall be in writing and shall effective when be
delivered by mail, overnight courier, special courier or otherwise to the
following addresses:
if to Borrower:
American Retirement Companies, L.P.
Attn: Mr. W.E. Sheriff
111 Westwood Place, Suite 400
Brentwood, Tennessee 37027
With a Copy To:
Bass, Berry & Sims
Attn: T. Andrew Smith, Esq.
First American Center
Nashville, Tennessee 37238
if to Lender:
First Union National Bank of Tennessee
Attn: Scott Miler
150 Fourth Avenue North
Nashville, Tennessee 37219
With a Copy To:
Boult, Cummings, Conners & Berry
Attn: John E. Murdock III, Esq.
414 Union Street, Suite 1600
Nashville, Tennessee 37219
Any party may change its address for receipt of notice by
written direction to the other parties hereto.
9.2 Renewal, Extension, or Rearrangement. All provisions of
this Agreement relating to Obligations shall apply with equal force and effect
to each and all promissory notes executed hereafter which in whole or in part
represent a renewal, extension for any period, increase, or rearrangement of
any part of the Obligations originally represented by any part of such other
Obligations.
9.3 Application of Payments. Amounts received with respect to
the Obligations shall be applied (i) first, to any expenses due Lender, (ii)
second, to accrued
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interest under any of the Obligations, and (iii) third, to reduce principal of
the Obligations, in such manner as determined by Lender.
9.4 Computations; Accounting Principles. Where the character
or amount of any asset or liability or item of income or expense is required to
be determined, or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, such determination or
calculation, to the extent applicable and except as otherwise specified in this
Agreement, shall be made in accordance with GAAP.
9.5 Counterparts. This Agreement may be executed in
counterparts with all signatures or by counterpart signature pages, and it
shall not be necessary that the signatures of all parties be contained on any
one counterpart. Each counterpart shall be deemed an original, but all of them
together shall constitute one and the same instrument.
9.6 Negotiated Document. This Agreement and the other Loan
Documents have been negotiated by the parties with full benefit of counsel and
should not be construed against any party as author.
9.7 Consent to Jurisdiction; Exclusive Venue. Borrower hereby
irrevocably consents to the jurisdiction of the United States District Court
for the Middle District of Tennessee and of all Tennessee state courts sitting
in Davidson County, Tennessee, for the purpose of any litigation to which
Lender may be a party and which concerns this Agreement or the Obligations. It
is further agreed that venue for any such action shall lie exclusively with
courts sitting in Davidson County, Tennessee, unless Lender agrees to the
contrary in writing.
9.8 Not Partners; No Third Party Beneficiaries. The
relationship of Lender and the ARC Entities is that of lender and borrower
only, and neither is a fiduciary, partner or joint venturer of the other for
any purpose. Except as described in the immediately succeeding sentence, this
Agreement has been executed for the sole benefit of Lender, and no third party
is authorized to rely upon Lender's rights or duties hereunder. Notwithstanding
the foregoing, Borrower specifically acknowledges that the representations,
warranties and covenants contained herein shall inure to the benefit of Lender
and FUNB-NC for as long as any obligations under the Reimbursement Agreement
remain outstanding, it being the expectation of the parties hereto that Lender
and FUNB-NC will rely on such representations, warranties and covenants in
connection with their consummation of the transactions evidenced by the
Reimbursement Agreement.
9.9 No Reliance on Lender's Analysis. Borrower acknowledges
and represents that, in connection with the Obligations, Borrower has not
relied upon any financial projection, budget, assessment or other analysis by
Lender or upon any representation by Lender as to the risks, benefits or
prospects of Borrower's business activities or present or
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future capital needs incidental thereto, all such considerations having been
examined fully and independently by Borrower.
9.10 No Marshalling of Assets. Lender may proceed against
collateral securing the Obligations and against parties liable therefor in such
order as it may elect, and neither Borrower nor any surety or guarantor for
Borrower nor any creditor of Borrower shall be entitled to require Lender to
marshal assets. The benefit of any rule of law or equity to the contrary is
hereby expressly waived.
9.11 Impairment of Collateral. Lender may, in its sole
discretion, release any collateral securing the Obligations or release any
party liable therefor. The defenses of impairment of collateral and impairment
of recourse and any requirement of diligence on Lender's part in collecting the
Obligations are hereby waived.
9.12 Business Days. If any payment date under the Obligations
falls on a day that is not a Business Day, or if the last day of any notice
period falls on such a day, the payment shall be due and the notice period
shall end on the next following Business Day.
9.13 Participations. Lender may, from time to time, in its
sole discretion, and without notice to Borrower or any other Person, sell
participations in any credit subject hereto to such other investors or
financial institutions as it may elect. Lender may from time to time disclose
to any participant or prospective participant such information as Lender may
have regarding the financial condition, operations, and prospects of Borrower.
9.14 Standard of Care; Limitation of Damages. Lender shall be
liable to the ARC Entities only for matters arising from this Agreement or
otherwise related to the Obligations resulting from Lender's gross negligence
or willful misconduct, and liability for all other matters is hereby waived.
Lender shall not in any event be liable to the ARC Entities for special or
consequential damages arising from this Agreement or otherwise related to the
Obligations.
9.15 Incorporation of Schedules. All Schedules and Exhibits
referred to in this Agreement are incorporated herein by this reference.
9.16 Indulgence Not Waiver. Lender's indulgence in the
existence of a default hereunder or any other departure from the terms of this
Agreement shall not prejudice Lender's rights to declare a default or otherwise
demand strict compliance with this Agreement.
9.17 Cumulative Remedies. The remedies provided Lender in
this Agreement are not exclusive of any other remedies that may be available to
Lender under any other document or at law or equity.
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9.18 Amendment and Waiver in Writing. No provision of this
Agreement can be amended or waived, except by a statement in writing signed by
the party against whom enforcement of the amendment or waiver is sought.
Additionally, no provision hereof may be amended or waived absent the written
consent of First Union National Bank of North Carolina.
9.19 Assignment. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of Borrower and
Lender, except that Borrower shall not assign any rights or delegate any
obligations arising hereunder without the prior written consent of Lender. Any
attempted assignment or delegation by Borrower without the required prior
consent shall be void.
9.20 Entire Agreement. This Agreement and the other written
agreements between the ARC Entities and Lender represent the entire agreement
between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein. Provided, if there is a
conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Obligations, the provision in
this Agreement shall control.
9.21 Severability. Should any provision of this Agreement be
declared invalid or unenforceable for any reason, the remaining provisions
hereof shall remain in full effect.
9.22 Time of Essence. Time is of the essence of this
Agreement, and all dates and time periods specified herein shall be strictly
observed.
9.23 Applicable Law. The validity, construction and
enforcement of this Agreement and all other documents executed with respect to
the Obligations shall be determined according to the laws of Tennessee
applicable to contracts executed and performed entirely within that state.
9.24 Gender and Number. Words used herein indicating gender
or number shall be read as context may require.
9.25 Captions Not Controlling. Captions and headings have
been included in this Agreement for the convenience of the parties, and shall
not be construed as affecting the content of the respective Sections.
9.26 Waiver of Right to Jury Trial. THE PARTIES HERETO HEREBY
KNOWINGLY AND VOLUNTARILY, WITH BENEFIT OF COUNSEL, WAIVE THE RIGHT TO HAVE ANY
DISPUTE ARISING FROM OR RELATED TO THIS AGREEMENT OR THE OBLIGATIONS TRIED BY A
JURY, WITH THE RESULT THAT ANY SUCH DISPUTE WOULD BE TRIED BY A JUDGE RATHER
THAN A JURY.
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Executed as of the date first written above.
AMERICAN RETIREMENT COMMUNITIES, L.P.
By: American Retirement Communities, LLC,
General Partner
By: /s/ George T. Hicks
-------------------------------------------
Title: EVP Finance
-----------------------------------------
FIRST UNION NATIONAL BANK OF TENNESSEE,
Lender
By: /s/ S. Scott Miler
-------------------------------------------
Title: VP
-----------------------------------------
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EXHIBIT 10.12
FIRST AMENDMENT TO LOAN AGREEMENT
This First Amendment to Loan Agreement is executed as of June 11th,
1996, by and between AMERICAN RETIREMENT COMMUNITIES, L.P. ("Borrower"), a
Tennessee limited partnership, and FIRST UNION NATIONAL BANK OF TENNESSEE
("Lender"), a national banking association:
WITNESSETH:
WHEREAS, Borrower and Lender entered into that certain Loan Agreement
("Loan Agreement") dated as of October 31, 1995; and
WHEREAS, Borrower and Lender wish to amend the Loan Agreement in
certain particulars;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Loan Agreement is hereby amended as
follows:
1. Paragraph 2.1.2 is hereby amended by adding the following
sentence thereto:
In no event shall the letters of credit issued under this section have
a maturity in excess of one (1) year.
2. Paragraphs 2.2.1, 2.2.2 and 2.2.3 are hereby deleted in their
entirety. They are hereby replaced with the following:
2.2.1 Amount of Term Loan. The original principal
indebtedness of Borrower to Lender under Term Loan shall be
Two Million Nine Hundred Fifty Thousand and No/100ths Dollars
($2,950,000.00).
2.2.2. Use of Proceeds of Term Loan. The proceeds of the
Term Loan shall be used by Borrower to refinance the
obligations of Borrower to Lender under that Amended and
Restated Promissory Note made by Borrower dated October 31,
1995 payable to the order of Lender in the original principal
amount of Two Million and No/100ths Dollars ($2,000,000.00),
and for the purpose of repaying $1,150,000 of the preferred
equity notes issued by Borrower to various investors in
Borrower (the LEAAF transaction).
2.2.3 Term Loan Note. Borrower's obligations under the
Term Loan shall be evidenced by the Term Loan Note, as amended
from time to time.
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3. The Loan Agreement is hereby further amended by deleting
paragraphs 2.5 and 2.6 in their entirety and substituting therefore the
following:
2.5 Principal Repayment.
2.5.1 Revolving Credit Loan. All remaining
principal outstanding under the Revolving
Credit Loan shall become due on October 31,
1997.
2.5.2 Term Loan. Payments of principal shall be
made under the Term Loan in the amount of One
Hundred Sixty Thousand and No/100 Dollars
($160,000.00) each due on the 10th day of
each January, April, July and October until
October 31, 1997, when all remaining
principal, interest and expenses shall become
due.
2.6 Fees.
2.6.1 Revolving Credit Loan Commitment Fee.
Concurrently with the initial execution of
this Agreement, Borrower paid the balance due
of the Twelve Thousand Five Hundred and
No/100 Dollars ($12,500.00) commitment fee
provided for by the Commitment Letter as a
commitment fee for the Revolving Credit Loan,
and shall pay in connection with the
amendment to the Agreement dated June 11,
1996 an additional commitment fee of
$12,500.00.
2.6.2 Term Loan Commitment Fee. Concurrently with
the initial execution of this Agreement,
Borrower paid the balance due of the Ten
Thousand and No/100 Dollars ($10,000.00)
commitment fee provided for by the Commitment
Letter as a commitment fee for the Term Loan,
and shall pay in connection with the
Amendment to the Agreement dated June 11,
1996 an additional commitment fee of
$5,750.00.
2.6.3 Letter of Credit Fees. Borrower will pay a
letter of credit fee equal to 1.15% per annum
of the face amount of any letter of credit
issued under the Revolving Credit Loan,
payable annually in advance. Borrower shall
also pay Lender's standard administrative
fees upon the issuance of any such letter of
credit.
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4. The Loan Agreement is hereby amended by adding the following
as additional paragraphs to Article II of the Loan Agreement. The additional
paragraphs shall read as follows:
2.11 Vehicle Loan. Lender shall fund up to $500,000 at
any time prior to June 11, 1997 for the use by American
Retirement Corporation for the sole purpose of providing up to
100% of the invoice costs needed to purchase commercial
vehicles. Any amounts paid or prepaid under the vehicle loan
may not be reborrowed. All vehicles purchased pursuant to the
vehicle loan shall be titled in the name of American
Retirement Corporation and Lender shall be granted a first
priority security interest in the vehicles so purchased.
Borrower shall guarantee American Retirement Corporation's
obligations under the vehicle loan.
2.12 Payment of Vehicle Loan. Payments of principal and
interest under the vehicle loan shall be made as set forth in
that certain Nonrevolving Line of Credit Note dated June 11,
1996.
2.13 Release of Vehicles. Provided that no Event of
Default exists hereunder, Lender hereby agrees to release its
lien on any vehicle purchased with proceeds of the vehicle
loan provided that it is delivered the greater of the sales
proceeds from the sale of the vehicle or the then current
N.A.D.A. listed loan value of such vehicle.
2.14 Lien Perfections. As each vehicle is purchased
pursuant to the provisions of this Agreement, Borrower
covenants to cause American Retirement Corporation to comply
with that certain Security Agreement dated June 11, 1996
2.15 Commitment Fee For Vehicle Loan. Borrower covenants
to cause American Retirement Corporation to pay Lender an
initial commitment of $1,250.00. On June 11, 1997, Borrower
further covenants to cause American Retirement Corporation to
pay an additional fee equal to one-half of one percent ( 1/2
of 1%) of all sums borrowed under the vehicle loan in excess
of $250,000. For example, if the total amount borrowed
equaled $400,000.00, an additional fee of $750.00 would be due
and payable.
2.16 Interest. Subject to the provisions of Section 2.3.,
2.4 and 2.8, amounts outstanding under that certain $500,000
Nonrevolving Line of Credit Note dated June 11, 1996 shall
accrue interest, as elected by Borrower, as either a Prime
Rate Loan or a LIBOR Loan.
EXECUTED as of the day first set forth above.
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AMERICAN RETIREMENT COMMUNITIES, L.P.
BY: AMERICAN RETIREMENT COMMUNITIES, L.L.C., G.P.
By: /s/
-----------------------------------------------
Title:
--------------------------------------------
FIRST UNION NATIONAL BANK OF TENNESSEE
By: /s/
-----------------------------------------------
Title:
--------------------------------------------
4
55
THIRD AMENDMENT TO LOAN AGREEMENT
This Third Amendment to Loan Agreement is executed as of February 18,
1997 by and between AMERICAN RETIREMENT COMMUNITIES, L.P. ("Borrower"), a
Tennessee limited partnership, and FIRST UNION NATIONAL BANK OF TENNESSEE
("Lender"), a national banking association:
W I T N E S S E T H:
WHEREAS, Borrower and Lender entered into that certain Loan Agreement
dated as of October 31, 1995, as amended by that First Amendment to Loan
Agreement dated as of June 11, 1996 and as amended by that Second Amendment to
Loan Agreement dated as of December 31, 1996 (as amended, the "Loan Agreement")
(capitalized terms not otherwise defined herein shall have the meaning assigned
in the Loan Agreement); and
WHEREAS, Borrower and Lender wish to further amend the Loan Agreement
in certain particulars;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Loan Agreement is hereby amended as
follows:
1. The Loan Agreement is hereby amended by revising the following
definitions to read in full as follows:
"REIMBURSEMENT AGREEMENT" means the Reimbursement
Agreement of even date herewith executed by Borrower in favor
of Lender and FUNB-NC, pursuant to which the Richmond Place
Letter of Credit has been issued, as it may hereafter be
modified, amended, restated or renewed.
"RICHMOND PLACE LETTER OF CREDIT" means the
Irrevocable Direct Pay Letter of Credit issued by FUNB-NC for
the account of Borrower to SunTrust Bank, Nashville, N.A., as
Trustee under the Trust Indenture dated as of April 1, 1987,
as amended and restated as of November 1, 1994, governing the
issuance of the Lexington-Fayette Urban County Government
Residential Facilities Refunding Revenue Bonds (Richmond Place
Associates, L.P. Project) Series 1987, and all modifications,
extensions, restatements, amendments and renewals thereof.
2. The Loan Agreement is hereby further amended by deleting
paragraph 2.5.2 in its entirety and substituting therefore the following:
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2.5.2 Term Loan. Payments of principal shall be
made under the Term Loan in the amount of One Hundred Sixty
Thousand and No/100 Dollars ($160,000.00) each due on the 10th
day of each January, April, July and October until April 30,
1998, when all remaining principal, interest and expenses
shall become due.
3. Concurrently with the execution hereof, Borrower shall pay to
Lender an extension fee for the extension of the Term Loan in the amount of
$13,150.00 and an extension fee for the extension of the Revolving Loan entered
into in December of 1996 in the amount of $6,250.00.
4. As amended hereby, the Loan Agreement remains in full effect,
and all agreements among the parties with respect to the subject hereof are
represented fully in this Amendment and the other written documents among the
parties. The validity, construction and enforcement hereof shall be determined
according to the substantive laws of the State of Tennessee.
EXECUTED as of the day first set forth above.
AMERICAN RETIREMENT COMMUNITIES, L.P.
BY: AMERICAN RETIREMENT COMMUNITIES, L.L.C., G.P.
By: /s/
----------------------------------------------
Title:
-------------------------------------------
FIRST UNION NATIONAL BANK OF TENNESSEE
By: /s/
----------------------------------------------
Title:
-------------------------------------------
2
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NONREVOLVING LINE OF CREDIT NOTE
$500,000.00 Nashville, Tennessee June 11, 1996
FOR VALUE RECEIVED, American Retirement Corporation ("Maker"),
a Tennessee corporation, promises to pay to the order of First Union National
Bank of Tennessee ("Payee"), a national banking association, the sum of Five
Hundred Thousand Dollars ($500,000.00), or as much thereof as may be
outstanding from time to time pursuant to that certain Loan Agreement dated
October 31, 1995 between American Retirement Communities, L.P. and Payee (the
"Loan Agreement"), together with interest thereon at the rate set forth in the
Loan Agreement. Accrued and unpaid interest shall be due and payable on the
10th day of each successive calendar month beginning on July 10, 1996 and
continuing on the 10th day of each successive month thereafter until June 10,
1997. Thereafter, this Note shall be due and payable in forty-eight (48) equal
monthly installments of principal, plus accrued interest. The first
installment, together with accrued interest, shall be due and payable on July
10, 1997 and a like installment of principal, together with accrued interest,
shall be due and payable on the 10th day of each successive calendar month
thereafter. All remaining principal and interest shall be due and payable on
June 10, 2001.
From time to time before June 7, 1997, Maker may borrow an
aggregate amount not to exceed $500,000.00 against this Note (but may not
reborrow any principal paid or prepaid) against written borrowing requests made
to Payee, provided that no default has occurred under this Note or the Loan
Agreement, and no event has occurred which, with notice, the passage of time
or both would constitute such an event of default. The proceeds of this Note
shall only be used to purchase commercial vehicles for the use by an ARC Entity
and the operation of its retirement/nursing homes. As a condition precedent to
any disbursement hereunder, Maker shall pay a fee as per Section 2.15 of First
Amendment to Loan Agreement. Terms not otherwise defined herein shall have the
meaning given such terms in the Loan Agreement.
Interest hereunder shall be calculated based upon a 360-day
year and actual days elapsed. The interest rate required hereby shall not
exceed the maximum rate permissible under applicable law, and any amounts paid
in excess of such rate shall be applied to reduce the principal amount hereof
or shall be refunded to Maker, at the option of the holder of this Note.
All amounts due under this Note are payable at par in lawful
money of the United States of America, at the principal place of business of
Payee in Nashville, Tennessee, or at such other address as the Payee or other
holder hereof (herein "Holder") may direct.
To the maximum extent permitted under applicable law, any
payment not made within fifteen (15) days of its due date will be subject to
assessment of a late charge equal to five percent (5%) of such payment.
Holder's right to impose a late charge does not evidence a grace period for the
making of payments hereunder.
The occurrence of any Event of Default under the Loan
Agreement shall constitute an Event of Default hereunder. Without limiting the
foregoing, the failure of Maker to make payment of any installment of
principal, interest or expenses due hereunder within ten (10) days of its due
date.
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Upon the occurrence of an Event of Default, as so defined, Holder may, at its
option and without notice, declare all principal and interest provided for
under this Note, and any other obligations of Maker to Holder, to be presently
due and payable, and Holder may enforce any remedies available to Holder under
any documents securing or evidencing debts of Maker to Holder. Holder may
waive any Event of Default before or after it occurs and may restore this Note
in full effect without impairing the right to declare it due for a subsequent
Event of Default, this right being a continuing one. Following the occurrence
of an Event of Default, the remaining unpaid principal balance of the
indebtedness evidenced hereby and all expenses due Holder shall bear interest
at the highest rate permissible under applicable law.
All amounts received for payment of this Note shall be first
applied to any expenses due Holder under this Note or under any other documents
evidencing or securing obligations of Maker to Holder, then to accrued
interest, and finally to the reduction of principal. Prepayment of principal
or accrued interest may be made, in whole or in part, only as provided in the
Loan Agreement. Any prepayment(s) shall reduce the final payment(s) and shall
not reduce or defer installments next due.
This Note may be freely transferred by Holder.
Maker and all sureties, guarantors, endorsers and other
parties to this instrument hereby consent to any and all renewals, waivers,
modifications, or extensions of time (of any duration) that may be granted by
Holder with respect to this Note and severally waive demand, presentment,
protest, notice of dishonor, and all other notices that might otherwise be
required by law. All parties hereto waive the defense of impairment of
collateral and all other defenses of suretyship.
Maker and all sureties, guarantors, endorsers and other
parties hereto agree to pay reasonable attorneys' fees and all court and other
costs that Holder may incur in the course of efforts to collect the debt
evidenced hereby or to protect Holder's interest in any collateral securing the
same.
The validity and construction of this Note shall be determined
according to the laws of Tennessee applicable to contracts executed and
performed within that state. If any provision of this Note should for any
reason be invalid or unenforceable, the remaining provisions hereof shall
remain in full effect.
The provisions of this Note may be amended or waived only by
instrument in writing signed by the Holder and Maker and attached to this Note.
Words used herein indicating gender or number shall be read as
context may require.
AMERICAN RETIREMENT CORPORATION
By: /s/
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Title:
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