Exhibit 10.4
EXECUTION VERSION
$112,750,000
AMENDED AND RESTATED LOAN AGREEMENT
Dated as of September 30, 2002
Between
ARCPI HOLDINGS, INC.,
a Delaware corporation,
as Borrower;
and
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation,
as Lender.
TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS................................................................. 1
Section 1.1 Certain Defined Terms.............................................................. 1
Section 1.2 Accounting Terms................................................................... 18
Section 1.3 Other Definitional Provisions...................................................... 19
ARTICLE II. AMOUNTS AND TERMS OF LOAN....................................................................... 19
Section 2.1 Making the Loan.................................................................... 19
(a) The Loan........................................................................... 19
(b) The Note........................................................................... 19
(c) Funding the Loan................................................................... 20
Section 2.2 Interest........................................................................... 20
(a) Interest Rate...................................................................... 20
(b) Default Interest................................................................... 20
Section 2.3 Mandatory Payments................................................................. 20
(a) Quarterly Payments................................................................. 20
(b) Maturity Date...................................................................... 20
(c) Payment Following Change of Control................................................ 21
Section 2.4 Voluntary Prepayments.............................................................. 21
(a) No Prepayment Prior to Third Anniversary........................................... 21
(b) Full Prepayment.................................................................... 21
(c) Partial Prepayment................................................................. 21
(d) Yield Maintenance Premium.......................................................... 21
Section 2.5 Payments and Computations.......................................................... 22
(a) Payments........................................................................... 22
(b) Computations....................................................................... 22
(c) Payment on Business Day............................................................ 22
Section 2.6 Right of First Offer to Finance.................................................... 22
(a) Request to Provide Offer to Finance................................................ 22
(b) Election to Finance................................................................ 22
(c) No Election........................................................................ 23
(d) Borrower's Election to Finance..................................................... 23
Section 2.7 Taxes.............................................................................. 23
(a) Net Payments....................................................................... 23
(b) Payment of Other Taxes............................................................. 24
(c) Indemnification.................................................................... 24
(d) Evidence of Payments............................................................... 24
(e) Survival........................................................................... 24
ARTICLE III. CONDITIONS..................................................................................... 24
Section 3.1 Initial Conditions................................................................. 24
Section 3.2 Funding Conditions................................................................. 24
(a) Representation and Warranties...................................................... 24
(b) No Default......................................................................... 24
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(c) Payment of Fees and Expenses....................................................... 24
(d) No Adverse Change.................................................................. 25
(e) Loan Documents..................................................................... 25
(f) Master Lease Documents............................................................. 25
(g) Borrower Corporate Documents....................................................... 26
(h) Property Owner Organizational Documents............................................ 26
(i) Property Operator Organizational Documents......................................... 27
(j) Other Permitted Subsidiary Organizational Documents................................ 28
(k) Real Property Deliveries........................................................... 29
(l) HCPI Equity Investment............................................................. 30
(m) Health Care Licenses............................................................... 31
(n) Condemnation; Casualty............................................................. 31
(o) Financial Statements............................................................... 31
(p) Other Document Deliveries.......................................................... 32
(q) Legal Opinions..................................................................... 32
(r) Governmental Consents.............................................................. 33
(s) Insurance Coverage................................................................. 33
(t) Corporate and Governmental Approvals............................................... 33
(u) Required Hedging Agreement......................................................... 33
(v) Minimum Net Operating Income....................................................... 33
(w) Occupancy and EBITDAR.............................................................. 33
(x) No Liability for Facility.......................................................... 33
(y) Appraised Value.................................................................... 33
(z) Exchange Offer..................................................................... 33
(aa) New ARC Securities Documents....................................................... 34
(bb) Refinancings....................................................................... 34
(cc) Escrow Deposit..................................................................... 34
(dd) [Intentionally Omitted]............................................................ 34
(ee) Termination of Retired Officers Right of First Refusal............................. 34
(ff) Amendment to HCPI Lease............................................................ 35
(gg) Reimbursement Obligation........................................................... 35
(hh) Vehicle Sublease................................................................... 35
(ii) Compliance with Zoning Laws........................................................ 35
(jj) Officers Certificate............................................................... 35
(kk) Documents and other Evidence Satisfactory to Lender................................ 35
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.................................................................. 36
Section 4.1 Representations and Warranties of Borrower......................................... 36
(a) Organization....................................................................... 36
(b) Power and Authority................................................................ 36
(c) Due Authorization.................................................................. 36
(d) Binding and Enforceable............................................................ 36
(e) Subsidiaries....................................................................... 37
(f) No Indebtedness.................................................................... 37
(g) No Liens........................................................................... 37
(h) No Defaults........................................................................ 37
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(i) No Conflicts or Restrictions....................................................... 37
(j) Governmental Approval.............................................................. 38
(k) Litigation......................................................................... 38
(l) Financial Information.............................................................. 38
(m) Material Adverse Change............................................................ 38
(n) Compliance......................................................................... 38
(o) Payment of Taxes................................................................... 38
(p) Security Interests................................................................. 38
(q) Title to Property.................................................................. 39
(r) Real Property Matters.............................................................. 39
(s) Conduct of Business................................................................ 40
(t) Investment Company................................................................. 40
(u) Margin Stock....................................................................... 40
(v) Registration of the Note........................................................... 41
(w) Environmental Laws................................................................. 41
(x) ERISA Compliance................................................................... 42
(y) Restrictions on Dividends.......................................................... 43
(z) Solvency........................................................................... 43
(aa) Labor Disputes..................................................................... 43
(bb) Master Lease Document Default...................................................... 43
(cc) Full Disclosure.................................................................... 43
(dd) Health Care Permits................................................................ 43
(ee) Compliance with Legal Requirements................................................. 44
(ff) Retired Officers Documents......................................................... 45
ARTICLE V. COVENANTS OF BORROWER............................................................................ 45
Section 5.1 Financial Covenants................................................................ 45
(a) First Mortgage Outstanding Principal Amount........................................ 45
(b) Minimum Operating Income........................................................... 46
(c) Minimum Debt Service Coverage Ratio................................................ 46
(d) Maximum Accounts Payable Period.................................................... 46
Section 5.2 Reporting Covenants................................................................ 46
(a) Monthly Statements................................................................. 46
(b) Quarterly Financial Statements..................................................... 47
(c) Annual Financial Statements........................................................ 48
(d) Annual Budgets..................................................................... 48
(e) Census Reports..................................................................... 48
(f) Compliance Certificate............................................................. 48
(g) Change of Name or Location......................................................... 49
(h) Management Letter.................................................................. 49
(i) Tax Returns........................................................................ 49
(j) Notice of Default.................................................................. 49
(k) Notice of Litigation............................................................... 49
(l) Security Holder Materials and SEC Filings.......................................... 49
(m) ERISA Notices...................................................................... 50
(n) Environmental Notices.............................................................. 51
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(o) Health Care Permit Violation....................................................... 51
(p) Notice of Material Event or Circumstance........................................... 51
(q) Other Information.................................................................. 51
Section 5.3 Affirmative Covenants.............................................................. 51
(a) Preservation of Corporate Existence, Etc........................................... 51
(b) Maintenance of Property and Assets................................................. 52
(c) Insurance.......................................................................... 52
(d) Compliance With Laws............................................................... 52
(e) Payment of Obligations............................................................. 52
(f) Use of Proceeds.................................................................... 52
(g) Inspection of Property and Books and Records....................................... 53
(h) Further Assurances................................................................. 53
(i) Disclosure Updates................................................................. 53
(j) Environmental Laws................................................................. 54
(k) Health Care Permits and Approvals.................................................. 55
(l) Compliance With ERISA.............................................................. 55
(m) Operating Account.................................................................. 56
(n) Reserve Accounts................................................................... 56
(o) Separateness Covenants............................................................. 62
(p) Certain Property Operators Treated as Corporations................................. 64
(q) Impound Accounts................................................................... 64
(r) Subordination of Management Agreements............................................. 64
(s) Board Attendance................................................................... 64
(t) Release of Lien on Somerby Purchase Option......................................... 64
(u) Vehicle Sublease................................................................... 64
(v) Reimbursement Obligation........................................................... 64
(w) Consent to Acquisition of First Mortgage........................................... 65
(x) Somerby Purchase Option............................................................ 65
Section 5.4 Negative Covenants................................................................. 65
(a) Liens.............................................................................. 65
(b) Limitation on Indebtedness......................................................... 66
(c) Limitation on Contingent Obligations............................................... 67
(d) Restricted Payments................................................................ 67
(e) Consolidation, Merger, Sale of Assets.............................................. 68
(f) Loans and Investments.............................................................. 69
(g) Conduct of Business................................................................ 69
(h) Transactions With Affiliates....................................................... 71
(i) Amendments to Corporate Documents.................................................. 71
(j) Health Care Permits and Approvals.................................................. 71
(k) Accounting Changes................................................................. 71
(l) Amendment to and Refinancing of First Mortgages or Wilora Lake Loan................ 71
(m) Sale and Leaseback Transactions.................................................... 72
(n) Separateness Covenants............................................................. 73
(o) Tax Status......................................................................... 75
Section 5.5 REIT Protections................................................................... 75
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ARTICLE VI. EVENTS OF DEFAULT............................................................................... 76
Section 6.1 Events of Default.................................................................. 76
(a) Non-Payment of Principal, Interest or Other Amounts................................ 76
(b) First Mortgage Loan Documents...................................................... 76
(c) HCPI Lease......................................................................... 77
(d) Representations and Warranties..................................................... 77
(e) Financial and Negative Covenants................................................... 77
(f) Reporting and Affirmative Covenants................................................ 77
(g) Other Covenants.................................................................... 77
(h) Bankruptcy......................................................................... 77
(i) Judgments.......................................................................... 77
(j) Transaction Documents.............................................................. 78
(k) Collateral Documents............................................................... 78
(l) ERISA.............................................................................. 78
(m) Other Indebtedness................................................................. 78
(n) Leases............................................................................. 78
Section 6.2 Rights Not Exclusive............................................................... 78
ARTICLE VII. MISCELLANEOUS.................................................................................. 79
Section 7.1 Collateral Matters................................................................. 79
Section 7.2 Amendments......................................................................... 79
Section 7.3 Notices............................................................................ 79
Section 7.4 No Waiver; Remedies................................................................ 80
Section 7.5 Costs, Expenses and Taxes.......................................................... 80
(a) General Costs and Expenses......................................................... 80
(b) Survival........................................................................... 80
Section 7.6 Right of Set-off................................................................... 80
Section 7.7 Indemnity.......................................................................... 81
(a) Indemnity.......................................................................... 81
(b) Limitation......................................................................... 81
(c) Survival........................................................................... 81
Section 7.8 Limited Recourse................................................................... 81
(a) Limitation on Recourse............................................................. 81
(b) Exceptions to Limitation........................................................... 82
(c) Full Recourse...................................................................... 83
Section 7.9 Binding Effect..................................................................... 83
Section 7.10 GOVERNING LAW...................................................................... 84
Section 7.11 WAIVER OF JURY TRIAL............................................................... 84
Section 7.12 Confidentiality.................................................................... 84
Section 7.13 Limitation of Liability............................................................ 84
Section 7.14 Entire Agreement................................................................... 85
Section 7.15 Execution in Counterparts.......................................................... 85
Section 7.16 Restatement........................................................................ 85
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LIST OF EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Borrower Pledge Agreement
Exhibit C Form of Reserve Account Security Agreement
Exhibit D Form of ARC SC Pledge Agreement
Exhibit E Form of Negative Pledge Agreement
Exhibit F Form of Separateness Covenant Certificate
Exhibit G Form of Compliance Certificate
Exhibit H Reviewed Facility Budgets
LIST OF SCHEDULES
Schedule I List of Facilities, Property Owners, Property Operators and First
Mortgage Lenders
Schedule II List of Entrance Fee Facilities
Schedule III List of Master Trust Documents
Schedule 2.3(b) Sample Loan Balance
Schedule 3.2(bb) List of Refinancing Transactions
Schedule 4.1(e) List of Permitted Subsidiaries
Schedule 4. l(f) List of Existing Indebtedness
Schedule 4.1 (g) List of Existing Liens
Schedule 4.1(j) List of Required Government Approvals
Schedule 4.1(r) List of Real Estate
Schedule 4.1(w) List of Environmental Reports
Schedule 4. l(aa) List of Collective Bargaining Agreements and Other Labor
Contracts
Schedule 5.4(c)(ii) List of Existing Contingent Obligations
Schedule 5.4(g)(iv) List of Facilities Leased from HCPI
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AMENDED AND RESTATED LOAN AGREEMENT
This AMENDED AND RESTATED LOAN AGREEMENT, dated as of
September 30, 2002, is made by and between ARCPI Holdings, Inc., a Delaware
corporation, as Borrower; and HEALTH CARE PROPERTY INVESTORS, INC., a Maryland
corporation, as Lender.
Recitals
A. Borrower and Lender are party to that certain Loan
Agreement, dated as of August 14, 2002 (the "Original Loan Agreement"), made by
and between Borrower and Lender.
B. Pursuant to the Original Loan Agreement, Borrower
requested that Lender make a loan to Borrower in the aggregate principal amount
of One Hundred Twelve Million Seven Hundred Fifty Thousand Dollars
($112,750,000.00), and Lender agreed to make the loan on the terms and
conditions set forth in the Original Loan Agreement.
C. Borrower and Lender now wish to amend and restate the
Original Loan Agreement on the terms and conditions set forth herein.
Agreement
NOW, THEREFORE, in consideration of the foregoing Recitals and
the mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Additional Recourse Amount" has the meaning provided in
Section 7.8(a).
"Adjusted Net Operating Income" means, for any period, (i) Net
Operating Income of Borrower for such period minus (ii) a capital reserve equal
to the product of (A) $33.33 times (B) the average number of units in the
Facilities during such period times (C) the number of months in such period.
"Affiliate" of a specified Person means any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Person specified. For purposes
of the foregoing, "control," "controlled by" and "under common control with"
with respect to any Person means (i) the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise, or (ii) the ownership of more than 10 percent of the voting
securities of, or other equity interests in, such Person.
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"Agreement" means this Loan Agreement, dated as of August 14,
2002 among Borrower and Lender.
"Anniversary Date" means each anniversary of the Closing Date.
"ARC" means American Retirement Corporation, a Tennessee
corporation.
"ARC Brandywine Holdings" means ARC Brandywine Real Estate
Holdings, LLC, a Tennessee limited liability company.
"ARC Equity Owners" means the owners (other than the General
Partners) of the equity interests of the Property Operators and the HCPI Lessees
identified on Schedule 4.1(e).
"ARC Fleetwood Entities" means ARC Fleetwood, LLC, a Tennessee
limited liability company, and CRICFW One, LLC, a Delaware limited liability
company.
"ARC Freedom" means ARC Freedom, Inc., a Tennessee corporation
"ARC General Partners" means the general partners of the
Property Operators and the HCPI Lessees identified on Schedule 4.1(e).
"ARC Santa Catalina" means ARC Santa Catalina Real Estate
Holdings, LLC, a Delaware limited liability company.
"ARC SC Holdings" means ARC SC Holdings, LLC, a Delaware
limited liability company.
"ARC SC Pledge Agreement" has the meaning provided in Section
3.2(e)(iv).
"ARC SC Pledged Interests" means the equity interests in ARC
Santa Catalina to be pledged as security pursuant to the ARC SC Pledge
Agreement.
"ARC Somerby" means ARC Somerby Holdings, Inc., an Alabama
corporation.
"ARC Wilora Assisted Living" means ARC Wilora Assisted Living,
LLC, a Tennessee limited liability company.
"ARC Wilora Lake" means ARC Wilora Lake, Inc., a Tennessee
corporation.
"Authorized Officer" means the chief executive officer, the
president, the chief financial officer, the secretary or the treasurer of
Borrower.
"Borrower" means ARCPI Holdings, Inc., a Tennessee
corporation.
"Borrower Pledge Agreement" has the meaning provided in
Section 3.2(e)(iii).
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"Borrower Pledged Interests" means the equity interests in the
Property Owners that are direct Subsidiaries of Borrower and ARC SC Holdings to
be pledged as security pursuant to the Borrower Pledge Agreement.
"Business Day" means any day except a Saturday or Sunday or a
day when commercial banks are authorized or required by law to be closed in Los
Angeles, California.
"Capital Additions" has the meaning provided in the Master
Lease.
"Capital Lease Obligations" means, with respect to any Person,
any and all lease obligations of such Person and its Subsidiaries on a
consolidated basis that, in accordance with GAAP, have been or are required to
be capitalized on the books of such Person and its Subsidiaries.
"Cash Equivalents" means: (i) securities issued or fully
guaranteed or insured by the United States government or any agency thereof and
backed by the full faith and credit of the United States having a maturity of
not more than 1 year from the date of acquisition; (ii) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, rated A by S&P or A by Moody's; (iii) certificates of deposit, time
deposits, Eurodollar time deposits, or bankers' acceptances having in each case
a tenor of not more than 1 year, issued by an United States commercial bank
having combined capital and surplus of not less than $100,000,000 whose
short-term securities are rated at least A-1 by S&P or P-1 by Moody's; (iv)
certificates of deposit in an amount less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation; (v) commercial paper or bankers acceptances of an issuer rated at
least A-1 by S&P or P-1 by Moody's and, in either case, having a tenor of not
more than 1 year; and (vi) money market funds invested in one or more of the
foregoing.
"Change of Control" means the occurrence of any of the
following: (i) at any time, any person or group of persons (within the meaning
of Section 13(d) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") and the regulations promulgated thereunder) owns beneficially
(within the meaning of Rule 13d-3 promulgated by the Security and Exchange
Commission under the Exchange Act, or any successor or replacement regulation),
20% or more of the issued and outstanding shares of capital stock of ARC having
ordinary voting power for the election of directors of ARC; (ii) at any time, a
majority of the members of the board of directors of ARC shall not be Continuing
Directors; (iii) a majority of the directors who are Continuing Directors as of
any date shall resign within a 4-month period after such date; (iv) ARC shall
cease for any reason to own 100% of the outstanding ownership interest in
Borrower; (v) at any time prior to the Funding Date, Borrower shall cease for
any reason to own directly or indirectly 100% of the outstanding ownership
interest in each Property Owner (other than ARC Santa Catalina); (vi) at any
time after the Funding Date, Borrower shall cease for any reason to own directly
the percentage of the outstanding ownership interest in each Property Owner
(other than ARC Santa Catalina) which Borrower owns on the Funding Date after
giving effect to the HCPI Equity Investment; (vii) at any time after the Funding
Date, the HCPI Affiliates shall cease for any reason to own directly the
3
percentage of the outstanding ownership interest in each Property Owner (other
than ARC Santa Catalina) which Lender owns on the Funding Date after giving
effect to the HCPI Equity Investment; (viii) at any time prior to the Funding
Date, Borrower shall cease for any reason to own directly or indirectly 100% of
the outstanding ownership interest in ARC SC Holdings; (ix) at any time after
the Funding Date, Borrower shall cease for any reason to own directly the
percentage in ARC SC Holdings which Borrower owns on the Funding Date after
giving effect to the HCPI Equity Investment; (x) at any time after the Funding
Date, the HCPI Affiliates shall cease for any reason to own directly the
percentage of the outstanding ownership interest in ARC SC Holdings which Lender
owns on the Funding Date after giving effect to the HCPI Equity Investment; (xi)
ARC SC Holdings shall cease for any reason to own directly 100% of the
outstanding ownership interest in ARC Santa Catalina; (xii) Borrower shall cease
for any reason to own directly or indirectly 100% of the outstanding ownership
interest in each Property Operator; (xiii) Borrower shall cease for any reason
to own directly or indirectly 100% of the outstanding ownership interest in each
HCPI Lessee; or (xiv) from and after the Funding Date, Borrower shall cease for
any reason to own directly 100% of the outstanding ownership interest in each of
ARC Wilora Lake and ARC Wilora Lake Assisted Living.
"Closing Date" means August 14, 2002.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulation promulgated thereunder.
"Collateral" means all property which is subject or is to
become subject to the security interests or Lien granted by any of the
Collateral Documents.
"Collateral Documents" means, collectively, the Borrower
Pledge Agreement, the ARC SC Pledge Agreement, the Reserve Account Security
Agreement, the Negative Pledge Agreements and all other security agreements,
collateral assignments and other instruments, documents and agreements at any
time delivered to Lender to create or evidence Liens to secure the Obligations
or any guaranty thereof, and any amendments, supplements, modifications,
renewals, replacements, consolidations, substitutions and extensions of any of
the foregoing.
"Compliance Certificate" has the meaning provided in Section
5.2(f).
"Condemnation" has the meaning provided in the Master Lease.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the "primary obligation")
of another Person (the "primary obligor"), including any obligation of that
Person, whether or not contingent, (i) to purchase, repurchase or otherwise
acquire any such primary obligation or any property constituting direct or
indirect security therefor; or (ii) to advance or provide funds (A) for the
payment or discharge of any such primary obligation, or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet item, level of income or financial
condition of the primary obligor; or (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) otherwise to assure or
4
hold harmless the holder of any such primary obligation against loss in respect
thereof. The amount of any Contingent Obligation of any Person shall be deemed
to be an amount equal to the maximum amount of such Person's liability with
respect to the stated or determinable amount of the primary obligation for which
such Contingent Obligation is incurred or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder).
"Continuing Director" means a director who (i) was a member of
the Board of Directors of ARC on the Closing Date, or (ii) was nominated to be a
member of the Board of Directors by a majority of the Continuing Directors then
in office to fill a vacancy left by death, retirement or voluntary resignation
of a director.
"Contribution Agreement" means that certain Contribution
Agreement made and entered into as of August 14, 2002 between Borrower,
Borrower's direct and indirect subsidiaries as set forth on Schedule A attached
thereto and HCPI, which Contribution Agreement shall be in form and substance
satisfactory to Lender.
"Contribution Documents" means the Contribution Agreement and
all other agreements, documents and instruments delivered to HCPI by or on
behalf of Borrower or any Affiliate of Borrower pursuant to or in connection
with the transactions contemplated by the Contribution Agreement, each of which
shall be in form and substance satisfactory to Lender.
"Covered Facilities" means, collectively, the Facilities and
the Wilora Lake Facility. "Covered Facility" means, individually, any of the
Covered Facilities.
"Debt" means, as applied to any Person and in each case
determined on a consolidated basis in conformity with GAAP (without
duplication): (i) all obligations for borrowed money (whether by loan or the
issuance of debt securities or otherwise); (ii) all obligations evidenced by
bonds, debentures, notes, or other similar instruments; (iii) all Capital Lease
Obligations; (iv) all obligations or liabilities of others secured by a Lien on
any property or asset of such Person, irrespective of whether such obligation or
liability is assumed; (v) all obligations owed for all or any part of the
deferred purchase price of property, assets, or services that are due more than
12 months after the date of the incurrence of the obligation in respect thereto;
and (vi) all Unfunded Pension Liabilities of such Person or any of its
Subsidiaries.
"Debt Service Coverage Ratio" means, for any period, the ratio
obtained by dividing (i) Adjusted Net Operating Income for such period by (ii)
the sum of (A) the cash payments required on the Loan during such period plus
(B) the aggregate principal and interest payments on the First Mortgage Loans
during such period (excluding therefrom any principal paid in connection with a
Permitted Refinancing Loan or a Permitted Payoff) plus (C) the net payments, if
any, made on the Required Interest Hedge during such period plus (D) any
payments required to be made into the Sinking Fund Reserve Account during such
period.
"Default" means any event or condition which with notice, the
passage of time or both would constitute an Event of Default.
5
"Depository Bank" has the meanings provided in Section
5.3(m)(i).
"Distribution Date" means the fourth Business Day of each
calendar month from the Funding Date through the Maturity Date.
"DOL" means the United States Department of Labor or any
successor department or agency.
"Dollars" and "$" means United States dollars or such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts in the United States of
America.
"EBITDA" means, for any period for any Person, the sum of (i)
Net Income for such period, (ii) depreciation and amortization included in
calculating such Net Income, (iii) Interest Expense for such period, (iv) Tax
Expense for such period, in each case determined for such Person and its
Subsidiaries on a consolidated basis.
"EBITDAR" means, for any period, the sum of (i) EBITDA; and
(ii) the aggregate amount payable under all leases and rental agreements, in
each case determined for such period for the Property Owners and the Property
Operators on a consolidated basis in accordance with GAAP.
"Enterprise Vehicle Master Lease" means the Master Equity
Lease Agreement, entered into the sixteenth day of November 2001, by and between
Enterprise Rent-A-Car Company of Tennessee, a Tennessee corporation, do business
as Enterprise Fleet Services and ARC.
"Entrance Fee Facility" means a Facility that is listed on
Schedule II.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case
relating to environmental, health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by such Governmental Authority in response to, a Release
or threatened Release of a Hazardous Substance into the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any regulation promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with Borrower or any of its Subsidiaries
within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and
(o) of the Code for purposes of provisions relating to Section 412 of the Code).
6
"ERISA Event" means (i) a Reportable Event with respect to a
Pension Plan, (ii) a withdrawal by Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA, (iii) a complete or partial withdrawal by Borrower or any
ERISA Affiliate from a Multi-Employer Plan or notification that a Multi-Employer
Plan is in reorganization, (iv) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multi-Employer Plan, (v) the occurrence of an event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multi-Employer Plan, or (vi) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate.
"Event of Default" and "Events of Default" have the meanings
provided in Section 6.1.
"Exchange Offer" means the offer to exchange Old ARC
Debentures for New ARC Securities, as described in that certain Offering
Memorandum, dated August 14, 2002, for Exchange Offer for Outstanding 5 3/4%
Convertible Subordinated Debentures Due 2002.
"Exchange Warrant Documents" means the agreements and other
documents pursuant to which the Exchange Warrants are issues and all other
documents executed in connection with the issuance of the Exchange Warrants.
"Exchange Warrants" means the warrants to purchase ARC common
stock to be issued in connection with the Exchange Offer.
"Facility" means each facility being (and to be) operated or
proposed to be operated on the Leased Property (as defined in the Master Lease),
together with any Capital Additions (as defined in the Master Lease).
"Facilities" means, collectively, all of the Facilities. The Facilities are
identified on Schedule I.
"Fee Estate" means any fee estate in real property.
"Final Appraisal" has the meaning provided in
Section 3.2(k)(iii).
"Finance," "Financed," "Finances," "Financing" and similar
terms shall mean the provision of financing to Borrower, its Subsidiaries and/or
its Affiliates whether in the form of a loan, a synthetic lease, a
sale-leaseback transaction, or similar or related financing structure, but shall
specifically exclude trade payables incurred in the ordinary course of business
consistent with past practices and Indebtedness permitted pursuant to Section
5.4(b)(iv), (vi), (vii) and (viii).
"Financing Transaction" has the meaning provided in
Section 2.6.
7
"First Mortgage Lenders" means collectively (i) the lenders
identified on Part B of Schedule I to this Agreement and (ii) the Permitted
Refinancing Lenders, if any. "First Mortgage Lender" means, individually, any of
the First Mortgage Lenders.
"First Mortgage Loan Documents" means collectively all
documents evidencing or related to the First Mortgage Loans. "First Mortgage
Loan Document" means individually any of the First Mortgage Loan Documents.
"First Mortgage Loans" means collectively (i) the mortgage
loans identified on Schedule I to this Agreement and (ii) the Permitted
Refinancing Loans, if any. "First Mortgage Loan" means individually any of the
First Mortgage Loans.
"Flood Hazard Area" means an area designated by the Federal
Emergency Management Agency and/or the Secretary of Housing and Urban
Development as having special flood hazards.
"Fort Austin LP" means Fort Austin Limited Partnership, a
Texas limited partnership.
"Freedom Village Sun City" means Freedom Village of Sun City
Center, Ltd., a Florida limited partnership.
"Ft. Worth Facility" means the Facility identified as the Ft.
Worth Facility on Schedule I.
"Funding Date" has the meaning provided in Section 2.1(a).
"Funding Date Restructuring Plan" means the restructuring plan
of Borrower and its Subsidiaries, to be accomplished prior to the Funding Date,
such plan to be reasonably acceptable to Lender.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accounts and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such entity as may be in general use
by significant segments of the United States accounting profession, which are
applicable to the circumstances on the date of determination; provided that if
one or more changes in GAAP after the date hereof are required to be applied to
the then existing transactions, and such change or changes have a material
effect on the financial computations required under this Agreement, then as used
in this Agreement, GAAP means generally accepted accounting principles as in
effect prior to such change or changes.
"GECC Loan" means the $95,700,000 First Mortgage Loan to Fort
Austin Real Estate Holdings, LLC, a Tennessee limited liability company, by
General Electric Capital Corporation.
8
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Requirement" means any law, ordinance, order,
rule, regulation, decree or similar edict of a Governmental Authority.
"Gross Revenues" means, for any period for all the Facilities,
all revenues received or receivable during such period from or by reason of the
operation of the Facilities or any other use of the Leased Property (as defined
in the Master Lease) related to the Facilities, the Property Operators' Personal
Property (as defined in the Master Lease) and Capital Additions (as defined in
the Master Lease) related to the Facilities including all revenues received or
receivable for the use of or otherwise attributable to units, rooms, beds and
other facilities provided, meals served, services performed (including ancillary
services), space or facilities subleased or goods sold on or from the Leased
Property and Capital Additions related to the Facilities and the amortization of
entrance fees related to the Facilities, all determined in accordance with GAAP;
provided, however, that Gross Revenues shall not include: (i) non-operating
revenues such as interest income or income from the sale of assets not sold in
the ordinary course of business; (ii) contractual allowances (relating to any
period during the Term (as defined in the Master Lease)) for xxxxxxxx not paid
by or received from the appropriate governmental agencies or third party
providers; (iii) all proper patient billing credits and adjustments according to
GAAP relating to health care accounting; and (iv) federal, state or local excise
taxes and any tax based upon or measured by such revenues which is added to or
made a part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated separately. Gross
Revenues for any period for the Facilities shall include all cost report
settlement amounts received in or payable during such period in accordance with
GAAP relating to health care accounting, regardless of the period to which such
settlement amounts are applicable; provided, however, that to the extent
settlement amounts are applicable to periods, or portions thereof, prior to the
Funding Date, such settlement amounts shall not be included in Gross Revenues
for the period in which such settlement amounts are received or paid. Gross
Revenues shall also include (x) the Gross Revenues of any Occupant (as defined
in the Master Lease) under a Commercial Occupancy Arrangement (as defined in the
Master Lease) (i.e., the Gross Revenues generated from the operations conducted
on or from such subleased, licensed or other used or occupied portion of the
Leased Property and all Capital Additions of the Facilities shall be included
directly in the Gross Revenues) if all or any portion of the rent received or
receivable by the Property Operators from or under such Commercial Occupancy
Arrangement is based on net income of such Occupant or would otherwise fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code, or any similar or successor provision thereto (in which event the rent
received or receivable by the Property Operators from or under such Commercial
Occupancy Arrangement shall be excluded from Gross Revenues), or (y) the rent
received or receivable by the Property Operators from or under such Commercial
Occupancy Arrangement, if no portion of the rent received or receivable by the
Property Operators from or under such Commercial Occupancy Arrangement is based
on net income of such Occupant and such rent qualifies as "rents from real
property" within the meaning of Section 856(d) of the Code, or any
9
similar or successor provision thereto (in which event the Gross Revenues of
such Occupant shall be excluded from Gross Revenues herein).
"Hazardous Substances" means, collectively, any petroleum,
petroleum product or byproduct or any substance, material or waste regulated or
listed pursuant to any Environmental Law.
"HCPI" means Health Care Property Investors, Inc., a Maryland
corporation.
"HCPI Affiliate" means HCPI or any Affiliate of HCPI.
"HCPI Equity Investment" means the equity investment in the
Property Owners made by HCPI as required pursuant to Section 3.2(l).
"HCPI Lease" means that certain Master Lease, dated as of
March 29, 2002, between HCPI and Texas HCP Holding, L.P., a Delaware limited
partnership, on the one hand; and the HCPI Lessees, on the other hand.
"HCPI Lease Documents" means the HCPI Lease and all other
guaranties and other agreements, documents and instruments delivered to Lender
by or on behalf of Borrower or any Affiliate of Borrower pursuant to or in
connection with the HCPI Lease.
"HCPI Leased Facilities" means, collectively, the facilities
leased from HCPI Lessor by the HCPI Lessees, as more specifically identified on
Schedule 5.4(g)(iv).
"HCPI Leased Facility" means, individually any of the HCPI
Leased Facilities.
"HCPI Lessees" means, collectively, ARC Carriage Club of
Jacksonville, Inc., a Tennessee corporation; ARC Delray Beach, LLC, a Tennessee
limited liability company; ARC Post Oak, L.P., a Tennessee limited partnership;
ARC Richmond Heights, LLC, a Tennessee limited liability company; ARC Shavano,
L.P., a Tennessee limited partnership; and ARC Victoria, L.P., a Tennessee
limited partnership.
"HCPI Lessor" means HCPI, HCPI's affiliates and/or their
successors-in-interest serving as lessor(s) under the HCPI Lease.
"HCPI Loan Reserve Account" has the meaning provided in
Section 5.3(n)(i)(E).
"Health Care Facility" means a facility which provides any
pharmaceutical products or any level of geriatric care, home health care,
medical care (including sub-acute care), assisted living service or
rehabilitative services, whether licensed as a skilled nursing facility,
intermediate care facility, personal care facility, hospital or pharmacy or any
products or services reasonably related thereto.
"Health Care Permit" means every accreditation, authorization,
certificate of need, license or permit that is required pursuant to applicable
federal, state or local law, rule,
10
ordinance or authority to own, lease, operate or manage a Covered Facility or
any Subsidiary of Borrower or an HCPI Lessee.
"Hedging Agreement" means (i) any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement designed to protect against fluctuations
in currency values; or (ii) any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement or other similar agreement or
arrangement which is designed to protect against fluctuations in interest rates.
"Indebtedness" means, as applied to any Person and in each
case determined on a consolidated basis in conformity with GAAP (without
duplication): (i) all Debt; (ii) all reimbursement obligations with respect to
surety bonds, letters of credit, bankers acceptances and similar instruments (in
each case, whether or not matured); (iii) all obligations (contingent or
otherwise) to purchase, retire or redeem any capital stock or any other equity
interest of such Person; (iv) all monetary obligations measured by, or
determined on the basis of, the value of any capital stock of such Person; (v)
all obligations, whether or not such obligations constitute Indebtedness
described in clauses (i) through (iv) above, secured by (or for which the holder
of the obligation has an existing right, contingent or otherwise, to be secured
by) any Lien upon or in property (including accounts and contract rights) owned
by such Person or any Subsidiary of such Person; (vi) Contingent Obligations;
and (vii) all monetary claims against Borrower or any Subsidiary of Borrower
under Hedging Agreements.
"Indemnified Liabilities" has the meaning provided in Section
7.7(a).
"Indemnified Person" has the meaning provided in Section
7.7(a).
"Intercreditor Agreement" and "Intercreditor Agreements" have
the meanings provided in Section 3.2(e)(vi).
"Interest Expense" means, for any period for any Person, the
interest expense (net of interest income) for such period of such Person and its
Subsidiaries on a consolidated basis, determined in conformity with GAAP.
"IRS" means the Internal Revenue Service and any successor
agency.
"Land" has the meaning provided in the Master Lease.
"Leased Property" has the meaning provided in the Master
Lease.
"Leasehold Estate" means any interest in real property which
is not a Fee Estate.
"Lender" means Health Care Property Investors, Inc., a
Maryland corporation, and its successors and assigns.
"Lien" means: (i) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including a security interest, charge, claim, or lien arising from
a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit
11
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; (ii) to the extent not
included under clause (i), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (iii) any contingent or other agreement
to provide any of the foregoing.
"Liquidity" means, as of any date of determination, the
unrestricted cash and Cash Equivalents of ARC and its Subsidiaries as of such
date of determination.
"Loan" has the meaning given in Section 2.1(a).
"Loan Documents" means this Agreement, the Note, the
Collateral Documents, the Intercreditor Agreements and all other guaranties and
other agreements, instruments and written indicia of the Obligations delivered
to Lender by or on behalf of Borrower or any other Loan Party pursuant to or in
connection with the transactions contemplated hereby.
"Loan Parties" means Borrower, the Property Owners and, so
long as it is the owner of the Somerby Purchase Option, ARC Somerby.
"Master Lease" means that certain Master Lease, dated as of
the Funding Date, between the Property Owners, on the one hand, and the Property
Operators, on the other hand.
"Master Lease Documents" means the Master Lease and all other
guaranties and other agreements, documents and instruments delivered to Property
Owners or Lender by or on behalf of Borrower or any Affiliate of Borrower
pursuant to or in connection with the transactions contemplated by the Master
Lease.
"Master Lease Payment Date" means the first Business Day of
each calendar month during the term of the Master Lease.
"Master Trust Documents" means the agreements and documents
set forth in Schedule III.
"Master Trust Payments" means any amounts paid or payable
pursuant to the Master Trust Documents.
"Material Adverse Change" means (i) a material adverse change
in the business, properties, assets, nature of the assets, liabilities,
operations, prospects or condition (financial or otherwise) of (a) Borrower and
its Subsidiaries, taken as a whole; (b) any Facility; or (c) ARC and its
Subsidiaries, taken as a whole, in each case as compared with the business,
properties, assets, nature of the assets, liabilities, operations, prospects or
condition (financial or otherwise) of Borrower and its Subsidiaries, any
Facility or ARC and its Subsidiaries, as the case may be, as of June 30, 2002;
(ii) a material impairment after the Closing Date of the ability of Borrower or
any Affiliate of Borrower to perform under any Transaction Document to which it
is a party; or (iii) a material adverse change in the legality, validity,
binding effect or enforceability against any Loan Party or any Operating Company
of any Transaction Document to which it is a party.
12
"Material Adverse Effect" means (i) a material adverse effect
upon the business, properties, assets, nature of the assets, liabilities,
operations, prospects or condition (financial or otherwise) of (a) Borrower and
its Subsidiaries, taken as a whole; (b) any Facility; or (c) ARC and its
Subsidiaries, taken as a whole; (ii) a material impairment of the ability of
Borrower or any Affiliate of Borrower to perform under any Transaction Document
to which it is a party; or (iii) a material adverse effect upon the legality,
validity, binding effect or enforceability against any Loan Party or any
Operating Company of any Transaction Document to which it is a party.
"Maturity Date" means the date 5 years after the Funding Date.
"Moody's" means Xxxxx'x Investors Service, Inc. or any
successor thereto.
"Mortgage Payment Reserve Account" has the meaning provided in
Section 5.3(n)(i)(D).
"Multi-Employer Plan" means a multi-employer plan (as defined
in Section 4001(a)(3) of ERISA) which is, or was at any time during the current
year or the immediately preceding 6 years, contributed to by Borrower or any
ERISA Affiliate.
"Negative Pledge Agreements" and "Negative Pledge Agreement"
have the meanings provided in Section 3.2(e)(v).
"Net Income" means, for any period for any Person, the net
income (exclusive of minority interests and extraordinary items) for such period
of such Person and its Subsidiaries on a consolidated basis, determined in
conformity with GAAP.
"Net Operating Income" means, for any period, (i) Gross
Revenues for such period minus (ii) the sum of (a) Operating Expenses for such
period plus (b) a management fee equal to the greater of (x) 5% times Gross
Revenues for such period and (y) the actual amount of management fees paid by
the Property Owners or the Property Operators for such period; provided that for
any Facility clause (y) of this definition shall not apply to any management
fees paid to an Affiliate of ARC with respect to such Facility so long as such
fees are paid pursuant to an agreement that specifically provides that such
management fee shall exceed 5% only during the period during which Borrower is
the owner of the Property Owner which owns such Facility.
"New ARC Securities" means, collectively, the New Series A ARC
Notes, the New Series B ARC Notes and the Exchange Warrants.
"New ARC Securities Documents" means, collectively, the New
Series A ARC Note Documents, the New Series B ARC Note Documents and the
Exchange Warrant Documents.
"New Series A ARC Note Documents" means the Indenture pursuant
to which the New Series A ARC Notes are issues and all other documents executed
in connection with the issuance of the New Series A ARC Notes.
13
"New Series B ARC Note Documents" means the Indenture pursuant
to which the New Series B ARC Notes are issues and all other documents executed
in connection with the issuance of the New Series B ARC Notes.
"New Series A ARC Notes" means the Series A Senior
Subordinated Notes due September 30, 2002.
"New Series B ARC Notes" means the Series B Senior
Subordinated Notes due September 30, 2009.
"Non-REIT Asset" has the meaning set forth in Section 5.5(c).
"Non-REIT Income" has the meaning set forth in Section 5.5(c).
"Note" has the meaning provided in Section 2.1(b).
"Obligations" means all present and future debts, obligations
and liabilities of Borrower of every type and description arising under or in
connection with this Agreement or any other Loan Document, due or to become due
to Lender or any other Person required to be indemnified under any Loan
Document, or any of their respective successors, transferees or assigns and
shall include (without limitation) (i) all liability for principal of and
interest on the Loan; and (ii) all liability under the Loan Documents for any
fees, taxes, additional compensation, expense reimbursements and
indemnification.
"Old ARC Debenture Indenture" means that certain Indenture,
dated as of September 29, 1997, by and between ARC and IBJ Xxxxxxxx Bank and
Trust Company, a New York banking corporation, as trustee.
"Old ARC Debentures" means the $132,930,000 of 5 3/4%
Convertible Subordinated Debentures due October 1, 2002.
"Operating Expenses" means, for any period for the Facilities,
the operating expenses of the Facilities during such period, as determined in
accordance with GAAP.
"Original Loan Agreement" has the meaning provided in
Recital A.
"Other Permitted Subsidiaries" and "Other Permitted
Subsidiary" have the meanings provided in Section 3.2(j).
"Other Taxes" has the meaning provided in Section 2.7(b).
"Payment Date" means the fourth Business Day of each calendar
quarter from the Funding Date through the Maturity Date.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
14
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which Borrower or any ERISA
Affiliate sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions, or in the case of a Multi-Employer Plan has made
contributions at any time during the immediately preceding 6 plan years.
"Permitted Letter of Credit" means a letter of credit (i)
which is issued by a financial institution which is satisfactory to Lender in
its sole discretion and whose long-term debt is rated at least "A" by S&P and
"A2" by Moody's; (ii) which names Lender as the beneficiary; (iii) which
contains terms and provisions satisfactory to Lender in its sole discretion; and
(iv) with respect to which the Borrower has the reimbursement obligation (and
such reimbursement obligation is not guarantied by ARC or any Affiliate of ARC).
"Permitted Payoff" means the payment in full of all
obligations under, and the release of any Liens with respect to, a First
Mortgage Loan; provided that such payment was made in accordance with this
Agreement.
"Permitted Refinancing Loan" means, individually, any mortgage
loan which refinances a First Mortgage Loan and is consented to by Lender in
accordance with this Agreement. "Permitted Refinancing Loans" means,
collectively, all Permitted Refinancing Loans.
"Permitted Refinancing Lender" means, individually, a Person
that is a lender under a Permitted Refinancing Loan. "Permitted Refinancing
Lenders" means, collectively, all Permitted Refinancing Lenders.
"Permitted Subsidiaries" has the meaning provided in Section
4.1(e).
"Permitted Wilora Lake Refinancing Loan" means, individually,
any mortgage loan which refinances a Wilora Lake Loan and is consented to by
Lender in accordance with this Agreement.
"Person" means an individual, partnership, limited liability
company, corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which Borrower or any ERISA Affiliate sponsors or maintains or to
which Borrower or any ERISA Affiliate makes, is making, or is obligated to make
contributions and includes any Pension Plan.
"Primary Intended Use" has the meaning provided in the Master
Lease.
"Property Operators" means (i) at any time prior to the
Funding Date, the Persons identified on Schedule 4.1(e) as Property Operators
and (ii) on and after the Funding Date the Persons identified as Property
Operators on Part A of Schedule I.
15
"Property Owners" means (i) at any time prior to the Funding
Date, the Persons identified on Part A of Schedule 4.1(r) as Property Owners and
(ii) on and after the Funding Date, the Persons identified as Property Owners on
Part A of Schedule I.
"Real Property" means any Fee Estate or any Leasehold Estate.
"Reinvestment Rate" means, with respect to any prepayment of
the Loan, an amount equal to the yield on U.S. Treasuries issued with a term a
near to equal to the remaining term as the Loan as possible, such yield being
based on the bid price for such issue as published in the Wall Street Journal on
the date that is fourteen (14) days prior to the date of such prepayment (of, if
such bid price is not published on such date, the next preceding date on which
such bid price is so published) and converted to a monthly (not compounded)
nominal yield, such Reinvestment Rate to be determined by Lender.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Hazardous Substance into the indoor or outdoor environment or into or out of any
Real Property or other property, including the movement of Hazardous Substances
through or in the air, soil, surface water, groundwater or Real Property or
other property.
"Repair and Replacement Expenditures" has the meaning provided
in Section 5.3(n)(i)(A).
"Repair and Replacement Reserve Account" has the meaning
provided in Section 5.3(n)(i)(A).
"Reportable Event" shall mean any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, a withdrawal from a plan
described in Section 4063 of ERISA or a cessation of operations described in
Section 4062(e) of ERISA.
"Required Interest Hedge" has the meaning provided in Section
3.2(u).
"Reserve Account Security Agreement" has the meanings provided
in Section 3.2(e)(vii).
"Reserve Accounts" and "Reserve Account" has the meaning
provided in Section 5.3(n)(i).
"Retired Officers Corporation" means Retired Officers
Corporation, a Florida not-for-profit corporation.
"Retired Officers Documents" means, collectively, the Retired
Officers Marketing Agreement and the Retired Officers Right of First Refusal.
"Retired Officers Land Corporation" means Retired Officers
Land Corporation, a Florida not-for-profit corporation.
16
"Retired Officers Marketing Agreement" means that certain
Marketing and Endorsement Agreement, executed as of the 30th day of June 1998,
by and between Freedom Village Sun City and Retired Officer's Corporation
"Retired Officers Right of First Refusal" means that certain
Agreement for Right of First Refusal, made and executed the 30th day of June
1998, by and between Freedom Village Sun City, Retired Officer's Corporation and
Retired Officers Land Corporation.
"Review Period" has the meaning provided in Section 2.6(b).
"Reviewed Budget" means the budget of the Covered Facilities
delivered prior to the Closing Date and reviewed and accepted by Lender, a copy
of which is attached hereto as Exhibit H.
"Right of First Offer" has the meaning provided in
Section 2.6.
"S&P" means Standard & Poor's Corporation or any successor
thereto.
"Sinking Fund Reserve Account" has the meaning specified in
Section 5.3(n)(i)(C).
"Solvent" means, when used with respect to any Person, that at
the time of determination: (i) the assets of such Person, at a fair valuation,
are in excess of the total amount of its debts (including contingent
liabilities); (ii) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become absolute and
matured; (iii) it is then able and expects to be able to pay its debts
(including contingent debts and other commitments) as they mature; and (iv) it
has capital sufficient to carry on its business as conducted and as proposed to
be conducted.
"Somerby Purchase Option" means purchase option of ARC on the
managed properties knows as the Somerby at Xxxxx Farm and Somerby at University
Park.
"Subsidiary" means, with respect to any Person, any
corporation, association, partnership, joint venture or other business entity of
which 50% or more of the voting stock or other equity interests is owned or
controlled directly or indirectly by such Person, or one or more Subsidiaries of
such Person or a combination thereof.
"Tax Expense" means, for any period for any Person, charges
for taxes accrued during such period by such Person and its Subsidiaries on a
consolidated basis, determined in conformity with GAAP.
"Taxes" has the meaning provided in Section 2.7(a).
"Test Period" means (i) for any Distribution Date occurring on
any date from the Funding Date through and including the Distribution Date in
February 2003, the period from August 1, 2002 to the last day of the calendar
month commencing two calendar months prior to such Distribution Date; and (ii)
for any Distribution Date thereafter, the period from the
17
beginning of the applicable calendar year through the last day of the calendar
month commencing two calendar months prior to such Distribution Date.
"Title Company" has the meaning provided in Section 3.2(k)(i).
"Title Policy" has the meaning provided in Section 3.2(k)(i).
"Transaction Document" means, collectively, the Loan
Documents, the Contribution Documents and the Master Lease Documents.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
"Unmatured Surviving Obligation" means, as of any date, an
Obligation which is contingent and unliquidated and not due and owing on such
date and which pursuant to provisions of this Agreement survives termination of
this Agreement and the repayment of the Loan, such as, for example, a contingent
and unliquidated indemnification obligation under Section 7.7.
"Vehicle Sublease" means a Vehicle Sublease in a form
reasonably acceptable to Lender.
"Wilora Lake Facility" means the facility set forth opposite
the names of ARC Wilora Assisted Living and ARC Wilora Lake on Part C of
Schedule I.
"Wilora Lake Loan" means the (i) mortgage loan identified on
Schedule I and relating to the Wilora Lake Facility and (ii) the Permitted
Wilora Lake Refinancing Loan.
"Wilora Lake Loan Documents" collectively and documents
evidencing or related to the Wilora Lake Loan. "Wilora Lake Loan Document" means
individually any of the Wilora Lake Loan Documents.
"Working Capital" means, for any date, (a) the current assets
of Borrower and its Subsidiaries on a consolidated basis (excluding (i) any
loans made to ARC or any Affiliate of ARC and (ii) any cash or Cash Equivalents)
minus (b) the current liabilities of Borrower and its Subsidiaries on a
consolidated basis (excluding, however, the current portion of long-term
Indebtedness and the Master Trust Payments, but not excluding other payments
with respect to Entrance Fee Facilities), in each case determined as of such
date in accordance with GAAP.
"Working Capital Reserve Account" has the meaning provided in
Section 5.3(n)(i)(B).
Section 1.2 Accounting Terms. Except where context otherwise
requires, all accounting terms not expressly defined herein shall be construed
and all financial computations required under this Agreement shall be made in
accordance with GAAP as then in effect.
18
Section 1.3 Other Definitional Provisions.
(i) Unless otherwise specified herein or
therein, all terms defined in this Agreement have the defined
meanings when used in any other Transaction Document or in any
certificate or other document made or delivered pursuant
hereto.
(ii) The words "hereof," "herein," "hereunder,"
and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular
provision of this Agreement, and section, schedule and exhibit
references are to sections, schedules and exhibits to this
Agreement unless otherwise specified.
(iii) The meaning of defined terms shall be
equally applicable to the singular and plural forms of the
defined terms.
(iv) The term "including" is not limiting and
means "including without limitation."
(v) In the computation of periods of time from
a specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each
mean "to but excluding"; and the word "through" means "to and
including."
(vi) References to agreements and other documents
shall be deemed to include all subsequent amendments and other
modifications thereto that are permitted under this Agreement.
(vii) References to statutes or regulations are to
be construed as including all statutory and regulatory
provisions consolidating, amending or replacing the statute or
regulation.
(viii) The captions and headings of this Agreement
are for convenience of reference only and shall not affect the
construction of this Agreement.
ARTICLE II.
AMOUNTS AND TERMS OF LOAN
Section 2.1 Making the Loan.
(a) The Loan. Lender agrees, subject to the terms and
conditions set forth in this Agreement, to make a loan to Borrower (the "Loan")
in the aggregate principal amount of $112,750,000 on any Business Day (the date
of the making of the Loan, the "Funding Date") after the Closing Date and on or
prior to September 30, 2002.
(b) The Note. The Loan shall be evidenced by a Note
(the "Note"), substantially in the form of Exhibit A, in an original principal
of $112,750,000. The Note shall amend and restate and replace in its entirety
the Note delivered under the Original Lease Loan.
19
(c) Funding the Loan. Upon fulfillment of the conditions
set forth in Section 3.2, Lender shall make the proceeds of the Loan available
to Borrower by transferring funds to an account within the United States, such
account to be designated by Borrower prior to the Funding Date.
Section 2.2 Interest.
(a) Interest Rate. Interest shall accrue on the unpaid
principal amount of the Loan from the Funding Date until the principal amount of
the Loan shall be paid in full, at a rate per annum equal to 19.5%.
(b) Default Interest. For any period of time during which
an Event of Default has occurred and is continuing, the principal amount of the
Loan shall bear interest payable upon demand at a rate per annum equal to the
sum of (i) 2 percent plus (ii) the rate otherwise payable pursuant to Section
2.2(a), but not to exceed the maximum rate permitted by applicable law.
Section 2.3 Mandatory Payments. Borrower agrees to make the
following payments on the Loan:
(a) Quarterly Payments. On each Payment Date (other than
the Payment Date occurring in October 2002), Borrower shall make a cash payment
to Lender in an amount equal to the amount for such Payment Date set forth in
the following table:
Period Interest Payment
------ ----------------
From the Funding Date through February 1, 2004 $2,536,875
After February 1, 2004 through February 1, 2005 $2,693,125
After February 1, 2005 through February 1, 2006 $2,849,374
After February 1, 2006 through February 1, 2007 $3,005,624
After February 1, 2007 through the Maturity Date $3,161,873
Any payment made pursuant to this Section 2.3(a) shall be applied first to
accrued and unpaid interest and then to the unpaid principal amount of the Loan.
On each Payment Date, any interest which has accrued pursuant to Section 2.2(a)
and is not paid pursuant to this Section 2.3(a) shall be added to the principal
amount of the Loan and shall thereafter accrue interest at the rate provided in
Section 2.2(a).
(b) Maturity Date. On the Maturity Date, Borrower shall
pay the full outstanding principal amount of the Loan (including any principal
that was added to the Loan pursuant to Section 2.3(a)), all accrued and unpaid
interest on the Loan and all other Obligations then due and owing under this
Agreement or any other Loan Document. For the convenience of the parties hereto,
attached as Schedule 2.3(b) is a schedule showing the accrual
20
of interest and principal amounts for the loan on a timely basis and that the
loan is funded on September 30, 2002 assuming all payments are made.
(c) Payment Following Change of Control. If within the
period commencing on the date of a Change of Control and ending 90 days after
written notice from Borrower to Lender of such Change of Control, Lender shall
request in writing that Borrower repay the Loan, then within 30 days after
delivery to Borrower of such written request, Borrower shall immediately repay
the full outstanding principal amount of the Loan (including any principal that
was added to the Loan pursuant to Section 2.3(a)), all accrued and unpaid
interest on the Loan and all other Obligations then due and owing under this
Agreement or any other Loan Document.
Section 2.4 Voluntary Prepayments.
(a) No Prepayment Prior to Third Anniversary. Borrower
may not, under any circumstance, prepay the Loan prior to the third anniversary
of the Funding Date.
(b) Full Prepayment. After the third anniversary of the
Funding Date, Borrower may prepay the Loan in whole, but not in part. For any
such prepayment, Borrower shall provide Lender written notice of such prepayment
not later than thirty days prior to the date of such prepayment, and such
written notice must state that Borrower intends to prepay the Loan and must
provide the date on which such prepayment will be made. If such notice is given
Borrower shall, on the prepayment date set forth in such notice, prepay the full
outstanding principal amount of the Loan (including any principal that was added
to the Loan pursuant to Section 2.3(a)), all accrued and unpaid interest on the
Loan and all other Obligations then due and owing under this Agreement or any
other Loan Document.
(c) Partial Prepayment. After the third anniversary of
the Funding Date, Borrower may with the approval of Lender (which approval may
be withheld in the sole and absolute discretion of Lender) make a partial
prepayment of the Loan; provided that such partial prepayments may not be
requested more frequently than quarterly and may not be requested for a
principal amount less than $20,000,000. For any such prepayment, Borrower shall
provide Lender written notice of such prepayment not later than thirty days
prior to the date of such prepayment, and such written notice must state that
Borrower desires to prepay the Loan and must provide the date on which such
prepayment will be made, if approved by Lender. If such notice is given and the
Lender approves such prepayment, Borrower shall, on the prepayment date set
forth in such notice, prepay the principal amount of the Loan approved by Lender
and all accrued and unpaid interest on such principal amount. No partial payment
hereunder shall reduce the amount of any payment required pursuant to Section
2.3.
(d) Yield Maintenance Premium. If, for any reason, the
Loan is involuntarily prepaid prior to the third anniversary of the Funding Date
(including, by reason of an acceleration following the occurrence of an Event of
Default), Borrower shall, concurrently with such prepayment, pay to Lender an
amount equal to the greater of (x) 1% and (y) the positive difference, if any,
between (i) the net present value of the remaining payments of principal and
interest (including the payment on the Maturity Date) discounted at the
Reinvestment Rate expressed in monthly terms (not compounded), determined one
Business
21
Day prior to such prepayment, and (ii) the principal amount of the Loan, as at
the date of such prepayment.
Section 2.5 Payments and Computations.
(a) Payments. Borrower shall make each payment hereunder
not later than 2:00 p.m. (Los Angeles, California time) on the day when due in
Dollars to Lender at its address referred to in Section 7.3 in same day funds.
(b) Computations. All computations of interest shall be
made by Lender on the basis of a year of 360 days, in each case for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest are payable.
(c) Payment on Business Day. Whenever any payment under
this Agreement or the other Loan Documents shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be.
Section 2.6 Right of First Offer to Finance. So long as any
Obligation (other than an Unmatured Surviving Obligation) shall remain unpaid,
if Borrower or any of its Subsidiaries desires to Finance any of its Health Care
Facilities or other property (including to refinance any loan or other financing
arrangement of Borrower or any of its Subsidiaries), including any financing
done in the form of a sale/leaseback transaction (each such financing or
refinancing, a "Financing Transaction"), then Lender shall have a right of first
offer to Finance such Health Care Facility or other property or to refinance
such loan or other financing arrangement (such right, the "Right of First
Offer"). The Right of First Offer shall be continuing and shall not terminate
until the date Lender exercises such right and Finances such Financing
Transaction or elects not to provide a Lender Finance Proposal. The following
provisions shall govern such rights and such Financing:
(a) Request to Provide Offer to Finance . For so long as
the Right of First Offer has not expired, for every Financing Transaction which
is proposed to be Financed in whole or in part by a third-party, Borrower shall
deliver to Lender a written request for Lender to provide a written proposal to
Finance a Financing Transaction. Such written request shall set forth the
property(ies) and/or construction plans which is (are) the subject of such
written request, the amount requested to be Financed, the requested term of the
loan or lease, the collateral available to secure the loan, and such other
information pertaining to the terms and conditions of the proposed Financing as
Lender may reasonably request (each such written request to provide a written
proposal containing the foregoing information, a "Request to Provide Offer to
Finance").
(b) Election to Finance. Lender shall have twenty (20)
days from the date of receipt of the Request to Provide Offer to Finance (the
"Review Period") to determine whether or not Lender will provide a written
proposal to Finance. During the applicable Review Period, Borrower shall
cooperate and shall cause the applicable Subsidiary to cooperate with Lender
22
and shall use reasonable efforts to provide Lender with such further information
as Lender may reasonably require with respect to the applicable Request to
Provide Offer to Finance.
(c) No Election. Lender shall be deemed to have declined
to exercise the Right of First Offer with respect to a Request to Provide Offer
to Finance if Lender fails to provide a written proposal to Finance (each such
proposal, a "Lender Finance Proposal") within the applicable Review Period).
Each Lender Finance Proposal shall contain the material terms under which Lender
proposes to provide the proposed Financing, including the amount to be Financed,
the term of the loan or lease, as applicable, the interest rate or lease rate,
as applicable, the amounts and schedule of principal and interest payments or
rental amounts, as applicable, the terms of any prepayment or yield maintenance
provisions, any loan recourse provisions, any "due on" provisions and related
transfer restrictions, the collateral to secure the loan, whether or not a
guaranty of the loan or lease is required, any cross-default or
cross-collateralization provisions and any fees and other costs to be charged in
connection with the proposed Financing.
(d) Borrower's Election to Finance. With respect to each
Request to Provide Offer to Finance, if Lender declines (or is deemed to have
declined its right) to provide a Lender Finance Proposal, Borrower and/or the
applicable Subsidiary may elect to Finance such Finance Transaction with any
third party provided, however, that Borrower or the applicable Subsidiary shall
have closed escrow with respect to such Finance Transaction within six (6)
months after the expiration of the applicable Review Period. With respect to
each Request to Provide Offer to Finance, if Lender provides a Finance Proposal
then Borrower and/or the applicable Subsidiary may Finance such Finance
Transaction with any third party only if (i) such Finance Transaction is
consummated on financing terms and conditions less favorable to such third party
than those set forth in such Lender Finance Proposal, and (ii) Borrower or the
applicable Subsidiary shall have closed escrow with respect to such Finance
Transaction within six (6) months after the expiration of the applicable Review
Period. If, within either such six (6) month period, Borrower or the applicable
Subsidiary fails to close such Finance Transaction in accordance with the terms
set forth in this Section 2.6(e), then the Right of First Offer with respect to
such Finance Transaction shall be reinstated, and Lender shall have the review
and financing rights for such Finance Transaction as set forth in this Section
2.6.
Section 2.7 Taxes.
(a) Net Payments. Any and all payments by Borrower under
this Agreement and the other Loan Documents shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, any taxes imposed on Lender's net income or net worth (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable under
this Agreement or any other Loan Document to Lender, (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.7) Lender receives an amount equal to the sum it would have received had no
such deductions been made; (ii) Borrower shall make such deductions; and
23
(iii) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) Payment of Other Taxes. In addition, Borrower agrees
to pay any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
under this Agreement or any other Loan Document or from the execution, delivery
or registration of, or otherwise with respect to, this Agreement or any other
Loan Documents, provided Borrower shall not be required to pay any tax based on
Lender's net income or net worth (all such non-excluded taxes or other items
hereinafter referred to as "Other Taxes").
(c) Indemnification. Borrower will indemnify Lender for
the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.7) paid by
Lender and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 5 days
from the date Lender makes written demand therefor.
(d) Evidence of Payments. Within 30 days after the date
of any payment of Taxes, Borrower will furnish to Lender, at its address
referred to in Section 7.3, the original or a certified copy of a receipt
evidencing payment thereof.
(e) Survival. Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and obligations of Borrower
contained in this Section 2.7 shall survive the termination of this Agreement.
ARTICLE III.
CONDITIONS
Section 3.1 Initial Conditions. [Intentionally omitted.]
Section 3.2 Funding Conditions. The obligation of Lender to make
the Loan is subject to the satisfaction of each of the following conditions
unless waived in writing by Lender:
(a) Representation and Warranties. Each of the
representations and warranties contained in this Agreement and in each of the
other Transaction Documents shall be true and correct in all material respects
on and as of the Funding Date, before and after giving effect to the Loan and to
the application of the proceeds of the Loan.
(b) No Default. No event shall have occurred and be
continuing, or shall result from the Loan or from the application of the
proceeds of the Loan, which constitutes a Default or Event of Default.
(c) Payment of Fees and Expenses. All fees and expenses of
Lender (including fees and disbursements of counsel to Lender) due and payable
on or prior to the Funding Date under this Agreement shall have been paid.
24
(d) No Adverse Change. There shall not have been any
Material Adverse Change.
(e) Loan Documents. Borrower shall have delivered to
Lender each of the following:
(i) this Agreement duly executed by Borrower and
Lender;
(ii) the Note duly executed by Borrower;
(iii) a pledge agreement, in substantially the
form of Exhibit B (the "Borrower Pledge Agreement"), duly
executed by Borrower and Lender, together with certificates
representing the Borrower Pledged Interests identified in Part
A of Schedule I to the Borrower Pledge Agreement, accompanied
by undated transfer documents executed in blank;
(iv) a pledge agreement, in substantially the
form of Exhibit D (the "ARC SC Pledge Agreement"), duly
executed by ARC SC Holdings and Lender, together with
certificates representing the ARC SC Pledged Interests
identified in Part A of Schedule I to the ARC SC Pledge
Agreement, accompanied by undated transfer documents executed
in blank;
(v) a Negative Pledge Agreement, in
substantially the form of Exhibit E (collectively, the
"Negative Pledge Agreements", and individually a "Negative
Pledge Agreement"), duly executed by each Property Owner and
Lender;
(vi) an intercreditor agreement, with each of the
First Mortgage Lenders, in form and substance satisfactory to
Lender (collectively, the "Intercreditor Agreements", and
individually an "Intercreditor Agreement"), duly executed by
each First Mortgage Lender and Lender;
(vii) a reserve account security agreement, in
substantially the form of Exhibit C (the "Reserve Account
Security Agreement"), duly executed by Borrower and Lender;
(viii) a control agreement, in form and substance
reasonably acceptable to Lender, duly executed by the
Depository Bank and Lender;
(ix) evidence that the Negative Pledge Agreements
have each been recorded in the appropriate real property
recording offices; and
(x) evidence that the financing statements
referred to in the opinion of counsel delivered pursuant to
Section 3.2(q) have been filed in the offices identified
therein.
(f) Master Lease Documents. Borrower shall have
delivered to Lender certified copies of the Master Lease Documents.
25
(g) Borrower Corporate Documents. Borrower shall have
delivered to Lender each of the following:
(i) the certificate of incorporation of
Borrower, certified by the Secretary of State of Delaware,
dated as of a date not more than 10 days prior to the Funding
Date;
(ii) a good standing certificate dated as of a
recent date for Borrower from the Secretary of State of (x)
Delaware and (y) each other jurisdiction where Borrower is
qualified to do business, in each case, dated as of a date not
more than 10 days prior to the Funding Date;
(iii) a certificate of the Secretary of Borrower,
dated as of the Funding Date, certifying as to;
(A) the certificate of incorporation of
Borrower as in effect on the Funding Date;
(B) the bylaws of Borrower as in effect
on the Funding Date;
(C) the resolutions of the Board of
Directors of Borrower approving each Transaction
Document to which it is a party, and of all documents
evidencing other necessary corporate or
organizational action and governmental approvals, if
any, with respect to each such Transaction Document;
and
(D) the names and true signatures of
the officers of Borrower authorized to sign each
Transaction Document to which it is a party and the
other documents to be delivered hereunder.
(h) Property Owner Organizational Documents. Borrower
shall have delivered to Lender each of the following:
(i) the articles of organization or certificate
of formation, as applicable, of each Property Owner, certified
by the Secretary of State of the jurisdiction in which each
such Property Owner is formed, dated as of a date not more
than 10 days prior to the Funding Date;
(ii) a good standing certificate dated as of a
recent date for each Property Owner from the Secretary of
State of (x) the jurisdiction in which each such Property
Owner is formed and (y) each other jurisdiction where such
Property Owner is qualified to do business, in each case,
dated as of a date not more than 10 days prior to the Funding
Date;
(iii) a certificate of the Secretary of each
Property Owner, dated as of the Funding Date, certifying as
to;
26
(A) the articles of organization or
certificate of formation, as applicable, of such
Property Owner as in effect on the Funding Date;
(B) the limited liability company
agreement or operating agreement, as applicable, of
such Property Owner as in effect on the Funding Date;
(C) resolutions of the Board of
Governors or Board of Managers, as applicable, of
such Property Owner approving each Transaction
Document to which it is a party, and of all documents
evidencing other necessary corporate or
organizational action and governmental approvals, if
any, with respect to each such Transaction Document;
and
(D) the names and true signatures of
the officers of each such Property Owner authorized
to sign each Transaction Document to which it is a
party and the other documents to be delivered
hereunder.
(i) Property Operator Organizational Documents. Borrower
shall have delivered to Lender each of the following:
(i) the charter, certificate of incorporation,
articles of organization or certificate of limited
partnership, as applicable, of each Property Operator,
certified by the Secretary of State of the jurisdiction in
which each such Property Operator is formed, dated as of a
date not more than 10 days prior to the Funding Date;
(ii) a good standing certificate dated as of a
recent date for each Property Operator from the Secretary of
State of (x) the jurisdiction in which each such Property
Operator is formed and (y) each other jurisdiction where such
Property Operator is qualified to do business, in each case,
dated as of a date not more than 10 days prior to the Funding
Date;
(iii) a certificate of the Secretary or general
partner, as applicable, of each Property Operator, dated as of
the Funding Date, certifying as to;
(A) the charter, certificate of
incorporation, articles of organization or
certificate of limited partnership, as applicable, of
such Property Operator as in effect on the Funding
Date;
(B) the bylaws, operating agreement or
partnership agreement, as applicable, of such
Property Operator as in effect on the Funding Date;
(C) resolutions of the Board of
Directors, Board of Governors or general partner, as
applicable, of such Property Operator approving the
Transaction Documents to which such Property Operator
is a party,
27
and of all documents evidencing other necessary
corporate or organizational action and governmental
approvals, if any, with respect to the Transaction
Documents; and
(D) the names and true signatures of
the officers of each such Property Operator or the
general partner of such Property Operator, as
applicable, authorized to sign the Transaction
Documents to which such Property Operator is a party
and the other documents to be delivered thereunder or
hereunder.
(j) Other Permitted Subsidiary Organizational Documents.
Borrower shall have delivered to Lender each of the following for each Permitted
Subsidiary (other than a Property Owner, a Property Operator and any ARC
Fleetwood Entity) (collectively, the "Other Permitted Subsidiaries", and
individually, an "Other Permitted Subsidiary"):
(i) the charter, certificate of incorporation,
articles of organization or certificate of limited
partnership, as applicable, of each Other Permitted
Subsidiary, certified by the Secretary of State of the
jurisdiction in which each such Other Permitted Subsidiary is
formed, dated as of a date not more than 10 days prior to the
Funding Date;
(ii) a good standing certificate dated as of a
recent date for each Other Permitted Subsidiary from the
Secretary of State of (x) the jurisdiction in which each such
Other Permitted Subsidiary is formed and (y) each other
jurisdiction where such Other Permitted Subsidiary is
qualified to do business, in each case, dated as of a date not
more than 10 days prior to the Funding Date;
(iii) a certificate of the Secretary or general
partner, as applicable, of each Other Permitted Subsidiary,
dated as of the Funding Date, certifying as to;
(A) the charter, certificate of
incorporation, articles of organization or
certificate of limited partnership, as applicable, of
such Other Permitted Subsidiary as in effect on the
Funding Date;
(B) the bylaws, operating agreement or
partnership agreement, as applicable, of such Other
Permitted Subsidiary as in effect on the Funding
Date;
(C) resolutions of the Board of
Directors, Board of Governors or general partner, as
applicable, of such Other Permitted Subsidiary
approving the Transaction Documents to which such
Other Permitted Subsidiary is a party, and of all
documents evidencing other necessary corporate or
organizational action and governmental approvals, if
any, with respect to the Transaction Documents; and
(D) the names and true signatures of
the officers of each such Other Permitted Subsidiary
or the general partner of such Other
28
Permitted Subsidiary, as applicable, authorized to
sign the Transaction Documents to which such Other
Permitted Subsidiary is a party and the other
documents to be delivered thereunder or hereunder.
(k) Real Property Deliveries. Borrower shall have
delivered to Lender each of the following for each Covered Facility:
(i) The current owner's policy of title
insurance issued by a title company acceptable to Lender (the
"Title Company") showing good and indefeasible title to such
Covered Facility in fee simple vested in the Property Owner
for such Covered Facility and subject only to (x) liens for
taxes, assessments and governmental charges not yet past due
and payable or delinquent and (y) such other title exceptions
as Lender may approve, in its sole and absolute discretion.
Such policy (the "Title Policy"), when issued, shall:
(A) be in current ALTA extended
coverage owner's form (but without a general
exception for creditors' rights);
(B) be issued in an amount not less
than the value of such Covered Facility, as set forth
in the Final Appraisals;
(C) include endorsements 100 (no
violations, etc., modified for an owner), 103.7
(access), 116.1 (survey accuracy), and 123.2
(zoning-improved property), and a non-imputation
endorsement or the equivalents thereof available in
the applicable State, and such other endorsements as
Lender may reasonably require; and
(D) insure (i) that any conditions,
covenants and restrictions affecting such Covered
Facility have not been violated and that a future
violation thereof will not result in a forfeiture or
reversion of title; (ii) if obtainable, that all
streets adjoining such Covered Facility have been
completed, dedicated and accepted for public
maintenance and use by the appropriate governmental
authorities and that such Covered Facility have
access to public streets; (iii) that local zoning
ordinances, general plans and all other applicable
land use regulations and all private covenants,
conditions and restrictions, if any, permit the
transfer and use of such Covered Facility (and
reconstruction and resumption of use of such Covered
Facility in the event of damage or destruction
thereof or cessation of use thereof) for all uses
contemplated by the Master Lease as a matter of right
for an unlimited time period, and specifically not
merely as a legal non-conforming use or any other
legal status which would by its terms or by operation
of law limit the duration of such use or the right to
rebuild and resume use of such Covered Facility for
all uses contemplated by the Master Lease in the
event of damage, destruction or cessation of use of
such Covered Facility for any reason; and (iv) over
and against all parties in possession except the
current occupants thereof.
29
(ii) either (x) a final "as-built" ALTA survey of
such Covered Facility completed in accordance with the Minimum
Standard Detail requirements for ALTA/ACSM Land Title Surveys,
with additional Title A survey requirements, jointly
established and adopted by ALTA and ACSM in 1999 that meet the
requirements of a Class A Survey as defined therein, certified
within 90 days of the Funding Date or (y) such other form of
title survey which is in form and substance satisfactory to
Lender in its sole and absolute discretion. Such survey shall:
(A) be certified to Lender, Property
Owner and the Title Company as being true and
accurate, which such certification shall include the
acreage of such Covered Facility and a statement that
such Covered Facility is not located in a Flood
Hazard Area;
(B) identify thereon all telephone,
water, sewage, electricity, gas and other utility
facilities to the points of connection; and
(C) show no encroachments onto or
conflicts with any adjacent property other than
pursuant to easements appurtenant to such Covered
Facility or such other agreements with the affected
landowner approved by Lender and which are, in turn,
insured under the Title Policy;
(iii) a final appraisal of such Covered Facility,
performed by a firm selected or approved by Lender
(individually, a "Final Appraisal" and collectively, the
"Final Appraisals"), each such Appraisal to be in form and
substance satisfactory to Lender;
(iv) copies of the First Mortgage Loan Documents
for such Covered Facility, all such documents to be
satisfactory to Lender;
(v) evidence satisfactory to Lender that the
Ft. Worth Facility is a separate legal lot or parcel; and
(vi) information, satisfactory to Lender, with
respect to the amount of the real property taxes with respect
to the Ft. Worth Facility and any real property that is a part
of the same tax parcel as the Ft. Worth Facility.
(l) HCPI Equity Investment. HCPI shall have purchased a
9.8% equity interest in the Property Owners (other than ARC Santa Catalina) and
a 9.8% equity interest in ARC SC Holdings for a cash amount of not less than
$12,250,000, which purchase shall be pursuant to that certain Contribution
Agreement dated as of the date hereof, which shall be in form and substance
satisfactory to Lender. Borrower, ARC SC Holdings and the Property Owners shall
have executed any and all documents, agreements and certificates required in
connection with the HCPI Equity Investment, and after giving effect to the HCPI
Equity Investment and the application of the proceeds from such HCPI Equity
Investment (each of which shall occur on the Funding Date prior to the funding
of the Loan), Borrower and HCPI
30
shall be the only members of the Property Owners (other than ARC Santa Catalina)
and of ARC SC Holdings.
(m) Health Care Licenses. With respect to each Covered
Facility, Borrower shall have delivered to Lender with respect to such Covered
Facility evidence satisfactory to Lender that (i) such Covered Facility and/or
the Property Operator for such Covered Facility holds all licenses, permits,
accreditations, authorizations and certifications from all applicable
Governmental Authorities required for the operation thereof for its Primary
Intended Use and for all other uses (if any) contemplated under the Master
Lease, including the applicable licenses (collectively, the "Health Care
Licenses") from the Florida Agency for Healthcare Administration, the Kentucky
Cabinet for Health Services, the Texas Department of Human Services, the
Michigan Department of Consumer and Industry Services, the Pennsylvania
Department of Health, the Colorado Department of Health and Environment and each
other state authority having jurisdiction over the Facilities (collectively, the
"Issuing Agencies"); (ii) such Covered Facility is not subject to, or threatened
with, any hold on admissions or other sanction and there are no outstanding, or
threatened, notices of deficiency resulting from any survey of such Covered
Facility which have not been fully responded to with an acceptable plan of
correction with which such Covered Facility is being operated in compliance; and
(iii) such Covered Facility and/or the Property Operator for such Covered
Facility is, to the extent applicable, (A) duly certified as a provider under
the Medicare and Medicaid programs and (B) in compliance in all material
respects with all Governmental Requirements, including rules and regulations
relating to Medicare/Medicaid fraud and abuse practices, and all insurance
requirements.
(n) Condemnation; Casualty. No Condemnation shall be
pending or threatened with respect to any Covered Facility and no casualty shall
have occurred with respect to any Covered Facility or any portion thereof.
(o) Financial Statements. Borrower shall have delivered
to Lender each of the following:
(i) a copy of the audited financial statements
of ARC and its Subsidiaries on a consolidated basis for the
fiscal year ended December 31, 2001, certified by KPMG LLP;
(ii) a copy of the unaudited financial statements
of ARC and its Subsidiaries on a consolidated basis for each
fiscal quarter ending after December 31, 2001 and more than 45
days prior to the Funding Date;
(iii) a copy of the pro forma unaudited financial
statements of Borrower and its Subsidiaries on a consolidated
basis for the fiscal year ended December 31, 2001;
(iv) a copy of the pro forma unaudited financial
statements of Borrower and its Subsidiaries on a consolidated
basis for each fiscal quarter ending after December 31, 2001
and more than 45 days prior to the Funding Date;
31
(v) unaudited operating statements for each
Covered Facility showing the Net Operating Income for such
Covered Facility for the trailing twelve-month period ended
December 31, 2001; and
(vi) unaudited operating statements for each
Covered Facility showing the Net Operating Income for such
Covered Facility for the trailing twelve month periods ended
on the last day of each month ending after March 2002 and more
than 10 Business Days prior to the Funding Date.
(p) Other Document Deliveries. Borrower shall have
delivered to Lender each of the following:
(i) Written disclosure, for Lender's review, of
all pending or threatened litigation or governmental
proceedings seeking to enjoin, challenge or collect material
damages in connection with ARC, Borrower, any Subsidiary of
ARC or Borrower or any Covered Facility;
(ii) All documents evidencing or otherwise
related to the contributions of assets to the Property Owners
and the Property Operators, which documents shall be
satisfactory to Lender; and
(iii) All documents, agreements and other
instruments executed in connection with the Funding Date
Restructuring Plan, which documents, agreements and other
instruments shall be reasonably satisfactory to Lender.
(q) Legal Opinions. Borrower shall have delivered to
Lender each of the following:
(i) an opinion of Bass, Xxxxx & Xxxx PLC,
counsel for Borrower and the other Loan Parties, in form and
substance satisfactory to Lender;
(ii) an opinion, in form and substance
satisfactory to Lender, of New York counsel for Borrower and
the other Loan Parties, such counsel to be acceptable to
Lender;
(iii) an opinion of special local counsel to each
Property Owner, in form and substance satisfactory to Lender;
(iv) an opinion with respect to the Master Lease,
in form and substance satisfactory to Lender, of counsel for
each Property Owner and each Property Operator, such counsel
to be acceptable to Lender;
(v) a substantive non-consolidation opinion
(with respect to substantive consolidation of Borrower or any
Property Owner with ARC) from Bass, Xxxxx & Xxxx PLC, counsel
for Borrower and the other Loan Parties, in form and substance
satisfactory to Lender; and
(vi) such other opinions as Lender may reasonably
request.
32
(r) Governmental Consents. Each Loan Party and each
Property Operator shall have obtained all consents, approvals and authorizations
required from any Governmental Authority in connection with execution, delivery
and performance of their respective obligations under this Agreement and the
other Transaction Documents.
(s) Insurance Coverage. Borrower shall have delivered to
Lender evidence that Borrower and each other Loan Party has in place the
insurance coverage required by this Agreement and that Lender, as Lender under
this Agreement, has been named an additional insured on all insurance policies
of Borrower or any of its Subsidiaries.
(t) Corporate and Governmental Approvals. Borrower shall
have delivered to Lender all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Agreement, the
other Transaction Documents and the Collateral Documents.
(u) Required Hedging Agreement. Borrower shall have
delivered Lender evidence reasonably satisfactory to Lender that Borrower has
purchased an interest rate cap agreement (the "Required Interest Hedge") from an
institution rated AA or better by S&P, such Required Interest Hedge to be for
the term of the Loan, and to provide for a maximum interest rate of 9.75% on the
principal amount of the GECC Loan.
(v) Minimum Net Operating Income. The sum of the Net
Operating Income for all Facilities for the trailing twelve months ended as of
each month after May 31, 2002 and more than 10 days prior to the Funding Date is
not less than $31,600,000.
(w) Occupancy and EBITDAR. The occupancy and the EBITDAR
of the Covered Facilities, as a whole, must reasonably be within Reviewed Budget
for the one-month periods, and for the fiscal year-to-date periods, ending on
the last day of each calendar month ending after February 2002 and more than 10
days prior to the Funding Date.
(x) No Liability for Facility. Borrower shall have
delivered to Lender evidence that no Property Owner is subject to liability for
the operations at the Facility owned by such Property Owner.
(y) Appraised Value. The aggregate appraised value of
all of the Facilities (as indicated in the Final Appraisals) shall be
sufficient, in Lender's opinion, to support and adequately secure the Loan.
(z) Exchange Offer.
(i) Pursuant to the Exchange Offer and the New
ARC Securities Documents, not less than 75% of the Old ARC
Debentures shall have been exchanged for the New ARC
Debentures as described in the Exchange Offer.
(ii) The terms and conditions of the New ARC
Securities and all of the New ARC Securities Documents shall
be satisfactory to Lender.
33
(iii) The aggregate principal amount of the New
Series A ARC Notes shall not exceed $105,920,286 and the
aggregate principal amount of the New Series B ARC Notes shall
not exceed $23,993,865.
(iv) The New Series B ARC Notes shall (x) have a
maturity date that is not earlier than six months after the
Maturity Date, (y) not require any principal payments or
sinking fund payments prior to the date six months after the
Maturity Date and (z) have other terms and conditions
acceptable to Lender.
(aa) New ARC Securities Documents. ARC shall have
delivered to Lender certified copies of all the New ARC Securities Documents.
(bb) Refinancings. ARC shall have (i) completed, in a
manner satisfactory to Lender, each of the refinancing transactions set forth on
Schedule 3.2(bb) (collectively, the "Refinancing Transactions"); (ii) pursuant
to the Refinancing Transactions, refinanced or extended each of the loans on the
properties listed in Schedule 3.2(bb) so that the maturity date for each of such
loans shall be no earlier than December 31, 2003; (iii) sufficient Liquidity
(after giving effect to the funding of the Loan) to repay the old ARC Debentures
at maturity; and (iv) Liquidity (after giving effect to the funding of the Loan)
minus the principal amount of the old ARC Debentures outstanding after giving
effect to the Exchange Offer in an amount sufficient to pay the principal amount
of the old ARC Debentures plus interest thereon through and including the
maturity date thereof plus interest thereon through and including the maturity
date thereof shall be not less than $24,000,000.
(cc) Escrow Deposit. Borrower shall have deposited the
proceeds of the Loan into an escrow account with a financial institution
satisfactory to Lender, and subject to an escrow agreement satisfactory to
Lender, which escrow agreement shall provide that such proceeds can be applied
solely to redeem the ARC Debentures.
(dd) [Intentionally Omitted]
(ee) Termination of Retired Officers Right of First
Refusal. Borrower or Freedom Village Sun City shall have delivered an executed
agreement (in form and substance satisfactory to Lender) providing that if
Lender becomes the owner of Property Owner that owns the Facility operated by
Freedom Village Sun City, whether pursuant to a judicial foreclosure, a UCC
commercial sale, an assignment in lieu of either of the foregoing or otherwise
(i) the parties to the Retired Officers Documents shall have no further rights
under (x) the Retired Officers Right of Refusal (including any rights that may
have accrued as a result of Lender becoming such owner) or (y) any provision of
any of the other Retired Officers Documents which give Retired Officers
Corporation or Retired Officers Land Corporation any rights that are triggered
solely as a result of Lender becoming the owner of all of the equity interest in
any Property Owner or that would require any consent from Retired Officers
Corporation and/or Retired Officers Land Corporation and (ii) the Retired
Officers Right of First Refusal shall immediately, and without any further
action by any Person, terminate and be of no further force and effect.
34
(ff) Amendment to HCPI Lease. Each of the parties thereto
shall have executed and delivered an amendment to the HCPI Lease, which
amendment shall be in form and substance satisfactory to Lender, (i) modifying
the conditions precedent to the exercise of the Post Oak Purchase Option; (ii)
providing that an Event of Default hereunder shall not, by itself, constitute an
event of default under the HCPI Lease and (iii) releasing the ARC guaranty of
the HCPI Lease.
(gg) Reimbursement Obligation. To the extent that any
letter of credit has been issued to support an obligation of Borrower or any
Subsidiary of Borrower, Borrower or such Subsidiary shall either (i) have the
direct reimbursement obligation with respect to such letter of credit or (ii)
have an intercompany reimbursement agreement with the ARC Subsidiary that has
the direct reimbursement obligation with respect to such letter of credit, which
shall in each event be in form and substance satisfactory to Lender.
(hh) Vehicle Sublease. Each Permitted Subsidiary which is
a lessee under the Enterprise Vehicle Master Lease, shall have executed a
Vehicle Sublease with ARC, as the sublessor, and such Permitted Subsidiary, as
the sublessee.
(ii) Compliance with Zoning Laws. With respect to each
Covered Facility, Borrower shall have delivered to Lender with respect to such
Covered Facility (i) copies of the applicable zoning ordinances and map marked
to show the location of such Covered Facility and certified by an appropriate
Governmental Authority to be complete and accurate, and (ii) evidence
satisfactory to Lender that such zoning ordinances and the general
plans/specific plans and all other land use regulations of the applicable
municipal jurisdictions and all covenants, conditions and restrictions, if any,
affecting such Covered Facility permit the transfer of such Covered Facility and
use thereof for its Primary Intended Use and for all other uses (if any)
contemplated under the Master Lease (and reconstruction and resumption of use in
the event of damage, destruction, or cessation of use) as a matter of right for
an unlimited time period and not merely as a legal non-conforming use.
(jj) Officers Certificate. Borrower shall have delivered
to Lender a certificate dated as of the Closing Date and signed by the Chairman,
Chief Executive Officer or Chief Financial Officer of Borrower, certifying that,
as of the Funding Date, (w) the representations and warranties contained in this
Agreement and each of the other Transaction Documents are true and correct on
and as of the Funding Date, as though made on and as of such date; (x) no Event
of Default or Default has occurred and is continuing; (y) there has been no
Material Adverse Change; and (z) each of the other conditions precedent to the
Funding Date has been satisfied.
(kk) Documents and other Evidence Satisfactory to Lender.
The documents, agreements and evidence deliver by Borrower to Lender pursuant to
Section 3.2 shall be satisfactory in all respects to Lender.
35
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Borrower. Borrower
represents and warrants as follows:
(a) Organization. Each of the Loan Parties and the
Property Operators is duly organized and in good standing under the laws of the
jurisdiction where such Loan Party or Property Operator, as the case may be, is
organized and is duly qualified to do business in each jurisdiction where the
absence of such qualification could have a Material Adverse Effect.
(b) Power and Authority. Each of the Loan Parties and the
Property Operators has the corporate or other organizational power: (i) to carry
on its business as now being conducted and as proposed to be conducted by it;
(ii) to execute, deliver and perform each Transaction Document to which it is a
party; and (iii) to take all action as may be necessary to consummate the
transactions contemplated thereunder.
(c) Due Authorization. The execution, delivery and
performance by:
(i) each of the Loan Parties of each Transaction
Document to which it is a party have been duly authorized by
all necessary corporate or other organizational action, and do
not contravene (A) such Loan Party's charter or bylaws or
other organizational documents or (B) any law or any
contractual restriction binding on or affecting such Loan
Party, and do not result in or require the creation of any
Lien upon or with respect to any of its respective properties
(other than Liens created pursuant to the Collateral
Documents);
(ii) each of the Property Operators of each
Transaction Document to which it is a party have been duly
authorized by all necessary corporate or other organizational
action, and do not contravene (A) such Property Operator's
charter or bylaws or other organizational documents or (B) any
law or any contractual restriction binding on or affecting
such Property Operator, and do not result in or require the
creation of any Lien upon or with respect to any of its
respective properties.
(d) Binding and Enforceable. This Agreement and each
other Transaction Document to which any Loan Party is a party has been duly
executed and delivered by such Loan Party and is a legally valid and binding
obligation of each such Loan Party enforceable against each such Loan Party in
accordance with its respective terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally and subject to the
availability of equitable remedies. Each Transaction Document to which any
Property Operator is a party has been duly executed and delivered by such
Property Operator and is a legally valid and binding obligation of each such
Property Operator enforceable against each such Property Operator in accordance
with its respective terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally and subject to the availability of
equitable remedies.
36
(e) Subsidiaries. Except as set forth in Part A of
Schedule 4.1(e), there are no direct or indirect Subsidiaries of Borrower on the
Closing Date. As of the Funding Date, Borrower owns directly or indirectly only
the following Subsidiaries and Investments (collectively, the "Permitted
Subsidiaries"):
(i) the Property Owners;
(ii) the Property Operators;
(iii) the HCPI Lessees;
(iv) the ARC General Partners;
(v) the ARC Equity Owners;
(vi) ARC SC Holdings;
(vii) ARC Wilora Lake;
(viii) ARC Wilora Assisted Living;
(ix) ARC Somerby; and
(x) the ARC Fleetwood Entities.
Part B of Schedule 4.1(e) sets forth the ownership interests in each of the
Permitted Subsidiaries as of the Funding Date after giving effect to the HCPI
Equity Investment.
(f) No Indebtedness. On the Closing Date, neither
Borrower nor any Subsidiary of Borrower is subject to any Indebtedness other
than Indebtedness identified on Schedule 4.1(f) and the Contingent Obligations
on Schedule 5.4(c). From and after the Closing Date, neither Borrower nor any
Subsidiary of Borrower is subject to any Indebtedness other than Indebtedness
permitted pursuant to Section 5.4(b).
(g) No Liens. As of the Closing Date, there are no Liens
on assets of Borrower or any Subsidiary of Borrower, other than Liens securing
Indebtedness identified on Schedule 4.1(g). From and after the Closing Date,
there are no Liens on assets of Borrower or any Subsidiary of Borrower, other
than Liens permitted pursuant to Section 5.4(a).
(h) No Defaults. No Default or Event of Default has
occurred and is continuing.
(i) No Conflicts or Restrictions. The execution, delivery
and performance by each Loan Party and each Property Operator of each of the
Transaction Documents to which it is a party do not and will not (i) conflict
with, result in a breach of, or constitute (with or without notice or the lapse
of time or both) a default under, any material agreement, document or other
instrument of any Loan Party or Property Operator, as the case may be, or
binding on any Loan Party or Property Operator, as the case may be, or any
property of any Loan Party or
37
Property Operator, as the case may be; or (ii) result in or require the
creation or imposition of any Lien upon any of the property or assets of any
Loan Party or Property Operator, as the case may be, (other than Liens created
pursuant to the Collateral Documents).
(j) Governmental Approval. Except for those listed on
Schedule 4.1(j) (each of which has been duly obtained or made and is in full
force and effect), no authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority is required for the due
execution, delivery and performance by each Loan Party and each Property
Operator of any Transaction Document to which it is or will be a party.
(k) Litigation. There is no pending or overtly threatened
action or proceeding affecting ARC or any Subsidiaries of ARC or Borrower or any
Subsidiaries of Borrower before any Governmental Authority which could
reasonably be expected to have a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this Agreement or any other
Transaction Document to which any Loan Party or any Property Operator is or will
be a party.
(l) Financial Information. The financial statements
delivered to Lender pursuant to Section 3.2(o) and each of the subsequent
financial statements delivered to the Lender pursuant to Section 5.2(a), Section
5.2(b) or Section 5.2(c) fairly present the financial condition of Borrower and
its Subsidiaries or ARC and its Subsidiaries, as the case may be, as at the date
of such financial statements and the results of the operations of Borrower and
its Subsidiaries or ARC and its Subsidiaries, as the case may be, for the period
ended on such date, all in accordance with GAAP consistently applied except, (x)
in the case of financial statements delivered pursuant to Section 3.2(o)(ii),
(iii), (iv), (v), or (vi), or Section 5.2(a), Section 5.2(b) or Section
5.2(c)(iii), (iv) or (v), for year-end adjustments and the lack of footnotes;
and (y) in the case of statements of income delivered pursuant to Section
5.2(c)(ii), for lack of footnotes.
(m) Material Adverse Change. There has been no Material
Adverse Change.
(n) Compliance. Each Loan Party and each Property
Operator is in compliance in all material respects with all applicable laws,
rules, regulations.
(o) Payment of Taxes. Borrower and each of its
Subsidiaries and ARC and each of its Subsidiaries have timely and accurately
filed all federal income tax returns and all other tax returns required to be
filed by each of them and have timely paid all taxes and assessments payable by
each of them which have become due, except to the extent that such taxes or
assessments are being contested in good faith by appropriate proceedings
diligently pursued, and as to which Borrower or its Subsidiaries or ARC and its
Subsidiaries, as the case may be, have established reserves acceptable to
Lender.
(p) Security Interests. The provisions of each of the
Collateral Documents are effective to create in favor of Lender legal, valid,
and enforceable security interests in all right, title and interest of Borrower
in the Collateral described therein and Borrower has taken all action necessary
to perfect such security interests, to the extent they can be perfected by
delivery in pledge to Lender or by the filing of a financing statement.
38
(q) Title to Property. Borrower, each Loan Party and each
Property Operator has good and indefeasible title to all properties reflected in
its books and records as being owned by each of them, free and clear of all
Liens other than Liens permitted pursuant to Section 5.4(a).
(r) Real Property Matters.
(i) Schedule 4.1(r) sets forth each Fee Estate
and each Leasehold Estate owned by Borrower or any Subsidiary
of Borrower. Part A of such Schedule 4.1(r) sets forth the
ownership in the Real Property as of the Closing Date. Part B
of such Schedule 4.1(r) sets forth the ownership in the Real
Property as of the Funding Date after giving effect to the
HCPI Equity Investment.
(ii) Current local zoning ordinances, general
plans and other applicable land use regulations and all
private covenants, conditions and restrictions, if any,
affecting the Covered Facilities, permit the use of the
Covered Facilities for their Primary Intended Use (and
reconstruction and resumption of use in the event of damage,
destruction, or cessation of use) as a matter of right for an
unlimited time period and not merely as a legal non-conforming
use.
(iii) The Property Owner and/or Property Operator
for each Facility has obtained all material consents, permits,
licenses approvals or authorizations from Governmental
Authorities or other third parties which are necessary to
permit the use of such Facility for its Primary Intended Use
and for all uses contemplated under the Master Lease (if any),
and each Facility is in substantial compliance with all
applicable zoning ordinances. ARC Wilora Lake and/or ARC
Wilora Assisted Living has obtained all material consents,
permits, licenses approvals or authorizations from
Governmental Authorities or other third parties which are
necessary to permit the use of the Wilora Lake Facility for
its Primary Intended Use and the Wilora Lake Facility is in
substantial compliance with all applicable zoning ordinances.
(iv) Each Property Operator's Medicare and
Medicaid participation agreements, if any, are in full force
and effect and no action has been taken to revoke, cancel,
suspend or modify any of such agreements; each Property
Operator's material provider contracts, if any, including
managed care contracts, are in full force and effect and no
action has been taken to revoke, cancel, suspend or modify any
such agreement, nor is there any basis for such action; and
reimbursement pursuant to the Medicare and Medicaid
participation agreements, if any, and any material provider
contract will not be adversely affected as a result of the
transactions contemplated hereby.
(v) No Covered Facility is located within an
area of special risk with respect to natural or man-made
disasters or hazards, including any Flood Hazard Area.
39
(vi) There are no material adverse geological or
soil conditions affecting any Covered Facility.
(vii) All public utilities, including telephone,
gas, electric power, sanitary and storm sewer and water, are
available for connection at the boundaries of each Covered
Facility; such utilities are adequate for the Primary Intended
Use of such Covered Facility; and the means of ingress and
egress, parking, access to public streets and drainage
facilities are adequate for the Primary Intended Use of such
Covered Facility.
(viii) Each Covered Facility is a legal lot or
parcel which for all purposes may be mortgaged, conveyed and
otherwise dealt with as a separate parcel and taxed as a
separate lot or parcel; provided that (x) as of the Closing
Date the real property on which the Ft. Worth Facility is
located is not a separate legal lot or parcel, but can still
be mortgaged, conveyed and otherwise dealt with in all
respects as if it were a separate legal lot or parcel and (y)
from and after the Funding Date the Ft. Worth Facility shall
include all real property that is a part of the legal lot or
parcel on which the Ft. Worth Facility is located.
(ix) No exception to title to and no interest in
any Facility will interfere in any material respect with the
use of the Leased Property for its Primary Intended Use. No
exception to title to and no interest in the Wilora Lake
Facility will interfere in any material respect with the use
of the Wilora Lake Facility for its Primary Intended Use.
(x) The real property tax assessor's parcel
numbers for each Covered Facility is as set forth on
Schedule 4.1(r).
(xi) Neither Borrower, any Subsidiary of Borrower
nor any Affiliate of Borrower have any interest in any
contiguous or adjacent property to any Covered Facility other
than such property that is subject to a non compete agreement
acceptable to Lender.
(s) Conduct of Business. Borrower and each Subsidiary of
Borrower is in compliance with Section 5.4(g).
(t) Investment Company. Neither Borrower nor any other
Loan Party is an "investment company" or a company "controlled" by and
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(u) Margin Stock. Borrower is not 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), and no proceeds of the Loan will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
40
(v) Registration of the Note. It is not necessary to
register the Note under the Securities Act of 1933, as amended, or to qualify
this Agreement as an indenture under the Trust Indenture Act of 1939, as
amended.
(w) Environmental Laws. Except as set forth in the
reports set forth on Schedule 4.1(w).
(i) Borrower and its Subsidiaries have complied
in all material respects with all Environmental Laws and
neither Borrower nor any Subsidiary nor any of its presently
owned Real Property or presently conducted operations, nor its
previously owned Real Property or prior operations, is subject
to any current enforcement order from or liability agreement
with any Governmental Authority or private Person respecting
(x) compliance with any Environmental Law or (y) any potential
liabilities and costs or remedial action arising from the
Release or threatened Release of a Hazardous Substance.
(ii) Borrower and its Subsidiaries have obtained
all material permits necessary for their current operations
under Environmental Laws, and all such permits are in good
standing and Borrower and its Subsidiaries are in substantial
compliance with all terms and conditions of such permits.
(iii) Neither Borrower nor any of its
Subsidiaries, nor, to the best knowledge of Borrower, any
predecessors in interest, has in violation of applicable law
stored, treated or disposed of any hazardous waste.
(iv) Neither Borrower nor any of its Subsidiaries
has received any summons, complaint, order or similar written
notice indicating that it is not currently in compliance with,
or that any Governmental Authority is investigating its
compliance with, any Environmental Laws or that it is or may
be liable to any other Person as a result of a Release or
threatened Release of a Hazardous Substance.
(v) To the knowledge of Borrower, none of the
present or past operations of Borrower and its Subsidiaries is
the subject of any pending or threatened investigation by any
Governmental Authority evaluating whether any remedial action
is needed to respond to a Release or threatened Release of a
Hazardous Substance.
(vi) There is not now, nor to the best knowledge
of Borrower has there ever been, on or in the Real Property
owned or operated by Borrower or any of its Subsidiaries:
(A) any underground storage tanks other
than those maintained and/or closed in compliance in
all material respects with applicable laws or surface
impoundments,
41
(B) any asbestos-containing material
that is friable, except such as has been removed or
encapsulated in compliance in all material respects
with Environmental Laws, or
(C) any polychlorinated biphenyls
(PCBs) used in hydraulic oils, electrical
transformers or other equipment, other than those
maintained in compliance in all material respects
with Environmental Laws.
(vii) Neither Borrower nor any of its Subsidiaries
has filed any notice under any requirement of Environmental
Law reporting a spill or accidental and unpermitted Release or
discharge of a Hazardous Substance into the environment.
(viii) Neither Borrower nor any of its Subsidiaries
has entered into any negotiations or settlement agreements
with any Person (including the prior owner of its property)
imposing material obligations or liabilities on Borrower or
any of its Subsidiaries with respect to any remedial action in
response to the Release of a Hazardous Substance or
environmentally related claim.
(ix) No Environmental Lien has attached to the
Real Property owned or operated by Borrower or any of its
Subsidiaries.
(x) ERISA Compliance.
(i) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code either (i) has
received a favorable determination letter from the IRS or (ii)
uses a standardized prototype document, which prototype
document is subject to a determination letter from the IRS,
and, in each case, to the best knowledge of Borrower, nothing
has occurred with respect to any such Plan which would cause
the disqualification of such Plan. Borrower and each ERISA
Affiliate has made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a
funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect
to any Plan.
(ii) There are no pending or, to the best
knowledge of Borrower, threatened claims, actions or lawsuits,
or action by any Governmental Authority, with respect to any
Plan. There has been no prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan.
(iii) (A) No ERISA Event has occurred or is
reasonably expected to occur; (B) no Pension Plan has any
Unfunded Pension Liability; (C) neither Borrower nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (D)
42
neither Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multi-Employer Plan; and
(E) neither Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c)
of ERISA.
(y) Restrictions on Dividends. Except for restrictions
contained in (i) the governing documents of each Permitted Subsidiary (other
than the Fleetwood Entities) delivered to Lender pursuant to Section 3.2(h),
3.2(i) or 3.2 (j); (ii) the governing documents of an HCPI Lessee as of the
Closing Date or (iii) the First Mortgage Loan Documents, no Subsidiary of
Borrower is subject to any agreement which restricts the ability of such
Subsidiary of Borrower to declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities to
its stockholders or other equity owners or to make any loan or advance to
Borrower or any other Subsidiary of Borrower.
(z) Solvency. Each Loan Party and each Property Operator
is, and upon the incurrence of any Obligations by such Loan Party or Property
Operator, as the case may be, will be, Solvent.
(aa) Labor Disputes. Except as set forth on Schedule
4.1(aa), (i) there is no collective bargaining agreement or other labor contract
covering employees of Borrower or any of its Subsidiaries, (ii) no such
collective bargaining agreement or other labor contract is scheduled to expire
during the term of this Agreement, (iii) no union or other labor organization is
seeking to organize, or to be recognized as, a collective bargaining unit of
employees of Borrower or any of its Subsidiaries or for any similar purpose, and
(iv) there is no pending or (to the best knowledge of the Borrower) threatened,
strike, work stoppage, material unfair labor practice claim, or other material
labor dispute against or affecting Borrower or its Subsidiaries or their
employees.
(bb) Master Lease Document Default. No Property Owner or
Property Operator is in default of any provision of any Master Lease Document.
(cc) Full Disclosure. None of the representations or
warranties made by Borrower or any Subsidiary in the Transaction Documents as of
the date such representations and warranties are made or deemed made, and none
of the statements contained in any exhibit, report, statement or certificate
furnished by or on behalf of Borrower or any Subsidiary in connection with the
Transaction Documents, contains any untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
(dd) Health Care Permits.
(i) Each of ARC Wilora Lake, ARC Wilora Assisted
Living and each Property Operator now has, and has no reason
to believe it will not be able to maintain in effect, all
Health Care Permits necessary for the lawful conduct of
43
its business or operations wherever now conducted and as
planned to be conducted, including the operation of the
Covered Facility or Covered Facilities operated by ARC Wilora
Lake, ARC Wilora Assisted Living or such Property Operator, as
the case may be, pursuant to all applicable laws, of all
Governmental Authorities having jurisdiction over ARC Wilora
Lake, ARC Wilora Assisted Living or such Property Operator, as
the case may be, or over any part of its operations. All such
Health Care Permits are in full force and effect and have not
been amended or otherwise modified, rescinded, revoked or
assigned. None of ARC Wilora Lake, ARC Wilora Assisted Living
or any Property Operator is in default in any material respect
under, or in violation in any material respect of, any such
Health Care Permit, and to the best knowledge of Borrower, no
event has occurred, and no condition exists, which, with the
giving of notice, the passage of time, or both, could
constitute a default thereunder or a violation thereof, which
default or violation would (with the passage of time, notice
or both) result in the loss of any Health Care Permit which is
necessary to operate any Covered Facility. Neither Borrower,
any Property Owner, ARC Wilora Lake, ARC Wilora Assisted
Living or any Property Operator, has received any notice of
any violation of applicable laws which could (with the passage
of time, notice or both) cause any of such Health Care Permits
to be modified, rescinded or revoked. No condition exists or
event has occurred which in itself or with the giving of
notice or the lapse of time, or both, could result in the
suspension, revocation, impairment, forfeiture or non-renewal
of any such Health Care Permit, and to the best knowledge of
Borrower, there is no claim challenging the validity of any
such Health Care Permit. The continuation, validity and
effectiveness of all such Health Care Permits are not
reasonably expected to be in any way adversely affected by the
transactions contemplated by this Agreement or any of the
other Transaction Documents.
(ii) All Covered Facilities are entitled to
participate in, and receive payment under, the appropriate
Medicare, Medicaid and related reimbursement programs, and any
similar state or local government-sponsored program, to the
extent that any Property Operator has decided to participate
in any such program, and to receive reimbursement from private
and commercial payers and health maintenance organizations to
the extent applicable thereto.
(ee) Compliance with Legal Requirements. Each of ARC
Wilora Lake, ARC Wilora Assisted Living, each Property Owner, each Property
Operator and each Covered Facility is in compliance with (i) all requirements of
any Governmental Authority applicable to ARC Wilora Lake, ARC Wilora Assisted
Living, such Property Owner, such Property Operator and/or such Covered
Facility, as the case may be, including compliance with all permits, licenses
and conditional use permits applicable to ARC Wilora Lake, ARC Wilora Assisted
Living, such Property Owner, such Property Operator and/or such Covered
Facility, as the case may be; and (ii) all insurance requirements applicable to
ARC Wilora Lake, ARC Wilora Assisted Living, such Property Owner, such Property
Operator and/or such Covered Facility, as the case may be.
44
(ff) Retired Officers Documents. Neither Borrower nor any
Subsidiary of Borrower has any agreement with Retired Officers Corporation or
Retired Officers Land Corporation other than the Retired Officers Documents, and
the agreement or agreements entered into in satisfaction of the requirements of
Section 3.2(ee).
ARTICLE V.
COVENANTS OF BORROWER
Section 5.1 Financial Covenants. So long as any Obligation (other
than an Unmatured Surviving Obligation) shall remain unpaid, unless Lender shall
otherwise consent in writing, Borrower will:
(a) First Mortgage Outstanding Principal Amount. (x) Pay
down or cause the Property Owners to pay down the principal amount of the First
Mortgage Loans and/or (y) make deposits into the Sinking Fund Reserve Account so
that as of each date set forth below the outstanding principal amount of the
First Mortgage Loans on such date minus the sum of (i) the amount of all
deposits in reserve accounts to be used for, or used solely to support, debt
service pursuant to the provisions of the First Mortgage Loan Documents for the
Facilities; and (ii) the then amount on deposit in the Sinking Fund Reserve
Account on such date is less than or equal to the amount set forth opposite such
date in the following table:
Date Amount
---- ------
September 30, 2002 $170,951,143
December 31, 2002 $169,332,893
March 31, 2003 $167,714,643
June 30, 2003 $166,096,393
September 30, 2003 $164,478,143
December 31, 2003 $162,859,893
March 31, 2004 $161,241,643
June 30, 2004 $159,623,393
September 30, 2004 $158,005,143
December 31, 2004 $156,386,893
March 31, 2005 $154,768,643
June 30, 2005 $153,150,393
September 30, 2005 $151,532,143
December 31, 2005 $149,913,893
March 31, 2006 $148,295,643
June 30, 2006 $146,677,393
September 30, 2006 $145,059,143
December 31, 2006 $143,440,893
March 31, 2007 $141,822,643
June 30, 2007 $140,204,393
September 30, 2007 $138,586,143
45
(b) Minimum Operating Income. Maintain a Net Operating
Income, determined for each period identified in the table set forth below as of
the last day of such period, in an amount not less than the amount set forth in
the following table for such period:
Period Minimum Operating Income
------ ------------------------
Four fiscal quarter period ending on $31,600,000
the last day of each fiscal quarter
ending after the Closing Date and on
or prior to June 30, 2005
One fiscal quarter period ending on $ 8,474,400
the last day of each fiscal quarter
ending after June 30, 2005 and on or
prior to June 30, 2006
One fiscal quarter period ending on $ 8,672,400
the last day of each fiscal quarter
ending after June 30, 2006 and on or
prior to June 30, 2007
(c) Minimum Debt Service Coverage Ratio. Maintain a Debt
Service Coverage Ratio, determined as of the last day of each fiscal quarter, at
an amount not less than the amount set forth in the following table for the
applicable period:
Quarter Ended During Period Minimum Debt Service Coverage Ratio
--------------------------- -----------------------------------
From Closing Date through June 30, 2003 1.04
From July 1, 2003 through June 30, 2004 1.05
From July 1, 2004 through June 30, 2005 1.07
From July 1, 2005 through June 30, 2006 1.14
From July 1, 2006 through June 30, 2007 1.17
(d) Maximum Accounts Payable Period. Aggregate accounts
payable for Borrower and its Subsidiaries must be no more than 45 days old,
excluding any accounts payable being disputed in good faith.
Section 5.2 Reporting Covenants. So long as any Obligation (other
than an Unmatured Surviving Obligation) shall remain unpaid, unless Lender shall
otherwise consent in writing, Borrower will, and will cause its Subsidiaries to
deliver to Lender:
(a) Monthly Statements. As soon as available, and in any
event within 10 Business Days after the end of each fiscal month of Borrower:
(i) the unaudited consolidated financial
statements of Borrower and its Subsidiaries and of ARC and its
Subsidiaries (including, for each, a balance sheet as of the
end of such fiscal month and a statement of income and
retained
46
earnings for such month and for the period commencing
at the end of the previous fiscal year and ending with the end
of such month), and, in the case of each statement of income,
setting forth comparable figures for the related periods in
the prior fiscal year and comparable budgeted figures for such
period, all of which shall be certified by the chief financial
officer of Borrower or ARC, as the case may be, subject to
normal year-end adjustments;
(ii) An operating statement for such month for
each Property Owner;
(iii) An operating statement for such month for
each Property Operator; and
(iv) An operating statement for such month for
each HCPI Lessee.
At the request of Lender, not later than 5 Business Days after delivery
by Borrower of the statements referred to in this Section 5(a) shall
arrange for a conference by the management of ARC to provide Lender a
detailed briefing of the operations and activities of ARC and its
Subsidiaries.
(b) Quarterly Financial Statements. As soon as available,
and in any event within 45 days (90 days for the final fiscal quarter in each
fiscal year) after the end of each fiscal quarter of Borrower:
(i) the unaudited consolidated financial
statements of Borrower and its Subsidiaries and of ARC and its
Subsidiaries (including, for each, a balance sheet as of the
end of such fiscal quarter, a statement of income and retained
earnings for such quarter and for the period commencing at the
end of the previous fiscal year and ending with the end of
such quarter and a cash flow statement for such quarter and
for the period commencing at the end of the previous calendar
year and ending with the end of such quarter), and, in the
case of each statement of income, setting forth comparable
figures for the related periods in the prior fiscal year and
comparable budgeted figures for such period, all of which
shall be certified by the chief financial officer of Borrower
or ARC, as the case may be, subject to normal year-end
adjustments;
(ii) An operating statement for such quarter for
each Property Owner;
(iii) An operating statement for such quarter for
each Property Operator;
(iv) An operating statement for such quarter for
each HCPI Lessee; and
(v) a report, reasonably satisfactory to Lender,
specifically identifying all Leased Vehicles (as defined in
the Vehicle Sublease).
47
(c) Annual Financial Statements. As soon as available,
and in any event within 90 days after the end of each fiscal year of Borrower:
(i) the consolidated financial statements of
Borrower and its Subsidiaries and of ARC and its Subsidiaries
(including, for each, a balance sheet as of the end of such
fiscal year, a statement of income and retained earnings for
such year and for the period commencing at the end of the
previous fiscal year and ending with the end of such year and
a cash flow statement for such year and for the period
commencing at the end of the previous calendar year and ending
with the end of such year), and, in the case of each statement
of income, setting forth comparable figures for the related
periods in the prior fiscal year, all of which shall be
certified by KPMG LLP or other independent public accountants
acceptable to Lender, together with an unqualified opinion of
such accounting firm;
(ii) for each statement of income delivered
pursuant to Section 5.2(c)(i), a statement setting forth
comparable budget figures for the applicable period;
(iii) An operating statement for such year for
each Property Owner;
(iv) An operating statement for such year for
each Property Operator; and
(v) An operating statement for such year for
each HCPI Lessee.
(d) Annual Budgets. As soon as available and in any event
within 30 days prior to the beginning of each fiscal year of Borrower, an
operating and capital budget for Borrower and its Subsidiaries and for ARC and
its Subsidiaries for such fiscal year; including, for each, a budgeted balance
sheet, statement of income and retained earnings and a cash flow statement for
such fiscal year and any such budget will be promptly updated and such update
delivered to Lender upon the occurrence of any material change to the budget or
to any of the assumptions made in preparing the budget.
(e) Census Reports. As soon as available, and in any
event not later than 5 Business Days after the end of every other week
commencing with the week ended August 24, 2002, biweekly census reports for each
facility for ARC and its Subsidiaries.
(f) Compliance Certificate. Together with the financial
statements delivered pursuant to Section 5.2(a), Section 5.2(b) or Section
5.2(c) each of the following:
(i) a Separateness Covenant Certificate of an
Authorized Officer of Borrower in his or her capacity as an
officer (and not as an individual) and in substantially the
form of Exhibit F (the "Separateness Covenant Certificate"),
stating that, to the best of such officer's knowledge, during
such period, Borrower and each Subsidiary (other than the ARC
Fleetwood Entities) has
48
observed or performed all of its covenants and other
agreements set forth in Section 5.3(o) and Section 5.4(n); and
(ii) a Compliance Certificate of an Authorized
Officer of Borrower in his or her capacity as an officer (and
not as an individual) and in substantially the form of Exhibit
G (the "Compliance Certificate"), stating that, to the best of
such officer's knowledge, during such period, each Loan Party
has observed or performed all of its covenants and other
agreements, and satisfied every condition contained in this
Agreement and all other Transaction Documents to be observed,
performed or satisfied by them, and that such officer has
obtained no knowledge of any Default or Event of Default
except as set forth in a notice delivered pursuant to Section
5.2(j).
(g) Change of Name or Location. Any change in any Loan
Party's name, state of organization, locations of Collateral, or form of
organization, trade names under which it does business, in each case at least 30
days prior thereto.
(h) Management Letter. As soon as available and in any
event within 15 days of receipt thereof, a copy of each management report and
management letter prepared for ARC, Borrower or any Subsidiary of Borrower by
any independent certified public accountants.
(i) Tax Returns. Promptly after filing with the IRS, a
copy of each income tax return filed by ARC, Borrower or any Subsidiary of
Borrower.
(j) Notice of Default. As soon as possible and in any
event within 10 Business Days after obtaining knowledge of each Default or Event
of Default continuing on the date of such statement, a statement of an
Authorized Officer of Borrower setting forth details of such Default or Event of
Default and the action which Borrower has taken and proposes to take with
respect thereto.
(k) Notice of Litigation. As soon as possible and in any
event within 10 days of obtaining knowledge of the commencement of any action or
proceeding affecting ARC, Borrower or any of their respective Subsidiaries
before any court, governmental agency or arbitrator, which, if decided adversely
could reasonably be expected to have a Material Adverse Effect or which purports
to affect the legality, validity or enforceability of this Agreement or any
other Transaction Document to which any Loan Party or any Property Operator is a
party.
(l) Security Holder Materials and SEC Filings. Promptly
after the sending or filing thereof, and in any event within 10 Business Days
after such sending or filing, copies of all reports which ARC or Borrower sends
to any of its security holders, and copies of all reports and registration
statements which ARC, Borrower or any Subsidiary of ARC or Borrower files with
the Securities and Exchange Commission or any national securities exchange.
49
(m) ERISA Notices.
(i) Within 10 Business Days after Borrower or
any ERISA Affiliate knows or has reason to know, that an ERISA
Event or a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred, and, when known,
any action taken or threatened by the IRS, the DOL or the PBGC
with respect thereto.
(ii) Upon request, or, in the event that such
filing reflects a significant change with respect to the
matters covered thereby, within 3 Business Days after the
filing thereof with the PBGC, the DOL or the IRS, as
applicable, copies of the following: (A) each annual report
(form 5500 series), including Schedule B thereto, filed with
the PBGC, the DOL or the IRS with respect to each Plan, (B) a
copy of each funding waiver request filed with the PBGC, the
DOL or the IRS with respect to any Plan and all communications
received by Borrower or any ERISA Affiliate from the PBGC, the
DOL or the IRS with respect to such request, and (C) a copy of
each other filing or notice filed with the PBGC, the DOL or
the IRS, with respect to each Plan by either Borrower or any
ERISA Affiliate.
(iii) Upon request, copies of each actuarial
report for any Plan or Multi-Employer Plan and annual report
for any Multi-Employer Plan; and within 3 Business Days after
receipt thereof by Borrower or any ERISA Affiliate, copies of
the following: (A) any notices of the PBGC's intention to
terminate a Plan or to have a trustee appointed to administer
such Plan; (B) any favorable or unfavorable determination
letter from the IRS regarding the qualification of a Plan
under Section 401(a) of the Code; or (C) any notice from a
Multi-Employer Plan regarding the imposition of withdrawal
liability.
(iv) Within 3 Business Days after the occurrence
thereof: (A) any changes in the benefits of any existing Plan
which materially increase the annual costs of Borrower and its
Subsidiaries with respect thereto or the establishment of any
new Plan or the commencement of contributions to any Plan to
which Borrower or any ERISA Affiliate was not previously
contributing; or (B) any failure by Borrower or any ERISA
Affiliate to make a required installment or any other required
payment under Section 412 of the Code on or before the due
date for such installment or payment.
(v) Within 3 Business Days after Borrower or any
ERISA Affiliate knows or has reason to know that any of the
following events has or will occur: (A) a Multi-Employer Plan
has been or will be terminated; (B) the administrator or plan
sponsor of a Multi-Employer Plan intends to terminate a
Multi-Employer Plan; or (C) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate
a Multi-Employer Plan.
50
(n) Environmental Notices. Promptly after receipt of:
(i) Any notice of any violation by ARC, Borrower
or any Subsidiary of ARC or Borrower of any Environmental Law
which could reasonably be expected to have a Material Adverse
Effect or that any Governmental Authority has asserted in
writing that ARC, Borrower or any Subsidiary of ARC or
Borrower is not in compliance in any material respect with any
Environmental Law or is investigating the compliance with any
Environmental Law by ARC, Borrower or any Subsidiary of ARC or
Borrower.
(ii) Any written notice that ARC, Borrower or any
Subsidiary of ARC or Borrower is or may be liable to any
Person as a result of the Release or threatened Release of any
Hazardous Substance or that ARC, Borrower or any Subsidiary of
ARC or Borrower is subject to investigation by any
Governmental Authority evaluating whether any remedial action
is needed to respond to the Release or threatened Release of
any Hazardous Substance.
(iii) Any written notice of the imposition of any
Environmental Lien against any property of ARC, Borrower or
any Subsidiary of ARC or Borrower.
(o) Health Care Permit Violation. As soon as possible,
and in any event within 5 Business Days (i) after obtaining knowledge thereof,
notice of the occurrence of any event that would (with the passage of time,
notice or both) be a default under or a violation of any Health Care Permit
necessary for the lawful conduct of the business or operations of ARC Wilora
Lake, ARC Wilora Assisted Living, any Loan Party or any Property Operator,
including the ownership and operation of the Covered Facilities; and (ii) after
receipt thereof, any notice of any violation of applicable laws which would
(with the passage of time, notice or both) cause any of the Health Care Permits
referred to in clause (i) to be modified, rescinded or revoked. Notwithstanding
the foregoing to the contrary, Borrower shall not be required to notify Lender
of routine, customary inspection deficiencies that are being remedied in the
ordinary course consistent with past practices.
(p) Notice of Material Event or Circumstance. As soon as
possible and in any event within 10 days of obtaining knowledge of such event or
circumstance, notice of any event or circumstance that could (with the passage
of time, notice or both) have a Material Adverse Effect. (q) Other Information.
As soon as practicable after request therefor, such other information respecting
the condition or operations, financial or otherwise, of Borrower or any
Subsidiary of Borrower as Lender may from time to time reasonably request.
Section 5.3 Affirmative Covenants. So long as any Obligation
(other than an Unmatured Surviving Obligation) shall remain unpaid, unless
Lender shall otherwise consent in writing, Borrower will, and will cause each of
its Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Preserve
and maintain in full force and effect (i) all material rights, privileges,
qualifications, permits, licenses and franchises
51
reasonably necessary or desirable in reimbursement programs and in the normal
conduct of its business; (ii) its corporate, partnership or limited liability
company existence and good standing under the laws of its state or jurisdiction
of incorporation or organization; and (iii) its good standing under the laws of
each jurisdiction where the character of its properties or the nature of its
activities makes it necessary for it to qualify to do business, except any
jurisdiction where the failure to be in good standing could not have a Material
Adverse Effect.
(b) Maintenance of Property and Assets. Maintain and
preserve all its property which is necessary for use in its business in good
working order and condition, ordinary wear and tear excepted and to use the
standard of care typical in the industry in the operation of the Covered
Facilities in each case except where failure to do so would have a Material
Adverse Effect.
(c) Insurance. Maintain insurance required pursuant to
the Master Lease; and, upon request of Lender, (i) furnish Lender a certificate
of an Authorized Officer (and, if requested by Lender, any insurance broker of
Borrower) setting forth the nature and extent of all insurance maintained by
Borrower and its Subsidiaries in accordance with this Section 5.3(c) (and which,
in the case of a certificate of a broker, was placed through such broker); (ii)
furnish Lender a certified copy of each policy of insurance maintained in
accordance with this Section 5.3(c); and (iii) cause Lender to be named as an
additional insured on all or any of such insurance.
(d) Compliance With Laws. Comply in all material respects
with all applicable laws, rules, regulations and orders applicable to Borrower,
such Subsidiary or its respective property.
(e) Payment of Obligations. Pay and discharge as the same
shall become due and payable:
(i) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or
assets; and
(ii) all lawful claims which, if unpaid, would,
with the passage of time, notice or both, by law become a Lien
upon its property;
except that any such item may be contested in good faith and when so
contested may remain unpaid so long as (A) adequate reserves have been
established in an amount sufficient to pay any such claims, accrued
interest thereon and potential penalties or other costs relating
thereto, or other adequate provision for the payment thereof shall have
been made, (B) enforcement of the contested item is effectively stayed
for the entire duration of such contest, and (C) any amount determined
to be due, together with any interest or penalties thereon, is promptly
paid after resolution of such contest.
(f) Use of Proceeds. Use the proceeds of the Loan for
lawful general corporate purposes permitted under and in accordance with the
terms of this Agreement.
52
(g) Inspection of Property and Books and Records.
(i) Maintain proper books of record and account,
in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of
Borrower and such Subsidiaries, and permit representatives of
Lender to visit and inspect any of their respective
properties, to examine their respective corporate, financial
and operating records and make copies thereof or abstracts
therefrom, and to discuss their respective affairs, finances
and accounts with their respective officers, employees and
independent public accountants, all at the expense of Borrower
and at such reasonable times during normal business hours and
as often as may be reasonably requested, upon reasonable
notice to Borrower; provided that unless a Default or Event of
Default shall have occurred and be continuing, Borrower shall
not be required to pay expenses for more than two visits per
fiscal year.
(ii) Cause each Property Owner to permit Lender
and its authorized representatives, upon reasonable prior
notice, to inspect the Leased Property and any Capital
Additions of such Property Owner during usual business hours
and subject to any reasonable security, health, safety or
confidentiality requirements of such Property Owner or any
Legal Requirement or Insurance Requirement. Lessee shall
cooperate with Lessor in exhibiting the Leased Property and
any Capital Additions to prospective lenders and, if an Event
of Default has occurred and is continuing, prospective
purchasers, lessees and managers.
(h) Further Assurances. Promptly upon reasonable request
by Lender, execute, acknowledge, deliver, file, re-file, register and
re-register, any and all such further acts, security agreements, assignments,
estoppel certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as Lender may require from time to time in
order (i) to carry out more effectively the purposes of this Agreement or any
other Loan Document; (ii) to subject to the Liens created by any of the
Collateral Documents to any of the properties, rights or interests covered
thereby; (iii) to perfect and maintain the validity, effectiveness and priority
of any of the Collateral Documents or any of the Liens intended to be created
thereby; and (iv) to better assure, convey, grant, assign, transfer, preserve,
protect and confirm to Lender the rights granted or now or hereafter intended to
be granted to the Lender under any Loan Document or under any other instrument
executed in connection therewith.
(i) Disclosure Updates. Promptly and in no event later
than 5 Business Days after obtaining knowledge thereof, (i) notify Lender if any
written information, exhibits and reports furnished to Lender contained any
untrue statement of a material fact or omitted to state any material fact or any
fact necessary to make the statements contained therein not misleading in light
of the circumstances in which made; and (ii) correct any defect or error that
may be discovered therein or in any Transaction Document or in the execution,
acknowledgement, filing or recordation thereof.
53
(j) Environmental Laws.
(i) Conduct its business in compliance in all
material respects with all Environmental Laws applicable to
it, including those relating to the generation, handling, use,
storage, and disposal of any Hazardous Substance; take prompt
and appropriate action to respond to any material
non-compliance with Environmental Laws and shall regularly
report to Lender on such response.
(ii) Without limiting the generality of the
foregoing, submit to Lender annually, commencing on the first
Anniversary Date, and on each Anniversary Date thereafter, an
update of the status of each material environmental compliance
or material liability issue, if any. Lender may request copies
of technical reports prepared by Borrower or any of its
Subsidiaries and its communications with any Governmental
Authority to determine whether Borrower or any of its
Subsidiaries is proceeding reasonably to correct, cure or
contest in good faith any alleged material non-compliance or
material environmental liability. Borrower shall, at Lender's
request and at Borrower's expense, (i) retain an independent
environmental engineer acceptable to Lender to evaluate the
site, including tests if appropriate, where the material
non-compliance or alleged material non-compliance with
Environmental Laws has occurred and prepare and deliver to
Lender a report setting forth the results of such evaluation,
a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof, and
(ii) provide to Lender a supplemental report of such engineer
whenever the scope of the environmental problems, or the
response thereto or the estimated costs thereof, shall
increase in any material respect.
(iii) Lender and its representatives will have the
right at any reasonable time to enter and visit the Real
Property owned or operated by Borrower or any Subsidiary of
Borrower and any other place where any property of any Loan
Party is located for the purposes of observing such Real
Property and, if Lender reasonably believes Borrower or any
Subsidiary of Borrower is not in compliance with this Section
5.3(j), taking and removing soil or groundwater samples, and
conducting tests on any part of the Real Property owned or
operated by Borrower or any Subsidiary of Borrower. Lender is
under no duty, however, to visit or observe the Real Property
or to conduct tests, and any such acts by Lender will be
solely for the purposes of protecting Lender's Liens and
preserving Lender's rights under the Transaction Documents. No
site visit, observation or testing by Lender will result in a
waiver of any default or impose any liability on Lender. In no
event will any site visit, observation or testing by Lender be
a representation that hazardous substances are or are not
present in, on or under the Real Property, or that there has
been or will be compliance with any Environmental Law. Neither
Borrower nor any of its Subsidiaries nor any other party is
entitled to rely on any site visit, observation or testing by
Lender. Lender owes no duty of care to protect Borrower or any
of its Subsidiaries or any other party against, or to inform
Borrower or any of its
54
Subsidiaries or any other party of, any hazardous substances
or any other adverse condition affecting the Real Property
owned or operated by Borrower or any Subsidiary of Borrower.
Lender may in its discretion disclose to Borrower or to any
other party if so required by law any report or findings made
as a result of, or in connection with, any site visit,
observation or testing by Lender. Borrower understands and
agrees that Lender makes no warranty or representation to any
Loan Party or any other party regarding the truth, accuracy or
completeness of any such report or findings that may be
disclosed. Borrower also understands that depending on the
results of any site visit, observation or testing by Lender
and disclosed to Borrower, Borrower or its Subsidiary may have
a legal obligation to notify one or more environmental
agencies of the results, that such reporting requirements are
site-specific, and are to be evaluated by Borrower or its
Subsidiary without advice or assistance from Lender. In each
instance, Lender will give Borrower reasonable notice before
entering the Real Property owned or operated by Borrower or
any Subsidiary of Borrower or any other place Lender is
permitted to enter under this Section 5.3(j). Lender will make
reasonable efforts to avoid interfering with the use of the
Real Property or any other property in exercising any rights
provided hereunder.
(k) Health Care Permits and Approvals. Take all action
reasonably necessary (i) to maintain in full force and effect all Health Care
Permits reasonably necessary for the lawful conduct of its business or
operations wherever now conducted and as planned to be conducted, including the
ownership and operation of the Covered Facilities, pursuant to all applicable
laws, of all Governmental Authorities having jurisdiction over any such Loan
Party or over any part of its operations; and (ii) to ensure that all of the
Covered Facilities owned, leased, managed or operated by any Subsidiary of
Borrower are entitled to participate in, and receive payment under, the
appropriate Medicare, Medicaid and related reimbursement programs, and any
similar state or local government-sponsored program, to the extent that such
Subsidiary has decided to participate in any such program, and to receive
reimbursement from private and commercial payers and health maintenance
organizations to the extent applicable thereto, except (in each case) where a
failure to do so could not have a Material Adverse Effect.
(l) Compliance With ERISA.
(i) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the
Code and other federal or state law;
(ii) cause each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification;
(iii) make all required contributions to any Plan
subject to Section 412 of the Code;
(iv) not engage in a prohibited transaction or
violation of the fiduciary responsibility rules which
prohibited transaction or violation of fiduciary
responsibility rules, together with all other prohibited
transactions and violations of fiduciary responsibility rules;
and
55
(v) not engage in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
(m) Operating Account.
(i) On or prior to the Funding Date, Borrower
shall establish at a financial institution acceptable to
Lender (the "Depository Bank") an operating account (the
"Operating Account"). The Operating Account shall be in the
name of Borrower, but shall be subject to a control agreement
permitting Lender, at its election if an Event of Default has
occurred and is continuing, to assume exclusive control over
the Operating Account.
(ii) All rents, issues and profits received by
any Property Owner (other than rents, issues and profits
required to be deposited with the holder of the First Mortgage
Loan Documents with respect to the Covered Facility or Covered
Facilities of such Property Owner) shall be deposited into the
Operating Account. In addition, all other payments to which
any Property Owner is entitled pursuant to the Master Lease,
including, insurance or condemnation proceeds, proceeds of any
put payment required pursuant to the Master Lease, shall also
be deposited into the Operating Account.
(iii) So long as no Event of Default has occurred
and is continuing or will occur upon giving effect to the
application described below, funds in the Operating Account
may be applied by Borrower to make additional investments in
the Permitted Subsidiaries or for general corporate purposes
of Borrower; provided that Borrower may make dividend
payments, loans or other distributions to ARC only on a
Distribution Date and only if such payments or distributions
are permitted pursuant to this Loan Agreement and the other
Loan Documents.
(iv) Lender and Borrower acknowledge that
Borrower, and not Lender, shall be treated as the owner of the
funds in the Operating Account for tax purposes, except to the
extent and at such time that Lender actually withdraws funds
from the Operating Account in accordance with this Section
5.3(m) and the Reserve Account Security Agreement.
(n) Reserve Accounts.
(i) On or prior to the Funding Date (or in the
case of the Working Capital Reserve Account, June 30, 2005),
Borrower shall establish at the Depository Bank the following
reserve accounts (collectively, the "Reserve Accounts," and
individually, a "Reserve Account"):
(A) a repair and replacement reserve
account (the "Repair and Replacement Reserve
Account") to be used in accordance with the
provisions of Section 5.4(n)(ii);
56
(B) a working capital reserve account
(the "Working Capital Reserve Account") to be used in
accordance with the provisions of Section
5.4(n)(iii);
(C) a sinking fund reserve account (the
"Sinking Fund Reserve Account") to be used in
accordance with the provisions of Section 5.4(n)(iv);
(D) a mortgage payment reserve account
(the "Mortgage Payment Reserve Account") to be used
in accordance with the provisions of Section
5.4(n)(v); and
(E) a HCPI loan payment reserve account
(the "HCPI Loan Reserve Account" to be used in
accordance with the provision of Section 5.4(n)(vi).
The Working Capital Reserve Account, the Sinking Fund Reserve
Account and the HCPI Loan Reserve Account shall be in the name
of Borrower, but Borrower hereby acknowledges and agrees, that
Lender, or at Lender's election, a servicing agent for Lender,
shall have exclusive control over the Working Capital Reserve
Account, the Sinking Fund Reserve Account and the HCPI Loan
Reserve Account, but the Working Capital Reserve Account, the
Sinking Fund Reserve Account and the HCPI Loan Reserve Account
shall be subject to, and Lender shall have only the rights
provided in, the provisions of this Agreement and the other
Loan Documents, including Section 5.3(n)(iii), (iv), (v) and
(vi) and the provisions of the Reserve Account Security
Agreement. The Repair and Replacement Reserve Account and the
Mortgage Payment Reserve Account shall be in the name of
Borrower, but shall be subject to a control agreement
permitting Lender, at its election if an Event of Default has
occurred, to assume exclusive control over the Repair and
Replacement Reserve Account and the Mortgage Payment Reserve
Account, but the Repair and Replacement Reserve Account and
the Mortgage Payment Reserve Account shall be subject to the
provisions of this Agreement and the other Loan Documents.
Until Lender assumes exclusive control, Borrower may issue
instructions with respect to the disbursement and use of funds
in the Repair and Replacement Reserve Account and the Mortgage
Payment Reserve Account, provided that such instructions are
in compliance with the provisions of this Agreement and the
other Loan Documents.
(ii) On each Distribution Date, Borrower shall
make a deposit into the Repair and Replacement Reserve Account
for the Covered Facilities in an amount equal to (A)(I) $33.33
times (II) the number of units in the Covered Facilities on
the last day of the calendar month commencing two calendar
months prior to such Distribution Date times (III) the number
of calendar months in the then current Test Period minus (B)
the sum of (I) the aggregate amount spent on repair,
replacement and renovation of the Covered Facilities (but
specifically excluding all Capital Additions and day-to-day
maintenance
57
with respect to the Covered Facilities) (the "Repair and
Replacement Expenditures") made at the Covered Facilities
during the applicable Test Period plus (II) the difference, if
positive, between (x) the sum of (A) the amount of all
deposits made during the applicable Test Period into a reserve
account to be used for Repair and Replacement Expenditures
pursuant to the provisions of the First Mortgage Loan
Documents for the Facilities or the Wilora Lake Loan Documents
for the Wilora Lake Facility and (B) the amount of deposits
made during the applicable Test Period into the Repair and
Replacement Reserve Account and (y) the Repair and Replacement
Expenditures made during the applicable Test Period. So long
as no Default or Event of Default has occurred and is
continuing, Borrower may withdraw funds from the Repair and
Replacement Reserve to pay Repair and Replacement
Expenditures, provided that, if Lender so requests, Borrower
shall deliver to Lender the following to the extent reasonably
applicable: (w) copies of paid invoices, receipts or other
evidence satisfactory to Lender, verifying the cost and
payment of the Repair and Replacement Expenditures; (x) copies
of affidavits, lien waivers or other evidence reasonably
satisfactory to Lender showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim
statutory or common law liens and are furnishing or have
furnished material or labor to the applicable Covered Facility
have been paid all amounts due for labor and materials
furnished to such Covered Facility; (y) a certification from
an inspecting architect, engineer or other consultant
acceptable to Lender (the "Work Inspector") describing the
completed Repair and Replacement Expenditures and verifying
the completion of the Repair and Replacement Expenditures; and
(z) a copy of a new (or amended) certificate of occupancy for
the portion of the Covered Facility covered by such Repair and
Replacement Expenditures, if said new (or amended) certificate
of occupancy is required by law, or a certification acceptable
to Lender by the Work Inspector that no new (or amended)
certificate of occupancy is required. Lender may, at
Borrower's expense, make or cause to be made an annual
inspection at each Covered Facility to determine the need, as
determined by Lender in its judgment, for further Repair and
Replacement Expenditures at such Covered Facility (or at such
other times as Lender shall elect if a Default or Event of
Default has occurred and is continuing, in an emergency or in
connection with inspecting the Repair and Replacement
Expenditures). In the event that such inspection reveals that
further Repair and Replacement Expenditures on any Covered
Facility are required in order to maintain the Covered
Facilities in compliance with the Master Lease, Lender shall
provide Borrower with a written description of the required
Repair and Replacement Expenditures and Borrower shall
complete, or cause the applicable Property Owner or Property
Operator to complete, such Repair and Replacement Expenditures
to the satisfaction of Lender within 90 days after the receipt
of such description from Lender, or such later date as may be
approved by Lender.
(iii) On each Distribution Date occurring after
June 30, 2005, if the sum of (x) the Working Capital as of the
last day of the calendar month
58
commencing two calendar months prior to such Distribution Date
plus (y) the amount, if any, on deposit in the Working Capital
Reserve Account on such Distribution Date plus (z) the stated
amount of any Permitted Letter of Credit outstanding on such
Distribution with respect to the Working Capital Reserve
Account, is less than the amount set forth in the following
table for the period including the calendar month commencing
two calendar months prior to such Distribution Date (the
"Required Working Capital"), then Borrower shall make a
deposit into the Working Capital Reserve Account in an amount
equal to the difference, if positive, between (i) the Required
Working Capital for such calendar month minus (ii)(x) the
Working Capital of Borrower and its Subsidiaries as of the
last day of such calendar month plus (y) the amount, if any,
on deposit in the Working Capital Reserve Account on the
applicable Distribution Date plus (z) the stated amount of any
Permitted Letter of Credit outstanding on the applicable
Distribution Date with respect to the Working Capital Reserve
Account:
Fiscal Quarter Ending During Period Required Working Capital
----------------------------------- ------------------------
From June 30, 2005 to September 30, 2005 ($3,750,000)
From October 1, 2005 to December 31, 2005 ($2,500,000)
From January 1, 2006 to March 31, 2006 ($1,250,000)
Thereafter $0
So long as no Default or Event of Default has occurred and is
continuing if, on any Distribution Date the sum of (x) the
balance in the Working Capital Reserve Account plus (y) the
stated amount of any Permitted Letter of Credit outstanding
with respect to the Working Capital Reserve Account plus (z)
the Working Capital of Borrower as of the last day of the
calendar month commencing two calendar months prior to such
Distribution Date, is in excess of (such excess, the "Working
Capital Excess") the Required Working Capital for the calendar
month ending immediately prior to such Distribution Date then,
on the written request from Borrower, Lender shall release
funds from the Working Capital Reserve Account or reduce the
stated amount of the Permitted Letter of Credit issued with
respect to the Working Capital Reserve Account in an amount
equal to the Working Capital Excess for such Distribution
Date.
(iv) On each Distribution Date that is in the
last month of any fiscal quarter, if (A) the difference (the
"Net Mortgage Loan Balance") between (I) the outstanding
principal amount of the First Mortgage Loans as of the last
day of the calendar month ending immediately prior to such
Distribution Date minus (II) the sum of (w) the amount of all
deposits in reserve accounts to be used for, or used solely to
support, debt service pursuant to the provisions of the First
Mortgage Loan Documents for the Facilities; (x) the amount on
deposit in the Sinking Fund Reserve Account as of the last day
of such calendar month; (y) the
59
scheduled principal payments for the First Mortgage Loans for
the period from the last day of such calendar month through
the end of the fiscal quarter containing such Distribution
Date; and (z) the stated amount of any Permitted Letter of
Credit outstanding with respect to the Sinking Fund Reserve
Account, is greater than (B) the balance (the "Required
Mortgage Loan Balance") required as of the last day of the
calendar quarter containing such Distribution Date pursuant to
Section 5.1(a), then Borrower shall make a deposit into the
Sinking Fund Reserve Account in an amount sufficient to cause
the Net Mortgage Loan Balance calculated as of such
Distribution Date to be less than or equal to the Required
Mortgage Loan Balance in each case, as of the last day of such
fiscal quarter. So long as no Default or Event of Default has
occurred and is continuing, on any Distribution Date that is
in the last month of any fiscal quarter on which the sum of
(w) the amount of all deposits in reserve accounts to be used
for, or used to solely support, debt service pursuant to the
provisions of the First Mortgage Loan Documents for the
Facilities; (x) the amount on deposit in the Sinking Fund
Reserve Account and (z) the stated amount of any Permitted
Letter of Credit outstanding with respect to the Sinking Fund
Reserve Account, is in excess of (such excess, the "Mortgage
Loan Balance Excess") the difference between (i) the Required
Mortgage Loan Balance as of the last day of such fiscal
quarter minus (ii) the Net Mortgage Loan Balance calculated as
of such Distribution Date, then Lender shall, on the written
request from Borrower, release funds from the Sinking Fund
Reserve Account or reduce the stated amount of the Permitted
Letter of Credit issued with respect to the Sinking Fund
Reserve Account in an amount equal to the Mortgage Loan
Balance Excess for such Distribution Date.
(v) On each Distribution Date, Borrower shall
deposit into the Mortgage Payment Reserve Account an amount
equal to the difference, if positive between (i) the sum of
the required principal and interest payments for each First
Mortgage Loan that has a required payment prior to the next
subsequent Master Lease Payment Date minus (ii) the sum, for
all First Mortgage Loans that have required payments prior to
the next subsequent Master Lease Payment Date, of (x) the
amount held by the holders of such First Mortgage Loans for
the payment of principal and interest with respect to such
First Mortgage Loan and (y) the amount held by the Property
Owners for the payment of principal and interest with respect
to such First Mortgage Loans. Amounts in the Mortgage Payment
Reserve Account may only be used to make required payments on
the First Mortgage Loans on the date such payments are due.
(vi) On each Distribution Date that is not a
Payment Date (other than the Distribution Date in October
2002), Borrower shall deposit into the HCPI Loan Reserve
Account an amount equal to one-third of the payment required
under this Loan Agreement on the next Payment Date. Amounts
in the HCPI Loan Reserve Account may only be used to make
payments required under this
60
Document on the first Payment Date following the date of
deposit of such amount into the HCPI Loan Reserve Account.
(vii) None of the Reserve Accounts shall, unless
otherwise explicitly required by applicable law, be or be
deemed to be escrow or trust funds, but, at Lender's option
and in Lender's discretion, may either be held in a separate
account or be commingled with the other Reserve Accounts. The
Reserve Accounts are solely for the protection of Lender and
entail no responsibility on Lender's part beyond the payment
of the respective items for which they are held following
receipt of bills, invoices or statements therefor in
accordance with the terms hereof and beyond the allowing of
due credit for the sums actually received. If an Event of
Default has occurred and is continuing, Lender may, but shall
not be obligated, to apply at any time the balance then
remaining in any or all of the Reserve Accounts against the
Obligations in whatever order Lender shall subjectively
determine. No such application of any or all of the Reserve
Accounts shall be deemed to cure any Event of Default. Upon
full payment of the Obligations in accordance with the terms
of the Loan Documents or at such earlier time as Lender may
elect, the balance of any or all of the Reserve Accounts then
in Lender's control shall be paid over to Borrower and no
other party shall have any right or claim thereto. Lender and
Borrower acknowledge that Borrower, and not Lender, shall be
treated as the owner of the funds in the Reserve Accounts for
tax purposes, except to the extent and at such time that
Lender actually withdraws funds from a Reserve Account in
accordance with this Section 5.3(n) and the Reserve Account
Security Agreement.
(viii) On any Distribution Date so long as no Event
of Default has occurred, Borrower may substitute a Permitted
Letter of Credit for any cash required to be maintained in a
Reserve Account, so long as after giving effect to such
substitution the stated amount of such Permitted Letter of
Credit plus amounts on deposit in the Reserve Account with
respect to which such Permitted Letter of Credit was issued
equals or exceed the amount required to be on deposit in such
Reserve Account. In addition, if, on any Distribution Date,
the amounts on deposit in any Reserve Account plus the stated
amount of the Permitted Letter of Credit issued with respect
to such Reserve Account exceeds the amount required to be on
deposit in such Reserve Account, upon the written request of
Borrower, cash in such Reserve Account in an amount equal to
such excess shall be released to Borrower. If no agreement for
a renewal or replacement of any Permitted Letter of Credit has
been made fifteen (15) days prior to the expiration of such
Permitted Letter of Credit, Lender may draw upon such
Permitted Letter of Credit and deposit such drawing in the
Reserve Account with respect to which such Permitted Letter of
Credit was issued.
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(o) Separateness Covenants.
(i) maintain an arm's length relationship with
its Affiliates and its shareholders or other equity holders
and any other parties furnishing services to it, including,
but not limited to, the Permitted Subsidiaries;
(ii) be solvent and pay its own liabilities,
indebtedness and obligations of any kind, including
administrative expenses, from its own assets as the same shall
become due;
(iii) do all things necessary to preserve its
existence, and observe all formalities applicable to it, and
do all things necessary to maintain its identity as an entity
separate and distinct from the Permitted Subsidiaries and all
of its other Affiliates;
(iv) conduct and operate its business in its own
name and as presently conducted and operated;
(v) maintain financial statements, books and
records and bank accounts separate from those of its
Affiliates, including, without limitation, its shareholders or
other equity holders or any other Person; provided, however,
that Borrower or any Subsidiary may be included in
consolidated financial statements of another Person, provided
that such consolidated financial statements contain a note
indicating that Borrower or such Subsidiary, as the case may
be, is a separate legal entity and the assets and liabilities
of Borrower or such Subsidiary, as the case may be, neither
are available to pay the debts of the consolidated Person nor
constitute obligations of the consolidated Person and that the
consolidated Person is not liable for any of the liabilities
of Borrower or such Subsidiary, as the case may be;
(vi) be, and at all times hold itself out to the
public as, a legal entity separate and distinct from any other
Person (including, without limitation, any Affiliate,
shareholder or other equity holder of Borrower or such
Subsidiary, or any Affiliate of any shareholder or other
equity holder of Borrower or such Subsidiary);
(vii) file its own tax returns (except to the
extent it is treated as a division of another taxpayer for tax
purposes) and pay any taxes so required to be paid under
applicable law; provided, however, that so long as (x) the tax
liability of Borrower or any Subsidiary and its respective
income and expenses are readily determinable based on a review
of the books and records of Borrower or such Subsidiary, as
the case may be, and (y) Borrower or such Subsidiary, as the
case may be, maintains sufficient books and records to
determine its separate tax obligations for any particular
reporting periods, Borrower or any Subsidiary, as the case may
be, may file consolidated tax returns;
62
(viii) maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size
and character and in light of its contemplated business
operations;
(ix) maintain its assets in such a manner that it
is not costly or difficult to segregate, ascertain or identify
its individual assets from those of any Affiliate or any other
Person;
(x) pay any liabilities out of its own funds,
including salaries of its employees, not out of the funds of
any Affiliate;
(xi) use stationery, invoices, and checks
separate from its Affiliates, including the Permitted
Subsidiaries;
(xii) deposit all of its funds in checking
accounts, savings accounts, time deposits or certificates of
deposit of Borrower or any Subsidiary in its own name or
invest such funds in its own name;
(xiii) correct any known misunderstanding regarding
the separate identity of Borrower or any Subsidiary;
(xiv) participate in the fair and reasonable
allocation of any and all overhead expenses and other common
expenses for facilities, goods or services provided to
multiple entities;
(xv) establish and maintain an office through
which its business is conducted separate and apart from that
of the Permitted Subsidiaries or any other Affiliate;
provided, however, that nothing herein shall be construed so
as to prevent Borrower or any Subsidiary from having office
space at the same address as any of the Permitted Subsidiaries
or any other Affiliate, so long as the costs and expenses
associated with such office space are allocated as set forth
in paragraph (xiv) above; and
(xvi) maintain a separate telephone number from
that of the Permitted Subsidiaries or any other Affiliate
(except that (x) any Subsidiary that is a partnership may
maintain the same telephone number as its General Partner and
(y) any Subsidiary that is a General Partner may maintain the
same telephone number as the partnership for which it is the
general partner).
Notwithstanding anything herein to the contrary in this Section 5.3(o), (x) the
provisions of this Section 5.3(o) shall not apply to the ARC Fleetwood Entities
and (y) Borrower or any Subsidiary may, from time to time, (x) make lawful
distributions in accordance with applicable law or loans on an arm's length
basis to its Affiliates subject to the provisions of Section 5.3(o)(viii) above,
or (y) obtain loans on an arm's length basis or lawful capital contributions in
accordance with applicable law from its Affiliates to the extent necessary to
satisfy its obligations as they become due; provided, however, that all such
transactions are accurately
63
reflected in the books and records of Borrower or such Subsidiary, as the case
may be, and each of its respective applicable Affiliates.
(p) Certain Property Operators Treated as Corporations.
Each of the Property Operators which operates an Entrance Fee Facility will be
an entity which is treated as a corporation or an association taxable as a
corporation for United States federal income tax purposes.
(q) Impound Accounts. To the extent that any Property
Operator is required to maintain an impound account pursuant to Section 4.4 of
the Master Lease, Borrower shall cause the Property Owner with respect to the
Facility leased by such Property Operator to direct that such impound account to
be maintained with and subject to the control of Lender, and shall cause the
applicable Property Owner to execute such documents as shall be requested by
Lender with respect thereto.
(r) Subordination of Management Agreements. To the extent
that any management fees are paid to ARC or any Affiliate of ARC with respect to
any Covered Facility, Borrower shall cause, or shall cause the applicable
Subsidiary of Borrower to cause, ARC or such Affiliate of ARC to deliver an
agreement, in form and substance satisfactory to Lender, that the payment of
such management fees is subordinate to Borrower's obligations under Section
5.3(n) to make deposits into the Reserve Accounts.
(s) Board Attendance. Borrower shall at all times give
Lender notice of (in the same manner as notice is given to directors), and
permit one Person designated by Lender to attend as an observer all meetings of
Borrower's Board of Directors and all executive and other committee meetings of
the Board of Directors and shall provide to Lender the same information
concerning Borrower, and access thereto, provided to members of Borrower's Board
of Directors and such committees. The reasonable travel expenses incurred by any
such designee of Lender in attending any board or committee meetings shall be
reimbursed by Borrower.
(t) Release of Lien on Somerby Purchase Option. Upon the
written request of Borrower delivered not less than 10 Business Days prior to
the closing of the sale of the Somerby Purchase Option in compliance with
Section 5.4(e)(vii), Lender shall, concurrently with such sale and at the
expense of Borrower, execute such agreements, documents and other instruments as
Borrower shall reasonably request to release the Liens granted to Borrower on
the Somerby Purchase Option.
(u) Vehicle Sublease. From and after the Funding Date,
prior to any Subsidiary (other than the ARC Fleetwood Entities) operating or
using a vehicle which is covered by the Enterprise Vehicle Master Lease or
another vehicle that is owned by ARC or an Affiliate of ARC, such Subsidiary
shall have executed a Vehicle Sublease with respect to such vehicle with ARC, as
the sublessor, and such Permitted Subsidiary, as the sublessee, and all payments
with respect to such lease of vehicles shall be on terms no less favorable than
could be obtained from a third party.
(v) Reimbursement Obligation. From and after the Funding
Date, no obligation of Borrower or any Subsidiary of Borrower shall be supported
by a letter of credit
64
unless, Borrower or such Subsidiary shall either (i) have the direct
reimbursement obligation with respect to such letter of credit or (ii) have an
intercompany reimbursement agreement with the Person that has the direct
reimbursement obligation with respect to such letter of credit, which shall in
each event be in form and substance satisfactory to Lender.
(w) Consent to Acquisition of First Mortgage.
Notwithstanding anything to the contrary in any First Mortgage Loan Document,
Borrower hereby consents, and shall cause any Property Owner with respect to
which Lender acquires the First Mortgage Loan to consent, to Lender becoming the
lender under any First Mortgage Loan.
(x) Somerby Purchase Option. On or prior to the date
thirty (30) days after the Funding Date, (i) ARC shall have either (a)
consummated a sale of the Somerby Purchase Option or (b) contributed the Somerby
Purchase Option to ARC Somerby in a manner and pursuant to documentation
satisfactory to Lender; and (ii) if the Somerby option is contributed to ARC
Somerby, ARC Somerby shall have provided Lender a Lien on the Somerby Purchase
Option pursuant to documentation acceptable to Lender.
Section 5.4 Negative Covenants. So long as any Obligation (other
than an Unmatured Surviving Obligation) shall remain unpaid, unless Lender shall
otherwise consent in writing, Borrower will not, and will not cause or permit
any Subsidiary of Borrower to:
(a) Liens. Directly or indirectly (x) make, create,
incur, assume or suffer to exist any Lien upon or with respect to any part of
its property or assets, whether now owned or hereafter acquired, or offer or
agree to do so; or (y) enter into any contract or agreement (other than the
First Mortgage Loan Documents and the Wilora Lake Loan Documents) that in any
way restricts the ability of Borrower or such Subsidiary to make, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its
property or assets, whether now owned or hereafter acquired, other than the
following:
(i) any Lien created under any Loan Document;
(ii) any Lien for taxes, fees, assessments or
other governmental charges which are not delinquent and remain
payable without penalty;
(iii) any carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other similar Lien
arising in the ordinary course of business, the underlying
claim with respect to which is not delinquent or remains
payable without penalty;
(iv) any Lien (other than a Lien imposed by
Environmental Laws or by ERISA) on the property of Borrower or
any of its Subsidiaries imposed by law, or pledges or deposits
required by law pursuant to worker's compensation,
unemployment insurance and other social security legislation;
(v) any easement, defect, right-of-way,
restriction and other similar encumbrances incurred in the
ordinary course of business that do not interfere in
65
any material respect with the business of the Loan Party whose
asset is subject to such Lien;
(vi) any Lien (other than Liens on the
Collateral) existing on the property of Borrower or its
Subsidiaries on the Closing Date and set forth in Schedule
4.1(g) securing Indebtedness permitted under Section
5.4(b)(ii);
(vii) any Lien on equipment of any Subsidiary of
Borrower securing Indebtedness permitted under Section
5.4(b)(iv) and extensions, renewals, refinancings or
replacements thereof;
(viii) any Lien on assets of Borrower (other than
Collateral and Borrower's ownership interest in the Permitted
Subsidiaries) securing Indebtedness permitted under Section
5.4(b)(vi);
(ix) any Lien on assets of any ARC Fleetwood
Entity securing obligations of such ARC Fleetwood Entity; and
(x) any Lien on assets of (x) any Property
Operator securing such Property Operator's obligations under
the Master Lease or (y) any HCPI Lessee securing such HCPI
Lessee's obligations under the HCPI Lease.
(b) Limitation on Indebtedness. Directly or indirectly
create, incur, assume, guarantee, suffer to exist, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(i) Indebtedness incurred pursuant to the Loan
Documents;
(ii) Indebtedness existing on the Closing Date
and set forth in Part A of Schedule 4.1(f) and extensions,
renewals and replacements thereof made in compliance with the
terms of this Agreement;
(iii) Contingent Obligations permitted pursuant to
Section 5.4(c);
(iv) (x) Indebtedness existing on the Closing
Date and set forth in Part B of Schedule 4.1(f) and (y)
Capital Lease Obligations of, or purchase money Debt incurred
by, any Subsidiary of Borrower (other than a Property Owner)
incurred after the Closing Date for the purpose of financing
purchases by Borrower or such Subsidiary of equipment;
provided that (A) the security for any such Indebtedness is
solely the assets acquired with the proceeds of such
Indebtedness; (B) such Indebtedness contains no cross-default
provisions; (C) such Indebtedness contains no provision that
permits acceleration or modification of such Indebtedness upon
a change in the ownership of Borrower or the Subsidiary
incurring such Indebtedness; (D) such Indebtedness is not
guaranteed by Borrower or any Subsidiary of Borrower; (E) the
aggregate outstanding principal amount of such Indebtedness
outstanding at any one time shall not exceed $2,550,000;
66
(v) the Required Interest Hedge;
(vi) Indebtedness of Borrower which is a
reimbursement obligation with respect to any Permitted Letter
of Credit;
(vii) any Indebtedness of any ARC Fleetwood
Entity;
(viii) Indebtedness of Borrower or the applicable
Subsidiary set forth on Part C or Part D of Schedule 4.1(f);
(ix) Indebtedness of any Subsidiary of Borrower
which is assumed or incurred in connection with and as a part
of the Funding Date Restructuring Plan, provided that such
Indebtedness shall be in amounts and subject to documentation
that is acceptable to Lender; and
(x) additional Indebtedness of Borrower in an
aggregate outstanding principal amount outstanding at any one
time not in excess of $500,000.
Notwithstanding anything to the contrary contained in this Section 5.4(c), prior
to seeking any Indebtedness not outstanding on the Closing Date (other than
Indebtedness permitted pursuant to Section 5.4(c)(iv), (vi), (vii) and (viii)),
Borrower will or will cause the applicable Subsidiary to first offer to Lender
an opportunity to provide such Indebtedness pursuant to the provisions of
Section 2.6.
(c) Limitation on Contingent Obligations. Directly or
indirectly create, incur, assume, guarantee, suffer to exist, or otherwise
become or remain directly or indirectly liable with respect to, any Contingent
Obligations, except:
(i) Contingent Obligations incurred pursuant to
the Loan Documents;
(ii) Contingent Obligations existing on the
Closing Date and set forth in Schedule 5.4(c)(ii) and
extensions, renewals and replacements thereof made in
compliance with the terms of this Agreement;
(iii) Contingent Obligations of any ARC Fleetwood
Entity; and
(iv) endorsements of checks for collection or
deposit in the ordinary course of business.
(d) Restricted Payments. Directly or indirectly (x)
declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any shares of
any class of its capital stock, or purchase, redeem or otherwise acquire for
value any shares of any class of capital stock or any warrants, rights or
options to acquire any such shares, now or hereafter outstanding; or (y) enter
into any agreement (other than the First Mortgage Loan Documents and the Wilora
Lake Loan Documents) restricting the ability of Borrower or any Subsidiary of
Borrower to declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations
67
or securities to its stockholders or to make any loan or advance to Borrower or
another Subsidiary of Borrower, except that:
(i) Borrower may declare and make any dividend
payments or other distributions payable solely by Borrower in
common stock of Borrower or in warrants, rights or options to
acquire such common stock;
(ii) any Subsidiary of Borrower may declare and
make any dividend payment or other distribution payable solely
to Borrower or any other wholly-owned direct or indirect
Subsidiary of Borrower;
(iii) on any Distribution Date, Borrower may
declare or make any dividend payment or other distribution to
ARC of cash or any other property received in a sale permitted
pursuant to Section 5.4(e)(viii); provided that no Default or
Event of Default has occurred and is continuing; and
(iv) on any Distribution Date, Borrower may
declare or make any dividend payment or other distribution of
cash to ARC; provided that (x) all payments of any kind and
all deposits into any Reserve Account required under the Loan
Documents on or prior to such Distribution Date shall have
been made and (y) no Default or Event of Default has occurred
and is continuing.
(e) Consolidation, Merger, Sale of Assets. Wind up,
liquidate or dissolve its affairs, or enter into any transaction of merger or
consolidation or to directly or indirectly sell, assign, lease, convey, transfer
or otherwise dispose of (whether in one or a series of transactions) all or any
portion of its assets, business or property (including accounts and notes
receivable (with or without recourse) and equipment sale-leaseback transactions)
or enter into any agreement to do any of the foregoing except for:
(i) Property Operators and HCPI Lessees may
lease or sell assets in the ordinary course of business,
consistent with past practices; provided that each such lease
or sale is consummated in compliance with the provisions of
the Master Lease;
(ii) Property Operators and HCPI Lessees may
enter into sale and leaseback transactions which are permitted
pursuant to Section 5.4(b) and Section 5.4(m) and each such
transaction is consummated in compliance with the provisions
of the Master Lease;
(iii) Property Operators and HCPI Lessees may
enter into transactions with respect to Real Property which
are permitted pursuant to Section 5.4(a)(v);
(iv) Property Operators may enter into the First
Mortgage Loan Documents;
(v) Property Operators and HCPI Lessees may sell
inventory in the ordinary course of business, consistent with
past practices; provided that each
68
such sale is consummated in compliance with the provisions of
the Master Lease;
(vi) Property Operators, HCPI Lessees and the
other Permitted Subsidiaries may dispose of obsolete or
unnecessary personal property;
(vii) Borrower may reincorporate in the State of
Delaware and may merge with or into a newly-formed company
created solely for the purpose of so reincorporating Borrower;
(viii) any ARC Fleetwood Entity may lease or sell
assets and any owner of any interest in any ARC Fleetwood
Entity may enter into transactions solely with respect to such
interest;
(ix) Borrower or any Subsidiary of Borrower may
transfer its assets in connection with and as a part of the
Funding Date Restructuring Plan; and
(x) ARC Somerby may sell the Somerby Purchase
Option to any Person that is not an Affiliate of Borrower for
fair market value.
(f) Loans and Investments. Directly or indirectly
purchase, acquire, carry or maintain (or make any commitment to purchase,
acquire, carry or maintain) any capital stock, equity interest, Indebtedness,
obligations or other securities of or any interest in, any Person or any
business or assets or make any advance, loan, extension of credit or capital
contribution to or any other investment in any Person including any Affiliates
of Borrower, except for:
(i) investments in cash or Cash Equivalents
provided that Property Owners may only invest in Cash
Equivalents described in clause (i) of the definition thereof;
(ii) investments on the Closing Date by Borrower
in the Permitted Subsidiaries;
(iii) other investments by Borrower or any other
Subsidiary of Borrower in an aggregate amount not to exceed at
any time $500,000;
(iv) Borrower and any Subsidiary (other than a
Property Owner) may make loans to Affiliates of ARC; provided
that (i) any such loan is in the ordinary course of business
and on terms no less favorable to Borrower or the applicable
Subsidiary, as the case may be, making the loan than Borrower
or such Subsidiary, as the case may be, would obtain in a
comparable arm's-length transaction with a Person not an
Affiliate; and (ii) any such loan must comply with applicable
law and with the provisions of Section 5.3(o) and Section
5.4(n); and
(v) investments by any ARC Fleetwood Entity.
(g) Conduct of Business. Engage in any business other
than the following:
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(i) for Borrower, the business of (x) acquiring
and holding shares of stock, partnership interests or
membership interests (as applicable) in the Permitted
Subsidiaries which are owned directly by Borrower as set forth
on Schedule 4.1(e); (y) guaranteeing the obligations of (A)
the HCPI Lessees under the HCPI Lease and the other documents
executed in connection with the HCPI Lease, all pursuant to
the HCPI Guaranty; and (B) the Property Owners identified on
Schedule I for the benefit of the First Mortgage Lenders
identified on such schedule; and (z) any other business
incidental thereto;
(ii) for each of the Property Owners (other than
ARC Wilora Lake), the business of owning the Fee Estate with
respect to the Facility set forth opposite such Property
Owner's name on Schedule I;
(iii) for each of the Property Operators (other
than ARC Wilora Lake and Fort Austin LP), the business of
operating the Facility set forth opposite such Property
Operator's name on Schedule I;
(iv) for each of the HCPI Lessees, the business
of leasing the property related to, and operation of, the HCPI
Leased Facility set forth opposite such HCPI Lessee's name on
Schedule 5.4(g)(iv);
(v) for each ARC General Partner (other than ARC
Freedom), the business of acquiring and holding the general
partnership interests in the Property Operator or HCPI Lessee
set forth opposite such ARC General Partner's name on Schedule
4.1(e);
(vi) for each ARC Equity Owner (other than ARC
Freedom), the business of acquiring and holding shares of the
stock, partnership interests (other than general partner
interests) or membership interests (as applicable) in the
Property Operators or HCPI Lessees set forth opposite such ARC
Equity Owner's name on Schedule 4.1(e);
(vii) for ARC SC Holdings, the business of
acquiring and holding the membership interests in ARC Santa
Catalina;
(viii) for ARC Wilora Lake, (x) the business of
owning the Fee Estate set forth opposite ARC Wilora Lake's
name on Part C of Schedule I and (y) the business of operating
the facility located on such real property;
(ix) for ARC Wilora Assisted Living, the business
of operating the assisted living wing of the facility set
forth opposite ARC Wilora Lake's name on Part C of Schedule I;
(x) for ARC Freedom, the business of acquiring
and holding the general partnership interests and other equity
interests in the Property Operators, the ARC Equity Owners and
the ARC General Partners set forth opposite ARC Freedom's name
on Part B of Schedule 4.1(e);
70
(xi) for Fort Austin LP, (x) the business of
operating the Facility set forth opposite Fort Austin LP's
name on Schedule I; and (y) the business of owning acquiring
and holding the membership interests in the ARC Fleetwood
Entities set forth opposite Fort Austin LP's name on Schedule
4.1(e);
(xii) for ARC Somerby, the business of owning the
Somerby Option; and
(xiii) for the ARC Fleetwood Entities, the business
engaged in by such entities on the Closing Date.
(h) Transactions With Affiliates. Enter or agree to enter
into any transaction with any Affiliate of ARC except in the ordinary course of
business and upon terms no less favorable to Borrower or such Subsidiary than
Borrower or such Subsidiary would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
(i) Amendments to Corporate Documents. Amend, modify or
otherwise change the certificate or articles of incorporation, bylaws or other
organizational document of Borrower, any Property Owner, any Property Operator,
any HCPI Lessee, ARC Wilora Lake or ARC Wilora Assisted Living.
(j) Health Care Permits and Approvals. Engage in any
activity that (i) constitutes or, with the passage of time, notice or both,
would result in a material default under or violation of, any such Health Care
Permit necessary for the lawful conduct of its business or operations; or (ii)
constitutes or, with the passage of time, notice or both, would result in the
loss by any Health Care Covered Facility owned, leased, managed or operated by
any Property Operator of the right to participate in, and receive payment under,
the appropriate Medicare, Medicaid and related reimbursement programs, and any
similar state or local government-sponsored program, to the extent that such
Property Operator has decided to participate in any such program, and to receive
reimbursement from private and commercial payers and health maintenance
organizations to the extent applicable thereto.
(k) Accounting Changes. Permit any change in the fiscal
year of Borrower or any Subsidiary or in any of the accounting procedures
maintained by Borrower or such Subsidiary as of the Closing Date (other than
changes required as a result of a change in GAAP).
(l) Amendment to and Refinancing of First Mortgages or
Wilora Lake Loan.
(i) Without the prior written consent of Lender
(which consent may be withheld or granted in Lender's sole and
absolute discretion), neither Borrower nor any of its
Subsidiaries will agree to any amendment to, or waive any of
its rights under, any First Mortgage Loan Document or any
Wilora Lake Loan Document.
(ii) Without limiting Lender's approval rights as
set forth in clause (i), in order to accommodate Borrower's
desire for a prompt approval of any
71
transactions contemplated to refinance a First Mortgage Loan
or the Wilora Lake Loan (each a "Proposed Refinancing
Transaction"), Lender hereby agrees that it will (x) respond
to Borrower's written request for approval of a Proposed
Refinancing Transaction within 10 Business Days after receipt
by Lender of such written request and of each of the
following: (A) a summary of, or a term sheet reflecting, the
material terms of the Proposed Refinancing Transaction; and
(B) all other information requested by Lender with respect to
such Proposed Refinancing Transaction or the lender or lenders
with respect to such Proposed Refinancing Transaction and (y)
respond to Borrower's written request for approval of the
agreement or documents or documents proposed to be entered
into by Borrower or any Affiliate of Borrower into in
connection with such Proposed Refinancing Transaction within
10 Business Days after receipt by Lender of such written
request and of each of the following: (A) copies of all the
agreements or documents (including, for each First Mortgage
Loan, an Intercreditor Agreement acceptable to Lender)
proposed to be entered into by Borrower or any Affiliate of
Borrower into in connection with such Proposed Refinancing
Transaction and (B) all other information requested by Lender
with respect to such Proposed Refinancing Transaction or the
lender or lenders with respect to such Proposed Refinancing
Transaction. Borrower specifically acknowledges that (A)
Borrower may not request approval from Lender of any Proposed
Refinancing Transaction that would, on a pro forma basis,
cause Borrower to fail to comply with any of the covenants
contained in Section 5.1 of this Agreement and (B) Lender's
response to a request for approval of a Proposed Refinancing
Transaction may include conditions that are required to be met
in order for Lender to approve such Proposed Refinancing
Transaction. If any request for approval provided pursuant to
this Section 5.4(l)(ii) contains a clear statement indicating
that the request will be deemed approved if no response is
received from Lender within 10 Business Days, then if Lender
fails to respond to Borrower's written request with such 10
Business Days, Lender shall be deemed to have approved a
Proposed Refinancing Transaction or the agreements or
documents proposed to be entered into by Borrower or any
Affiliate of Borrower into in connection with such Proposed
Refinancing Transaction, as the case may be.
(m) Sale and Leaseback Transactions. Directly or
indirectly become, or permit any of its Subsidiaries to directly or indirectly
become or remain liable as lessee or as a guarantor or other surety with respect
to any lease of any property (whether real, personal or mixed), whether now
owned or hereafter acquired, (i) which Borrower or any of its Subsidiaries has
sold or transferred or is to sell or transfer to any other Person (including
Borrower or any of its Affiliates) or (ii) which Borrower or any of its
Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by such Loan Party to
any Person (including Borrower or any of its Affiliates) in connection with such
lease; provided that any Subsidiary of Borrower (other than a Property Owner)
may become and remain liable as lessee, guarantor or other surety with respect
to any such lease with a Person (other than Borrower or any of its Affiliates)
if and to the extent that (x) such Subsidiary has, pursuant to Section 2.6,
offered Lender an opportunity to become the lessor of such lease
72
prior to offering such opportunity to any other Person; (y) after giving effect
to such lease, and the application of the proceeds of such lease, there is no
Default or Event of Default and (z) Borrower has provided Lender evidence
satisfactory to Lender that, after giving effect to such sale and leaseback
transaction, Borrower shall remain in compliance with its obligations under this
Agreement and the other Loan Documents.
(n) Separateness Covenants.
(i) amend, modify or otherwise change its
charter, bylaws or other organizational documents in any
material term or manner, or in a manner which adversely
affects the existence of Borrower or any such Subsidiary, as
the case may be, as a single purpose entity without the prior
written consent of Lender;
(ii) permit any shareholder or other equity
holder of Borrower or any such Subsidiary to amend, modify or
otherwise change the charter, bylaws or other organizational
documents of Borrower or any such Subsidiary, as the case may
be, in any material term or manner, or in a manner which
adversely affects the existence of Borrower or any such
Subsidiary, as the case may be, as a single purpose entity
without the prior written consent of Lender;
(iii) to the full extent permitted by law,
liquidate or dissolve (or suffer any liquidation or
dissolution), or enter into any transaction of merger or
consolidation, or acquire by purchase or otherwise all or
substantially all the business or assets of, or any stock or
other beneficial ownership of, any entity (other than the
Permitted Subsidiaries) without the prior written consent of
Lender;
(iv) guarantee, pledge its assets for the benefit
of, hold its credit as being available to satisfy, or
otherwise become liable, on or in connection with, any
obligation of any other person (other than as permitted
pursuant to Section 5.4(c)(i) or (ii)) without the prior
written consent of Lender;
(v) without the prior written consent of Lender,
own any asset other than (x) incidental personal property
necessary for compliance with the provisions of Section 5.3(o)
and this Section 5.4(n) and (y) (A) for the Borrower, (I) the
shares of stock, partnership interests and membership
interests in the Permitted Subsidiaries owned directly by
Borrower; and (II) incidental personal property necessary for
the ownership of the shares of stock, partnership interests
and membership interests in such Permitted Subsidiaries; (B)
for any Property Owners, the Fee Estate with respect to the
Facility set forth opposite such Property Owner's name on
Schedule I and other property designated as being owned by
such Property Owner pursuant to the Master Lease; (C) for any
Property Operators (other than Fort Austin LP), the assets
necessary for the business of operating the Facility set forth
opposite such Property Operator's name on Schedule I; (D) for
any HCPI Lessees, the assets necessary for the business of
leasing the property related to, and operation of, the HCPI
Leased Facility set forth opposite such HCPI Lessee's name on
Schedule 5.4(g)(iv);
73
(E) for any ARC General Partner or ARC Equity Owner, (I) the
shares of stock, partnership interests and membership
interests in the Permitted Subsidiaries owned directly by such
ARC General Partner or ARC Equity Owner, as the case may be;
and (II) incidental personal property necessary for the
ownership of the shares of stock, partnership interests and
membership interests in such Permitted Subsidiaries; (F) for
ARC SC Holdings, (I) the membership interests in ARC Santa
Catalina; and (II) incidental personal property necessary for
the ownership of such membership interests; (G) for ARC Wilora
Lake, (I) the Fee Estate set forth opposite ARC Wilora Lake's
name on Part of C of Schedule I; (II) the assets necessary for
the business of operating the facility located on such Real
Property; (H) for ARC Wilora Assisted Living, the assets
necessary for the business of operating the assisted living
wing of the facility located on the Fee Estate set forth
opposite ARC Wilora Lake's name on Part of C of Schedule I;
(I) for Fort Austin LP, (I) the assets necessary for the
business of operating the Facility set forth opposite Fort
Austin LP's name on Schedule I; (II) the membership interests
in the ARC Fleetwood Entity owned directly by Fort Austin LP;
and (III) incidental personal property necessary for the
ownership of the membership interests in such Fleetwood
Entity; and (J) for ARC Somerby, the Somerby Option;
(vi) engage, either directly or indirectly, in
any business other than the business permitted pursuant to
Section 5.4(g) for Borrower or such Subsidiary, as the case
may be, without the prior written consent of Lender;
(vii) incur any debt, secured or unsecured, direct
or contingent (including guaranteeing any obligation) without
the prior written consent of Lender (other than accounts
payable incurred in the ordinary course of business and the
Indebtedness permitted pursuant to Section 5.4(b));
(viii) make any loans or advances to any other
person or entity, including the Permitted Subsidiaries other
than loans or advances permitted pursuant to Section 5.4(f);
(ix) commingle the funds and other assets of
Borrower or such Subsidiary, as the case may be, with those of
the Permitted Subsidiaries, any shareholder or other equity
holder, Affiliate or any other Person;
(x) hold itself out to be responsible for the
debts or obligations of any other Person (other than (x)
Borrower's obligations under the HCPI Guaranty and (y) the
obligations of any ARC General Partner, in its capacity as a
general partner);
(xi) do any act which would make it impossible
for Borrower or such Subsidiary, as the case may be, to carry
on the ordinary business of Borrower or such Subsidiary, as
the case may be; and
74
(xii) hold title to the assets of Borrower or such
Subsidiary, as the case may be, other than in the name of
Borrower or such Subsidiary, as the case may be.
Notwithstanding anything herein to the contrary in this Section 5.4(n), (x) the
provisions of this Section 5.4(n) shall not apply to the ARC Fleetwood Entities
and (y) Borrower or any Subsidiary may, from time to time, (x) make lawful
distributions in accordance with applicable law or loans on an arm's length
basis to its Affiliates subject to the provisions of Section 5.3(o)(viii), or
(y) obtain loans on an arm's length basis or lawful capital contributions in
accordance with applicable law from its Affiliates to the extent necessary to
satisfy its obligations as they become due; provided, however, that all such
transactions are accurately reflected in the books and records of Borrower or
such Subsidiary, as the case may be, and each of its respective applicable
Affiliates.
(o) Tax Status. No election shall be made with respect to
any Property Owner to have such Property Owner treated as an association taxable
as a corporation for tax purposes. No election shall be made with respect to any
Property Operator of an Entrance Fee Facility to have such Property Operator
treated as a disregarded entity for tax purposes.
Section 5.5 REIT Protections.
(a) Notwithstanding anything else to the contrary in this
Agreement, unless Lender shall otherwise consent in writing (which consent may
be withheld in Lender's sole and absolute discretion), Borrower shall not permit
ARC SC Holdings or any of the Property Owners to:
(i) own or acquire any stock, loan or other debt
or equity securities of or make any advance to another issuer
(including an Affiliate of Borrower or any Subsidiary);
provided, however, that ARC SC Holdings may own 100% of the
interests of ARC Santa Catalina provided that ARC Santa
Catalina is a disregarded entity for tax purposes;
(ii) enter into any lease which is not approved
by Lender or provide any services to any lessee;
(iii) enter into any lease which provides for the
rental of personal property, except a lease which provide for
the rental of both personal property and real property and in
which the personal property accounts for less than 10% of the
total rent (as determined pursuant to Section 856(d)(1) of the
Code);
(iv) derive income in any calendar year other
than from rent or interest on any bank time deposits, in
either case which is not based on net income or profits of the
lessee or bank, as the case may be, which would cause the
aggregate amount of such income earned by all Property Owners
to exceed $100,000 during such calendar year;
75
(v) own any assets other than the Facilities,
cash, bank time deposits and receivables such as rent, which
arise in the ordinary course of its rental business; provided,
however, that ARC SC Holdings may own 100% of the interests of
ARC Santa Catalina provided that ARC Santa Catalina is a
disregarded entity for tax purposes; or
(vi) sell, dispose, convey or otherwise transfer
any of its properties (or interests therein) in a manner that
fails to satisfy the requirements of the prohibited
transaction safe-harbor set forth in Section 857(b)(6)(C) of
the Code with respect to Lender and as if Lender became the
owner of such properties at the time the Loan was made.
(b) Borrower shall, promptly upon Lender's request, make
available to Lender all data and information in the possession of Borrower or
any Subsidiary relating to Borrower, any Subsidiary or any of their respective
assets, which is determined by Lender to be necessary or helpful to monitor its
compliance with the REIT income and asset tests and other legal requirements
relating to the status of Lender as a REIT.
(c) Notwithstanding anything to the contrary herein,
while Borrower shall not be required independently to determine whether any
transaction or arrangement would adversely affect Lender's ability to qualify as
a REIT or would result in a Property Owner holding any assets other than "real
estate assets" as defined in Section 856(c)(5)(B) of the Code ("Non-REIT
Assets") or generating income which would not qualify under Sections 856(c)(3)
of the Code ("Non-REIT Income") if Borrower or any Subsidiary has actual
knowledge, or is otherwise informed by Lender in the exercise of Lender's
reasonable judgment, that a transaction or arrangement could have an adverse
effect on Lender's ability to qualify as a REIT or could result in a Property
Owner holding Non-REIT Assets or generating Non-REIT Income, the Borrower or any
Subsidiary, as applicable, shall take such actions (or refrain from taking such
actions) as are required to protect Lender's REIT status or to avoid a Property
Owner's receipt of such Non-REIT Income and/or its ownership of such Non-REIT
Assets (as the case may be).
ARTICLE VI.
EVENTS OF DEFAULT
Section 6.1 Events of Default. If any of the following events
(each such occurrence an "Event of Default," and collectively, the "Events of
Default") shall occur:
(a) Non-Payment of Principal, Interest or Other Amounts.
Borrower or any other Loan Party shall fail to pay (i) when due any principal of
the Loan, (ii) within 5 days of the date when due, any interest thereon or (iii)
within 5 days of the date when due, any other amount payable under this
Agreement or any other Loan Document;
(b) First Mortgage Loan Documents. Any breach, default or
event of default shall occur and any applicable grace period shall have passed,
or any event shall occur or condition exist, under any First Mortgage Loan
Document if the effect thereof is to accelerate,
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or permit the holder or holders of the First Mortgage Loan with respect to such
First Mortgage Loan Document to accelerate such First Mortgage Loan;
(c) HCPI Lease. Any Affiliate of Borrower (including any
HCPI Lessee) shall (i) fail to pay when due any monetary obligation under the
HCPI Lease Documents or (ii) fail to perform or observe (giving effect to all
applicable cure periods) any material term, covenant or agreement contained in
the HCPI Lease Documents;
(d) Representations and Warranties. Any representation
or warranty made by any Loan Party under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
(e) Financial and Negative Covenants. Borrower shall fail
to perform or observe any term, covenant or agreement contained in Sections 5.1,
5.2(j), 5.3(m), 5.3(n), 5.3(o), or 5.4 of this Agreement;
(f) Reporting and Affirmative Covenants. Borrower shall
fail to perform or observe any term, covenant or agreement contained in Sections
5.2 (other than Section 5.2(j)), 5.3(c), 5.3(e), 5.3(h), 5.3(i), 5.3(j), 5.3(k),
or 5.3(l) if such failure shall remain unremedied for five days after such
failure;
(g) Other Covenants. Borrower or any Loan Party shall
fail to perform or observe any term, covenant or agreement contained in this
Agreement or any other Transaction Document (other than a default under
subsection (a), (b), (c), (d) or (e) of this Section 6.1) if such failure shall
remain unremedied for 30 days after the earlier of (i) the date Borrower or such
Loan Party obtains knowledge of such failure or (ii) the date Borrower receives
notice from Lender of such failure;
(h) Bankruptcy. Borrower or any other Loan Party shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either (i) such proceeding shall remain undismissed or unstayed for a period of
60 days; or (ii) any of the actions sought in such proceeding (including the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or any Loan Party shall take any corporate action to
authorize any of the actions set forth above in this Section 6.1(h);
(i) Judgments. Any judgment or order for the payment of
money shall be rendered against any Loan Party and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order and not stayed for any period of 30 consecutive days; or (ii) there shall
be any period of 30 consecutive days during which a stay of
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enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(j) Transaction Documents. Any Transaction Document shall
cease to be in full force and effect after delivery thereof, or any Loan Party
or Property Operator shall so state in writing;
(k) Collateral Documents. The Collateral Documents, after
delivery thereof pursuant to this Agreement or any of the other Loan Documents,
shall for any reason (other than pursuant to the terms thereof) cease to create
a valid and enforceable security interest in, or the Lien created thereby shall
not be duly perfected as to, any Collateral purported to be covered thereby;
(l) ERISA. (i) An ERISA Event shall occur with respect to
a Pension Plan or Multi-Employer Plan which has resulted or could reasonably be
expected to result in liability of Borrower or any ERISA Affiliate under Title
IV of ERISA to the Pension Plan, Multi-Employer Plan or the PBGC; (ii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $100,000; or (iii) Borrower or any ERISA Affiliate shall fail to
pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multi-Employer Plan;
(m) Other Indebtedness. Borrower or any of its
Subsidiaries shall fail to pay when due any principal of or premium or interest
on Indebtedness; or any breach, default or event of default shall occur and any
applicable grace period shall have passed, or any event shall occur or condition
exist, under any Indebtedness if the effect thereof, is to accelerate or permit
the holder or holders of such Indebtedness to accelerate the maturity thereof;
or
(n) Leases. Any breach, default or event of default shall
occur, or any event shall occur or condition exist, under any Master Lease
Document or any HCPI Lease Document; or the Master Lease or the HCPI Lease shall
be terminated for any reason,
then, and in any such event, Lender may declare the Note, all interest thereon
and all other amounts payable under any Loan Document to be forthwith due and
payable, whereupon the Note, all such interest and all such amounts shall become
and be forthwith due and payable (without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by
Borrower); provided, however, that in the event of an Event of Default with
respect to Borrower under Section 6.1(g), the Note, all such interest and all
such amounts shall automatically become and be due and payable (without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by Borrower).
Section 6.2 Rights Not Exclusive. Subject to Section 7.8, the
rights provided for in this Agreement and the other Loan Documents are
cumulative and are not exclusive of any other rights, powers or privileges or
remedies provided by law or in equity, or under any other instrument, document
or agreement.
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ARTICLE VII.
MISCELLANEOUS
Section 7.1 Collateral Matters. Lender is hereby irrevocably
authorized (but shall not be obligated), without the necessity of any notice to
or further consent from any Person, from time to time to take any action with
respect to any Collateral or Collateral Documents which may be necessary or
appropriate to perfect and keep perfected the Liens created in favor of Lender
pursuant to the Collateral Documents.
Section 7.2 Amendments. No amendment or waiver of any provision
of this Agreement or the Notes, nor consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Section 7.3 Notices. Any notice, consent, approval, demand or
other communication required or permitted to be given hereunder (a "notice")
must be in writing and may be served personally or by U.S. Mail. If served by
U.S. Mail, it shall be addressed as follows:
If to Borrower: ARCPI Holdings, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx Xxxxxxx, CEO
Fax: (000) 000-0000
with a copy to: Bass, Xxxxx & Xxxx PLC
AmSouth Center
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: T. Xxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
If to Lender: Health Care Property Investors, Inc.
0000 XxxXxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Legal Department
Fax: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided
79
above, on the date of receipt, refusal or non-delivery indicated on the return
receipt. In lieu of notice by U.S. Mail, either party may send notices by
facsimile or by a nationally recognized overnight courier service which provides
written proof of delivery (such as U.P.S. or Federal Express). Any notice sent
by facsimile shall be effective upon confirmation of receipt in legible form,
provided that an original of such facsimile is also sent to the intended
addressee by another method approved in this Section 7.3, and any notice sent by
a nationally recognized overnight courier shall be effective on the date of
delivery to the party at its address specified above as set forth in the
courier's delivery receipt. Either party may, by notice to the other from time
to time in the manner herein provided, specify a different address for notice
purposes.
Section 7.4 No Waiver; Remedies. No failure on the part of Lender
to exercise, and no delay in exercising, any right under any Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 7.5 Costs, Expenses and Taxes.
(a) General Costs and Expenses. Borrower agrees to pay on
demand all costs and expenses of Lender in connection with the preparation,
execution, delivery, administration, modification and amendment of the
Transaction Documents and the other documents to be delivered under the
Transaction Documents, including the fees and out-of-pocket expenses of counsel
for Lender actually incurred with respect thereto and with respect to advising
Lender as to its rights and responsibilities under the Loan Documents. Borrower
further agrees to pay on demand all costs and expenses, if any (including
counsel fees and expenses) actually incurred, in connection with the enforcement
by Lender (whether through negotiations, legal proceedings or otherwise) of the
Loan Documents and the other documents to be delivered under the Loan Documents,
including counsel fees and expenses actually incurred in connection with the
enforcement of rights under this Section 7.5. In addition, Borrower shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution, delivery, filing and recording of the Loan
Documents and the other documents to be delivered under the Loan Documents, and
agrees to save Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
(b) Survival. The provisions of this Section 7.5 shall
survive the termination of this Agreement and the repayment of the Loan.
Section 7.6 Right of Set-off. Subject to the provisions of
Section 7.8, Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by Lender to or for the credit or the
account of Borrower against any and all of the obligations of Borrower now or
hereafter existing under any Transaction Document, whether or not Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. The
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rights of Lender under this Section 7.6 are in addition to other rights and
remedies (including other rights of set-off) which Lender may have.
Section 7.7 Indemnity.
(a) Indemnity. Borrower shall pay, indemnify, defend and
hold Lender and each of its directors, officers, employees, attorneys or agents
(each, an "Indemnified Person") harmless (to the fullest extent permitted by
law) from and against any and all claims, demands, suits, actions,
investigations, proceedings and damages, and all attorney's fees and
disbursements and other costs and expenses actually incurred in connection
therewith (as and when they are incurred and whether or not suit is brought), at
any time asserted against, imposed upon or incurred by any of them in connection
with or as a result of or related to the execution, delivery, enforcement,
performance and administration of this Agreement and any other Loan Documents or
the transactions contemplated herein, and with respect to any investigation,
litigation or proceeding related to this Agreement, any other Loan Document or
the Loan or the use of the proceeds thereof (whether or not any Indemnified
Person is a party thereto) any act, omission, event or circumstance in any
manner related thereto (all the foregoing, collectively, the "Indemnified
Liabilities").
(b) Limitation. Borrower shall have no obligation to any
Indemnified Person under this Section 7.7 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person.
(c) Survival. The provisions of this Section 7.7 shall
survive the termination of this Agreement and the repayment of the Loan.
Section 7.8 Limited Recourse.
(a) Limitation on Recourse. Notwithstanding anything
herein or in any other Loan Document to the contrary, subject to the
qualifications set forth in this Section 7.8, Lender agrees that (x) Borrower
shall be liable upon the indebtedness evidenced hereby and for the other
Obligations arising under the Loan Documents to the full extent (but only to the
extent) of the Collateral plus an amount (the "Additional Recourse Amount")
equal to the value (as of the time of the exercise of remedies under the Loan
Documents and net of the principal amount of the Wilora Lake Loan) of the real
estate upon which the Wilora Lake Facility is located, (y) if an Event of
Default occurs, except for the recovery of the Additional Recourse Amount, any
judicial or other proceedings brought by Lender against Borrower shall be
limited to the preservation, enforcement and foreclosure, or any thereof, of the
liens, security titles, estates, assignments, rights and security interests now
or at any time hereafter securing the Obligations of Borrower and the other Loan
Parties under the Loan Documents, and no attachment, execution or other writ of
process shall be sought, issued or levied upon any assets, properties or funds
of Borrower, any other Loan Party, ARC or any Subsidiary of ARC other than the
Collateral (except (i) with respect to the recovery of the Additional Recourse
Amount and (ii) with respect to the liability described below in this Section
7.8), and (z) in the event of a foreclosure of such liens, security titles,
estates, assignments, rights or security interests securing the Obligations of
Borrower and the other Loan Parties under the Loan Documents
81
and the recovery of the Additional Recourse Amount, no judgment for any
deficiency upon the indebtedness evidenced hereby shall be sought or obtained by
Lender against Borrower or any other Loan Party, except with respect to any
liability described below in this Section 7.8.
(b) Exceptions to Limitation. Notwithstanding anything to
the contrary in Section 7.8(a), Borrower shall be fully and personally liable
and subject to legal action for any and all fees, costs, expenses, damages and
losses (including, without limitation, legal fees and costs) incurred or
suffered by Lender, resulting from relating to the following:
(i) The misapplication or misappropriation by
Borrower, any other Loan Party, ARC or any Subsidiary of ARC
in violation of any provisions of the Loan Documents or the
Master Lease of any or all money collected, paid or received,
or to which, pursuant to the Loan Documents, Borrower, any
Loan Party or Lender is entitled to receive, relating to the
Loan, the Collateral or the Master Lease, including, but not
limited to, insurance proceeds, condemnation awards, lease
security and other deposits and rent;
(ii) Rents, issues, profits and revenues of all
or any portion of the Collateral or the Facilities received or
applicable to a period after the occurrence of any Event of
Default which are not applied to pay, real estate taxes and
other charges, premiums on insurance policies required under
the Loan Documents and the other ordinary and necessary
expenses of owning and operating the Facilities;
(iii) Waste committed on the Facilities or damage
to the Facilities as a result of intentional misconduct or
gross negligence or the removal of all or any property in
violation of the terms of the Loan Documents or the Master
Lease;
(iv) The filing of any petition for bankruptcy,
reorganization or arrangement pursuant to state or federal
bankruptcy law, or any similar federal or state law, by ARC or
any Affiliate of ARC against Borrower, any Loan Party or any
Property Operator or if any proceeding seeking the dissolution
or liquidation of Borrower, any Loan Party or any Property
Operator shall be commenced by ARC or any Affiliate of ARC;
(v) The failure by Borrower to obtain Lender's
prior written consent to any assignment, transfer or
conveyance of any portion of any Facility or any interest
therein that is not otherwise permitted pursuant to the Loan
Documents (other than an assignment, transfer or conveyance
covered by Section 7.8(c)(ii)); or
(vi) The failure by Borrower or any Property
Owner to comply with the provisions of Section 5.3(o) or
Section 5.4(n).
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(c) Full Recourse. Notwithstanding anything to the
contrary in Section 7.8(a), if:
(i) Borrower fails to obtain Lender's prior
written consent to any financing or refinancing by any
Property Owner or other Person of all or any of the Covered
Facilities;
(ii) except for assignments, transfers or
conveyances specifically permitted pursuant to the Loan
Documents, Borrower fails to obtain Lender's prior written
consent to any assignment, transfer or conveyance of (x)
interests in any of the Permitted Subsidiaries or (y) any
material portion of the real property interests in any Covered
Facility;
(iii) any petition for bankruptcy, reorganization
or arrangement pursuant to state or federal bankruptcy law, or
any similar federal or state law, shall be filed or consented
to, or acquiesced in by, Borrower, any Loan Party or any
Property Operator, or Borrower, any Loan Party or any Property
Operator seeks (or consents to, or acquiesces in) the
appointment of a receiver, liquidator or trustee, or any
proceeding for the dissolution or liquidation of Borrower, any
Loan Party or any Property Operator shall be instituted or
consented to, or acquiesced in by Borrower, any Loan Party or
any Property Operator; or
(iv) any Fraud or intentional or grossly
negligent material misrepresentation or failure to disclose a
material fact (including, without limitation, with respect to
any such fraud, misrepresentation or failure to disclose in
any materials delivered to Lender) by Borrower, ARC or any
Affiliate of ARC or Borrower or by any other Person authorized
to make statements or representations on behalf of Borrower,
ARC or any Affiliate of ARC or Borrower in connection with the
Transaction Documents;
then (x) the Obligations shall be fully recourse to Borrower; and (y) Lender
shall not be deemed to have waived any right which Lender may have under Section
506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code as
same may be amended or replaced to file a claim for the full amount of the
Obligations or to require that all collateral shall continue to secure all of
the indebtedness owing to Lender in accordance with the Loan Documents.
Section 7.9 Binding Effect. This Agreement shall become effective
when it shall have been executed by Borrower and Lender and thereafter shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that (x) Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of Lender (which consent may be withheld or granted in Lender's
sole and absolute discretion) and (y) so long as no Event of Default has
occurred, Lender shall not have the right to assign its rights hereunder or any
interest herein to a Person that competes directly with Borrower or any
Subsidiary of Borrower without the prior written consent of Borrower (which
consent may be withheld or granted in Borrower's sole and absolute discretion).
83
Section 7.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF BORROWER AND LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
TO THE JURISDICTION OF THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS MAY BE MADE BY ANY MEANS PERMITTED BY NEW YORK LAW.
Section 7.11 WAIVER OF JURY TRIAL. BORROWER AND LENDER WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE, AND
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH PARTY FURTHER AGREES THAT
ITS RIGHT TO A TRIAL BY JURY IS HEREBY WAIVED AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
Section 7.12 Confidentiality. Lender agrees that material,
non-public information regarding Borrower, its Subsidiaries, operations, assets,
and existing and contemplated business plans shall be treated by Lender in a
confidential manner, and shall not be disclosed by it to Persons who are not
parties to this Agreement, except: (i) to counsel for and other advisors,
accountants, and auditors to Lender; (ii) as may be required by statute,
decision, or judicial or administrative order, rule, or regulation; (iii) as may
be agreed to in advance by Borrower; (iv) as to any such information that is
generally available to the public; and (v) in connection with any assignment,
prospective assignment, sale, prospective sale, participation or prospective
participation of Lender's interests hereunder.
Section 7.13 Limitation of Liability. No claim may be made by
Borrower, any Subsidiary of Borrower, or any Lender or the Affiliates,
directors, officers, employees, attorneys or agents of any of them for any
special, indirect, consequential or punitive damages
84
in respect of any claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by this Agreement or
the other Loan Documents, or any act, omission or event occurring in connection
therewith, and Borrower, each Subsidiary of Borrower, and Lender hereby waives,
releases and agrees not to xxx upon any claim for any such damages, whether or
not now accrued and whether or not known or suspected to exist in its favor.
Section 7.14 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire Agreement and understanding between
Borrower and Lender and supersedes all prior or contemporaneous agreements and
understandings of such persons, verbal or written, relating to the subject
matter hereof and thereof.
Section 7.15 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Section 7.16 Restatement. By their execution hereof, each of the
parties hereto agrees that the Original Loan Agreement shall hereby be amended
and restated as set forth in this Agreement.
(remainder of page intentionally blank)
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IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Loan Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
ARCPI HOLDINGS, INC., a Delaware
corporation, as Borrower
By: _________________________________
Name: ___________________________
Title:___________________________
HEALTH CARE PROPERTY INVESTORS,
INC., a Maryland corporation, as Lender
By: _________________________________
Name: ___________________________
Title:___________________________
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