Exhibit 10.83
 
Bank of America logo [abanklogo.jpg]
 

 
 
CONSTRUCTION LOAN AGREEMENT
 
by and between
 
American Retirement Corporation,
 
a Tennessee corporation,
 
as Borrower,
 
and
 
Bank of America, N.A.,
 
a national banking association,
 
as Lender,
 
with respect to The Cumberland at Green Hills
 
Burton Hills, Nashville, Tennessee
 
 

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TABLE OF CONTENTS
 

   
Page
Article I
General Information
1
Section 1.1
Conditions to Closing
1
Section 1.2
Schedules
1
Section 1.3
Defined Terms
1
Article II
Advances of the Loan
1
Section 2.1
The Loan
1
Section 2.2
Purpose; Reallocation; Revenues from Property
2
Section 2.3
Draw Requests
2
Section 2.4
Additional Terms Regarding Advances
2
Section 2.5
Liability of Lender
2
Article III
Representations and Warranties
2
Section 3.1
Organization, Power and Authority of Borrower; Loan Documents
3
Section 3.2
Other Documents; Laws
3
Section 3.3
Taxes
3
Section 3.4
Legal Actions
3
Section 3.5
Nature of Loan
3
Section 3.6
Trade Names
4
Section 3.7
Financial Statements
4
Section 3.8
ERISA and Prohibited Transactions
4
Section 3.9
Compliance with Zoning and Other Requirements
4
Section 3.10
Plans and Specifications
4
Section 3.11
Building Permits; Other Permits
4
Section 3.12
Utilities
5
Section 3.13
Access; Roads
5
Section 3.14
Other Liens
5
Section 3.15
No Work Commenced
5
Section 3.16
No Material Adverse Change
5
Section 3.17
Defaults
5
Section 3.18
Affirmation of Representations and Warranties
5
Article IV
Affirmative Covenants and Agreements
6
Section 4.1
Commencement and Completion of Construction
6
Section 4.2
Approval of Construction
6

 
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TABLE OF CONTENTS
(continued)

   
Page
Section 4.3
Deposits to Balance Loan
6
Section 4.4
Compliance with Laws; Encroachments
7
Section 4.5
Inspections; Cooperation
7
Section 4.6
Contracts, Vouchers and Receipts
7
Section 4.7
Payment and Performance of Contractual Obligations
7
Section 4.8
Correction of Construction Defects
7
Section 4.9
Insurance
8
Section 4.10
Adjustment of Condemnation and Insurance Claim
9
Section 4.11
Utilization of Net Proceeds
9
Section 4.12
Management
10
Section 4.13
Books and Records; Financial Statements
10
Section 4.14
Estoppel Certificates
11
Section 4.15
Taxes
11
Section 4.16
Lender’s Rights to Pay and Perform
11
Section 4.17
Reimbursement; Interest
11
Section 4.18
Notification by Borrower
12
Section 4.19
Indemnification by Borrower
12
Section 4.20
Fees and Expenses
12
Section 4.21
Appraisals
12
Section 4.22
Leasing and Tenant Matters
12
Section 4.23
Principal Depository
13
Section 4.24
Swap Contracts
13
Article V
Negative Covenants
13
Section 5.1
Conditional Sales
13
Section 5.2
Changes to Plans and Specifications
13
Section 5.3
Changes to ASF Loan Documents or the Subordinated Loan Documents
13
Section 5.4
Insurance Policies and Bonds
13
Section 5.5
Consolidated Fixed Charge Coverage Ratio
13
Article VI
Events of Default
14
Section 6.1
Payment Default
14
Section 6.2
Default Under Other Loan Documents
14
Section 6.3
Accuracy of Information; Representations and Warranties
14

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TABLE OF CONTENTS
(continued)
 
 

   
Page
Section 6.4
Covenants
14
Section 6.5
Deposits
14
Section 6.6
Insurance Obligations
14
Section 6.7
Other Obligations
14
Section 6.8
Progress of Construction
15
Section 6.9
Damage to Improvements
15
Section 6.10
Lapse of Permits or Approvals
15
Section 6.11
Completion of Construction
15
Section 6.12
Mechanic’s Lien
15
Section 6.13
Survey Matters
15
Section 6.14
General Contractor Default
15
Section 6.15
Performance Enjoined or Prohibited
16
Section 6.16
Bankruptcy
16
Section 6.17
Appointment of Receiver, Trustee, Liquidator
16
Section 6.18
Judgment
16
Section 6.19
Dissolution; Change in Business Status
16
Section 6.20
Default Under Other Indebtedness
16
Section 6.21
Change in Controlling Interest
16
Section 6.22
Material Adverse Change
16
Article VII
Remedies on Default
17
Section 7.1
Remedies on Default
17
Section 7.2
No Release or Waiver; Remedies Cumulative and Concurrent
18
Article VIII
Miscellaneous
18
Section 8.1
Further Assurances; Authorization to File Documents
18
Section 8.2
No Warranty by Lender
19
Section 8.3
Standard of Conduct of Lender
19
Section 8.4
No Partnership
19
Section 8.5
Severability
19
Section 8.6
Notices
19
Section 8.7
Permitted Successors and Assigns; Disclosure of Information
21
Section 8.8
Modification; Waiver
21
Section 8.9
Third Parties; Benefit
21

 
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TABLE OF CONTENTS
(continued)
 

   
Page
Section 8.10
Rules of Construction
22
Section 8.11
Counterparts
22
Section 8.12
Signs; Publicity
22
Section 8.13
Governing Law
22
Section 8.14
Time of Essence
22
Section 8.15
Electronic Transmission of Data
22
Section 8.16
Dispute Resolution
23
Section 8.17
Forum
24
Section 8.18
WAIVER OF JURY TRIAL
24
Section 8.19
USA Patriot Act Notice
25
Section 8.20
Entire Agreement
25
Section 8.21
HIPPA Disclosure
25

 
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 Schedules to Construction Loan Agreement
       
Schedule 1
Definitions
Schedule 2
Form of Draw Request
 
Schedule 3
Budget
 
Schedule 4
Project Schedule
 
Schedule 5
Additional Terms Regarding Advances
 
Schedule 6
Leasing and Tenant Matters
 
Schedule 7
Swap Contracts
 

 
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Construction Loan Agreement
 
This Construction Loan Agreement (this “Agreement”) is made as of the 12th day
of December, 2005, by and between American Retirement Corporation, a Tennessee
corporation (“Borrower”), and Bank of America, N.A., a national banking
association (“Lender”).
 
Recitals
 
Borrower has applied to Lender for a loan to assist in financing certain costs
related to the construction and development of improvements on real property in
Burton Hills, Nashville, Tennessee. The Borrower has simultaneously herewith
sold its interest in the real property to ASF of Green Hills, LLC, a Tennessee
non-profit limited liability company ("ASF") owned solely by American Seniors
Foundation, an Ohio non-profit corporation ("American Seniors"). Borrower
intends to re-lend the entire proceeds of its loan from Lender to ASF pursuant
to separate construction loan documentation between Borrower and ASF, and to act
as the developer of the property and the improvements on ASF's behalf. Lender
has agreed to make the loan to Borrower for the sole purpose of the Borrower
re-lending same to ASF on the terms and conditions set forth in this Agreement
and in the other documents, including without limitation those documents between
Borrower and ASF evidencing and securing the second loan (the "ASF Loan").
 
Now, therefore, in consideration of the premises, and in further consideration
of the mutual covenants and agreements herein set forth and of the sum of Ten
Dollars ($10.00) paid by each party to the other, receipt of which is hereby
acknowledged, the parties covenant and agree as follows:
 
 
Agreements
 
Article I  
General Information.
 
Section 1.1  Conditions to Closing.
 
The conditions precedent to closing the Loan and recording the Mortgage are set
forth in the Closing Checklist.
 
Section 1.2  Schedules.
 
The Schedules attached to this Agreement are incorporated herein and made a part
hereof.
 
Section 1.3  Defined Terms.
 
Capitalized terms in this Agreement shall have the meanings ascribed to such
terms in the Preamble hereto and in Schedule 1.
 
Article II  
Advances of the Loan.
 
Section 2.1  The Loan.
 
Borrower agrees to borrow the Loan from Lender, and Lender agrees to lend the
Loan to Borrower, subject to the terms and conditions herein set forth, in
incremental advances which will not exceed, in the aggregate, the Loan Amount.
Interest shall accrue and be payable in arrears only on sums advanced hereunder
for the period of time outstanding. The Loan is not a revolving loan; amounts
repaid may not be re-borrowed.
 
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Section 2.2  Purpose; Reallocation; Revenues from Property.
 
The Loan shall be advanced by Lender in accordance with the terms of this
Agreement to pay those expenses related to the Loan and the Property that are
described in the Budget, but not, in the aggregate with respect to any line item
set forth in the Budget, in excess of the amount of the Loan to be disbursed for
such line item, as set forth in the Budget. Borrower will receive each advance
in trust for the purpose of paying only those costs for which the advance is
made and will utilize the funds advanced for no other purpose. With the prior
approval of Lender, any cost savings, actual or estimated, affecting any
approved line item within the Budget, other than the interest reserve, may be
reallocated by Borrower to any other line item within the Budget. Upon
completion of the Improvements and the payment of all costs in connection
therewith, any undisbursed proceeds of the Loan shall be allocated to the
interest reserve or to such other line item as Lender shall approve. Each
disbursement from a contingency reserve shall be subject to approval by Lender
as to the amount and purpose for which such disbursement will be used. If and
when revenues are derived from the Property in amounts sufficient to pay all or
any portion of the operating expenses of the Property or all or any portion of
the interest on the Loan, revenues will be used to pay such expenses and/or
interest, and Lender, at its sole option, may restrict or prohibit future
disbursements of the Loan for such purposes to the extent that revenues are
sufficient to pay such amounts.
 
Section 2.3  Draw Requests.
 
Advances shall be made not more frequently than monthly based on draw requests
signed by an Authorized Signers in the form attached hereto as Schedule 2. Each
draw request, whether for hard or soft costs, shall be set forth on AIA Forms
G702 and G703, and shall be reviewed by the Construction Consultant, signed by
the General Contractor and, if requested by Lender, approved by the Architect.
Draw requests for hard costs shall show the percentage of completion of
construction and shall set forth in trade breakdown form and in such detail as
may be required by Lender the amounts expended and/or costs incurred for work
done and materials incorporated in the Improvements. Retainage will be withheld
and released in accordance with the terms of Schedule 5. Each draw request,
whether for hard and/or soft costs, shall be supported by such information and
documentation (such as paid receipts, invoices, statements of accounts, lien
releases, etc.) as Lender may require to assure that amounts requested are to be
used to reimburse Borrower for costs previously paid by Borrower and/or ASF or
to pay costs incurred by Borrower and/or ASF that are to be paid from proceeds
of the Loan, as set forth in the Budget. Unless reasonably requested by Lender
in any instance, Borrower will not be required to provide any individual invoice
for an amount less than or equal to $5,000.00 in support of a draw request;
provided, Borrower shall provide or cause to be provided with each draw request
a complete listing of all payees and the amounts requested for payment by each.
 
Section 2.4  Additional Terms Regarding Advances.
 
Advances of the Loan shall also be subject to the terms and conditions set forth
in Schedule 5.
 
Section 2.5  Liability of Lender.
 
Lender shall in no event be responsible or liable to any Person other than
Borrower for the disbursement of or failure to disburse the Loan proceeds or any
part thereof and neither ASF, the General Contractor, Construction Consultant
nor any subcontractor, laborer or material supplier shall have any right or
claim against Lender under this Agreement or the other Loan Documents.
 
Article III  
Representations and Warranties.
 
Borrower represents and warrants to Lender that:
 
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Section 3.1  Organization, Power and Authority of Borrower; Loan Documents.
 
Borrower (a) is a corporation duly organized, existing and in good standing
under the laws of the state in which it is organized and is duly qualified to do
business and in good standing in the state in which the Land is located (if
different from the state of its formation) and in any other state where the
nature of Borrower’s business or property requires it to be qualified to do
business, and (b) has the power, authority and legal right to own its property
and carry on the business now being conducted by it and to engage in the
transactions contemplated by the Loan Documents. The Loan Documents to which
Borrower is a party have in each case been duly executed and delivered by
Borrower, and the execution and delivery of, and the carrying out of the
transactions contemplated by, such Loan Documents, and the performance and
observance of the terms and conditions thereof, have been duly authorized by all
necessary organizational action by and on behalf of Borrower. The Loan Documents
to which Borrower is a party constitute the valid and legally binding
obligations of Borrower and are fully enforceable against each of them in
accordance with their respective terms, except to the extent that such
enforceability may be limited by laws generally affecting the enforcement of
creditors’ rights.
 
Section 3.2  Other Documents; Laws.
 
The execution and performance of the Loan Documents to which the Borrower is a
party and the consummation of the transactions contemplated thereby will not
conflict with, result in any breach of, or constitute a default under, the
organizational documents of Borrower or any contract, agreement, document or
other instrument to which Borrower is a party or by which Borrower or any of its
respective properties may be bound or affected, and such actions do not and will
not violate or contravene any Law to which Borrower is subject.
 
Section 3.3  Taxes.
 
Borrower has filed all federal, state, county and municipal Tax returns required
to have been filed by Borrower and has paid all Taxes which have become due
pursuant to such returns or pursuant to any Tax assessments received by
Borrower.
 
Section 3.4  Legal Actions.
 
There are no Claims or investigations by or before any court or Governmental
Authority, pending, or to the best of Borrower’s knowledge and belief,
threatened against or affecting Borrower, Borrower’s business, or the Property.
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or any Governmental Authority affecting Borrower or the
Property.
 
Section 3.5  Nature of Loan.
 
Borrower is a business or commercial organization. The Loan is being obtained
solely for business or investment purposes, and solely to be re-loaned to ASF
for Construction of the Improvements, and will not be used for personal, family,
household or agricultural purposes.
 
Section 3.6  Trade Names.
 
Borrower conducts its business solely under the name set forth in the Preamble
to this Agreement and makes use of no trade names in connection therewith,
unless such trade names have been previously disclosed to Lender in writing.
 
Section 3.7  Financial Statements.
 
The financial statements heretofore delivered by Borrower to Lender are true and
correct in all respects, have been prepared in accordance with sound accounting
principles consistently applied, and fairly present the respective financial
conditions of the subjects thereof as of the respective dates thereof.
 
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Section 3.8  ERISA and Prohibited Transactions.
 
As of the date hereof and throughout the term of the Loan: (a) Borrower is not
and will not be (i) an “employee benefit plan,” as defined in Section 3(3) of
ERISA, (ii) a “governmental plan” within the meaning of Section 3(32) of ERISA,
or (iii) a “plan” within the meaning of Section 4975(e) of the Code; (b) the
assets of Borrower do not and will not constitute “plan assets” within the
meaning of the United States Department of Labor Regulations set forth in
Section 2510.3-101 of Title 29 of the Code of Federal Regulations;
(c) transactions by or with Borrower are not and will not be subject to state
statutes applicable to Borrower regulating investments of fiduciaries with
respect to governmental plans; and (d) Borrower will not engage in any
transaction that would cause any Obligation or any action taken or to be taken
hereunder (or the exercise by Lender of any of its rights under the Mortgage or
any of the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA or Section
4975 of the Code. Borrower agrees to deliver to Lender such certifications or
other evidence of compliance with the provisions of this Section as Lender may
from time to time request.
 
Section 3.9  Compliance with Zoning and Other Requirements.
 
The anticipated use of the Property complies with applicable zoning ordinances,
regulations and restrictive covenants affecting the Land. All use and other
requirements of any Governmental Authority having jurisdiction over the Property
have been satisfied. No violation of any Law exists with respect to the
Property.
 
Section 3.10  Plans and Specifications.
 
The Plans and Specifications are complete and adequate for the Construction of
the Improvements. The Plans and Specifications have been approved by all
Governmental Authorities having or claiming jurisdiction over the Property and
by the beneficiary of each restrictive covenant affecting the Property whose
approval is required. The Plans and Specifications have also been approved by
any tenant and by any prospective purchaser of the Property or provider of
permanent financing for the Property whose approval is required. To the best of
Borrower’s knowledge, the Improvements, if constructed substantially in
accordance with the Plans and Specifications, will fully comply with all
applicable Laws, including those Laws relating to access and facilities for
disabled persons.
 
Section 3.11  Building Permits; Other Permits.
 
All building, construction and other permits necessary or required in connection
with the Construction of the Improvements have been validly issued or will be
issued in a timely manner by a date sufficient to ensure commencement of
construction and Completion of Construction in accordance with the Project
Schedule. All required fees have been paid and bonds and/or other security have
been posted in connection with all permits that have been issued, and adequate
amounts are included in the Budget to pay all fees and the cost of all bonds and
other security in connection with permits to be issued in the future. Following
the issuance thereof, all permits will remain in full force and effect.
 
Section 3.12  Utilities.
 
All utility services necessary for the Construction of the Improvements and the
operation thereof for their intended purposes are available at the boundaries of
the Land (or will be available upon the completion of work shown in the Plans
and Specifications), including telephone service, cable television, water
supply, storm and sanitary sewer facilities, natural gas and electric
facilities, including cabling for telephonic and data communication, and the
capacity to send and receive wireless communication.
 
Section 3.13  Access; Roads.
 
All roads and other accesses necessary for the Construction of the Improvements
and full utilization thereof for their intended purposes have either been
completed or the necessary rights of way therefor have either been acquired by
the appropriate Governmental Authority, or have been dedicated to public use and
accepted by such Governmental Authority and all necessary steps have been taken
by Borrower, ASF or such Governmental Authority to assure the complete
construction and installation thereof by a date sufficient to ensure the
Completion of Construction of the Improvements in accordance with the Project
Schedule.
 
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Section 3.14  Other Liens.
 
Except for contracts for labor, materials and services furnished or to be
furnished in connection with the Construction of the Improvements, Borrower has
made no contract or arrangement of any kind the performance of which by the
other party thereto would give rise to a lien on the Property.
 
Section 3.15  No Work Commenced.
 
Prior to the recordation of the Mortgage, except as disclosed to Lender in
writing, no work of any kind (including destruction or removal of any existing
improvements, site work, clearing, grading, grubbing, draining or fencing of the
Land) has been or will be commenced or performed on the Land, no equipment or
material has been or will be delivered to or placed upon the Land for any
purpose whatsoever, and no contract (or memorandum or affidavit thereof) for the
supplying of labor, materials, or services for the design or construction of the
Improvements, or the surveying of the Land or Improvements, has been entered
into which could cause a mechanic’s or materialman’s lien or similar lien to
achieve priority over the Mortgage or the rights of Lender thereunder.
 
Section 3.16  No Material Adverse Change.
 
No material adverse change has occurred in the financial conditions reflected in
the financial statements of Borrower since the respective dates of such
statements, and no material additional liabilities have been incurred by
Borrower since the dates of such statements other than the borrowings
contemplated herein or as approved in writing by Lender.
 
Section 3.17  Defaults.
 
There is no Default or Event of Default under any of the Loan Documents, and
there is no default or event of default under any material contract, agreement
or other document related to the Construction of the Improvements or the
operation thereof.
 
Section 3.18  Affirmation of Representations and Warranties.
 
Each draw request and each receipt of the funds requested thereby shall
constitute an affirmation that (a) the foregoing representations and warranties
of Borrower are true and correct as of the date of the draw request and, unless
Lender is notified to the contrary prior to the disbursement of the advance
requested, will be so on the date of the disbursement, (b) the work completed to
the date of the draw request is of quality and in all other respects consistent
with the Plans and Specifications, and (c) if applicable, Construction of the
Improvements is proceeding in accordance with the Project Schedule.
 
Article IV  
Affirmative Covenants and Agreements.
 
Section 4.1  Commencement and Completion of Construction.
 
Borrower shall cause the Construction of the Improvements to be commenced by ASF
and prosecuted in a good and workmanlike manner and shall cause the same to be
completed by ASF in accordance with the Project Schedule and substantially in
accordance with the Plans and Specifications.
 
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Section 4.2  Approval of Construction.
 
No work associated with the Construction of the Improvements shall be commenced
by Borrower or ASF unless and until the Plans and Specifications have been
approved by Lender, by all Governmental Authorities having or claiming
jurisdiction over the Land and Improvements, by the beneficiary of any
applicable restrictive covenant whose approval is required, and by any other
party whose approval is required under applicable agreements, and unless and
until all building, construction and other permits necessary or required in
connection with the Construction of the Improvements have been validly issued
and all fees, bonds and any other security required in connection therewith have
been paid or posted.
 
Section 4.3  Deposits to Balance Loan.
 
If at any time Lender shall determine that (a) the proceeds of the Loan
remaining to be advanced for any line item within the Budget, together with any
anticipated Deferred Equity that Lender determines to its satisfaction is or
will be available for such item, are not or will not be sufficient to pay, in a
timely manner, the amount of such line item remaining to be paid, and (b) the
deficiency cannot be remedied by a reallocation of budgeted amounts pursuant to
Section 2.2, then Borrower shall deposit with Lender, within ten (10) days from
the effective date of a Notice from Lender requesting such deposit, funds in an
amount equal to the deficiency. Such funds shall be held by Lender in a
Borrower’s Deposit Account, which shall be an interest-bearing account, with all
accrued interest to become part of Borrower’s deposit. Borrower agrees that it
shall include all interest and earnings on any such deposit as its income, and
shall be the owner of all funds on deposit in the Borrower’s Deposit Account for
federal and applicable state and local tax purposes. Lender shall have the
exclusive right to manage and control all funds in the Borrower’s Deposit
Account, but Lender shall have no fiduciary duty with respect to such funds.
Advances of the deposited funds will be made from time to time for the payment
of deficient line item amounts, prior to the advance of proceeds of the Loan for
such amounts. Advances of the deposited funds will be subject to the terms of
this Agreement regarding advances of the Loan. Any account fees and charges may
be deducted from the balance, if any, in the Borrower’s Deposit Account.
Borrower grants to Lender a security interest in the Borrower’s Deposit Account
and all such deposited funds hereafter deposited to such deposit account, and
any proceeds thereof, as security for the Obligations. Such security interest
shall be governed by the Uniform Commercial Code of the State, and Lender shall
have available to it all of the rights and remedies available to a secured party
thereunder. The Borrower’s Deposit Account may be established and held in such
name or names as Lender shall deem appropriate, including in the name of Lender.
Borrower hereby constitutes and appoints Lender and any officer or agent of
Lender its true and lawful attorneys-in-fact with full power of substitution to
open the Borrower’s Deposit Account and to do any and every act that Borrower
might do on its own behalf to fulfill the terms of this Section 4.3. To the
extent permitted by Law, Borrower hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. It is understood and agreed
that this power of attorney, which shall be deemed to be a power coupled with an
interest, cannot be revoked.
 
Section 4.4  Compliance with Laws; Encroachments.
 
The Improvements shall be constructed in accordance with all applicable (whether
present or future) Laws. The Improvements shall be constructed entirely on the
Land and shall not encroach upon any easement or right-of-way, or upon the land
of others. Construction of the Improvements shall occur wholly within all
applicable building restriction lines and set-backs, however established, and
shall be in strict compliance with all applicable use or other restrictions and
the provisions of any prior agreements, declarations, covenants and all
applicable zoning and subdivision ordinances and regulations.
 
Section 4.5  Inspections; Cooperation.
 
Borrower shall permit or cause ASF to permit representatives of Lender and the
Construction Consultant to enter upon the Land, to inspect the Improvements and
any and all materials to be used in connection with the Construction of the
Improvements, to examine all detailed plans and shop drawings and similar
materials as well as all records and books of account maintained by or on behalf
of Borrower or ASF relating thereto and to discuss the affairs, finances and
accounts pertaining to the Loan and the Improvements with representatives of
Borrower and ASF. Borrower shall at all times cooperate and cause ASF, the
General Contractor and each and every one of its subcontractors and material
suppliers to cooperate with the representatives of Lender and the Construction
Consultant in connection with or in aid of the performance of Lender’s functions
under this Agreement. Except in the event of an emergency, Lender shall give
Borrower at least twenty-four hours’ notice by telephone in each instance before
entering upon the Land and/or exercising any other rights granted in this
Section.
 
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Section 4.6  Contracts, Vouchers and Receipts.
 
Borrower shall furnish to Lender, or cause to be furnished to Lender, promptly
on demand, any contracts, subcontracts, bills of sale, statements, receipted
vouchers or other agreements relating to the Construction of the Improvements,
including any such items pursuant to which Borrower or ASF has any claim of
title to any materials, fixtures or other articles delivered or to be delivered
to the Land or incorporated or to be incorporated into the Improvements.
Borrower shall furnish to Lender, or cause to be furnished to Lender, promptly
on demand, a verified written statement, in such form and detail as Lender may
require, setting forth the names and addresses of all contractors,
subcontractors and suppliers furnishing labor or materials in the Construction
of the Improvements and showing all amounts paid for labor and materials and all
items of labor and materials furnished or to be furnished for which payment has
not been made and the amounts to be paid therefor.
 
Section 4.7  Payment and Performance of Contractual Obligations.
 
Borrower shall cause to be performed in a timely manner all of ASF's obligations
under the Architect’s Contract, the Construction Contract and any and all other
contracts and agreements related to the Construction of the Improvements or the
operation thereof, and Borrower will pay or cause to be paid when due all bills
for services or labor performed and materials supplied in connection with the
Construction of the Improvements. Within thirty (30) days after the filing of
any mechanic’s lien or other lien or encumbrance against the Property, Borrower
will promptly discharge or cause to be discharged the same by payment or filing
a bond or otherwise as permitted by Law. So long as Lender’s security has been
protected by the filing of a bond or otherwise in a manner satisfactory to
Lender in its sole and absolute discretion, Borrower and/or ASF shall have the
right to contest in good faith any claim, lien or encumbrance, provided that
Borrower and/or ASF does so diligently and without prejudice to Lender or delay
in completing Construction of the Improvements.
 
Section 4.8  Correction of Construction Defects.
 
Promptly following any demand by Lender, Borrower shall correct or cause the
correction of any structural defects in the Improvements, any work that fails to
comply with the requirements of Section 4.4 and any material departures or
deviations from the Plans and Specifications not approved in writing by Lender.
 
Section 4.9  Insurance.
 
Borrower shall maintain or cause to be maintained the following insurance:
 
(a)  Insurance against Casualty to the Property under a policy or policies
covering such risks as are presently included in “special form” (also known as
“all risk”) coverage, including such risks as are ordinarily insured against by
similar businesses, but in any event including fire, lightning, windstorm, hail,
explosion, riot, riot attending a strike, civil commotion, damage from aircraft,
smoke, vandalism, malicious mischief and acts of terrorism. Such insurance shall
name Borrower and Lender as joint mortgagee and loss payees. Unless otherwise
agreed in writing by Lender, such insurance shall be for the full insurable
value of the Property, with a deductible amount, if any, satisfactory to Lender.
No policy of insurance shall be written such that the proceeds thereof will
produce less than the minimum coverage required by this Section by reason of
co-insurance provisions or otherwise. The term “full insurable value” means one
hundred percent (100%) of the actual replacement cost of the Property (excluding
foundation and excavation costs and costs of underground flues, pipes, drains
and other uninsurable items).
 
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(b)  Comprehensive (also known as commercial) general liability insurance on an
“occurrence” basis against claims for “personal injury” liability and liability
for death, bodily injury and damage to property, products and completed
operations, in limits satisfactory to Lender with respect to any one occurrence
and the aggregate of all occurrences during any given annual policy period. Such
insurance shall name Lender as an additional insured.
 
(c)  Workers’ compensation insurance for all employees in such amount as is
required by Law and including employer’s liability insurance, if required by
Lender.
 
(d)  During any period of construction upon the Property, Borrower shall
maintain, or cause others to maintain, builder’s risk insurance (non-reporting
form) of the type customarily carried in the case of similar construction for
one hundred percent (100%) of the full replacement cost of work in place and
materials stored at or upon the Property.
 
(e)  If at any time any portion of any structure on the Property is insurable
against Casualty by flood and is located in a Special Flood Hazard Area under
the Flood Disaster Protection Act of 1973, as amended, a flood insurance policy
in form and amount acceptable to Lender but in no amount less than the amount
sufficient to meet the requirements of applicable Law as such requirements may
from time to time be in effect.
 
(f)  Loss of rental value insurance or business interruption insurance in an
amount acceptable to Lender.
 
(g)  Such other and further insurance as may be required from time to time by
Lender in order to comply with regular requirements and practices of Lender in
similar transactions including, if required by Lender, wind insurance and
earthquake insurance, so long as any such insurance is generally available at
commercially reasonable premiums as determined by Lender from time to time.
 
In addition to the foregoing, Borrower shall cause the General Contractor to
provide and maintain comprehensive (commercial) general liability insurance and
workers’ compensation insurance for all employees of the General Contractor
meeting, respectively, the requirements of Subsections (b) and (c), above.
 
Each policy of insurance (i) shall be issued by one or more insurance companies
each of which must have an A.M. Best Company financial and performance rating of
A-IX or better and are qualified or authorized by the Laws of the State to
assume the risks covered by such policy, (ii) with respect to the insurance
described under the preceding Subsections (a), (d), (e) and (f), shall have
attached thereto standard non-contributing, non-reporting mortgagee clauses in
favor of and entitling Lender without contribution to collect any and all
proceeds payable under such insurance, either as sole payee or as joint payee
with Borrower, (iii) shall provide that such policy shall not be canceled or
modified without at least thirty (30) days prior written notice to Lender, and
(iv) shall provide that any loss otherwise payable thereunder shall be payable
notwithstanding any act or negligence of Borrower which might, absent such
agreement, result in a forfeiture of all or a part of such insurance payment.
Borrower shall promptly pay all premiums when due on such insurance and, not
less than thirty (30) days prior to the expiration dates of each such policy,
Borrower will deliver to Lender acceptable evidence of insurance, such as a
renewal policy or policies marked “premium paid” or other evidence satisfactory
to Lender reflecting that all required insurance is current and in force.
Borrower will immediately give Notice to Lender of any cancellation of, or
change in, any insurance policy. Lender shall not, because of accepting,
rejecting, approving or obtaining insurance, incur any liability for (A) the
existence, nonexistence, form or legal sufficiency thereof, (B) the solvency of
any insurer, or (C) the payment of losses. Borrower may satisfy any insurance
requirement hereunder by providing one or more “blanket” insurance policies,
subject to Lender’s approval in each instance as to limits, coverages, forms,
deductibles, inception and expiration dates, and cancellation provisions.
 
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Section 4.10  Adjustment of Condemnation and Insurance Claims.
 
Borrower shall give prompt Notice to Lender of any Casualty or any Condemnation
or threatened Condemnation. Lender is authorized, at its sole and absolute
option, to commence, appear in and prosecute, in its own or in Borrower’s and/or
ASF's name or names, any action or proceeding relating to any Condemnation or
Casualty, and to make proof of loss for and to settle or compromise any Claim in
connection therewith. In such case, Lender shall have the right to receive all
Condemnation Awards and Insurance Proceeds, and may deduct therefrom any or all
of its Expenses. However, so long as no Event of Default has occurred and
Borrower and/or ASF is diligently pursuing its rights and remedies with respect
to a Claim, Lender will obtain Borrower’s written consent (which consent shall
not be unreasonably withheld or delayed, with Borrower obtaining ASF's consent
if deemed necessary) before making proof of loss for or settling or compromising
such Claim. Borrower agrees to diligently assert or cause to be asserted its
and/or ASF's rights and remedies with respect to each Claim and to promptly
pursue the settlement and compromise of each Claim subject to Lender’s approval,
which approval shall not be unreasonably withheld or delayed. If, prior to the
receipt by Lender of any Condemnation Award or Insurance Proceeds, the Property
shall have been sold pursuant to the provisions of the Mortgage, Lender shall
have the right to receive such funds (a) to the extent of any deficiency found
to be due upon such sale with interest thereon (whether or not a deficiency
judgment on the Mortgage shall have been sought or recovered or denied), and (b)
to the extent necessary to reimburse Lender for its Expenses. If any
Condemnation Awards or Insurance Proceeds are paid to ASF or Borrower, Borrower
shall in each case receive the same or cause the same to be received in trust
for Lender. Within ten (10) days after receipt of any Condemnation Awards or
Insurance Proceeds, Borrower shall deliver such awards or proceeds to Lender in
the form in which they were received, together with any endorsements or
documents that may be necessary to effectively negotiate or transfer the same to
Lender. Borrower agrees to execute and deliver from time to time, upon the
request of Lender, such further instruments or documents as may be requested by
Lender to confirm the grant and assignment to Lender of any Condemnation Awards
or Insurance Proceeds, including obtaining any such documents requested by
Lender from ASF.
 
Section 4.11  Utilization of Net Proceeds.
 
(a)  Net Proceeds must be utilized either for payment of the Obligations or for
the restoration of the Property. Net Proceeds may be utilized for the
restoration of the Property only if no Default shall exist and only if in the
reasonable judgment of Lender (i) there has been no material adverse change in
the financial viability of the construction or operation of the Improvements,
(ii) the Net Proceeds, together with other funds deposited with Lender for that
purpose, are sufficient to pay the cost of the restoration pursuant to a budget
and plans and specifications approved by Lender, and (iii) the restoration can
be completed prior to maturity of the Loan. Otherwise, Net Proceeds shall be
utilized for payment of the Obligations.
 
(b)  If Net Proceeds are to be utilized for the restoration of the Property, the
Net Proceeds, together with any other funds deposited with Lender for that
purpose, must be deposited in an interest-bearing account with Lender, which
account will be assigned to Lender as additional security for the Loan. The
account will be opened, managed and controlled in a manner consistent with, and
subject to, the provisions of Section 4.3 governing a Borrower’s Deposit
Account, including those provisions permitting Lender to require Borrower to
deposit funds in the event of a deficiency in the funds available to complete
restoration as herein contemplated. Disbursements of funds from the account will
be made in a manner consistent with, and subject to, the requirements for the
closing and funding of the Loan and the terms of this Agreement regarding the
disbursement of Loan proceeds.
 
Section 4.12  Management.
 
Borrower at all times shall provide for the competent and responsible management
and operation of the Property. Any management contract or contracts affecting
the Property must be approved in writing by Lender prior to the execution of the
same, provided Lender's approval will not be unreasonably withheld or delayed.
 
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Section 4.13  Books and Records; Financial Statements.
 
(a) Borrower will keep and maintain or cause to be kept and maintained full and
accurate books and records administered in accordance with sound accounting
principles, consistently applied, showing in detail the earnings and expenses of
the Property and the operation thereof. Borrower will keep and maintain its
books and records, including recorded data of any kind and regardless of the
medium of recording, at the address of Borrower set forth in Section 8.6.
Borrower shall permit Lender, or any Person authorized by Lender, to inspect and
examine such books and records (regardless of where maintained) and all
supporting vouchers and data and to make copies and extracts therefrom at all
reasonable times and as often as may be requested by Lender. Borrower will
furnish or cause to be furnished to Lender annual financial statements,
including balance sheets and income statements, for the Borrower, ASF, any
Guarantor and the Property, within ninety (90) days after each fiscal year end
for the Borrower and one hundred twenty (120) days after each fiscal year end
for ASF and any Guarantor. Borrower will also furnish or cause to be furnished
to Lender quarter-annual financial statements within forty-five (45) days after
each fiscal quarter-end for the respective reporting party, including the
December 31 fiscal quarter end, and such financial statements shall include (i)
consolidated balance sheets and income statements for the Borrower, ASF, each
Guarantor and the Property, and (ii) cash flow statements for the Borrower. In
addition, Borrower will furnish or cause to be furnished to Lender, with
reasonable promptness, such interim financial statements of Borrower, ASF, each
Guarantor and the Property, together with such additional information, reports
or statements in connection therewith, as Lender may from time to time request.
All financial statements must be in form and detail acceptable to Lender and
must be certified as to accuracy by Borrower, ASF or the respective Guarantor,
as the case may be. The year-end financial statements of the Borrower and
American Seniors must also be audited, with an unqualified opinion given by the
respective independent certified public accountant reasonably satisfactory to
Lender. Borrower shall provide, upon Lender’s request, convenient facilities for
the audit and verification of any such statement of the Borrower. All
certifications and signatures on behalf of corporations, partnerships, limited
liability companies and other entities shall be by a representative of the
reporting party satisfactory to Lender.
 
(b) Contemporaneously with each quarter annual and fiscal year-end financial
report required by the foregoing paragraph (a), a certificate of the president
or chief financial officer of the Borrower stating that: (i) such officer has
individually reviewed the provisions of this Agreement; (ii) a review of the
activities of the Borrower and its Subsidiaries during such year or
quarter-annual period, as the case may be, has been made by such officer or
under such officer’s supervision, with a view to determining whether the
Borrower has fulfilled all its obligations under this Agreement; and (iii) to
the best of such officer’s knowledge, the Borrower has observed and performed
each undertaking contained in this Agreement and is not in default in the
observance or performance of any of the provisions hereof or, if the Borrower
shall be so in default, specifying all such defaults and events of which such
officer may have knowledge. Such certificate shall further set forth the
calculations of the financial ratios and covenants set forth in Section 5.5,
including without limitation any antecedent calculations and the source of any
information that was used in such calculations.
 
Section 4.14  Estoppel Certificates.
 
Within ten (10) days after any request by Lender or a proposed assignee or
purchaser of the Loan or any interest therein, Borrower shall certify in writing
to Lender, or to such proposed assignee or purchaser, the then unpaid balance of
the Loan and whether Borrower claims any right of defense or setoff to the
payment or performance of any of the Obligations, and if Borrower claims any
such right of defense or setoff, Borrower shall give a detailed written
description of such claimed right.
 
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Section 4.15  Taxes.
 
Borrower shall pay and discharge or cause to be paid and discharged all Taxes
prior to the date on which penalties are attached thereto unless and to the
extent only that such Taxes are contested in accordance with the terms of the
Mortgage.
 
Section 4.16  Lender’s Rights to Pay and Perform.
 
If, after any required notice, Borrower fails to promptly pay or perform any of
the Obligations within any applicable grace or cure periods or an Event of
Default otherwise occurs hereunder, Lender, without Notice to or demand upon
Borrower, and without waiving or releasing any Obligation or Default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of Borrower. Lender may
enter upon the Property for that purpose and take all action thereon as Lender
considers necessary or appropriate. At the option of Lender, following the
occurrence of an Event of Default, Lender may apply any undisbursed Loan
proceeds to the satisfaction of the conditions of the Loan Documents,
irrespective of the allocation of such Loan proceeds in the Budget. Without
limiting the generality of the foregoing, Lender may pay directly from the
proceeds of the Loan all interest bills rendered by Lender in connection with
the Loan, and following the occurrence of an Event of Default may make advances
directly to the General Contractor, the title insurance company, any
subcontractor or material supplier, or to any of them jointly. The execution
hereof by Borrower shall, and hereby does, constitute an irrevocable
authorization so to advance the proceeds of the Loan. No further direction or
authorization from Borrower shall be necessary to warrant such direct advances.
Each advance shall be secured by the Loan Documents and shall satisfy the
obligations of Lender hereunder to the extent of the amount of the advance.
 
Section 4.17  Reimbursement; Interest.
 
If Lender shall incur any Expenses or pay any Claims by reason of the Loan or
the rights and remedies provided under the Loan Documents (regardless of whether
or not any of the Loan Documents expressly provide for an indemnification by
Borrower against such Claims), Lender’s payment of such Expenses and Claims
shall constitute advances to Borrower which shall be paid by Borrower to Lender
on demand, together with interest thereon from the date incurred until paid in
full at the rate of interest then applicable to the Loan under the terms of the
Note. Each advance shall be secured by the Loan Documents as fully as if made to
Borrower and ASF, regardless of the disposition thereof by the party or parties
to whom such advance is made. Notwithstanding the foregoing, however, in any
action or proceeding to foreclose the Mortgage or to recover or collect the
Obligations, the provisions of Law governing the recovery of costs,
disbursements and allowances shall prevail unaffected by this Section.
 
Section 4.18  Notification by Borrower.
 
Borrower will promptly give Notice to Lender of the occurrence of any Default or
Event of Default hereunder or under any of the other Loan Documents, including
without limitation under any loan documents entered into between Borrower and
ASF with respect to the property and the construction of the improvements
thereon. Borrower will also promptly give Notice to Lender of any claim of a
default by ASF, or any claim by ASF of a default by any other party, under the
Architect’s Contract, the Construction Contract or any Lease.
 
Section 4.19  Indemnification by Borrower.
 
Borrower agrees to indemnify Lender and to hold Lender harmless from and
against, and to defend Lender by counsel approved by Lender against, any and all
Claims directly or indirectly arising out of or resulting from any transaction,
act, omission, event or circumstance in any way connected with the Property or
the Loan, including any Claim arising out of or resulting from (a) Construction
of the Improvements, including any defective workmanship or materials; (b) any
failure by Borrower to comply with the requirements of any Laws or to comply
with any agreement that applies or pertains to the Property, including any
agreement with a broker or “finder” in connection with the Loan or other
financing of the Property; (c) any failure by Borrower to observe and perform
any of the obligations imposed upon the landlord under the Leases; (d) any other
Default or Event of Default hereunder or under any of the other Loan Documents;
or (e) any assertion or allegation that Lender is liable for any act or omission
of Borrower or any other Person in connection with the ownership, development,
financing, leasing, operation or sale of the Property; provided, however, that
Borrower shall not be obligated to indemnify Lender with respect to any Claim
arising solely from the gross negligence or willful misconduct of Lender. The
agreements and indemnifications contained in this Section shall apply to Claims
arising both before and after the repayment of the Loan and shall survive the
repayment of the Loan, any foreclosure or deed, assignment or conveyance in lieu
thereof and any other action by Lender to enforce the rights and remedies of
Lender hereunder or under the other Loan Documents.
 
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Section 4.20  Fees and Expenses.
 
Borrower shall pay all fees, charges, costs and expenses required to satisfy the
conditions of the Loan Documents. Without limitation of the foregoing, Borrower
will pay, when due, and if paid by Lender will reimburse Lender on demand for,
all fees and expenses of the Construction Consultant, the title insurer,
environmental engineers, appraisers, surveyors and Lender’s counsel in
connection with the closing, administration, modification or any “workout” of
the Loan, or the enforcement of Lender’s rights and remedies under any of the
Loan Documents.
 
Section 4.21  Appraisals.
 
Lender may obtain from time to time an appraisal of all or any part of the
Property, prepared in accordance with written instructions from Lender, from a
third-party appraiser satisfactory to, and engaged directly by, Lender. The cost
of one such appraisal obtained by Lender in each calendar year and the cost of
each such appraisal obtained by Lender following the occurrence of an Event of
Default shall by borne by Borrower and shall be paid by Borrower on demand.
 
Section 4.22  Leasing and Tenant Matters.
 
Borrower shall comply with the terms and conditions of Schedule 6 in connection
with the leasing of space within the Improvements.
 
Section 4.23  Principal Depository.
 
Borrower shall maintain Bank of America, N.A. as its principal depository bank,
including for the maintenance of business, cash management, operating and
administrative deposit accounts. If Lender determines that Bank of America, N.A.
is not Borrower's principal depository bank, it shall not be deemed an Event of
Default, but the interest rate charged on the Loan shall be increased by
forty-two and one half (42.5) basis points per annum upon five (5) days' prior
written notice to Borrower.
 
Section 4.24  Swap Contracts.
 
Borrower shall comply with the terms and conditions of Schedule 7 with respect
to all Swap Contracts.
 
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Article V  
Negative Covenants.
 
Section 5.1  Conditional Sales.
 
Borrower shall not incorporate in the Improvements any property acquired under a
conditional sales contract or lease or as to which the vendor retains title or a
security interest, without the prior written consent of Lender.
 
Section 5.2  Changes to Plans and Specifications.
 
Borrower shall not allow or permit any changes, whether made by ASF, Borrower or
otherwise, in the Plans and Specifications, including any such changes that
alter, diminish or add to the work to be performed or change the design of the
Improvements, without the prior written consent of Lender and under such
reasonable conditions as Lender may establish. Lender’s prior written consent
shall not be required, however, as to any change order which (a) individually
does not cause the fixed or guaranteed maximum price of the Construction
Contract to be increased or decreased by more than Fifty Thousand Dollars
($50,000.00) and, when added to all previous change orders, does not cause such
price to be increased or decreased by more than Five Hundred Thousand Dollars
($500,000.00) in the aggregate, (b) does not result in a material change to the
design of the Improvements, and (c) has been approved in writing by the
Architect and any Governmental Authority, tenant or other party whose approval
is required.
 
Section 5.3  Changes to ASF Loan Documents or the Subordinated Loan Documents.
 
Borrower shall not allow or permit any changes or modifications to be made to
the ASF Loan Documents or the Subordinated Loan Documents without first
obtaining in each instance the prior written consent of the Lender, nor shall
Borrower enter into any additional or supplemental documents relating to or
affecting in any manner the ASF Loan or the Subordinated Loan without first
obtaining Lender's prior written consent. Borrower shall not release any
collateral or cancel any guaranty securing the ASF Loan or the Subordinated
Loan.
 
Section 5.4  Insurance Policies and Bonds.
 
Borrower shall not do or permit to be done anything that would affect the
coverage or indemnities provided for pursuant to the provisions of any insurance
policy, performance bond, labor and material payment bond or any other bond
given in connection with the Construction of the Improvements.
 
Section 5.5  Consolidated Fixed Charge Coverage Ratio.
 
Borrower shall not allow or permit its Consolidated Fixed Charge Coverage Ratio
to be less than 1.20 to 1.00.
 
Article VI  
Events of Default.
 
The occurrence or happening, from time to time, of any one or more of the
following shall constitute an Event of Default under this Agreement:
 
Section 6.1  Payment Default.
 
Borrower fails to pay any Obligation under this Agreement within three (3) days
after the date such Obligation is due or upon acceleration, maturity or
otherwise.

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Section 6.2  Default Under Other Loan Documents.
 
An Event of Default (as defined therein) occurs under the Note, or the Borrower,
ASF or any Guarantor fails to promptly pay, perform, observe or comply with any
term, obligation or agreement contained in the Mortgage or any of the other Loan
Documents (within any applicable grace or cure period).
 
Section 6.3  Accuracy of Information; Representations and Warranties.
 
Any information contained in any financial statement, schedule, report or any
other document delivered by Borrower, ASF, Guarantor or any other Person to
Lender in connection with the Loan proves at any time not to be in all material
respects true and accurate, or Borrower, ASF, Guarantor or any other Person
shall have failed to state any material fact or any fact necessary to make such
information not misleading, or any representation or warranty contained in this
Agreement or in any other Loan Document or other document, certificate or
opinion delivered to Lender in connection with the Loan, proves at any time to
be incorrect or misleading in any material respect either on the date when made
or on the date when reaffirmed pursuant to the terms of this Agreement.
 
Section 6.4  Deposits.
 
Borrower fails to deposit funds with Lender, in the amount requested by Lender,
pursuant to the provisions of Section 4.3 or Section 4.11, within ten (10) days
from the effective date of a Notice from Lender requesting such deposit, or
Borrower fails to deliver to Lender or cause to be delivered to Lender any
Condemnation Awards or Insurance Proceeds within ten (10) days after Borrower’s
or ASF's receipt thereof.
 
Section 6.5  Insurance Obligations.
 
Borrower fails to promptly perform or comply with any of the covenants contained
in the Loan Documents with respect to maintaining insurance, including the
covenants contained in Section 4.9.
 
Section 6.6  Other Obligations.
 
Borrower fails to promptly perform or comply with any covenants or other
Obligations set forth in this Agreement and such failure continues uncured for a
period of thirty (30) days after Notice from Lender to Borrower, other than
those expressly described in other Sections of this Article VI and those
covenants set forth in Sections 4.13, 5.3 and 5.5, for which no notice or cure
rights shall be applicable and the occurrence of any of which shall constitute
an immediate Event of Default. Notwithstanding the foregoing, if Lender
determines, in Lender's sole discretion, that such failure, by its nature, is
not capable of being cured within the thirty (30) day period after the initial
Notice from Lender to Borrower (other than a failure to comply with any of the
Obligations expressly described in other Sections of this Article VI and/or the
covenants set forth in Sections 4.13, 5.3 and 5.5), it shall not be an Event of
Default hereunder if (a) Borrower commences to cure such failure and thereafter
diligently prosecutes the cure thereof, and (b) Borrower causes such failure to
be cured no later than ninety (90) days after the date of such initial Notice
from Lender.
 
Section 6.7  Progress of Construction.
 
Construction of the Improvements is abandoned or is discontinued for a period of
more than twenty (20) consecutive days.
 
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Section 6.8  Damage to Improvements.
 
The Improvements are substantially damaged or destroyed by fire or other
casualty and Lender determines that the Improvements cannot be restored and
completed in accordance with the terms and provisions of this Agreement and the
Mortgage.
 
Section 6.9  Lapse of Permits or Approvals.
 
Any permit, license, certificate or approval that Borrower is required to obtain
with respect to the construction, operation, development, leasing or maintenance
of the Improvements or the Property lapses or ceases to be in full force and
effect.
 
Section 6.10  Completion of Construction.
 
Completion of Construction does not occur in accordance with the Project
Schedule, or Lender determines that Completion of Construction will not occur in
accordance with the Project Schedule.
 
Section 6.11  Mechanic’s Lien.
 
A lien for the performance of work or the supply of materials filed against the
Property, or any stop notice served on Borrower, ASF, the General Contractor or
Lender, remains unsatisfied or unbonded for a period of thirty (30) days after
the date of filing or service.
 
Section 6.12  Survey Matters.
 
Any Survey required by Lender during the period of construction shows any matter
which in Lender’s reasonable judgment would interfere with the Construction of
the Improvements or the operation or use of the Property, and such matter is not
removed within a period of thirty (30) days after Notice thereof by Lender to
Borrower.
 
Section 6.13  General Contractor Default.
 
The General Contractor defaults under the Construction Contract in a manner
which Lender deems in Lender's reasonable judgment to be material, and, unless
otherwise agreed in writing by Lender, ASF fails promptly to exercise its rights
and remedies under the Construction Contract with respect to such default.
 
Section 6.14  Performance Enjoined or Prohibited.
 
Borrower or ASF is enjoined or prohibited from performing any of its respective
obligations under any of the Loan Documents for a period of more than fifteen
(15) consecutive days.
 
Section 6.15  Bankruptcy.
 
Borrower, ASF or any Guarantor files a bankruptcy petition or makes a general
assignment for the benefit of creditors, or a bankruptcy petition is filed
against Borrower, ASF or any Guarantor and such involuntary bankruptcy petition
continues undismissed for a period of sixty (60) days after the filing thereof.
 
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Section 6.16  Appointment of Receiver, Trustee, Liquidator.
 
Borrower, ASF, or any Guarantor applies for or consents in writing to the
appointment of a receiver, trustee or liquidator of Borrower, ASF, any
Guarantor, the Property, or all or substantially all of the other assets of
Borrower, ASF, or any Guarantor, or an order, judgment or decree is entered by
any court of competent jurisdiction on the application of a creditor appointing
a receiver, trustee or liquidator of Borrower, ASF, any Guarantor, the Property,
or all or substantially all of the other assets of Borrower, ASF, or any
Guarantor.
 
Section 6.17  Judgment.
 
A final nonappealable judgment for the payment of money involving more than
$100,000 is entered against Borrower or a final nonappealable judgment for the
payment of money involving more than $50,000 is entered against ASF or any
Guarantor, and Borrower, ASF or such Guarantor fails to discharge the same, or
causes it to be discharged or bonded off to Lender’s satisfaction, within thirty
(30) days from the date of the entry of such judgment.
 
Section 6.18  Dissolution; Change in Business Status.
 
Unless the written consent of Lender is previously obtained, all or
substantially all of the business assets of Borrower, ASF or any Guarantor are
sold, Borrower, ASF or any Guarantor is dissolved, or there occurs any change in
the form of business entity through which Borrower, ASF or any Guarantor
presently conducts its business or any merger or consolidation involving
Borrower, ASF or any Guarantor.
 
Section 6.19  Default Under Other Indebtedness.
 
Borrower defaults under any existing or future loan and/or credit agreements
(other than this Agreement) in excess of Ten Million and No/100 Dollars
($10,000,000.00), subject to all applicable grace periods therein; however, any
periods of forbearance with respect to such credit agreements, which arise and
continue for more than forty-five (45) consecutive days, will be deemed as a
default hereunder.
 
Section 6.20  Change in Controlling Interest.
 
A Change of Control occurs without the prior written consent of the Lender.
 
Section 6.21  Material Adverse Change.
 
In the reasonable opinion of Lender, the prospect of payment or performance of
all or any part of the Obligations has been impaired because of a material
adverse change in the financial condition, results of operations, business or
properties of Borrower.
 
Article VII  
Remedies on Default.
 
Section 7.1  Remedies on Default.
 
Upon the happening of any Event of Default, Lender shall have the right, in
addition to any other rights or remedies available to Lender under the Mortgage
or any of the other Loan Documents or under applicable Law, to exercise any one
or more of the following rights and remedies:
 
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(a)  Lender may terminate its obligation to advance any further principal of the
Loan pursuant to this Agreement by Notice to Borrower.
 
(b)  Lender may accelerate all of Borrower’s Obligations under the Loan
Documents whereupon such Obligations shall become immediately due and payable,
without notice of default, acceleration or intention to accelerate, presentment
or demand for payment, protest or notice of nonpayment or dishonor, or notices
or demands of any kind or character (all of which are hereby waived by
Borrower).
 
(c)  Lender may apply to any court of competent jurisdiction for, and obtain
appointment of, a receiver for the Property.
 
(d)  Lender may set off the amounts due Lender under the Loan Documents against
any and all accounts, credits, money, securities or other property of Borrower
now or hereafter on deposit with, held by or in the possession of Lender to the
credit or for the account of Borrower, without notice to or the consent of
Borrower.
 
(e)  Lender may enter into possession of the Property and perform any and all
work and labor necessary to complete the Construction of the Improvements
(whether or not in accordance with the Plans and Specifications) and to employ
watchmen to protect the Property and the Improvements. All sums expended by
Lender for such purposes shall be deemed to have been advanced to Borrower under
the Note and shall be secured by the Loan Documents and the Mortgage. For this
purpose, Borrower hereby constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution, which power is coupled with an
interest, to complete the work either in the name of Borrower and/or ASF, and
hereby empowers said attorney or attorneys, in the name of Borrower, ASF or
Lender:
 
(i)
To use any funds of Borrower including any balance which may be held by Lender
and any funds which may remain unadvanced hereunder for the purpose of
completing
the Construction of the Improvements, whether or not in the manner called for in
the Plans and Specifications;  
(ii)
To make such additions and changes and corrections to the Plans and
Specifications as shall be necessary or desirable in the judgment of Lender to
complete the
Construction of the Improvements;  
(iii)
To employ such contractors, subcontractors, agents, architects and inspectors as
shall be necessary or desirable for said purpose;
   
(iv)
To pay, settle or compromise all existing bills and claims which are or may be
liens against the Property, or may be necessary or desirable for the completion
of the work
or the clearance of title to the Property;  
(v)
To execute all applications and certificates which may be required in the name
of ASF and/or the Borrower;
   
(vi)
To enter into, enforce, modify or cancel Leases and to fix or modify Rents on
such terms as Lender may consider proper;
   
(vii)
To file for record, at Borrower’s cost and expense and in the name of ASF and/or
Borrower, any notices of completion, notices of cessation of labor, or any other
notices
that Lender in its sole and absolute discretion may consider necessary or
desirable to protect its security; and  
(viii)
To do any and every act with respect to the Construction of the Improvements
which either the Borrower or ASF could do in its own behalf.

 
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It is understood and agreed that this power of attorney shall be deemed to be a
power coupled with an interest which cannot be revoked, and includes within it
any power of attorney or other similar rights granted by ASF to Borrower to act
on ASF's behalf. Said attorney-in-fact shall also have the power to prosecute
and defend all actions or proceedings in connection with the Construction of the
Improvements and to take such actions and to require such performance as Lender
may deem necessary.
 
Section 7.2  No Release or Waiver; Remedies Cumulative and Concurrent.
 
 
Borrower shall not be relieved of any Obligation by reason of the failure of
Lender to comply with any request of Borrower or of any other Person to take
action to foreclose on the Property under the Mortgage or otherwise to enforce
any provision of the Loan Documents, or by reason of the release, regardless of
consideration, of all or any part of the Property. No delay or omission of
Lender to exercise any right, power or remedy accruing upon the happening of an
Event of Default shall impair any such right, power or remedy or shall be
construed to be a waiver of any such Event of Default or any acquiescence
therein. No delay or omission on the part of Lender to exercise any option for
acceleration of the maturity of the Obligations, or for foreclosure of the
Mortgage following any Event of Default as aforesaid, or any other option
granted to Lender hereunder in any one or more instances, or the acceptance by
Lender of any partial payment on account of the Obligations shall constitute a
waiver of any such Event of Default and each such option shall remain
continuously in full force and effect. No remedy herein conferred upon or
reserved to Lender is intended to be exclusive of any other remedies provided
for in the Loan Documents, and each and every such remedy shall be cumulative,
and shall be in addition to every other remedy given hereunder, or under the
Loan Documents, or now or hereafter existing at Law or in equity or by statute.
Every right, power and remedy given by the Loan Documents to Lender shall be
concurrent and may be pursued separately, successively or together against
Borrower, ASF or the Property or any part thereof, and every right, power and
remedy given by the Loan Documents may be exercised from time to time as often
as may be deemed expedient by Lender.
 
Article VIII
Miscellaneous.
 
Section 8.1  Further Assurances; Authorization to File Documents.
 
At any time, and from time to time, upon request by Lender, Borrower will, at
Borrower’s expense, (a) correct any defect, error or omission which may be
discovered in the form or content of any of the Loan Documents, and (b) make,
execute, deliver and record, or cause to be made, executed, delivered and
recorded, any and all further instruments, certificates and other documents as
may, in the opinion of Lender, be necessary or desirable in order to complete,
perfect or continue and preserve the lien of the Mortgage. Upon any failure by
Borrower to do so, Lender may make, execute and record any and all such
instruments, certificates and other documents for and in the name of Borrower
and/or ASF, all at the sole expense of Borrower, and Borrower hereby appoints
Lender the agent and attorney-in-fact of Borrower to do so, this appointment
being coupled with an interest and being irrevocable. Without limitation of the
foregoing, Borrower irrevocably authorizes Lender at any time and from time to
time to file any initial financing statements, amendments thereto and
continuation statements deemed necessary or desirable by Lender to establish or
maintain the validity, perfection and priority of the security interests granted
in the Mortgage, and Borrower ratifies any such filings made by Lender prior to
the date hereof.
 
Section 8.2  No Warranty by Lender.
 
By accepting or approving anything required to be observed, performed or
fulfilled by Borrower or to be given to Lender pursuant to this Agreement,
including any certificate, Survey, receipt, appraisal or insurance policy,
Lender shall not be deemed to have warranted or represented the sufficiency,
legality, effectiveness or legal effect of the same, or of any term, provision
or condition thereof and any such acceptance or approval thereof shall not be or
constitute any warranty or representation with respect thereto by Lender.
 
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Section 8.3  Standard of Conduct of Lender.
 
Nothing contained in this Agreement or any other Loan Document shall limit the
right of Lender to exercise its business judgment or to act, in the context of
the granting or withholding of any advance or consent under this Agreement or
any other Loan Document, in a subjective manner, whether or not objectively
reasonable under the circumstances, so long as Lender’s exercise of its business
judgment or action is made or undertaken in good faith. Borrower and Lender
intend by the foregoing to set forth and affirm their entire understanding with
respect to the standard pursuant to which Lender’s duties and obligations are to
be judged and the parameters within which Lender’s discretion may be exercised
hereunder and under the other Loan Documents. As used herein, “good faith” means
honesty in fact in the conduct and transaction concerned.
 
Section 8.4  No Partnership.
 
Nothing contained in this Agreement shall be construed in a manner to create any
relationship between Borrower and Lender other than the relationship of borrower
and lender and Borrower and Lender shall not be considered partners or
co-venturers for any purpose on account of this Agreement.
 
Section 8.5  Severability.
 
In the event any one or more of the provisions of this Agreement or any of the
other Loan Documents shall for any reason be held to be invalid, illegal or
unenforceable, in whole or in part or in any other respect, or in the event any
one or more of the provisions of any of the Loan Documents operates or would
prospectively operate to invalidate this Agreement or any of the other Loan
Documents, then and in either of those events, at the option of Lender, such
provision or provisions only shall be deemed null and void and shall not affect
the validity of the remaining Obligations, and the remaining provisions of the
Loan Documents shall remain operative and in full force and effect and shall in
no way be affected, prejudiced or disturbed thereby.
 
Section 8.6  Notices.
 
All Notices required or which any party desires to give hereunder or under any
other Loan Document shall be in writing and, unless otherwise specifically
provided in such other Loan Document, shall be deemed sufficiently given or
furnished if delivered by personal delivery, by nationally recognized overnight
courier service or by certified United States mail, postage prepaid, addressed
to the party to whom directed at the applicable address set forth below (unless
changed by similar notice in writing given by the particular party whose address
is to be changed) or by facsimile. Any Notice shall be deemed to have been given
either at the time of personal delivery or, in the case of courier or mail, as
of the date of first attempted delivery at the address and in the manner
provided herein, or, in the case of facsimile, upon receipt; provided that
service of a Notice required by any applicable statute shall be considered
complete when the requirements of that statute are met. Notwithstanding the
foregoing, no notice of change of address shall be effective except upon actual
receipt. This Section shall not be construed in any way to affect or impair any
waiver of notice or demand provided in this Agreement or in any other Loan
Document or to require giving of notice or demand to or upon any Person in any
situation or for any reason.
 
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The address and fax number of Borrower are:
 
American Retirement Corporation
Address: 111 Westwood Place, Suite 200
City/State/Zip: Brentwood, TN 37027
Contact Person: George Hicks
Telephone: 615-221-2260
Fax: 615-221-2269
E-mail Address (if applicable): ghicks@arclp.com

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With a copy to:

Andrew Smith
Bass, Berry & Sims
315 Deaderick Street, Suite 2700
Nashville, Tennessee 37238
Telephone: 615-742-6266
Fax: 615-742-6293
 
The address and fax number of Lender are:
 
Bank of America, N.A. Bank of America, N.A.
414 Union Street
Nashville, TN 37219-1697
Senior Underwriter: Ms. Hope Walker
Phone: (615) 749-3023
Fax: (615) 749-4951
E-mail Address: hope.walker@bankofamerica.com

Construction Administration: Kathryn V. Traylor
1111 E. Main Street, 6th Floor
Richmond, VA. 23219
E-mail address: Kathryn.v.traylor@bankofamerica.com
Phone (804) 788-3873
Fax: (804) 788-2248

With a copy to:

William W. Earthman, III
Boult, Cummings, Conners & Berry, PLC
1600 Division Street, Suite 700
Nashville, Tennessee 37203
Telephone: 615-252-2304
Fax: 615-252-6304

Section 8.7  Permitted Successors and Assigns; Disclosure of Information.
 
(a) Each and every one of the covenants, terms, provisions and conditions of
this Agreement and the Loan Documents shall apply to, bind and inure to the
benefit of Borrower, its successors and those assigns of Borrower consented to
in writing by Lender, and shall apply to, bind and inure to the benefit of
Lender and the endorsees, transferees, successors and assigns of Lender, and all
Persons claiming under or through any of them.
 
(b) Borrower agrees not to transfer, assign, pledge or hypothecate any right or
interest in any payment or advance due pursuant to this Agreement, or any of the
other benefits of this Agreement, without the prior written consent of Lender,
which consent may be withheld by Lender in its sole and absolute discretion. Any
such transfer, assignment, pledge or hypothecation made or attempted by Borrower
without the prior written consent of Lender shall be void and of no effect. No
consent by Lender to an assignment shall be deemed to be a waiver of the
requirement of prior written consent by Lender with respect to each and every
further assignment and as a condition precedent to the effectiveness of such
assignment.
 
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(c) Lender may sell or offer to sell the Loan or interests therein to one or
more assignees or participants. Borrower shall execute, acknowledge and deliver
any and all instruments reasonably requested by Lender in connection therewith,
and to the extent, if any, specified in any such assignment or participation,
such assignee(s) or participant(s) shall have the same rights and benefits with
respect to the Loan Documents as such Person(s) would have if such Person(s)
were Lender hereunder. Lender may disseminate any information it now has or
hereafter obtains pertaining to the Loan, including any security for the Loan,
any credit or other information on the Property (including environmental reports
and assessments), Borrower, any of Borrower’s principals or any Guarantor, to
any actual or prospective assignee or participant, to Lender’s affiliates,
including Banc of America Securities LLC, to any regulatory body having
jurisdiction over Lender, to any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to Borrower and the
Loan, or to any other party as necessary or appropriate in Lender’s reasonable
judgment.
 
Section 8.8  Modification; Waiver.
 
None of the terms or provisions of this Agreement may be changed, waived,
modified, discharged or terminated except by instrument in writing executed by
the party or parties against whom enforcement of the change, waiver,
modification, discharge or termination is asserted. None of the terms or
provisions of this Agreement shall be deemed to have been abrogated or waived by
reason of any failure or failures to enforce the same.
 
Section 8.9  Third Parties; Benefit.
 
All conditions to the obligation of Lender to make advances hereunder are
imposed solely and exclusively for the benefit of Lender and its assigns and no
other Persons shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make advances in the absence of strict compliance with any or all thereof and no
other Person shall, under any circumstances, be deemed to be the beneficiary of
such conditions, any or all of which may be freely waived in whole or in part by
Lender at any time in the sole and absolute exercise of its discretion. The
terms and provisions of this Agreement are for the benefit of the parties hereto
and, except as herein specifically provided, no other Person shall have any
right or cause of action on account thereof.
 
Section 8.10  Rules of Construction.
 
The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar
import refer to this Agreement in its entirety. The terms “agree” and
“agreements” mean and include “covenant” and “covenants.” The words “include”
and “including” shall be interpreted as if followed by the words “without
limitation.” The captions and headings contained in this Agreement are included
herein for convenience of reference only and shall not be considered a part
hereof and are not in any way intended to define, limit or enlarge the terms
hereof. All references (a) made in the neuter, masculine or feminine gender
shall be deemed to have been made in all such genders, (b) made in the singular
or plural number shall be deemed to have been made, respectively, in the plural
or singular number as well, (c) to the Loan Documents are to the same as
extended, amended, restated, supplemented or otherwise modified from time to
time unless expressly indicated otherwise, (d) to the Land, the Improvements or
the Property shall mean all or any portion of each of the foregoing,
respectively, and (e) to Articles, Sections and Schedules are to the respective
Articles, Sections and Schedules contained in this Agreement unless expressly
indicated otherwise.
 
Section 8.11  Counterparts.
 
This Agreement may be executed in any number of counterparts, each of which
shall be considered an original for all purposes; provided, however, that all
such counterparts shall together constitute one and the same instrument.
 
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Section 8.12  Signs; Publicity.
 
At Lender’s request, Borrower shall place a sign at a location on the Property
satisfactory to Lender, which sign shall recite, among other things, that Lender
is financing the Construction of the Improvements. Borrower expressly authorizes
Lender to prepare and to furnish to the news media for publication from time to
time news releases with respect to the Property, specifically to include
releases detailing Lender’s involvement with the financing of the Property.
 
Section 8.13  Governing Law.
 
This Agreement shall be governed by and construed, interpreted and enforced in
accordance with the laws of the State.
 
Section 8.14  Time of Essence.
 
Time shall be of the essence for each and every provision of this Agreement of
which time is an element.
 
Section 8.15  Electronic Transmission of Data.
 
Lender and Borrower agree that certain data related to the Loan (including
confidential information, documents, applications and reports) may be
transmitted electronically, including transmission over the Internet. This data
may be transmitted to, received from or circulated among agents and
representatives of Borrower and/or Lender and their affiliates and other Persons
involved with the subject matter of this Agreement. Borrower acknowledges and
agrees that (a) there are risks associated with the use of electronic
transmission and that Lender does not control the method of transmittal or
service providers, (b) Lender has no obligation or responsibility whatsoever and
assumes no duty or obligation for the security, receipt or third party
interception of any such transmission, and (c) Borrower will release, hold
harmless and indemnify Lender from any claim, damage or loss, including that
arising in whole or part from Lender’s strict liability or sole, comparative or
contributory negligence, which is related to the electronic transmission of
data.
 
Section 8.16  Dispute Resolution.
 
(a)  Arbitration. Except to the extent expressly provided below, any Dispute
shall, upon the request of either party, be determined by binding arbitration in
accordance with the Federal Arbitration Act, Title 9, United States Code (or if
not applicable, the applicable state law), the then-current rules for
arbitration of financial services disputes of AAA and the “Special Rules” set
forth below. In the event of any inconsistency, the Special Rules shall control.
The filing of a court action is not intended to constitute a waiver of the right
of Borrower or Lender, including the suing party, thereafter to require
submittal of the Dispute to arbitration. Any party to this Agreement may bring
an action, including a summary or expedited proceeding, to compel arbitration of
any Dispute in any court having jurisdiction over such action. For the purposes
of this Dispute Resolution Section only, the terms “party” and “parties” shall
include any parent corporation, subsidiary or affiliate of Lender involved in
the servicing, management or administration of any obligation described in or
evidenced by this Agreement, together with the officers, employees, successors
and assigns of each of the foregoing.
 
(b)  Special Rules.
 
(i) The arbitration shall be conducted in any U.S. state where real or tangible
personal property collateral is located, or if there is no such collateral, in
the City and County where Lender is located pursuant to its address for notice
purposes in this Agreement.
 
(ii) The arbitration shall be administered by AAA, who will appoint an
arbitrator. If AAA is unwilling or unable to administer or legally precluded
from administering the arbitration, or if AAA is unwilling or unable to enforce
or legally precluded from enforcing any and all provisions of this Dispute
Resolution Section, then any party to this Agreement may substitute another
arbitration organization that has similar procedures to AAA and that will
observe and enforce any and all provisions of this Dispute Resolution Section.
All Disputes shall be determined by one arbitrator; however, if the amount in
controversy in a Dispute exceeds Five Million Dollars ($5,000,000), upon the
request of any party, the Dispute shall be decided by three arbitrators (for
purposes of this Agreement, referred to collectively as the “arbitrator”).
 
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(iii) All arbitration hearings will be commenced within ninety (90) days of the
demand for arbitration and completed within ninety (90) days from the date of
commencement; provided, however, that upon a showing of good cause, the
arbitrator shall be permitted to extend the commencement of such hearing for up
to an additional sixty (60) days.
 
(iv) The judgment and the award, if any, of the arbitrator shall be issued
within thirty (30) days of the close of the hearing. The arbitrator shall
provide a concise written statement setting forth the reasons for the judgment
and for the award, if any. The arbitration award, if any, may be submitted to
any court having jurisdiction to be confirmed and enforced, and such
confirmation and enforcement shall not be subject to arbitration.
 
(v) The arbitrator will give effect to statutes of limitations and any waivers
thereof in determining the disposition of any Dispute and may dismiss one or
more claims in the arbitration on the basis that such claim or claims is or are
barred. For purposes of the application of the statute of limitations, the
service on AAA under applicable AAA rules of a notice of Dispute is the
equivalent of the filing of a lawsuit.
 
(vi) Any dispute concerning this arbitration provision, including any such
dispute as to the validity or enforceability of this provision, or whether a
Dispute is arbitrable, shall be determined by the arbitrator; provided, however,
that the arbitrator shall not be permitted to vary the express provisions of
these Special Rules or the Reservations of Rights in subsection (c) below.
 
(vii) The arbitrator shall have the power to award legal fees and costs pursuant
to the terms of this Agreement.
 
(viii) The arbitration will take place on an individual basis without reference
to, resort to, or consideration of any form of class or class action.
 
(c)  Reservations of Rights. Nothing in this Agreement shall be deemed to
(i) limit the applicability of any otherwise applicable statutes of limitation
and any waivers contained in this Agreement, or (ii) apply to or limit the right
of Lender (A) to exercise self help remedies such as (but not limited to)
setoff, or (B) to foreclose judicially or nonjudicially against any real or
personal property collateral, or to exercise judicial or nonjudicial power of
sale rights, (C) to obtain from a court provisional or ancillary remedies such
as (but not limited to) injunctive relief, writ of possession, prejudgment
attachment, or the appointment of a receiver, or (D) to pursue rights against a
party to this Agreement in a third-party proceeding in any action brought
against Lender in a state, federal or international court, tribunal or hearing
body (including actions in specialty courts, such as bankruptcy and patent
courts). Lender may exercise the rights set forth in clauses (A) through (D),
inclusive, before, during or after the pendency of any arbitration proceeding
brought pursuant to this Agreement. Neither the exercise of self help remedies
nor the institution or maintenance of an action for foreclosure or provisional
or ancillary remedies shall constitute a waiver of the right of any party,
including the claimant in any such action, to arbitrate the merits of the
Dispute occasioning resort to such remedies. No provision in the Loan Documents
regarding submission to jurisdiction and/or venue in any court is intended or
shall be construed to be in derogation of the provisions in any Loan Document
for arbitration of any Dispute.
 
(d)  Conflicting Provisions for Dispute Resolution. If there is any conflict
between the terms, conditions and provisions of this Section and those of any
other provision or agreement for arbitration or dispute resolution, the terms,
conditions and provisions of this Section shall prevail as to any Dispute
arising out of or relating to (i) this Agreement, (ii) any other Loan Document,
(iii) any related agreements or instruments, or (iv) the transaction
contemplated herein or therein (including any claim based on or arising from an
alleged personal injury or business tort). In any other situation, if the
resolution of a given Dispute is specifically governed by another provision or
agreement for arbitration or dispute resolution, the other provision or
agreement shall prevail with respect to said Dispute.
 
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(e)  Jury Trial Waiver in Arbitration. By agreeing to this Section, the parties
irrevocably and voluntarily waive any right they may have to a trial by jury in
respect of any Dispute.
 
Section 8.17  Forum.
 
Borrower hereby irrevocably submits generally and unconditionally for itself and
in respect of its property to the jurisdiction of any state court or any United
States federal court sitting in the State specified in the governing law section
of this Agreement and to the jurisdiction of any state court or any United
States federal court sitting in the state in which any of the Property is
located, over any Dispute. Borrower hereby irrevocably waives, to the fullest
extent permitted by Law, any objection that Borrower may now or hereafter have
to the laying of venue in any such court and any claim that any such court is an
inconvenient forum. Borrower hereby agrees and consents that, in addition to any
methods of service of process provided for under applicable law, all service of
process in any such suit, action or proceeding in any state court or any United
States federal court sitting in the state specified in the governing law section
of this Agreement may be made by certified or registered mail, return receipt
requested, directed to Borrower at its address for notice set forth in this
Agreement, or at a subsequent address of which Lender received actual notice
from Borrower in accordance with the notice section of this Agreement, and
service so made shall be complete five (5) days after the same shall have been
so mailed. Nothing herein shall affect the right of Lender to serve process in
any manner permitted by Law or limit the right of Lender to bring proceedings
against Borrower in any other court or jurisdiction.

Section 8.18  WAIVER OF JURY TRIAL.
 
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY
“DISPUTE” (FOR PURPOSES OF THIS SECTION, AS DEFINED IN SCHEDULE 1) AS SET FORTH
IN THIS AGREEMENT, TO THE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO ARBITRATION
OR IS DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT
ARBITRABLE OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY
JURY IN RESPECT OF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.” THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND
BORROWER AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR
TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS. BORROWER AND LENDER
ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER REPRESENTS
AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
 
Section 8.19  USA Patriot Act Notice.
 
Lender hereby notifies Borrower that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”), Lender is required to obtain, verify and record information that
identifies Borrower, which information includes the name and address of Borrower
and other information that will allow Lender to identify Borrower in accordance
with the Act.
 
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Section 8.20  Entire Agreement.
 
The Loan Documents constitute the entire understanding and agreement between
Borrower and Lender with respect to the transactions arising in connection with
the Loan, and supersede all prior written or oral understandings and agreements
between Borrower and Lender with respect to the matters addressed in the Loan
Documents. In particular, and without limitation, the terms of any commitment by
Lender to make the Loan are merged into the Loan Documents. Except as
incorporated in writing into the Loan Documents, there are no representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the matters addressed in the Loan Documents. If there is any conflict
between the terms, conditions and provisions of this Agreement and those of any
other instrument or agreement, including any other Loan Document, the terms,
conditions and provisions of this Agreement shall prevail.
 
Section 8.21  HIPPA Disclosure.
 
During the course of Lender's, its agents' or employees' inspection of the
Property pursuant to the terms of this Agreement, Lender, its agents or
employees may encounter individually identifiable healthcare information or
other confidential information relating to the residents at the Property
(collectively, the "Confidential Information"). Unless otherwise required by
law, Lender, its agents and employees shall use commercially reasonable efforts
not to disclose, compile, aggregate, remove from the Property or record in any
manner any Confidential Information, and shall not willfully cause Borrower or
the Property to violate any laws, regulations or ordinances intended to protect
the privacy rights of the residents at the Property, including, without
limitation, the Health Insurance Portability and Accountability Act of 1996 or
its implementing regulations.

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IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed under seal as of the date first above written.
 

    BORROWER:          
American Retirement Corporation,
a Tennessee corporation
     
   
   
         
By:

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Name:

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Title:

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    LENDER:      
Bank of America, N.A.,
a national banking association
       
By:

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Name:

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Title:

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PAGE 27

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Schedule 1
 
Definitions
 
Unless the context otherwise specifies or requires, the following terms shall
have the meanings herein specified, such definitions to be applicable equally to
the singular and the plural forms of such terms and to all genders:
 
“AAA” means the American Arbitration Association, or any successor thereof.
 
“Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)).
 
“Architect” means Earl Swensson Associates, its successors and permitted
assigns.
 
“Architect’s Contract” means the agreement dated September 1, 2005, by and
between ASF, as owner, and the Architect, as architect, and any other contract
for architectural services relating to the Construction of the Improvements
between ASF and an architect, and approved in writing by Lender, as the same may
be amended from time to time with the prior written approval of Lender.
 
"ASF Loan" means the loan in the Loan Amount from Borrower to ASF, the repayment
obligations in connection with which are evidenced by the ASF Note.
 
"ASF Loan Agreement" means that Construction Loan Agreement of even date
herewith between the Borrower as the lender therein and ASF as the borrower
therein pertaining to the ASF Loan.
 
"ASF Loan Documents" means the ASF Note, the Mortgage, the ASF Loan Agreement,
and all other documents now or hereafter evidencing or securing the ASF Loan
from Borrower to ASF.
 
"ASF Note" means the Promissory Note of even date herewith, in an amount equal
to the Loan Amount, made by ASF to the order of Borrower and collaterally
assigned and negotiated by Borrower to the order of Lender, as the same may from
time to time be extended, amended, restated, supplemented or otherwise modified.
 
“Authorized Signers” means either George T. Hicks or H. Todd Kaestner of the
Borrower, and either Christopher Coates or R. Murray Hatcher of ASF, or such
substitute officers of Borrower and/or ASF as shall be duly designated and
authorized in writing by Borrower and/or ASF, as the case may be, to sign draw
requests in a writing addressed to Lender, which writing may include a draw
request in the form attached hereto as Schedule 2.
 
“Banking Day” means any day that is not a Saturday, Sunday or banking holiday in
the State.
 
“Borrower’s Deposit Account” means an account established with Lender pursuant
to the terms of Section 4.3.
 
“Budget” means the breakdown of hard costs and soft costs attached hereto as
Schedule 3, as the same may be revised from time to time with the written
approval of Lender.
 
“Casualty” means any act or occurrence of any kind or nature that results in
damage, loss or destruction to the Property.
 
"Change of Control" means an event or series of events by which:
 
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, but excluding any employee benefit plan
of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a person or group shall be deemed
to have "beneficial ownership" of all Capital Stock that such person or group
has the right to acquire (such right, an "option right"), whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of thirty percent (30%) of the Capital Stock of the Borrower
entitled to vote for members of the board of directors or equivalent governing
body of the Borrower on a fully diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to any
option right); or
 
SCHEDULE 1 - PAGE 1

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(b) during any period of 24 consecutive months, a majority of the members of the
board of directors or other equivalent governing body of the Borrower cease to
be composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or
 
(c) any Person or two or more Persons acting in concert shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation thereof, will result in its or their acquisition of the
power to exercise, directly or indirectly, a controlling influence over the
management or policies of the Borrower, or control over the Voting Stock of the
Borrower on a fully-diluted basis (and taking into account all such Voting Stock
that such Person or group has the right to acquire pursuant to any option right)
representing thirty percent (30%) or more of the combined voting power of such
Voting Stock.
 
“Checking Account” means account no. 3253194544 of the Borrower maintained at
Lender.
 
“Claim” means any liability, suit, action, claim, demand, loss, expense,
penalty, fine, judgment or other cost of any kind or nature whatsoever,
including fees, costs and expenses of attorneys, consultants, contractors and
experts.
 
“Closing Checklist” means that certain Closing Requirements and Checklist
setting forth the conditions for closing the Loan and recording the Mortgage.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
"Collateral Assignment of Loan Documents" means that Collateral of Assignment of
Loan Documents of even date herewith from Borrower to Lender assigning to Lender
the ASF Note, the ASF Loan Agreement, the Mortgage, the Guaranty and the other
loan documents entered into by and between ASF and Borrower, or from ASF and/or
American Seniors to Borrower, with respect to the ASF Loan, as the same may be
modified and amended from time to time with the consent of the Lender.
 
"Collateral Assignment of Subordinated Loan Documents" means that Collateral
Assignment of Subordinated Loan Documents of even date herewith from Borrower to
Lender assigning to Lender the Subordinated Note, the Subordinated Mortgage, and
other documents between ASF and Borrower pertaining to the Subordinated Loan.
 
"Collateral Assignments of Loan Documents" means, collectively, the Collateral
Assignment of Loan Documents and the Collateral Assignment of Subordinated Loan
Documents.
 
“Completion of Construction” means, with respect to the Construction of the
Improvements or any component thereof, the satisfaction of all of the conditions
of Section 5 of Schedule 5.
 
SCHEDULE 1 - PAGE 2

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“Condemnation” means any taking of title to, use of, or any other interest in
the Property under the exercise of the power of condemnation or eminent domain,
whether temporarily or permanently, by any Governmental Authority or by any
other Person acting under or for the benefit of a Governmental Authority.
 
“Condemnation Awards” means any and all judgments, awards of damages (including
severance and consequential damages), payments, proceeds, settlements, amounts
paid for a taking in lieu of Condemnation, or other compensation heretofore or
hereafter made, including interest thereon, and the right to receive the same,
as a result of, or in connection with, any Condemnation or threatened
Condemnation.
 
"Consolidated Fixed Charge Coverage Ratio" means the ratio of Borrower's EBITDAR
to its Fixed Charges, computed in each instance for the immediately preceding
two (2) fiscal quarters. "EBITDAR" shall mean, as of any time of determination,
Borrower's consolidated net income plus (without duplication) the following
items: consolidated interest expense, consolidated income tax expense,
consolidated depreciation and amortization, and consolidated rental expense; in
addition, any gains or losses arising from the sale of assets, or any non-cash,
stock-based employee compensation expense arising from the application of APB 25
(Accounting for Stock Issued to Employees), SFAS 123R (Accounting for Shared
Based Payment) or SFAS No. 148 (Stock Based Compensation - Transition and
Disclosure), or from any other items of income or expense which are deemed to be
extraordinary or nonrecurring in nature shall be subtracted or added back, as
the case may be. Items shall be deemed to be extraordinary only if deemed to be
so in accordance with GAAP, and items shall be deemed to be non-recurring only
if they are expenditures or charges that have not been incurred in the last
eight (8) fiscal quarters and are not likely to recur in the subsequent two year
period. "Fixed Charges" shall mean, as of any time of determination, the sum of
Borrower's consolidated rent expense, consolidated interest expense (including
the interest component of rentals under capitalized leases, but exclusive of
prepayment fees or one-time loan fees), scheduled principal payments due on any
indebtedness or capitalized leases (but exclusive of balloon payments due on
maturity or expiration), dividends due or paid on preferred stock, and any
mandatory distributions of earnings to shareholders. All calculations shall be
done on a consolidated basis in accordance with generally accepted accounting
principles consistently applied ("GAAP") computed over the trailing two fiscal
quarter period.
 
“Construction Consultant” means a person or firm appointed or designated by
Lender from time to time to inspect the progress of the Construction of the
Improvements and the conformity of construction with the Plans and
Specifications, the Budget and the Project Schedule, and to perform such other
acts and duties for such other purposes as Lender may from time to time deem
appropriate or as may be required by the terms of this Agreement.
 
“Construction Contract” means the agreement dated October 20, 2005, by and
between ASF, as owner, and the General Contractor, as general contractor, and
any other contract for the Construction of the Improvements between ASF and a
contractor, and approved in writing by Lender, as the same may be amended from
time to time with the prior written approval of Lender.
 
“Construction of the Improvements” means the development of the Land and/or the
construction of the Improvements.
 
“Default” means an event or circumstance that, with the giving of Notice or
lapse of time, or both, would constitute an Event of Default under the
provisions of this Agreement.
 
“Deferred Equity” has the meaning ascribed to such term in Schedule 5.
 
“Dispute” means any controversy, claim or dispute between or among the parties
to this Agreement, including any such controversy, claim or dispute arising out
of or relating to (a) this Agreement, (b) any other Loan Document, (c) any
related agreements or instruments, or (d) the transaction contemplated herein or
therein (including any claim based on or arising from an alleged personal injury
or business tort).
 
SCHEDULE 1 - PAGE 3

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“Environmental Agreement” means the Environmental Indemnification and Release
Agreement of even date herewith by and between Borrower and Lender pertaining to
the Property, as the same may from time to time be extended, amended, restated
or otherwise modified.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Event of Default” means any event or circumstance specified in Article VI and
the continuance of such event or circumstance beyond the applicable grace and/or
cure periods therefor, if any, set forth in Article VI.
 
“Expenses” means all fees, interest, charges, costs and expenses of any nature
whatsoever incurred at any time and from time to time (whether before or after
an Event of Default) by Lender in making, funding, administering or modifying
the Loan and/or the ASF Loan, in negotiating or entering into any “workout” of
the Loan and/or the ASF Loan, or in exercising or enforcing any rights, powers
and remedies provided in the Collateral Assignment of Loan Documents, the
Mortgage, or any of the other Loan Documents, including attorneys’ fees, court
costs, receiver’s fees, management fees and costs incurred in the repair,
maintenance and operation of, or taking possession of, or selling, the Property.
 
“Force Majeure” means strikes, lock-outs, war, civil disturbance, natural
disaster, acts of terrorism or acts of God which cause a delay in Borrower’s
performance of an Obligation related to the work of construction; provided,
however, that (a) Borrower must give Notice to Lender within ten (10) days after
the occurrence of an event which it believes to constitute Force Majeure, (b) in
no event shall Force Majeure extend the time for the performance of an
Obligation by more than sixty (60) days, and (c) circumstances that can be
remedied or mitigated through the payment of money shall not constitute Force
Majeure hereunder to the extent such remedy or mitigation is deemed reasonable
by Lender in its sole discretion.
 
“General Contractor” means American Constructors, Inc., its successors and
permitted assigns.
 
“Governmental Authority” means any governmental or quasi-governmental entity,
including any court, department, commission, board, bureau, agency,
administration, service, district or other instrumentality of any governmental
entity.
 
“Guarantor” means American Seniors Foundation, an Ohio non-profit corporation,
as the guarantor of the loan from Borrower to ASF, and its successors and
assigns.
 
“Guaranty” means the Guaranty Agreement of even date herewith executed by
Guarantor for the benefit of Borrower as well as the Lender as assignee of the
Borrower, as the same may from time to time be extended, amended, restated,
supplemented or otherwise modified.
 
“Improvements” means all on-site and off-site improvements to the Land for a 93
unit assisted living center together with an 18 unit Alzheimers' facility to be
constructed on the Land, together with all fixtures, tenant improvements and
appurtenances now or later to be located on the Land and/or in such
improvements.
 
“Insurance Proceeds” means the insurance claims under and the proceeds of any
and all policies of insurance covering the Property or any part thereof,
including all returned and unearned premiums with respect to any insurance
relating to such Property, in each case whether now or hereafter existing or
arising.
 
“Land” means the approximately 4.674 acre tract of land described in and
encumbered by the Mortgage.
 
“Laws” means all federal, state and local laws, statutes, rules, ordinances,
regulations, codes, licenses, authorizations, decisions, injunctions,
interpretations, orders or decrees of any court or other Governmental Authority
having jurisdiction as may be in effect from time to time.
 
SCHEDULE 1 - PAGE 4

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“Leases” means all leases, license agreements and other occupancy or use
agreements (whether oral or written), now or hereafter existing, which cover or
relate to the Property or any part thereof, together with all options therefor,
amendments thereto and renewals, modifications and guaranties thereof, including
any cash or security deposited under the Leases to secure performance by the
tenants of their obligations under the Leases, whether such cash or security is
to be held until the expiration of the terms of the Leases or applied to one or
more of the installments of rent coming due thereunder.
 
“Letter of Credit” means any letter of credit issued by Lender for the account
of Borrower or its nominee in connection with the Construction of the
Improvements, together with any and all extensions, renewals or modifications
thereof, substitutions therefor or replacements thereof.
 
“Loan” means the loan from Lender to Borrower, the repayment obligations in
connection with which are evidenced by the Note.
 
“Loan Amount” means Twenty-Six Million Two Hundred Fifty Thousand and No/100
Dollars ($26,250,000.00).
 
“Loan Documents” means: (a) this Agreement, the Note, the Environmental
Agreement, the Collateral Assignments of Loan Documents and related instruments,
(b) all documents now or hereafter evidencing or securing the ASF Loan,
including without limitation the ASF Note, the Mortgage, and the other ASF Loan
Documents, and (c) any and all other documents which Borrower, ASF, Guarantor or
any other party or parties have executed and delivered, or may hereafter execute
and deliver, to evidence, secure or guarantee the Obligations, or any part
thereof, as the same may from time to time be extended, amended, restated,
supplemented or otherwise modified.
 
“Mortgage” means the Deed of Trust, Assignment, Security Agreement and Fixture
Filing of even date herewith given by ASF to John S. Seehorn, trustee for the
benefit of Borrower, and collaterally assigned by Borrower to Lender to secure
the Obligations, as the same may from time to time be extended, amended,
restated, supplemented or otherwise modified.
 
“Net Proceeds,” when used with respect to any Condemnation Awards or Insurance
Proceeds, means the gross proceeds from any Condemnation or Casualty remaining
after payment of all expenses, including attorneys’ fees, incurred in the
collection of such gross proceeds.
 
“Note” means the Promissory Note of even date herewith, in an amount equal to
the Loan Amount, made by Borrower to the order of Lender, as the same may from
time to time be extended, amended, restated, supplemented or otherwise modified.
 
“Notice” means a notice, request, consent, demand or other communication given
in accordance with the provisions of Section 8.6 of this Agreement.
 
“Obligations” means all present and future debts, obligations and liabilities of
Borrower to Lender arising pursuant to, or on account of, the provisions of this
Agreement, the Note or any of the other Loan Documents, including the
obligations: (a) to pay all principal, interest, late charges, prepayment
premiums (if any) and other amounts due at any time under the Note; (b) to pay
all Expenses, indemnification payments, fees and other amounts due at any time
under the Mortgage or any of the other Loan Documents, together with interest
thereon as provided in the Mortgage or such Loan Document; (c) to pay and
perform all obligations of Borrower (or its affiliate) under any Swap Contract;
and (d) to perform, observe and comply with all of the terms, covenants and
conditions, expressed or implied, which Borrower is required to perform, observe
or comply with pursuant to the terms of the Mortgage or any of the other Loan
Documents.
 
SCHEDULE 1 - PAGE 5

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“Person” means an individual, a corporation, a partnership, a joint venture, a
limited liability company, a trust, an unincorporated association, any
Governmental Authority or any other entity.
 
“Plans and Specifications” means any and all plans and specifications prepared
in connection with the Construction of the Improvements and approved in writing
by Lender, as the same may from time to time be amended with the prior written
approval of Lender.
 
“Project Schedule” means the schedule for commencement and completion of the
Construction of the Improvements attached hereto as Schedule 4, as the same may
be revised from time to time with the written approval of Lender.
 
“Property” means the real and personal property conveyed and encumbered by the
Mortgage.
 
“Rents” means all of the rents, royalties, issues, profits, revenues, earnings,
income and other benefits of the Property or any part thereof, or arising from
the use or enjoyment of the Property or any part thereof, including all such
amounts paid under or arising from any of the Leases and all fees, charges,
accounts or other payments for the use or occupancy of rooms or other public
facilities within the Property or any part thereof.
 
“State” means the State of Tennessee.
 
“Stored Materials” means building materials or furnishings that have not yet
been incorporated into the Improvements.
 
"Subordinated Loan" means that loan in the amount of up to $6,050,000.00 to be
made by Borrower to ASF to finance the purchase of the Property by ASF as well
as ASF's working capital operating deficits upon Completion of Construction.
 
"Subordinated Loan Documents" means the Subordinated Note from ASF to Borrower,
the Subordinated Mortgage and related loan agreement and other documents.
 
"Subordinated Note" means that Note in the maximum principal amount of
$6,050,000.00 from ASF payable to the order of Borrower.
 
"Subordinated Mortgage" means the Deed of Trust, Assignment, Security Agreement
and Fixture Filing from ASF to John S. Seehorn, trustee, to secure the
Subordinated Loan.
 
“Survey” means a map or plat of survey of the Land which conforms with Lender’s
survey requirements set forth in the Closing Checklist and with the “Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys” jointly
established and adopted by ALTA, ACSM and NSPS in 1999, and pursuant to Accuracy
Standards as adopted by ALTA, ACSM and NSPS and in effect on the date when the
Survey is certified to Lender in the form specified in the Closing Checklist.
 
“Swap Contract” means any agreement, whether or not in writing, relating to any
Swap Transaction, including, unless the context otherwise clearly requires, any
form of master agreement (the “Master Agreement”) published by the International
Swaps and Derivatives Association, Inc., or any other master agreement, entered
into between Swap Counterparty and Borrower (or its affiliate) in connection
with the Loan, together with any related schedule and confirmation, as amended,
supplemented, superseded or replaced from time to time, relating to or governing
any Swap Transaction.
 
“Swap Counterparty” means Lender or an affiliate of Lender, in its capacity as
counterparty under any Swap Contract.
 
“Swap Transaction” means any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap or option, bond, note or bill option, interest rate option, forward
foreign exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swap option, currency option or any other similar
transaction (including any option to enter into the foregoing) or any
combination of the foregoing, entered into between Swap Counterparty and
Borrower (or its affiliate) in connection with the Loan.
 
SCHEDULE 1 - PAGE 6

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“Taxes” means all taxes and assessments whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, which at any time may be assessed,
levied, confirmed or imposed by any Governmental Authority or any communities
facilities or other private district on Borrower or on any of its properties or
assets or any part thereof or in respect of any of its franchises, businesses,
income or profits.
 
SCHEDULE 1 - PAGE 7

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Schedule 2
 
Form of Draw Request
 
[BORROWER’S LETTERHEAD]
 
DRAW REQUEST NO. _________
 

TO:  BANK OF AMERICA, N.A. (“Lender”)
 
 
LOAN NO.
 
PROJECT
The Cumberland at Green Hills
LOCATION
Burton Hills, Nashville, Tennessee
BORROWERS
American Retirement Corporation
 
ASF of Green Hills, LLC
   
FOR PERIOD ENDING
 

 
In accordance with those two (2) certain Construction Loan Agreements in the
amount of $26,250,000.00 dated December 12, 2005, with one being between ASF of
Green Hills, LLC and American Retirement Corporation and the other between
American Retirement Corporation and Bank of America, N.A., the undersigned
jointly request that $______________________ be advanced from Loan proceeds. The
proceeds should be credited to American Retirement Corporation's Account No.
3253194544, at Bank of America, N.A.
 

 
1.  CURRENT DRAW REQUEST FOR HARD COSTS
$
 
2.  CURRENT DRAW REQUEST FOR SOFT COSTS
$
 
3.  TOTAL DRAW REQUEST
$

 

 
AUTHORIZED SIGNERS:
             
ASF of Green Hills, LLC
 
Dated:
 
 
 
 
 
Approved:
 
     
American Retirement Corporation
 
Dated:
 
 
 
 
 
 

 
SCHEDULE 2

--------------------------------------------------------------------------------

 
Schedule 3
 
Budget
 
 
 
 
 
 
 
 
 
SCHEDULE 3

--------------------------------------------------------------------------------

Schedule 4
 
Project Schedule
 

 
1.  Commencement.
 
Subject to Force Majeure, Borrower shall cause development of the Land to
commence no later than December 31, 2005, and shall cause Construction of the
Improvements to commence no later than February 7, 2006. In connection with the
foregoing, Borrower shall obtain from the appropriate government officials (i) a
grading permit on or before February 7, 2006 and (ii) a building permit on or
before February 7, 2006.
 
2.  Completion of Construction of All Improvements.
 
Subject to Force Majeure, Borrower shall cause Completion of Construction of all
of the Improvements to occur no later than August 27, 2007.
 
3.  Outside Date for Completion of Construction.
 
Regardless of the existence or non-existence or occurrence or non-occurrence of
Force Majeure, in no event shall Completion of Construction of the Improvements
occur later than November 27, 2007.
 
SCHEDULE 4

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Schedule 5
 
Additional Terms Regarding Advances
 
The conditions precedent to closing the Loan, recording the Mortgage and making
the first advance are set forth in the Closing Checklist. Subsequent advances of
the Loan shall be subject to the following additional terms and conditions:
 
1.  Advances Under the Budget.
 
As listed in the Budget: (a) the “Total Costs” are the maximum costs anticipated
by Borrower for each item specified; (b) the “Total Budget” is the maximum cost
anticipated by Borrower for the Construction of the Improvements and Borrower’s
satisfaction of the other requirements of the Loan; (c) the “Loan Proceeds” are
the maximum amount to be advanced under the Loan; (d) “Upfront Equity” is the
amount that Borrower is required to pay toward the Total Costs; and (e)
“Deferred Equity” is an additional amount that Borrower is required to pay
toward the Total Costs as of the date indicated. Whenever Borrower is required
to pay any items from Upfront Equity or Deferred Equity, Lender, at its option,
may restrict or prohibit advances of the Loan for such items to the extent that
Upfront Equity or Deferred Equity is sufficient to pay such amounts. Whenever
Borrower’s Upfront Equity or Deferred Equity is on deposit with Lender, Lender
shall make all advances first from such equity based on the allocations thereof
set forth in the Budget. After the exhaustion of Upfront Equity or Deferred
Equity allocated to a given line item, Lender will advance Loan proceeds for
that line item pursuant to the Budget.
 
2.  Special Conditions to Second Advance [First Advance for Hard Costs].
 
Prior to the second advance of the Loan [first advance for hard costs], Borrower
shall furnish the following items to Lender, all of which must be satisfactory
to Lender:
 
(a)  The original title insurance policy insuring Lender’s interest under the
Mortgage, issued pursuant to the commitment for title insurance approved by
Lender prior to the closing of the Loan;
 
(b)  Evidence of Borrower’s Upfront Equity investment in the Property of not
less than Three Million Six Hundred Thousand and No/100 Dollars ($3,600,000.00)
from sources other than the Loan, in accordance with the Budget.
 
3.  Additional Items Required for Each Advance.
 
Lender shall not be obligated to make an advance of Loan proceeds until and
unless the following additional items shall have been received and approved by
Lender, as and to the extent required by Lender, prior to the date of the
advance:
 
(a)  A notice of title continuation or an endorsement to the title insurance
policy with respect to the Land theretofore delivered to Lender, showing that
since the last preceding advance, there has been no change in the status of
title and no other exception not theretofore approved by Lender, which
endorsement shall have the effect of advancing the effective date of the policy
to the date of the advance then being made and increasing the coverage of the
policy by an amount equal to the advance then being made, if the policy does not
by its terms provide automatically for such an increase.
 
(b)  Interim acknowledgments of payment and releases of liens from all Persons
who have furnished labor, materials and/or services in the Construction of the
Improvements, covering work performed, materials supplied and services rendered
through the date of the last preceding advance.
 
SCHEDULE 5 - PAGE 1

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(c)  Soil compaction test reports, bearing capacity test reports and concrete
test reports.
 
(d)  A foundation Survey and such other current Surveys as Lender may reasonably
request, in each instance disclosing no violation, encroachment or other
variance from applicable set-backs or other restrictions unless approved in
writing by Lender.
 
(e)  Evidence that the Improvements have not been materially damaged by fire or
other Casualty unless Lender shall have received Insurance Proceeds, or
satisfactory assurance that it will receive such proceeds in a timely manner
pursuant to Section 4.10, sufficient in the judgment of Lender to effect a
satisfactory restoration and completion of the Improvements in accordance with
the terms of the Mortgage and this Agreement.
 
(f)  Evidence that all work requiring inspection by any Governmental Authority
having or claiming jurisdiction has been duly inspected and approved by such
authority and by any rating or inspection organization, bureau, association or
office having or claiming jurisdiction.
 
(g)  Evidence, including a report from the Construction Consultant, that all
work completed at the time of the application for an advance has been performed
in a good and workmanlike manner, that all materials and fixtures usually
furnished and installed at that stage of construction have been so furnished and
installed, that the Improvements can be completed in accordance with the Project
Schedule, and that the balance of the Loan proceeds then held by Lender and
available for advance pursuant to the terms of this Agreement, together with
other funds which Lender determines to be available to Borrower for such
purpose, are and will be sufficient to pay the cost of such completion.
 
4.  Conditions Precedent to All Advances.
 
Lender shall not be obligated to make an advance of Loan proceeds unless the
following additional conditions shall have been satisfied or waived in writing
by Lender as of the date of each advance:
 
(a)  No lien for the performance of work or supplying of labor, materials or
services shall have been filed against the Land and remain unsatisfied or
unbonded.
 
(b)  No condition or situation shall exist at the Land which, in the reasonable
determination of Lender, constitutes a danger to or impairment of the Property
or presents a danger or hazard to the public.
 
(c)  The representations and warranties made in Article III shall be true and
correct on and as of the date of the advance with the same effect as if made on
such date.
 
(d)  All terms and conditions of the Loan Documents required to be met as of the
date of the applicable advance shall have been met to the satisfaction of
Lender.
 
(e)  No Default or Event of Default shall have occurred and be continuing.
 
5.  Advances for Hard and Soft Costs.
 
Lender shall make periodic advances for hard and soft costs as construction
progresses. Each advance shall be equal to 91.2646% of Borrower’s total costs as
reflected in the applicable draw request, net of retainage in the amount of 10%
for hard costs, until Lender has disbursed an amount equal to 50% of all hard
cost line items in the Budget. Thereafter, each advance shall be equal to
91.2646% of Borrower’s total costs as reflected in the applicable draw request,
net of retainage in the amount of 5% for hard costs. The balance of Borrower's
total costs, being 8.7354% of each draw request, shall be made up by the
Borrower in cash as Deferred Equity simultaneously with each advance by the
Lender. Lender shall not be obligated to make the final advance of the Loan for
hard costs unless the following additional conditions shall have been satisfied,
to the extent required by Lender:
 
SCHEDULE 5 - PAGE 2

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(a)  The Construction Consultant and the Architect shall have certified to
Lender that construction has been completed in a good and workmanlike manner, in
accordance with applicable requirements of all Governmental Authorities and
substantially in accordance with the Plans and Specifications;
 
(b)  To the extent required by applicable Governmental Authorities for the use
and occupancy of the Improvements, certificates of occupancy and other
applicable permits and releases shall have been issued with respect to the
Improvements and copies thereof have been furnished to Lender;
 
(c)  Lender shall have received a satisfactory as-built Survey showing the
location of the Improvements;
 
(d)  Lender shall have received a satisfactory final affidavit from the General
Contractor and full and complete releases of lien from the General Contractor
and each subcontractor of and supplier to the General Contractor with respect to
work performed and/on materials supplied in the Construction of the
Improvements;
 
(e)  Lender shall have received a satisfactory set of as-built plans and
specifications for the Improvements;
 
(f)  A valid notice of completion shall have been recorded;
 
(g)  Lender shall have received a satisfactory endorsement to its title
insurance policy; and
 
(h)  All other terms and conditions of this Agreement and the other Loan
Documents required to be met as of the date of the final advance of the Loan for
hard costs shall have been met to the satisfaction of Lender.
 
6.        Advances for Stored Materials.
 
No advances will be made for Stored Materials unless (a) Borrower has good title
to the Stored Materials and has furnished satisfactory evidence of such title to
Lender, to the extent required by Lender, (b) the Stored Materials are
components in a form ready for incorporation into the Improvements and will be
so incorporated within a period of forty-five (45) days from the date of the
advance for the Stored Materials, (c) the Stored Materials are in Borrower’s
possession and are satisfactorily stored on the Land or at such other location
as Lender may approve, in each case with adequate safeguards to prevent
commingling with materials for other projects, (d) the Stored Materials are
protected and insured against loss, theft and damage in a manner and amount
satisfactory to Lender, (e) the Stored Materials have been paid for in full or
will be paid for in full from the funds to be advanced, (f) Lender has or will
have upon the payment for the Stored Materials from the advanced funds a
perfected, first priority security interest in the Stored Materials, (g) all
lien rights and claims of the supplier have been released or will be released
upon payment with the advanced funds, and (h) following the advance for the
Stored Materials, the aggregate amount of advances for Stored Materials that
have not yet been incorporated into the Improvements will not exceed Two Hundred
Thousand Dollars ($200,000.00).
 
7.        Advances for Soft Costs.
 
Lender shall make periodic advances for soft costs, each in the amount requested
in the applicable draw request, without retainage.
 
8.        Advances for Interest.
 
Lender shall make periodic advances to pay interest as and when it becomes due.
Borrower hereby irrevocably authorizes Lender to make any interest payment on
Borrower’s behalf by debiting the interest reserve in the amount of the payment
and applying the debited amount to accrued and unpaid interest on the Loan.
Lender will disburse the amount of any interest payment into the account
designated below for funding of advances, and will invoice Borrower for such
interest payment.
 
SCHEDULE 5 - PAGE 3

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    9.            Account for Funding Advances.
 
Subject to Lender’s right to advance Loan proceeds as provided in this
Agreement, Lender may make advances into Borrower’s checking account No.
3253194544 maintained with Lender. Borrower hereby irrevocably authorizes Lender
to deposit any advance to the credit of Borrower in that account, by wire
transfer or other deposit. Borrower further irrevocably authorizes Lender to pay
and reimburse itself for any Expenses incurred by Lender by debit to such
account.
 
SCHEDULE 5 - PAGE 4

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Schedule 6
 
Leasing and Tenant Matters
 
1.  Representations and Warranties of Borrower Regarding Leases.
 
Borrower represents and warrants that Borrower has delivered to Lender
Borrower’s standard form of tenant lease, and no Lease or lease guaranty
contains any option or right of first refusal to purchase all or any portion of
the Property or any present or future interest therein.
 
2.  Covenants of Borrower Regarding Leases and Rents.
 
Borrower covenants that Borrower (a) will observe and perform all of the
obligations imposed upon the landlord in the Leases and will not do or permit to
be done anything to impair the security thereof; (b) will use its best efforts
to enforce or secure, or cause to be enforced or secured, the performance of
each and every obligation and undertaking of the respective tenants under the
Leases and will appear in and defend, at Borrower’s sole cost and expense, any
action or proceeding arising under, or in any manner connected with, the Leases;
(c) will not collect any of the Rents in advance of the time when the same
become due under the terms of the Leases; (d) will not discount any future
accruing Rents; (e) without the prior written consent of Lender, will not
execute any assignment of the Leases or the Rents;  (f) other than in the
ordinary course of business, will not alter, modify or change the terms of the
Leases, or surrender, cancel or terminate the same without the prior written
consent of Lender; and (g) will execute and deliver, at the request of Lender,
all such assignments of the Leases and Rents in favor of Lender as Lender may
from time to time require.
 
3.  Leasing Guidelines.
 
Borrower shall not enter into or allow ASF to enter into any Lease of space in
the Improvements unless approved or deemed approved by Lender prior to
execution. The standard form of tenant lease, and any revisions thereto, must
have the prior written approval of Lender. Lender shall be “deemed” to have
approved any Lease that: (a) is on the standard form lease approved by Lender
with no deviations except as approved by Lender; (b) is entered into in the
ordinary course of business with a bona fide unrelated third party tenant, and
ASF, acting in good faith and exercising due diligence, has determined that the
tenant is financially capable of performing its obligations under the Lease; (c)
reflects an arm’s length transaction at then-current market rate for comparable
space; and (d) contains no right or option to purchase the Property or any
present or future interest therein. If requested by Lender, Borrower shall
provide to Lender a correct and complete copy of each existing and future Lease,
including any exhibits, and any guaranty(ies) thereof, within seven (7) days
after Lender’s request (for existing Leases) or seven (7) days after execution
(for future Leases).
 
4.  Delivery of Leasing Information and Documents.
 
From time to time upon Lender’s request, Borrower shall promptly deliver to
Lender (a) complete executed originals of each Lease, including any exhibits
thereto and any guaranty(ies) thereof, (b) a complete fee schedule relating to
the Property in such detail as Lender may legally require, together with such
operating statements and leasing schedules and reports as Lender may require in
compliance with applicable law, and (c) such other information regarding tenants
and prospective tenants and other leasing information as Lender may reasonably
request.
 
SCHEDULE 6 - PAGE 1

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Schedule 7
 
Swap Contracts
 

1.  Swap Documentation. Within the timeframes required by Lender and Swap
Counterparty, Borrower shall deliver to Swap Counterparty the following
documents and other items, executed and acknowledged as appropriate, all in form
and substance satisfactory to Lender and Swap Counterparty: (a) Master Agreement
in the form published by the International Swaps and Derivatives Association,
Inc. and related schedule in the form agreed upon between Borrower (or its
affiliate) and Swap Counterparty; (b) a confirmation under the foregoing; (c)
the Guaranty; (d) if Borrower (or its affiliate) is anything other than a
natural person, evidence of due authorization to enter into transactions under
the foregoing Swap Contract with Swap Counterparty, together with evidence of
due authorization and execution of any Swap Contract; and such other title
endorsements, documents, instruments and agreements as Lender and Swap
Counterparty may require to evidence satisfaction of the conditions set forth in
this Section 1 of Schedule 7.
 
2.  Conveyance and Security Interest. To secure Borrower’s Obligations, Borrower
hereby transfers, assigns and transfers to Lender, and grants to Lender a
security interest in, all of Borrower’s right, title and interest, but not its
obligations, duties or liabilities for any breach, in, under and to the Swap
Contract, any and all amounts received by Borrower in connection therewith or to
which Borrower is entitled thereunder, and all proceeds of the foregoing. All
amounts payable to Borrower under the Swap Contract shall be paid to Lender and
shall be applied to pay interest or other amounts under the Loan.

3.  Interest Reserve. Borrower and Lender acknowledge that the amount of the
interest reserve line item in the Budget was calculated based on the assumptions
that Borrower (or its affiliate) would obtain the Swap Contract and would timely
pay and perform its Obligations under the Swap Contract in the future. On the
terms and subject to the provisions of this Agreement governing advances of Loan
proceeds, Lender will make advances from interest reserve for periodic payments
under the Swap Contract as and when they become due. Borrower hereby irrevocably
authorizes Lender to make any payment under the Swap Contract by debiting the
interest reserve in the amount of the payment and applying the debited amount to
the Swap Contract. [Lender will disburse the amount of any payment under a Swap
Contract into the Checking Account defined and designated below.]
Notwithstanding the foregoing, Lender shall have no obligation to make any
advance for any payment which becomes due under a Swap Contract following an
Event of Default.

4.              Cross-Default. It shall be an Event of Default under this
Agreement if any Event of Default occurs as defined under any Swap Contract as
to which Borrower (or its affiliate) is the Defaulting Party, or if any
Termination Event occurs under any Swap Contract as to which Borrower (or its
affiliate) is an Affected Party. As used in this Section, the terms “Defaulting
Party,” “Termination Event” and “Affected Party” have the meanings ascribed to
them in the Swap Contract.

5.  Remedies; Cure Rights. In addition to any and all other remedies to which
Lender and Swap Counterparty are entitled at law or in equity, Swap Counterparty
shall have the right, to the extent so provided in any Swap Contract or any
Master Agreement relating thereto, (a) to declare an event of default,
termination event or other similar event thereunder and to designate an Early
Termination Date as defined under the Master Agreement, and (b) to determine net
termination amounts in accordance with the Swap Contract and to setoff amounts
between Swap Contracts. Lender shall have the right at any time (but shall have
no obligation) to take in its name or in the name of Borrower (or its affiliate)
such action as Lender may at any time determine to be necessary or advisable to
cure any default under any Swap Contract or to protect the rights of Borrower
(or its affiliate) or Swap Counterparty thereunder; provided, however, that
before the occurrence of an Event of Default under this Agreement, Lender shall
give prior written notice to Borrower before taking any such action. For this
purpose, Borrower hereby constitutes Lender its true and lawful attorney-in-fact
with full power of substitution, which power of attorney is coupled with an
interest and irrevocable, to exercise, at the election of Lender, any and all
rights and remedies of Borrower (or its affiliate) under the Swap Contract,
including making any payments thereunder and consummating any transactions
contemplated thereby, and to take any action that Lender may deem proper in
order to collect, assert or enforce any claim, right or title, in and to the
Swap Contract hereby assigned and conveyed, and generally to take any and all
such action in relation thereto as Lender shall deem advisable. Lender shall not
incur any liability if any action so taken by Lender or on its behalf shall
prove to be inadequate or invalid. Borrower expressly understands and agrees
that Lender is not hereby assuming any duties or obligations of Borrower (or its
affiliate) to make payments to Swap Counterparty under any Swap Contract or
under any other Loan Document. Such payment duties and obligations remain the
responsibility of Borrower (or its affiliate) notwithstanding any language in
this Agreement.

SCHEDULE 7 - PAGE 1

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[Optional provision requiring the borrower to choose one-month LIBOR fixings
under the note to coincide with swap payments. Swaps use British Bankers
Association LIBOR, which is expressed to 5 decimal places without rounding. If
you want the loan and swap to match exactly, you will need to delete the LIBOR
rounding in the note.]

6.  Timing of Interest Rate Periods. At all times when any Swap Contract is in
effect, Borrower shall elect Interest Periods of one month in duration for all
LIBOR Rate Principal. As used herein, the terms “Interest Period” and “LIBOR
Rate Principal” have the meanings ascribed to them in the Note. Borrower shall
time its rate elections under the Note so that each Interest Period for LIBOR
Rate Principal ends on a day when a payment is due from either counterparty
under any Swap Contract.

[Optional provision authorizing the lender to debit and credit a specified
checking account for loan and swap payments.]

7.            Automatic Deduction and Credit.
 

 
(a)
At all times when any Swap Contract is in effect, Borrower shall maintain the
Checking Account in good standing with Lender. Borrower hereby grants to Lender
and
  Swap Counterparty a security interest in the Checking Account, and any other
accounts and deposit accounts from which Borrower may from time to time
authorize Lender to debit payments due on the Loana nd the Swap Contracts.
Borrower is granting this security interest to Lender and Swap Counterparty for
the purpose of securing the Obligations.      
(b)
At all times when any Swap Contract is in effect, all monthly payments owed by
Borrower under the Note will be automatically deducted on their due dates from
the
  Checking Account. Lender is hereby authorized to apply the amounts so debited
to Borrower’s obligations under the Loan. Notwithstanding the foregoing, Lender
will not automatically deduct the principal payment at maturity from the
Checking Account.      
(c)
At all times when any Swap Contract is in effect, all payments owed by Borrower
(or its affiliate) under any Swap Contract will be automatically deducted on
their due
  dates from the Checking Account. The preceding sentence includes Borrower’s
authorization for Lender to debit from the Checking Account any monetary
obligation owed by Borrower (or its affiliate) to Swap Counterparty following
any Early Termination Date, as defined under the Master Agreement. Swap
Counterparty is hereby authorized to apply the amounts so debited to the
obligations of Borrower (or its affiliate) under the applicable Swap Contract.  
   
(d)
Lender will debit the Checking Account on the dates the foregoing payments
become due; provided, however, that if a due date does not fall on a Banking
Day, Lender
  will debit the Checking Account on the first Banking Day following such due
date.      
(e)
Borrower shall maintain sufficient funds on the dates when Lender enters debits
authorized by this Agreement. If there are insufficient funds in the Checking
Account on
  any date when Lender enters any debit authorized by this Agreement, without
limiting Lender’s other remedies in such an event, the debit will be reversed in
whole or in part, in Lender’s sole and absolute discretion, and such amount not
debited shall be deemed to be unpaid and shall be immediately due and payable in
accordance with the terms of the Note and/or the Swap Contract, as applicable.  
   
(f)
So long as there is no Event of Default existing under this Agreement or any
Swap Contract, Lender will automatically credit the Checking Account for
payments owed
  by Swap Counterparty under the Swap Contract. Lender will credit the Checking
Account on the dates the foregoing payments become due; provided, however, that
if a due date does not fall on a Banking Day, Lender will credit the Checking
Account on the first Banking Day following such due date.

SCHEDULE 7 - PAGE 2

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