Exhibit 10.5

 
CONSTRUCTION LOAN ADMINISTRATION AGREEMENT
 
THIS CONSTRUCTION LOAN ADMINISTRATION AGREEMENT ("Agreement") is made as of the
7th day of July, 2005, by Bank of America, N.A. ("Bank"), and the Borrower
identified in Exhibit B ("Borrower"), who agree as follows:
 
RECITALS:
 
WHEREAS, Bank has agreed to loan to Borrower amounts up to an aggregate of
Twenty Three Million Two Hundred Twelve Thousand Five Hundred Fifty and No/100
Dollars ($23,180,008.00) of which of up to $18,721,550 shall be available on a
term loan basis for the purposes of financing and/or refinancing the acquisition
costs of a skilled nursing facility known as Hacienda De Vida, consisting of a
128 bed skilled nursing facility and a 44 unit assisted living facility, and up
to $4,458,458 shall be available for providing financing for the construction of
a 21-unit assisted living expansion and a connected 20-unit Alzheimer’s building
(the "Project"); and
 
WHEREAS, the foregoing loans from Bank shall be evidenced by three (3) notes,
being a $4,458,458.00 construction loan note, a $9,360,775.00 floating rate term
note and a $9,360,775.00 fixed rate term note; and
 
WHEREAS, the $4,458,458.00 Construction Loan Promissory Note evidencing the
construction loan (the "Construction Loan") from Bank to Borrower shall be
disbursed by Bank to enable Borrower to construct the 21-unit assisted living
expansion and a connected 20-unit Alzheimer’s building contiguous to Hacienda De
Vida; and
 
WHEREAS, Bank requires that disbursements from the Construction Loan be approved
by Bank pursuant to criteria hereinafter set forth; and
 
WHEREAS, the purpose of this Agreement is to set forth the terms and conditions
related to administration and disbursement of the Construction Loan.
 
Section 1. - ADMINISTRATION OF THE CONSTRUCTION LOAN
 
Section 1.1. General Information and Purpose. The Basic Information attached as
Exhibit "B" and all other exhibits, which are made a part of this Agreement and
incorporated herein by reference, contain definitions of certain terms used
herein, and also contain other terms, provisions, and conditions applicable to
the Construction Loan. The proceeds of the Construction Loan are to be used by
Borrower to pay the cost of the construction of the Improvements on the Land,
and other costs regarding the Property if and to the extent that such costs are
specifically provided for in the Budget. The Loan Documents, which must be in
form, detail and substance satisfactory to Bank, evidence the agreements of
Borrower and Bank with respect to the Construction Loan. Borrower shall comply
with all Loan Documents.
 
Section 1.2. Administration of Construction Loan. Bank agrees to administer the
Construction Loan in accordance with the terms and conditions of this Agreement.
 
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Section 1.3. Budget. The Construction Loan amounts are allocated for the costs
of the Project shown in the Budget attached as Exhibit "D". The Budget has been
prepared by the Borrower, and Borrower represents to Bank that it includes all
projected costs and expenses (the "Aggregate Cost") incident to the Project,
after taking into account the requirements of this Agreement. Bank shall not be
required to approve a Requisition which includes (a) any advance for any cost
not set forth in the Budget, (b) any advance for any line item in the Budget
that, when added to all prior advances for that line item, would exceed the
lesser of (i) the actual cost incurred by Borrower for such line item or
(ii) the sum allocated in the Budget for that line item, (c) any advance for any
contingency line item unless Bank consents to such advance in its sole
discretion, reasonably exercised, or (d) any advance other than as provided in
the Budget or to make any advance for interest on the Construction Loan after
commencement of operations in the Improvements if and to the extent that there
is sufficient net operating income from the Property to cover any such interest.
Bank may approve Requisitions for advances allocated to line items in the Budget
for other purposes or in different proportions as Bank in its sole discretion
deems necessary or advisable. Any reallocation of Construction Loan amounts from
one Budget line item to another, or any other amendment to the Budget, shall be
subject to Bank's approval prior to the making of any advance of the
Construction Loan based upon such reallocation or amendment.
 
Section 1.4. Borrower's Deposit. If at any time Bank determines that the sum of
(i) the unadvanced portion of the Construction Loan to which Borrower is
entitled, plus (ii) the amounts of the Aggregate Cost which are scheduled to be
paid by Borrower from funds which are available, set aside and committed, to
Bank's satisfaction, is or will be insufficient to pay the unpaid actual
Aggregate Cost, Borrower shall, within seven (7) days after written notice from
Bank, deposit with Bank the amount of the deficiency ("Borrower's Deposit") in
an interest-bearing account of Bank's selection with interest earned thereon to
be part of the Borrower's Deposit. Such Borrower's Deposit shall be advanced as
construction progresses in accordance with this Agreement before any, or any
additional, Construction Loan disbursements are made. Upon a Default, Bank may
(but shall have no obligation to) apply all or any part of the Borrower's
Deposit against the unpaid Obligations in such order as Bank determines.
 
Section 2. - ADDITIONAL COVENANTS AND AGREEMENTS
 
Section 2.1. Plans. Borrower assumes full responsibility for the compliance of
the Plans and the Property and the construction of the Improvements in
accordance with all laws, governmental requirements and sound building and
engineering practices. No construction shall be undertaken on the Land except as
shown in the Plans. No plans or specifications, or any changes thereto, except
Permitted Changes, shall be included as part of the Plans until consented to by
Bank, all applicable governmental authorities, and all parties required under
the Loan Documents.
 
Section 2.2. Contracts. Bank shall have the right of approval as to parties,
terms, and all other matters, with respect to (a) any contract for the
performance of any work or the supplying of any labor, materials, or services
for the design or construction of the Improvements, (b) any management, leasing,
maintenance or other contract pertaining to the Property and (c) the
modification, amendment or termination of any such contracts. Borrower shall not
default under any contract, Borrower shall not permit any contract to terminate
by reason of any failure of Borrower to perform thereunder, and Borrower shall
promptly notify Bank of any material default thereunder. Borrower will deliver
to Bank, upon request of Bank, the names of all persons or entities with whom
each contractor has contracted or intends to contract for the construction of
the Improvements or for the furnishing of labor or materials therefore.
 
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Section 2.3. Construction of the Improvements. Borrower shall complete
construction of the Improvements, and shall obtain a permanent unconditional
certificate of occupancy and all other permits, licenses, and approvals for the
occupancy, use and operation of the Improvements from all applicable
governmental authorities on or before the Completion Date, free and clear of all
liens except the Loan Documents. Borrower shall correct promptly (a) any
material defect in the Improvements, (b) any material departure from the Plans,
law, or governmental requirements, or (c) any encroachment by any Improvements
or structure on any building setback line, easement, property line or restricted
area. Borrower shall not permit cessation of work for a period in excess of
fifteen (15) consecutive days.
 
Section 2.4. Changes. Without Bank's prior written consent, Borrower shall not
change or modify the Plans, agree to any change order, or allow any extras to
any contractor or any subcontractor, except that Borrower may make the Permitted
Changes if: i) Borrower notifies Bank in writing of the change or extra with
appropriate supporting documentation and information; ii) Borrower obtains the
approval of the applicable contractor, Borrower's architect, and all sureties;
iii) the structural integrity, quality and standard of workmanship of the
Improvements is not impaired; iv) no substantial change in architectural
appearance is affected; v) no default in any obligation to any person or
violation of any law or governmental requirement would result from such change
or extra; vi) Borrower complies with Section 1.4 of this Agreement to cover any
excess cost resulting from the change or extra; and vii) completion of the
Improvements by the Completion Date will not be affected. Bank shall not be
obligated to review a proposed change unless it has received all documents
necessary to review such change, such as the change order, cost estimates, plans
and specifications, and evidence that all approvals by all applicable parties
have been obtained.
 
Section 2.5. Storage of Materials. Borrower shall cause all materials supplied
for, or intended to be utilized in the construction of the Improvements, but not
yet affixed to or incorporated into the Improvements on the Land, to be stored
on the Land with adequate safeguards as required by Bank to prevent loss, theft,
damage or commingling with other materials or projects. Borrower shall not
purchase or order materials for delivery more than forty-five (45) days prior to
the scheduled incorporation of such materials into the Improvements.
 
Section 2.6. Inspection. Bank or Bank's agent may enter upon the Property to
inspect the Property and any materials at any reasonable time. Borrower will
furnish to Bank at any time for inspection and copying all Plans, shop drawings,
specifications, books and records, and other documents and information required
by Bank.
 
Section 2.7. Notice to Bank. Borrower shall promptly notify Bank in writing of
any of the following events, specifying in each case the action Borrower has
taken or will take with respect thereto: viii)any violation of any law or
governmental requirement; ix)any litigation, arbitration or governmental
investigation or proceeding instituted or threatened against Borrower or the
Property or any material development therein; x)any actual or threatened
condemnation of any portion of the Property, any negotiations with respect to
any such taking, or any loss of or substantial damage to the Property; xi)any
labor controversy pending or threatened against Borrower or any contractor or
any material development in any labor controversy; xii) any notice received by
Borrower with respect to the cancellation, alteration or non-renewal of any
insurance coverage maintained with respect to the Property; or xiii)any failure
by Borrower or any contractor to perform any material obligation under any
construction contract, any event or condition which would permit termination of
a construction contract or suspension of work thereunder, or any notice given by
Borrower or any contractor with respect to any of the foregoing.
 
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Section 2.8. Assignment of Contracts and Plans. As additional security for the
payment of the Construction Loan, at Bank's request Borrower agrees to transfer
and assign to Bank together with such consents thereto as Bank may request all
of Borrower's rights and interest, but not its liability, in, under, all
existing or future construction, architectural and design contracts, and the
Plans, and further agrees that all of the same shall be covered by the security
agreement provisions of the Deed of Trust. Borrower represents and warrants that
the copy of any contract furnished or to be furnished to Bank is and shall be a
true and complete copy thereof, that the copies of the Plans delivered to Bank
are and shall be true and complete copies of the Plans, that there have been no
modifications thereof which are not fully set forth in the copies delivered, and
that Borrower's interest therein is not subject to any claim, setoff, or
encumbrance. Neither this assignment nor any action by Bank shall constitute an
assumption by Bank of any obligation under any contract or with respect to the
Plans, and Borrower shall continue to be liable for all obligations of Borrower
with respect thereto, Borrower hereby agreeing to perform all of its obligations
under any contract. Bank shall have the right at any time (but shall have no
obligation) to take in its name or in the name of Borrower such action Bank may
determine necessary to cure any default under any contract or with respect to
the Plans or to protect the rights of Borrower or Bank with respect thereto.
Bank shall incur no liability if any action so taken by it or on its behalf
shall prove to be inadequate or invalid. Borrower indemnifies and holds Bank
harmless against and from any loss, cost, liability or expense (including, but
not limited to, attorneys' fees and expenses) incurred in connection with
Borrower's failure to perform such contracts or any action taken by Bank. Bank
may use the Plans for any purpose relating to the Improvements. Borrower
irrevocably constitutes and appoints Bank as Borrower's attorney-in-fact, which
power of attorney shall be irrevocable and coupled with an interest, in
Borrower's name or in Bank's name to enforce all rights of Borrower under any
contract or with respect to the Plans.
 
Section 2.9. Omitted.
 
Section 2.10. Financial Statements. Borrower shall deliver to Bank the Financial
Statements and other statements and information at the times and for the periods
described in the Basic Information, as otherwise required by any other Loan
Documents and from time to time such additional financial statements and
information Bank requests.
 
Section 2.11. Annual Appraisal. Bank may obtain at Borrower's expense, as
required by Bank's policy from time to time, an appraisal of any part of the
Property prepared in accordance with written instructions from Bank by a
third-party appraiser engaged directly by Bank; provided, Borrower will not be
required to pay for more than one (1) appraisal in any twelve (12) month period.
Each such appraiser and appraisal shall be satisfactory to Bank (including
satisfaction of applicable regulatory requirements). The cost of each such
appraisal shall be due and payable by Borrower on demand and shall be secured by
the Loan Documents.
 
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Section 2.12. Reports and Vouchers. Borrower shall (a) promptly deliver to Bank
copies of all reports, studies, inspections and tests made on the Land, the
Improvements or the materials to be incorporated into the Improvements; and
(b) make additional tests Bank reasonably requires. Borrower shall immediately
notify Bank of such report, study, inspection or test that indicates any adverse
condition in the Land or the Improvements.
 
Section 2.13. Payment of Withholding Taxes. Borrower shall not use, or knowingly
permit any contractor or subcontractor to use, any portion of the proceeds of
any advance to pay the wages of employees unless a portion of the proceeds or
other funds are also used to make timely payment to or deposit with the United
States all amounts of tax required to be deducted and withheld with respect to
such wages under the Internal Revenue Code, and to make timely payment to or
deposit with any local and/or state governmental authority or agency having
jurisdiction all amounts of tax required to be deducted and withheld with
respect to such wages under any applicable local and/or state laws.
 
Section 2.14. Representations and Warranties. Borrower hereby represents and
warrants to Bank that xiv) to the extent required by applicable law, Borrower
has filed all necessary tax returns and reports and has paid all taxes and
governmental charges thereby shown to be owing; xv) the Plans have been or will,
prior to commencement of construction, be approved by all applicable
governmental authorities, accepted by each contractor, complete in all material
respects, adequate for the construction of the Improvements (containing all
necessary detail), and in compliance with the Loan Documents, all applicable
laws, restrictive covenants, and governmental requirements, rules, and
regulations; xvi) the Land is, or will be, separately assessed for tax purposes;
xvii) the Land and Improvements comply with all laws and governmental
requirements, including all subdivision and platting requirements, without
reliance on any adjoining or neighboring property; xviii) the Plans will and the
Improvements when constructed will comply with all legal requirements regarding
access and facilities for handicapped or disabled persons; xix) Borrower has not
directly or indirectly conveyed, assigned or otherwise disposed of or
transferred (or agreed to do so) any air rights or other similar rights,
privileges or attributes with respect to the Property, including those arising
under any zoning or land use ordinance or other law or governmental requirement;
xx) the construction schedule for the Project is realistic and the Completion
Date is a reasonable estimate of the time required to complete the Project; and
xxi) the Financial Statements delivered to Bank are true and correct, and there
has been no material change of Borrower's financial condition from the financial
condition of Borrower indicated in such Financial Statements.
 
Section 3. - DEFAULT AND REMEDIES
 
Section 3.1. Events of Default. "Default" shall have the meaning set forth in
the Loan Agreement.
 
Section 3.2. Remedies. Upon a Default Bank may, at its election, but without any
obligation to do so, pursue the remedies set forth in the Loan Agreement or in
any of the other Loan Documents.
 
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Section 4. - GENERAL TERMS AND CONDITIONS
 
Section 4.1. Omitted.
 
Section 4.2. Bank's Consent. Except where otherwise expressly provided in the
Loan Documents, in any instance where the approval, consent or the exercise of
judgment of Bank is required, the granting or denial of such approval or consent
and the exercise of such judgment shall be (a) within the sole reasonable
discretion of Bank; and (b) deemed to have been given only by a specific writing
intended for the purpose given and executed by Bank. Notwithstanding any
approvals or consents by Bank, Bank has no obligation or responsibility
whatsoever for the adequacy, form or content of the Plans, the Budget, any
contract, any change order, any lease, or any other matter incident to the
Property or the construction of the Improvements. Bank's acceptance of an
assignment of the Plans shall not constitute approval of the Plans. Any
inspection or audit of the Property or the books and records of Borrower, or the
procuring of documents and financial and other information, by or on behalf of
Bank shall be for Bank's protection only, and shall not constitute any
assumption of responsibility to Borrower or anyone else with regard to the
condition, construction, maintenance or operation of the Property, or relieve
Borrower of any of Borrower's obligations. Borrower has selected all surveyors,
architects, engineers, contractors, materialmen and all other persons or
entities furnishing services or materials to the Project. Bank has no duty to
supervise or to inspect the Property or the construction of the Improvements nor
any duty of care to Borrower or any other person to protect against, or inform
Borrower or any other person of, the existence of negligent, faulty, inadequate
or defective design or construction of the Improvements. Bank shall not be
liable or responsible for any defect in the Property or the Improvements, the
performance or default of Borrower, Borrower's architect, engineer and
contractor, or any other party, or for any failure to construct, complete,
protect or insure the Improvements, or for the payment of costs of labor,
materials, or services supplied for the construction of the Improvements, or for
the performance of any obligation of Borrower whatsoever. Nothing, including any
advance or acceptance of any document or instrument, shall be construed as a
representation or warranty, express or implied, to any party by Bank. Inspection
shall not constitute an acknowledgment or representation by Bank that there has
been or will be compliance with the Plans, Loan Documents, applicable laws and
governmental requirements or that the construction is free from defective
materials or workmanship. Inspection whether or not followed by notice of
Default shall not constitute a waiver of any Default then existing, or a waiver
of Bank's right thereafter to insist that the Improvements be constructed in
accordance with the Plans, Loan Documents, applicable laws, and governmental
requirements. Bank's failure to inspect shall not constitute a waiver of any of
Bank's rights under the Loan Documents or at law or in equity.
 
Section 4.3. Miscellaneous. This Agreement may be executed in several
counterparts, all of which are identical, and all of which counterparts together
shall constitute one and the same instrument. A determination that any provision
of this Agreement is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the determination that the
application of any provision of this Agreement to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances. Time shall be of
the essence with respect to Borrower's obligations under the Loan Documents.
This Agreement, and its validity, enforcement and interpretation, shall be
governed by Tennessee law (without regard to any conflict of laws principles)
and applicable United States federal law.
 
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Section 4.4. Notices. Unless specifically provided otherwise, any notice for
purposes of this agreement or any other Loan Document shall be given in
accordance with the provisions of the Loan Agreement.
 
Section 4.5. Successors and Assigns. This Agreement shall be binding upon
Borrower, and Borrower's heirs, devisees, representatives, successors and
assigns, and shall inure to the benefit of Bank and its successors and assigns,
provided, however, that Borrower shall not assign or encumber any interest of
Borrower under any Loan Document or in any proceeds of the Construction Loan
without the prior written consent of Bank.
 
Section 4.6. Modification or Termination. The Loan Documents may only be
modified or terminated by a written instrument or instruments intended for that
purpose and executed by the party against which enforcement thereof is asserted.
This Agreement shall continue in full force and effect until the Obligations are
paid in full; and all representations and warranties and all provisions herein
for indemnity of Bank (and any other provisions herein specified to survive)
shall survive payment in full of the Obligations and any release or termination
of this Agreement or of any other Loan Documents.
 
Section 4.7. Costs and Expenses. Without limitation of any Loan Document and to
the extent not prohibited by applicable laws, Borrower shall pay when due, and
reimburse to Bank on demand, and indemnify Bank from, all out-of-pocket fees,
costs, and expenses paid or incurred by Bank in connection with the negotiation,
preparation and execution of this Agreement and the other Loan Documents (and
any amendments, approvals, consents, waivers and releases requested, required,
proposed or done from time to time), or in connection with the disbursement,
administration or collection of the Construction Loan or the enforcement of the
obligations or the exercise of any right or remedy of Bank, including xxii) fees
and expenses of Bank's counsel; xxiii) appraisal, re-appraisal and survey costs;
xxiv) title insurance charges and premiums; xxv) title search or examination
costs, including abstracts, abstractors' certificates and uniform commercial
code searches; xxvi) judgment and tax lien searches for Borrower; xxvii) escrow
fees; xxviii) fees and costs of environmental investigations and site
assessments; xxix) recordation taxes, documentary taxes, transfer taxes,
mortgage taxes and intangible recording taxes xxx) filing and recording fees,
and xxxi) brokerage fees. Borrower shall pay all costs and expenses incurred by
Bank, including attorneys' fees, if the obligations or any part thereof are
sought to be collected by or through an attorney at law, whether or not
involving probate, appellate, administrative or bankruptcy proceedings. Borrower
shall pay all costs and expenses of complying with the Loan Documents, whether
or not such costs and expenses are included in the Budget. Borrower's
obligations under this Section shall survive the delivery of the Loan Documents,
the making of advances, the payment in full of the obligations, the release or
termination of the Loan Documents, the foreclosure of the Deed of Trust or
conveyance in lieu of foreclosure, any bankruptcy or other debtor relief
proceeding, and any other event whatsoever.
 
Section 4.8. Further Assurances. Borrower will, on request of Bank,
xxxii) promptly correct any defect, error or omission in any Loan Document;
xxxiii) execute, acknowledge, deliver, procure, record or file such further
instruments and do such further acts deemed necessary, desirable or proper by
Bank to carry out the purposes of the Loan Documents and to identify and subject
to the liens and security interest of the Loan Documents any property intended
to be covered thereby, including any renewals, additions, substitutions,
replacements, or appurtenances to the Property; xxxiv) execute, acknowledge,
deliver, procure, file or record any document or instrument deemed necessary,
desirable, or proper by Bank and to protect the liens or the security interest
under the Loan Documents against the rights or interests of third persons; and
xxxv) provide such certificates, documents, reports, information, affidavits and
other instruments and do such further acts deemed necessary, desirable or proper
by Bank to comply with the requirements of any agency having jurisdiction over
Bank or any examiners of such agencies with respect to the Construction Loan,
Borrower or the Property. Borrower shall pay all costs connected with any of the
foregoing, which shall be a demand obligation owing by Borrower (which Borrower
hereby promises to pay) to Bank pursuant to this Agreement.
 
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Section 4.9. No Assignment. Borrower shall not assign, transfer or encumber its
rights or obligations under any Loan Document or any proceeds of the
Construction Loan without the prior written consent of Bank.
 
Section 4.10. Inducement to Bank. The representations and warranties contained
in the Loan Documents xxxvi) are made to induce Bank to make the Construction
Loan and Bank is relying thereon, and xxxvii) shall survive any bankruptcy
proceedings involving Borrower or the Property, foreclosure, or conveyance in
lieu of foreclosure.
 
Section 4.11. Omitted.
 
Section 4.12. Interpretation. References to "Dollars," "$," "money," "payments"
or other similar financial or monetary terms are references to lawful money of
the United States of America. References to Articles, Sections, and Exhibits
are, unless specified otherwise, references to articles, sections and exhibits
of this Agreement. Words of any gender shall include each other gender. Words in
the singular shall include the plural and words in the plural shall include the
singular. References to Borrower shall mean, each person comprising same,
jointly and severally. References to persons shall include any legal entities,
including public or governmental bodies, agencies or instrumentalities, and
natural persons. The words "herein," "hereof," "hereunder" and other similar
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision or section. The words "include" and "including" shall be
interpreted as if followed by the words "without limitation". Captions and
headings in the Loan Documents are for convenience only and shall not affect the
construction of the Loan Documents.
 
Section 4.13. No Partnership, etc. The relationship between Bank and Borrower is
solely that of Bank and borrower. Bank has no fiduciary or other special
relationship with or duty to Borrower and none is created by the Loan Documents.
Nothing contained in the Loan Documents, and no action taken or omitted pursuant
to the Loan Documents, is intended or shall be construed to create any
partnership, joint venture, association, or special relationship between
Borrower and Bank or in any way make Bank a co-principal with Borrower with
reference to the Project, the Property or otherwise. In no event shall Bank's
rights and interests under the Loan Documents be construed to give Bank the
right to control, or be deemed to indicate that Bank is in control of, the
business, properties, management or operations of Borrower.
 
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Section 4.14. Records. The unpaid amount of the Construction Loan set forth on
the books and records of Bank maintained in the ordinary course of its business
shall be presumptive evidence of the amount thereof owing and unpaid, but
failure to record any such amount on the books and records shall not limit or
affect the obligations of Borrower under the Loan Documents to make payments on
the Construction Loan when due.
 
Section 4.15. Exhibits. This Agreement includes the Exhibits listed below which
are marked by "X", all of which Exhibits are attached hereto and made a part
hereof for all purposes, it being agreed that if any Exhibit to be executed and
delivered contains blanks, the same shall be completed correctly and in
accordance with this Agreement prior to or at the time of the execution and
delivery thereof.
 

 X
Exhibit "A"
-
Legal description of the Land
 X
Exhibit "B"
-
Basic Information
 X
Exhibit "C"
-
Certain Conditions to Initial Funding
 X
Exhibit "D"
-
Budget
 X
Exhibit "E"
-
Plans
 X
Exhibit "F"
-
Requisitions
 X
Exhibit "F-1"
-
Requisition - Draw Request Information
 X
Exhibit "G"
-
Survey Requirements
 X
Exhibit "H"
-
Architect's Certificate

 
Section 4.16. Entire Agreement. The Loan Documents constitute the entire
understanding and agreement between Borrower and Bank with respect to the
transactions arising in connection with the Construction Loan and supersede all
prior written or oral understandings and agreements between Borrower and Bank
with respect to the matters addressed in the Loan Documents.
 
Section 4.17. Mandatory Arbitration. Any controversy or claim between or among
the parties hereto including but not limited to those arising out of or relating
to this Agreement or any related agreements or instruments, including any claim
based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or if not
applicable, the applicable state law), the Rules of Practice and Procedure for
the Arbitration of Commercial Disputes of Endispute, Inc., doing business as
J.A.M.A./Endispute (J.A.M.S.), as amended from time to time, and the "Special
Rules" set forth below. In the event of any inconsistency, the Special Rules
shall control. Judgment upon any arbitration award may be entered in any court
having jurisdiction. Any party to this Agreement may bring an action, including
a summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this agreement applies in any court having jurisdiction over such
action.
 
(a) Special Rules. The arbitration shall be conducted in Nashville, Davidson
County, Tennessee and administered by J.A.M.S. who will appoint an arbitrator;
if J.A.M.S. is unable or legally precluded from administering the arbitration,
then the American Arbitration Association will serve. All arbitration hearings
will be commenced within 90 days of the demand for arbitration; further, the
arbitrator shall only, upon a showing of cause, be permitted to extend the
commencement of such hearing for up to an additional 60 days.
 
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(b) Reservations of Rights. Nothing in this Agreement shall be deemed to
(i) limit the applicability of any otherwise applicable statutes of limitation
or repose and any waivers contained in this Agreement; or (ii) be a waiver by
Bank of the protection afforded to it by 12 U.S.C. § 91 or any substantially
equivalent state law; or (iii) limit the right of Bank (A) to exercise self help
remedies such as (but not limited to) setoff, or (B) to foreclose against any
real or personal property collateral, or (C) to obtain from a court provisional
or ancillary remedies such as (but not limited to) injunctive relief or the
appointment of a receiver. Bank may exercise such self help rights, foreclose
upon such property, or obtain such provisional or ancillary remedies before,
during or after the pendency of any arbitration proceeding brought pursuant to
this Agreement. At Bank's option, foreclosure under a deed of trust or mortgage
may be accomplished by any of the following: the exercise of a power of sale
under the deed of trust or mortgage, or by judicial sale under the deed of trust
or mortgage, or by judicial foreclosure. 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
controversy or claim 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 controversy or claim.
 
(Remainder of Page Intentionally Left Blank)
 
 
 
 
 
 
 
 

-10-

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THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
 
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
EXECUTED and DELIVERED as of the ___ day of ___________, 2005.
 
Borrower’s Address
for Notices:
 
BORROWER:
 
111 Westwood Place, Suite 200
Brentwood, Tennessee 37027
 
ARC HDV, LLC
   
By:
           
Name:
           
Title:
 
The Federal Tax Identification
Number of Borrower: _______________
   

 
Bank’s Address
for Notices:
 
BANK:
 
TN1-100-08-07
414 Union Street, 4th Fl.
Nashville, TN 37239-1697
Attention: Healthcare Lending
 
BANK OF AMERICA, N.A.
 
 
By:
       
Name:
         
Title:
 

 

-11-

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EXHIBIT "A"
 
PARCEL NO. 1:

THAT PORTION OF THE NORTHEAST QUARTER OF SECTION 16, TOWNSHIP 3 NORTH, RANGE 1
EAST OF THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY, ARIZONA,
DESCRIBED AS FOLLOWS:

COMMENCING AT A HALF-INCH REBAR FOUND AT THE NORTH QUARTER CORNER OF SAID
SECTION 16, FROM WHICH A ONE-INCH IRON BAR AT THE NORTHEAST CORNER OF SAID
SECTION BEARS NORTH 87 DEGREES 41 MINUTES 30 SECONDS EAST, A DISTANCE OF 2691.76
FEET;

THENCE NORTH 87 DEGREES 41 MINUTES 30 SECONDS EAST, ALONG THE NORTH LINE OF THE
NORTHEAST QUARTER OF SAID SECTION, A DISTANCE OF 1043.98 FEET TO THE POINT OF
BEGINNING;

THENCE CONTINUING NORTH 87 DEGREES 41 MINUTES 30 SECONDS EAST, ALONG THE NORTH
LINE OF SAID NORTHEAST QUARTER, A DISTANCE OF 827.66 FEET TO THE CENTERLINE OF
PLAZA DEL RIO BOULEVARD AS SHOWN ON THE PLAZA DEL RIO MAP OF DEDICATION,
ACCORDING TO BOOK 344 OF MAPS, PAGE 47;
 
THENCE SOUTH 02 DEGREES 18 MINUTES 30 SECONDS EAST, ALONG SAID CENTERLINE, A
DISTANCE OF 658.71 FEET TO A HALF-INCH REBAR FOUND AT THE NORTHEAST CORNER OF
THAT PARCEL OF LAND DESCRIBED AS 88-331437 OF OFFICIAL RECORDS OF MARICOPA
COUNTY;
 
THENCE SOUTH 87 DEGREES 41 MINUTES 30 SECONDS WEST, ALONG THE NORTH LINE OF SAID
PARCEL, A DISTANCE OF 692.63 FEET TO A COTTON-SPINDLE WITH TAG (#24738) FOUND AT
THE NORTHWEST CORNER OF SAID PARCEL;
 
THENCE SOUTH 02 DEGREES 18 MINUTES 30 SECONDS EAST, ALONG THE WEST LINE OF SAID
PARCEL, A DISTANCE OF 41.30 FEET TO A HALF-INCH REBAR FOUND;
 
THENCE SOUTH 87 DEGREES 41 MINUTES 30 SECONDS WEST, A DISTANCE OF 105.01 FEET TO
A POINT;
 
THENCE NORTH 02 DEGREES 18 MINUTES 30 SECONDS WEST, A DISTANCE OF 307.06 FEET TO
A BRASS CAP FOUND FLUSH;
 
THENCE SOUTH 87 DEGREES 41 MINUTES 30 SECONDS WEST, A DISTANCE OF 30.02 FEET TO
A HALF-INCH REBAR WITH CAP (LS #13562) FOUND AT THE SOUTHEAST CORNER OF THAT
PARCEL DESCRIBED IN 89-277884 OF OFFICIAL RECORDS OF MARICOPA COUNTY;
 
THENCE NORTH 02 DEGREES 18 MINUTES 30 SECONDS WEST, A DISTANCE OF 392.95 FEET TO
THE POINT OF BEGINNING.
 
PARCEL NO. 2:
 
NON-EXCLUSIVE EASEMENTS FOR DRAINAGE, WALKWAY, PARKING AND ACCESS AS SET FORTH
IN EASEMENT AGREEMENT RECORDED MARCH 31, 1997 AS 97-0763185 OF OFFICIAL RECORDS
AND RE-RECORDED AS 97-0769793 OF OFFICIAL RECORDS; ASSIGNMENT OF EASEMENT
RECORDED AS 98-1153322 OF OFFICIAL RECORDS AND FIRST AMENDMENT RECORDED AS
2000-0123884 OF OFFICIAL RECORDS.
 

Exhibit A - Page 1

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EXHIBIT "B"
 
BASIC INFORMATION
 
A.
SPECIFIC DEFINITIONS:

 
1. "Additional Land" means certain individual parcels that bisect the Land
including closure of an existing public right-of-way, all as reflected in the
approved Plans.
 
2. "Agent to Request Advance" means Ross Roadman and/or Bill Sheriff.
 
3. "Appraised Value" means $33,075,000.
 
4. "Architect" means The Orcutt/Winslow Partnership.
 
5. "Borrower" means ARC HDV, LLC.
 
6. "Completion Date" means November 1, 2006.
 
7. "Construction Account" means account no. _________________.
 
8. "Improvements" means all on-site and off-site improvements to the Land for a
40-unit assisted living facility, all as reflected in the approved Plans for the
Project, 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.
 
9. "Permitted Changes" means changes to the Plans or Improvements, provided the
cost of any single change or extra does not exceed $50,000.00 and the aggregate
amount of all such changes and extras (whether positive or negative) does not
exceed $200,000.00.
 
10. "Project" means the Land, the construction of the Improvements, and if
applicable, the leasing and operation of the Improvements.
 
11. "Title Insurer" means First American Title Insurance Company.
 
B.
GENERAL DEFINITIONS:

 
1. "Architect's Certificate" means the Architect's Certificate attached hereto
as Exhibit "H".
 
2. "Budget" means the budget and cost itemization for the Project attached as
Exhibit "D".
 
3. "Deed of Trust" means the Deed of Trust, Assignment of Rents, Security
Agreement and Financing Statement described in the Loan Agreement.
 
4. "Default" is defined in Section 3.1.
 
5. "Environmental Agreement" means the Environmental Indemnity Agreement dated
of even date herewith, between Borrower and Bank.
 
Exhibit B - Page 1

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6. "Land" means the real estate described in Exhibit "A".
 
7. "Loan Agreement" means the Loan Agreement of even date herewith between Bank
and Borrower, as the same may be amended, modified or restated from time to
time.
 
8. "Plans" means the plans and specifications listed in Exhibit "E".
 
9. "Property" means Borrower's estate in the Land, the Improvements and all
other property constituting the Project.
 
10. "Title Insurance" means the title insurance described in Exhibit "C".
 
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to such terms in the Loan Agreement.
 

Exhibit B - Page 2

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EXHIBIT "C"
 
CERTAIN CONDITIONS PRECEDENT TO INITIAL FUNDING
 
1. Fees and Expenses. Borrower shall have paid all other fees, costs and
expenses then required to be paid pursuant to this Agreement and any other Loan
Documents.
 
2. Financial Statements. Bank shall have received and approved the Financial
Statements of Borrower or any other party required by any loan application or
commitment or otherwise required by Bank.
 
3. Appraisal. Bank shall have received and approved a market value appraisal
which appraises the Property on a "completed value" basis at not less than the
Appraised Value. The appraiser and appraisal must be satisfactory to Bank
(including satisfaction of applicable regulatory requirements) and the appraiser
must be engaged directly by Bank.
 
4. Draw Schedule and Budget. Bank shall have received and approved Borrower's
proposed cash flow, draw schedule, and construction schedule, for the Project.
 
5. Architect's Certificate; Budget. Bank shall have received the executed
Architect's Certificate from the Architect. To the extent not previously
delivered in final form, Borrower shall also prepare and deliver the final
Budget to be attached as Exhibit “D”.
 
6. Authorization. Bank shall have received and approved evidence Bank requires
of the existence, good standing, authority and capacity of Borrower and American
Retirement Corporation to execute, deliver, and perform the Loan Documents,
including but not limited to:
 
(a) For each partnership (including a joint venture): (i) a true and certified
copy of an executed copy of the partnership agreement and all amendments
thereto, and (ii) for each limited partnership, an original of the certificate
of limited partnership accompanied by a certificate, dated within sixty (60)
days of the Construction Loan closing, that the copy is true and complete issued
by the appropriate governmental official of the jurisdiction of formation, and
satisfactory evidence of registration or qualification to do business in the
state where Borrower's principal place of business is located and the State
where the Project is located.
 
(b) For each corporation: (i) a certified copy of its articles of incorporation
and by-laws, and all amendments thereto, (ii) a certificate of incumbency of all
of its officers who will be authorized to execute or attest any of the Loan
Documents, (iii) a copy of resolutions approving the Loan Documents and
authorizing the transactions contemplated in this Agreement, (iv) certificates,
dated within sixty (60) days of the Construction Loan closing, of existence,
good standing and qualification to do business in the state of its creation and,
if different, in the state where the Project is located, issued by the
appropriate governmental officials.
 
(c) For each limited liability company: (i) a certified copy of its Articles of
Organization and Operating Agreement, and all amendments thereof, (ii) a
Certificate of Incumbency of its managers or other individuals who will be
authorized to execute or attest any of the Loan Documents, (iii) a copy of
Resolutions approving the Loan Documents and authorizing the transactions
contemplated in this Agreement, (iv) Certificates, dated within sixty (60) days
of the Construction Loan Closing, of existence, good standing and qualification
to do business in the state of its creation, and, if different, in the state
where the project is located, issued by the appropriate governmental officials.
 
Exhibit C - Page 1

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(d) All certificates, resolutions, and consents required by Bank applicable to
the foregoing.
 
7. Loan Documents. Borrower and each other person or entity required by Bank
shall have duly executed, acknowledged and/or sworn to as required, recorded or
filed, and delivered to Bank all Loan Documents then required by Bank, dated the
date of this Agreement, all in form and content satisfactory to Bank.
 
8. Opinions. Bank shall have received the written opinion of counsel
satisfactory to Bank for the Borrower, addressed to Bank, dated the date of this
Agreement.
 
9. Survey; No Special Flood Hazard. Bank shall have received two (2) prints of
an original survey of the Land and improvements thereon dated not more than
sixty (60) days prior to the date of this Agreement (or dated such earlier date,
if any, as is satisfactory to the Title Insurer, but in any event not more than
one hundred eighty (180) days prior to the date of this Agreement) satisfactory
to Bank and the Title Insurer and otherwise complying with Exhibit "G", together
with a flood insurance policy in an amount equal to the lesser of the maximum
Construction Loan amount or the maximum amount of flood insurance available
under the Flood Disaster Protection Act of 1973, as amended, and otherwise in
compliance with the requirements of the Loan Documents, or evidence satisfactory
to Bank that none of the Land is located in a flood hazard area.
 
10. Title Insurance. Bank shall have received and approved one or more title
insurance policies, as Bank may require, issued by the Title Insurer, on a
coinsurance and/or reinsurance basis if and as required by Bank, insuring that
the Deed of Trust constitutes a valid first lien covering the Borrower's fee
simple estates and all improvements thereon, and subject only to those
exceptions and encumbrances (regardless of rank or priority) Bank approves, in a
form acceptable to Bank and containing such affirmative coverages as may be
required by Bank, and with all "standard" exceptions which can be deleted,
including the exception for matters which a current survey would show, deleted
to the fullest extent authorized under applicable title insurance rules, and
Borrower shall satisfy all requirements therefore; containing no exception for
standby fees or real estate taxes other than those for 2005 and no exception for
subsequent assessments for prior years; providing full coverage against
mechanics' and materialmen's liens to the extent authorized under applicable
title insurance rules, and Borrower shall satisfy all requirements therefore;
insuring that no restrictive covenants shown in the Title Insurance have been
violated, and that no violation of the restrictions will result in a reversion
or forfeiture of title; insuring that fee simple indefeasible or marketable (as
coverage is available) fee simple title to the Land and Improvements is vested
in Borrower; containing such endorsements as Bank may require and are available
under applicable title insurance rules, and Borrower shall satisfy all
requirements therefore; insuring any easements, leasehold estates or other
matters appurtenant to or benefiting the Land and/or the Improvements as part of
the insured estate; insuring the right of access to the Land to the extent
authorized under applicable title insurance rules, and Borrower shall satisfy
all requirements therefore; and containing provisions acceptable to Bank
regarding advances of Construction Loan amounts after closing.
 
Exhibit C - Page 2

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

11. Plans. Bank shall have received and approved two (2) true and correct copies
of all existing Plans (including the site plan), together with satisfactory
evidence that all applicable governmental authorities, Borrower, Borrower's
architect, engineer, and contractors have approved the same.
 
12. Contracts. At the request of Bank, Bank shall have received and approved
(a) a list containing the names and addresses of all existing contractors,
architects, engineers, and other suppliers of services and materials for the
Project, their respective contract amounts, and a copy of their contracts; and
(b) duly executed, acknowledged and delivered originals from each contractor,
architect, engineer, subcontractor, or supplier of services or materials
required by Bank, of (i) consents or other agreements satisfactory to Bank and
(ii) agreements satisfactory to Bank subordinating all rights, liens, claims and
charges they may have or acquire against Borrower or the Property to the rights,
liens and security interests of Bank.
 
13. Insurance Policies. Bank shall have received and approved the insurance
policies initially required by Bank, pursuant to the Loan Documents, together
with evidence satisfactory to Bank that all premiums therefore have been paid
and that the policies are in full force and effect.
 
14. Environmental Compliance/Report. Bank shall have received and approved
evidence satisfactory to Bank that no portion of the Land is "wetlands" under
any applicable law and that the Land does not contain and is not within or near
any area designated as a hazardous waste site by any governmental authority,
that neither the Property nor any adjoining property contains or has ever
contained any substance classified as hazardous or toxic (or otherwise
regulated, such as, without limitation, asbestos, radon and/or petroleum
products) under, and that neither the Property nor any use or activity thereon
violates or is or could be subject to any response, remediation, clean-up or
other obligation under, any law or governmental requirement pertaining to health
or the environment, including without limitation, a written report of an
environmental assessment of the Property, made by an engineering firm, and of a
scope and in form and content satisfactory to Bank, complying with Bank's
established guidelines, showing that there is no evidence of any such substance
which has been generated, treated, stored, released or disposed of in the
Property, and such additional evidence as may be required by Bank. All reports,
drafts of reports, and recommendations, whether written or oral, from such
engineering firm shall be made available and communicated to Bank.
 
15. Soil Reports. Bank shall have received and approved a soil composition test
and any other tests reasonably deemed necessary by Bank, satisfactory to Bank,
and performed by a licensed professional engineer satisfactory to Bank, if
requested by Bank.
 
16. Access, Utilities, and Laws. Bank shall have received and approved
(a) satisfactory evidence that the Property abuts and has fully adequate direct
and free access to one or more public streets, dedicated to public use, fully
installed and accepted by the appropriate governmental authority, that all costs
and expenses of the installation and acceptance thereof have been paid in full,
and that there are no restrictions on the use and enjoyment of such streets
which would adversely affect the Project; (b) letters from the applicable
utility companies or governmental authorities confirming that all utilities
necessary for the Improvements are available at the Land in sufficient capacity,
together with evidence satisfactory to Bank of paid impact fees or utility
reservation deposits or connection fees required to assure the timely
availability of such services; (c) satisfactory evidence that all applicable
zoning ordinances, restrictive covenants and governmental requirements affecting
the Property permit the use for which the Property is intended and have been or
will be complied with without the necessity of variance and without the Property
being a nonconforming use; (d) evidence satisfactory to Bank that the Land and
Improvements comply and will comply with all laws and governmental requirements
regarding subdivision and platting and would so comply if the Land and the
Improvements thereon were conveyed as a separate parcel; (e) a true and correct
copy of a valid building permit for the Improvements, together with all other
permits and approvals necessary for construction of the Improvements; and
(f) evidence satisfactory to Bank of compliance by Borrower and the Property,
and the proposed construction, use and occupancy of the Improvements, with such
other applicable laws and governmental requirements as Bank may request,
including all laws and governmental requirements regarding access and facilities
for handicapped or disabled persons including, without limitation and to the
extent applicable, The Federal Architectural Barriers Act (42 U.S.C. § 4151 et
seq.), The Fair Housing Amendments Act of 1988 (42 U.S.C. § 3601 et seq.), The
Americans With Disabilities Act of 1990 (42 U.S.C. § 12101 et seq.), The
Rehabilitation Act of 1973 (29 U.S.C. § 794) and any applicable state
requirements.
 
Exhibit C - Page 3

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17. Parking. Bank shall have received evidence satisfactory to the Bank that
there is sufficient onsite parking for the improvements to be constructed
thereon.
 
18. Omitted.
 
19. Tax and Standby Fee Certificates. Bank shall have received and approved
satisfactory evidence (a) of the identity of all taxing authorities and utility
districts (or similar authorities) having jurisdiction over the Property or any
portion thereof; (b) that all taxes, standby fees, impact fees, and any other
similar charges have been paid, including copies of receipts or statements
marked "paid" by the appropriate authority; and (c) that the Land is a separate
tax lot or lots with separate assessment or assessments of the Land and
Improvements, independent of any other land or improvements, or will be
reassessed shortly after Closing to reflect same.
 
20. Omitted.
 
21. Compliance With Warranties. All representations and warranties of the
Borrower contained in this Agreement shall be true and correct as of the date of
disbursement.
 
22. Omitted.
 
23. Other Documents. Borrower and any other person or entity, shall have
delivered to Bank, in form and content satisfactory to Bank, such other
documents and certificates as Bank may reasonably request.
 
 
Exhibit C - Page 4

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

EXHIBIT "D"
 
BUDGET
 
Certified Cost Breakdown to be supplied by Borrower
 
 
 
 
 
 
 
 
 

Exhibit D - Page 1

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EXHIBIT "E"
 
PLANS
 
(See Bank file)
 
 
 
 
 
 
 
 

Exhibit E - Page 1

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EXHIBIT "F"
 
ADVANCES
 
1. Requisition. A "Requisition" means a properly completed and executed written
application by the Agent to Request Advance to Bank in the form of Exhibit "F-1"
(or in another form approved by Bank) setting forth the amount of Construction
Loan proceeds desired, together with such schedules, affidavits, releases,
waivers, statements, invoices, bills, and other documents, certificates and
information required by Bank. At least five (5) business days before the
requested date of each advance, Borrower shall deliver a Requisition to Bank.
Borrower shall be entitled to an advance only in an amount approved by Bank in
accordance with the terms of this Agreement and the Loan Documents. Bank shall
not be required to make advances more frequently than once each calendar month.
Bank shall, only upon the satisfaction of all applicable conditions of this
Agreement and the Loan Documents, make the requested advance to Borrower on a
business day within five (5) business days after such satisfaction. Each
Requisition, and Borrower's acceptance of any advance, shall be deemed to ratify
and confirm that all representations and warranties in the Loan Documents remain
true and correct as of the date of the Requisition and the advance,
respectively.
 
2. Advances. Subject to Section 6 of this Exhibit "F" all advances made to
Borrower shall be disbursed in accordance with the terms hereof. All such
advances shall be for payments of the costs and expenses specified in the Budget
for which the advances were made, and for no other purpose. Following receipt
and approval of a Requisition, all supporting documentation and information,
Bank will determine the amount of the advance it will make in accordance with
this Agreement, the Loan Documents and the Budget and the following standards:
 
(a) For construction work advances will initially be made on the basis of ninety
percent (90%) of the costs shown on the application for payment from the
contractor reviewed and approved by Bank of the work or material in place on the
Improvements that comply with the terms of the Loan Documents, minus all
previous advances and all amounts required to be paid by Borrower, as described
in Columns (B) and (C) of the Budget, until the Project is fifty percent (50%)
complete; thereafter, no additional retainage will be required and advances will
be funded on the basis of one hundred percent (100%) of the costs shown on the
application.
 
(b) Advances will not be made for building materials or furnishings that are not
yet incorporated into the Improvements ("stored materials") unless the stored
materials are in Borrower's possession and satisfactorily stored on the Land.
 
3. Omitted.
 
4. Conditions to All Advances. As conditions precedent to Bank’s approval of
each advance made pursuant to a Requisition in addition to all other
requirements contained in the other Loan Documents, Borrower must satisfy the
following conditions as determined by Bank:
 
(a) properly completed Requisition with all supporting information.
 
Exhibit F - Page 1

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

(b) No Default or any event which, with the giving of notice or the lapse of
time, or both, could become a Default exists.
 
(c) The representations and warranties made in the Loan Documents must be true
and correct on and as of the date of each advance.
 
(d) Each subcontract or other contract for labor, materials, services and/or
other work included in a Draw Request shall have been duly executed and
delivered by all parties thereto and shall be effective, and Bank shall have
received a true, complete copy of a fully executed copy of each such subcontract
or other contract as Bank may have requested.
 
(e) No mechanics or materialmen's lien or other encumbrance shall have been
filed and remain in effect against the Property, and releases or waivers of
mechanics' liens and receipted bills showing payment of all amounts due to all
parties who have furnished materials or services or performed labor of any kind
in connection with the Property shall have been obtained or Borrower shall bond
off under the provisions of applicable law any lien or claim of lien filed for
record, within thirty (30) days of the date of notice to Borrower of filing of
said claim.
 
(f) The Title Insurance shall have been endorsed and down-dated in a manner
satisfactory to Bank to increase the coverage by the amount of each advance
through the date of each such advance with no additional title change or
exception not approved by Bank.
 
(g) To the extent requested by Bank, Bank shall have received written
certification by Borrower's architect, that to the best of such party's
knowledge, information, and belief, construction is in accordance with the
Plans, the quality of the work for which the advance is requested is in
accordance with the applicable contract, the amount of the advance requested
represents work in place based on on-site observations and the data compromising
the Draw Request, the work has progressed as indicated, and the applicable
contractor is entitled to payment of the amount certified.
 
(h) To the extent requested by Bank, Bank shall have received (i) a foundation
survey made immediately after, but in no event later than ten (10) days after,
the laying of the foundation of each building or structure of the Improvements
satisfactory to Bank complying with Exhibit "G", (ii) a certificate of
Borrower's architect stating that based on personal inspection, the foundations
have been completed in accordance with the Plans and are satisfactory in all
respects, and (iii) a bearing-capacity test report with respect to the excavated
footings and foundations, reviewed and approved by the Borrower's architect.
 
(i) To the extent requested by Bank, Bank shall have received within ten (10)
days after the pouring of concrete for any Improvements, a report satisfactory
to Bank of the results of concrete tests made at the time the concrete is
poured.
 
(j) Bank shall have received within ten (10) days after the compaction of any
soil for construction, a report satisfactory to Bank of the results of soil
tests, if applicable.
 
(k) As of the date of making such advance, no event shall have occurred, nor
shall any condition exist, that could have an adverse effect on the
enforceability of the Loan Documents, be materially adverse to the financial
condition of Borrower, impair the ability of Borrower to fulfill its material
obligations under the Loan Documents, or otherwise have any adverse effect
whatsoever on the Property.
 
Exhibit F - Page 2

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

(l) The Improvements shall not have been damaged and not repaired.
 
(m) Borrower shall have paid all amounts required to be paid by Borrower under
the Budget.
 
(n) Borrower shall have made the Borrower's Deposit if required by Section 1.4
of this Agreement.
 
(o) Borrower shall have delivered to Bank such other information, documents and
supplemental legal opinions as may be required by Bank.
 
(p) With respect to any advance to pay a contractor, Bank shall have received
original applications for payments in form approved by Bank, containing a
breakdown by trade and/or other categories acceptable to Bank, executed and
certified by each contractor and Borrower's architect, accompanied by invoices.
 
(q) Borrower shall provide Bank with copies of all field reports of the Project
architect and engineer at Bank's request.
 
5. Final Advance for Improvements. The final advance for the Improvements
(including retainage) shall not be made until thirty (30) days after the Bank
shall have received the following:
 
(a) Certificates from Borrower's architect, engineer and contractor, certifying
that the Improvements (including any off-site improvements) have been completed
in accordance with, and as completed comply with, the Plans and all laws and
governmental requirements; and Bank shall have received two (2) sets of detailed
"as built" Plans approved in writing by Borrower, Borrower's architect, and each
contractor, including plans and specifications for architectural, structural,
mechanical, plumbing, electrical and site development (including storm drainage,
utility lines and landscaping) work.
 
(b) Final affidavits (in a form approved by Bank) from Borrower's architect,
engineer, and each contractor certifying that each of them and their
subcontractors, laborers, and materialmen has been paid in full for all labor
and materials for construction of the Improvements; and final lien releases or
waivers (in a form approved by Bank) by Borrower's architect, engineer,
contractor, and all subcontractors, materialmen, and other parties who have
supplied labor, materials, or services for the construction of the Improvements,
or who otherwise might be entitled to claim a contractual, statutory or
constitutional lien against the Property.
 
(c) The Title Insurance shall be endorsed to remove any exception for mechanics'
or materialmen's liens or pending disbursements, with no additional title change
or exception objectionable to Bank, and with such other endorsements required by
Bank.
 
(d) Evidence satisfactory to Bank that all laws and governmental requirements
have been satisfied, including receipt by Borrower of all necessary governmental
licenses, certificates of need and permits (including certificates of occupancy)
with respect to the completion, use, occupancy and operation of the
Improvements, together with evidence satisfactory to Bank that all such
licenses, certificates, and permits are in full force and effect and have not
been revoked, canceled or modified.
 
Exhibit F - Page 3

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(e) Two (2) copies of a final as-built survey satisfactory to Bank and complying
with Exhibit "G".
 
6. Omitted.
 
7. Conditions and Waivers. All conditions precedent to the obligation of Bank to
approve any advance are imposed hereby solely for the benefit of Bank and the
parties under the Loan Documents, and no other party may require satisfaction of
any such condition precedent or be entitled to assume that Bank will refuse to
make any advance in the absence of strict compliance with such conditions
precedent. Any requirement of this Agreement may be waived, in whole or in part,
in a specific written waiver intended for that purpose and signed by Bank. Bank
shall have the right to approve and verify the periodic progress, costs incurred
by Borrower, and the estimated costs remaining to be incurred. No advance shall
constitute an approval or acceptance by Bank of any construction work, a waiver
of any condition precedent to any further advance, or preclude Bank from
thereafter declaring the failure of Borrower to satisfy such condition precedent
to be a Default. No waiver by Bank of any condition precedent or obligation
shall preclude Bank from requiring such condition or obligation to be met prior
to making any other advance or from thereafter declaring the failure to satisfy
such condition or obligation to be a Default.
 
 
 
 
 
 
 

Exhibit F - Page 4

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EXHIBIT "F-1"
 
REQUISITION
 

 
Borrower shall use AIA Forms G702 and G703 for all draw requests.
 
 
 
 
 
 
 

 
Exhibit F - Page 5

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EXHIBIT "G"
 
SURVEY REQUIREMENTS
 
1. Field Note Description. The Survey shall contain a certified metes and bounds
description complying with the following: (i) the beginning point shall be
established by a monument located at the beginning point, or by reference to a
nearby monument; (ii) the sides of the Land shall be described by giving the
distances and bearings of each; (iii) the distances, bearings, and angles shall
be taken from an instrument survey by a registered professional engineer or
registered professional land surveyor; (iv) curved sides shall be described by
data including: length of arc, central angle, radius of circle for the arc and
chord distance, and bearing; (v) the description shall be a single perimeter
description of the entire Land. If and as instructed, there shall also be a
separate metes and bounds description of one or more constituent tracts out of
the Land; (vi) the description shall include a reference to all streets, alleys,
and other rights-of-way that abut the Land, and the width of all rights-of-way
mentioned shall be given the first time these rights-of-way are referred to;
(vii) for each boundary line abutting a street, road, alley or other means of
access, the description must, in calling the boundary line, state that the
boundary line and the right-of-way line are the same; (viii) if the Land has
been recorded on a map or plat as part of an abstract or subdivision, reference
to such recording data shall be made; and (ix) the total acreage and square
footage of the Land shall be certified.
 
2. Lot and Block Description. If the Land consists of one or more complete lots
or blocks included within a properly established recorded subdivision or
addition, then a lot and block description will be an acceptable substitute for
a metes and bounds description, provided that the lot and block description must
completely and properly identify the name or designation of the recorded
subdivision or addition and give the recording information therefore.
 
3. Map or Plat. The Survey shall also contain a certified map or plat clearly
showing the following: (i) the Land; (ii) the relation of the point of beginning
of the Land to the monument from which it is fixed; (iii) all easements,
streets, roads, alleys and rights-of-way on or abutting the Land, showing
recording information therefore by volume and page; (iv) if the Land has been
recorded on a map or plat as part of an abstract or subdivision, all survey
lines must be shown, and all lot and block lines (with distances and bearings)
and numbers, must be shown; (v) the established building setback lines, if any,
including those by restrictive covenant, recorded plat and zoning ordinance
(identifying the source in each case, by volume and page reference if
applicable); (vi) all easements appurtenant to said Land, with recording
information by volume and page; (vii) the boundary lines of the street or
streets abutting the Land and the width of said streets and the width of the
rights-of-way therefore; (viii) the distance from the nearest intersecting
street or road to the Land; (ix) all structures and improvements on the Land
(with designation and dimensions of each party wall, if any) with horizontal
lengths of all sides and the relation thereof by distances to (A) all boundary
lines of the Land, (B) easements, (C) established building lines and (D) street
lines; (x) the types of materials comprising the exterior walls and roofs of all
buildings; (xi) all street addresses of improvements on the Land; (xii) all curb
cuts, driveways, fences, sidewalks, stoops and landscaping; (xiii) the number of
stories of all multi-story structures; (xiv) the location, type and size of all
utility lines as they service the Land and improvements (sewer, water, gas,
electric and telephone); (xv) all encroachments and protrusions, if any, from or
upon the Land or any improvements thereon or upon any easement, building setback
line or other restricted area, with exact measurements; (xvi) all parking and
paved areas, including the number of vehicles that may be parked; (xvii) all
distances, angles and other calls contained in the legal description;
(xviii) the location, type and size of all monuments, and as to each monument,
indication whether it was found or placed by the surveyor; (xix) the boundaries
of any flood hazard area or flood plain area in which any part of the Land lies,
with the map number, date and source (governmental authority) of each flood map
shown; (xx) all surface water bodies or courses; (xxi) the date of any revisions
subsequent to the initial survey prepared pursuant to these requirements;
(xxii) a legend explaining the meaning of all symbols used on the plat; and
(xxiii) the scale of all distances and dimensions on the plat.
 
Exhibit G - Page 1

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4. Certification. The certification for the property description and the map or
plat shall be addressed to Bank, Borrower and the Title Insurer, signed by the
surveyor (a registered professional land surveyor or registered professional
engineer), bearing current date, registration number, and seal, and shall be in
form reasonably acceptable to Bank.
 

 
Exhibit G - Page 2

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EXHIBIT "H"
 
ARCHITECT'S CERTIFICATE
 
The undersigned ("Architect") hereby states the following to Bank of America,
N.A., a national banking association ("Lender"), regarding the Plans and
Specifications described on the Schedule of Plans and Specifications attached
hereto ("Plans and Specifications"), and any agreements ("Agreements") between
Architect and ARC HDV, LLC ("Borrower") or American Retirement Corporation
pertaining to the construction of the improvements described in the Plans and
Specifications (the "Improvements"), such Improvements to be located upon
certain land in Peoria, Maricopa County, Arizona, as more particularly described
in Exhibit "A", attached hereto and made a part hereof by reference (said land
and the Improvements being collectively referred to as the "Property").
Architect further represents and warrants to and agrees with Lender as follows:
 
1. Architect is licensed and authorized to practice architecture under the laws
of the State of Arizona and is familiar with the federal, state, and local laws
and ordinances relevant to the construction of the Improvements. Architect
prepared all of the Plans and Specifications or such Plans and Specifications
were prepared under Architect's supervision and direction, and Architect is
responsible therefore.
 
2. Attached hereto as Exhibit "B" is a true and complete copy of all written
Agreements.
 
3. The Plans and Specifications are final, complete and adequate for the
construction of the Improvements, and, as of the date hereof, there have been no
modifications thereof except as described on the attached Schedule.
 
4. To the best of Architect's professional knowledge (a) the Improvements, if
constructed in accordance with the Plans and Specifications, will fully comply
with all applicable governmental statutes, ordinances, codes, and regulations
(including but not limited to those relating to access and facilities for
handicapped persons), applicable restrictive covenants and the approved site
plan; and (b) the structural design of the Improvements, the proposed method of
construction, the foundation plan, and the materials specified by the Plans and
Specifications for the project are adequate and appropriate for the contemplated
Improvements and for the soil conditions at the construction site.
 
5. Architect has no counterclaim, right of set-off, defense or like right
against Lender or Borrower, and Architect acknowledges that Architect has been
paid in full for all services and costs in connection with the Agreements and
the Plans and Specifications and the preparation thereof except fees to be paid
hereafter for additions or changes thereto or for inspection of construction of
the Improvements.
 
6. If Borrower defaults in making any payment or in performing any other
obligation under the Agreements, Architect shall promptly give Lender written
notice thereof. If Architect learns of any default in payment due to any
subcontractor or other person supplying labor or materials in connection with
the architectural work for the project, Architect shall similarly advise Lender
thereof.
 
Exhibit H - Page 1

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7. Nothing herein shall be construed to create any duty owing by Lender to
Architect. Architect is executing this Certificate to induce Lender to make a
loan to Borrower pursuant to that certain Loan Agreement by and between Borrower
and Lender, and Architect understands that Lender would not do so but for
Architect's execution and delivery of this Certificate.
 
Executed this _____ day of ___________, 2005.
 
ARCHITECT
 
By:
 
Name:
 
Title:
 

 

Exhibit H - Page 2

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EXHIBIT "A"
 
Property
 
 
 
 
 
 
 

Exhibit H - Page 3

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EXHIBIT "B"
 
Agreements
 
 
 
 
 
 

 
Exhibit H - Page 4

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