Unassociated Document


    
      Exhibit
        10.86


      Promissory
        Note

       

      
        	
                $26,250,000.00
                  

              	
                December
                  12, 2005

              


      

       

      FOR
        VALUE
        RECEIVED, ASF of Green Hills, LLC, a Tennessee non-profit limited liability
        company (“Borrower”),
        hereby
        promises to pay to the order of American Retirement Corporation, a Tennessee
        corporation (together with any and all of its successors and assigns and/or
        any
        other holder of this Note, “Lender”),
        without offset, in immediately available funds in lawful money of the United
        States of America, at 111 Westwood Place, Suite 200, Brentwood, Tennessee
        37027,
        or at such other address as Borrower may from time to time be directed by
        Lender, the principal sum of Twenty-Six Million Two Hundred Fifty Thousand
        and
        No/100 Dollars ($26,250,000.00) (or the unpaid balance of all principal advanced
        against this Note, if that amount is less), together with interest on the
        unpaid
        principal balance of this Note from day to day outstanding as hereinafter
        provided. Capitalized terms used and not otherwise defined herein shall have
        the
        meanings assigned thereto in the Loan Agreement (as hereinafter
        defined).

       

      Section
        1  Payment
        Schedule and Maturity Date.

       

      (a)  Base
        Rate Interest.
        Beginning on January 1, 2006, and continuing on the first (1st)
        day of
        each succeeding month thereafter until the Maturity Date (as hereinafter
        defined), Maker shall make payments of interest accrued in respect of the
        indebtedness evidenced by this Note at the Base Rate as required by Section
        2.2
        of the
        Loan Agreement.

       

      
        (b)  Spread
          Rate Interest.
          In
          addition to interest payments required by Section
          1(a)
          above,
          beginning on the
          first
          (1st)
          day of
          the first (1st)
          month after
          which Maker achieves a Debt Service Coverage Ratio greater than or equal
          to 1.1
          to 1.0, and, provided that Maker thereafter maintains a Debt Service Coverage
          Ratio greater than or equal to 1.1 to 1.0, continuing on the first
          (1st)
          day of
          each succeeding month until the Maturity Date, Maker shall make payments
          of
          interest accrued in respect of the indebtedness evidenced by this Note
          at the
          Spread Rate as required by Section
          2.2
          of the
          Loan Agreement.

         

        (c)  Principal.
          The
          entire principal balance of this Note then unpaid, together with all accrued
          and
          unpaid interest and all other amounts payable hereunder and under the other
          Loan
          Documents (as hereinafter defined), shall be due and payable in full on
          December
          12, 2010 (the “Maturity Date”), the final maturity of this Note.

         

        Section
          2  Security;
          Loan Documents.
          The
          security for this Note includes a Deed of Trust, Assignment, Security Agreement
          and Fixture Filing (as the same may from time to time be amended, restated,
          modified or supplemented, the “Mortgage”)
          of even
          date herewith from Borrower to Lender, conveying and encumbering certain
          real
          and personal property more particularly described therein (the “Property”).
          This
          Note, the Mortgage, the Construction Loan Agreement between Borrower and
          Lender
          of even date herewith (as the same may from time to time be amended, restated,
          modified or supplemented, the “Loan
          Agreement”)
          and all
          other documents now or hereafter securing, guaranteeing or executed in
          connection with the loan evidenced by this Note (the “Loan”),
          as the
          same may from time to time be amended, restated, modified or supplemented,
          are
          herein sometimes called individually a “Loan
          Document”
and
          together the “Loan
          Documents.”

         

        Section
          3  Interest
          Rate.
          

         

        (a)  BBA
          LIBOR Daily Floating Rate.
          The
          unpaid principal balance of this Note from day to day outstanding which
          is not
          past due, shall bear interest at a fluctuating rate of interest per annum
          equal
          to the BBA LIBOR Daily Floating Rate plus two hundred fifty (250) basis
          points
          per annum. The “BBA
          LIBOR Daily Floating Rate”
shall
          mean a fluctuating rate of interest per annum equal to the British Bankers
          Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
          commercially available source providing quotations of BBA LIBOR as selected
          by
          Lender from time to time) as determined for each Business Day at approximately
          11:00 a.m. London time two (2) London Banking Days prior to the date in
          question, for U.S. Dollar deposits (for delivery on the first day of such
          interest period) with a one month term, as adjusted from time to time in
          Lender’s sole discretion for reserve requirements, deposit insurance assessment
          rates and other regulatory costs. If such rate is not available at such
          time for
          any reason, then the rate will be determined by such alternate method as
          reasonably selected by Lender. A “London Banking Day” is a day on which banks in
          London are open for business and dealing in offshore dollars. Interest
          shall be
          computed for the actual number of days which have elapsed, on the basis
          of a
          360-day year.

         

         

        
          
            PAGE
              -1

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        (b)  Alternative
          Rates.
          If
          Lender determines that no adequate basis exists for determining the BBA
          LIBOR
          Daily Floating Rate or that the BBA LIBOR Daily Floating Rate will not
          adequately and fairly reflect the cost to Lender of funding the Loan, or
          that
          any applicable Law or regulation or compliance therewith by Lender prohibits
          or
          restricts or makes impossible the charging of interest based on the BBA
          LIBOR
          Daily Floating Rate and Lender so notifies Borrower, then until Lender
          notifies
          Borrower that the circumstances giving rise to such suspension no longer
          exist,
          interest shall accrue and be payable on the unpaid principal balance of
          this
          Note from the date Lender so notifies Borrower until the Maturity Date
          of this
          Note (whether by acceleration, declaration, extension or otherwise) at
          a
          fluctuating rate of interest equal to the Prime Rate of Lender. The term
          “Prime
          Rate”
means,
          on any day, the rate of interest per annum then most recently established
          by
          Bank of America, N.A. "Bank
          of
          America"
          as its
“prime rate.” Any such rate is a general reference rate of interest, may not be
          related to any other rate, and may not be the lowest or best rate actually
          charged by Lender to any customer or a favored rate and may not correspond
          with
          future increases or decreases in interest rates charged by other lenders
          or
          market rates in general, and that Lender may make various business or other
          loans at rates of interest having no relationship to such rate. Each time
          the
          Prime Rate changes, the per annum rate of interest on this Note shall change
          immediately and contemporaneously with such change in the Prime Rate. If
          Bank of
          America ceases to exist or to establish or publish a prime rate from which
          the
          Prime Rate is then determined, the applicable variable rate from which
          the Prime
          Rate is determined thereafter shall be instead the prime rate reported
          in
The
          Wall Street Journal
          (or the
          average prime rate if a high and a low prime rate are therein reported),
          and the
          Prime Rate shall change without notice with each change in such prime rate
          as of
          the date such change is reported.

         

        (c)  Past
          Due Rate.
          If any
          amount payable by Borrower under any Loan Document is not paid when due
          (without
          regard to any applicable grace periods), such amount shall thereafter bear
          interest at the Past Due Rate (as defined below) to the fullest extent
          permitted
          by applicable Law. Accrued and unpaid interest on past due amounts (including
          interest on past due interest) shall be due and payable on demand, at a
          fluctuating rate per annum (the “Past
          Due Rate”)
          equal
          to the Prime Rate plus two hundred (200) basis points. 

         

        Notwithstanding
          anything to the contrary contained in Section 3 of this Note, Lender shall
          only
          make adjustments or changes to the interest rate as provided in Section
          3(a) and
          (b) hereof, or charge interest at the Past Due Rate as provided in Section
          3(c)
          hereof, at the same time and in the same manner as are made or charged
          by Bank
          of America under that certain Promissory Note of even date herewith executed
          by
          American Retirement Corporation (“ARC”),
          payable to Bank of America, in the original principal amount of $26,250,000.00
          (as the same may from time to time be amended, restated, modified or
          supplemented, the “ARC
          Note”).

        


        Section
          4  Prepayment.
          Borrower
          may prepay the principal balance of this Note, in full at any time or in
          part
          from time to time, without fee, premium or penalty, provided that: (a) no
          prepayment may be made which in Lender’s judgment would contravene or prejudice
          funding under any applicable permanent loan commitment or tri-party agreement
          or
          the like; (b) Lender shall have actually received from Borrower prior
          written notice of (i) Borrower’s intent to prepay, (ii) the amount of
          principal which will be prepaid (the “Prepaid
          Principal”),
          and
          (iii) the date on which the prepayment will be made; (c) each
          prepayment shall be in the amount of $1,000 or a larger integral multiple
          of
          $1,000 (unless the prepayment retires the outstanding balance of this Note
          in
          full); and (d) each prepayment shall be in the amount of 100% of the
          Prepaid Principal, plus accrued unpaid interest thereon to the date of
          prepayment, plus any other sums which have become due to Lender under the
          Loan
          Documents on or before the date of prepayment but have not been paid. If
          this
          Note is prepaid in full, any commitment of Lender for further advances
          shall
          automatically terminate.

         

        Section
          5  Late
          Charges.
          If
          Borrower shall fail to make any payment under the terms of this Note (other
          than
          the payment due at maturity) within fifteen (15) days after the date such
          payment is due, Borrower shall pay to Lender on demand a late charge equal
          to
          four percent (4%) of the amount of such payment. Such fifteen (15) day
          period
          shall not be construed as in any way extending the due date of any payment.
          The
          late charge is imposed for the purpose of defraying the expenses of Lender
          incident to handling such delinquent payment. This charge shall be in addition
          to, and not in lieu of, any other amount that Lender may be entitled to
          receive
          or action that Lender may be authorized to take as a result of such late
          payment. Notwithstanding anything to the contrary contained in Section
          5 of this
          Note, Lender shall only demand a late charge at the same time and in the
          same
          manner as demanded by Bank of America under the ARC Note.

         

         

        
          
            PAGE
              - 2

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        Section
          6  Certain
          Provisions Regarding Payments.
          All
          payments made under this Note shall be applied, to the extent thereof,
          to late
          charges, to accrued but unpaid interest, to unpaid principal, and to any
          other
          sums due and unpaid to Lender under the Loan Documents, in such manner
          and order
          as Lender may elect in its sole discretion, any instructions from Borrower
          or
          anyone else to the contrary notwithstanding. Remittances shall be made
          without
          offset, demand, counterclaim, deduction, or recoupment (each of which is
          hereby
          waived) and shall be accepted subject to the condition that any check or
          draft
          may be handled for collection in accordance with the practice of the collecting
          bank or banks. Acceptance by Lender of any payment in an amount less than
          the
          amount then due on any indebtedness shall be deemed an acceptance on account
          only, notwithstanding any notation on or accompanying such partial payment
          to
          the contrary, and shall not in any way (a) waive or excuse the existence of
          an Event of Default (as hereinafter defined), (b) waive, impair or
          extinguish any right or remedy available to Lender hereunder or under the
          other
          Loan Documents, or (c) waive the requirement of punctual payment and
          performance or constitute a novation in any respect. Payments received
          after
          2:00 p.m. shall be deemed to be received on, and shall be posted as of,
          the
          following Business Day. Whenever any payment under this Note or any other
          Loan
          Document falls due on a day which is not a Business Day, such payment may
          be
          made on the next succeeding Business Day.

         

        Section
          7  Events
          of Default.
          The
          occurrence of any one or more of the following shall constitute an “Event of
          Default” under this Note:

         

        (a)  Borrower
          fails to pay within three (3) days after the date such payment is due or
          upon
          acceleration, maturity or otherwise.

         

        (b)  Any
          covenant, agreement or condition in this Note is not fully and timely performed,
          observed or kept, subject to any applicable grace or cure period.

         

        (c)  An
          Event
          of Default (as therein defined) occurs under any of the Loan Documents
          other
          than this Note (subject to any applicable grace or cure period).

         

        Section
          8  Remedies.
          Upon the
          occurrence of an Event of Default, Lender may at any time thereafter exercise
          any one or more of the following rights, powers and remedies:

         

        (a)  Lender
          may
          accelerate the Maturity Date and declare the unpaid principal balance and
          accrued but unpaid interest on this Note, and all other amounts payable
          hereunder and under the other Loan Documents, at once due and payable,
          and upon
          such declaration the same shall at once be due and payable.

         

        (b)  Lender
          may
          set off the amount due against any and all accounts, credits, money, securities
          or other property 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.

         

        (c)  Lender
          may
          exercise any of its other rights, powers and remedies under the Loan Documents
          or at law or in equity.

         

        Section
          9  Remedies
          Cumulative.
          All of
          the rights and remedies of Lender under this Note and the other Loan Documents
          are cumulative of each other and of any and all other rights at law or
          in
          equity, and the exercise by Lender of any one or more of such rights and
          remedies shall not preclude the simultaneous or later exercise by Lender
          of any
          or all such other rights and remedies. No single or partial exercise of
          any
          right or remedy shall exhaust it or preclude any other or further exercise
          thereof, and every right and remedy may be exercised at any time and from
          time
          to time. No failure by Lender to exercise, nor delay in exercising, any
          right or
          remedy shall operate as a waiver of such right or remedy or as a waiver
          of any
          Event of Default.

         

         

        
          
            PAGE
              -3

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        Section
          10  Costs
          and Expenses of Enforcement.
          Borrower
          agrees to pay to Lender on demand all costs and expenses incurred by Lender
          in
          seeking to collect this Note or to enforce any of Lender’s rights and remedies
          under the Loan Documents, including court costs and reasonable attorneys’ fees
          and expenses, whether or not suit is filed hereon, or whether in connection
          with
          bankruptcy, insolvency or appeal.

         

        Section
          11  Service
          of Process.
          Borrower
          hereby consents to process being served in any suit, action, or proceeding
          instituted in connection with this Note by the mailing of a copy thereof
          by
          certified mail, postage prepaid, return receipt requested, to Borrower.
          Borrower
          irrevocably agrees that such service shall be deemed to be service of process
          upon Borrower in any such suit, action, or proceeding. Nothing in this
          Note
          shall affect the right of Lender to serve process in any manner otherwise
          permitted by law and nothing in this Note will limit the right of Lender
          otherwise to bring proceedings against Borrower in the courts of any
          jurisdiction or jurisdictions, subject to any provision or agreement for
          arbitration or dispute resolution set forth in the Loan Agreement.

         

        Section
          12  Heirs,
          Successors and Assigns.
          The
          terms of this Note and of the other Loan Documents shall bind and inure
          to the
          benefit of the heirs, devisees, representatives, successors and assigns
          of the
          parties. The foregoing sentence shall not be construed to permit Borrower
          to
          assign the Loan except as otherwise permitted under the Loan
          Documents.

         

        Section
          13  General
          Provisions.
          Time is
          of the essence with respect to Borrower’s obligations under this Note. If more
          than one person or entity executes this Note as Borrower, all of said parties
          shall be jointly and severally liable for payment of the indebtedness evidenced
          hereby. Borrower and each party executing this Note as Borrower hereby
          severally
          (a) waive demand, presentment for payment, notice of dishonor and of
          nonpayment, protest, notice of protest, notice of intent to accelerate,
          notice
          of acceleration and all other notices (except any notices which are specifically
          required by this Note or any other Loan Document), filing of suit and diligence
          in collecting this Note or enforcing any of the security herefor; (b) agree
          to any substitution, subordination, exchange or release of any such security
          or
          the release of any party primarily or secondarily liable hereon; (c) agree
          that Lender shall not be required first to institute suit or exhaust its
          remedies hereon against Borrower or others liable or to become liable hereon
          or
          to perfect or enforce its rights against them or any security herefor;
          (d) consent to any extensions or postponements of time of payment of this
          Note for any period or periods of time and to any partial payments, before
          or
          after maturity, and to any other indulgences with respect hereto, without
          notice
          thereof to any of them; and (e) submit (and waive all rights to object) to
          non-exclusive personal jurisdiction of any state or federal court sitting
          in the
          state and county in which any of the Property is located for the enforcement
          of
          any and all obligations under this Note and the other Loan Documents;
          (f) waive the benefit of all homestead and similar exemptions as to this
          Note; (g) agree that their liability under this Note shall not be affected
          or impaired by any determination that any title, security interest or lien
          taken
          by Lender to secure this Note is invalid or unperfected; and (h) hereby
          subordinate to the Loan and the Loan Documents any and all rights against
          Borrower and any security for the payment of this Note, whether by subrogation,
          agreement or otherwise, until this Note is paid in full. A determination
          that
          any provision of this Note 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 Note 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. This Note
          may not
          be amended except in a writing specifically intended for such purpose and
          executed by the party against whom enforcement of the amendment is sought.
          Captions and headings in this Note are for convenience only and shall be
          disregarded in construing it. This Note and its validity, enforcement and
          interpretation shall be governed by the laws of the state in which payment
          of
          this Note is to be made (without regard to any principles of conflicts
          of laws)
          and applicable United States federal law. Whenever a time of day is referred
          to
          herein, unless otherwise specified such time shall be the local time of
          the
          place where payment of this Note is to be made. The term “Business Day” shall
          mean a day on which Lender is open for the conduct of substantially all
          of its
          banking business at its office in the city in which this Note is payable
          (excluding Saturdays and Sundays). Capitalized terms used herein without
          definition shall have the meanings ascribed to such terms in the Loan Agreement.
          The words “include” and “including” shall be interpreted as if followed by the
          words “without limitation.”

         

         

        
          
            PAGE
              - 4

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        Section
          14  Notices.
          Any
          notice, request, or demand to or upon Borrower or Lender shall be deemed
          to have
          been properly given or made when delivered in accordance with the terms
          of the
          Loan Agreement regarding notices. 

         

        Section
          15  No
          Usury.
          It is
          expressly stipulated and agreed to be the intent of Borrower and Lender
          at all
          times to comply with applicable state law or applicable United States federal
          law (to the extent that it permits Lender to contract for, charge, take,
          reserve, or receive a greater amount of interest than under state law)
          and that
          this Section shall control every other covenant and agreement in this Note
          and
          the other Loan Documents. If applicable state or Federal law should at
          any time
          be judicially interpreted so as to render usurious any amount called for
          under
          this Note or under any of the other Loan Documents, or contracted for,
          charged,
          taken, reserved, or received with respect to the Loan, or if Lender’s exercise
          of the option to accelerate the Maturity Date, or if any prepayment by
          Borrower
          results in Borrower having paid any interest in excess of that permitted
          by
          applicable law, then it is Lender’s express intent that all excess amounts
          theretofore collected by Lender shall be credited on the principal balance
          of
          this Note and all other indebtedness secured by the Assignment, and the
          provisions of this Note and the other Loan Documents shall immediately
          be deemed
          reformed and the amounts thereafter collectible hereunder and thereunder
          reduced, without the necessity of the execution of any new documents, so
          as to
          comply with the applicable law, but so as to permit the recovery of the
          fullest
          amount otherwise called for hereunder or thereunder. All sums paid or agreed
          to
          be paid to Lender for the use or forbearance of the Loan shall, to the
          extent
          permitted by applicable law, be amortized, prorated, allocated, and spread
          throughout the full stated term of the Loan.

         

        [Signature
          Page Follows]

         

         

        
          
            PAGE
              - 5

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

         



        IN
          WITNESS
          WHEREOF, Borrower has duly executed this Note as of the date first above
          written.

         

        
          	 	Borrower:	 
	 	 	 	 
	 	ASF
                  of Green Hills, LLC,
	 	a
                  Tennessee non-profit limited liability company
	 	 	 	 
	 	By:	American
                  Seniors Foundation, Inc., 
	 	 	
                  its
                    sole member

                
	 	 	 	 
	 	 	
                  By:

                	 
	 	 	
                  Title:

                	 


        

         

        


        ENDORSEMENT

        


        


        As
          collateral security, pay to the order of Bank of America, N.A.

        
          	 	 	 	 
	 	AMERICAN
                  RETIREMENT CORPORATION
	 	 	 	 
	 	By: 	 	 
	 	 	Name: 	 
	 	 	Title: