Exhibit 10.1


 


EXECUTION
VERSION


 


FIRST AMENDMENT TO THE CREDIT AGREEMENT


 


FIRST AMENDMENT, dated as of October 14, 2005
(this “Amendment”), to the Credit Agreement, dated as of April 6,
2005 (as previously amended, supplemented or otherwise modified, the “Existing
Credit Agreement”, and as amended hereby and as further amended, restated,
supplemented or otherwise modified and in effect from time to time, the “Credit
Agreement”), by and among ARC Housing LLC (“Housing LLC”), ARC
HousingTX LP (“HousingTX LP”, together with Housing LLC, collectively,
the “Borrowers”, each, a “Borrower”) and Merrill Lynch Mortgage
Capital Inc. (the “Lender”).


 


RECITALS


 


The Borrowers and the Lender are parties to the
Existing Credit Agreement.  Capitalized
terms used but not otherwise defined herein shall have the meanings given to
them in the Existing Credit Agreement.


 


The Borrowers and the Lender have agreed, subject to
the terms and conditions of this Amendment, that the Existing Credit Agreement
be amended to revise the provisions
relating to, among other items, the maximum aggregate amount of Loans available
to the Borrowers, the rate of interest payable to the Lender on the Loans and
the maturity date of the Loans.


 


Accordingly, the Borrowers and the Lender hereby
agree, in consideration of the mutual premises and mutual obligations set forth
herein, that the Existing Credit Agreement is hereby amended as follows:


 


SECTION 1.         Amendments.


 


1.1           Section 1.01
of the Existing Credit Agreement is hereby amended by inserting in proper
alphabetical order the following new defined terms:


 


“Dispatch Date” shall mean the date on which
the Transmittal Package of a Dispatched Unit is dispatched by a Borrower to the
applicable Registry Office via overnight mail.


 


“Dispatched Unit” shall mean any Unit for which
the related Transmittal Package has been dispatched by a Borrower to the
applicable Registry Office via overnight mail for notation of the Lender’s
first priority, perfected Lien and a Lien-Noted Certificate of Title has not
been returned to the Custodian.


 


“First Amendment Effective Date” shall mean the
“Amendment Effective Date” as defined in the First Amendment to the Credit
Agreement, dated as of October 14, 2005.


 


“Funds from Operations” shall mean, with
respect to any Fiscal Quarter, the net income of ARC Inc. and its Subsidiaries
(determined on a consolidated basis in 


 


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accordance with GAAP) for
such Fiscal Quarter, excluding gains or losses from sales of property and
extraordinary and unusual items, plus depreciation and amortization.


 


“Holdings” shall mean ARC Real Estate Holdings,
LLC.


 


“Holdings Security Agreement” shall mean the
Security Agreement dated as of October 14, 2005 between Holdings and the
Lender, as the same may be amended, restated, supplemented, or otherwise
modified and in effect from time to time.


 


“Lien-Noted Certificate of Title” shall have
the meaning set forth in the Custodial Agreement.


 


“Weekly Report” shall have the meaning set
forth in the Custodial Agreement.


 


1.2           Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Accelerated Amortization Event” and inserting in lieu thereof the
following:


 


“Accelerated
Amortization Event” shall, on any date of determination, mean the
occurrence of any of the following:


 


(a)           (i) An
amount equal to the Real Estate Net Segment Income for the two (2) Fiscal
Quarters preceding such date of determination shall be less than 90% of (ii) an
amount equal to the Real Estate Net Segment Income for the four (4) Fiscal
Quarters preceding the Fiscal Quarters described in clause (i) above,
divided by two (2);


 


(b)           The
Aggregate ARC Community Occupancy Ratio shall be less than 81.00% at the end of
any Fiscal Quarter of ARC LP;


 


(c)           The
Interest Coverage Ratio shall be less than 1.25 : 1.00 for any Fiscal
Quarter;


 


(d)           Funds
from Operations shall be less than zero for two consecutive Fiscal Quarters,
beginning with the two consecutive Fiscal Quarters ending September 30,
2005 and December 31, 2005; or


 


(e)           The
amount received from the aggregate net proceeds of the disposition of ARC
Communities shall be less than $85,000,000 during the period from the First
Amendment Effective Date to the first anniversary of the First Amendment
Effective Date;


 


provided,
that an Accelerated Amortization Event shall be deemed to be continuing until:


 


(i)            (A) in
the case of the preceding subparagraphs (a), (b), (c) and (d), (x) the
Borrowers shall have delivered financial statements (together with a Compliance
Certificate) to be delivered to the Lender pursuant to Section 6.01(a)


 


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and (b) for
any Fiscal Quarter following the occurrence of an Accelerated Amortization
Event, and (y) the Lender shall have thereupon determined that an Accelerated
Amortization Event no longer continues to exist and shall have promptly so
notified the Borrowers, and (B) in the case of the preceding subparagraph
(e), the amount received from the aggregate net proceeds of the disposition of
ARC Communities is greater than $85,000,000; or


 


(ii)           such
Accelerated Amortization Event shall have been waived in writing by the Lender.


 


1.3           Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Adjusted Eligible Collateral Value” and inserting in lieu thereof the
following:


 


“Adjusted Eligible Collateral Value” shall
mean, as of any date of determination, the sum of the Value of Eligible Units, plus,
the Value of Eligible Unperfected Units; provided, that the Value of Eligible
Unperfected Units included in the determination of Adjusted Eligible Collateral
Value shall not exceed an amount equal to (i) if such date of
determination is prior to January 15, 2006, the quotient of the Value of
Eligible Units divided by 0.85, minus the Value of Eligible Units, or (ii) if
such date of determination is on or after January 15, 2006, zero.


 


1.4           Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Applicable Margin” and inserting in lieu thereof the following:


 


“Applicable Margin” shall mean, with respect to
all Loans, (a) commencing as of the (i) First Amendment Effective
Date or (ii) the Applicable Margin Adjustment Date following an Applicable
Margin Reduction Event, and for each Fiscal Quarter thereafter until the
occurrence of an Applicable Margin Increase Event, four and one-eighth percent
(4.125%) or (b) commencing as of the Applicable Margin Adjustment Date
following an Applicable Margin Increase Event and for each Fiscal Quarter thereafter
until the occurrence of an Applicable Margin Reduction Event, seven percent
(7.00%).


 


The Applicable Margin shall be adjusted downward on
the Applicable Margin Adjustment Date upon the delivery of a Preliminary Margin
Adjustment Certificate for the prior Fiscal Quarter; provided, that, as of the
date of delivery of such Preliminary Margin Adjustment Certificate, no Default
has occurred or is continuing, provided, further that in the event (x) the
Preliminary Margin Adjustment Certificate in support of the downward adjustment
of the Applicable Margin is inaccurate or otherwise misleading, as determined
by the Lender in its sole discretion in good faith based upon a review of the
Compliance Certificate and the Borrowers’ financial statements for such Fiscal
Quarter upon receipt thereof, and (y) such downward adjustment in the
Applicable Margin would not have been made had such Compliance Certificate and
the Borrowers’ financial statements for such prior Fiscal Quarter been used to
adjust the Applicable Margin, then each Borrower shall pay to Lender, within
five (5) calendar days of such determination such additional interest on
the Loans that would have been payable 


 


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hereunder had the Applicable Margin been so adjusted (or not adjusted)
on such basis and the Applicable Margin shall be readjusted in accordance with
such Compliance Certificate as of the prior Applicable Margin Adjustment Date.


 


1.5           Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Applicable Margin Increase Event” and inserting in lieu thereof the
following:


 


“Applicable Margin Increase Event” shall mean,
as of any date of determination, the failure of any of the conditions or events
set forth below to exist:


 


(a)           commencing
for the Fiscal Quarter ending December 31, 2005, with respect to each
Fiscal Quarter, ARC LP and its Affiliates shall have in the aggregate completed
sales of not less than 450 Units for such Fiscal Quarter; provided that,
to the extent the sales of ARC LP or its Affiliates during any Fiscal Quarter
exceeds 450 Units, such excess amount may be carried forward to any succeeding
Fiscal Quarter.


 


(b)           commencing
for the Fiscal Quarter ending September 30, 2005, the
Interest Coverage Ratio as of the last day for the preceding Fiscal Quarter
shall not be less than 2.00:1.00.


 


(c)           commencing
as of the Fiscal Quarter ending September 30, 2005, the Aggregate Borrower
Lease Occupancy Ratio as of the last day for the preceding Fiscal Quarter shall
be equal to or greater than 86.00%.


 


(d)           commencing
as of the First Amendment Effective Date, the average age of all Units owned by
ARC LP and its Affiliates, in the aggregate, as of the last day of each Fiscal
Quarter, is less than or equal to 4.00 years.


 


1.6           Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Applicable Margin Reduction Event” and inserting in lieu thereof the
following:


 


“Applicable Margin Reduction Event” shall mean,
as of any date of determination, the initial occurrence of each of the
conditions or events set forth in clauses (a) through (d) of the
definition of “Applicable Margin Increase Event” within the same relevant time
period after the occurrence of any Applicable Margin Increase Event.


 


1.7           Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Borrowing Base Amount” and inserting in lieu thereof the following:


 


“Borrowing Base Amount”
shall mean, on any date of determination, an amount equal to sixty-five percent
(65%) (the “BB Factor”) of Adjusted Eligible Collateral Value, as
certified by each Borrower pursuant to Section 4.02(b) and
pursuant to Section 6.01(e) of this Agreement in connection
with the delivery of the applicable Borrowing Base Report; provided that
(x) the “Borrowing Base Amount” shall be adjusted on the date of delivery
of each Borrowing Base Report by reducing the BB 


 


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Factor in increments of
0.50% for each one percentage point (rounded up) by which the Default
Percentage exceeds 6.0%.


 


1.8           Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Eligible Units” and inserting in lieu thereof the following:


 


“Eligible Unit” shall mean, with respect to
each Borrower, at the time of any determination thereof, a Unit as to which
each of the following requirements is satisfied:


 


(a)           such Unit
is owned by a Borrower;


 


(b)           such Unit
is located on an ARC Community;


 


(c)           the Lender
has a first-priority perfected Lien in such Unit; provided, that, in the
case of any Dispatched Unit for which the Certificate of Title does not reflect
the Lien of the Lender on the face of such Certificate of Title, such “Lien”
shall be deemed to be a first priority, perfected Lien for purposes of this
subparagraph (c) for the period beginning on the third (3rd)
Business Day following the Dispatch Date until the ninetieth (90th)
calendar day following the Dispatch Date of such Dispatched Unit (unless
otherwise consented to by the Lender);


 


(d)           ownership
of such Unit is evidenced by a Certificate of Title or, in the case of a
Dispatched Unit, by a Certificate of Title or by an MSO that has been submitted
to the applicable Registry Office for the issuance of a Certificate of Title
naming a Borrower as owner and the Lender as first lien holder; and


 


(e)           the
representations and warranties on Schedule 6 to this Agreement are true
and correct as to such Unit in all material respects.


 


1.9           Section 1.01
of the Existing Credit Agreement is hereby amended by inserting the clause “,
the Holdings Security Agreement” into the fifth line of the definition of “Loan
Documents”, immediately after the clause “the Additional Fee Letter”.


 


1.10         Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Maximum Credit” and inserting in lieu thereof the following:


 


“Maximum Credit” shall mean the lesser of (a) the
Borrowing Base, and (b) $150,000,000.


 


1.11         Section 1.01
of the Existing Credit Agreement is hereby amended by inserting the clause “the
Holdings Pledge and Security Agreement,” into the first line of the definition
of “Pledge and Security Agreement”, immediately after the clause “the Parent
Pledge Agreement,”.


 


1.12         Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Termination Date” and inserting in lieu thereof the following:


 


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“Termination Date” shall mean the earlier of (a) September 30,
2008, (b) subject to the provisions of Article IX(a) of
this Agreement, the occurrence and continuance of an Event of Default, or (c) such
earlier date on which this Agreement shall terminate in accordance with the
provisions hereof or by operation of law.


 


1.13         Section 1.01
of the Existing Credit Agreement is hereby amended by deleting the definition
of “Trust Receipt” in its entirety.


 


1.14         Section 2.06
of the Existing Credit Agreement is hereby amended by deleting Section 2.06(b) and
inserting in lieu thereof the following:


 


(b)           The
Borrowers hereby promise, jointly and severally, to pay to the Lender interest
on the unpaid principal amount of each Loan for the period from and including
the date of such Loan to but excluding the date such Loan shall be paid in full,
at a rate per annum equal to the LIBOR Rate plus the Applicable Margin; provided,
that in no event shall such rate per annum exceed the maximum rate permitted by
law.  Notwithstanding the foregoing, the
Borrowers hereby promise, jointly and severally, to pay to the Lender interest
at the applicable Post-Default Rate on any principal of any Loan and on any
other amount payable by the Borrowers hereunder or under any Note that shall
not be paid in full when due (whether at stated maturity, by acceleration or by
mandatory prepayment or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full.  Accrued interest on each Loan shall be
payable monthly on each Payment Date and for the last month of this Agreement
on the Payment Date and on the Termination Date; provided, that, the
Lender may, in its sole discretion, require accrued interest to be paid
simultaneously with any prepayment of principal made by the Borrowers on
account of any of the Loans outstanding. 
Interest payable at the Post-Default Rate shall accrue daily and shall
be payable upon such accrual.  Promptly
after the determination of any interest rate provided for herein or any change
therein, the Lender shall give notice thereof to the Borrowers.


 


1.15         Section 2.07
of the Existing Credit Agreement is hereby amended by deleting Section 2.07(b) and
inserting in lieu thereof the following:


 


(b)           Reserved.


 


1.16         Section 3.04
of the Existing Credit Agreement is hereby amended by deleting Section 3.04
and inserting in lieu thereof the following:


 


Section 3.04           Non-usage
Fee.  The Borrowers, jointly and
severally, agree to pay to the Lender a non-usage fee from and including the
First Amendment Effective Date to the Termination Date, equal to .375% of the
difference, if any,  between the
applicable amount set forth below and the aggregate outstanding Loans:


 


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  Period

  	
   

  	
  Amount

  	
   

  
	
  October 1, 2005 through September 30, 2006

  	
   

  	
  $

  	
  100,000,000

  	
   

  
	
  October 1, 2006 through September 30, 2007

  	
   

  	
  $

  	
  125,000,000

  	
   

  
	
  October 1, 2007 through September 30, 2008

  	
   

  	
  $

  	
  150,000,000

  	
   

  



 


in each case payable quarterly in arrears on the first Payment Date of
each Fiscal Quarter and on the Termination Date, such payment to be made in Dollars,
in immediately available funds, without deduction, set-off or counterclaim, to
the Lender at the account set forth in Section 3.01(a) of this
Agreement.


 


1.17         The Existing
Credit Agreement is hereby amended by deleting Section 4.02(e) and
inserting in lieu thereof the following:


 


(e)           Weekly
Reports.  The Lender shall have
received one or more Weekly Reports from the Custodian, duly completed,
confirming (i) that the Custodian is holding Certificates of Title for
each Unit that is included in the Borrowing Base Amount, with the Lien of the
Lender duly noted on each such Certificate of Title by the applicable Registry
Office in conformity with the requirements of applicable state law or (ii) that
the Borrowers shall have notified the Custodian that they have sent out a
Certificate of Title or an MSO, together with a Transmittal Package, to the
applicable Registry Office for a Certificate of Title to be issued with such
Lien to be so noted, indicating the applicable Dispatch Date.


 


1.18         Section 4.02
of the Existing Credit Agreement is hereby amended by inserting as Section 4.02(h) the
following:


 


(h)           Account
Control Agreement.   The Lender shall have received an
account control agreement relating to the collection account of Holdings with
JPMorgan Chase Bank, N.A. referred to in the Holdings Security Agreement, duly
executed and delivered by Holdings, the Lender and JPMorgan Chase Bank, N.A.,
as depositary bank, in form and substance reasonably satisfactory to the
Lender.


 


1.19         Section 6.01
of the Existing Credit Agreement is hereby amended by renumbering Section 6.01(i) as
Section 6.01(j) and inserting as Section 6.01(i) the following:


 


(i)            as soon
as available and in any event within forty-five days of each Fiscal Quarter of
each Fiscal Year, a report of the aggregate completed sales of Units that shall
have been completed by ARC LP and its Affiliates during such Fiscal Quarter,
certified as true and correct by the chief financial or accounting Responsible
Officer of ARC; and


 


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1.20         Section 6.09
of the Existing Credit Agreement is hereby amended by deleting Section 6.09(e) and
inserting in lieu thereof the following:


 


(e)           The
Borrowers shall maintain a cash reserve in the Interest Reserve Account in an
amount equal to $875,000 (the “Interest Reserve Amount”). The Borrowers
shall be permitted to invest the Interest Reserve Amount in certain permitted
investments upon terms acceptable to both the Borrowers and the Lender; provided,
that any such account containing such investments shall be subject to an
account control agreement.


 


1.21         The Existing
Credit Agreement is hereby amended by deleting Paragraph (c) of Schedule 6
and inserting in lieu thereof the following:


 


(c)           Certificate
of Title.  Either (i) the Certificate
of Title for the Eligible Unit bears a notation indicating that the Lender is
the first lien holder of the Unit evidenced by such Certificate of Title or (ii) in
the case of a Dispatched Unit, such Certificate of Title, together with a
complete Transmittal Package, has been submitted by a Borrower to the
applicable Registry Office (however designated) in the state in which the Unit
is located, together with a duly completed form requesting that (A) the
lien in favor of the Lender be noted on such Certificate of Title and (B) the
applicable motor vehicle registrar return the original Certificate of Title to
the Custodian (or another entity designated by the Lender) and no more than
ninety (90) calendar days have transpired since the Dispatch Date of such
Dispatched Unit.


 


SECTION 2.         Conditions
Precedent.  This Amendment shall
become effective on the date (the “Amendment Effective Date”) on which
the following conditions precedent shall have been satisfied:


 


2.1           Delivered
Documents.  On the Amendment Effective
Date, the Lender shall have received the following documents, each of which
shall be satisfactory to the Lender in form and substance:


 


(a)           Amendment.  This Amendment, duly executed and delivered
by a duly authorized officer of each Borrower and by the Lender;


 


(b)           First
Amendment to the ARC LP Guarantee. 
The First Amendment to the ARC LP Guarantee, duly executed and delivered
by a duly authorized officer of Affordable Residential Communities LP and by
the Lender;


 


(c)           Amended
and Restated Custodial Agreement.  An
Amended and Restated Custodial Agreement, duly executed and delivered by a duly
authorized officer of each Borrower, the Lender and the Custodian, in form and
substance satisfactory to the Lender;


 


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(d)           Reaffirmations.
A reaffirmation of each Loan Document (other than the Existing Credit Agreement
and the Holdings Security Agreement), in form and substance reasonably
satisfactory to the Lender, duly executed and delivered by each Affiliate of
the Borrowers that is party thereto (together with the Borrowers, collectively,
the “ARC Parties”);


 


(e)           Collateral
Certificates. An updated collateral certificate for each Borrower in the
form previously provided to the Lender (or a certificate of a Responsible
Officer of each Borrower confirming that there are no changes to its existing
collateral certificate or indicating any changes from its existing collateral
certificates);


 


(f)            Security
Agreement. (i) the Holdings Security Agreement, in the form of Exhibit A
to this Amendment, duly executed and delivered by a Responsible Officer of
Holdings and (ii) UCC financing statements covering all the security
interests created in the Holdings Security Agreement;


 


(g)           Legal
Opinions. Opinions, dated as of the Amendment Effective Date and addressed
to the Lender, from Skadden, Arps, Slate, Meagher & Flom LLP, special
New York counsel to each of the ARC Parties;


 


(h)           Resolutions,
etc.  from each Borrower, (i) a
copy of a current good standing certificate of the Secretary of State (or
comparable official) of the jurisdiction of organization of such Person and (ii) a
certificate duly executed and delivered by such Person’s Secretary or Assistant
Secretary as to (A) resolutions of such Person’s board of directors (or
analogous governing body as Person or Persons) then in full force and effect
authorizing the execution, delivery and performance of this Amendment and any
related documents or agreements and the transactions contemplated hereby and
thereby, (B) the incumbency and signatures of those of such Person’s
officers authorized to act with respect to this Amendment, and (C) the
full force and validity of each Organic Document of such Person and copies
thereof (or a certificate of such Person’s Secretary or Assistant Secretary
that there have been no changes to the versions of such Organic Documents
provided to the Lender in connection with the effectiveness of the Existing
Credit Agreement), upon which certificates the Lender may conclusively rely
until it shall have received a further certificate of the Secretary or
Assistant Secretary of such Borrower canceling or amending such prior
certificate;


 


(i)            Resolutions,
etc. of Holdings.  from Holdings, (i) a
copy of a current good standing certificate of the Secretary of State (or
comparable official) of Delaware and (ii) a certificate duly executed and
delivered by the Secretary or Assistant Secretary of Holdings as to (A) resolutions
of such Person’s board of directors (or analogous governing body as Person or
Persons) then in full force and effect authorizing the execution, delivery and
performance of the Holdings Pledge and Security Agreement and any related
documents or agreements and the transactions contemplated thereby, (B) the
incumbency and signatures of those of Holding’s officers authorized to act with
respect to the Holdings Pledge and Security Agreement, and (C) the full
force and validity of each Organic Document of Holdings and copies thereof (or
a certificate of such Person’s 


 


9





















 


Secretary or Assistant Secretary that there have been no changes to the
versions of such Organic Documents provided to the Lender in connection with
the effectiveness of the Existing Credit Agreement), upon which certificates
the Lender may conclusively rely until it shall have received a further
certificate of the Secretary or Assistant Secretary of Holdings canceling or
amending such prior certificate; and


 


(j)            Other
Documents.  Such other documents as
the Lender or counsel to the Lender may reasonably request.


 


2.2           No
Material Adverse Change. There shall have been no material adverse change
in the financial condition of Housing LLC or HousingTX LP prior to the
Amendment Effective Date.


 


2.3           Loan
Fee.  The Borrowers shall pay to the Lender
on the Amendment Effective Date, for its own account, (i) a loan fee of
1.00% of $75,000,000.00, (ii) all remaining fees owed by the Borrowers or
any Obligor to the Lender under the Existing Credit Agreement.


 


2.4           Expenses.  The Borrowers shall pay to Lender on the
Amendment Effective Date the fees and expenses of counsel and other
professional advisors to the Lender.


 


2.5           No
Default.  On the Amendment Effective
Date, (i) the Borrowers shall be in compliance with all the terms and
provisions set forth in the Existing Credit Agreement on its part to be
observed or performed and (ii) both before and after giving effect to the
amendment, no Default shall have occurred and be continuing on such date.


 


2.6           Representations
and Warranties.  On the Amendment Effective
Date, the representations and warranties in the Loan Documents shall be true
and correct as of such date, unless such representations and warranties relate
to an earlier date, both before and after giving effect to the Amendment.


 


SECTION 3.         Master
Lease Estoppel Agreements.  The Master Lease Estoppel Agreements required
to be delivered pursuant to the post-closing letter delivered in connection
with the Existing Credit Agreement will be duly executed and delivered to the
Lender by the parties thereto, to the extent that a Borrower is affiliated with
the party to each such Master Lease Estoppel Agreements, and with respect to
any unaffiliated party, Borrower will use its reasonable best efforts to obtain
consent and signature, in a form and substance satisfactory to the Lender,
within 90 days of an agreement among the Borrowers and the Lender regarding the
form of such Master Lease Estoppel Agreements.


 


SECTION 4.         Limited
Effect.  Except as expressly amended
and modified by this Amendment, the Existing Credit Agreement shall continue to
be, and shall remain, in full force and effect in accordance with its terms; provided,
however, that reference therein and herein to the “Loan Documents” shall
be deemed to include, in any event, this Amendment.  Each reference to the Existing Credit
Agreement in any of the Loan Documents shall be deemed to be a reference to the
Existing Credit Agreement as amended hereby. 
The execution of this Amendment by
the Lender or Custodian shall not operate as a waiver of any of their rights, 


 


10





















 


powers or privileges under the Existing Credit Agreement or under any of the other Loan
Documents except as expressly set forth herein.


 


SECTION 5.         Counterparts.  This Amendment may be executed by each of the
parties hereto on any number of separate counterparts, each of which shall be
an original and all of which taken together shall constitute one and the same
instrument.  Delivery of an executed
signature page of this Amendment in Portable Document Format (PDF) or by
facsimile transmission shall be effective as delivery of an executed original
counterpart of this Amendment.


 


SECTION 6.         GOVERNING
LAW.  THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK. THIS AMENDMENT INCORPORATES BY REFERENCE, AND THE BORROWERS
AND LENDER HEREBY AGREE TO BE SUBJECT TO, THE PROVISIONS SET FORTH IN SECTION 11.11
OF THE EXISTING CREDIT AGREEMENT.


 


[SIGNATURE PAGE FOLLOWS]


 


11





















 


IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed and delivered as of the day and year first
above written.


 


	
   

  	
  BORROWERS

  
	
   

  	
   

  
	
   

  	
  ARC
  HOUSING LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/Scott L.
  Gesell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Scott L. Gesell

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  ARC
  HOUSINGTX LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/Scott L.
  Gesell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Scott L. Gesell

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
						



 


 


FIRST AMENDMENT TO CREDIT AGREEMENT


 





















 


	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH MORTGAGE

  CAPITAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Joshua
  A.Green

  	
   

  
	
   

  	
   

  	
  Name: Joshua A.
  Green

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  



 


 


FIRST AMENDMENT TO
CREDIT AGREEMENT


 





















 


EXHIBIT A


 


Form of Holdings Security Agreement


 


 


FORM OF ACCOUNT CONTROL AGREEMENT