Mortgage Modification

EXHIBIT 10.1


CONSTRUCTION LOAN AGREEMENT


In consideration of the mutual covenants and agreements contained herein, Lender agrees to make and Borrower agrees to accept a loan in accordance with and subject to the terms and conditions set forth herein.


ARTICLE I


PARTICULAR TERMS AND DEFINITIONS


1.1 "Account to Receive Advances" or "Account": That bank account on deposit with Lender depository facilities which shall be designated by Borrower or by the Agent to Request Advances as the account to which advances hereunder may be made by Lender. Unless otherwise designated, this account shall be the account of FREEDOM VILLAGE OF SUN CITY CENTER, LTD., A FLORIDA LIMITED PARTNERSHIP.


1.2 "Agent to Request Advances": Gregory L. Patterson and Robert
Votteler.


1.3 "Amount of Loan": $11,430,000


1.4 "Architects" (collectively, "Architect"): No other Architect can be
selected without the written approval of Lender:


1.4.1 Site Work and Development:


Professional Engineering Resources, Inc. ("PEER")
9800 4th Street North, Suite 308
St. Petersburg, Florida 33702


1.4.2 Building Construction:


Bessolo Design Group, Inc.
556 Central Avenue
St. Petersburg, Florida 33701


1.4.3 Landscape Architect:


Swan Moody
1537 7th Avenue West
Bradenton, Florida 34205


1.5 "Borrower" (the "Borrower"):


FREEDOM VILLAGE OF SUN CITY CENTER, LTD.,
A FLORIDA LIMITED PARTNERSHIP
111 Westwood Place, Suite 402
Brentwood, Tennessee 37027


1.6 "Closing": The time of the execution and delivery hereof by Borrower and Lender.


1.7 "Commitment Fee": Sixty (60) basis points on the Future Advance Loan (as hereinafter defined) shall be paid by Borrower upon execution of this Agreement.


1.8 "Contingency" or "Contingency Reserve": a minimum of three percent (3%) of the total unspent "hard costs" as shown in the Budget.


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1.9 "Contractor" or "General Contractor": Mike Carter Construction Company whose address is 1227 9th Avenue West, Bradenton, Florida 34205. No other contractor can be selected without the written approval of Lender.


1.10 "Engineers" (collectively, "Engineer"): No other Engineer may be selected without the written approval of Lender:


1.10.1 Civil Engineer:


PEER
9800 4th Street North, Suite 308
St. Petersburg, Florida 33702


1.10.2 Structural Engineer:


KEM Engineers, Inc.
556 Central Avenue
St. Petersburg, Florida 33701


1.10.3 Mechanical, Plumbing and Fire Protection:


KEM Engineers, Inc.
556 Central Avenue
St. Petersburg, Florida 33701


1.10.4 Electrical:


KEM Engineers, Inc.
556 Central Avenue
St. Petersburg, Florida 33701


1.11 "Governmental Authority(ies)": The United States, the State of Florida, County of Hillsborough and any political subdivision thereof, and any agency, department, commission, board, bureau or instrumentality of any of them.


1.12 "Guarantor":


AMERICAN RETIREMENT CORPORATION,
a Tennessee corporation
111 Westwood Place, Suite 402
Brentwood, Tennessee 37027


1.13 "Improvements": A project consisting of Phase 2 of Plaza West Health Center, consisting of 71 additional skilled nursing beds and associated common areas, associated with a retirement community known as "Freedom Village at Sun City Center" located in Hillsborough County, Florida.


1.15 "Interest Rate": As provided in the Note.


1.16 "Interest Rate Hedge Agreement": Any indebtedness, liabilities or obligations, now existing or hereafter arising, due or to become due, absolute or contingent, of Borrower to Lender (or any affiliate of Lender) under any arrangement with Lender (or any affiliate of Lender) whereby, directly or indirectly, Borrower is entitled to receive from time to time periodic payments calculated by applying either a floating or fixed rate of interest on a stated notional amount in exchange for periodic payments made by Borrower calculated by applying a floating or fixed rate of interest on the same notional amount and shall include, without limitation, interest rates swaps, caps, floors, collars and similar agreements.


1.17 "Lender":


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SUNTRUST BANK,
a Georgia state chartered bank,
successor by merger to SunTrust Bank, Tampa Bay
Post Office Box 3303
Tampa, Florida 33601-3303


1.18 "Loan Documents": Any document or instrument submitted by or for Borrower in connection with the Loan, including, but not limited to: Note, Mortgage, this Construction Loan Agreement, Guaranty of Loan, Assignment of Rents, Leases, Profits and Contracts, Assignment of Borrower's Interest in Contract Documents, Guaranty of Completion, Security Agreement, Financing Statement, Cross-Collateral and Cross-Default Agreement, Owner's Affidavits, Title Insurance Binder or Policy, Survey, Site Plan, Plans and Specifications, insurance policies, Opinion of Counsel, letters from any Governmental Authority or provider of utilities or architect or engineer or other consultant, Terms Letter, Construction Contract and an Interest Rate Hedge Agreement, if applicable.


1.19 "Loan Fund(s)" or "Loan": The amount equal to the face amount of the Note to be advanced by Lender together with Borrower's Total Cash Equity, in accordance with this Agreement, project budget (the "Project Budget") and the loan funds schedule (the "Loan Fund(s) Schedule") marked Exhibit "A" and attached hereto and made a part hereof. The Loan amends and restates the Original Note (as hereinafter defined) with a $4,680,000 future advance made under the Mortgage (as hereinafter defined) (the "Future Advance Loan").


1.20 "Mortgage": The Mortgage Modification and Future Advance Agreement of even date herewith made by Borrower to Lender to secure payment of the Note, which modifies that certain Mortgage and Security Agreement dated December 2, 1999, and recorded as Instrument #1999370411 in Official Records Book 09946, beginning at page 0372 of the Public Records of Hillsborough County, Florida, made by Borrower to Lender to secure the payment of a certain Promissory Note dated December 2, 1999, in the amount of $6,750,000 from Borrower in favor of Lender (the "Original Note").


1.21 "Note": The Amended and Restated Promissory Note of even date herewith (and any other note executed hereafter under the future advances provision of the Mortgage) in the amount of ELEVEN MILLION FOUR HUNDRED THIRTY THOUSAND DOLLARS ($11,430,000), made by Borrower to Lender, which Note amends and restates the indebtedness of the Original Note with the Future Advance Loan.


1.22 "Owner/Contractor Agreement" or "Construction Contract": Those certain construction contracts and addenda between Borrower and the Contractor now existing or entered into in the future for the construction of the Improvements.


1.23 "Plans and Specifications": Plans and Specifications and all amendments and modifications thereof furnished to and approved by Lender as hereinafter provided (the term shall include the final plans and specifications for segments of the Improvements).


1.24 "Premises," "Property" or "Project": The property encumbered by the Mortgage, as more particularly described in Exhibit "B" attached hereto. The real property upon which the Improvements are to be constructed is described on Exhibit "B" and is hereinafter referred to as the "SNF Site."


1.25 "Representative Inspector": Lender shall retain Wedding, Stephenson & Ibarguen, whose address is 300 1st Avenue South, St. Petersburg, Florida 33701, at Borrower's expense to be its Representative Inspector.


1.26 "Requirement of Governmental Authority": Any law, ordinance, order, rule, building code or regulation of a Governmental Authority which affects or governs the use of the Premises or any construction thereon.


1.27 "Survey": That certain survey last certified by the Surveyor as of December 1, 1999.


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1.28 "Surveyor: John C. Brendla & Associates whose address is 4015 82nd Avenue N., Pinellas Park, Florida 33781. No other surveyor can be selected without written approval of Lender.


1.29 "Term" or "Loan Term": From the date of closing of the Loan until December 2, 2002.


1.30 "Terms Letter": That certain letter dated February 17, 2000, as amended by the Loan Documents, from Ruden, McClosky, Smith, Schuster & Russell, P.A., as agent for Lender, to Gregory L. Patterson, Esq., as agent for Borrower.


1.31 "Title Insurance Commitment": That certain commitment for title insurance issued by STEWART TITLE GUARANTY COMPANY bearing number C-9912-2031501.


1.32 "Title Insurer": Stewart Title Guaranty Company
c/o Gregory L. Patterson, Esq.
Authorized Agent
1401 Manatee Avenue West
Suite 800
Drawer 27
Bradenton, Florida 34205.


ARTICLE II


REPRESENTATIONS AND WARRANTIES OF BORROWER


2.1 Borrower represents and warrants that:


2.1.1 The Plans and Specifications are satisfactory to Borrower and have been approved by the beneficiary of any restrictive covenant to which the Premises may be subject and by any Governmental Authority whose approval is required; all construction or development has been and shall be performed within the perimeter of the Premises and in accordance with the Plans and Specifications, appropriate set back requirements, any restrictive covenants and the requirements of any Governmental Authority; and the anticipated use to which the Improvements will be put will comply with all requirements of Governmental Authorities and any restrictive covenants to which the Premises may be subject.


2.1.2 The financial statements heretofore delivered to Lender are true and correct in all respects, have been prepared in accordance with generally accepted accounting principles, consistently applied, and fairly present the respective financial conditions of Borrower and Guarantor as of the respective dates thereof, no material adverse change has occurred in the financial conditions reflected therein since the respective dates thereof and no additional borrowings have been made by Borrower since the date thereof other than the borrowing contemplated hereby or otherwise approved by Lender. All other information submitted by Borrower or Guarantor in support of the application for the Loan is true and correct as of the date of this Agreement, and no material adverse change has occurred.


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2.1.3 There are no actions, suits or proceedings pending or, to the knowledge of the undersigned, threatened against or affecting Borrower or the Property or the Guarantor named in the Loan Documents, or involving the validity or enforceability of the Mortgage or the priority of the lien thereof, at law or in equity, or before or by any Governmental Authority, except actions, suits or proceedings fully covered by insurance or which, if adversely determined, would not substantially impair the ability of the Borrower or the Guarantor to pay when due any amounts which may become payable in respect of the Note; and to the Borrower's knowledge it is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority.


2.1.4 The consummation of the transactions hereby contemplated and performance of this Agreement will not result in any breach of, or constitute a default under, any deed to secure debt, mortgage, deed of trust, indenture, security agreement, lease, bank loan or credit agreement, partnership agreement, operating agreement, articles of incorporation, or other instruments to which Borrower is a party or by which it may be bound or affected.


2.1.5 All utility services and facilities necessary for the construction or development of the Improvements and the operation thereof for their intended purpose are available at the boundaries of the Premises, including water supply, storm and sanitary sewer facilities, gas, electric and telephone facilities and Borrower has the right before, during, and after construction to connect all utility services without restriction.


2.1.6 Except for the contracts for the Improvements entered into by Borrower and Architect, Contractor and Engineer, Borrower has made no contract or arrangement of any kind, the performance of which by the other party thereto would give rise to a lien or claim of lien on the Premises.


2.1.7 At the time of the execution and delivery of the Loan Documents, the recording of the Mortgage and the execution and delivery of this Agreement, no work has been done on Improvements or on the Premises by Borrower or on behalf of or under Borrower, and no materials have been placed or furnished on the Premises, except for work performed and materials provided in connection with that certain Notice of Recommencement described in the Title Insurance Commitment (the "Notice of Recommencement"), all of which liens related to said Notice of Recommencement shall be subordinate to the lien of the Mortgage. At the closing of the Loan, the Title Insurance Commitment will be endorsed or "marked up" by the Title Insurer to reflect that the "gap" and the "mechanic's lien" exceptions will be deleted from the Title Commitment (and subsequent title policy).


2.1.8 All roads necessary for ingress and egress to the Premises and for the full utilization of the Improvements for their intended purposes have either been completed or the necessary rights-of-way therefor have been acquired by Borrower and all necessary steps have been taken by Borrower to assure the complete construction and installation thereof.


2.1.9 There is no default on the part of Borrower under this Agreement, the Note, the Mortgage, or any other Loan Document, and no event has occurred and is continuing which with notice or the passage of time or both would constitute a default under any thereof.


2.1.10 Except for the Notice of Recommencement, no Notice of Commencement, as defined in Florida Statutes, Section 713.13, for construction of the Improvements shall be recorded against the Property, prior to the recording of the Mortgage and other applicable Loan Documents. The Notice of Recommencement is reflected in the Title Insurance commitment as being subordinate to the Mortgage.


2.1.11 The Improvements, other than the installation of utility and site work, shall be constructed in such a manner as to qualify for insurance against flood damage under the federal flood insurance program and such insurance shall be maintained at all times, unless waived in writing by Lender in accordance with the Mortgage. The Representative Inspector shall certify to Lender, upon request of Lender, at the expense of Borrower, that the minimum floor elevations and other construction elements meet the minimum requirements prescribed for Improvements constructed on the Premises under said program.


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2.1.12 The Premises are in compliance with all, and are not in violation of any, applicable federal, state or local statute, ordinance, order, requirement, law, rule or regulation (including, but not limited to, building, zoning, land use, or environmental laws) affecting the Premises.


2.1.13 There is no plan, study or effort by any Governmental Authority or any non-governmental person or agency which may adversely affect the current or planned use of the Premises.


2.1.14 No notice of violation of any applicable federal, state or local statute, law, ordinance, rule, regulation, order or requirement, or of any covenant, condition, restriction or easement affecting the Premises or with respect to the use or occupancy of the Premises has been given by any Governmental Authority having jurisdiction over the Premises or by any other person entitled to enforce same.


2.1.15 There are no encroachments onto the Premises of any improvements on any adjoining real property, except as shown on the Survey.


2.1.16 There is not (i) any intended public improvement which may involve any charge being levied or assessed or which may result in the creation of any lien upon the Premises, or (ii) any intended or proposed federal, state or local statute, ordinance, order, requirement, law or regulation (including, but not limited to, zoning changes) which may adversely affect the current or planned use of the Premises, or (iii) any suit, action, claim or legal administration, arbitration or other proceeding or governmental investigation pending or, to the best knowledge of Borrower, threatened or contemplated against or affecting the Premises nor, to the best of Borrower's knowledge, is there any basis for any such matters.


2.1.17 Except as set forth in Schedule 2.1.17 attached hereto, Borrower has not subjected, and, except as otherwise may be provided in this Agreement, will not subject or suffer to be subjected hereafter the Premises or any portion thereof to any lease, sublease, tenancy, concession, license, occupancy agreement or similar right (except in the ordinary course of business), mortgage, lien, encumbrance, security interest, claim, charge, equity, covenant, condition, restriction, easement, right-of-way or other matter affecting the Premises or any portion thereof, and has not entered into, and, except as otherwise may be provided in this Agreement or in the Title Insurance Commitment, shall not enter into any agreement to do any of the above.


2.1.18 Borrower is the entity described in Article I of this Agreement and is duly formed, validly existing and in good standing under the laws of the State of Florida and has all the power and authority to consummate the transactions contemplated under this Agreement and in any and all other agreements and instruments herein mentioned to which Borrower is a party.


2.1.19 Borrower represents that no brokerage or other fee, commission or compensation is due to anyone or is to be paid by Lender to anyone, except as provided to Lender in writing or on the Settlement Statement of even date. Borrower acknowledges and agrees that no fees, commissions or other payments shall be paid to Borrower, Guarantor or any principals or affiliates thereof without the prior written approval of Lender.


2.1.20 All advances pursuant to the terms of this Agreement will be utilized solely for commercial and business purposes and then only in accordance with the provisions hereof.


2.1.21 Borrower has obtained all permits or licenses necessary to allow the construction of the Improvements in accordance with the Plans and Specifications and all such permits and licenses are in full force and effect and the fees therefor have been paid in full, except as set forth on Exhibit "C" attached hereto, if any.


2.1.22 Each request for an advance under this Agreement shall, without a further writing of any kind, constitute (i) an affirmation that all of the representations and warranties set forth in this Article II remain true and correct as of the date thereof and, unless Lender is notified to the contrary prior to the disbursement of the requested advance, will be true and correct on the date thereof, and (ii) a representation and warranty that the information set forth in each such request in accordance with the requirements of this Agreement is true and correct.


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2.1.23 The Premises are not now damaged or injured as a result of any fire, explosion, accident, flood or other casualty.


2.1.24 There is no existing, proposed or contemplated plan to modify or realign any street or highway or any existing, proposed or contemplated eminent domain proceeding that would result in the taking of all or any part of the Premises or that would adversely affect the current or planned use of the Premises.


2.1.25 No defect or condition of the Premises or the soil or geology thereof exists which will impair the planned use of the Premises.


2.1.26 Borrower is indefeasibly seized of the Premises in fee simple subject only to current taxes not yet due and such restrictive covenants and restrictions, containing no right of reverter or forfeiture of title in case of violation thereof, as would not in any manner affect the use of the Premises contemplated by Borrower or for the construction of the Improvements strictly in accordance with the Plans and Specifications.


2.1.27 All proceeds of the Loan are for the reimbursement of monies actually advanced by Borrower, or to pay existing or future claims for services or materials, in connection with the development or construction of the Improvements.


2.1.28 There are no unemployment compensation or federal social security taxes due and owing from Borrower and there are no liens under the Employment Retirement Security Act of 1974, as amended, against the Premises, whether real or personal, of Borrower.


2.1.29 Borrower does not hold title to the Premises for the benefit of any foreign national or contrary to any regulation or law of the United States of America or of the state wherein the Premises are located pertaining to the control of foreign funds, assets or property. No foreign national has any fee simple ownership interest of any nature, direct or indirect, in the Premises.


2.1.30 Guarantor is duly formed, validly existing and in good standing under the laws of the State of Tennessee and the State of Florida, and is authorized to do business in the State of Florida, and has all the power and authority to consummate the transactions contemplated under this Agreement and in any and all other agreements and instruments herein mentioned to which Guarantor is a party.


2.2 Other terms not specifically defined in this Article II shall have the meaning assigned to them specifically in this Agreement.


2.3 Borrower acknowledges that (i) the aforesaid representations and warranties are given to induce Lender to make the Loan and to fund the same, (ii) Lender is relying and will continue to rely on the same in making and funding the Loan, and (iii) the same shall survive any bankruptcy proceedings.


ARTICLE III


ADVANCES


3.1 Borrower shall infuse cash equity, as subordinated capital, into the Project in a total amount of approximately $3,232,000 (the "Borrower's Total Cash Equity"). Borrower's Total Cash Equity shall be subject to verification by Lender. Borrower's Total Cash Equity requirement equates to approximately forty-one percent (41%) of the total budgeted cost for the Project (the "Project Total Cost"). The Project Total Cost is budgeted at $7,912,000. At all times during the Loan Term, the amount of the Loan shall not exceed fifty-nine percent (59%) of the Project Total Cost. Additional cash equity may be needed in the event of an increase in the Project Total Cost. Only upon infusion by Borrower of Borrower's Total Cash Equity as verified by Lender in an amount of not less than $3,232,000 shall any Loan Funds be expended for construction of the Improvements. Except for cash infused into the Project by Borrower in excess of the Borrower's Total Cash Equity or for liquid collateral pledged as security for the Loan, the Loan shall be repaid in full prior to any repayment or distribution of the Borrower's Total Cash Equity.


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3.2 If any line item as shown on the Loan Funds Schedule is in excess of the amounts as designated herein, Borrower will first reallocate dollars available in the Contingency. To the extent funds in the Contingency are not available, Borrower shall furnish such excess from its own funds prior to closing or at any time thereafter, but in no event later than five (5) days from the date of written notice by Lender to Borrower. Failure of Borrower to comply herewith shall constitute an Event of Default, as such term is defined in the Loan Documents. If any items are less than the amount designated herein upon confirmation by the Representative Inspector of the proposed adjusted line item amount, the difference between the amount shown and the actual amount shall be added to the Contingency required by the Loan. All reallocations are subject to Lender's approval which shall not be unreasonably withheld. In the event the Project is complete (pursuant to the provisions of this Agreement), and the Contingency Reserve contains funds which will not be utilized in the construction of the Improvements for the Project, then Lender shall not be required to disburse the Contingency to Borrower, but shall reduce (by the amount of the then balance in the Contingency) the amount of Loan Funds committed under the Loan.


3.3 Lender's committing to fund the Loan is conditioned upon the following:


3.3.1 Not less than $3,232,000 of the Borrower's Total Cash Equity has been infused by Borrower in cash, or as evidenced by receipts for expenditures as approved by Lender.


3.3.2 Borrower furnishes to Lender for review and approval all contracts, plans and specifications, bonds, building permits, governmental approvals, and such other documents or information related to the Improvements, as may be requested by Lender.


3.3.3 There being no Event of Default, not cured within the applicable cure period, in the Loan.


3.4 As set forth in the Project Budget, an interest reserve ("Interest Reserve") in an amount as deemed necessary by Lender to secure periodic interest payments due during the Loan Term shall be established. So long as there are available funds in the Interest Reserve line item shown in the Project Budget, Lender shall be obligated to make periodic payments of interest due under the terms of the Loan Documents from the Interest Reserve. In the event the Interest Reserve is depleted or there is a continuing default under the terms and conditions of the Loan, Lender shall have no obligation whatsoever to make any payments of interest due under the terms of the Loan Documents from the Interest Reserve.


3.5 [INTENTIONALLY DELETED.]


3.6 Borrower shall have the right to reallocate funds from the Contingency Reserve into the additional Interest Reserve, so long as the following conditions are met:


3.6.1 The Project Total Cost has remained at no less than $7,912,000, or has been increased and an appropriate amount of equity has been contributed by Borrower;


3.6.2 The Contingency has rem ...