PROMISSORY NOTE
$11,310,591.46 Birmingham, Alabama
August 25, 2003
FOR VALUE RECEIVED, Alabama Somerby, LLC, a Delaware limited liability
company (the "Company"), and, subject to the limitations set forth in Section 7
below, ARC Somerby Holdings, Inc., a Tennessee corporation ("ARC"), each promise
to pay to Xxxxxx Senior Living, L.L.C., an Alabama limited liability company
(together with any successor, assignee or endorsee the "Holder"), without offset
and in immediately available funds, c/o Xxxxxx Corporation, 0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000-1930, or at such address as the
Holder may provide the Company in writing, the principal sum of Eleven Million
Three Hundred Ten Thousand Five Hundred Ninety-One and 46/100 Dollars
($11,310,591.46), as such principal sum is reduced from time to time by the
amounts paid to and received by the Holder pursuant to the Earn Out Agreement
(as hereinafter defined) and as such principal sum is adjusted from time to time
pursuant hereto, with simple interest payable on the unpaid balance of such
principal sum as of August 25, 2006 (the "Conversion Date") from and after such
date at an annual rate equal to the Prime Rate (as hereinafter defined).
RECITALS
WHEREAS, in consideration of the Holder's entering into the transactions
more particularly described in the Earn-Out Agreement, the parties now wish to
make this Promissory Note in favor of the Holder.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements hereinafter set forth, the parties hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings ascribed to them in the Earn Out Agreement.
Additionally, as used in this Promissory Note, the following terms shall have
the following meanings:
"Earn Out Agreement" shall mean that certain Earn Out Agreement of even
date herewith by and among CNL Retirement DSL1 Alabama, LP, Xxxxxx Senior
Living, L.L.C., American Retirement Corporation and Alabama Somerby, LLC, a
conformed copy of which is attached hereto as Exhibit A.
"LLC Agreement" means the Company's Limited Liability Company Agreement of
even date herewith.
"Prime Rate" shall mean, at any given time, the rate of interest publicly
announced by Bank of America, N.A. (or any successor thereof, or, alternatively,
The Wall Street Journal) as its prime, reference or similar rate of interest as
of such time.
2. Payment Terms. The Company shall, within ten (10) days after the first
day of each calendar quarter during the term of this Promissory Note, pay to the
Holder without notice or demand an amount equal to the Net Operating Income
(Lessee Cash Flow) (as increased by any income resulting from the proceeds of
any business interruption insurance which income is
included in the definition of Total Facility Revenue (under the Leases) and not
already included in the Earn Out Agreement) for and during the immediately
preceding calendar quarter until such time as the Holder shall have received an
aggregate amount equal to all amounts due from time to time hereunder pursuant
to the terms of this Promissory Note and the Earn Out Agreement, provided,
however, that, to the extent that any payment the Company is required to make to
the Holder pursuant to the preceding clause would, if made, cause the Holder to
have received an amount in excess of the total amount of principal and interest
then outstanding under this Promissory Note, such payment shall be reduced as
necessary to cause the amount of such payment to equal the total amount of
principal and interest then outstanding under this Promissory Note. All
outstanding amounts of principal and interest as of the fifth (5th) anniversary
of the date hereof shall be due and payable in full on such anniversary, or, if
applicable, on the immediately succeeding business day.
3. Imputed Interest. In the event that any payments hereunder are deemed to
include any unstated or imputed interest, the rate for determining the amount of
such payments that will constitute such unstated or imputed interest will the
"short-term federal rate" (as such term is defined in Section 1274(d) of the
Internal Revenue Code of 1986, as now and hereafter amended, and the
regulations, rulings and pronouncements promulgated thereunder) as of the date
hereof which the Company and the Holder acknowledge is (1.21%), and the Company
and ARC shall prepare and file all tax returns to be filed with any taxing
authority in a manner consistent with the foregoing and shall take no position
inconsistent therewith in any tax return, in any discussion with or proceeding
before any taxing authority, or otherwise.
4. Prepayment. The Company shall have the privilege to prepay all or any
portion of the principal amount hereof, at any time, without premium or penalty
and with interest computed and charged to the date of prepayment only.
Notwithstanding anything herein to the contrary, the parties acknowledge and
agree that any payments made to and received by the Holder pursuant to the terms
of the Earn Out Agreement shall constitute prepayments of principal due under
this Promissory Note, and, accordingly, shall reduce the principal balance of
this Promissory Note.
5. Security; Remedies. As security for the full and timely performance of
all of the Company's obligations hereunder, ARC hereby grants to the Holder a
security interest in and pledges one hundred percent (100%) of its membership
interest in the Company (the "Membership Interest") now owned or hereafter
acquired or arising, together with the proceeds thereof, and all cash,
securities or other property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any of the Membership
Interest. Upon the occurrence of a default hereunder, the sole rights and
remedies of the Holder with respect to ARC shall be, and the Holder is hereby
authorized and empowered, to: (a) exercise all of ARC's rights with respect to
the Membership Interest, which rights shall include, without limitation: (i) all
of ARC's rights under the LLC Agreement or under the Delaware Limited Liability
Company Act, 6 Del. L. ss. 18-101 et seq. as now or hereafter amended, or any
corresponding provision or provisions of any succeeding law; (ii) all of ARC's
financial rights with respect to the Membership Interest; and (iii) all of ARC's
governance rights with respect to the Membership Interest, including without
limitation, voting rights and rights as the Managing Member (as such term is
defined in the LLC Agreement) of the Company; (b) collect and receive all cash
dividends
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and other distributions made with respect to the Membership Interest (including,
without limitation, any liquidating distributions); and (c) otherwise act with
respect to the Membership Interest as though the Holder were the outright owner
thereof. ARC hereby irrevocably constitutes and appoints the Holder as its
attorney-in-fact (coupled with an interest), with full power of substitution to
exercise any of the rights provided in the preceding sentence; provided,
however, that Holder shall not have any duty to exercise any such right or to
preserve the same and shall not be liable for any failure to do so or for any
delay in doing so. Nothing herein shall limit any of the Holder's rights
pursuant to the LLC Agreement, including without limitation, any rights granted
to the Holder upon the occurrence of a default hereunder. Except as may be
prohibited by applicable law, all of the Holder's rights and remedies, whether
evidenced by this Promissory Note or by any other writing, shall be cumulative
and may be exercised singularly or concurrently. Election by the Holder to
pursue any remedy will not constitute a waiver of its rights to pursue other
remedies or an election to make expenditures. Notwithstanding anything to the
contrary herein, the Holder agrees not to seek to sell the Membership Interest
or any part thereof without the prior written consent of ARC, which consent
shall not be unreasonably withheld, conditioned or delayed. In the event that as
a result of the exercise of its remedies hereunder, the Holder shall become the
owner of the Membership Interest, it shall, contemporaneously with its exercise
of such remedies, reimburse ARC for all Transactional Expenses (as defined in
the LLC Agreement) incurred without duplication, by ARC and/or the Company as of
such time. ARC and the Company shall take all actions and shall file all such
documents as may be requested by the Holder to evidence, perfect and continue to
perfect the security interests and other rights granted herein.
6. Default. In any one or more of the following events the Company shall be
deemed in default under the terms of this Promissory Note:
(a) The failure of the Company to make any payment required under this
Promissory Note within ten (10) days after receipt of written notice thereof
following the due date of such payment;
(b) The occurrence of an Event of Default (as such term is defined in the
Leases) under either Lease which has not been waived and with respect to which
the Holder exercises its cure rights under either of the Leases or the Earn Out
Agreement; or
(c) a material breach or a default of the LLC Agreement by ARC.
If Company defaults under the terms of this Promissory Note then the Holder
shall, without notice to any party, be entitled to exercise and enforce all the
rights and remedies described in Section 5 hereof.
7. Non-Recourse Obligations. Except as expressly provided in this Section
7, notwithstanding any other provision in this Promissory Note, this Promissory
Note is a non-recourse obligation of ARC and the Company and the Holder, as
evidenced by its acceptance of delivery hereof, agrees that ARC and the Company
shall not, except to the extent herein stated, be or become personally liable
for payment of any amounts due under this Promissory Note and, upon the
occurrence of a default hereunder, the Holder shall look solely to the
Membership Interest of ARC (and the Holder's rights and remedies with respect to
such Membership Interest pursuant to Section 5 hereof) for the satisfaction of
all amounts due from ARC under this
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Promissory Note and solely to the Net Operating Income (Lessee Cash Flow) of the
Company for the satisfaction of all amounts due from the Company under this
Promissory Note. No property of ARC or the Company other than, as applicable,
the Membership Interest or the Net Operating Income (Lessee Cash Flow) shall be
subject to levy, execution or enforcement for the satisfaction of the Holder's
rights and remedies under this Promissory Note, and the Holder will not make any
claim or institute any action or proceeding against ARC or the Company with
respect to such other property in connection with this Promissory Note.
Notwithstanding the foregoing, the Holder may give such notices and take such
other actions as may be necessary to foreclose on its security interest in the
Membership Interest, and ARC and their respective properties shall be personally
liable for any and all damages resulting from any fraud, breach of trust, breach
of warranty or misrepresentation committed by ARC in connection therewith.
8. Waivers, Extensions. Each of the parties to this instrument, whether
maker, endorser, surety or guarantor, hereby severally (a) waives as to this
debt or any renewal or extension thereof all rights of exemption under the
Constitution or laws of Alabama or any other state as to personal property; (b)
agrees to pay all costs of collecting or securing or attempting to collect or
secure this Promissory Note, including reasonable attorney's fees; (c) waives
demand, presentment, protest, notice to hold protest, suit and all other
requirements necessary to hold him, her or it liable hereunder; (d) agrees that
time or payment may be extended or renewal note taken or other indulgence
granted without notice of or consent to such action, without release of
liability as to any party to this instrument, and (e) acknowledges receipt of a
duplicate copy of this Promissory Note.
The Holder may extend the time of payment of this Promissory Note, postpone
the enforcement hereof, release any of the collateral or security pledged or
given in connection herewith, or grant any other indulgences whatsoever, without
affecting or diminishing the Holder's right of recourse against the Company, as
provided herein, which right is hereby expressly reserved. The Holder shall not
be deemed to have modified, terminated, discharged or waived any of its rights
hereunder unless such modification, termination, discharge or waiver is in
writing and signed by the Holder. No delay on the part of the holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any power or right hereunder preclude
other or further exercises thereof or the exercise of any other power or right.
All rights and remedies of the Holder shall be cumulative and may be exercised
consecutively or concurrently.
9. Usury. Notwithstanding any provision herein to the contrary, the
interest rate provided by this Promissory Note shall in no case exceed the rate
allowable under any statute or law applicable to this transaction when
appropriate consideration is given to borrowers and lenders of like character or
classification. In the event the rate is determined to exceed the rate allowable
under any statute or law applicable to this transaction after giving such
appropriate consideration, the interest rate shall be the maximum allowed by any
such statute or law.
10. Financial Statements and Information. For so long as there are amounts
of principal and/or interest outstanding hereunder, the Company shall, within
thirty (30) days after the end of each calendar quarter and within ninety (90)
days after the end of each calendar year, provide to the Holder copies of the
Company's and both properties' financial statements
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(including balance sheets, income statements and statements of cash flows) and
rent rolls for, as applicable to the properties, such calendar quarter or
calendar year.
11. Notices. Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this Promissory
Note shall be given in writing and delivered either by hand, by telecopier with
acknowledgment of receipt, or by mail or Federal Express or similar expedited
commercial carrier, addressed to the recipient of the notice, postpaid and
registered or certified with return receipt requested (if by mail), or with all
freight charges prepaid (if by Federal Express or similar carrier). All such
notices shall be deemed to have been given upon the date of acknowledged
receipt, in the case of a notice by telecopier, and, in all other cases, upon
the date of receipt or refusal. All such notices shall be addressed as follows:
If to Maker: Xxxxxx Senior Living, L.L.C.
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000-1930
Attn: Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxx, Xxxxxxxx, Xxxxxxx, Xxxxxxxx
& Xxxxxxxxx, PC
000 Xxxxx 00xx Xx.
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Company Alabama Somerby, LLC
c/o American Retirement Corporation
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: X. Xxxx Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxxx Senior Living, L.L.C.
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
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If to ARC: American Retirement Corporation
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: X. Xxxx Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx
XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: X. Xxxxxx Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: X. Xxxxxx Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxx, Xxxxxxxx, Xxxxxxx, Xxxxxxxx
& Xxxxxxxxx, PC
000 Xxxxx 00xx Xx.
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
12. Collection Costs and Expenses. Provided that the Holder is the
prevailing party, the Company shall pay all reasonable out-of-pocket costs, fees
and all expenses, including without limitation, any and all court or collection
costs and reasonable attorneys' fees whether suit be brought or not, incurred in
collecting this Promissory Note or defending any claim arising out of the
execution of this Promissory Note or obligations which it evidences, or
otherwise involving the employment by the Holder of attorneys with respect to
this Promissory Note and the obligations it evidences.
13. Respective Obligations of the Parties. In the event that a portion of
any Earn Out Payment is paid into escrow as contemplated by Section 20 of the
Contract, such escrowed amount will result in a reduction of the principal
amount due hereunder except to the extent that the underlying claim is a claim
for which the Current Operator (as defined in the Contract) is liable under
those provisions of the Management and Marketing Services Agreement (as defined
in the Contract) that are deemed to survive pursuant to the terms of that
certain Termination
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Agreement of even date herewith by and between the Holder and the Current
Operator (as defined in the Contract).
14. Successors and Assigns. The term "the Company" shall include the maker
of this Promissory Note and each person and entity now or hereafter liable
hereunder, whether as maker, principal, surety, guarantor, endorser or
otherwise. The provisions of this Promissory Note shall apply to and bind the
Company and its successors and assigns and shall inure to the benefit of the
Holder, its successors and assigns, provided, however, that neither the Company
nor the Holder may assign its rights and/or obligations under this Promissory
Note without the prior written consent of the other.
15. Severability. Any provision of this Promissory Note which is prohibited
or unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Promissory Note.
16. Governing Law. This Promissory Note shall be governed in all respects
by and construed in accordance with the internal, substantive laws, and not the
choice of law rules, of the State of Tennessee.
(Signatures Appear on the Following Page)
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IN WITNESS WHEREOF, the undersigned have executed this Promissory Note on
this the date and year first above written.
Alabama Somerby, LLC
By: ARC Somerby Holdings, Inc.
Its: Managing Member
By:
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Its:
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ARC Somerby Holdings, Inc.
By:
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Its:
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